♪ >> the possibility of having another wave of inflation to me is not impossible. >> the risk is that we might see a resurgence. >> everyone is happy right now and the drumbeat of soft landing there but as soon as you get some bumping is, the market will pull back a little bit. >> the fed would even accelerate the free cuts they are talking about if they perceived any week this. >> i'm very convinced the fed will do whatever it takes. announcer: this is "bloomberg serveillance" with tom keene jonathan ferro and lisa abramowicz. jonathan: good morning, good morning. this is "bloomberg serveillance" on tv and radio alongside tom keene and lisa abramowicz. i'm jonathan ferro. your equity market on the s&p 500 just a touch negative the global disinflation data continues to pour in and i have to say that data is silencing

any hawkishness on central banks. tom: the first thing i did today was look at the generic 10-year gilts, the united kingdom yield. boy, does that have a celebration, even more so than what we are seeing here. and what i love about it, it is getting real forced disinflation report by disinflation report. jonathan: u.k. inflation, big downside surprise. lisa, any pushback from central banks only as credible as the data behind it. if you are putting your hand above the bank of england, make this a little been difficult to believe when you see data like this. lisa: which is the reason people are pricing in 145 basis points of rate cuts. you had a very different tone at least verbally from the federal reserve. when i'm looking at this data, core cpi rising 5.1%.

yes, it is not 9%, but it is not 2%. at whatnflation enough for them to start cutting rates aggressively? tom: pushing against this on the zeitgeist is what is not coming in is age inflation and i would say setting up into december, setting up to that december jobs report early in january if we make it to the new year, it is 50-50 right now. the basic idea -- lisa: great, we've got three hours, let's go. tom: the basic idea is the wage inflation story is separate from this disinflation story. jonathan: the market right now doesn't care, the bullish train has left the station. here the headlines, the highlights, the most update since january 2010 to which incidentally was the last all-time high. cash cut, a two-year low on cash levels.

expectations for higher rates, just 2% of investors expect higher rates. and lisa: when we ask people is this the flood of cash we are seeing going into risk assets, they say it is a start that there is still $6 trillion in money market so this is really the issue. why would anyone be bearish heading into this year and is that alone enough start to get bearish? i did hear from jim beyonca over at beyonca research. this sort of whisper the people are getting a little more worried about re-inflation given the fact that if there is no landing, we could have a very different scenario. jonathan: warning about the potential of a second wave of inflation. tom talked about the data coming out in early january. fedex getting absolutely hammered. stock is down by 10%.

the prophet, the numbers not impressive. lisa: volume is coming in and even with all of the cost-cutting they weren't able to offset it. the one silver lining is they were up 60% year to date before this so they are basically blowing off the top and second of all they could potentially gain market share because they are on -- have on-time packages at a high rate. this shows me that any disappointment is highly punished especially on some of the high flyer shares. tom: what i would really point out is is less than profitable. these are fancy businesses making five cents on the dollar, six cents on the dollar and there's a lot composition -- competition out there. it is a very tough business to be in. jonathan: we will speak to a senior analyst over at cowan a little bit later. but the state in your diary for the earnings. january 12, jp morgan will be talking about what earnings. closing at 2023 with all-time

highs. futures are positive throughout much of the last month or so. on the s&p, we had three consecutive all-time highs on the nasdaq 100 the s&p 500 not far behind. lisa: people are changing estimates for next year in response. existing u.s. home sales as well as consumer confidence. when it comes to existing home sales they are currently at the lowest since 2010. do lower mortgage rates, albeit still at a sort of difficult 7% to get your hands around if you have a less than 3% mortgage, does that get people moving? >> he said flat out there is a housing recovery, it begins now. i don't know. we are biased here in new york but the basic idea, where do we have a housing recovery?

jonathan miller on the insane prices in new york city. >> and will be got from the homebuilders yesterday. chicago fed president is still on tour. let's try again. want to collect p.m., treasury plan qassem -- sell $13 billion of twenty-year notes and watching this really has been shocking to see more than 1% rally in terms of retracement in 20 year yield since the october boost. jonathan: a big fan of his communication style but maybe a little bit too much, don't you think? lisa: it's been a very consistent message. doesn't totally understand the market reaction, doesn't disagree with anything jay powell said. has that work? jonathan: larry, let's start with this market and how one side of things -- one-sided

things have become and how quickly they became one-sided the most upbeat since january 2022. cash levels, two-year lows. only 2% of investors expecting higher rates last year. has it become a little bit too one-sided too soon? larry: i think it is almost a bookend of what happened coming into this year. everybody thought we were going to see a recession, that earnings were going to implode. that the fed was going to over-tighten. now we are on the others that where everyone is talking about no recession and as you just said, some people are talking about no landing. earnings, we think it comes in at 2.25. if you look at the fed, we think it is three or four. there is an uber amount of optimism coming up. bullish sentiment over 51% right now, one of the highest holes we've seen. historically when you see those levels you do see more muted

performance. tom: this money moving out of money market funds? >> i would say very slowly. i think people are still skittish on this market although it is starting to turn, but i do think that is going to remain fairly sticky at least for the near term. if you get some volatility is going to take a wild to be deployed to the market. lisa: everyone we talked to said they expect january to be in the bit rocky with some on salon the way and all of those bumps are buying opportunities. do you agree? we >> are the target for next year of less than 5% from where we are today. i do think it will be, but i think that the year would be much more volatile than we saw this year. one of the biggest things leading to that volatility will be the fact that earnings will be much weaker than what the consensus is looking for.

yes, everyone is posited that economic growth is slowing, that is going to have an impact on earnings. you're seeing that with fedex. if you missed earnings or your guidance isn't as robust as what people believe, you're going to see volatility. lisa: this is especially true for some of the names that have the biggest gains so far which raises the specter of the magnificent seven because they felt the key to a lot of the gains that we seen so far, some 75% of all returns for the s&p in terms of the total return. how much do you see this as sort of the nexus of the disappointments that could drive the volatility mark larry: that a scenario we continue to like. when you look at those particular stocks, first of all, if you go back to years to the beginning of last year, they really haven't moved all that much. but it is one area where earnings have actually got higher. when i look at valuations for

those particular names, i think they actually become even more attractive. when i go into a year next year where i think growth is going to be at a premium, i think those tech-related stocks will continue to deliver and will continue to see them do well. jonathan: let's build on that and talk about the other side. what has happened over the last couple of months, just broader participation yesterday? energy started to take part again, top of the pile on the s&p 500. what do you make of them were cyclical sectors that have been rallying going year end and looking ahead to when 24? -- 2024? larry: energy is one of my biggest contrarian calls. a lot of people have turned negative on that particular sector and we believe oil prices will probably move higher toward a five dollars by the end next year. if that is the case, that is going to be a good tailwind for that particular sector of the market. the other area that i think could benefit is small caps.

valuations are discounted. we think we have a mild recession. the mildest recession ever experienced here by the u.s. but as we start to come out of that, you will start to see small caps rally. they tend to do better when the fed is cutting rates. i'm looking for that area to outperform as well. tom: you've got a huge advantage of being in the real america and i've got a 5% gdp, whether for 2.5% right now. you mention recession and it has been the wrong call of the year. in the raymond james world, do you see a recession developing, nurturing, expanding? larry: we do see a mild recession occurring during the second and third order of next year. i think it was premature to call for one this year because there are still a lot of excess savings. banks were still lending but i think a lot of that is starting to dry up.

thanks are tightening pursestrings. we do think we ultimately end up having a mild recession. one pushback that i get, this economy has been so strong, how can we go into recession? my point is that this economy can pivot very quickly. if you go back to the last 12 recessions, you would see that the quarter before the recession, growth averaged about 2.6%. the first quarter of the recession, it turns around and is actually down 3.5%. you're talking about a delta of 6% in that one quarter time. it can happen pretty quickly. jonathan: appreciate it, thank you for your support through 2023. we will continue this conversation in just a moment. amy was silverman coming up at 7:00 a.m. eastern time, so don't miss that conversation. we will talk about politics in about five minutes.

how about this for a quote from president biden: every head of state at come into contact with has said you've got to win, you've got to win. it is less about me, unfortunately, i think, then about the other guy. if we lose, we lose everything. how about this for timing? those comments from the president of the united states moments before the release of the colorado supreme court decision that disqualified donald trump from the states presidential primary ballot. tom: historic, just definitive on this. it was a very, very tight boat plain and simple. but far more, and i think we don't understand what the supreme court does, and this is precisely what they do, and lisa, frankly this is your world not mine, but the answer is they look at states usurping, states taking too much power, state courts getting it wrong. that goes right back to marshall. lisa: all i know if the supreme court is going to really define the contours of this presidential election to decide whether or not some of the court

cases that former president trump is dealing with are going to make it into the political sphere and they've got to make those decisions pretty soon at a time of incredible dissent. jonathan: big time. lisa: real issues, we could raise money. jonathan: the conversation continues. from new york city this morning, equity theaters pulling back just a touch. down 0.2% on the s&p 500. from new york, good morning.

>> a conduit for 10% to 50% of all global trade. 12% of global seaborne oil trade. the bottom line is this has to stop. they are unacceptable. united states, our allies and our partners, will do what we have to do to protect the ships.

jonathan:jonathan: that was u.s. national security spokesperson john kirby addressing the situation in the red sea. with bloomberg reporting the u.s. is weighing possible military attacks in response. let's just take the temperature of that story and look at crude. crude at the moment not really screaming bad things. not in the 60's anymore, but not a huge move. lisa: this is the mystery especially as we hear some pretty dramatic, and out of the u.s. and other allies and also just the shipping giants saying that they cannot continue passage the red sea. did you see insurance costs also? they are skyrocketing. it cost them 500,000 dollars to ensure $100 million cargo ship at this white passage that space. just gives you a sense it is going to make things pricier which is really curious that things are getting more heat in the market.

jonathan: it was 0.1 so we will see a massive increase in insurance costs. tom: let's show the photos of the aircraft carrier and the both around the. he is scathing is off the mark because he is too respectful, but he is just heated. guys, or has got to be a better, more offensive plan. jonathan: could take it while working this up. tom: he's got a little experience, i would listen to him. it is the way it is, and it is the politics. that story is two days old. jonathan: i would say it started last week. tom: the holidays are not sleepy right now. tina knows that. she is an expert on colorado law. tina, all of a suddenly turn to state judicial affairs in colorado.

and all of a sudden it comes down to a speed decision by a supreme court. your take on the independence of the united states supreme court? >> thanks for the softball question, tom, because you know i'm not a colorado state supreme court analyst, but it is part of what i've characterized as non-binary nature of this u.s. election. markets are used to pricing victory by one or the other and a swift recognition, and what you've just described, the close decision by the colorado state supreme court is just one of many possible disruptive factors. you guys were talking about how it would be referred to the u.s. supreme court soon. donald trump himself appointed several of those justices. that is one layer of this decision-making process.

another one is the fact that the u.s. public trust in the supreme court has plummeted from it being one of the most trusted institutions in america to one of the least trusted institutions in america, so how does that bode for recognition of the final decision in this u.s. 2024 election? tom: let's take it over to global foresight which is real simple here. not so much the colorado narrowness, but the general u.s. election. how do they take this in as we enter 2024? >> i can corroborate what was said earlier, the quote from president biden that he is hearing from world eaters is what i hear from ceos and boardrooms. they are not bullish on a trump 2.0 presidency, at least not global ceos. i am based in london. and the concern is really about the u.s. role in upholding security order, which has been reflected in the tensions right

now in the red sea. congress is looking to pass legislation to prevent a future u.s. president, not naming names, from taking the u.s. out of nato without congressional approval. the world is really on a knife's edge. not so much about trump domestic policies which have got wall street investors pretty enthusiastic, but about that u.s. global role. lisa: pivoting to the red sea given the fact that you talk to global ceos, how much are they getting really concerned about how things are progressing and the lack of a visible way out to clear this path? >> they are starting to get concerned because we are talking about rebels firing tens of thousands of drones and the u.s. and the western powers that have kind of cobbled together a so-called armada are blasting them with surface-to-air

missiles. you quoted earlier the amount of traffic. this is less about oil prices, commodities prices because supply feels comfortable to markets, but about the supply chain and two words, suez crisis. the red sea leads to the suez canal. suez crisis reminds us that there competing political ramifications and where about china thinking about taiwan looking at how the u.s. is now not only caught up with ukraine, but in the med with five carriers stationed there under attack by you many-iran-backed hutu rebels? lisa: what is the timeframe for which this becomes a serious problem for supply chains? do they have a sense of what they are looking for before they start trying to materially offset some of the extra time that it would take for ships to get to them? >> is already happening. we've got five of the world's

largest shipping companies shifting operations from the reds the. the time it takes ads onto the journey is considerable. i still think it will take more time for that kind of lag to feed into any sort of indicators that we might see, but i talked to shipping, louisiana can tumor electronic companies, consumer good companies. they've been concerned about blockages and of course, the straits of taiwan for some time now. we are tracking these things closely. tom: do we need to be more offensive? james is writing about it within thence experience of naval affairs in the arabian sea. in the red sea as well. just as simple as we can, do we know how to be offensive with our defense? >> i suspect the words that are being used have been used without a lot of consideration.

so far, this armada -- we don't say coalition of the willing anymore -- is patrolling the seas and not being offensive. i think if they don't get the message and stand down, we will start to see escalation, and that is where markets have been mispricing this with the 2006-2007 playbook. i talked to john authers about this early on and said this is not going to be regionally contained. there's too much opportunity for rogue actors and other actors. and remember, the saudi's have been at war with the yemeni rebels for many years. that is starting to become more complex for them as well. jonathan:jonathan: thank you for the update. tina fordham. traffic ground to a halt. started friday going into the weekend and picked up again with bp at the start of the week. a bit of a reality check at how

serious this all was. tom: i believe it was 1956 if my history is correct, it matters. we think it is stated, it is something out of movies from our childhood guess not, israel. lisa: this is one of the biggest and potential risks. that is nowhere on anyone's radar, and i'm not saying that this is going to necessarily cause a complete rethinking of disinflation, but i do wonder how much lower oil prices as part of the disinflation narrative that no one is really talking about. jonathan: talking about the same thing, it may be reigniting some goods inflation all over again. tom: i see it percolating out there. i don't know which way to go on goods and services other than disinflation needs to reign supreme is how i would put it. as i mentioned earlier, the one thing i see in the zeitgeist is

people are sobered with charts of wage non-disinflation. and maybe we all see it anecdotally day today. jonathan: will continue the conversation in just a moment. if you are just joining us, welcome to the program. equities on the s&p pulling back by 0.2%. stocks better than good, three consecutive days of all-time highs on the nasdaq 100. the s&p 500 not far behind. from new york, this is bloomberg. ♪

you can't buy great conversations or moments that matter, but you can invest in them. at t. rowe price our strategic investing approach can help you build the future you imagine. t. rowe price, invest with confidence. - after military service, you bring a lot backgine. to civilian life. leadership skills. technical ability. and a drive to serve in new ways. syracuse university's d'aniello institute for veterans and military families

has empowered more than 200,000 veterans to serve their communities and their careers. from professional certifications, to job training, to help navigating programs and services, we give veterans access to support from anywhere in the world. (jennifer) the reason why golo customers have such long term success is because we focus on real foods in the right balance we give veterans access to support so you get the results you want. when i tell people how easy it was for me to lose weight on golo, they don't believe me. they don't believe i can eat real food and lose this much weight. the release supplement makes losing weight easy. release sets you up for successful weight loss because it supports your blood sugar levels between meals so you aren't hungry or fatigued. after i started taking release, the weight just started falling off. since starting golo and taking release, i've gone from a size 12 to a 4. before golo, i was hungry all the time and constantly thinking about food. after taking release, that stopped. with release, i didn't feel that hunger that comes with dieting.

which made the golo plan really easy to stick to. since starting golo and release, i have dropped seven pant sizes and i've kept it off. golo is real, our customers are real, and our success stories are real. why not give it a try?

♪ jonathan: record high, record high, record high. check out uterus on the s&p come on the nasdaq this morning. down one third of 1% on the nasdaq 100. on the s&p yesterday i believe that 28 points shy of an all-time high, going back to only 2022, which is in line with the survey from bank of america. lisa: and the rally that we've gotten is one of the biggest rallies that we've seen going back to the immediate aftermath of the march 2020 pandemic-induced easing. this raises this question, ok, is this setting us up for the fall that everyone is planning to buy? it raises the question, how far could possibly fall?

check jonathan: out the bond market, two-year opens up monday, closes yesterday. yields drop again six basis points down to 4.38. i keep going back to this. any pushback is only as credible as the data behind it. the bank of england starts pushing back, your high for longer, all that good stuff. big downside surprise and all of a sudden you can ignore the hawks and listen to the doves. that is the u.k. this morning. some of that spilling over to what we were seeing in treasuries early on. lisa: tom: tom: first thing today with the technical structure of the 10 year real yield and the nominally u.s. 10 year, still an active god. you take the technical trends of those bond yields and then you say bring them over the equity market, when is this going to end? the answer is those are extremely well-contained trends, well-behaved trends. frankly i think you're going to hear from -- today on this. jonathan: particularly in the

u.k. that spills over to foreign-exchange anyway you might expect out the back of that cpi data. a weaker pound, -0.6%. lisa: this makes sense looking at the rate hiking with a rate easing cycle, maybe the u.k. might cut rates by 145 basis points. of course, you have to think at a certain point get the disinflation is good for the economy, when we get beyond just the race to see who cut rates faster, and what is actually better for the economy? jonathan: let's just enjoy the rates for now. this morning coming unprecedented ruling in the colorado supreme court finding donald trump ineligible to serve as president because of his actions and citing the 2021 attack on the u.s. capitol. the ruling bars and from the primary ballot ahead of next year's election. his campaign already announcing it will appeal the decision. lisa, sending this case to the u.s. supreme court. lisa: lined up with the other

things the supreme court is dealing with. essentially the u.s. supreme court is going to set the contours for how much of legal battles enter into the former president's campaign. here's my question. this is just going to ignite an incredible rush of cash into the trump campaign as well as potentially five is hoping into the biden campaign. is anyone taking this seriously? lisa: i think to that really good question, as i mentioned earlier, this is the wheelhouse of the supreme court when states overreach. that will be the arch debate that we see. i'm speaking as an amateur. noah feldman of bloomberg opinion on legal is world-class. jonathan: the first 24 hours is really interesting here. in the short-term, with the other candidates do in the republican primary. vivek ramaswamy is already pushing back against this saying

he would pull out of colorado effectively and lisa, putting pressure on haley, desantis, kristi to announce the same thing. it's going to be interesting to see how they respond in the coming days. lisa: especially as you have seen a little bit more pushback after the comment that donald trump said about immigrants poisoning the bloodstream of the united states. there is a real question here whether they are going to pushback or whether they are going to actually go with the others. tom: this is not where my expertise is, but this is going to be an exceptionally narrow debate. it is going to be on states overreaching and all of the other stuff. jonathan: this is the domestic situation, let's talk about the international backdrop. the u.s. and its allies, possible attacks continue. planning possible actions to hit the militant group at its source in yemen. the national security council spokesman john kirby saying he wouldn't " telegraph any punches one way or the other." lisa: how many proxy wars with

iran can we possibly have? this is probably one of the biggest obstacles throughout the u.s. doesn't want to take aggressive action but if you do have shipping lines, they are actually delayed. what justification can they use not to go on the offensive? jonathan: here's the latest on the fed speak, lease excited about this. then officials continued to pushback on a cut speculation. chicago fed president telling foxx the market is getting ahead of itself when it comes to rate cuts. saying there has not been an active discussion on. >> i'm thinking if it does not come down relatively slowly there is not going to be an emergency for us to start to pull off about restrictive stance. jonathan: this is the last week or so, kind of talking about it followed by somerset we aren't talking about and then no active discussion. i hope that clears it all up for

you at home. tom: no, they are guessing just like everybody else. these people are massively x posted, what are they waiting for? they are waiting to see a crack in wage inflation which they will not see for 2.5 weeks. jonathan: they shifted the focus on the labor market and think we heard that from mary daly. tom: i just think there has been a seismic shift here like white is the equity --why does the equity market move? the outperformance of the american economy as corporations adapt. some fed officials are really looking at that. jonathan: global chief economist and tech strategist. good morning, francis. your take on all that beautiful fed speak over the last week. any clearer? >> i think it is also antics. we are in a global easing cycle. they can tell us we are not talking about it but then we are talking about how they are not talking about. emerging markets are cutting. every single day i get a new

emerging market that is cutting. they are leading on the way down. every morning i wake up to inflation prints that are surprising to the downside. macro's most valuable at inflection points. the toothpaste is out of the two. we have already effectively ease. we will see it very soon in some areas like housing that has very strong reactivity. it doesn't change that i still technically have two quarters of negative gdp in my forecast, so that is technically a recession, but if we do get this earlier easing, it will help us come out faster and reduce the odds of financial accidents which is been a concern for some economists. they tom: need to make earnings, they need to make revenues between thing to live with indecent nominal gdp. or he going to see enough nominal gdp to keep the earnings and revenue boat going? >> it's not coming from cap x

which is declining sharply. not a lot of fiscal room. we talk about the soft landing, hard landing. that is only a u.s. conversation because anywhere else i go the world here not discussing software hard landing as we are already in hard landing. germany is most probably in a recession. a whole range are already in recession. asia is slowing very prominently so we don't have the global impulse that come through, and the consumer is declining and owing. we don't need the consumer to be in a recession for the u.s. economy to be in recession. can be celebrating the pivot party, which we are, and recognize that it is not going to be a straight line up for equities and a straight line down for bonds. i ask of you, every time you have a guest come on, investment horizon is because there investment horizon is very different than the horizon and we have to be able to reconcile the two when they are different perspectives.

in this environment, they are different perspectives. jonathan: extrapolate that out five minutes and see if it changes. lisa: there might be some volatility but at what point is this basically being bullish and trying to have a unique take on it? is there a risk of not giving you landing? if you have a longer term horizon does it have to include a greater risk of reinflation? >> if you have a 5-10 year horizon with a lot of institutional money does, they are not asking if i have a recession call. they want to know what the inflation outlook is, they want to know what interest rates are going to be. our central banks going to be changing inflation targets because if so, our relationship changes and that changes the long-term asset allocation models. no, there are certain investors who do not care about recession risk for 2024 and that is important. they are asking larger, more important questions about the framework which are financial

markets change and that is why i think the powell pivot is so critical and interesting to this large, sticky money. it basically said this concept of we need to present inflation in order to cut, we need to see the evidence, we are focused on services, all of this discussion around financial conditions. now i for you question what was it that led to the pivot? that question to me is far more important than how many rate cuts we have next year or if it is one or two quarters of negative gdp. jonathan: there's a belief on the street from a lot of people that this labor market is no longer a reason to be hawkish. what america has benefited from his this supply-side rebalancing in the labor market, increase participation. do you see reason to believe that continues into next year? >> any sort of leading indicator you have of the job market right now will tell you that things are deteriorating and going in

the wrong direction. markets are second derivative preachers. they are going to care more about the rise in the unemployment rate than how far it goes up to a breaking point. the unemployment rate is going to rise. it takes two years for the first fed rate hike to impact the labor market. that is q1. the mistake in calling for that to happen last year was thinking that that lag would be shorter because the fed moved faster. but until we get through the next three to six months, we won't be able to say that the relationship is truly broken because we haven't even passed the first starting post of when that is going to impact things. i can't throughout the argument of the labor market interest rate conversation is totally different than the past because we are not even there yet. tom: so what did you watch to see if wage disinflation begins? >> real-time data, probably. we need surveys, but maybe we also need to be asking how much is it going to matter to the ration story?

we went from 9% down to 3% in change on inflation largely off the distant ration from my chain dynamics. are we allowed to say that was transitory yet? is my head going to be on a stick for that one? i will throw up the balloon and see what kind of pushback i get on twitter. lisa: not as much as you think. >> the next phase of disinflation is what they call the painful part. not because it is hard to go from 3% to 2% but because consumers and wages carry the brunt of that. we would posit that the disinflation we've seen so far, we don't get to say thank you, fed for that. it is the next part that comes. what i want to know if this wage inflation story, how critical is it to the inflation we are monitoring and what inflation does the fed need to see?" just a headline number, or does it matter where it is coming from? my sense is we got told a lot in the past year it matter where it was coming from. i think it just matters that we are closer to target.

> i think they are so important. just how much of the scintillation we've seen so far is actually off the back of the fed tightening of the last 18 months? lisa: when you talk to a love economists, they have been using the t-word all along and basically saying maybe the fed was right and it was transitory. that is the reason the fed is getting nervous because if the fed's actual rate hikes start to kick in, it starts to become something else in a downward cycle. the jury is still out and service to sector inflation is up. i forgot to mention we slant supply chain issues. jonathan: just shameless. frances donald, head on a stick. you're one of the best, appreciate it. tk, on what we can look forward to next year, or maybe not. tom: we've got to get the data from december, the cpi. unemployment is coming in and then we've got more inflation

data. i think the fed is no different than we are. they are facing the shock. drawdowns from the peak of the market all the way down. then draw up right now, the dow up 3%. nasdaq of 2%. no moment in 2023 did i think that was possible. jonathan: doing some price action, some bigger moves. fedex is down more than 12%. coming up next, elaine becker reacting to the disappointing results from fedex overnight.

in the u.s. we see millions of cyber threats each year. that rate is increasing as more and more businesses move to the cloud. - so, the question is... - cyber attack! as cyber criminals expand their toolkit, we must expand as well. we need to rethink... next level moments, need the next level network. [speaker continues in the background] the network with 24/7 built-in security. chip?

at&t business. ♪ >> i thought both the press conference and the state went -- statement were more dumpers than i expected. there is a soft landing base case, we are all hoping for it, and a think the markets are really focused on that. i think the delicate challenge, and we've discussed this in the past, is a tug-of-war between

their guidance and market pricing. as the markets think mission accomplished, and rate cuts are coming in next year, that will ease conditions. that makes it less likely that inflation comes down. it is a tricky point right now for the fed. jonathan: rigid cloud or in fantastic exchange -- richard clarida with the disconnect between what the fed is trying to guide you toward and what this market is pricing. let's talk about this market right now pulling back by 0.2%. maybe with the exception of what is happening in the bond market. yields lower by five basis points, 3.88 in the u.k., yields are a lot lower at the front end of curve. down more than 10 basis points through the front and into the tenure. just north of 4% in the u.k., just a big downside surprise on cpi in the united kingdom. lisa: and it wasn't just headline cpi, but also core cpi.

it goes to the point, the data is really going to tell the market how much they can price in rate cuts much more than any rhetoric from the central bank with themselves and that is really dictating all of these price moves. if you would like a jonathan: big move, here it is. fedex shares falling by almost 12%. second-quarter earnings for missed estimates as cost cuts were not enough to make up for declines. ceo speaking on the earnings call, saying this. there is more work to do where we are structurally redesigning our network for speed and entity, but we continue to make progress. those words not enough to offset this move early on. tom: this is to say, cowan joins us now to look at this important american company. i look at this and i look at the misses, i look at the share price, and i just see a lousy business. tenure total return, that is before today's drawdown.

is they're just too much competition for anybody to make legitimate profit? >> i think it is more that shippers are trading down. tom, fax and ubs raise rates somewhere between 5% to 7% every january, and at some point, you have to ask the question, do i really need to get my package there first thing in the morning? can it get there in the afternoon, and to an extent, the answer is yes. you see people trading down from express to ground, and that is the future. tom: i will go right where you went. his next day dead because we don't want to pay for it? >> i don't think it is dead specifically but i don't think it is growing anymore. and fedex also has a big issue with the u.s. postal service contract which actually expires

next october, october 1 at the end of the current government fiscal year. and with that contract, they are losing money because again, they were flying in express during the day, and the postal service only runs in over ground sort. so unless the postal service is willing to renegotiate that higher price point, we see fedex walking away from that which will provide additional headwinds into fiscal 25. lisa: i always love looking at fedex and ups and some of the broad-based shivers, in part because they can be a macro lead on the economy. is this disappointing earnings report at all a sense of whether people are really souring on ordering as much stuff or whether people are paring back and having more discretion because of tighter budgets? >> yes, any word.

you and i have talked in the past year about how money people are traveling. we are expecting near record travel this holiday season, but yes, i think there has been this huge shift away from online ordering to in person as well, because i think brick-and-mortar stores are also encouraging people to come into the store and spend rather than ordering online. so you are seeing that shift happened that you are seeing it away from goods to services. lisa: this is the reason you're the perfect person to talk to about this. the ceo of fedex said that a weak economic backdrop is part of the reason for the decline and said there has been significant demand disruption. how much are you starting to see this in the services side of what you cover, in the airlines, in the travel sectors? >> as you know, over the summer we saw a dip down in airline

traffic, and especially domestically, we saw the domestic-focus airlines lose many. into the fourth quarter, frankly thanksgiving was better than i thought it would be. more people traveled. we were forecasting about 27 million people would travel over 12 days and actually 29 million people traveled. so it is a little better than expected. and heading into december, the numbers have come off a little bit. maybe people were just waiting until later because christmas is monday vs. a middle of the weekday. so you're seeing people getting ready to travel rather than traveling. lisa: i just looked at my price, john and i are always looking at business-class. it is under 3000. premium economy is $1300 round-trip to paris, which i find just stunning. when do they take out capacity? plaintiff these people start

saying we want to go to the pacific with 47 flights it isn't gonna work? >> so tom, this is our view for 2024. we think there is overcapacity that will develop in the north atlantic. i know some of the airline managements disagree with me, but the fact is except for united which has just restored seasonal service and delta which is growing 6%, if we look at the parallel between summer 2024 and summer 2023, domestic grew 8.7% in the aggregate and we are forecasting 8.5% in the aggregate for atlantic, which implies to us that we are not going to see traffic grow and we are expecting that shift the pacific, that airfare is down to $3000 during one point last year when the paris air show is occurring. round-trip airfare to paris from

the u.s. east coast were running . it is rare -- it is where they should be. we think that will continue. tom: paris this weekend, the three of us? jonathan: so romantic. he looks at business-class tickets for himself and puts me in freeman economy. -- premium economy. tom: you could be coach. jonathan: the matt miller story is amazing. flies to berlin, true story. flies to berlin, two seats in business-class. one friend, the other for his dog. puts his wife in coach. lisa: are they still married? jonathan: they are still married. lisa: congratulations. all i can say. i want to finish this. are you traveling for the christmas and new year's break? >> yes. and yes. we are traveling.

i'm a little fearful because we have a three hour to get from where we are flying to tell where we want to go, so i'm a little concerned we are going to miss our connection, but whatever. jonathan: enjoy it. thanks for being with us. i saw a great stance recently on twitter, x as we now call it. the percentage of americans with passports, the percentage of americans with passports, that number is now close to 50%. do know what it was in 1990? as a guest. -- have a guess. jonathan: 5%. lisa: no. jonathan: isn't that amazing? tom: to her point, new york to shanghai was $45,000 business-class. i've never seen this number, it is under $7,000. that is how much that has plummeted. jonathan: it is why international travel is so much more busy now than it used to

be. it is not just mexico, canada, hawaii sometimes. tom: edinburgh, manchester, sitting in the middle of nowhere in england. lisa: the exchange rate is actually making people more open to other cultures. jonathan: is that what it is? there is a correlation between passport implications and the strength of the u.s. dollar. lisa: 100%. tom: open ash and a sherlock holmes hat. jonathan: on boxing day walking around with the cane. lisa: what is going on? jonathan: and a shotgun over my shoulder. lisa: oh my god, just stop. [laughter]

i'm a little anxious, i'm a little excited. i'm gonna be emotional, she's gonna be emotional, but it's gonna be so worth it. i love that i can give back to one of our customers. i hope you enjoy these amazing gifts. oh my goodness. oh, you guys. i know you like wrestling, so we got you some vip tickets. you have made an impact. so have you. for you guys to be out here doing something like this, it restores a lot of faith in humanity.

♪ >> the possibility of having another wave of inflation to me is not impossible. >> the risk is we might see a resurgence. >> everyone is happy and the drumbeat of soft landings there but as soon as you get some lumpiness, the market will pull back. >> the fed would even accelerate the cuts they are talking about if they received any weakness. >> i'm very convinced the powell fed will do what it takes. announcer: this is "bloomberg serveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: good morning, good morning. this is "bloomberg serveillance" on tv and radio alongside tom keene and lisa abramowicz.

the band back together for one last day this year. your equity market on the s&p 500 pulling back by 0.2% on the s&p. what a run over the last two months. the nasdaq, three consecutive days of all-time highs on the s&p 500. jonathan: tom: tom: a surge in the market and of course the big bet under heated debate is what is all that cash gonna do? i would look at the marginal cash. i would say what part of that is marginal that needs to find a comfort place? people just have to catch up, there is a windowdressing going on. tom:tom: is that about what has happened or what is happening already? we've seen some big moves both in equity and in bonds as well. lisa, all that cash, what cash? lisa: falling to 4.5%. this raises the question, what

does cash on the sidelines mean? there is a lot of pushback from a lot of different investors who say if people had their money in savings and shifted it to money market accounts, if that really cash on the sidelines or is that fully invested cash, especially when it is earning some income? tom: these are micro decisions by beleaguered hedge funds. these are all micro decisions away from grand themes we can spot and the micro decision right now is disinflation, i've got to get on board. jonathan: most people are on board. the train left at the end of october. get on board if you are not on board already. i think everyone is on board over at bank of america. the highest fond overweight in 15 years. lisa, overweight stocks, overweight bonds, investors

rotating to the euro zone, to small caps. lisa:lisa: this is turbocharged and then some. at what point is this something that the fed has changed the paradigm? frances donald basically said what was it that caused them to have such a dramatic shift in stance? really highlighting how that is going to dictate what the parameters are for them to continue easing in to actually encourage this kind of exuberance because they want a soft landing that bad. jonathan: we've been discussing selective hearing in the global bond market and equities as well. seemingly ignoring the hawks and embracing the doves. the story is for me, and i want to keep going back to it, it is not just that we are ignoring the hawks for no reason. it is not that. it is that the hawkish messages only as credible as the data that is coming in and the data that has coming over the last month or so screams global disinflation. and you see that again this morning and the u.k.

tom:tom: it's on the financial side but also the real economy side. third quarter, 5%. now we are modeling to percent for this quarter, the answer is the real economy continues to outperform. that means better earnings, better revenue, and that helps out as well away from financial fed, how many speakers are speaking today. jonathan: unless you are fedex because fedex is not pretty this morning. stocked down by 11.4% in the premarket. tom: with the ceo flooding -- flagging broader economic weakness. to me, the fact that a high flyer, a share that had gains more than 60% year-to-date is seeing this they decline on a mist that wasn't that bad tells you a lot. jonathan: earnings season just around the corner. pencil in january 12 jp morgan numbers coming up in early 2024. equities pulling back by 0.2% on

the s&p 500. a rally spills over to the treasury market, down five basis points. lisa: i think this is actually incredibly important, we get u.s. existing home sales after the surprise to the upside with homebuilders yesterday at a time when existing home sales have all into the lowest volumes going back to 2010. does the decline in mortgage rates reignite enthusiasm in the housing market anyway that starts to pique interest about whether the that is going to take its foot off the break here in terms of economic activity in a material way? chicago fed president austan goolsbee is planning to speak. his message very clear, markets are getting ahead of themselves, we are not doing this right now. but i will say it is getting harder for him to even put that pushback in because we are hearing from other fed officials yesterday who just confirmed of course we would respond appropriately.

and i 1:00 p.m. the treasury selling $13 billion of 20 year note. is that bid going to be sustained after such a big rally? i love what you say which is that people didn't like it when the yield was 5.3 percent but they will love it when it is 4.2%. so how much do they flood back? jonathan: you get to five, you are scared it is going to go to six. you get the four, you were it by drop to three. it is just the psychology of markets every single time. tom: the heart of this is fear of missing out. jonathan: that is what i was told. are you doing live coverage of that auction later on? tom: is it the last auction of the year, please say yes. jonathan: this is your last chance. tom: who buys a 20 year piece? jonathan: there is not much liquidity in the. lisa: that is the reason why people are watching it.

it is a smart question, tom. head of derivative strategy joins us now. let's talk about stocks. they question for us is just how one-sided this market has become. you've got a great read into that. how one-sided is this market now? >> it is pretty one-sided. when we look at the auction sentiment, it is essentially saying the same thing. you're getting these dynamics that we like to look at. folks actually still do feel that foam oak, which is interesting because from a positioning perspective, a lot of people have already jumped in the pool. when you look more nuanced they are getting into areas which is essentially saying the market rent is going to widen. that is where we are starting to see that auction. tom: there is a place in sheldon

ladenburg regan halfway through the book in your head is spinning with greek letters like vega, theta, sam r.o.e. and the rest. does your world, is it cohesive now, or is it a jumble given these seismic moves we seen? >> that's a great question. it is probably the one that keeps me up at night because the technical factors in our market are quite real. one thing we've written about a lot is volatility suppression. because of the way the market has traded, folks are really into getting yield enhancement, getting equity income, so there is a lot of overriding in the market and suppressing volatility. we all know that technically, the question is does the party stop? i think most folks think it doesn't stop but equity strategists like myself remember 2008, 2018, march of 2020 and

that has always been the question of whether those dynamics start to break. lisa:lisa: do you think this is a serious risk factor being built up because, as you say, the market is so one-sided? >> the way we are set up in the market right now isn't the same as a february 2018 where we had those, it is not the same kind of trade. i think what could be interesting next year as part of the volatility 2020 outlook is if we believe there is substantially more upside in the market, that is all it could take in the sense that why do you want to pack your yield if you believe there is substantial upside to the market? however, if you go with wall street strategist targets, another 10% only, the trades do still make sense. jonathan: i just want to squeeze in one final question about how you think about the world. there a belief off the back of the moves the pre-pandemic

market conditions. for the economy as well. very low interest rates, stable inflation. amy, you believe that we stick around at a higher volatility regime. do you still believe that going into next year, and what drives that relative to what we used to see pre-pandemic? >> it is so interesting. i think one is the fact that look, we are still not going to get rates to zero. rates are likely to be cut next year, but the actual rates regime is going to be higher than pre-2020 and where we looked at a stretch of over a decade of zero rates. and historically when you look at the kind of political purview , election years tend to be higher volatility. we just got the colorado ruling this morning which i think is going to turn out to be an extremely interesting situation.

and three, i think the market has been very complacent pricing geopolitical risk. i don't blame the market, look what happened with russia and ukraine from an volatility perspective. but i do think there is still ongoing geopolitical concern that has not been addressed. the question of any of these unknowns unknowns change heading into next year. jonathan: thanks for the update, appreciate it and enjoy the christmas period. on this high volatility regime, i also want to talk about the politics as well. we all know canada, we know what is on the horizon for a lot of market participants. they just don't know what to do with any of it. lisa: we don't even understand what the risks are going to be. a deficit concern, geopolitics concern, just in terms of political uncertainty concern. is that a problem in gridlock is usually embraced by wall street? jonathan: is it a problem? lisa: i don't know. everyone just knows it is going

to have volatility in impact, we just don't know what it is. next year is going to be fascinating. could be massively volatile. and given what we are seeing, to see the latest overnight in colorado, a supreme court coming out there to disqualify a presidential primary ballot, just a huge development for this country. jonathan: time for a huge respect for experts to get those of us like me who are not experts. what i would say is it is 2024. does it have the debris of the pandemic? and that is the question i don't know. a lot of the angst, the getting it wrong was a pandemic follow-up. do we still have that here? i've mentioned this before, my other mysteries china. i think china is just the wildcard. jonathan: without a doubt. equity market negative by 0.2%.

not much moves here right now, no drama, but i want to talk about china. beijing will reunify taiwan with mainline china but the timing is not yet been decided current and warmer u.s. officials. that is a remarkable story coming out of nbc this morning. tom: it is, and again it goes to the tensions that are out there. i'm going to go back to micro tensions, a microcosm of little decisions. for example, in the eastern south china sea on a daily basis, the philippines navy is marching up against the chinese navy. there are these little micro events wrapped around this maximum event of taiwan. lisa: if this just sort of to reiterate how we can understand exactly how to price some of the foreign policy risks attended by

a dozen american and chinese officials that china's preference is to take taiwan peacefully, not by force. is this a warning sign to the u.s. or a willingness to wait until this is something where people can get on board? jonathan: it is quite a story. more on that in just a moment. your equity market, negative zero .2% on the s&p 500. live from new york, good morning. (sfx: stone wheel crafting) ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently.

it still does. what can you do with spy? ♪

>> these were nuisance attacks as privately described by the u.s. government until a couple weeks ago. now they are much more than that, they are significant, durable threats to shipping through the red sea. and to the military vessels that accompany them. iranians are the de-escalation risk.

they were to get involved or be involved by the israelis directly, then you have shipping being disrupted for a long time, energy flows being actually disrupted. jonathan: that was the view of the eurasia group founder warning of the escalation risk stemming from the attacks in the red sea with whom are reporting the u.s. is way possible military action in response. good morning, plenty of news flow as we go into the holidays. your equity market -0.2%. yields lower by four or five basis points. a rally this morning. inflation data out of the united kingdom coming in much lower than anticipated, sparking a rally in the u.k. which spills over to treasury market as well. allow me to get you up to speed on the latest news. developing story out of nbc, the lead paragraph chinese president xi jinping bluntly telling president joe biden during their

recent summit in san francisco that beijing will reunify taiwan in land china, but the timing is not yet been decided. tom, this according to three current and former u.s. officials. tom: you can take it back to speaker pelosi's visit which was controversial to say the least, but that is the narrow here. take it across 10 years or 20 years or 50 years, and there is a deep-seated linkage here between the united states and taiwan that is centered on verbiage. when is it going to be more than a verbal soiree? jonathan: the timing undecided, preference is peaceful. we have to talk about where we are currently. the backdrop for the international scene at the moment is incredibly fragile. the war in ukraine, the war between israel and hamas, two proxy wars, one against russia and another against iran. and now that story drops from

nbc. these other kinds of things people are very, very concerned about. the way america responds in ukraine specifically could set the tone for what developed here over and taiwan. tom: this shift here is also from tpp from quadra basis across the philippines north-south to reaffirm a pacific rim placement. that is a fact that is going on right now as we speak. lisa: this comes down to the question how much bandwidth does the u.s. have and how much desired of the u.s. have to get involved in international conflicts that they think might strategically benefit them? that goes to the question of what happened to ukraine, what happened that israel and gaza. increasing aggression by chinese authorities. tom: terrific news from china to colorado. her head is spinning as our heads are spinning and what does

she do? she turns to the experts including on china. a new relationship with china over taiwan. >> i think it is going to affect the global economy and one of the things we will have to watch out for is tech stocks in particular because they are the ones that are really counting on taiwan and these semiconductor chips. we've seen the biden administration make a lot of moves over this past year to try to bring a lot of that manufacturing of semiconductor strips home, but we are still very dependent on china for that and for things like everyday people use, which is the iphone. lisa: how much do you see a weaning of the desire on behalf of congress to really take action on the international front? i say this as he put into perspective the lack of a bill getting past for additional ukrainian aid, questions around whether israeli aid is going to be conditional, and also whether there is going to be aggression,

actual offensive aggression against the militants? is there just a reluctance on the part of congress members to engage? >> i don't know if i would save reluctance. i would say the border has become one of the biggest political issues on capitol hill, and what republicans are saying is we want to see some action on the border before we will actually unleash more funding for ukraine, for taiwan, for israel. that is really where we stand on capitol hill right now. lisa: that said, how much is it just another sign of dysfunction that you can't have one conversation without the other, that immediately come located bill rather than a simple, narrow one? there was a story in the times about how there were 724 votes in the house and only 27 laws enacted. how much is this just another set of dysfunction at a time with serious international concern? tom: what lisa just brought up

is stunning. lisa: i will say that the american people are getting frustrated. we definitely see that in washington but we are going into an election year. i can honestly say that i don't know if i think it is going to get much better next year. it could potentially get worse. tom: this is so important. say about the legislation success of this congress. lisa: this from the new york times that there were 724 votes in the house of representatives. there were only 27 laws enacted. this gives you a sense of the inability to get something done at end the crucial time. you have people warning if ukraine does not get aid, russia's going to win. you hear vladimir putin talking about that and then there is the latest issue with xi jinping. this raises the question where is the urgency, is there a sense of need to really get on it in washington, or is it sort of

another political football? >> to jonathan's point, there is a growing sense of urgency in washington about all of these fires that are popping up around the world and what that could mean the u.s. economy and u.s. democracy. but the other thing we have to think about is if the stalemate in washington something that in some ways, investors like? if washington is not going to do anything, they can plan in some ways. sometimes certainty around nothing being done can be helpful for investors. >> completely unfair question reporting on supreme court this morning. i'm going narrow here, that this will be incredibly narrow, a colorado decision over the overreach of state judiciary. is that where greg stohr is in washington? >> greg has a great story out that essentially says the supreme court is looking like it is going to be in friendly pivotal next year when it comes

to trump's legal cases colliding with the election. that is something we are really going to need to watch and we are going to need to watch where voters end up calling on whether or not they want the courts involved in some of these issues or they want them to stay out of who is on the ballot or who is not. division, it is by design. it is meant to be playing out this way. would you call it dysfunction? >> i think at some times it looks like dysfunction because we had so many public speaker five for example this year on capitol hill, which was unusual. mccarthy being ousted and then we had a really hard time getting the next speaker of the house. but i think going into next year we are going to have to see what americans give congress and also the other big thing hanging over us is dead. the american people do realize we have been spending a lot of money. congress is looking at the debt, markets are looking at the debt,

something that was going to come back next year for sure. jonathan: just on the debt situation, we've rallied from 5%. the problem goes away. i don't believe the problem is going way at all. we all know the trajectory for the deficit is just unsustainable and something needs to be done about it. lisa: january 19 i think we shut down again. there is another deadline in february so we get to start this all over again. you raised the question, what is the difference between division and dysfunction? it really set me off thinking about this. essentially, democracy was set up to have that division, to not get things done easily. if the united states cannot speak with one voice or a consistent voice internationally, that is one question that there is at a time of increasing international strife. i don't know the answer to that but it is a real question if

either democracy is designed to have that division and that gridlock and that was part of what was supposed to happen, what if you don't get that real voice with any consistency? jonathan: this conversation is going to continue for a long, long time. your equity market on the s&p 500, -0.2% on the s&p. yields lower, down five basis points. live from new york city this morning, good morning.

c'mon, we're right there. c'mon baby. it's the only we need. go, go, go, go! ah! touchdown baby! -touchdown! are your neighbors watching the same game? yeah, my 5g home internet delays the game a bit. but you get used to it. try these. they're noise cancelling earmuffs.

i stole them from an airport. it's always something with you, man. great! solid! -greek salad? exactly! don't delay the game with t-mobile 5g home internet. catch it on the xfinity 10g network.

jonathan: stocks are pulling back here by 0.2 5%. no drama after the tremendous gains we've seen in the equity market over the past couple of months. record high on the nasdaq 100. the s&p 500 not too far behind. when you hear headlines like that you get carried away that it is all tech you don't see the participation growing even reaching the energy stocks. lisa: this is the story since october, the broadening out in the rally in small caps. the bread that continues to broaden given this momentum and we have seen the head fake again and again. how many times have leaned into

small caps and get burned? jonathan: i've seen that in europe but the dax, the cac. we are calling it in everything rally because it is stocks and bonds and fixed. the to at 4.37. the downside surprise earlier in the u.k.. tom: it shows the convexity, the acceleration, the overreach of inflation worries in the u.k. coming with a vengeance. different than what we see in the u.s.. jonathan: the bond market moving through the foreign exchange, the pound versus the dollar. we are -.6%. lisa: and people pricing out

rate cuts for the bank of england. when is disinflation a reason to cut rates? but maybe not by five times, six times given the region? jonathan: were not discounting what they have to say. but the data has come out against the hawks. lisa: longer-term inflation expectations are not on board and longer-term expectations coming in closer to 2% over the past few months. given fields of this feeling we are headed back to where we were before the pandemic, kumbaya, soft landing. tom: that's the 2020 for outlook? kumbaya? jonathan: the u.s. considering strikes against who the rebels.

meant to protect's ships in the red sea. the level insurance coverage has jumped to 0.25 and earlier this month it was 0.1. lisa: a ship that would've cost $100,000 to ensure with 100 million of cargo now cost 500,000 to ensure. how long would routes have to be to avoid going through the street? how much are companies planning for this? changing routes and adding expense? tom: with my limited knowledge here this is all about saudi arabia and their relationship with yemen and the answer is, watch saudi arabia do what it

will with their allies. jonathan: they have failed to reach ukraine a. biden requested six billion and mitch mcconnell says were committed to addressing the needs on the southern border and confronting threats in israel, ukraine and pacific. the situation with israel/hamas and taiwan. developing in the last 20 minutes. reports from nbc that the chinese president told president joe biden during his summit that beijing will reunify taiwan with mainland china but the timing is not been decided. ukraine, israel/hamas, and what

could happen with taiwan and the southern border and you have to get everyone to agree on these issues going into next year? lisa: our competitors are using this to an advantage. that's one of the concerns we hear vladimir putin saying he has one when a time when ukraine is losing support from the u.s. and european allies. you hear that with the ho uthi militants. jonathan: i would like to know the response to the white house about the story out of nbc. did that happen in what'd the president say back to the chinese leader if he said that?

tom: it will be folded into the election. you wonder if it will be a geopolitical election in the rulebook says it doesn't play into it but i wonder this time if it's different. right now kristina campany joins us today the global debt senior equity investor. you stay at 60,000 feet how does that view devolved into what bonds and equities are doing? kristina: the fed painted a picture and asked the driver of central bank policies, the fed is still the big driver. i think the fed message is we are getting a lot closer to a soft landing in the policy makes

has to be adjusted to keep us out the soft landing. tom: what's your duration 6, 7? kristina: shorter 3, 4. tom: what's a consensus on money fund flows with your duration? kristina: when we look at these markets we are priced for perfection, 150 basis points in terms of cuts next year. duration feels a little stretched but the same way risk assets look rich. opportunities in fx, the curve seems out of whack. you should have a steepening bias in the u.s.. lisa: all i can say is i want to talk about the whatever.

it's not money market funds, what about longer-term debt makes a concern? are you worried we are not going back to a pre-pandemic world? we see inflation expectations coming down and a feeling that the fed is declaring for three without declaring the three? kristina: it's interesting because we have had all these fed speakers trying to push back in the markets not listening. it's hard to look at powell's performance on fed day. you had the statement in the press conference itself and everyone seemed to lean dovish and it was a clear message. i don't think anyone is looking back saying we need to walk this back. there were always be pushback but he has taken out the details on both sides. inflation expectations are coming down but it is been very impressive how inflation markets

even when we were riding high, tips markets were well behaved. expectations believed that the fed could do this much to participants display. -- this may. may it really was transitory and it was just the longer transition. lisa: do you buy into that? if it's rich on the lawn and why not by 10 year yields? kristina: you have a lot of supply and some of the dynamic here, it's less of an inflation story and more of a curve story. should the curve normalize in both ways that we should have hired lung bid rates because you have to price in premium from fiscal is supplied? with the web taking -- fed

saying inflation has come down in the labor market slowing down without job losses, we want to normalize. that leaves you with risk at that inflation can be higher. you need to have that term premium. duration of what we have seen the last week as a flow story people are chasing. a lot of idiosyncratic things are driving it short-term. tom: is been price subfield down after of three year carnage. i guess you have to go through a resistance line to say it's fixed income bull market? have we gone through that resistance line of three years? have we broken out to bond nirvana?

kristina: you have taken out the tail that the fed needs to get to 6%, 7%. tom: but is suitable market? kristina: i think that's the backdrop but from the levels we are at now i don't think duration as a standalone is very exciting. i think there are local market rates that are more exciting. jonathan: we have had a one-year move in two months. i look at a year and outlook for next year, they were looking for 370 500 10 year. that sounds like a massive move it 5%. doesn't 375 sound like a big move?

you get to december 20 and we are at 387, thus not how this works. lisa: you have to talk about the volatility baked into the 15 basis point move. you have to imagine everyone is rewriting and goldman sachs saying, just forget it. jonathan: 5000 after looking for 4700. 47 hundred sounded bullish at the end of october. and now all of a sudden you look into the downmarket at 4700 year-end market. we are this far away from all-time highs. i feel for you. it's difficult to keep up. just keep redoing the year end outlook before we get to year

and this year? lisa: something could change. not just the data but how the fed response to it. that change was material enough for people to shift their outlooks. they gave a green light to all the bulls so why not get more bullish? then you have to worry about the effects of bullishness leading to bearishness. jonathan: we are negative by 0.2%. we talked about this yesterday. 12 months ago looking out 12 months, the average call on wall street for strategies for the s&p 500. the question was where would we finish the year in 2023. the average was at 4000. we are 20% above what people thought we would finish year in this year. how much weight should we put on

year end outlooks when we have seen the move over the last two months? tom: they help you frame your belief. lisa: it gives you a sense of where the balance is. the potential risk is that things overshoot to the upside and that blows people out of their positioning. jonathan: we have had everyone run from one side of boat to the other. tom: i like that, well said. jonathan: tom sally with fixed futures coming up. ♪

>> this is not an accidental infringement. this is a deliberate taking of our intelligent property. apple internal documents new their product wasn't good enough to be used medically. these people have been caught

with their hands in the cookie jar and instead of being embarrassed they are blaming everybody. jonathan: i love the story i think is brilliant. what a gift from the regulator but it comes in on christmas day. we will come back to that in the moment. that was the patent dispute over smartwatch technology. we believe they will be the first 4 trillion market cap with the growing iphone business on the heels of what we view as a new tech bull market. apple is poised to have a strong year ahead. tom: he's been all over the media, neil data is my economist of the year. on the sell side and getting the

magnificent seven right. i want to go to the morning's valuation. you have the service sector up to 1.5 trillion which is 257 per share. what is the total sum of the parts? is it above 257? >> is closer to 300. tom: services will be the key over the next year. >> i think it will be services driven. i do think what is starting to happen now in terms of the china issues, you see unigroup,, in cupertino, they're popping champagne and getting ready for a phenomenal year.

tom: are you running a revenue growth story or a profit-making story? apple is running this thing for profit, right? dan: that is how they have done it but the difference to your point, it's the monetization. in the thing is, what is starting to happen is if you look at the services piece the average apple customer is 20, 20 5% penetrated from the services perspective. i believe the big thing is the ai app store they introduce over the course of the year. jonathan: before we get to the shiny object let's talk about

the iphone. if i told you what revenue was and where it would be, would you have said the stock was up 52% year to date? dan: that part has been an upside surprise in terms of the stock. i think the difference rests on the services business in the margin story. from a unit perspective, there has been choppiness over the past quarter or two. if you look at the margin drop, they have been able to expand margins in this environment. that just shows they have control over the system from a chip perspective? , this year they were able to get the growth multiple next year the renaissance of growth happens in cupertino on double

digits units. the china story, despite all of the worries and many yelling fire in a crowded theater we will see china growth. lisa: i'm wondering if you see growth coming from the united states or of that's international growth? where to succumb from in the competitive landscape? dan: 70% of it is u.s. and europe. 100 million iphones in china have not been upgraded in three years. the actual penetration and a great opportunity. our asian checks showed no cuts and i think that's important. jonathan: you said exactly the same thing 12 months ago. where's this upgrade super

cycle? dan: to that point, the upgrade cycle has been happening. jonathan: but you say is some reason that these phones have not been upgraded. dan: the differences these last 18 months, may be the upgrades have been at a slower pace. but they've made 100 million new iphones so maybe we've been right for the wrong reasons. the upgrade opportunity has been a little more subdued than we would've expected but on the upside, the android market share gains have been in flux. jonathan: i just want to get to the reasoning. the stock is up 52% year to date. we talked about the watch.

telling father christmas he can't deliver presence until the 26. what does that actually do? dan: when the red phone rings and it is coke in cupertino. jonathan: you think that makes a difference to the regulator? dan: i think apple just brings jock you see it with big tech. within europe, and the u.s. there is a recognition where you don't want to poke the bear. to actually do this in the holiday season to go to december 15 would've been much more drastic than on christmas eve. they will continue to have patent issues on the health care fraud. lisa: is this really a proletarian issue when they're charging $1400 for an iphone.

does not become a pressure point of how the margins can keep expanding? dan: from a chip perspective they own their own ecosystem. that's a huge part of the opportunity in terms of getting margins. from a regulator perspective, i am more focused on cappuccino than regulators in europe because that continues to be noise not real. jonathan: you sound like a man who has up 52%. tom: dan ives is dressed like a piñata. they love going after you. 2019, there was a 29 percent margin, even as that 30% where is it in four years?

dan: that's getting to 40%. as services becomes a bigger piece that will be double the hardware business. if you're looking at hardware is 2, 3 years. tom: 40% margin on ebita? dan: this is when the continues to move in that direction. jonathan: what is an ai app stock? dan: it will be health, fitness and ai app that apple will have. it will be an option on the app store and that is the heart and lungs of the what. tom: you have day-glo pink sneakers, the lime green pants in the lavender on top.

he looks like a piñata. jonathan: he was wearing leopard print other day. it's aggressive. dan ives, congratulations sir. you were bullish and you were right to be. i think lisa gave you a round of applause there. dan: a little golf club? jonathan: lisa is like yeah, stocks are up. lisa: no, i appreciate it. shut up. [laughs] jonathan: 20% and a couple of months. lisa: really? jonathan: we will break down the stock market for you. ♪ ♪

♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪

>> the fed has told us they are not going to let this economy we can in any material way. >> there is a lot of chest thumping. they will have to push back a little bit because it's been an enormous rally.

the fed's credibility will rise and fall with price credibility. >> we are not out of the woods and we have a lot of work to do. this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: on radio and television, on radio on car play. an interesting economy at the end of the year. futures are down 10, it's over. lisa: here is the issue, we are looking at a market that is reaching towards all-time highs and dealing with the broadening out where nobody is pushing back. i have not heard one fund manager leaning hard against selling everything and going to cash.

tom: what has changed here, i'm serious about this, with international relations. we were all looking at a map of the red sea. concerns about transport and the red sea, maybe there will be a new transport, there is a geopolitical overlay did this market that were ignoring. lisa: there are very specific read through's and taking the issue with the red sea in particular. over 100 container ships have been rerouted. insurance prices has quintupled -- half quintupled. how do you price this into a model that assumes disinflation

with supply chain interruptions? tom: when you go over to the wheelhouse of what we do in finance and investment. the u.k. giving the gift that keeps on giving with strong disinflation. lisa: that has given fuel to the bond market. the downside, general mills came out and downgraded their full year forecast. those shares are down 18%, they are being punished at 4% down this morning. how much is this a catalyst to the movie market? tom: jim caron will join us for morgan stanley. futures said -10, the vix under

13 at 12.7. lisa: yields are down five due to the downside surprise in the u.k.. tom: with inflation at 2.2, the inflation adjusted yield has really come down. jim caron is an expert at cio at morgan stanley. when you talk about naughty or nice and real yield. what is the level that keeps asset inflation going? jim: where the fed wants to go with this, i want to talk about

the real policy yield. i think that number is around one .5%. lower than what it is today. if we look at nominal fed funds and u.s. inflation is at three, that means real policy rates are at 2.5% which means the fed could cut 100 basis points to get neutral. there are six rate because priced and but 100 basis points is just getting to neutral. they don't start easing until they start doing more than 100. tom: i did some fancy math on the standard deviation move, we have gone from accommodative, grossly accommodative. there are degrees of freedom seem to have shrunk because the

market statement on accommodation. jim: when we look at financial conditions, it's a way for the fed to gauge how their monetary policy is impacting the broader market and there should be some feedbacks to what their policies are saying. the way i think about this is, if the markets are rallying that's ok with the fed. they don't have to push back on a rally because they don't like a rally. that's not their job. what they are saying is can we get this rally and can inflation also stay low? if the answer is yes to both and they don't care if the market continues to rally. they don't feel like they have to push back on that. the look through to inflation going forward with the downside surprise to inflation in the u.k.. the fed will be ok with higher equity prices and tighter credit spreads and easier financial

conditions as long as we don't get inflation starting to move higher. lisa: let's park that for a second the idea that disinflation in goldilocks and the fed just cutting rates surgically to keep in tandem with where inflation is going and going to the fundamental economy and earnings. how much is the real risk that people are not talking about? fedex disappointed was shares lower by 12%. general mills retracting their full year forecast downgrading it in response to lower sales. those shares following. is this the theme of january people are missing? jim: that's a good question because effectively, we have to look through this. if the unemployment rate starts to rise. when we talk about earnings and missing earnings.

at what point do these companies start laying workers off and at what point does that boost the unemployment rate? what we are seeing at this point , the labor market remains relatively tight. yes it is softening but were not seeing signs of a collapse. ultimately some of these things will be cyclical. if we look at the broad market, the story for december is not the supercharged seven stocks are doing well intact. the story for december is the market is broadening out in the other sectors the other 493 stocks, are actually participating in the upside. it's not going to be a straight line, it will be volatile.

missing earnings this one thing and that can be cyclical. but as long as it does not affect hiring and wages and things like that to the degree it creates a deeper downturn and loss of consumption. that's markets being markets. lisa: are you telling clients to go all in because they could miss on the upside next year? jim: i'm not saying that. we have been bullish and overweight inequities all year. towards the end of this year we are starting to think about reducing that and moving towards neutral. we haven't done it yet but that's probably our next step. everything we thought about in late october, november has already come through by the end of the year. we have a 50% rally across the board inequities. credit spreads are a lot tighter, 10-year gilts or below 4%.

-- 10 year yields are below 4%. we need another catalyst to go higher and i think that's neutral. there will be dislocations. tom: the cosmic questions from recovering from the bond tobacco. when you were studying physics, you go to caltech to get decent weather in aeronautical engineering. are these glide paths of stability that indicate the dividend growth as a proxy for yield forward. that back and forth between your world of bonds and equities as a yield alternative? is that possible? jim: i think it can be possible but i don't see it is highly probable.

the thing i'm concerned about the most is the 2024 will be a very rocky year. i know we are talking about glide paths and soft landings. we may ultimately get a mild slow down or mild recession characterized as a soft landing. i think it's a dangerous landing. it is one of the reasons why we need to engage in a balanced portfolio approach. have fixed income, equity, growth and value. lisa: before we run out of time, what you mean by a dangerous landing? jim: there are more geopolitical tensions and risks this year than last year. we have china, taiwan, the u.s. presidential election. i think the markets -- and forget we have 2025 with the trump tax because do.

we will start to price the outcome of that in and that could swing the markets from an earnings perspective. let's just enjoy this calm because i think it's going to get a lot rockier and a lot more in certain. tom: jim karen there from morgan stanley. futures are -10, and s&p we are down .20%. lisa: the key question for people who already wrote their outlooks, do we revise them or lean into them saying it already happened so we just bump up and

down to figure out the new narrative for next year. tom: i'm going to go back to something i mentioned to ours ago. here's the headline from the last 24 hours. homelessness is at a record high in the united states. it's not 1937 or the panic of 1907 or 1870. the financialization has led to a pop from the stimulus. lisa: to take it a step forward. let's talk about the generational divide. americans over the age of 70 hold more than 30% of the country's wealth.

you see that wealth disparity fueled by homeownership on the backs of a different interest rate regime. tom: i was talking to john tucker. he still care retire he's going to be here until he's 85. lisa: i love when you troll random people. tom: who can you hire they're all looking at me? futures are -10, good morning. ♪

what do you see on the horizon? uncertainty? or opportunity. whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today.

>> the red sea as a conduit for 10, 15% of global trade. the percent of grain train and 10% of global seaborne oil trade. these attacks have to stop. they are not acceptable. we will do what we have to do to

counter these threats and protect the ships. tom: the attention to the navy with admiral john kirby. the u.n. national security council spokesman and talking about the geography that we think we know. the red sea. extraordinary to see the suddenness of this. lisa: and the willingness to have another proxy war with iran being fought right now and gaza and how much of this is willingness to engage. tom: futures are -10, yields coming in a solid five basis points from the united kingdom disinflation. do we say oil is inflated --

elevated? lisa: a little bit of a lift but people are surprised it isn't more given that 100 cargo ships have been rerouted as a result of the conflict we have seen in the red sea. tom: this goes back to his phd, it's not those who talk with those who do. the great doers and international relations is aaron miller senior fellow at the carnegie endowment. you have written about the stretch of see which to us is romantic, biblical. what is distinctive about the red sea in yemen? >> it has turned into a chokepoint. you referred to the regents neutrality in 57 and 67.

you are now in the position where an extremist, ragtag militia driven by ideology, the houthis. they control part of the country which contains yemen. rather than being holy on subsidiary of iran they are willing participants. they are both shieh and now, drones are being manufactured by the houthi. they are now an

international actor on the international stage. tom: saudi arabia with some ford -- form triangulate our interest with these rebels with saudi arabia and riyadh. aaron: the saudi's do not want an escalation. their plans have been undermined by regional instability caused by the israel/hamas war. they want to extricate themselves from yemen. they fought the houthis unsuccessfully. airstrikes killed thousands of yemenis. the southeast do not want an issue.

you look at the maritime task force that secretary alston tried to assemble. the only regional nation that agreed to participate is bahrain and that's considered a consolation prize given their relationship with saudi arabia. but the new york state seems very reluctant to suppress a group that is wanting a short range missile. this will be a huge problem because our options here are not great. in terms of deterrence, we are past that. houthis don't seem to be able to be deterred. lisa: the middle eastern allies

are not getting involved because of the war between israel and hamas. is this iran taken this opportunity to direct the houthis to do this. to exploit the weakness between saudi arabia and d.c.? aaron: someone argued that the terror search was a pro iranian effort to undermine a relationship between the saudis in the u.s.. we were prepared to pen a mutual defense act to facilitate this normalization process. we have not done that since we amended the american japan treaty of 1960. this was part of a rants calculation to chill that

relationship that was emerging and ultimately undermine it. the houthis had the same motivation. lisa: how much does this add to the urgency of getting a resolution to the war between israel and hamas that seems to be entering a new phase but does not seem close to a resolution? aaron: it's now global trade, supply chain, christmas. a three week delay in bp has pulled their red sea operational trade from the region. you have to go around the cape of good hope that adds another three weeks to a month. this could cause other private companies to pull out of the red sea trade. i don't think it will affect

israel or hamas calculations. tom: if we decide to become more offensive against these terrorist, these houthis, is that it decision of defense? we decide to become moreis it decided at 1600 pennsylvania? aaron: 1600 pennsylvania. the options are already on the table. you can have armed escorts but we don't have enough war ships. you could have anti-drone bubbles but every time these launch we respond with interceptors that cost 2 million. bubblesthe pinna column is alrey concerned about the expense of waging war. the only real deterrence would

be strikes against houthis assets in yemen. i don't think there is a drive on the part of the administration to go there. tom: we have to leave it there, thank you so much i can't say enough about his writings over the past decades. i have no idea how this falls into oil but when we go back to when we were kids and we imagined a boat going around the cape of good hope rather than going through the suez canal. that scene in lawrence of arabia where he is coming off the desert and you hear the ships horn and that's the romance of this away from the risks involved. lisa: what he said about why

other middle eastern allies are not weighing in and it's because they are concerned about what's going on with israel and hamas. this is a jigsaw puzzle coming together in a complicated soup of geopolitics. tom: working fiercely in the bloomberg control room. they are adapting and adjusting to the news flow this morning. on taiwan, michael hirson. from new york, this is bloomberg surveillance. ♪

(jennifer) the reason why golo customers have such long term success is because we focus on real foods in the right balance so you get the results you want. when i tell people how easy it was for me to lose weight on golo, they don't believe me. they don't believe i can eat real food and lose this much weight.

the release supplement makes losing weight easy. release sets you up for successful weight loss because it supports your blood sugar levels between meals so you aren't hungry or fatigued. after i started taking release, the weight just started falling off. since starting golo and taking release, i've gone from a size 12 to a 4. before golo, i was hungry all the time and constantly thinking about food. after taking release, that stopped. with release, i didn't feel that hunger that comes with dieting. which made the golo plan really easy to stick to. since starting golo and release, i have dropped seven pant sizes and i've kept it off. golo is real, our customers are real, and our success stories are real. why not give it a try? it's an amazing thing

when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. we have been able to reach over 100 million people impacted and affected, and at risk of hiv. the rocket fund takes all of the work that we're doing, all over the world, and looks at the most effective ways, to get resources to them, to get services to them. the idea that we have saved five million people's lives, it's overwhelming. it's everything.

♪ tom: "bloomberg serveillance" going to get to it quickly here. jon ferro starting his christmas shopping. lee says here with me, waltzing through a wednesday. we are going to get to that in two seconds. tom l.a. to come up with -- but first we are going to crowbar this thing, we are thrilled to tear him away from you. michael hersen, head of the china research. where you surprised by the nbc report of a discussion between the two world leaders over the future of taiwan? >> no, not particularly surprised. it was consistent with what i heard from the meeting. i obviously wasn't there so i can't speak to the details, but i think the notion that the xi

jinping is determined to pursue reunification with taiwan is not new. i think in some ways, it was equally interesting that he told u.s. officials according to this report that there was no set timeline for china to do so. i think that is consistent with the view that while this is a really important issue, beijing continues to exercise what you could call strategic patience on this issue. that is important because if that changes, it does, i think, increase the risks around taiwan. for now, i think those near-term risks are manageable. lisa: there is this question whether china is going to take an opportunity at a time of the u.s. is involved in a two front proxy war with with russia and iran to try to engage in this more aggressively since it is already difficult for the u.s. to commit exactly how much they are going to win on these other conflicts. >> i don't think we should dismiss those kinds of concerns. we need to be realistic about

not mirror imaging in terms of how china think they are going to think about this the same way that we do. at the same time, we need to keep in mind there is a fundamental calculus at work for beijing which is right now, it would be extremely risky even with the u.s. tied down, so to speak, with other conflicts, to pursue reunification through military means. beijing continues to feel the time is on their side. that timeline is not incident -- infinite, but i think the notion that beijing would take this kind of gamble in the near term seems to me probably not worth it from the standpoint of china's leadership. lisa: what is the motivation to try to take taiwan at a time when there are some real clouds over the economic outlook for china, where they are trying to win back u.s. and other international businesses, and where xi jinping is dealing with

a host of issues around the housing market that are also challenging? i think if they made this >> all of his broader ambitions for china in terms of economic development and its place in global leadership. so i don't think that the calculus is worth it for beijing. i think the risk is that this could change over time. beijing could decide it is less risky and more urgent for them as time goes on, but i don't think that that calculus is going to shift such as to argue for a conflict over taiwan anytime soon. we should add though, we have a very important election coming up in taiwan, a presidential election which is going to have an important bearing on these issues. tom: that is right where i wanted to go. thank you so much for joining. abruptly here, our stereotype is the pan-blue coalition, they lost in 2016.

the domestic politics of taiwan, are they uniformly for america and for independence or is there a nuance there that beijing can play off of? >> there is a nuance. i do think fundamentally voters in taiwan want to maintain the status quo. the difference between the two camps really is what is the best way to maintain that status quo, keeping china at arms length or engaging with china anymore close political economic relationship? >> thrilled that he could join at this morning. we move onto the american domestic politics, chief economist here as he tried to get our bearings. i have to go to your wheelhouse. the claim here is simple. wage dynamics, wage analysis, and the answer here is when does

wage inflation break? >> i think it is starting. i think companies have a choice. if you are potentially on the verge of compression, which we talked about this, i think there's three things you could do. this is the basic playbook. you could cut back hours, you could cut back wages, and if those don't work, you go after headcount. i think there is more work to do on the wage front and we are seeing that and i think that will persist, but you can't have a situation where wage pressures or wage growth, i should say, is running at a faster pace than revenue. that is not sustainable. something is going to continue to give and i think it is going to be wages. lisa: you must be one of the very happy people seeing the rhetoric change from the federal reserve, that they should be cutting rates and that you do see weakness coming down the

pipe and that disinflation has been very much in the fore. have we brought forward all of the potential good news that we could have potentially gotten next year? >> i worked with jim for a long time and i was totally disappointed that he wasn't here. i think that the one thing that we've continued to say is, and thank you for the plug, by the way, look, i would say this. you get through sort of this uncertain period, the fed is going to cut, what is going to happen from growth perspective, and let's say we are right, that growth does slow down to 1% which will feel pretty recessionary for some people, which is the unfortunate reality that unemployment is going to rise. but what happens on the other site of that? how do you get through that?

what is the catalyst to get to a higher plane from growth perspective? truthfully, we just don't see that. the productivity story is a really interesting story that will come to pass, but what i think about the next year or two, i don't really see any meaningful catalyst to break us out of what could be a really sluggish growth backdrop. lisa: so not stagflation but just kind of sluggishness that is going to hurt may be more than people realize, is that your sense? >> i think that is a fair way of characterizing what could be the next couple of years. again, we put a lot of hope in this idea that there is this productivity dimension out there that i think is going to kick in. i guess sort of the debate that we have is how quickly will it kick in? once it does, great. i don't know what gets us from the bridge from here to there.

tom: with the new productivity, let's set it up as capital labor and something else we don't understand like red sox baseball. labor deepening, we have the haves and have-nots. we were talking about record homelessness around a boom america economy, whatever amount of gdp now says, and the answer is there is a wacko labor deepening going on in productivity. what is it? >> this is a really important idea because when i think about the unemployment rate rising, which is what we expected, the fed expects and a lot of people expect to happen in the coming year, it is worth a million jobs. where does that get hit? when we go through all of the employment sectors, there's really only a few sectors that we see that have real imbalance. one of them is retail. you could see some real damage in the retail space. you're talking at least a few hundred thousand jobs. as a corollary to that, transportation and warehousing

get hit on the back of this. they are very related. those sectors alone, you could see up to half a million jobs. that to me is the problem. that to me is the challenge. you are going to see this rise. if there is any good thing about this, if you think about the retail space, you can see some transition. you could season transition from retail workers going in to something like leisure and hospitality. from a skills perspective, they are roughly equivalent. i think it is an inescapable reality that unemployment rate is going to rise in the coming year. tom: i look at this end the question is folding and the shock of the yield melt up of lower yield, higher bond price and also the equity shock as well. it just sustains along the cash moving in for money markets. you're surrounded by smart guys and bonds.

what is your belief on money market fund? >> the way that i will answer that question is one thing that i found really interesting is the higher for longer narrative that the fed put out there. the one thing that i've said, and i think this is especially true when you think we were 5% and now we are back down to 4%, i think there has been an element of price discovery going on from the market, and not just from the market, but from the fed. we all wondered what does higher for longer actually mean? we've been in the price discovery mode, and i would say that higher for longer is something we actually believe in. i don't know that we believe in it at 5%. 4% seems much more palatable to us. lisa: when we talk about these complicated stew of slow growth, how much are some of the divergences we are talking about, the fact that there are two or three or five america's. i really was struck by the study showing that americans over 70 hold more than 30% of the

country's wealth. we are seeing younger people not able to buy homes in the same kind of way and their politics are very different. the fissures between the generations are really getting wider. >> here is an interesting thing think about, and i'm not making a call on this but i'm simply saying this is an interesting framing of your observation there. you keep on hearing about excess savings still which is just crazy all this time in, but when you think about whatever excess savings remains, because let's be clear, it is not in the middle and lower incomes, that is long since gone, but what excess saving does remain mostly sits in the upper income. specifically sit in the top quintile. what is interesting about that is they don't need that money to spend, they will never use that money to spend. that for investing. i could easily see a scenario where they are trying to deploy that money. the fed is going to cut rates a few times in the coming year and then all of a sudden that money could easily fund that.

tom: are we going to get in s&p call here? we couldn't get it out of greg peters. are you going to give us the equity call here? >> i'm going to follow the big boss on that one. tom: the levels here, these are futures levels. 48 .13 spx, near 38,000 dow. near 17,000 nasdaq 100. wow. down 2/10 of 1% this morning. lisa: that idea is such an interesting one, which that essentially the savings are for investment. that is the cash on the sidelines in earners that have the money, that aren't going to go and buy new watches, they are going to buy stocks. so this is the question. has that money already been unleashed to some degree, or is

there that much more to go in terms of the balance of money market vs, other investments? tom: this is back of the 60's frenzy which i just barely remember. 1999 into 2000. but the answer here is stock ownership in america. and eric any others in bloomberg on the etf high ground, the money is flowing in. the money is flowing in on individual stocks and i'm thinking of opening up an account at robinhood. everybody is loving stocks right now. that is what the chart says. lisa: does it make the economy more fragile to have a group of people who cannot spend and for dealing with slow growth while other people are looking for which stocks to buy? this is a question of longer-term fragility in an economy that might be a short-term room for people who can invest.

tom: that is the political debate and i would suggest some of it is the new immediacy of social, the new immediacy of media. we didn't have that generations ago where there was a real separation. now there is less so. these are the debates into 2024. the major debate we have is lisa needs four bedrooms in a wbs. a wbs is a wood-burning fireplace. stay with us. from new york, start shopping. this is "bloomberg surveillance."

♪ >> the consumer capacity bar is strong. mortgages are all locked in on low rates. the best asset for a lot of households is their low interest liability. the reality is a 3% mortgage as an asset for people because it means payment hadn't moved, so

that is good news. >> brian moynihan speaking with david westin of bloomberg about why there has been his optimism around housing even though mortgage rates have fallen to the lowest level since early this year, but still hovering around 7%. not exactly a great recipe for people wanting to get in. tom: what is greater that mr. moynihan's he loves talking banking nerd talk. he says i don't want to talk about the fed. he wants to talk about mortgages and i love him for that. he loves to talk about the -- he's not like jamie dimon running around running for secretary of treasury. he is worried about the christmas club account. lisa: we will get into housing in the real economy in just a second. a number economy that are getting our attention this morning, fedex, how they were disappointing in the earnings last night. shares lower by more than 11%. just a reminder their shares have been up more than 60% year-to-date but it shows how big of a penalty there could be

doing this and it raises the question if consumers are chipping as much, is this a broader macro concern for the consumer? ups falling in tandem and general mills down 3.9% after volume in sales coming in later than expected. saying that there is a more cautious recovery, more cautious consumer. the serial-buying cohort not having a good time. tom: you look at amoxicillin, a major invention. honey not euros. lisa: i was going to say lucky charms. tom: honey not cheerios saved general mills. lisa: we can all have our favorite cereal but evidently it is on the outs these days. that is one of the reasons why people have been cutting back on cereal. this gets the housing conversation, which has been so important. yesterday the data came out, better homebuilding starts, better-than-expected sentiment the day before.

how much of the senior recovery in the housing market despite the fact that yes, organ rates have fallen, but not all that much? jonathan miller who peruses all things real estate joins us here on set. are we seeing some sort of resurgence in the housing market, a feeling of activity simply because mortgage rates are no longer 8%? >> i think it is anticipation that 2024 will be more transaction volume than 2023. that 2023 with the bottom of the housing recession warehousing has been much weaker than the rest of the economy because of the spike in rates and now we are going into 2024 and maybe it will be the opposite scenario. the thing that i worry about in terms of the housing recovery is if we go into a hard recession where there is real job loss because that doesn't help housing that much no matter how low rates get.

lisa: but what is worse, the idea of a recession for the housing market long-term, a recession causing house -- housing prices to drop, or longer-term for the barrier to entry for buying a home to be so high that it prohibits an entire generation from getting in? >> there is no great answer to that because all three scenarios had significant problems. the issue that i think we aren't going to see in 2024 that is going to make housing cheaper for the generational cohort that is cut out is that we have to see a significant drop in rates. we were talking earlier that the spread between someone with a 3% 30 year fixed and a 7%, i think they have to look at that as some sort of incremental change, that the more rates go lower, the more inventory will come into the market, but it won't be

enough because rates are falling, so there will be an increase in demand. in many ways, i think we are sort of stuck even in this improved condition for 2024 that is perceived in sort of solving the problem. tom: i want to rip up the script here. usually we talked cute stuff about miami and florida because they tell me to. jonathan miller in denver, renton manhattan is $4400. everything is priced out in manhattan. it is really not funny. you with public service have taken on a committee effort with the mayor of new york city. who do we blame, and what can someone like mayor adams do about the housing crisis? >> so the mantra really is build more housing. the problem is in new york, it is extremely lengthy. it is no surprise why developers tend to be families that have

passed through their expertise over generations. it is very old line because it is very complicated and very difficult. land is at a massive premium in manhattan, less so in the outer boroughs. and so to build the volume of new product coming in, even though we want to build more housing as a market, we have a lot of not in my back yard type thing. we have zoning issues. tom: is there a religion to change the litany you just described? >> there doesn't seem to be. this is been a century-old problem. 100 years ago if you look at new york times headlines, it was the same complaint. wall street is going to continue to be an important driver real estate demand and international buyers are driving prices higher.

nothing has really changed. lisa: is that so? we still see the international buyers even amidst some of the pullback, particularly from china? >> not so much right now. the dollar is stronger so we are not seeing the sort of intensity of demand on the market especially more in the condo side that really drove it up. it is always a constant in the market and we go through periods where it is stronger or weaker than the norm. lisa: this is crucial from every point of view, the housing market in one manner or another is the linchpin behind a lot of the economic trajectories that we've seen over recent decades. from your perspective, do you think that the disinflation that we've seen, the decline that we've seen on the margins and rent or at least the stability can continue, even the backdrop that you've put out there which is a tight housing market and a lot of people looking for entry point after being locked out free year? >> i absolutely do.

rent has peaked in the summer. we seem to be four to six months behind the national housing narrative of weakening rent. and i can't see rent tightening or rising quite a bit over the next year because the reason why we've had this astronomical surge is been -- has been because of the spike in mortgage rates. if that eases because people are priced out, which is already relatively tight, and then it became astronomical. tom: here's where we are going. miller doesn't know how to use one of these so we are going to do it for him. 3900 dollars per month. i mover on 2nd avenue, the 2nd avenue of nashville. $46,800 in rent. how much of my rent should i pay , how much of my income should i pay for rent? >> in theory, 30% as a cap tom: so i've got to make

$156,000 large to get an entry rent in many urban cities. this is nuts. who is going to fix this? >> the only way i can see to fix it is to build a lot more product than we are building now, supply and demand. tom: so make the place look like east germany? this dark, dusty skyscrapers out there, is that would new york look like in 30 years? >> i don't think so because i don't anticipate the city -- listen, the city has been trying to create a significant number of more affordable properties in the rental market for the last 15 years, and has had very limited success. i don't see that really changing. unfortunately, the problem with that is that the city, like many municipalities, not just new york, are pricing out there workers. and that is not good for the

longevity of the city. tom: it's like colorado. people are driving from utah to get -- they don't live in grand junction anymore. they are over at utah at some shack in the woods coming over to western colorado. >> they are taking on longer commutes. tom: what is the average commute in new york, only you would know this. >> it just under an hour. tom: if you live on fifth avenue. i love busting your chops. you are our single worst guest. you make me miserable when you come on. lisa: i love when you come on. tom: the expert on our housing economy in america. lisa abramowicz and tom keene. is john at bloomingdale's? lisa: you didn't get the job, but he is looking for it.

i'm a little anxious, i'm a little excited. i'm gonna be emotional, she's gonna be emotional, but it's gonna be so worth it. i love that i can give back to one of our customers. i hope you enjoy these amazing gifts.

oh my goodness. oh, you guys. i know you like wrestling, so we got you some vip tickets. you have made an impact. so have you. for you guys to be out here doing something like this, it restores a lot of faith in humanity. (announcer) enough with the calorie counting, carb cutting, diet fatigue, and stress. just taking one golo release capsule with three balanced meals a day has been clinically proven to repair metabolism, optimize insulin levels, and balance the hormones that make weight loss easy. release works with your body, not against it, so you can put dieting behind you and go live your life. head to golo.com now to join the over 2 million people who have found the right way to lose weight and get healthier with golo. the power goes out and we still have wifi to do our homework. and that's a good thing? great in my book! who are you?

no power? no problem. introducing storm-ready wifi. now you can stay reliably connected through power outages with unlimited cellular data and up to 4 hours of battery back-up to keep you online. only from xfinity. home of the xfinity 10g network.

jonathan: three consecutive days of gains on the s&p 500. life from new york, good morning, good morning. the countdown to the open starts now. ♪ >> everything you need to get set for the start of u.s. trading3. this is bloomberg, the open with jonathan ferro. ♪ jonathan: live from new york, coming up, global disinflation silencing central bankers, fedex tumbling after profit mrs. estimates and wall street buses planning tepid bonuses. we begin with the big issue -- too much of a good thing. >> it has been an absolutely