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. >> good.

we will be simulcasting on bloomberg radio and tv today. stocks are trading higher this morning. yields pulled back a little bit. wti crude oil slightly over here. had been moving higher. gold is a little bit higher, 2000 $70 per ounce. we will get the latest reporting on holiday retail sales and market call. we will see the global impact on oil. brendan, i'm seeing an article.

they are continuing to reroute their ships away from the red sea. what is the latest? >> there is the risk of attacks sailing through the red sea. the latest was a ship that was attacked yesterday. they are taking the stance that we are still going to divert around africa. there is a serious risk to the crew. they are making that extra 25% -- a journey that is 25% longer. katie: this is despite efforts

to make sure that merchant vessels are put to did -- protected. is anyone feeling protected enough to go through the red sea right now? >> we had a statement that said that they are preparing to resume sailing across the red sea, as soon as it is appropriate. they aren't sounding like they are willing to take that trip. that was a turnaround from a week ago when they said they were calling on the u.s. and u.k., and other countries to provide more protection it is

still not happening. paul: who pays the higher cost? >> the cargo owners pay out higher costs. there are costs that they are charged. the customers of transport services pay those and they turn those over to consumers. an increase is not an enormous bike higher. but it is still a turnaround from the steady erosion. they really cannot make money the way they were before.

katie: it is so crucial in terms of maritime trade locked. instead, it is about time, especially when we think about how supply chains were snarled. are we going to see any backups as the ships are taking longer to arrive, or is it a little bit smoother? ? seeing hundreds and hundreds of ships. all that cargo will have to be revalidated. we will see an initial jolt. but in truth, supply chains have been pretty resilient and

absorbed even the biggest shocks. we will see initial disruptions in the coming weeks. if it gets resolved, the likelihood is that this will not leave a huge dent. initially, it will be painful, come january. paul: ultimately, who decides when it is safe? is it the navy or the shipping companies themselves? >> it sounds like the companies themselves are making this decision. there are ships going through and as we saw yesterday, they are getting attacked by drones, rocket and other things, so the

shipping companies are taking their cues from insurance companies. there is a trade-off and ultimately, higher insurance costs will dictate some of those decisions. katie: he is our trades are -- trade czar. paris new editor is joining us from london to talk about how this is translating into oil markets. coming off of those levels attached today. should we be expecting this to resonate more with the oil market, or are traders expecting this will be a short-term?

>> they have rallied against this news in the red sea. they have rallied. it does make people nervous. it makes people nervous that the conflicts could spread. that regional tension remains and makes people nervous. coming through the red sea,

perhaps it would be a target of these attacks. there are reasons we are nervous . finally, saudi arabia retains a good amount of spare capacity. if the situation were to worsen, there are responses that could make some of the sting removed. paul: prices had been trending lower. where is the market now and terms of assessing the demand? where is the sense of demand over the next six to 12 months?

>> it has been a lot stronger than expected. china was the last major economy to come out of covid. it has been fairly held in the united states. the economy is doing well. we continue to drive. i think that it has been much stronger. if the economy does have that soft landing, there is reason to expect the demand will be fairly strong. we may have more than one million barrels by next year. that is the sort of forecast that we were looking at. the question then becomes, what happens with supply? is it more than natural supply?

it strengthened the bond. that is one of the key questions. katie: shale in the u.s. far exceeded. the saudi's are the ones that were leading. they would like to keep prices elevated. to make sure it comes true, are they likely need to keep them as tight as possible? >> they agreed to cut more. the studies themselves were contributing to that. other members -- what that means is that they want to see that play out in the next quarter.

they were willing to see demand tighten. more oil in the market in the short term. they would like to see the market tighten. they will be patient and wait for that to happen. paul: we are in peak heating season here. it turned out better than expected last winter. what is the situation for this winter? >> it has been incredibly warm, wet and a windy winter. it does not put a huge strain on demand. to be of, a huge amount of power

. he put that together. we should come through this winter really good shape. people are fairly confident of this winter will not be too bad. above average levels of gas supply. paul: thank you so much. we appreciate it. think about where the energy prices could go. it was warmer than expected. they build up their supply. a good start this year.

katie: no white christmas was had on the east coast this year. paul: about three dollars a gallon is pretty good. katie: the biden administration has been pounding the table. this is still a u.s. president who is not getting credit for that. paul: the s&p 500, absolute. lisa abramowicz does not care for a. unchanged on the market. this is very. -- this is bloomberg. ♪ ♪

be ready for any market with a liquid etf. get in and out with dia. you got this. let's go. gobble gobble. i've seen bigger legs on a turkey! rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989! anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. i go through a lot of pants. before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com.

katie: we are simulcast today. i am kailey leinz alongside paul sweeney.

we have to talk about what is happening. not a lot of people sitting at the trading desk. we are looking at volume right now, down 42%. you should take today's moves with a grain of salt. right on the cusp of a record high. it has been a remarkable year. kent 2024 deliver anything like what we have seen this year? chief investment officer advisor. great to see you. it has been quite the year. are we going to be able to do anything like it in 2024? >> people are probably reeling from the volatile ride that 2020

has been. 2024, there will probably be a little bit of harley next year. we have seen a volley of new report, a little chastened and a little bit more humble. in some cases, their targets have already been met. it is for them to say that there will be a little bit of a pullback. paul: let's talk about valuation here. i do not recall earnings going up by a whole line during that period. >> with the exception of the magnificent seven and big tech.

the earnings report and were generally rewarded. a lot of the weakness was factored in. many sectors were entirely overlooked in 2023. we were talking about the concentration of the magnificent seven, renewable energy, very overlooked. otherwise, whole sectors have not had that surge. investors can look at rotation into them. overall, buying the gas at the pump and seeing how it is lower than before. the session we have been talking about, the economic data and how we have felt -- maybe that is starting to be eliminated now.

it is natural for there to be some optimism. kailey: there was the suggestion that they would probably start cutting weight next year. what do you think about that and how does it factor into the rotation? what kind of venting does that assume? >> that seems to have been orchestrated. a lot of ammunition. on the fiscal side, there is not a lot of ammunition. there will be incentives, but where there is a lot of movement possible is on the monetary side. flexibility be -- will be one of

the watchwords. i would suggest it will be around the middle of the year. they have that ability. unemployment numbers will be in focus. they said they would be data driven. paul: one of the ways that they assess the health of a market is the breadth. up until august, maybe september, it was not very good. it seems to have improved. >> definitely. they will look at the portfolios around 40%. you mentioned the s&p and they may have experienced that in portfolios because they are balanced values and growth.

they were very much lagging. international stocks, asia was pretty poor the exception of japan. they will be feeling a little bit mixed, but you are absolutely right. we expect to see more breadth in the markets, and we have seen that in the last quarter. getting some legs. let's not forget that we have yields coming down well more -- coming down. well north of 500 now. that money has to go somewhere. kailey: you expect more cash to becoming off the sidelines. >> absolutely. i do not think we have seen that

volume and some time. there will be the building up of cash. we have looked at the indicator for bitcoin and gold, and other risk assets at the end of 2023. all of that will bolster a desire for risk assets. when cash is not as attractive, there will need to be a home for that cash. paul: i see green across my screen for the fixed income space. up 13%. should i keep that allocation to fixed income the quest absolutely. it has been a very reasonable place to put money. the one wrinkle is the default

rate. ultimately, the default rate had not matched expectations. it could be a little bit of a delayed factor and we could see more of that working across the system. let's be realistic. we no longer have to deduct the inflation from that. inflation is still there. is it going to stack up? it makes sense. kailey: they are not sure when the effects of their monetary policy will kick in. even if the hikes have stopped, do you think that is appreciated, the fact that there might be a lot more that has yet

to hit the economy? >> the question is what consumers and corporate. selling as they are getting a new mortgage would be affected. that would be transmission effect may have worked its way out. it is not as clear with corporate's. will they be able to refinance at levels that are meaningful and available to them? that is a big question mark. we have seen the landscape really expands match those needs. with rates coming down, little bit more stability, which

enables them to make more loans. it will be a little bit watered-down. paul: thinking about the mortgage rates, i took a 6% mortgage and i felt like a total knucklehead. then i said, maybe i am a real estate mogul. now the rates are coming that down. a lot of real estate folks are saying, i need a five handled. chief operating officer kate ki is coming up, next. this is bloomberg.

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. plus, now through december 31st, eligible xfinity rewards members can get 25% off a storm ready wifi device. hi, i'm jason and i've lost 202 pounds on golo. so the first time i ever seen a golo advertisement, i said, "yeah, whatever. there's no way this works like this." and threw it to the side. a couple weeks later, i seen it again after getting not so pleasant news from my physician. i was 424 pounds, and my doctor was recommending weight loss surgery. to avoid the surgery, i had to make a change. so i decided to go with golo and it's changed my life. when i first started golo and taking release, my cravings, they went away. and i was so surprised. you feel that your body is working and functioning

the way it should be and you feel energized. golo has improved my life in so many ways. i'm able to stand and actually make dinner. i'm able to clean my house. i'm able to do just simple tasks that a lot of people call simple, but when you're extremely heavy they're not so simple. golo is real and when you take release paul: we have been talking and follow the plan, it works.

residential real estate. we have got a person at a point in their life when they are net sellers. and another person who is a net buyer. they can get together and form a market. we have not seen much in terms of inventory trading. frustrating time for buyers and sellers with rates that were so high earlier this year. we will dive into that. mark rayfield joins us. take a listen. mark: i think last time we were

here, rates were going up. there were questions if they went up half a point, what would happen? we believe that because the environment is under belt -- underbuilt, there is this demand. rates going down will create more people selling their homes and more r&r activity. regardless, we have seen that even with higher rates, we have seen good demand. if it goes down a bit, 5% looks good. kailey: so it is about getting sellers want to sell --alix: so it about getting sellers wanting to sell? is that 5%? 4%? i have a 2.5 6 -- 2.75% 30 year. mark: that is true.

it is my perception that if you are going into the housing market in looking at a rate of 8% that used to be 3%, now 5% looks reasonable. that will get people into the market. i think about 40% of the homes are all-cash cash owned, no mortgage. those people are selling and downsizing. folks my age or older who are retiring and downsizing. that has had a big impact. see the highest percentage of new build is part of the new homes. the new build of big builders, stocks are way up guy: brett jacobs was sitting in the chair you are in a few days back. he is going to be looking to consolidate the building cheerios distribution business -- building materials distribution business in america and to a certain extent europe. one of the things he was talking

about was the application of technology to that business. you can see significant improvement in terms of warehousing distribution and management. how rife is your industry for that kind of improvement? mark: we sell through distribution. we have a good, large service we sell through. they have a lot of technology, the ability for contractors to use drones to take measurements of the roof and order directly from that. it is also a hands-on business distribution. have to deliver shingles or chips. it is a complicated market, always a chance for consolidation, but i think existing players in the market are strong. alix: where could things be improved on that end? mark: where there is always an opportunity is trading for the traits. if housing continues to pick up, we always save it is a great career to be -- we always say is

a great career to be in, construction products. we need to train more people. it is our responsibility. kailey: that was mark rayfield last week on bloomberg markets. we want to get more insight into the housing market. joining us is kate kaminski, he operating -- chief operating officer for walton global. i want to return to a point of conversation between mark and alix steel, this idea of where sellers will be willing to let go. what rate will get them to bring inventory back on the market. is there an equilibrium between what that figure is an the figure in which demand will also be unleashed? kate: thanks for having me on. we are seeing trends with builders cutting prices of homes that continued in december. about 36% of builders cut home

prices in order to really drive traffic into those homes. we are seeing mortgage rates continuing to drop. we are at about 6.7% as of the 21st. we think that as we continue to see that trend down to about 5%, we will see more and more demand going into these new home sales. paul: the bad news when i look at mortgage rates is when i look at the mba 30 years next rate is 6.83%. that is the bad news, but it is down significantly from a couple of months ago. isn't there pent-up supply? people have not sold homes for several years. i would think there would be huge supply coming on the market. is that what you are hearing? or is it still demand in excess

of supply? kate: still demand well in excess of supply. in 2022 alone, there was more than 80 million millennials between the ages of 22 and 39 who were coming into household have that along with your older demographics who are looking to downsize their homes, moving into some of those southern, warmer climates. we continue to see significant demand within the new homebuilding space because of that effect in the resale market. from a new home construction standpoint, demand is significant because that is where you are seeing affordability. but also that resale market, we continue to see prices go up a bit. as a result, demand for new

households that are forming continues to climb. kailey: when you are talking about the millennial household formation, i was raising my hand. paul raised his hand for downsizing. both groups here in the studio. to your point about how it has been a tale of two markets, on the one hand, existing home sales choked up but new home sales has been a different story. do you think that will start to normalize? will existing be stronger than new? or will it still be a new sales story going forward? kate: type think it is a new-home sales story for a a while. we saw you housing permits at 18% month over month. we are hearing a lot in the market about things softening. winter months tends to be seasonally slow. this is not uncommon, but builders are also driving

incentives to get people into new homes. if you look at the numbers where we are at year-over-year, we are up over 1% from where we were at last year. while we might be seeing some seasonally adjusted numbers that are a bit lower, homebuilder sentiment in december was up for the first time in months, which i think is a result of what we are seeing with where we think rates are going and as a result i think we will continue to see strong new-home sales. paul: you are in scottsdale, arizona, the hottest of hot real estate markets, literally and figuratively. our builders building starter homes so young folks can get housing? are they just putting up mcmansions because that is where the margins are. kate: definitely not mcmansions. we are seeing entry-level homes

continue to drive market share. affordability is the name of the game. if you couple that with the buydown in mortgage rates, you are able to get people into a home that they can afford. that is the significant supply shortage that we are seeing in this market. and across the country. as builders continue to strive to work with a company like walton to find land, the growth where we could put the right pricing on that land and build an affordable home, we believe we can get americans into those homes. kailey: as we talk about land, i am in northern virginia. it is as packed as it can get. i would love to build a new home, but i am not sure where,

unless you go out toward the mountains. is that another hot area? where other than scottsdale are using that kind of activity and opportunity for that kind of growth? kate: the midwest is leading right now in terms of increases in volume year-over-year, but your southeast markets and taxes also continue to lead-- texas also continue to lead the markets. florida, the carolinas, texas, those are markets where we are putting significant volumes under contract and where you are seeing that most substantial affordability, but you do continue to see demand within areas that have significant population and job growth. those are the leading indicators that we are focusing on in terms

of where we are looking to buy new assets. paul: i am keeping my powder dry. i want to short south florida real estate. we moved to south florida has been unlike anything i have ever seen. extraordinary. it is not just snowbirds. it is businesses, seems like whole cities are moving to south florida. what is the feeling from a real estate perspective? is it a bubble? is it ready to pop? kate: you continue to see significant job growth coupled with the net domestic migration to florida. it is astounding. while miami might be really increasing from your average home price, markets like tampa, orlando, especially jacksonville, tar leading in our opinion in terms of affordability -- in our opinion

in terms of affordability. the builders we are partnering with our delivering homes that will be sub $200,000. that continues to be a key driver in terms of where you are going to see new homebuilders focusing on new construction. kailey: as we talk about the move to florida, i feel like that picked up. my head during covid. everybody was like, i can move -- work from home, i am moving to warmer temperatures. but it feels like work from home is unwinding. more businesses are demanding that people be back in the office. that has to effect where people want to live. are you seeing that? kate: i think we are going to continue to see a hybrid approach. people definitely are looking for work that offers them the flexibility of working from home

and the ability to go into the office. the commercial market continues to be down, especially in arizona and other markets. i do not know that we are going to see that rush back to the office anytime soon, but really that desire for flexibility and the ability to have a hybrid approach. that is definitely going to play a part in people continuing to look for homes that offer may be in office, a bit of extra space whereby they can work from home and do so comfortably. paul: thanks for joining us. kate kaminski is chief operating officer at walton. you are in washington, d.c. how far out do you have to go? kailey: to build a house? paul: for jester to find a

reasonable place to live and commute? kailey: we have got bad traffic. the alternate transport system is not like it is in new york. you do not have the nice trains. just metro. the outlook is not great. i am feeling better than i was. paul: i have a two hour commute. mine is south. caroline hyde goes the same distance north. a lot of good stuff coming up. stacy will join us. she will give us a sense of how this holiday retail sales season is playing out. i spent my money. this is bloomberg. ♪ the first time you connected your godaddy website and your store was also the first time you realized...

well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com today's the day you graduate from southern new hampshire university. i've been waiting for this day my whole life. the fact that i get to walk across the stage and get my degree. it's honestly unreal. don't ever stop. keep on believing in yourself. it is never too late. if you're out there to wonder

if you could be an snhu graduate today is the day to find out. visit snhu.edu. -i don't have a lot of time. i'm a busy dad. my stylist curates unique personal looks that are just for me. kind of nice. i like that. it's easy. give them your size, your style, your budget. -now, this is a nice shirt. i keep what i like and send back the rest. -now my wardrobe stays updated with fresh fits created just for me. did you see that texture? this just feels really good. fits perfectly. -what can i say? my stylist gets me. they get me. and they'll get you too. kailey: welcome back. we are simulcast on tv and radio today. christmas is over.

is shopping season over? or are we hitting after christmas sales? paul: i do not know. i am done but i do not know about regular people. kailey: they might also be done. paul: stacy is a president of s w retail advisors. thanks for joining us. you give us a rundown on how this 2023 holiday season is shaping up? stacey: sure. what we have seen so far is every year, sales get earlier and earlier. this year, we had a longer time in between thanksgiving and christmas, so there was a deeper thud, but generally this time of year inventories are -- this year, inventories are well-controlled. after covid, nobody knew how to gauge command, so promotions were a disappointment this

season. that is good for operating margins but bad for the customer i think customers shopped around black friday and cyber monday. those were the best deals out there. since then, it has been full price selling. high-margin selling. sales were not as great as we thought. mastercard numbers are a the low light. consumers are still spending on things like restaurants, up 8%. that is eating into some of the things and goods that we are expected to buy over the last six weeks. kailey: i think you are referring to the mastercard spending data that came out yesterday. it showed that holiday sales rose at a slower pace than in 2022. a similar study in 2020 that was up 7.6%, which is interesting.

to go back to your point, we can talk about the consumer and what it is they are and are not demanding, but you mentioned how inventories work oversupplied this year versus undersupplied last year. are you concerned about what we are seeing the red sea and disruptions to trade, that there may be more inventory mismanagement? or inventory difficulty? stacey: the good news is retailers have been through this before and have gotten better at inventory management, but i think right now the holiday season has slowed. inventory is in. we are pushing toward spring. irving will be a couple weeks of disruption. as we know from the past, when we get out of whack with tories,

the margin cycle starts again -- with inventories, the emergent cycle starts again. but if there is not a lot of inventory in early spring, customers will think they need to buy now and will be willing to pay full price. paul: i can report firsthand from the short hills mall in new jersey, it was packed every day from thanksgiving through christmas, people fighting for parking, the whole nine yards. give us a sense of how this season broke down, brooks -- brick-and-mortar sales growth versus e-commerce. stacey: we have reverted back. customers are going back to stories. stores were packed in this season, great news. consumers can in and there is impulse purchasing and attachments. that is great news. digital was stronger than in-store sales, but at least you

are seeing the customer come back to stories. we are seeing the return to purchasing apparel, more full price selling. some eating out, some sporting goods. you look at lululemon. they key had some conservative comments about guidance last week. that margins up, promotions down . things seemed ok. it is a season of pick your spots and pick your stocks wisely into 2024. kailey: you mentioned apparel, what some consumers are picking. what was not picked? what did not do well? stacey: if you go back to department stores -- obviously, there is some m&a action at macy's, but nordstrom is still under pressure in terms of traffic. the customer is just not shopping that way anymore.

also, if you look at the rack, t.j. maxx is on fire. traffic is up, conversions are up, where's the rack is lagging. they have not figured out how to turn it around, but a full-line stores of nordstrom are just trying everything to get the consumer back and it does not seem to be working. as you look at this huge retail rally over the last three weeks, you also see operating margins peakish for a lot of these names. even though norstrom and williams and sonoma have disappointed on sales, they are getting a pass from investors because operating margins are intact. looking into next year, that is tougher, unless revenue turns around. paul: talk to us about luxury. how did luxury do this year? stacey: coming off of covid, we had all those savings, luxury

was booming. some of these names were up 30% or 40%. whether it was lvmh. at this year, in the u.s., spending slowed months ago. it is a big piece of the puzzle. 30% for some of these larger brands. you are starting to see moderation. every american was running to tourism running to london, spending money. but that is not happening anymore. you are seeing things in the u.s. slow down. lb was a bit slower. -- lv was slower. burburry was quiet over the holiday. those were the preferences of who did ok and on downwards. luxury right now, probably not a lot of catalyst, particularly as the european piece slows. kailey: about buy now pay later? that could enable consumers who

could maybe not afford something expensive at full price at that moment but maybe can spread out those payments, is that not enough to spur more of that activity? we talk so much about how consumers are using that heavily. stacey: consumers have used it and they have used it for lower ticket items, maybe not an lvmh bag. spreading that out over time will not make it less painful. in some categories, that helps somewhat when payments are somewhat moderate, but also think about for the younger consumer, some of them are having loan repayments started and there is somewhat of a delay before you start to feel that in early 2024 as post-christmas, credit card bills start rolling in at a higher interest rate and the consumer says, ok, i need to get spending under control. paul: one of the themes of

retail over the last 20 or 30 years is too many stores. with e-commerce, you saw a lot of retailers strengthen their footprint. where are we in that today? stacey: some sectors in better shape than others. department stores have a ways to go. we are probably still 20% oversaturated. we need further closings. i think at this point, we saw so many store closings over the past few years. we are generally where we need to be, with the exception of the department store space. paul: give for joining us. stacey is president of s w retail advisors. pretty solid holiday selling season. i will walk down to penn station on my way home, i will go down 5th avenue, madison avenue. the european tourists are back.

not so much asian visitors. i have not seen that, but i know for a light at the high-end retailers, they depend on china tourism. kailey: absolutely. you mentioned luxury goods. china drives so much of that demand. we learned in 2023 that the rebound on the part of the chinese consumer did not rebound in the way many thought. but i have seen a lot of people out and about. paul: absolutely. kailey: i did all my shopping online this year. paul: i was out a few times checking out the tree at rockefeller center. pre-pandemic packed. people on fifth avenue. you like to see that. hopefully, retailers are doing well. coming up, ian steeley, international cio for fixed income at morgan stanley.

they had some positive results.

hi, i'm kevin, and i've lost 152 pounds on golo. i had just left a checkup with my doctor, and i'd weighed in at 345 pounds. my doctor prescribed a weight loss drug, but as soon as i stopped taking the drug, i gained all the weight back and then some. that's when i decided to give golo a try. taking the release supplement, i noticed a change within the first week, and each month the weight just kept coming off. with golo, you can keep the weight off. paul: kailey leinz, paul sweeney

live from the bloomberg radio studio in new york city. we are simulcasting. i am looking at mapco. traversing europe, they usually go through the suez canal but now look at the detour. this is around the cape of good hope around africa. extraordinary what has to happen. should berhow fog lloyd says the red route is still too dangerous. brendan murray covers all of this for bloomberg. this is no small thing to reroute some of these ships. kailey: it certainly is not. i think we are waiting on him to join us, but when we talk about the ships being rerouted, so that it is container ships. some is oil, which is why we

have seen this reflected to an extent in the oil market. we are seeing oil at the highest level in about a month. is the primary concern the idea that petroleum cannot get where it needs to go? or the idea that it is not clear how much is conflicts could testily and what could happen in the middle east and it is the uncertainty that traders are worried about? alex: i think it is the second one. i have had a rough few months. we saw some hefty action by opec-plus in december. the market shrugged at that. it is only since the attacks in the red sea have escalated -- actually not since the big container lines, it is only since they began going away that the severity of this situation became clearer and that is when

the market began taking note one thing to keep in mind is that prices have not rallied that far in the scheme of where we have treated this year. we have come off the end of the range. you could make an argument that oil is not done. paul: that is where i wanted to go. i am learning a lot about the red sea and what it means for global trade. roughly 12% of global trade goes through the red sea. in the world of oil, how critical is it? alex: vital. one of the more interesting elements is the way it has changed in recent years, particularly since the invasion of ukraine. before that, much of russia's oil experts went to europe, countries like poland. now a lot of that oil travels through the suez canal, down the red sea and to india and china.

it has become vital not just for the west but also for countries like russia. on the flipside of that, europe has replaced the letters that russian oil with -- from the middle east. the primary way of getting that is through the suez canal. ships can go the long way around. it is not the be all and end all but the problem is that it makes shipping more expensive. kailey: good point. on that point, we want to bring in brendan murray, our trade c zar. i think 12% of global trade goes through this waterway and it is now going around the coast of africa. for these big container ship companies, when they have made the decision to go around, they are not likely to just turn around and go back to the red sea.

once you commit to the voyage, do you go all the way? when will we see activity in the red sea normalize? >> what we seem right now is about less container ships currently diverted. -- 300+ container ships currently diverted. you could imagine 4 million containers, a little less than half of what the port of los angeles handles in an entire year. that is a fair number, but, like alex suggested, ships are flexible in their schedules. they can turn around, they can reroute ships again through the suez canal if the situation improves. the system got some flexibility built into it. it can shipped -- shift back

quickly, but we have yet to see the big wholesale turnaround in the industry that it would take to let people know that this situation has stabilized or is getting less severe. paul: the u.s. navy is in the region. what kind of impact are they having on security there? >> it seems like the shipping companies is slowly starting to improve. a week ago, they put out the call for urgent help. there ships were under attack and they needed protection. that seems to have improved a bit this week. we heard mirsky say that they are evaluating plans to sail through the red sea and the suez canal as soon as it is feasible.

whether that is feasible tomorrow or three weeks from now, we do not know, but they are ready to make that adjustment as soon as they deem it safe. it seems that there is a slow belief that the situation could improve. ships will get the protection that they need, but it is not clear at this stage. headed in that direction, though. kailey: when we think about operations of the navy or anyone in this maritime task force, it is defensive. to this point, it has not been offensive. yet, bloomberg has been reporting that the u.s. is considering whether offense, direct strengths, may be needed. one concern with that is on the part of saudi arabia, who prefers something more measured,

because they have had energy infrastructure targeted in houthi attacks before. how should we think about oil infrastructure as we think about potential escalation? alex: through an extent, the situation we see now, if you think back to 2019, when we had the attacks on saudi oil infrastructure, between five percent and 7% of global oil production was essentially loan up overnight. that was fixed within a couple of weeks. the barrels came back weekly. but the oil market tends not to react to a long-term supply disruption. but we see up to but not in the sense of losing barrels. it might need a ship takes a long way around and some cargo is slightly delayed, but this is a meaningful hit to supply and demand. that is what people are looking

for. keep in mind opec-plus relationships. angola leaving opec-plus, which is just a reminder that it is not just middle eastern politics at play here. booming u.s. oil production help to balance the market this year and keep a lid on prices at a time of elevated tensions. paul: brandon, i will ask you to put your trades are hat on. in terms of the global supply chain, we all got smarter over the pandemic about this. how do issues in the middle east, europe, ukraine impacts the overall supply chain in and around europe? brendan: some of it is being offset by weak demand in europe at the moment, even weaker than the u.s. economy. the heavy demand for consumer goods and auto parts and the

kind of things that are flowing steadily when the economy is going strong, we are not seeing that at the moment. this decline and disruption, these delays will be offset to some extent by the weakness of the european economy, but if you are an automaker and you have a shipment of parts coming in from asia and those are delayed for three weeks, that control production off. it will depend accompanied by company and products by each individual container full of goods. there will be some disruptions but whether this turns into a big shock, we are a long way from that. but i think we will see the ripple effects play out in the next few weeks. kailey: we have been paying

attention to the suez canal and the red sea because there has been so much conversation in media coverage. but what we seem to be leaving out is what is happening in the panama canal. the idea that there is vital choke points of trade that are in jeopardy. the panama canal is because of drought and low water levels. how concern should be the? arden: a lot of the ships that were going to go through the panama canal rerouted to the suez canal only to find the attacks. quite a few chokepoints at the moment. the net effect is they will put upward pressure on freight rates, which have come down significantly this year, 75% or so. we are not looking at a hugely inflationary situation, but if you are walmart or a kyiv, and you thought -- ikea and you start your freight rates would

be low, you are probably redoing those estimates. these are rolling shocks, not the big jolts we saw during the pandemic. these are grinding shocks that will affect the price of things on the margins in the months ahead. paul: what are traitors saying about the next several weeks or months in terms of where they expect oil to go? it has bounced off that low recently but is still well below brent crude, but we had in late september. alex: supplies the big narrative in the coming months. for all the talk of a recession and flowing global growth, whether interest rate cuts are coming, i think the last 12 to 18 months has shown that demand has been fine. if prices are going to move higher, it is going to take in underperformance from u.s. shale production, which people have

called the death of many times and it continues to reinvent itself. we seek about -- consolidation in the u.s. at the moment. we see oil out of the permian, other non-opec producers, brazil, norway is producing more barrels. lots of smaller additional supplies that create a headache for opec-plus. then you have the question of the supply-side. how long will opec-plus cut if prices do not move higher? that, from the first and second quarter of next year, we have foundation into the demands of next year. but focus will come back onto the supply-side of the equation and whether that non-opec supply growth is outpacing and exceeding what is required from demand as the demand side of the oil balance has been fine since 2020. paul: over here from the u.s. of

a, we are fracking like crazy. smart discussion. we appreciate you guys giving us the latest arm the red sea, impact on global trade, including energy prices. one of the things that name long live past the pandemic is the supply chain and moving away from just-in-time inventory, which we have learned over the last 40 years is we want more slack. on shoring, friend-shoring,. kailey: prepare for the unexpected. maybe that is why because supply chains are more resilient, you will not see as much disruption this time as a few years ago. paul: s&p 500 unchanged on the day. this is bloomberg.

kailey: welcome back. simulcast today. i am kailey leinz alongside paul

sweeney in what i believe is the third to last trading day of the year. the end of the year is rapidly approaching. what a year for the bond market. treasury is trading at 3.82. 10 year treasury low, 3.3%. but after starting the year at 3.87, we are just about five boy -- basis points on the year changed. joining us now is in jp morgan asset management international fixed income cio. where should we expect yields to go in 2024? will it be as volatile as 2023? iain: it probably will continue to be volatile. huge move over the last couple of months, all the way down from 5% to where we are today.

a lot of cuts priced in by the federal reserve and other central banks going into next year. it will be a case of looking at the data, keeping an eye on the jobs market, where inflation goes. but i think the fed has let the cat out of the bag. they want to ease policy. that should be good for the bond market. paul: i am looking at the bloomberg index browser. i see european high-yield that had a total return of 12.5% this year, strong performance after a brutal 2022. i would think with recession talk that maybe high yield would not have been the place to see this kind of performance. what do you make of that? iain: the bond market typically looks forward. there were big concerns around economic activity in the euro zone, particularly around ukraine and what is happening to gas and energy prices.

as we came into this year and did not have negative gdp prince, the market recovery. although we have had a slow growth environment around zero at the moment, that is fine for a lot of corporate bonds and corporate companies. clients and investors were looking at the spreads they were getting and the yields and thinking they were attractive, yields they have not seen for a number of years in the european bond market. a lot of people were thinking that was a good time to get invested. kailey: the ecb is doing something in the federal reserve is push back on the market expectation that the easing will be aggressive next year. the fed does not seem to be fighting that narrative. they have admitted they will be easing, but christine lagarde was trying to push back do you

think she will throw in the towel in the not so distant future? iain: i think so. that week, it was strange that the fed was pushing back with the economy holding up. when you look at europe, you have got anemic growth and inflation slowing at an even faster pace than in the u.s. i would not be surprised if we see the ecb pivot and look toward more easing next year. the market is already pricing that in. paul: how much risk do i want in terms of the curve in 2024? iain: you want to be thinking about the upside and downside in yields. you now have central banks which have pretty much told us they are done barring a big surprise in the data and that they want to ease policy. they believe the next move will be lower yields lower rates and

that should be good for the bond market. we have moved a long way in a short space of time. you want bonds but also the capacity to buy bonds. buying bonds and yields makes sense to us at the moment, owning high-quality fixed income. if you can get corporate bonds with a yield north of 5% and inflation at 2%, that is attractive. kailey: when we think about inflation, and it seems like central banks think their job is done and they will be able to cut rates soon, but i think back to conversations we have had, talking about the red sea, potential risks to supply chains, costs moving higher. were also speaking to retail specialists in the last hour, talking about how consumer demand is resilient. people are out there spending. i wonder if there is more inflationary risk out there than the market anticipates? iain: if you look at the

near-term, inflation is simple. three, six-month moving average headed in the right direction. we saw that with the pce numbers. what we are looking at is goods are almost deflationary at the moment. services are coming down. it feels like we are headed in the right direction. the u.s. consumer continues to look robust but the central bank is saying we have taken rates into restrictive territory. with inflation coming down toward their target, they will be happy to ease into that. it may be a case of normalizing, still supportive for bonds. if you get more of a hard landing, that will be a good environment for bonds. if you go back to previous cutting cycles, they market typically underestimates the amount of cuts that central

banks need to do. paul: talk to us about credit quality. it has held up well. yes, stimulus money helped, but how about europe and the u.k.? how is the credit quality situation there? how are you positioned? iain: maybe go back to the european high-yield market. it is high-quality. the upper end of the high-yield space. when you think about it from a corporate standpoint, corporate are fine with growth hovering around zero. what corporate do not like his sharp declines in activity. that is not happening at the moment. if you get an environment where we get easier policy, rates are coming down, that continue to be supportive. when you look at fundamentals, comfortable at the moment. we think high-quality parts of

the high-yield market in europe are particularly attractive, particularly where the spreads are relative to the u.s. market. much later spreads in europe. kailey: i wonder if you are expecting there will be more out there to consider buying. is borrowing costs become more reasonable, are we going to see a huge amount of issuance coming? paul: i always think issuance comes when there is demand. if you are getting demands for the bonds, companies will issue. we saw a lot of issuance from corporate's during the pandemic. date issued at low yields for long periods of time. duration made sense. they will use a window of opportunity to issue, but they do not need to issue a lot over the next few months. that should be supportive for the bond market. paul: in terms of credit, what

is the sector you guys like the best? iain: from a valuation standpoint, the banks. particularly in the euro zone, if you look at convertibles, the 81 market, you are getting an average spread -- but i think the banks are robust. a log of core equity. they have got that spread. you are getting a higher quality asset than high yield. that will be a good spot as we move into next year. paul: thanks. i think he was in the bloomberg office on queen victoria street. kailey: i have never been there. paul: possum location, right in the center of london, kind of their wall street area, near the bank of england. you cannot get any closer to the

financial center of the u.k. kailey: how is the pantry? paul: outstanding. rate you of st. paul's cathedral -- great view of st. paul's cathedral. looking at these markets, unchanged on the s&p, dow up by .1%. a lot of nothing going on out there in terms of the indexes. you cannot say indeces. not miller will be all over you. kailey: that is in the style guide. paul: coming up, djokovic tony on his outlook for gold going into next year. this is bloomberg. ♪

(adventurous music) ♪ ♪ ♪ be ready for any market with a liquid etf. get in and out with dia. i don't want you to move.

be ready for any market i'm gonna miss you so much. you realize we'll have internet waiting for us at the new place, right? oh, we know. we just like making a scene. transferring your services has never been easier. get connected on the day of your move with the xfinity app. can i sleep over at your new place? can katie sleep over tonight? sure, honey! this generation is so dramatic! move with the xfinity 10g network.

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. paul: we are back.

kailey leinz, paul sweeney. we are simulcasting from the bloomberg radio studio, my home away from home here in new york city. i am looking at bitcoin. just because matt miller has got me thinking bitcoin, over 150 percent up this year, extraordinary any year, particularly in a year where two exchanges went belly up. so much concern about the secret

eat -- secrecy and security of crypto, but just a riproaring year for bitcoin, showing amazing asset class. she covers all things crypto for bloomberg, joins us live. looking back in 2023, i did not see it coming, but the crypto space, how do we look at it in a world where we have had ftx and other issues? >> 2023 is the year of recovery for a lot of people in the crypto industry. there is the sense that now that sam bankman-fried was convicted, everybody could move on. some of the overhead has been removed. there is still a lot of regulatory uncertainty in the u.s. for example, the sec lawsuit against coinbase is still going on, but prices are going back up. the u.s. will finally approve

the bitcoin etf as early as january. kailey: a spot etf has never been approved before. the sec has said there is a difference between spot and futures. spot is more vulnerable to manipulation, at least you hear that from gary gensler. but it seems like the grayscale case made the difference. they were trying to convert their grayscale investment trust into a spot etf. the sec said no. scale screwed -- sued. the judge said they were wrong. are we likely to see grayscale result before a spot etf's approved? what do you hear? >> yesterday there was an interesting piece of news from grayscale. they have decided that very silver will be stepping down from the board of grayscale. for a lot of people in the

industry, some analysts told us they see this as a positive step building toward potential etf conversion. grayscale said they are also doing this in the context of getting ready for the next chapter of the company. we will see whether they will be the first, but that does contribute to some of the price optimism in the industry. paul: print out for us. how big is a spot etf? it seems transformational. i look at all the funds flows going to etf's in general. you lay on top of that the excitement around crypto in general. this two together and you have got a transformational event. is that how the industry is thinking about it? yueqi: on the one hand, it will be big but there is also

concerned that because bitcoin prices rallied so much of this year, maybe some investors will take profit once the approval decision comes out. that could be a potential risk in the short-term, but when we talk to people in the industry, especially people running to hedge funds, they are bullish. they think that regardless of the etf news it will be a great year, just because of the combination of macro factors, said pivot, as well as industry specific factors, such as the happening of bitcoin which will use supply. -- reduce supply. they are aggressively positioned. kailey: when we think about probably will be seen as a regulatory victory, there is still huge regulatory overhang around the tokens that are not bitcoin. the sec has said bitcoin is not

a security but they think most crypto tokens are. that will not necessarily change. without the a headwind for everything that is not? yueqi: i think it will be a headwind, especially in the u.s. a lot of crypto companies are trying to diversify their offerings for going overseas, coinbase being one of them. at the same time, i that for the crypto market, even the u.s. presidential election could be a potential risk factor. the regulatory direction of the u.s. will be important for the entire crypto industry. kailey: there is at least one candidate, vivek ramaswamy, who is into crypto. i think he is the only one who is put anything forward on his policy platform. that will be interesting to watch as we head into the election year. often, we hear about bitcoin

talked about his digitalglobe. we want to think about the difference between digital gold and physical gold. joining us now is world markets chief strategist does gold have any reason to fitbit -- fear bitcoin? joe: i do not think so. quite the contrary. if you are going to bitcoin in your risk portfolio, which is a risk assets, i would say it bodes well for the case to continue to increase your allocation for gold, which will offset that risk with an asset that is a real asset that is predicted, easy to understand, easy to analyze. you can see the consumer side, the investment side, the demand side, and understand the supply-side. it is interesting when you look at bitcoin and the momentum it has had, a lot of which has been driven by potential for clarity around regulation, potential for

new mechanisms or vehicles to access it, outside of it, use cases are still unclear. there is still opportunity but they are unclear and adoptions in its early stages. we look at it as a risk asset. we can look at gold and show you the demand side for central banks, investors, consumers in the form of jewelry and also for technological applications. it gives a clear picture as to why that is an asset of off-site risk in a portfolio. paul: who is buying gold these days? joe: lots of people, but the big standouts over the last two years have been central banks and we have had pockets of retail buying of bars and coins, but central banks set a record in 2022 and have been to the third quarter of 2023 on record to set another record in terms

of consumption of gold. these have been raging -- mainly emerging market, developing economies central banks, but also developed market central banks that have been buying -- china, poland, turkey, singapore, ireland. they have been vying for reasons of diversification, dollar risk in their portfolio, passive benefits when it comes to a liquidity. they have been buying it as a diversifier to their portfolios. a record in 2022. on track to be a record in 2023. what is important is what we have seen more recently is political risk is likely weighing on their decision to diversify. plus noise and concerns about whether the dollar is here to stay or whether a the dollarization --

de-dollarization market will emerge. -- ultimately having the ability to maybe manage against risks alongside the risks of geopolitical, whether it is a conflict in a particular region or a need to manage your own political situation or maybe even prevent some risks that come along. i also mentioned retail being a source of demand. in the u.s., we had pockets of quarters where we saw larger demand increases. they were not major in terms of the u.s. retail market, but you suck first and third quarters where geopolitical events popped up and led to movement into the gold space, not in etf's, but in bars and coins. those of been two big surprises. kailey: super interesting. you are speaking about emerging market central banks is being big buyers, but when you think

about the fed and the ecb, how much is the case for gold predicated on what kind of landing they are able to pull off? soft or not? joe: that has been it. what i have talked about in terms of those sources of demand, it has all been offset. the headwinds, all eyes on the fed. we are waiting and expecting to see that decision, those steps forward, the rate environment going forward being the most likely factor in the market that will lift what has been a cap on the gold price. we are starting to see it over the last couple weeks of the year when people are building in an pricing in rate cuts into 2024. will they happen? that is the risk we face with gold right now. if we get more of the same, we called it earlier this year that

rates would cut. we expected it. what we got was a long year of waiting to see and further rises in rates. but those are the moments that kept gold capped. if we can see rate cuts on the horizon, that will lift the gold price and we can see an interesting environment for the gold market. if it is a soft landing, that will be one where opportunity costs and risk moments will continue to support the price for gold, but if it is a hard landing and we have more risk in the system, the fight to gold will be more substantial. paul: i am pleasantly surprised that gold has been rallying in a forecasted soft landing. i would've thought people would've traded out of lust risky assets, -- less risky assets, but that is not been the case. joe: i think they also think the environment is that the gold

market will benefit from a few things. it will see rate cuts move people into the allocation of holding stable value in terms of gold. it is also a dollar weakening that is kept people moving away from the dollar. ultimately, what you will find is as we move into 2024, it will be clearer as to whether we move into recession or if we come into a more comfortable soft landing. ultimately, in that kind of environment, we will have maybe a bit of a stall. but if we see that recession service, that is an environment for gold, safe haven, savings mentality, both on the investment and retail side, will surface. gold is a global asset. we talk a lot about the interest rate environment, the u.s. dollar.

earlier in your program you were talking about where you are seeing consumers in china. i saw quite a few in las vegas last week. but ultimately what you need to keep an eye on is where does that head in india and china? large markets, large consumer demand for gold. they have been tapering in terms of jewelry demand, but what has been servicing is gold as an investment. bars and coins versus jewelry. etf's, a bit of a bright spot in 23, asian rockets, china and india. but small relative to the big markets. you are starting to see that shift. are we seeing that in asia more broadly? we will keep an eye on it. kailey: we've got to leave it there. thank you for joining us, world gold council's chief market strategist. jewelry can often include watches. i want to talk about a watch of a different kind.

the apple watch sales ban has been put on hold by an appeals court. this is a patent dispute. there was a review period that ended on christmas day. the u.s. trade representative had a chance to veto what would've put the ban into place. an appeals court has said hold on. a win for apple but that is not reflected in apple shares right now. paul: but they are up 48% year to date, so not that big of an issue. it is rare that you see a legal issue for apple's patents. we will recap the year that was in the banking industry. this is bloomberg. ♪

kailey: welcome back to bloomberg markets, simulcast today. i am kailey leinz alongside paul sweeney here in new york, where

despite the holiday week, there is still plenty of news. breaking news, apple watch sales ban put on hold by an appeals court. this is a patent dispute over the blood oxygen technology into the watches. mossimo following 5% as the end as been positive at -- as the ban has been paused. this will play out in the technology sector. we want to focus also on banks. a lot of people have been saying to by vanke credit today. -- buy bank credit today. that is a conversation that took place with brian moynihan earlier. i want to play that conversation now. brian: we have the number one research team. they just shifted yesterday and

moved to more rate cuts to 2024. but the real key is what we see in the economy. they have moved from a .5% growth rate to up about 1%. they have softened their soft landing. by doing that, they have set that when the fed is seeing inflation slow this much, the fed needs to bring the rate structure down. they are saying basically 200 basis points of cuts next year. that still leaves you at 3.2 5%, 3.5%. last time we were at that structure was 18 years ago. we have had a long stretch of rates, except for what happened recently. that fueled activity. now the reit -- rate structure is higher. we have to normalize this. we are seeing the economy and inflation coming. not that -- not done yet but

consumer spending is consistent with a 2% inflation economy. that level of spending is what we's on the 17 and 2018. david: are you concerned to markets over reacting to what they heard from chair powell? brian: the fed was late to cutting inflation. now it has to be late to stop cutting off inflation. the market has two evan flow, but this is trading talk, the 10 year moving between 390. it is not the real economy. that is still impacted by the rates. we have a had a letter stimulus, chips act, still coming through the system. but overall, we believe he has engineered a soft landing through the interest rate environment. paul: that was brian wayne a with david westin last week to

talk about the state of the economy and the outlook from bank of america. stock of bank of america of 2% year to date, significantly underperforming. sridarh joins us to talk about the global banking industry. as we look out to 2024, i am that i am not back on wall street trying to negotiate a bonus. not a great year for deal flow and trading. what is your expectation for 2024? >> it was not a great year but remember that the outlook, when we are thinking about rate cuts flowing through the system, about capital markets picking up, if you are high ranked and you own these big banks, they need to make sure their top

performers are taken care of, because the next several months could be a bone anza for the banks. headed into the end of the year, we were talking about how wednesday rate cycle takes hold, bank stocks would be attractive. we have seen a big rally, seen bank stocks climb 35%. some of that has played out but considering where activity levels were for much of this year, we are looking at a 2020 24 that promises to be better for the banks. kailey: what about jp morgan. a headline says today it was a tough year for almost every bank not named. this was primarily because they were able to buy first republic. is everybody else going to play catch-up with jp morgan? sridhar: it is not a wrong headline. jp morgan is up 25 percent this

year, bank of america is up 2%. the big goals there is also what happened with bank of america is that they've missed out on excess profit because of how their portfolio got impacted. jp morgan was not handicapped by that. it was able to capitalize on the looming crisis in march. it got further diminished into this california banking crisis, but jp morgan was again able to benefit and able to skip out first republic. it comes out stronger than before. you have jp morgan that is on track to post 50 billion dollars in adjusted traffic for the year. just to give you a sense of what that, goldman sachs's entire revenue is expected to be 46 billion. kailey: that would be the

biggest annual profit in the history of american banking. paul: do you hear jamie dimon on regulations, you have to put that in context. you do a lot of work covering goldman sachs. i competed against him for more than 20 years, probably lost more than i won against them. they are good. but what about the foray into consumer banking? what do you expect from goldman sachs strategically over the coming year? sridhar: a lot of 2023 was the year of mea culpa for them. they acknowledged their mistakes, got out of some things, this exciting apple card. that is a thing of the past. we want to get out of that. we are not out yet but they are trying to get out. now we have had an asset and

wealth management division that is been there for about 20 or 30 years. and you have the investment bank that undoubtedly goldman has been amongst the best for several decades. you see the broader economy pick up andy -- and if you see capital markets actively pick up, goldman will be in a position to benefit from that. but the big question that hangs over almost every big bank what happens with those rules? that will ultimately has a big impact on how investors see these banks. do they still see them as desirable if those rules go through his proposed dapo or should we put stock in the senior banking executives who also are cautiously optimistic that a lot of this will get redone or watered down in a way that they will not be incumbent upon. kailey: i am usually in

washington. local tv stations there are running commercials essentially telling lawmakers to push back on higher capital requirements. on one side of the aisle, you see pushback from republicans on the idea that these will be higher. the banks will be detrimental, not able to loan as much but they are doing pretty well. they really cannot take it if what indeed michael barr has proposed goes through. sridhar: we are doing well, but why shouldn't we've been doing better? fundamentally, there have been the specifications in the rules -- how market risk has been calculated, how some players have been penalized for operational risk. banks that have diversified, they are like, we have spent money trying to diversify. that can be punitive. you cannot punish that. similarly with market risk, how

some of the business will be affected based on how those reps are calculated, they have serious concerns about not that they are trying to undo. you risk weight to consumer loans and that is different. the some of the ways they are handling operational and market risk, that is where most of the back and forth is happening. paul: thanks. he covers all the big banks. we had it in our studio, which is cool. that profit number for jp morgan is staggering. they dominated almost every major business. kailey: it will be big. we are just a couple of weeks away from big bank earnings time again. we will find out just how well they are doing. paul: quiet day on the markets. s&p up fractionally, the nasdaq same. more coming up.

this is bloomberg. ♪ - i ended up spending less money my entire time at snhu than i did in just one year at my other university. - [juan] my time at snhu has given me more confidence. now i can go for that promotion. - if you're ready to go back to school... you can do it. southern new hampshire university has changed my life. and it can change yours too. ♪ - [announcer] visit snhu.edu. was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com

i'm a little anxious, i'm a little excited. i'm gonna be emotional, tshe'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. 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. ♪ paul: welcome back to bloomberg markets.

caroline hyde joins me for the next two hours. it's not much moving in terms of the major index out there but a lot of news out there. caroline: it is. put really, there is still so much geopolitics at play to be digesting and its impacts in the markets though. paul: the 10 year trading incorporate of 5% there. let's get a sense of maybe where these markets are going because it's been such a move. big, big moves up in the equity markets and down in yields. i'm not sure how many people saw that on their bingo card.

fancy tangler joins us via zoom here. this move we've had over the last eight, nine weeks has been something to marvel at. what do you make of it? nancy: well, i love the bingo card analogy. we wrote a piece that said opportunity and every opportunity and we woe a piece that said that we thought investors were being way too pessimistic and we expected to see the markets do better than most thought. we don't do market forecasts for the year end but in the october 31 piece, we thought we would see a rally and not expecting this much of a rally to be sure. i think you've got a lot of things going on. it's not just the fed. it's, you know, the money on the sidelines, it's creeping in, it's window dressing. but i do think that stocks, you look at the multiple, you're at 15 times, 15.3 times s&p ex

feng. that is not super lofty and we have the opportunity to move up from here with some chopness in the first quarter. caroline: i've always love nancy, your thoughts. back to some of the quotes you used in particular. you said a pessimist sees difficulty in every opportunity and vice versa. what are some of the that you're going to be keeping an eye on as you assert some of this optimism? nancy: yeah, so i think one of the biggest concerns is inflation. we know that the cord number has been coming down but the sticky inflation number is still very high. and if you look at historical numbers back in the 1970's and period with we had inflation restart, it's pretty positively

correlated. we're at the turning point. but the other thing i'm concerned about is red sea. delivery times have come down but they're about to go up if we have to continue to go in alternate routes for shipping. so that's something on our radar. we're not concerned about earnings. we think margins are going to continue to improve. that was the good news story the second half of this year. and so we think that continues. management's done an excellent job because most of them refinanced before rates went up. i haven't been complementary of the fed and they can still screw this up in my view. caroline: we are going to go into red sea in a moment but i want to go back to some of the expertise that i'm so please that you bring to our technology shows.

nancy, you are someone who might not think that the feds are doing that great but you are focused on leadership and you called out some certain tech companies. what are bret in technologies? nancy: the market for generative a.i., cloud, digital transition is enormous. it's in the trillions of dollars. so the question becomes who are going to be the survivors and the thrives in this environment? companies like oracle, i call broad come the poor man's nvidia. that is one place that still has plenty of room to run. and i think you want to remain

overweight this group. but we are also overweight industrials and our big move in the fall of 2022 was to add to consumers discretionary in tech and those two are the best performing sectors. there's still opportunities in consumer discretionary as well. paul: that's where i wanted to go, nancy, because it may surprise you to find out that i am not in the magnificent seven stocks in 2023. what do do i in 2024? do i try to chase those names? or do i try to fine some values somewhere else? nancy: if you look the valuations compared to the 1990's, and when i was on with you last, caroline, i talked about that this market is an analog or the 1990's is an analog to this market. a lot of similarities in semis of inflation, high rates and soft landing, a war. and those valuations, look at microsoft. it was trading at the own they have 1990's at 50 plus times

peak earnings. i love meta. amazon is a name that is probably our top pick in that space for next year. yeah you use weakness and you be disciplined. you don't chase any of them. if you look at nvidia on a forward multiple basis, it's pretty cheap compared to what you might think since the stock has doubled. it's in the mid 25 range. so, i think those are all names that you can use opportunistically to round out holdings. don't chase anything because the market will pull back. we'll get a correction and that's when you step in and buy with both hands. paul: i want if a correction to the extent, will it be earnings based? you look at the s&p 500 earnings

expectations are up about 12% for 2024. it feels a little frothy to me. do you think there's earnings risk in this market? nancy: well, i think the dollar's coming down. so that will help some of the multinationals. it has come double. it will continue to come down. but i'm not sure about that. because if you look at the companies that we have just been talking about, they have not only been guiding up but they've been expanding margins. i mean, there will be companies that miss earnings and they will be punished. oracle just missed guidance and it was punished and we use that as an opportunity to add to holdings. long term, those are the canadians that you want to grow in a tightening market. and you know this as well as i do,ages are wrong to the tune of about two thirds of the time. paul: why does everybody look at

me? nancy: so you have to be ready to do is you have your list and if they do disappoint, you step in and you add to those names. caroline: nancy tensionler, it is such a joy to talk to you. one of her key concern is what's happening in the red sea coming from these boatloads of goods having to go further than initially priced in and delays to delivery times. let's dig into all of that in terms of some of the risks that are troubling the red sea and what it means to some of these shipping companies. we're pleased to welcome brendon murray and girard. how much harder is it saying

hold on. we're still not going be going to the red sea where we're starting to see from other players that they are starting to cross it again. >> yeah, we see confidence slowly starting to look at the red sea crossing re-emerging. we don't know how long it will be safe but they're getting ready to change direction fairly quickly. epic lloyd is saying it's still too dangerous. we're seeing a steady increase of ships, diverting south of the southern tip of africa and it bears watching. there are about 300 ships by our latest count currently making that diverted route. that's roughly 5% of all the container ships in the world.

and it's not an enormous amount but it's creeping higher it and bears watching. paul: so that takes us right to where we want to go. the economic impact for that part of the world and maybe even globally, i look at the map. that's a long way to go. i mean, you're taking a ship and this isn't just like around the block detour. this is a huge detour. how do you think we might feel it and i guess the european economy and abroad? >> our view is that the economic impact globally is going to be fairly limited. for new york, example, something like 5% of the total cost of oil from saudi arabia to europe is for shipping costs. shipping costs have gone up. but they are much, much lower than they were a year or two ago during covid. on the inflation side, you find that shopping costs are pretty small share. so our view is that apart from

supply chain issues, the inflationary impact is limited mostly because this is happening a time where there's more capacity than there was a year or two ago. caroline: and on that note, gerald have you sort of thought through which inflation pressure hurt the most or oil this knee-jerk reaction? is that the right place to look or is it going to be creeping to some of the goods that are going to be brought through the red sea? >> so based on market response so far, it's limited on the energy side that oil's up a few dollars but that's not that much. my guess is that over time if this last for weeks or months, where you're going to see it more is on supply chain. people were getting used to having shipping be normal again and now this is pushing it backyards abnormality. paul: just real quick here, brendon. the u.s. navy in that region, they having an impact?

>> not a huge impact just yet. there are still plenty of ships, tankers and cargo vessels going through the red sea on average. there's about one attack per day. but when you're looking at dozens of ships going by, the percentage of ships that are getting attacked is not very high. so, we are seeing cargo continue to flow through this region but if we continue to see an inability of the navies in the region to prevent these attacks, then we may continue to see this sort of drawn out long -- weeks turn to months and, you know the conflict spreads through the region. you know, one of these drones, if a serious fire catches on one of these big ships, then you're looking at a different scenario. but at the moment, it seems fairly -- the impact of the navy's protection seems fairly

limited. paul: all right. folks, thanks so much for joining us. that was a smart discussion. both bloomberg news bringing us the latest reporting from the middle east here. coming up, we're going to talk a little crypto. bitcoin up 150% this year and according do coin market cap dot-com, the total global crypto market cap is $1.68 trillion. we're talking some size. caroline: it's smaller than apple though. paul: yeah, put that in the perspective because perspective is everything. s&p 500 unchanged the end of day. more coming up. this is bloomberg. ♪

we all work differently now. so cdw helped us deploy mac, supercharged by apple silicon. ♪♪ built-in security protects me from malware and forgotten passwords. i've got enough battery life to get me halfway around the globe. and lower overall costs leave more money in our budget. for more practical furniture? this was supposed to be hip. no. can you help me up? with mac, configured by cdw, a solution that works for everyone isn't just possible, it's powerful.

caroline: welcome back to bloomberg markets. we are simulcast across tv and radio today. i'm looking atwell, crypto, the

alternative investment of choice it would feel for 2023. look, we know that the risks are often tied up with some of the rewards but extraordinary performance particularly if you're looking at the crypto hedge funds. they returned 44% this year. however, they massively underperformed if you just bought bitcoin on the market. it's decent reprieve and bounceback after a scan loss the previous year. why are they underperforming that we saw on bitcoin more generally? >> it is pretty incredible. you would have been up 160% but if you invested in any of these funds that's were up about 44% on average this year. you would have been better off even investing in the philadelphia semiconductor index. it's pretty amazing to see how crypto has done so well. all funds are not created equal. last year, we've seen hundreds of funds shut down in the wake

of a lot of the crypto crash we've seen. a lot of people who had money tied up and invested in things like luna. but that rebound in crypto currency to your point is better than most hedge funds depending on what you invested in. there was one alt firm that was up to 270%. and it's interesting. one of the people we spoke to was nick carter. we talked a little bit to him about what his picks were because we get a lot of heat here at bloomberg for focusing so much on bitcoin and not talking enough in other places where there are a lot of fund managers that see a lot of promise going into next year because of how people are building on these chains. paul: the only thing i know about this crypto spaces what is i read from the research and talked to bloomberg intelligence because he knows what's going on. but there is a monitor on the

terminal. the list a lot of the crypto currencies. so if i'm a hedge fund focused on crypto, i buy bitcoin. i guess i buy theorem, but there's a lot of other things out there too. >> you can sit there and buy different types of coins. futures is now the bitcoin market is a derivative market as well. and they're levering up those trades for example. futures allow you to go short a little but if you want to. but that would have been a terrible trade if you chose that to hedge your exposure this year. there was a lot of uncertainty because the exuberance that we've seen in the last couple of weeks, really, couple of months for that bitcoin utf that we haven't seen. the other thing that nick carter had said yesterday to us was he thinks that this melt-up in

bitcoin risks the correction as well. so it sets you up really interestingly to see how much it's already been priced in that exuberance around the bitcoin etf that really has is next big deadline on january 10 when you think about whether it can start time prove new assets or not. caroline: maybe brace for early january and people to be perhaps getting out of bitcoin but then, finding alternatives. >> exactly. caroline: the problem with crypto and i say this with love, is that they're very hard to take seriously when they're naming pancake swaps cake token. but they have a lot of the times, serious applications, use of case. what are the protocols? what are the toke finance that some of the longtime crypto investors are seriously going to

be solving real world problems right now? >> one thing is part of this was an answer to a broken payment system. and that has been a very challenging thing to be solved through blockchain. one thing that will be interesting into next year is the way you do it on bitcoin is there's this layer called lightning. and now, there are alternatives that could make it easier and it's fairly significant. if you want to pay for a starbucks coffee with bitcoin in el salvador, lightning is what helps to facilitate that. there are cases but it's not the united states that you see that as popular as you do in areas that probably have more broken payments infrastructure. everything's online here anyways. but those kinds of applications are good example of how you see real world problems being solved. but i think back a couple of years ago when mark cuban really work to integrate the shiba or

the coin when it came to the mavericks purchases. and he had said to me it's just fun. caroline: yeah. he doesn't take it too seriously. >> can fun be an investment thesis? it's paid off in some of these regards. and he's one of the more, you know, successful investors particularly in venturing the world. paul: but on the flip side of that is jamie dimon. you still don't have an acknowledgement much less a vote of confidence to support in i guess broader crypto but -- >> but do you need it from him at this point? when you black rock fidelity, it's not surprising to to see a banker say that this payment system -- caroline: it's disruption. >> totally. and so when he says things like that but also is working on things like their own blockchain projects, you know, it doesn't seem like an entire dismissal of the blockchain model as much as it is a criticism of bitcoin in and of itself coming from

somebody who competes with this technology. caroline: so nick carter was giving us a little bit of rub as many should that let's stop focusing on the og that is bitcoin but think about some alternatives. but to go back to the og for a minute. we do have fundamentals in place. talk to us about the harding as well. >> there are a lot of investors that do believe that that is something that can start to change the supply dynamic. that is more skeptical. paul: so halving cut in half? is that what they're saying? or reduced? caroline: the amount of rewards. >> here's another thing too. the amount of rewards but the way that theorem has been a

better way to let's say earn yields from a staking then you're seeing in bitcoin. it's an interesting monetary debate if you will, i guess in the crypto community. i will say something else that is kind of interesting, caroline. you were talking about practical use cases you see bitcoin be one of the best performing asset classes in the world this year but on the other hand, you do have camps of people in the crypto community that i've heard speak to me about how they're distancing themselves from bitcoin, from crypto. caroline: from an energy perspective? >> also this idea that there's a lot of uncertainty about where it fits into the financial ecosystem and they want to focus their energy on the blockchain structure and more. and -- caroline: i don't like the asset class but they like the underlying energy.

>> exactly. and you are seeing. when you look at all the different types of crypto assets out there, and even the infrastructure behind them, there's a lot of debate this year around coin base for example, how profitable can coin base be when you have an etf infrastructure if when you start to think about what all of the pieces of the pie mean in terms of how the digital asset infrastructure is re-creating the financial community to some degree, you know, blockchain, goldman-sachs would have said a year ago that blockchain is one of the most revolutionary technologies that could change the way they transact. caroline: now it's a.i. paul: and weight loss trucks. awesome stuff. you never know where this discussion of crypto is going to go. appreciate getting some of your time. she covers all of the financials stuff for us all of the wall street stuff for us. coming up, we're going to talk

media. that's right in my belly with 2024. a lot of folks are predicting some m&a here. maybe they'll do some deals. maybe some of the big tech companies will once and for all jump in and buy some of these media assets. we're going to break all that down from simone foxman and ian whitaker. we're going to get those folks together and talk about media industry 2024. that's all coming up. this is bloomberg. this is bloomberg. ♪ stitch fix.

-my stylist curates unique personal looks that are just for me. kind of nice. i like that. give them your size, your style, your budget. i keep what i like and send back the rest. -what can i say? my stylist gets me. they get me. and they'll get you too. and i've lost 152 pounds on golo. -what can i say? my stylist gets me. (uplifting music) my biggest concern when i started golo was food.

i'm a big guy and, shockingly, i like to eat. i was worried it was gonna be like other diets that were bland and restrictive. but with golo, my meals are great, and i'm no longer hungry like i was before. i'm so pleased i gave golo a shot. don't wait, go to golo.com.

paul: welcome back to bloomberg markets, we are simulcasting from new york city. a quiet day from a trade perspective which you would expect between christmas and new year's.

the dow isthe dow is up about .e russell isall right let's talk e bit about media here. a lot of people in 2024, these business models for the media are undergoing an unbelievable transformation as they transfer away from paid tv and more towards streaming. not all the companies have survived or will survive. it's a big change and we will cover that with simone foxman.

i want to start with streaming. netflix makes money on streaming but i'm not sure anyone else does what you think simone? simone: it's and an enormous cost. apple said they are charging prime if they want to avoid ads. it's a challenging business model and markets where pro building these these streaming

services and subscribers and they've done an about-face. they are going to watch the nba negotiation for the next round of right and we are expecting apple, amazon. amazon looking to invest in diamonds sports. that could be something where we see them differentiate themselves but again, the move is towards streaming but it's about who can capture the biggest cost.

paul: so the nba has granted the purchase of nba to the edelson family and las vegas. ian would occur owner of liberty sky advisor based in london. let's start with the kind of investors that invest in social media. what is the new world order? i guess it streaming but which companies can survive this how will this play out in 2024? ian: i think you have to go back to the fundamentals. if you look at who will be field to vent winner i think it will be tech companies because they have deep pockets that the other

players don't. i think you will find that disney, comcast will have to stay in the streaming market because they have made some big strategic mistakes which is to go all in on streaming. the consequences of that are rippling through the market. i think there will have to be a consolidation. i think possibly a warner -paramount deal. but in terms of who has the deep pockets it's the apple and amazon's. you have all of these streaming companies and that's one of the big mistakes they've made as well. they look at the world from a u.s. centric point of view and they thought the dynamics that worked in the u.s. would work globally.

it does not. you have structural penetration that the u.s. market and when you look at the premier league rights, were talking about nba rights. the tech companies fought aggressively in the u.k., the economics don't work. what we see here is with streaming there is a realization that different models work in different geographic markets. paul: i have pitched every tech company and i've gotten no bites whatsoever. i am wondering if they can stay on the sidelines and let the media companies give each other over the head. i'm not sure the appetite has come in the hollywood. ian: if you look at the various

maneuvers that have gone on, amazon bought mgm but not further purchases. it's interesting what netflix can do, can they join with paramount? the analogy i have used in the past, what you have in streaming , you have major media companies bashing each other over the head endorsing themselves into a state where it's hard to make major gains.

if youif you look at what happen world war i, the winner was one of the last player in the game. with apple, amazon and google's. there are different viewing habits in different ways of paying for the tv but most of the established media companies, and going full on into the streaming model which destroyed a lot of the infrastructure that had worked so well. playing devils advocate many would say i have built a

business that is where several billion. what would you say to that? ian: from an analyst standpoint, they just care about profits. you have warner which is making a slight profit, netflix is the only one who is managed to make consistent profits. the cash flow is ok but when you look against their peers, you have several ways to approach this. you can say we made a strategic error to go streaming and now we have the courage to say, may be we exit the game. for me the smartest media company when it came to what

happened with streaming was sony. they decided they would not get involved and remained an arms dealer. caroline: they don't want to be an arms dealer they just don't want to supply content, why don't they want that? ian: essentially they have invested into those streaming platforms. they have realigned their companies to focus on streaming operations. it's a hard job for them to step back and say maybe we made a mistake and we need to realign it. investors don't like it because it raises questions about management. one way to look at it is to say, what exactly is going to change with the streaming model that

will suddenly make it the optimum model? you can't look at anything that will say it's a real game changer. paul: bloomberg intelligence is out with research with the 6 billion loss in profits they will lose more on apple plus then disney, paramount plus, combined. an entity that could spend like crazy. when you talk to institutional investors, why is anybody buying any of these big media names? ian: that's a good question. there are several elements here. if you look at the u.s. media companies, they do have other assets. disney has the parks. they do have good historical

content assets which goes back to being the arms dealer. it's always the old shows that perform the best. the new shows get lauded and forgotten about. i think for what you have got from many investors is what they're thinking is, at some point it will come out right and the problem with that is that it doesn't come out right automatically. you have to take the companies and management and they have to take active measures to make sure they go down the right route. i would look at the legacy media companies and what they're doing at the moment. warner, discovery they've started to go down the right route we will let streaming tail

wag the dog. i look at disney and i think strategically in terms of the decisions they've made they are pulled in several different directions. in paramount, how does that survive in streaming? personally, there is a question over netflix. it's done very well in making profits and has a global presence but when you look at historical content, it doesn't have that much. i go to this total addressable market picture. if you look at the u.s. penetration is 85%. if you look at europe, is flatlining at 59%.

it's not just about subscriber numbers, it's about the average view per user and that's much less outside the u.s.. paul: thank you so much for breaking it down for us, ian whitaker at liberty sky advisors covering the media industry for decades. we appreciate getting a few minutes of his time. media investors have a tough time making a case for media stocks. coming up, we will get technical trading zero date options. they warm up zero date options, that's coming up here on bloomberg. ♪

welcome back to bloomberg markets we are simulcasting with caroline hyde a paul sweeney.

we are not talking about what was hot, not hot and then hot again. zero day offices think back to wednesday the 20th of december. there was a lot of handwringing when we finished down 1.5% we had the zero day options where you have zero day until expiration. why are they now being liked on wall street? to get the information on that we talk to abigail doolittle. what is the zero day option and why do they have the fandom talking? abigail: zero data expiration so by the end of the day any premium they repay disappears but they have been around for a long time. i was speaking to steve dobson

he was saying you can make the case they go back to 1973 but they searched this year. -- surged this year. earlier this year they added tuesday and thursday and so these options are available every day. when they became big was this previous february, powell used the word disinflation or neutral in the market loved it, it is assumed and it was primed to rally but there was a job stay on february 3 so they figured out they could use or hedge these zero day options to hedge that event and they become big ever sense. it's a fact that they were flooding the market. as for institution, is likely

they are using them to because they were record buy ins for options. you have to distinguish are they using them to generate income or to hedge? paul: how do market pros feel about this? they were kind of blamed for a selloff at one time. >> they actually pushed through the day that they had and it showed that market makers were log gamblers meaning essentially they were going against the prevailing trend and buying stocks as they default. there are more pieces to this

puzzle. caroline: are they going to remain hot into 2024? what is the on boarding? have we hit the saturation point? abigail: they are a new tool in the toolbox and institutions take a little longer to become comfortable with the tool. from the writing standpoint you can generate one day income and that can act as a hedge for a portfolio. in terms of hedging for cpi day or job stay, it's a nice tool to have in the toolbox. there has been a big conversation about whether the vix is dead and if it is dead is a because of these zero day

expiration options. the fix is not dead. they are two different instruments. the vix is written on a 30 day basis. you can use these to hedge a portfolio because they expire by the end of the day so it's a right in for generating income or a single day event whether it is pce, jobs. would it make the volume go down? that's a possibility. the hot new thing on wall street and the attention will go somewhere else. it seems like they're here to stay. paul: it's a regular investor does this means marcus will become more volatile? jess: this became popular when you had meme mania in 2021 with

the gamestop stock. in order to protect against them, them, hedging.

you have not just the retail side but you also have a sophisticated traders that are jumping on this too. caroline: to that point, the fact that we are thinking these could be used as tools in the tool kit. see below falls back against it but if the selloff was categorized by the zero day options, do we worry about market volatility in terms of disruption? jess: the big thing is liquidity. at the end of 2018 was liquidity and that was when the fed was paring back its balance sheet which did add to immense volatility. i was there that week when markets bottomed out on christmas eve. part of why these sophisticated

clients are getting into liquidity. using these zero day options and getting out of trades as opposed to the way they used to do. they are looking at low cost that to portfolio diversification. my clients don't think we are heading out of the market. abigail talks about scenes and when they bring up the vix, when he sees markets turning sideways, it makes sense to see the vix where it is. paul: some wiseguy in my chat group asked why don't we have one hour options i guess anyone can write a contract with anyone else. abigail: i want to the idea that the zero day expiration options have been around forever.

it's an old product that is being repackaged in some way. caroline: who would've thought? abigail: that was one of the fears after that big volume day ahead of the job stay ahead of the fomc when they were going nuts with these things. is not that it becomes more risky but that more people are able to play. one of the cash side a link that takes away from assignment risk. even on huge volumes it's a safer way to not hedge a portfolio, because to hedge a portfolio you will need something longer data. any premium he would pay at the beginning of the day disappears but writing it to hedge on those

particular days if you are willing to do that. that's something that jess is bringing it up from the article, some of these big banks are writing package derivatives involved around these options. i don't know enough about it to have a big opinion but that sounds like there could be some risk. when someone is putting together a derivatives package is not for the customer, it's for the bank. they are trying to generate income. in retail these would be sold because you expected the as to why to go down and a lot about still work out. but these are putting and other derivative plays that could be longer-term. caroline: thank you so much just menton and abigail doolittle.

meanwhile, the market is flat as a pancake. 0% moves on the nasdaq. 0% moves on the nasdaq. that first time you take a step back. i made that. with your very own online store. i sold that. and you can manage it all in one place. i built this. and it was easy, with a partner that puts you first. godaddy.

>> december 27. welcome to out simulcast.

it is a joy to be back. and really talking all across the markets as it stands. let's dive in on those markets, boring, are we surprised? >> no problem. >> flat on the s&p 500, less than a point to the downside. we are still near that record highs that may be people playing calm. the nasdaq flat, up one point on the date. the dow, more activity. the russell comes small-caps up five points. watch the vix. it is off. 12.5. brent crude. activity. often 1.5 percent. more looking at the new york contract. all this regarding geopolitical

tensions around the red sea and israel-hamas but for now we can go more broadly across the markets with our guest. always enjoy your voice on days such as these. where are we in terms of market exuberance? we were expecting sideways trading as we come towards the end of the year but what a year it has ended up being certainly for that nasdaq at the end exuberance around ai. and we vindicate these valuations that the fed does not cut as soon as we anticipate? kelly: yeah. investors are optimistic, not exuberant. you can look at high cash allocations and investors are uncertain about that future rather than take the needed risk , so i look at sentiment that has improved a lot in the s&p is up 15% since the end of october. you will get more optimistic investors with the move like

that that there is still skepticism out there so i think the mood is healthy. paul: we have been calling it out, how it seems like the breadth of this market has improved significantly, whether the spw equal weighted s&p or the russell 2000. they have outperformed over the last nine weeks. is there more room to grow do you think? callie: this is one of the most encouraging parts of the move as we have seen so many stocks participate in a rally that was unloved at the beginning. thinking if we did bottom and october 2022, then most of the ride up has been carried by bigger large-cap stocks and tech stocks. it is not a problem. that is usually how bull market start but you want to see more participation some thinking about the fed and thinking about how the market is factoring in great cuts next year there could be disappointment especially

because the move we have seen and more cyclically sensitive stocks has been strong. we are not sure the economy is fine yet even though things look at right now. caroline: i mean there is great analysis, so-called bad breadth and these euphoric stocks that have led us higher even though they have not been beating as much of the second half of the year, but if we are going to go broader and looking, i mean people are assessing small-caps russell 2000, is it the right time rotating or do we need to wait until that first rate cut really? callie: it is a matter of pays. we think it is a good time to rotate into cyclical slowly, really thinking about where we are in the economic narrative, solid jobs numbers, good-looking economic data, the economy looks

fine, but there is still pressure on the economy and could be pressure even if the fed does cut once or twice in the first half of the year so we think it is smart to step into cyclical's especially because they have been beaten down so much, especially rate sensitive cyclicals like banks, but you have to hold onto the half quality risk cannot dive too far to the other side. paul: an evaluation concerns after this big year end run? callie: you know i think back to bull market's humble market started and you tend to see valuations increase at the beginning of bull market's and i would argue we are at the beginning of a bull market now so i am not as concerned by valuations especially because there is the expectation that earnings could catch up next year. we are looking at a different market than we saw in the 2010's and 1990's, a lot of people make the comparison to the tech bubble because of that but this is a different looking market i think in tech stocks are some of the bigger stocks are some of the strongest on the market and we throw those in the quality risk buckets that valuations don't concern me at the moment. caroline: we are harking back to

the 1990's of course we talked about that earlier. great to have you on. thank you so much. talking about some of the lack of breadth and where valuations could take us into this new goal run. this is a topsy-turvy economy and were trying to understand the resilience of the consumer and economy good let's talk about the companies that have failed. bed, bath and beyond. some of america's best-known brands have declared bankruptcy and after years of cheap barring it was unsurprising after the fed started to hike into an inflationary environment, but what does it mean going forward when were thinking about rate cuts. have a listen. >> bankruptcy. >> stunning fall. >> debt is piling up. >> companies are filing for bankruptcy. >> bad, bad, beyond. vice media. pyrex. the list goes on. >> by all caps there is more to come. >> stakes are high. >> credit crunch.

>> debt defaults like this come in cycles like 2008. >> we are in the midst of a serious and financial crisis. >> when we started the pandemic in washington stepped in. slashing interest rates that companies could get cheap money. >> we saw company after company taking on more debt. >> all this access to debt but companies time but also kicked the can down the road. >> nobody knows how long the pain will last. ♪ >> we are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level. >> the record surge in interest rates is at the root of the issue as global companies have borrowed more than $500 billion of investment-grade debt. the fed rate hikes began in 2022. the vast majority was heaped onto u.s. balance sheets and despite the high borrowing costs, debt continues to grow. >> it has been building over the last year. interest rates have increased. cash flows have declined.

>> by mid-2023 blue-chip names of the borrowing costs rise by more than doubled to an average of 5.6%, while junk rated companies were paying 8.7%. >> with rates potentially staying high for longer period of time we could see a longer cycle that may not be tied to the macroeconomy. >> the problem is this a little bit by design. the federal reserve wants to slow down inflation. interest rates were cap higher for longer than a lot of people expected. >>'s higher rate environment has created a mountain of distressed debt. >> distressed debt is generally bonds, tradable, bonds that originally sold for $100, selling for $20 or $15 or five dollars. >> there are more than 200 billion dollars of distressed debt in the u.s. and more than the gdp of some european countries. 2021 this debt owned by riskier less creditworthy businesses has

jumped around 400%. retailers are especially vulnerable and inflation keeps her because high even as consumer spending slows. by mid-2023 the consumer industry accounted for more than a fifth of bankruptcy filings. >> bankruptcies don't occur because you have a business that is losing money. that business borrows money in times get tough and when it goes to refinance the loan the bank says you are not as good a credit as you used to be our we don't have as much money to lend as we used to have or our standards are higher. >> the hope in bankruptcy is the doors are kept open and everybody is kept employed but were seeing more and more liquidations which basically means that all of the stores need to be shut down. >> consumer facing companies and those upstream supplying them will impact their businesses. >> you can have this domino effect that can have huge impacts on communities. >> and that can be difficult but tickly if they have a lot of space. >> retailers use bankruptcy to get out of leases without having

to pay large sums of money to the landlords. >> which leads us to commercial real estate, remote work plus online shopping have helped to increase vacancies. unlike home loans commercial real estate mortgages typically range from five years to 15 years and across the united states is one point $5 trillion worth of commercial real estate debt is due before 2025. > we are starting to see some major real estate firms default on their buildings. >> the big impact as the downtown central business districts. >> another potential victim of mounting debt is health care. one of the most distressed industries in the u.s., in part because the sector's stability made it attractive to private equity. >> private equity buys with that because they don't have to put up their uncashed and can basically return the debt to the

company but as a result the company needs to be making enough profit not just to pay off that debt but also to have enough returns on lucrative returns for those investors. >> as of 2023 private equity on 30% of the country's for-profit hospitals which means these hospitals are forced to prioritize achieving sustainable profits instead of just focusing on community needs and public health. the tech industry has its own pressures mainly because most startups are unprofitable and depend on cheap financing. >> the appetite for risk has declined a bit and there is less capital available to the counties particularly those that are growing. >> higher rates make these new tech companies less attractive because investors want to see proof of profit immediately. the companies respond by cutting jobs to reduce costs. small companies struggled to raise funding. >> typically when a tech company goes bankrupt it is a product they are, technology or ideal failure. it kinda goes proof. >> playing into the consolidation of tech and other industries as the collapse of local lenders like silicon

valley bank, signature and first republic, or received by the fdic end had their assets sold off in their demised reduced to credit availability. >> a daily battle is being waged in supermarkets all over this country. >> from the postwar economic boom in the 1950's. to its high point in the 1980's. interest rates have always fluctuated with the times. at the near zero rates the last 15 years following the great financial crisis have hardly been the norm. >> the financial crisis was obviously unique in and of itself at this time around banks are much healthier. >> when it is difficult to raise money clearly more companies will fail. >> virtually for companies on the brink this time default is not seem quite so far. >> it is definitely not 2008. it is not on the same scale. >> the problem is when companies are not put off by higher rates and keep borrowing, it may be assigned the fed has more work to do to bring down inflation, which increases the odds that

someone will get caught up sides and left to take the hit. ♪ paul: that was sonali basak with a fascinating report on what we are seeing in the bankruptcies in the banking space and credit in general. you know i think a lot of folks probably felt like it would see more bankruptcies and a lot more bankruptcies and what we have seen and more as the interest rates went up by more than 500 basis points you would see more pain may be at the corporate level than maybe we have not with that stemless money in the early part of the financial crisis was there to help. that was true in the municipal bond market, very strong, very few credit problems they are, so that is certainly interesting to see but again, we will see what happens in 2024. i still think this apple news is pretty interesting. i mean apple watch sales ban put on hold by u.s. appeals court.

i thought something like that would happen because it is apple after all, but it is rare they make a big big misstep they are so we will have to see how that plays out. mark gurman bloomberg news will join us in los angeles, the go to person on apple. i think he pitches a tent outside apple hq because he gets off the scoops. caroline: he has sources all over the place when it comes to apple but apple under pressure but not much because the context is they did not make that much money from an apple watch but what is the consumer implication and what we think about more broadly apples on technology and the ability to build it in-house? we would discuss it how they just won a court ruling emberley pausing that sales ban. this is bloomberg. ♪

caroline: in broad context, tech stocks are doing very little if anything today from a benchmark perspective with nasdaq trading

flat on the day but individual bits of news we want to keep you up-to-date with. apple i mean down just a touch on the day and we have seen the behemoth that is worth in the trains is off less than a point at the moment, a 10th of a percent, but we want to talk about the intricacies of the watch ban that goes back to a patent dispute with one masimo. apple has just won a court ruling pausing the sales ban, so the company has a bit of a reprieve in its patent fight. have we anticipated it? let's get to mark gurman who has plenty of scoops we want to dive into when it comes to the creation of new technology at first let's go with apple. were you anticipating the stay of execution came to the ban? >> yes. the day after the ban came into play christmas day apple was able to file an emergency motion to get this temple early stage.

it would last until january 10 at minimum so they will get an extra two weeks of sales since the state since they would not otherwise have it and this was anticipated and apple made good arguments and showed in previous cases where injunctions had been in place in the same court did grant a temporary stay, so it was clear to me and a few others that this would happen and it did happen. this morning. we are still waiting to hear back from apple if they're putting this watch back on sale immediately today or tomorrow. you know it is a pretty arduous process operationally to get it on the online store, remove it from the online store, get it back in the retail store, get it out of the retail store, so we'll have to see how long it will take. paul: is there any reason to believe the parties here can come to some kind of settlement here monetary settlement?

mark: yeah, at this point given that apple is having some success in the legal proceedings here, i think it makes a settlement more and more unlikely. you can see it is off 6% this morning and some people who bought masimo stock banking on revenue from apple realized it will not happen so certainly i have think like i said the settlement is less and less likely and they will get this temporary stay. and our understanding of a temporary stay from this appeals court is that it would not have given the temp raised a if they did not ultimately believe the issue is going to be resolved somewhat in the near future. january 10, mark your calendar for the next hearing and the response to this temporary stay. after that is january 12 when the u.s. customs agency which has the ability to reverse the ban allows the imports of apple watches to the united states will determine whether or not apple's software fix it developed is sufficient to no longer infringe on the patents,

so we are coming up on two weeks away from either this exploding into apple getting the watch re- band over the watch being a thing of the past. caroline: going back to the history you have a piece out talking about how the saga was set in motion by a late night emailed to tim cook at 1:00 a.m. in 2013 he got an email from the scientist over at the sister company of masimo talking about the irresistibly of a new wave of technology was the oxygen, are dispute here. what do you think if anything the ultimate thing that masimo can prove? at looks like they failed in court recently but it is the itc that has come to it salvation. mark: that is right. they did fail in court. it was a hung jury and the jury voted in favor of apple 6-1. this is a crazy story for those

who have not read the article, i encourage you to do so. he writes that emailed to tim cook saying that he knows how to build blood oxygen and pulse sensors and knows how to make this technology work, let me come to apple and join your team and make this happen. 10 hours later he gets an email from an apple recruiter and weeks later he's working on apple. he only lasts at apple six months, then he creates his own wearables company and falls off the face of the earth. masimo sued his company into oblivion. it is just a crazy story with this guy who has developed these helped sensors going from company to company and as compelling as the email is in the email is in my story, the judge threw it out even though the jury made the determination based on it, but still i think that masimo's beliefs about

this guy going to apple's part is legal fight. this was the origin story leading to the lawsuit, countersued, the itc putting this ban in place. it is a fascinating story, the origin here. paul: it is a great story. it is a big story. it is a scoopage, which we get from mark gurman, notably on apple, but the ceo of masimo, he does not sound like he is backing down anytime soon. what can you tell us about the ceo of masimo? mark: well, he is extremely stubborn and seems to despise apple. he is great friends with joe biden. and it is very unclear what they want. on one hand they are saying this is not about money. this is not about a settlement. this is about to use their words, this is about apple not using their technology for free, but then not wanting apple to

use their technology for free and then wanting a settlement, those are the same things. on the other hand this masimo making a point that apple for years has stepped on the little guys and stole technology from another company, developing it from a competitor and that company going out of business, then using smart recruiting to buy up companies instead of acquire them, and you have seen so many companies go bankrupt over the years because of apple, and i think masimo is trying to take a stand here and they clearly believe apple is infringing on their patents and may be so and may be the solution and their solution is a licensing agreement, but it seems like apple's decision there is to redesign some of the software underlying its blood oxygen sensor so it does not have to reach a settlement. caroline: let's just talk about smart hiring and any other

direction because you have a great story. we heard in recent months that one sam altman was working with johnny i've, the visionary of apple products of old, on an ai wearable. now johnny i've has his own firm love from and there has been executive turnover over at apple in one of the key players that product is going over to join johnny i've fed his new company and design ai wearable it seems. can you tell us a bit about it, mark? mark: he is the former head of design at apple in sam altman the embattled chief of openai are working on a new joint insured to create a slew of ai products for the home, ai hardware, and now apple's vice president of product design and injuring for the iphone and apple watches leaving apple and will be heading to love from to

run hardware engineering for love from in this joint venture with sam altman. this is the biggest design related departure from apple since johnny i've, and this is the biggest hiring to date for him at love from comes that this is quite significant, and to your point about apple, right, apple is free to hire anyone they would like, as they say, as the court said, and other companies are free to hire whoever they would like from apple. this is an interesting thing because you would think there would be some competition here, but apple is well aware of the plans and well aware of the plans of johnny ivan don't seem to think that the products that he will be working on apple will be competitive in any way, and it is also interesting. i would imagine there was a three-year plus noncompete between johnny ivan apple that took place, well, we have passed

that three-year mark so i don't think there would be anything litigious around this. paul: a slew of great reporting today. i don't know where we would be content wise without mark gurman today. mark gurman, technology reporter based in los angeles breaking a lot of news on apple and a lot of movement at apple, the watch is in the news, technologies and the news, a lot of moving parts, and you put it together for apple stock. up 48%, 49% year to date in a market cap of a clean, even three bills -- i'm sorry, $3 trillion. $3 trillion market cap. how about that? this is bloomberg. ♪

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.

>> welcome back to bloomberg markets. we are simulcasting from the bloomberg radio studio in bloomberg hq in new york city. the king at the markets, a little bit of green on the screen. the s&p up 3/10 of 1%. nasdaq up to tenths of 1%. the russell giving a little more performance up about half of 1%. smaller caps stocks outperforming. 10 year treasury, 7.9% on your 10 year. double check crude oil off 1%. coin, up 1.5%.

just under $43,000 per token. one of the economic winds that have shifted has been the soft landing thing is getting more airplay than earlier in the year with the fed signaling it is open to a pause or a more dovish tone. let's check in with somebody who does this for a living. a professor of public policy and economics at the university of michigan. a bloomberg opinion columnist as well. thanks for joining us here. it feels like the market may be getting over its skis here. let's start with the basics. is the fed likely to navigate a soft landing? >> the world keeps on moving. it is going to depend on when we are going to call it a soft landing mission accomplished.

a lot of people are ready to declare that now. if you look at the fed's target inflation rate over the last six months, the annual rate comes in below the target rate of 2%. we have still continued to have unemployment well below 4%. here we are. it is the end of 2023. no one saw this coming or i should say few people did a year ago. we had 85% of people forecasting a recession. those who did not think we were going to have a recession thought we were going to have a difficult to address inflation ongoing. we have neither. we are clearly at this point of a soft landing. there is a question of does it stick. do we -- are we able to keep inflation down over the next six months? is it going to stick at the fed's target? are we going to be able to keep the economy humming along over the next six months? we are going to want more than one month of having touched down

with the soft when before people will declare it is here. i think it is important to realize we are ending the year with by almost any definition the soft landing has been achieved. paul: you mentioned the labor market. from my perspective, that has been an amazing source of strength and stability in this economy. we saw the end of limit rate takedown last month. what you think is supporting the labor market in the face of a brutal rate environment the last 18 months? >> without an increase, why has the labor market able to be so strong? the view of economists has been you cannot sustain unemployment below 5%. we have sustained unemployment below 4% for a long time now. we have done it in the face of

an increasingly challenging economy. why is that? i think part of the answer is it was a very dynamic labor market as these challenges arose. lots of people were switching jobs. remember the record high flip rate? still above where they were in 2019. this dynamic economy. it has brought a lot of people back into it. there is a lot of change going on. all of that has enabled there to be some layoffs which there have been. think of the tech oil stories of 2023. there has been -- tech layoff stories of 2023. there have been enough opportunities we did not see people getting laid off and sucked into long durations of unemployment. caroline: i'm interested in the risk factors around the soft landing you think we have already managed to achieve.

at this exact moment we have the nasdaq 100 at a new record high. a record high being hit by the dow. the market still thinks this inflationary cooldown is set in stone. . the fed is going to be cutting as soon as march. we do have the red sea concerns. we have the supply chain anxiety creeping in in the background. is there any of that concern in the economy right now? >> recessions are always caused by some sort of negative shock that is hard to predict. that is why economists and people are really lousy at predicting recessions. i remember doing interviews in 2019 where people kept asking me as they're going to be a recession in 2020. unless you had a crystal ball and you knew covid was coming, you did not have any reason to predict a recession. the recession we had in 2020 was clearly caused by the pandemic. the economy was strong going into the pandemic.

we could see a lot of problems on the horizon. global conflict for sure. we could se economies out there having much greater trouble than the united states is having. those are our trade partners. macro economic problems abroad could spill over to the united states. all of these things are a concern and should be a concern. it is why the fed is not going to promise what they are going to do in 2024 because it got to be data-dependent. the reason people are expecting rate cuts is because the fed told them we anticipate rate cuts. look at where they said the dot plot was going to be for 2024 in september and compare that to december. the central tendency, meaning the vast majority of people on the fomc don't see rates going any higher.

they see rates coming down. the top end of the central tendency is for .9%. that is a cut. the bottom end is 4.4%. there is a reason the markets are pricing in the cuts because the fed told them that is what we think is going to happen. caroline: it is not always about the way people feel. we were talking yesterday about the new word in dictionary.com coined by our own columnist called vibe session. it is about how you feel. inflation has been cooling but people still have sticker shock. as someone who is a president's council of economic advisers, a chief economist in the u.s. department of labor, with your policy hat on, what do you advise the administration do going into the election year? >> i do think the vibes are starting to improve. we saw consumer confidence starting to tick up to the

administration needs to make their case with the facts. we could think about our personal relationships. if you bring a problem you have two a friend or a romantic interest and you say i am unhappy about this and they tell you you should not be because xyz, that is not -- that conversation is not going to go great. the same thing -- the white house has to learn a lesson from that. they cannot tell people don't be unhappy. look at all the great things we have done. they need to say we understand you are unhappy and we understand this has been a challenging economy with a lot of change, upheaval, prices have changed. jobs have changed. childcare has been hard. we have been doing everything we can to try to not just give us back to normal but get us to a better normal. here are some of the things we have done. we are going to keep doing more. it is going to be that kind of message and i really deeply hear and feel your pain and this is

how we are going to be able to keep moving forward. i don't hear anything on the republican side saying we would do this instead or that instead and it would be better for people. what i am hearing is people being frustrated and upset. we have got to start -- as you said it is the feeling and vibes. we have to start by acknowledging them. paul: appreciate getting your time. betsey stevenson, professor of public policy and economics at the university of michigan. she is a bloomberg opinion columnist. more discussion from more smart voices on where interest rates may be going. bill ackman, pershing square capital management ceo sees the fed adding rates as soon as the first quarter of 2024. here he is on the david rubenstein show peer-to-peer conversations. >> i think it is hard to predict. i think the economy is weakening. we are seeing evidence of that

in some of our companies. i have some concerns. there has been a huge subsidy in terms of low interest rates. most companies fix their rates or their debt at low rates. certainly real estate investors did the same. that works until at those not work. what is going to be interesting is to see what happens when people have to reprice their debt. that can have a cliff like effect. you are seeing that in real estate. >> the markets are assuming on the markets are not always right but the markets are assuming there is going to be a fed discount cut sometime next year. as we talk now at the end of november, it is not clear what the fed will do. some people say the fed if they were to cut interest rates next year would help the democrats and be seen as political. on the other hand people say the fed cannot wait until after the election because the economy may need a stimulus. >> i think they are going to cut rates. i think they are going to cut rates sooner than people are

going to expect. what is happening is the real rate of interest which is what impacts the economy keeps increasing as inflation declines. if the fed keeps rates in the middle fives and inflation is trending below 3% or at the very high real rate of interest and that is having a retarding effect on the economy. many businesses and individuals have the benefit of fixed rate debt. that fixed rate debt for companies and commercial real estate starts to rolloff. there is a risk of a hard landing if the fed does not start cutting rates soon. the market expect sometime middle of next year. it is more likely as early as q1. >> the fed probably missed inflation. they said it was transitory. they played catch up and increased rates considerably since that time. do you think the fed made a mistake in not handling inflation differently at the

beginning and how do you think they have done since they have started increasing interest rates? >> they certainly have made a mistake. the fed as an institution would admit that. i think they caught up. effectively. i give them credit for acknowledging the mistake and being aggressive. you want to make sure german powell's desire -- chairman powells not to have a -- desire not to have a legacy of intruding to long-term inflation does not cause him to make the opposite mistake. the market expectation is middle of next year, july for beginning of easing. the economy will likely demand an earlier move. i don't think of the fed or this fed as a particularly political institution. i think they're trying to do the right thing. paul: bill ackman of pershing square capital management founder and ceo sitting down with david rubenstein. he is calling for rate cuts may

be earlier than some other folks think about. caroline: i am hearing the growing narrative of the reverse. the market getting excited about the march date we could see. what i do 50 to basis points over the course of the year. there seem to be more market analysis saying it is going to be july. ultimately this inflationary pressure is still going to be somewhat there. the labor market is going to be so good. we will cut but maybe not quite as soon as the market is envisioning. paul: what is labor hoarding? i've never seen or heard of a company hoarding employees given the cost of that. apparently economists keep saying that is a thing. i keep saying how -- why is this labor markets over bust? we saw the unemployment rate tick down last month. caroline: they want to train people or retrain them. ultimately that is were ai eventually comes in.

we are getting more technology that is going to be able to -- particularly in the industrial area where a lot of the craftsmanship and knowledge is within a few heads. can they ultimately make it easier and cleaner to train up new? hires does that make it a more dynamic labor market where we don't hoard? we are more fluid in and out. paul: it is amazing. 3.7% unemployment that feels like employment. coming up, we will take a look at wall street. the that was and maybe the transfer 2024. sally blake well from bloomberg news in london is going to join us. it is bonus payment time coming up in a few weeks on wall street. this is bloomberg. ♪

psst. hey, sarah. hi. if you had to choose, would you listen to elevator music all day or deal with payroll compliance? payroll compliance, for sure. wait. for real? switching to gusto made staying compliant much easier. on top of seamless payroll, they automatically calculate my taxes and file with the right agencies for me. can gusto help my small business with compliance too? definitely. thank you so much. choose payroll compliance without the ups and downs. that's working with gusto. caroline: bloomberg markets tv and radio. we join forces at this time of year. talking about a little bit of

the uptick we have seen in some unloved areas of the market. the russell 2000 doing relatively well into the end of the year. the kbw bank index is 12 keep an eye on. not much happening across the board. up 3/10 of 1%. the last month or so, the kbw up 15%. this has been a year where the biggest got bigger. there is a great piece talking about how it is a tough year for every bank not named jp morgan. school out to sally to talk about what it is like in the banking industry at the moment. more than a decade after regulators have said they are going to tame this too big to fail mantra, it is still alive and well. >> if we reflect on the year we have just had, a big important factor is interest rates. full interest rate -- four interest rate hikes in 2023.

this became overwhelming for some lenders and contributed to the collapse of several smaller lenders. the market is pricing in an aggressive path of cuts in 2024 that eases pressure on banks fighting to keep depositors from fleeing. that will help original lenders grappling with unrealized losses. we are seeing a bit of the bank stock rallying. that raises the bigger question. what does the banking landscape look like in 2024 after this regional banking turmoil? ? after jp morgan rescued first republic making jp morgan bigger, silicon valley bank collapsed. do we have a landscape of further consolidation next year? do regulators want to that amid two big to fail concerns? in may, we heard treasury secretary janet yellen say the environment we are in where there is pressure on earnings may lead to more concentration in the sector and regulators

will likely be open to the mergers. 2024 could hold more consolidation. paul: there is a great chart in the bloomberg news reporting. it says jp morgan is worth more than bank of america and citi combined. i had no idea they were that much bigger. is there a feeling within washington or the world of banking that jp morgan has gotten too darn big? >> that it was definitely a concern surrounding the purchase of first republic. the excellent story opens with the anecdote of they have the highest bid and it came to rescuing first republic. the bid was four times larger than the three others which were pnc, citizens and -- since jp morgan bought bear stearns and washington mutual in the financial crisis, it has been able to add a mountain of

assets equal to wells fargo which itself is the fourth-largest lender. i think there is concern about this too big to fail kind of slogan that has been with us since the previous financial crisis. it looks like one consequence of the recent regional banking turmoil is the biggest banks dug deeper around themselves. caroline: one area of concern looking into 2024 is the real estate area and holdings of in particular commercial real estate by local banks rather than the big lenders. how much of that is a reality? how much of that is something people are keeping an eye on of what could trigger further concerns for kbw bank index for example? >> i think it is a really big concern for the regional lenders . not so much for the bigger banks which don't have significant exposure or any exposure mitigated by the diversity of

their businesses elsewhere. for regional lenders, they have tended to be more exposed and more exposed to commercial real estate which is the area where there is significantly more pressure. the statistic for regional bank exposure could be around 18% to real estate and commercial real estate is within that. this has already bubbled up as a problem for a lot of smaller lenders. they have mentioned it in earnings calls. we can expect to see more of that in 2024. caroline: one of the thick -- paul: what are the things i learned at the getting of the year is there are 4000 regional and committee banks in the united states. that is unusual. not many other developed countries have it structured that way. is there a belief maybe there should be some consolidation within those to compete against some of the bigger banks? >> i think that is probably what

will ultimately happen. do we need 4000 banks when banks like jp morgan have been expanding in a lot of regions? we have seen since it bought first republic, it made inroads into some of the clientele and this does areas silicon valley bank was prominent in. the banking industry has some good templates to work off of this year with pac west which combined with a smaller rival. that was a deal regulators it seems like they encouraged. they certainly put no hurdles in its way. thinking about what janet yellen said, they would rather have banks do this then succumb to the pressures failed banks succumbed to earlier this year which would cost them money because they need to use the fdic insurance fund to protect depositors. paul: the rich get richer in banking sally blake well, thank you for joining us.

bloomberg news. let's stay on the discussion of financial services with fintech. motive partners founder says the next 10 years of fintech innovation will be driven by artificial intelligence. here are some of the conversation on bloomberg wealth with david rubenstein. >> the last 10 years of financial services has seen an extraordinary change. mobile banking, and all of the a technology enabled services we have come to considered to be table stakes. the next 10 years is going to take that technology impact and expand it exponentially. there are enablers said that but the primary driver is going to be related to the deployment of artificial intelligence. it is interesting if you look back at the beginning of the internet era, 2000, 2001, of course there was a bubble. there was all sorts of excessive exuberance. we know there was a there there.

what came after that deliver change and value. but people were unsure in 2000 what did the internet really mean. would anyone ever really trust the world wide web is a place to do business let alone financial services business. as we look forward at the potential for artificial intelligence, as we see it today, i don't think any of us is in any doubt about the profound threat and opportunity that represents. it is intuitively obvious and now in a real way we as individuals get to interact with artificial intelligence through things like chatgpt which has taken the world by storm and can see with our own eyes and can feel and become enamored with the way in which these ingenious programs are able to interact with us. that will profoundly change not just the financial services landscape but everything we do.

>> i have the view that sometimes the easiest way to sell your company to an investor is to put ai behind it. company ai. you add a i, people think it is great. not everything is ai. you think people get in so enamored with the ai concept, they are going to put money into things that are not ai were good ai? >> it is possible and we assume the experience the same thing with blockchain a few years ago. you plug blockchain into a press release and the impact was 10 i. . the other -- was 10 at. i think the other risk is a grows too quickly to fast and is unregulated and the biases and abuses of the technology are unchecked. that would be a devastating loss. paul: that was with masters come up motive partners founder and jp morgan alum. caroline: cbs creator.

paul: sitting down with david rubenstein talking about fintech. during the pandemic, i think i upped my fintech game pretty big. i got apps all over the place depositing checks, taking pictures. it is the new me. caroline: i thought you were going to say i got a crypto app where i am buying and selling. confetti for every trade. paul: i'm excited with depositing text by taking a picture but i still walk around with cash because you never know. caroline: i am in a completely cashless society which is not great when you want to buy a light up balloon for your daughter on the street. venmo came to my rescue. paul: the rockettes lived up to it. caroline: i've never been to something that electrified so much in quite a whale. my daughter was thrilled. i was more thrilled. paul: that is a great new york tradition. s&p 500 up 1/10 of 1%. this is bloomberg.

♪ did you know you can get someone to shop for you? with stitch fix, it couldn't be easier. i share my style, size and budget.

and they shop just for me. my shopper sends me stuff i feel good in. i keep what works, and send back the rest. stitch fix. i don't want you to move. i keep what works, and send back the rest. i'm gonna miss you so much. you realize we'll have internet waiting for us at the new place, right? oh, we know. we just like making a scene. transferring your services has never been easier. get connected on the day of your move with the xfinity app. can i sleep over at your new place? can katie sleep over tonight? sure, honey! this generation is so dramatic! move with the xfinity 10g network.

>> welcome back to bloomberg markets.

the closing bell ringing on wall street. we do have three more sessions left in the year including today. within a whisper of the record for the s&p 500 yesterday. with an a hair's breath today. volume pretty anemic. out about 40% of the 20 day moving average. i want to point tell there were pockets of activity in the market albeit a quiet market. the income seeing some activity. seeing activity in commodities and we have seen 40 plus stocks hit all-time highs so that bodes well for the last couple sessions of the year. sonali: seeing the santa claus rally going but cooling down. not the same velocity we saw a day ago. the bid under the bond market is impressive. seeing where yields end the week on the two-year and tenure, let's see how much of a bid there is when you think about duration as we think about fixed income. vonnie: more auctions today so

there was plenty of activity. we are going to be talking to somebody who can tell us more about the auctions sole plenty of demand just as yesterday's did. the bond market has not fully had its say for the year even if the equity market looks like it might have. sonali: watching the s&p 500 struggling to hold onto gains. flat on the day but you are still seeing a bid in other indices like the russell 2000 still up to tens of 1%. the -- up to tenths of 1%. every single stock in the semiconductor index was under the green. seeing declines in that index on the day. the nasdaq struggling to hold onto gains. silly little but of green on the nasdaq 100 on the day. vonnie: let's take a look at where we are yelled wise. we have the two year yield at 4.2344%. the 10 year yield at 3.7926. investors are locking in the

yields at the end of the year. seeing a little bit of steam coming out of oil markets appeared to be tip's debt 74.23. down 1.8%. gold is up 14%. off our highs for gold. sparkled priced at 2070 726 and ounce. that is about 30 bucks or more than that away from an all-time record. that does look to be headed that way as well. still, or about the fixed income markets and bring in the eagle asset managing director of strategic income. thanks for joining. we are seeing investors lock in those yields today and potentially tomorrow and the next day. is it a surprise we are seeing the 10 year benchmark yield down almost low 3.8% at the moment? >> we had a 375 at year end forever year end call.

as we have been messaging and people are finally gathering that the end of a fed tightening cycle is unambiguously good for bonds. you go back to the last five cycles, they dramatically outperform the cash market. . what people are waking up to is when the fed does move, thanks will move and the cash investments that have to be redeployed will start to evaporate in terms of their yield. duration is your friend. the 10 year is going to relax as we start 2024. this has been extraordinary couple months for the bond market. the year of the bond turned into the two months of the bond. we are going to end up with a good return on fixed income. vonnie: your view is the rate cuts on the table whether those be the three the fed have on the table or the six plus the market has on the table are not necessarily a done deal. who is right? you or the market/the fed? >> we go back to the pandemic experience and we have the

missed inflation call, the transitory. we put so much omnipotence onto the fed. it is probably unfair. inflation is a difficult thing to measure. our best analysis suggesting goods inflation rolling over and service inflation continuing to be high. what surprised me is we have the victory declaration or the appears of a victory declaration now. the data to us over the last month and a half is not materially better on the inflation front. i think the fed once to take a few of the insurance hikes off the table but a six or seven or eight reversal of the fed cycle in 2024 to us is not in the offing? sonali: even if you don't think the fed is going to hike again, the idea of rate cuts the market has been pricing in, to what extent is an increase or a re-acceleration of certain parts of inflation still a risk to investors going into next year given they have recalibrated so drastically? >> it is a very big risk. what is interesting about jay

powell's statement, the 2% number inside a 2% number was no longer the goalpost. he said he could loosen monetary conditions prior to that. what i would suggest is the inflation animal has some inertia to it. labor markets are still tight. i believe covid forever changed the labor management dynamic. there is still a lot of wage pressure that has a nurse a two it -- that has inertia. more importantly to us, the consumer, even though rate of change is moderating at the inflation level, we are still at high levels in charge of absolute numbers. what we look at is a slowing economy. perhaps a recession. and the fed is likely going to react to that. they are doing that. absent any material slippage in the labor market that is unprecedented. we would like to see a little bit of softening.

some pretty good softening in the labor market before i would say mission accomplished for the inflation fight. sonali: how much does the relative story matter? to the extent next year you start to see the ecb or other central banks cut before the united states and then all of a sudden you have a higher rate differential moving forward. how much does that make? a difference i think it is going to make a big policy difference in terms of >> because of the interest rate disparities. the eurozone and other markets are in a world of hurt/recession. it would be on likely that it would be unlikely be would have the steepness of tightening with lending standards tightening, loan growth slowing. it would be the outlay or not to have a slowdown/recession ducks deposed against those dynamics. it is certainly possible. if you were going to make an argument sometime is going to be different, maybe this is the time.

my history tells me we are still likely into a slowdown type territory to start 2024. vonnie: his monetary policy restrictive? >> yes, finally. i would suggest that has only happened the last quarter or so. if you look at financial conditions generally, if you look at the lag effect of these tightening scum i think you're just heading to see the teeth of it. i think maybe that is where the fed is going. if i can still a when gretzky analogy, the puck is going to an economic slowdown. perhaps they know that. perhaps they know the last hikes were insurance hikes. those are the ones that will likely come off but a widespread cutting in rates to re-accelerate and economy given the inflation backed up to us is not likely. vonnie: are you concerned about anything related to the fixed income market, repo markets and so on in the next 12 months at this point? there is a lot of talk about what might happen if deficit concerns increase.

the fed has been reducing its balance sheet for 18 months. >> i am concerned about what we call fiscal dominance. we have numbers you have reported on at bloomberg. but that can be a narrative the market may grab hold of. here to for they have not. we have 33 trillion in debt. you are seeing the profit taking from the quantitative easing mathematics between treasury and fed going away. you are seeing tax receipts marginally declining. the adjustments to the entitlement program. all of that conspires to make an environment where the bond market can have a knee-jerk and move higher. our best guess's q1, q2, we see a relaxation of yields in the 10 year treasury. for those that have missed it, that is going to be a great entry into a fixed income.

it is interesting the income space up until two months ago looked horrible from a return standpoint. we are going to end the year with a balanced dividend bond strategy approaching double digits. for any long-term investment policy, that does hit the mark. it has been a huge about-face the last couple months. those that think they missed the fixed income trade, they're going to get another bite of the apple in the first quarter. sonali: you were talking about duration but how much duration are you willing to take on given some of the large fiscal concerns, the tightening by the fed? how much control is there over the long end of the curve and how much danger is there when you look past the 10 year? >> the intermedia partners the sweet part. if you look at the credit market, it is the double. become a triple be areas those are still a 6% handle yield. on the muni side, because of the demographics, the supply and

demand imbalances and the muted nature of municipal volatility generally. we are more constructive on duration there. the move index, the measure of treasury volatility unlike the vix, the measure of equity volatility is still elevated. caution on duration. particularly on the taxable side is warranted. sonali: how much caution do you have when it comes to steepeners? you have had investor after investor pitching steepeners going into the into the end of the year. we have inverted quite a bit on the 210 curve. > we continue to invert with the clock ticking between inversion and recession which is one of our tells that has failed us at least up until now at this point. i don't think the 10 year eclipses 5%. before 999 will be the high water mark this cycle. the range is going to be the 375 to mid-four for the next couple of quarters.

i am comfortable owning treasuries in anywhere in that range the next five to 10 years. vonnie: the other thing to point out is credit bonds in the triple b and double b sector still offers 6% yields. are you happy with those are looking for opportunities in that arena? >> the case for the double b sector has never been stronger. since 2009, defaults have been almost nonexistent in that space. what we have learned is corporate america has gotten comfortable functioning in those double b areas. we have had a number of upgrades to the double b space. with rising angels into the triple b space. to us that is the sweet spot of yield in credit. those two sectors which encapsulate roughly half the ig market, roughly half the high-yield market. you don't have to go way down the stack. if you look at a 6% yield, and you look at the relative to risk

premium and relative to most folks investment policy or investment objectives, that is heading a lot of marks. that is going to be especially for balanced investors a good entry point. in that area along with some of the agency backed mortgage securities which spreads have gotten wide because of the volatility under the treasury market. let's not get too comfortable with the money market rates. they are going to be fleeting if the fed and markets are going to be true to what they are telling us. vonnie: a volatile time in treasury markets. a little relief when we are looking for returns. our thanks to james camp of eagle asset management. when you think about the credit plays, you have people pitching a lot of duration more than they are credit risk. you and i were talking on the sidelines earlier high-yield has been a great performer into the end of the year the last two

months. vonnie: exactly and i'm sure there are people waiting for the falling angels. they have not fallen yet. many likely will in the coming quarters. you heard james talking about rising angels so we will have both sides of the coin. sonali: let's talk more about the fallen angels and even the equity side is looking ugly. you have to have the stomach to invest in this market. we are going talk about the retail industry. we're going to be joined by jay michael prince, ceo of u.s. polo a ssn for their retail outlook for the year ahead. this is bloomberg. ♪

ameritrade is now part of schwab. bringing you an elevated experience, tailor-made for trader minds. go deeper with thinkorswim: our award-wining trading platforms. unlock support from the schwab trade desk, our team of passionate traders who live and breathe trading. and sharpen your skills

with an immersive online education crafted just for traders. all so you can trade brilliantly. and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com sonali: this is bloomberg markets. we are going to talk about the consumer because early data shows u.s. holiday retail sales

rose at a slower place than yesterday -- slower pace than last year. joining us to discuss the trends is j michael prince, global president and ceo at u.s. polo assn, a 2.3 bullion dollar retail fashion company. when you look at the slowdown, how is it impacting you and how are you getting around it? >> i think the -- is fairly consistent from what we have seen. we have a $2.3 billion global footprint that spans across 190 countries worldwide. we a good perspective not only of the united states but abroad on what trends are working, what is not working and what we saw coming out of black friday, we saw a very strong online sales. but then it slowed down as you get closer to the christmas holiday and was steady thereafter. online was up mid to high digits, single digits.

retail sales at brick-and-mortar were basically flat to slightly up to slightly down depending on the market you look at. what is interesting is we have to factor in inflation. would say inflation has been up five to 10%. some of the reports are saying retail sales were up 3%, 6% online. if you factor out inflation, it was roughly flat give or take this year versus last year. sonali:sonali: how do you think about the set up into next year? we think about the u.s. consumer come on one hand there is a little optimism around the direction of inflation but they are levered to the knees. they have more than a trillion dollars of credit card debt in the united states alone. how do you think about that dial-in a? >> i think it is a real dial-in a. and i think there has been a disconnect within the marketplace. as you mentioned and so well said, inflation is high. interest rates are impacting all of us. the consumer is strapped. credit cards are maxed out.

a lot of the consumers were putting purchases on pay to play platforms, pay over several months. it is going to be interesting about 2024 is how does a consumer hold up knowing you always run up a lot of credit card debt going into the holiday season. do they pay it off over time? do they have the ability to continue to consume? one thing? that focus on great discounts or a brand like ourselves which has a great price to value proposition for working families i think we'll be ok with this but i think you're going to see the consumer pullback post holiday across a lot of spending platforms. vonnie: how did you deal with inventory post-pandemic and are you at quote unquote normal levels now? also the supply chain, are you seeing any issues to do with current supply chain issues?

>> one thing with inventory levels, i think we all learned a valuable lesson during the pandemic. we were over inventory, under and over and supply chain issues. there was a reckoning 12, 18 months ago. i do feel retailers are in better inventory shape this year. going into next year and they were in years past based on lessons learned. for us, we are a price to value proposition. we focus on the basics. we will have some fashion items but a core basic polo shirt, white, red, blue, black will sell 12 months out of the year. therefore, we feel good about our inventory position globally because we have been focused on the basics. if you went very forward fashion that did not resonate with the consumer, you could have challenges putting the inventory. you mentioned supply chain. one thing we do watch carefully

is the items that are happening or the actions happening around the red sea. this one of the top six trade routes in the world. we have a large middle eastern business between turkey and some of the middle eastern countries. that is something that has not impacted us yet but we are keeping an eye on it because it is something most vendors and retailers should be watching. vonnie: abercrombie & fitch coming out saying they were going to fly some of their products as opposed to ship them because of it. i am curious as to your thoughts on real estate because you say you have 1100 retail outlets and stores, locations let's say worldwide. are there places where real estate may be looking attractive at this point? >> i think in places where you have a soft economy, if your brand is performing, i think there will be opportunities. western europe comes to mind where it is a slow growth market. we see opportunities of

landlords to get good rates for extended deals. that is something we will look at aggressively. in the u.s. and you guys have seen this trend, the class a malls are still extremely expensive. hard to get into. they make sense where you can make money. class b and c are harder. the outlet centers are still performing well. for our retail season in line was good but out was strong as we expected. class a malls space will still be tough. there are always goes to be had if you are patient and you have a strong brand. sonali: you mentioned europe. how are you thinking about a potential slowdown in europe let alone the united states given we have not seen the brunt of a recession? >> great question. when we look at everything globally and that is how we forecast the year and you mentioned two point 3 billion, that was 2022. . we just delivered 2.5 billion in

2023. will make a formal announcement the next few weeks. when we look at the markets around the world, we see the u.s. still being healthy. the consumers a little more strapped than we would like but for our brand we will hold our own. we just became the largest power brand in india. we think that is a billion-dollar opportunity for us long-term. the indian marketplace is strong for us right now. western europe, i will tell you from a retail perspective, i believe they are in a slate recession already. i think 24 will be flat to slightly down to slightly up. the chinese economy is still soft as well. we have seen softness in china in some -- and some of asia as well. u.s. and india up. some of the other markets flat to down a little bit. sonali: how do you think about the dispersion in the types of consumers? you think about the set up for 2024, concerns around luxury but we speak to other luxury brands. say norwegian wool spoke to

yesterday and they cannot keep things around fast enough. as are flying off the shelves. what are consumers doing across different levels? >> i think -- i will call it lower middle income, working family, working class family down has had a challenge the last six months. those are some of our customers. we appreciate the fact we can offer them a great price to value proposition. i think with gas, interest rates, inflation in general, groceries, it is tight for that demographic. it is only tell you in the u.s. but worldwide. in q3, we saw softness around luxury for the first time in years. a lot of the really strong luxury brands reported soft numbers especially in the united states which kind of surprised me. i will be interested to see what happens at retail for the luxury providers. q4 around holiday.

to your point, i think a really strong brands are going to always perform better than others. the brand you mentioned must be one of the great strong brands but your average luxury retailer . it will be interesting to see. i think they will be a little softer than the market had planned. the q3 kind of transition continued. vonnie: a huge background to places like guess, nike. as an outside observer, what is nike getting wrong? >> what is interesting about nike and that is where i would say is one of the top tier three brands in the world. i put apple and nike as one of the top two brands. they have always been strong with innovation in the brand. what i have seen happen with some of these new up and comers on cloud, even like the ouray, lululemon, air chipping away at innovation and coming up with new interest for the consumer.

i think that is something nike has got to refocus on is getting their innovation game back. the new product pipelines coming out with product every demographic once a piece of. a brand is a great brand but they will figure it out. i do feel there is a blip in the road right now. vonnie: thank you so much for joining us and giving us so much time today. that is j michael prince joining us from u.s. polo assm. we look ahead to the outlook for tech and ai in 2024 with the vice president and general counsel at net choice. this is bloomberg. ♪

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.

vonnie: this is bloomberg markets on bloomberg television and bloomberg radio. at least we are positive an hour and a half towards the close. sonali: some indices more than others. the s&p 500 has been struggling to hold onto gains. we are near session lows share the nasdaq 100 still positive on the day. the semiconductor index flat on the day. s&p 500 and the russell 2000 up 3/10 of 1%. absolutely. we are holding onto some gains but not with the same velocity. vonnie: may be getting thinner

toward the end of the week. any fixed income seeing activity. quit a bit of activity with quite a bit of yields. continuing to descend to the two year yield at 42416. the oil markets, we know this is very lately about the red sea. a little bit of relief. under $75 a barrel for wti. a ban on the sale of apple watches has been put on hold by a u.s. federal appeals court. here with this and other apple and related news, mark gurman. a ban on the sale being put on hold as a relief for apple. how does it work in actual practice? >> that is exactly what we are trying to figure out. we are waiting to hear back from apple. we have been refreshing the apple online store.

we have been checking apple's physical retail stores and people who work there. there is no update as of yet as when though watches will return to sale. getting this reprieve, this emergency order through a core in d.c. puts the watch on track to go back on sale today through january 10th at minimum. january 10 is when the itc is going to respond and try to shoot down this motion. this particular court in d.c. has a history of not granting these emergency lifts if they don't believe this will stick long-term. as of now, it seems likely if i were a betting man that this apple watch ban situation should be resolved by the middle of january. sonali: you have mossimo corp., the company that had bought the patent infringement claim against apple now down about 5.4% on the day. what does this end up meeting for them? >> for the stock, you had a lot

of people, the stock up last month or so buying into mossimo on a more basic level. you have heard about their technology. this has been an incredible marketing moment for mossimo. that probably brought in a lot of consumer investors and day traders. on the other hand, you had people jumping into mossimo because they became under the impression there would be some sort of licensing pact or settlement from apple. mossimo generates about 2 billion in revenue on an annual basis. a settlement with apple would be worth hundreds of millions of dollars and would use the market cap. now you see this appeals court has stepped in, that makes the settlement all the more unlikely. i don't think that something that would happen unless there is a circumstance in which the u.s. customs agency rejects a softer base fix. a hardware fix could take

several months. in that case, apple would need to settle with masimo to avoid losing out of three to four months of sales. softer fix, that is a matter of weeks. for now, investors are scared off. they will be scared by the middle of the month if the software fix is approved by customs. sonali: i went to talk about another story here. this idea that openai is leaning on apple talent. a veteran of apple to work on ai devices. we have been talking about these devices for months now, the possibility of them. what does it mean to bring on this kind of talent for sam altman? >> it is unclear if this is openai related or if this is more related to sam altman and more of an independent venture. he is starting this new company with johnny i've, apple's former chief design officer. he is credited with designing almost every iphone, apple watch, ipad, mac to date.

he worked on their headquarters as well. of the five most important people, maybe three most important people within tim cook and steve jobs in the history of apple. . has this new company he started four years ago. he is working with altman on ai devices. so far he has hired over 20 former apple employees for his design studio. most recently, apple's current vice president of iphone and apple watch product design in their hardware engineering group, he is leaving apple in february and i am told he will be joining him at this hardware company. vonnie: it is a fascinating story. cannot wait for more of your reporting for what comes next. a suite of devices potentially. also we want to direct people to your story about the emailed that started the whole apple watch saga.

let's turn to carl's a bow who is a vice president and general counsel of net choice, professor of internet. . law at george mason university thanks for joining. perhaps you would sum up 2023 in ai regulation for us and set the stage for what might happen in 2024. >> thanks for having>> -- thanks for having me. look at the magnificent seven. 2024 is when the promises become real. we have heard every ceo whether it is credible cruise line to apple to facebook talk about ai and make these outlandish claims. in 2024, we're going to see claims become reality. we are trying to see artificial intelligence be integrated into office suite solutions. on microsoft or google -- or google cloud services we are going to cai copilot become life and help us write better, create better and do economic analysis better. we're shutting to see artificial intelligence be injected to things like health care, to

figure out better ways to optimize finances to create medical men -- to create better medical treatment or transcribing notes for a doctor so they spent more time talking to patients and less time looking into computers. legal space will be heavily disrupted by ai for the better. are going to be able to put law students to work writing briefs rather than spending time doing discovery and pouring over court documents because we can use artificial intelligence to offset that. 2020 four is when the promises of ai become reality and a decade from now you're going to look back on our daily use of ai and wonder how did we live without it much in the same way we look back now as to how do we live with life before the internet. vonnie: are all sorts of promises but there is also the promise or threat depending on how you look at it of regulation. what happens regulatory-wise in washington, d.c. next year? >> that is the thing i am

keeping a close eye on and we are keeping a close eye net choice on every day. let's be crystal clear. the artificial intelligence is heavily regulated today. we have hundreds if not thousands of laws that apply to artificial intelligence right now. that is because of the way united states has always done walls and law enforcement. we don't outline technology or devices. we outlaw that actions. if you use ai to commit harassment we have laws that apply to artificial intelligence. unfortunately there are many in d.c. that are looking to regulate shared they are looking to create laws or federal agencies to create regulatory red tape for artificial intelligence. this is being led by fear surrounding artificial intelligence. we are starting to move past this notion ai is the terminator or skynet and we are starting to realize ai is just a tool. there are many in europe, there

many in d.c. looking to create rules to regular artificial intelligence rather than looking to enforce existing laws we have today. sonali: on that note, this idea there are winning fears about it, we did seize tons of strikes this year that invoked the idea of ai and the disruption it has to certain industries. what about the job market let alone any potential ethical concerns around the use of ai? >> every time there is a new technology, we hear concerns about jobs or loss of jobs. you will back 100 years ago when the camera came around. we were worried it would limit the jobs of artists. artists are still around today and cameras have created a whole new profession: professional photography per the same is true with the combine in farms. will jobs be changed? absolutely but you jobs will be

created. another good artist but artificial intelligence can help me create the images i want to use in my tweets and my writing. that is the way artificial intelligence is going to empower many of us to be more creative and create new jobs. will jobs change? absolutely but we are not going to eliminate radiologist but if you do not understand how to use artificial intelligence, you are going to be in trouble so what we need to do is recognize it is a new tool and begin teaching how to use ai. sonali: that all makes sense, however, there is a sense most of the major industries in the united states have grown under the weight of some regulation with guard rails and the ones that have not, the banking industry ended up failing for a hot minute. when you think about the regulation of ai moving forward, how do you make sure it is regulated but also in a way it

can grow the industry responsibly so it is a net positive for the economy? >> it is something we are also looking at. what we are seeing is a lack of enforcement. if we get enforcement of our existing walls as they apply to artificial intelligence, that will send a clear message to the industry you cannot hide behind a computer and pretend you are not committing a crime. let's use the example of sam bankman-fried. he was sent to prison not because you to bitcoin but because he committed fraud. that sent a clear message to the bitcoin universe you cannot engage in fraud via bitcoin and hope to escape justice same methods news to be sent to the artificial intelligence agency. if you are using ai to engage in illegal discrimination, that is a crime and it should be prosecuted. we don't need new laws. we utter enforcement. that is how you create the guard rails by making it crystal clear to anyone using or developing

artificial intelligence that just because it is new does not mean it is unregulated and that is the solution we are encouraging across the board. more law enforcement, less government regulation because one of the things that does concern me is we are seeing a lot of lobbyist flocked to d.c. to try to make sure their company is allowed to prosper at the expense of other companies and that is scary because that is going to create less innovation. it is going to give less of an opportunity for the next great piece of technology in artificial intelligence to come into fruition. vonnie: that is carl's a bow of george mason diversity and also net choice. little bit of trouble ahead for tesla or at least some thing interesting. i.t. security researchers from berlin tentacle university say they have gained access to tesla's autopilot system. these researchers are saying it is not going to be possible to manipulate the autopilot of other people's parked tesla

vehicles at the same time it is not really a vulnerability you want to have if you are allowing a car to drive itself and i'm not sure i would trust if somebody has access to autopilot they would not have access to my autopilot. sonali: it is a big concern of what it means to have a hacker be able to gain access. it is a consumer revocation but the researchers say competitors could re-create parts of the autopilot system and speaking of competitors to tesla, we have this amazing story today on the bloomberg terminal a bill and massive competitor in china. who knew that the chinese auto market was booming so drastically such that they would take the place here of tesla across the world? vonnie: you know who knew? warren buffett in 2008 because he bought a stake representing about 10%. you know how much that steak has grown since then? 35 fold. sonali: i've been waiting for

vonnie trivia this week. vonnie: it is incredible. tesla also making many of their ev's in china so it is not as if there is this established knowledge in china for making this ev's. sonali: you know who did not see it coming? elon musk who said to bloomberg in 2011 he did not see this as -- vonnie: he did not see of them but bear in mind what was that, 13 years ago now? these things move fast. sonali: coming up next we are going to talk about women in economics. that is the focus of wall street daily up next. this is bloomberg. ♪

sonali: welcome back to bloomberg markets on tv and radio. it is time for our wall street week daily segment.

an associate professor at yellow walls coup rights in the washington post of the signs of economic optimism ahead, there is one thing that shined brightly in 2023 and that is the economic power of women. david westin asked her about the power and key women driving it. >> i am actually pretty inspired as i look at this year and all the progress that has been brought. i talk about this in the piece but if you look across fields, you see women trailblazing and trailblazing in uniquely female ways. if you look at entertainment, you see taylor swift and the eras tour which is going to be on track to be the highest grossing concert tour of all time. world leaders around the globe are begging taylor for a tour stop. you have beyonce who's

renaissance tour has brought billions to the economy, who brings a beyonce bump to every city she tours in because her fans bedazzled in silver turn up ready to celebrate her and particularly support women-owned is mrs. in every tour stop they -- women-owned businesses in every tour stop they attend. you have economic policy, one of the steadiest hands of bidens cabinet secretary yellen who is the first person to hold the three most significant economic policy roles in the united states. as her current job, treasury secretary, chairwoman of the council of economic advisors and chairwoman of the federal reserve was at the forefront of pushing toward the imitation of our transition to a cleaner greener economy, leading the irs or working with the irs to modernize technology and improve

the service taxpayers receive. and you have in the world of athletics the spanish women's national team which won its first world cup this year but if anything, that is a small victory relative to what has been able to accomplish off the field in the wake of sexual assault that players experienced. the players turn this into an opportunity to leverage and fight deeply for equal pay, for women's rights and to push for the types of progress that for too long has been hard to attain. this year i think we are at the precipice of something exciting in the economy which is growth and our understanding of that growth being propelled by women. >> all of that is terribly important and really exciting and you left out the first time in history when a woman by herself got the nobel prize in economic sciences. tell us about that and why that

is so important. >> she is a superstar and became this year as you point out the first solo female recipient of the nobel prize. it is even more exciting her nobel is for her work on understanding women's role in the labor force. in particular when she was coming up as an economist, she graduated from the university of chicago in 1972, there were not that many female economists. as we became interested in the study of the family and family economics, claudia realized there was an incredibly important story that was missing from not being told. that story was about the role of the wife and mother and the ways in which social norms and expectations and access to certain types of progress would come with the gender equity that so far in the economy we have

not been able to see. her work has inspired a legion of economists who do economics history, study women's roles and has pushed us to understand the ways in which the workforce can evolve most usefully to attain that type of equity here one of the bright spots of covid claudia pointed out in her recent work is maybe the type of flexibility giving us the opportunity to have this interview on zoom today is what is critical to allowing the world to move to a place where it creates economic environments and a labor force that is supportive of all its members and that includes women. >> i want to jump back to janet yellen who has had a truly extra ordinary career. no doubt about it. you said a steady hand in governing the economy. is it a successful steady hand? right now there are a lot of americans who are not satisfied with where they think the

economy is. is she succeeding? >> i kind of find this year and it is how i start the piece which is there has been a lot that has been discussed about the ways in which consumers are facing in have been facing for many years and incredibly difficult economic environment. we have dealt with the shock of a once in generation pandemic in covid. we have dealt with hopefully once in our lifetimes frankly. we have dealt with rising inflation and higher prices for consumers. and now prices are starting to come down. inflation is starting to come down. in a world where unemployment is still low. there is this sense of -- lack of optimism about the economy. i suspect that is totally understandable and that is what you would expect and the situation you would expect us to be in given the shock we have

suffered. that said, this administration and secretary yellen is at the forefront of this and has been working to try to make the situation for american consumers and american workers and improved one. inflation as i mentioned is falling. you are in a situation where secretary yellen in particular has been an ambassador for the administration across the globe and where the points i make in the piece is she led an effort to have a conversation in china that predated an incredibly important moment for president biden and xi jinping. i think the way in which she has leveraged her understanding of how the economy works, her understanding and deep empathy for the american people and her stature abroad has made her tenure incredibly successful and we are all very lucky. >> you lay out a lot of the

success stories at .23 for women. let's talk about an area where it looks like there's a lot of progress to be made at that is the c suite at the ceo level. you have the dean of the female ceo. she has been there 10 years as ceo. she has had a rough year as you point out but she has done many people think monumental work at general motors. last time i checked if you look at the s&p 500, it is still down around 10% of the s&p 500. we have jane fraser, a woman running a major bank. if you look around the c-suite generally, there is a lot of progress yet to be made, is there not? >> there absolutely is and you are right that number is slightly above 10%. it has been rising so that is exciting to see. we have been in a world where maryborough is the first woman to run an automobile manufacturer to jane fraser is

running a significant u.s. bank. we are in a world where you are starting to see progress on dimensions that are incredibly important. it is an exciting world. i talk in the piece about barbie and say it has been important -- barbie was the largest grossing film of the year. barbie celebrates and embraces the scene of barbie herself, the dull. the way in which the doll treated unrealistic expectations for women on what they should look like. it was exciting for young girls to be able to look at barbies and see themselves and imagine themselves as supreme court justices and imagine themselves as business tycoons. as you look at mary and female executives rate large, it is exciting for women like me to be able to look to them, granted 10 years are rocky. it is difficult to transition the world in green economy, automobiles fully electric by 2035.

it is hard to look at that world and not be incredibly excited about the fact this transition is being led by women and it is being led by women who embrace it and celebrate the fact they are women and that grants them a particular window into the american consumer and labor force. the ways in which you can lead and lead successfully. vonnie: that was an associate professor of yell law school -- of yale law schoo. coming up, we are going to be speaking about the outlook for m&a deals. we will speak with rob brown, ceo of lincoln international. for all our bluebird radio listeners and bloomberg tv watchers, this is bloomberg. ♪

stitch fix.

-my stylist curates unique personal looks that are just for me. kind of nice. i like that. give them your size, your style, your budget. i keep what i like and send back the rest. -what can i say? my stylist gets me. they get me. and they'll get you too. 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, sonali: welcome back. it restores a lot of faith in humanity.

i am sonali basak alongside vonnie quinn. vonnie: we do have about 47 companies making 52 week highs. good stores under the surface. s&p down about a point right now. i wonder if we will finish the day higher. yields are being locked in substantially. 3.7870 on the 10 year.

oil coming up a bit but look at bitcoin. we are reversing yesterday's reversal. we are up 1.9% on spot bitcoin. i guess the institutional community awaits the decision on potential etf's. sonali: he will keep an eye on the bitcoin etf watch and we will switch gears now to talk about a story on and off air. dealmakers are coming to the end of their worst year for mergers and acquisitions in a decade. value down roughly a quarter in 2023. this is according to data compiled by bloomberg earlier this month. we are bringing in rob. one verse five is that middle market where a lot of private equity activity is happening -- happening and expected to rebound year.

rob: the pipeline for next year looks improved. the private capital and middle markets are not unscathed by the slowdown or the air coming out of the balloon, but there is some cause for optimism in 2024. sonali: if you think about the optimism, i wonder where the money comes from. rates are high and things are starting to stabilize. they are higher than they have been in the last decade. private credit, there is an expectation that even there, defaults will start to to cap. his capital as available as it seems on the surface? rob: i think capital availability is less of the issue. i think there is lots of dry powder in private equity, lots of cash on corporate balance sheets. private credit markets have a good deal of capital to put to work.

the issue is more about how the cops of capital rose more rapidly than expected and had an effect on value. markets take time to react to that. it is a bit of a stare down between buyers and sellers right now, with some external forces putting pressure on both returning capital and putting capital to work. vonnie: zach the. we have seen, particularly in private equity, a lot of write-downs and reevaluation some stuff on the books. how are companies valuing themselves these days? what kinds of metrics are most important? rob: you look at fundamental performance, which is held up well. we are not seeing widespread business performance at the top or bottom line across any sector. when we look at the private capital markets, business performance has been relatively good. the issue has been multiples.

as the cost of capital has gone up, the multiples have come down. you have to put this in context that a lot of private equity groups did not write their assets way up when the public markets were moving materially up, but i agree that there will be an ongoing revaluation of some assets. vonnie: you are looking outside the u.s. as well. india, singapore, vietnam are interesting to you right now. why? rob: i think india is a particularly strong beneficiary of people wanting to the risk economically from china. there is a view that whatever geopolitical tensions there are with china are not going away soon. well china will always be an important company, many western

companies are looking for alternatives. india is the largest democracy on earth, largely based on english common law. we have a large, successful office in india. we are seeing increased economic activity there. looking around the globe for companies that were in china, where else can they go? india is a big beneficiary. sonali: there is a lot of uncertainty around china, including geopolitical uncertainty. a lot of uncertainty in the middle east, where financing has come from in recent years. how much does not have a potential to throw a wrench into the optimism we are seeing for next year? rob: less on the financing front. a lot of the sovereign wealth money has made his way into private equity groups. maybe direct investments to slow down. the bigger issue is on the macroeconomic front. one of the things that happened

this year's we were seeing a pickup in activity in q3 and then the crisis in the middle east happened. as people were starting to be a bit more risk on, that came out on the geopolitical stage. the fear is that the u.s. and other countries have pulled into something more broadly. it is a bit of a black swan event but it potentially has a bigger effect than in our markets financing out of the middle east. a lot of it is committed to global equity funds. sonali: what about this idea of private equity? i mentioned earlier buyers and sellers in heating in the middle -- meeting in the middle in terms of negotiating rob: the seller has less leverage. it takes time to realize their

leverage. you are coming off of many years where sellers had highly competitive processes, multiple bidders and high values. if you blinked, they would just go on. that has changed. buyers have more leverage. they can dictate timing, structure. they can dictate what they will do in due diligence. interestingly, we did a survey of thousands of private equity groups and we just got the results back. over 70% feel that this bid ask between buyers and sellers will continue to rectify. you could see an opening of the floodgates in the back half of 2024. if anyone links first, i think it will be the sellers, not the buyers. vonnie: why the second half? we have had buying ceos promise

m&a activity for a couple of quarters. is that not going to happen until the fed starts cutting rates? rob: you will see improvement even in the first half, but it is not linear growth. it is exponential. once buyers and sellers start seeing activity picked up, they fled back to the market. i believe that as things stabilize and fear of recession has passed, you are going to see an increase in activity throughout the year. what is expected is an acceleration on the back half of the year. sonali: thank you for your time. it has been a tough year but a rebound en route. we will turn our attention to the outlook for etf's in the year ahead and one of the most highly anticipated events in about two weeks when the sec is likely to approve the first spot

coin etf's. i like how you call this the coin derby, where there are a certain number of issuers in the making, including some large ones. how important is it for them to get out the gate and based on their preparation, who will be most successful? vonnie: get out of the gate. i like it. sonali: i did not think of that. eric: i like it. that is the third attempt. i tried to get the bit-tucky derby. it is a's -- a horse race. there has never been a situation where multiple etf's were launching on the same day that did the same thing. it comes down to the variables, the company is, their distribution, their feet?

but the ticker is a how much they are spending on marketing. there should be an epic marketing war. i think we will see 6 to 8 make it to the starting gate. there is a last step, which is getting authorized participants signed agreements. you need one to one and etf. there has been a bit of an issue with everybody getting theirs on board. it is possible that some do not make it to the starting gate. then there is grayscale. possible they do not make it either based on if the sec decides it would be unfair to let them go with everybody else. they would come over with assets and trading volume. if they want to start or convert their trust into an etf on day one, the clear favor would go from blackrock fidelity to grayscale instantly. a lot of variables at play here. sonali: what about this idea of

other types of etf's? we have not seen much by way of a bitcoin etf this year and we have seen varying success when it comes to bitcoin futures but a lot was in plain vanilla bread and butter etf's tied to the s&p 500. eric: the top three etf's of this year were the three amigos, which i'll do the same thing. the s&p 500 up 25% this year. those three etf's in their biggest share ever appeared as much as we get carried away with things like that coin, so much of the money -- bitcoin, so much of the money goes to shape data. it is where the real cash goes. there was an article a week ago about how every trading cycle was unable to be the s&p.

the only thing that be the s&p was the use. that is ridiculous. talk about something nobody called. but what happens now? we said the q's could not do it but it did. if you are an active manager, do you go to small value now? this will be a tricky year in terms of whether to load up undignified since seven or just get out. one etf we are watching is equal weighted, an opportunity to get this without the magnificent seven overweight. the lot of the inverse leverage g -- vcs did not do well. one thing that did not work was some smart that -- beta. when you have a year where everything is going well, it is

tougher for active, especially when a couple of stocks carry it. active springs are wild -- wired to go for value. and a lot of of them legs. there was barely anything negative but a lot of things did lag. i would put active, smart data and one loser of the year is probably esg. esg saw outflows. it was the top of the town two or three years ago but outflows this year, lack of energy. vonnie: the tide really turned on esg. thank you. coming up, our many moment. this is bloomberg. ♪ ed thrthe whole proc ess, even from the first call. [graduate] my advisors consistently reached out and guided me along the way. - it was like i was talking to a friend, like someone that i had known for years. - the instructors were very helpful with everything that i was going through. [announcer] we'll be with you from day one

to graduation to your dream job. ♪ it all starts the moment you find your program. [announcer] go to snhu.edu to get started. vonnie: this is bloomberg

markets. time for our muni moment.

we focus on the financial health of smaller u.s. colleges, kit with rising costs and following enrollments. they has been covering the story. tell us about alien college. nick: it is a school that last week ran into some financial difficulties. they sell debt in municipal bond market. their debt fell into distress. great example of a small school in the real -- rural area feeling constrained by demographic changes in the u.s. vonnie: what does it tell us about the landscape more broadly? is this just one anecdote? or can we extrapolate from there? nick: i think investors and analysts have been watching

closely. they expect a lot of incidences like this. fewer children are being born in the u.s. less value around the u.s. degree these days translates into fewer applicants and fewer students in seats. the u.s. is facing a problem where many of these small schools that draw from small, regional areas are going to have to target new students or find new revenue streams. pressures are mounting on them. sonali: what types of schools are facing the most pressure? what are the biggest issues? the cost side or the enrollments themselves? nic: the big issue stems from enrollment in admissions. we wrote a story a couple of weeks ago trying to measure every small school in the u.s. pump likes to look at our the acceptance rate and the yield

rate. are they excepting more students? are few and -- fewer students enrolling? are they losing students year after year? are they losing money? how much are they giving students in aid to get them to the door? sonali: what is the end game? if smaller schools are fighting this type of financial stress, what is the direction of travel? nic: there is a bifurcation happening. namebrand schools -- harvard, yale -- they are seeing acceptance rates drop. they are going to be here for as long as any of us can realistically think ahead. on the opposite end, you have schools that are small, less brand recognition, not as competitive. realistically, we expect 15 to 25 closures a year going

forward. that has its occasions for investors holding college debt, parents and students paying tuition and for the people these colleges employee. vonnie: you mentioned the ideas. plenty of donors are threatening to take away funding. some have already decided to. this is potentially benefit smaller colleges? or does the funding just go away? nic: those are probably separate issues but the big issue is probably the enrollment trajectory in the u.s. and how they are able to diversify away from traditional liberal arts offerings. vonnie: more broadly, november saw the best returns to municipals since the paul volcker era. what is the outlook for december and january in the first quarter? nic: a lot of muni market investors are watching closely.

december is notoriously quiet. we have seen rates high and ratios expensive. i think this is an exciting period for being an investor. most of the people i have talked to her talking about tax advantages. most income on municipal bonds is tax-exempt. sonali: where is the opportunity? we started this conversation off about the school systems facing such pressure. it begs the question about the resolution process. municipal bond investors, how much more pain is to be seen in this higher rate environment? nic: probably seven. a school -- probably sounded. a school closure is difficult. we wrote about a school in upstate new york. they had upwards of 50 million in municipal bonds outstanding. when the school closes, it becomes a graveyard for investors.

they tend to have the highest ranking on the assets of the school. the school assets are complicated. think of an endowment. a lot of people give to an endowment and they earmarked their money. that is not something an investor can tap into to make themselves whole on a bond. these are lengthy, complicated processes that involve lawyers, sometimes state attorneys general. as we see closures, we will see bifurcation with some schools that are able to successfully pivot into new programs, whether that is career focused or new masters programs. those schools will probably see some strengthening. schools that are not able to pivot are going to struggle. sonali: to the broader questions about the muni market, a couple of weeks ago, we reported that

blackrock believes the broader rally is likely unsustainable. nic: there definitely have been some headwinds. one story we have been focusing on his citi's announcement that they are closing their public finance department. they were four years a gargantuan player in this market. over the last decade, we have seen a steady decline of bond underwriters in the municipal world. this comes up in all of my interviews. investors are concerned about implications, particularly around liquidity. citibank had a reputation for being reliable, buying liquidity, especially in challenging times, think the pandemic there was this massive solid happening and nobody could find holders for the debt. we probably will see some other banks. we wrote a profile about jeffries rising the ranks in underwriting for munis. they have taken some real market

share there but this is a tumultuous time as we are starting to see big banks think and talk about the future of public financing, how profitable is it? what is the outlook? vonnie: i was going to ask about repercussions. will there be re-ratings if the fed moves on interest rates substantially year, as the market expects? nic: for credit ratings, particularly in munis, the issuers tend to not be very rate sensitive. it is separate from our traditional fixed income market. look at local government. they need to build a new bridge or road. they tend not to -- because processes move so slowly, they are not sensitive to swings or trajectory is in interest rates because these are demanding, less time sensitive issues. if a government is going to

build a bridge, or a school will issue bonds, they tend to do it on their own timeline, not necessarily the interest rate environment. sonali: thanks. we appreciate your time. please, read his story on the bloomberg terminal and online, thorough read on what is going on in these schools. two markets, we have been talking a lot about equities but the also have to talk about what the setup is moving forward. even though we are seeing some weakness in the dollar, there are questions about whether that is an up or down arrow to next year given not only the rate cuts but relative to what you would see in europe. a lot of people have been burned on that trade throughout the course of year. the yen also, after a historic move, and a lot of questions about what happens with the doj next year. the gold rally has also been stunning but that gold question, they make a point here that the

gold rally could really facing some structural headwinds when you think about the trajectory moving into next year relative to the dollar. vonnie: interesting you bring it up. interest rate -- the interest rate story, interest rates will still be the main topic of conversation is the fed decides whether or not to move but that dollar index below 1.01 is standout. sonali: we have hedge funds treating those currencies and the macro. next, the housing market. stay with us. this is bloomberg. ♪

( ♪ ♪ ) ( ♪ ♪ ) ♪ (when the day that) ♪ ♪ (lies ahead of me) ♪ ♪ ( seems impossible to face) ♪ ♪ (a lovely day) ♪ ♪ (lovely day) ♪ ♪ (lovely day) ♪ ♪ (lovely day) ♪ a bank that knows your business grows your business. bmo. c'mon, we're right there. c'mon baby. a bank that knows your business grows your business. 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. sonali: welcome back to catch it on the xfinity 10g network.

bloomberg markets. we are a half-hour into the market close. s&p 500 wavering all day. we have been looking at the santa claus rally, fading. flat on the s&p 500. nasdaq 100 pretty flat on the day. the russell 2000 still getting a lift up more than .2%. vonnie: the 10 basis points on the session. the two year yield at 4.2396.

investors looking to lock in yields. we have crude oil down more than 2%. a little bit of relief potentially regarding red sea concerns. right now, we are looking at gold, spot gold at 2077 dollars an ounce. sonali: u.s. mortgage rates continue to fall for the third straight week. that hopefully opens up the market for more sellers. we spoke to mark rayfield last week on the market. mark: last time we were here, the rates were going out. there was a question if they went up another half a point what would happen. we believe that because the environment is under built, there is demand. rates going down will create more people selling their homes and more are on our activity.

regardless, we've seen today that even with high rates we see good demand. if rates go down a bit, 5% looks good. alix: it is about getting sellers want to sell. mark: i think one sellers start selling, you get more homes on the market. alix: is that 5%? 4%? i have a 2.75% 30 year. it is going to take a lot for me to move. mark: this is my perception. if you are going into the housing market and looking at a rate of 8% and it used to be at 3%, now 5% looks reasonable. that will get more people into the housing market. 40% of homes are all-cash owned. those people are selling and downsizing. folks my age or older are downsizing. that is having a big impact area

we see the highest percentage of rebuilt as part of new homes. people are not trading homes. people are building new homes, which is great for our business. guy: brad jacobs was here a few days back. he just announced that he is going to be looking to consolidate the building materials distribution business in america and to a certain europe. one of the things he was talking about is the application of technology to that business. he thinks you could see significant technological improvement. how rife is that industry for that kind of improvement? mark: the sellthrough distribution. we have good distributors. they have a lot of technology. they have the ability for contractors to use drones to

take the measurements of a roof and order directly from that. there is a lot of technology in there. it is also hands-on distribution. it is a complicated market. always a chance for consolidation but existing players are strong. alix: where could things be improved on that end? mark: where there is always an opportunity to improve is trading for it -- training for the trades. it is a great career to be in the construction industry. we need to train more people. it is our responsibility to do that. sonali: that was mark rayfield. as you just heard from him, mortgage rates are dropping, now below 7%. many economists expect that to continue to fall. we are joined now by the cofounder of picasso.

when you think about the market you operate in, you are working on second-home, luxury homes, and matching buyers and sellers in this market. how does that differ from what you are seeing across the broader landscape? austin: thanks for having me. we are a coho ownership -- coownership marketplace focused on vacation homes. but we are also in the broader real estate market. it is an interesting time. the projected rate cuts have given us a bit of good news to look forward to. we will see how it all plays out. sonali: kenny initial expectations on -- do you have any initial expectations on how much rate cuts could influence activity? austin: i think it is safe to assume that rates will continue to come down from today. if we could see rates in the mid 5%'s by the end of next year,

that would be great. even high 5%'s is better than today. it is safe to assume that rates are going down. with rates coming down, the other thing that is going to be helpful is a soft landing. if we can see one in the common me written large, it is -- the economy rate large, it is safe to say that that is good. vonnie: picasso is fascinating because it is a new idea where you buy a portion of a house, like a timeshare. you buy a portion of a house along with up to 8 other people. you get it at a price where you would not normally be able to afford a house in an area like that. what are the destinations for 2024? austin: we are a coownership

marketplace. imagine if you were buying a home with two or three of your closest family or friends. we enable you to do that but you do not have to know the other people. we have every detail covered -- design, furnishings, bill pay, maintenance. it is interesting. there is places like the lease accounting, best known for daytona beach, which has seen 47% year-over-year increases. crazy to think in a market like this that we are seeing 47% increases in a market like this. we are also seeing alternative destinations pop up that are proximate to major second-home destinations. an example would be bald island, north carolina, an alternative to a better-known part of north

carolina that much more affordable. as we look into the future, you can expect to see more of the second and third destinations that were not previously top of the list in terms of national second-home destinations. you can expect to see some of the second and third tier destinations ramp up to the top and benefit from continued price appreciation. vonnie: for me, it is just another place to window shop about wonderful website, fascinating to look at those homes. that is pacasso co-founder austin allison. gordon brown, mohamed el-erian, and michael spence sat down with jonathan ferro earlier this year to talk about their book permit crisis. >> when jan ai came along and i

saw its multi-domain capability, the fact that you could use it with no technical training, and its applicability pretty much everywhere, i thought even though it is early days and we are in a period of exploration, i think it is a reasonable forecast. this tool is an important part of the future productivity surge. if it comes, it will make it a lot easier to do inclusive growth patterns. it will not be a zero-sum game. it will be easier to invest multi trillion dollars in the energy transition. it will be terribly difficult to get that done with rising debt levels and rising interest rates. that is why we spend a fair amount of time. it is not that the growth itself is the only thing.

it is that it enables an awful lot of what we want to accomplish. >> we are headed toward a low growth decade if we do not have a productivity surge. you will never see accountants for the legal or teaching profession be the same again if ai has the impact we think it will have. but we've got to have that productivity surge. without that, inflation, the fiscal space being narrowed, the debt we are running, and supply-side -- we are headed for a low growth decade. ai will take us out of that. it is critical. we have a debt issue, and inequality issue. we need resources for critical transitions. the notion that higher, more

inclusive, sustainable growth is a massive enabler to be a problem. jonathan: you understand the risks, though. i am asking why wouldn't do the same thing to services? my question as a voting citizens why would i trust these same people all over again? who should i trust to manage the integration of those technologies? >> that is what my children say. you guys have messed it up. we tried to create a more inclusive system, tried to deal with the problems of the omma but we could not get what we needed. we tried to have more equity and better jobs, but i think young people want to see this change. the issue is not whether or not you have changed but what kind.

we have got to make it inclusive. >> agreed. we talked about the touring trap. the touring test pushes you in the direction of automation. policy should be pushing in the direction of augmentation, giving people tools to make them more productive. this is the journey we are setting out on, but i do not think it is right to capitulate and say productivity produces appointment problems. it is more complicated. >> but global institutions have got to reform to deal with this. the imf will be a crisis prevention mechanism. it cannot just be there for crisis resolution. the world bank will have to become a global public goods bank and deal with the energy transition. the wto has gotten to find a way

of arbitration working better than it has in the past we need a better concept to burden sharing during i cannot understand why when you have a humanitarian crisis that always seem to be able to do is pass the baking ball around and hope somebody will pass money. we have a system of burden sharing. if you talk to people around the world, they all want this to happen. we need to show that this can yield the best results. vonnie: that was jonathan ferro in conversation with gordon brown, mohamed el-erian, and michael spence earlier this year. in a few moments, michael green will join us, but we have to have a look at this market. wavering between gains and losses it is but it really wants to not have a down day. right now, the s&p 500 is down a

point, but we have got 17 minutes to go. sonali: that is the mystic view. i am so fascinated in that russell 2000 bit. it tells a story that the s&p 500 is having trouble reaching where it was at its record. there are doubts about the sustainability of this rally. maybe this is fair value, but we do have a few more days of the year. vonnie: two. and the rest of today. more coming up. this is bloomberg. ♪

stitch fix. my stylist gets me. -i don't have a lot of time. i'm a busy dad. my stylist curates unique personal looks that are just for me. kind of nice. i like that. it's easy. give them your size, your style, your budget. -now, this is a nice shirt. i keep what i like and send back the rest. -now my wardrobe stays updated with fresh fits created just for me. did you see that texture? this just feels really good. fits perfectly. -what can i say? my stylist gets me. they get me. and they'll get you too. vonnie: we are less than 15

minutes away from the market

close. joining us is michael green, portfolio manager at simplify asset management. even if volume is low or significantly under average, this market on stew close that a record. michael: those two things are combined. the very low volumes are telling that nobody wants to incur a 2020 three taxation event. they are desperately holding on for january 1, which will give them a year to decide what to do with the gains they generated on the us and the or any other stock they happened old, preferably buying it near lowes in october. vonnie: that would have been the best case scenario, but if they do decide to hold it over into the new year, is there a massive reallocation in january? or at least a massive cashing out event? michael: it certainly seems like there is an opportunity to take

gains but that would depend on the narrative that emerges in the next couple of days. the selling could become self reinforcing. right now, everything is turned profitable for 2023. bonds, which looked like they were in the cellar back in october, are now at a point where even they are profitable. buyers of the treasury etf's have now turned positive, despite the fact that they started buying in 2022 nearly 35% higher. no losses out there for people to recognize. it does seem like that is a logical point for the market to at least begin the process of pausing. sonali: if you think about when and how you would take profits in a market like this, what are you looking for? michael: two components. mutual funds and have a tax that ends in october. what we such as those names that

had underperformed being sold. one set selling evaporated, it became harder and started to move upwards, causing short rallies. again, that is true in both equities and bonds. many macro accounts were of the opinion that interest rates were way too low, given the huge amount of supply and high inflation. they are licking their wounds and being forced to cover on the others. i think that short covering and the unwillingness to take a taxable event are contributing to elasticity in the market. it means people are not particularly price-sensitive. they have that large benefit associated with waiting just a few more days to sell. sonali: a few more days and a nervousness to buy a little more. where you do see buying is the

bond market. the two year yield today has dropped by more than 11 basis points. where are the buying opportunities for you here? michael: two challenges. one is when we think about the underlying dynamics of that to year, my firm offers exposure through an etf that is a levered version of that to your bond. it is well positioned. this is a much easier argument at five and change. it gets harder as you move down to that for level. you are now dependent -- four level. you are now dependent on the fed cutting and cutting aggressively the narrative around nine cuts being priced in has the potential for markets to remain inverted. we continue to be of the belief that interest rates are high

because the fed has pushed them higher. the evidence that they should be here on an empirical basis is less robust. part of what is driving the inversion of the yield curve is this is a solution set being forced upon us by the federal reserve. vonnie: what are you anticipating in terms of cuts and next year, particularly with etf in leverage to the two-year? our expectation is two things -- one, as the fed does cut, because we seem to have made extraordinary progress against inflation, i do not put the fed a lot for that. i believe most of that was supply oriented and generally reflecting slow growth in the economy. but if i look at what is likely to happen in 2023, it is probably and earn your coupon sort of year, where the odds are

good that the two year rate ends the year close to where it started. we just do not know how 2024 will play out. if we see events occur in markets that create additional concerns, then the fed may be more aggressive and they have the capacity to cut by 75 basis points, just like they hiked by 75 basis points. something poorly reflected in the statistics is the asymmetry. vonnie: it is fascinating. there is still a wide disparity of views. there are people who think inflation may be stickier in certain areas and that even if the fed cuts, there is a scenario where it has to raise again. do you think that is at all possible? michael: i think it is a low probability event.

the critical thing that i think a lot of people tend to forget is they look at the instructor level of interest rate -- historic level of interest rates we saw in 1980 and think of that is normal. the reality is that a level of interest rates in the 2% to 5% range has been trending for thousands of years as we built surplus in our society. i do not see a shortage of incredible investment opportunities that would create demand for buying that at higher interest rates. it has not just been that the supply of money in terms of cheap loans is fallen. demand for money at higher interest rates has also fallen. that is why we have seen low levels of corporate issuance. the economy is not set up to deliver returns that allow contestant delivery again --

consistent delivery against these rates. we have probably seen a high in this cycle for both inflation and interest rates. sonali: to the extent that we do not see the level of cuts that the market is currently expecting, how levered do you think the stock market is to rates right now? if we do not see those cuts, do we see a pullback? what would that look like? michael: i have a non-consensus view on this. my general view is that stock markets no longer care much about interest rates, except to the extent that they impact other collateral in the form of bonds or portfolios. throughout this entire cycle, we see the market capitalization of bonds and equities largely move in lockstep. that really reflects portfolio construction techniques that have become increasingly dominant, or some then individuals pulling out calculators and figuring out a discount in cash flow on

individual securities. this is about how much have i allocated to bonds? two stocks? how do they behave? and the rebalancing of those portfolios, that is fundamental on what is priced in. vonnie: in fact, you mention the short-term treasury futures strategy etf. it is on our one to watch list for next year. i am curious which you most recommend yourself? michael: i have been a strong proponent because it provides you with leverage duty to your bond. i also did is important to consider the opportunities that have been created in the past couple of years diversifying portfolios away from equities and bonds. the alternatives category has grown quickly.

our products in the futures space, product offerings in the fixed income space, which offer hedge bond exposure, tya, which is a similar exposure on the 10 year point, and also our commodities etf's, we offer strategies that allow investors to fill out a portfolio in ways that were not possible before. sonali: complicated market set up into 2024. we appreciate your time. we are close to those closing bells and looking at a market that has been fluctuating all day long. big debate on whether we can end in the green. this is bloomberg. ♪

the first time you made a sale online with godaddy

was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com vonnie: welcome back.

the closing bell winging-- 52 wg

intel. they also included some holiday vocation time companies, including booking and we had gorman making a 52 week high. sonali: we are talking about sectors as well. not everything was in the green. small beat on the day.

we had yields plunging, we read index rising more than any other. other index sees up on the day, including home furnishings, gold, april culture. relief rally in oil and gas stocks. vonnie: for sure. and that was a big deal earlier in the natural gas area. natural gas futures higher today, having come off substantially in the last few days, futures up to .7%. i want to point to yields as well. once again across the curve, we had the 10 year yield now at 3. 7815. two year yield at four point 23. lots of buying in fixed income as investors lock-in yield for the end of the year.

bitcoin had a special day. it was most 23%, still back to 4 3508. that is in anticipation of what might be determined regulation wise when it comes to small bitcoin etf's. are we going to make a record? planned? we cannot help ourselves. >> it is likely. the fed has waged a war against inflation. in the economy is doing well. inflation is down. we anticipate that going into next year, the rally will continue because of upcoming rate cuts. do not be surprised if we get some pullback in the first quarter of next year. the people who've missed out on the rally, that will be an opportunity to take advantage of. vonnie: if you are looking at the magnificent seven, nasdaq

100 up 54% this year. if you missed out on that, would you test those waters next year? aadil: the magnificent seven will continue to be magnificent. in this environment, increased focus on artificial intelligence and cloud, some of those stocks will -- especially on a pullback. we do think that the breath in the market will improve. the skinny bond market will fatten up and other sectors will participate. we really feel that some of these yield hungry investors, because of rate cuts, are going to grab the gate -- gravitate toward dividend paying companies. sonali: you have started to see the breath of the market brought it -- broaden. i look at growth versus value in the russell 2000.

that cap has started to narrow in recent weeks. do you think that continues? do you think there will be more emphasis on where the herd has already been going, the semiconductor stocks the ai boom and those magnificent seven? aadil: it will be pretty much all of that. probably the speed at which tech stocks have gone up, that will slow down but i think tech stocks will continue to do well. but there will be greater participation from other sectors. right now, the cheapest sector in the market is the energy sector and rate cuts. the four oil will go up. prices for oil, we anticipate, will go higher. we feel that there is consolidation in that space you just spoke about. that will benefit some of the big players. sonali: how do you play the

energy sector? what stocks are you buying? aadil: one stock i really like his exxon mobil. through that deal with the merger, they are going to benefit from economies of scale. exxon has said that by 2027, they anticipate that earnings will double based on an average oil price of $60 a barrel. we think oil will be higher. and the stock pays a dividend north of 3%. those large companies we feel stand to benefit in this environment. vonnie: why do you think oil is going higher? we are awash in oil and natural gas. opec said we are cutting in the market said ok. aadil: we think that if you take a step back, we think that this transition from fossil fuels will take time. with rate cuts, we will get

economic expansion. we feel that if you take a longer-term point of view, by 2045, we anticipate that the world economy will more than double ended geopolitical or will continue, opec production will continue. prices will continue to rise. vonnie: are you talking about near-term gains? first couple of quarters before the fed starts to cut rates and then everyone's attention gets turned elsewhere? aadil: this breath of the market has legs. it will last. we feel that the sectors that rely on dividend paying companies across the board, high-quality businesses that pay dividends. if you look at a company like mcdonald's, fantastic business model. their franchise business, they are getting recurring fees plus rental income, which is a high margin business.

they have done a great job in international markets by catering to local flavors. if you look at the dividend history of this company, for the past 47 years, year-over-year they have increased their dividends. those are some areas that investors will gravitate toward which have legs. sonali: there is a lot of optimism in your trades, but what happens if the market turns or if the consumer breaks at a faster rate? what happens to those trades? aadil: that is always a risk. what we always recommend to clients is having a diversified approach. the concentrated approach may have worked for this past year but being diversified, not only across sectors in the stock market, but gold is a great hedge for those types of scenarios. if there volatility or

geopolitical tensions, we like the later gfd which gives that hedge. also having some fixed income exposure provides that heads to portfolios as well. sonali: is fixed income purely a hedge or an investment? aadil: mainly a hedge. we think as we go down, fixed income should do well, but for us, fixed income gives stability to the portfolio in volatile times, but the equity portion of the portfolio is what we are focusing on for growth. vonnie: anything else in the u.s.? there is a lot of opportunity potentially out there. aadil: we think global markets should do well with opportunity in specific areas. we like companies that have international exposure. we spoke about mcdonald's. another company is caterpillar.

when we cut rates and there is economic demand expansion, there will be more construction projects. that means that a company like caterpillar, world's largest construction appointment manufacturer, will benefit. that has a great dividend history. for the past 30 years, year-over-year, they have increased their dividend and have an international presence. that is a stock that we also like. to answer your question, focusing on good-quality companies that give you international exposure is what we like. vonnie: you are looking at financials as well. if all of these stocks on your watchlist, are you waiting for more attractive levels? aadil: these stocks are on our client portfolios but we are also looking for pullbacks to add exposure there. but we like all these companies.

we have exposure to them. sonali: we were talking about the strength of the market going into next year, but the risk. you still cannot discount the risk moving forward. how would a deeper recession change your thinking? aadil: i think if we go into a deeper recession, the growth area of the market will be -- some of the big tech that has tremendous run ups, there would be volatility there. this is a market where there is a lot of active trading that will have to be done. to add positions on value, add a pullback, rebalancing portfolios , and making sure you are well diversified, those would be the strategies we would be following to safeguard clients. sonali: certainly a traders market. thanks.

meanwhile, wall street's love affair with spac's has been ugly this year. bloomberg estimating that $46 billion in losses have been wiped out of equity markets with spac's and 21 firms have gone bankrupt. vonnie: we work, it is one of those things that you sort of anticipate, not just we work but all these bankruptcies or at least failed spac public listings. they come and it still seems like a massive surprise. 21 former targets went bankrupt. they destroyed a huge amount of value. remember gordonstoun motors? sonali: i do. remember bird, the scooter company? vonnie: i was shocked. sonali: you songbird go from zero to 60 in terms of valuation the facts this.

-- the fastest. you are talking about a billion-dollar company priest back. -- pre-spac. exuberance sometimes leads to massive losses. vonnie: been there were so many warnings about the exuberance. is it always the same? maybe it is the same about bitcoin etf's. was there exuberance for these spac deals? not just for the creation of them? sonali: there was so much excitement on the front end. you saw things start to turn when banks stop underwriting them, said we could no longer do this. the market flew away from itself but i beg the question at me record highs, is there still exuberance hanging out in the market that can lead to loss? vonnie: it is not funny but

lordstown said they have a backlog of 38,000 vehicle preorders but they had sold fewer than 40. there are poor cases going on. -- court cases going on. we can see if shareholders can recover their losses. do they deserve to? sonali: it was an enter at your own risk situation. coming up, we will talk about the banks. only one big bank has managed to stay ahead. we'll talk about that next. this is bloomberg. ♪

sonali: this is bloomberg markets. everyone is focused on what the fed will do next, including

brian moynihan. david westin spoke to him last week. brian: we have the number one research team. they shifted yesterday, moved to more rate cuts in 2024 but what did they see in the economy? they have moved from a half percent growth rate up above 1%. they have softened their soft landing. by doing that, they have said that when the fed sees inflation sowing as fast as it is, the think we will get down to below 2%'s and that the fed needs to bring rate structure down. this still leaves us at three .2 5, 3 .5. the last time we were at that rate structure was 18 years ago. we have had a long stretch of low rates, except for what

happened recently. now the rate structure can be fundamentally higher. some saying we have to normalize this because we are seeing inflation command, not done yet but all indications say that everything is consistent with a 2% inflation economy. that level of spending is where the fed was in 2017, 2018, 2019. david: are you concerned about people overreacting to what they heard from chair powell? brian: the fed has to be careful not to be late to stop cutting off insulation. i think people have to be careful. this is the 10 year moving between 3.90 and 4.70. the real economy is still restrictive and still coming to a system. we have a lot of stimulus coming into the system. you have the chips act, those are all coming through the

system. overall, we believe he is engineered a soft landing. sonali: that was brian moynihan with david westin. bank of america may be up about two percent for the year, part of a turbulent year for most banks across america, but we saw the biggest u.s. bank failure since the 2008 financial crisis. yet one big bank ended the year way ahead of the pack. sally bakewell is here. on the one hand, j.p. morgan made out like a bandit. they were able to add significant assets, clientele. does everyone think that is fair? sally: yes, j.p. morgan is in line with its dashboards biggest annual profit in the history of

american banking. it was able to rescue his profits. it raises one interesting question. what will the banking landscape look like in 2024? we have seen a lot of consolidation this year. we saw silicon valley bank collapse, signature bank failed. the question is do we have the landscape for further consolidation? do regulators want that amid the too big to fail concerns that swirled around when j.p. morgan bought first republic? janet yellen in may said that in this environment with pressure on earnings, that may need to cut -- lead to concentration and regulators may be more open to mergers. when it comes to a question of fairness, regulators probably

think what is the least ugly hit for their deposit insurance fund? j.p. morgan was able to offer that ultimately the least cost to that fund. at least the minimize, that is helpful. sonali: i am going to read a comment from lee raymond. he spent 33 years on j.p. morgan's board. he said there is frustration for other banks. this is an opportunity for j.p. morgan to acquire things they would like to acquire but are not in the position to bring to a just watch the big get bigger? or is that good for american banking? sally: the jp morgan is the biggest u.s. lender. it spares regulators and even uglier hit. during this time where the big heavy regulator banks students

beacons of relative safety, they attracted customers cash. we think that attracts criticism. the government has been making efforts to keep the largest banks from getting bigger through acquisitions. there are wills of the posit -- there are rules. there are exceptions that came into play earlier this year. it comes back to the question of what regulators want the banking landscape to look like next year. a lot of regional lenders are facing the same pressures that they saw earlier this year, although less aggressive now that the interest rate hiking is probably done, that does ease some pressure on deposit costs. they do not have to fight so hard to keep depositors from high-yielding assets. it probably eases some of the

pressure on investments. the confluence of those two things caused a number to fail earlier this year. how it shakes out in 2024 will be the most fascinating question. vonnie: if you are of the mind to defend some of the other big banks, you could make the argument that this was j.p. morgan's year. the things that happened this year perfectly suited j.p. morgan, whereas for some of the other banks, dealmaking was not that hard. citi was distracted doing other things and so on. sally: it definitely suited jp morgan. it did not make the big bet on treasury bonds and other supposedly safe assets like bank of america did. we just heard from brian moynihan. bank of america is now contending with significant

unrealized losses because of its decision to invest in those securities. jp morgan found itself in a favorable position from that perspective. as the biggest bank, it was able to put in a bid for first republic for the whole of the bank. that is what regulators wanted. that gives it a significant foothold in the first republic's client base. it also went into the void created when silicon valley bank collapse. they are going strongly after that customer, no doubt a boon. it attracted a lot of depositors who spooked by what was happening at smaller lenders. it really has benefited this year. those things should still continue to see the positive impacts of those things into the

next year. we have the dealmaking environment. we have had this prolonged dealmaking, which we are headed for our worst year for m&a in a decade. that is like goldman sachs and morgan stanley. they have cut jobs, saw profits in the third quarter, in part because of this prolonged slump. optimism about that returning, about the market bouncing back has started to dim because of this geopolitical crisis we are now witnessing. vonnie: incredible performance. 28%. i would urge everybody to read the story. it was a tough year for almost every bank not named jp morgan. i guess this is one of the reasons why jamie dimon is not appointing a successor. why would he?

sonali: he wants to leave on a high note. vonnie: but he thinks the high note will hang around. sonali: the kbw bank index, smaller banks, we have seen a rebound but it is far off from the hives we saw before march. is there more pain ahead? do we start to see relief amongst the small firms? vonnie: you're hearing some guests say they would nibble at financials now. still ahead, pmc chief economist will be coming on to speak all things economy. this is bloomberg. ♪ i'm going to sell my life insurance cuz i don't need it anymore. my kids are

grown, my wife is great, let's settle up the score. it's time to travel to paree, spend retirement happy. call 877-sell-easy. 877-sell-easy. 877-sell-easy, and sell your policy. you can sell all or part, live your life and play it smart. 877-sell-easy, and sell your policy. if you've had a change in health, or you're over 65, and paying for $100,000 or more in a life insurance policy you don't need, get paid for it instead. then take the money that you get, go to live it up, you bet. call 877-sell-easy. 877-sell-easy. 877-sell-easy, and sell your policy. after i lost my mom, i lost my way. then i found youth advocate programs, yap behavioral health services.

as a little kid, i made some mistakes, but i'm not a mistake. [male narrator] yap gives communities alternatives to residential care, youth incarceration and neighborhood violence. after completing our program nearly 90 percent of participants remain in their community. i'm working towards a bright future. [narrator] youth advocate programs. others talk social change. we make it happen. ♪ comcast jingle ♪

bonnie: this is bloomberg markets. >> we talked about equities and we are in the middle of the silicon valley, i want to talk a bit about other things because into next year it is fascinating, we watched the dollar move and it is on fragile footing here. so much of the cross asset move is predicated on rate cuts, these are relative rate cuts we have to think about here. the yen has adjusted from his november allow an jeffries putting out a warning saying that investors might be getting carried away.

it makes sense as long as the petition stays on the hope of the rate cuts and the dlg rate hiking cycle. it is an asset to watch. old, people are using it as a hedge as we have heard from our last guest, it going, that rally is back in play. 2.5 percent nearly. even there you have some questions about whether that bitcoins bought etf excitement is priced in and whether we can hold all of these levels heading in. vonnie: exactly. teh yen, 10 big figures of a difference between now and a few weeks ago. of course, april is when the real decision is expected for the doj, these markets are trying to anticipate something. joining us now is because, pnc chief economist. let us start right there. is the u.s. central bank going to cut the first quarter?

participating -- precipitating cuts from other banks? >> i would be surprised to see the fed cut in the first quarter. they want to see inflation is slowing significantly. they have made progress there. the fed wants to make sure that inflation is consistently at 2%. i would expect to see the first rate cuts around may 2024. obviously, the has been pushing expectations for fed rate cuts and pushing long-term yields lower. inflation is at the point in early 2024 the fed feels comfortable cutting. vonnie: you say cuts later in the year will not be one at a time or how many of you anticipate the economy being able to handle a meeting? >> i think the fed will be cautious. . we have been through a period of high inflation. they want to make sure that inflation pressures are contained. i would expect that the fed would be cutting every other meeting or something like that by 25 basis points.

maybe three or four rate cuts and 2024. if we see the economy is starting to deteriorate, the fed does have the ability to cut rates more quickly. i think given where the economy is and the fact that it is still solid, given the fact that inflation is slowing, but has been above 2% for a period of years. the fed is going to be cautious and does not want to cut rates too quickly over concerns that inflation could get back up again. sonali: you have a market that is taking for granted that they are going to see a series of rate cuts next year. a lot happens between now and then. what is the risk that inflation is a bigger problem than the market is expecting? >> we have been through a period of high inflation and the potential for a war in the middle east could push inflation expectations higher. perhaps housing costs do not slow and significantly as we are expecting or the labor market remains strong and wage pressures remain strong.

there are a lot of reasons to think what inflation will not slow as quickly as markets are expecting. even if we get a small hike up the fed may say we are holding back for a bit. the economy is doing well. there is no need to cut rates quickly. i think given everything we have been through and there are some upside inflation risks out there, i think this view that the fed will be cutting aggressively in 2024, i do not see that. sonali: this idea of example housing being a problem or even will be a problem or wage inflation as another thing that our guests are talking about these days. what are the signals you are looking for to show you that these will be a bigger problem potentially? than meets the eye? >> there are a lot of wage measures that we pay attention to. average hourly earnings, the employment cost index and the fed will be looking at all of those. the fed is looking at what is going on with consumer spending. does that remain strong or is

that positive slowing? the second point of positive slowing consuming growth is better from an explanation or expectations point. what is going on with energy prices, the fed is watching closely there. a combination of factors the fed is looking at that would lead the fed to feel comfortable cutting rates sometime around the middle of next year. vonnie: we are not going to get much economic data until the new year. what are you looking for us to tell us we are still on the trajectory we have been on which is pretty moderate growth and pretty moderate inflation at this point? >> the key thing is what is going on with the labor markets. do we see that job growth slowing between more sustainable pace over the longer run? at the beginning of 2023 the economy was adding 300,000 jobs a month. we are adding about 200,000 jobs per month. over the long run the economy can at 150,000 jobs per month.

if we see the job growth is slowing do that more sustainable pace, the average hourly earnings growth is slowing from around 4% now to around 3.5%. i think the fed can say the economy is evolving and it is returning back to where it was pre-pandemic in terms of inflationary pressures. that would give the fed room to cut rates sometime next year. vonnie: do you have your eye on the repo market at all? it is sending signals about financial liquidity. what are your thoughts regarding what signals it is sending? >> obviously, we are in an interesting spot because of the fed is reducing the size of its balance sheet which is contractionary. at the same time there are expectations that we will see fed funds rate cuts which are expansionary. i think that the fed is trying to suss out exactly what the size of its balance sheet should be. we may see some modest dislocation in repo markets.

i would expect that as we get over the next three or four months the fed will be sending indications of what it expects the size of the balance sheet to be over the longer run. they will ensure that there are appropriate liquiditys in the financial market. sonali: speaking of financial markets, even though there is a relative calm now, and the last several weeks have brought us a tremendous rally in the markets. we are near highs for the s&p 500. we have to remember the braking crisis in march and a lot of these companies are still fragile. you think about next year and financial conditions, is there a risk that things are worse than they seem? conditions get tighter very quickly given the stresses that are still willing under the system? -- boiling under the system? >> we see long-term yields increased dramatically and i did put a pressure on some companies. the fed will be aware of that. the problem is that there are stresses in the financial system

and we are not sure where they are. in march we did the problems at some of the banks and i think if we see rates move higher long-term yields move higher we could see some of those stresses show up in the financial system and certainly that is something the fed has to be cognizant of. the problem is that we do not recognize things until they actually happen. there are a lot of unknowns out there about the potential faultlines in the financial system. sonali: how much control does the fed actually have at this point at the long end of the curve? >> we have seen the big dramatic swings we have seen in recent months. obviously, with the fed reducing the size of its balance sheet that adds volatility there. the fed will do it it can to keep long-term rates under control. the market has a mind of its own . i think the market is pricing in a lot more rate cuts in 2024 than the fed has indicated we could be seeing.

that raises the potential that the long end of the curve could get away from the event and that could cause some problems. vonnie: are you surprised we are ending the year with a 10 year yield up 3.7852%? >> i was surprised when we got up to 5% on the 10 year note and we saw and move below 4%. a lot going on out there and i do think that perhaps the market is pricing in more fed cuts in 2024 than we are likely to see. i would not be surprised if we saw long-term yields move up somewhat from where we are over the next couple of months until we get a better sense of what the event outlook for 2024 is going to be like in terms of the fed funds rate but also the size of the balance sheet. vonnie: the curve is so interesting because the spread is still negative by 35 basis points. is that an inversion that is

telling us anything that we do not already know? >> we thought six or nine months ago that that was signaling a recession and the has not turned out to be the case. there are a lot of countervailing factors that are going on right now in the financial markets. we have got quantitative tightening and expectations for fed rate cuts and very high inflation that is slowing. i think it is difficult to get a read on what is going on in the economy and what is going on in financial markets from the yield curve. that being said, i do think that we will see rates over the longer run kind of normalizing close to where they were pre-pandemic. it will take some time and we are not quite sure what the process is going to look like over the next six through nine months. sonali: we started to address repo markets and it is something i have been watching in 2018 and 2019 and there were significant problems. if you think about how much

volatility has been rising for the first time in five years is there a worry here that the structur -- structural issues in the market, bank balance sheet shrinking, this issue could get worse? >> absolutely, we are dealing with and of unknowns out there. we are dealing with quantitative tightening on a scale we have not seen before. we are dealing with inflation, the highest inflation we have seen in 40 years although it has slowed. we are dealing with large federal government budget deficits. you put all of those pieces together and it is possible that there is a misstep out there where the financial markets misread the data and i am concerned about the potential for disruptions in financial markets. i think at this point the fed does have the ability to respond quickly if need be, we saw that happen in 2018 and 2019 and i do think that the fed has the tools and we start to recognize there are problems in the financial system. sonali: is it that a good thing?

some would call that moral hazard. >> that is a valid point. the fed's job is to focus on financial stability. the fed has the tools out there and if the fed feels the need to act to stabilize financial market to meet the dual mandate of low inflation and maximum employment, they should respond appropriately. i do think that is the role of the fed and that is the role of the central bank to address those types of issues. vonnie: thanks to the chief economist, thank you so much only for walking us through the fundamentals of the economy and some structural risks that lie under the surface. he was talking about the fed's role in financial stability. the fed's initial role was not about financial stability per se. >> per se. i think financial stability was the reason why it was set up in the first place. sonali: the dual mandate,

inflation. stock market. you do not need to worry about banks failing left and right. vonnie: i hear you. hopefully not anytime soon. february 1 is the next fomc meeting. march 22 is when traders are eyeing the first rate cut. not all of them. even a bank or two is calling for a call on march 22 and may 3 and june 14, quite a big calendar to look forward to. sonali: i wonder how many of those expectations come from the expectation that the economy, and more difficult than expected. on the bloomberg terminal today, the idea that they stock market, employers are looking at job cuts into next year. after what has been a tough year for job cuts. vonnie: something like 60,000 plus bankers? globally i guess. all of the banks are global and local at the same time. we have some massive cuts. when you consider that sonali: the job market is doing

fine. vonnie: small places of industries. we will see the number take up -- tick up. sonali: how painful does it get from here? a little bit of pain allows for the rate cuts to happen. we talk about the economy relative to politics. we stick to the editor-in-chief of gallup on where u.s. president joe biden stands heading into the election year. complicated election year, primaries around the corner, this is bloomberg television and radio. stick with us for the final block of the day. ♪

sonali: this is bloomberg markets. donald trump will remain on the michigan republican primary

ballot after a ruling from the state supreme court. the iowa caucuses, the first nominating contest in the 2024 election cycle is two weeks away. joining us to look at the polling ahead of the general election is mohammed, editor in chief of gallup. how does the polling set up into those primaries? >> president biden sits at the lowest approval rating of any other moderate president going into a reelection year. we did a phenomenal analysis taking our latest presidential approval number at which was running through the month of december and he says that is is a 39% overall approval, a 2.9 increase from the month before. listen to the other presidents who are up against this contest. president trump at 45%, obama had 43%. all the way down to george w. bush at 51%. president reagan and carter at

54. president biden goes into this election year with a very challenged approval rating, if history is to prove prescient to the future. this is a unique election year. a lot of kind of variable factors. the historic trend should be studied closely but also keep in mind that we are in a hyper-partisan environment and the state updates back to every moderate president that presidents tend to have lower approval ratings and you see it in that list for the most part with the exception of george w. bush on the heels of 9/11 and that is continuing to worsen in president biden's time. sonali: what are you watching most walking into the republican primaries in particular? what are the trends? >> one of the things that comes up a lot and we dated 830 year analysis on the issues that really drive partisan wedges of the most in america.

we found that things around the size of government or the power of big government. i mentioned that because with president trump's legal challenges. that is a powerful message he will drive throughout the election campaign as we get closer to the contest. it is important to note that attitudes around the economy tend to be the most important topic for any voter going into any election and modern times whether it is -- they are democrat or republican. your economy is the true state of the economy, that is going to be critical when it comes to november. that is light-years away in terms of how we think of the economy will be doing. we see relative improvement in our confidence index. i doubt that we assess people's sentiment throughout the economy and where we see it going in the future. it is far in the negative and republicans will definitely be driving that topic home. the other important topic will

be immigration. one of the most important questions we have is what is the most important problem facing the country? immigration is relatively high for republicans. over a third of republicans say immigration is the number one problem facing the country and you will see that topic got up time and again -- brought up time and again. they thought pattern -- the thought pattern at the border. vonnie: a ruling allows donald trump to stay on the republican nominee well after colorado booted him. how does this progress and we should bear in mind that none of us have any reflection on whether or not donald trump can be on the general election ballot? >> from our perspective we are focused on public opinion. not so much on the federal system or legal battles in the court. it is essentially going to be about when people start tuning in.

most americans are not attention to the election, they are not as much attention as we are to it, collectively we had this conversation. as the year progresses and you mentioned one of the huge kind of variables in the scenario. as these cases unfold only for every state, it will be really interesting to see how much it impacts kids. vonnie: the polling in order to get an early glimpse into what it might mean for the voters. if they are in agreement with their state's supreme court or high court or what have you. have we any data on that yet? >> we do the national picture and one of the things that has come through in all of that national polling and we have done quite a bit of it since the beginning including issues. for the most part people who support president trump do not -- it does not impact their perception of him. in fact, the more these cases have come to the forefront, it

seems to very clearly both in our polls and others and i think this is an established theory is only solidifying his support with his base. the notion anyone state or government or court decision will throw off the election or throw off a primary for him is not necessarily something that is rooted in the data. that has been an exciting thing to consider happening. based on the data what we find is essentially people who support president trump are going to continue to do so throughout the whole. of challenges he faces -- myriad of challenges he faces. vonnie: a potential nominee or perhaps entrant into the race, have you done any opponent on whether that will actually impact things? >> it is interesting you bring that up because one of the really interesting trends right now is the relative high rate of people who identify as independent.

right now people, a third of americans, 42% of americans identify as independent. that rate has held pretty steady since the high in 2008 and 2009. as lieberman and kennedy and all of these other leaders came to the floor and tried to present an alternative approach that goes beyond the bipartisan paradigm, it will be interesting to see if they can garner the support. the support keep in mind is that national politics and national party as to not be popular when it comes to public opinion. when we ask people if they identify as one group or the other you are getting down to the core. right now there are more people who identify as independents than democrats or republicans. the other factor is to keep in mind that just because people identify as independent does not mean that they all agree on a

particular ideology or set of policies. a lot of times it is somebody who is refusing to pick a side because they are turned off by both were people who tend to lean in one direction or another on one topic or the other. even though there is a relative high it does not mean much. sonali: we have broken a lot of news on this program about a large republican donor starting to rally behind nikki haley. at what point and what would it take for more polling to fall into her favor? >> i think it is very early and nikki haley is a competent and effective national figure at this point. it will be interesting to see how things unfold. we do not do polling necessarily on her in-depth right now. her challenge like all others stepping in for a former president and an incumbent president is the name recognition is going to be a challenge.

as the public begins to focus on the election and we are going to see that halfway through the year, it will be telling whether nikki haley can really garner the name recognition that would even give someone who is stepping into an arena with two former president's a chance to even be known and heard. we have seen many of the other names that have entered the race and they have not garnered any kind of significant or unique early name recognition factor whether it is governor desantis or others that is the promise of someone stepping into a contest between established home recognized names like donald trump and president biden. halfway through the year could things change? absolutely. right now we do not see that in our polls or others. vonnie: we have to leave it there, thank you, you also have new data out on israel and israeli adults -- 1 in 4 israeli adults supporting an independent

palestinian state. that is the gallup polls editor-in-chief. we had another date where the markets teetered and it is inching closer and i thought that was a very good point that was made earlier that for tax purposes people do not want this market to go anywhere until the first of january? that is why the santa claus rally goes to the second. sonali: what happens when we turn the year? want to make a bet? are we going to hit this record or not? vonnie: what do you want to lay down? i only do the big bets. sonali: friday! vonnie: what are the stakes? sonali: i was just going to get a starbucks. vonnie: i will sit out then. [laughter] sonali: i will have a better price tomorrow. we will face a pullback and nobody wants to sell. that does it for us here. this is bloomberg.