>> we still think the market can move higher in 2024. >> we do think there is a chance there will be surprises in the economy. >> the u.s. economy may re-accelerate in the coming quarters. >> we should be celebrating that this economy is quite good. >> "bloomberg surveillance" with tom keene, lisa abramowicz, and jon ferro. jonathan: good morning, good morning. this is "bloomberg surveillance"

on tv and radio. the s&p 500 just about positive. it is drum roll, api thursday. tom: and then onto banking tomorrow. i will conflate them all in a moment. how important is the next day, ppi, that no one is talking about where you have a disinflationary trend of what the public is doing and also what is mrs. are doing with ppi? jonathan: the data point that neither of us have discussed, jobless claims later this morning. -- 2.10, historically low. tom: 2.8 0%. how is that stress? it is fully employed america to a lot of people and it rolls over to a market with a big yesterday x boeing and a further bid today. -- yesterday expoing, and a

further bid today. jonathan: what have you been doing? tom: i have been put on a list of bitcoin idiots. jonathan: who is running that list? tom: on behalf of senator warren of the commonwealth of massachusetts. she is on the list. jonathan: above you or below you? tom: oh, way above me. jonathan: good to know. we will check up with loretta mester later. john williams come the u.s. fed president yesterday afternoon. i suspect we will need to maintain restrictive policy for some time to fully achieve our goals. the fed, on repeat. tom: we will do this all through the show. you will see with us tomorrow as well, market cabana with a blistering first great research note of 2020 four. cabana a bank of america

conflates powell, master, all of the challenges that they have into what jamie dimon will tell us on friday, and it synthesizes from the fed, the big banks, to the tensions of our small banks in america. hugely sophisticated on reverse repo as there is a real tension out there beneath all of the headlines, thursday and friday. jonathan: a few more days to go. let's get to the price action on the s&p 500, positive by .1%. the 10-year is still around 3.99. the fx market is doing absolutely nothing once again. that currency pair is pretty stable, negative by 0.02%. the next day or so, coming up later, your morning brief, cpi at eight: 30 eastern alongside jobless claims. the fed speak today, loretta mester with michael mckee coming up on bloomberg tv and radio.

a conversation that you don't want to miss later on today. tom: i don't think mckee knows the questions to ask until he sees cpi at 8:30. that will change the dynamic of the discussion. raimo is not -- bramo is not here. jonathan: we will talk bank stocks. jp morgan, bank of america, wells fargo, citi still to come. the stand out, just to see be of a over the last 12 months down by something like 2% and jp morgan up by 22%. tom: i would say when in doubt they will do what they do, which is job cuts. i'm really interested, not so much in the conference calls, but in the next two to three weeks to see how they rationalize forward.

it wasn't too percent to 3%. it was more. jonathan: do you want to bring our next guest? tom: this is -- he invented the wall street journal beauty contest -- what you do on the street. that led off institutional investor and what they do in polling and trying to figure out who makes the fewest mistakes across a given year. christopher veron does techno analysis in microstrategy and he joins us after adding a trophy to the mental at home. did you have a cigar? i am sure that it was a better cigar than you would've had with me. let's talk about the why. what do you need to do with exes and nose, point and figure, exponential moving averages -- with x's and o's, point and

figure, exponential moving averages? >> the goal is to be correct as often, but the reality is that you are never any more right or wrong. are you pragmatic or dogmatic? we try to be pragmatic. tom: chris and i are theoretically on the same page. a memo yesterday said the standard deviation of all that the forecast that jon, lisa, and i talk about every day come he's never seen this variance. you see that in your technical analysis? chris: certainly over the course of the last year we see a lot of correlations and rules that people have built their careers on were ineffective, didn't work, or were on delay. value in trend following and prices and momentum because it allows you to forget about the things that don't make sense and focus on what the tone of the tape is and the trend has been up.

we have to evaluate from the standpoint of what is the status quo? the trend is up. what can upset that? what do we have to be on guard for that would change the perception of the status quo? jonathan: how do banks perform? chris: technically, great. 85% of financials are in an uptrend, one of the better that we've seen in two or three years. importantly, when you go group by group in financial, something that we always do, what does the consensus perceived to be the weakest corner of the market? then we evaluate what is actively acting as the weakest corner of the market? . for a longtime community banks have been perceived to be the weakest corner of the market. they're great here so it's hard to say that the market reflects that anxiety. you can do the same thing when you travel around. what do you hear? manhattan office or west coast office are weak. look at the office stocks. they actually trade really well. we can be worried about those

things intellectually, but does the market allow you to position in that direction? that is the bridge that my work is trying to cross. jonathan: let's introduce the tension cross asset. as the treasury market supportive of what you are looking to happen in bank stocks? the stability we've seen in the 10-year yield hanging out around 4% at 3.99%. chris: you'll speak to i think on october 27 at 5.02%. they come down to 3.7380. a lot of the speculative and financials work like biotech. the last two or three weeks the yields have crept back up to 4%. 4.0 2%. it seems like the markets really are moving away from being so abscessed with whatever tick in bond yields is. my take is we probably bounced to 4.3 0%. then we can evaluate. i think i'm in the curve steeper

camp. four point 30%, let's reassess. -- 4.30%, let's reassess. tom: this was back when he used a quilt that than ink. basically invented this. the cardinal rule is that you can go short if the market is short and the sector is short you find a stock that goes short here that isn't happening right now. how do people go short that negative in an up market with selected up sectors as well? chris: your best chance for shorts are relative shorts, not absolute shorts. the way that you describe it is right.if you're going to be short, you need the market helping you. there is an old saying that you are only a good short seller basically by luck if the market is helping you. when you go stock by stock or sector by sector right now, looking for relative shorts, it

is still probably consumer staples, the weakest relative performers. you could say energy relative lows, but most of the sectors that we spend a lot of time trafficking, discretionary or industrials, are pretty firm. tom: the magnificent seven. i am of big believer they are individual stock stories, individual charts. what is the technical construction given the carnage and the bounce back over the last couple of days. chris: last year this was a monolithic group. our thinking on the mag seven is that it's not a monolithic group. apple, as we know, the most important stock in the world come has not necessarily been involved the last few weeks as the others. nvidia, new highs. apple has lagged. i think is the first clue on that front. jonathan: nvidia and apple are

very different. your thoughts on apple going into the new year? i believe we started with two downgrades. barclays by 5%. the multiple expenditure that we saw and the iphone going x growth the last couple of months. chris: i will let smart people worry about the fundamentals of why something may or may not be happening, but i will frame it like this. the low and apple is 167. mid one 80's right now. if the tone of the market is going to change, it probably happens with apple below the october lows. i'm big on the idea that every year starts with reference points. under what levels would the status quo for the market begin to change? as the market's most important stock, if apple gave up 170 on the downside, you would say that that's a meaningful change, new information relative to what we've seen over the last year. jonathan: apple closing yesterday at 1.8690.

tom: we had the same raging battle 90 days ago. obviously, it's a different story. jonathan: the things we are saying about apple today you could have said 90 days ago and the stock performed beautifully through the year, something like up 84%. chris: if you look at apple relative s&p it has undercut its october relative performance lows. it is the first magnificent seven group seeing legitimate relative deterioration. i don't think that it can be the same size as six months ago. jonathan: congratulations. thank you. a great start to this morning. cpi is coming up later. we will talk to scotty montgomery lombard. tom: upon us on monday, martin luther king day, jon, you will be traveling to davos.

michael shepard and our team in washington giving us good coverage on that. but then it's on to new hampshire. after the debates last night, i am worn out by the back-and-forth juvenila. jonathan: do you want to teach chris christie about hot mics? tom: that would be another lesson. [laughter] jonathan: it happens, t.k. when you get comfortable having a microphone on you, it could happen. had some things to say about nikki haley and ron desantis. about how nikki haley would get smoked. to talk about what you spent on advertising and the return you've got from that. tom: but it is vintage chris christie. he has sort of been doing this for decades. jonathan: i love finding out what people actually think about

a certain situation, never mind the varnish are sitting in front of people when the news conference goes live and you say the things that you think you have to say. i'm interested in what people actually think. i think that we got a little snippet yesterday. tom: i saw you in a conference call. he was in a conference call an hour ago. jonathan: equity futures on the s&p 500 are just about positive, up by 0.1 percent. good to see you. the 10 year, 3.99. from new york city, this is bloomberg. ♪ the first time you made a sale online with godaddy

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but dr. xichun will take your sketchy insurance. xi-chun! xi-chun, xi-chun, xi-chun! thanks, bro! you've got more options than you know. book now. >> we don't need another mealy mouthed politician who tells you what you want to hear to get

your vote. >> he has switched his policies multiple times. every time he lies, drake university, don't turn this into a drinking game because you will be overserved by the end of the night. >> when you need someone to fight for you don't look for nikki haley. you wouldn't be able to find her if you had a search warrant. >> how did you blow through $150 million in your campaign if you were down in the polls? >> she equates -- jonathan: gop presidential candidates ron desantis and nikki haley sparring on the cnn debate stage. the two republicans calling each other liars and exchanging insults through the evening ahead of iowa on monday. tom: we had a drinking game at the keene household. i'm sorry, that was irresponsible. i am so worn out by the childishness of this.

it's painful. jonathan: as a practical matter, we are down to two. parliament, every single week. to be fair, i wish that i saw more of that in congress in washington, d.c. i would like to see a robust exchange of views. you don't want to see the slinging of insults.ultimately , of course, you want a fiery debate. tom: right now, we get an informed brief from the managing director of the united states eurasia group. they are out with their top risks and far more. he has worked for the gentleman from kentucky, and there's only one gentleman from kentucky. i will dismiss desantis, because that is with the numbers tell me to do. is haley running for vice president? >> that's a great question.

she would be a great vice president. she has a central casting, she has great foreign-policy experience, her views on ukraine are well-informed and forceful. it's the part of her campaign that is the most compelling. the challenge is i don't think trump likes her that much. you think about donald trump's motivations come he tends to be motivated by someone out of central casting, which haley is, she matches well against kamala harris, but also about spite. unless haley says good things about him soon, i think you will look elsewhere. tom: he has this cool banjo in the background. let's go to your kentucky deliverance out there from movies long ago. will kentucky get deliverance in new hampshire? will new hampshire change the dialogue? >> i think trump looks good in new hampshire. with christie out, this is where haley has a chance to

consolidate the field. but i was still matters. there is a chance that he could rally donors and make it deeper push into the spring. what is more likely to happen is that the sentence is a distant second or even third in iowa. then it is haley's race to lose in new hampshire next to desantis. but trump is still the dominant force. he will blow everyone out in nevada and michigan. he will probably won south carolina. it will be really hard for either of these two to consolidate the field if they don't win a single state before super tuesday. this is still, and has always been, trumps race to lose. jonathan: the working assumption will be it will be former president donald trump as the candidate. the current president, president biden, his approach seems to be it is me or democracy under threat. it is him or democracy. how successful do you think that that approach will be on the national stage? >> the debate last night got

all of the attention but the main show was on fox where donald trump is giving a town hall and was pretty good. he was funny, charming, showed command and leadership. i think that that will contrast poorly with president biden, who -- there is no other nice way to say it, is getting up there. biden has to run a negative campaign against trump to have a shot. he has to convince voters to ignore the inflation, ignore the wars overseas. this guy is terrible. i'm here to remind you why. i think that that's a difficult argument to make in an environment when your popularity is in the high 30's and people don't feel good about the direction of the country. jonathan: i would say he has to actually run a campaign. he didn't need to last time. we were in the pandemic. he could make it a referendum on the sitting president and he won. how different will this be compared to 2020? >> that's a great point. that is an unusual presidential campaign where you have a

current sitting president and ex -president running against each other. you could try to make it a referendum on trump, you have to remind voters what they didn't like about trump the first time. biden is just not a vigorous, forceful campaigner that has to make that case. has to do it through proxies and he has a lot of baggage. it's a big challenge. tom: to your service to senator mcconnell, what should the senator from kentucky say to nikki haley? they are comrades in arms. what does mitch mcconnell say to haley to prosecute the best path over the next couple of months, say super tuesday? >> i think that he says good luck. make sure that you have enough money to spend on ads and that your ground game is good because that's the only way you will have a shot at beating trump. the big thing will be money. you have to keep the donors motivated. you have to make them believe that you have a real shot so that you can prosecute this campaign. tom: it doesn't matter how haley

polls against biden? >> it is not motivating voters. you don't see primary voters in the u.s. acting strategically. if you did, you would have a more vigorous challenge against biden and the democrat party. you will have people thinking about looking ahead to the general election and the republican party, but you don't. people are motivated by their emotions, by the guy that they liked, and the guy they think is fighting for them. that guy is donald trump right now. jonathan: the world is watching. number one, probably expected, it is the u.s. versus itself. as you explained over the last few days with the team at eurasia, this will have huge consequences on several fronts around the world, including ukraine and what is developing in the middle east. when you speak to clients at the moment, especially international clients, what are they talking about?what questions are they asking about the election this year? ultimately, what are you telling

them? >> our international clients are acutely aware of the u.s. election. they follow it closely. i'm always impressed and a little dismayed about how much knowledge they have about the u.s. political system because they have better things to do with their time than to pay attention to the electoral college or reconciliation. they are concerned about the return of donald trump. one thing that highlighted to me is if the u.s. is a reliable partner for the rest of the globe. the u.s. led the security coalition in favor of ukraine. it is planning to lead -- it is positioning itself to lead us the security coalition to defend taiwan. it is israel's biggest benefactor globally, which isn't that popular in the rest of the world. can the usb relied on when you have deep partisan divisions -- can the u.s. be relied upon when you have deep partisan divisions depending on who wins the white house? this is a huge question on top of mind for clients, particularly european clients, who are worried about future president trump's commitment to

nato and the shield of protection that that provides for them. jonathan: let's talk about the europeans. maybe we can reframe things. have the europeans proven that they can be reliable partners for the united states on certain issues, thinking specifically of china? chris: the europeans are acting very mercantilist in their commercial interests. the u.s. has been a leader on this front. the chinese used economic coercion to their great benefit and have been using it in europe. germany sent over a coalition to german industrialists to china to deepen their trade ties with china. i don't think that this is the number one issue in europe right now. i think that russia is the number one issue. it is for the u.s. and the europeans as well. this is an issue they are freaked out about. they see the threat that russia poses on their border and they need the u.s. to help defend it. if the u.s. isn't there, it will drastically change the balance

of power in europe in a way that we haven't seen for almost a hundred years. jonathan: food for thought. appreciate your thoughts. let's catch up again soon. the domestic story and international consequences. tom: my take away other than the interesting questions that you had about how europe perceives us is evermore the primaries are polarizing. genuine democratic primary it would be the same. you have rfk junior, but the bottom line is that the primaries are highly polarized versus where we will be the third week of october, the november election. jonathan: it is cpi thursday. that means that we will catch up with macro policy perspectives. that conversation is up next. ♪

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jonathan: equities up on the week up on the session. the equity market on the s&p 500 a little bit higher, posited by 1%. the nasdaq up by .4%. tom: you buy and sell tickets on the left and the right. i'm trying to get the buy ticket for the purchase of apple and i can't for the trigger. the world has come to -- deep into 2024, the world is coming to an end. jonathan: equities, we are trying to get closer and closer

to all-time highs. the bond market, some stability on the 10-year may be contributing to the better sentiment in the equity market. four straight days we closed above 4%. 3.9828 on the 10-year. tom: real yield, 1.7 6%. there is a real debate around inflation-adjusted yield. maybe we will get more information at 8:31. jonathan: the 10-year is basically where it was after the fed meeting in mid-december. tom: late last night, published, it is clear it with a gallon of gas, used car, rents. navy we come in late, particularly rents. jonathan: your top story, u.s. cpi, that data is under two hours away. the meeting estimate in our survey expecting a 3.8 percent read on correlation. the new york fed president

saying, "my base case is the current restrictive stance of monetary policy will continue to restore balance and bring inflation back to our 2% longer run goal." my focus on year-over-year, i think that the consumers feeling cumulative inflation since 2020. wall street focuses on month over month and shorter term trends with what they informed the federal reserve about the future. tom: bill dudley, bloomberg opinion columnist, i will go jason furman. i'm sure that we will see this morning out of harvard where he takes a matrix or sum of different annualized calculations. that is where i will be. the answer is 2.2-ish, two point three-ish and that is awful near-ish. jonathan: i want to bring you an

update on boeing. a quick return to this guys is unlikely for the max 9 jets. -- to the skies is unlikely for the max 9 jets. safety is going to dictate everything. no one can or should be rushed in the process. alaska airlines has already canceled all flights on the max 9 through saturday. tom: the new the faa guy, what does the new head of the faa do? alaska air will look at 14 boeing 737s? what if they find one with loose rivets? i don't really see where this is going, other than a bad outcome for the nation. jonathan: jeffrey suggested that maybe we can get the plane in the sky next week. i think that the transportation secretary is tempering those expectations a little bit based on those comments. the round up from iowa, insults flying on the debate stage

yesterday evening. nikki haley and ron desantis squaring off ahead of monday's caucus. repeatedly accusing the other of lying. the favorite for republican domination donald trump hosting his own town hall, counter programming on fox news last night. tom: the former president has been brilliant on this. he is just not going to participate. forgetting about trump and biden, is this a new trend? where heavyweights in any campaign say we are just not going to do the childish back-and-forth? jonathan: i think it is strategic to say i am the former president, i'm not participating in the primary the way that you are. i have a massive lead and you are struggling to catch up. why participate? tom: have you seen the video of john f. kennedy and richard nixon in 1960? we don't want to get back to that. that is too nostalgic. there was a grace to it.

kennedy said i am the young one and nixon struggled. the nation wants to see vitality and not one-liners. jonathan: can you see the front runners in this race talking about who is the young one? tom: maybe you want to put it in black-and-white and make it more theatrical. let's get to our next guest. the founder and president of macro policy perspectives. let's talk about the debate at the fed right now. let's sharpen the debate and go to the real yield, which has exploded up to a breaking level. not breaking like snap, but slowing down the american economy. where is the appropriate 10-year real yield right now. are we restrictive? >> i think it is clear that the fed has policy in a restrictive place. we see that in the cost and availability of credit. when we look at things like the

hiring number, the gdp has been more volatile. hiring has been slowing steadily. even john williams said yesterday that the risks are pretty balanced right now. inflation has been running low. we will get another print that is probably going to be in the moderates on this morning. tom: what is the measurement of cpi that you use on an annualized basis? i go to threemonths because i can't do the math like you can. julia: we look at the same 3, 6, 12. three gives you the highest frequency with a little more noise. chair powell has told us to look at the six month annualized. when we look at their core pce inflation, it's already there. tom: what are we waiting for? thank you. i want a january rate cut. am i out of line? jonathan: possibly.

julia: that is a little bit greedy. the january data last year, if you recall, we got changes in seasonal factors in the cpi and surprisingly strong january numbers. i think that the fed wants to get through the january numbers that we will get in february. if that stays in the zone that we've been in, which is what we expect, then it begs the question, what are we doing at 5.5%? we don't need to be here. the real yield is rising. hiring is slowing. everything in the economy is telling them that things are balanced. it is time to start adjusting the nominal funds rate. tom: a couple of days ago, kathleen from nationwide was brilliant on this yesterday, two .8% unemployment in columbus, ohio. they are getting ready for football and spring sports. the bottom line is, if we back up the unemployment rate in columbus, ohio we get to a

horrific 4%. is there a new, bad unemployment rate for the fed? julia: i think that the fed is very pleased with the unemployment rate staying as low as it has. under the hood there is some indication that the labor market is a lot more balanced. hiring has slowed, wage growth has moderated, employers are telling them their own district businesses are telling them that it is easier to hire and retain workers. turnover has slowed down a lot. the churn in the labor market has really normalized. that is where even though there is a low unemployment rate the problem in fine-tuning the economy, the u.s. economy is an ocean liner. if you get to a point when the unemployment rate is rising steadily you may not have control of that dynamic anymore. the idea of a shallow recession

is beguiling, but the u.s. economy generally doesn't work like that. when you are in a zone where businesses are laying off workers, that tends to feed on itself. you probably don't want to get there. as long as the labor market isn't generating inflationary pressures, you don't need to get there. the fed has unusually great trade-offs right now that it's facing, and it sounds like they might be willing to take advantage of that and explore the space a little bit by starting to adjust that nominal funds rate. not in january, but we think by march of the data are going to be telling them that they can begin a process, a sequence of adjustments. nothing to hurry, because the labor market is resilient and solid, but we don't need to run the risk of tipping the economy over. jonathan: you mentioned the rebalancing in the economy. has that been the product of time or the product of federal

reserve timing. can you identify which one it is? how difficult is that for someone to do? julia: it is both, clearly. when we look at inflation from a sectoral standpoint you can see where it is that the fed's policies are cooling things down and where it is that just normalizing supply chains and easing pandemic frictions are bringing inflation down. it is a combination of both. the car market is a perfect example of both. chips are available, production is rising, inventory is rising, dealers have to compete on price again. that is clearly an easing pandemic frictions story. it is also a demand story. car loans are real expensive at these levels of prices and these interest rates. those payments have soared. dealers are telling us that at these levels of interest rates there is no more pent-up demand and they have to compete on

price. it's really a combination of tighter policy and an economy that is functioning a lot better. jonathan: i am wondering how effective monetary policy tightening has been. we used to talk about, a few months ago, the long available exit policy and how much was in the pipeline about to hit the u.s. economy. is the channel still waiting for that tightening to show up in the economy? julia: we have clearly seen a lot of the tightening hit the economy. what you see is in the credit multiplier. if you look at credit flows and the availability, cost, and amount of bank credit flowing, and the general availability of funding, even for things in the private equity space, it is a lot tighter. money is not cheap right now. money is expensive. you really have to prove your concept. you have to have a cash flow business to get funding. there is less funding that is flowing around. that tells us that policy is

tight. that is starting to hit the economy, slow it down more in a more trend-like zone for growth. hiring has been slowing pretty steadily and narrowing space. we can see policy. is there more yet to come? i think, yes. credit flows over time, the less that is flowing the more that begins to restrict investment and other interest-sensitive areas of spending. tom: in a podcast in the financial times, modern monetary theory, she goes after the doctor coronado's of the economic world. the basic idea is that debt is ok. with the growth rate where we are, the growth rate is the debt rate is fine, no big deal. you told me that we have a slow down because we are encumbered

by debt, commercial real estate, etc. is debt a problem right now, dr. coronado? julia: that is part of making yields higher. we can see that in the bond yield dynamics, that supply -- a lot more supply needs to be absorbed. it has been a factor leading us to the leg up in yields that we've seen. is that a problem? the u.s. economy has been functioning surprisingly well at this level of interest rates. part of that is not about policy. that is about productivity that has been a lot better. we are a bit optimistic that that can be sustained. you might be in an area where because the debt level is higher, but also because productivity is higher, we might be in a zone where interest rates stay a bit higher this cycle then when we were penned at the zero lower bound and effectively in a liquidity trap. i think it's a bit of both.

it is not that these yields seem to be particularly problematic, but they could stay higher for a lot longer time. jonathan: this was the clinic that we were looking for. appreciate it. the potential for a federal reserve to maybe be in a position to think about cutting interest rates, not in january but potentially in march. tom: there are eight ways to slice this. part of this is about the financial system. the care that we really need to have a robust financial system. i am worried about another 1000 banks that no one ever talks about or thinks about. jonathan: we will talk about those banks next on the program. looking ahead to big bank earnings kicking off tomorrow morning. ♪

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>> i think there were three banks that got it wrong. i have said that publicly.

they made choices that were the wrong choices. it wasn't complicated. they got washed up, cleaned up, and folded into other banks and you move on. we have a banking crisis. no we don't. we had a crisis among three banks. it is not a crisis for the market. the core banking system is in good health. jonathan: that was the morgan stanley president. the banking index showing that good health of more than 25% since the start of october. the first read on the banks this year coming tomorrow with bank of america, citibank, wells fargo reporting earnings. given the fourth quarter rally, the sharp turn in sentiment heading into this year, we think that january earnings season may present a speed bump to the sector's recent momentum. we are joined now. it is great to catch up with you. what is it about this group of earnings that you think might be that speedbump?

>> it is really, to use james' term, a rude awakening for earnings. it is not about the absolute price level and not about the absolute multiple on earnings. it isn't that earnings aren't going to go up. as a reminder to everyone, what happened at the rally is we priced out a negative. the negative was the realized bond losses on bond portfolios as treasury yields were shooting higher. now, we remove that negative. keep in mind that banks are actually positivly rate sensitive. what that means, jonathan, is that if the fed is cutting rates you will have pressure on interest income, especially a path of the cuts. tom: i'm looking at your coverage of the big banks. i want to ask about one that i know is out of bounds but is

germane right now. you see the divide between 20 or 30 big banks and everybody else out there? the concern that the smaller banks of america are not in route good health? -- rude good health? erika: they may not be as strong as the top 20 banks, but i think if the forward curve pans out they will get relief in two ways. one, relief in deposit costs. i think what you've seen in 2023 is a nice run-up in deposit costs as the fed tightens. they will get relief on the funding side. the other piece of relief that smaller banks will get is on commercial real estate. commercial real estate is more widely held at smaller banks than larger banks that you mentioned. as such, if interest rates are coming down, they could actually narrow the subset of potential

problems as we deal with commercial real estate maturities. tom: to translate this, to the rescue will be a lower money market yield where aliens flows out of money market funds back to a more normal banking economy? right? erika: correct. i love that you hit on that. not only will you get relief in deposit costs, you also get the deposit flow back. you are no longer having to come as an alternative, having to borrow wholesale at pretty much fed funds or ratchet up what you are offering your deposit customers. jonathan: what is your topic going into earnings season? i know you think it might be a rocky patch, but what is your ultimate topic? erika: in a difficult moment, a rocky patch, who does the market turn to? jp morgan. as i think about the

expectations known in the market and the enthusiasm about having these cuts without a recession, the bank that can deliver on earnings, where we are most confident that the earnings expectations can be delivered is jp morgan. tom: jp morgan, it is like nvidia. jonathan: relatively speaking. tom: you're telling me after massive double-digit return, complete outperformance, the vector keeps going for mr. diamond? -- mr. jamie dimon? erika: i think so. a couple of other data points, from the october bottom jp morgan has underperformed by eight percentage points. remember what i said at the top of the segment? i said, it's not about the absolute price, the pe, it is about the ee. i think the involvement in the space today is in hedge funds and macro funds.

how long they will step in and move their weight in banks is that they feel confident it isn't just bottoms but there is a good news upside potential. going back to jp morgan, i think that they are in the best position to deliver that. so, their performance can continue from here. tom: do we see merges? i've been waiting not to get to where canada is, but what is the number, 4000, 5000 banks? how do we cut that in half? is this the year that that happens? erika: i don't think so, because it's an election year. tom: interesting. erika: there is a little bit of a sellers mentality that, wow, i got the bond losses back in my capital as rates have come down. now, they're thinking about with the forward curve is implying and saying, my book value recovery is going to be x higher

at the end of the year. i want a multiple offer that. the buyers are like, absolutely not. the other part of that, and since i mentioned the election, there has been a lot of consternation about the length of time between announcement and close. so, i think that smart buyers may wait until we get more clarity on leadership before they think about waiting into m&a. jonathan: the 2024 election season, our clients asking about the regulatory backdrop going into next year off the back of who may or may not win? is it too early or is that something they are considering already? erika: they are saying it is too early to price in given the many variables that can happen between now and november. that said, they are thinking

about the banks in a positive light if we did have a republican administration. a lot of investors are asking about the regulatory environment. the thought process is similar to 2016 and the change from democratic to republican could potentially lead to regulatory easing. particularly now that we have a proposal out there that everyone is hoping could be at least delayed if not softened significantly. if you have an administration change and you don't have the capital rules finalized yet, there is hope of not only a significant delay, but also a potential for reissuing that proposal with much, much less bite. it gives the market hope, that all of this capital at the bacon going up will be returned back to shareholders -- capital at

the bank that's going up will be returned back to shareholders. i think is part of the current broad appeal. as a reminder, the "trump bump" , i think that is part of the thought process that the bulls are thinking about as they think about rate cuts and a potential administration change. jonathan: that is a big one to watch. erika, thank you. it's good to catch up. the topic of the last 12 months, jp morgan. tom: i love the thing on rude health. when you are british, it is very posh. you break it forward, and i think at morgan stanley he is channeling roger kipling. --

reared kipling. --rude your kipling. rude health. jonathan: fantastic leadership that he has displayed at that bank. tom: i will go with greg fleming. you would go greg fleming and james gorman, and they changed how all of us deal with this bogus phrase, wealth management. it is the managing of peoples money, has bidding it for non-losses, with our retired -- with our shattered retirement program as an overlay. jonathan: a must watch conversation next week. coming up, ts lombard on this cpi thursday. from new york city, equity futures positive by 1% on the s&p 500. bond yields lower by four basis

points in and around 4%. from new york, good morning. ♪

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>> we still think the market can move higher in 2024. >> this is a fairly decent nominal growth environment. >> we think there is a chance of upside growth in the economy. >> the economy may reaccelerate over the coming quarters. >> we should be celebrating this economy is quite good. >> this is "bloomberg

surveillance" with tom keene, lisa abramowicz, and jonathan ferro. jonathan: good morning, good morning. this is "bloomberg surveillance" on tv and radio. alongside tom keene, i am jonathan ferro. getting closer and closer back to all-time highs that we last hit in early january 2022. t.k., cpi is the next stop about an hour and 30 minutes away. tom: disinflation tendency, julia coronado framing out three month annualized, six-month annualized, 12-month annualized. my guess is that it's not europe-like, but there is a tendency to the shock of what we saw in europe. jonathan: for two years, this has been the northstar for this market, for financial markets, for the federal reserve and policymakers not only in the u.s. but arguably worldwide. inflation. inflation. is that beginning to shift?

are we getting closer to some inflection point? shifting from inflation to tackling employment. policy actions will continue to depend to some point on this inflation data. tom: the basic idea is used cars. other things, groceries, food, the twelve-month look back looks pretty constructive, but the animal in the room is housing, rent, mortgages, yields. rent is the dominant statistic for me today. jonathan: we will talk about month over month disinflationary trends over the last three-month and how it informs the federal reserve decision. this is the issue in the election campaign as well. but not month over month. it is about cumulative inflation that you and i have been talking about since 2020. the price climbing. services, goods. we feted the goods story but the food issue, rent, energy prices.

they're still hitting a lot of people hard across this country. tom: looking back to say december 2019, january 2020 is legitimate. we don't capture that within the financial media very well. with the advent of 2024, time marches on. it will be interesting to see how that phrase resonates at 8:30. jonathan: is the calendar on the presidents side? the financial markets come the s&p 500, positive by .14%. yields are lower by almost five basis points. 3.9 790 on the u.s. 10-year. the currency pair is positive by 0.05%. your morning brief looks like this this morning. 8:30 eastern, cpi, jobless claims, it is not just about inflation, it is claims. 210,000 is the estimate this morning. the previous read was 202.

tom: i have been talking about columbus, ohio. i look at fully employed america, and there are so many people watching this saying, tom, you don't know what you're talking about. even with claims outstanding moving averages, there is a whole part of america that just doesn't buy the magnificent 2.8% unemployment rate of ohio. jonathan: you will get the data and then the policy response to it, or the policy speaker response. loretta mester with michael mckee. mr. sitting down with mckee at 11:30 eastern time live on tv and radio. tom: she's the fed mathematician. it will be interesting what she says off of inflation data. since the top of the show, overlaid ppi tomorrow, it is not

first and last down from another time and place, but there's a new importance to ppi. jonathan: find the time we get to the weekend you will have the fed speak and bank earnings. jp morgan, bank of america, -- tom: jp morgan. jonathan: she said that things could get rocky, may be volatile the first humans of this year, the topic is jp -- maybe volatile the first few months of this year, the top pick is jp morgan. tom: i believe it is one out of five profit dollars. it is amazing. let's not forget the call that citigroup, there is -- jonathan: that is the banking story. that's get a conversation started with the macro strategy director at ts lombard. it's wonderful to catch up with you. let's go to the data in 85 minutes. what are you looking for in cpi?

>> i think the headline of what we need to focus on isn't so much this, but what we have seen since the summer of 2022, disinflation. we got the peak, then we got the peak in core. when it is higher it is more volatile. you can see that in the impact that geopolitics has on commodity prices that feeds into inflation and the core on inputs. we are getting inflation prices that are a bit hot. we saw that in europe earlier this month. core is too elevated for the fed's comfort, but the trend is in the right direction. that's key for the market. i think that the disinflation story has legs, and it is hard to dissuade the market unless we get a large upside surprise. tom: buried in your report, you have scattered charts with a regression line through it. how linked is eu inflation,

their disinflation tendency with the across the atlantic jerome powell's disinflation tendency? skylar: european inflation lags u.s. inflation. the disinflation trend has picked up the end of 2023. the big difference between european inflation and u.s. inflation is in the first instance was, what was the main driver? in the u.s. it was demand and supply driven. we got very strong inflation in the u.s. in europe it was mostly supply driven which is why we are seeing such a large disinflation trend now that is accelerating. we expected to be below two percent this year because the supply-side factors feet out quickly. honestly, there still risks in terms of geopolitics and inflation supply shocks, but i

see european inflation falling quite quickly. tom: is the fed behind? i have a lot of fancy people like you telling me that this fed is behind and we are waiting for march. jonathan: the middle of the year. tom: march, june. are they restrictive now? skylar: what is the rush? tom: what do you mean what is the rush? jon is looking at six bedrooms somewhere in manhattan. jonathan: don't bring me into it. skylar: the policy rate is restrictive and that's feeding into the economy, but the duration of u.s. debt is long. it takes a while to feed through. in the u.k. it is two to five year mortgages and in the u.s. it is 30 years. wide rush to cut rates when the economy is very strong and you have inflation above target. with inflation being where it is , it allows you to cut without seeing unemployment rise

significantly, without seeing some risk or recession shock. that is what would really cause a rush, but right now, we are not there. tom: 2.20%. jonathan: i need more than a 25 basis point cut to buy that property. 25 basis points is it going to get it done. tom: but it gets the motion going. jonathan: you could grease the wheels. i understand that. when they start cutting, and i think for a lot of people this year is a matter of when and not if, what you think they are going back to? skylar: absolutely. this is the timing issue in terms of the market looking for significant easing in 2024. no one doesn't expect these. the smallest easing that anyone is expecting his 50 basis points. but it is frontloaded. the market prices 200 basis points this easing cycle over two years and that is fairly reasonable if you get a soft landing. it is still above the estimate of neutral, but may be the estimate of neutral is too low.

the problem is it is frontloaded. about 240 basis points in 2024. tom: what do you use in america? i am on three month annualized. skylar: you need to look at quite a lot of factors. really core and three-month annualized is what you should look out for a broader trend rather than just having the numbers ping around because you have more volatile inflation because it is higher. tom: you have the cleveland, the dallas, this, that, and the other, are they of value? skylar: absolutely. it is important to look at the survey measures in terms of if you are looking at survey measures of inflation they all point to lower inflation. that is something that europe is more worried about. in their sentiment surveys people are worried about sustained higher inflation. it is something that the fed has going for it that the ecb doesn't. jonathan: we will hear from

madame lagarde a few times in davos, switzerland a few times next week. what you expect her to say based on the news conference? we didn't get a repeat of the chairman powell 24 hours after the meeting. you expect to change from her anytime soon? skylar: i am worried about the ecb. i think that they already over tightened and are trying to accelerate qt, which will squeeze even tighter and the economy is already in stagnation. i think that the ecb has too much focus on the supply-side shocks. the fact that we have had shipping costs rise and the fact that we are getting potentially higher january inflation out of europe because of the way that the calendar rolls means that i am worried they will ask more hawkish lee and continue the hawkish stance that would squeeze the economy more and cause more pain. jonathan: can i say that t.k. is impressed with the bar behind you. for listeners who can't get to a tv set, that is a pretty impressive bar. tom: it is spring at junior year

at saint andrews. it is bar 101. jonathan: it is meant testing to -- to catch up. ahead, for the federal reserve and the ecb. tom: we are busting her chops. she was first in her class at mathematics. it is like loretta mester in marketing economics. her essay, and we protect the copyright of our guests, it is some sophisticated imf-like stuff. jonathan: you are going to say something else, not stuff. she is the real deal. from new york city, good morning. welcome to the program. on the s&p 500 equity futures, positive by 0.07%. in the bond market, yields are lower by four or five basis points, let's call it 3.9809.

in cairo, egypt, speaking to reporters, saying that the u.s. wants to make sure houthi violence stops. they don't want an escalation. sometimes things happen accidentally. what we saw yesterday and talked about it through the morning and will do so again, houthi rebels have launched one of the most complex attacks in the red sea that we have seen today. the potential that the u.s. is dragged into this almost by accident is still on people's radar. tom: i am haunted forever. it was not a drone, it was a missile in the falkland islands. this is not equivalent to what the british saw. you have 18 drones in the air? pretty much at the same time? i guess that is where you get to one thing breaks and all of a sudden we lose control. jonathan: our attention will turn to that in the next 10 minutes with anne-marie who will

break down some of these issues and respond to the debate that we saw last night between governor desantis and nikki haley and the counter programming from donald trump on fox news at the same time yesterday evening. later in the hour we will catch up with the former senior u.s. intelligence official in 30 minutes. linda duessel and the 8:00 a.m. hour to break down what she sees in this equity market, fixed income, and beyond on the cpi thursday. equity futures on the s&p are just about positive. from new york city this morning, good morning. ♪

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>> i think what happened on january 6 was a terrible day and president trump will have to answer for it. >> there's a larger issue republicans have to think about. he will lose the appeal and go to trial in front of a stacked left-wing d.c. jury of all democrats. what will we do in terms of republicans in terms of who we nominate for president? >> that is what we need in our country. we need someone who will be a new generational leader that brings sanity back to america. jonathan: gop presidential candidates ron desantis and nikki haley sparring with each other before finding a common enemy, former president donald trump, who has been missing from all republican debate so far. all of this ahead of the iowa caucus that's coming up on monday. the campaigning already started last year. it will pick up big time in the next week. tom: we were making jokes about it thanks to our team that stayed up all night putting together the best quality shots of video to capture the emotion of it. jon, he has a real they job

having to put up with the pettiness i heard last night. you have a governor of one of our most vibrant, dynamic states. you have someone who has done public service to the nation at the united nations under huge rhetorical pressure. they are talking at each other like it is a frat party freshman year. jonathan: that is what politics has become. it is like half of the course. it wasn't surprising to me. was it surprising to you? tom: it was not surprising. i could make a joke about it, but i want. she could make a joke, but she is still livid. longing for the old days that are gone, aren't they? >> they are gone. last night was a display of that. that you had a republican presidential debate without the front runner, and saying that this was not a split screen, this was a sideshow.

tom: how did president trump do last night? annmarie: i will voters like him. he is dominating the polls. you saw his ability to talk about what he wants. he is asked about the $8 trillion that he added to the deficit and instead goes off on tangents about how by the -- about how bideno mics is not working. and how he will be the one to release american independence. no one told him america is at record production. he will do that. it's already happening. jonathan: democrats won't correct him because they don't want to talk about it. annmarie: they want to talk about the electrification of the grid. what i think is more interesting

is chris christie yesterday suspended his campaign. it was a longshot for him to ever become president, but new hampshire becomes more interesting now. there was a recent poll that shows two thirds of his voters will go to governor haley, ambassador haley, if he were to drop out. he had this hot mic mike moment that isn't boding well for anyone, although a lot of people say he is just saying the quiet part out loud. he basically says she is going to get destroyed. jonathan: we talked about in the last hour that ron desantis was somehow scared about what is going to come. i think we all assume it will be biden versus trump. that may change, but that is the working assumption now. the president is trying to make this a choice between former president donald trump and democracy. how successful is that going to be? annmarie: it does come up in polls that people care about democracy, but at the same time what comes up in polls time and

time again is the economy and why trump continuously pivots to what he would do on the economy. he wants to make the trump era tax cuts in perpetual. he wants them to be in law forever. the economy will rank number one. many people felt they were doing better. the timeline potentially is on joe biden's side. inflation is coming down. all of your guests are talking about rate cuts. potentially people will go to the polls in november feeling better about where they stand economically and wanting to avoid the chaos that they felt under the trump administration. tom: i can't believe we will have an economic/domestic debate in october into the election given the polarity and culture wars around abortion and the border issues that both parties face. i don't buy that it is about the economy. am i wrong? annmarie: the biden campaign will campaign heavily on abortion. trump gave a soundbite that he could put two swing states that

will make suburban woman want to vote for biden. that is when trump said, for years, more than 50 years we have been trying to get rid of roe v. wade. i was the one able to do it. i got rid of roe v. wade. trump is trying to have his cake and eat it too when it comes to abortion. a boater said she was going to go to the caucus to vote on this and is leaning towards trumpet said i am confused, mr. president, about where you stand on abortion. he has tried to distance himself from of states that want six weeks bans some women don't even know they are pregnant at six weeks. he says i want to make sure we can be a pro-life party but we need to win elections. he's walking a fine line. the biden camp is going to head on this. tom: and immigration. basically, a large part of the country is saying rebuild trump 's walls. a huge part of the nation was appalled by it and that has shifted? annmarie: trump still says that

he wants to build a wall. this is something ron desantis has hit him on. he said that he was going to build a wall and never did it. now things have changed in the sense that we potentially might get an emigration before the election. even though biden has to deal with the progressives on those who don't want to see any changes when it comes to amnesty, a border package under biden could help him going into november. jonathan: the last hour, talking about the rest of the world watching the consequences of this election. let's talk about the red sea. houthi rebels launching a complex attack in the last day or so. how is the international community responding? annmarie: they are very reactionary at the moment. no one has strike the houthi in yemen, a fragile peace agreement and civil war there.we

have heard from secretary blinken, as we have made clear, other countries have made clear, there will be consequences for the houthi's actions. right now it's costing companies more money and time to avoid the red sea. jonathan: we are lucky that damage hasn't been done to u.s. military and personnel. let's talk about what might happen if it did happen. what if there is an accident? what will the response be? annmarie: obviously, the pentagon will have plans on what it will mean to strike the houthis within yemen. i think that people forget there are hundreds of men and women in u.s. uniforms in syria and iraq and places where it is incredibly dangerous for them right now. tom: i brought that up two days ago. ian bremmer has a fabulous chart of the middle east in the eurasia group's top risks of the year that shows the dispersion

of the american troops. it is not like three or four things. it is 5, 6, 10 geographies. annmarie: that is why there has been so much criticism about what happened with lloyd austin. you go in for an elective surgery for prostate cancer and allow your deputy to go on vacation in puerto rico. if you are in the military overseas in a place like syria or iraq, that doesn't bode well. jonathan: lighter news in the sporting world. t.k., this might be expected from espn this morning. bill belichick and the new england patriots are expected to part ways after a remarkable 24 seasons together. ending an unmatched run that included six super bowl titles according to leaked sources. tom: in the last 18 hours, i'm guessing, pete carroll of the

seattle seahawks, advisor, whatever that means -- you follow alabama football. jonathan: nick sabin is a surprise to me. the guy has been dominant in the sec. but $11 million a year he was picking up from the alabama program. tom: the common theme is they are all 72-ish plus or minus six months.this is a generational shift in coaching. jonathan: from new york city, good morning. michael collins coming up shortly. equity futures, just about positive. ♪

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jonathan: two hours away from the opening bell. one hour away from cpi data in america. the scores look like this on the s&p 500. equity futures up one point -- .16% on the s&p. tom: let's do the levels right now. and the standard & poor's 500, i'm sorry, as of today i am in the 5000 watch. we are distant. 4827, but after this year, i'm sorry, up 170 points on the spx

to get to 5000 has my attention. not a record high on the dow. the nasdaq 100 popping back to 17,000. i believe i saw a chart, the magnificent seven sort of burst through yesterday. even if it was not apple. jonathan: 4783 was the close in yesterday's session. we are getting closer and closer. the next stop, the data, and then we get the earnings. the banks in the premarket shipping up as follows. jp morgan over the year up by something like 22.48 percent, which has been phenomenal. tom: i'm going to give gina martin adams all of the love here, but there is a lot of other people with her saying there is an underestimation of earnings come and the pulse of the stock market tells me maybe there is an adjustment from mid-single digit up to top-single-digit. jonathan: top pick jp morgan? tom: top pick citigroup.

everybody has their favorite. jonathan: let's look at the bond market briefly. the 10 year, 3.98%. four straight days, closing and in around 4%. tom: that is a nominal yield that will play off what we are in one hour. but i'm going to do a real yield analysis here, and there is a raging debate about what the inflation-adjusted yield does. as julia coronado said, interest rates are up, and it has put a brake on also it's of business transactions, including commercial real estate. maybe something comes to the rescue here. jonathan: and for people may be looking for properties in new york city, tom, facing skyhigh mortgage rates and hoping they might come down sometime soon? tom: i think you said this, coming down, one rate cut ain't going to do it, but do you get a drop off of the inflation trend

that will be reaffirmed in 50 minutes? jonathan: shocked to see the numbers, the new york property sales in the composition of them. how much of it is cash. it is shocking. tom: i think that is in a lot of cities worldwide. it has become a property investment, a sinkhole. jonathan: people of a certain age have built up a lot of equity in their homes. a big cash palace well. let's get to some stories this morning. just under an hour away from the december cpi report. bloomberg expecting inflation making progress toward the fed's 2% goal, but still running at a pace close to 3%. reaction to this, including john williams saying current policy is tight enough to bring inflation down toward their goal. and he expect interest rates to come down over time. tom, i'm interested to see the additional fed speak following the numbers we get a little bit later. tom: edward denny suggested there may be a few items that

may give you a surprise lower, including all of the housing oer, rents, and all. you may get a number that is more disinflationary than expect. jonathan: you have been itching to talk about the story on monday. it is not a hoax. u.s. regulators approving the first etf's direct directly in bitcoin. landmark decision broadening access to the largest cryptocurrency in the roughly $1.7 trillion digital asset sector. the breakthrough will allow investors to buy bitcoin as easily as mutual funds. the bitcoin etf is expected to start trading today. tom: eric bell tunis is on twitter. if you want to follow this, follow eric on tour -- on twitter. the asset sizes, i don't understand what he is doing because i don't understand bitcoin, but the answer is aliens are involved here, and i'm absolutely shocked. if you see price come in, you

speculate, and bitcoin pops $47,000 right now. do we close above $50,000 by this afternoon? why not? jonathan: i don't know, but eric is awesome. i love this story. a great year to be a european traveler. the 2024 hindley passport indexes outcome up with rankings of the most powerful passports for visa-free travel. i always ask this question, and it surprises people. italy and spain now have easy access to 194 of two hunted 27 destination. three more than last year. they joined singapore and japan, who have enjoyed the most powerful travel documents for the last five years. the u.k. is fourth. the u.s. is in seventh place. tom: but they still have to stand in that other eu line at jfk. have you ever looked over there? jonathan: unfortunately i am a permanent resident in this

country, so i don't have to go to that line anymore. tom: the backup for being in new york is so big i have never done it, but my word, all of those advantage passport stories, and the answer is the line at jfk can get a little bit long. he's never been in that line, michael collins, senior portfolio manager, debt, at pgim. he watched every minute of prudential's coverage of the rose bowl. i'm going to look at the rose bowl here. the bond market. how will yield react off the cpi today if we reaffirm disinflation? where across the yield curve where we -- will we see the biggest adjustment? michael: good money. i'm a football fan, but i'm more excited about today's cpi print. that tells you what a bond geek i am. disinflation is becoming more

entrenched. notwithstanding the big jump in freight charges we have seen as a result of geopolitical risk, but you are seeing more evidence that things like housing are starting to unravel a little bit. i think you are seeing more evidence of a big surge in multifamily construction that is still online is going to cause rents to come down. if you have housing at zero, you have goods at zero or negative territory, even if services and wages get stuck in the 4%, inflation in the mid-2%'s, i think you are on that trajectory, and the fed is going to have to play catch up. tom: i have not ask this question in ages, but i agree with you. on the surprises we may see in housing disinflation. what does that do to the twos-tens vanilla yield curve?

we have been inverted since time began. how does that react off of today's report? michael: the playbook, as you know, is the curve steepen's. the front and rallies more than the rest of the curve. that is, i think, what is in the cards over the intermediate term, meaning over the next year or two. in the next few months, though, if you are looking to trade this it is really tough to be long that two and three-year part of the curve. you know there are a lot of rate cuts priced in in the near term, starting as early as two months from now. that may not come to fruition. the fed is good at waiting and watching and lagging, right? they lagged on the way up, and they are probably going to wait too long and keep rates too high for too long before they cut, and then they are going to have to cut more aggressively. i think that is really the

timing of what is going to happen, but ultimately in two years from now i think the curve will resume a more normal upward-sloping shape. jonathan: this is a little bit of a subtle shift from you. i have been following you for a long time. you have not been super bearish. the thing but. i have noticed you have lightened up on credit exposure. can you tell us why and what has changed? is it prices, fundamentals? michael: it is more price than fundamentals, right? if you look at the fundamentals, the economy is actually doing great. it continues to surprise in terms of its resilience. it seems like the whole soft landing is happening, right? if you do have a recession -- and we have a 25% recession probability, which is elevated relative to historical averages. it is not going to be hard landing. the probability of this big existential credit crisis where default spike and consumers default and businesses go out, is really low.

we don't have the leverage in the private sector to cause that impetus. so, i think that bodes well for fundamentals. but credit fundamentals are deteriorating on the margin. they are definitely not improving, but it is really the price. if you look at what has happened with credit spreads, they snapped in dramatically through the end of last year, along with rates rallying, along with volatility coming down, along with stocks going up. they are kind of getting to the low end of their historical ranges in an environment where there is still a ton of economic and geopolitical -- i'm sorry. it is more be patient, take some chips off the table, wait for better opportunities to reload on credit. tom: does that mean clip the coupon, as a general statement, after a robust 2023? michael: i think you clip the coupon in fixed income, and you are still earning attractive yields.

so, i think you clip the coupon for now. look for opportunities. if rates backup, you buy them. if credit spreads wide and you buy them. you have this fed backstop which you have not had in a long time. tom: with immense respect for pgim and all of the awards you have won for total return, how do you and the team framed the debacle of the last three years? do you frame it, someday we will get back to where the bloomberg total return index was, that we will see true appreciation? or is that a time long gone? michael: no, we are back to where we were 20 years ago. we look at beginning yields, and big index everybody uses is your bloomberg aggregate bond index, which is averaging 4.6%, and we are trying to beat that by 1% to 2%. if you do that simple matthew were looking at mid-plus single

digit expected returns in high-quality quality, diversified fixed income. over the next five or 10 years. beginning yield on high quality fixed income is a really good predictor of ultimate return. so, the last 10 years has really been the lost decade in fixed income. it has been more than two or three, returns in the low single digits. that is behind us. the forward-looking view on fixed income is much more constructive. jonathan: michael collins, you are one of the absolute best at pgim. thanks for being with us, sir. if you are just joining us, welcome to the program. cpi just around the corner. equity futures on the s&p 500 look like this. we are positive by .17%. breaking news just moments ago. another ev reality check. this time from the car rental company hertz. to sell about 20,000 electric

vehicles from its u.s. fleet. 20,000. and reinvest a portion of the proceeds into internal combustion engine vehicles. tom, the action to better balance supply versus expected ev demand. that is another big reality check for this push. tom: i'm not up to speed on what this means, but my operative word is massive. this is a massive signal from mother hertz. i love what they do in the press release. they say ice. we are getting out of ev and going back to old technology. and i'm certain that within their analysis on the sell side, that work is going to be because their customers told them. jonathan: precisely. they've got to slow down. if you speak to the automakers about this, they will talk about a change in execution, not strategy. it seems that is the same approach from hertz.

because 20,000 represents about one third of the global ev fleet. they are trying to do too much too soon relative to the demand that exists right now. hertz is experiencing that. other automakers are experiencing that to some degree as well. we have seen headline after headline speaking to the same thing. tom: ian bremmer out with a beautiful chart today on the minerals that china dominates in, and they dominate in battery technology because they have got the raw materials. some of them i could not pronounce. jonathan: you get to the airport, you rent a car, right? you are in a new city, you don't know whether charges are, you have that anxiety. you get an internal combustion engine car. tom: i do like internal combustion. jonathan: from new york city, this is bloomberg. ♪

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diplomacy we can create enough security and a strong sense of security to people in israel can move back, people in southern lebanon can move back. i think no one wants to see escalation there. israel doesn't. lebanon doesn't. i don't think hezbollah does. we are working on that. jonathan: that was u.s. secretary of state antony blinken speaking in cairo on the latest developments in lease tensions. tk, that intense diplomacy for the secretary of state has been nonstop, hasn't it? tom: nonstop and multi-front, and certainly the conversations we have had here have not been centered just on gaza and the horror we see in gaza, the eastern side of the west bank and on up to hezbollah. all of a sudden you have a fourth front in the red sea as well. is it hour-by-hour? no, but it is half-day by half-day. jonathan: the news yesterday was

extraordinary, that we have u.s. and allies shooting down drones and a barrage of missiles and that these merchant shipping lanes. tom, accidents can happen, and we are fortunate accidents have not happened, and that so for the u.s. and its allies have been successful to some extent. is it acting as a deterrent to stop them? no, it has not worked it all to that extent. as we know, the big container shipping giants are not using the red sea as they were a month or so ago. tom: a delicate conversation on this right now. and a conversation of geography and technology. norman roule, senior nonresident advisor for transnational threats project at csis, and working for america as a senior u.s. intelligence official. norman, i have eight -- i have eight ways to go, when i looked through the literature and zeitgeist, it is not like from butch cassidy, who are these guys, it is, where are these

guys? where are the drones coming from? where are the who the -- who these established -- houthis established gr graphically? norman: generally the western portion of yemen, which focuses on the red sea and the gulf of bacon. there are not only missiles, drones, explosive boats and mind capabilities that must be monitored, but some of these capabilities are mobile. missile launchers are mobile. drone sites can be trucks or barren fields. this requires intensive intelligence collection if one is to look at targeting these facilities for military action. tom: do we do this alone or collect intelligence? particularly with saudi arabia? norman: the nature of u.s. intelligence collection for operations in this scenario would likely be done by u.s. and

british and allied forces, who would be involved in any potential kinetic action. the saudi's would not be playing a role in kinetic action. so, their involvement would be limited, if any. jonathan: this is causing a massive disruption. i'm wondering how cheap it is to cause this disruption. sophisticated is the military arsenal of the houthi rebels? norman: the military capabilities of the houthis are relatively sophisticated in terms of missiles, but this is an older technology. iran has provided the training in yemen and iran itself. i think when the military tends to look at these targets there is the issue of missile that costs so many thousands of dollars or drones versus a $2 million anti-ballistic missile. what damage could that drone or missile cause really becomes part of an economic equation. jonathan: u.s. forces and

allies, their mere presence is meant to act as a deterrent. it is not. they are now intercepting missiles. happens if they fail to intercept one of those missiles? have we given thought as to what would happen next is a consequence? norman: so, i think it is fair to say that the u.s. and partner presence, to include the united kingdom, has shaped houthi behavior and deterred some scale of their action. that said, if a houthi missile were to hit the bridge of a container ship, or to strike the bridge of a tanker, or worse yet, to cause significant damage on an oil tanker, that would be dramatic. a significant oil leak in the red sea would shut down all shipping. tom: a really naive question, but i have to go there. a drone goes up in the air, and does a pro like you go, we will knock it down? is it like skeet shooting and

you just nail that puppy? or is it sort of blind luck-ish that we are knocking down these drones? norman: i'm not a pro and i have not been involved in those angles, but it is not blind luck. this involves precision weaponry and a tremendous round of -- tremendous amount of trying. they go through a tremendous amount of training throughout the year. tom: when we bring this forward -- and let's take it back to the secretary of state doing shuttle diplomacy. who does he want to talk to to have a change agent for the houthis? does the secretary of state need to go to tehran and started dialogue with people we do not want a dialogue with? norman: such a dialogue, which would be on judicious, would have no impact on iran's behavior. iran's proxies are following a pattern of aggression against

the united states and israel. united states does send messages indirectly to iran through partners, people who have diplomatic relations. but it has no effect, and it is not anticipated to have any impact. jonathan: ultimately what is the potential this war could spread? in the last week a top hamas official killed in lebanon. that potentially was a source of escalation. how do you think that is contained at the moment? how contained is the risk of a broader conflict? norman: they continue to be nor strategic drivers for iran or its proxies to engage in a conventional conflict, because that threatens many of their domestic political and economic initiatives. at the same time there were multiple reasons for iran and its proxies to maintain the current level of violence, and even escalate that violence, as they have crossed redlines and some of the violence is normalized. tom: one final question. we are thrilled with your commitment to "surveillance."

you have given us perspective. this seems to be deteriorating. away from them -- from the media coverage, cause and all, is that correct in washington among institutions, including the cia, is this a deteriorating situation? norman: i would say it is an evolving situation, and it is evolving somewhat predictably. in the absence of deterrent against iran and its proxies they are continuing to maintain some sort of an approach to upset regional security. here is your worry. if we undertake a -- a two state solution to fanatic effort do we expect iran and its proxies to standby? that is unlikely. so, i don't see that there has been sufficient diplomatic effort by the international community to say, how do we constrain iran and its proxies from upsetting peace in the region? jonathan: thank you for your input this money.

norman roule of csis, a former senior u.s. intelligence official. crude higher this morning by 2%. brent crude up by 1.9%. tom: you wonder what the energy stocks will do off of the hurts announcement. -- hertz announcement. i don't take lightly this right down, depreciating accounting. but this right down -- write-down of ev. you were going to do an entire hour on esg and davos. jonathan: is that what you are assigning me? tom: i remember being there. the high ground on this, in terms of careful adult math, that is away from the branding, and here you are, hertz,

n the towel before davos. jonathan: kind of, just incrementally poke -- pulling back. we are talking about 20,000 ev's, but it is a really important story. 11% of the total fleet was ev's. 80% of that, tesla spearing you're going to get a fair amount of tesla's hitting the car market, tom. tom: if i get a tesla, folks, on lyft or uber, i have to cancel it. because i cannot get in it. jonathan: i think that is a unique problem. tom: i was on 59th street and driving all the way like this. jonathan: i would be nervous about buying an ev in the secondhand car market, wouldn't you? when you want the warranty from the manufacturer? would be a little bit nervous about that. linda duessel of federated hermes coming up next. cpi, 8:30 eastern time. equities up by .1%.

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♪ >> right now, the consumer is starting to feel a little dead

center. inflation is going to search come down. >> as long as the labor market is holding up as strong as it is, we continue discretionary ul. >> until we see a slowdown consumer market -- labor market, the consumer can continue to run here. announcer: this is bloomberg surveillance with jonathan ferro, tom keene and lisa abramowicz. tom: bramo on assignment this morning and this important half hour, a measurement of urine lucian across america. we will have that for you at 8:30 with michael mckee. its ramifications in the market. why you are not in the stock market, and you've got to believe the economic reports, what we see from the banks tomorrow for right into the equity tone. jonathan: data this morning and then earnings tomorrow. cpi a little bit later. and then bank earnings, jp morgan leading the pack tomorrow

morning. looking forward to covering all of that with you. the fed, what are the numbers mean for them? it is much too soon to consider easing policy and reducing interest rates. tom: goldman sachs is republishing and i guess that gets readjusted here at 8:30 and then readjusted with michael mckee's conversation with loretta mester of weaverland where she will give the tea leaves out. did you see the headlines off williams yesterday? what do you know? it is about the economic data, they are data-dependent and you are going to be defended for 26 minutes here, 29 minutes, excuse me. jonathan: as inflation comes down over time i expectation is interest rates will also come down over time. when that happens in the speed at which that happens will depend on how inflation in the economy evolved. we will find out and about 20 minutes. tom: if i said that on air the

audience and you would put me in a chair. jonathan: no doubt about it. cpi, but later, this story is fascinating. 20,000 ev's are going to be sold by hertz. we saw some subtle signs of this will me heard from the ceo. what is interesting about this, it is also about the cost of carrying these cars at a company like hurts. the company expects to reinvest a portion of the proceeds from the sale into the purchase of internal combustion engine vehicles to meet customer demand. the company expects this to better balance supply against expected demand, but earlier last year, late last year the ceo was talking about the cost of carrying them, higher repair costs compared to the rest of their cars. this is what a lot of people are going to find out. tom: good morning mr. musk, i know you watch every morning but i'm not going to pick on tesla here. i think there is a real worry about that, but you nailed it

with what we are talking about. before we get to linda because of the data check as well, what are we talking about within the bladder of early january? what we're talking about is the cost of carry. and when you go to happy valley this week, that is the difference in davos, is all of a sudden there is a finance rate for everything that great and worthy want to do. >> this is the distinction between speed and destination. the crew at the world economic forum are going to talk up the destination. they are going to get everyone to say yes, this is where we need to end up and then they are going to aggressively push the speed, how quickly you get there. but we've seen reality check after reality check from companies and from consumers as to how fast we can actually get there and i think what this is about is not a change of destination yet i don't know if that destination will ultimately change, but the speed at which

you're going to achieve them, clearly this is another reality check. tom: it's about the journey of the real yield. just moments ago, craig trudell of detroit will join us on ice. jonathan: internal combustion engine. looking forward to that. the scores look like this on the s&p, positive by 0.1%. just a little lift going into the data. yields are lower. tom: without question, the most important interview of the day, the conversation of the day, and your courage to be in the equity markets. all the troops at federated, there has been a lot of experience and cycles linda, what did the team do at federated on january 2 third when the world collapsed for "the magnificent seven"? >> well, we like the magnificent

seven that we feel pretty good about the year ahead because we are looking for broadening and ensure lots of people are talking about broadening of this market. last year was the easy year. last year we have lots of easy money. profit margins are what really surprised all the naysayers last year. this year should be harder, but which we are we going? are we going into recession now or do we have a bowling recession already? it doesn't even really matter because if we go into recession, our dividend stocks are extremely cheap, nobody has been looking at them for years. and if we are not going into recession, than the early cycle stuff, that small cap, particularly growth stocks and those financial stocks are really inexpensive, they've been hit hard. tom: you don't remember this, 1977 where we came out of the horrific 75, first bull market lag and then surprise in '77,

there was a second leg nobody saw coming. how do you have a second leg of the full market? >> the revenue line will be more challenging. it's interesting that you bring up the 70's because in the 70's you had an way sherry problem. that is good news to the top line until it starts to get your expenses and that it hurt your bottom line. and that is what we are looking at this time. rv repeating the 70's where he claim victory too soon, for the fed made the cuts too soon? but actually, companies are having a harder time with their margins, because they did have a topline growth. good news it is coming down, but what about the wages that keep going up 4% and 5% per year? that is where we have to watch the margins and what we are really going to be listening for. jonathan: defending those margins, who is doing a good job of it right now?

>> i think this is where as you were talking about, our destination on how fast we get there. how fast can companies incorporate the benefits of artificial intelligence to help the productivity to advance? so i think this is going to be much more of a stock picker's market. it's not necessarily in sectors. we talk about small-cap stocks particularly in a growth area being inexpensive, people want to know which ones are the profitable small-cap stocks. they are historically inexpensive. you have to go all the way back to 2000 to see them being this inexpensive. that is where you have to really roll up your sleeves and work on the individual names. jonathan: we are dancing around the elephant in the room, talking about ai adoption. are we just talking about job cuts here? and given where claims are at the moment, we get an update in

about 12 minutes, 22 minutes. where do you expect claims unemployment to be as we close out this year given what you've just suggested? >> i don't think we should blame ai for job cuts. if you are worried about losing your job to ai you should be worried about losing your job to someone who understand how ai can help your company and your profit margins. but as we look at the employment situation, and we are at near record low on the unemployment rate, it is hard to imagine that it's too much worse when the labor market is so very tight but what we are going to watch is something that has been termed the rich session were people making $125,000 or more, those people who pay much more for them then they would have just three years ago are having to cut cost because of a margin problem and then we see that may be rolling across the economy. tom: i'm absolutely fascinated by your comment on dividend

growth. what i find interesting make use of cash analysis right now is nobody is talking about that has all my radar up. why are we just going to see a continuation of the use of cash, of dividend increase and far more importantly, share buyback people seem to like that. >> people like the buybacks, they like the dividends. people who want to have income are looking for income sources, and that is where dividend plays work. they are also looking for inexpensive stocks, and that is where the dividend lacework because who has needed dividend stocks in the past few years when the magnificent stocks for all the rage, when people think that microsoft is your bank? and who needed it necessarily when you can get money market rates over 5%? but guess what, if the fed starts cutting interest rates, that $9 trillion, $10 trillion that we have in money market funds, they will say i don't

know if maybe i want to find income a more diversified way. and they will find that in the fundamentals dividend plays. tom: what you do with the date banks? i believe we have a banking day tomorrow. jp morgan, sydney group and the rest. are they the ones to buy, or do you by the value or value trap that is smaller banks? >> that's a really interesting and important question. we are overweighted on the financial sector so we do like them. we agree they are incredibly cheap and i and watching your program before my time to come on i saw your banking analysts jp morgan is the number one pick. that is a conservative pick. the chasm between the regional banks and that they money center banks is really, really wise. and analysts can say i don't need to throw the baby out with the bathwater, i can study these

companies and find excellent regional banks that are unbelievably cheap. and that will be the importing brought -- important broadening that will give us a good, strong year this year. jonathan: at times this year that gap got even better. good to hear from you. you're looking at a rocky time, looking at j.p. morgan for defense. tom: that is what we do, we try to use outside analyst, and i love linda disobey. very much like barclays yesterday, these are like pros taking a belief and that the cacophony of news flow. you might not agree with the belief, but you listen to them to frame out why linda has that view of optimism on the market. >> we are 18 minutes away from inflation did in america, it is just around the owner. if you are just joining us,

welcome to the program. your equity market is positive by 0.15%. yields are lower like four basis points. we are going to catch up with dana peterson of the conference board reacting to the cpi data following those numbers. mike mckee is going to break it down for us. we need to talk about the threat of hiring nation as well. and the shipping problems in the red sea, we catch up with bloomberg intelligence and a couple minutes time. tom: these truly world-class -- i'm not quite sure how boats in the red sea fall over, tractor-trailers on i-80 going out past iowa, but the idea of logistics and transportation being upset is a wildcard. jonathan: have you seen the move nap? two months, 30%. they are looking for higher prices potentially. that is what this market is hearing. that is what the reaction is of the stock price. are we going to see that in the kind of numbers where we are

looking at cpi? maybe a few months down the road. tom: it is a half and a skip up from the huge appreciation last year but maybe that comes to something we haven't talked about all day, which is china. i wonder how shipping fulton to a misguess on a better than good china. that is not consensus, but it is something people are talking about. jonathan: coming up next on shipping stops, absolutely surgical in the last few months. the data is just around the corner. cpi and american bond market yield on a train year-round for percent. yields are lower by four basis points. from new york city, this is bloomberg. ♪

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down. there is a lot that is positive for businesses because interest rates are going to go down. so we do think that there is a chance that there could be -- in the economy. jonathan: that is the very positive view on the economy the chief u.s. economist at high frequency economics. inflation data, the next conversation in about 14, 15 minutes time. that is just around the corner in america. pretty needed on equities, positive by 0.16% on the s&p. yields are a little bit lower, but still around 4%. 3.98 .66%. tom: in the old days, transportation and logistics. in the old days we had paper sell side reports. there wasn't the internet, there was pdf files. and you would look at the report

from the classico and say wow, does he know what he is talking about? this guy has devoted 30 years plus to the idea of logistics in america and all of a sudden he is an expert on the red sea as well. senior logistics analyst from bloomberg intelligence, credentialed to be like wow, this guy knows what he's talking about. what is a distinction that was not in the media right now for this red sea mass? in logistics, what is the thing you need to tell people? >> i think most people should take to heart that this is probably a short-term phenomenon and not a long-term structural change to rates. it's obviously been very disruptive to supply chains as ships have to bypass the suez canal and go around africa. that adds 10 to 12 days and that is absorbing a lot of excess capacity that is in the marketplace.

the amount of capacity that probably looses container liner industry, and you are seeing really the best increase in rates in that market since they bought them in mid-october. up around 165. so that is a pretty high number, but people have to also remember yes, it may be a little ration area but rates are down 70% to 80% since the highest,, and they were depressed before. even though rates have gone up considerably, companies may not make money in the first quarter even with the high rates, because the rates are higher, but they are just starting to move above break even levels for a lot of these carriers. tom: we talked few in number of times during the pandemic the

upset of asia and china and the pacific rim. are we back to normal? >> when it comes to the north american supply chain, i think we are very close to normal. i think the rails have to do a little better when it comes to service. they've made from drastic improvement since the onset of the pandemic when they were furloughing way too many people and took a long time for them to rehire those folks back, plus a lot of them did not want to come back to work. but outside of that, i think we are back to normal. i think the trucking market, there's a lot of capacity out there and that is keeping truckload rates pretty depressed. but one of the knock on effects of the red sea when it comes to north america is we could see an increase in traffic coming into the west coast because the east coast is either too expensive or taking too long. and then railroads will ship freight or containers from the

port of l.a. or long beach or up in canada the population centers in the east. that would benefit the union pacific, the bulletin them, and also providers like kasie hunt and schnider. jonathan: as you know, that is not just because what happening in the red sea. potentially the panama canal as well. the water levels are pretty low. wondering how busy they are going to be after the next few months and have busy the west coast is going to be given that, too. >> what is going on in both canals has obviously been extremely disruptive and the panama canal as you mentioned, when that comes to a conclusion that is in my mind a bigger unknown because we don't know when mother nature is going to bless the region with rain. so what that is limiting is a number of ships second go through the panama canal and actually how much freight a particular ship can carry because of the limits on the levels of the water.

so that is also changing the way people are shipping things. maybe instead of going through the panama canal for delivery into the gulf or the southeastern united states, maybe they're moving stuff again into the west coast ports, each with you for the west coast ports because they've lost market share during the pandemic when congestion was at its highest, so you could see them starting to win back some of that share. in one of the other railroads, they own a railroad that is a land bridge in panama and they are probably benefiting incrementally from a lower level as shippers are looking maybe to use that land bridge to move the containers from the pacific to the atlantic. jonathan: this speaks to what tom asked you. are you comfortable with the capacity we have on the west coast deal with this? >> we are not nearly where we were during the pandemic.

what really will depend is how long the issues in the suez canal last, because it is changing the schedules. when a ship is expected to come in seven days, if that is all the sudden 14 days, you have to readjust schedules. you might for some ships waiting a little bit, but you are not going to see the craziness that we saw when there were over 100 ships outside of l.a., long beach waiting just to unload the freight. but it definitely will be disruptive. and if this ends in a couple of months, i think it will be more or less a flash in the pan. tom: off-topic but critical over your 30 years of excellence, when we look at the revolution of logistics in our delivery, fedex, amazon and the rest of it, we had a next day experiment. his next day shipping sort of

done because it proved to be a lot harder to do than expected? >> i don't think so. i think it is a premium product and therefore it probably deserves a premium price. if you really need that amazon order the next day, you might be willing to pay for it, or you might be looking for something that maybe is not on amazon, if you are looking for that next day, your billing to pay for it. but i think what we are seeing as consumers is we are more with them to say i don't need tomorrow, i can wait three days. i met a something that we are seeing in the numbers for fedex and ups when they report. you see a negative shift to more economic services, which carry lower fees and therefore reduces their overall revenue per shipment. it's not over, but it is really going to be pigeonholed to be more of a premium as opposed to

the norm. jonathan: i just want to squeeze this in, how durable are these tailwinds? particularly on the likes of ap moller-maersk. do you think this is durable? >> no. the reality is i don't know when the red sea crisis is going to end, it really depends on the coalition and how active they go after the huthis. it doesn't seem like they've done much so far, they need to do a lot more. that being said, once it comes to an end there are structural issues within the container liner market. supply growth as opposed to outpaced demand growth by a significant margin over the next two years, and that is going to ring break -- rates back to those depressed levels of resolve maybe not in mid-october but much lower level that we saw today. it is a little different than the tanker market, those fundamentals are in much better shape. jonathan: let's do this again soon.

i can tell you that the federal reserve wanted to be short one story right now, it is this one right here. this is not one that they want to stick around. tom: long ago and far away kenneth would have said to me quietly off mike and off-camera there is a huge underestimation of the ease of our logistics. our modern logistics. sometimes i get a dhl from europe after that i do from dallas. jonathan: it is kinda of strange, isn't it? tom: the answer is right now we do not with our military in harm's way in the red sea. jonathan: we don't take michael mckee for granted. easier to break down inflation data. cpi and america. on yields lower by five basis points. equities positive. your data is just around the corner.

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♪ jonathan: the inflation data in america about 20 seconds away. the scores going into it look like this on the s&p 500 equity futures positive by 0.2%. a little lift in this equity market and the bond market, we are rallying, down three or four basis points. we are lower by five basis points to about 3.98. with economic data, cpi and america is michael mckee. >> looks like we had a little harder than we expected inflation during the month of december, up three tens of 1%.

the forecast was for eight to 10th game, pushes the year-over-year number up to three point or percent, from 3.1% in november. that's not what the fed or the markets want to see. however, the core rate comes in at 3/10 as expected, which pushes down the year-over-year core number to 3.9% from 4%, so it is basically what we are seeing here is a little bit worse headline and as expected corner. the core is going to matter more than anything else. index for shelter is what the bls says contributed most of the rise in december. energy rose, increases in the electricity index and the gasoline index, which is a bit of a surprise. so i will look at the rest of this breakdown here, and you can look at whether the market is freaking out over this. jonathan: we've got a move, not a freak out. -50 .10% on the s&p 500.

we are negative on the nasdaq by 0.03 percent, the bottom line is we are off the highs of the session. similar move in the bond markets, yields were lower, now they are higher by two bases the euro turning around, positive against the dollar. that is now negative by 0.5%. it is not just cpi but jobless claims. >> jobless claims. they continue to be what they were. 202,000. that is down 1000 from the revised week before. but at this point, we are still dealing with holiday weeks and holiday adjustments, and that is always an issue, so it does tell you that the labor market is still tight, but we can't put a lot of faith in the exact number. continuing claims, 1,000,830 4000, that is down from 1,860,000. so a tight labor market, headline prices of a little bit,

for prices on a year-over-year basis going down. tom: i wish you could see him as he paws through this data. the answers i'm seeing, owners equivalent rent, month over month numbers, up 6.3% year-over-year. we will see what housing is doing, rental and all the rest. but are we underestimating if there's already rates coming down that maybe there is a rekindling housing boom out there? is that an uncertainty? >> there has been a suggestion there could be happening but that would be too early to get into the cpi right now. it wouldn't show up. we've seen ongoing strength in rent which is been a reason for seeing strength in the housing numbers. but at this point it is more just the fact that housing prices have not moved down very quickly. here's the rent number.

rent of shelter top at this point for tenths after 3/10 the prior month. rent of shelter, rent goes up, and owners equivalent rent is up for tenths -- rather, 5/10. so we saw the housing numbers go up, and that did not help. i'm under the microscope here. jonathan: it is january 11 and it feels like the longest month ever already. tom: are you surprised that the lack of movement in the bond market? jonathan: not really, it is all incremental stuff. i'm not sure this is going to shift the debate. you are going to catch up a bit later. >> last week, we had a very similar result in your where the headlights went out and the core went down and when that happened, european futures markets sort of freaked out a little bit in took away a number

of rate cuts and pushed back the timing of rate cuts for the ecb. some of that has come back now but it looks like u.s. futures traders have learned a lesson. tom: you ask if she retires from cleveland if she is going to become a football coach in the nfl? >> is also a big one in alabama so if she is looking for some warmer weather. she is originally from philadelphia and we will see. jonathan: $11 million, real money. to go in coach alabama. >> $11 million or so per year. i don't think people get $11 million without winning seven national championships, but figured that into the wage tracker. this is the john chambers part where we see you get more money for changing jobs tom: he will go beneath the headline data, really important stuff. david rosenberg up in toronto, we will see what he says as well. right now, dana pearson joins

us. chief economist at the conference board. if there inflation that will affect corporations in this report or what your gastim -- guesstimate is for tomorrow's ppi? >> ceos are already complaining about nation from wage increases the higher interest rates. all of it is really weighing on ceos right now. some of this probably will feed through to cpi over time. tom: publicly defend policy? it is an unfair question, but dana peterson, do you see enough of a movement here to adjust to the parlor game of march and beyond june? >> well, we think that the fed probably won't start cutting rates until around june, and the key thing will be the course of inflation. the good news is that core inflation is still slowing the that also cares about the

headline, and it is only when we look in the core of home prices are still rising month on month, that doesn't bode well for year on year. the good news is that we are seeing some cooling and wage inflation overall, and when you look at home prices or the existing home prices during the year, there slowing, and that is showing up certainly in the rental components of both cpi and pce. jonathan: can we get a little more detail, just how high or low is the bar to reduce interest rates in the federal reserve and is it because you think it takes longer to get to that bar or ultimately a bit higher than the market thinks it is/ >> i think the bar really is inflation but it is also going to be the labor market. if you take away government, leisure, hospitality and health care, you see no gains in employment. once those three industries run out of steam, what do you have? and also the economy in general. i think if the economy slows a

lot, labor market continues to slow and inflation is headed back to the 2% target, the fed will feel comfortable cutting interest rates. but it may not be in march, it may be later this year. >> is that when we would expect to see jobless claims as well? we've got jobless claims at 2.02. just absolutely incredible. when we can expect to see that try when flight higher? >> the reason why initial jobless claims are so low is that ceos of large companies are not looking to let people go, they are fording workers holding onto people. certainly when people are let go it is taking them longer to find a job continuing claims are taking up a little, and we do think that it's going to show up more so in the unemployment rate. tom: are you modeling out a wage growth think of inflation until america sees illegitimate real wage growth? start what will it is possible

that wages will remain above 2%. certainly when we look at the gains over the next few years, yes, they were really outsized we are seeing slowing it, but you do have some industries that wages are rising certainly in construction, in particular nonresidential construction where there's a lot of building infrastructure and factories at home for industrial policies. you can see wages settle out at a rate that is about 2%. tom: i look to dana and the inflation data and they want to go back to it. this used to be religion 30, even 40 years ago. ppi was just as important as cpi. but in tomorrow's ppi report, he is explained it to me three times, i one sticky quiz. final business inflation, is it legitimate? >> is everything that businesses

are looking at and certainly that includes transportation costs even though the ppi is different now than it was 10 years ago, it is still very relevant. tom: this ties directly into it linda distal said. it is federated, is about margins. if you got that inflation down the income statement, jonathan: apple is not a real american company. tom: but to the rest of america, they are making 4% revenue growth, i'm sorry, margin erosion can be tangible. jonathan: thanks for your time. the conference board on cpi data. just ahead, ppi data coming up tomorrow morning. jobless claims out moments ago, mike mckee still around the table with us. you had a bit of time to chew over this. >> we mention housing being the

biggest contributor but also gasoline prices up to tense, and that is a surprise after the declines we've seen and the it is a we would declines. also, used cars up by half of 1% which is totally the opposite of what was expected. we were looking for another maybe smaller decline car prices. airfares also up after a big drop in november so some of the areas that have been a problem all along are still contributing to higher inflation, something to keep an ion. food prices up just to tense, so that if the same as november. if you look at overall gasoline prices, we did see a bit of a rise in part of december and then a decline again. and food prices down a little bit. i'm doing the anne-marie part right now. joe biden and the white house maybe see some progress with the american people because the

things that people see and think about inflation are down. tom: i can see you are up to page 14 of the 42 pages. can you tell yet with service sector inflation is? you are hysterical about some index i never understood. is there service sector inflation out there? >> i can look at service sector inflation here, services, energy services of 4/10 after 5/10, so they dropped, overall services drop. we can see what the core rate was by culligan up. that is the one you like. that is the one that jay powell had talked about, and the super court is 3.87% doing it in three digits which is up from the prior month. >> you think dumping 20,000 tds on the used car market is going to move it down? >> it could it a lot of cars

when you consider that the annual sales rate is somewhere around 15 million, 60 million. 20,000 in a month is a lot. i don't know what the average tv price is in the used car market, so are they going to be underselling to try to get rid of them? tom: does that fold through the used car market? >> that will go through the used car market because these have been used by hertz. the problem is people did not want to drive ev's because they are not used to them. if you had one you maybe put a charger in your house and you know how to do it and where the charging things are. but to rent one, i've heard from people who got ev rentals and they were like, what do i do? jonathan: gives me anxiety. you can see why that makes sense.

by the way, the weather goes south, they started last month and are going to spread out through 2024. it's going to take a while to get rid of the stuff. tom: someone was giving me grief about this stuff. i made a list of the bitcoin idiot i'm calling it. jonathan: i've not seen that list. what do you rank on this list? tom: i'm way down, the bottom run. but some would say i am in ev idiot, but i'm not. i will never forget getting in a london cab at heathrow and it was one of these new, nancy cars. blown away. absolutely blown away. it was better than a bentley. jonathan: conversation is going to continue. not sure i would go that far. up next, equities, just a little negative. what do you think, fever monster? what about zocdoc? zocdoc? dr. castell has a great bedside manner. so many options.

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bringing ration back to at least 2%. i expect that we will need to maintain a restricted stand on policy for some time. jonathan: that was john williams speaking on the u.s. economy and the outlook for the year ahead. from new york city this morning, good morning. your equity market shaping up as follows. unchanged following that slightly higher than expected cpi print about 60 minutes ago. yields basically unchanged as well. back to about 4% on a 10 year. tom, initially equities sold off, yields climbed, the dollar was stronger. we've erased much of that move in the last 50 minutes or so. tom: i guess they want to say it waits for the most ppi, but i'm not sure the market is riveted epi. and guess what, there's going to

be a lot of microanalysis including the annualized ballet, and there it is just staggering into 2024 with real estate. it is like used cars. all of a sudden teslas fold to used cars. you go up to some famous used car auction in the northwest of the united states, minnesota or wherever, and there's going to be 4000 teslas a lot? >> this is a serious thing. this is another warning from an american company saying we tried to do this to weekly, but consumer demand is not there. and by the way, i will throw this in as well. it is not just consumer demand that is not there, this is costing us a lot of money to area these cars. a lot of money compared to the internal combustion engine vehicles. tom: the bottom line is that is what is new at davos this year, every single fancy executive at davos has to worry about cost of carry with whatever their

business is. jonathan: it's interesting that tesla is a link down by 0.5%. the bulk of the vehicles in that fleet that they had, the other car rental companies facing a similar problem, signaling that lack of consumer demand. the question we financed in, that got shared a month ago, a few weeks ago. do we just want tesla and not ev's? where does that leave gm, where does that leave for? if you ask management, is this a shift in execution or strategy, they will always the execution and i'm trying to work out when we actually get a shift in strategy, when they start to reconsider the ultimate destination for this because this government is we're about where they want things to go. we know the objective. what we are finding out is we can get there as fast as they like us to. when we start to question the objective? tom: what is the next government

say if it is a second term president trump? there is going to be a whole different view and macros to the politics of the election. that is off story today, but nevertheless it is there. why do you bring in the next guest because he is the only one about that has a drivers license jonathan: that's a good point. greg, great to catch up. your initial reaction to this one as it dropped in the last hour or so? >> it's just fascinating to me because i think back to when hertz announced that they were going to buy a ton of test was. this was 2021, we are still in the meme stock era. it was very clearly to me, it seemed like a play on the part of generating interest in the company an interest in the strategy going forward. it may tesla a trillion dollar company. and it was soon thereafter that we saw in the regulatory filings that hertz was buying a lot

fewer tesla than they originally announced, and even fallen well short of their plans for the number that they were going to purchase. they've really taken a bath on those purchases. it can't help that elon musk has cut price so much. tom: let's try to go there, what is a new or used tesla cost now, and what is he going to costing 90 days? >> if we think about the cheapest tesla you can get your hands on, the model three, this is a car that was supposed to out of the gate cost $85,000. the company is now fairly close to that in terms of how much you can pay for a new one, and that moved down dramatically last year. this is a company that just repeatedly was cutting price to try to keep growth going, and it was effective in helping the company to continue to increase volume, but they really took it

on the chin in terms of margin. they really burned hertz and over here in europe as well, you've heard rental companies grape about what the price cuts have done for me depreciation standpoint for their fleet. tom: on a $35,000 value, what is a used car going to be in 90 days? >> the 90 day question is a little bit tricky to answer, but i will say that one of the things that we saw just as they have started to list these cars on their website is that you can get your hands on one for like $16,000. this is pretty substantial for a company that only was buying tesla just in the last couple of years. jonathan: craig, tom and i have been talking about this ever since the news came out but i think it has been a subject, a topic of for months. this is another reality check. when you speak to the manufacturers, the big automakers in this country, they talk about a change of execution, not only strategy.

they all agree on the objective of this and how it is going to support them. at what point do we start to question the ultimate destination? where is this industry going? >> i think if you take a step back and think about this made global perspective, we are not necessarily seeing this disastrous result in china or over here in europe. i do think that this is a bit of a u.s.-specific phenomenon where you had a really dominant player in tesla that was pushing, pushing it pushing for years and maybe the fact that they've pushed on a string to some degree in the u.s. in the last year and a half or so, we've seen this really sort of cyclical change in the auto industry we've seen over a long period where you see companies boom and bust quickly. but the question is whether or not this is a u.s.-specific and tesla-driven phenomenon. it seems to be the case that

this company that is been very successful, the rental companies are taking it on the chin. >> jon ferro had a blistering conversation. how do gm and ford react to today's bombshell announcement? what is a pickup truck cost, like $150,000? why can't we make $38,000 gm whatever to compete with elon musk companies. >> i think the fact that muska has been at this for so long, to use his phrase, production hell on the part of gm and ford, where these are companies that have a long history of making combustion engine cars. they don't have nearly as long a history making electric vehicles, and they and their battery partners are really struggling to scale the way that we saw tesla and have challenges with the model three years back.

we see tesla jump out of this big lead. it has been a long slog to bring costs down. a ton of invasion -- investment, a lot of losses. a lot of negative headlines for many years for some of the companies in china where we seem tesla really emerge as the very clear number one and number two, but it hasn't been a clean story of all as well. jonathan: the stock is down by about 3.85%. the state never met conversation, just how unique some of these issues are for this country. these headlines we are seeing in america are maybe not seeing the same way in europe. tom: are we bringing in chinese cds into america? that is a huge distinction for

german manufacturing. i want to be accurate here. it is the electric taxi. mayor adams, can you just bring them to new york? that is all i want, john, is some fancy five or seven year pay structure for our cabdrivers and cab companies to bring the best cab i've ever sat in in my life. jonathan: what is it you like about it? tom: do it again. i like the tesla. but the bottom line is it is just done right. and that is what we need. jonathan: this was nice, we should do it again. i will see you tomorrow. cpi behind us, bank earnings

coming up tomorrow from new york city. this is bloomberg.

manus: ms. hits the pause button. he stocks drop incrementally. account entity up and starts now. >> everything you need to get start -- to get started. this is bloomberg the open with jonathan ferro. manus: