francine: the u.k. becomes the first nation in europe 100,000 deaths from the coronavirus. global cases pass 100 million. and astrazeneca pushes back against the e.u. the drugmaker says the union must take responsibility for delays to the rollout of the vaccine. and gamestop won't stop. the reddit revolution leaves those crushed in its wake. it morning and happy wednesday. this is bloomberg surveillance. i'm francine lacqua in london, tom keene in new york. the focus is on the fed, and that could move some of the treasuries. i know you are focused, as i am, on gamestop. what it means for hedge funds, and on the bloomberg terminal today. we look forward to the next couple of days. tom: this is history in the making full to him and his gone from the same story, and a lot of things, an article for bloomberg opinion is absolutely brilliant. and in the last 20 minutes,

francine, this has truly become history making. it is about derivatives. i am thrilled that jean is with us. he certainly has the knowledge to explain the dynamics that is going on. what is happened at gamestop in the last 20 minutes is historic. francine: it is historic, and one of the main questions is, what the regulators will do about it. we are trying to get a hold of the regulator to see what they can do. if what is happening is legal. let's get to first word news with ritika gupta. ritika: good morning. former president trump appears to be headed for a quick -- only five senate republicans voted with democrats to block a move to declare the trial unconstitutional. the 55-45 vote says a rough proxies well short of the two thirds majority that would be needed for conviction. senate majority leader chuck schumer says he is ready to move

on a democrat only coronavirus stimulus plan next week, that is if republicans continue to reject president biden's $1.9 trillion proposal. the bipartisan group made it clear that the backing by both parties is not dead yet. jerome powell is expected to maintain the central bank set aggressive support for the global economy. fed policymakers are all but certain to hold interest rates near zero when they wrap up their two-day meeting today. and the u.k. is facing up to pay for lesson -- for after 100,000 deaths from coronavirus. prime minister boris johnson said he is deeply sorry for every life that has been lost. the question that what went so wrong over the past year, the u.k. has a higher death toll from the virus.

global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries, i am ritika gupta. this is bloomberg. tom? tom: we greatly appreciate it. equities, bonds, currencies, commodities. on this fed day, a real stasis to the market. microsoft leading the nasdaq 100 higher. may be 4% -- maybe a .4% move. a little bit of a curve steepening. i would make note of that. dennis gartman on gold, i believe we do that in the next hour, and dollar, not much. sterling has my attention. they be the bank of england has shares in gamestop. francine: maybe. what i am most focus on -- focused on, an official told me that the ecb has the necessary tools to avoid further strengthening of the currency, and the euro fell on the back of

that interview. that certainly had my attention. treasury yields holding steady. we find out more about the fed today after its first meeting of 2021, dollar edging up, bitcoin dipping below the 32,000 level. what is important about bitcoin, or the headline they grabbed my attention -- not sure what to make of it -- that anthony scaramucci was making a comparison between gamestop and bitcoin. we spent a good amount of time talking about that. tom: go back to the board with gamestop on it. gene frieda wired up with this, and we have now broken out to a 3.12. thank you for that screen, tanya. that really helps. we are losing perspective on this. i'm not going into gamma derivatives, but we have gone from 1.47 to 3.12 and moving higher. francine? francine: there is a full-blown retail rate really targeting

some of their short folks. many of the stuff that hedge funds are bullish on will be in trouble as well. this is behind everything we are seeing that we need to spend a bit more time on gamestop. joining us to talk about something out -- something else, but maybe there is a link, it is gene frieda. i know you cannot talk about gamestop, but does that translate into how you see some of the asset classes in general? gene: yeah, i mean, i think that the analog is really around how stimulus money, how loose fiscal and monetary policy are circling through the markets. and you can see a very clear spill over certain corners of the market. anything focused on retail daytrading, obviously is part and parcel of that. so from that perspective i think the question that inevitably comes up is how does the fed think about that and how did they adjust their strategies,

does it require a strategy adjustment? francine: is it from the fed? is it from regulation? how does this actually play out? gene: i think that this fed you will probably see, -- under a democratic administration you will ca greater willingness to give the fed more macro powers. you will see a greater willingness for security regulators to use these powers a little bit more, you know, more often than has been the case in recent years, and i think this is part and parcel of how you actually feel the cracks to avoid extreme spillovers into monetary policy into parts of the economy where it becomes dangerous or, you know, worse. tom: gene frieda with us from pimco. we will take advantage of his

immense knowledge into fundamental knowledge of the options market. right now we join you tracy alloway, who with joe weisenthal has looked at these derivative excesses. i want to go back to what you and i observed a decade ago, which is distortions where conservator institutions -- i want to make this clear, folks, not pimco -- but where conservative institutions had to affect covers of derivative trades as things moved. is jean -- as gene frieda just said, are we in an equivalent analog this morning? tracy: a lot of people are likening what we see with came stop to the tech bubble. -- with gamestop to the tech bubble. people in social media forms are doing something strategic and are being targeted as to what they are buying. it is not just about buying gamestop stock, it is about buying particular options on the

stock, which then leads to something called a gamma squeeze for the major dealers. so if you have a bunch of small retail triggers, you're all buying small call options. the end impact is much bigger than their actual spend. if you spent $350 on a gamestop call option, the dealers and up buying the underlying stock by a multiple of that, especially if the stock keeps rising. so these small retail flows and of having a big impact. tom: i am going to ask a question that gene frieda cannot answer because his general withrow him in the pacific ocean. if you take a little bit of money and throw it into an option, that desk has two heads that, protect himself from that with a market purchase. within all your study with joe weisenthal, is there a belief conservative institutions could

be dragged down by gamestop access? tracy: i think there is an open question about how market makers are going to respond to this exactly, and i'm talking about the dealer banks. clearly if they have to keep buying the underlying stock over and over because the gamma is so high and the market is moving so cruelly because of the squeeze, they might start pricing those options differently. they might even rethink way they are hedging. for other institutional investors -- think they hedge funds like melvin capital -- you would not want to be on the others of this. i am looking at the prices for some of the weekly call options. those have gone from two dollars to almost $70 in the space of three days. that is going to be painful for anyone who was short. tom: francine, the kids are doing this on the couch from home. you mentioned melvin capital.

we are going to be very careful about the speculation of who is involved in this. are there other melvin capitals out there, and are there other major banks involved in these desk transactions? tracy: i am not exec for sure who else has shorts out, but i'm going -- i am not exactly sure who has shorts out, but the institutional participation is interesting. you might start to see is anyone who has a long position in gamestop maybe start to take profits at this moment in time and take some money off the table. for instance, michael berry of 2007 studio fame is out there saying that he thinks what is going on at gamestop is just crazy and probably illegal. he has a long position in gamestop. you could argue that he kind of started this whole cycle by getting people excited about the stock. it sounds like he might be at a

place where he starts taking money off the table, and maybe that is the thing that kind of knocks this entire feedback loop off balance. maybe that is what ends the gamma loop finally. looking at gamestop, stocks premarket i think are up over 100%. tom: 3.30, tracy. francine: is all of this legal and hooded soon be illegal? who is looking at this? tracy: i can guarantee you there are people at the u.s. securities regulators watching this with great interest. the problem is never you have something new like this happen in the market, it takes quite a bit of time to digest what is happening and to compare that to previous case law. it is not exactly a pump and dump. no one is going what is my

gamestop stock, and get out before everyone else. a few people might be doing that, but the actual argument on wall street bets is that this is an undervalued company, that's push the stock higher, and everything will be great and fun. it is a new thing. i think it is going to take time lawyers come up with here. tom: tracy alloway on short notice, thank you so much. in free to of pimco is with us. we had tracy come on -- gene frieda of pimco is on with us. we had tracy come on to answer questions we know you don't want to. i have to ask you -- we understand the theory behind this delta hedging, being short gamma. you and i can draw the lines and connect the dots. it took francine's -- two francine's good question -- is this at a point with modern trading and with social media and messaging that the regulars have to -- that the regulators

have to redraw the dots and the lines? gene: all i can say, tom, is i am glad i am in currencies and bonds. this is really outside of my sphere. tom: we will continue, gene frieda with us this morning. so much going on here. we are going to stay on this gamestop story. for anybody on global wall street, including the major banks, this has gone from an interesting study to a must-understand what is going on with gme. there is a fed decision today. your mom powell will speak. i, he scheduled -- jerome powell will speak. michael mckee scheduled to ask difficult questions. stay with us full-time at future's negative nine. buttressed up moments ago. 3.38 on gamestop. -- 338 on gamestop.

francine: this is bloomberg surveillance. i am losing my voice because we are spending so much time looking at gamestop and reddit. tom: your kids are just killing it. francine: the ultimate insult. if you don't exactly know what is going on, gamestop. i'm speaking about myself. let's go back to treasuries. more of a wheelhouse. gene frieda, when we look at the fed, a lot of the focus will be on bond buying in the future. how will they navigate this kind of lockdown world economy and what they can do without spurring more inequality? gene: i think it is a tricky

balancing act. i feel right now that markets are kind of treading this very fine path between stimulus, optimism -- term optimism and fire -- stimulus optimism and virus pessimism, ensuring that the economy is backstopped, so from that perspective i think these kind of isolated pockets of excess are going to be a feature for at least the next six to nine months unless we kind of fall off the path and become more pessimistic about what vaccination delivers us. i think that has to be a realistic possibility. the market is really kind of through all of the downside. francine: where do you see treasuries at the end of the year? tracy: this is a -- gene: this is a horribly boring answer, but mine would be around

1.5% on the idea that we are going to get a lot of stimulus and that is going to the well understood in the market. that is the theme for the first couple of weeks of the year, and it is going to be a very choppy path back to normality. the vaccination is not a panacea, it is really about some combination of virus containment and vaccination, and i think there is room for disappointment there and also room for disappointment around the speed with which consumers come out of their shells and start going on with a normal life. i think that kind of contains the upside in treasury yields. tom: how does pimco perceive the foreign exchange market? is it disassociated, and d-link of all that is going on, or do you get information from dollar dynamics? gene: i think you do. increasingly, i think you may need to just think was between dollar dynamics and cyclical dynamics, but i think the way that i see currency markets

right now, i think and developed markets, we are trading vaccination success. you can see it with sterling. in emerging markets we are trading infection rates. they are very distinct. there will be a leveraged play on the success of the developed market, but right now you can see differentiations emerging. in developed markets, it is about the speed of vaccination. even that is probably too simplistic over the course of the year, but i think it is nice to actually see differentiations starting to happen into the fourth quarter when it was all about selling the dollar. tom: is there an urgent need to hedge equity believe out one year, three years, five years against foreign exchange? gene: equities, you said? tom: if you have a stock

portfolio or frankly a bond portfolio, is there going to be enough currency dynamics where i need to head? there is an efficacy to hedging? gene: i think it really depends on the market. my sense is that there will need to be -- there will be a need to hedge. you kind of stalled out after six months, you consolidate, and then you -- then the trend continues. coming into this year, people saw a media continuation. it has never been the norm. so if you look at 1.5 to 2.5, i think you will have to head some of your currency. the dollar still has a significant leg down unless we have completely misunderstood that average inflation target. francine: we had a conversation. the ecb still has the tools to deal with the strengthening euro.

how problematic is euro strength for europe? does it spur inflation? gene: well, does it spur disinflation in the euro zone? it amazes me in a way that the ecb is, you know, focused on the exchange rate given that the dollar is depreciating against everything, number one. at number two, if the exchange rate is not going up, it will probably be a function of relative eurozone weakness, and that is what is emerging right now and the euro zone, basically the fact that they are not handling the virus as well, they are slow off the mark with vaccinations. the stimulus is not at the same magnitude as in the u.s. so yes, i think the ecb has the tools. i think it has to be careful with what it -- it is not obvious to me that there is a great willingness to cut deposit rates further. so if you make the threat, you

had better be ready to carry it out. francine: thank you so much. gene frieda with some of the things we watch out for. if you look at the emerging markets, i don't think we have one more -- question -- time for one more question with gene frieda, but what do you see with emerging markets? gene: i think emerging markets are a leveraged play on developed market growth. with one caveat. because of lack seen -- because of vaccine availability, emerging market could still do very well, and with a function of capital inflows because of good outcomes in developed markets. the risk is some emerging

markets will be unsettled politically, and the politics translates directly to fiscal. it is kind of drawing a line in terms of how far down the credit spectrum you would want to go in being exposed to emerging markets. i think generally em should do ok. tom: gene frieda, thank you so much. let me do a data check. a churn is how i am going to put it. i also want to note gamestop come up to 330. i am a bloomberg on this and clueless. i am learning as i can. we are getting there. tom: it was not -- francine: it not directed at us, tom, but it is like the ultimate put. bloomberg. tom: eileen burbidge, your thoughts on gamestop. do we blame it on you? eileen: i don't think you can blame it on me, but you can blame it on even younger people.

i am not your wall street expert. you have me on because of underlying tech enablement. what is remarkable to me about what is happening with gamestop is two things. one, there is no such thing as proprietary data anymore. they were potentially even accessing from retail platforms. when that dries up, they have two go to other sources, and go with the wisdom of the crowd or with retail investors. tom: that is in your wee house, eileen. -- in your wheelhouse, eileen. i'm going to talk about what your world, technology has wrought. what i would say is regulation is no understanding of the slew rates involved, given liquidity and leverage. do you have any sense that government can get around the slew rates, gamma, or delta

hedging, anything else that might be out there in your world? eileen: i think that the regulators have a lot on their hands right now. it is coming from all different sides, as you are pointing out. this is one area that is way behind, and the point, the fact that retail investors are going to be able to communicate with one another, that they can consolidate their buying power in such a way, providing research data points for these large institutional investors is something i don't think the regulators would have anticipated even three years ago, much less 20 years ago. francine: how can they get up front of it, eileen? and good morning. eileen: hi, good morning. i think it is too late. they are going to be catching up, so there is a love discussion about whether or not the sec is going to take a look at whether or not data sharing, data consolidation, data access is actually fit for purpose. what is interesting and you have got these sort of self re

dditers, whether that is acting irresponsibly or needs to follow some regulation. that population was say that what we are trying to point out to you is that the hedge funds are institutional investors that have been wielding far too much power. it depends on what you're looking at, and i think the regulators are going to be really stuck for a long time. tom: this is wonderful to have tracy alloway and then eileen burbidge with us. gamestop at the 300-ish level. this is a new world, no question about that. eileen burbidge will come back. coming up, robert prince. good morning. ♪ so you're a small business, or a big one. you were thriving, but then... oh. ah. okay. plan, pivot. how do you bounce back? you don't, you bounce forward,

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>> you have -- and there's

always so much -- only so much you can do about it. asset bubbles command go. there's lots of conversation over bitcoin, stocks, gamestop and what is happening. those are asset bubbles much like the crisis of 2000. they can end badly, but they don't affect actual economy, the actual banking system and the security we are talking about here. tom: jp morgan has and wealth management chief executive speaking yesterday at the world economic forum panel about the financial stability of the banking sector. with us is eileen burbage. we change our lives because everyone is doing anything on zoom. how are some of these valuations getting out of hand when it comes to technology space? >> i am not sure where the line

is. i do not know when we have come into this territory where nobody can explain what is happening. as you pointed out, the pandemic has changed how everyone behaves day-to-day. any sector -- if any sector is going to benefit, it will be technology. francine: what does that mean for how much we understand the legacy of what we will see post pandemic? how will our lives change forever? if we say if it is travel less, speak more by zoom and things like that, what are the companies that have a justified valuation? eileen: i don't know that i would say enter -- that i would say any of these companies have justified valuations. valuations are relative. you have to think about whether these companies and their

valuations relative to one another make any sense, or relative to what they are disrupting. whether they are going to stay this wealthy after the pandemic, i cannot predict. what i can say is that is not going to go away. i don't think we are going to revert back to habits exactly like they were before the pandemic. i don't think they are going to stay the way they are now, but we are going to see some sort of hybrid. maybe tom keene is going to start to use more paper again. there is going to be some hybrid, a little of what we have seen in the pandemic that people are now comfortable with. we are going to continue to use technology in ways people hadn't anticipated years ago. those in the technology sector would say we have anticipated -- tom: it was a great surprise after the pandemic that the big tech, winning, winning, winning,

really begins to become blue-chip psychology where they deploy capital back to shareholders. the silicon valley e-service and a much more as a bigs -- e-service -- eileen: i would like to see them contribute back to society. we are in a new world. tesla's first quarter on the s&p 500 index. his elon musk going to start behaving like other constituents? i wouldn't hold my breath. we are going to see a hybrid. we are not going to see tech companies behaving like the industry stalwarts, but maybe that is a good thing. tom: do you see, amazon at 3000

a share, does jeff bezos decide to be a dow component, do a split and start acting like the corporate conservative societal? eileen: i don't think jeff bezos is ever going to rest on his laurels. he's got personal communications and media, there is a lot. his influence and his involvement is going to affect change for the better. my suspicion or guess is that companies will continue to think that way where they can actually do ploy their resources is better than giving it back. they have massive philanthropic arms. they all push towards further technology literacy in children, but are they going to behave

like the old guard? no. francine: thank you so much eileen burbage, who is getting a lot of love on her staircase. i keep getting messages that it is a very downing street type staircase. ritika: rand paul lost the battle but may have won the war. paul bid to question the constitutionality of former president trump's impeachment trial. the vote serves as a rough proxy for the eventual verdict. it falls well short of the two thirds majority needed for a conviction. law enforcement officials are defending the pace of their investigation into the riot at the capitol. they say they have charged more than 200 so far and more are expected. investigators are offering rewards for whoever was

responsible for placing a pipe bomb near the democratic and republican headquarters. president biden will order 200 million more coronavirus vaccines and temporarily speed up shipments. the new purchases of pfizer and moderna would increase government orders by about 50% to 600 million shots. a greater share of the american public wants a coronavirus vaccine as soon as possible, compared with those surveyed in september. according to a poll by the kaiser family foundation, almost half of adults were enthusiastic about getting the shot. in december, 44% were. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta this is bloomberg. francine: thanks so much. coming up, we speak italy. tom will maybe have a thought or

two about gamestop as well. ♪

francine: this is "bloomberg surveillance." i know it is valuations, consolidations, italian politics , and maybe gamestop. no better person to talk about all this is -- if you start with the banks and dividend paybacks, what are you expecting for the banking sector in 2021?

>> i think the banking sector has basically provided an anchor to corporations and real people by basically providing liquidity by central banks. in most cases, providing a moratorium to loans on those activities that had to be shut due to the pandemic. i think 2021, there will be an assessment on what is the damage this has done to the economy, the net losses, vis-a-vis public balance sheets. at that point, the central bank will be able to see what is left. as it happens in the u.s. or switzerland, capital returns would be allowed in forms of dividends. or consider the duration -- francine: we spoke to the

central bank governor on the ecb, see says there watching effects. what would that do for european banks? davide: the central bank factor has started -- on one side, there are monetary policies, at the same time they do not want to destabilize the financial system which is basically based on modern rates. if ecb were to keep bringing nominal rates to more negatives, eventually the banks would have to put this through their customers. so far, they have not done it. they eventually will have no choice. this is why i think ecb for the time being has started peeling. banks are immune to most negative rates. tom: i just went through a 60

page deck from citigroup. you are one of the experts in the world on this matter. what permeates the citigroup deck is a search for profitability. his profitability out there for eu banking? davide: i think that is a good question. if you take a firm like ups, its posting of internal negatives are close to morgan stanley. morgan stanley and ubs are among the most important in the world. that is a clear business model based on wealth management on the part of corporate investment banking that specialize on the global scale. i think in europe, there are some institutions that have those characteristics. i can think of a term that has 65 -- [indiscernible]

i think it all depends on your business model. in europe, you have lots of banks -- too many -- too many that do bread-and-butter like they used to in the u.s.. they have not evolved. what is needed in europe is less --, more investment in digital, and a cion of what is going to be a business model. you can't just be a universal bank with no specialization. tom: you know more than anyone in europe, if you are in a skyscraper of a big bank on the 47th floor, things that go on on the 13th floor are the 80th floor really matter. the dynamics of gamestop. i guess big banking is removed

from that, are they? davide: right now, across the banking system, -- has totally changed. if you go into european banks right now, one floor is managed by -- basically what you have is 100-150 people that are regulators said they check every meeting you do. they are basically part of the fabric of organization. the banking industry has become a nativity. right now it is priced as a risky asset, but in reality, the top 70% of banking assets which are 150 institutions regulated by ecb is becoming more a nativity factor. i think there is more upside than the market is pricing.

francine: speak in plain english, look at what is happening with gamestop, reddit, various tweets by elon musk, what does this mean for the hedge fund? davide: [indiscernible] in our view, the idea of having all of this technology stock come along shorting -- is something we do not understand. we stick to our nitty-gritty. we rank very well. in particular, my view in the digital world, there is craziness in valuation.

i think it is probably a -- faction rather than a fundamental. not every company can be an apple or a tesla. people are looking to stop a problem that doesn't exist. francine: talk to me about apollo global management's. our governance issues resolved, or should they have gone further? davide: certainly it is not for me to tell. that is a u.s. firm. it is regulated. historically one of the most successful investors around the world. i think they have it the benchmark which i highly respect

to the way he transformed parts of the annuity business. i am sure the lawyers and regulators will do whatever is necessary. it appears that there is absolutely nothing illegal being done. if someone paid highly for tax advice, that is a personal problem, not a company problem. i think, in a way, the fact they changed the operational wrangling of the business means they understood public pressure was mounting, right or wrong. tom: davide serra, we will come back to him, especially on the

challenges of italian society and government. on gamestop, we've drawn out new strength there. what is called the "drift," is really something. mounting up a little bit of a pullback, then boom, up it goes. 342 just minutes ago. somehow that has to be a theme. brian moynihan and david westin in conversation with the gentleman from bank of america, the ramifications of market volatility and derivative instruments to our major banks. this is bloomberg. ♪

>> the euro has strengthened a little over the few weeks. it is something we monitor carefully. it is one of the factors, not the exclusive factor, but one we take into account. when assessing where inflation

is going to go. if it becomes too dominant and threatening to derail our inflation directive, we would have tools to counter that. francine: french central bank governors speaking to me of -- me a little while ago, once again saying they're looking at effects levels and they have all the tools available, he says, to counter draw strength. let's get back to davide serra. if you are a european bank dealing with lockdowns, vaccinations are taking time, and you also have ecb that could cut interest rates further, where do you move? davide: first of all, banks have one great advantage. they keep de facto booking revenues. if you are a fashion retailer or

you may cars, your top line is really impacted. as far as making, this is not happening because they are not building in the digital world and revenues keep going ahead. there is a bit of it -- an activity, but markets are positive. [indiscernible] financials and banks will come out as clear winners out of this pandemic. i think at the same time there are challenges. what are the losses you incur on some of these? and it is here we need to wait. banks have received lots of moratorium out of governments. the weather u.k., across europe, governments have been at a loss of guarantees. those won't be bank losses. those will be basically treasury losses. i think right now with banks,

the thinking is, how do we compete with digital champions? how do we have a level playing field? how can i transform my organization to digital? how can i manage costs? these are real challenges today. that in no way is impacting less in distributions. all of their activities are ongoing so they are not being disrupted as the real world. francine: when you look at unicredit, we have an executive that will be appointed shortly and we have politics suspended. what is the way forward for unicredit? davide: we will see whatever the board decides today officially.

tom: this morning, it beckons

for chairman powell. february 2020 is ever so distant. america is millions from fully employed. the fed will plead for fiscal support from secretary ellen. forget securities analysis, focus on microsoft. apple, facebook, tesla, all of them after the close. what can be said about gamestop? you know i am a bloomberg. let's talk gamma. good morning everyone. i am with francine lacqua. jean freda, thank you for making the effort.