>> what we see is an earnings season that is likely to be more volatile. >> we have been in a highly profitable, highly productive economy, despite all of these frictions and challenges. >> we are where we are because central banks have essentially taken it upon the cell -- upon themselves to prevent any downside from occurring. >> if people start worrying about the cycle again, that is a different story. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. in this hour, claims.

it is my most elegant chart. there's a persistency to lesser claims and a better america. that dovetails with what we see in this early earnings season. jonathan: earnings are good so far. we came into earnings season worried because we saw nike, we saw bed, bath & beyond struggling to meet demand with supply-side issues. it is always going to be about who handles the cost pressure. have been success stories. unilever is one of them, boosting prices the most since 2012, and the consumer able to absorb that. if you need to, repeat the act a few more times. tom: there it is. the shorts are out there. the people saying it is top, top, top. i don't see catharsis. do you see taxi cabdrivers telling you what to do with tesla? jonathan: i have not, although when they told me what to do with bitcoin, i should have listened. i missed out big time.

yields are up by two basis points on tends to 1.67 percent. yields up twos as well. yields up for the equity market, still within a whisper of all-time highs. tom: there he goes. [laughter] the last 24 hours for the president have been a change. jon ferro trashing the president of the united states. jonathan: i didn't. i was just copying him when he leans into the mic. tom: i'm leaning into the mic. can you explain washington? lisa: no, i can't explain washington. what i can say is they are struggling to understand how to read some of the inflationary pressures. i do want to highlight the fact that five year breakeven rates in the united states just rose to the highest since 2005. this comes as we see consumer prices continuing to rise. there's one thing for there to continue to be growth. at what point does it decelerate

enough that it creates an issue for markets that are really shrugging it off for earnings that look great? tom: a lot more information coming on that. let's get to the data so we can beat sam stovall on the future of the market. he's 120% invested. what i am noticing is the vix, even on pullbacks, 16.10 is a constructive number. jonathan: we are down 14 points, down 0.3% into thursday. yields higher on the 10 year nominal yield, up by a basis point to 1.6727%. if you subtract the real yield from the closest nominal maturity, you get the so-called breakeven. take the five year maturity. to lisa's point, we are starting to climb again. lisa, i think you are right to bring this up because this peaked back in may. then it settled down. now it is a story again. is it a story for this fed? that is what we need to try to understand more. tom: hold my hand over here.

i'm going to talk to lisa about auctions now. lisa: virtual. carry on. tom: the 20 year auction didn't go well. what does that signal? lisa: on the margins, people are getting more concerned about long-term interest rates, although i will just say it is hard to draw any long-term narrative from an auction right now that is fast-moving and a market that is increasingly unpredictable. i don't want to make any broad assumptions. i will say the idea that we are looking at inflation expectations that are climbing, at least in the medium-term, and a market that is still not reflecting that an absolute rates, is very interesting and attention that will persist. tom: sam stovall is with us, chief investment strategist with cfra. sam, the gloom crew is out there citing history. you say yes, it is a guide, but far more, history as gospel is a

threat to your pocketbook. explain how you use history to the end of this year. sam: good morning, tom. basically, what i look at is knowing that the s&p 500 is likely to close above the september 2 all-time high fairly soon. the question is going back to world war ii, looking at the prior 60 pullbacks or declines of 5% to 10%, how much further did it go beyond that recovery level before stumbling into another decline of 5% or more? the answer was the market has risen an average of eight point 4%, a median of 5.4%, and it has taken about 98 days before we on average slip into a new decline. when you look also to how well the market has done from the low point of october to the end of december, average gain is more than 7%, so basically, there

really is a santa claus. jonathan: what is it about seasonals? when all of us first got into this business and heard about all of this, it sundered like hocus-pocus. what is it about all of this? sam: a lot of it has to do with capital inflows, the old sell in may strategy, basically implying that most of the money is put to work early in the year, and then you simply have rotation in the summertime months when investors are focusing more on their tans than their portfolios. i the end of the year, because you have or windowdressing for fiscal year closes in october, you get that stuff out of the way, and investors are looking five quarters ahead, looking to the end of the next calendar year. what doesn't look good when you look that far down the road? i think the seasonals tend to benefit because they are gearing up for the new year. lisa: thank you, tom. there is an issue here. are people looking too far in

advance and pricing and what they are expecting in 5, 10 quarters, and not what they might see in a couple of quarters, which is why you are not seeing big rewards for companies that beat their expectations? sam: i think the real worry is the question about profit margins. still, the forecast is for improvement in profit margins slightly in 2022 over 2021, but depending on how high oil prices go. right now, our estimate is that we are really not going to be hitting the $100 mark anytime soon, though we do see a higher creep over the next several months. also, in terms of the 10 year yield, i'll relief is that it is going to creep higher, but remain below 1.75 percent in much of 2022. so it really depends what kind of headwinds and how strong they end up being. tom: around the iconic five-star

system of srp and cfra, how do you analyze these tech companies? sam: basically, it is fundamental analysis. it is gross and a reasonable price. what our analysts do is look to a discounted cash flow model. tom: how far out do you go? sam: first of all, the star system is for the coming 12 month period, but obviously you look to peg ratios, long-term growth versus valuation, etc. but really, investors are focusing more on the coming six to 12 months period, so that is what our stars do. we also look at relative valuations. we look at some of the parts. so all of the different kind of analyses that fundamental investors do, and also since cfra recently purchased lowery

research, a technical analysis firm, we know that fundamentals tell you what, and technicals tell you when and how far. jonathan: i like that. tom: nice plug there. jonathan: thank you, sir, as always. sam stovall of cfra. speaking of ratings, the team of bloomberg put this one together. tesla, if you go to the market cap of tesla right now, $870 billion coming into today. then you go to the credit. bbb down to bb, that is the line between the two. you've got a junk rated credit in the credit market with a market cap of almost $1 trillion. you find that odd? tom: odd doesn't describe it. jonathan: when have we ever talked about that before? tom: what i find amazing here, shout out to matthew wendler,

our founder and editor-in-chief at bloomberg news, all i know is the disciples are on board and the critics are still there. jonathan: it is incredible, to see a bb credit with close to $1 trillion. lisa: people were completely dismissing their plan to profitability. there was this key existential question of whether this could ever be profit. -- ever be profitable. now they have recorded nine straight quarters of profitability. all of a sudden a new company with a lot of hopes and dreams that other companies are trying to emulate. are the other companies just behind the curve? jonathan: i remember several years ago, they had a coupon of 5.3%. at the time, it was record low yield. a lot of people in the credit market very snarky about how that issue priced. here we are. and it must, i keep going back to this, has proved so many people so wrong over the last several years. tom: not only on this, but on

other things as well. we talked a week ago about his effort in real space versus others flying up 106 team miles, whatever the number is. i can't remember. but i got to admit, his space effort is extraordinary. i just went a tesla i can get in. is that asking too much? jonathan: they are making the truck for you. is that right? tom: lisa has got the hummer, the addition one. just make the ev -- the ev3 they are making. lisa: just a fact-check, i do not have a hummer. jonathan: i am pretty sure 99.9% of viewers know. lisa: yeah. jonathan: if we did fact-checks on this show, we would be very busy. from new york city, this is bloomberg.

♪ leigh-ann: with the first word news, i'm leigh-ann gerrans. congressional democrats are at odds over the tax and spending sides of a bill to bolster president biden's bill but better agenda. the chances of a deal by the end of the week seems to be receding. they are debating with senators joe manchin and kyrsten sinema. in a large study, the result is likely to bolster the argument for giving a third dose of the vaccine. the companies say a booster was 95.6% effective against symptomatic covid-19 in the study, which followed 10,000 people aged 16 and older.

risk cases in new south wales, australia's populous state, jumped 89 from the day before to hit 300 72 infections today, the biggest daily increase since mid-september, and comes 10 days after the state lifted a widespread lockdown that did last more than 100 days. 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'm leigh-ann gerrans. this is bloomberg. ♪

>> it was april of last year

that we ran out of storage and oil prices went negative. no place to put it. but this time we worry with a cold winter that demand for the oecd as a whole and observable inventory could get up to 50 days. that is almost unheard of. it is the reverse of 14 or 15 months ago. jonathan: that was ed morse, the global head of commodity research at citi. here's the market right now. equities down 14, -0.3%. yields higher by two basis points, 1.6727%. 10 basis points short of the year, highs we have not seen since the first quarter of this year. $84 on crude. the turnaround in this market, when it comes to things like copper, we are having a real conversation about their not being anything in storage, and

storage and lme warehouses. tom: not just the supply, the demand dynamics, but the economics. amrita sen on copper is interesting. we are making jokes about magnesium, and i would suggest the manufacture of aluminum, the manufacture of magnesium, the manufacture of copper still goes back to hydrocarbons. jonathan: and you pointed out what has been happening with zinc and the likes of glencore. when power prices go up and it costs more to develop some of these metals, the pullback on the production and development of these metals. tom: the analysts approach this differently. ed morse is much more geopolitical, geostrategic.

what will the saudis do? jeff currie, with the microeconomics of chicago, is very precise and concise. i think francisco blanch at bank of america present a holistic view of all of the economies. everyone is different, including amrita. jonathan: as we get that ready, let's talk about this bond market. we have gone from talking about breakevens, higher inflation expeditions that peaked in may, then faded away. now that is the story again. your nominal yield is 1.67% on tens. it is the breakevens i want to pick up on. the market implied inflation expectations, just working through some of this bond market math, you subtract the real yield on the inflation linked maturity curve from the mode yield, and right now the focus is on fives. lisa: the idea that the five-year breakeven rate has risen to the highest since 2005. this isn't just an oil story. this isn't just a commodity story. this is also a toilet paper

story, a paper towel story, a going out to a restaurant story. i think about supply chain disruptions lasting well into next year and beyond. the idea that labor markets are going to take time to work through. this is all going into market expectations, and to me, this is meaningful. why are we not seeing the actual nominal rates rising at the same pace? jonathan: we are having a big lift at the front end on twos, at the long end on tens. i think where the conversation has changed for me, it is much more global now. we are seeing this take place in the u.k. and central banks are actually responding to it. take your pick in em. tons outside of turkey have done the same thing. now the issue is does the federal reserve join in. when we also around these tables come of these podiums in a couple of weeks for the fed meeting, we talk about paper, the focus is going to be higher interest rates. the paper story is done with. this is going to be about the

what next. deutsche bank are out here and -- out year-end of next year. tom: lisa and i can't pronounce glasgow. jon can. folded into what you perceive will be the end result of glasgow and cop26. to be honest, i don't see much there. jonathan: i would tell you the answer to that if i knew it. i've got no idea. they are very scripted events. you go into them. the diplomats get around a table before they begin. you basically script the outcome of them. right now, as far as i understand, it has been very hard to get anyone to agree on anything going into this. that climate change conference starts at the end of this month and runs for about a week. there seems to be a scramble to find something. lisa: it is not just disagreement among the constituents, but also among the

nations themselves, including the united states heading into this. this also dovetails into the oil story, the idea of the transition, the idea that this is not going anywhere. i want to go back to the question of a changed environment in yields. i think that is a really important idea, and it really is a difference as we look out. yields have been rising, but to me, have they been rising to the same place they should be if the fed was not involved? jonathan: where should they be? i've got no idea. lisa: this is the reason why the bears have been bearish. they have looked at the fundamentals and said they should be higher, or else this does price in some stagflation or something like that. other people are coming out and saying it will save its way because central bankers go elsewhere. jonathan: what is important is the direction of travel. we have gone from lowe's at the start of august, having a look at testing the highs of the year so far. it is the character of that move that matters, too.

what about real yields in the move we had off of august? this is developing into a bit of a test for the fed here, particularly at the front end. how they respond to that in the next couple weeks i think is really important. i don't want to over dramatize it, but there's clearly a market pricing in hikes. tom: that is absolutely true. the insight i learned yesterday from dr. coronado was the idea that you take atlanta gdp now and add on to it the complete messed up realities of detroit, and maybe that gets you to a better number where it is not so urgent for the fed. this is really important, and we thank mr. cohen for emailing in on this. it is pronounced glasgow. jonathan: i'm aware. did you not know that? what have you been saying? tom: i just butcher it. jonathan: like moscow? we say mosc-o, too.

tom: i'm a tourist. it is going to a mess -- to be a mess, from what i hear. jonathan: the deliverables. president putin and xi are not going to be there. tom: i noticed the queen at 95 and the uproar over ireland, she was in a reception line, and there was the former secretary of state clearly on his way to glasgow. glas-go? nailed it. you wonder what secretary kerry accomplishes their. jonathan: dropping you through the price action and setting you up for this month. scotland at the end of this month, going into a federal reserve decision at the start of next month on november 3. yields higher by about a basis point. in the commodity market, $82.96. equity futures are -12 points, down about 0.3%.

after a six-day winning streak on the s&p, the longest going back to july, we pull back just a little bit, just short of all-time highs. beautiful new york. this is bloomberg. ♪

♪ jonathan: live from new york city for our audience worldwide, waiting for jobless claims in america. alongside tom keene and lisa abramowicz, i am jonathan ferro. we are down about one third of 1% on the s&p 500. claims dropped nicely. the estimate, 2.97. so good to see these numbers south of 300. the estimate, 297 the previous three, 293. if you are interested in the fed outlook, the estimate 25, the previous number 30.47 -- 34.7. claims coming down. the slow grind, you talked about

the slow, persistent grind lower in that basis point. tom: the persistence was back to february and it was a point of tension, and down we go. what is important in this high frequency data, we've had very constructive weeks trending down, trying to get down. i'm going to say normal, long ago and far away, with something under 2.20 or 2.10 with a shock of under 2.00 but 2.90 is not far from the nirvana of where we are. jonathan: the market looks like this, down 10 on the s&p, -2/10 of 1%. the dow jones, yields higher by a basis point on the 10, 1.67. in the fx market, euro just a touch weaker, euro-dollar 1.1 640. it is always onto the fed speak. tom: november 5 i believe is

jobs day as well. we need to frame up and see what has changed with the chief economist of pimco, tiffany wilding. in your orbit, in your xl spreadsheet, what have you changed in the last week, or what are you really focusing on as the subject to change? tiffany: first of all, thanks for having me, but i think what we are seeing is that the economy actually is re-accelerating. after this summer period, some soft patch, as a result of rising cases associated with this new delta variant of covid-19. we are starting to see as case counts go down, a pickup in spending across leisure and travel services industries. talking about the labor market, because the claims data came out and suggests you will see a

re-acceleration in the labor market as well. we expect net job gains in october to pick up when we get that report in a couple weeks. we see encouraging signs the economy is reaccelerating and this makes us more confident that monetary policy can kind of get on with its tapering business that we expect in november, and we can continue to recover from this pandemic. tom: will the fed be surprised by nominal and inflation-adjusted wage growth? tiffany: i think that we've had a couple of -- in terms of high frequency data over the last couple of months, we've had a couple of very strong wage gains that have been reported in the official statistics. we think that maybe there is a little bit of noise in that come in that you could see the wage data moderate a little bit. that's as you get this pickup in leisure services, which tend to

just have lower wage jobs. i think when you think more broadly, going out to the next year, you should see wages accelerate because we've seen a broad pickup in productivity in the economy. i should get paid for how productive i am. we should see wages accelerate. ultimately, the fact that the labor market is getting tighter, which it is, that should also put upward pressure on wages across a wider range of sectors than just across the low income and lower skilled jobs that we are seeing the biggest wage gains now. jonathan: if you are more productive, you get paid more. many better be listening this morning. tiffany, talk to me about what should happen november 3. imagine if you had seen 24 hours ago talking up a rate hike in the fed next year. where are you in the moment? tiffany: we think that you

probably get a rate hike in the beginning of 2023. the reason for that is we still believe inflation is likely to moderate by the end of next year. there has been a series of shocks, if you will, that have kept inflation more higher for a little bit longer and people were expecting. but we do ultimately think that comes down. that you give the fed a little bit of reading room -- breathing room in the latter half of next year and as a result, we think it will be 2023 before they hike. lisa: do you think fed officials appreciate the tightening of the labor market? tiffany: i think there are -- they've certainly highlighted what we would agree are temporary trends that will probably result in the labor market being tighter than it other would be and that helps general anxiety around health.

a lot of these service jobs are very public facing and of course there has been childcare disruption. i do think there are more medium-term factors that will take a little longer to work themselves out, but ultimately when you think that they will. that's related to geography, which is kind of weird, but this work from home dynamic has really changed the local market dynamic and where jobs are demand it. they are maybe not demanding as many jobs in urban city centers. they are demanding jobs more in suburban and rural areas so we are getting that mismatch. the question is, how long does it take for that labor to migrate out? we look at data on migration from the credit reporting agencies, and it suggests lower income zip codes and folks are able to move. we've seen excess moves from those zip codes so that's good news, but ultimately these

things take time to work out. keep in mind, usually a hot labor market does draw people back in. we saw that from 2017 to 2019. i do think labor markets will get tighter. we think you get some wage inflation, but i think all of this will be moderated to some extent by labor supply gains next year. lisa: we were talking about earlier today, the market expectation for five-year inflation if you look at tips has climbed to the highest since 2005 at 2.8%, north of that. is that correct and an accurate assessment of the five-year inflationary outlook? tiffany: obviously, there's more going on with the tips market than just expectations around the near term path of inflation. i think the path has become more uncertain lately and we believe that kind of over that five-year

time horizon, it will remain uncertain. we are moving into this age of transition where you have a grounded green transition, trends towards globalization, and a policy focus on inclusivity on the fiscal and monetary side it has potential to produce some upside in inflation. i would also keep in mind -- and this is much less talked about -- is that there is some downside risk to inflation as a result of this pandemic, coming into the next five years. we've seen productivity and innovation really get jumpstarted as a result of this pandemic. you also have trends toward digitization. the other thing is we've also seen a big dealt up in debt and leverage and it is ok now because interest rates are low, but if we have a negative economic shock, it increases the risk that you get the debt fuel

environment. the risk to the upside and downside, the market is trying to incorporate that, but i think the other thing to keep in mind is that if you look further out in the tips market at the five-year five-year forward, it is kind of trading right around the fed target, maybe a touch above. the market is giving the fed a lot of credibility along the long term inflation goal. jonathan: i was reading through the new outlook and congratulations to you, by the way. as a team, you seem to think the fed made be constrained and can't lift rates much. what do you think of how long this cycle will be, the shape of this cycle, given how constrained you think the fed is? tiffany: we think likely this cycle will be faster than what we saw after the great financial crisis, because of the policy and we see really extraordinary policy. instead of taking years to get

back to trend growth after the 2008 recession, we are likely going to do it within the next several quarters. and that's really a testament to the amazing fiscal policy we've gotten. just by that definition, this should be a faster cycle. in terms of a fed policy, i think that when you start to raise rates, as the tightening really gets in the cracks and sort of was famously described, and the question is, who is the weakest link and is that systemically important? that will determine how much the fed can tighten. you've seen a lot of businesses that have had to take on more debt as a result of the economic disruption associated with the pandemic, so when the fed starts raising rates, we think it will turn out that the economy is more interest rate sensitive than people thought. the other thing to keep in mind is the fed balance sheet is much larger than pre-pandemic and if

they want to normalize their balance sheet, that means they will hike the fed funds less than they would otherwise. that suggests the target rate and this cycle will be lower even than it was last cycle. jonathan: tiffany, thank you, and congratulations for 15 years at pimco. bill gross, 1971. tom: starting in the mailroom down in the basement of the pacific investment management company, literally sorting mail. the gentleman out of duke was doing it. pimco has been legendary for the phrases of mohammed and others following on, but to me, transition is a struggle to figure out this great mystery of the new technology. now and 10 years from now. do we have an understanding in this so-called transition, of what technology is doing to us? the haves, have-nots, everybody?

jonathan: not a sufficient understanding because it has moved so quickly. i will talk about this with kristin bitterly in about 20 minutes time. tom: lisa abramowicz to get you to the end of the year, we've got a number of things coming up. i just want to go back to the auction and the idea of the wall of liquidity that we haven't talked about this week, the absolute wall of liquidity out there. lisa: and how much has been provided by fiscal and monetary policy until now. something tiffany wilding was saying, perhaps we don't appreciate the sensitivity to higher interest rates in this economy and people dismiss debt as all but free at the rates we see now. that really ties the hands of the federal reserve in terms of adjusting that regime. that's a really important point that people do not price in, rate hikes. tom: that's something we have done and jonathan ferro does on "real yield," a distortion of

our adjusted rates and sonali basak knows it has a lot to do with a company named black's bone -- blackstone. she is with jonathan gray. sonali: thank you for joining us. you are coming off what you call your best quarter in your 36 year history. records are hard to keep beating. do you tell your investors about where to go from here and how to squeeze out the next set of goals? john: it is great to be with you. i will just talk a moment -- stop a moment and talk about the quarter. we really delivered for our customers. we had nearly record appreciation in our funds. we had extraordinary fundraising for our shareholders, fee related and distributable earnings. and what's driving that is a couple of things. first off is where we focus in

terms of investing, really dramatically. some areas like global logistics, software, technology, the travel recovery out of covid, all of those have done quite well in the quarter. the second thing i note is we continue to expand what our business is about, who we invest for, where we invest. we are moving more and more in real estate and infrastructure, direct lending, and we are also serving more clients, serving more institutions, retail, insurance. we've described it as a ship that's been operating in a narrow channel moving into open waters. it was a great quarter for us and we are excited to do more for our clients. sonali: a lot of this has come from fund realization, investment realization. you've been selling assets as well as investing. is it getting harder to invest at these valuations, and with

all of the choppiness we see in our markets? jonathan g.: it is certainly trickier as values move up. the good news is, we have some competitive advantages. we operate almost all of our businesses at very large-scale, so we've done something like 13 public to private that we've been investigated and. that's a real competitive advantage. the breath of our platform continues to expand. that helps us a lot. so many of our larger investments were in newer areas. then again, what we are trying to do is find interesting areas in some of these thematic neighborhoods we love where we can buy in at a more favorable price. we bought in india and automotive parts company several years ago that had at that time a very small ev business, but we saw huge potential. we invested considerably.

the company has gone public, hugely successful investment. we made something like 15 times our investors capital because we found a really great company but people did not realize was in on seem investment. we are doing that this quarter with the garage door opener business with a company called chamberlain that owns the lift master brand. it is a play on the house recovery and e-commerce and access to homes, which makes so much sense through the garage. a response to the high-priced market is to buy things we like but in one derivative off from where we find value in those areas. sonali: do you agree with the competitors in the banking industry, james foreman at morgan stanley, john waldron at goldman sachs, do you believe that they have it right when it comes to inflation, that perhaps many are undercounting how much of an issue it's becoming? jonathan g.: yes, i would agree

that inflation is definitely becoming more pervasive, more persistent than people had hoped. and i think that's happening for a couple of reasons. one is money supply has grown really significantly, by more than a third, since covid, which happened the monetary fiscal response to the crisis. it puts more money in the system. at the same time, we have big structural shortages so in housing, we've been building 40% fewer homes than in the past. we've been investing a lot less in energy of course, because we are trying to balance that out in terms of green sustainability and so forth. and we've seen fewer people in the workforce. tom: i want to get away from the co speak and get to the structural solution. you came out of the university of pennsylvania the year of bill clinton and you are a card-carrying, bona fide

democrat, hugely charitable, an icon across the nation for charity. help the democratic party with some charity. how do you put the progressives and moderates together? what is the gray formula? jonathan g.: wow, that is a big assignment. tom: do it in 30 seconds. go. jonathan g.: i think there are shared objectives and things where you can say, how can we help people in lower and middle income areas, and do things that drive the economy an opportunity for them? immigration would be one where i think we can help the economy and a lot of people. ideally, we can bring people out of the shadows. housing would be another area where if we built more housing, that could drive down the cost of rental housing and buying homes for lots of people. i think green energy context, building housing would help. education, more investment, doing more in vocational

schools, community schools, to help people. when i want to do is create more opportunity. the debate in the democratic party is about whether we should fundamentally change the system we have, or do we give more opportunity to people who have less opportunities themselves today? i vote with that second camp. i think we have a powerful system that in crates create a ball companies -- creates incredible companies. my wife and i created a program to give low income kids in the community the ability to save. tom: john, you are buying a building in northern manhattan in hard cash to build the great elementary school, right? jonathan g.: we helped support harlem village academies, certainly something that's important with us. we named it after my father -- grandfather leon gray. we do want to help as many people as possible. i think that debate that you touch on is so important,

because there is a solution where we can bring more people into the system, give them more opportunity, and still keep the energy and power of our economic system to create lots of jobs and wealth. lisa: that's where i wanted to go, this idea of pairing the social objectives with the financial objectives of the democratic party. we've heard this desire to change the composition of the fed in large part because of the oversight of wall street. i wonder from your vantage point of $731 million firm expanding into an industry that typically has been private and not regulated as tightly, what do you expect and hope to see on that front? jonathan g.: as it relates to our firm, i would say we are regulated, certainly, in lots of different ways. we take that responsibility, transparency, how we operate, is really important. the difference between us and

large financial firms, banks, is they are highly levered. they operate at 10 to 15 times leverage. they also have access to the fed window and their depositors are guaranteed. none of that exists in our business, managing capital for third parties. so we are generally today, i think the financial system in the u.s. is as healthy as i've seen. the banks have a lot of capital. there is good oversight in the markets. sonali: i know it is a figure for succession on wall street, your peers have turned over the ledger on top. do you have a timeline for blackstone? jonathan g.: we feel pretty good about what's happening. sonali: give it to us next time.

jonathan g.: no, i would say that -- look, we have a really good set appear. steve schwarzman is an amazing leader, visionary businessperson, and i can tell you, somebody who has worked with him now for 30 years, it is an incredible gift for me and the others. we are sticking with our approach. tom: to be a fly on the wall when gray and schwartzman go at it on politics. thank you for joining us, the small real estate firm blackstone. we can only do this with sonali basak. i want to get away from the financials. you are so wired in to the pulse of manhattan. you have to see it. her phone bill is so high at bloomberg, they wanted to put a payphone next to her desk. you are wired in. all the money being made, will we see the acquisition in the hamptons? what is the tone into the end of the year and into bonus season in february? sonali: is this as good as it is going to get?

blackstone came in with our best quarter in history and we've seen the banks wayne but still make a lot of money. markets are getting choppy or. james gorman is saying there should be a fed hike next year in the third quarter. yes, bonuses are coming in, but should you be asking for more? lisa: what will the private shops look like in say five years, looking at apollo targeting more than $1 trillion in line with what blackstone is looking for? sonali: i was listening to apollo yesterday and hours this week you see mark rowen take the stage. it was interesting to see this buyout shop and distressed investor going to what is mainly retirement services in a big way. then you have them competing on another scale. his retirement services going along the road of apollo in the future or continuing on the future of blackrock? lisa: this really goes to the

heart of returns. the whole idea was bigger returns, less liquid assets. how much will bigger returns get to be smaller bigger returns as everyone piles in? sonali: smaller bigger returns and there is a big pitch, fixed income replacement. you have large, traditional investors who can only limit that amount that goes into those higher fee businesses that are largely in fund format. you are switching away from the fund format and going into other things. tom: it wasn't me falling off my walker, that was me seeing the announcement that mr. ferguson, truly a great american, will join apollo. this guy is truly our nation's expert on what to do with retirement. you are the inside pro. what did it signal that roger ferguson, the former vice chairman that got us through the day of 9/11 financially, what's different?

sonali: they said they want to be a financial juggernaut, is the word they used. tom: you mentioned the dreaded r word, retirement. maybe not so. sonali: it's here right now. they own one of the largest annuity providers in the country and growing fast. roger ferguson added a million customers alone when he was at -- exactly. you add somebody like that and you start to really shape the way forward. tom: sonali basak, conversation with jonathan gray and the future. this retirement thing, i am guilty that we don't talk enough about this. lisa: this is the whole 60/40 debate, how do you arrange in a world that looks changed where people need income? that's why these firms are getting so much bigger. tom: i've talked to mr. ferguson about this. it is a complete failure of the contribution system.

apollo leading by hiring ferguson. an eventful day, a gentleman who knows all of this from connecticut, 12:00 noon on radio and television. futures negative nine. this is bloomberg. ♪

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jonathan: since the winning streak for the fed, good morning. equity futures just a little soft, down nine. countdown to the open starts

now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. ♪ jonathan: investors focusing on one thing -- this earnings season -- >> inflation. >> rising inflation. >> inflation concerns are on the supply side. >> supply driven to increase inflation. >> concerns about margin. >> companies' earnings reports will be a bellwether. >> how will we overcome these inflation challenges? >> inflation is likely to be higher on average. >> and how to overcome supply chain issues. >>