>> the fed always gets what they want. >> the fed cannot give the market what it wants. >> one of the biggest wagers in the market, at the moment is whether or not the fed can engineer a soft landing. >> they are more likely to be hiking into a slower economy. >> this is bloomberg surveillance. tom: good morning, everyone.

december eighth and the gloom is lifting. imagine what they see right now for 2021. jonathan: the biggest two-day move so fire. up another .1%. a third dose, a three dose regime, neutralizing the omicron variant. tom: a sum of things. the makeup of it is a complete mystery, but if everyone who has missed the boat this year -- it is tangible. jonathan: how high can they go? we have 70 points on a two year. we just caught up with bill dudley a couple minutes ago.

he thinks that it goes from 180 to 250 in the forecast. we will get that acceleration to taper. from there, you have to look at the forecast. then what do you do? tom: we got there from george with the new york fed. lisa, that polarity is evident. lisa: it speaks to that yield curve that is flattening. i go back to what bill dudley was saying. this bill is supported by quantitative easing. tom: that is important, the idea of smooth curves. there has been talk about a possible inverted yield curve.

jonathan: 70 basis points between the two. that steeper curve. it has been a flatter, ever since. tom: the dow did not get there. jonathan: you know, after today, we only have one more show together for the rest of the year. that is sensitive, isn't it. are you going four up? deutsche bank looking for a break of 110 and expecting to stay below 110 on the euro-dollar. tom: is that all you got? this is important.

$76 brent. people are making headlines. deutsche bank is saying, no. we are not going to make that. lisa: the oil market is one of high confusion. how much is a proxy heading into 2022 with gas prices raining supreme. jonathan: we have not even talked about the debate. if you want one more, apple is up another .6% -- is up again. maybe they are pushing to boost the supply. tom: we will see. jonathan: stock is at a record high. tom: if you are confused, it is good to bring in alicia.

here is a scenario based on mathematics that i see. how has your scenario changed, given the confusion that we just laid out? >> it is a fascinating discussion. the headline is, we are essentially in a new regime with the fed, which was announced a couple weeks ago. there is a separate discussion about what is happening in the economy. these are different right now because we are entering a lower liquidity environment, moving forward. what it -- whether the said hikes, the next move is still a hike. it is not a cut. we talked about how the markets have levitated in this sea of

liquidity. at present some challenges for investors. last week represented the first shot and where investors need to be thinking about investing. i suspect it is not the only one. we think that earnings are there. it is something that investors should be thinking about. you need quality companies that can earn, or the staple, which will not perform next year because we will have a pretty good economy. jonathan: why do you think that we have repriced the front and again? does it make sense to you? >> we have priced in two or three hikes. when it comes in high, i think the market is going to be

inoculated from it simply because we have already priced in the price hikes for next year. they could show much higher inflation at a higher terminal rate. i do not think those projections are right. the market is telling you that they cannot get above 150 basis points because we have the flattening of the yield curve. the market is fascinating. they will not be able to hike very far without inverting the curve. lisa: you talk about entering a new regime. a lot of people have been pointing to big tech as the haven of a market that will grind higher next year.

do you agree or are you leaning more heavily into airlines and stocks that are taking a dip after news of different travel bans? >> the first is reopening. we keep on getting reopening depending on which variant we are dealing with. the fourth quarter looked very strong. we think that the reopening theme will maintain itself. people will not stop there be engagement into the services. we need services to reengage. the second thing is that we like companies that can earn. i would not choose either value or growth. i would choose stocks that are high earners with high cash flow

because that is what the new regime is going to do. on the stables and companies, they will be more challenged because of the inflation issue. jonathan: forgive me for jumping in. this sounds like the playbook for this year. can you go through the major differences? >> that is a great analogy but i would say it is more limited. it was more open ended in 2021. i think that the case for stronger growth, slowing as the year goes on is the right playbook. not those really high value, but we still like financials here. we like energy.

the high multiples will not work year. jonathan: awesome are up nine. tom: these are wonderful guests. a view forward for 2022. he does not call for curve inversion, but he makes it clear that you will see them at a far greater rate. i find it fascinating that he calls for back-to-back u.s. treasury price indexes to decline two years in a row. jonathan: it is cristobal coming up later this hour, back down to 1%. lisa: talking about inverted yield curves.

this is fascinating. the number of voices saying that the fed is the verge of a policy error. this bipolar market view is not going away. it is not getting resolved. jonathan: acquitted is believed to come from the saying quid pro quo. tom, that is what a quid is. i knew that a quid was a pound, but that is what a quid is. does that help you? groundbreaking, i know. 10 year yields are up. crude, 72 .17. from new york, this is bloomberg. ritika: with the first word news, i am ritika gupta.

the company says initial data shows that a dose of the coronavirus vaccine neutralizes the omicron variant. pfizer and i intact are working -- beyond tech -- biontech are working on another vaccine. the new german chancellor will face a number of challenges including the standoff in ukraine. the two leaders from america and russia held a video call that lasted over two hours. vladimir putin made it clear that he will not tolerate the west deploying weapons in ukraine. pk told --

a record high amid growing optimism over new products. raising and outlook after a booming thanksgiving holiday. a revenue drop of up to 15% after previously estimating a 25% decline. it sees dividends returning in 2023. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i am right could do is bloomberg. ♪ -- i am ritika gupta. this is bloomberg. ♪

>> the higher inflation from 2022, a higher labor market and

more tightening from the fed in the forecast from 2022 to 2024. last time, the fed forecast 1.8%. that is below what they think is neutral. jonathan: what an interesting call. he says next week, look for that to go from 180 to 250. your equity market up .25%. your equity market advancing. yields are higher by a basis point. as we look ahead to next week, this just dropped from goldman sachs. goldman is joining the club.

looking ahead to next week. tom: papers lit up in the u.k. over that. 45 pages. this is something that james dimon will want to put in his briefcase to read over the next few days. jp morgan is optimistic about the view forward. they look for a full global recovery and a return to normal conditions. u.s. dollar and rates to higher ground. jonathan: they are optimistic on this market. a couple weeks ago he wrote the following. omicron could be a catalyst. we have a little bit of a flavor of that from a couple months ago. tom: i have never seen such a rich time in this pandemic that

we have. it is fun to do. it is fun to speak to guy johnson. i look at the live feed and there is too much to talk about. forget about english football. what are you focused on right now? >> we are trying to figure out how they are going to take on policy. we have the prime minister and a difficult position. the video leak yesterday put him under considerable pressure. speculating that he might bring forward some of the restrictions . i cannot possibly suggest such a thing, but it is being talked about over here. there are rumors. he talked about the idea that we will see a cabinet meeting

before restrictions are put back in place. it seems to be that it would be a good idea. jonathan: there is a video that has been leaked from 12 months ago of a government official rehearsing her response to what she would say if she was asked about a christmas party. >> what it does is undermine the credibility. you need to play by the rules for the sake of society. everybody needs to do their part and we will be able to get through this and lower what we are seeing. that message gets muddled when people and government do not play by the rules. that is part of the problem at the moment.

he is in a position once again where he is having to deal with the surge and having a confused message from downing street. lisa: can you give us some verification of this theory put forward by the financial times? some strategists are speculating that they put forward the idea of tighter restrictions to distract from this video that came out this morning. is there any veracity to that whatsoever? >> honestly, it would be a personal opinion, if i were to give you one. i do not know the honest answer. i do not know that there is a clear line of sight. politicians play things a little differently than some of us do.

lisa: this is the most political response ever. >> it would not surprise me. jonathan: well handed -- well handled. we cannot have a party, but we practiced to answer questions about a party of an we were not sure if we should deny whether we had a party or not seems to be the thinking in the u.k. tom: my head is spinning off of it. it was so screwed up in brexit. i went back and i read a history of the war of the roses. it was no different than. while we got you, you are truly our global expert and the aviation business. all of us on here are buffeted right now by the green pass in italy, what is going on in the u.k., it that are up. what do you see?

>> i suspect it will be dealt a blow by the just restriction. it is the uncertainty that causes the problems. these rules change on a dime and people do not know whether they are coming or going. that causes problems. i'm thinking of events in derby later this week. people are coming over from the u.s. i was at an event the other evening. they told me they got a message saying they had to be at the airport in four hours if they wanted to avoid the quarantine. why would you put yourself in a position where you are trying to travel when you do not know if you will be dealing with rule a, b, or c.

it is just a lack of detail. there is not a clear line of sight. i do not know whether that is by design or something that they just do not understand how the rules are going to work. it is really difficult. you look at what southwest just said. things are looking pretty solid. jonathan: trying to arrange a way to get to europe. thank you. who would do that, tom? trying to work out what the rules are. what did she say? five day trip, four tests. tom: i go through a travel agency. it is really working out. i have to pay her by the syllable.

she is trying to teach me. particularly if people travel with kids? it is brutal. jonathan: this is bloomberg. ♪

jonathan: your stock market is positive, up at on the s&p. live from new york city on radio and tv with tom keene and lisa abramowicz, i am jonathan ferro. advances in the equity market as pfizer biontech say a third dose of their covid vaccine neutralizes the omicron variant. the biggest two day pop on the s&p so far, the biggest day yesterday back to march. yields higher, in and around 1.50. 1.50 in important number for the team hsbc. i want to point out, the survey coming out at 10:00 maybe of interest. we are supposed to talk interest rates but i will give it over to

you because it is an extraordinary fun time for a team called quest him. -- called westham. when the guy from richmond went to westham, that was the start of great things jonathan:. this team is looking good this year. the worst -- the most well-known westham supporter, steve major. as part of the exchange, i promised you we would talk about westham. what are performance. steve: all that matters is we are above arsenal. jonathan: wears is this coming from? how much money is there to spend to do this? this is west london club chelsea going against and east london club. are they getting this done? steve: card work, go to

visitation, they have signed some good players. it is not just about the best player in the world. at psg and manchester united, it does not work. jonathan: let's forecast bonds right now. 1.50 year end next year. this path towards 1%, a bit of a tweak. run us through it. steve: the thing about the forecast, it is a points estimate, it is a thankless task. successful forecasting is likely tian tian beauty contest -- is like a beauty contest. you're trying to forecast what everyone else is thinking. it is whether i can correctly forecast what everyone else is thinking at that point in time. we only have one number to play with. for us 1.50 for the 10 year treasury's reasonable going into next year because there is now a floor for rates because the fed

has this hawkish bias. it is possible they will hike. we have forecast for rate hikes. i will believe each hike when i see it. that is my view throughout this stop 1% call we have pushed into 2003 because we think -- into 2023 because when they start to hike they will not get very far. we are not in the business of forecasting policy errors. the central bank will presumably not do very much. to me, it is difficult to believe rates are going to get anywhere near the level reached in the last cycle. when you look at the terminal rate like that, it is probably going to have a one handle, that is why 1% in the long run is more like the fair value for 10 year treasuries. lisa: i would love to have dinner with you and bill dudley.

he has been talking about how the end rate for the fed could be 3% or 4% based on how hot the economy is, based on how high inflation has been. what would you say to him? steve: i get very few invitations so thank you very much. next week or the next week after. it would be interesting to know the basis of that. we have to respect his opinion. interesting to see how we get to three or four, and has this calculation included the sensitivity of the economy to the amount of debt and has it included global factors about the policy direction in china or europe and japan? does anybody watching this think china will hike rates or the ecb or bank of japan? presumably we need to

incorporate the longer-term structural variables like the debt overhang's demographics, distribution of wealth, technology, and we need to think globally. once we've done that, i would like to hear how it is possible to get to 3% or 4% because on our reckoning that will be difficult. lisa: some people say this time is different because of the money that was printed by somebody economies. people got checks directly and they are spending those jacks. -- those checks. why is that not enough given where inflation is to get us over the hump of the demographics? steve: a lot of the money that has been created through q. week exists as reserves. it depends on your definition of money supply. the other thing is the impulsive

2021 goes into reverse in 2022. the rational expectations view of all of this would say let's be careful, somebody has to pay for it. the u.s. government has effectively borrowed from the children to pay their parents. if anyone thinks that is clever, then fine. i do not get it. it was a huge bridge to tomorrow , but it does not look very stimulative. it will not be stimulative into 2022. tom: deutsche bank frames out on a curve inversion, the possibility of one. we have a scenario that goes above the 1.50 level on your tenure call? steve: part of the reason for our forecast was the two year was trading at 1.20 at the end of last week. a lot of cover for the rate

hikes. in the forward there is an inversion already. if you go one year, two years forward for the tens and 30's, you can see an inversion. if you look the last 30 or 40 years, and versions of only happened two or three times. i would be fading that move. what we have been doing is looking at steepeners in the ultra long sector coming you get paid in terms of carrion role. they have not gone -- of car ry and roll. they have not gone long. we have to look at the forwards. the two year rate is already pretty long. we had a hawkish surprising june followed by a big hawkish surprising september and next week some people are calling for even bigger hawkish surprise. i say once bitten twice shy.

tom: as we go into the sophistication of your market which is to look to the future, if you are having coffee with jerome powell, how you frame the forwards with him to frame his press conference? steve: he gets it, and he also -- he can top to the bank of england governor. the maradona affect his using credibility to drive expectations. may be getting hawkish just when inflation is about to crash around their ears is a way of tightening policy. they have not got the hike very much. tom: who is maradona? jonathan: you are not serious? diego o'mara donna -- diego maradona?

one of the best football players in history? he would fain left, fain r ight, but ultimately go straight forward. the maradona effect is the bank of england suggesting they might do one thing and then do another. steve, great to have you. steve: seasons greetings. jonathan: thank you very much. a big up in yields after a move lower to start the morning. we start think about a front end through 70 basis points, up a basis point today. lisa: i think about what bill dudley said. how much definitions tighten as the fed is expected to hike rates? we have not seen that happen yet. what is the threshold for response inequities as we start a price in two or three rate hikes? jonathan: steve is already

fading that move in the curve. you find that interesting? steve: i do find that -- lisa: i do find that interesting. the idea he said he wants to find what other people are thinking and recasting that. tom: you can drive this forward with jim caron. what you just saw from steve majors is so important. the media lives in the spot present market. the people we talked to spend an inordinate amount of time looking at the forward or futures market into the distance, even as far as 10 years. jonathan: all morning we've been playing a game, it is important. famous people burn on december 9. -- famous people born on december 9. one was judy dench, another was perked up less, -- another was kirk douglass.

another is tom keene. one short of the big one. we will have a massive birthday next year when you have a 70 handle. 69 tomorrow. we do not look a day apart. fantastic. happy birthday tomorrow and into the long weekend. jonathan: you are in a timeout. lisa: cemented. happy birthday. there was a fantastic montage with tom keene. tom: i'm a big fan of judy dench, i must admit. jonathan: happy birthday. only one more show left together this year. tom: we are having awake tomorrow at 6:00 p.m.. watch shum football together over the weekend -- watched some football together over the weekend. a very happy birthday to our good friend, tom keene.

ritika: with the first renews, i am ritika gupta. in germany the parliament has made it official. lawmakers have elected social democrat olaf scholz to be chancellor. he will succeed angela merkel. he put together a government with two other parties with sharply different policies. the house has passed legislation that would clear the way for the u.s. debt ceiling to be raised quickly. that would avert a partial government shutdown next week. the bill would also cancel automatic cuts for medicare's and other subsidies driven by deficit spending. boris johnson apologized after a video emerged showing key aides choking about a christmas party and a possible breach of coronavirus laws. the video came out just as the government is considering more restrictions. johnson understands how infuriating he thinks it must be

to think of those setting the rules are not following them. they head of instagram is going to capitol hill to talk to those still angry. they will bring something of a peace offering. instagram announced a number of new features making the platform saver for young users. in the united arab emirates -- the uae is breaking ranks with the rest of the gulf region, changing from a sunday to thursday schedule. the new work week will be four and a half days. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

tom: good morning. lisa abramowicz and tom keene. jon ferro getting ready for

event full 9:00 program with a new high in the two year yield off the joy of science on omicron seeming very constructive. lisa and i want to brief you on something we have not mentioned. i think this sets us up for a must pay attention to bloomberg and particular our hong kong and beijing desks this evening, new york time, which is evergrande and china real estate takes a new leg down. they have had a distressing 24 hours. lisa: people are speculating they have to restructure. they have not made a lot of payments or at least creditors overseas have not received payments owed to them. it is not just evergreen. it is also another developer in china. all of this feeding into the back shop of china realizing there is a problem in changing

their tone this week about the importance of financial stability over curbing some of the leverage that put into pumping up some of the sectors. tom: we do not have the chart for radio or tv, but the log chart for evergrande is distressing. it has the velocity down to a worse level it could be. it is not all gloom. we saw that with jp morgan with a 45 page outlook adamant about recovery, adamant about normalization. some of it understands this as the president and chief executive officer of hilton on the recovery. >> i have no real worries. every time as we've been recovering, if you look at the minute people start to feel we are through their crisis, the demand for meetings and events skyrockets. people are dying to get out. tom: chris nassetta talking with

david rubenstein. david, i think about a moment i had earlier this year about maintaining optimism in travel in hotels. what did you learn about the trench warfare of this pandemic? david: the hotel industry suffered enormously, as did the entire lodging industry in the travel industry. they are coming back. what is coming back more rapidly is recreational or vacation related travel. business travel is not coming back as quickly because businesspeople have learned they can do a lot on zoom. that has not come back to the same extent vacation and leisure travel has come back. tom: are you suggesting within the bride and the many people under you that david rubenstein will do your claim transactions by zoom? david: there is no doubt the

private equity world has done a lot through zoom over the past year and a half. clearly a lot of people are beginning to travel again. i have traveled a fair bit in recent weeks or so, but it is not coming back at the level it was before and will take some time. the lodging industry has done reasonably well in terms of its stock performance. the performance at the height of the pandemic were all-time lows for the travel industry and the lodging industry and now they have come back to near record highs. the market is anticipating they will see travel coming back. lisa: how much is the hilton president and ceo anticipating business travel will resume and putting money behind it by making acquisitions into the more been up areas in larger cities, in convention centers? david: hilton is the second-biggest hotel operator. marriott is the biggest. they have thousands of hotels.

a lot of them his franchise operation. they take a fee or some kind of royalty on the name hilton. it is coming back reasonably well. they are making some investments to get hotels back. the biggest problem is getting labor back. a lot of people lost their jobs, a lot of people were laid off, now they have to get these people back. as hotels are coming back, more people are coming back to stay at the hotels. a lot of workers are not coming back. it is a real labor problem and to some extent prices are going up at hotels because you have to pay for higher priced labor than you did before. lisa: hotels or try to figure out what they can cut, perhaps not changing the towels for as many nights and other areas they can reduce costs in order to have fewer employees and keep costs lower for consumers. what are some of the areas costs are getting streamlined that you

talked about with the head of hilton? david: if you are staying at a topline hotel, one of their waldorf hotels are one of their more luxurious hotels, you will get all the services you had before. if you are staying at their lower grade hotels, where you can get by at $125 a night, you may not get daily towels are best, you may not get the free breakfast you had before. room service has probably been cut back. you are not getting services back yet. your experimenting. maybe people do not need the hotel services they have before. right now the hotel industry is coming back. its stock performance is in good shape but the bottom line is still 20% to 30% below where it was at the peak before the pandemic. tom: this is perhaps my last question to you of 2021. i want you to look into next

year. as you look at the d conglomeration of general electric, of toshiba and a few others, what is your town on combinations or deed combinations -- or decombina tions for 2022? david: i think you will see a lot of acquisitions but conglomerate type acquisitions will not be in favor. many large companies are deconglomorating. i think interest rates will be higher next year but not so high to deter people from making acquisitions. the acquisitions industry is still pretty strong. tom: david rubenstein, thank you for joining us. peer-to-peer very strong this year. 9:00 in new york with the chief executive officer of hilton. lisa, what an extraordinary day. i did not know where to begin

other than we've been fixated on a two year yield. lisa: the idea you have such polarized views on what the long-term trajectory is oven patient and of benchmark rates. it is of -- is of inflation and benchmark rates. tom: not as buoyant as two hours ago. nevertheless to lift led by the small caps. russell 2000 having a better day on a comparative basis to the dow. the vix now in 10 full figures from the gloom of seven days ago. lisa: it cannot be gloomy because it will be a birthday. we will all be celebrated, including the dow. the dow will have a special celebration. tom: i'd was thinking was going to be quiet and then ferro. he is sitting in the

surveillance timeout chair. lisa: for celebrating? tom: a wake schedule for this evening. "balance of power" a timely interview with the gentleman from pfizer. this is bloomberg. ♪

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jonathan: from new york city for our audience worldwide, good morning. your equity market positive, up seven, advancing more than .1%.

"the countdown to the open" starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: we begin with the big issue, a whisper -- a whisker from record highs. >> the emma corrin variant creates uncertainty -- the omicron variant creates uncertainty. >> we are looking through everything. >> there was a lot of trepidation. >> a great time to be an investor. >> a never say never business. >> we are navigating the peaks and equity markets. >> the market is where i want to be. >>