>> we are seeing more fed numbers becoming more worried about inflation. >> the economy has been overheating from most of the year. >> the fed has turned really hawkish, really aggressive. >> every time we get close to a fed tightening cycle the markets tend to get really aggressive. >> it won't take much to break something. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: from new york city for our audience worldwide, good morning, good morning. this is bloomberg "surveillance" live. together this morning with caroline hyde. tk is back with us tomorrow. lisa, just pulling back further from all-time highs. lisa: you keep seeing that the year will be over and people are tepid in terms of trading ahead

of the fed meeting which is the key event tomorrow. do you think we will get anything dramatic? jonathan: maybe we will, maybe we won't. isn't that interesting regardless? lisa: it is interesting regardless. what could be market moving other than the balance sheet? what benefit do they have the knock the market off course at this point? a lot of people are figuring out how far out they increase their inflation expectations, but i think the balance sheet, from what i've heard, is the only thing that could really knock markets. jonathan: that is what citi has made in their research, they made that point. the hawkish surprise would be a balance sheet reduction as part of the sequencing for the year ahead. caroline: never underestimate some central actors to move away from a hawkish privet as they did a u-turn in the united kingdom. it has to be the key line of question for the federal reserve

how focused and resilient their call of being that much more hawkish will be if we do indeed see more impacts to the economy. jonathan: i am certainly not the only one who wants this year done with. jp morgan and goldman, reports about how big the bonus calls might be this year. lisa: they are really big. jp morgan are looking to boost potentially their bonus pool for bankers up to 40% gain given how hard the bankers have been working on mergers and acquisitions. goldman sachs weighing on whether to increase the bonus pool for the investment bankers by 50%. i'm sure people on the year to be over so they can spend that money doing things. jonathan: take that phone call and find out how big that number actually is. jp morgan set to way boosting the bonus pool up to 40% and goldman looking at boosting theirs by 50%.

great reporting from bloomberg. price action for you, equities down 10, s&p down .2%, pulling back a little bit adding to yesterday's losses come yesterday yields were lower in today they are little higher to 143 point 77. we talk about the yield curve in a moment. the euro is positive. the euro-dollar positive 1.1319. lisa: it is constructive in the u.s., perhaps less so in europe. i wonder how long companies can keep absorbing the cost of higher prices, how long they can pass them onto consumers running out of savings from the pandemic era? we get the u.s. november ppi data highlighting how much the end products that factories and manufacturers are putting out have gotten more expensive. it has absolutely surged. the highest levels and decades are expected to continue. margins have been at record

level. they have been able to pass this along. what is the sticking point as people get concerned about the inflation on the consumer side? we hear from secretary -- how much is he echoing what blinken said about china and the threat of cyber security coming from that nation? is there an ongoing hard-line thread from the white house and the administration with respect to the china policy? at 9:00 p.m. talking about china planning to release retail sales and property investment data. looking at the slowdown that a lot of people are expecting to see in china, and frequently bad news is good news in china. people are easing in policy at the people's bank of china. you are seeing yields tick downward on the front-end of the chinese yield curve. jonathan: easing the fiscal or monetary policy that we are building up for?

lisa: people are looking at both. another rate cut which we have gotten expectations for broadly, but also the idea that some of the leverage, particularly in the property sector, will get lightened just a touch to counteract some of the contagion people have started to see in a number of property developers. jonathan: the next couple of days into the fed, lisa, thank you. we have a new big bill on wall street. we will catch up with him later this morning. his view on the year end s&p next year. we have to talk to the biggest on the street, price target at morgan stanley. a different side of the business.you work very closely with mark wilson, who straddles both sides of the business. let's talk about the call for local equity market. what i hear is not a less constructive view per se on earnings, but it is bringing the

multiple down. what is it about the multiple that you're focused on at the moment? >> that's right. good morning, happy holidays to you and the team. as we've been saying for several months, we think that there is more room to go on multiple contraction and that has historically been the case as we work through midcycle transitions. we think that it's basically the same scenario this time around even though we've had extraordinary circumstances in this particular cycle given covid, lockdowns, reopening's, etc. we think things are tracking to a normal historical context which has seen a multiple come down anywhere between 10% and 15% as midcycle transitions culminate in the past. we think there is more room to go on valuation. lisa: you say we halved our exposure to the equity-like asset classes. can you give us a sense of where you put the money as you took down your exposure? daniel: we put some money into

alternatives. we put money into a shorter duration credit, high-quality credit. valuations and spreads are not exceedingly undemanding, but we think that that can offer some balance in portfolios as we go into a little more volatile period. we have been through this anomalous, smooth sail upwards over the past 15 to 18 months where we haven't had your typical 10% correction in the s&p, and we don't think that will continue through the winter months. caroline: so brace for a 10% to 15% correction. what is the snap element that suddenly drives us lower? ppi data later today, inflation has been a key area of risk you are looking at? daniel: correct. we see a gradual online. positioning has already started to move that way, particularly when you look at faster moving institutional funds positioning

starting to lighten up more recently. we think the market acknowledging that the fed is about to announce this week a much faster taper schedule that will conclude in march, that will remove the accident accommodative stance we've had. even though folks have known about this, been preparing for it, i think that there is a difference in terms of the effect on markets over the next couple of months. jonathan: there will be more emphasis on individual names and sectors. where do you like now? daniel: we favor defensive, high-quality names. from sectors, think health care, trading extremely cheap after underperforming this year but has all of the benefits of innovation and growth but is not priced like many of the growth sectors. areas like consumer staples. power was mentioned. you have to be selective.

not every global consumer franchise has pricing so you have to do the bottom of work. on the other end of the barbell we are to shying away from growth names, except we want to focus on growth at a reasonable price. we are looking at names we've added to our team's portfolio recently like mastercard, t-mobile. these are structural growers off of their 52-week highs. if we get into an environment where rates back up in 2022 they will not be as acutely sensitive to higher rates as some of the high multiple growth stocks this year. lisa: you and others have been talking about a 10% to 15% correction that is overdue for a while. people have been saying things have been flying too high for too long to be justified on a fundamental level. every dip has been buyable, no matter how small it is. has that made you rethink your thesis given that you've seen cash piles increase according to

the fund managers survey from bank of america and a sense of caution among your peers? daniel: it is a fair point. one thing i would say is that particular dynamic itself has not made us back away from the call or change the call. we acknowledge that the individual investor in particular, given the millennial wealth coming in, new investors coming into access this market, technology apps and so forth, that has been a particularly strong force and higher than we would have resumed coming into this year, but that hasn't made a change in call. what would make us adjust the call is we have been wrong on rates. instead of 1% or 2%, we hang out around these levels. equity risk premium for the s&p are not as challenged. number two, we've been calling for a pushback or slow down and the consumer. the consumer has eaten through a tremendous amount of savings

you've referenced. they have been pulling forward tremendous demand for durable goods given that we have been at home for so long. we don't see some of those trends continuing. that is part of our near-term caution. if we are wrong about rates, wrong about the consumer, those would be aspects that would change our call. jonathan: you have been a good friend of the shell and wonderful partner over the last year. -- of the show and wonderful partner over the year. enjoy the holidays i'm a we send our best to the team. we had some really interesting calls. small caps early this year and a sector rotation as well. lisa: the idea that they are talking about selling some of the most loved areas that a lot of people rode off earlier in the year, namely big tech are some of the most highflying stocks. jonathan: just around the corner, maybe, perhaps, today, could be, possibly.

from a less constructive you to the biggest bull on wall street. joining us about an hour from now. don't miss it from new york. this is bloomberg. ♪ >> two studies out today show mixed results about pfizer's experimental covid pills. according to data it was highly effective at keeping patients out of the hospital but did not do as good a job of milder symptoms associated with breakthrough infections. results suggest it will be for covid patients at risk of developing severe disease. the u.k. will use it soccer stadiums and courses to open vaccination sites in the coming days according to the government. the omicron variant counts for 20% of the confirmed cases in england. the estimated number of daily infections has climbed to 200,000.

secretary blinken lashed out at china while trying to rally allies in asia. in jakarta he criticized what he calls beijing's aggressive actions in the region and infant-sized u.s. efforts to deliver high-quality infrastructure and vaccines to asia while working closer on security issues. goldman sachs and jp morgan are opening their wallets to keep bankers happy. that will put pressure on their rivals to do the same. goldman may boost its bonus to 51 percent and jp morgan by 40%. they dominated the dealmaking frenzy. they may have to overpay to keep the people they want the most. global news, 24 hours a day, on bloomberg quicktake, this is bloomberg. ♪

>> narrowing between senator manchin and senator schumer and

the rest of the democrats. they won't make their christmas deadline, this will bleed into january, but i'm optimistic they are able to get a $1.3 trillion, $1.5 trillion package done in january. jonathan: 1.3 and one point five, very different-sized package there. caroline hyde out of london with me in new york lisa abramowicz. a little more than .1%. yields higher by couple the basis points to 1.4377. the nasdaq down 71 points on the session so far. we will catch up with oppenheimer, "we don't expect the fed to slam on the brakes about pump the brakes as lightly as he can." lisa: don't you think he saw

their call and said it is worth 30? jonathan: you can ask him that at 8:15. how did he get to 330 specifically. mario, i have a wall street bias. my questions are along the lines of what people will want to hearing d.c. policy, the fiscal effort. i imagine that you are drowning in news. is that where the focus is in washington? mario: that's correct. among other things going on in washington the january 6 commission and bombshells that came out last night are remarkable and has our attention in washington, d.c. first and foremost, repeated text messages from fox news personalities and allies of the president urging mark meadows, the former chief of staff, to have the president say something to stop the insurrection at the

capitol on january 6. lisa: is there any kind of ramification that affects policy in some sort of way that is currently not being factored in? mario: it is not entirely clear now as to what policy implications these have. obviously it puts heat on some of these lawmakers with text messages revealed, particularly as we head towards the 2022 midterms. the last thing many of these congressional lawmakers who may have been in contact with the president one is to be in the spotlight for reasons like this. lisa: the reason i ask is we are still talking about the build back a better plan. it looks highly unlikely it will be passed before christmas as many people wanted. i think of a polarized washington, d.c. with former president trump being one of the most polarizing figures out there. how much is that representative of the republican-democratic

divide? are we talking about issues for the democrats and a core group of democrats and republicans in the center trying to work together? mario: right now you're seeing disagreements between democrats. as you allude to, which is on point, democrats have to go it alone. in order to pass this legislation it has to be the senate and congress -- the democrats have a very thin majority. anything that has to pass has to pass along party lines votes. essentially, washington is extremely divided. this puts the spotlight on a conversation like we saw yesterday between joe manchin and president biden as opposed to perhaps president biden moving across the aisle, which is inconceivable right now given the current climate in washington. caroline: always good to speak to you. talk to us about what brings

joe manchin onboard if at all this year or early 2022. is he so focused on the fed and so focused on inflation? mario: i think last week when the inflation number hit, speaking about what we're looking at in washington, i think that washington can collectively turn and look at joe manchin expecting what response we will get from him, whether or not we can read the tea leaves to whether he would support the bbb. the good news for the biden administration as he has not ruled anything out. he has not ruled out calling on schumer to not vote on it this year. he has been publicly advocating for it to be kicked down the road necessarily, but he doesn't appear to be in a hurry. he has questions and he is really asking for those questions to be answered along the lines of inflation and federal priorities. caroline: from $3.5 trillion to

potentially $1.7 trillion as joe manchin is asking for come you just mentioned chuck schumer does think we will get a deal done or once it done by christmas. the probability of that? mario: we have less than two weeks so -- [laughter] it looks more grim as time passes. schumer is publicly advocating for a vote to happen by christmas. every day that passes makes it less likely. the hope and the silver lining is that joe manchin has not come out and said ultimately that he doesn't want this to pass or does not want it to pass before christmas. there is still hope. jonathan: your wonderful and i enjoy hearing from you, mario parker in d.c. a call from evercore, another upgrade from apple on the price target. they go from 180 to 200.

they call it one of their topics of 2022. this stock has been climbing close to 180. they go from 180 close to 200. lisa: bank of america going overweight apple, saying that it is a buy. why for these particular analysts? is it the consumer is strong and apple is a dominant player in the market or an issue of virtual and augmented reality, new products that apple is putting out there? some of the most bullish calls have been done without even factoring that in. you put that on top of it and a lot of people are seeing a lot of potential gains for apple. jonathan: saying the following, the monetization of the in-store services and new product launches and margin expansion. that is his call for apple. caroline: there are five other analysts that currently say the

price target should be 200 or above, the most bullish being jp morgan overweight to -- overweight 210. even amid supply chain issues meaning that new watch that you wanted to get has been very slow coming. jonathan: already nine b -- 39 buys, 2 sells. 90 is the price target. lisa: that is very, very aggressive. when you say bigger margins, that means more expensive, right? what is the price tolerance given some of the entrances that are -- entrants? it is amazing to see how high some of these prices can go and how big these margins get. jonathan: absolutely. sounds like you're struggling ahead of christmas. you told us earlier in the week about the supply chain. lisa: i have explained, the

flowcharts come out. one of them is getting a phone for the first time which i'm concerned about. the other is waiting for his airpods. jonathan: when you were 10 years old did you get gifts that expensive? i didn't. it was a football to play outside with. lisa: i hear you. jonathan: this is bloomberg. ♪

jonathan: from new york city for our audience worldwide on tv and radio this is bloomberg surveillance. we are down five on the s&p, -.1% on the nasdaq, -.4%, inching down from all-time highs. goldman and credit suisse have done wonderful work on the last four rate hiking cycles. the end of the 90's, 2004, 2015. the performance leading up to the first hike and the performance the three years after. 12 months leading up to it are positive 9.5%, three years after, positive. as long as the yield curve doesn't do this.

we can talk about the bond market, the distance between the two. the yield curve looks like this. 78 basis points. the point is that as long as this stock is flattening and doesn't invert it is good to go, a green light for equity bowls. he is constructive on the s&p. lisa: the economic story the fed would be hiking rates into strength not weakness. as long as the bond market reflects that that they are moving appropriately into the strength of the economy stocks should rally. are we going to see a strengthening in the momentum of the u.s. economy next year or a d acceleration -- deceleration? jonathan: you are thinking a good story in the outlook. we talked about it briefly, when we first broke 140 in the summer of 2016 towards the end of june, end of june, may be the start.

we were thinking of a china-induced global recession. cpi was nowhere near the 6.8% we are now and here we are with a 10-year at a similar level. the backdrop for this one is radically different. lisa: people say it is a distortion, qe, global savings going into the bond market. it is a mystery, but if you listen to the bond market it is not sending the all clear that you would like to see if you are going to get super bullish. jonathan: calling the bond market is one of the hardest things to do right now. right now the distance between twos and it tends is 78 basis points asset price action -- two's and ten's is 78 basis points asset price action. >> the latest data on the covid bill, a mixed bag if you have

serious symptoms and are hospitalized the covid bill has -- covid pill still has a long way to go before it gets approved. it could be encouraging, could be not. what is not is tesla down more than 20% since musk tweeted the requested fee should start selling shares. the plan was already in effect. 13 million shares are sold including 900,000 disclosed in a filing last night including exercisable options. 17 million shares has been sold over the past few weeks. an apple watch, if it gets to 3 trillion or not come you have a lot of analysts reading their price targets. evercore isi putting it on their best ideas list for next year. i ever heard you talking and i know that you are a simple man who only needs a ball into stick

to entertain himself, but kids need iphones and that will drive earnings. isn't that what goes on on the streets of london? stick ball? jonathan: if you watched scrooge lately isn't that with the kids were doing? rolling a wheel with a stick? >> ralph lauren down 4%. goldman sachs, pretty bearish overall on some of the brand recognition and retail strategy with that company. jonathan: that is an older british stereotype, kids running around with sticks. [laughter] what have you been watching? caroline: you could play baseball with a stick and a ball. jonathan: we call that cricket, that is a different game.

caroline: it is a good game because you get to eat tea during it. jonathan: what other sport can you drink beer for 10 hours? not many. kathy jones joins us now. kathy, we have to talk about this bond market. 2016 when we were at these levels we were talking about a global recession. what are we doing now? kathy: it is a conundrum for the fed because they tried to signal that they are tightening policy and all week it is the flatter yield curve. i think that tells you that the market's view is that inflation is not going to last a long time and growth will celebrate next year -- will decelerate next year and we have enough demand to prevent yields from rising much. it places a lot of pressure on the fed. how high can they go in terms of rate hikes and not invert the

yield curve? that will be probably the biggest problem that they face over the next 12 months. lisa: what would you say to the argument that the bond market, i don't want to say it is wrong, but distorted by quantitative easing, the savings flood, what is going on overseas? kathy: i don't think that it is distorted, but those are factual evidence that contributed to low bond yields. if there is one surprised the fed could pull off it is quantitative tightening. if they wanted to see long-term rates go up they could sell bonds and reduce the size of the balance sheets. i don't think that will happen anytime soon, but that would be one way to do it. the collective wisdom of the markets is that we have a lot of factors holding down long-term rates will stop global savings flood is not going to go away tomorrow. aging populations are not going to disappear tomorrow. that continues to make demand at

the long end of the curve for 20 or 30 years very strong and that is the reality in the bond market that i think is reflected in this flattening curve. caroline: that is why you call a terminal rate at 1.75%. talk about looking further along the risk spectrum. how much we will see an outperformance of potentially high yields if you will see such tame long in the in the government? kathy: high yields and investment grade have been doing great. credit has good, strong fundamentals here. the problem is the yield. you're not getting much spread over treasuries to take that risk. but, it is hard to see in this environment that credit won't continue to outperform treasuries in 2022. it is a question of how much risk you want to take in terms of moving into the lower credit for the events that we get in some kind of accident in the market or if we were to get an

inverted yield curve. that would be a negative signal. it is all good except for the yields in the credit world, but i think it will outperform in 2022. jonathan: what would a hawkish surprise look like tomorrow at the federal reserve? can you give us more detail on how they could surprise hawkish leak on the f1c? kathy: they could raise the terminal rate. i'm not sure it would be a selloff at the long end. it might be a rally at the long in the. they could move up that terminal rate. four quantitative tightening -- or quantitative tightening. they could announce the rolloff sooner rather than later and that would be a surprise to the market. jonathan: a ton of people, do you know what they missed the most? the piano. they miss the piano. ken schwab -- can schwab not let the piano into the office?

we will sort out the crane next time. and wonderful partner as we work through some complex issues, particularly in this bond market. lisa: if the yield curve is distorted by some of these factors that are not going anywhere, how predictive is it for economic reading? how much does it give us a sense of what the outlook is an a concrete way when you have negative real yields into the future? that i think is what everyone is grappling with. jonathan basically talking about the flattening yield curve as an indicator, but how much does it lose its power that way based on these other factors? jonathan: you have a price insensitive buyer the economic signal that you get is distorted. i think we are all on board with that. regardless, you think that the federal reserve would be countable hiking into a yield curve. lisa: the reason why we were talking about of a possible rolloff in the fed balance sheet

would be more of a possibility if they want to allow the long end to rise to avoid that type of signaling. that would be a shock to a lot of people who aren't expecting that. jonathan: not an exact science. the last rate hiking cycle on the backend of 2016 the difference was north of 120. now it is sub 80 basis points. i wonder if you think that that would make a difference? lisa: the reporting and work being done by analysts, you haven't seen, not for decades this flat, weak yield curve overall in seeing that rate hike from the u.s. unlikely. we've talked about how shocking it is to have a real yield that is negative in the u.s. nominal yields negative in europe still the ecb is wondering if they have a hawkish surprise. will they say that we are not happy with a inflation rate, lower than in the u.s. but still above 5%.

jonathan: there is still another day to come. the ecb and bank of england. are we done with the bank of england? lisa: maybe we are done having faith in them to be reliable in any way, but it will be fascinating. how do they deal with the fact that they are facing omicron variant and potential restrictions? they promised something that it seems unlikely they will be able to deliver. jonathan: i am excited for your coverage of it. lisa: where will you be? jonathan: somewhere that i can take your call. i promise. it is a promise if they hiked interest rates i will take your call. lisa: everyone heard that. jonathan: i will admit that the year is over now on a thursday. lisa: the stakes are high. jonathan: from new york this is bloomberg. ♪

>> in the northeastern u.s., officials are trying every tactic to control a surge of coronavirus cases that have emergency rooms overflowing and infection rates soaring. new york is requiring masks in all indoor places across the state. massachusetts is sending home free test kits to its poorest areas after covid climbed 14% in the week ending december 9. in kentucky come authority say that at least 74 people died in tornadoes last week. 14 were killed in four other states. efforts are now turned to repairing the power grid and helping those whose homes were destroyed and delivering drinking water and supplies. the committee investigating the january 6 insurrection at the u.s. capitol voted to recommend mark meadows be held in criminal content as congress turned over materials to the panel but won't testify under subpoena.

his lawyer says he is invoking executive privilege. the release for the tight oil market is on the way. there is a surplus in the market and the agency forecasts a bigger oversupply here because the omicron variant is impeding its -- impeding international travel. the british economy is heading to a mild slow down because of restrictions and limiting the spread of the omicron variant. the imf is forecasting 5% growth in 2022 after 6.8 percent increase this year. inflation will peak in the spring. global news 24 hours a day on air and on bloomberg quicktake powered by more than 27 journalists and analysts in more than 120 countries, this is bloomberg. ♪

>> you are always happier to buy a dip if all-time highs and

growth in the u.s. is incredibly strong. the more the mix of real yields and growth is deteriorating the more difficult it gets to buy a dip. jonathan: a more complex 2022, goldman sachs, the managing director. the nasdaq 100 down 77. the bond market yields are higher by couple of basis points. in the commodity market basically unchanged at 7126. looking at crude, good morning. >> we are seeing $71 a barrel for wti. it is the time spread that i want to keep an eye on because it is the real-time impact of the omicron variant. for brent crude on a one month to three months spread it shows you that the near-term premium for getting a barrel of oil is dropping and a lot of it has to

do with worsening demand. a lot of it is tied to the omicron variant. if it goes negative and starts to signal that the market is oversupplied, the near-term demand is not as strong. the iea coming out this morning saying a new oversupply is being created and could get worse next year. on the surface it sounds like worsening demand oil prices should drop in theory. then you have opec, the saudi energy minister saying he is in munication with his peers and warning traders not to short oil because opec-plus could react quickly. this week is about the fed and the boe, but we have to keep an eye on opec and their reaction to the omicron variant's impact on oil. jonathan: they have big skin in the game. starting this conversation with a senior fellow at atlantic

council come the supply piece is something that you are thinking about. how much of a production rebound can we get next year? why do you have your doubts? >> the iea is seeing supply growth from the u.s., russia, canada, brazil, all converging next year to create a 1.7 billion barrel per day surplus of oil and sooner the first quarter and next year. russia has been slowly but surely come steadily increasing its production in line with the opec increases. it is not altogether clear that they have invested in capacity to increase their production further. the u.s. is a huge question mark. we will not see a return to the massive growth that we saw prior

to the pandemic, but the iea thinks that the u.s. will hit record levels of production next year. it is not clear where this production will come from in the u.s. and how they will get there. lisa: for much of the pandemic we have been talking about the demand side of the picture, people are traveling and flying around west. we hear the conversation shifting to supply and how much supply can come online, be available, and how quickly. do you think that is the correct dynamic to look at or demand is the big driver as we look at the omicron variant in the variables? ellen: i think that the demand is an important component of the picture because both opec and the iea are seeing less impact economically globally from the omicron variant. the iea was honing in on the

fact that it sees the variant impacting mostly jet fuel demand. jet fuel demand was the big question mark and was previously seen to be surging in 2022. jet fuel demand was supposed to make up a lot of the increase in demand in the coming years. if we see jet fuel demand suppressed, that is not an insignificant issue, though perhaps not as great as was previously feared, especially on the black friday oil drop in november. caroline: going back to the supply side, and yourself a historian, a scholar in the energy markets and in the middle east, talks seem to be not going anywhere between western leaders and iran. what was the supply going into 2022?

that was a hit on oil prices a month ago. ellen: iran is a question mark in terms of supply. they came out with a budget for the following year. they definitely seemed pretty optimistic about their ability to export more oil, however that doesn't necessarily seem to be reflected in the progress of the negotiations between the u.s. and iran. we have seen some reports recently that the u.s. is trying to crack down even harder on iranian oil exports, illegal ones, and enforce shan -- enforce sanctions more than they were before. jonathan: it is good to hear from you on an important topic. on the crude market. we heard from j.p. morgan in the past couple of weeks on opec.

have a look at the prospect of breaking through 125 on brent. an important conversation about the fed, she remembers the president of the minneapolis fed from 2009 to 2015? i remember a very dovish central bank president. reading what he has to say in bloomberg opinion, that is a different man. lisa: this is rhetoric on the verge of alarmist with respect to how quickly the fed should be moving. a pretty hawkish statement. to give you a flavor, if officials don't announce a more aggressive path of interest rate increases, i expect they will, their passivity risks a repeat of the great inflation of the 1970's. seeing a scenario like we did in 1965 where the increases seemed controllable in the consumer

price indexes and consumer price index but spiraled out of control. he said that is the risk if the fed is not aggressive enough. this is from someone who talked extensively about his transition from hawk to uber dove when he headed the federal reserve. jonathan: he writes, in principle they impose from the added spending should have been temporary but fostered an inflationary psychology where prices rose in anticipation of future price and wage increases. that is the virtuous cycle we've been talking about and something mohamed el-erian has talked about extensively. lisa: it is an important point in terms of data come the university of michigan survey and inflations over the longer-term. how much do inflation expectations drive what transpires when you go to the store? jonathan: the fed faces a troubling 1965 parallel. coming up, he says there is

nothing to worry about. the biggest bull on the street looking for 5330 on the s&p. we are down by .2%. from new york city on radio and tv, this is bloomberg surveillance. ♪

>> people are not well-positioned for the environment we are imagining now. >> there is the risk that all markets go down, long-term treasuries, equities, there is no place to hide. >> negative real yields are very positive thing for risk assets. >> for another year i think stocks are the best game in town. >> bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: the hawks are out in force. good morning, good morning, this is bloomberg surveillance on