>> to say the fed is behind the curve is putting it very kindly. >> there will be more hikes than previously thought and 2022. >> i do think they want to get to the balance sheets sooner than later. >> to question is not is the fed going to be hawkish or not. it is more can the fed still surprise on the hawkish side. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. in this hour, you must be with us on radio and television the

entire hour. abby joseph cohen when joins us in the next half-hour. we start strong with lisa shalett of morgan stanley wealth management. they've got a lot to talk about. jonathan: all officials saying the same thing. patrick harker sees the inescapable need, the inescapable, logical conclusion to tightening monetary policy this year. one hike in march said to be the story. how many after that? tom: we will see it from brainerd today as well. the only page i believe they are on is they have to wait for the data. jonathan: they keep talking about removing accommodation. we are having a debate on programs like this about a real tightening of monetary policy and how high do they take it. it is not about the start of a journey. it is about where it is going to go and how quickly they get there. tom: are we going to say lisa today, a future vice-chairman and the social monetary policy

expert, are we going to see a lot of social policy today? lisa: she has been considered a more dovish member of the federal reserve, has talked about getting labor market participation back to where it was pre-pandemic, even though a lot of academics and fed officials say it does not seem likely in the near future. however, her pre-release comments really focus, i think that is what they want to hear. tom: lisa shalett will join us. jane fully world join us. abby joseph cohen will join us. and then we finish strong with robert or mass -- robert or matt's. i'm sorry, there is a bid. jonathan: then onto that hearing with governor brainerd. will governor brainerd became vice chair brainerd? equities up 0.1% on the s&p come on the nasdaq 100 by a similar

amount. they story for people has been in the fx market. euro-dollar is positive on the year. euro-dollar at 0.14 -- at 1.1 for now. tom: jane to give us a brief there in a number of moments. let's get right to it. lisa shalett joins us. i want to cut to the chase. how much cash do you need? is cash a negative thing or is cash in a portfolio a positive construct? lisa: we are looking at cash as an opportunistic asset right now . stocks in the market had actually corrected to 52 week highs, and many have corrected as much as 10% or 20%.

that homework really requires understanding if you've got enough defensiveness, if you've got the potential to be profit forecast, if you got the potential to raise profit dividends and be buybacks. those are the types of things that are going to allow your stock to be resilient against the tape where the fed is raising rates, which means price-earnings ratio is drifting lower. jonathan: is a late psychodynamic now? -- late cycle dynamic now? lisa: i think it is a little early to say that. we have been pretty consistent saying this is a midcycle transition. with unemployment below 4%, it is starting to feel light cycle to us.

we are aware structural changes have happened in the labor market that are going to prevent participation rates from rapidly mean reverting to where we wear for the pandemic. but we do think there is a big chunk of the economy that has yet to recover. so we are still in that late midcycle as opposed to expose it like cycle. lisa: late cycle at a time when the market's current repricing about four rate hikes in 2022. frankly, the answer has come back, everybody knows it is priced in. do you agree? lisa: the stock market has been extorted nearly skeptical of the fed. i think when you have had as powerful a said put as we have had in this market, quite

frankly for the past 13 years doing all the way back to the great financial crisis and march of 2009, it is hard to convince people that the regime is shifting. we certainly think that the indices, some of the more richly valued names, we know those teflon mega cap tech names still need to reprice a decent amount, maybe 10% to 15% of what we do think is the distance forward on rates. lisa: i have to think, what is the trigger given the fact that we have cpi coming in at the hottest level in 39 years? we are about to get a similar read from ppi. lisa: i think it is a question of actually seeing the fed follow-through. certainly we now plan that not

only are rate hikes on the table as early as march, but the fed minutes really planted the seeds that perhaps we will see balance sheet runoff. balance sheet runoff really contributes to actual tightening and translates into the equivalent of additional rate hikes. i think once there is more clarity on that, that will be the last down leg in the market. tom: three to five years out, how do you rationalize double-digit revenue growth at the profit makers that are minting free cash every day? how do you approach those with a longer-term time horizon? lisa: i love your question

because this is a conversation we are having with clients every single day. how realistic that some of the growth rates we have seen, much of which have included a pull forward of demand were linked to some of the unique dimensions of this pandemic. history is just not kind on this point. innovation is terrific, but so is disruption. it is very rare for companies decade after decade to be able's is sustain these levels of growth without being disrupted by competition.

jonathan: this is -- tom: this is really important. i wish we had an hour for this. can they go bring the disruption inside? lisa: certainly they can. and perhaps they may transform themselves. obviously a lot of these high flyers have gone beyond betting on social media. they got on the cloud and cloud services, and now they are betting on metaverse and some of the virtual services. perhaps some of these companies will make that transition to leadership yet again in these emerging markets, but we continue to believe that the next set of market leaders are going to be a different set of six or seven companies if we look three to five years from now. jonathan: lisa shalett, wonderful to catch up with you. we always enjoy it. thank you. we want to turn to goldman with

numbers this tuesday. we get little bit of insight at the team. the following, $2.2 billion of revenue in the commodities trading unit for 2021. tom: when we see tottenham-arsenal, we will have to stop by for a beverage of our choice the ellie mae group. -- with the lme crew. profit is made. jonathan: this is a unit in the lead paragraph of our story. this unit was failing to generate $300 million. these are big numbers. lisa: $2.2 billion, that was the tally. i have to think about when oil prices were negative completely

sent us to tailspin as a result of the pandemic. who else is minting money? where does it go at this point? where does it go from here given that we are still in a very uncertain time, but was really interesting calls? jonathan: we were talking about getting paid on wall street this year. quote in a year of record off its, we will surpass $30 million. for some of the top performers, $30 million. tom: we should invite them on a cruise. jonathan: i think they are paying. they are picking up the tabs for the drinks. tom keene, lisa abramowicz, and jonathan ferro. futures basically unchanged, up 0.05% on the s&p. yields unchanged at 1.7376 percent. from a beautiful but slightly cold new york city, this is bloomberg. ♪ ritika: president biden's choice

of vice chair of the federal reserve says that cutting inflation is the central bank's most important task. in advents of her confirmation hearing today, lael brainard said people across the country are concerned about how far their paychecks will go. russia viewed talks this week with the u.s. and nato as unsuccessful. the u.s. says moscow must discuss if it wants to resolve or is just looking for a pretext to invade. in states facing coronavirus surges, doctors, nurses, and others will help ease the stress on hospitals.

in the u.k. come of the covid isolation period has been cut from 10 days to five. data from the u.k. health experience -- health security agency shows that cases are no longer infectious by the end of day five. apartment rent in manhattan rising to a record last month. that is largely due to leases at buildings with doorm -- with doormen. 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 ritika gupta. this is bloomberg. ♪

♪ jonathan: from new york city, for our audience worldwide, alongside tom keene and lisa abramowicz, i'm jonathan ferro. ppi data just moments away. 12 minutes away, to be precise. your equity market advancing 0.1% on the nasdaq 100, up more than 0.1%. the story on the bond market on the session and only year come on the session down by almost 0.1%. on the year, by more than 20%. the dollar is weaker on the year , despite the fact that yields are higher. the dollar index is down 0.9 percent. euro-dollar on the year so far is positive 0.1%. we are back with a 1.14 handle at 1.1461. tom: in this hour, lisa shalett

with us of morgan stanley. jane foley can join us from london, head of foreign strategy at rabobank. how is the foreign strategy different now from where it was 13 days ago? what has changed? jane: if we go back to that last full week in december, we had all of those central-bank meetings, and euro-dollar did better, and i think that was the warning sign was long, so i think positioning is a large part of the story and why the dollar is pulling back. it is coordinating with a buildup of a consensus view on european equities, that being

that there is less tech encyclicals and european equities, and a lot of commentators suggesting european can do well this year. people have been being short euro for a while. maybe you can reconfigure that. tom: away from the brexit ballet you are living in london, what is the positioning for trade this year? this is the meat and potatoes of rabobank. are you assuming a more buoyant trade regime that allows for foreign-exchange hedging? jane: definitely. if we talk about effects of hedging, i think we are going to have a lot more volatility this year. any when you are expecting to see the drawing back of liquidity permissions, tightening of policy, that removes some of that comfort get and releases some volatility. i think that is the first thing. i think corporate certainly looking to hedge will be

perhaps wary of volatility, but we still have these big issues with inflation. if you look at u.s. data, what we see now is it is back on the trend it was pre-pandemic, but extended her on goods is still massively higher, even though it has come down a bit. that suggests that we are still going to have tightening labor markets. we are going to have issues about wages, and we have seen some tightness slipping into the countries. look at the australian vacancy status we had yesterday. so that is going to be triggering a lot of talk about what central bank's are doing in 2022. more reason really to hedge. lisa: amid all of this and the positioning noise you see around the dollar, you see the euro-dollar heading back down to 1.10, and the dollar continuing to strengthen and the first six months of this year, can you walk us through the path of that at a time when it is unclear how

much positioning has been unwound? jane: that is right. i think the positioning unwind we are seeing right now is necessary. i think the signs in december were not good, and this is sort of an inevitable move. but i don't think the dollar is totally done yet. we are talking about tightening labor markets. certainly in the u.s., there's far more tightening there. even if we look at cpi or inflation data, and inflation is pretty high in the u.s. and in the u.k., but if you move into japan, if you move into the euro zone, it is still a lot more moderate. still don't have the tightening in the labor market, that wage inflation that we see in the u.s., perhaps because they have furlough schemes. this has kept their employees on the payroll, unlike in the u.s. so there isn't that urgency, and once this unwind that we see now with respect long dollar

positions, as many this year with three or even four interest rate hikes. i don't think we are done yet, but it is going to be to the latter part of this year that we will have a comes in trajan -- have a concentration. i think at that point, the dollars day will be done. lisa: what is your sense about the ecb and left off their? what is the timing? jane: we've got to remember that the same pressures in wages, certainly not looking at the free data, it is nothing in terms of real wage strength. there's a lot more time there in terms of what the ecb needs to do in terms of inflation, but certainly we will be talking a lot more about normalization relative to --, and i think that

will have a bit more support. jonathan: to what degree are we on boris johnson much in the fx market? jane: it is interesting because clearly, u.k. newspapers are all over this or in johnson -- this boris johnson scandal and his premiership. we see a lot of movement upwards in cable, which predicts dollar weakness. you've got to remember the difference in the political system in the u.k.. we don't vote for the prime minister. we vote for a party. so the party contingents is his leadership, and they still have a strong majority from the last election, and the next general election isn't scheduled for another couple of years or more, so whoever is leading the tory party, whoever is the prime minister will inherit that

strong majority, and that perhaps is really giving sterling a bit of a reason not to react to some of this turmoil we are seeing now. that said, with so many investors still skeptical over the post-brexit situation in the u.k., i think we need strong leadership to try to put some of those concerns to bed. jonathan: awesome as always. that is where the outperformance has been in g10, from 132 to 130's out -- 1.32 to 1.37. tom: to me, the most interesting thing there was a positioning, where she was suggesting everybody had a long dollar bet. we've got to cut her that in go the other way that we got to cover that and go the other way. jonathan: ppi just around the corner, and then catching up with abby joseph cohen,

professor at columbia business school. looking forward to that conversation, her first interview post goldman sachs. for our audience worldwide, i'm jonathan ferro. mike mckee running through the inflation numbers next. ppi numbers just around the corner. this is bloomberg. ♪

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>> welcome to " bloomberg surveillance." with the numbers come here is mike mckee. michael: it is lower than last month, 5/10. it was 7/10 in november. it was a tenths -- that is largely afflicting -- largely reflecting the declines

we saw in commodity prices for food and energy. those may be going back up on a year-over-year basis. final demand is up at 9.7 percent, higher than in november. the court is at 6.9% -- the core is at 6.9%, same as in november and is matching expectations. tom has been interested in the rig down with in it for services. they were up half a percent. for final demand, goods were down for 10 of 1%. final demand goods reflect the commodity changes and services are sewing -- services are showing some inflation. even though we are lower month over not -- month over month, i don't think the fed is going to take anything from this. we have been saying for some time you could not get a clean read on the jobless claims

numbers because it was the holiday period. we are getting through that and it looks like we have moved up a little bit. i would not say this is because people are being let go at any greater rate given the difficulty of finding people these days. we do expect claims to rise in the weeks of january because of temporary holiday workers leaving their jobs. i would suggest this is in the other direction just as hard to read as in december. jonathan: you know how it works in markets. this market is not being surprised. not being surprised today. we talked about how long had to wait for numbers like this. this market has always been proud for them. when you look at the price action, there is not much. your 10 year yield is where it was. equity futures up one quarter of 1%. on the whole for this federal reserve, patrick with the philly

fed said it, the logical conclusion of this situation is in escapable. we need on a trade policy. michael: his talk on financial -- his talk on inflation to the financial times ties it up, very high and very bad. we have four members of the open market committee who vote saying you're going to raise rates in march and we had leadership of powell, a nerd, and williams saying we are going to raise rates. markets have accepted the fact that it is not a question of data, it is a matter of waiting for the meetings. tom: thank you so much. coverage of the brainerd conversation, we will see that later. this harkens back to 20 years of columbia. this is 2004 or 2005, a vision of a columbia university that

would support harlem and new york city with manhattanville. they have moved forward to the great architect to professor cohen. joining us now, abby joseph cohen and, now senior goldman sachs investor and professor. you were not going to start -- you were going to start remote because of omicron. when you get there, how will you lecture to the students? what will you bring different? abby: thank you for bringing me. this is in fact my first time speaking since my shift at goldman sachs. the global economics and markets

course i'm teaching is one i have been teaching for the past eight or nine years. i have been a long-standing adjunct at columbia. i consider to be a great intellectual home. the course is a combination of theory and practice. i have the opportunity to teach with one of the tenured professors at columbia, a wonderful gentleman who will be covering a lot of the theoretical macro and i will be talking about what has been the happened in the market not just over the last few days but over the last several decades, trying to put this into perspective. tom: the perspective is the new capitalism, columbia business school has supporters with names we know on "surveillance." how do they knew capitalists and the budding mba students deal

with a new, more responsible capitalism? abby: that is a terrific question. let's keep in mind that at columbia is a great legacy of intellectual capital. some of the great thinkers in terms of capital markets in the 1930's and 1980's also had relationships at columbia. a strong economics department, a finance department. what i see in the new students is interesting. at columbia, half of the students are non-americans. they bring an incredible global perspective to what we are seeing. when we look at structural change in the u.s., we say nobody else has ever dealt with this before. we are incorporating the experiences of our students as well. we do find that this generation of students is very much

interested in a few things. number one, they would like to know how companies run, obviously. in our course, we also talk about how government policies made. we give the students opportunities to debate what should those policies look like. among the topics we address are things like esg. we also look at things like regulatory changes, things that might need to be adjusted at the structure of the economy changes. i always love to talk about the fundamentals, the data in the economy but also the evaluation of the markets. tom: lisa, you know someone in row seven is going to say what do you think of the market? lisa: i will do it, i will stand up and say we got this ppi data. we are now pricing in four rate hikes.

we are in a new regime for inflation. what is the market call at a time and a lot of strategists are bullish on equities? abby: i think the regime change occurred a few months ago when we began to see data suggesting inflation is rising, interest rates would be moving up. underneath the service desk underneath the -- underneath the surface, we have seen rise in action. we are saying that investors are starting to move away from the big mo. that was fixed income by bonds. we see that investors are becoming more selective with fixed income. we see that on equities as well. the thing that is always so important is what is already baked in to ask the -- baked into expectations. my feeling is we have a few surprises ahead in the equity market. some good, some not so good.

valuation support is not particularly good in some segments of the market. in sum, it looks pretty good. there are some growthy areas that are not priced acceptably. the overall market will be volatile because the only valuation metrics that still look appealing are the ones linked to low inflation, low interest rates. as those move up in 2022, the equity market comes under pressure. i think pe ratios for the overall market compressed somewhat. i think there is some offset terms of continued improvements in earnings growth. i certainly don't see a recession. i think the real action in the market will be under the surface, not in the indices. lisa: based on that, how much of that is pricing in a perfect

transition to a tightening cycle? this idea of an exit and threading a needle that will be tough for the fed to do. abby: you raise two interesting points. number one, the needle of the fed has to thread. they will be doing it through a combination of increases in short rates and adjusting the balance sheet. could there be another temper tantrum? maybe. i think the fed is doing a great job by signaling these things ahead of time. when i started as a junior economist in washington, the rule was you did not tell the markets anything about what you plan to do as policymakers. two to three months later, you would start to tell people what already happened. that is not the way it works now. i think the signaling that gets done by the fed is actually very helpful in that regard. that is one needle has to be threat.

the other needle that has to be threaded is how to position portfolios. i think institutional investors have been talking about this. they have not been doing it. i am worried about individual investors, many of whom have not yet figured out the damage that could incur to their personal portfolios as interest rates rise. that to me is concerning. when we think about shocks to the system when evaluation is not so good, we cannot assume a smooth transition. there are some risks that could knock us off balance. people talk about the pandemic, which is not over. we need to worry about what is happening in other countries where vaccine distribution has been limited. we also need to worry about disruption in the fixed income markets and what that could do. i know there are some people

were concerned about what happens when people recognize there has been a difference between cap market performance and equal weighted performance. tom: when they ask for your market call, just tell them yields up and price down. thank you so much for joining us from columbia's business school. jonathan: what i cannot get -- tom: what i could not get in was a delicate question. she will be joined by richard clarida and the two of them in a course would be charged about the future of ethics in the government. jonathan: do you want to go there? do you think he is going to teach an ethics class? tom: i don't know if you will teach an ethics class but he has lived one. ndp tradition of these institutions, they are trying to fit the new regulation, the new ethics everyone is getting with, including the presumptive vice

chair of the fed. jonathan: i might enroll. would you be proud of that? tom: if you were in row 42 of professor cohen's class, you would be obnoxious. i can see it, professor, what about the twos-tens spread? jonathan: i think the 42nd row is too far forward for me. lisa abramowicz and tom fara -- and tom keene. yields on tens at 1.7 341. for our audience worldwide, pp a coming in line. a lift in the equity market. this bond market and this pricing, a big debate here. from new york, this is bloomberg. ♪

>> they are clear about the

prospects of progress in these stocks. they expressed concern about the russian military buildup in and around ukraine and called on russia to immediately escalate the situation. at the respect of sovereignty and integrity of its neighbors. tom: yun stoltenberg, the nato secretary-general looking at the many fronts of russia. it used to be simple math, there was one front, then two, now there are three or four fronts. follow us on a radio and television, a wonderful time to speak to robert hormats. he is tiedemann advisors. his experience from northern ireland and the planet because extent. i don't even know -- from northern ireland and the in kazakhstan. explained from a diplomacy stand went the importance for america,

kazakhstan. robert: kazakhstan is a largest supplier of transit vehicle -- supplier and transit vehicle of natural gas and oil. some of it goes to china but some of it goes to western europe and the west. energy, particularly during where they have 40% to six to percent of the uranium production of the world. now we are building up nuclear power, they are important. third, they are strategically located. other than mongolia, they are the only country in the world that has a border with china and russia.

the russian troops that there for the moment is not worrisome. they could be another front on the russian desire to expand. tom: what is our diplomatic force forward? china has got a view. russia has got a view. our view is any isolationist tone act 250 years and the idea that the -- the idea that kazakhstan is on the others of the world. what is the diplomatic umph democrats and republicans can generate? robert: very little. the russians don't want and the chinese don't want instability in kazakhstan for various reasons. it is on the border of russia and china. if it were unstable, it would be an opportunity for the russians

in particular to expand their influence. we have had very good relations with kazakhstan. i have been there several times. if it becomes an unstable lease and a lot of instability, it affects the world's energy supplies and uranium supplies and it makes for a more -- it makes for more political volatility in central asia. lisa: as the whole world moves towards a less fossil fuel attentive regime, i wonder whether the u.s. has enough of a footprint in these countries to provide such a huge proportion of the raw materials needed to engage in some of these plans. what is your view on that at a time when russia and china are moving together to the sled -- together to solidify their

strategic positioning in that region? robert: that is a good point because those in kazakhstan have been suppliers of a lot of oil. not all of it comes to the u.s., but it does go to our friends and allies and affects the world price. it does matter a lot. in terms of our influence there from a geopolitical interview, it is far less than the russians or the chinese. therefore, our ability to really play a major role is insignificant. we want to stability there, the russians and the chinese do, too. we don't what it to be a base for radical jihadists. i don't think it will be. it is very important qualitatively on energy and strategically because of where it is looking -- because of where it is located. lisa: given your former

experience as an ambassador and that the nord stream 2 sanctions could come today, do you think that is a wise move for the u.s. to move to try to pressure russia in some of the rhetoric on the ukrainian border? robert: that is a big problem and it requires reading putin's mind. the problem is if you legislate that now, your reducing some of their negotiating leverage over the russians. sir gary avakov and nancy sherman are trying to work things out. they keep sticking the rows in the russians' face. even if there is a benefit to tweaking the russians and putting pressure on them, it does make negotiations harder and puts putin and -- puts putin

in a much more aggressive place. don't forget, there is a big events among the europeans on this. some europeans want nord stream 2, some do not. you now have 30 countries in western european -- and western europe united against russia and supporting the u.s., for the u.s. to do this unilaterally. it would not help the negotiators. tom: thank you so much. that is all the time we have today. tiedemann advisors, robert hormats. i think it is being played down and i don't buy it. i think it is going to be fascinating. lisa: she has a less clear path to confirmation of then jay powell. when it comes to rate hikes and the balance sheet, if she gives

her sense of what the view is on it, it could really move markets. tom: almost as important is a 30 year auction today. let's review it again, 30 years out. why do i want to get paid two point -- x percent by the u.s. government? lisa: you don't. we are going to be heading back into this low inflation and the growth experiment -- and low growth environment. this is a key debate at the time when a trajectory for the fed funds rate goes from 3% to 4% to the rest of wall street -- wall street 1.75%. tom: we need a 50 year auction next week. can we do that? lisa: sure. tom: that worked out for me. talk about price down coming yield up. thank you, austria. stay with us, an infantile day after ppi. we move on to the brainerd

conversation the senate banking committee later today. on radio and television, we say good morning with futures advance income up 11. the vix, 17.80. good morning. ♪

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jonathan: two days of gains on thursday, good morning. the s&p 500 up 11, advancing 2/10 of 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: live from new york, we begin with the big issue, the road to march. >> the cpi numbers. >> 7% cpi. >> it does reinforce the message we have been getting from the fed. >> the march rate hikes. >> i don't think anything stops them from going in march. >> we are looking at the seven handle. >> rate hikes with potentially anti-rolloff. >> the fed cannot escape the inflation issue. >> they are going to chase this thing. >> they want to appease