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tv   Bloomberg Surveillance  Bloomberg  February 10, 2022 7:00am-8:01am EST

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♪ >> in terms of the fed, i think they are in one of the most difficult situations in our lifetimes. >> we are right a point in the cycle where inflation is a major issue. >> the fed needs both quantitative tightening and rate hikes. >> i don't think we are going back to the pre-covid inflation environment. >> landing this perfectly is going to be a difficult task. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: cpi 90 minutes away. from new york city, for our audience worldwide, good morning. this is "bloomberg surveillance, " live on tv and radio. alongside tom keene and kailey leinz, i'm jonathan ferro. tom: twitter out with earnings right now. they do a share buyback.
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what is important is we need to go beneath the headline data, and that means a cross-section of the makeup of inflation and the dynamics separately of goods as compared to services. jonathan: and rent. why is that so important this year for you? tom: words important for me is we have heard from some of our guests, it is not so much of the look back, which is rents are surging, but the look forward. how will people readjust, whatever the statistic? jonathan: market pricing important to me. the two-year yield just south of 1.40%. we ended last year at 1.50% on tens. tom: this is not in the zeitgeist this morning. i don't know the exact hour, but the twos-tens spread flattened out to new flatness yesterday. that was missed with that lift in the two-year yield. jonathan: we saw a really strong demand on the long end tens. kailey: really strong takedown,
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the highest bid to cover ratio going all the way back to may 2020. we have another auction on deck today for the long bond, the 30 year. my question is, will the appetite stay this strong, considering that that auction is coming post cpi? yesterday's auction came pre-cpi. jonathan: the walt disney company in the premarket up more than 7%. we can talk about the subs, tremendous, the theme park business, but think about the average spend of someone going to a disney theme park. through the roof. kailey: the margin on that is huge. i don't know the last time you went to disney, but i just remember the last time i went, everything at those parks costs so much money if you want a drink, if you want some mickey mouse ears. all of it is expensive. but considering the capacity to spend, what is that single for the u.s. economy? jonathan: that stock is up. i'm pleased kailey brought up
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margins. tom: margins front and center, and margins are solved by revenue growth. we are going to focus on inflation, but coca-cola is an american bellwether. their organic revenue growth as published is 9% versus the 5% statistic. that solves margin asked. jonathan: eps lower than sales beats. 53% of the companies that have reported in europe have beat on eps. 71% of companies have beat on sales. it is not falling down in the same way. tom: i will go with that. liz ann sonders was great on this yesterday. revenue solves problems. with inflation, you do get revenue. coke number to me, organic revenue at 9%, that is a high
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level. jonathan: looking forward to catching up with them a little bit later. coca-cola up by more than 1%. it is cpi thursday. futures softer 0.1% on the s&p. on the nasdaq, down 0.2% and -30 points. in the bond market, down almost a basis point, 1.9337% on tens. euro-dollar at 1.1433. kailey: it really feels like stasis across asset classes as we wait for that inflation rate at 8:30 a.m. eastern time. 1982 is what we are thinking in terms of how high this inflation print could be. the month on month number, we are expect and 0.4% gain, down from zero point 5%. how much does that matter to this market? does a hot or cold read have an effect, given how aggressively we have priced federal reserve hikes for the year?
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jobless claims data also coming out at 8:30 a.m. eastern. you and i were talking about the 23 billion-dollar bond auction coming up at 1:00 p.m. eastern time. after really strong demand for the 10 year yesterday, what is the takedown going to look like this afternoon? we have focused a lot on the fed in the u.s. today, but the boe him to be in focus at 3:15 p.m. eastern time. andrew bailey will be speaking at a dinner. my question is, does he have to apologize and maybe walk back for some of his comments he made on wage restraint last week? he got a lot of blowback from that, so it will be interesting to hear from him. jonathan: what was he thinking? why did he say it? some people criticized him for saying that we should be restrained asking for pay rises, but he did not tell corporations to be restrained as they think about passing through high costs. it is tough. tom: it came up at dinner last night.
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the dialogue in the u.s., is it dramatically different on wages and executive compensation? jonathan: the front of living crisis is front and center. you are facing higher interest rates now. things get harder. tom: i was going to look at tottenham cold today, but -- tottenham coal today, but instead i looked at newcastle coal. the price of coal in the united kingdom is tangible. jonathan: you have seen the price of net gas as well as around europe. it is a big problem. let's get to anastasia amoroso, chief investment strategist at i capital -- at icapital. how much will this hurt for this market? anastasia: i think parts of the market are not prepared for this. the challenge is, as you pointed out, inflation is starting to bite real wages. it is eating into consumer confidence. so you already see demand
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slowing down and some cyclical parts of the economy. manufacturing. we have seen the pmi's peak. the new orders component is at the lowest level since september 2020. i think we are ready to watch a slowdown underway in some of the consumer spending and cyclical categories, but then let's bring the fed into the equation. if the fed wants to slow down inflation that is going to be probably 7.2% today, they need to slow down demand. they can't build more houses. they can't issue more semiconductors. they can't build more cars. they can start to slow down demand, which has been blockbuster for a lot of these durable goods. if they do that, some of the cyclical value type stocks will potential he have to reprice lower, or at least they don't have much room to go higher. the reason i say this is because if you look at the last six quarters, it is the upward earnings revision that have really driven the upside in a lot of those cyclicals, and i
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don't know that we are going to see those going forward against tightening rates and demand that is already slowing. that is why our call for this year has always been more subdued market returns and more differentiation, so consensus piled into value and cyclicals, it may be time to take profit on those trades. kailey: that rotation was fast and furious when we saw in january that dramatic rotation into value and cyclicals. will the unwind of that be just as steep, or is this a process you see playing out more overtime? anastasia: i think over the next several quarters, we will start to see this unwind. probably not as overweight as they have been in technology. evaluations have not been as stretched. i don't see this being a violent selloff in these sectors. you have already started to see some of this rotation to lace. we look at the latest hedge fund data, a lot of the hedge funds
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have bought into financials, but they have started to take profits on those financials. you have seen the sector maybe not perform as well as one might expect, given the higher interest rates cap. on the flipside, it is back to buying tech. tom: your research note is against consensus. when you say buy technology, are you saying load the boat on google and amazon, or do you have another nuance there? anastasia: there's a lot to do in technology. i look at semiconductors, software, and i look at what are the trends we are likely to see persevere despite any sort of cyclical. for example, we are still going to see more on capex. we're going to see i.t. managers spend more on cloud spending as well. anything tied to the cloud ecosystem, whether it is the names you mentioned, the
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cybersecurity stocks that help us ensure their data is but beast in the cloud -- is safe in the cloud, i think those will continue to benefit. we have seen a measurable reset on that. then i go to semiconductors, which is kind of a sweet spot of the secular growth from 5g, from the move to the cloud, from electric vehicles, and also the cyclical momentum as well. we are going to see auto production likely recover this year. that will benefit some semis. i would go pretty granular in tech, but also say we have seen some pretty big shifts within technology. i think the old social media centralized model, that may not be intact going forward. jonathan: thanks for being with us. anastasia amoroso, thank you.
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let's get to one of those social media companies, twitter. we are used to big moves in the premarket after an earnings relief from this company. another sizable one, up 8.5%. the ad spend seems to hold up in a way it did not at facebook, and we've got by back in the mix. kailey: a big buyback, 4 billion dollars, which is probably what the market is taking most kindly too, given some of the factors, including the monetization of active users came in a little bit like. my question is, what is going wrong for meta that is going right for all of these other companies, subsequent to the same headwinds? tom: i want to emphasize, twitter is truly minuscule. it is for percent or 5% the revenue a facebook. jonathan: up 8% in the premarket at around $41. coming up at 8:00 a.m. eastern time, lisa shalett of morgan stanley. a conversation you do not want to miss. from new york, this is bloomberg.
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♪ ritika: today's report on to its largest rate hike in more than two decades. the consumer price index is out at 8:30 a.m. new york time. a reading may pressure the fed to consider its first half percentage point hike since 2000. the white house picked -- the white house pick to be the top fed regulator faces a senate banking committee vote next week. russia and belarus are beginning their largest joint military drills in years today, being watched closely by the u.s. and europe amid tensions over neighboring crane. thousands of troops backed by tanks, fighter aircraft, and missile to si -- missile defense systems are involved in
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the exercise. ford has been forced to temporarily shut a canadian engine factory and will operate another plant at reduced capacity area protesters angry over covid restrictions are blocking the ambassador bridge between detroit and windsor, ontario. pepsico has given a sales out look for the full year that has beaten estimates. they have raved prices on salty snacks and bottled water. they saw operating profit declined in its america's beverages unit. 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. ♪
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>> in terms of the fed, i really think they are in one of the most difficult situations in our lifetime. we have inflation well over expectations, and our view is 12 months from now, cpi is probably going to be closer to a 5% figure, not the 3%-ish that consensus is looking for. jonathan: rebecca patterson, the director of investment research. from new york, with tom keene and kailey leinz, and jonathan ferro. futures are a little bit negative on the s&p. on the nasdaq 100, down a little
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more than 0.1%. yields are unchanged going into the cpi print in one hour and 12 minutes. 1.93% on tens. tom: there it is, it is inflation. we will have that for you in an hour and x number of minutes. right now, we will do ukraine or this and that, but today we are going to sit on this important inflation report. jack fitzpatrick joins us with bloomberg government. is there a difference in inflation analysis between the right and the left? jack: i don't know that there is necessarily a difference. when i talk to people on capitol hill, when you hear the way the president addresses it, i'm not sure there's a difference in analysis. there's a difference in focus in how it translates to legislation , and how people develop their opinions about it, but i think
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generally when you hear from lawmakers debating how this plays into build back better, they are more or less debating the same kind of set of numbers. i don't think there's a fundamental difference in their analysis of it. tom: i'm going to suggest, and correct me if i am wrong, the third rail is a gallon of gas. how does that play off the report this morning? jack: that is where a lot of the focus is. tom: i got that right, good. jack: clearly, you have heard the president talk about the price of gas. you have heard republicans go after the president, pointing at the price of gas and energy prices. they like to talk about california. it is no coincidence that the president wrought up first and foremost in his call with king salman yesterday on opec, trying to at least appear that he's doing what he can on gas prices.
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but that really is the political flashpoint more than probably any other in terms of how inflation works its way into the political debate and/or political understanding of these numbers. kailey: is inflation the single biggest force dogging the biden administration at this point? jack: it would be hard to say if it is inflation or the frustration over the fact that we haven't really moved beyond the pandemic. whether you are frustrated with people who aren't still wearing masks or have not gotten vaccinated or frustrated with what we see as more burdens than necessary that the government imposes, those obviously are linked together and how one affects our economy, but really, that is the big one to punch that is hurting the president polls, hurting democrats as they looked towards the midterms,
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inflation and the pandemic, and the fact that they go on much longer than a lot of people initially expected. kailey: let's continue on the midterms. the clock is ticking fast. realistically, how much time is therefore potential improvement as we talk about inflation may be waning later in the year, talking about hopelly moving to someone of a different stage of the pandemic by later this year? is it going to be too far gone, too late for that to actually make a difference when voters had to the polls? jack: people vote early to some extent, but really, the election is in november, so if there is a significant improvement in people's lives by november, or at least october, that can change things rapidly. i would point out that there is a lot of history showing that the president party in the first midterm tends to struggle, and if it is not those issues of inflation and the pandemic, other bad things could happen
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that is very easy to blame the president for. i'm not sure the russia-ukraine situation has been dominant in people's minds, but that could flareup. there are a lot of risks for the president and democrats on the campaign trail. things definitely need to change and get better by november, but it is challenging for them. tom: i'm going to go back to something we did in the last hour. how do they message their concern about inflation? we get jobs day. they go out. the secretary of labor talks to jon ferro. jon ferro beats them to death. we get that. how do you message price change at 1982 levels? jack: they struggle with that, clearly. they tried to emphasize come of the president has tried to emphasize the flipside of the coin and say if you blame the aggressive stimulus for inflation, you may also want to keep an eye on the dropping unemployment rate. but the details of what the
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president is trying to do regarding inflation are tough to communicate to the general public, whether it is competition, antitrust stuff, competition for meatpackers, the semiconductor issue and the price of cars. it is complicated enough that clearly the fed and said that he has limited capability here. tom: jack fitzpatrick, thank you so much. this is absolutely critical one hour away from this vital report, that the dispersion of affect of high inflation, one of the great series of the 1980's and the 1970's is for the haves, it is like, no big deal. i can take care of that. the have-nots, the middle class got crushed. i predict that is what you will start to see in the coming weeks. jonathan: would you like to talk about the economics of the politics? tom: i think it is both. jonathan: i keep saying the
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calendar is on their side because you get to summer, what matters on here is the year on year figure -- what matters politically is the year on year figure. the hope is that the story fades. problem politically, and this has been leveled at this administration by many others as well, there's a sudden aloofness that has at times plagued this administration. coming into this year, there has been a big change. every time you turn the tv on now, you will see the likes of brian deese, the director at the national economic council. they are trying to communicate with people, help them understand they understand what people are going through right now. 12 months ago, it wasn't the problem it is now. but in the summer, going into the fall and winter, that approach was totally absent. it did not exist. you remembers begin to the energy secretary. we asked about crude. we got laughed at. that did not go over well. there has been a change in this administration. they need to change quickly going into the midterms.
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from new york, alongside tom keene and kailey leinz, and jonathan ferro. 'bramo taking a long weekend, skipping the inflation data that an hour from now. from new york, this is bloomberg. ♪
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jonathan: live from new york city, here's the price action one hour away from cpi in america. futures down 0.1% on the s&p. on the nasdaq, is down by 0.14%. the russell moving lower by a little more than 0.1%. we start to eat away at those losses as the sessions progressed. a big two day winning streak. we break that a little bit going into cpi. things can change a lot of 60 minutes. twos's, tens, and 30's. on twos, 1.3 686%. very close to 1.37%. we pulled back by three basis points. 66 on tens. came very close to getting that
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1.97% a little earlier in the week. then we pulled back up to that really strong demand in the auction yesterday. the 10 year yield coming in about a basis point or so. similar move on 30's. big question for the fed, how does this cpi print set the tone for the march meeting and may be shaped the year beyond that? the ecb and the boj, switch up the board, euro-dollar, dollar-yen. will they hike? possibly later this year. for the boj, governor kuroda was asked about it. no chance this year from that man anytime that soon. is he a last one standing? tom: that is going to be interesting to see. the turn -- the churn of information has been extraordinary. jonathan: dollar-yen with a move off the back of those comments, 1.157 nine. that currency pair up 0.25
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percent. cpi just around the corner. let's get you some movers and say good morning to romaine. romaine: the complexion of that cpi data is going to be a big driver for the markets. we do have some fundamental stories in the premarket moving stocks. twitter shares up about 5%. the numbers they had on their earnings this morning pretty much in-line with estimates, but they did have to do a new $4 billion buyback that adds to about $1 billion left over from past buybacks, so all told, about $5 billion shares they are going to buy. that is a reason why you're seeing shares higher. disney stock was out last night. the big news, although people folks -- a lot of people focusing on that streaming revenue, pushing out to about 130 million subscribers overall. 7.23 billion dollars of revenue in the most recent quarter. you go back to the last quarter of 2019, they had $7.5 billion
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in revenue at the parks business. so they are basic a back near prepend them at levels with the parks business. bob chapek talking a lot about this yesterday and about the pricing power that they have at that part. he said he would not rule out a price increase on some of the disney+ services in 2023. coca-cola, 9% organic growth, but that price makes they had is also up about 10%, well above what the street was looking for. a couple other names which did get uber earnings, pretty much a beat on all of the main metrics. tulia was your biggest percent gain or, as well is your biggest volume gainer. keep an eye on micron and some of the other memory chipmakers. a shutdown at its competitor western digital giving a boost to micron and some of the other competitors. tom: thank you so much. this is our interview of the day
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on inflation. we do this with the gentleman from cornell and yale under james tobin, edward yardeni, definitive of linking our investments into economics. i want to talk about the great divide, which is the analysis of the nominal, the actual, the current statistic with the inflation-adjusted statistic. the legend at pioneer once told me the bright lights of inflation can solve a lot of problems for corporations. do you see that now, that corporations will prosper amidst this new inflation? ed: i don't know that anyone really prospers in an inflationary environment. so far over the past year, where we have seen a surge in inflation, it certainly seems as though corporations have been able to hold onto their profit margins remarkably well. they are basically at all-time record highs. that certainly implies all of these lost increases, labor
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shortages, parts shortages, we will overcome it one way or another, and one way is to pass those pressures on through higher prices, which we have seen. i am early a believer that companies are scrambling for some productivity, and i think that is going to be the big difference between now and the great inflation of the 1970's. tom: we had a raging debate on this yesterday on the horse and cart of productivity. do rising wages lead to a more spirited productivity? it is debatable, isn't it? edward: yes and no. i think the big structural issue of the decade ahead which is not going to go away, baked into, it is going to grow between 0.5% per year, maybe because boomers are retiring, and we are replacing them basically one-for-one. so there's no growth in the labor force, and companies are
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starting to see that when the unemployment rate cut to do .5% before the pandemic, and now here we are again with extremely tight labor market. i think everybody is starting to understand that this is not just a pandemic issue. this is a structural issue. the only way to deal with it is to increase productivity. there's phenomenal technologies out there to increase the manual and mental productivity of workers. i think that is going to happen. michael: as the federal -- kailey: as the federal reserve is looking at this labor market, we are likely to see 1982 level inflation in the print we get an hour from now. you cut your target last week to the uncertainty around fed policy. how much room is there on either end for a hawkish surprise, given how much has been priced in, or a dovish one? edward: as you said, if you look at the two-year treasury note yield, which tends to be a great year ahead motivator which the market will anticipate the fed funds rate to be 1.33%.
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here we are just a little bit north of zero. so we got a ways to go. the debate is are they going to do it in measured 25 basis point increments or starting out with a 50 basis point increments. the answer will depend on what kind of surprise we get out of cpi this morning, but i would like them to just get on with it. let's do 50. the market has already discounted it, so just do it. kailey: in terms of what matters to this market, you say all of this has been discounted and contributed to the turbulence in 2022. is it just the macro policy environment that matters here? you were talking about profit margins, the earnings story. does that just matter less now? edward: it does, but the reality is that those profits increasingly, we have to look at them discounted by the kind of
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inflation we are getting. when inflation was less than 2%, nobody really cared about what impact that was having on revenues and earnings, but now clearly we are not getting as much bang for buck, real earnings, if you will, from this kind of inflation. so we need to see inflation start to moderate in order to see stronger, organic earnings than just pricing. tom: there's a trend right now of flows of equity money abroad. maybe i don't want to own apple, i want to own something abroad. you up -- do you buy it or stay with big tech, the defensives? edward: i would stay in the u.s. that doesn't mean that i would not invest overseas, but i have been promoting stay home
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really since the beginning of the bull market, and it has worked quite well. it is not just tech that has outperformed. we have seen other sectors like health care and finance outperform the rest of the world. i think we continue to do that. we have a quality sector that produces a lot of technologies that lead to fintech, so all in all, i would stay in the u.s. on an overweight basis. jonathan: you own this phrase. are the vigilantes back? edward: i think we will find out shortly. we were in the ides of march, and they should be announcing they are done buying s securities, and that will free up the bond vigilantes to express their opinions here. so i think they are waking up. jonathan: ed yardeni, fantastic to get your research. they have been in hibernation for a long time.
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i think they are thinking about coming back out. tom: also the measure of a bear market, i believe it is yield up, price down. to me, the money call linking fixed income into this report in 50 minutes is the crew looking for rates to come up, and then they will halt. jonathan: the yield calls from goldman, year end 2.25%. you're in next year, 2.24%. tom: we've covered a lot of ground here. for those who are not in the statistics game, mike but he is going to come out and give us a snapshot, and it is going to be interpreted not by a bond market , but three or four or five beliefs in the bond market. jonathan: when it comes to the bond market and rates at the fed, of course the march call gets a lot of attention. the middle of march, whether it is 25, 50, the destination, the
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path is so undefined at this point. they have been so vague about it. i'm looking forward to the dot plot from the fed in the mill of the month. kailey: it raises the question of about has this market misunderstood what the >> will be. if fed -- if the fed decides to pause, that could stagnate. it is not about liftoff, not about 25 or 50 basis points. it is how long do they go for that. they chill out a little bit? jonathan: that is a call from standard chartered. hopefully the inflation story fades. a keyword, hope. tom porcelli of rbc joins us at 8:30. mike mckee breaks down the data. we will bring you the price action. futures essentially unchanged. from new york, this is bloomberg. ♪.
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ritika: with the first word news, i'm ritika gupta. jared kushner held talks with saudi arabia's de facto ruler in recent weeks. he also met with top officials from saudi aramco. he formed a close relationship with mom and bring some on -- with crown prince mama been solemn on during the administration -- prince mohammad bin salman during the administration. russian billionaires have been buying up property and assets in the u.k. since the 1990's. russia has repeatedly denied it plans to invade ukraine. credit suisse cut after posting net loss, but found the bank has found a way to avoid its best performers. >> the fact is in 22 anyone, we
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also included compensation and terms of our -- for each third delivery plan, and it is well seen by our employees. credit suisse is more positioned to pay in terms of compensation. ritika: 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. ♪
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>> i think right now it is unpleasant because the regime
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has shifted. people are getting used to it. i think we are going to have this volatility perhaps for a while, but at the end of the day, i continue to believe firmly that the cycle will be muted relative to normal monetary policy. jonathan:jonathan: philipp hildebrand there, the blackrock vice chairman. 8:30 eastern time, 42 minutes from now, we will have inflation data and america. futures at the moment a little softer, down 0.2%, up 1% on the nasdaq, down 25 points. the at about three. bank of america cuts the christ target at credit suisse, the most irish on the street. they go to eight swiss francs from 50. they already underperformed. they maintain that rate on the bloomberg at the moment, the lowest price target for credit suisse. credit suisse just above that of the moment at 8.70. tom: the normalize vector from
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20 -- from 2007 is a steady decline. deutsche bank was worse and was saving deutsche bank -- and with sewing, deutsche bank swung back, so these are two different but very troubled banks. the vector on credit suisse is sustainably lower. jonathan: we've got to catch up with david haro. he has been so patient at harris associates. i think he still owns about 5% of the name. i just wonder how patient he will continue to be. tom: he and bnp paribas, only because it was the same as the green bay packers colors. jonathan: i'm not sure that his it -- that is his investment strategies. tom: right now it's kriti gupta. in 1982, maybe the benchmark, maybe the 30 year bond. now it is the tenure. kriti: back then, you had a 10
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year above 10% yield. now we are looking at 1.92%. look at the 10 year yield going all the way back four decades. the trendline is what matters for our radio audience. essentially, the trendline has been down, down, down. tom: on radio, i am tearing up. it is a log y-axis on 10 year yield. kriti: continue. making tom keene proud. of the big pieces of the equation is that the bond-bull market was dead. tom: look at those. 1, 2, 3, 4, 5 volker kisses. kriti: it looks like perhaps in the long term, the bulls are still winning. the other side of the argument is if you continue to see persistent inflation coming to the yields break above this long-term decline in the trendline?
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we are not there yet, but we could be. tom: former chairman john fisher, where was he working, blackrock? fisher is watching this, he's tearing up. this is modern economics. kriti, homerun, over the turnpike. that sets of cameron crise on our markets blog. i'm sorry, cameron. kriti nailed the rate of change of yield that we see now. stan fischer was huge on that with his tenure at the fed. we are moving fast, aren't we? cameron: we are. the question is whether we will continue to move fast moving forward. you can perhaps argue that the rate of change in yields might slow from here. certainly at the last few auctions, central banks have stepped up huge, took down a record proportion of the 10 year
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sale yesterday. so it might be the case that some pretty large buyers have decided that yields are juicy enough that may be it is worth ago. tom: an unfair question, but it is unfair thursday here. the 10 year yield is 1.92%. where is the equivalent neutral value of the 10 year yield? cameron: it is so much higher. i reckon the 10 year now should be around 2.90%. the curve is a lot flatter than it ought to be, given current policy settings, and that is largely a function of the tenure being lower than it should be, given where inflation is, given where unemployment is. kailey: could we start to see the tenure moving closer to that 2% threshold based on the data, or is there room for a hot print to make a difference, given the market is expecting a hot print?
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edward: i think the market is probably shaded -- cameron: i think the market is probably shaded toward lower than consensus today. the absolute level is high, but i kind of think that people are may be looking for a little bit of downside there. can the 10 yield continue to rise? obviously, yes. part of that i think is going to be down to the resilience in the economy as the fed begins to tighten rates. one of the reason rates are so low because market pricing for the terminal rate is also very low. how can the 10 year trade at 2.90% if everyone thinks the fed is going to stop at 1.75%? it would be close to free money if that were the case. to get yields sustainably higher , we will be above 2%. the market has to come to the realization or the belief that the fed itself is going to go
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above 2%. kailey: jon roth is up earlier. it is ultimately what is going to matter more to the market if the fed moves 25 or 50 basis points, or what the dot plot is going to look like? cameron: i tend to think it will be the dot plot. personally, i think there's relatively little chance to go 50. with the privies -- the provi ashley provise that they can adjust. part of the reason why the terminal rate pricing is still relatively low is the expectation the fed is going to be very aggressive this year, and that will essentially lower the absolute magnitude of the entire cycle. if the dot plot still suggests a relatively modest pace of the cycle this year, that raises the amount of tightening that they would ultimately need to do, so
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in a sense, the dot plot is going to be a more important guide as to where that terminal fed pricing is going to be. jonathan: for good reason, we are going to escape the west ham conversation. i know you would like to avoid that. cameron crise, thank you very much. cameron mentioned that second inflation print before the federal reserve. that is going to be interesting. march 10 cpi for the month of february. tom: i missed that. i thought it was the 11th kailey: jonathan: and then this -- the 11th. jonathan: and then the 16th, the decision from the fed. tom: i think this march inflation adjustment, i think of ellen zentner with a strong call saying there is bad inflation, and it is going to roll over. jonathan: the rollover i think expected deeper into the summer.
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calendar starts to shift the other way. tom: the base effect can be really important. i think stroman does a great base effect. you've got to be careful there. jonathan: thank you, tom. i appreciate it. futures unchanged. this is bloomberg. ♪
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>> you got this beast called inflation out there. how many stabs does it take to slay it? >> it is not a healthy consumer. >> we do not get strong growth without a healthy consumer. >> we are seeing very high inflation rates. >> 12 months from now, cpi is probably closer to a 5% figure, not the 3%-ish that consensus is looking for. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone.

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