>>'s labor market has gotten too tight. >> this is an environment where the bond vigilantes are back.>>s report is indicating they will probably continue on hiking in a more aggressive fashion. >> i think there is more to come from the market unfortunately. announcer: this is "bloomberg surveillance" with jonathan ferro, tom keene. >> good morning. this is bloomberg surveillance prayed i am jonathan ferro with lisa abramowicz coming up later

and the special guest including apollo's jim alto. features down about 1% on the s&p 500. we have a lot to talk about in this bull market. the bank of england today. >> the bank of england continuing to have their backs against the wall. they have no choice in the matter. they are trying to do with the political situation that is across the system. the new acronym to your -- du jour. you are setting up for a showdown as you basically have the program ending, quarter to beginning and the budget due on the same day. >> we have a showdown, haven't we? greg is going to be with us for the hour on a lot of this. the bank tries to sign these operations of purchases.

to be expect to wake up monday morning and see this continue. >> any time you draw a line in the sand, there is generally a bad idea? i really worry about that. the markets will tested them. i think most investors believe this is a program that has to continue. whether they -- >> bond markets. equity features down about one percentage. the cash treasury market reopening in america. equities down, yields up. how many times have we talked about this? . yields higher by seven basis points. the effects market, euro-dollar unchanged. 96, 90 nine, call it 97.

gregory, the pickup on the move in europe. the euro-dollar not going anywhere this morning. yesterday, briefly from 650 into the upper in germany. we put out a story about the mutual's asian -- mutualization of debt. >> not tremendous as of yet. that is a story that was kind of about yesterday. they try to dismiss at the same time and threw some cold water on that. ultimately, it just shows with higher rates, fiscal issues and the ecb has the same challenges. they have to keep together funding liquid across all the different jurisdictions across europe. >> in the u.k., we talk about

the accident in europe. not activated right now. should they reactivate it pretty soon? >> once again, when you draw a line in the sand, the markets will test it. as we enter the cold winter months. i think the pressure will likely wrap up and you will see that get activated in eight one shape or form. details matter so we are all wondering what that means. once again, the markets will test. >> the head of u.s. microstrategy joining us right now. george, first of all, one conversation we have had over the last few weeks is how unique his problems are to the u.k.. the potential spillover from the u.k. to the global market -- bond market. can you walk us through a particular standpoint? >> good morning. definitely showing up first in the u.k. markets but with it, it drives up all the rain. i think that is the big issue we

have had for years. policy globally set. now, we are clearly going to see this in the u.k. but in the u.s., the fed has a similar problem too. we had two attempts and the last three or four months of them trying to pivot. i think the bears are going to win any the next couple weeks. >> president putin die headline for years -- 40 minutes ago, -- we put out a headline 40 minutes ago. >> definitely opens up more liquidity for sure. i do think that this is another example.

>> before this kind of started we had -- how do you see that playing out over the near term and do you see that breaking? >> at some point it does break, if the fed is leading the charge. i think it is important to note a global rise in short rates but we are going to see a moving off around the world. as it keeps going forward, the bot will run out of fuel and cannot go further so the core relationships further to the tenure sector plus -- 10-year sector plus over the fourth quarter. >> how do you see the ecb being challenged over the winter? john and i were talking about this before you got on. do you see this as a row part of the risk factor heading into the winter? >> if there is any, do you see a

risk? >> they have to think about growth versus inflation in that fight. just because the ecb takes a pause first, does not mean they are double tightening but it could be a two-stage where they have to get through the winter and then talk about tightening more. >> they had a long speech yesterday. i read it for you so you do not have to. in this environment, a sharp increase in risk sentiment that may be difficult to anticipate could be amplified especially if you can scratch out liquidity in market. in some countries, she went on to say, the real risk of this trade-off policy. what are the policy trade-offs? is this a situation between getting inflation down and making any financial stability? >> i think it is hard to do

both. what the market has missed throughout the course of this year is that the fed globally is fighting inflation. this is different than what we have seen over the past decades. financial stability has been thrown in for the fed to put in other types of things. functioning markets is what matters to simple bankers. not that prices are lower necessarily. i think this is just another kind of spin on traders and investors hoping to get bailed out by central banks. >> what is the difference between now and 2018? last time they backed off and set it was about the markets not functioning. what's the difference between now and what happened in late 2018? >> i don't know. that is good question. 2018 sounds like three decades ago. 20/20 is a better example. the reason why the fed stepped

in and initially is because the markets were completely broken. we cannot trade u.s. treasures and we are not quite there yet. liquidity in the market absolutely. we just talked about jd be -- jdp's not trading for the past two days. >> do we have a market functioning issue that the fed needs to respond to anytime soon? >> the u.s. markets are still functioning. liquidity is dear. we are also heading into the end of the year and after such a tough year that we have had, you would ask that down risks anyway and balance sheets are scarce so we are in the toughest spot of the year. if liquidity was to get worse, it would matter but at the end of the day, which market was the fed care about? it is about the repo market. in the coming crisis in the financial crisis.

i think they will let the first line of defense hold before they pivot anytime soon. >> one last question. if the 10-year goes every time we get close to 4%, we have kind of touched that level again of seven basis points today and back to 395 -- 3.95. >> i think we are in a tough spot. i am more concerned about equities them bonds at this point. i think bonds could benefit from more more big move. if we move equity down 5-10% and avonex couple weeks, i do not think it will. >> your thoughts on that? leaning a little bit into the 10-year and the 30-year space? >> i think we are closer to the end than the beginning. about 4%. and to wear real rates are just prevent the -- where real rates

are does present value. i think you need to see rhetoric and all these types of things but you are getting close to it. so, i see a lot more value within the u.s. treasury market than i do within the market. >> what are you doing on a morning like this morning? >> it is so early and i'm still watching but you have to take a longer-term view on this market. trading this market is incredibly difficult. yes, you modulate here and there but you have to have a northstar our northstar view is there is value but we are not getting checked up and brought in. i think you have to be disciplined. you cannot just wash. it makes you mad. >> gregory peters from pjm -- p

gim. will be cutting a with mohamed el-erian -- catching up with mohamed el-erian and a just a few. there is the possibility coming up of a joint effort in europe and potentially a lot more cold water to come from germany. from new york city this morning, good morning, equity features are lower. this is bloomberg. ♪ >> given you up-to-date with news from around the world, this is the first word. a group of seven leaders are scheduled to hold a call in which russia's strikes on civilian targets are set to top the agenda. vladimir putin says this was a retaliation for explosions on a multibillion-dollar bridge connecting russia to crimea. ukraine has not claimed responsibility. traded near the highest level in more than three months as russian president vladimir putin threatened more missile strikes across ukraine. this has sparked more fear that

harvesting transporter in the country will be cut even further. the agreement over the black sea export quarter comes up next month. they are warning of rising risks of global recession. ims managing director says higher interest rates are adding to direct -- debt pressures on developing nations. he says a third of the world economy will into recession this year or next. bloomberg has learned the u.k. is pushing ahead to set a cap on the revenue of renewable power producers. governor officials -- government officials held that they would limit revenues in channel funds to help struggling consumers. more allegations in the elon musk and twitter battle. bloomberg learned that just before he resigned his proposal to buy the company, he accused twitter of hiring a whistleblower to destroy evidence. the brain of handwritten

notebooks and deleted a computer file at the request of managers as part of the $7.8 million severance package. global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. this is bloomberg. ♪

>> there is risk in the real danger of a world recession next year. advanced economies are slowing in europe. the debt levels for developing companies -- countries are getting more and more burdensome. inflation is still a major problem for everyone that -- but especially for the poor. >> david malpass, world bank president. i am jonathan ferro. when the roll starts saying

that, do you start leading the other way? >> definitely intelligent that is the case. a very concurrent forecasting. it just speaks to how much negativity there is. this is a recession that has been talked about for the past nine months and we are not quite there yet. i think we have another six months before things start to play out potentially. this is what we call a slow moving train wreck and the imf and the world bank just getting on board is a testament to that. >> a slow moving train wreck in italy as well. italy back to four point 74. the story of the last day or so, they are going to back london in the pushback and energy. bloomberg europe correspondent out of brussels with -- ada

brussels joins us now. >> you have one force that does not go on the wrecker and says the german government is not aware of this plan but i think you need to take a step back and see how the german government operates. this is a three party coalition. lumber story mentioned that the adam shoals, german canceler -- chancellor, had a change of heart after he met last week. what i can tell you is something is cooking across europe. there was a lots of pushback from the plan that germany put back in the euro group. you can hear the countries openly saying we need a joint response otherwise it will be each nation to their own devices and it will be a problem when it comes to the capacity. then the german chancellor messaged european leaders last

week and heard the same message and there was a lots of criticism that germany did not cooperate well. we are at a stage where this is an open debate and there is an actual behind-the-scenes tension in terms to how you bond to be crisis. this is not going to go away. the kohler graffiti -- the choreography will be to listen and this time next week learned -- european leaders will have to decide on something, whether it is joint debts or the price cap. but there is a debate. >> is the debate over land or grants? >> we have never talked about a recover response. if you go back in time, you will have to allow me 30 seconds of technical talk. if you go back to 2020, this was a recovery. the european union went jointly triple debt into the market and

distributed that in grants alone. what we are talking about is a plan that came before the recovery fund but everyone forgot about this because it was eclipsed by the big fund. the idea is that the eu, you go to the markets, you get better funding costs and then you get that to member states but they will have to pay it back. the only difference is if you are italy, you will want to do that's at that rate and not independently on the market because he will not lock an advantageous rate. that is where the debate is set. no one is talking about a recovery fund. >> maria tadeo, a broad source. is that enough to put a lid on things over in italy if it gets finalized? >> it helps. it definitely raises a major fear that the market house where the ecb will lose control and the ability of these countries

to fund themselves at a time when they need the funding. i think this absolutely helps. the closer you get europe together as a fiscal union than the better you are. >> how do you compare what is happening now to 10 years ago were the catalyst of the crisis is on the periphery and now arguably, it is in germany. >> that is a change. i think it matters and we can think about this but it is a process that pools the core to the periphery and says the other way around and maybe germany is seeing the value of having amorphous full union and an allied european union. >> is that prevent that permit opportunity in germany? >> i think so. europe was trading as a single marketplace and that blew apart.

and this continues to be quite fractured but i think it takes less pressure off italy and puts more pressure on germany. obviously that is not such a bad thing. >> is 4.75 a good thing on the 10-year? >> for germany? no. >> buffer italy right now? >> i think it is to early? the challenge investors have is extreme volatility. we are focusing on guilt but it is happening all over so it is hard to put a stake in the ground. i think you need to dampen the fall which is what the central bank tried to do and that investors start to enter. >> i have been so surprised by how ambitious the ecb is doing. we are having another conversation about a 70 point faces hike. i think if he asked me, i was

thinking that we could go another full cycle without a rate hike for the. i was not alone. people were saying here we were talking about 75 again for the end of this month. do you think that is doable without causing issues? >> i think it is and i think the ecb has been allowed to get out of the trap. look at what is happening in japan. the boj is stuck as far as the eye can see in that has clear implications. i think the ecb is using this as an opportunity to normalize rates. i think history will shine a very unfair light on negative rates. i think they are trying to get as much of room as they cancel and things slow they can get control again. >>'s to reboot -- how do we leave behind this era? do you think we are firmly leaving behind this era?

>> i think we are moving out of a central dominant phase, that era. i think history will look back on that and say that is a really bad idea. you are destroying savers and insurance companies. look at the fallout on the lbi side. that is just a fallout in the change in policy and how difficult they had over the past couple years. >> let's hope we can get to a better transformation. andrew hall is going to join us shortly. he is looking for another 75 basis point hike in december. coming up, annmarie hordern warned. recapture with mohamed el-erian right here in new york city. ♪

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>> stocks down, how many times have we said that? good morning to you all. here is the price action on the s&p 500. on the nasdaq, we are lower. equities down. yields higher. shaping up as follows on the ten-year.

all over again. 394 .49. up another basis point. let's call it for 32. yields higher. the girl look something like this. the euro-dollar holding on unchanged with 97.05. unchanged to the ecb. later this month, a call for a 75 basis point hike from the european central bank. the ecb front and center pray we heard from the chicago fed president. take a look what he had to say. >> the federal reserve is committed to returning inflation to its 2% average goal. i expect we will need to raise rates further and hold that stance for a while. policy will depend on the evolution of economy and risk to the outlook. >> some people are excited that

there may be a pivot around the corner. gasoline prices on the rise until the macro suggest more material weakness. they go on to say that we are generally weak against market. how many times have we done this to last three or four months? >> it helps swing internal. i think the markets have been looking for any window of change and pivot and i do not think it is there. i think the most important point in that speech was average inflation. i think that gives you more room. i do not think they are going to be completely dogmatic to get to 2%. it has to be 2%-ish. the average thing is what i've picked up on. it takes them a lot in five months. they reflected on that. twice she went through a list of things -- >> she went through a

list of things. mortgage rates have doubled this year. they reflect what happened on the dollar. the dollar depreciated 11%. i just wanted to -- do you think the risks have been overdone? >> i think so. the fed believes it is a financially driven economy so there is a much more immediate impact on rate hikes and what they have experienced in the past. time will tell whether that has been experienced. you are beginning to see fractures in the mortgage market and the housing market. i suspicion is they want to get another hundred and just for good measure and then they will reset and see how things shake out. >> city thinks there is 75 coming for the next meeting. andrew, why another 75 in the next few months? >> i think it goes back to what

you were discussing. two issues. one is the economic fundamentals issue and there has been a lot of progress in tightening of financial -- conditions. but then they have also separately had a communication issue and i think that is what they are managing. that is where you see comments. yes as interest rates get higher you get into a range that may be more restrictive and you start thinking about can you slow down, can you pause. if the issue is from a communication perspective, how do you explain to the market and the public that you still have to fight inflation if you are slowing down rate hikes and pausing rate hikes? this ultimately goes back to the data that would give the fed the ability to see ppi slowing down. i think that is what they are really watching now. >> do we think any of those things are the two things that you mentioned?

>> i think you can argue that labor markets may have been loose today. we had job openings come up meaningfully. we had a ratio of about two job openings to everyone inflated individual. historically it is usually one or 1.1 but that came down to 1.7 two every unemployed individual so it is moving in the right direction for the fed if we want to excess demand coming off. but the level of 1.7 openings to everyone unemployed individual is intuitively a lot out there. >> we have a big release of a cpi this week. is there a level you think shakes markets confidence one way or the other? the consensus is around 8.1 annualized. is there one number or do we need several numbers of a certain trend to really kind of move that rhetoric?

>> hello greg. i think it is going to come down to where it is the core monthly inflation number come in? that is where we saw it last month that there was a stronger core reading and rayna talked about this yesterday that the core goods stayed strong. there is a broad consensus that core good prices should be coming off. until recently, we had commodity prices moving lower and used car prices looks like they should move lower. we are really watching the court goods component to see if this slows down. right now we look at the core cpi inflation month online. we have that at city citi -- at citi. if you saw that slow down to 0.2 or 0.3, i think that would show that we are getting down to price pressures. i think the upside is that you will see 0.4 or 0.5.

>> picked up on that as well. she said market read would help reduce inflation. the part of inflation is going to be stickier and then greg and i can have a conversation about what that means for corporate profits. >> i would take us back to the labor market. i think there are reasons to think that inflation could slow down a bit. if i look at slowing, we have wage growth still running upwards of 6.7% year on year and the average early earnings are a little bit slower but still well above most consistent with 2% inflation. that is why worry about persistent inflationary pressures. you will have some pressure in red and also inflationary pressures lingering. in the past, not shelter services and the tight labor

market is where i would be concerned about reciprocal inflationary pressure. >> can we talk about whether the federal reserve has a price target? right now you have rideshare telling us there is ample room for marginal compression. isn't that telling you that earnings in america will come down? >> yes but you are not wrong because you are looking at record profit margins. well above anything we have seen on a long-term trend data. or is ample room. our expectation right now is the profit margin to come down. i have been saying that for over a decade now. from labor costs increases to input costs generally on the rise, and revenue slated to come down. keep in mind that corporate have put on all this low-cost debt. that is a good news/bad news story. the good news is operating leverage is working in your favor and you have ample

profits. and that reverses, it goes the other way. i think there is more of a acceleration to the downside than anticipated. >> final question for me to you. the 75 basis point hike in december, is that the last one in the cycle? >> it may be in that is where we come back to do we get this from the data. if you see margin compression and gives inflation lowering and we see a job market that looks like some kind of loosening, that would give the fed what it needs to see and start that process of slowing down. if you do not see that thing, that is the risk of getting another 75 basis points. >> i am sure the market will try to pin at point in printing. andrew hallman horst from citibank. amh down in d.c. joins us right

now. talk to us about the month ahead? annmarie: we just had insight last night about the senate race in ohio. this is the portland seat, ohio which has turned red over the past two elections, voting for donald trump twice. if you look at what 538 is saying is this rate is 80 -- this race is getting very close. you top issues we have seen across the polls really came out in this debate. we had congressman ryan talking bands and extremists and abortion was one of those issues. at the same time you saw the congressman say that it is distancing itself from the white house and not saying that president biden should run again. you see these issues coming up in a very hotly contested race. you're going to see insights to

what is going on in the country. i would also like to point to what is happening in a -- in nevada because there is an issue affecting inflation of this is what this means for oil and gas. what you are seeing is republicans can slip nevadans. the natural -- the average gas price right now is $3.92 on average nationally but in nevada, it is north of five dollars a gallon. this is a key issue when you look at western states. >> going to catch a big and in the next hour, looking forward to it. through dollars and $.80 -- three dollars in two cents is the national average. are we going to see this come back again? >> are. we are quite poor from the

democrat side. so higher prices. >> operation midterms next month. i am waiting to see what they can do about this one. coming up, the head of research at eds man, next on the program. down zero .8% on the s&p 500. this is bloomberg. ♪ >> keeping you up-to-date with news from around the world. with the first word, i am lisa mateo. oil workers joining protests which continued over the death of a 22-year-old woman last month who was in the custody of a so-called morale to group. a video on social media shows dozen of laborers and uniformed workers marching. lebanon has a historic agreement to settle there maritime dispute. in a text message, his office says they will "strengthen security" and ensure stability

of the country's northern border. malaysia is heading for early elections this year after prime minister announced the solution of parliament. his ruling of the party is seeking to strengthen his position following a run a successful local polls and a budget for next or that lowers taxes. legislator says the election commission will decide on the date of the vote which must be held in 60 days. ongoing supply chain bottlenecks and increasing negative economic outlook as consumers battle surging inflation. the luxury automaker delivered nearly 580,000 vehicles globally in the third quarter, up 21 percent compared to a year ago. global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪

>> if china is on the way back, and the as a big move in the right direction, you will probably see the market sing to $100 by do not see it return to $130. >> here is a state of play. i'm sure the equity markets bulls would love to stay close but that is not how this stays.

394.29 on the u.s. 10-year. you know where the market is going. equity down by 0.8%. crew down by 2.14%. 88.94. we have a rally. once again, the head of research at ed joins us again. i think a lot people want to parse this story asked me that happened a year ago and will start to fade. it is back on the agenda. why? >> why does it stop? i think the mood basically moved away from inflationary fears and pro commodities to recessionary fears. i think we are beginning to see wholesale risk off the dollar being stronger. then, we got to see a retraction in the dollar but importantly an escalation in the ukrainian war. i think the fed has a power hat

in ukraine and russia which is such a big supplier of food and energy commodities. if anything can go wrong overnight, i think stocks are not that comfortable across the commodity space and if we get further to supply then we supply -- and things become downhill again. >> is this something you saw take place over the weekend that would disrupt supply? >> the way they were targeted it is that russia was probably targeting the energy and of ukraine. i think that is a strategic issue and worrying because obviously ukrainian people that have to flee the country and moved to europe in order to seek energy. essentially, energy will be fraught in europe and has been for the last year or so.

you can see that ukraine has pushed up demand for food and now maybe will again for energy at a time when there is barely enough to go around. i think that is a key issue and i think that europe is so vulnerable going into any supply out of russia and ukraine. >> based on what you are seeing right now, and i would love to wrap things up in the following question, do you see material risks that these kind of price moves might be sticky even if they help the economy? >> unfortunately yes. although we do have the recessionary fear overhead, that in itself can be demand destruction, not just for any people but also with food. ultimately, commodities power stay cold. you cannot do without them. certainly, the supply chain is

intense right now. i think it is just entrenched in everything whether food production or manufacturing or transportation. everything is on the line by how high the energy prices are going to go. i think that is what we are thinking that we are not going to see prices normalized to where they were over a ago. that is not going to happen. i think that is definitely a death threat. >> cpi thursday, how sticky is this story going to be, we have talked about peak fed and we have to talk about that once again. we talked about peak inflation over the last 12 months or so. are we going to make the same mistake again? >> inflation is incredibly difficult to forecast, to state the obvious.

i would not be surprised by another misreading. ultimately what we are seeing month after month is a broadening that we did not anticipate. i also think it is important to look at this globally. this is not just a u.s. issue but a global issue and there are different reasons driving it. i believe inflation is a little more secure than what is being forecast and the ford markets is still really quite these yesterday around inflation coming down. i think the story over the next 6-9 months is the stickiness of the inflation rating. even if it does come off the peak, is it really going to be a straight line down? >> so we could have 5% inflation and a recession? >> that would be a really bad outcome if you are a central banker and that is the risk on the table. i think central bankers have to

lean on it even higher. if you throw the economy into a recession and inflation remains high, and you bail on both fronts. to me that means you do not pause but lean harder into it. >> how is the bond market trade in our world? >> poorly. we are that is what we are witnessing this year. the fed is still around next year than i think you will have much of the same story next year as this year. >> we have gone through a range of markets together this morning and we have talked about where the opportunities might be but each time you said not yet, we need patient. what are you waiting for specifically? what are the preconditions that we need to think about and we are not there yet? what are you waiting for? >> i am much more enthusiastic around the opportunities today than six months ago and nine months ago.

if you go back to when the 10-year was up 50 basis points, where was the opportunity going forward? we are definitely seeing a lot of value created and seen a lot of disruption. we are excited about micro parts of the market. if you look at what is happening with the lbi situation, there is lots of interesting securities for sale and stressed types of prices. these broad macro calls are really difficult normally and are even more difficult today. we are seeing loss of value idiosyncratically. we are bond pickers at the end of the day but making a massive call on rates and overall data market is really difficult. >> are not going to make a massive call on rates right now? if i found a 10-year right now, am i happy in 12 months? >> maybe not 12 but probably 18 absolutely. >> thank you for being here we

should do this again. >> we should, i would be for that. >> gregory peters, thank you sir. mohamed el-erian will join us in the last hour. we'll catch up with a range of guests including the deputy prime minister of spain and talk to the spanish about what they think about a plan that has been circulated around. features are just futures down by about three quarters of a percent on the s&p 500. your old -- euro-dollar unchanged about 97 and crude is lower. on radio and tv, this is bloomberg. ♪

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>> from the intersection of wall street and washington, nobody covers politics like berg. -- bloomberg. announcer: balance of power with david westin, insight about power. weekdays, this is bloomberg. >> hard line is likely because the labor market has gotten too tight. >> this is the environment where the on the market vigilantes are back. >> the fed with the job report is indicating they will probably continue hiking in a more aggressive fashion. >> i think this will counter the market unfortunately. announcer: this is bloomberg survey of jon ferro, tom keene

and lisa abramowicz. >> good morning, good morning. this is bloomberg. savannah is on tv and radio alongside mohamed el-erian for the next hour. i am jonathan ferro. futures down 0.7 percent. mohammed, this is special. the central banks have their problems haven't they? >> they have. not only do they need to balance growth and inflation but they also need to on top. it is a challenge that is very tricky. >> do you think they will have to count inflation? it's that ultimately where it is added? >> ultimately, ultimately, ultimately. yes, that is where it is headed. >> you talked about a destination over the next few weeks. what is that destination? >> first we accent artificial finance which has created a loss of damage and which we are going

to spend a lot of time trying to overcome. secondly, we to focus on economic growth. making a sustainable is a better pace to be. >> going to this conversation, looks like this on the s&p, down six -- 0.6 down, treasury down, yields higher by five basis points. 86 on the 10-year. equities lower by 0.6%. crude has weakness at $88.96. lisa joins us right now. good morning. lisa: hello john. i will say i could not handle this but i decided to take the cruise down long island sound and contemplate regime change. going to stay with mohamed el-erian and you about what is going on.

we are having a critical conversation. we have policy makers meeting in washington dc to talk about how there featuring higher inflation and combating that in the higher growth. who is a marginal buyer? we are going to speak with a member of apollo and lawrence of gulf capital. later in the day, ray dalio of bridgewater, the chief investment officer. and the top official at manage capital. if you are a bond vigilante, are you there yet? are you happy with what you are seeing? this interesting question of what is the trigger point where we start to realize this new reality as people begin to stay -- to say yea, we are getting yield again. >> yea, we are getting yield again. potentially. >> i am glad she is not here

because we would make each other cry even more. >> you support the just and she supports the giants. >> i can live with that. [laughter] >> the giants came back and a very dramatic fashion. i'm very proud of this knowledge. >> around the table with muhamed and i for the next 10 minutes. thank you for coming in. let's talk about market functioning. have we got a market functioning problem? >> good morning to to both of you. a market functioning problem in the u.s., we have not seen when compared to what is happening in the u.k.. i will say that looking at eps and high ratings, we have seen a huge amount of volume in etf trading. there are days we get to about 43% of the equity market trading in etf. i think that means people are looking for liquidity and going where they can find it.

is there a challenge yet? no. can there be as we go into the end with the quantitative tightening process? there can. >> where are you anticipating pockets of stress at the moment? >> at the moment, i would say that for almost all of europe, we have thought about interest rates moving up and only now are we getting to some levels, especially on the longer end of the side. this is maybe looking more interesting to people. to the extent to that a lot of investors come back into the interest rates markets and a lot come back to the long and day of the curve, then we see bond outflows and we see foreign investors. source of flee away from the market because of hedging costs. think there could be stress there. i do not expect there to be any massive stressors in the front and day of the market or the credit markets by think the

balance sheet of most of these companies looks very good so staying up in quality makes a lot of sense. i would also say we began talking about liquidity and that would be very cautious about how the markets raise and keep a strong eye on the labor markets. >> what i hear you say we are not seeing stress in certain states and we are not going to see stress because fundamentals are basically sound for most countries, i agree on both but that is not worth stress originates. stress originates in -- and then contaminates technicals that then cascaded the market and even markets with strong fundamentals are then disrupted. if you look at the periphery, aren't we seeing serious distress developing there? >> yes and that is why when i began this, i said in the u.s., it is obvious you are in a much better place. we go to europe and look at the periphery, in europe, i think that could be the case.

there is a lot of doubts about how they are going to come out of the energy crisis with industry rates climbing higher. so stress there. i would also say that unfortunately, we are often not able to pinpoint stress exactly. this is not going to be the housing market stress we had any the prices just because it happened last time. i think there will be new areas of stress in the markets. one of the things we have been looking at is market functioning and how bonds and equities trade between now and we are going to look at what it cost to finance it. i think that will give us indication. >> the tough question i get asked as i want to pass to you is we have inflation concern end growth concern and now potentially a market function concern, where should we hide, where do we go? what do we tell people? >> it is a good question. it has been a hard year for the

markets with bonds not giving up a balance. the good news and a little good news is people on the front end of the curve, the closer we get to 4.5-5 percent in the u.s. market can potentially be high. i do think the closer we get with u.s. treasuries getting 4.5%-5% and getting over 5%, those are creating pockets of volatility. within the equity market, there are areas you are supposed to gravitate to. he talked about this. even says maybe july when energy markets and energy equities, not so much energy as a commodity but energy equities, given the balance sheet and the cash flow and the earnings we are going to see, this is another area that could potentially do well. i would also say that infrastructure probably will be think about inflation, that

infrastructure given the backdrop of potential policy support coming to be another. probably, by long-duration today, not quite yet. i think the front end, and the market, but high quality is beginning to look attractive. the last one is, i spent my life looking at inflation linked bonds but the very front end, two years, that has cheapened up significantly. i would say that would make a little bit of -- >> you have competition from the bank of england. ha bank, i think it is --mohamed , i think it is frustrating the correlation between equities and bonds. is it hard for that story were we get to a moment where it kicks in the early way? >> for look at that for a while but it works for us. and it went up, i did not hear anybody complaining.

they were coming up because they were pushed by massive liquidity. illiquidity regina has changed so it is not surprising to me that -- the liquidity regime crushing so it less surprising to me that it is not good now. be careful of technicals. a lot of people underestimate technicals and when you go to a regime where people are forced to change, that changes the markets in a significant matter. >> are we in that right now? >> we are getting close. >> what about you? >> i am not sure yet. i think we get to the end of the year, there will be a bigger role to play in that. >> the -- do you think it will back away soon? >> i think not yet but soon. stacy a couple of -- once they

see away from 0.5 and 0.6 and closer to 0.3s, and more inflation goes down, we can begin talking about the two-sided nature. i think they will start talking about policy books with a lag. >> with cpi, the report comes thursday. >> 6.5 encore, 8.1 on headline. i would specifically look for shelter to see how that is accelerating or decelerating. >> i would say 6.5 encore down to 6.3 because of the last core peak. >> i think around here. maybe we see another month. more importantly, we should look at the month over month because there are so many dynamics with the 2021 press but i would say monthly changes it -- changes

allow for it to peak. >> thank you. the title of your laces piece, "the romance of the fed prevent breaks investment heart". that is going to break this week isn't it? mohamed from -- with us for the next few minutes. from new york, this is bloomberg. >> keeping you up-to-date with news from around the world. this is first word, i am lisa mateo. seven leaders are scheduled to hold a call in which russian strikes on civilian targets are set to top the agenda traded vladimir putin said this was a retaliation for explosions on a multibillion-dollar bridge connecting russia to crimea. ukraine has not claimed responsibility for the incident. we traded near the highest level in more than three months as

russian president vladimir putin threaten where missile strikes across ukraine. the installation sparked more fears that harvest in transport in the country will be cut even further. the agreement over the black sea export corridor comes up for renewal next month. the singapore airlines says cabinet workers can resume their some dexter jobs which -- resume their jobs. this says pregnant employees may choose to work on ground crews, relieving -- returning to flying duties after maternity leave. according to goldman sachs, there is a further in frustration -- further demonstration of inflation. -- global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and

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>> we are starting to see the effect on some sectors but it will take time for the cumulative tightening to transfer throughout the economy and for inflation to come down. uncertainty is high so i am looking at close attention to global risk. >> that was the federal reserve vice chair of the national economics. mohamed el-erian here for the next hour. we catch up with the deputy prime minister later this hour as well. we are lower on the s&p 500 by

-0.6%. yield down by three basis points on the 10-year. in the u.k., the gilt markets all over the place. file this under things you never want to say as a central banker. the function in this market and the prospect of failed dynamics of material risk to u.k. financial stability. they have expanded their support this morning but they still have a line to know. as previously announced, the bank has to look at these operations and seized audio the is a few days away. is that doable? >> it is doable but in a very challenging environment. but they are trying to do is pass on liquidity to the private market, supported by the bank of england. i think there are two major takeaways here that go beyond what is happening and what is the difficulty of balancing

growth inflation and financial stability. it is not just an -- issue. you will see this in the eurozone and the u.s. the second issue is just as important. once font vigilante -- once bond vigilantes are unleashed, they tend to find tipping points. there are very aware we are getting close to situations where financial stability is a tale that wife's the economy. >> get us to which one you think we have to accept. >> i think we need different issues. when you the central banks to focus on inflation and we need governments to do more to promote economic growth. the risk of financial stability is in the nonbanks. we need financial regulators to step up to the challenge. risk does not disappear but morphs and migrates and has migrated to the nonbanks. it is not impossible of a

trinity but a difficult trinity. they later you believe this, which is why the fed being late is so problematic is the longer you wait, the worse it gets. >> think about what we have just loaned up. i do not think we have enough time to reflect on this. as we talk about the latest news and data points, we just lined up a decade of queuing negative rates, zero rates forever. you sit here thinking we go through another full cycle of the same thing. i am trying to understand whether we see the consequences of that. guy talks about the resilience of the balance sheets and i hear that a lot. i hear that a lot about household balance sheet and corporate balance sheet. we think about this on the periphery. can you give me more on that? >> for the last year, you and i have been talking about a sequence we did not want to happen. this is all about central banks

changing and the liquid regime. we worry about recession and if we are not careful, it migrates to liquidity risk. we have been talking about being careful of that sequence because we get to liquidity rates, all three are playing at the scene time. but we have seen happen is that sequence has played out and we are now dealing with interest rates and credit risk and we are worried about liquidity risk. that is a really difficult environment and we need to appreciate that navigating through it is going to be incredibly bumpy. >> market stability is the phrase of the moment. and market functioning two. vladimir putin, of russia, talking about market functioning right now. opec goes on to say the opec-plus decisions were not aimed at anyone else. annmarie hordern joins us now. what is right take on those lines? >> have heard this before from

the leaders of opec countries even if they are not aimed at president putin towards anyone else, they clearly benefit producers especially russia which is being hampered on how much they can export but needs a much higher price. for vladimir putin to make these comments is planned for him on the energy front. have to look at who he is sitting next to. he is having a meeting with the leader of the uae and it is uncomfortable for these leaders are trying to act as a media area and individuals who want to strike a peace deal with what is happening between president putin's invasion of ukraine. the sicily they can say to save the opec decision was really about market stability and not about politics which many are viewing this as. >> as you have been likely reporting, this has both domestic implications for the u.s. but also implications for u.s. foreign policy -- policy.

how do think the biden administration response to what we are seeing? >> it is incredibly challenging. one you have geopolitics and the optics of the president making an historic trip to the kingdom and then three months later and weeks before the midterm, the kingdom not coming to help in torn of oil supply when they clearly need to keep a lid on gasoline prices. what jon and i spoke about in the last is you look at places like nevada where the democrats are trying to keep a hold of the senate seat and the polls are not showing that possible because you have a gallon of gasoline north of five dollars a gallon. that was the peak of the national average in june. then mohamed, you later top the conversations i am sure you will be privy to at the ims later this week which is the price cap. this is what the west wants to see but russia said if there is

a price cap, it may impact their production and export and will have a backlash effect. they may not even want to export if they are being told they have to up -- cut the price. >> that is the final word. it can be about baseball if you want it to be. >> i think in the commercial break, -- mohamed el-erian is on the yankees train. >> i am not sure he is. >> i am. >> what kind of fan are you? >> a realistic one. >> operation midterms for this. mohamed, how problematic is this going to be? >> depends on demand. demand is dipping and giving the administration some relief but it continues. headline inflation is going to head back up and we are having

this not just be a one-off but be consistent and that is a problem. >> speaking of inflation, do you think the fed is so optimistic -- too optimistic about what they can achieve in the next few months? >> to optimistic not just on inflation but also growth. >> would you call that aspirational? >> that is a nice word, yes. >> definitely want to talk more about that. we are going to build on that in the next segment. foreign-exchange not doing much this morning. the equity market down -- bouncing off the lows. yields up by four or five basis points on the ten-year. the euro-dollar sending a stronger your up. the euro-dollar 0.93. this is bloomberg. ♪

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jonathan: good morning. two hours away from the opening bell, your equity markets shipping up. yields off the highs. equity futures, -0.5%. on the 10 year color getting

closer to 4% and backing away four or five basis points. yields on the front end, very close to the highest of the year. the highest we've seen since 2007. 430.58 on the two-year. euro-dollar problematic yesterday. the italian had german spreads broke through about 250. the euro-dollar, 97.32. bob michele for jp morgan asset management, this is what he had to say. when the central bank steps on the brakes, something go through the windshield. the cost of financing has gone up and it will create tension in the system. we've been talking about this for a long time. what is going through the windshield? >> the economy. the financial system. this is not stepping on the brakes, it is slamming the brakes. it is the most frontloaded cycle that we have seen in a very long

time, and he did not need to be this. this is the tragedy of it. it didn't need to be this way. this is a self-inflicted wound. jonathan: you are incredibly frustrated. >> i am. not just about this economy, but the world. over and over again, somehow they held onto this transitory for way too long. mistake number two, they didn't actually. jonathan: a long list of things. how much financial conditions of changed for the first time since two thousand seven, near decade highs on the 10 year yield. we talked about the strength of the dollar so far this year as well. it seems to me like the last several years we talked about a fed with the market that was pricing everything all at once. do you push back against that? >> i do, and a pushback also by

being dependent. you don't look beyond the next quarter and then you are surprised. i would suggest to everybody to read the very balanced speech, probably the best thing that has come out of the fed for a while in terms of where we are and what we could see going forward. jonathan: she reflected on policies in that speech. what do you think is the trade-off for this fed? mohamed: it is inflation, growth, and financial stability. they somehow have to find a way to separate that from the rest of the world. jonathan: we are going to talk about it right now with jane. jane, let's start with the bank of england additional support yesterday. what do you make of that?

jane: what happened to the end of the week with the bank of england bears ahead, we know the bank of england as being fairly chaotic. yesterday, particularly, which is why they had to incorporate that into the special measures. of course, this is just addressing the symptoms, not the cause. the cause remains concerned about what this government is doing on fiscal policy and on spending. the government may have to make cuts, huge cuts in spending in order to balance the books. that is going to be certainly painful. if those are brought forward about how he is going to balance the books, it is not clear if he could release any reassuring message on that case. jonathan: what happens on friday

if it gets removed or extended? can you tell me about what you are seeing in this market? jane: the fundamental problem remains unaddressed, and that is about fiscal spending. if they don't extend this and go ahead and say we are going to start tightening at the end of the month again, it is going to look like a caramel mass anything that is something that would be reflected in the price of the pound as well. if they extend -- well, there is a lot of pressure for them to do that. the bank of england has been very careful in what they are buying. they are buying smaller amounts to try to pinpoint. that is protected by credibility to some degree. really, i think the ball has got to be in the government's court.

mohamed: if i may ask you to go from the u.k. to global, lots of people will be convening in washington, d.c. for the annual meeting of the world rank. there is a few out there that the dollar strength is a u.s. problem. it is up to the u.s. and something about it. the u.s. will perhaps intervene in some sort. is it really that? jane: i think the question is bigger. i would go even further and saying it is clearly providing a huge -- mandate. i think we've talked about this when the government has been in a feedback loop.

there does need to be sensitive outlook for this. when the fed decides it has done enough, something gives. right now it puts terrible pressure on the global economy. mohamed: what do you say to people who say has already given? we are going to be going been lower. this is a problem from yesterday, the dollar strength is behind us. you really think it is behind us? jane: not necessarily. i would say dollar strength, dollar peak, when you can ask the question "what else do you want to buy?" when you want to move into emerging markets, when the levels are there for you to take on that risk, i don't think

we're there yet. we don't think there is an appetite to struggle. jonathan: do you see that improving anytime soon? mohamed: you have to recognize that there is a government of people who believe that the dollar is behind us. i don't agree, but the view is out there. jonathan: do you think we could even come up with a kind of combination for this that is required to do something about this even if he wanted to? mohamed: no. this is not 2009. multilateral governance is really challenged. this is a global issue. it is not a u.k. issue, not a u.s. issue, it is global. certain developing countries are under the wheels.

the problem, as she points out, is something else. jonathan: the bank of japan. i would love a final word on that. the jgp 10-year -- for the first time since 1999. we don't even have a market anymore and i think we should stop calling it one. jane: i would say that right now, the bank of japan understood that intervention. they understood it was just buying time intervention. they know that is going to be the case because of the inverse -- interest rate differentials. they will then be forced to do something about it at some point. they are wasting and watching but i think it will go still

higher as one of the bank of japan implemented policy course intercourse course it is wanting to nurture inflation. jonathan: jane, thank you very much. what did you wager? i said the boj is like --. there is another way of looking at this, that is much kinder. an opportunity to reset inflation expectations in japan. which one is it? mohamed: more the former than the latter. when you are talking a trap you are not able to get out of, it is meaningful when you send a government bond market has not traded in three days. the government bond market which is at the center of all other markets. jonathan: we talked about that transition. how hard is it to transition away from what we've witnessed in the last couple of decades.

some people come to the market and price risk again. mohamed: you got to navigate both the journey and the destination. jonathan: right now the 10 year 25 basis points. is that a problem for them, or a problem for us? mohamed: if the low has been pressed come is the outlier. think of a ball on the water and suddenly you release it. jonathan: it is going to go like a rocket. mohamed: there is the whole challenge on climate, we mustn't forget that. this is going to be a reminder a little bit of october, 2008 when people gathered and realized we have a global problem and needs global solution. jonathan: and yet we are not forecasting a recession of the fed, of the ecb. mohamed: do you call that

aspirational? jonathan: do you call it aspirational or delusional? we will continue this conversation in just a moment. the deadly prime minister of maine -- spain joining us very, very shortly. good morning, futures lower. this is bloomberg. >> keeping you up-to-date with newsom around the world, iranian oil workers 20 protest over the death of a 22-year-old woman last month who is in the custody of the so-called morality police. unverified video showed dozens of laborers and workers marching. and a new push for scottish independence under the u.k. prime minister liz truss'agenda.

conservatives and opposition in scotland accused of pursuing a self-serving push. mercedes-benz -- supply-chain bottlenecks and an increasingly negative economic outlook among surging inflation. nearly 500 80,000 vehicles global in the third quarter, 21% compared to a year ago. more allegations in the elon musk twitter battle. bloomberg has learned that justice he revises proposal to buy the social media company, twitter has -- destroy evidence. according to court filings, he deleted one computer files at the request of managers. 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.

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>> inflation in europe, we have the ecb which is forced into tightening. jonathan: said that somebody times in the last nine months or so. stateside, we shape up as follows on the s&p. off session lows, negative six tens of 1%. session high, still higher on the day like four basis points.

euro-dollar, 97.23. hunt about 2/10 of 1%. lucky not just because we have mohamed out there, but because we are joined by the deputy prime minister of spain. having a happy with us. >> thanks for having me. jonathan: good start here. the process of joint debt to do something about the energy crisis, is that something you think we can find agreement on at the european level? dark out we are acting in a very decisive manner -- decisive manner. this time around, we are facing global challenges again. more at the doorstep of europe. in any case, push back together any decisive manner to tackle the challenges. jonathan: based on polemic area discussions, the germans, is

that something they would support? nadia: we had an exchange with ministers and with the chancellor. the pack of from the pandemic. we didn't go into intimate details, but i'm pretty sure we need to react in a manner which makes us stronger and allows us to face the current challenges in the best possible manner for actual solutions. >> there is a market consider developing that this is going to be a really difficult time for europe we may see europe fall into a recession. what is not clear if the life and depth of this potential recession. we had any indicators of what happens if, indeed, europe falls into recession? nadia: i think what would happen would depend on what we do. i am not fully deterministic in the sense of what is going to

happen. we need to take steps to avoid these situations. this is a very challenging and delicate time, the global economy slowing down. inflation is increasing in some economies. i hope that we are able to make the right decisions to avoid rising. mohamed: and what do we say to people who say the initial conditions are such that there is almost no policy flexibility? the ecb has regress inflation. fiscal space is limited and if you go too far, just look at what has happened to the u.k. the reality is that even as governments wish to move, the amount of measures available to them is much more than us. nadia: it is, indeed, tricky. it is not easy. i think that one basic principle

is the good coordination of monetary policy from the perspective of spain. to give you example, we are very strongly committed to pursuing reduction and i think that is going along and helping pre-policy implementation. i do hope that we find the right balance between fighting inflation and not endangering growth because if we want to pursue, growth and job creation is a necessary function. jonathan: the forecast from the bank of spain and from the spanish government, take us to 2023. 1.4%. the government at 2.1%. do you think that articulates just how much pain this economy has had to go through? one thing is that there forecast has been unrealistic. they've been to aspirational. nadia: is realistic. around 5.5%.

a very strong 2022. that is a quite prudent forecast. what we anticipate is a slowing down of growth in 2023, obviously. the european economy is very much affected by what happens in germany. but all institutions, national, public, private, international, they foresee the spanish economy to continue to grow in 2023. some analysts think it is particularly resilient and at this time. mohamed: whether it is the fed aggressive interest rate hiking cycle, there is a section that a lot of people are going to be going to washington it bought to the american authorities and saying what you do here has major repercussion. not just a europe, but beyond that. a u.s., you must have a global perspective.

nadia: i do think they are well aware. just like putin's actions in ukraine are having a worldwide impact, it is not only having to do with security and inflation. good security is an issue that we will certainly be talking about. i do think that the u.s. authorities are well aware of the impact of their position on emerging economies, on inflation throughout the world and growth throughout the world, course. jonathan: do you think they should stand back on the cycle? nadia: i would never dare to say anything to a monetary policy authority. i hope that they will get it right, both in the u.s. and in europe. there are different on both sides of the atlantic. energy prices going up, the

underlying cause inflation is the youth. as you are rightly saying, increased exchange rates are very, very sensitive, very important. that is driving the relationship between monetary policy in different parts of the world. i really hope they get it right. >> have pressing at this meeting going to be? nadia: 2007, 2008, national regulations, a very complex scenario with multiple interrelationships having an effect here. i think it is good we have the g20, it is good we are meeting this week and i hope we do have a good outcome in terms of a good economic policy at this point in time. jonathan: let's do that again soon. diplomatic, as i would expect.

the market might listen -- will you? mohamed: this is very tough. jonathan: every week is exhausting. mohamed: but it is even tougher for policy-makers. jonathan: again, thank you. thank you for the privilege. we going to do this again? mohamed: i hope so. i am in your hands. jonathan: from new york city this morning, good morning. we will catch up with bramo in the next hour. live from new york, this is bloomberg.

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>> i don't think that would

bring theaters in early. >> the markets coming to terms with the fact that is going to go higher. >> broadly based across the board. the next thing they are really worried about is the cpi. announcer: this is bloomberg surveillance upon keene, jonathan ferro and lisa abramowicz. jonathan:jonathan: live from new york city this morning, good morning, good morning for our audience worldwide. tkwill be down in d.c. . we will catch up police and just a moment. coming up later, bank earnings coming up on friday with j.p. morgan kicking things off for you. this morning, we are lower by about 4/10 of 1% on the s&p 500. yields are higher by three basis points. equities obsession lows. very familiar.

elsewhere in the market, euro-dollar, to tens of 1%. the euro shoving justin that if strength. wti, we are down by 1.9%. i'm pleased to say lisa joins us now from the economic form. the next hour, we have a fantastic guest coming right out. lisa: and i would never abandon you, as much as it is gorgeous here. coming out, we have a series of incredible guest including the governor of connecticut. i really can't emphasize enough in terms of heading into this economic time, also given the fact that there have been so

many people post-pandemic. how do you invest and focus on private markets and public markets? in lawrence dollar also focused -- florence golub. -- lawrence golub. where did these come from and where do they focus? bridgewater, going to be speaking with our own david westin. we are also going to be hearing from ares capital. so many conversations. as you look at the policy changes that we are going to be hearing about, here is who is going to step out and what kind of deal they are going to be looking for. jonathan: one thing you say when you get into a crisis, nothing can stop panicking when policymakers start to panic. we had the spanish deputy prime

minister say that she might have to come up again. the idea that this is like 2008. not that he thinks 2008 will happen, but ultimately because it is like that kind of moment. your thoughts on that, what is your take on that conversation? ? ? have we heard that from policymakers in the united states, from the fed? in 2008, we did not see inflation like this. what does it take for them to pull back from the rate hiking? refer to some other discussion around getting rates of high and leaving them there for a long time. this is not a crisis kind of mood you're looking for if you are an investor. they are not necessarily panicking, which is the reason

why those bonds come out with a budget. jonathan: j.p. morgan asset management, this is what he had to say. when the central bank steps on the brakes, something go through the windshield. the cost of financing has gone up and it will create tengion in the system. with that quote the last hour, i haven't responded to it. mohamed: the economy is going to go with the windshield, the financial system is going to go to the windshield. this is not slamming the brakes. is the most frontloaded interest rate cycle that we have seen in a very long time and it didn't need to be this. this is the tragedy of it. he didn't need to be this way. this is a self-inflicted wound by central banks. jonathan: we joined now by the brilliant sheet market strategist. how bad is this going to be? >> i think i agree with

mohammed. the fed, if they acted earlier, they could have stopped earlier. instead, inflation got out of control. now they really need to get it under control which is going to be a process and i think that is the issue the market is having right now. people don't know what to do and we are not going to have this bond that markets have come to expect. it is justice uncertainty that keeps away not investors. >> across a range of securities, we haven't adequately discounted the future. >> jamie dimon was spot on saying that we need to go down another 20%. if you go up 10%, you're looking at the s&p 500 trailing the historic average at that point. there is a very strong case to be made for financial markets.

last year's earnings was some type of peak. so we have to start discounting weaker earnings just because the interest rate environment. i would say that we can have his next 20% down and we still have to evaluate, where are we and what is business going to look like in an interest rate environment with a rate above 4%? jonathan: you mentioned that conversation over at cnbc. this is what he said on rates that caught my eye. rates going up another 100 basis is a lot more painful than the first 100 basis points biggest market used to it. does that resonate with you? what is it that is harder than the previous 300? >> it is funny, if you look at the consumer credit data we received on friday, you will see that consumers are borrowing tremendously this year. consumer credit is up, the monthly borrow is up 50% vs.

last year and about 100% against pre-pandemic years. people haven't adjusted to the higher interest rates. they use their credit cards to kind of fill the holes right now, but at this process plays out and we are fueling these higher interest rates, they are going to start retrenching as we head into year end and 2023. that circles back to the comment that mohamed was making that it is going to be slamming the brakes. jonathan: michael, i ask this question delicately and perhaps provocatively but you can push back by all means. do you think a recession is all but guaranteed? >> a little more hawkish

traditionally. very aggressive, more aggressive than i would be. i think it should be somewhere around 4%. we are not there yet. and again, if they reached the point where the target is, i think that is going to bring a recession on. jonathan: can you get bullish from this fed? >> i could get bullish about the concept of a pause but it is still not anything near valuations for the environment we are in. when you think about this, the different environment of the past decade, for the past two decades, we had this low-inflation environment. in china, the manufacturing center of the world, exporting inflation.

obviously that is shifting today. we are headed into a higher inflation regime so we need to have a real effect which we haven't had the global financial crisis. that is for the fed needs to head. i think that is where we are heading and they think that changes the investment outlook for everybody. it is going to be the most different that we've seen in the past 10 or 12 years. jonathan: i think we just are used to this. there was a quote from them. guidance is going to be terrible. a downside risk starting. michael, dean agree? michael: i do. what is happening here, they haven't had guidance projected in where the trends in business

are. i think we see that with this earnings season but the problem is, this is a process that is going to take time to play out. so we still won't have great visibility about 2023 because again, this is a generational tightening we are seeing. we are slamming the brakes. a very different 2023. still can't have high confidence in numbers. a higher risk premium for investors to want to be. jonathan: final question, you sound like a man hardened in cash. is there anyway --? michael: i think that has incorporated all of that height that we should need. it very much priced in. i think that is a good place to be. if the fed does have to pause

earlier, i think they will respond. i think there should be net -- much better equities opportunities. jonathan: michael, thank you, sir. teachers were covering just alluded. on the other set of the break, we will and the democrat from connecticut. from new york, this is bloomberg. >> keeping up-to-date with newsom around the world, i'm lisa mateo. leaders are scheduled to hold a call today during which russia's strike on civilian target are set to top the agenda. vladimir putin has called it retaliation for explosions on a melt -- multibillion-dollar bridge connecting russia to crimea. afghanistan's government is

working to build ties with russia. afghanistan's minister of commerce and industry says the moscow offer at a discounted rate may be more appealing. ties between moscow and afghanistan have grown since the u.s. exit last year. a shortfall of as much as $8 billion in 2024. equity rate was included in the recent investment banking operations of a time when minimal capital there is. the french finance minister calls on total energy to bring an end to a dispute that has seen workers blocked the country's biggest oil refinery. an interview, he said my fellow

citizens are the victims of a conflict. mohamed: -- 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. this is bloomberg. >> welcome back to >> welcome back to >> welcome back to >> welcome back to

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>> you may not notice potentially -- i think it is very likely because -- unemployment rate up significantly. jonathan: always great to catch up with william dudley. equities were covering, we are down now by only a quarter of 1% on the s&p. down about 4.71%.

no doubt helping out that equity market. the bond market, a single basis point on the 10 year. the market acted on the greatest economic forum or we can catch up with lisa. lisa: live from british connecticut, the democratic governor of connecticut has been in office since 2019. thank you so much for joining us. there are a lot of people who it was really easy for them to come to the conference. many people will have, including businesses. how do you have the governor planned to keep that considering the polls? >> we have one of the greatest education systems in the country so a lot of people love to come here for their families.

cryptocurrency, financial services, obviously we've got the insurance capital of the world. we've got a lot of finance companies over the last few years. lisa: they are about 30 days in the election cycle. you previously raised taxes. how do you see the issue given the talk about the education, the services that cost money? >> to be exact, we inherited a $2 billion budget and weaken holding the line of spending. the first governor in three years not to raise income taxes. the past year, we put in place the biggest tax cut their ins. making life a little more affordable and this inflationary time.

i'm going to hear from the finance people today. i'm going to be ready. lisa: you said you were going to talk about how the world is about to implode and then sit there and hide under your chair as you prepare your budget how do you plan to really withstand whatever is to come given the negativity out there and given that it is hard to borrow right now? >> two things. i've got 15% above budget that aside in cash as a rainy day fund. so when capital gains start slipping, we will be ready. i don't have to raise taxes. i've budgeted very conservative for this fiscal year. i think we can see the storm clouds out there. lisa: go back to the election cycle.

your opponent does keep talking about the importance of keeping --. heidi balance lowering taxes to the competitive with states that heavily drawn a lot of wall street businesses? >> we had a couple of fortune 500 companies. we had dozens of other companies a lot of our local companies are growing and expanding. more new business startups than ever before. i don't want more taxes, but i don't mind more taxpayers. lisa: your tone has shifted with more focus on --. why is there the emphasis on getting people to vote? do you think there is something they can keep democrats home? >> piping anger sometimes motivates people. i believe in letting people believe we are turning things

around, making progress every day. yeah, vote. lisa: going forward, how concerned are you? given the fact that some of the revenue for possibly years come to pass -- >> they know that for the first time in years, we have not raise taxes. that is a big deal. they love the best education system in the country, they love the fact that we provide job training, they can get the people and the skill they need. lisa: do you feel like there is a short trade out? there is strength of the physical response because when you are doing with inflation, you are dealing with a situation where you cannot borrow money in the same kind of way. how are you preparing for that?

>> there is a big macro economic world out there, and we are a small piece of it. all i can do is prepare, and i've prepared by making sure we have a lot dry powder. i can't borrow my way out of this. can't do that at the state level. lisa: when you look out today and hear all of these executives at alternative investment firms, many have moved recently to connecticut. what have you heard from them that you find most compelling? >> i think they like being here. they don't necessarily have to be in new york city or boston. otherwise, i think they like the lifestyle here. they like the fact that we have a very well-trained, smart,

educated workforce that help them grow and expand. lisa: do you have more tax hikes planned overall? there worsen tax sites that you did with your first budget. you plan on doing that again, or that it thing? >> we didn't do that. i was the first guy not to raise the income tax on anybody. people want to say what does the state look like now, but what is it going to look like in five years? i need to know what the world is going to look like in a few years so i can start to gather my projections and make them happy. lisa: you've been trying to encourage people, is that correct? >> we have an amazing baseball team.

we want to get football bigger in connecticut and make them invest franchise. >> is going to buy? lisa: thank you so much for being with us. governor of connecticut here with us. coming up, we are going to be speaking to -- apollo global management as we take a look at a time of incredible summers and later this week we are going to the with tom keene, time to navigate what is going to be a very difficult environment.

jonathan: live from new york city this morning, good morning on tv and radio. equity features were covering on the s&p 500. justin had unchanged now. inflation loads down by more than 1%. at about the bond market? the high this morning of the 10

year. was up 12 basis points. now, not even two. 10 back over to connecticut to catch up with lisa abramowicz. lisa: right now we're talking the bond vigilantes and we have someone who has been in the bond market for decades. this was the day of bond vigilantes. this is a year of pond vigilantes and this is raising so much fear about people who valued 20 rates over such a long time. are you more nervous today are more excited? start out you got to respect it. certainly there is a big paradigm shift going on right now. you have to respect the markets. they begin rates where they

should be, more so than the fed. it is a paradigm shift receiver the rates have been and then leaping in the story where there has been undo focus on low rates that has put valuation very, very high. respect it, but also you want to be on your own foot which we've been able to do over the last several months or so. if you have been thoughtful about what you put on the books, there is a very extreme time. the cost of capital matters. purchase price matters. and those who have capital and a lot of flexibility in your toolbox will find many areas to give capital to. lisa: are you taking more risk or less than a month ago? >> we are measured. we went on a very, very large platform in aggregate. you really can't pick the bottom.

it really is impossible to predict. but we are methodically putting opportunities to work. we've been active in the working with some of those banks on the large indications in particular. i think i have a healthy respect for what is going on, but i don't think we are in the corner i any means. lisa: i think of the language you're using and then some of the stories included. you've worked with banks, you helped them. commitments that they made to finance mergers and acquisitions. how many opportunities do you have to buy assets for the banks? >> in the gse, the banks were

arguably $500 billion plus in loans and ideals. today that number is circa $80 million to $100 billion. it is a much smaller opportunity set with not as many names. nope funds, no enemies. we have a great dialogue with them. we will partner especially in the u.s. and europe with a lot of banks. i think you have to have a realistic dialogue. in the challenging position. i think they want to move on, they want to get back in business. the reality is a high-yield fantasy market -- obviously shut down right now. i think that they would like to be able to be in a position to make new loans at appropriate levels. it's going to be interesting

between now and the end of the year. lisa: including apollo, investigating credit but not very often. that is a company that you also have higher yields. is that the same now, or are there more opportunities given yields north of 10% in many cases and arguably, north of 8%? >> i'm glad you brought that up. we are really a performing investor, looking to extend capital to companies that are growing and get paid back. there's not really a distressed angle in their typical credit business. if you raise rates, when you have the dislocation we've had thus far, there are opportunities in the public markets with the investment-grade market with low dollar price, long-duration assets at same opportunities. new capitalist time with better

terms and better pricing. pure and unique area where there's actually high-yield on a year basis as somewhat attractive. on a spread basis, the spreads this morning are mid 500s. that is statically a time you get interested in high-yield. right now, yields are approaching 10%. it is my view that having done this for a few decades now, things are happening faster and faster and faster. the rate rises the historic, and in the past, that might have happened over 12, 18, 24 months.

you have to be measured and patient along the way. lisa: do you think we are going to see a cycle like 2008? >> yes, you will see some degree. you can't slow down the economy with the monetary policy as we include today. that is going to happen. north of 6%, there is going to be a default cycle. it might not be as pervasive, but there will be some companies with a cost has increased dramatically. >> at this point, looking for those idiosyncratic companies that you want to invest in, actually going to other out of managers and saying we will give you money, we will give you a

space in our assets and go at it? >> you are alluding to recent announcements in diameter, these were all great managers that have proven their wisdom and their judgment over time and their strategies. at the same time, were very active on our own accounts. we are connected for a lot of folks. i think much of the strategy of the ins to do both of those. lisa: i mentioned united kingdom. seeing a policy response from the bank of england, how much are you playing the u.k. market right now? >> i think from our perspective, the u.k. market, it is a robust economy going through some great challenges. we were very active as i suspect

in the residential market, the commercial real estate market, you will see as active. a low market with u.s. and broader europe with some of the u.k., but it is the printer coney assumption. a are assuming 10% plus in the next five years, which we think in some cases is an opportunity to be higher. lisa: is something more start taking place? dark out in my view, europe is a bit behind the u.s. in terms of always hiring the market is tight and creates volatility. there is plenty to focus on right now in the u.s. i think you're in the table be a

23 and 24 opportunity set. we talk about investing alongside some niche investors. would do ever be interested in acquiring certain assets? >> since 2008, 2009, page been many instances where we have strategies that we are not taking to the banks, that there were credit cards in some areas that restate-run, portfolios and germany and the u.k.. we were always there as a partner. if there's is a bank considering large-scale strategic transactions, we certainly expect to be part of the dialogue. lisa: how much includes 4%-four

.5% country or perhaps per year? >> i think that has got to be the base case. we are in a higher rate regime to shock the system and the monetary policymakers are trying to really shock the economy on the nasty concept of inflation. you have to expect we are in a higher rate for some time. you got plenty of other folks will talk to you for your certainly in a higher rate. lisa: in terms of one is required, in terms of payment from a lot of these companies. thank you so much for taking time. the president of apollo global, really great perspective. it is really cold suddenly. jonathan: stay warm. making great work as always.

lisa is going to be joining us a little bit later. we will be catching up with the chief u.s. equity strategist at morgan stanley. with equity for covering this morning on the s&p 500, down, but only by 1/10 of 1%. for new york city, this is bloomberg. lisa: keeping you up-to-date with news from around the world, i'm lisa mateo. ukraine's allies say people supported for as long as it takes. after the group of seven planned to stay in a statement later today, and a statement, the group says we will continue to provide financial, humanitarian, military, get, and legal support with ukraine for as long as it takes. taking place one day after lot -- russia launched the initial strike.

a historic agreement -- maritime disputes. the deal will strengthen security and -- his real economy and ensure the stability of the country's northern border. a new push for independence is -- liz truss. second referendum on scotland breaking with the rest of the u.k. . her conservatives in scotland thank you the scottish national party government of pursuing a self-serving, obsessive push. resilience bends sales rose during the third quarter. ongoing supply-chain bottlenecks in increasingly negative economic outlooks. the luxury automaker delivered nearly 500 -- vehicles below -- in third quarter. that is off compared to a year

ago. 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. this is bloomberg.

dark out the market coming to terms of the idea that rates are going to go higher >> with the market is still playing around with his this recession. a lot of people think it is very unlikely. >> asset management growing yesterday, he is in washington right now.

bloomberg economic and policy correspondent. one is coming up this week? can you give us a sense of the international monetary policy --? >> lisa, this is the first time in three years now than all these people have gathered in person in washington so there is a sense of happiness and that there is a real evasive sense of gloom around the globe economy. the incident for a national finance represent the world's biggest banks and they got economists and political leaders and investors from around the world, bankers, they are having a conference address cointreau days of this weekend. everybody there is basically suggesting that you batten down the hatches. that things are not going to be good. that 2023 looks rather bad. the fed minutes come up tomorrow from the last meeting. we will see what they think about how long they have to keep

raising rates and of course, that whole idea of the fed raising rates in the world raising rates is going to be sort of topic number one along with rain and bank ratings because the higher the central banks around the world paying interest rates, the more it squeezes those were not prepared. they have a lot of dollar debt in the dollar is getting stronger and stronger. lisa: we referred from a lot of central bankers, and a lot of fed members. for weeks, there was a feeling that all of the fed members were on the same page. you further from a few others with a slightly different tone. they seem to emphasize the necessity to not make a policy error on the others. do you think that is significant or is this basically emphasizing man been saying some -- all along?

>> i think they are emphasizing it now because we are getting closer the terminal rate, the rate in which they want to stop. they do want to get there, they don't want pressure from the markets, and they don't want the markets to price in far as well. they're letting people know yes, we are aware of your concerns, aware of the possibility we could go too far. so we aren't going to do that, we are to stop when we need to stop but according to the latest forecast, they are still 125 basis points below that. some combination of 75, 25, or 50's probably still to be expected. lisa: given the drop, how important is what we're going to see on thursday? >> thursday is going to be very important because the cpi is going to come out. i would argue it is going to be more important for the markets than for the fed. he comes in worse than expected.

if they comes a worse than expected, it may change the market view. meka causing problems. the markets are functioning fine in the united states. can't say that about every market, but it can raise questions about at what point do something break? there's a lot riding on what the cpi comes out with. lisa: so it is very much for that point where we are talking about as an investor, policymakers panic. they do not see panic yet. what would be the trigger coming in strong? is there a sense of what

breakage would actually get in a responsive way? dark out there was an old saying that a recession on wall street is when you lose money. that that is where they are going to get a lot of complaints from investors about their policies because it makes it harder for them to make money. what they are going to be watching for is what you can trade. we seen in england over the last couple of weeks that there are trades that maybe don't go through because it is margin calls and the priced -- depressed prices but so far, that is not happening in the united states. the problem is there are not going to be problems in the banks, they are going to be in the shadow financial sector. banks are capitalized and much heavenly more scrutinized these days. but you don't know what is going on in the shadow sector which is the position that the bank sounds in that is what people are going to be worried about.

the fed is at this point very aware of that possibility. not sure they can do much about it except to keep vigilant. lisa: the united kingdom, it is very clear that the problem has not gone away. that raises this question about how balance sheets could be used with quantitative tightening, not quantitative easing. how much have we heard from u.s. central bankers that they are taking a look at the balance sheet roelofs? michael: so far their view is that it is working fine. christopher wallace summed up the overall view of the fed this week when he said look, the markets are giving the fed back to trillion dollars every day in the reverse repo facility, so

there's plenty of liquidity out there. it is a question of who had liquidity. thank still want loan securities, so they are not putting money up to the head. there may be some regulatory issues that the fed could address that convenes that a little bit. beyond that, they don't think there's a problem yet with the balance sheet. they are going to keep going with that for now. you don't want to get into a position, as you mentioned, with the bank of england where they have two monetary policies working with cross purposes to each other. lisa: you mentioned earlier that we at the meeting minutes for the budget reserve. what would be important to look for given all the communication begin everyday? michael: i think that they people on wall street are going to be looking for some indication of where they're going to stop and when they are going to stop. there is a view on that, about how far they can go, how much

concern do members have about over-tightening. that is going to be one of the questions that people ask. the other is going to be what does the fed think about how long they want to keep interest rates up? what is their view of inflation? we got there views on where they think inflation is going to be with some economic projections, but what did they really think about how fast he could come down? lisa: thank you so much. coming up, david westin in conversation with -- of bridgewater. in coming up, unimposing. this is bloomberg.

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jonathan: life from new york city, good morning. the s&p 500 is tying -- is trying to recover, the countdown to the opening starts now. >> everything any to get ready for the start of u.s. trading, this is bloomberg, the open with jonathan ferro. ♪ jonathan: live from new york, we begin with markets on it. >> we are worrying about