>> this cycle is being defined not by its severity but by its duration. >> lower equity prices and a stronger dollar will continue into year end. >> i think the stock market is washed out. >> i think if 3500 does not hold 3200 is the next natural place to go. >> i get that we are not at the bottom but things are starting to look more reasonable with a longer time horizon. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: good morning. this is bloomberg surveillance on tv and radio. i am jonathan ferro. futures up again on the s&p 500,

up 1.29%. tom: goldman coming up a little bit later. it'll be interesting after the generally good news we saw. it is finally acquired tate, lift inequities. i am going to one person. brian moynihan. do we get the same surprise from solomon like moynahan? he will say business is not all that bad. jonathan: we will talk about the other consumer banks. brian moynihan saint consumers are spending, they have good credit. consumers are in very good shape. you had jane frazier at city saying the u.s. economy remains resilient. we know all of those things about the u.s. economy. tom: you have to go to the conference calls and this dreaded forward guidance. gina martin adams is really good at this at bloomberg intelligence and she says there is a wait to looking out further

like there was a year ago. jonathan: early days, but are we skipping over a very low bar for the third quarter? lisa: a lot of people say that. when you do not skip over it you get punished badly. it is hard to come away without any kind of conclusive narrative , especially when you have bank of america talking about embrace the bear and prepare for the bull and all of these metaphors. out of be a more comfortable bear. jonathan: is this therapy? lisa: this is therapy for a people who will look at a rally that will rip their faces off. tom: are we vulnerable? i feel so vulnerable. get me some more tang. jonathan: this is outside therapy. on friday doing bloomberg real yield i turned to the guest and said i feel like this should be a 30 minute show of market therapy. tom: the bear market down 50%, the bond market, as we open the

show today, we need to look at -20 or -30. i looked at one etf bond fund. that is a bear market and that is where you need therapy. jonathan: no cuts no glory is what he had to say. ultimately you have the ingredients for a bear market rallied but the lows for the team at bank of america not until the first half of next year. jonathan: is not about -- lisa: it is not about jumping over a low bar, it is about what happens next. what will the guidance give us except mike wilson, he has a crystal ball no one else seems to. jonathan: he has insight no one else has. tom: what is great about a guy like mike wilson is they have a humility about them. mike wilson knows he will get it wrong at some point. would you like to speak? lisa: talk about urge humility.

-- about earned humility. marco. i'm just saying he walked back some of the risk appetite. jonathan: still overweight on equities. when he goes underweight on stocks we will make the change. we will talk about the gilt market a little later as well. in the s&p 500 we are positive 1.3%, elevated in the equity market on the s&p. in the fx market, cable breaking lower .8%. the ft comes out this morning and says the bank of england is getting ready to delay the start of qt, than the bank of england says that report is inaccurate. tom: as a complete amateur, i thought it was difficult day for the prime minister. jonathan: you thought yesterday

was difficult? tom: of all of the different days i thought yesterday was difficult. dollar-yen, i was surprised to the solid 1.49. it is something to watch. jonathan: yields pretty much unchanged, up almost one basis point to just north of 4%. big moves in this market. lisa: you talked about goldman sachs earnings at 7:30 a.m.. how indicative is that what we will see for the rest of the earnings complex? netflix after the bell. it starts to kickoff and broaden the companies reporting earnings. i am particularly interested to see the post-covid darlings that have lost their luster like netflix. air travel has continued to take off despite the fact that tickets are so expensive and people still seem to buy them.

to date economic data includes u.s. industrial production and nhp housing market at 10:00. how much is homebuilder sentiment deteriorating. it is expected to go to the lowest back to 2012. how much does this lead to what you are worried about? tom: i do not know if is a housing crisis, it will be the mother of all adjustments. mortgage rates are 7%. lisa: the mother of all adjustments, crisis? you know. at 2:00 tomorrow neel kashkari, at 5:30, what they say about frontloading? we have her jim bullard talking about raising rates to -- at the end of the year. is the goal to raise it to that level and try to get ahead of it? i think that will matter in terms of the risk appetite, what people see going forward for the fed and rates? jonathan: let's talk about the

rate market, we can talk about qt, let's talk about sterling, we can do that with kit juckes. on a report qt gets delayed, sterling climbs to session highs. on the pushback from the bank of england sterling falls to session low. in i to believe qt is somehow sterling negative and delaying qt is somehow sterling positive. what you make of that? kit: the price action tells you you have two conflicting messages, one coming up the start of it all. everyone is looking at the k and saying please can you get the messaging right? we are all confused. what we need for the currency is for the volatility to go away, for everything to calm down and to put this kind of period of massive uncertainty behind us. contradictory reports are no help in that regard.

the most confusing thing of all would be although they are not planning on delaying the start of qt come if they do it anyway because of the volatility in the gilt market, then we will be full-circle. tom: i thought your note today was lovely and it was very indeterminate. we need to wait. now what? what you do with a strong dollar reality given the unsettledness of your note? can you go the other way and call weak dollar work in you just sit here? kit: that is why i think what we do is we get stuck with less volatility. their two problems with the weak dollar. one is you have to embrace the idea that we have the softest of soft landings in the united states. the difficulty with that is if the economy does not slow they will hike more, not less and we would get a very inverted curve by christmas.

the second one is russia-ukraine , the problem we have out there. how do i turnaround in europe and say shellac by the pound, shall i buy the euro when i am getting reports about cold days in the middle of winter in january and february and the lights will go out. have we price that improperly yet? i am not sure. we could get stuck. that is the end conclusion. until we get the next trend, and the next trend might be kicked off by the next leg up. lisa: jordan rochester was on yesterday and he talked about how central banks are important but it is about the economic trajectory and right now morgan austerity approach for fiscal policy makers in the u.k. will lead to a deeper recession and that means a more negative outcome for the pound. is that the kind of rationale you think is what you should be following? how much is the economy the main driver? kit: the economy becomes one.

the economy is heading into a recession that could last a long time. to the extent that there is a wisdom that says what you need to do when your financial position as a country is poor's titan fiscal policy aggressively in the hope that will improve as opposed to get yourself any chance of growing out of your fiscal problems, then we start looking more like japan. that is pretty scary for a country like the u.k. it is not a great picture. i think the only piece about sterling's we are priced for a lot of bad news. sterling could be held down. i do not know how much further it could fall unless something really negative happens. what i do not see is the policies that would let the economy do better than expected and people start looking around

and say i want to buy. jonathan: final question. can national win the league? kit: no. jonathan: just flat out no? i have given kit so much grief over his support of arsenal football club and their refusal to engage the possibility of winning the title. michael: are we still early in the season -- tom: are we still early in the season? jonathan: they will go on a ridiculous one month break for the world cup, which i detest the idea of. tom: to be clear, there a team like arsenal, all of the different players will play for their countries. jonathan: that they come back, we will lose a lot of momentum. tom: they did that in hockey with the winter olympics, never worked out.

jonathan: q1 hockey in the summer? they do that anyway. tom: i played hockey once in davos. jonathan: the river when i played skating as well and ended up on my back on a hill? good times. tom: the annual ferro fall down. jonathan: peter tchir of academy securities joining us in a moment. this is bloomberg. lisa m.: keeping you up-to-date with news from around the world. olaf scholz has ordered an extension of the lives of the country's three remaining nuclear plants until april 2023. the decision is meant to end a standoff between two coalition partners. the breeds are opposed to nuclear power but the german democrats say germany should use

all of the energy possible to tackle the energy crisis. slogans attacking president xi jinping on a beijing bridge have spread to other cities in china as well as across the globe. phrases have criticized strict lockdowns and restrictions that have defined xi's covid-19 zero policy and call for new elections. junk dollar bonds have dropped to a record low as a property crisis is showing signs of improving. the notes are dominated by real estate firms in the average price fell below $.56. it hit that level in august before government support fueled the rally. the biden administration moving forward releasing another 10 to 15 million barrels of oil. the move is said to be meant to balance markets and keep gas prices from climbing further. the strategic petroleum reserve would be the latest in a 180 million barrel program that began in the spring. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more

than 120 countries. i am lisa mateo. this is bloomberg. ♪

>> i recognize we have made mistakes. i am sorry for those mistakes. i fixed the mistakes. i have appointed a new chancellor. we have restored economic stability and fiscal discipline. what i now want to do is deliver for the public. we were elected on the 2019 manifesto, i am determined to deliver on that. jonathan: when he got a trouble as a kid and the parent said you have to go in school and sit in front of the teacher, this is what you have to say. i would say i'm here to apologize for my mistakes and i would look back down at my

notes. [laughter] can i go to class later? the last week or so, every time i see the prime minister, it looks like she is not enjoying any power whatsoever. it is unreal. tom: what is your vision of how this is solved? jonathan: i don't know. tom: a lot of people do know -- a lot of people do not know. jonathan: it looks like the chancellor is in charge. tom: a global train wreck with ramifications worldwide. lizzy burden is in london in front of the house of commons and joins us this morning. i am keeping count of the number of tory members saying out, and it was two, i think now it is four, what is the count this morning, and how any ministers have to say out before liz truss

is out? lizzy: i think publicly the herd is five which is not massive. i do not think there is a threshold they need to hit to change the rules because this is a different situation. the tory party is the most successful political party in the world for a reason. like a snake it can shed its chin. former chancellor george osborne said water will find its way downhill. if they were to want to replace liz truss they could find a way to do that. behind the scenes it is said the letters are going in to the chairman of the 1922 committee of tory backbenchers. it is not just how they do it, it is who would they pick? yesterday in the comments it seemed to be an open audition between liz truss's cabinet for who would replace her. you had penny morton up to bat.

she had to reassure the commons that liz truss was not hiding under her desk. the problem with morton if she is thought not to have enough broad government experience to take over. then you have jeremy hunt in his various appearances throughout the day. he has already lost two leadership elections and he says he does not want another one. there is always rishi sunak, he has been notably out of the picture for the past few weeks. he is seen as a divisive figure in the party. perhaps he is staying out of the way because he does not want to be seen as a backstab or in the way he was in the downfall of boris johnson. in westminster one thing i'm hearing about how rishi sunak could square the circle about not having to go to the public to get a mandate via a general election would be to claim he has more of a link to boris johnson's mandate from 2019,

because johnson went out for conduct reasons, not policy reasons. rishi sunak would be closer to johnson that liz truss would have been. jonathan: i will allow someone else to explore whether we could see boris volume two. the policy announcements of the last 24 hours, how have they been received and are we ready to see more of the same by the end of the month? tom: -- lizzy: markets seem to of been calmed by this. hard to understate how big of reversal it was. huntt has managed to close some of the fiscal whole but he still has 30 billion bound -- some of the fiscal hole but he still has 30 billion pounds to go. without the sugar rush it raises the recession risk. whatever jeremy hunt did, there is still going to be the mor

on risk premium for because of the scarring to the uk's economic credibility done by liz truss and that limited time. the borrowing costs for the government are higher. jeremy hunt is going to have to show more fiscal discipline in the form of austerity. labor has already branded it austerity 2.0. he has appointed as an economic advisor blackrock's rupert harrison. as respected as he is in the markets, it is in a knowledge meant of the need of this economic orthodoxy. rupert harrison was george osborne's right-hand man in the austerity years. politically it is a difficult link to be bringing back this link to austerity. as they head towards this halloween budget it will be very

politically risky. jonathan: you call it a moron premium. was that perkins at ts lombard? lizzy: not my word. ts lombard's. jonathan: that is brutal, isn't it? lisa: if you want to look at brutality you can look up all in terms of liz truss popularity. it is now at 10%. just giving you a sense of that. that is a sense of scope. that is giving a real problem to her party. we have not touched on the financial times report about delaying quantitative tightening by the bank of england. bloomberg coming out and reporting that is not accurate. what happens if they do not delay quantitative tightening? and if they do, where's the credibility at a time when they have come out pretty unscathed. jonathan: it is the bank of

england themselves reporting telling us the ift reporting is inaccurate. what is problematic about all of this and we mentioned it earlier, we do not have any understanding about the direction of policy of the bank of england. when you have a conflicting report in a short amount of time, based on that additional premium into the gilt market of not knowing anything about where we are going. lisa: what would you call that premium? jonathan: i would not call it the moron premium. i did ask how deep the stars would be over the mess of the last month and the u-turn, the u-turn is not enough to heal them. tom: i agree because the powers that be are still in power. if you get people changes for the conservative party, or number one wise of their general election? this is how americans think. we do not understand.

we are like what is the date, when is there an election, can labor do it or not. it is bizarre. lisa: you all sound completely -- jonathan: coming times have we had this conversation? tom: it is uncountable. lizzy was clear and we did not have the betty hill music from yesterday. i like transistor radio the other song. jonathan: you probably know more about this than i do. no betty hill music. although that would be a great soundtrack for this program sometimes. live from new york, this is bloomberg. ♪

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jonathan: live from new york city this morning, here is the rice action in the equity market, of by one .4%. the earnings season continues, creeping and further and further. full yields sales have been adjusted on fx had wins. lisa: how much will this be the catchall versus a huge problem

especially for international companies but shares are up one .5%. --1.5 percent. jonathan: we are unchanged in the bond market. sterling is all over the place with intraday trading. cable is now negative three quarters of 1% stub cute t might be delayed, this is the language they used. they have decided to delay guilt sales/qt. and they say it's inaccurate. i wonder if the conversation is active or not. tom: they will clarify it through the day. dollar-yen, weaker yen is

something maybe off the radar. kristin joins us and she has an exceptionally important single sentence of courage in her research note. anytime the index is sold up by more than 25%, the three year future return has an average of 40%. how do you know when to step in and go long? >> it's a really hard decision and we can understand why people are naturally nervous given everything that's going on but for the investors able to take a long-term view and three years is not necessarily long-term, the data is in your favor and time is on your side. the three year forward return, any time we see the s&p 500 selloff by more than 20 five percent has always been positive and averaged a return of 40%.

five years is 85%. time is on your side and there are buying opportunities. talk to us about the huge advantage tom: you have at citibank. you've got the security analysts talking day to day with the corporations. business is good in j&j is giving a decent forward guidance. what are you hearing from your research staff --staff about corporations weathering this moment? >> coming into q3 earnings, the bar has been revised down so it's set low so we could see the countertrend rallies in the back of it step it's all about the consumer in earnings and that was a key point in financial earnings. is the consumer strong? there is a nuance here. as we see credit card balances increase and we are looking at

spending patterns, there is a difference between nominal and real number so inflation is impacting our consumers and its impacting spending pattern so inflation benefits topline revenue growth so we have to get down to the unit numbers and see if they are spending on the same things and buying the same quantity and that's something that flows through to earnings and puts pressure on q4 into 2020 three as well. lisa: talking about history and not necessarily predicting the future but being a guide for a good time to invest based on how much stocks have gone down. is this time different? does that give you enough conviction to go all in with risk if you have a longer time horizon? >> we are defensively positioned but fully invested in this market. we believe these markets require patience, diversification and discipline so we don't want investors all in cash.

in our portfolios, we are overweight fixed income since we so the 10 year at 4%. you look at six-month people's yield enclosed of or percent, we want to increase those yields and see opportunities in fixed income investment grade and government and communities. even in preferreds where we see opportunities as opposed to going long on financial stocks. it's attractive and can mitigate some of the impact of inflation. lisa: how much are you going to the long end of the curve? we have seen the curve shift again and again. >> it depends on the risk appetite of the investor. the sweet spot now is probably about two-five years and most of our investors are long individual bonds so that ability

to hold is important and even two years ago, we had 40% of the worlds government debts of seeing these heels out five years is an area where we are comfortable and comfortable with standing the headwinds. tom: how do you judge? how do you judge between bonds and equities? are equities giving you the enthusiasm of a new bond? >> this is why we are pretty balanced and pretty defensive. we think we will see peak rates and we will see peak inflation dominate over the next couple of months with volatility. you will see these countertrend rallies. if you play the long game, there are opportunities but if you are looking right at the short-term, you want to have that balance.

q4 in u.s. equities going back to 19 36, 80 1% of the time has generated positive returns and an average of four .4%. it's the best quarter for u.s. equities of any quarter in the year. if we have surprises in earnings, you want to be positioned in dividend growers in sectors that can withstand the recession. health care is a sector that's been able to consistently grow earnings for the past four recessions. they have grown about 8%. you're not stretching too much there but you still have exposure to equities. tom: what about i quality big tech? >> high quality big tech, we have to look at the international exposure and look at the pressure in terms of how strong the dollar is over all. there is a huge difference between profitable tech and

unprofitable tech. when we think of unprofitable tech, it's an unknown future. in long-term low markets and low interest environments, that unknown future is much more palatable than this type of market condition. these types of companies exist and you can make the argument that a lot of the profitable tech, we will look for signs of margin compression and signs of durable demand as to which companies have durable demand and whether it's in hardware or software. jonathan: it's awesome to hear from you as always. on the earnings, netflix after the close a little later. lisa: how much will we see subscribers continue to decline? jonathan: are you watching netflix right now? tom: netflix does not exist in

my house. i think it's mostly stupid tiktok. lisa: how much is social media taking over and how much do we see a saturation and crackdown on multiple people using the same subscription but how much does the subscriber count affect things? jonathan: do you watch house of dragons on netflix? tom: i down. lisa: my kids like it. jonathan: it's a bit weird. tom: hollywood is just struggling. i watch the new star wars thing but what does it cost? jonathan: on a serious note, you have had the credit markets supply in extremely accommodative terms. they invest in some big

projects. lisa: you asked the question yesterday about private valuations and in public markets, that could be the take away from netflix. how many of these companies that have huge amount of capital investment that cannot come close to justifying it with the revenue streams they are seeing and the cost to keep that up? tom: in 18% weight on debt with apple at 5%. she's talking about a call option on an uncertain future. jonathan: so was kristin. tom: it's like a call option. lisa: i'm not sure where we are. jonathan: does apple get it done? we reported in the last couple of weeks it they were struggling and maybe i phone demand was struggling.

every single time, they knock it out of the park. lisa: this might be different because of what we've seen from micron and intel or all the chipmakers that have had some dire projections. if that's a t leave to demand on personal electronics, it's not a good sign. jonathan: the market is shaping up on the s&p 500. the nasdaq as well and yields are not doing much. i cannot keep up with pound sterling. the intraday rates on cable are ridiculous. the highs of today's session was $1.14. they are off that low right now. lisa: what will be in 10 minutes, we cannot tell you. what does the denial mean? it's inaccurate. jonathan: they said the report was inaccurate. the decision that had been made

was inaccurate. the last couple of weeks in the u.k. are driving me nuts. jmp securities is next. this is bloomberg. ♪ lisa: here's the first word -- attacks against g zheng paying have spread to other cities in china. they have criticized strict lockdowns and restrictions that have defined xi's zero covid policy and call for new reactions. the german chancellor has ordered an expansion of the country's three remaining nuclear plants until april, 20 20 through. --2023. the greens are opposed to nuclear power but the free democrats say germany should use all the capacity available to

tackle the energy crisis. the vine administration is moving toward releasing another 10-15 million barrels of oil from the emergency stockpile. it's meant to balance markets and keep gas prices from climbing further. the strategic petroleum reserve would be the latest in the 180 million barrel program that began in the spring. president biden political travel schedule is lighter than his immediate predecessors at the same point in the midterm campaigns. it's a challenge to stave off congressional losses. during the same week in 2018 and 2010, the former residents traveled to three and four states respectively for political events. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo this is , bloomberg. ♪

>> consumers are spending, they have money and they have good credit and that's good news for america and it makes the fed's job tougher because they are trying to slow down the american consumer which is a very resilient thing. jonathan: the ceo of bank of america. tom: suits and ties and everyone has macro baloney questions about jerome powell. he stopped traffic in davos, showing his precision on what he executed yesterday. jonathan: they are reinforcing the issue for markets. bad news for the fed because

they want to slow this down and for many people, that means higher interest rates. lisa: when that data is good, people get nervous in the market sells off but when is good news just good news? in earnings, that seems to be what's happening more. jonathan: i was shocked at the average credit score in america, it's like high 700s. isn't that shocking to you? lisa: yes, how much is this used by selection or how much of this credit score is inflated and it will come down rapidly once the equation changes economically? jonathan: i would love to know. i will not share my credit score. i'm surprised that was the average in america. tom: i think they made it easier. jonathan: i'm very proud of my credit score. tom: when we talk about the

challenges of goldman sachs, we have the senior research analyst out of rhode island. what you need to focus on is the 10 year. i am going to cut to the chase, you could have called your research note ohlone and you say this is a return on equity juggernaut and solomon and company will launch up 50%. what does the gloom crew get wrong on the fortress? >> good morning, i think the gloom crew is more of a near-term versus long-term. there is a lot of uncertainty. this is not the first place people are going to. they don't lean and when there is no certainty.

you take a step back, historically, goldman sachs was trading at book value and was an attractive proposition. some say it's a better proposition today because the return on equity is more durable and we expect they can do double digit return on equities and even in this tough backdrop and what we will see to day is a return on equity of 10 percent or higher. people are concerned about the macro and we appreciate that. this is a long-term opportunity in our opinion. tom: will they execute this plan with or without mr. solomon? >> i think mr. solomon is an important part of the occasion and i think he has done a nice job. to me, that is getting more

organized around the business units. i don't see too much strategically changing is how they report their results. it is also a testament to where some of the newer does this is our going by transaction banking. they started from scratch a couple of years ago and it's already become their main business and they are nipping at the heels of some of the incumbent banks that have been doing that a long time. lisa: you think david solomon is doing a nice job. many people would disagree including the board and some of the people who would reverse his changes and call mark is a big mistake. even though it's losing money and hasn't gained traction, how can you say it's not a mistake? >> on the consumer side, you don't start a consumer business and reach scale into or five years. the business is losing maybe $1

billion which is not immaterial but relative to the firm that will make well over 10 ilya and on the year, it's manageable. in our opinion, this is part of a longer-term opportunity for the company and i think they are gaining traction. i cover fintech very closely in one of those firms are strongly in this environment because they were operating business models that try to be loss leaders to gain market share but that doesn't work anymore. these are the moments where you gain market share. you don't necessarily see it in the moment it is happening. i would push back and say david solomon has been navigating a tough environment since he's taken the helm.

we are pretty constructive on some of his moves. lisa: what is the proposition for can --for a consumer facing industry when we are heading into a recession. >> you will not build the business for a recession and recessions happen. this is a long-term action, thinking about the next hundred years of the firm. consumers have been hanging in better than many people thought that's why these banks are posting solid earnings. it's an area we are concerned about over the intermediate term but that shouldn't derail the longer-term story which is diversifying the business away from parts of the market that it not high growth. your capital markets do well when the economy is boring.

when it's not like this year, they are softer and that's why banking is down 50% in some areas. consumers are chipping away. the best scenario for goldman is they will gain market share. jonathan: thank you. one person messaged me and they are looking at what i was looking at. two 35 anna market account will step which you take that? lisa: compared to bank of america, it's higher. that's the big proposition. tom: triple leverage gets down to three point 2% --3.2%. jonathan: they should just clip 100 basis points. tom: that's a conversation from

the 70's. lisa: right now, you are seeing markets offer these rates because they are trying to attract deposits and the jp morgan's of the world are not because they don't care if you take your deposits out because they got too many of them stop it's the haves and the have-nots. tom: this is a cabinet meeting this morning. jonathan: who is running that? tom: it's nuts. jonathan: i agree. from new york, this is bloomberg. ♪

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>> this cycle was being defined not by its severity but by its tire ration. >> and the stronger dollar we think will continue into year end. >> i think the stock markets washed out. >> if it doesn't hold, i think 3200 is the next place to go. >> there's more stress to, but things are starting to look pretty reasonable. >> this is bloomberg surveillance with tom keene, jonathan ferro and reese -- lisa abramowicz. jonathan: live from new york

city from new york city for audience worldwide, this is bloomberg surveillance on tv and radio alongside tom keene and lisa abramowicz. later this -- goldman coming up. >> as we just heard from devon ryan, an optimistic view yesterday. in the last hour, goldman comes now on the back of bank of america, business is good, j.p. morgan, i'm sorry business is good. jonathan: early days but so far, so good. >> we've seen the banks, they are doing great with the interest payments because things have not frozen up so they can clip the differential of what they're able to pay out and what you're getting in the t-bill market. how much does that get reflected in the rest of the world as we brought in out. tom: wasn't that the conversation 90 days ago? jonathan: what are we learning?

we are confirming everything we knew from these banks which is the consumer is strong and we have a recession it will be short and shallow because they keep asking where is the access. lisa: will we be stuck with stocks rallying in one day for a prolonged period of time. it doesn't seem like anything's changing but if you look at what's happening with rates and what's happening with some of the granular data, it is changing. tom: is united airlines of more descriptive value than goldman sachs. jonathan: in terms of the consumer. tom: that a come out and say this is where we are. did fedex no. jonathan: all roads lead in the same direction for this fed will do more. that's why many people disbelieve it 75 again in early november. lisa: the question is whether it 75 in december.

whether we get there by year end and that shift to conversation and the likelihood of the peak being far below that. is jim leading the psychology in terms of what needs to get done especially given the upside surprise. >> i want to say it again just briefly. in the december fed meeting they did not even project rates at 1% by year round this year. weird on about 45 handles year end. that's a monster shift. lisa: what else are we getting wrong especially given how much everyone's come to this impression. people are on board, say the peak being around 4.9%. close to that as a base case for this market. jonathan: we got this year so wrong for this fed just 10 or 11 months ago what are we getting wrong about 2023. tom: let's join the broken

record society. we have had higher interest rates before. things move on. corporations adjust to this and find revenue earnings. fx headwinds, it is a worry but not the end of the world. broken records. some of her audience doesn't even know what a record is. jonathan: s&p at 1.5%. equities kicking higher. netflix after the close paid more earnings still to come. your 10 year yield in around 4% on the 10 year maturity. euro-dollar -2/10 of 1%. crude did you see the 40 from the team down in d.c.. the white house could announce later this week another spr release. >> at 85 42 west texas intermediate, that source in pricing grade that's the ammo,

of gunpowder you use. jonathan: midterms coming up. a little bit later. tom: does britain have an spr. jonathan: i think liz truss would be running a down right there that's for sure. lisa: coming up we will speak about the politicization. we are talking about earnings putting goldman sachs at abut a half hour, netflix at 4:00 p.m.. after the bell, i do think to your point that some of the other earnings might be more instructive than bank earnings. because banks are not the bellwether necessarily on the economic growth as some of these other companies. they might have more of a front running tea leaf kind of deal to them. what we are seeing with the big banks hanging in there.

we get economic data including u.s. industrial production as well as nhp housing market data which is positioned to see homeowners -- you've talked about this. how much is that rolling over. when does it bleed into sentiment among consumers with house prices declining and the feeling we are entering some sort of downturn we have not seen since 2008. we have the atlanta fed president today and neel kashkari. i want to know about frontloading braided -- frontloading. how much does that change the equation for people who are saying perhaps the fed needs to wait a bit now. take it slow and understand how much they are impacting the economy. there is a 12 to 18 month lag time people talk about we haven't gotten to. jonathan: long and variable

policy. >> that's codified in all the textbooks and the answer is coming off a pandemic it's a little bit different. you see the equities in particular what we are seeing. jonathan: the head of macro strategy, in your words the board of worry is so big we can klein. can you explain that for me. >> no matter where we look, whether it's china around earning spheres. there's so much fear out there and it's been priced in. we get this bounce that started yesterday. what i really like is yesterday afternoon stocks held on even his bonds gains gave up. we are doing well. i think that's the important change we see these past couple of days and i think that leads to a further rally. >> we've seen the can farces up to 3840. we are locked into 32, 31 maybe

30 on the vix. frame your enthusiasm when you study this. >> i see that going below 25. we are getting these earnings but we priced in so much negativity of single get great earnings from the airlines. consumer company's will be struggling a little bit. and then the debate is going to use -- switchblade what about the meeting after that. let's see how some of the data comes in. cpi this week, we had the shelter component which is the highest it's been on any given month since 1990 and there's no way the highest increase in a month in september. is a lot of bogus stuff coming into the data. i think we get some relief on the fed front. >> i want to understand the new consensus because it seems as a new consensus forming that we could see rallies in the near term. but over the long-term we probably haven't seen the lows and that something a lot of

people have been discussing as you see the weaker data, in. can we infer that weaker data is really going to be in the driver's seat and not necessarily a fed pivot or pause. but some kind of retracement by how quickly the fed will be going. >> will be looking at data dependent. at first people will say it allows the fed to pause. it will be some concern. it's good to be good. my real concern is then the pendulum swings way further and the data is so bad they have to pull back. the final stages a real risk off type rally. we see much lower yields and stocks. we still of a small chance of a soft landing. but that's what the market will start pricing in is a soft dish landing and that's good drive this rally. >> weaver the same arguments as to why this will be short and shallow. the balance sheets are stronger on the consumer side. you pushed back against that,

just give me the short story as to why you pushed back against the argument. >> i think wealth destruction has been immense and it's been very concentrated on a lot of these not just individuals but the companies and they were the ones really pushing that up. we are seeing that pullback. you see where companies are adapting to it. so i think there's going to be this big drag on the economy. when they did say they are sitting west for energy. i think we could have a much deeper recession and i look at the consumer part of the business, a two dollars being spent on goods last year. the spinning a dollar and a half on services. what we look at next january. i think it's unclear the consumer on january. >> lisa we've heard the same arguments, of the short and shallow recession. this cycle has been short. we still of the benefits of

these huge fiscal transfers in the pandemic. you had some pushback there. >> and how much does it lead to the new consensus. mike wilson has been out front it seems like other people coming to the feeling people haven't fully appreciated the weakness but will cause the fed to take their pedal off of the break, how much is that going to drive a new about of weakness and to your point what does that shake out in terms of the excesses. when we have seen with the bank of england a sudden move can really pull a lot of things out of the woodwork that perhaps were unexpected. >> up on the s&p. you said lisa seems to have a crystal ball talked about the prospect for a bear market rally. the same thing for the survey at b of a. for the lows in the big rip, no cuts no glory. >> a lot of technical damage. we are nowhere through at a rebound.

we need to do a lot more. >> futures up in the next hour. looking forward to that conversation. goldman sachs coming up. goldman coming up later this morning. then on to netflix after the bloomberg. >> keeping up to date with news around the world with the first word. just 10% of britons have favorable opinion by him but -- of prime minister liz truss according to a yougov survey. these, one day after trust was forced to pull back on the bulk of her economic vision. some 80% said they had negative view giving her net favorability rating of -70. russian missile and drone strikes targeted ukrainian power infrastructure over the past week have failed to knock electricity supply off the grid for any prolonged period according to the international energy agency. strikes of targeted powerplants and electricity substations across the country.

chinese junk dollar bonds have dropped to a record low as the crisis is showing signs of improving. the notes are dominated by real estate firms in the average price fell below $.56. it hit that level before in august before government support fueled a rally. at&t is counting on stimulus dollars to help fund its broadband push. wireless giant wants small towns to use federal economic recovery money. to cover the cost of landline high-speed internet in remote areas. the ceo met with local politicians and residents in indiana about using american rescue plan money to cover a portion of the fiber network expansion. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm lisa mateo. this is bloomberg. ♪

>> 12% upside from here to the end of the year makes a lot of sense. almost 33% upside where the s&p closed on friday. we are still bullish on equities. it will take more time until the fed has effect on curbing inflation. jonathan: not as bullish as they were. chief investment strategist at oppenheimer asset management. from 4800 down to 4k. even with some of the big moves we've seen. equity futures pushing higher. up again this morning on the s&p. yields a little bit lower. just cracking 4% of the 10-year.

goldman out a little bit later this morning. should be the next 10 or 15 minutes or so. tom: we just heard, looking at 15% on a goldman sachs on the total return kind of one year basis. we will digress here quickly. maria, i believe it's all quiet on the northern front and the northern front is a back story. and that is belarus. explain to us the dialogue between moscow and minsk. >> that's a key relationship which goes back two years. they really feared the grip on power was going to decline. vladimir putin stepped in. essentially is puppet. lukashenko will never say he is

but in many ways he has participated. and you make a very good point. the ukrainian say let's be honest the army is not in good positions -- but is a distraction for the ukrainian army which will tell you they are focused on the southeast. they also say watch out belarus that could be more sanctions to come. but ultimately the key question is what to see put out and how willing is he to say yes to he what he demands. tom: what's the european response to the news and footage we've seen the last couple days of these drones. >> that's the key question. i was on the phone with european diplomats. we know there's drones that have destroyed 30% of power plants, a lot of this has to do with the

winter season. what they want is ukrainians to freeze, that's part of the morale war that plays into this and the europeans is well-paid they argue they want to find out if this is a run, if they supply this to russia that means more sanctions are to come. the iran nuclear deal you can kiss it goodbye because the only engage site here if you get belligerent expecting more sanctions. lisa: i honestly can't follow the inner machinations. who's on board and who isn't. you offer some clarity on that. >> i think we are actually in this is why i'm looking at my phone every 10 minutes because we will get ahead of the european commissioners with an executive roadmap. they said gas prices need to come down. they need to go down further.

we talk about a namic price cap which essentially is a cap that's not really a cap. there's not a lot of volatility with the halt of the transaction and you close it for the day the key percentage allow and the other thing is they want to leverage the power of the european market. i would say every official, every diplomat i speak to tell me i'm less concerned now about the winter than weeks ago. jonathan: that's the number one question. the european tour continues for maria as we know. the point there on gas. gas prices of come down. and the fear of a very calm wind has been part somewhat of the last few weeks. >> we seen gas prices are a three-month low in the region.

how much could that change as they see the pace at which some of the natural gas resources are pulled down but also the lack of ability to rebuild pretty how much they talk about idling factories or some sort of cohesive plan to limit manufacturing at times of complete use. jonathan: it's can be difficult to repeat that next year. we will focus on this later. sonali basak around with us. a few minutes away, what are we looking for. >> we should not get distracted from the numbers themselves. we will want to see goldman still be on the things they are good at which is fixed income trading. morgan stanley with a 33% jump. we want them to hold strong in equities because the time to gain share when the industry has been going up. the rise and deposit rates of goldman have been a higher and

your seeing numbers as we speak. to your point they have been spending more as those build the business. will they see that is something worthwhile or something they need to change course on. jonathan: third-quarter investment banking revenue. 1.6 3 billion. the estimate 5.6 9 billion. breaking that down between equities and figures. equities at 2.68 billion per the estimate 2.6 five. sales and trading revenue yesterday. >> that is strong beat. as a consolidate the trading businesses. of it stronger. that's with the rubber hits the road. they are putting out details on what that looks like. that will take a while for the

market to absorb. what does that mean. you're looking at revenue coming above expectations. really matching that of morgan stanley. there more efficient than morgan stanley. making the -- in terms of turns. tom: very quickly after we digest these numbers as well. i look at the long-term track record. big banks outperformed goldman sachs. has goldman sachs been a decade or two decade underperformer. >> you are looking at today it trades at less than price-to-book. tom: wells fargo trades at a higher book? stunning. sonali: you are still seeing them trade higher than goldman sachs but does not have half the regulatory overhang.

what is it when the market isn't latching on to. you are seeing the market now rewarding goldman for those trading numbers. much stronger than all of its peers so they are not showing strength in a tough market, they are showing market share. >> stick around. lisa: how much does this give david solomon a bit more lifeline to fill out his vision. >> we will catch up with gina martin adams of bloomberg intelligence. goldman up a little bit more than 2%. let's see about q4 and beyond print this is bloomberg. ♪

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jonathan: two hours away from the opening bell. the price action shaping up as palm -- as follows. up around about 60 points, climbing up, advancing 1.88 percent on the nasdaq. goldman, the last one to cross the line. hopping over in a massive way.

we are up by a little more than 1%. jonathan: the side -- tom: a doom and gloom, solomon, is it going to survive. looking at this beautifully laid out very traditional press release. i have to go to the bottom of the press release. jonathan: we do this every earnings season. you give the fees back on the press release. you like goldman. you like them all. tom: they've all gotten better. jonathan: who executes less well? tom: wells fargo. it executes less well. jonathan: do think it's clumsy? tom: trying to keep up with sonali bass sick. sometimes it's the font. . >> i can even read one anymore without tom's voice in my head. tom: bank of america is really

clear. very charty. lisa: i want to talk about some of the details of this. i'm really starry it was illuminating to goldman sachs with their fixed income trading revenues. really blowing it out of the water and how much is this taking risk again at a time when liquidity is in question and you have traders able to be market makers once again. sonali: 41% jumped in fixed income trading, that is bigger than anything any jump we've seen by percentage point year-over-year. if you listen to what brian moynihan told david westin yesterday. he said they didn't want to be taking on much risk. the 10 q and what they are doing in terms of daily trading losses will be interesting. goldman sachs traders are coming to work. in the press release very high

up as they reorganize the lines. they show you what the consumer is getting you. jonathan: marcus -- tom: marcus it's a failure parade i don't see a failure on the plane asked the page. sonali: record net revenues and double what you saw a year ago. it beat wall street expectations by $100 million. even though this business is smaller than the rest of them they are still bringing in money. tom: i'm lost. sonali: profitability. they've raised deposits, of the saving rates much more than you've seen any of their peers. jp morgan, bank of america. goldman sachs wants those deposits. it lowers the cost of funding. it's not a business that looks like it's going away. this will be different than maybe we thought it was in the past. jonathan: i can see the number from goldman increased compared to the end of two q.

what's happened with the headcount? sonali: the numbers are holding better than expected. you are seeing spinoffs, potential restructurings and your seeing customers that still need to figure out what to do with their business. >> was the ballet into the february of next year. sonali: i don't say there's not anxiety. everyone's preparing for the bonus season already because they are looking for what this is heading into next year. competitive among the buy side and investment banks but they will be efficient and keep a lid on costs of the bottom performers will go. >> thank you. just awesome. do you take the rest of the year off now? sonali: sharpening our pencils for the rest of it. tom: that checks out. your idea -- on wells fargo was brilliant.

gina martin adams joining us. the insight that wells fargo's book is actually better than goldman sachs, it seems like the mother of all opportunities on the sell side. janie baker at jp morgan and others are looking at the airlines, they are looking at goldman sachs. jmp securities her up. is the sell side out front of this earnings recovery? >> i think the sell side has gotten too bearish on the earnings growth in the near term and anticipating recovery into the next 12 months. this is what's happened pretty much every quarter since the devastating sort of fourth-quarter release season of the early start of the year is analysts have clearly struggled to get this right on 2022. they really severely cut estimates for second-quarter earnings. reflecting that sentiment. companies continually come in

and beat those expectations but it's a near term revision cycle so they are not saying the next 12 months will look awful but they are capitulating to the short term. analysts were expecting nearly 10% earnings growth in third quarter as of june and they are now down to 2%. companies have helped them by guiding them to anticipate lasts , creating a lower bar. companies are able to beat 2% and that's what we are seeing. lisa: traditionally we talk about banks reading the tea leaves and being the front runners and jp morgan kicking off the season. is this time different for banks where they don't give us much of a read at all and the rest of the compex of corporate america? gina: i argue that's been the case for a while now. we've gotten custom to banks disappointing us relative to expectations and that's not necessarily been a predictor of what to expect the rest of the earnings season. banks are beating expectations.

maybe that's not what to expect. banks to tend to march their own drumbeat. we want to look at the consumer rate and look at lending growth. in an environment where liquidity is ample, easy to access, that sort of lending has not been particularly profiled as a driver of overall economic conditions. companies for example are getting tremendous amount of cash. they are still generally producing some cash flow, that is funding operations and funding activity outside of financial sector lending conditions. credits weds have -- spreads have been tight. so credit has been somewhat ample especially of the last year. i think the financials while they are an indicator of some things they've lost their lead in a lot of ways. maybe it's reestablished of the next couple of quarters.

this year we haven't seen financials operate as a leader. lisa: i ask this at a time talk about the airlines, some airline companies might be benefiting disproportionately from business travel. from upper income individuals were able to travel slower income pull back on spending with certain retailers or consumer shops. was the industry to watch. gina: there are three segments leading in as well as overall learned earnings trends. as are semiconductors in the technology space, that's been an area where we've been watching inventories closely pray they are homeowners in the consumer discretionary space. they've broken out of the downtrend paid will they be able to establish a steady case of earnings growth over the next year is a huge question. the third's transports in the industrial space. those of the segments truly indicators of economic conditions, they are the most

important segments to watch for earnings cues going forward. the only other thing in there is mega cap stocks. those are now driving roughly 20% of income, a 25% of market cap at the s&p 500's of the large-cap index specifically this group is impossible to ignore. tom: i want to pull out that book you and i love. page 842 they talk about affects adjustment. my amateur take his two to 3% multinational. it's noise. we are clearly not in a noise aspect. that affects headwind, what's the new number? gina: it's good to be in earnings -- interesting earnings season. about 30% of companies on the index exposed to currency. those of the biggest multinational companies that sell overseas. , but is most exposed to europe

and china in particular of to watch. but the degree to which the currency has moved would suggest that these companies are going to experience some degree of pretty extreme currency pressure provided they were not hedged coming into the season. going into second quarter we had the same phenomenon. the dollar was surging in the second-quarter earnings. was of the multinationals generally underperform. it had almost no net impact on the stocks. so will it impact the stocks is a good question. we think it will definitely impact the earnings stream. 1% gain on the dollar is worth about 17 on earnings growth. so we have an impact overall. but will it impact the stocks or will they push for investors? >> wonderful as always. is pondering to the earnings we've had so far looking compared to the earnings.

apple and amazon next thursday after the close. early that morning we get the ecb decision. busy morning october 27. i'm all about the big tech players. tom: gina just mentioned that. the percent of the market in the dow jones. jonathan: of course it's important for it all change the subject quickly. the yougov pole and the headline reads as follows. most tory members say liz truss should resign for the next line says boris johnson is the most popular successor of the conservative party members. tom: churchill would die and come back. jonathan:jonathan: not churchill. boris. lisa: i could argue churchill is not making a comeback. jonathan: managing director over

at pimco. good morning. equities doing better than good and goldman doing ok. equity futures advancing. this is bloomberg. ♪ >> keeping up today with news around the world. slogans attacking president xi jinping featured on banners to beijing bridge last week have spread to other cities in china as well as across the globe. phrases from the original handwritten banners criticized strict lockdowns and restrictions that are designed -- defined the covid policy did german chancellor olaf scholz asked for an extension -- extension of the country's three remaining nuclear plants until the end of 2023 to end the standoff between coalition partners. the free democrats argue germany should use all of the energy capacity to tackle the energy

crisis. chip delivery time shrank. a sign the industry supply crunch is easing. leads times, the gap between when it's ordered and delivered averaged 26.3 weeks in that period down from nearly 27 weeks the prior month. women in leadership roles are quitting at a faster rate than ever. a new report from mckinsey and company shows that for every woman at the director level gets promoted, two female directors are choosing to leave. a lack of advancement opportunities are to blame. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm lisa mateo, this is bloomberg. ♪

>> the fed is on a mission, very intentional and aggressive tightening of domestic monetary conditions in an effort to slow growth, slow demand specifically loosen up the labor market a little bit to get inflation back to target. so definitionally they're going to be some things that probably break along the way. jonathan: the head of america's fundamental fixed income at black rock. good morning to you all. equities pushing higher by 1.9% on the s&p. treasury yields the other way down to basis point, a colleague 39940. the fx market euro not doing

much. we are -1/10 of 1% on euro-dollar. crude up 1/10. we reported overnights, we could get another recipe on release for this white house may be getting that later this week. we have had 180 million barrels released from the spr. tom: i guess bill clinton was the first one to get out here with the experiment of a release and this is very different. granted the war in ukraine. $86 on american oil. $92 on brent crude. mentioned this earlier, it's the election but are those elevated prices. jonathan: the question i'm asking is how vulnerable are we to the whims of opec-plus if we drained the spr. is this a one-off shock we get over in which case this is an appropriate use to get over a

short-term flow issue or is it something bigger than that. and if it is the latter we are exposed next year. tom: we will see. right now goldman sachs earnings and what were seeing futures up 70, the vix does not move yet. a view on the economy with chief u.s. economist -- economist at mizuho. steve, i want to talk with a hope and prayer inflation will come in. we are seeing glimmers of goods inflation coming down off of the pandemic gyrations. do you model the goods inflation can get back to a strong disinflation or dare i say deflation? >> a really good question. having the answer is after we get through this cycle there is a reality that will settle. and then through the

diversification of supply chains we have probably amplified that supply especially against the backdrop of global deceleration's and growth that are likely to be sustainable. not just in the u.s. and europe. the net result is since we haven't destroyed the capacity as a result of the covid shock and the latest inflation and the results of that we will be sitting with too much capacity and that will drive down goods prices and lead to a deflationary bias down the pipeline. the key i think for you is will this lead to near zero interest rates again and the answer is probably not. tom: doug says ask him about housing. how does housing fold into service and goods inflation. steve: it's one of most interest rate sensitive sectors in the economy. the automobile space is also

interest-rate sensitive print we see problems in those spaces. as demand gets pulled back who's are big ticket items. i think those are part and parcel of what we experience in terms of the downward draft in terms of goods inflation whistle struggling with the component of this. >> you said something probably not going back to 0% interest rates in the near future. what is the baseline interest rate you see as where we end up once were out of this inflationary and disinflationary period. lisa: i think it's good -- steve: i think it's -- in the near zero interest rate and bierman's occurred where we had systemic credit issues that had to be corrected in the economy. and therefore you needed to create abnormally low levels of interest rates to correct that problem.

in this environment we do not see the structural credit issues. there are going to be companies that go bankrupt. there'll be institutions that have problems in here. but if you go back to areas like 1975 we didn't have systemic credit problems at the business cycle. we'd upwards of 140 financial institutions that need to be resolved and assumed by other insurance companies. so there are going to be casualties as a result of this but they're not in a lead to a systemic credit crunch environment. lisa: how much will that be the fiscal programs of a lot of developed markets. how much will you see a massive program to reduce debt in the developed world. steve: there's a lot of debt accumulated but also keep in mind who for most of these governments, a lot of the debt

has been internalized by central banks. and in our case in particular while that gets credited back to the u.s. treasury and therefore is pretty much a net wash. i don't thing we will reduce the debt as much as we will allow the economy to grow around the debt which means we are not going to be able to go through expansive fiscal policy programs for quite some time without having it be reflected in long-term interest rates paid -- interest rates. jonathan: did you see the tweet yesterday that got a tonic feedback? this one was fascinating. an independent federal reserve is critical to the well-being of the u.s. economy. it's getting harder to justify such independence when four big operational errors of analysis forecast communication are accompanied by a lack of accountability. lisa, your thoughts? lisa: to clarify it does not

seem like he is saying that the fed should not be independent. but the issue is how much credibility has the fed lost and how much do they need to -- how do they regain it to protect themselves against losing said independence because of the faith they lost. you are seeing this with the political sphere and you will hear that with more elizabeth warren discussions. jonathan: and sanders no doubt. effectively what is trying to communicate is the errors made have invited criticism and pushback from the central banks independence. tom: doing a tour de force on the telegraph on this. the traditional theory and construct the phillips curve, the beverage curve, they do not work in a pandemic adjusted regime shift to use the phrase.

and with that they are flying blind every moment, they have made mistakes, no question about that but it is not within a normal theoretically founded structure. it is original, they are allowed to make mistakes. jonathan: senator stan -- senator sanders, senator warren. this is the beginning. when you see him -- unemployment go the other way. lisa: this will be a bigger discussion when you go to the point you were talking about where we have monetized fiscal budgets and that something that's an issue. jonathan: live from new york, this is bloomberg. ♪

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>> the fed is still the central focus and when it comes to the dollar there's concern. >> i think it's in february and march. that's the time for dollar weakness to come back in. >> this is a very intentional

and aggressive tightening of domestic monetary conditions. >> a long drawnout multicore economic downturn not something that's been a reverse quickly. >> this is bloomberg surveillance with tom keene, a lisa abramowicz. >> on radio and television, says businesses -- brian says businesses ok. david says businesses ok. >> jane says the u.s. economy remains relatively resilient. every single chief is saying the same thing. business is doing ok. >> we saw this the last quarter as well. it's the view forward in the conference call and will have to see what they say. >> it is uncertain. ultimately, no cuts no party. >> we look at equity bonds,

currencies and commodities. a fairly quiet day but not quiet in the united kingdom. continued volatility. >> this came out overnight and suggested the bank of england was ready to delay qt. the bank of england said that report was inaccurate. so you decide. sterling has been whipsawed. the prime minister is just about hanging on. you get the full budget of the end of the month. and they will make a decision to hike interest rates made by 75 basis points. tom: you featured earnings earlier in the brief, to me it's the ark of the elites doing well at a whole bunch of other people really struggling within the u.k., the u.s. and the global economy as well. it looks like two global economies. lisa: it's good to be more political wealth that -- the fed tightens rates in response and the persistence you are seeing

particularly with people who have more money that are spending it. the earnings have been looking good and so right now you're having a 4.93% fed funds rate being priced in as of march 2022. what is that due to the economy. 2023, i lose track. tom: on the edge of 5%. jonathan: 1.8% on the s&p. we are adding to it. bear market rally. that's what many people are calling it. >> wilson has been good on this. let's start the data. i want to go to yen witches and i guess intervention territory. on the edge of 150. jonathan: equities are flying. up on the s&p 500. yields not doing much in and around 4% on the u.s. 10 year.

the conversation we have to have, how much scope is therefore more upside on pricing this fed terminal rate. how much further will we be willing to push this. lisa: that's not the issue people are talking about. he's talking about what's the weakness that would have to be seen and how is that can be priced. i got the sense once we treat bad news as bad news that that possibly is when we get the capitulation. jonathan: what do you make of how we are treating the data so far? the monster upside surprise and then we rallied really hard and we are doing the same thing again this week. tom: dow futures up 500 points just to get your attention. 1.5 to 1.2. it's less restrictive. crossing asset strategist in morgan stanley joins us. an amazing set of meetings at

morgan stanley today to recalibrate into november. take this and make sense of it. how do you recalibrate to the end of the year? >> it's nice to be here with you guys. i think you have an overlap of the tactical story with a bigger strategic story. tactically as you heard my colleague turned tactically bullish on the s&p as of sunday night. he sees the potential for a rally to 4000. a number of tactical indicators we follow suggest a market were 7 -- where this was sensitive. maybe it turns ok where seasonality at risk assets. we still have growth that will be slowing over the next three to six months. we have a lot of monetary policy tightening ahead of us even if markets don't price anything in addition above what's expected and you still have a earnings we

think in the u.s. and europe will need to be revised down in the fourth quarter and the first quarter next year. a bear market rally, it's short and sharp. it still matters but the big picture hasn't changed and there is work to be done before we can say this is over. >> maybe we haven't started to price in the consequences just yet. what do you think the consequences will be paid i hear the short shallow nonsense all the time. what you think it means? andrew: i think it means you could see a downturn that matters more to earnings than it does to gdp. we've been through an environment where goods consumption has soared relative to services consumption with the type of economy everybody buys a barbecue and nobody goes to the dentist so to speak. that's the environment it's good for earnings. the s&p 500 global equities are

good at monetizing goods and turning them into earnings. they are less good at monetizing services. you could have an environment if you look at those consumption series where goods demand comes down and services demand holds up well. the overall gdp affect is modest ultimately the earnings impact is larger and we hope to be more specific, housing is important for goods demand. every time someone moves people buy furniture, electronic goods. there's a lot of stuff that gets bought in the housing transaction and given this move in rates we are seeing housing transaction volume really decline in some of the sharpest deceleration we've seen. lisa: how much or long dated bonds the best haven right now if people think were pricing in a fed that gets as aggressive as we've seen for decades. andrew: i think you see more

value into the long end of the market. you also have some challenges were dealing with a high volatility asset class and i think there is some widget amid uncertainties around where new neutral rates are going to be and also where what is the type of kind of real restraint required to slow the economy and we still don't have that. there's a large cloud of uncertainty. i think it's difficult to go into the -- long end of the curve. one thing that's a good risk board combination would be five your corporate bonds. it's not that far away from the earnings yield of the s&p 500 and it is -- is an asset class that can provide pretty decent income above what we think inflation is of the next 12 months while providing some ballast and volatility. >> the number that jumped out in your latest report over the weekend.

how far you think this can go. i wonder when you look at that i will point do you say this is more than just a bear market rally. andrew: i think the inflation numbers are important if we see positive surprises to inflation is a lot of good that can come from that. the market can start to think maybe the fed doesn't need to do so much. maybe we can see the fed backing off in the release pressure from rates which can swing back into equity. we see that participation continued to climb suggesting the supply side is stronger and we can have more growth for a lower level of inflation. and on the earnings front a reason why we've been cautious has been around the view that margins will come down ultimately and earnings estimates will come down. maybe this is better than we expect. many companies are able to

defend margins through cost cuts do not impact the broader economy to such an extent. jonathan: andrew, you and the team have been awesome this year. appreciated what andrew had to say. a real distinction between gdp short and shallow and earnings may be not short and shallow. >> i'm good to go back this on the revenue dynamic and on the income statement. it's different sector to sector what happens on the income statement but they will adapt as was talked about at the end. it's good to be one part pricing power and one part cost-cutting and thickening get to the other side. jonathan: sink short and sharp, not shallow. lisa: this is the economic play but what you're talking about with earnings, how much going back to what steve said do we have to reset corporate

performance and the earnings and a 2% world. if that's we are heading back to. how much do you take away from the momentum of the financial eyes world and potentially give back to the real economy. jonathan: the theme of it was can pitch elation. if we can push that further and build on what you said. i don't think people have kept elated at all on the view about where we go after all of this. the destination for so many people is to go back to the pre-pandemic playbook with low rates, low growth and that's a view we have not capitulated on. tom: this is how far down we are. i'm not can eat -- i'm to look at spx up 73, 3700 rounded up.

73, 3700 rounded up. two standard deviations. you don't get the resistance until 3842. it's what america cares about. jonathan: juergen keep this up. i can tell you're in the mood for it. founding partner and senior research analyst. i noticed that on the weekend. almost canceled my journal subscription again. >> anaconda copper. westinghouse. >> what year is this? this is bloomberg. >> keeping you up today with

news from around the world, i'm lisa mateo. 10% of britons have a favorable opinion of their prime minister liz truss according to yougov survey. this comes one day after she was forced to put back on the bulk of her economic vision for britain. 80% said they had a negative view giving her a net favorability rating of -70. russian missile and drone strikes targeting ukrainian power infrastructure over the past week have failed to knock electricity supply off the grid for any prolonged period. hundreds of recent strikes of targeted power plants and electricity substations across the country. the biden administration is moving forward releasing another 10 to 15 million barrels of oil for the emergency stockpile. the move is set to balance markets and keep gas prices from climbing further. the strategic per prolia him -- petroleum reserve release would be the latest in a program that

began in the spring. at&t counting on stimulus dollars to help fund its broadband push. the wireless giant wants small towns to use federal economic money to cover the cost of a landline, a high-speed internet to rule -- rural and remote areas. they met with local politicians and residents in indiana about using american rescue plan money to cover a portion of its expansion. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm lisa mateo, this is bloomberg. ♪

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>> the old system of stimulating your way out of a recession for financial market pain isn't being allowed. you're in this scenario where you have a slowdown in you might have pressure and credit crack's

and central banks can come to the rescue as quickly. jonathan: the head of multi-asset solutions at federated joining us yesterday. good morning. equity markets pushing higher. futures up by more than 2% on the s&p 500. this is a big lift into the cash open off the back of gains yesterday. yields lower. down on the 10 year. those numbers after the close. that stock is down. >> they're go to talk about the new hollywood property called dead cat bounce. we need to get an update on entertainment. michael nathanson, we are thrilled that they can join us this morning. i'm going to digress here to

that thud was me falling off that chair as mr. murdoch wants to piece humpty dumpty back together again. what did you think when you saw a young murdoch said let's bring them back together again. >> we have a -- our view on fox is a pure play on sports and news and they're not wasting their money fighting streaming wars. we thought at some point they would sell fox to private equity or another media company. so i think it but the narrative is from here is the company will need approval from the minority -- majority of minorities. i think those we talked to who own are not happy with the decision. we will see what comes next pray there's probably a second leg of the story. put it together and then do

something with those assets. we are waiting to hear more from the murdoch's of their attendant -- intention. jonathan: -- tom: netflix teetering on three legs. what will you listen for from netflix today? >> they are introducing in advertising tear for six point $99 in the fourth quarter. what i want to hear is why are they so confident there won't be a spin down as they say in the u.k. from a higher price point down to this new tier which will be very diluted in the near term for revenue per users. i'd like to see why they are so confident that this won't be in the near term a very diluted strategy. to us given the drop in price and as we talked about earlier, they don't of the same grip on users as they once did. i think there's a risk there is a spin down. >> how much he looking at the

potential of these media darlings certainly during the pandemic at least being acquired by the likes of walmart, the likes of apple. >> the challenge we have is some of these companies are family held. tom mentioned the murdochs. the red stones control paramount. nbc was controlled by the roberts family. there has to be capitulation which we don't see. everyone things they have the right strategy, investing in streaming. at some point we think of the next 12 months or 24 months there will be capitulation where they will realize they have the wrong strategy. they don't have the balance sheet to make this pivot. and maybe there will be some m&a. but that's not her working thesis. there has to be some level of realization that the strategies are just not going to work.

you have for five large players in streaming with much better positions so the people who are lagging have to get out. >> who do you think needs to get out? >> you would say peacock, paramount has to be some combination. comcast and paramount global. they've done well in the u.s. but they are not going to scale to that higher level with a profitable business model. they need to combine streaming assets. with warner, wb d. the market is worried about the debt load. it is scaring people away. those three companies need to figure out a path forward for consolidation or more scale. >> do you think disney is making the cable bundle all over again with hulu? >> they are trying to. they have disney plus, hulu and espn plus.

our concern is the cable bundle is the best product from an economic standpoint. everyone paying the same amount of money and watching the same amount of channels. you have to be careful not to further disrupt that. i think disney things long term we have -- we can replicate the product but the economics of that new offering will be so -- i think they have to be careful. they have the pieces in place. i'm just hoping the speeds of change is slower by them. tom: we did not have you on for all this chit. yankees cleveland. >> the guy behind me i wish he was pitching today. i'm worried about the bullpen as everyone is. the bullpen of number 42 behind me. tom: on radio it was great.

>> just to clarify. jonathan: michael, thank you. svp securities company. tom: this is great. jonathan: can you repeat what you said. tom: you have to go with the yankees. jonathan: that was just for doug at home. tom: you have to keep the yankees in there. jonathan: you are saying it's good for commercial reasons. tom: it's good for baseball. i love that much more than the home runs. jonathan: we call that rounders in the u.k.. lisa: that's not what you call it he is insulting baseball. i have looked it up. jonathan: it is an epic game. lisa: that's played by schoolchildren. i do just want to say -- jonathan: really intense stuff.

people take it very seriously at lunchtime. [laughter] tom: that's great. as nathanson said with fox all about sports. >> we just took it that seriously in the u.k.. lisa: i guarantee some of his screaming at the screen right now because tom said you have to go the yankees and all the mets fans are livid. >> they were asleep jonathan: what's happening with judge? lisa: please write in steve and let us know if you will do it. jonathan: a lot to talk about. do you think he's been a busy man this year. short-term portfolios at pimco. i imagine some serious money flowing in. tom: pimco nailed the get out a

long-term debt call. jonathan: live from new york city, this is bloomberg. ♪

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jonathan: this week, what a run. monday morning, off to the races. tuesday morning, off to the races. people deploying some cash, tk. adding to yesterday's gains, your 10 year, and the fx market -- i don't know what those hand signals are. it is sort of gesturing to me. people get so angry on twitter. tom: it is un-american. jonathan: but with this -- what was this individual telling me? please dispense with your silly trash talk of the dow. it is not about the members, it is about how the members are weighted. for the people that complain about this, are you allocated to the dow passively? yes or no? tom: the fact is, you do both.

and you do the nasdaq 100, not nasdaq composite. jonathan: i'm on board, you can do it. tom: what is not broken is the vix. it has not come in, given the enthusiasm. lisa: on twitter somebody says i am wearing a snarky today. jonathan: what is that? lisa: let's move on. it is like a thing. i wish i was wearing a snuggie. tom: let us continue right now. we do so and celebrate the holiday season. we begin thanksgiving season with jerome schneider, advisor on thanksgiving dinner at pimco, and here on "bloomberg surveillance" as well. short term paper is a place to hide, right? jerome: it is busy. short-term paper is a place to hide.

i think the nuances of short-term paper or whether store is at 42022 and 2023. cash is not necessarily as democratic as people would like to think. while cash is king the crown jewel is really or nuanced than that. bank deposits are in some cases moving higher. t-bills may offer attraction, but the reality is they are trading quite rich, 30 to 50 basis points through bench rates. so there is value if you want to be appropriately highlighting and thinking more interest rates should be headed based upon fed expectations. tom: in the pimco meeting you have out there, the legendary meeting, what do you say about the short-term space and dollar illiquidity worldwide? there was no other theme at imf. jerome: the reality is we are facing a change where people need to digest the changing cost

of capital. notion of liquidity is one that has been more prolific. people are concerned about liquidity. it has been a call word, but it means different things to different people. that is the consequence of one we want to think about the marketplace. you have macroeconomic liquidity, concerns driven to quantitative tightening, haircut concerns and marginal requirement concerns, which we have seen within england. importantly, as the economy progresses we are going to see other tightening ratchets of illiquidity and haircuts. we really need to be paying attention. from a starting place at pimco and everyone else we have relatively judicious amounts of preventative liquidity, defensive liquidity. the key comes in, how do you think optimistically -- opportunistically, given this shallow but longer recession?

ultimately how do we extrapolate that to value in the future? how does liquidity translate to volatility within the marketplace and how do investors absorb that volatility properly? jonathan: the problem for a lot of people right now is when you expect there to be liquidity with there should be liquidity, then there is not. and you talk to us about what is happening in the treasury market? last week the treasury reached out to a group of individuals in the market they speak to. they try to get feedback. one thing they were asked about is whether they should buy back certain securities. what do you say to that? jerome: this has been top of mind not just over the past few months -- we published a paper at pimco highlighting this -- and that is a function aspect of where you want to think about where the market and how the market is digesting actual functional high-quality assets. it is a concern, but it is also

an opportunity for investors. they can think about how to maneuver around this high cost of capital, and the opportunity sets. i would suggest it is a transformation from what we have been used to over the past one to two decades. it is a concern when you think about curtail months -- curtailments. you are going to find opportunities to incorporated. it might mean there is more volatility, you're going to have to be more convicted and have longer older -- longer holding periods. lisa: there is investors acting as liquidity providers and stepping in and disintermediation banks. is that what you are saying? the banks are not necessarily the ones that are there and you had a platform you could make markets in real time that could possibly be a more effective way of providing liquidity to this market? jerome: liquidity in general is not a democratic process. there is different layers of

liquidity in the marketplace. you have more degrees of freedom, perhaps that is better for market equity. -- market liquidity. the market is the market, but when we think about it, that brought-based landscape is where we are trying to head. lisa: investors are holding the highest cash piles going back to 2001. we hear that from everyone. cash is your friend, you want to be liquid, nimble. is your experience that people are coming to you and saying, please, give us anything you can, how to be safe, and you are overwhelmed? or is that not the case? jerome: people are focused on looking and driving in their rearview mirror. as you are thinking about where it is to come, they are so focused on what has happened in the past one to two quarters they do not necessarily have the ability to look out the front window and see the opportunity set that perhaps cash and fixed income provides.

one of the concerns you have is growth. does the risk-parity element of having interest rate exposure duration offset some credit risk taking within equity markets? maybe the correlations do not hold, but if they do reemerge there are different opportunity sets. the higher rate environment right now is the setting of the table, something that is very different than we have had over the past decade. don't keep looking in the rearview mirror. jonathan: it is not just two quarters, a decade's worth of negative rates, qe. i get the sense you think this is something that is going to hang around. this is something we need to adjust to. jerome: it is unlikely we get back to a 0% rate level like we have been witnessing. a 25 basis point seems to be something in the past. when you see where we are for the next one to two years, a higher inflationary rent, pce

that might level out at 3.5%, front end rates are going to be in this vicinity and investors should be comfortable with that notion. it has effects of what happens with fx marketing -- fx market risk taking. this is a higher rate level and investors need to think about the value of fixed in this environment. because of its complementary effects on your total portfolio. tom: that's where i want to go. let's go long term. does the actuarial assumptions shift? we have gone to a percent. are we going the other way now, where we going to have a higher actuarial assumption of our retirement plans? jerome: ultimately investors are going to look for sources to produce return. we have focused on declining interest rates over the past three decades. lower rates spurred higher capital appreciation opportunities.

that calculus has fundamentally changed. the return calculation is not just on capital appreciation, it is the ability to earn income through dividend or bonds in the traditional sense. that is honestly one of the things investors who are may be new to the market over the past decade needs to be thinking about. a lot of factors are putting us back into a more traditional 1980's and 1990's mindset. not only how to trade markets from a liquidity perspective, but how to think about constructing portfolios. jonathan: when is the last time you set around the table together? jerome: this is lovely. jonathan: in town for the yankees, tk? it just so happens the yankees are playing that he is in town. i'm sorry to accuse you of being in town for the yankees. jerome: i'm here to give turkey advice. jonathan: jerome schneider of pimco. as we count you down to the open, an all-star lineup. we'll catch up with kay moore of

blacklock around the opening bell. tom: they're going to celebrate thursday, up 170 dow points. that is quite a rally. jonathan: do you want me to fill in the silence. [laughter] tom: of course. jerome was going back to eastman kodak. jonathan: what was the stock in wall street? what was that stock call? jerome: anaconda steel. jonathan: there we go. [laughter] lisa: can i point out something? not to break this, but -- super special, but i could not it anymore. carnival offering yields of about 11.5% on 1.2 5 million junk bonds. this is what jerome was talking about. you can get yields in a way you couldn't as long as they did not quite of business. how does that change? to your point, jon, actuarial

assumptions, i think that is fascinating. jonathan: could not take it anymore. [laughter] i cannot take it anymore. lisa: carry on. tom: the rules have changed. we are back to gravity, we are back to the risk-rate. that is something a huge body of people are not familiar with. jonathan: i'm going to go. see you next week. you can do whatever you like for the next three days. tom: you are gone gone? oh my word. lisa: have a great time. we are going to miss you. jonathan: you won't. tom: very good. lisa: what is it called again? he remembered it. jonathan: i know it. i speak japanese. this is bloomberg. ♪ >> keeping up-to-date with news

from around the world, i'm lisa mateo. french rail energy and other key workers are striking today to demand a bigger share of corporate profits. it is raising pressure on president macron to take steps to ease the impact of surging inflation. there has been protesting in the country, and commuters are facing travel disruption. german chancellor olaf scholz has ordered an extension of the lives of the country's remaining nuclear plants until april 2023. the decision is meant to end a standoff between two coalition partners. greens are opposed to nuclear power, but the free democrats argue germany should use all of the generation capacity available to tackle the energy crisis. the european union is unveiling an emergency package to tackle the energy issue, letting on steps to bolsters all the dairy among member states -- to bolster solidarity among member states.

bloomberg has learned the european commission was set to propose measures to avoid extreme price spikes in energy derivatives. slogans attacking president xi jinping featured on banners on a aging bridge last week cap spread to other cities in china. phrases from the handwritten banners have criticized strict lot nouns and restrictions that have defined xi's code zero policy and calls for new elections. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

>> at the end of the day, if you want to attract investors you need to have the right business model. this review is all about the clarity on the business model. this is what has been in many

ways haunting the european banking sector. tom: philip hildenbrand, the former leader of the swiss national bank and at black rock as vice-chairman. when he speaks, i take notes. talking there about european banking and the challenges for it. the smartest thing i heard on the show today was from ed bassett, who told me wells fargo's price-to-book was larger than goldman sachs. i was stunned by that. wells fargo, it is a little bit apples to oranges. wells fargo, 1.06. goldman sachs, 0.98. and credit suisse, 0.27. lisa, the differentials, stunning. lisa: this is the reason why. the headlines keep coming out, the latest one being that credit suisse is potentially speaking with canadian and u.s. banks to raise capital after the october

27 restructuring plan comes out. this has been this leaked process. how are they going to raise cash? and it is happening in real time and being priced out stock investors. tom: providing leadership on this news is michael moore, who joins us with this bloomberg story. it is real simple, they are looking for capital. how soon will they find it? is this today? is it october? or will it be a more protracted negotiation? michael: it might depend on where the shares are, and how they react to this strategy announcement. if they decide to pull the trigger on this a could come as soon as the strategy announcement in a little over a week's time. when that would actually be placed is tbd, but ultimately it seems like we have the rough outlines of their strategy,

leaning more into wealth, shrinking down the investment banks, selling off of that. then it becomes a math question of, how do you pay for it? we have seen them pursue asset sales, and the other option, does not look knowledgeable right now, but you have to put it on the table, is a capital hike. tom: do we have knowledge of whether they do a convertible offering or give up equity down the road? will this be a preferred statistic of a big single digit number returned? michael: we have seen them do convertibles in the past, straight equity in the past. the regulators have narrowed the definition of what counts in that core ratio all the investors look at. so the options are somewhat limited if they want to boost that number, but that is kind of one investors are wondering. how painful would this one be?

lisa: what does credit suisse after this look like? michael: i think you have -- they lean into it, they have a strong swiss business, have a strong international wealth management business, and i think they're going to lean into them. a lot of the problems but not all of the problems have come from the investment bank, and that has been losing money in recent quarters. you have seen them with the spg sales process try to selloff that unit, or at least pieces of it. and kind of shrink for capital devoted to the investment bank. a lot like ubs did a decade ago. lisa: how much is credit suisse an idiosyncratic story based on events that have transpired over the past decade, and how much does it represent the struggles at a number of european banks that have resisted consolidation, resisted measures

like what we are seeing credit suisse speculate on? michael: you definitely see echoes in other situations. there have been a lot of parallels with what deutsche bank face five or six years ago before they did a major restructuring. you are seeing -- you pointed out the price-to-book that is definitely low, but not unheard of in europe. you see some of the other big european lenders trading around that .3 level, so i think there are other struggles across the board, but credit suisse is the one and in the spotlight because of some of the idiosyncratic issues. tom: michael moore, thank you. that story, just out on the bloomberg terminal. leading our coverage of european banks. it never ins, and, lisa, i do not understand to this day -- i remember davos years ago, a

conversation with david rubenstein and a panel about the idea of, inner nation mergers versus other mergers, and we are nowhere near either of those now. lisa: part of this is because of stories, like in germany everyone has kids bundesbank. how much is that a story around the european continent? we are seeing u.s. banks do well. how much is that sustainable given the pushback, saying you guys have to give more savers. at the same time they come out and say, our resilience is what is keeping us going in the reason we have not seen some explosion in markets. tom: the word i would use is festering. futures up 85. dow up. even the nasdaq leads the way, 2.5%. it is off the bottom, but there

is so much technical damage i cannot call this resistance. lisa: i am not getting that much of a signal from certain swings we have seen in the market over the past couple of sessions. i am getting a consistent message from the bond market, which is inflation is prevalent and you are going to see this federal reserve raise rates more aggressively when people thought. as we heard jerome schneider say, where we end up is probably more likely to be a to percent level than a 0% level. that is different. tom: on the yield curve we come in -44 basis points, possibly better off the tension of last week. we give back a little bit. lisa: although consistent in where it has been. 1.5%, 1.6% for a real yield. this is a game changer for

people who have been used to a valuation proposition in a raise that is different. the stability of this contrasts with the whippiness in stocks. tom: when is united airlines? that is what is most interesting to me. lisa: it is after the market. after the market today. tom: i'm really interested in what the airlines do here. like fedex. fascinating. lisa: we have seen from delta they have done well and actually outperformed. tom: doing a moynihan. lisa: that is as a result of business travel coming back, people using business class, and also people who have money have you had to spend and they want to travel. tom: yeah, but the economy is packed. packed. lisa: people are traveling. tom: i get the elite ring, but it is a statement about the country. congratulations to goldman sachs. after all of the gloom

yesterday, pretty good earnings day. stay with us on radio, on television. this is bloomberg. ♪

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jonathan: up more than two yesterday, up more than two percent today, the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is bloomberg, the open with jonathan ferro.

jonathan: live from new york, mounting signs of capitulation. >> what is happening now is very extreme. >> companies are getting ready for chapter times. >> there