>> we are not seeing cracks in the labor market yet. the fed will have to continue on its path. >> this will be a slow grind into this. >> what do we know so far about the inflation call? everybody has gotten it wrong.

>> the savings buffer is coming down. >> i don't think consumers are seeing the type of stress that will lead this economy into recession. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: good morning, jonathan ferro, tom keene and lisa abramowicz. we welcome all of you on radio, on television and in washington. an election. john and sloan -- writing on latino and black votes that this election is a paradigm shift. are we going to see a paradigm shift? jonathan: it's amazing to see the president campaigning in new york state, he won by 23 points in 2020. that is amazing. we asked a range of guests what they would be watching.

the midterm or the cpi, with near-term and longer-term outlook. lisa framed it nicely. when it comes to the midterms, you want to understand the composition of d.c. to get your hands around whether we can have a kata cyclical circuit. the fed is saying they are unwilling to provide it. the objective is to slow down growth. i don't think we have the physical space at all, aced on what we saw take place in the u.k.. tom: or will that? and is the paradigm shift that we will have fiscal gridlock? the tendency jonathan: is toward gridlock. jonathan:if you as people -- tom: the tendency is toward gridlock. jonathan: if you ask people on wall street, they will say that is what they want. the conversation that lisa and i had in the last couple of hours is that is the short-term story. if you landed at 12 months with inflation lower and bond yields

lower in the physical space returns in washington and you can provide that buffer in a downturn, i wonder how british people will think that is. tom: we see oil price, brent crude at 97.83. i'll tile, it is tangible. -- i'll tile -- aisle to aisle, it is tangible. lisa: -- how long it will take to understand what we have done, with the withdrawal of fiscal as well as the withdrawal of monetary support. how long it takes to bleed through and what the damage is it does to the economy. we are looking for a cpi report. maybe it will show us 7.9%, great. it's going down. not quickly enough. the drivers of it are still very much in force. tom: will that -- with that, are we going to get an elections report? the governor for buffalo,

challenged downstate is how i would put it. we will get an inflation report tuesday evening with david westin. lisa: how much is this a read on inflation? in terms of the election and the outcome and kathy hochul? in the -- in new york, the reason why it is such a hard election to get your arms around is there are different things driving people to the pole in different places. you are seeing a disparate message with inflation at the backdrop. what also the forefront, there are social issues, whether it is crime, abortion or something else. tom: we have breaking news we have to cover. i'm sorry, i think the foreign view is important. i'm going this is crazy. how do you look at the midterms? jonathan: the midterms? from what perspective? a markets perspective? tom: no, from a john ferro -- jonathan ferro perspective. jonathan: the outcome will be

huge for everything that happens in markets for the next couple of years. we wouldn't have this conversation if you did not have the outcome of the georgia runoffs go the way they did. how different with this conversation be politically if this white house was not able to get its way? you would not be able to sit here and blame the white house in quite the same way. when it comes to georgia, we face the real prospect of a runoff, again. we will speak to the experts on what is happening on the ground there. if everybody is looking forward to waking up on wednesday morning with some firm set of results to fade this event, and start buying equities again, we could be in a situation where it takes a couple of weeks to find out the answer. tom: i agree. let's do the data. brent crude is at 98.21.

jonathan: the euro-dollar, back down to 99.90 5 -- .9995, looks like a sale. [indiscernible] sold to the good man in the bowtie. your 10 year yield basis points down 4.12. tom: can you do the whole cadence thing? jonathan: do you like that? tom: what i love about your report is you say you have to go out to high yield. you have to go to certain loans and notes. provide a distinction. what part of not full faith and credit, not equality corporate

is the best opportunity? >> good and thinks for having me. i would say we are very much focused on making sure our investors are diversified right now. i think our team message to investors is we are facing uncertain times and there are things that you discuss this morning. a lot of the different outcomes that we are debating for 2023 have different outcomes for different parts of fixed income. all in all, we are focusing in on the fact that the income level opportunity is interesting and income generation is the vast majority of returns for fixed income more broadly. from that perspective, we are looking at the higher income side of fixed income. we do like parts of high yield and leverage loans. we are focusing in on the higher quality and the stronger credits and freak cash flow -- free cash flow, really understanding what you are putting into your

portfolio and active management is going to be ever more important in a year like 2023. another area we like as well is preferreds. we think that is a space that is offering a little more attractive risk reward. it has a solid foundation to go into next year. lisa: it's interesting you are going into the riskier aspects of the market as we talk about the live effects of some of the tightening on the monetary and fiscal side. how concerned are you that we don't really grasp the scope of the damage being done i raising rates as quickly as they have, as the fed has, and the idea that there will not be the kind of fiscal spending to offset any sort of payment in the economy? >> that certainly is a key concern here, going into next year. we are actually expecting more uncertainty, volatility, we are expecting spreads to go wider and possibly retesting what we saw in june of this year.

we certainly are being mindful of moving parts. if we were to go into more of a hard landing, we will have a tougher time. i think we are trying to be mindful that a law has been priced in if you are willing to take a more medium to long-term perspective. particularly if you compare it to everything else that is out there. equities are much more comfortable. even some of the private alternative spaces, we feel like public fixed income, particularly with a diversified lens will be more attractive. jonathan: anders persson. fenway sports group, owned and founded by john henry, known to many of you because of the ownership of the boston red sox, fsg inviting offers for a possible liverpool sale. liverpool ballclub.

they are reporting that morgan stanley and god would have been retained to help with the process. they have been murmurings over the last three months but here we are based on the athletic reporting. tom: this is different. i am spark -- speaking with your expertise. any other tore my oil -- turmoil in the premier league, these guys are wonderful operators. old fenway park combined with tom warner, these guys are competent. when i suggest -- what i suggest, they sell from a point of strength. jonathan: what would he go for? $5 billion? tom: i went on youtube and solve a magical point where the players come out with the little kids. there are the tots and all that. there is that liverpool red and the payroll and the quality of the players, this -- is it like

the new york yankees? jonathan: not quite, but close. i will offend some chelsea fans and look at the price of 4 billion dollars and say liverpool has more of an international reach that chelsea does not, specifically in asia if you look at the fan base. i would suggest the number might be bigger than that aced on that alone. and that is a shallow analysis. the bank will do a lot more work than that, i'm sure. tom: yes. we need surveillance research on this. they have put a lot of money into this stadium. lisa: i was just waiting for you to say 5 billion, 5 billion dollars, $6 billion. jonathan: john henry wants me to do the auction process live on "bloomberg surveillance." we have been talking about deal flow and banks trying to make some money. reporting from the athletic this morning, tom.

we will see what happens here. dan ives might have something to say on this. he will join us shortly. apple in the news. apple is basically seeing production get hit. we are reporting here at bloomberg that there is a demand story going on here. apple says demand is still robust. we will break that down for you in a moment. from new york, this is bloomberg. ♪ >> with the first word, i am lisa mateo. the u.s. and russia reportedly have held private talks on ways to avoid escalating the war in ukraine. according to the wall street journal, a place -- peace settlement was not a goal in the negotiations. the biden administration was said to have warned the kremlin against nuclear weapons. chinese experts -- exports failed for the first time in over two years unexpectedly. brazilian exports have been a

major supporter of china's recovery in the past two years. twitter is asking dozens of its employees it laid off last week to come back. elon musk cut close to 3700 employees last week to slash costs. some were let go by mistake and others were let go before they realized they needed to build new features that elon musk wants. apple expects to make 3 million fewer iphone 14 handsets than originally planned. the cutback is due to softer demand for the iphone 14 and 14 plus. apple and its suppliers are aiming to make 87 million devices or fewer. impounded russian super yachts are costing millions of dollars to dock and maintain. american taxpayers are putting most of the bill. it can cost up to 10 to 15% of a yachts value to keep it running every year. at an ultraconservative 3%, the u.s. and italian governments

will pay more than $50 million a year to maintain their fleets. i am lisa mateo. this is bloomberg. ♪

♪ >> the consumer has the savings buffer. the savings buffer is coming down. i think the rate will put pressure on the economy. the longer we stay at these high rates, you will see credit contraction.

jonathan: a big week ahead. lisa: low blow. jonathan: i say that every monday, everyone knows that. every monday, i'm going to say big week ahead. tom: the vix is 25 and it used to be 15. jonathan: big move in apple. apple, lowering the premarket by 1%. not a big move but a conversation is taking place. tom: jonathan ferro and i were apple picking and you look at the macintosh apple versus the red and that is a tough decision. jonathan: see what you can get hold of. apple is saying they have to trim expectations for the amount of production they can get. we are reporting that you can expect apple to reduce --

not because of production difficulties but because of demand. tom: let's talk about that right now. not on the macintosh but that is -- because that is old news. we are thrilled to bring in dan ives. ewert -- you and i were talking about this, any clarity on sales? the two fancy phones, t-mobile and all that, am i right that the pro and promax are selling like hot cakes? dan: i think demand on pro has been impressive relative to what we have seen with its background. you saw a in september results and guidance. we have seen that come out of china. for apple, the issue is not demand, it is the supply. that is the gut punch we are dealing with this morning. tom: i don't mean to get mathy, but what percent of this is about china lockdown?

what percentage is about demand of the phones underneath the pro and the promax? >> let's break that down. when you look at the iphone 14 plus, that is been the strike on apple coming out of the gate, you are seeing lower production in terms of coming out of asia. on the other side, the strength is coming out of the iphone 14 pro. we think it is closer to 85% this quarter. that is positive for asp. it is positive for margins. that is what they are focused on here. lisa: you are rejecting the idea this could be demand driven, is that correct? you think that is perhaps not a correct interpretation of apples? -- apple's announcement? dan: no one has been better in

terms of forecasting their strength. i believe the iphone would be up year after year. in terms of the zero covid shut down, that takes potentially 3% of iphone units. demand is not the issue. it continues to be supplied. that is the frustration in terms of what they are dealing with in china. lisa: you are not necessarily seeing people expect bigger margins. we are not hearing that perhaps apple will raise the price of the iphone 14 in response to the lack of supply. so, does this mean that apple and a lot of companies could have reached the end of how much they can offset some of these pressures with higher prices? dan: it's a great point. i also think it speaks to why within the four walls, why it is so important. i think that is what apple has done. it gives them more flexibility

from the supply chain and a margin perspective. that is something that is playing out more and more. the narrative is the iphone 14 pro, despite storm clouds is seeing strength. despite what we see and what i call was a night mail in -- nightmare in the large-cap tech earnings season. tom: all these people with their fancy egos and business beliefs, what is the difference between a hiring freeze and outright firings? explain that body language, not company to company but within the industry, within the culture you follow. dan: in the valley, especially the last seven to eight years, a lot of these companies were hiring 15, 20, sometimes 30% more employees per year. in terms of a freeze, you need 10 more engineers. now, what you are starting to see is clearly a slowing down.

you are starting to see now cuts across the board. they want to make sure that they get ahead from a margin perspective. i view it as ominous. it is still more between a freeze and slight cuts. if it continues, then it becomes dark. jonathan: dan ives, still looking for 200. 144 from 156. pro production shortfall is what they call a rare move. he is cutting his estimates for the iphone 14 and the units for the december quarter. he is picking up signals in his own checks. it's not just our reporting, others too, feeding into the big debate around that name. tom: the big debate. i get that it is china but it is more than that. i'm fascinated how apple, who has been untouchable, how do

they adapt to it? they are not lyft, they adapt. they cut costs. have they ever heard of -- have i ever heard of apple cutting costs? jonathan: when was the last time some of these companies had a true, real, cyclical test? the pandemic is not it. give in fiscal transfers we saw, lisa, i will argue that is not a good model to argue they have had a cyclical test. in some spaces, big tech actually got acceleration of demand from the pandemic. that is not a fair comparison. when was the last time they had a major cyclical test? lisa: through the lens of apple, on the broader level, there is six -- cyclical and structural issues. which platform is the star one at a given moment, at apple? i am thinking about this question of demand and questioning how much they can move away from china. if this is going to be an

ongoing problem and this is an area that produces 85 percent of the iphone 14, how do they move away and create the infrastructure quickly enough to avoid this happening again in the near term? jonathan: how do they move away without harming the demand side of the equation? they get that pushback and blowback from moving your production away. comedy times have we written that headline? four-time -- 14 times? tom: we have a crisis. we will come back and talk about it.

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jonathan: 60 minutes away from the opening bell. live from new york, equity features look like this. they fade just a little bit on the s&p. still up 2/10 of 1%. big day of gains, a racing a week of losses on the s&p 500. the s&p down by 3.35% last week. yields much higher across the curve, particularly at the front end. yields a little lower on a 10 year to about 415.

tom: a big week, absolutely. jonathan: what is the crisis? tom: the three of us to milan, $38,000. jonathan: that's american airlines? tom: united. jonathan: try zurich with united. tom: we can go after davos. that's a plan right there. taylor richardson with us, chief economist with adp research. not only working with adp with her thumb on the pulse of american wages but also her work on government economics. thank you for joining us. taylor: thanks for having me. you walk in and say hey stupid, this is what matters. it's monday. it is stupid monday for me. tom: the media over waste technology because we have technology on the brain.

you are saying layoffs are not that big of a deal? taylor: it's a big deal for the tech sector and tech employees but in terms of the workforce, tech information sector, it is 2%. when you are talking about the heavy hitters in the labor force, it is services. services when it comes to leisure and hospitality. the retail sector, that is important. professional business services, all of your accountants out there, that is important. tom: what is the service dynamic into this election coming off the adp report and the full employment reports on friday? what is the service report dynamic? >> it is all about hospitality. that has been the big growth sector. in january of 2021, wage growth and leisure and hospitality was the lowest of any sector we

track. now it is the highest. it has been doing double dutch this summer for a very long -- since this summer for a very long time. as that dynamic changes, you might see wages peter out in terms of acceleration and still remain high at these elevated levels. jonathan: we are waiting for the supply-side response. any sign of it whatsoever? nela: a little bit, here and there. jonathan: can you walk us through it? nela: there was a little bit of movement, i'm talking about labor supply. jonathan: we are on the same page. [laughter] nela: so many supply issues here. we saw some people move back into the labor market in the fall. we had the promise of a normal school season. that was helpful. if you look at the labor force participation rate, it is still stubborn and retreated last month. that is an issue because it suggests a bit more permanence

to the fact the working age supply has shrunk. what does that mean for growth going forward? not just when we get through the inflation cycle but in the years ahead. jonathan: this is the inflation cycle i wanted to talk about. inflation kicked high very quickly. do you consider it to be stickier on the way down? is that the way it works out? nela: it is stickier and i think it will be more persistent. the fed has admitted the persistence is much more than it has been in previous cycles. the shortest supply, those dynamics, globalization, automation, that were pushing inflation down, they don't have the same power they use to. and the demographic changes are not having the same power it used two to keep inflation low. it is not only likely that this inflation cycle is stickier, it is also likely that future levels of inflation are more persistent than we have seen, historically. lisa: you guys were talking about the supply issue in terms of workers coming back into the

workforce. how can we understand the fact that the participation rate has not creeped up and it is still going lower on a month-to-month basis if you look at the biggest read, why? nela: we talk about economics but we forget there is a huge psychological factor undergirding the entire labor market. this was not just a supply shock, this was a people shock. people are making different decisions. they are giving up that second job. they are deciding to live on one income. they are switching industries. in combination, all of these different decisions at the household level means that the workforce has become smaller. so, how do you get the workforce back up? you might have to re-skill for different jobs, jobs that make it worth it to get off the sidelines. lisa: what does that mean in terms of inflation and how prickly it can come down? we were talking about how on the

product side, we were seeing reasons to be optimistic about inflationary forces but not so much on the other side based on what you were talking about. nela: productivity is the fly in the ointment of the labor market. we need more productivity and we have not seen it. it is productivity that rose you out of this inflation status. it is more workers are more productive and creating more output. we have more workers putting out the same output or less output. that is not the way you grow out of inflation and that is the issue. tom: let me ask you because it is what you have done for years. how do you measure productivity of the new economy? of work from home? i get that from a big corporation like adp, work from home is countable. but other than that, are we flying blind in this productivity and analysis? nela: you have made an interesting and important point.

over the last two years, the economy has become more digitized. the standard measures of productivity may not hold. maybe there is some good news that we are actually more productive than we think, we are just not counting it right. but if that's the case, we should see that show up in gdp growth, right? and we haven't. tom: just like bloomberg surveillance, we know we are more productive. jonathan: they don't give us credit for it. is that where you're going? [laughter] policy going forward from here, are we restrictive, how do we know? nela: great question. we are restrictive in pockets. let's put it this way, supply has been chronically short, like in housing. the policy works. the policy only works because there is not that many houses to begin with and prices were skyrocketing already. if there was a greater supply of

housing, even a 7% mortgage rate would not keep the tail end of demographics at bay. but it is because the housing is chronically undersupplied that the rate is having an effect. so, where you have supply shortages and a higher borrowing cost, it is not happening in the labor market. tom: unfair question, but all of global wall street is watching us and listening on radio as well and they want your update on the new adp report. you know the pinout of this has been. what is the knowledge base you have about the quality of your new, improved adp report? nela: it's a different approach. we start with over 25 million workers and we do something that is a pivot. instead of forecasting the friday number on a wednesday, we provide an independent measure, based on adp client base. this is the future of data. tom: how much timeline do you

need? how much statistical end do you need where you can say this has veracity? nela: i think we are in that moment, now. we have an expansive labor market. adp pays one and six of u.s. workers in the united states. tom: i didn't want to turn this into a commercial. nela: i'm not trying to but you asked. [laughter] the corporate sector is delivering with high frequency data. we don't just get a read every month. we don't just get it once a month. we get it every day. and i think adp is not alone with other companies that are getting reads on inflation and productivity. when it comes to the future of data, it's not just going to be with government statistics. jonathan: i can sense the frustration.

does it frustrate you that if wednesday doesn't forecast friday, it is useless? nela: i have lots of frustrations. that's not it. what i can say is when i haven't independent metric, it is one of many. it is a supplement. don't say this is a substitute, it's not. it will never be. but it is another read on the economy. at a time when the economy has become more complex, more affected by rate sensitivity and government debt and fragmentation globally, you need as many credible resources as you can get. and so we offer this to wall street. take a look, disagree, like it, don't like it, figure out when it works for you but it is another data point for you to look at. jonathan: they should click this. lisa: don't worry, we probably will. [laughter] jonathan: thank you for coming in. always good to see you. good to see you in person. the payroll support on friday,

we talked about it. tom: i thought the differential between the two series, the non-fire series and the establishment were very nuanced. there is a real desperate -- disparate view. jonathan: in the next hour, the chief -- of morgan stanley will be joining us. tom: what did i say? jonathan: mike is talking about the potential of a midterm result that drives years -- yields lower. we need to build on what we had from the fed last week, which i think is a game changer for many people. mike wilson at 9:30, in the next hour.

might have john henry on liberal -- liverpool. from new york, this is bloomberg. ♪ >> keeping you up-to-date with news from around the world, i am lisa mateo. ukraine's president, volodymyr zelenskyy, once iran to be punished for helping russia. if it was not for russia -- iran supplying weapons to russia, we would be closer to peace now is what he said. in brazil, there president will unveil a multibillion-dollar spending plan to pay for social aid. it will be the first test of his congressional support before taking power. he will need approval. meta-will start laying off thousands of workers this week. the job cuts could come as early as wednesday. meta-had been struggling with

growing losses and has been investing heavily in developing its metaverse business. shares are down 73% this year. the northeastern u.s. is heading toward a winter heating prices. retailers in connecticut are rationing to prevent panic buying. there is warnings of a natural gas shortage. northeastern consumers faced the highest energy bills in decades this winter. in houston, jim machen vale has won $75 million on his bets that the hometown astros would win a spalls world series. that includes a $30 million payout from caesar sports book that the company calls the largest ever at illegal sports betting site. some of his winnings will go back to his customers. those who bought a mattress for $3000 or more will get their money back. global news 24 hours a day, on the air, on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo.

this is bloomberg. ♪

>> you look at all of the polling data. if y'all show up and vote, democracy is sustained. it's in your hands. and look, you are one of the reasons why, as i said, i have never been more optimistic about the future of this country. i look at america reasserting itself to lead the world in the 21st century. tom: the president of the united states speaking as we head toward the election. we will be in washington on tuesday and wednesday with an understanding that much will be undecided by wednesday morning. there was one person i wanted to speak to. he is someone in the fabric of the democratic party for a good 50 years. he was philadelphia district

attorney in 1978. anybody in politics would know that would be the former governor of pennsylvania, the former chairman of his democratic party, ed rendell. i want to know how you would pick up the pieces for the democrats, beginning wednesday morning. there has been a liberal, a progressive shift. there has been what we have observed over two years of a biden government, fine. what is the ed rendell prescription, starting on wednesday? ed: wednesday, we have to come to grips with the fact that both wings of our party want the same outcome. they just defer about how to get there. we have to learn the art of compromise among ourselves, first. secondly, we can't be shy. if they smack us in the mouth, smack them back.

republicans say democrats are weak on crime. they say there is an increase in homicides but homicides are increasing because of the availability of guns. every democrat should vote to ban assault weapons -- every democrat voted to ban assault weapons and every republican voted against it. so who's fault is that? tom: i want to speak to a party that some would say was hijacked i fancy people on the east coast. how do you get back to mainstream democrats? the people that found conor lamb attractive outside of pittsburgh . there is this arch senate battle in pennsylvania as well, how did the democrats move away -- how do the democrats move away from east coast liberals to centralist pennsylvanians? ed: we have to find the right

candidate. i think congressman ryan is a great candidate. i don't know if he will win. he is a candidate who people know represents their best interests. if i was running for office now, i would go around with a big board. the board would have 10 issues. i would say what the democrats and republicans voted. we don't press the fax enough. we get scared and shy away from it. if someone attacks you, you can't ignore it. you have to fight back. lisa: do you think it was a mistake for senator federman to do that debate, given that he is still recovering from his stroke? ed: i'll tell you, no. he deserves high marks for courage. that was difficult to do.

the format was terrible. 15 seconds to answer a question about real policy? you can't do that if you are 23 euros old -- 23 years old and tremendously healthy. on the other hand, there are some tough images out of that debate. tough images of him not being able to put his thoughts together. the interesting thing was i was with him thursday before the debate. he gave a 15 minute speech without stumbling for one second. lisa: there is a larger issue here as we head into 2024, which is why as the democratic party not gotten a bigger bench of people to become younger and more vocal and get out there rather than basically sticking with people who have worked in the past and who are known but maybe have not won? ed: we do have to mention younger people.

the congressmen and congresswomen from 2018 are still there. they are good democrats and good candidates. i think they might just pull this thing out for us. tom: i want to look back to william scranton. he was one of your opponents. how do you perceive, ed rendell, the republican party after this election? and dare i say if president trump does not run again, the next gop? what will they look like? ed: it depends. if they are smart, they will moderate a little bit. in the end, election denying will hurt them. independent voters, the moderate republican voters, they don't believe the election was stolen. there were 62 court judges. half of them were appointed and not one of them won.

the election was fine. if we fixed the elections in 2020, we did a terrible job because we lost seats in congress. tom: thank you so much. we look forward to speaking with you at the super bowl with the eagles here. he is the former governor of pennsylvania. i go back to the heart of ed rendell, which was crime and all he did in philadelphia. i can remember the accolades from republicans and democrats. but also, inflation in the paycheck, which global elite wall street does not talk about. lisa: what we do about inflation? what can either of them really do to mitigate it? tom: the emotion changes the politics. lisa: that is the reason why it will be interesting to see what

this means for the parties going forward. it is a popularity contest for who they think will have a better say in a better voice moving this forward. tom: i will say this is strictly anecdotally. i never saw more items on sale in a grocery store then when i went through this weekend. prices beginning to adapt. >> although this story about the energy bills, the northeast will offset this, this is the reason why it is such a difficult moment. it is not just one area or another. perhaps goods are coming down, perhaps there are areas where food and the inflation rate is mid getting. heating and services and plane tickets, you're seeing the opposite. tom: i go back to rent, i think. we are colored in new york city by that. with hawaii, the most expensive rent of a state in america in the west coast, i think rent has to be front and center. lisa: if it does come down, how

far does it have to come down before it affects some of the main metrics and how people feel? tom: we will have a cpi report and we will do that with all of our good guests, as we can. we look forward to speaking to you from washington tomorrow. david westin leading our election coverage tuesday night. futures up nine. stay with us. this is bloomberg. good morning. ♪

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open starts right now. >> every the you need to get set for the start of u.s. trading, this is bloomberg the open with jonathan ferro. jonathan: live from new york, we begin with the big issue. here come the cuts. >> it's been this disconnect. >> that has not translated into a growth phase. >> there is near