>> central banks are not going to go all the way to fight inflation to bring it on target. >> we don't necessarily think the path to a soft landing is closed, but it is getting narrower. >> decided inflation is not fixed. the fed knows that and they are going to be -- >> the biggest concern is that inflation is been around long enough that it has become entrenched in the labor market. announcer: this is bloomberg "surveillance" with tom keene jonathan ferro, and lisa abramowicz. jonathon: good morning, good

morning. for our audience worldwide, equity futures this morning just about unchanged on the s&p. chairman powell triggering a massive rally in yesterday session. tom: lisa, we were talking earlier about the oddities of yesterday. it was down, down, down, whatever the reasons. then, boom, up we went. were people betting on gloom in the market and saying they had to get out or was it more than that? green on the screen. the dow jones industrial average, a positive 0.31%. jonathon: a big, big move. powell made two points. what he did not say is he did not lean against the easing of financial conditions we have seen. number two, what he chose to improve size. if you go back to the november

news conference, he talked about risk. he thought the risk of doing too little outweighed the risk of doing too much. then yesterday, for some reason, he started emphasizing the risk of over tightening, and that decelerating increases would decrease that risk. lisa: the market did not find that odd, they said game on. perhaps creating a real downturn in the economy. he wants to be nuanced in a moment when the market is not nuanced. he is try to be nuanced when the market is looking for him to cut rates and be open about that next year. andrew hallman host -- andrew holland -- tom: gina martin adams was great yesterday.

the story not being reported this morning, that's the opening of china. you mentioned the dollar move. renminbi is near a critical strong reopening breakout. jonathon: month or so. it's not just equities.k europee lows in september. lisa: and we got more yesterday, with officials out of china moving away from talking about covid zero anything. how do you end up with a real reopening? tom: i just want to say that in the history of the show, you are watching -- [crosstalking] jonathon: wrap it up, let's go. lisa: i had two screens up. tom: going to take a nap. jonathon: tom slept through chairman powell and football.

s&p down 0.1%. yields on the 10-year down aggressively. down a little bit this morning to 3.6016. euro-dollar up 0.1 point -- 0.15%. tom: i'm going to go to the bloomberg financial conditions index that certainly did not move on powell's comments. lisa: definitely a question about the reopening of china, fueling the very unclear picture around oil. today, what i'm looking for is jobless claims, personal income, and consumption, as well as the pce deflator. this is the key inflation metric the fed has traditionally will look at. you are also looking at core pce, which isn't what the fed once to see.

how much of this will cause versatile of the enthusiasm from yesterday? data does not bear out the hope that officials have for a soft landing. today, it is a reality show. we have several fed presidents in the vice chair. i'm interested to hear what michael barr has to say about overseeing certain financial institutions, especially after the ftx debacle that was reinvigorated in terms of the debate with yesterday's discussion with sam bankman-fried. also, emmanuel macron comes to washington dc and joins the first state dinner in years. is there some sort of coming together with trade policy, countering inflation that does not necessarily reach other regency? -- regions? jonathon: looking forward to catching up leader. ben laidler, walk us through the

reasons you think this rally can continue into december and beyond. >> i'm a little bit cautious on the pace, but not the direction. do think the low is in. corporate's and consumers have been incredibly resilient, and i don't think that resilience is done. and we are seeing inflation beginning to come down, but maybe more importantly from all of those lead information indicators, even things like the sticky landing in the labor market and housing market. we are beginning to see this over the next few months. valuations have come down, maybe not quite as much as we would like in the u.s. to your point, we are seeing it dramatically overseas. we think that is where the action has been in this off the

october low. you don't need good news, you just need a little less bad news. i think that is going to keep coming. tom: i like that green backdrop. it speaks to your optimism since christmas 2018, when you nailed three bull markets in a row. heirs rationalize. it's one big short cover, but when is there more than just obvious recovery? -- obvious short cover? 0 i think there --ben: i think there is debate on how quickly it will come down. the catalyst for the next boom market is when the fed actually starts down. cutting interest rates. we are a long way from that, but necessary -- but step one is remaking. again, this is not just about the u.s.

the rally has been dramatically bigger outside the u.s. the gradual reopening of china, the support of the property sector, less bad news out of europe, peak inflation and lower natural gas prices in europe. profit margins and valuations are lower there. it's not just about the u.s., it is increasingly global. lisa: if there is a cold winter in europe, does that shift completely your view, in terms of how much this rally can continue? ben: there are plenty of headwinds in europe. it will lead to a downturn next year, this strength in the euro. does not help corporate profitability. gas prices are probably going to go up again. those are things we all know. that is why europe is 10, 11, 12 times earnings. european corporate's ex energy

revenues are 20%. that's dramatically more than the u.s.. i think what we often underestimate is the buffers that they have there, whether that is the euro, fiscal policy, how well they have navigated this crisis so far, and how cheap those valuations are. i think this 20% rally off the bottom is just a reminder of that, which i think we would be wise to take on board jonathon: the number one challenge to your call right now isn't q1 earnings, or q4 earnings reported in q1. this is from j.p. morgan, who is in line now with morgan stanley for what they think they're going to see in 2023. i will read your quote. i would love your response. "previous lows and markets are likely to be tested as a significant decline in earnings paid within this market decline could happen between now and the first quarter of 2023."

then, that is increasingly the overwhelming consensus for you. corporate earnings are about to keep -- to get hammered in the markets will roll over. what is the argument against that? ben: l.a. some of it is sort of priced in here. point well taken. i think next year will be the opposite of this year. you will have valuations coming down and earnings hanging in there. i think we will have valuation relief and we get to the top of the fed cycle, but earnings will come under more pressure. i think you will make money in different places. the surprise so far as how resilient corporate earnings have been and how resilient the consumer has been in the u.s. economy has been. gdp will be 3% or 4%. why are we accelerating? inflation is starting to come down and consumers are getting purchasing power back. i don't think we should forget that. if inflation keeps coming down,

it could come down even quicker with lower energy prices. we all know that earnings are coming down and there is a weak link. we are going to get some relief from valuations. jonathon: looking for another move higher here in this equity market. ben laidler there. in line with what

jonathon: to discuss this morning. future equities unchanged. from new york city, this is bloomberg. >> keeping up-to-date with news around the world, i am lisa mateo. jerome powell signals the fed will back off increasing aggressive interest-rate spirit he made the case for lowing inflation without sending the economy into a deep recession. that policymakers meet for two days starting to simmer 13. the missing billions from the collapse of ftx are still a mystery. that is christ of the crypto exchange, sam bankman-fried, denied he was behind a fraud. he he told the new york times deal books summit that he made a lot

of mistakes made it was his first major appearance since ftx imploded november 11. three years since the first documented coronavirus patient and china, the country is finally pivoting away from efforts to quash the pandemic. they have entered a new phase and the government is making some concessions, such as allowing some low risk patients to isolate at home instead of in controversial quarantine camps. european union members are looking at a compromise on a russian oil price cap. bloomberg has learned they discussed a $60 per barrel limit help reach a deal with the eu's wider membership in the broader group of seven. the goal is to keep russian oil flowing, to avoid a global price spike, while lowering moscow's revenue. the feud between apple and twitter seems to be easing. elon musk met at apple headquarters. apple had never considered removing twitter from the app store.

musk started criticizing apple after they reduced at spending on twitter. lisa m: -- global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ what if we wanted to electrify all of this... 100% carbon free... is it possible?

♪♪ aes has been leading energy transitions for decades... and is partnering with the worlds leading companies to decarbonize industries... cities, and nations. even the internet. is it possible? can we reliably power the things we love and green the planet at the same time? yes... aes.

>> the time for moderating the pace of rate increases may come as soon as the december meeting.

given our progress in tightening policy, the timing of that moderation is far less significant than how much further we will need to raise rates to control inflation. jonathon: chairman powell absolutely ripping yesterday's session. from december, with the new york , equity futures basically unchanged, -0.1%. yields unchanged on the 10-year, 3.5998. we get back up to that level, positive 0.2%. tom: what matters right now? jonathon: things turned around virtually quick. we went from 1.0350 to one .20 just a couple months later. tom: i did a lot of technical

studies of dxy and didi why this morning, and all of a sudden, they have a lot of southedness to them this morning. it is so technically wonderful. also wonderful is our washington correspondent. she missed powell yesterday, watching argentina, which is what you would expect. but she did not miss the rail strike of this nation. it is something from another time and place. i am looking at the senate and the secretary of later -- secretary of labor. marty walsh is looking for a path forward. what is a path forward for the senate? >> given the fact that the house cleared this on a bipartisan vote, it does look like the senate could clear this as well and could potentially clear it as soon as this week. the bigger issue is whether or not this provision on sick leg that the house -- sick leave the house voted on afterward.

they voted on it as a provision. the issue with that is only three republicans voted for that. that just sets the tone that the sick leave provision may not get the votes it needs in the senate. except you have senator sanders, who is demanding an up or down vote on sick leave be included or he will not sign up that tentative agreement to become legislation. you also have the likes of individuals like senator rubio. never see these two on the same side, saying that he is for the workers rights and he doesn't want to vote for anything the workers don't agree with. there is potential for that. but that is where it is going to get tricky. tom: why are they doing this if the airlines are on strike or the postal workers are on strike? i don't get what is unique about a rail strike versus 10 other critical industries. annmarie: it's a good question. we don't normally have these moments where it is down to the wire, in essence that the strike will happen if this agreement is

not in place and congress does not act. as you said, tom, this is something of another era. this will happen potentially on december 9. issue you have now is companies are actually starting to shift things around, not putting them on railroads, because there is concerned this is going to come to a stop, especially when you think of issues like hazardous material that comes from refineries and go on railroads. these kinds of materials, these products, cannot get that stuck. lisa: in the meantime, president biden is eating in washington, d.c., sharing a 100 $20 seafood tower with emmanuel macron last night. is there any sense of how things are going? annmarie: you can ask jonathan what he thinks about that washington, because i took him there one time when he visited washington. lisa: [laughter] annmarie: we know tom that you only go to the chili bowl.

it was all smiles when the president tweeted out a photo that he has friends in town and it is the dinner before the main dinner, a little bit more intimate setting bidens like to go to. but obviously, today's going to be a bilateral meeting, and trade tensions are the major concern. emmanuel macron has called the subsidies that the inflation reduction act will give to clean energy companies, it is unfriendly policies be if you also have his finance minister equating it to what china does. but emmanuel macron will likely say, i am going to be frank with an ally, and that is america. lisa: what does america want from emmanuel macron? what is biting going to be asking for? annmarie: we haven't had a steak dinner since 2019.

this is really them showing their friendship and the all of branch after the concerns with trade policies. also, for the biden administration, it is making sure keeping this western alliance intact. it is not just the trade issues that you have these growing concerns amongst european capitals, but also the oil price cap. that is going to be a big concern on monday. that has to be in place or you will not have russian oil leaving, if it is set to be left, on certain types of ships. there's a lot of concerns there and they want to make sure they have france on board with all of these issues, as you have this war still waging dish -- still raging in ukraine. jonathon: thank you very much. i still need to expense that meal. i'm not sure how to do it. tom: i'm going to popeyes around the store from gucci.

lisa: you know when they charge seven dollars for bread. [crosstalking] [laughter] jonathon: just getting the latest from doordash. we talked about this ruefully yesterday. more cuts coming. they are talking about a reduction of 1250 positions. we are seeing a lot of this through tech. we are wondering if it goes beyond that in the next several months. lisa: is this to be getting or special kind of circumstance with businesses that built over for the past 10 years, five years, and a very different monetary regime, at a time when people were willing to get things delivered? do you both get things delivered as much as you did a year ago? jonathon: yeah, but it is getting more expensive. lisa: if i could just take a walk, i justify it is good exercise and take a walk. all i can say is i am not really

surveying a sample size, but i think some people are rationalizing. jonathon: i don't think asking tom or i anything about that is representative. lisa: [laughter] i agree. tom: doordash is publicly traded. i am looking at the financials. is it a zombie company? i am not willing to say that. but all of these companies are stressed across every sector. it is a great zombie roll up next year. jonathon: we will have this conversation. from new york city, equity futures just about -0.1%. a massive month of gains on the s&p. kicking off december with you.

jonathon: live from new york city's -- new york city this morning. equities up and away for s&p 500. in october, up 8%. this is the first back-to-back monthly gains we have seen on the s&p so far this year. outside of that, looking at futures. down about zero .1% as we look

at december. down 44 basis points on the 10-year in the month of november. this morning, basically unchanged. 3.607 one. i want to finish foreign-exchange briefly. the euro-dollar down 0.28%. it has been a while. tom: there are two indexes. the one that we grew up with is the dxy, which is major trading partners, not including china. the bloomberg dollar index screams weaker dollar. the people looking for resiliency in the dollar, i need to hear the story right now. jonathon: it cut people off in a massive way. as soon as i walked into the building, credit suisse is down for a 13th straight session. 13 straight days. we are down this morning by another 3%. tom: we speak to global wall

street, we don't do rumor, we don't do speculation. "not surprised the share price is lower. the question is the why." i cannot even paraphrase it, but the idea is that when one thing goes wrong, other things go wrong as well. right now, the thing going wrong is assets out the door. their so-called wealth management platform. what are those numbers in a week, a month? we have gone from forebrain swiss francs -- four swiss francs. you could do it on a terminal, folks. 4.5% equity. 95.5% debt. that is the weight. jonathon: cutting your weight of growth is tough. we saw that with deutsche bank. this is from ubs at the end of november. ubs said that credit suisse came to the bank.

i was surprised when we got to single-digit's with credit suisse. tom: in the u.s., and i'm not knowledgeable on the swiss, but in the u.s., there are all sorts of mandates that if you fall below five dollars per share, you have got problems. you have to sell, lighten up, review with the committee or whatever. where is the swiss government on this? i am surprised it is not more emergent right now. jonathon: the credit suisse chairman, we have had very few clients leaving. the headline just crossing the bloomberg terminal right now. lisa: they are trying to bring some capital into the bank and raise some capital, which is part of the reason why people are saying they are having issues, the reason you're having the longest streak of losses even after all the pain they have been experiencing, while also giving confidence to existing clients. how do this? cutting yourself to

growth is a very difficult thing. to your point, tom, when do regulators step in? people are saying no. consistently, this is a business that isn't viewed that way anymore. at what point does it really need regulatory action? tom: thank you to our team. i'm just going to read this verbatim. "concerning estimates by 45% next year, 33% two years out, and 66% with the james dimon crystal ball up to 2025." on the sell side, when jp morgan talks, people listen. how do they get a long day today with wealth management? jonathon: i want to read you a quote from the ubs chairman verbatim as well. this is what he said today in a conference in london on wednesday. "we are not actively benefiting at their expense. we view them as a worthy competitor going through a crisis, which i believe they will manage and get to safer ground. but we are also in a world with

clients moving money around, where clients proactively approach us." we all know some supremely talented people who work for credit suisse. i wish them the best of luck, in the same way we did with deutsche bank. tom: i was lost once and walked in the front door and walked in and asked for directions. they gave me directions. jonathon: we need important stuff this morning. tom: that was important as well. let's dive into the labor economy of america. a critical jobs report tomorrow. rubeela farooqi, chief u.s. economist with high-frequency economics. what is the distinction of what we are going to hear friday, tomorrow, at 8:30? what matters to you and carl? >> good morning. what we are looking at, beyond the usual job numbers and petition patient rate is wages. chairman powell made it clear

yesterday what they're focusing on, in terms of inflation dynamics. that is what we're going to be looking at. we are looking at a very small deceleration, but very, very far above the pre-pandemic trend, fair -- far above what the chair -- with the fed is saying with the 2% inflation target. definitely something where focusing on, but not something we are going to see with imminent improvement on either. tom: i want to dovetail with the academic zeitgeist out there. this is the academics saying, maybe labor participation rate is not accurate because of the pandemic, and older people retiring. is this good math that we see friday? rubeela: we have seen this adjustment post-pandemic, where you have seen excess retirement. we really should not be looking for the participation rate to improve too much. but if you remember, before the pandemic, when the labor market

was strong, job growth was strong. but people were coming back into the labor market. what is the dynamic here? is growth going to slow enough that people will want to get back into the labor market? are there savings going to diminish enough? is the cushion from the income support that they have had, is that going to dissipate and they are going to be motivated to come back into the labor market? certainly a possibility, obviously not the case right now. if you heard jay powell yesterday, that is not what they are expecting to see. i think those dynamics, that post-pandemic distortion, is probably going to last for some time. lisa: you mention fed chair jay powell and his speech yesterday. a lot of people thought it was more dovish than expected. at least, he did not come out with a hawkish rebut of the gains we have seen in equity markets. however, to your point, he talked about the labor market tightness and how significant of a concern this is for him.

how much do you view that as causing the fed to raise rates higher than the market is currently pricing in, even after yesterday's rally, even after yesterday's shift slightly in tone from jay powell? rubeela: what i heard from what he said yesterday is that higher for longer. rates have to rise further. they don't really know how restrictive, because they don't know where that level is. but certainly, we going to move higher. our base case is there going to go 50, then another 50 in the first quarter, top out around 5%. if the labor market does not start responding, our base case as it is, five percentage point rate hikes, we don't see how the economy is going to respond to that. but if we don't see the type of improvement we need to see and we don't see sustained easing of wage pressures off of this level, 4.7% maybe 3.5%, then yes, certainly there is a risk that rates will move higher. i think what markets really need

to understand is that the fed does not want to over tighten now, because they will crush the economy and come out on the other site to ease rates. they are going to go gradually and watch the response to what they have done so far. then, they are going to see how long they need to stay there. we think that they reach peak rate, whatever that rate is, in the first corner, and stay there for the rest of the year, at least, to see sustained improvement in inflation from slightly restrictive policy stances. lisa: people pushed back, saying disinflation is everywhere. is there any area that is not true? is there any area you are starting to see inflation react seller? rubeela: inflation readings right now are still not that far off peaks. 7.7 on the cpi, down from 9.1%. quite substantial, but still way above target. we are going to see a slight

deceleration, but these are not levels that are consistent with what the fed wants to see. yes, there are signs of disinflation, but on the good side, this is still very sticky. what fed chair jay powell talked about yesterday was housing and how that has a strong wage component to it. adjustment in the labor market, rebalancing as necessary, so that those wage pressures come under control, which will give them a little bit more room to adjust to see where we're going from here. jonathon: for a man who said there wasn't space for nuance in the last conference, i have to say there was nuance we did not expect yesterday. rubeela farooqi, chief economist. lisa: how real are these numbers? that was something you were both talking about earlier, especially given that jay powell

said the reason why the participation rate hasn't come back is because of early retirements, that two of the 3.5 million job openings are people who brought forward their retirements. to me, that is fascinating. to see if that is borne out the data remains to be seen. tom: particularly off of one essay, looking at 3% inflation for the long-term, the bottom line is if you take a presidential four-year moving average, we are getting down to the tension point, where the real wages have been negative for a long time. we are not quite there yet, where the pain really clicks and socially, but you see it in the strikes. the strikes in the united kingdom, should anyone watching or listening fly to london for the holiday season? jonathon: you want me to tell them not to? i'm going. of course. tom: what about the strikes year? the royal mail? is that what they call it? what do they call the post?

jonathon: what are you up to? what's going on? tom: for the holidays? nothing. jonathon: you're not going away? tom: right now, it is 50-50. we don't know what we are going to do. jonathon: is this you crossing london off the list? you're not going to london? lisa: this is london crossing tom off the list. jonathon: [crosstalking] you can click this just for misses keene. don't go. the strikes are going to kill you. [laughter] this is bloomberg. ♪ lisa m: from the first word, and lisa mateo. in a speech wednesday, fed chair ron powell signaled the unprecedented run of 475 basis point hikes could come to an end

in the december policy meeting. we could achieve lower inflation without sending the country into a deep recession. a house committee can now look at six years of donald trump's tax returns. the treasury apartment has complied that the supreme court decision and delivered the documents. the ways and means committee meets today to decide what to do with them. the panel could vote to release them or a summary of the findings to every member of congress. the average british household is paying the price for brexit. according to the london school of economics, this added 6% to food bills. the study says that due to additional business costs by so-called nontariff barriers, in the form of border checks. a new survey says new york and singapore are the most expensive cities to live in. the report comes from the economist intelligence unit. tel aviv, hong kong, and los angeles round out the top five. the survey says the cost of living in the world's largest cities rose more than 8% over the past year.

global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪ ♪

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jonathon: the world bank president on the latest in the global economy. the latest in global markets looks a little something like this. equity futures down 0.1% on the s&p 500. the month of gains for november, helped out by the monster move we saw on the final trading

on china with a parchment from washington and lee from oxford, and the language study in taiwan is definitive. leland miller, the china beige

book needs to be rewritten and it's about, quote, tom: when we say china is going to open, what does that mean? >> it means a lot of things to a lot of different people. in the short term, you are seeing a response to the protest against the government. the government is acknowledging protesters and frustration with the duke county and aspects of covid zero. they have been easing and changing the language, the narrative, and has been signaling the days of really being locked down and having your life torn apart. that's over. a lot more freedom of movement. from that perspective, people are seeing and moving -- seeing a move toward reopening. the problem here is the backdrop. it is quite scary with rising covid cases. you are seeing a weakening global economy and some of the worst kind -- worst china data

we have seen in a long time. it's not altogether clear how you can get from this stage of reopening to the next stage without sears problems along the way. -- serious problems along the way. lisa: before we get into whether or not they have the desire to move away from this, or is the stealth move from international businesses away from chinese factories, especially given all the uncertainty right now? leland: it's been building for years. you saw corporate's start to rethink strategies and supply chains because of geo-political tensions and the trade war. then, covid. covid zero really cemented that they had to have a plan b or plan c. this is happening amidst the slowing economy and tensions between the two powers. you have got a few dynamics that are on top of the economy, in addition to covid zero. lisa: i wonder how much of that

means this willingness to move away from stricter covid policies. we have seen china in the past not necessarily cave to protest or social uprisings. is this really a suppressed international business and the deterioration you are seeing in the underlying economy versus the past couple of years? leland: i think it's accommodation of a couple of things. obviously, the government protests are a big factor. they are worried about businesses leaving china, to some degree. there hasn't been a game plan for figuring out covid zero. i think this just expedited the potential exit. tom: let me rip up the script. i was appalled yesterday at the major media coverage of the previous leader of china, who was hauled out of shanghai as mayor, to take after tenement square. now, they have a new leader codified with the party congress. how close is this protege to

what we saw from the previous? leland: it's a very different type of leadership. it was the beginning of the institutionalization of the current set of rules, which president xi just broke by taking a third term. i think the previous president thought he was reading norms, institutions, rules around leadership. president xi thinks that in order to fix or save china, he needs to break all those rules. it is quite a contrast. jonathon: leland, what did you make of xi jinping at the g20? were you impressed by his performance there? leland: we haven't seen him interact with non-chinese for a long time. i think 2 in europe and other places, trying to push back against what they see as a coalition building against advanced technology, ring fencing, trade, and military aspects of the relationship. i think china is going to turn around some of this in 2023, in

terms of being so completely inward looking. but again, they have a long way to go. they haven't been on the world stage for several years. jonathon: i think we see a little bit of that this morning. leland miller of the china beige book. solving the ukraine crisis through political means, tom, is in the best interest of europe and all countries in eurasia. it is necessary to avoid escalation. that charm offensive leland is talking about, pushing against that coalition building against china, let's see if that is a key feature in 2023. tom: how do you do a charm offensive against the one thing at republicans and democrats agree on in washington right now? i don't know how you project that forward. the secretary of state has been in asia. i don't how you project that forward. it is a huge mystery to me. lisa: if xi jinping is somehow able to step into what's going

on in ukraine, that will be a real charm offensive. if he reversed course in some kind of way and said they were going to take a harder line with russia, perhaps that would have more influence. are they willing to go that far or is this simply what it is, charm offensive? tom: i would say they will goose the export industry, we have seen a million times. that is how they get back to 5% growth. jonathon: what's interesting to me is not europe and china, but europe and the united states. the inflation reduction act. when you get that meeting of minds between the french leader an american leader later today, if there is any tension right now, it is over that. it is going to be interesting to see how that plays out down in washington. tom: let's be honest. 104 euro off the gloom we had six weeks ago, is anyone framing out that europe gets its act together, that ukraine gets better, that mr. putin slips away in whatever way, and all of

a sudden you have 120 euro? i don't hear anyone talking about that. jonathon: it's not the winter people feared. we had the worst case and area wind nord stream shut off, but they got the capacity up to the levels they want it to be. they were blessed with a milder winter. let's say so far, so good. they hope to repeat the act next year. tom: i think the only solution is we need a trip to london here. jonathon: we can't do that. the strikes. lisa: do it in january, just not december. [laughter] jonathon: futures negative. this is bloomberg. ♪

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>> central banks are not going to go all the way to fight inflation, to bring it down to target. >> we don't necessarily think the path to a soft landing is closed either, but it is getting narrower. >> the supply side on inflation is not fixed. the fed knows that and they're going to be keeping things tight. >> i think if to take that as a signal they are willing t that a signal they are willing to do more rather than less. >> the big concern is inflation has been around long enough, it has become entrenched in the labor market. jonathon: why was lisa so rude

to us in the commercial break? lisa: [laughter] tom: people have been doing all this weeping. we have been here together since time began. what you don't understand is that when we go to break, we don't even talk to each other, we just sit here. jonathon: it is our anniversary today. lisa: congratulations to two wonderful people. jonathon: i remember that meeting. would you like to do radio with tom? i said no. they said, you will be doing radio with tom. i said ok and it went from there. from there, i think people spent the last however many years trying to figure out if we actually like each other or not. lisa: [laughter] tom: the truth is, folks, we can't stand each other's guts. that's just the way it is. but within the stresses of this, what we all agreed on, what you and i agreed on right from the start, is that the data and the conversation matters, and not all of the whizbang our bridge of tv.

we are fighting for that everyday. jonathon: i want to set the record straight. meeting you change tom: tom: my life. oh, shut up. lisa: i'm crying. [crosstalking] jonathon: big back-to-back monthly gains on the s&p 500. is this going to be our domestic? the s&p 500 up more than 5% in october. in october, 8%. chairman powell triggering this one and a big way. tom: i don't know what to make of it. the smartest note was out last night. you mentioned this earlier. what changed? the answer is, it was hawkish in a 50 in december. what did the market here that i did not hear from powell? jonathon: there was a shift in emphasis. it was also what he did not say. he did not mention easing

financial conditions for it he also emphasized he did not want to over-tighten. they were thinking the biggest risk was doing too little, not too much. for me, there was a shift there. it was a subtle one and somewhat bizarre, compared to the performance we saw in the news conference a month or so ago. tom: my shift is, where his economic growth? i would to just that everybody, whatever their opinion is, is surprised in the last six months, more buoyant on a real basis and a nominal basis, than anybody expected. maybe for the first quarter of that, it continues in the recession stays out there somewhere. jonathon: i think one thing we can all agree on, lisa, is the data driving us in the next month or so. lisa: how much is it actual data versus soft data? for those listing earlier about

jay powell and how may companies you know -- versus soft data? -- hiring aggressively or as aggressively. at the same time, i am watching the inflation metrics, since it is one the fed looks at. it has actually climbed in recent weeks. how much is that going to be the theme, this idea that even if you see the overall top line rollover in the face of energy coming down, the court continues to stay strong. today, we have the reality television show that is fed members. today, we also get some word from washington, d.c., with emmanuel macron, the french president, coming to join the white house for this -- for the first state dinner in more than three years last night. last night, he dined with president biden. jonathon, you made a very important point earlier. maybe it's more important to see what we are looking at with france and the u.s., and their approach to china, than anything

jonathon: you say you are selectively contrarian. can you tell me what that means? >> we are still careful at the top level. we are still underweight stocks. i don't think we have reached a by risk moment. but i do see opportunities to lean in selectively. small caps, high yield, value

stocks. as part of a diversified approach. we look ahead 12 months to 18 months, and those are the asset classes where we see the valuations have reached an extreme, where the recession is basically priced in. kind of like a deep recession, jonathan. tom: your book "beyond diversification" -- folks, i cannot say enough about it. i love what you say about kool-aid. what is the kool-aid of next year looking like? we are all going to drink the kool-aid, get on a theme. what is the kool-aid we need to avoid next year? sebastien: i think right now, the kool-aid is the gloom and doom. we can call it the lisa kool-aid. lisa: [laughter] thanks. sebastien: or the tang tom. lisa: [laughter] sebastien: optimistic early

expectations, rising recession risks, we are all talking about three potential stages to this bear market. the rate shot, which has been priced in, the growth shock, and we are all worried about earnings. i am worried about a potential third stage that could unfold next year, which would be a liquidity shock. that is the kool-aid we are all drinking. beyond that, you have been talking on the show. nominal growth and the importance of nominal growth, and the resilience of earnings. tom, you were just talking about not only inflation stickiness, but growth stickiness. i think you don't want to drink the kool-aid in the sense that you want to go all in cash and give up on diversification, because you just had a drawdown between stocks and bonds. i think you go back to i -- to a diversified approach and selectively contrarian. think about small caps.

nobody really likes that asset class when you are heading into a recession. i like the s&p 600. i know you have debates about the dow. i have debates about the s&p 600 versus the russell. the s&p 600 excludes non-earners. that asset class is basically rock-bottom valuation of its 20 year range. it is in the 13 price-earnings ratio. the price-earnings ratio looks like 2008. that's an opportunity for me. lisa: i'm just so busy over here, drinking my really depressing kool-aid, that i really could not wrap my head around the positive things you said. i keep focusing on liquidity shock potential. where do you see a potential liquidity shock? sebastien: it is all about the rate of change. if you step back, the liquidity level is still quite high. we talk about accumulated savings and so on. where i get worried is this slow boiling frog problem. you know, you put a frog in water and crank the temperature

up. all of a sudden, the frog dies and it does not see it coming. i am looking at the bloomberg index of liquidity in the treasuries market. it is just cranking up and up and up, in terms of illiquidity. it is getting less and less liquid. maybe that is qe, may be a change in liquidity conditions, but that is almost at a level similar to where it went during covid. you saw what happened with the dilts market in the u.k. you don't know where liquidity shock can come in. the squab spreads are showing illiquidity. you have other measures that are showing lower liquidity. this is a risk that just keeps brewing in the background and it could be the third stage. it would make monetary policy really complicated, because the fed would have to do something to fix the plumbing, if the plumbing starts to fail like it did during covid. that's why it's not the time to

be all in risk assets. again, i go back to diversification. jonathon: let me pick up on anything. you're talking about a pan of water. how do i avoid being the frog? sebastien: we have a cash buffer in our portfolios. have been short treasuries all year long. that has kind of been the trade. if you listen to "surveillance" every day like i do, everyone has outgoing long treasuries. we are at neutral treaswe just , have a cash buffer. guess what? what is the what is the best time to buy risk assets, especially credit? it has been during liquidity crises. as long as you have your cash buffer. everyone is excited about the 4% or 5% return on cash. that's nice. one of the reasons we have the cash buffer is because there is liquidity risk out there and you don't know where it could come in, but it could create a massive opportunity to deploy

that cash quickly. those are historically really good times to lean in. jonathon: sometimes those windows don't stay open very long, tom. we saw that in spring 2020. tom: the answer here is they move and they move fast. and that's what we are seeing now. even the bulls we talked to, there are still some confirmed bulls out there still, but you don't know when you are coming off the bottom. it takes months to figure out, oh, it is able market. jonathon: hindsight is a beautiful thing. leland miller --sebastien page of t rowe. i care even less about the world cup than lisa. lisa: [laughter]

>> china's covid czar says china has entered a new phase and the

government is making some concessions, such as allowing some low risk patients to isolate at home instead of controversial quarantine camps. in south africa, the president is considering resigning over an advisory panel's report that he may have violated the constitution. wennberg has learned that he is had meetings with allies looking for advice. the controversy has to do with a robbery of the presidents's game form. a standoff between twitter and apple appears to be easing. elon musk met with the apple ceo at apple's headquarters. afterward, musk said cook told him apple had never considered removing twitter from its app store. must begin criticizing apple after the iphone maker reduced advertising spending on twitter. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪ ♪

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>> for starters, we need to raise interest rates to a level that is sufficiently restrictive to return inflation to 2%. there is considerable uncertainty about what rate will be sufficient, although there is no doubt we have made substantial progress raising our target raised -- target range by

300 semi five basis points since march. jonathon: they have done a lot. that was jay powell, the fed chair. tomorrow morning, it is payrolls friday, just around the corner. equities looking like this on the s&p 500, trying to add onto the gains of november. of around 5% on the s&p. just about negative on futures, down by 0.06%. a couple of basis points adding to the move lower more than 40 basis points on the 10-year. your 10-year yield right now 3.5870. tom: are we going to see jonathon: if you can tell me where cpi will be. i might be able to give you a better guess.

tom: i agree. cpi is really critical. notice the vic's did not move yesterday. we are not there. 20.8 two on the spx volatility. right now, annmarie hordern joins us. a real short note on the shock. congress wants to spend more than the president on defense. we are getting very $1 trillion on defense. love the international feel here. these are squishy numbers. don't quote me. $850 billion is the estimate. the next is china at $250 billion. russia, $160 billion as well. is the pentagon the defense of the free world? are we so dominant that the defense budget we talk about in washington is a defense budget of the free world? annmarie: it's massive. it includes all of our allies

and eclipses the adversaries. what a stunning about the reporting that bloomberg government has is that this would be 45 billion dollars more than the president is even asking. you are getting 11 naval ships instead of eight that the pentagon actually asked. we don't know. there are still negotiations happening. potentially this friday, we will actually see it and get more details on what's in that. we do know the president is asking for upward of $37 billion, $38 billion going to ukraine. that could be a sticking point with republicans in the new congress that want more oversight on that money. we are also reporting $10 million more for defense directly to taiwan. you are looking at potentially more ships in the south china sea. tom: was there any talk at the restaurant mr. micron and the president were at, $45 a teeny's -- $45 martinis, is there any talk about the military-industrial complex? annmarie: i think you're looking

at the defense spending what the pentagon shoring up what we have, with all military bases around the world. that's why you would likely see this welcomed by individuals like president macron, individuals like australia's leader, japan, south korea, germany, etc. lisa: as we focus on the international, domestic very much at the four prime -- forefront, with several bills having to do with taxes. janet yellen removed her talk about what she thought about twitter and some kind of review about elon musk taking over, even as we see a real crackdown over in europe. what is the latest on that? is there some sort of investigation in progress we are aware of? annmarie: there's no investigation at this moment, though there potentially looking into it. this is something that janet yellen, this remark was really

walking back and interview she gave to cbs at the g20 in wally, where she said she did not understand the president's comments on what they would need to looking at -- need to be looking at with twitter and foreign money when elon musk took over the company. she said that she misspoke and they would potentially need to look into this. it is kind of a murky situation right now because you do have the treasury secretary backpedaling. it is that also because she wanted to make sure she was in line with her boss, the president? lisa: i wonder how much this is an international concern, with emmanuel macron currently in washington, d.c. how important is it from a u.s. standpoint the play ball with them from any kind of review that can be done domestically? annmarie: i think it is important. the europeans are very out front with this. just this morning, i was looking at a ban they want on a russian propagandist. you are looking at the way they potentially want to fire people. that's not how they happen in

europe. you see elon musk having a lot of issues with european regulators. potentially, the united states is on a slower track, but that is the direction of travel. they may potentially have to look at this harder. you are also hearing calls from congress for them to do that. jonathon: good to catch up with you, annmarie down in the sea this spat between elon musk and pretty much everyone. between elon musk and apple, that has been dealt with. lisa: there was a video after he met with tim cook. he said it was never discussed that there was going to be some sort of removal from the app store. i wonder what happened behind closed doors. i wonder if he said, look, if you keep it up, we will pull all advertising spending and that's it. tom: i'm not really following

it. i will say there is more garbage in my twitter feed. that is a fact. [crosstalking] jonathon: what were you about to say that you are worried about? lisa: are you worried about getting in trouble? [laughter] tom: it's sort of like see embankment. jonathon: that's a different issue. tom: it's this enthusiasm we have for billionaires. i don't know. it has been a long week. [crosstalking] lisa: aside from spf, just deal with elon musk and twitter. there is a real discussion over what free speech means. there is a huge divide over that and he is trying to cater to one view of free speech. european regulators are saying absolutely not. his removal of some are rails around misinformation around covid recently, his missive for -- his removal of people who were supposed to police child

pornography and other things, absolutely horrific. how do you dovetail that into some sort of policy? [crosstalking] jonathon: there are two ways of looking at that story. one is this billionaire that lost all his money. great. the other is someone who potentially committed fraud. i think a lot of people are uncomfortable with the treatment being around the former and not the latter. tom: i stood in a bar on 1st avenue the night of the made off scandal when it broke, or the woman whose penance -- whose parents lost everything to that guy. [crosstalking] all these fancy people in crypto. what about the zillions of people who have broken or lost money? ♪

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jonathan: coming off the back of the biggest one-day rally on the s&p 500 and nasdaq since november 10. that was the cpi report. we had a monster move that day. delivery gains of 5% on the s&p 500. futures down .1%. on the nasdaq one purse -- on

the nasdaq 100, down 1.1%. two basis points on a 10 year to 3.588. a theme of november, deep, deep carve -- curve inversion. a much weaker dollar through last month. if you count the bloomberg dollar index, biggest monthly loss going back to 2010. tom: the dollar is underplayed by the equity market shock. people are reeling from another bull market off the june rally. there is people talking about going through 200 moving day average. in the dollar, there is becoming technical veracity that wasn't there two or three weeks ago. it wasn't there at the beginning of november. is this a trend towards weaker dollar, that discussion is a december discussion. jonathan: everyone is on the wrong side of the boat, everyone

starts running to the right side very quickly. tom: always happens. jonathan: we catch up with -- later. and later this money. lisa: how much do people get caught off size when you have natural gas prices ticking up in europe? we can discuss that with jordan rochester. i want to give you a couple of names i'm looking at. software shares. people were saying a lot of people would continue investing, they are not as people as expected. we are seeing that snowflake in salesforce. both reporting worse than expected expert patients. this was an area people thought was a lesser bad then perhaps some of the other big tech names. snowflake shares down nearly 6%. almost named your dog, snowflake. tom: yeah, snowflake. lisa: credit suisse down in premarket trading by more than

6% after 13 straight days of losing longest streak ever. those shares down more than 66%. jonathan: what is tintin's dog? dear member that cartoon -- do you remember that cartoon? tom: that is a european thing. is that the stock report? jonathan: we are done. lisa: do you want to keep going? tom: the shock, nobody believes in this. jonathan: chairman powell yesterday, some people may not have liked what they heard in november. it wasn't consistent. there was a subtle shift. you think as a central banker, your power lies in what you choose to emphasize. you choose to emphasize in november the asymmetric risk. this was the risk of doing too little outweighs the risk of doing too much. he said than -- in the news

conference, -- yesterday, not to over tight it. i wonder where that comes from. tom: he is reading marco. [laughter] jonathan: and thinking what? tom: i think everybody's heads are starting tumbling and what they have done. they are at supposed after the fact. jonathan: when i noticed a shift, something has gone wrong with the mitigation with this fed chair. i cannot work out if the mistake was yesterday or in november. to lean that aggressively towards financial conditions and not even go there at all yesterday is bizarre. i know there is a risk of over reading, reading too much into this. i found it a little weird. tom: on good morning america, they've got the zeitgeist on abramowitz, pharaoh and keene. they said made off comparisons are not accurate. he's got a point there. these are two different events

we are talking about. we are talking about mr. maid off scandal 10 minutes ago. to be clear, i had agreed with bankman-fried, they are not comparative. the shock and social shock is. jonathan: let the lawyers and judges decide that. i am not going to have any -- tom: why is it coming with bankman-fried? jonathan: this is a serious story. to be approached by the media, this is nothing with a potential case. to be approached by the media is something serious. this obsession with wealth that someone has gone from one billion to 100 k, that is not the story. the story is that someone has lost their life savings on some of these platforms. we've got to work out what went wrong. tom: bradley rogoff wants to say -- stay so far from this conversation. [laughter] jonathan: without a doubt. tom: and he is here. they launched their important report today.

i love bradley. thanks so much for joining us. i love what you have gotten there about the humility barclays has about 2022. you talk about, you need a good defense next year. no one breathing has weathered the bond reality of this year. how do you recalibrate into next year with a 10% plus loss? >> obviously, is not want anyone wanted. yields are good. it doesn't mean you will get 10% plus returns, but the prospect form -- four single-digit returns, even high single digits exists. it is the first time it feels like, based on the yields coming into the year, we do not need a miracle for that to happen. i do not think it is going to be a straight path between here and there, but there is a possibility. tom: is this a year forward where we clipped the coupon, make it the yield, or can you say it is a total return 2023?

bradley: i think clipped the coupon, everyone likes to make that projection at the beginning of the year. if you look historically and how often it actually happens, it is rare. there is usually some event. what most likely happens, it is a year where it is not about rates. there is move in rates, but nothing like we saw in 2022. instead what happens is, we see spread weakness probably earlier in the year, the base case of a recession and materializes. in the back half of the year, you see spike compression towards more normal levels. lisa: can we avoid a default cycle? bradley: i do not think we have devoted a default cycle. i think that might be the case. one of the reasons that is the case, just for the viewers, you may be thinking about 10% high yield defaults as a normal recession period default cycle.

i think the number could be half of that. the big part of the reason why is because of 2020. 2020 wasn't long ago. a lot of the worst stuff in the market was cleansed out in 2020 with defaults. lisa: this is the irony. so many people said for the past decade, there is no way rates could go above 3% just because of how much debt was in the economy, because of the debt piled on company's balance sheets. here we are, rates are climbing toward the 5% level and people are saying it is not a big deal because maturities are not becoming due. when does the ralph fiennes -- refinancing cycle matter? bradley: it is going to be less than a quarter of debt for most every market. investment grade companies, one of the big stories and one of the reasons we had the losses we talked about last year, the duration of that market and up a ton. they issued a lot of 30 year type fonts.

as a result, there is less coming due in your term. they do not want debt coming due in the coming years. the one exception is, there is voting rate debt. that is the case in the leverage loan market. it is going to hit home early then a lot of other markets. lisa: a lot of people couldn't get that yields, they went to private markets over the past couple of years and the past decade. that hasn't been fully repriced. a lot of people talk about the pain to be experienced in that area. when it does repriced, how much lead through could there be in public credit? bradley: it takes time. the only way it re-prices is a default cycle. if it is a non-mark to market instrument. what if there is build and leverage their? for example, something like a bdc does have built-in leverage. they have the ability to put a turn of leverage on this facility. however, it is a term.

you are not going to see enough price action for that to be the case in 2023. the moral of the story is, those flows you just mentioned that had been going into private credit, those slow substantially. we are seeing a bit of that. part of it is, if your investments are down 15% and that one is not been marked down , everyone looks like they are overweight private credit. whether you like it or not, probably do not want to get more overweight. jonathan: what did you make of chairman powell yesterday? bradley: i agree mostly with what you said, but part of the reason he came off that way is they are trying to stay true to the data dependence. we get another number tomorrow. we have cpi numbers coming up next month -- i forget it is december already. jonathan: next week. bradley: i expect we all thought it would be 50 boys -- 50 basis points in december. it was. i do not know what it will be early next year. jonathan: do you think there

will be reluctance to ease against financial conditions yesterday, will it make the job harder? bradley: maybe a little bit. i agree with what you said earlier in terms of consistency of message, and change that message when you have conviction in it. but, i think you saw someone who wants to see if inflation is coming down. we had a print that said yes. we had one that said yes and then we didn't. jonathan: december 13th, two weeks away from the next cpi print. tom: jobs day tomorrow is a big day. jonathan: emphasis in the labor markets, wages and a bench bigger way. he said in the news conference there wasn't space for nuance around inflation and starts chopping up cpi -- lisa: is he representing massive dissent in trying to piece it together with? a he was meant e

speaking on behalf of the committee. i was trying to figure out whether the news conference was him going off the rails. honestly, i found yit didn't ad. it was inconsistent from the news conference delivery. lisa: we should bring in a meteorologist and a psychologist. tom: we need joint therapy. jonathan: would you like to come to my office later? tom: couples therapy. jonathan: i'm going to skip that. tom: we are so vulnerable. jonathan: jordan rochester, coming up. from new york, this is bloomberg. ♪ lisa: the federal reserve is set to slow the pace of raising interest rates this month. in his speech wednesday, fed chair jerome powell signaled the unprecedented run of 475 base going to hikes could come to an end at december's policy makers meeting. he made the case for achieving

lower inflation without sending the country into a deep recession. it is up to the senate to avert a crippling u.s. freight rail strike. the house passed a legislation that would oppose a labor agreement hammered out by rail companies, unions and the biden administration. for of 12 unions rejected the deal. the senate could vote on the house legislation this week. one of the european union's top officials warned elon musk to keep russian propaganda off twitter. d.c. vice president told bloomberg failing to take on vague or misleading content online could lead to a very quick abuse of twitter. it is the latest warning shot over the possible side effects of mass resignations and layoffs at twitter. one of the biggest casino deals in the u.s. this year. according to the wall street journal, black stone agreed to sell its 49.9% stake in two las vegas casinos to the key properties, which owns a majority stake. the deal values mgm grand and

the mandalay bay at $45 billion. global news 24 hours a day, on air and on "bloomberg quicktake." powered by more than 2,700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

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>> the fed is trying to run a more aggressive policy relative to its central bank peers. the dollar is going down because there is enthusiasm people in europe will not freeze to death and that china is maybe reopening. that is providing optimism around the global economy. the dollar is going down, the trade deficit has been narrowing. jonathan: he was brilliant yesterday, thank you to everyone who listen to that. it is available online on bloomberg.com and on the bloomberg terminal. tom: and youtube. jonathan: you are fired up about youtube. tom: it is building. we have a killer audience out there. jonathan: foreign-exchange over

the last couple of months, the pound against the u.s. dollar. noted fx markets are cable, lower on the year one 350 intraday. we have gone from 10350 intraday to 122 in just a couple of months. tom: two cups of coffee. jonathan: euro-dollar, lower on the year sentiment 28. 95.36. today 104.64. these are big moves. tom: we are going to dive into this with jordan rochester. one question, how do you not lose money, and the -- and john will cap get up on the -- you like every adult uses stop losses. you have enjoyed being stopped out of trades now. explain to our audience why it is amateur hour if you not get stops. jordan: i do not enjoy being

stopped out. it is essential to your risk management. with the ftx scandal, it is clear what can happen if you don't. what is happening in the markets, how to avoid losing money here is the markets moving at u.s. energy prices. they have called up year on year. that leads ppi lower. that leads headline inflation with a lag, lower. it is hard to see reasons why the fed would get suddenly more hawkish, especially after chair powell's speech last night signaling that slow down to 50 basis points. you had a green light from the fed chair last night to sell the dollar and by risk appetite. that is why you are seeing the nasdaq up over 4% yesterday. fx, the tour -- the correlations between or in exchange and interest rates have dropped off the cliff. the most predominant factor driving everything now is where global equities are going. i am long euro-dollar, we have a stop on that around 101.70. i think it will go towards 108. it go -- it could go towards 110

in the new year. what is happening in china, the low energy prices over recent weeks in europe, helping boost european production. at risk on sentiment, they have seen equities need direct to the dollar. there is that famous spider-man meme on twitter where one is pointing at each other, blaming each other. tom: we call that surveillance. jordan: the fx guy says it is the driver, the driver guy says it is fx. to carry on in the s&p 500, it means the dollar will continue to we can into year end. jonathan: where to sterling fit in? jordan: we have short sterling swiss on. we thought we needed rv to hedge risk on position. sterling had been less correlated to the equity market, but you cannot ignore swissie is a risk off hedge. we got to stopped offshore, not

because we had amazing news out of the u.k., but everybody agreed with the trait and that always tells you everyone's position the same way as you. and risk on, sterling always does well when the equity markets rally. it is rare that it doesn't, only during president -- during brexit did we see that. with sterling, we think you could climb towards 125 toward the end of next year. in these markets, seeing big moves in dollar-yen. for big figures in 24 hours. 125 is not a big push to see earlier if we have more good news. aced on what we know now, it is a slow grind higher. lisa: it is harder for me to see anything other than a long dollar story. it is all the major currency pairs. we are big gainers in the past month versus the dollar. people are getting ahead of the selves in feeding inflation in a fed that is going to respond to that, could this whipsaw and the other direction based on positioning? jordan: it could, but not now.

we could have a view of what could happen in q2 or q3 next year, but the markets do not trade that yet sometimes. i think the risks are for all my leading indicators for inflation in the u.s., they all point down. there is none pointing up. they are all pointing to lower energy prices, lower inflation. therefore, you can see cpi has clearly. it was the economics team in the u.s. to get that economic number right. if we get that number right, it is hard for the dollar to rally. to next year, we could have a q2 , china has reopened, q3, we feel the impact of that. in energy markets. the fed doesn't cut rates, perhaps. we think they will, but the risks are we have a wave of energy inflation next year in q3 as energy markets tighten up and demand comes back. that could change the narrative a lot.

right now, i think the dollar can continue to weaken against the euro. lisa: one reason why i love reading your reports, you've got this confidence metric and you have three out of 5, 5 out of five. i remember when you were five out of five. now, you are three out of five. how much are you seeing a lack of conviction in some of the positioning across fx as you sort out these uncertainties that are lying ahead? jordan: i think there is a lot of uncertainty. what we tend to have in this market is prices moving making narratives, narrative drive research pieces. fundamentals ultimately drive what prices will be. right now, the fundamentals are that we could perhaps see softer inflation, weaker dollar. we are getting to year end, a lot of accounts which sat with long dollar, including ourselves, why wouldn't you be longer dollar? that trade is still being unwound in certain sectors, that means perhaps everything we are

seeing now is position reduction and no one really changing their optimism for next year. we think there is going to be recession risks. usually when there is a recession, the dollar does well. we start to see signs of early rebounds in a european pmi's, china's credit impulse is going up. they are fundamental reasons why you could see risk on be sustained, you need hope to prevail and we have risk coming up. we've got opec next week, e.u. sanctions on oil on monday. that is 21% of the eu's oil imports from russia, being sanction from monday onwards. i'm not sure where they will get that 21% of their total oil imports from and the next month, but there are risks to this outlook. jonathan: what are you more confident about, euro on dollar call or this weekend? jordan: eu and team. the usa game was boring. it was like watching paint dry. what a fantastic wales game. hopefully, they bring it back to

the pitch. tom: should jack e playing more? jonathan: you are asking a birmingham boy that? the answer is yes. jordan: i am happy with him playing in the game at least in the second half if he gets a showing. this is fantastic for birmingham. tom: he said the british is on the edge of gareth. he gets on the field and things happen. jonathan: he is a classic player. tom: jordan rochester and the world cup? jonathan: we break it down city to city where these players come from, you are on another level. thank you. tom: i am doing it because of our love. jonathan: it is so deep. ♪

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>> you can't afford to ignore the fed speak. >> the fed is still on this path to raise rates. they have made it clear they are not done. >> we believe the high can stay

at those levels for a period of time. >> they are going to keep rates tight. that is going to keep pressure on earnings. >> we are probably in for a period of below trend returns to the equity markets. >> this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. tom: it is december 1, time to the christmas tree. at the keene house. ferro out front of this, as well. we saw a bull market no one saw coming. what happened yesterday? jonathan: big gains yesterday, up more than 5% in november. chairman powell shifted the emphasis, moving away from this idea that is asymmetric risk and risk of doing too little is the greater risk than doing too much. yesterday, all of a sudden, he death of 12 over tighten. tom: 8:00 opening on global wall street. good morning, we've got my son coming up.

-- we've got mike wilson coming up. the bond markets out front of the stock market, did that happen in november? lisa: kinda. yields down, that means stocks up. what does that break down? there is this feeling in markets that may be we are seeing inflation rollover after they had previously expected. you talked about neil, his base case was it isn't rolling over as quickly and people are going to get blindsided by the reality early next year. tom: one more question, with the bears capitulating -- bank of america -- the bulls have capitulated. maybe morgan, says the lows are -- i do wonder if mike wilson can get comfortable. tom: we will talk about that any moment. it is fluid, folks. we were making jokes about a christmas tree, but what a year

it has been. we've got 30 days. i've got green on the screen. dow jones industrial average 12 months trailing is barely positive. no one saw that coming. jonathan: it has had a big move. tom: down 11%. jonathan: s&p has had a future rally -- massive rally on the lows. yields lower i a basis point on the 10 year, 3.59 on the tenure. more dollar weakness we saw in november. dollar index weaker this morning. tom: how do you get out of those trades successfully, it is called a stop loss. he has been the big winner of the last 18, michael wilson, chief u.s. equity strategist at morgan stanley was out on with acute, week to week talk about a bear market. in june, up, down in june, down again. jonathan: we've got to ask

mike's crystal ball. it was the tactical rally, the bullish call you made about a month or so ago. we have seen it play out. we are all wondering whether you think there will be much more upside from here. >> we talked about this the last time i was on. the tactical rally, the move to 4000 was pretty much in the cards. we said we do not know if we will get another level to this. if it is going to happen, we need rates to come in further. that is what is happening now. it will probably be led by nasdaq and the stocks that are most heavily shorted as rates come down in long-duration plays. that is what we saw yesterday. we have more confidence this rally will continue into december. it is not going to be easy. i want to make it clear, it is still a bear market. these things are tricky. we have to try and trade these. when you get 15 to 20% moves against these, you do not want

to miss it. sometimes you get it right, sometimes you do not. we got it right this time. we think powell's commentary is in-line with what we have been saying, they will probably pause in january and the market is getting in front of that. this is a classic fed pause, stockmarket rally. jonathan: you think we get beaten around the head with poor were earnings at 22023. i will read you a quote, previous lows and equity markets likely to be retested as there may be significant decline corporate warnings. we decline you think this market decline could happen now and the first quarter of 2023. i think you gave me that quote, but it was jp morgan's mike --. you like to be a contrarian. i have to say that of you, of only 23 earnings risk is a consensus. how are you thinking about it as we go into a new year? mike: look, you can say for other people to, we all try to

stand out. whether it is something we like to say different, you are right. our call has become consensus. that is why we flipped in october. we felt like that all, the fire and ice called fed tightening into a slow down, became consensus. now, we see this idea that we are going to make a lower low in the first quarter. i do not think that is consensus yet. what is not consensus is this tactical rally. we have watched our competitors, we watch a lot of clients try to get a sense of where the sentiment is. i would say this is one of the most hated bear market rallies i can recall, even more than this summer. i think the rates set up now is this rally will go further and will probably drag people into thinking the bear market is over. that will be part of the signal for us to press on the other tom: site again. tom:pushing against that, and this goes to alexander. maybe jobs day tomorrow, what inflation does with the economy does.

what do you are analysts at morgan stanley say about the mystery of revenue growth at the top line next year? and if you get better revenue growth because of high nominal gdp, how it is that bring down upon margins? mike: this has been an ongoing debate. we have had a client since april, we work out in front of earnings this appointing at some point into 2023. it does contrast with this idea that we live in a -- world. nominal gdp will probably stay positive next year, even if we have a recession. 0% real growth will feel like a recession. to your point, if inflation is still positive, you could have positive revenue growth. we have not baked into our numbers. our base case of 190 five dollars next year assuming we have positive revenue growth of 3% due to nominal gdp staying in positive territory, it all comes down to margins. this is part of the story we

think is underappreciated by investors. inflation is what drove profits higher. as inflation comes down next year, as we are forecasting, we have inflation going towards 2% to 3% by the end of next year. that is bad for equities. good for bonds, bad for equities. his -- it is going to crush margins. this is a story underappreciated. negative operators in business models as companies struggle for supply six to eight months ago and over hired, that has to be run through the income statement now. that is going to be what makes the low in the first and second quarter. when people are catching up on the earnings story, i do not think they are bearish enough. lisa: you said there could be a trough of 3000 to 2200 and the first quarter of next year as we get the reality check from earnings. have the recent data with respect to the cpi, the other metrics people are seeing a softening in and we are hearing a change in tone from the

rhetoric of jay powell yesterday, have you changed that eu? does that seem further away in terms of the bear case scenario? mike: the bear case scenario assumes we have a modest recession next year. in that scenario, all that happens in revenue growth goes flat. maybe slightly negative. ll make the negative leverage worse. that is $180 in earnings next year. with $180 in earnings next year, 3000 is not a stretch. we do not have a crystal ball. i wish i did. i am most uncertain about the timing of this. we thought it could have happened in the fourth quarter of this year, these earnings revisions. that is one of the reasons we flipped positive in october. could it get pushed down further in the middle of next year, yes. do you think we could -- do we think we can avoid it, no. at a minimum, we think we will take up 3500 at the first half of next year.

there case is alive, that is 3000. jonathan: what would you buy and hold right now going into year-end? it can be away from the index. you tell me. mike: i think it is bonds. if you think about bear markets punctuated by either economic or earnings recession, we think we will get at least one of those. the order of operations is clear. you want to do cash first, by treasuries, long-duration, then by credit and equities last. we are overweight cash. front in cash or you own act and treasuries. for a trade, we think it is nasdaq or long-duration stocks. will like that move in rates lower. that is more speculative, that is for the trading community. for the investment community and asset owners, it is bonds. jonathan: phenomenal. let's catch up for year end. mike wilson of morgan stanley. tom: i thought 9:00 a.m.

tomorrow. jonathan: sonali basak did a great piece in bloomberg markets this month's edition. check that out. check out online. phenomenal. a great call from him. mike would be the first to say, this is a team effort. a massive team effort at morgan stanley. tom: i give stephen roach the credit in the world for this. they argue like no other firm. it is part of the culture. you have an opinion, you state it and you are allowed to publish a different angle. that is the heritage of morgan stanley economics, it goes over to their sales side debate from decades ago. the great work mike wilson has done creates a fervor that you do not have any a lot of other firms. jonathan: equity futures this morning lifted. up .2%. equity futures up. yields down a little bit. now, now. down a basis point on a 10 year. 3.5980.

from new york, chair powell behind us, in front us. payrolls data coming out tomorrow morning. ♪ this is bloomberg. ♪ lisa: missing billions from the collapse of ftx are still a mystery. the disgraced founder of the crypto exchange sam bankman-fried he was behind the fraud. he told the new york times deal book summit he made a lot of mistakes. it was his first major public appearance since ftx imploded on november 11 heard three years since the world's first document in coronavirus patient in china and the country is finally pivoting away from efforts to quash the pandemic. china and's -- china's covid czar has said the right has entered a new phase and government is making concessions allowing low risk patients to isolate at home, instead of in corn tane camps.

jerome powell signaling the federal bank will back off its pace of hiking interest rates. he made the case for lowering inflation without sending the economy into a deep recession. that policymakers met for two days starting december 13 in south africa, the president says he is considering resigning over an advisory panel to report that he may have violated the constitution. bloomberg has learned the president is in meetings with allies looking for advice. the controversy has to do with a robbery at the presidents game farm. one of the largest grocery chains in the u.s. has raised its earnings forecast for the year. kroger posted third quarter sales and profit that beat estimates. the company has put share buybacks on hold while it dries to complete a proposed $24.6 billion takeover of albertsons. global news 24 hours a day, on air and on "bloomberg quicktake." powered by more than 2,700 journalists and analysts in more than 120 countries.

i am lisa mateo. this is bloomberg. ♪

>> used to be the head of the fed, chairman of the fed. what goes on in their? [laughter] you guys wear robes and sacrifice a goat? right before the goat bursts into flames and tells you the new interest rate hike you are supposed to say --why so secretive? >> once upon a time, i can no longer remember why. the monetary policy would be most effective if it was most secretive. the truth is that the fed never even announced to the public what decision they could make about monetary policy. jonathan: the treasure secretary

janet yellen. i understand she has been practicing for signature. to sign the currency, she does not want to make the mistake that -- dear member jack's signature on the desk do you remember that's signature on the currency? lisa: 15 zeros. jonathan: -- tom: mr. colbert. jonathan: how many goats did they sacrifice before voting for 50 instead of 75? tom: maybe those are the questions we should ask. [laughter] right now, turn to a big fan desk over at the new york times. greg looked at the seismic tilt of republican success, that success came in new york. maybe it was on long island, maybe above new york city. the foundation of republican success for so much of new york

starts and ends on staten island. nicole breeds staten island, she is one of those rare things. a greek cuban immigrant from a long time ago, her parents in the time of fidel castro. she joins us this morning. thank you for joining bloomberg surveillance. you guys won on crime, a select other issues. a fury of scared suburban voters. what now? what is the next after your victory? >> we need to continue to push for the policies we talked about during the election. i am not going to stop calling on governor kathy hochul to fix the disastrous bail law that has led to crime skyrocketing in new york. i'm not going to stop speaking out against her plan and driving into manhattan whether it is employees, visitors or tourists. i think that would have a detrimental impact to new york. i'm going to push for what i

said i was going to do, stop the inflationary spending to focus on securing our border. that is what my constituents want great i think that is what the mass majority of americans want. i heard them loud and clear at the supermarkets, meeting with them at the senior center or speaking with veterans. i'm going to push for that now that we have the house of representatives on the federal level. tom: do you since this is a polarized constituency of the greater state of new york and of the nation? four, can you find common ground forward with a, i am going to call disaffected democrats? rep. malliotakis: i am a member of the problem solvers congress -- caucus in congress, we try to find common ground on solutions. i think one of the top things we should be able to find common ground within the moderates is energy policy. i am for clean energy. i am for diversification, just not to the exclusion of

traditional energy sources that we so depend on for manufacturing, for transportation of goods, for food. that has to be what we need to do, unleash america's potential in all aspects. i think that is one of the ways we can address some of the issues we are facing with inflationary costs, particularly with energy. and bring down costs or consumers and on manufacturers and small businesses. i think that is one area. on or security, this should be common sense. people should one to see our nation's borders secure in a post 9/11 world. the fact you have over 100 terrorists who have crossed and tens of thousands of criminals, they should want to address that. and the fentanyl coming lisa: over, killing americans. lisa:a lot of people are questioning the leadership of the republican party, especially as we start gearing up for 24 alexion. you have expressed support for donald trump. do you continue to support him as the leader of the republican party?

rep. malliotakis: i do not know if he is the leader, but he is a leader of the party. i think what is nice about the republican party, we have a bench or wants. it is not just president donald trump, we have governor ron desantis. we have other leaders like nikki haley and mike pompeo. we have leaders coming into the house of representatives that are reflective of america. we have just elected more african-americans, more asian americans, more hispanic americans and or women. we have a bench right now. we are going to find the best candidate to run in 2024. i think it is important we are united in this process. it is playing out now. we finished the midterms. we must be united going forward as a conference in the house so we can push president biden on the border, on public safety issues, on energy policy and inflation. that is what we are focused on. lisa: it is important for the republicans to be united, or for

there to be a united, more centrist look and how to make policy? a lot of people took the take away from the latest election as a move to the center. rep. malliotakis: sure. look, we have to find common ground of where the republicans in our big tent party can come together to support the candidate we will be able to have the best chance of winning in 2024. make no mistake about it, compare president trump's economic policies and border security policies and energy policies with that of president biden. throw in oren policy with the success of abraham accords and usmca. i would say we were much better off as a nation in terms of policy under president trump. i think we want someone who is going to continue to push for those same policies, whether it be him or someone else. i think the bottom line is, we need balance in washington. we were able to achieve that this cycle by getting republicans peered one already will has been disastrous for the

country and my city and state. this -- we are looking forward to finding common ground. i am willing to work with the democrats when we can come up with sound policy that is going to address issues i mentioned. border security, energy independence, stop the inflationary spending and let's protect our men and women who serve our nation, both at the border or in our cities. jonathan: thanks for your time today in washington. waiting in on some big issues. i want to keep on foreign policy. heard from the french president emmanuel macron speaking to abc, saying the inflation protection act lacks a level playing field. that the so-called ira has not been properly coordinated with euro best europe. this is something we have been talking about, this is growing tension between the europeans and this administration over this issue. tom: you see that in brexit, a pass for britannica would expand on as well.

they are running into trade realities and you see how that goes forward. one thing i would say into next year, we have to redefine post-pandemic what the new globalization is and what the new transatlantic is. jonathan: cannot avoid this story. macron says musk moderation on twitter is a "big issue for the europeans." i guess that content moderation may become a bigger issue for the europeans. we have this conversation about whether twitter be taken down in europe, this will go on and on. tom: can he talk about what it costs to fly to paris? jonathan: you want to have that conversation with macron? from new york, this is bloomberg. ♪

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jonathan: seconds away from economic data in america. payrolls coming tomorrow morning. equity futures at the moment on the s&p 500 through most of this morning positive or negative by a couple tenths of 1%. s&p up .2%. economic data dropping now. let's get to mike mckee. michael: we've got numbers in initial jobless claims. first ones to fall, 225,000

staying in the same range. it is interesting. i will discuss this a little more with you on your show later. goldman sachs suggesting these are artificially high. seasonal adjustment practices adopted by the labor department after the pandemic to account for the wide dispersion at that time are pushing up the jobless claims numbers more than they might otherwise be. this is a big drop. 220 5000, 200 40,000. whether they are distorted or not, still good news. the income and spending numbers, i'm going to go straight to the inflation part. the pce, this is what the fed follows. up .3%, less than the .4% then had been anticipated by economists surveyed by bloomberg. puts the pce deflator for the year at 6%, down from 6.3%. the prior month. the core, which is what everyone is focused on, .2% lower than

the .3% and had been anticipated. the core for the year is now 5%, down from 5.2%. the numbers the fed follows on inflation are better than anticipated. in comes up .7%. i will look in a second to see where the money is coming from. spending up .8%. both of those are significantly up from the month before. at the same time as the economy is strong, inflation coming down a little bit. those income numbers may be affected by the inflation numbers. real personal spending inflation-adjusted up .5%, it was .3% last month. americans are still spending money. inflation is coming down a little bit. jonathan: upside surprises is where you want them, downside surprises where you might want them. equity market, a cake on the s&p up by .4% on the s&p 500.

a little leg lower on treasury yields, particularly the 10 year and beyond the 10 year down three basis points to 3.58. tom: i've got to ask you about this. after what we heard from powell yesterday, this is not what he wants. particularly if we get more accommodative off the bloomberg financial conditions index. michael: i guess you could make the other argument that it is what the fed wants, because they do not want a recession. if we are going to see some strength in spending, that is going to be ok in the long run. the question is, doesit push up inflation? if inflation is coming down at the same time these things are going up, we will have to dig into these numbers. that is going to matter. for jay powell. tom: very quickly, liz and sounders making a big deal about the challenging numbers. we look at the challengers and say, maybe it is not there. challenges like adp like i don't

care, or do you see the challenge in job statistics a concern. michael: challengers, you do not care. they compile press releases. job cut announcements. those are overseas and the u.s.. jonathan: challenger exists on the adp, let's go, tom. tom: there are the numbers, they are grim. that is what we do, we talk to dolts like mike mckee. jonathan: more numbers in about an hour in 20 minutes. mike mckee will break that down. tom: the quality of what we do is celebrate lisa abramowicz, jon ferro and i on bloomberg surveillance. what we do is every day is our guests, it starts and ends with research capabilities at -- with edson reinhardt. -- vincent reinhart. important writings in the pandemic about the state of our economy. just a general question about a two hour conversation, do you buy the idea we are heading for

a recession? in your years with greenspan, were you able to predict a recession? vincent: nobody really predicts a recession. what you can say is there is an elevated chance of it, just like you can say you have an elevated chance of infection if you go into bad places without a mask. there is extremely elevated chance of recession. if you had a place -- had to place your money, i would bet within 12 months, the economy is in a downturn. tom: i look at the parlor game of the fed, which is different than when you were holding court at the eccles building. the basic idea is that you are gaming out a rate movement higher, and we are "going to figure out the pivot and guess when that occurs." have you ever seen anything like this? vincent: absolutely. this is old-style, monetary policy. right now, monetary policy is hard, but simple.

it is hard in the sense they have to put pain on the economy to get inflation down. it is simple because the strategy is, if you do not know what the right neutral funds rate is, put it at a level you are sure is restrictive and keep it there until you have demonstrable evidence that inflation is gone back to goal. if you are not sure how to calibrate policy, do not. put it at a plateau next year and just wait. that is what chair powell told us yesterday. lisa: is that what he told us yesterday, or did you hear perhaps more of a concession around moderating their stance in order to avoid a hard landing? vincent: i do not get how most of the headlines came out of that, remarks yesterday afternoon. he repeated his press conference characterization, we are raising

rates until we get them to a level, and then we are going to keep them there. he dismissed a lot of that with regard of -- i do not want to be on the others of mike's argument, but i think i have to be. yesterday, chair powell said inflation moves around, sometimes after a good number, bad numbers come out. i think they downplayed the pce price part of this. then what he was saying was, we've got to keep the pace of aggregate demand below that trend. he should be worried about the spending part about it. this was not a good morning for the fed. lisa: this is the key point. a lot of people are saying there is a downward shift in inflation coming at a pace surprising analysts, that this is good news that is going to allow the fed to move away so they can cut rates more than previously expected. do you think people are getting ahead of themselves, those inputs are not quite -- declining quickly enough and could we accelerate a stop the

rollover effects in areas like used cars? vincent: evens always look bigger in the rearview mirror than they really are. i think there is a tendency to overweight this incoming information. chair powell said that yesterday. he said inflation, volatile sometimes after good readings. you get bad readings. he was basically telling us not to be so stressed about it. do i believe inflation is off its peak? absolutely. goods price inflation has come off the boil because supply chains have been improving. market economies work by bringing resources into sectors that are overheated. but, it is still over to service inflation. that is what you've got to worry about, that is what powell is worried about. the durable part of inflation is still above the fed's goal. tom: vince reinhart, olivia lynn chart affirmed a higher level of

inflation we could be comfortable with. went from 4% on the crisis of 2008 to 2009 down to 3% level. is the new 2%. without going into the details of the plan chart essay in the ft, is he on to something here which we are going to rationalize away from the 2% level? vincent: yes and no. vs part is, back in the mid-1990's when central banks settled on a 2% inflation goal, it is not like they had a great conversation about the cost and benefits of that long-term goal. we know more about problems with the zero lower bound. we should have a serious discussion of what the right goal is. in the united states, it has got to include congress because the congress specifies price stability. that is my note, i wouldn't want to have a conversation with congress about the federal reserve's goals most times,

certainly not in the next two years. moreover, it is one thing to redefine the goal when you are succeeding. it is another thing to redefine the goal when you are failing. tom: we call that the bank of england. [laughter] vincent: you just cannot do it. jonathan: well said. vince reinhart, at dreyfus mellon. he is right, if you cannot down to two and start talking about three, he made the argument it would be difficult to get to three. tom: vince is dry and academic. jonathan: you appreciate that characterization. tom: with his heritage of research on serious stuff. jonathan: so dry. tom: when he was in research at the fed, they were on fire. they were writing wonderful reports. we've got the idea of, we have worked with blanche hard over the years, adam posen and peterson institute onto vince reinhart.

they were showing writing in the ft, you've got him in the 9:00. jonathan: next hour. tom: that is what we are doing. jonathan: going to catch up with chris harvey of wells fargo around the opening bell. mike wilson was on 40 go. if you missed that, this call he had over a month or so ago about this tactical rally you could get, this bear market rally into year-end continues this morning up .5% on the s&p 500. the consensus is we get smacked around the head by the reality of bad earnings in early 2023. at the moment on this equity market, it keeps climbing. tom: it is extraordinary all in all. i look at the heritage of what we've got in the equity market climbing. this reminds me of tunisia beat france yesterday. when they beat north macedonia, that was something. jonathan: do you have to do that on our anniversary? where's the love? taking digs at the italian football team. tom: no.

i just think north macedonia was more competitive. jonathan: do you think we could go another decade? tom: i think so. jonathan: i do not think of bramwell could --abramowitz could have that. lisa: no. jonathan: futures positive .5%. happy anniversary. tom: go away. jonathan: i will. to my next show. this is bloomberg. lisa: the federal reserve is set to slow the pace of raising interest rates this month. in a speech wednesday, fed chair jerome powell signaled the unprecedented run of 475 basis point hikes could come to an end at the summers policy makers meeting. he made a case for achieving lower inflation without sending the country into a deep recession. it is up to the senate to avert a crippling u.s. freight rail strike. the house passed legislation that would impose a labor

agreement hammered out by rail companies, unions in the biden administration. four of 12 unions rejected the deal, the scent could vote on the house legislation this week. the u.k. will be affected by strikes every day this month in the run-up to christmas. workers from the countries rail network, buses, postal services health sector and schools are among those staging walkouts. union leaders want to cause a maximum disruption in their bid for higher wages. they are concerned about inflation and the government spending cuts. one of the european union's top officials has warned elon musk to keep russian propaganda off twitter. ec vice president told bloomberg failing to take on fake or misleading content online could take abusive twitter. it is the latest warning shot over the possible side effects of mass resignations and layoffs at twitter. global news 24 hours a day, on air and on "bloomberg quicktake." powered by more than 2,700 journalists and analysts in more than 120 countries.

i am lisa mateo. this is bloomberg. ♪

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>> markets are pricing rate cuts , a aggressive rate cut cycle. in this persistent inflation and supply constraint, we believe they will hike and stay at those levels for a standard period of time. tom: an incredibly important conversation yesterday in bloomberg surveillance, whaley chief investment strategist at black rock. her comments, lisa, on china were stunning. it was like a pin drop in the room. it is never like that. lisa: especially at a moment with collaboration and people getting bullish in china next year at the prospect of it reopening. taking a different view there. tom: thank you for those

comments, really important. somebody there when -- took over china was robert doll, chief investment officer at cross bird. he has been doing this or a couple of years. we are thrilled he joins us in the studio. you got a little bit in your note were the first time in 50 years, we have been this gloomy. we have had this much gloom out there. that is why i make the job -- joke back in 1947. part of our history is when inflation moves, it move suddenly to disinflation. is that where we are now? >> i do not think we are there yet, unless you are going to call acceptable or disinflation three or 4%. i think we can get there with what we have done, but nowhere close to 2%. tom: not to 2%, but we are there. that means we've got nominal gdp, which helps corporate revenues. bob: yes. tom: who are the survivors of a better corporate revenue, given an inflation mill you you and i are the only two who have ever lived through?

bob: [laughter] given we want pricing power, you've got to go to places where people can raise prices. we haven't been in that environment in a long, long time. tom: you're going to love this. i used to go up and down the elevator in boston with a giant philip caray, who bob and i worshiped -- mr. caray, it is mr. caray. mr. caray would talk about the bright lights of inflation, that is where we are now. lisa: let's talk history, and let's talk cap a century ago, the last time we saw three consecutive quarters of stocks and bonds losing value together. what does history say, is it instructive in terms of what that means going forward? bob: the reason that happened was the rapid adjustment. we had essentially zero inflation and zero interest rates, not to exaggerate, by much. all of a sudden the fed is, it is not transitory, we got to get moving. we had the most rapid increase in fed funds, you guy said it a

few minutes ago. the lag is impossible to predict about the impact of that. we are going to have a slowing economy. that will help bring the inflation rate down. the fed has got to pray the labor market quiets down. lisa: one gast -- guest after another has talked about flooding into treasuries, flooding into duration. mike wilson says, what would you be buying, the equity strategist bonds. how much do you lean into that purchase step away and say people are overestimating how much inflation could drop? bob: i think owning some bonds is fine. it is zero at the beginning of the year, you didn't want any. when treasuries approach for on the tenure, you've got to be nibbling away at bonds. the old 60/40 instead that we all preached a year ago, not true any more. bonds have a place in the portfolio, especially if you believe inflation is coming down to 3% or 4%, forget the 2%. tom: my theme for next year --

bob and i remember, when every wiseguy in manhattan said we've got to rule of the chemical industry. we went mental for 18 months and turned it into three companies. i'm talking about the great zombie rule of next year, we demarcate between profit-making and cash flow, making companies and everybody else. do you agree with that, there is going to be a demarcation? bob: so a great. what that means more broadly, fundamentals matter again. when interest rates are zero, they are artificially low and you cannot really say the good guy wins from a stock price standpoint. how did sears last so long? they were given artificially low interest rates, that was tough for places like target. this environment, the targets will do well, the sears'will struggle. tom: explain to people under duress, corporations adjust. how does the process happen?

bob: it is slow, because they have been so used two inflation. tom: they had free lunch for 12 years. bob: they got used to operating in that environment. this is a different world now. can you raise your price, can you attract customers and keep them as your price rises? look at what is happening in the steel's stock. tom: steel. bob: poking their head up. this is telling us we are in an environment where inflation is not going back to zero. tom: u.s. steel is still x. lisa: people are talking about how the real economy is getting its revenge. that has been the theme for 2022, rearing its head. that is why you are seeing inflation underpinning some of these commodity sectors. how much does that mean the other areas that got it up and i am thinking been -- big tech, cannot come back in the same way and will not drive indexes to the same extent? bob: i think you are onto it.

we have seen it this past year. going forward, we will have the same issues. if you are -- your company is operating on unit growth come unit growth has got to be strong to get you through. tech is mostly unit growth. that will be a lacking sector again. tom: you cross mark out of houston and nationwide. are they loaded up in their eyeballs in cash? what are they doing with their money? bob: too many people are frozen. they are making investments. you have to hold their hand and draw them to the warmest of the water. tom: and saying -- sing ♪ let it go. ♪ bob: they are doing more to get educated and buy more alternatives. we have a product getting more attention. tom: you have a equity market neutral product. bob: yes. tom: thank you so much. bob: all the best. tom: some optimism now off the

economic data that gets us to jobs tomorrow. mckee lectured me, forget about year-over-year, go month over month. those statistics in the deflator are pretty good. lisa: i do not buy it. i am going to be honest. this is why, you saw an upside revision to some of the data. tom: fair. lisa: it came to the same levels people were previously expecting. right now, you are seeing confirmation bias in markets uniformly. people are taking this rally and running with it. i keep wondering whether anyone is actually pulling back from the pessimism that starts next year and are trying to get ahead of it. this is a timing issue, not that people think the clouds have all abated. tom: to be fair to you, i am hearing that as people rationalize this bull market, including what we hear from mr. wilson of morgan stanley, everybody is doing timing. everybody is trying to figure out, we are going to go up this, down over like this, i do not hear anybody like bob doll

saying, by amalgamated copper and hold it. lisa: a lot of people are talking about the commodity sector because it has been underinvested and because of some of these secular trends. they are going to boost them. china reopening, colder winter, recession. tom: on this anniversary of bloomberg surveillance and all that, lisa abramowicz, jon ferro and tom keene, we get strong with bob doll which nones with the dow jones industrial average is. lisa: [laughter] that is not there. jon isn't here to discuss that. tom: rumor has it, will be here tomorrow. lisa: [laughter] ♪

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monthly gains on the s&p 500 for the first time this year. we try to add some weight to the rally. come down to the open starts now. -- countdown to the open starts now. ♪ jonathan: live from new york, a not-so-subtle shift from the fed chair. >> we heard from powell -- >>