>> we continue to believe there is another issue that has to drop. the economy is resilient still. >> the market has priced and will be the cause of economic pain in the year ahead. >> it feels like there is hope the u.s. can avoid a recession

if the fed can micromanage this process. >> the fed is going to keep at it until the job is done. >> how long does the fed stay at those restrictive levels? >> this is "bloomberg surveillance." tom: good morning, everyone. on radio come on television, worldwide, and far more at this moment for global wall street. we welcome you, with sonali basak in a conversation with goldman sachs chief executive. we are going to get right to this. we note that the gentleman from hamilton college applied to goldman sachs a few years ago and was rejected. was swept -- that rejection was swept aside, and the investment anchor replacing lloyd blankfein leads goldman sachs forward into 2023. sonali basak. tom, thank you so much for your

time. david, think you for joining us. you are entering your fifth year as ceo. you are in such a different place than you were six months ago. your stock is holding up better than your rivals. the reality is everyone is preparing for what could be a mild or deeper recession. as the ceo of goldman sachs, how do you prepare your bank for that? david: thank you for having me. i appreciate you being at our financial services conference. this is our 33rd year. it is a great time to reflect on our industry and look at our industry going forward. we are in a very uncertain time. we are changing monetary conditions quickly, and that is certainly having an impact. if you are running a big financial services firm i think you have to assume that we have some bumpy times ahead, and you have to be more cautious with your financial resources, with your size and the footprint of

your organization. have to expect dictated -- activity levels are going to be constrained. we have businesses that are very correlated to economic growth in the world, and we are predicting economic growth will slow. our economists predict 1.9% growth around the world in 2023, which is slowing growth. as central banks tighten monetary conditions to try to control inflation, and they do that and orchestrate some sort of a soft landing? that is uncertain. there is a possibility, but we could see a recession in 2023 as well. sonali: how do you prepare your staff around all of this? people are worried about jobs. they are thinking about pay as well. it is bonus season coming up. we have reported that you are even thinking about having lower bonuses at businesses that will have rising revenue this year. how are you thinking about this? take us inside your

decision-making process and what you are telling your staff right now. david: we operated business where every single year we have to pay our most important asset, which is our people. it should not be surprising to people that 2021 was an exceptional year. it was a record year for the firm. it was our highest ever revenue year for the firm. 2022 is a different year, so naturally compensation will be lower. just like every year we pay for performance, and we will pay people based on the performance of the firm, and especially for our senior people we consider the overall performance of the firm as we go through our process. sonali: this year you reintroduced the calling of headcount. the bonus discussion is everywhere on wall street. how do you balance that with this talent war we saw, this booming market for people and what is happening this year going into next year?

how do you balance retention, as well as those more difficult conversations? david: we take a long-term view with everything we do. we have to adjust to the environment. at the same point you take a long-term view and try to think about your business over time. we are extremely focused on serving our clients and core businesses. our clients have been active, so it is important for us to strike the right balance and protect our franchise, and make sure that our people are paid for performance. we are in an environment that is a tougher environment broadly. we take a long-term view, our people take a long-term view, i made some comments in the financial services form, whereas i said i am surprised by talent. you are seeing that labor is still relatively tight. sonali: the talent war is not over? david: the talent war -- i think

there are some headwinds, given changing economic conditions. competition for talent is still strong. how that evolves in 2023 is unknown. if we have a slower economic environment it will have an effect you can see across all industries that people are thinking about their headcount size and making cuts or adjustments just because they feel more margin pressure coming. financial services is not immune to that. we have to watch the environment and make the right long-term decisions for our organizations. sonali: whether it is headcount or otherwise, do you think goldman is going to have to pursue another round of cost cuts? if that were to be the case where could you see them? david: we always look at the environment and size the firm to the environment. if the environment gets tougher we will make decisions appropriately. they can come from slowing down hiring, which we have already done considerably in the second half of the year. that also might come from pruning in certain areas.

sonali: switching gears, broader financial services picture and talent war, last year fintech, crypto firms booming. i'm curious whether the collapse of ftx is making you think in any different fashion about crypto and the ability to potentially invest in some firms. david: i've been very clear on my view around this space. the underlying technology of blockchain is extremely interesting. there are enormous opportunities for blockchain to play a role in evolving the infrastructure of our financial system. think there is an enormous amount of friction in the way money moves. think there are a variety of ways this technology could be used to allow more inclusive participation in financial activities. that has nothing to do with bitcoin or a cryptocurrency. i don't really offer a few on cryptocurrencies. i think they are highly speculative.

i'm interested in the underlying technology and how the technology can help serve our clients, our customers, and take friction out of the financial system, and also make it more accessible. sonali: goldman was early in the market here when it came to futures trading, the industry at large. do you think there is a chance to lean in or are there too many regulatory risks? david: when you say we are early, we have done a very narrow selection of things around this broad area. from a regulatory perspective we are limited in terms of our participation. i don't see that changing in the immediate future. we want to be available to give our clients insight into how we think about some of these things. our activities are limited in the space. sonali: it is about to be a big moment, year five that you have been running this firm for. is there anything you didn't do in the first five years that will be at the top of your list to execute as you enter this new

phase? david: you were there, you covered it as a reporter, a desire to grow the firm, diversify its revenue base and make it more durable. in particular we focused on the opportunities for us in the wealth management. our recent reorganization, we have businesses together, we have a jewel of a wealth management business, and we see opportunity to continue to grow that. we are on a journey to diversify the firm. the thing we are most proud of over the last few years is at the time of that investor day it was a lot of skepticism about our markets franchise, particularly the returns we could generate, our clients' positions in that business. that is a leading franchise. it is performing well. we have taken market share, and that is our biggest business.

it has made the firm much stronger. we have really focused -- i'm sorry to interrupt you -- we have really focused on the client experience and making sure the way we serve our clients is differentiated. we are getting great feedback from clients, and that is strengthening our business. we are on this journey to strengthen the business. we have a lot of work to do, and we continue to focus on growing and strengthening the firm. sonali: you are leaning into so much of the core goldman sachs. couple of months ago you announced this general realignment in consumer strategy. do you expect more big changes to be announced ahead as you have your next big investor day coming up? do you think you will have a target here? do you have any sense of when it can become profitable? david: we made a very purposeful decision in this reorganization to organize the business into three units. our asset/wealth management

business, our banking and markets business -- i was highlighting our banking franchise, a leading franchise -- and we took our platform business. we narrowed our focus, purposefully, on our consumer business, and try to align it with things that play to our strength, there it is the technology development of platforms, our relationship to businesses, and also our alignment with our wealth business. with that narrowed focus we are going to be very attentive to making sure we scale those platforms and they are as quickly as possible. sonali: your five, you look around corporate america and you see so many companies, the ceos have had to come back on multiple occasions. you seen it at disney, you have seen at carlisle. how are you thinking about succession planning now? sonali: i am -- david: i am in year five.

i have a great team. that is what i'm focused on. there will be a time when it will be someone else's turn to steer this great institution that has been around for 154 years. at that time we will make the appropriate decisions. for now this leadership team is really focused on continuing to grow and strengthen goldman sachs. we feel like we have made progress, but we feel there is a lot we can do and we are excited to talk about that in february. sonali: thank you so much for taking time with us here on a big day for goldman. thank you so much. david: it is nice to be with you. jonathan: brilliant, as always. looking forward to coverage on bloombergtv and bloomberg radio. always a tough question to ask it the end, what is the plan not to be the ceo? i think he appropriately dodged that. tom: "time has moved on, with the pandemic and four years on from like fine.

everybody mentions though:'s wonderful book. sally touched on it, and to me it is the goldman sachs focus away from their excellence that we all know and some of the challenges in wealth management, that competition. jonathan: you are thinking about markets. just say it. tom: come on, marcus. is he going to be a marcus 2023? only bill cohan knows what marcus means. jonathan: organically it is tough. you know that. tom: from the ground up. doing it in salt lake city. full disclosure, i have a family member linked into that. that is the big experiment here. goldman sachs and consumer banking. jonathan: a couple of comments about 2023. the competition for talent is still very strong. that is how he characterized things here right now. lisa: which raises questions about what tricking the bonus

pool is going to do. some people get everything and others get nothing, or whether there is attrition. it still is good for a lot of workers and companies, so how do you plan for that second half of 2023? jonathan: what happened to the days of first-year analysts doing powerpoint presentations that say you don't pay us enough? [laughter] lisa: all the time. jonathan: i only want to do six-hour work days. lisa: i remember that. jonathan: what happened? [laughter] ♪

>> it feels like there is a lot of hope still that the u.s. can avoid a recession, but the fed can micromanage this process. people are forgetting that monetary policy is a sledgehammer, not a scalpel. there is too much optimism embedded in markets. jonathan: ron temple was great. we caught up in the last couple of days.

from new york city this morning, good morning. jonathan ferro. just a quick snapshot of the market for you. we are down about .1% on the s&p. i think what you heard from ron temple there is a complaint you have made repeatedly. we are getting too cute about the runway for 2023. tom: never seen it. jonathan: the second half is going to be better. the fed is going to go too far. then all of a sudden you get a rally during the second half. tom: i'm literally speechless about it, and my number one question is, why are we here? [laughter] because theoretical frameworks are gone. lisa is asking herself the question right now. [laughter] tom: all of our theory. powell alluded to this. he was spouting out theory, like the beverage curve, the taylor rule -- none of that works in

the supply-side disruptions we are seeing. witness our conversation with a gentleman from the port of los angeles. this is unique, so we get this cuteness. jonathan: he's talking about the flow of business, and he was not concerned. decent going into 2023. tom: i don't know what else to say. that seems to be the minority pushback. jonathan: i agree. i think we got a snapshot of that from mr. solomon over at goldman. tom: lisa, have you got a, on this? you are quiet today. jonathan: why am i here? [laughter] lisa: you guys covered it well. let's find out from lisa shalett. how do you be in the crystal ball room? just how specific it gets. does a great granular about the fed's thought process? tom: she has a plaque on her door at morgan stanley that says "lose the cute." lisa, i've never seen an outlook

season like this. my head is spinning over the cuteness, as jonathan puts it. the nature of where we are going to be in the third week of may, and i don't buy it. give us a broader vision so i can sleep at night. lisa: look, i think our bigger, broader vision is that right now we are in this period of time where we are still resolving what had been a profound mix shift between goods and services. you are seeing this disconnect where there is pent-up demand for services, we are going through the holidays, for a lot of folks they are still playing out their, i haven't been with friends and family for 2.5 years, so we are still seeing that. for us what the risk is, the consumer, while the labor market

is strong, we are in the camp that says there are structural changes that are going to keep it robust. the reality is that consumers are starting to run out of the -- out of dough. consumer's back to where we were in 2007. that is a 15-year low. we have credit card revolving balances rebuilding. we are through the 2019 i. as we get into 2023 we think everything rests with the consumer, and we really think this could go either way. what analysts seem to be forgetting -- look, i'm going to throw ceos in there. ceo confidence is deteriorating, but i think a lot of corporate guidance is delusional, and terms of the fact that they over the past two years benefited

from both a pull-forward in volume, 7%, 8% pricing power. you were talking about nominal top lines that were growing in the double digits. if the fed succeeds, if the fed pauses, which is what all of the enthusiasm is about, that pricing power at best is going to have, and at worst is going to go away completely. at the same time that your volumes are slowing. it is that kind of negative operating leverage that i just do not think is in the numbers. tom and jon and lisa, i know you guys know me, i started my career covering companies like caterpillar reindeer. i know it negative operating leverage looks like. mike wilson, my colleague, started his career as a specialist on semi conductors. he knows what negative operating leverage looks like, and we don't think there is enough

attention to that in the current consensus numbers. jonathan: when you say that ceos are delusional, are you talking about the whole of corporate america, or a specific slice of that? which one is it? lisa: it is more than a specific slice, but it is a slice that unfortunately at the moment dominates the market cap and weight of how we are comprising consensus estimates. so, you know, i just think it is going to be a rude awakening for a lot of folks, and some of these mega-cap names, and some of the discretionary leverage names in the e-commerce and social media ecosystems, which increasingly are purely cyclical. and i think we need to remember that. lisa: how much more of a downside to you see in the tech world, considering we have already seen losses there? lisa: our best guess -- and i know you guys have spoken to

mike regularly -- he most recently took down his 2023 estimates to 195. i think the forward consensus is still just below 230 year. we are looking for a number 15% below that. jonathan: is the austerity hitting some of these companies changing your mind about this? when andy jassy and amazon are considering cuts? does that change your view? lisa: very modestly, because i think that certainly does that help marginally and the decimal points on margin? sure, but i'm not sure it is going to make up for what we think is going to be material loss of momentum from loss of volume and pricing. jonathan: interesting. absolutely brilliant.

tom, throughout 2022, guiding us through a messy market. tom: it is not a small matter. we make light of asset allocation and we have cliches like 60/40, but what is there is the marginal reallocation. not maybe every quarter, but every year. it matters in terms of the long-term return. jonathan: heavy headwinds to come. mornings for morgan stanley. tom: the gloom is out there. two quarters in a row. jonathan: doesn't make a difference, brammo? this all comes down to the timing. morgan stanley would be the first to admit that. they are working -- looking for a slowdown. does this slowdown get pushed out or brought forward? lisa: pushed out. that is my hunch. a stone the incoming information if the market comes in hotter than expected, if the slowdown is not as much of a slowdown, that is actually really negative

for risk assets. we will have to hold rates there for longer, which will be a much jerky or stop to this economic -- jonathan: what are we talking here, fed funds closer to 6%? for those who believe this economy is far more robust than people make out, are they saying it is the upside risk on fed funds? lisa: 5.5 percent for example for the entirety of next year, which is not a dent hare what does that do to some of these assets that already are still going and have momentum? this really is the pushback. then you don't get some sort of lovely 2023 pullback where everything is roses again. tom: brammo has not talked enough today. she is framing out what a lot of people feel. jonathan: lisa is sounding constructive. are you in shock? tom: no. i think there is this -- there is this huge uncertainty out there. there is not a belief.

jonathan: about 30 minutes until the open on bloomberg tv. is this economy slowing down or picking up? we are going to have that conversation. tom: erik nelson of wells fargo was really strong the last time he was on. jonathan: eric nelson thanks yields are too low going into 2023. we will get his view on that in just a moment. equity futures just about positive. this is bloomberg. ♪

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tom: red and green on the screen here. in the bond space yields are lower than the headline, which we are going to sit on for a moment. further curve inversion. an important statistic. we are out to a -83 basis points. the trend has been further inversion. lisa: why isn't it more inverted? completely honestly, given the projections people are talking about and the upside surprises we have gotten in recent data, the fact one person after the other says the labor market is strong, are we not seeing that two year yield higher? tom: the dynamic of the 10 year yield as well. spreads matter right now. i spent time as an amateur on

the tuesday and spread. -- twos-tens spread. lisa: people are not worried about defaults. you are seeing the extra yield for riskier credit come in at some of the lowest levels in months. it is doing better than you would expect at a time people are thinking you are heading into a downturn, because we might not be. tom: i got in at 5:5 to this morning, eight minutes before the show, and this is the first thing i looked at. lisa gets in at 3:00 a.m. the thing i look that was the continued conversations about liquidity next year. this is percolating. it is on the edge of the zeitgeist right now. lisa: it has a lot of meanings within this market. people are not talking about credit markets in a typical way. they are talking about liquidity and private credit. is this a repricing? tom: the bank of international

settlements out of geneva with a really important fx swap paper. lisa: that was good. tom: nerdy, but it harkens to some of the risks in 2023. right now we are going to turn within this jumble of an economy to someone who prints your paycheck. neil richardson -- nela richardson -- is your signature on all of our paychecks? nela: i'm working on that. it is a little stamp. [laughter] nela: when that be nice if you got that on your paycheck? tom: i love, love, love the top of your research note, where you go to the three ratios the media never talks about, which is the productivity of america. the bottom line is, it is a mystery, and we don't know much about it. and your bold assumption is

there is a hollowness to the productivity of america. discuss. nela: that's right. we have talked about the strong labor market. it is a strong labor market that is hollow, because despite a lot of innovation that has happened, especially over the last three years, the simple fact is americans are working more and producing less. and that is not a sustainable growth dynamic. i do countries grow? two reasons. more workers getting more productive, and of story. tom: within the adp study, are we working less, or less efficiently in a big cap, the middle market, which is important, or the small business market? should we blame someone for this? nela: i have to say, i don't have a treatise on the small business market, but i do talk to a lot of small businesses. they are working really hard, but they are crippled in some ways, in terms of efficiency, or

worker turnover. especially when you talk about consumer-facing mom-and-pop shops getting workers in the door and getting them to stay. it is really difficult. you're constantly retraining people, which is possibly the reason why we keep hearing about a white collar recession. lisa: this going to be a downturn in offices, in their headquarters, in the suites we just heard from pepsico. on the ground they can't get enough people, but in the offices have too many. is that the nature of what we are looking at? nela: i think this labor market has really come in it. the reason it is complicated is firms have hired at different stages with different intensities. i actually don't think it is a foregone conclusion we will see a recession in any part of the labor market. i think we will see a transition. we talk cyclical, but there is a lot of structural going on.

structurally our business is positioned to capture an increasingly digitized global economy. some of the layoffs or even the lack of hiring might be a repositioning by businesses, especially large ones, to take into account structural dynamics that are going on post-pandemic. lisa: i don't understand how we get to a productive future if we don't get the layoffs that come with that? nela: there is this thought that productivity has to mean fewer workers. maybe more robots. maybe more ai. maybe more checkboxes -- chat boxes. if you look at what drives productivity, it is making people more efficient. i'm not saying ai doesn't have a strong place in american business. it also means skill development, apprenticeships, vocational training. all of that bread-and-butter stuff we don't always talk about that leads to a more productive workforce.

tom: i love what you are saying here. i have had a conversation with paul romar on this, his ability to judge his wheelhouse, which is technology applied across the atomic. we talked about capital deepening, which is something our viewers intuitively get. there is a technology deepening that cuts both ways. i strongly agree with your analysis of large cap. basically they are laying off jobs where they cannot use them, etc., and they're going to turn around and rehire in the technology-specific areas. is that going to diffuse down to other businesses? nela: non-automatically. it is the fallacy of technology. actually businesses have to change operations to really leverage technology, and they have to skill up in order to make them more efficient. it is not an automatic yes.

that is why we have seen technology percolate in the larger companies, not trickling down to that midmarket small business. which, as we know, are the drivers of the labor market. they create two thirds of the new jobs. we definitely want to tech in that stream, because that is what leads to a more productive workforce overall. tom: this goes to the adp heritage. i'm going to try to avoid the economic number jumbo. move that camera back to cleveland. i don't look good today. move that camera back to cleveland. nela: that is a lie. you look great, tom. you can take monotony -- it is like a rubber plantation in singapore. they control the price. are we going to have a mono psonistic america that is going to leave the rest of america flat on its back because they cannot utilize that technology?

nela: there is one other voting number, that is the consumer. if you want to do business in this country you have to move to where the consumer has moved. the consumer has embraced digital economy. we want everything cheaper and faster. that is not going away did not go to sleep during the pandemic. it only accelerated. if the consumer is the person you are after, then businesses will adapt. tom: lisa, davos, one season years ago, not one, but two major ceos of banks said to me two days apart, we have completely underestimated the take in of technology by older bank customers. they both said that separately. the consumer wanted digital. lisa: how do you invest at a time where money is tight? with the outlook is coming down? that is one of the big issues. what gives if you have the wage price style -- spiral?

but you also have a lack of productivity and something that needs to be remedied on the others? nela: main street needs wage increases. inflation is too high. i will contend that this current inflation battle is not one off. that we are going to see persistent inflation well into the future, because the supply chain dynamics have changed. the lack of immigration in advanced economies has slowed. labor shortages, if you look at what chair powell's speech last week when he said there are 3.5 missing -- 3.5 million missing workers and a lot of them are retirees, that dynamic has changed. in order to get the efficiency we need that actually produces profits and increased standards of living, we need productivity. right now wages are going up, and it is because firms are competing with each other for headcount. lisa: you think that is likely

to continue because it needs to? based on all of that to you think other economists, that the market at large is overly complacent? that we are going to see a real deceleration by the end of 2024? nela: i think most people are overly concerned with recession. if you talk to american business, if you talk to small and large businesses, they are not talking about whether we will see two quarter drops. they are making sure they have enough people to serve them. what gets us to 2% inflation is advanced productivity. it is whether at the corporate level or the policy level in which we are actually endowing workers with skills needed for the next 10 years of the economy, of the global economy and not the past 10 years. tom: we will have to say -- have to see.

she does not sign our adp paychex. i wanted to make that clear. nela: carlos's point is taken. i'm sorry if i offended you. [laughter] tom: lisa, that is the kind of conversation that i hope we invented at surveillance. productivity is complex by definition. it is a triple ratio with six moving parts. lisa: how do we get that investment from the public sector time -- how do we spend money on a corporate since if money cannot or a money for free anymore? tom: that is the big change. lisa: and a time when margins have not compressed enough and are we willing to see that compression? that is the real question, because without that investment we don't get productivity up and inflation back down, especially

given that your deck area a lot of companies c. tom: the pandemic influence that we are still living in this part of the investment problem, but the huge one -- this goes to my zombie 2023 -- is all of a sudden and is not a dire straits economy, it is not money for nothing. this is a profound change, folks, that we will cover into next year as well. right now red and green on the screen. that vix up. bloomberg surveillance. ♪ >> keeping up-to-date with the first word, i'm lisa mateo. voters will decide today with the u.s. senate will look like for the next two years. in a runoff election they will choose between senator raphael warnock or republican herschel walker. democrats already hold the majority, a victory for warnock would give them a 51st vote, which would make legislating slightly easier.

president biden likely to announce he is running for reelection after the christmas and new year's holidays. that is according to chief of staff ron klain. the president turned 80 last month and is already the oldest person ever to occupy the old -- the oval office. russia says a third airfield has come under attack by drones. stay-run news service reported that an oil tank caught fire after a drone attack at an airfield. two long-range bombers were damaged. ukraine has not confirmed a carried out any of those attacks. the attacks were the furthest penetration yet on russian soil since the invasion began. bloomberg has learned the u.s. and european union are considering new tariffs on chinese steel and aluminum. it would be par a bid to fight carbon emissions and global overcapacity. the u.s. and eu would use tariffs, usually deployed in trade disputes, to advance their climate agenda.

warner bros. discovery will sell hbo max through amazon prime. as an attempt to bring millions of subscribers to its flagship streaming service. warner bros. discovery ceo david zaslow is reversing a move by the previous leaders of hbo max. he is looking to boost revenue to pay down billions in debt. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

>> the market is anticipating right now we get significant rate cuts starting in the second half of next year. we think without severe economic weakness to justify that we are going to get the fed pausing, but not cutting. tom: rebecca patterson of bridgewater. thrilled she came out after the bombshell announcement.

and also i would say for global wall street, really, find us on youtube and in the digital space for that complete comment from miss patterson. she was really something yesterday. jon ferro appearing for a 9:00 episode of the open. red and green on the screen. we are looking at the curve version. -83 basis points is important. annmarie hordern is in washington, and she is looking at the challenges of a president traveling. but first we get the weather report from joe mathieu. rain is ebbing away. joe, to be serious, the downpour , is whether a factor for the future of these two senate candidates? joe: it is a huge factor. if this race is going to come down to turn out, the weather is a big story today. look at this pc behind me.

you normally would see peachtree street and a gorgeous view from the 26th floor of this building we are in, but of course you can see what we are dealing with. both of these candidates have turnout challenges. herschel walker might be more obvious, as we have seen early voting trends in democratic. we know that warnock eat him in the last connection. raphael warnock, who i watched last night at a local brewery, in his closing argument begged people, vote like it is an emergency. listen to the stories about early voting. even urged people to call their acts and -- their ex and urge them to vote. lisa: you have talked about early voting. how much has that driven the outcome before we get to the p soup of the day? joe: i spoke with a congressman from georgia.

republicans are not typically those to embrace early voting, but he said we need to change the way we do this. it is part of the strategy now and the only way to win an election against a democrat. tom: has there been a loss of worthies through georgia? i do recall the first tuesday of november there were a lot of people waltzing through georgia, helping. have they been helping this vote? joe: last weekend we did see a couple of folks -- a couple of senators. we have seen herschel walker surrounded by kennedy and graham. last night raphael warnock was on his own. we did see barack obama in town about a week ago. he has made two stops here. this is a very different approach on both sides of the campaign. walker did -- i should say warnock did half a dozen events over the weekend. he is holding rallies. he is showing up in public places. also walker has been pinned --

pinpointing some of the more rural areas. he showed up at a gun range and a tailgate party yesterday to make his closing arguments, doing no interviews. the press has been largely cut out from his campaign. lisa: the significance of this runoff election, what is it? joe: you can frame this in a couple of different ways. i think you are reaching to 50-50 here, if raphael warnock keeps his job democrats control the committees in the senate. that means judges, that means nominees, having control over what goes to the floor. if herschel walker wins, they already know that world. tom: thank you so much. the results of a democratic vote in jordan -- in georgia today. annmarie hordern joins us in washington. are you leaving for arizona today? annmarie: no, but jenny leonard will be there.

interesting moment for the president, right? he needs arizona if he is thinking of 2024. tom: i'm stunned by the different conversations we have had about this. manufacturing in america. how can anybody be against that? are the republicans and democrats against semi conductor manufacturing in whichever state it is? annmarie: not really. this has to stem from the chips act, which had a lot of republicans sign up for and wanted to see that pushed through. this is a win for arizona, for the jobs in manufacturing that is going to come, but also in the sense that when you look at how america was dealing with debt of the pandemic, still reeling from supply chain issues, the fact that so much of the semi conductors are coming out of taiwan. this is going to give the u.s. a little bit of leverage, but we should put a little bit into context.

the wafers, the semi conductors, the amount that will be coming out of these two plants. remember, one is about to be operational. the other one that they are going to break ground on is about 4% of the global supply. so it is still minuscule when you look at what taiwan is producing. from a national security perspective, from a buy and make in america perspective, this is a win for democrats and republicans. lisa: do we have the workers to fill these factories? annmarie: that is a great question. at the moment there is potentially a bipartisan deal on dreamers, because this is not just something -- you see that from kyrsten sinema. she is one of the democrats trying to work on getting this through, potentially before christmas or into next year. greg valieva is talking about the -- about it this morning. starting to see something economists have been talking about for a while, which is a

tight labor market. the fact that we need more workers. in potentially these dreamers and immigration reform, if it is done in a bipartisan way, could help some of that slack in the labor market. lisa: when you talk industrial policy, one thing stands out to me. so this documentary about chinese workers and how there is this ecosystem training people around some of this production. where is our ecosystem to bring people into this fold because this is a skilled labor? this is highly specified types of positions. annmarie: it is a great question. i think this is why the president not only when he talked about wanting to bring manufacturing back to the united states and he wants hard infrastructure in the united states, he also talks about the fact that he is supportive of the unions. that is where a lot of these skilled labor individuals come from. it is a great question, because the united states has a tight labor market on the services industry, as well as the

manufacturing industry. this is something they are going to struggle with in the next few years. tom: annmarie hordern. a busy day for washington. ginny leonard will be with the president. there are research notes to come across the terminal, and you stop. do that with matthew mission. he is a legend in ubs. he just published a note that i think is fascinating in the bond world. bonds beat loans next year. the coupon wins. lisa: how much is this that you have seen leverage loans face more credit risk because they are an adjustable rate? that means that companies have to pay more as yields rise, has benchmark rates rise, which creates this technical issue. have heard this from amy silverman. she is concerned about leveraged loans and how they could reprice. tom: for many of us this is

inside baseball, but we want to bring this to you. it is much more than quoting the 10-year gilts or the spread. are they part of the shadow economy out there that a select few are concerned about? lisa: they are less visible than bonds because they do not trade publicly. you say we don't want to do too inside baseball, so let's go abroad. how do we get there if you do not have companies that have to refinance in the near term and don't see the ramifications of higher rates because they have locked in financing costs? it might be through the loan product, but that is the real issue. could we sustain much higher rates than people currently think because of these lockton financings? tom: it is in the restructuring folks that we will see into next year, so much of it is not only the bond back and forth but also the cash and put where the equity kicker have to give away

as you readjust and reset almost. lisa: what happens if we don't get a recession? tom: i think that is a brilliant question, and was germane even nine months ago. boy has this been not a missed call, but just delayed. would you agree the vast majority of people we speak to, they are still looking for the recession? lisa: everyone thinks there is going to be a recession, and it is baked into the yield curve how do we get there if things are going so well? tom: it will be an eventful day. of course we get the incredible importance of next week as well. futures at -2%. this is bloomberg surveillance on radio, on television. ♪

jonathan: live from new york city this morning, good morning. the countdown to "the open" starts right now. >> everything you need to get set for the start of u.s. trading. this is bloomberg "the open," with jonathan ferro. jonathan: live from new york, we begin with economic warnings piling up. >> there is another issue that has to drop, and that is the economy. it is resilient still, with the exception of housing, we think the fed is going to have to push to get that wage inflation down, and they are not likely to ease next year. jonathan: here's another one.