>> the market is convinced the idea that the economy is slowing. >> economies are either slowing or entering into recession. >> as he can get into and 2023, peak inflation becomes your concern. >> this is bloomberg surveillance. jonathan: live from new york city this morning. this is bloomberg surveillance along tom keene.

it is a move of 3%. tom: this is a historic moment, folks. all of the economist looking at this done. nobody saw this coming, which is the best time for a central bank. jonathan: certified basis points -- 25 basis points. tom: we are not going to make this a economic lecture, it doesn't help anybody. what does it mean for you, yield curve control? the size, it is what we call sterilized. they're doing the action of raising the ban, but at the same time they are keeping the addiction going, they are buying bonds 25% more, purchase size would go up 25%.

it is basically sterilized expansion of yield curve. jonathan: do you think this is the first step towards normalizing or the step towards the boj making the bush asset sustainable? i think this market is trying to work out. jonathan: we are not going to get any charts done, folks. tom: global ramifications now the one that refuses to tighten, refuses to adapt. marginally, this is good news for chairman powell. jonathan: u.s. 10 year, 225. for today, japanese tenure, not up not even a single basis point. tom: with great respect, i

referred to the phd's, this is a fiction they are doing, it is a process and a lot of constraints on the way. there are bonds. imagine folks bonds in the united states where 80% of the tranche was owned by the government. you have been good about that. jonathan: you have days where the benchmark is not even traded once. there is no market some days at all. are they trying to address that at all today? tom: my biggest thing is they are hoping inflation comes down. 3.7 percent inflation, which would be a homerun right now. but in the zombie economy, thank you for mentioning the per capita analysis as well.

is japan the biggest zombie rollup of next year? they are going nowhere, so that they .7% inflation hurts -- so that 3.7% inflation hurts. jonathan: they have been added for 20 years plus. the question going into 23, it will be somebody else. what comes next, is the question we are all trying to answer. tom: the idea we have deflation disinflation, zombie percent. we are at a 2.7 percent level, nominal gdp minors whatever the inflation is getting a real gdp that does not work out. that is there risk. jonathan: 132, that is a 3.3% move this morning. let's switch to the rice action. another drama -- the price

action. we get a move of about eight basis points on the u.s. 10 year. i have to say, no one anticipated this happening this morning. when you have guessed futures were down and yields were up just eight basis points? tom: i have not looked at the dollar charge. the bloomberg financial index is pretty much a hunch. this is a u.s. index, i would have thought we have seen movement in the u.s. index off of the action in tokyo. jonathan: the global head at brown brothers harriman. win: first of all, i went to

sleep last night and did not think it would be anything to talk about. i am one of those economists that expected nothing. this is a shock. the bank of japan seems to like surprises. it is not just the boj come every central bank around the world is adding volatility. it is a tough sort of road to travel for the investors. online, it is clear that the bank of japan is going to heighten next year. we have second half of next year. a government comes in april who does not review second rate hike i think that moves the timetable as get something as q2. the global monetary rambles on, that is bad for risk and markets have been used to zero rates and abundant global equity.

jonathan: would you say this is a step towards global normalization? win: absolutely. this is a clear step. i would go back to my experience. once you start messing with -- the markets is blood and water. i would expect a 0.5 range. the bank of japan has led aging out of the bottle -- has led a genie out of a bottle. i think that is when we continue to see the real moves. the market will test this pay arrangement. tom: with great respect for your burglaries heritage, saving face is --. what i see here is a massive exercise culturally for the bank of japan as a domestic

institution to save face. how does a culture of this forward april and a new governor fit in? explain the political calculus of japan as a staggers april? win: we had hints that there is some policy review sooner than later. i think the markets really -- base. the governor has been dovish throughout this episode of higher inflation. it is strange in terms of saving face of being saying one thing, 100% certainty and all of a sudden surprise markets. the reality took precedence over certain appearances, they really couldn't keep this going much longer. we have the cpi report coming out friday to show headlines. i think it is getting harder to sustain this facade that they

are going to keep things as is. it is tough to break now. once the genie is out of the bottle, everything is off. tom: the monetary policy in. commodious is a dominant constraint russian mark is a fiscal gdp, what is he focused on? win: they're juggling so many targets with very few instruments. a central banks around the world have gotten involved way beyond their commitment. i think the main thing you pointed out, they own half of gdp's. 80% of certain tranches. was the interest rate starts going outcome of those borrowing

costs are going up. that is the one thing that kept this whole ball of wax going. if the 10 year yield goes up 1% or 2%, which is not a question. all of a sudden the debt burden jumps down. another russian, i think it is hard to explain. -- another question, i think that is hard to explain. it is held by the government. it is a strange construct that has developed over the last two decades. i think them trying to keep this going, i think they have been doing marketing then they should have. jonathan: the phrase the genie is out of the bottle, it is not the first time i heard. why aren't we up at 50 basis points on a japanese 10 year,

why do you think that is? win: interest -- it is too soon to say. give us a couple of hours. it takes some participants times two adjust things. it's clear you sell and abiding buy the yen. we have to talk about 125 possibly lower on dollar yen. a stronger yen is a sure thing. jonathan: thank you. is coming for eight rate hike next year -- he is coming for a rate hike next year. tom: as a cultural landscape here at the pacific rim, it goes to china and a covid and the horrific news we are getting on the covid across china.

i have not a single guest on bloomberg surveillance give it any credence whatsoever. it goes until the constraints were out and then you are done. what do they do at 90%? jonathan: i call it operation ostrich earlier this year. do you want to talk about the real breaking news? commercial break before the show started, tk turns to me and says he never watched gladiator. russell crowe. come on, we have got to fix this , haven't we? this is absolutely ridiculous. have you never watched rocky?

coming up, kelsey berro. this is bloomberg. >> keeping up-to-date with news from around the word -- world. it is now up to the justice department to decide whether to prosecute donald trump on his role on the attack of the capital. the house committee voted to refer the president for prosecution on criminal offenses including the insurrection. he called the january 6 committee a kangaroo court. a surprise move by the bank of japan. the governor shocked markets by doubling a cap by 10 year yields. that is at the -- that has set the yen higher than the dollar. sam bankman-fried's preparations to be actually guided to the u.s. appeared. to be back on track. the ftx co-founder told the

judge in the bahamas he will end his fight to avoid being sent to the u.s. to face nominal charges for the collapse of his crypto empire. the hearing was adjourned and vaguely freed return to jail. it now appears that he and his lawyer is on the same page. in the u.k., more labor problems for the national health service. nurses are on strike. it has a mandate from members to continue for six months unless their wages. s are raised. this is bloomberg.

jonathan: just insane. tom: just great. thank you so much for bringing visibility on this knowledge. what is a distinction here for celebration in argentina versus brazil? jonathan: one of these players place for you, look away now,

they are due to play again on monday. you said that these guys will bounce back from that long wig hangover --week hangover. tom: there is a plaque outside in new york. jonathan: fantastic seats in that country. tom: we thank all of you for putting up with our coverage. emory, you know we are gifted. timothy o'brien, the number one expert over many decades of

former president trump's finances. this op-ed piece in bloomberg opinion today is blistering about the need to move forward with a judicial process. what is the likelihood of that? >> we do not know yet. we have these referrals, four counts of criminal referrals to the department of justice and it is unto them where they take it next. this is just another straw of issues that the united states -- the former president of the u.s. is dealing with. we could have a committee today release his tax returns over the course of a number of years for at least release a key summary of the tax returns. this adds to the pressure of the former president if you look at some of the poles that are being done already when we are seeing in 2024 that he would lose if they were to instead pick a new leader like governor ron desantis. tom: to o'brien expertise,

does this go to justice general garland or jessica today one when the republicans take over the house and nothing gets done? annamarie: the republicans will take over the house and they want january 6 to focus more on the security implications, whether it was enough security at the capitol and want to shy away from any of the politics. we heard from former president vice president mike pence. he does think it will be more damaging for the justice department to actually after the former president on this. that has -- there has never been a formal president that would be in this position in terms of criminal cases. it goes to the justice department. when i'm trying to explain is that, yes, these criminal referrals yesterday hold no legal weight. they do hold a lot of political weight. it is just something that is

piling up that the former president is dealing with. tom: does mr. desantis of florida support his former president? annamarie: he does not want to ostracize those individuals. he is going to want their support, these individuals who are very much pro-trump, does not matter what the january 6 committee says, department of justice says, former president says, they will still back in. he is trying to walk this tight line. he has not said he is going to come out and run. all of this is good for him and his future. jonathan: kenny you walk us to have a formal presence campaign is going for it can you walk us through -- can you walk us through how the formal president's going? annamarie: it is not going well. his company was indicted or

found guilty of tax fraud. on the political side, if you want to be the leader of the party, you have to be able to merge the party together, show successes on the ground. the current president was able to do that on these midterm elections. the former president, who is running for another bed was not able to do that. his candidates were not able to succeed. there was no red wave. what you have is leader mccarthy struggling to get five very pro-trump individuals in his party to sign up to make and speaker of the house come january 3. all of this has been incredibly for quote. on top of that, trying to run a campaign when you are losing the support of your own party. jonathan: have you seen the polls last week in a hypothetical contest between mr. desantis and mr. trump? that is swinging further in

governor desantis favor. tom: everyone in any persuasion is started from how wrong everyone got in 2016. this guy has some a resiliency that is historic in american politics. jonathan: we still need to hear from governor desantis early next year. i believe we are also going to hear from the current president early next year on what he decides to. do you know if that has been confirmed or not or if there is official announcement we're waiting for in january? annamarie: it has not been officially confirmed. president biden will come out and say that he is going to run again. he has more support from his party now following the midterm elections. we have heard what his chief of staff ron desantis said, which is basically he is not going to preemptive the announcement, he does expect that the

announcement is that the president is going to run. in the press conference the reporter says i need to talk with my family. he had that family time in nantucket. it will be seeing his family around the christmas holidays. we all expect him to come out and make that announcement. those polls as well, if there's a rematch of trump versus biden, biting a showing that he will win that. jonathan: the news this morning commit is not the ability, not any of this -- the news this morning, is not boj, not any of this. tom this morning told me he has never watched rocky. he says he never seen top gun. i said, no way. annamarie: i do not know what you are doing on the weekends. are you not entertained?

tom: this weekend i got penciled in to see avita with madonna. jonathan: did that reference just go straight over your head? does that mean nothing to you? tom: usually you turn to me and say, tom, i'm not entertained. jonathan: you must have seen a trailer in the movies? tom: the family in the movie business reminds me daily that i have never seen some of his movies. annamarie: i have never seen star wars. jonathan: that is ridiculous too. you are about to tell me you have not seen star wars? tom: no, i am not.

in the 40's, everybody stood up and applauded. i have never seen that. jonathan: you go to the cinema? why did you stop? tom: the tv at home is gorgeous. i see great resolution. jonathan: not as many people has gone to see avatar as many people at disney would like. tom: what is this, the hollywood hour? jonathan: this is the holiday edition of bloomberg. creating a world where healthcare has no limits. this is ge vernova, helping generate and move the energy that our world needs. this is ge aerospace,

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jonathan: you can tell the euro is over based on the amount of engagement this is getting. i have never seen titanic and i figured it was a waste. you ever seen titanic? tom: the screenwriter came home, she was nine years old. she was like, dad, the boat sank. jonathan: leonardo dicaprio was asked about that, couldn't he have found a space? the question comes in on

twitter, has tom keene seen trading places? tom: there's a scene with germy iron at the end of the table, he absolutely nails it -- jeremy iron at the end of the table, he absolutely nails it. yeah. he nails the body language. jonathan: you have not seen trading places? tom: oh, no, i have. jonathan: i will get your review later appeared equity is unchanged on the s&p -- i will get your review later. equity is unchanged on the s&p. to close out the year, does it get any better? nothing about this market is unchanged.

check out the japanese 10-year. it is from .25 two .50. right now we are .50 on 18 year, that is a nash on the 10 year, that is a big shift --on the 10 year, that is a big shift. the u.s. equity market on track for the worst year since the financial crisis. we talked to -- yesterday, he is something bearish about the year ahead. >> now what we are not looking for, a balance sheet recession, systemic risk fallout you saw in the fall of 08. it does not mean that there still a lot of price risks.

jonathan: did you hear what he said yesterday, we can get to his lowest three k? decidedly in the camp with the low end giving up low earnings. that is the downside in early 23 he is looking for. tom: he is on top of it. everyone has an opinion. i think he is looking up a more short-term new than the official morgan stanley view. the glue that is out there is tangible and he has had to cut against it -- gloom that is out there is tangible and he has got to cut against it. i have a bunch of questions for liz sanders. are you glue like morgan stanley or are you more optimistic? liz: you have to qualify that with a time horizon. tom: three years? liz: if you give me a three year

time horizon, i am always going to be optimistic. investing by its nature is a act of optimism. if you're on a time horizon, you ought to be optimistic. it is funny, we wrote our 2023 outlook a few weeks ago, when you have bright outlooks you're forced to put in your calendar year terms, even though the market does not care about the calendar. it was more of a weaker first half, stronger second half. i do not know if it works out as clearly as that. i think the deterioration in earnings estimate for 2023 is somewhat underway. you were up around 250 or so in dollar terms, you add that to 230. i think we are moving to well below the estimate for 2022, which is to 18. i think very soon we are going to be a negative year for

earnings. i think there is more downside than upside. tom: i look at exponential moving averages, three of them, they come to a point for the first time since 2018, it really shows a market with some form of moving average study. how should individual investors, and particularly with retirement plans invest giving doldrums question mark liz: it depends on ? liz: it depends on where you are as a investor. on the equity side and fixed income side of things, you actually have an come. you guys talked to my colleague all the time. i think there's opportunity for those investors that are income oriented to not be up the risk spectrum might they were forced to be when you were in a environment. with the return of the risk-free rate, price recovery is back in

and fundamental is getting back to prices. i think the biggest leader has been cap to the average stock. i think activists operating on a more level playing field. for those equity oriented stock pickers out there, those would be the areas i would focus on, take more of a factor approach than a index. tom: this is really important folks. when you get into these doldrums , the -- comes down. is there a more diversified approach? liz: if you're taking a active stockpicking approach, you're actually moving away from some of the concentration and lack of diversification that comes when

you take a more passive approach. i also think that there's an opportunity here to allow for international representing diversifier again, speaking specifically of the equity side of things. not that one quarter that is not even over makes a trend, -- is pretty out handling u.s. performing averages. this is not a message to double your u.s. equities, but from lack of rebalancing, investors have not been at all exposed or maybe only to a minor degree. i think there may be an opportunity for diversification both within the equity asset class, but also externally with not some non-u.s. exposure as well. jonathan: i would love to talk about this a little bit more. when you have these conversations with clients at the moment, just how receptive are they to this, this message

that you're are trying to send? liz: they are receptive when you should give them the details of how cycles work. when you go through what i like to call a dual cycle, where you have a bull market and you go into their market and you pull out. if there's a corresponding overlapping recession, we are either in one, a rolling recession or we are going to get one, that is a dual cycle. when you come out of those, you have never not seen pretty meaningful leadership ships. the key once you have seen is u.s. versus non-us. they set up may be there for non-us. when you show how cycles work, there is a little more up and down nodding of the heads. initially, it is more of, the u.s. is the only place any to be. jonathan: it is going to take a wild. hile. tom: the bottom line here,

they have the courage to think of longer-term perspective and yet give the short-term visit to of it. i do not want to say that ms. sanders invented that, but she certainly carried that heritage forward. jonathan: it is a difficult message to sell. tom: it is. jonathan: it is delivered big time year after year from most years. tom: it is learned to be fascinating to see -- say the least. i want to talk about the storm that coming. is going to get in the way of the holiday. the surveillance team has translated this. chicago with wind chills -- really serious windstorm. tom: we are willing to call that

cold? dangerous colder. i do not think we are going to see much of it in new york. this is the real deal. i have trouble with people and -- winter. this time ministering to be a big deal. jonathan: europe's ability to refill the gas storage up again. tom: overnight there were some bombing across the russian border by ukraine and it seems to be heating up even with winter. it is supposed to stop in winter. with modern history, the history is up. drones do not care. jonathan: there is still a war in europe. crofton is that coming up? i do not hear it -- how often is that coming up? i do not hear that much.

people would point to that and say that is a shock. they did not anticipate it. tom: we featured this a couple of times. thank you so much for bringing this up. this is one quick way to show how powell is a different from . i really can't convey. on radio, all you need to know that powell prosecuted a yield from a -1% and popped up to positive percent. japan taken somewhat the same trend and down with a massive negative yield in japan. just showing you artificiality there. jonathan: we will talk more about this in little bit later. the firms, so called widow maker has been rewarded overnight.

those two firms what is interesting for me, they are sticking with the short. when we ask a question, do you think this is a step towards normalization or a re-step for the doj to stick with something more sustainable, i have hearing for more and more people. tom: back in 1982 -- goes back to 1973 and says the analysis is basically week as it has been in 50 years. jonathan: i would not have said equities would be unchanged. the geopolitical strategist and global foresight is going to join us next. lisa: after a 17 month investigation, a house committee has recommended donald trump be

prosecuted for his role in january 6 of salt on the capitol. it is now up to the justice department to decide whether to hold legal proceedings against the formal president four criminal offenses. another house committee is scheduled to meet to consider releasing six years of trust tax returns. negotiators has agreed to a one point trillion dollars spending bill. they will practice and into the house and senate to avoid a government shutdown on christmas eve. provides funding to government agencies through september. china is adding weight to the speculation it is hiding the true picture of how many people have died since the end of the covid zero policy. health officials confirmed how they define a death caused by covid. all the people who died of respiratory failure will be considered. harvey weinstein guilty of rape

and sexual assault. he was guilty and abused only one of four woman in the case and could get up to 34 years in prison. he is already serving a 23 year sentence for rape. president biden condemned what he called the violent venom of anti-semitism. according to one report, jewish incidents reach a all-time high. this is bloomberg.

jonathan: we got to shipped overnight. the bank of control shifting yield control. we are about 40 basis points on a japanese 10 year this morning. there's a difference. do you view this is a step towards normalization? he thinks they are going to hike early next year. do you think this is a reset to make -- a little sustainable. tom: everybody is pretty much on

same theoretical page, given coming out of a supply auditing called a pandemic. japan took a different road. they took the road not taken. it is original. every single expert says it is flawed. jonathan: this is a quote from them. the market will now pressure the doj. you're going to hear this phrase a few times again today. the genie is out of the bottle. tom: we will give you much more of that in the morning. this is a huge deal. the action of mr. -- in the 1:00 a.m. our last night. we have experts on this. one of them with a geopolitical spectrum.

tina, i want you to haul the bank of japan auditing back to what it means across the athleisure. s the action to finally towards the knowledge you mean or powell ? it has got to be a more restrictive. they have got to have support in their dynamics of restrictive to perhaps accommodate us down the road. tina: good morning, tom. i am not sure if i agree with that. i do not make interest rate calls, if we think from a global macro perspective, sitting here in europe it is not looking like normalization time or filling let normalization time. you are right, lagarde and jay powell have some cover coming from the bank of japan. i think the worries fill a lot more acute, particularly

speaking from the european perspective. that brings it back to, what you won't be surprised to hear me say, extends to its geopolitics is the main driver of the economy and the investments environment. tom: help us with the geopolitics christine lagarde has with the war that is basically unmentioned in economic talk. i do not fault her for that. overlay a continued war overnight, ukraine attacking over the russian border. tina: central banks do not explicitly incorporate geopolitical criteria into their analysis, which is why you're not hearing too much talk.

it is the most difficult variable with a constellation of factors they are looking at. we have been lucky so find that russia has not escalated -- so far that russia has not escalated and used unconventional weapons. knowledge of the potential risk -- no it is a potential risk. ukraine is being told everyday not to fire over the order. the next three months it will be the worst of the conflict from the humanitarian impact. it has been the morale in ukraine that has allow them to carry on fighting and again but has to be a modest advantage. i have been reading all of the analyst reports. everyone is saying how most of the bad news is already priced in. i do not feel that comfortable myself.

tom: the past week we thought we might get a update on the u.s. administration. the u.s. was set to send out the defense system. can you tell us what beholding that decision up? tina: we shouldn't doubt that the united states remains committed to supporting ukraine. it is likely cracks are nearing in the way to best support ukraine. that to me is when we come back to the idea, does ukraine start to take matters into its own hands and also the states of poland getting frustrated. i do not think it is correct to say that washington is easing off. we are at a critical juncture right now. we are starting to see my

arguments about the just way to do that and the types of weapons that are needed, especially with iran supporting russia with drones. jonathan: are they appearing in more concerning places? europe has been on the same page throughout the last nine months. have you seen bigger cracks on how to approach this? tina: not yet. when i would emphasize is in public opinion. there was high expectations from outside of the group that -- outside of europe, the public paying higher heating and electricity bills will translate into demand to readers support from ukraine. what is happening, people are unhappy with their leaders -- this is especially true in the u.k., who is dependent on

russian gas. the blame on the cost-of-living crisis is falling squarely on national leaders rather than the war in ukraine. public support is solid. there will be a time of fatigue. that is what ukrainian leaders are concerned about. fighting may be more sporadic. the population is going to fill the consequences in a brutal way. tom: to finish on the yield curve control on the japanese experience, maybe -- affected this experience because of massive doubt of the nominal gdp in japan. the question of the nominal gdp of europe, does christine

lagarde, governor bailey commander they have the nominal gdp to reflect -- affect a monetary policy? tina: it does not feel that way to me. it does not. from where we are in europe, we know we are at the most risk of recession, we know we are experiencing cost-of-living crisis, central banks remain the most important actor much more than national leaders. your question about whether they have the space. oh i think the markets are still engaging -- i think the markets are still engaging when it comes to a pivot or change. to me, they are going to focus on that on the next couple of months. jonathan: wonderful to catch up.

let's stay on the japan story. let's talk on macro. they arranged this on the government bond markets. they say other foreign bonds should deteriorate further. that is going to be a interesting element, may be taking the floor away from treasuries. we will see how that plays out in the next 12 months. tom: there is the core dynamic of tokyo and what is going on there and the knockout effects. when do we start hearing about 110 again? jonathan: jp morgan up next. tom: their loophole is

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>> the market is convinced the idea that the economy is slowing. >> most other economies are slowing are entering into recession. >> peaked inflation becomes their number one concern. >> this is a bloomberg surveillance with tom keene and jonathan ferro. jonathan: we needed something to talk about and you delivered.

live from new york city this morning. good morning. this is a bloomberg surveillance. takei, what is the move, dollar-yen? tom: the house is publishing this morning, folks. we are just starting to see -- we are thanking citigroup from being upfront on that. it is real simple. clearly the trend is that we are now in playback to some form of y strongen. we are in the 1973 value of a week yen. jonathan: on a session in japan we close to 40 basis points on a japanese 10 year. they believe this is a step towards normalization are

resetting policy on a more sustainable path? overwhelmingly the response has been the form and not the latter. tom: to me it was a surprise. that is the first order of any central bank. also what i would stay here, maybe there is a bit of a hope as we see other central banks that inflation is topped out. in japan let's call at 3.7%. maybe there's that hope that they can get out front with a little tweak of inflation coming down. that may be the hope we see in the bank of japan. jonathan: this was the last banker worldwide? it was the story for the most in the last 10 years. then you have got a new call.

how far does treasuries go from here, how much high do yield ds go? tom: everyone is dealing with some form of transparent argument and dynamic. a bank of england -- at the last fed conference, neither of us are experts with what was said. still not sure what was said. who is important to folks looking up to this nancy phd dynamics, the fiction -- the fancy phd dynamics, a buying in bonds. some of those charges, they own 50 -- tranches, they owned. jonathan: they're going to keep buying.

i am not sure if that changes overnight. tom: this is important. if you do the math, it is a 20% left. the word we use is sterilized. here is our action, but, they will continue to buy the bonds up 25%. jonathan: dramatic move. no turn in this market. tom: the dow jones investment average unchanged. jonathan: the tenure up by six basis points. -- 10 year up by six basis points. tom: japan we cannot do the math. the math does not exist. jonathan: we have a fantastic guest with us this morning.

cassie, can i go to the question of the morning. is it a step towards local normalization or resetting the policy stance or something more sustainable? kelsey: we did feel like the bank of japan's policy was unsustainable. it was time for a move by them. we think it was important that they did it now. they could have waited until january, but they did not. what we see is, a policy rate or a 10 year yield around 50 basis points is consistent with the 10-year gilts that we have right now -- yields we have right now. we do not think it is a huge story for the treasury market. where we are expecting to see a lot of flows is in europe. we do expect our european bonds to sell off on this. jonathan: this is the japanese demand that you think is going to wait in? is that a problem for the italian bond market? kelsey: in general, we have seen

yields across europe. you have the fed try to be as hawkish as it possibly could last week. they were not able to tighten financial conditions. finally the ecb and the deal to come to the rescue and get financial conditions to tighten. the fed is not going at it alone. i think that is a positive for bond investors next year. global inflation is going to come down. we are seeing these yield rises as a opportunity to buy bonds and to lay into long-duration position. tom: you have a great fortune of sitting across a guy who i think . saw the financial world it was amazing what you deal with. jonathan: that was a compliment. tom: the bottom line a, everybody watching and listening is seeing -13% bloomberg

terminal return. it is now -6% annualized. 6% down. how long does it take for me to get back to even if i am running an adult bond portfolio. is it a two-year exercise or dare i say a five-year exercise? kelsey: i think the question is very important. we talk a lot about what is going to happen in the next one week, two week, three months. when you look at a 12 month horizon and what you can get from a bond portfolio over the next 12 months, look at the global aggregate. the yield is 5% on a u.s. dollar hedge basis. if you have a modest 50 to 75 basis points rallying yields over the course of the next year, you're getting high single digit returns on the portfolio. that is why across the board you are hearing people say, not just

a bonds are bad, fixed income is fashionable again. jonathan: fixed income is fashionable. what do you make of that? i am hearing the equity guys talk about fixed income a lot. tom: i'm going with that. you see culturally when you are walking down the street in new york, that is like 18 months to get my for probably about 20. ready to do that across a continuum? kelsey: we are sticking with high-quality. tom: did you see the tv show --? it would be a great one hour fixed income that would be a great show and good. kelsey: i am on board. we are focusing on high-quality. when we look across the opportunity with risk rates

significantly higher, you do not have to extend into those sectors to get the yield that you want. we are thinking about agency mortgages, investment grade credit, securitize credit that is higher up in a capital structure. jonathan: i have not asked this question in 17 years. tom: what does issuance do? all of the cfos look at you low yields. they love it. how do they reset it? will jp morgan see issuance the last 12 months? kelsey: they will have to continue to issue. they have turned out their balance and made themselves -- put themselves in a good position on high cash balances. they extended out the debt and put themselves in a position where going into -- we have never seen corporate fundamentals to be even better. . jonathan: can we finish that?

what are your box on that now? kelsey: we are expecting that spreads are going to continue to widen. if you look at 400 basis point range, what we are thinking here, if we do get a soft landing, these spreads are reasonable. our expectation is that, with the most aggressive central bank tightening you have seen since the 1980's, it is going to bite. when the recession comes, spreads are going to widen further. jonathan: this was great. come more often. this was fantastic. have you ever watched titanic? you have never watched gladiator? trading places? rocky? kelsey: you have to do a viewing

party get together. jonathan: top gun? kelsey: yes. tom: both of us go home. you are watching rocky, we are reading. jonathan: i guarantee that -- has watched both movies. i think team coverage in tokyo in the evening would be great. jonathan: we want to do surveillance from japan? tom: i have done it many times, coverage from tokyo. i have some really emotional things around hiroshima. if you go in the evening and do the broadcast in the evening, a big view of the square. you cannot shut the imperial guardians -- you cannot show the imperial gardens.

i like to go to the four seasons downtown, the chef was from boston so you get new england claim child or you actually die for. -- clam chowder you actually die for. i think a road trip to provide team coverage. jonathan: kelsey, this is great. thank you. where is lisa? feature is unchanged on the s&p. 36417 from new york city. this is bloomberg. lisa: with the first word. it is now up to the justice department to decide whether to prosecute donald trump for his role of the attack on the capital. the house committee voted to refer the formal president for prosecution for criminal

offenses, including insurrection. in a radio interview, he called the committee a kangaroo court. a surprise move by the bank of japan, the governor shocked markets by doubling a cap bond on 10 year yields. that set the yen higher against the dollar. sam bankman-fried's preparations to be accident to the u.s. appeared to be back on track. the co-founder told the judge to avoid being sent to the u.s. to face criminal charges. his a local lawyer says he was not aware of the plan. the hearing was adjourned and bankman-fried returned to jail. it now appears that he and his lawyer on the same page. ukraine has reached a deal with elon musk to receive thousands of starling to counter russian attacks, more than -- will be

sent to ukraine in the coming months. in the u.k., more labor problems from the health service. nurses are on strike after their first walk out last week. it has a mandate for members to continue action for six months unless wages are raised. ambulance workers are set to start on wednesday. global news three for hours a day -- 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.

>> the committee has evidence that ex-president trump planned to declare victory and unlawfully called for the vote count to stop. he told numerous allies about his intent in the weeks before the election. the committee found that mr. trump raised hundreds of millions of dollars with false representations made to his online donors. jonathan: that was representative of california. we will pick up on that story. here is the price action for you. equity futures and just about unchanged on the s&p. yields in japan are higher as the bank of japan shifts its

yield curve control on .550 basis points right now. a stronger euro, weaker dollar. 132 59. i wanted to pick up on apple. as many as you know, this stock has had a difficult month of december down by 10%. this morning down to tenths of 1%. jp morgan cutting as price target and lowering two 190, cutting christmas iphone expectations once more. is it revenue lost or delayed when it comes to the iphone? tom: there are all sorts of

opinions. i have seven new iphones at the house. i am biased on this. everybody wants the same phone and the other ones they can care less about. i believe it is international. this is basically where it came from. getting the stuff made and getting out the door. everybody wants the same phone this christmas. jonathan: if you can't get the fungus quarter, you're going to buy at the following korten nash if you can't get the phone -- if you can't get the phone this quarter, you're going to buy it the following quarter? do you think we have a supply problem or a demand problem? tom: i am saying the apple gloom crew has been wrong. at some point they are going to be right.

as of this the time? i am not willing to go there. they have to be effective on both sides of the macro economics. jonathan: 37 basis. still overwhelmingly bullish. tom: they have done better than other big tech companies, particularly amazon is always a compare and contrast. there is. i got the new phone, the camera is a act of god. jonathan: the cameron? tom: all i know is you hit the resolution button, i did a shot of a squirrel. that was 48 megapixels. jonathan: you have watched that

movie? tom: yeah, many times. tom: annmarie joins us from washington. we have more on the bank of japan. i want to go were john. he is leaving early for england because of strikes. here we are in america with nurses on strike, they are in strike in england. tell me about the presidents approach to labor, nurses, strikes? annamarie: we have been on display over the course of the past few months. the president wanted to make sure he hammered out this deal. he wanted to be the most prolabor president in history. he really makes that point across when he brings individuals from the labor unions through press conferences. he was able to strike a deal on the railroads, not all of the union signed up. the white house and congress forced them to accept this deal.

that meant that these individuals could not strike. the heart of it was access to health care. the president has been working for all americans at large. as opposed to the u.k., where i did live at one point, having strikes for the metro, it is not exactly uncommon. it would be incredibly uncommon in the united states. tom: the united kingdom nurses strike appeared to do you think the labor challenge will challenge the president? annamarie: we could see it with the dockworkers in los angeles. i know john has spoken to the secretary a number of times who says they will come to an agreement. there is a shift in the sense that employees like they have more power against their employers. back at potentially mean you do

see things -- that could mean you do see things like strikes. we have seen that over the past few months when it comes to the railroads, starbucks, potentially we could maybe see more of this. a good question. jonathan: how much leverage do you think labor has in the labor markets? are we chipping away at that? i know on wall street is a very narrow sound. i would say the leverage has gone quickly over the past 12 months. tom: i do not have a strong opinion on this. i fill a very strong that the united kingdom is a different labor environment than the united states. this comes back to monetary policy can the risk. we anticipate with inflation coming in that wages come in as well, most people i know in most industries are screaming for help. annamarie: they want higher wages.

we do have 7% inflation. you are basically taking a pay cut. what you are hearing in congress. we just had more than 5000 pages for their spending bill released how the republicans and democrats are going to say that they have won the spending showdown. for the democrats, it is things like grants, childcare 30%. they did not get those extended tax credits that they think would help working families. they cannot afford to have a job and make sure that kids are getting childcare. jonathan: thank you very much. on a less serious issue. tom: junior banker? jonathan: does that for like 10

years ago? imagine that same presentation being made in wall street right now? tom: there are a lot of things we talk about off-camera and not on radio or tv. i think we can say with hindsight, you and i were sitting here looking at the spac resolution. going, really? paul sweeney who has real-world experience by this was stunned. we can say on air this is a bunch of baloney. we can say, well the nash that went away. jonathan: the one thing we went to is never having that program were a celebrity came in endorsing products. i have huge problems with that. tom: i have a whole entourage that polices me on the cash

fund. i am sorry, it is paying out this year. jonathan: you know what is not paying out this year? 60/40. it is set up based on where bonds are repriced to. fixed income guys would say the 40's are looking good. tom: i just think a lot of them are muddling along. it will be interesting to see what people do. jonathan: on the equity side, you hear it again and again. futures are unchanged in the s&p. from new york, this is bloomberg. ♪

>> china had a four-day losing streak. unchanged after even a big shift from the doj and the bank of japan shifting your -- you'll curve control -- yield curve control. yield on the 10 year right now looks like this, up by six basis points to 3.6491. a japanese tenure shafting up as follows, yield time by 15 basis points to 6.4%.

great coverage by the team at bloomberg and fed tested catch up with two individuals short this market. here's a quote from -- the market will pressure the doj and we are adding to our short position and building our position in yen. " although it is a small shift in the van, the genie is out of the bottle." do you believe this is a step towards normalization or do you believe this is about decentering policy on a more sustainable path? i think people came to this looking at a shift in the boj and they think there is more to come. >> what are the constraints that they have? >> they want to control the shift -- >> the market will let them.

--will not let them. our team has been working on this since 1:00 a.m. and we are thrilled from global wall street to bring dominique custom --c ostom. he is not speaking for the management of mazzulla bank. that is an appropriate. -- inappropriate. -- our tunes of the monetary -- monetary -- monetary policy of japan. it is simple as this, given the zombie nature of the japanese economy for 20 years, the dearth of nominal gdp, the bouts of disinflation and outright deflation, how can -- constraint

is bank of japan forward and how many degrees of freedom have they lost in the last decade? >> they are constrained in terms of the idea that they are going to normalize policy in any way that we have seen elsewhere but i think the idea of they are targeting the 10 year yield -- the market is pricing for interest rates will next year and this is is letting the genie out of the bottom -- bottle and i think it is something we would have expected but with the timing, it is unexpected. the boj could have done this when the yen was other -- when the yen was other -- under pressure. the idea is that they brought this forward and they are doing it before corona and i guess

there are reasons why they are bringing it forward related to the fact that perhaps, they have seen an opportunity to do it now and better to do it before the fed is reverting course on their rates. i think that is the logic behind some of the decision. >> if there is a vat of disinflation, even the united kingdom a whisper of better inflation, is it a bet by bank of japan three point 7% nationwide cpi can come in? dominic: we are seeing japanese and placing -- inflation rising now and the focus on the inflation from our japanese colleagues has been on the wayside. -- wage side. some of the logic delaying any

move -- was to see how the wage goes because the inflation you are seeing now is imported from the weakness of the yen and to the extent that become self-fulfilling because wages are allowed to rise, that is the uncertainty in the guess is there is one read is that there is going to be an expectation that you are going to see wage growth at least in line with inflation. >> you have written must read essays on quantitative eating -- seasoning and tightening and there is a government with 50%-80% ownership of domestic bonds, a government looking at a fiction of a debt to gdp ratio out near to 50%. do you have a confidence that japan can unwind those two extreme positions?

dominic: we do and the reason there is a sharp whitening in the band -- widening in the band and allowing a freefall in the market and that would raise concerns for the debts holdings of japanese financial institutions and how will hedge they would be an over the course of this year, probably hedging and being -- put in place actively at we know that japanese institutions having cultures around the increase in interest rates globally because -- so the concern around financial stability related to the sharp move in interest rates has diminished in recent months and the fact that they are breaking -- bringing 25 basis points is massive. i think, there is relatively more conflict from this unwind

--, hunting easing -- they need to get their loan deposit ratios back in order and reduce their reliance on jd be --jgp holdings. that will take a long time and i think normalizing interest rates on the front and because inflation is higher and nominal growth is sustainably higher, that will be the way in which japanese banks will re-fracture -- restructure their balance sheets. we are not having a a massive rise in interest rates. you basically have half of that move basically today and no doubt will get the other half in due course but probably not until the boj has lifted razors. --raises.

jonathan: what is this mean for global markets outside of japan? dominic: this like, -- of first thing that occurs is that we have sold all global bonds massively without the japanese markets being best involved so the old days when pam was moving progressively, it was seen as a harbinger for global bond selloff and that was related to trade and cap these holdings and foreign bonds, they needed to bring it back because they were less attractive and hedging costs that undermined attractiveness -- what we have seen is the marketer -- marginal flows of japan have been negative.

that is because as the bond market has sold off globally with ecb and the fed raising rates and aggressively, it is not attractive for them to be overseas so my guess is that the impact will be much more muted and that has been the case. it is about these have not been exposed as they have been in a previously cycles in previous cycles. we send shieh collapse in bond markets high and yields higher on the back of this normalization. jonathan: we go back 10 years when we look at that data, how many bonds they have bought. are we looking at that every month again? dominic: we tend to but they have been flat like -- flatlining for a while. there are important things to

consider. the attractiveness of the jgb market related to treasuries is impressive so if japanese investors have been encouraged to stay at home and that is one of the reasons why you could argue that blg could have an orderly exit to the stage because jgb is attractive. we can look at that data but we are in a slightly different world probably because of the different speed at which these central things have been moving. jonathan: this was also -- awesome. we have serious echo over the last people saying jgb is out of the bottle. >> we had 30 people on this and

it is amazing. maybe it is 28 people. we have a guest coming up who took institutional investor trophy and fixed income. he thinks it will be a temporarily affect on u.s. paper. jonathan: think about the move we had here today. i happy to share them again. the u.s. 10 year this year up to 15 basis points and german 10-year up to 45 and u.k. 10 year and the gilt market to 60. --250. the analyses you will hear is keeping a beach ball underwater. you keep a beach ball underwater and let it go and what happens? >> cambridge water polo is like trophy taken. that just lost and he won't come

on but the bottom line -- jonathan: that is why he won't come on. >> it is true. i look where we are and what the doctor said in terms of -- that was great to get him on the mozilla bank is what this show is about -- the mazzulla bank is what the show is about. jonathan: equities are down, attentive 1% on the s&p -- a 10th of 1% on the s&p. from new york, this is bloomberg. ♪ >> after a 17 month investigation, a house committee has recommended jumbotron be prosecuted for his role in the january 6 assault on the u.s. capitol. it is now to the justice

department to decide whether to hold legal proceedings against the former president on four criminal offenses. another house committee is scheduled to meet again to consider publicly releasing six years of trumps tax return. u.s. lawmakers have agreed to a spending bill and they will try to spend -- send it through to the house and senate to avoid a government shutdown. the bill provides funding for government agencies the next september and includes more than the $5 billion in aid to ukraine. china is adding weight to the speculation that it is hiding the true picture of county people have died as the end of the covid zero policy stop officials confirmed that they have narrowed what they have to find death caused by covid and died of respiratory failure will be considered a virus that -- virus death. regulators accept the company's promise to stop using data on

independent sellers on his marketplace for competing business and the agreement includes offering equal access to amazon's by box. 3m will stop making so-called forever chemicals. the company faces lawsuits that threaten $3 billion in damages. they have also used -- they are all used in products like smartphones and raincoats. they are playing for a large number -- they are blamed for a large number of health problems. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa matteo. this is bloomberg.

>> we had the second -- new governor comes in and april and does not review the second half

rate hike and. that moves the timetable much head. -- ahead. jonathan: maybe even q1 for rate hikes for boj. who are we to say that one have been given what has happened in the last 12 months but the federal reserve and the ecb -- with the federal reserve and the ecb. " when the bond vigilantes barked, the boj point -- blinked. the next thing you know bond yields sank under the weight of the session -- recession. " >> we don't even exchange christmas gifts and the reality here is he gave me a gift because i missed the rosenberg, and this is a guy who parses

inflation dynamics like no one and he was acclaimed at merrill before this and this goes to when we were talking to the doctor about which is, are they getting in front of a presumed is inflation moderate or rapid off 3.7%? jonathan: their policy stuck out like a store -- sore thumb. they were trying to keep their hand on top of government bond yields. >> we have to do business here. a larry and and 9:00 - -el-erian at 9:00. he is noting that he is not on the show because the jets lost and therefore --

jonathan: he says the jets lost and therefore -- >> she is on with us but a lot of experiences. our u.s. economist with fx investments but on this day of standing economics, she is qualified for the dynamics at play. when you heard that news out of the bank of you're responsible for synthesizing that for americans. what is the ratification to american investors this morning? -- ramification to american investors this morning? >> the dollar and the strong dollar runoff have been a hugely defining feature and it has been really putting a damper on u.s. equities and helping on the inflation side but when asked about the dollar for much of this year, financial was the dollar is strong but don't blame the dollar.

there is no one -- nowhere else to go when japan really stuck at this zero lower bound for policy and pulling more qualitative so this helps to reinforce this broadly dollar weaker trend and you are seeing it in the entire asian complex which has the good news from china exiting zero covid. i don't think it emerges as good news yet but it will. that is the base innovation that is happening. >> to bring it back to investments, how discrete and separate is the united states economy right now with the institutional policies we have had with buoyant nominal gdp and people like michael verrilli at jp morgan suggesting a good fourth quarter gdp? how unique is america into the holiday season? lara: america continues to be

illegal -- leader in economic strength and that is saying a lot because i think we will get a solid fourth quarter but that is coming off a pretty stagnant year. both rotations for next year on vigorous and the probability of a recession is high at the same time, u.s. policy is occurring against this wave of tighter policy around the globe. in this unique moment where the u.s. business cycle stands out as stronger, it means that the fed is having to push a lot harder on the brakes to get off the slowdown. the fed is so much more aggressive than other central banks. jonathan: new data -- said this, " historically, whenever economist have put ours in a recession is high, we are usually already in one. the element of surprise is

missing." what is your reaction? lara: i feel like we have talked about this over several business cycles. it is a self-fulfilling prophecy, when everyone talks about the economy slowing down, that is when it happens. one thing that is missing is any sort of job loss. when the job losses start to happen, that is the recession. multiple quarters of payroll losses is the start of the recession. it is like the weatherman standing in the rain staying -- >> >> -- -- saying i think it might rain. my canary in the coal mine is a digital claims and the canary looks healthy but this is the uncertainty that will weigh on markets. we were thinking we would have a nice rally into the end of the year and the lights are being chipped away from a variety of directions. jonathan: can we sit on the

number claims? is it to 11 --211? what is behind that number because i have people telling me maybe the numbers aren't reflecting what is happening in the labor market? lara: the claims do. at the end of the day, we have very little productivity growth and we are bringing back and ate workers and it gives us a feeling of stagnation but on the jobs numbers, we are looking positive but i do not buy into the cracks are forming. >> how is the consumer doing? they look alive to me. lara: it has to be the question, tom because that is the biggest sector of the economy and there is the jobs holding. for a variety of reasons, and come growth remains solid and i think easy inflation helps that. high food and energy cost in and

of themselves are going to dampen u.s. consumption. as that has come down, that combination, lower gas prices gives the consumer a boost but it is a robust reporter going into next year, i am expecting full-year growth of 0.3% and that will turn negative -- by the end of next year. jonathan: everyone is on that page. lara rames. we had the same argument. if they got about 2%, they would be promised with debt. here we are. tom: it feels like the 70's where here we are and we somehow survived with real societal train -- pain. tony dwyer nails it. he talks about generationally

legal -- levered system. that is where we got off to health disaster and every nation is the same but we forgot what we were dealing -- what japan is dealing with. i have a calculus of japan up 2 37% and many people think that will drive higher. the u.s. of 107%. jonathan: you're talking about the sovereign here. tom: i am of the camp it is a sovereign mass and the reporting i would hear from robert feldman, expert on japan, is companies there are in pretty good shape. tom: will hear the same argument here -- you will hear the same argument here in the united states. we will see if that holds up through 2023.

and places it on the corporate side. we haven't had a long enough expansion to build up the leverage and that is why we hear that we will get a recession that is shallow? tom: i was thinking about doing a -- chelsea says they can't take 20 people. tom: where is that --jonathan: where is that? tom: downtown. some of our hipster staff has been there. jonathan: you get dropped off on 58. tom: i get dropped off on 59th? jonathan: i walk. tom: why do you do that -- jonathan: you actually walk a block? tom: i do two blocks. i have a cigar before i go to work. [laughter]

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>> the u.s. probably started to enter into a recession at the close of the year. >> this that the discussion becomes how deep of a recession and what we see during for q.

>> the u.s. consumer has a fair amount of money saved up and employment is strong. >> the economy still has some forward momentum. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramovitz. tom: good morning everyone. historic day for joby -- tokyo and japan ended bank of japan links. we have coverage on that. we have donnie costal -- dominic konstam. and mohammed delta variant --el -erian will join tom. jonathan: we heard a couple

guests saying jimmy out of the bottle. we have people wondering if this is a step towards normalization and a lot of people think it is a step towards normalization. one person thinks it is a rate hike potentially first quarter. tom: this is not popular but i will say it but chairman powell 's steadfastness and others, they have to take comfort that they are joined today by the bank of japan. do they throw in the towel? that is not accurate but they blink and move towards the other banks stop -- banks. jonathan: we came into 2022 with a threat -- fed projection of 19 basis point. that was a big change that we

didn't expect and going into 2023, where is the surprise coming from? tom: i will go to david rosenberg and thanked the guests coming in. john, i will go to rosenberg which is the dynamics of the inflation trend and we cannot predict that and david knows that, as anyone but you have to wonder 3.7% inflation in japan, is this a bet that that will come in constant will come constructive on that? tom: --jonathan: we have asked the question, why didn't they move with the ecb? they have a different historical perspective on this and this inflation story is new to the bed and ecb. -- fed and ecb.

this boj probably saw it a opportunity to reset expectation higher. i think that is what they're trying to communicate this morning. >> what i think doesn't matter, dr. constant was heated. we can't forget china in this discussion and on data, john has noted, i will go to the vix, 22.56 and removed from the drama in tokyo. tom: --jonathan: it is a big deal and yields are up by seven or eight basis points in over the last couple days, we had a left in the 10 year treasury and

equities coming into today into tuesday down four straight sections. it has been a software patch -- software patch. -- softer patch. tom: --jonathan: i will catch up with someone in about 60 minutes. tom: it is exciting and we are trying to keep score of them and everything adjust today with the blockbuster out of bank of japan and megan horneman joins us, chief investment officer of verdence capital advisors and she is with us to synthesize things with american investors. this this give us a further confidence that i can invest in

fixed income for total returns nature? -- next year? megan: no. this will show you that interest rates have more room to go and we are seeing that with cash this morning and japan has jumped on the dragon -- wagon. investors have to get used to higher interest rates. jonathan: someone -- fed funds, he thinks will go through 5% and stay there. are you on the same page? megan: i am in are fed forecast is from 525 two 550. if you look at the futures market, there are expecting rate cuts. that is not our call. once the fed gets to level, then

they can see a restrictive territory but we are still not restrictive and the long end of the curve, evie 4.5 -- maybe 4.5. in the short end, maybe 4.75%. jonathan: you don't think we will get rate cuts for the next year and is it because you disagree with the senses forecast or you disagree with the interpretation of the fed reaction? megan: i think they want have enough proof to say inflation is behind us to be able to cut. i think the economic environment will be weak. i don't think the fed will be able to say they have completely put inflation behind and give them that flexibility to cut. they can stop in the market can take that in a favorable view but i don't think they have the room to cut. tom: if we can price down and yield up and whatever the first and second derivatives are of that action, what this that do

and how does it down upon the american apollo -- economy? megan: housing will remain weak and consumers are going to start to feel the pinch of the higher interest rates next year. you have seen resiliency in the consumer but when you see credit card rates where they are an auto loan rates where they are, this will cause a slowdown in spending on the consumers by -- on the summerside and spending side -- consumer side and spending side. tom: you mentioned credit card numbers and i guess it comes down to retail spending. link in your bottom call into what it means for the tangible consumer because people are telling us solid, stable and buoyant consumer, you are pushing against that? megan: yes, if you look at consumer spending, they are using credit card debt and that is growing in a double-digit

pace over a year or year basis and that is not sustainable in a environment when you are seeing the car rates increase -- credit card race -- rates increase. consumer confidence has been very weak or long. -- for long and it has correlation with spending. jonathan: you think inflation can be sticky. the fed fund states -- stays elevated. where are you on risk assets? megan: going into 2023, it doesn't hurt to get a little cash back into the portfolio and maybe reduce overall risk into the portfolio from the risk assets are from equities but have that dry powder ready because when the fed to just they are done, and i think they will be able to suggest that in the first half of next year, not saying they will cut rates and

they can say they will stop where they are, that could lead to a nice ready --rally. jonathan: you are not alone on that one. megan horneman of verdence capital advisors. that goes to the restrictive question of last year. what you think sufficiently restrictive is? how do they know? tom: i would say the financial media is at fault. we are visible and out there and everyone is watching. you know what? it is about, we are overanalyzing gaining that short-term and i have too much respect for what i don't know to game out where inflation is january 12 or february whenever. jonathan: you know the lesson of the last two years. you get embarrassed every time

you make a forecast. tom: ian lyngen will be on here. i am sorry, even for a guy as smart as him, this is brutal guessing. jonathan: bank of america has a note asking -- about how to talk to your family about the holidays. i imagine this would get very political around the dinner table. technical definition of what a actual recession is. is that will people -- what people will about around the christmas table? you talk about recession. tom: one day i brought the ft to the thanksgiving table and that didn't go over well.

there was a brilliant article and i had to finish reading it. i look at the recession the session -- discussion and they say, they are pulling back and let's lighten up. jonathan: we would call that idiosyncratic. tom: goes to retail sales as we were talking to megan about. it is a mystery. six month ago, christmas would be terrible. jonathan: that was 12 months ago. omicron. on that number, to 11,000 jobless claims --211,000 jobless claims. in lugging -- ian lyngen is next. >> it is now up to the justice department to decide whether to prosecute donald trump for his role in the january 6 assault on the capitol.

the house committee voted unanimously to her further former president on four criminal offenses? a surprise move by the bank of japan, a governor shot markets by doubling the cap on 10-year gilts and that sent the yen higher against the dollar. many see the move as laying the groundwork -- groundwork of exiting extraordinary policy. the ftx co-founder told a judge in the bahamas he will end his fight to avoid being sent to the u.s. to fate criminal -- face criminal charges for the collapse of this empire but his layer -- lawyer said he wasn't aware of the plan. been freed return to jail and it appears that he and his lawyer are on the same page. geithner is adding weight to the speculation that is hiding the

picture of how do people have died since the end of the covid zero policy. health officials confirmed they have narrowed how they define a death caused by covid. only people who died -- and tested positive by covid and those with respiratory disease will be classified. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa matteo. this is bloomberg. ♪

>> the data are consistent from what we have been saying for months, that the u.s. entered into the recession at the close of the year and maybe early next year. we still have recession calls and we will probably see about three quarters of negative eating people growth -- three quarters of negative gdp growth. jonathan: the boj making a shift overnight and moving his yield curve control and you have seen that 0.5% on the japanese 10 year government bond yield. short of that ceiling by 10 basis points but it shakes things up in the global bond market.

equity futures, no drama. if you asked me where equities will be on the day like today, i went have it -- that habit to tenths of 1% -- i would not have a to tenths of 1%. just to frame this morning from the boj move, whenever it came and it happens to be today, marks the end of the free money trade. the boj went first in and last out. tom: i agree with the fee -- free money idea. we are seeing bank advertisements for yield. these major central banks, it is a world turned upside down and i would say back 17 years, all of a sudden, money cost something. paul: --jonathan: this is sick? -- does it stick? tom: you have to talk to people

that are still in the history of the dynamics. as lisa would say, with the death of the fixed income. jonathan: you are saying that what happened. -- people are saying that will not happen. tom: we are thrilled with the quality of guests we have for you with the bank of japan capitulating towards a tragedy like the bank of england and the ecb and the fed. dominic konstam with us. and ian lyngen with us. the good news is that you cannot make a straight line so then jeffrey took the award from -- and his colleague picked up the pieces. what did you write this morning? congratulations on the ii lovefest. i think you have won as many

times as another. explain your first blush of this historic moment. ian: in terms of the bank of japan, the most surprising aspect of it is the timing but to some extent that they lasted this long, when we think about what the rest of the world has been engaged in this year, it is collective tightening. the fact of the matter is that the bank of japan is engaged. tom: from the foreign-exchange space, bmo capital markets is doing well. i look at the sterilized nature of this. we are going to make the move but we are going to increase bond purchases, 25%. explain that to us and what that means for global finance. tom: -- i think --ian: i think their decision to increase bond

purchase with them acknowledging that that -- that someone will push the 50 basis points abound. that move was more intuitive that the headline might have implied. jonathan: how sustainable do you think this is? ian: i think the maker japan for one up against the reality of needing to be more aggressive as the 2023 counter unfolds but i don't think it will be as quick as the market would like to see. jonathan: we are hearing genie is out of the bottle. the new governor comes in and they will make another move. how would you think about a new government -- governor coming in? ian: the front runner to replace someone at the bank of japan is in keeping with the overall maintain -- mentality of bank of japan. even if that were the case, the groundwork has been laid for a more hawkish move.

i would not be surprised to see out of negative rates on time in the first half for the maker japan. -- for the bank of japan. tom: i don't know if you have spoken to mr. anderson this morning but the idea of a resumed glide path of strong again from 150 to 132, does he have a conviction that the glide path will sustain? ian: this biggest take away is that momentum path -- has shifted and the progress towards the ultimate goal will be on autopilot. there is high conviction on the glide path. tom: what they have the animal spirit of nominal or inflation adjustment of real gdp to allow for these trends to occur and unwind their debt ownership? ian: i think the trajectory that

is in place suggest that they will be -- there will be very little problem getting there but we need to see how the first quarter shakes up in japan and we need to see the impact from a reversal of the yen will be for inflation. katie: have each --jonathan: have you changed your treasury call? ian: we have not and we think 10-year yields in 2023 at 3% is a relatively benign forecast given where we are and the one thing i would emphasize is at the end of the day, that is a fed credibility call because we have -- and the biggest risk is that the fed would -- well gave up 32% target -- will give up the 2% target.

i think the biggest surprise for 2023 is going to be the fact that both two and 10 year yields can trade well below affective fed funds. -- effective fed funds. that doesn't occur until later into the cycle so we don't see any rate cuts in 2023 but we see deeper and version funds versus two's and funds versus tents. tom: did you say that twos and tens will be below that? ian: absolutely. jonathan: you implied that it will be under 200 basis points. ian: absolutely. tom: where's your path? ian: if i am wrong, one way is i

have underestimated the fed's ability to keep policy on hold into 2024 and we are assuming we make it through -- they make it through 23. that would imply that there could be more upside in the front end of the curve and the flipside is that we have underestimated the extent of the recession we have seen. we are looking for a more benign version of soft landing but if we got that wrong, we could see two handles on 10-year gilts. jonathan: i have never seen so calmly explain something that is a monster call. it is a serious call. tom: i had the great joy of -- knowing someone at bloomberg and at the wall street journal and b's beauty contacts -- and these beauty contests are not a small matter. . this is really hard and part of it is not only making a call but delivering and ian lyngen

does it in english. jonathan: thank you. we will catch up with bloomberg's mohamed el-erian and he will be hot -- aside for the hour -- aside me for the hour. we will catch up with sarah hunt. tom: it is very good. jonathan: still to come. you can come by the end of the hour and sit with us. this was fun. tom: this was historic and a big deal. features are -11 -- futures are -11. this is ge vernova, helping generate and move the energy that our world needs. this is ge aerospace,

advancing flight for future generations. this is the next generation of ge.

>> from the world of >> bloomberg surveillance on radio and television and thank you for being with us. john barrow --ferrow with a lineup to talk about. if you are just tuning in, the make of japan blinks -- bank blinks. they decide that they will be not accommodative and they move in a subtle and small way towards a restrictive policy in a unique corona fashion. we will continue our analysis. we do so with futures down -10.

oil 7596 on the american pricing at west texas. we had a stellar lineup and we are thrilled to speak with dominic konstam and we will continue that with his wonderful team with the leadership of -- neither of them speak of missoula bank --mizuho bank. how does this reach down to the other three central banks? steven: a ghost of a part that central banks are becoming more tolerant of central banks and the tolerant -- they are tolerant of the idea that they need to move monetary policy to a restrictive -- territory to

tame the environment that was unleashed as a result of covid and the stimulus that was provided. that is the critical issue for markets here because central banks will be pushing higher for longer and i think that drives the direction over time. >> can you predict the pact of inflation and disinflation or reflation? steven: when we have a type labor market, we will have inflationary biases -- and the federal reserve is trying to ease those pressures are trying to create a better balance between the underlying supply and demand for labor and that this particular juncture, there is no evidence they have accomplished that. at the same time, you have this

environment where global excess supplies still exist and the global economy is likely to be heading into a recessionary path. you do have a increase possibility for a disinflationary forces. that depends on how quickly the fed can adjust the imbalances. tom: your call did mention this for tokyo and bring it back to washington, cross america. do we see steven ricchiuto, an important disinflation that will assist chairman powell? steven: we are seeing that away -- already. if you will look at at the degree -- we are now below the 105 level which we put at the bottom end of the range and there is some potential in here for the currency to help bring down the rices and we are seeing that

when you look at the cleveland fed taxable versus -- flexible versus sticky inflation numbers, the possible numbers that were geared off of federal trade goods prices and commodity prices have been coming down rapidly and the key is whether those sticky prices, the service related components and the 55% of cpi that the chairman complied -- implied, how quickly that reverses. tom: i bet it was buried within the press conference but i am -- a fan of the work of the heritage of cleveland inflation series. they have two series but if you look at those series and bring it back to the listeners and viewers of this program, is there a feeling fear that wages and the 55% of services can come in? i don't see evidence of that. steven: i don't see that either. everyone wants to ignore the payroll employment numbers and find it chooses while -- white

payment -- white payment doesn't matter --why payroll and woman doesn't matter -- what we will discover is that lady -- we will be getting new updated jobs numbers and those numbers will continue to show us this labor market has an and balance and the imbalance is towards a shortage of workers relative to demand of workers and we don't see any evidence in terms of wage demands that we are starting to see any easing up of the labor market and this drives the point to why we believe we need short-term interest rates higher for longer. tom: we had dominic konstam from us and his colleague is with us. we are thrilled to have these

people. if that is the case and we get wages to this template -- to not move, and we get an employment rate that doesn't go up like a hope and prayer, what does the chairman of the fed to do? steven: i think he will gradually raise interest rates over time and creating a shallow but longer recession. everyone in the market is convinced that the fed tightening will create some time -- kind of credit crunch. we see no evidence that there is that credit crunch lying under the surface and we think you will wind up with higher for longer in terms of short-term interest rates and along but shallow environment. it will take the pressure's off the labor market and it will allow inflation to be settled to lower levels and that is why, at the long end of the curve, i

believe rates will be higher at the long end of the curve. tom: this is the debate that is out there. it is interesting to see. if we launch into 2020 three and everyone is playing the fed parlor game, i don't think there is enough talk of how along -- alone the united states is with institutional success. our policy success relative to europe in war plus their own challenges and the challenges of china and japan, should not we be taking a victory lap with how we have gotten through 2022? steven: i think so but this is reflected in the currency. we had an upset -- upbeat currency requirement. the currency is off the lows we have experience with the downdraft people have expected and as we went into 2022 and

2023 environment, in this environment, the currency is reflecting the fact that from an energy perspective, we are in that are positioned that are colleagues overseas. that is the key driving motivation. when you look at the contrast between the u.s. in the 70's and europe in the 70's versus europe and u.s. in the 2020, we were at a energy problem in the 70's and europe is at an energy problem now and that sets the tone for white european currencies will be weaker than the dollar and that drives home the point -- if you want to be in peace two markets, you want to be in the dollar market. tom: is that pandemic over? --steven: i believe the pandemic

is over and the bulk of the supply chain issue is over. you look at the freight rates and the transportation of goods and the reduction of backlogs of ships. all of that is over. freight rates will never go back to the lows prior to covid because we have to news -- use new fuels that are more expensive and less efficient to burn that -- for ships that bring containers but we have reversed was all of that. from the supply chain related issues and that is what you are seeing with the commodity price numbers, the pandemic is over. tom: the holiday season -- everything is on sale which means in january, it will be on more sale. you can fix your time on tv. he is fixing his tie. i have trouble every day.

whether the consumer, and what will we look like for consumption in february as we go into q1 march? steven: in terms of the consumption numbers, as long as the bait -- labor market is firm. it is wages that drive the overall consumer spending numbers, not the interest rate environment and when people have jobs and they feel comfortable, they are willing to spend and they are willing to take on credit. i think you will look at a more resilient consumer then at other -- then other callings are dissipating because i believe we have a tight labor market and that will dominate the story. tom: to come back to the moment. does this change anything for chairman powell? does this change february 1 for chairman powell? steven: i don't think this does. i -- this is something that the

markets have been anticipating and we knew it was going to happen. we assumed it would happen after corolla left off -- corona left off. that leads us to a environment where the currency finds a floor and that puts us in a better position for the chairman to assess where we are going on a goods basis going forward now that we have set the floor on the currency. jonathan: --tom: thank you so much and all of ,izuho --mizuho usa. bear in research capacity in -- they are in a research capacity. i would note that bitcoin -- where you do see it is in

foreign exchange, a dollar weaker by some amount and yen -- not quite yet and stronger japanese yen as well. euro yen shows the same dynamic almost exactly to the 100th point. we are going to continue. there is so much to talk about on japan and tokyo but also i am setting up for next year, given your ability to look at your 2:01 --201k envelope. ♪ >> give you up-to-date from news from around the world -- world, i am lisa mateo. i house committee has recommended donald trump be prosecuted for his role in the january 6 assault on the u.s. capitol and it is up to the justice department to decide

whether to hold legal seedings against the former prince -- proceedings against the former president. another house committee is scheduled to meet today to release -- do decide to release tax returns. they will try to send it through the house and senate to avert a government sactown. --shut down. the bill provides funding for government agencies and has $45 billion for aid to ukraine. economists say there is a seven-10 likelihood that the u.s. economy will sink into a recession and that is more than double it was six months ago. economists -- consumer spending, which accounts for two thirds of gdp, is expected to barely grow in the middle half of the year. ukraine has ever -- reach a deal with space x to receive more

startling antennas and they will be used to counter russian era cap -- attacks. these antennas will be sent to ukraine and they provide internet -- regulators accepted the company's promise to stop using nonpublic data on independent sellers on his marketplace for competing retail business. they also will offer people access to amazon's by box. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa matteo. this is bloomberg.

>> the discussion becomes, how deep of a recession and what is the impact on earnings and what do we see during work you? --4q? the second is what happens in 4

q? tom: one of my pet themes which is, when it is difficult as it is now, your choices go down. you are supposed to be diversified. there is nothing to diversify into gear like this. -- our year like this. a big picture thing. this is the important nine minutes we will do with the masters in business podcast and chairman. what would you do forward with your 201k? it was a 401(k) and everyone listening and watching is enjoying the 201k.

>> the storms come along occasionally and it has been 41 years since we have seen a market were equities and fixed income double-digit drops. it doesn't mean you throw your plan out the window or panic. there was no place to hide. it is the dollar index but you look at everything else, stocks and bonds and private. spac's. we're supposed. -- municipals. tested ok -- tips did ok. short duration bonds was the only thing -- and small-cap value has held up better than most but wherever you look, it was a bad year and this happens every decade. tom: what is challenging here is the pandemic gets in the way of rational thought. how do you promise, yes, it is

the end of the pandemic. you look at this end to a liftoff point to what you will i -- and i know is possible when you get equities with double-digit returns? barry: here is a funny coincidence and i do not put much stock in bee stings. -- these things. the dot-com bubble collapsed and the financial crisis bottoms in march 2009. maybe that same streak of that happens and we continue to grind lower as people debate is the fed going to make a little mistake or a big mistake, maybe as people realize they will find -- by q1, we could see a great opportunity.

tom: mike wilson says ignore the fed and look at earnings. are we all in our modern financial media, are we all overanalyzing on the fed? re: navelgazing -- are we navelgazing chairman powell? barry: it is either all elon musk are all jerome power -- powell. we need to focus on the many other elements. when you talk about earnings, we are talking about profitability of company and that is why the focus is on the federal reserve. this is the fastest rising rate regime we have seen. we have seen various sectors all over. housing rolls over and that doesn't normally bode well for

durable goods. here is the real crazy part. if i was drawn power, i would stick my flag in the ground and declare victory and go home. never we look in commodities and goods, rices pete six months ago -- prices peaked six months ago. are they going to stick the landing and get it perfect? that is a low probability but is it a big mistake or little mistake determines where we bottom. tom: we look at return and maybe it is a bank account, compound return and all that and there is the industry of internal rate of return, which are known stec keep the calculus at big accounting firms and we talk about the private equity market that has gone from large to enormous.

a huge impact. how does this rate of return workout? barry: here is the funny thing about privates. we are willing to lock out money for long periods of time. because you get the liquidity premium. -- illiquidity premium. then, i get a mark on my public stocks and bonds every day. private equity, we will get around to marking it up. the smaller real estate firms, they will do a quarter of their assets every quarter so weak two, you get a full mark and it is fairly current but a lot of the other, larger private equity shops will get around to it. it is funny.

they have held out great and they are investing as the -- the same things as a public traded -- tom: they invented the pulling and ownership of different kinds of real estate and they have been articulate. they don't think they are moving the market. do we know what is the underlying --in their private investments? barry: they do a good job giving you the broad strokes. it's not the same where's -- where you buy mutual fund. you look at the perspective for be read. it tells you, here are the liquidity gates. i don't understand -- it really matters who your co-investors are and the problem is they had a lot of retail brokers who assumed i will get my money out.

it is private which means it is different disclosure rules. they put together -- what is it, 16% annually for 30 years? tom: it is a plain green. it is a lovely sweater. active is percolating. you will heard this. -- have heard this. barry: every year. the brady people like warren buffett and go down the list -- beauty of people like warren buffett and go down the list, they are outliers. we all want to be like michael jordan and nailed that penalty shot but the vast majority of us cannot. the tees --tease of seeing those

outliers who figure out a way to be active, the academic literature is overwhelming. after of -- a decade, 90% failed to meet the best -- benchmark and this one thing investors can do is to make sure at least their corporate polio, 70%, is brought low cost index. if they want to play around the edges, feel free. you want statistics on your time -- side. tom: how about those jets? barry: really? tom: it is painful. barry: it always has been. they just might be the second worst management in sports. if you want to see terrible ownership, you have to look at dolan. i want -- once pull aside a

mutual friend who said do -- and said do a public service and by the makes away from the dolans. tom: i will brief the mailer -- mayor on that. the guy on the name of the building has to do a bloomberg television and radio. barry ritholtz with the important conversation. it has been underplayed the losses -- it has been truly a migration to a 201k. i can't say enough about the importance of the next hour in radio and television of this historic moment with the bank of japan. futures at negative seven. say with us.

-- stay with us. this is bloomberg. ♪

jonathon: new york city this morning. four-day losing streak. can we snap that. the countdown to the open starts right now. announcer: everything you need to get set for the start of u.s. trading. this is bloomberg "the open," with jonathan ferro. ♪ jonathon: live from new york, we begin with the big issue. another central-bank surprise. governor is rona shifting -- governor kuroda shifting