>> is clear it is going to hike next year. >> is the end of any era and investors have to get used to high rates. >> this is going to bite and when the recession comes, spreads are going to widen further. >> the global economy is likely to be heading into a recessionary path. >> we are going to get a recession. it is a dual cycle. >> this is bloomberg surveillance -- this is bloomberg surveillance bank -- this is bloomberg surveillance bank -- "bloomberg surveillance"

with tom keene lisa abramowicz, and jonathan ferro. jonathan: welcome back. equity futures are up on the s&p 500. we can finally talk about company earnings, fedex, nike. tom: we will do a lot of japan here. we talked about it yesterday. there were some earnings and i looked at fedex very carefully. the stocks property much untouched. it was okay. jonathan: it wasn't a repeat of september because september was brutal for this company. lisa: if you look under the hood, it was fascinating. they raised costs and cut costs, they raised prices and cut expenses. volume was down. this does not indicate a healthy economy, to your point, companies adapt and adjust. tom: the cardboard box polyp outside my walk up, it has to be

30% bigger than a pile last year. jonathan: it is that time of year, though. tom: but anecdotally, i agree with.. jonathan: another industry builder, perhaps that feeds into this idea you get more goods disinflation. sales profit is better than expected. lisa: so consumers can spend, they are perhaps being a bit more cautious with how and years these companies are able to raise prices. it flies in the face of the narrative that there is a bigger concern. jonathan: 90 is up for more than 12%. futures up .5% on the s&p. what day is it? wednesday morning? tom: stay focused. jonathan: it feels like a friday. the futures, 3869. the euro-dollar 1.06.

getting close to 50 basis points. tom: all of our team yesterday talking about this historic moment for japan. it dawned on the american financial media through the morning. my major message is that there is follow-through this morning. there is dawning awareness. this is a big deal, the yen comes through stronger through 1.31 a five. jonathan: the japanese yen a 10 year, 3.81%. lisa: i found the story exciting. some of the biggest moves we have seen this decade. here is what we're looking at today, u.s. existing home sales at december conference board consumer confidence data. the data has been mixed as of late although existing home sales are at the lowest going back to may 2020. can it go much further?

sam bankman-fried has agreed to be extradited to the u.s.. he will fly back a company by fbi agents and the hearings begin about what his guilt is and whether he will serve the rest of his life in jail. president biden is reading a volodymyr zelenskyy, the president of ukraine on the south lawn of the white house. volodymyr zelenskyy is expected to receive $2 billion and a certain weapons, a system that will be fascinating to see. how much they get of these high-tech missiles that can potentially blow russian missiles out of the air. do we find out more of what the strategy is? jonathan: thank you. there is a report that this meeting does not take place without a big derivative of and that is expected to be the patriot missile-defense system. tom: it is a good morning for raytheon. i have been informed by people there are different kinds of

patriot missiles and you have to wonder which ones we are delivering. they are what they are, but they are maybe not the most sophisticated once. jonathan: we will get some details in about 10 minutes in washington, d.c. joining us now is brian weinstein of morgan stanley. your words, risky assets are overly optimistic the fed. it will come before the pain. is that optimism misplaced? brian: yes. i do think it is wildly misplaced but the market always was the easier path and it is not that clear to me it is coming. the fed statement might be overshadowed by the doj which is very hawkish. i think the pivot will come next year but not until risk assets give up gains we have already seen them starting. jonathan: one of the great hallmarks of the last -- tom: one of the great hallmarks of the last 24 hours is bonds tanked. bonds have to come back.

is it a year of clipping coupons or can you find total return? brian: i think it is a year of clipping coupons plus a little bit. i don't believe we go back to 250 on 10-year note's. the income opportunities out there are real. you can buy 10 year in this range and get income plus a little more. i think it is a decent year for 60/40. it may depend more on equities than bonds of the income on bombs will be different than last year. tom: we had incredibly low yields, money for nothing, money for free. we saw this bond charges by tech companies. what does issuance look like when money actually costs something. brian: issuance slows down a little bit. it depends how quickly defective. it's. one thing risk assets may be telling us is they can hold out a little bit. no one has to refinance at 10%

on 10 year bonds. if you can wait and rates normalize, you can refinance it 6% were 7% so you don't bar as much. i think issuance will pick back up but it is not the same as when rates were zero. those trenches or under 1% charges were too good to be true. lisa: throughout this year, people were talking about the risk factor, china would reopen and cause more demand. if the bank of japan could drop their yield curve control pegs and that would cause disruption and higher yields. both things appear to be having hints of happening and yet this market is tugging along. there was a disruption yesterday but not as much as people expected. what do you make of that? brian: i was surprised yesterday. you look back and wonder why. when the u.k. miniature crisis was happening and rates were spiking, that is what people expected. if you look at the yield curve,

you could argue the market sniffed it out. they were trading higher than the peg so maybe it was more in the market. what is tells me is we have seen our highs in yields unless we have some other shock. if you had told me what you said, that china was reopening and japan can move their peg and rates went from 340 to 370, i would have jan. it is not the story people wanted to be. either it is quiet or the market has sniffed it out and it is in the price already. it is very interesting. lisa: i would agree especially since the theory was japanese investors piled into u.s. treasuries and would redraw and go back home as soon there was a sense that could be a free-floating bond market. they have not done that, they just adjusted sensibly. do you look for some other indication we have seen a peak in yields, that this is not

going to be another shoe to drop? 40 think the jury has already come back with that verdict? brian: eileen toward the fact we have seen highs in yields. you look at what the bond market is time you, it is telling you the fed is going to win the battle against inflation. it tells you growth is falling. the fed told us that with their prediction. there are a lot of reasons we're looking into this and lower growth and low inflation. it gets rid of your list of what you thought might drive yields higher. your deceit gdp numbers with the upside and the fed maybe doesn't have to go to 6% but they could stay at 5% all year. i don't think we will have the information all year. jonathan: we want all of the excitement at front. it takes time. you have a new upper limit to that band, 50 basis points. we have to see if that gets tested.

when the governor exits and somebody new comes in. tom: it takes time and it is about flows. it is not just an interest rate analysis, it is about what japanese does with a broad amount of cash. some really smart notes over the night. i like what georges said about yen strength from this wall of international money that will return to japan. jonathan: $1.25-yen, that is a major call -- 120 -- 1.25 dollar-yen, that is a major call. tom: i would suggest it is nonlinear and the easy move has been made, 1.50 to 1.30. jonathan: i want to talk about europe, we have talked about the boj and what hasn't happened. the italian 10 year was of the more than 50 basis points, the two-year, rather, over four sessions.

up almost 40 basis points over four sessions. these are real moves. people are talking about the end of the shift higher in bonds. what is happening in europe? brian: you're a busy interesting, very hawkish, the ecb. usury a lot of things about what if the japanese investors stopped buying treasuries? i am confident treasuries will get funded. they are liquid. the world's benchmark is a different story. where you can see more trouble are in europe where the markets have not functioned as well and where the ecb has been a bigger player. it is not obvious to me those moves are over. jonathan: fantastic to catch up. the boj, unexpected going into the new year. look at these seats in buenos aires. 4 million people descending on the capital of argentina.

there was meant to be this parade of the world cup team, that got abandoned and the players had to move to helicopters to completed because the open top bus could not move. tom: it is wednesday and they are playing their day job on monday? jonathan: the premier league commences again. tom: they are not in the premier league? jonathan: that is differentially. tom: do they? play each other? jonathan: used describe the champions league -- you just described the champions league. that continues. tom: is that odd? jonathan: there are people who think the quality of football might be better at the club level. we can talk about the ratings, the ratings are in. i will bring you those next. 7:00 a.m. our, this boj

decision. eric nelson has things to say at wells fargo. ♪ >> keeping you up-to-date with news around the world, i am leigh-ann gerrans. president biden one unveiled nearly $2 billion in assistance and to deliver a patriot missile battery to help ukraine bolster its defenses. the state department says shipments of drones is transforming relations between tehran and moscow into a fully fledged defense partnership. ukrainian president volodymyr zelenskyy is traveling to washington to meet with president biden net address congress. it is his first trip out of ukraine since russia invaded in february. chinese president xi jinping is telling dmitry medvedev his president would like to see talks on ukraine.

the remarks come as beijing tries to improve ties with europe. central china television is reporting he told medvedev his administration has been promoting peace. china has avoided criticizing russia over the war in ukraine. china has confirmed it has narrowed how it defines a covid death counting only victims who tested positive for the virus and died of respiratory failure. the decision after speculation that china is hiding the true picture in the abrupt pandemic pivot. the country has reported fewer than 10 deaths this month. global news 24 hours a day on bloomberg. planning parents. ♪ this is ge healthcare, creating a world where healthcare has no limits. this is ge vernova,

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>> what are the real needs of the country right now? making sure defense department and can deal with the major threat coming from russia and china, providing assistance for the ukrainians to defeat the russians. that is the number one priority of the united states right now. jonathan: president zelenskyy heading to washington, d.c.. that was senate minority leader mitch mcconnell from new york city. here is the s&p snapping a four

day losing sheet -- losing streak. in the bond market, yields unchanged at 3.68. tesla up by 1%. it was up by more on the month with yesterday's losses by 8%, down 29% month to date. with all of this speculation with what will or not happened with the leadership at strattera at twitter and what it means for tesla. tom: i agree, what do they do today after the price action yesterday? jonathan: one report came through, tesla two of them a hiring freeze and another round of layoffs. these reports keep coming throughput but ed ludlow has been talking about this. investors in tesla would like to hear from the company and not just of these reports from other organizations. they would like to hear from the company. lisa: who is running the day-to-day?

are the concerns in stocks are due to anything fundamental without the company is being run and with respect to the demand issues over in china? or is this due to some risk title to twitter and elon musk's focus in there and watch the collateral could be of tesla chairs -- tesla shares? jonathan: i think the question and and i have been asking, is a do you have a vision problem or just a macro problem? do you have a leadership problem or just an economic issue? meta is down, google is down, microsoft is down. a lot of these big tech names that have had a weakness of the back of higher interest rates are in the same group. lisa: you could say that but if you look at the correlation of the price action to the drama around twitter, the correlation is direct. there is a question about the

correlation. how do you tease out of to the man from the company if the man is her percentage of of the country and created the fan base? jonathan: still bullish on these stocks and that is clear, he wants elon musk out of the twitter situation and focused on tesla. i think it will be difficult for that to happen even if he steps down and installs a new leader because he will be heavily involved. tom: there seems to be a lot of damage. jonathan: particularly over the last month. tom: i talked to our head auto guy at bloomberg news and he was heated, the competition coming tesla's way is a huge. jonathan: look at the american car manufacturers this year. they have not on well. tom: they don't have tesla's on the back of patriot missiles. let's get to and reorder. each missile in the millions of dollars. they are fancy and the memory of

the goal for when raytheon launched these wonder missiles by defense experts. and reorder, -- annmarie hordern, how many of those missiles will they have? annmarie: the president to be announcing that they will be sending these missile batteries to ukraine. ukraine will be staffing them. an official who briefed reporters last night with the news that president zelenskyy will be here in washington, d.c. today. the fact of the matter is they're not changing their policy about troops on the ground but president zelenskyy has been pushing for more high defense -- high-level defense missiles. he is getting them today. tom: will those be able to land in russia or take missiles launched from russia? annmarie: i think the idea is that these missiles are defensive.

this is why zelenskyy has been pushing for it, a barrage of drone attacks on critical infrastructure. we have talked about today number of times. many analysts have said it and it is playing out every day in ukraine, putin is weaponizing winter. he is starving civilians of the power and the energy that is needed. this is something critical in the hard, harsh two months in ukraine, especially in eastern ukraine. that is where zelenskyy was yesterday. the hope for ukraine is they would be able to shoot down these missiles and hits russian aircraft missiles. lisa: we have heard about patriot initials being delivered -- patriot missiles they delivered to ukraine. what is the significance of president zelenskyy coming to washington, d.c. to meet the president and lobby because? annmarie: this is incredibly significant. he is leaving a war zone, he was just in a central area of

fighting just yesterday. he was handed a ukrainian flag by the soldiers and he alluded to his troops and many didn't see it saying he is going to pass this on to u.s. congress and the president of the united states. it is coming at a critical time because of the weather. ukraine officials have been telling the press they believe as soon as january or march that russia will attempt a fresh take on kyiv, especially from belarus , this on the heels of president putin being in minsk. this is zelenskyy's appeal in a joint congress -- to republicans taking over the house who have said they do not want a blank check in terms of finding to ukraine. lisa: we are hearing from xi jinping meeting with medvedev of russia urging for talks and peace.

how does the u.s. give aid to ukraine without assuming like they are moving away from that kind of reconciliation and being more antagonistic than defensive? annmarie: the u.s. assets constantly nothing about ukraine without ukraine. they would welcome peace talks if putin was going to leave ukrainian soil. the u.s. has always been sending funding. i don't think the extra $2 billion or the patriot missiles has really changed that calculus. this is something they have since february 24 when russia invaded. what is interesting is china's tone shifting slightly and directly to medvedev. he is the president of russia and what xi jinping is saying, this is also an a all of branch to the european -- to europe and the u.s., is that china wants peace and talks.

he is saying this to a key ocean player. maybe not the inside circle of president -- inside circle of putin but he was president for a few years. jonathan:'s feels since the g20 there has been a shift from china in tone from the rest of the west. what happened over there? annmarie: you are right, there has been a shift in tone. china has still not come out and condemned the war. they have signed on to the communique that said stte of the countries at the g20 or against this war. they allowed that align. they did not name or which countries were there but china allowed that. china has continually said they do not want to see a nuclear war. they do not want to see nuclear weapons being used. this is something of putin has flirted with in terms of his language in terms of may be digging into his nuclear arsenal. china is questioning without

directly saying it outfront russia's plans. putin said to president she in you have -- to president xi jinping and are you have questions. jonathan: i think we all felt that since g20. there was a feeling china might be isolated by the u.s. and other nations and that did not take place. tom: i believe it is winter in china. can you imagine the weekend the president faces? jonathan: have you heard from president xi jinping on covid? tom: no. jonathan:, weed. tom: i imagine it is a medical challenge. jonathan: i am with you. christian nolting from deutsche bank. ♪

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♪ jonathan: this week, every day is a friday. tom: would you like to leave an hour early? we and i just showed the airport in boston. it is packed. lisa and i can do this. jonathan: i'm confident that you can. tom: i wore this for you. it is a festive coat.

i was with christine and she was doing the houndstooth thing. it works out well. lisa: merry christmas. jonathan: i'm sure there is someone at home seeing these. tom: after the fifth mince pie, there is a supply shift. jonathan: mince pie? lisa: other people scrambling to get back because of these random shocks? jonathan: no. tom: when we back together? jonathan: january 2023. everything i say is genuine. it is truthful. i mean it from the bottom of my heart, if you can find it.

your two year. two year nominal yields. right now, the 10 year can get back. it is a big call. tom: a lot of nuances as well. so much of this is just the different views, particularly institutional, client money views. christian joins us now. i want to know what they will do next year. jon ferro's 401(k) has blown up to smithereens. how do we get back? christian: that is a good question.

they have been going down. i can imagine going the same direction next year but staying up. we think there is a recession both in the u.s. and europe. they could go below are from our perspective and on equities, we are cautiously optimistic. not as bad as this year, maybe. tom: what do you see in your corporate analysis, not only deutsche bank europe, but global? what is the tone of corporations after we saw federal express and nike in the u.s.? christian: it could be split in two halves.

there is a bit more consciousness that could lay on the markets, but in the second half of the year, if we are not going for a recession, the outlook should improve, maybe even earlier. lisa: a lot of people are talking about the different halves of year. what are you looking for to determine whether the thesis is accurate in terms of the response in markets? christian: we look at earnings expectations. you always have to check the market has been thinking. a good comparison, they have come down a little bit. it is a positive sign, but we

probably have to lower this as well. i think that is important on the one hand. top down, you look at where inflation is stabilizing. they will want to see tdb of to three. that is very important to watch. lisa: it seems that lower earnings expectations are baked in. they want to enjoy the second half and see those gains. we have seen all of the panic instruments that people report -- were putting out. potentially changing their yield curve control. what will it take to surprise a consensus of a better second half. christian: we are not going into panic mode.

we have also been saying that the recession will not last very long. we also agree that we can see a lower market, but we have to be very disciplined. we need to use it as an opportunity. tom: i have been reading a note. it is on nike and it looks like a repeat of the quarter before and the quarter before that. you have been great about the measuring. let's take one company in america. it is a fancy brand. but the basic idea is, are we

overdoing it? dana really pushes against that this morning with 90. christian: people are surprised if it is not that bad. let's not be too optimistic. the environment will be tough and for that perspective, we should not be too optimistic. i think it will not be an easy year, but there will be opportunities. tom: i am learning every day. jonathan: in the u.k., we used to call nike nike. mainly because people do not understand. tom: christian, what is the value of cash?

i am there, but what do you do with cash that actually has yield? christian: for a long time, we had a lot of cash on the account because they were negative rate. now we have moved -- we moved the cash. this year, clients will see much lower positions. still, if you look at money market funds, we are still ready to deploy them, given the view that we have. lisa: do you see another rise inmates, based on the latest moves and what happened with the boj? christian: everybody is talking about inflation to come down. we have seen the trend changing

in europe. but i think the market is too optimistic. we think inflation will be higher and once the market is realizing this, we could see higher rates. we do not see the same move that we have been seeing this year. jonathan: thank you for joining us. a beautiful german backend there. fantastic. i love that. he has a great outlook. a fantastic outlook. you talked about that first half and second half story. he is looking at the structural disinflation. replaced by the structured inflation of the next decade.

that is sticky inflation as well looking at next year and beyond. tom: it is i have hours what you just said is a narrower group of successful companies and it is not my job to pick those names. some big tech will win. many will lose. it is not our job to give an opinion on this, but is this finally the era where active begins to compete?

jonathan: how many times have we had that? lisa: are you talking about factor-based investing or specific selections? there is also an issue with the idea that everything is getting rated with this idea that money is not free and it is a complete stock evaluation. it has not been priced into the market. equities are expecting a return to a low of eight environment. jonathan: mohammed said yesterday that we are not going back to it. it is the end of free money and it starts with japan and it ends with japan. 20 years of this and we have seen this happen in a big week -- in a big way. lisa: when they went to buy bonds, here they go again with

this. it was welcome this time. they wanted to sell at a time when they felt yields going higher. tom: i want to be careful in our analysis. if you are point 92, -- i'm looking at ark investments. this has worked out. it is point 77 and it down 66%. you have to be careful about treating all the same. lisa: my favorite moment of the morning was when you said, while lisa was talking -- jonathan: i was listening, for what is worth. tom: people are working, everybody but you. jonathan: i love my job so much.

this would never work. i still want to be paid for this, of course. 8:30 eastern time. this is a conversation you do not want to miss. sitting down with bloomberg's maria taddeo. there is still a lot of work to be done. tom: there is. a very important conversation. >> keeping you up-to-date. a u.s. house committee has voted to publicly release donald trump's personal and business tax returns. it caps a three-year legal saga to obtain and release the former president's closely held financial documents. it comes in the waning days of the democratic majority.

federal authorities will whisk bankman-fried to face a round of criminal charges. bloomberg has learned that the co-founder will sign a set of extradition papers today and take a non-proportional aircraft back to the airport escorted by fbi agent's. i'm leigh-ann gerrans and this is bloomberg. ♪ ealthcare, 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, advancing flight for future generations. this is the next generation of ge.

>> look at the consumer spending. we are seeing it grow at a

double-digit pace year-over-year. confidence has also been a big disconnect. it typically has some correlation with spending, and we have not seen that yet. jonathan: catching us up just yesterday. let's get you up to speed. we have a little bit of a lift in and around 4k. deutsche bank is at the top. here is one for you. 2023. that is actually high we wanted --that is actually high. a lot changed, didn't it? the federal reserve went way more.

the top one last year, i will not pick on anybody. yes i will. it was rough. at the bottom, morgan stanley. the bottom call, the 40 400 on the s&p from morgan stanley is just about the time goal for next year on s&p. lisa: do you think people would use these as trading instruments and understand what the range of thought is? we just heard christian saying, if everybody thinks this will go down, it will go up. jonathan: they do not really enjoy making these gases by

saying this point at the end of the calendar, this is where i think the market will be. they are trying to deemphasize the call and tell us that the bigger call is beneath the surface. sure, it has been difficult. tom: joining us with all of the rest of it. enjoying the trenches before she ended up in securities analysis. thrilled that you are with us. your optimism is extraordinary. what do you the gloom crew have

wrong about buying nike shoes? >> thank you for having me on. the negative sentiment going into this quarter was all about the next three to six months. it was about inventory, the pace of china recovery. the brand is stronger than it has ever been. more distribution point, number one in every market in the world and it holds onto its number one china position, despite everything that has happened. we are talking about a cautious consumer, but there was growth. it still shows resilience. there is a path to recovery, so

the doom and gloom is very short-term. this is a strong stock and eight usually does well in a recession. long-term, i am very bullish. tom: the gentleman from france had three goals, whereas the nike zoom soccer cleats. do people buy the product? did they see unit sales because their heroes still wear this stuff? >> they highlighted. they did not mention argentina, but they talked about how it is one of their best-selling products. it is also the kid and the murch. there is a lot of merchandising sales because of this big final benefiting from that. lisa: tom is wanting murch for a

long time. tom: john xiaomi the store on the way out. i got the sun jersey. jonathan: try getting the messi jersey now. lisa: this is a hero specific story. in the sense that people are going to keep buying, people would go back to the brands that they love and no. >> i am not that bullish about the broader consumer environment. i think there is a softening and you see it in the traffic data and guidance of the company. the performance has been strong. guidance has been a lot more cautious across the board. the high-value retailers, they did terribly this year and are much more bullish.

when you look at nike's guidance , they only inched up their guidance a little bit because they are being cautious on china. lisa: how much do you see? waiting for this washout and retail for so long and we might finally see something more like the wave of consolidation. a lot of people have been looking for this in this sector. >> if you look at the numbers coming out, if you look at the numbers even more recently coming out of covid, 2019 to 20 20 one, nike was the biggest share again are. some of them closed down stories and some of them shut down entirely. being the biggest in the market

gives us that benefit. i expect it to be more coming out of rather than into the environment. that is part of why strong brands do better. they share over time and share particularly. jonathan: we hope the kids are listening. they wanted the football shirts, they wanted the lionel messi shirt. you know what it was for me? 19. -- 1995. i was dying for a pair but they were difficult to find. i do not even play football anymore. george was a god to me. phenomenal.

tom: they look like something you would see in little venice. they did not look like soccer shoes. lisa: did you know it is a thing that when you are an adult, you buy the gifts that you wanted as a kid. this is the biggest growing trend in toy purchases. adults are actually the biggest drivers. exactly. that is what i am saying. jonathan: you have a control that looks like a formula one steering wheel. i was playing with it yesterday. lisa: you still have to get the

squirrel down. tom: i said we have to keep this puppy up through march. jonathan: i remember a tree of years that remained undecorated. this was at the old place. i remember that. and then it came over --i came over a few days before christmas and there was this thing. it was so sad. it just sat in the corner. tom: i think we were going to rome or venice. jonathan: macro strategist looking to get down to 125. what will happen with japanese investors, and where they are taking their money. that is coming up, shortly. this is bloomberg.

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>> it is clear that the bank of japan will hike next year. >> they have to get used to higher interest rates. >> when the recession comes, spreads are going to widen further. >> the economy is likely to head into a recession. >> we are going to roll into a recession.

jonathan: what a year and has been. good morning. from our audience worldwide, i am jonathan ferro. equity futures are up. recapping a phenomenal 2022. it is the end of an era. the ecb going to places i never imagined it would go to. the boj to close out the year. tom: the bottom line is that it is the end of the era for many. it is all the same story and finally there is a value to cash and money. i will guess 13 to 15 years ago. you mentioned capital allocation . jonathan: all of the above. it will depend on whether we can return or not.

some people tell me it is the old normal. lisa: we are going to return to what we are use to come in the past. this comments me is the biggest question because there are all these issues with the globalization going on. i do not know what this world looks like or if stocks can come out of a slump. jonathan: what are they coming down to? pushing rates back to zero. that is how people start to think about the world. look how quick these things have changed. they had 90 basis points as the meeting. you and i were thinking, we were having this conversation. can we get to two or three? now we are talking about five

and some people are suggesting that maybe it is more than that. lisa: the distinguishing feature would be wages. to your point though, there are all of these inflationary pulses that are not there now. that includes the reopening of china. jonathan: we will go through the week ahead. are you upset that i am finishing this? tom it is ok. jonathan: aren't you off after this week as well? what are the plans? tom: the plans are to move some children around and have some joy in the house. one of the kids is making a movie, which is pretty cool. it is years and years of work,

but we are celebrating. jonathan: but you can share that this is a christmas movie. tom: it is a big is this right now. i already have my tuxedo for the ox carries. -- oscars. we are regrouping. unlike you. the place you got has a moat around it. jonathan: it does not have a moat, but it is a nice place. lisa? lisa: you are inviting tom to come with you on your vacation? i just wanted to clarify. jonathan: it would be fun.

lisa: home sales are coming up. very curious to see what the deceleration is like in the housing get. how much does it hinge on how much we see a softening in prices? bankman-fried is expected to be extradited to the u.s. with the fbi escorting him back to the states. this is given the billions of dollars that he lost or mr. perp needed, according to the allegation from the u.s. government. this, to me is the key event of the day. on the south lawn of the white house, there will be a discussion, the expectation of $2 million of aid. a defense system. where are the main tension points and read lines?

where is the room to negotiate into a harsh winter? also, economically for europe. jonathan: a big story in washington today. this was nelson of wells fargo needed more downside ahead. it is a no brain funding policy. managers might need to unwind further, driving back to 125. joining us right now, eric, can we start there about how you think we need to be balance as we shift away from this regime? >> you have talked a lot this morning about the end of an era and various products and paradigm shifts.

one thing that i noted on the funding currency side, we have had a huge shift from the national bank and the boj this year. three big funding currencies for traders, and they have all completely shifted on us. this is a warning shot. i want to focus on an arcane prospect. a cross between a mexican peso and the japanese yen. lost about a quarter to a third of that in the matter of two weeks. for 2023, -- tom: it has gone four standard deviations. is the dollar going to do the same?

>> it will spill over to the exchange rate, certainly if you look at the asset manager position, they have been sticky and we will find out through the data next week, but the question is getting back to 125 will be easy in the sense that it is like getting down on inflation. it is going to be a challenge. tom: i want to stop and say this is what the bloomberg portal is about. that is why there are there are so many bloomberg terminals out there. lisa: you noted that the action

that they took does not necessarily show that the bank is going to ease. just simply that they are willing to act in some sort of shift, but not necessarily a breakup of control. what would it take for the yen to appreciate that much more? why is there so much enthusiasm if this is just kicking up the target? flex there is the unwind of the carry trade. the bigger question is, are we going to see a larger shift? a huge buyer of foreign asset. the question is, if we have some positive dynamic taking place in japan and a real increase in nominal rates, is a substantial

amount of money going to come back? it could jot it down, but inflation in japan continuing, growth remaining quite strong and the boj at least providing a little more upward lift in those nominal yields. jonathan: where are you looking for demand that is supported over the last few years and the treasury market? >> look at the hedge deals on that. when you swap the return, it is a brutal picture for japanese investors, buying u.s. treasuries, buying french bonds. this really accelerates that trend of selling of treasuries. you have to watch for some back product where japan has

historically been a big presence. that is where i am focusing my attention. jonathan: we will catch up a little later this morning. the second order of effects leveraged to low and stable yields. it was brought up yesterday on the program. can you tell me what you think those effects will be as we shift away from that regime? >> i think central banks need to be careful here. it is not a tightening of policy and there is more to come. they have increased buying because they know how fragile the japanese system is and how leveraged it is to yet -- low yields. you have to watch the duration risk. the bigger point is that central banks, talking about the equity

context, what about the bond context? they are hiking pretty aggressively. we have never seen this environment before, given our starting point. you have to watch out for long-term bond yields. jonathan: this was wonderful. really nuanced, deep conversation about what we might experience. tom: everybody focuses on interest rate analysis. next year is the time to look at flows sloshing around. jonathan: up almost 1.5%. this is bloomberg. >> keeping you up-to-date, i am leigh-ann gerrans.

adding to the squeeze on public services. the center says that slower growth is weighing on the treasury's revenue and that the tax increase is announced --the findings are the latest to highlight the cost of brexit. it may last until the next election. volodymyr zelenskyy is expected to travel to washington today to meet with president joe biden and address congress. this is an expected move to announce anti-aircraft missiles, ratcheting up u.s. support. president xi jinping has told dmitry medvedev that nation would like to see talks on the plane. my --their marks come as they try to improve ties with europe.

they are reporting that the administration has been actively promoting peace and talks. they have been criticizing russia over the war in ukraine. air france also faces strikes in the coming weeks. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i am leigh-ann gerrans. this is bloomberg. ♪

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>> after a long process, this was not about being punitive or malicious. >> after nearly half a century, the list is back in washington dc, and we worry that this will unleash a cycle of clinical retribution and congress. jonathan: more tension in d.c. representative kevin brady of texas there. your market looks like this.

equity futures advancing a little bit. yields unchanged. no real drama yesterday in global markets. it was a story in and of itself. about .1%. tom: i said it is big macro. there are ramifications over months and years. john: it does not have to move the markets. people were like, somewhat, it is a big, central move. it takes time. jonathan: there is a new upper limit and we are getting to that point, getting closer to that level. what was interesting about yesterday, some of the firms

were waiting for this to happen. lou bley -- i thought it was interesting. they think this will cascade. lisa: i can understand why. if they are dealing with a new head of the bank of japan, there have to be some other moves. tom: there is a feeling that it could move higher. can even move higher? that would create even more tension. that was the goal but not with a debt buildup that they have.

a stunning visitor to washington. i had to ask about the taxes. i feel mine in on an envelope. what do you taxes even look like? how many pages is a fancy real estate by? >> there have been a lot of reporters talking about the tax returns. two trailers filled with paper. we will be able to see them in the coming days. social security numbers are redacted. they will be releasing trump's tax return. they say the irs did not audit

the president, and they are pointing to a number of dubious charitable claims, gifts to his children and the fact that there were deductions that should not have been. tom: the fire that would behind is a president's gift for the fireplace this year. tim o'brien is an expert. as a generalization, we are missing in action. will that receive immediate scrutiny? >> there was only one person dedicated to this. there was a busy week in washington. lawmakers start to smell the jet fuel. this will be picked up next year

and it will be interesting because he will have a divided congress. what the chair of the committee is pushing for is that the irs should be going through their tax returns. lisa: this is possibly why volodymyr zelenskyy is coming to make sure that crane is on the agenda. how receptive are republicans to that message? >> we have heard from mitch mcconnell who says he wants to continue, going into mitch mcconnell's office, all before making this shocking and unprecedented trip. he is coming to washington dc to

potentially help on the house side. we heard he was expected to be speaker of the house. you had individuals on the fringe side of the republican party being very disparaging about zelinski. really being disparaging about his visit to not only the white house. this is his plea in person. already trying to use that and trying to knock off powerlines. he is here to say that we will do the fighting and can, but we need your help. lisa: how much is oil on the agenda given that prices have come down, but there will be a cold snap? there is a question about what

happens when they start refilling the petroleum reserve. >> it is a very early christmas present for this white house. they are poised to drop below three dollars a gallon, nationwide. you are talking about diesel, how to heat your homes. that will be crucial. prices are coming down, but heating oil, especially outweighs. this is not just a problem for the u.s., but also europe. maria tadeo sent me her energy bill and it is three times what she normally pays. jonathan: you know what he said to maria?

quit smoking. just blunt, brutal. save some cash. quit smoking. we will catch up in about an hour from now. tom: brutal. there is a cigar bar right along whatever the road is. brussels diplomat shopping. it is great. she is a trooper. for those of you international, massive cold from montana to ohio. we could disintegrate here. -26 degrees celsius right now. i have experienced lower than that only once. plymouth, new hampshire. lisa: i was there for a full month and my car died.

you cannot write with pins outside of taking note. you need to use a pencil because the pen freezes the ink. jonathan: this was your investigative reporting days. tom: at hockey games, the games were canceled because the skates would not work. they work with a stream of water under the blade, and if it is cold --to quote, there is no water there. jonathan: basically, you are saying that new york is not cold now. tom: you are whining about the cold. jonathan: tom, as a man who appreciates science, what is freezing? ♪

jon: the s&p 500 in yesterday's session with a small day of gains. greg peters joining us around the table. we will get to greg in a moment. treasuries look like this. your 10 year 368. two-year, 422.

still thinks this two-year could get back into the high fours. tom: international falls, when we were kids we would check international falls, minnesota. -25 right now. when you are kids that is what you look like. lisa: in new york you walk around. in fargo you have your car heated and you run into your car and you are in your tunnels in minneapolis. you don't actually walk outside. it feels colder in new york when it is less cold because you are in said cold.

tom: if you're in l.a., it is 52 degrees and women are in furs. greg peters is like why are we here? lisa: i want to reiterate what we saw from fedex, nike and some others we got earnings from. in terms of premarket actions, fedex shares up more than 4% of expected earnings. this comes from the ability to cut costs and increase their charges on each package. what you are seeing at fedex is lower volumes. this doesn't necessarily mean we see a very robust recovery in the economy. there is still pricing power and companies traded nike shares up more than 11%. sales globally up 70%. at company that still has a lot of inventory but can still would pricing power because a lot of kids like air jordans. after the bell macron is

reporting earnings. i am curious to see if there is some snap in a downtrend in the sinnott conductor stocks. jon: is he trading them, what is he doing? does he find them to where? lisa: that was a phase. we had a situation with mud and it killed the cleaning. jon: is he going to sell them? lisa: i don't think he can at this point. we got stuck in mud and the air jordans were devastated. jon: is he deeply upset about it? lisa: let's move on. if you gets older he can replace them himself. jon: yesterday the boj have this

to say. >> there is no doubt in my mind this is a step towards globalization. they are drunk -- they are trying to make it as unexciting as possible so it does not fours. that is jon: a big risk. jon:jon: that is the risk going into next year. the big question we were asking, is that a step towards normalization? order to maintain their dovish starts but make it more sustainable? overwhelmingly the response to that question was formal a. tom: for global wall street take notes now. this year is provincial. when they set up years ago, no one could expect the total return of award-winning portfolios they put together. the force behind that, the thinking behind that was from dragging morgan stanley's greg peters over cio.

he joins us this morning. you called for a radical shift next year. where will that shift be? greg: the shift is in the bonds. this year has been historically difficult. yield matters and a starting place matters. when you think about the boj yesterday, we have moved from this zero negative interest rate policy to positive territory for yields. that matters a lot. when we were looking at the 10 year at 50 basis points our future looked really bleak. it was hard to earn return off of that. where we are today we are in much better place. it creates a much more balanced portfolio. those who were calling for the death of fixed income were kind of right for the year. but the reset matters a lot. we are pretty construct of as we head into 2023. jon: is this a call on

sellthrough ribbons, credit or the whole universe? greg: it is a sequencing of sorts. the first move is on the sovereign side. the defensive nature of fixed income starts itself. there is a high probability of recession. it is really difficult to ascertain. that protection mechanism matters a lot into 2023. and then you roll into credit and other things. it is a sequencing aspect that physics that -- that fixed income provides. lisa: does that sequence provide inflation disinflation? a linear path to disinflation? does it have to happen to make what you are saying come true? greg: it does. the lesson of 2022, speculation, bad. even commodities started to

catch the knife for a little bit towards the end of the year. as we move off the stagflation narrative it bolds much more favorable -- favorably. if we are wrong about that and stagflation is incredibly -- all indicators point to lower inflation in 2023. the tail risk we were experiencing in 2022 gets chopped off in 2023. lisa: if you see a stickier bottom, let's say we stop by 3.5% by the end of next year, how does that and your call it when people are talking about construction early higher inflation even some of the labor gaps and the deglobalization a lot of people are talking about? greg: that is an underappreciated risk. go back to starting point. do we think the fed is going to move another 400, 500 basis points from year? no.

we are talking about right now incremental. the markets right now are wrong in terms of the pricing. the markets are pushing back on the fed staying higher for longer. i don't know if i buy into that myself. we are in this higher fed rate regime. that isn't a bad thing for fixed income assets. it is about rolled and carrying yield income. it bolds quite favorably. tom: in the equity space, maybe internationally with weak dollar with what we saw with japan yesterday, international filing after 10, 12, 15 years, what will international bonds do? do they outperform yield down? greg: the preferred habitat is in the u.s.. europe has their struggles. they are fighting a different inflation monster. it is the energy shock. very different than what we have

seen here in the u.s.. the u.s. is much more on the path to normalization. the boj yesterday was a shock to the system. it creates volatility that does not induce investment. it induces exit. by virtue of that the u.s. is the preferred place to be. if you buy into this weaker dollar story and inflation coming down global story then em has to outperform in that scenario. jon: are you expecting that scenario between u.s. and europe to close? naturally get yields creeping higher, is that how that is going to close? greg: that is right. on the margins you see a bid to the u.s. market and europe and sterling in the same boat. a tremendous amount of supply hitting the markets in 2020 three. there is a clearing level there. there is lots of government spending. i expect things to compress into thousand 23. jon: europe is in for a

difficult time. not just the u.k., the whole continent. to see numbers coming in from the ecb, that delivery from president -- i was shocked by it last thursday. tom: the nominal gdp will perform better than japan. some people disagree with me. it is directly linked to the lagarde theory. jon: about 50 minutes from now sitting down with maria tadeo. tom: deutsche bank, i remember hanging out with him at davos. when torsten's lock -- when torsten slok speaks, people listen. jon: he went on to say the labor

demand is 5 million people higher than labor supply which is why a wage inflation is so strong. greg: this is the tricky part of the marketplace and why it is a bottom low outcome. tom: greg, over in jersey city, it is so cold she walked across the hudson river. jon: skated across. greg: good to see you. tom: it is that cold in new york. greg: you folks have got to lay off the eggnog so early in the morning. jon: why are you telling people that so publicly? you call that festive tipper. right now just little drink.

8:30, christian lindner sitting down with bloomberg. there is so much work to do going into 2023. at futures right now on the s&p elevated up by .5% on the s&p 500. yields coming in basis point or two on the 10 year. 366 38. euro-dollar unchanged. what a trip it has been since 2022. crude 77.77. lisa: keep you up-to-date with news from around the world with the first word news i am leigh-ann gerrans.

releasing trumps tax returns. the former president closely held financial documents means chairman says the documents will be out in days. >> after a long process, this was not about being punitive, about being malicious. >> now that vote comes in the waning days of the democratic majority and trumps referral for criminal prosecution by another house panel. federal 30's will whisk sam bankman-fried to the u.s. to face a range of criminal charges related to the collapse of the ftx crypto exchange. bloomberg has learned the ftx co-founder will sign a set of extradition papers today at a bahamas court and take a noncommercial aircraft back to the u.s. escorted by fbi agent. elon musk says twitter was supposed it hit $3 billion of

negative cash flow prior to the recent round of severe cost-cutting. must -- elon musk about twitter for $44 billion in october. he has laid off more than half of twitter staff and has stepped down as the chief executive officer until an appropriate replacement has been found. and afghanistan telegram bars women from attending a university. suspending girls education from further notice saying it is in an afghan tradition but a part of western culture. 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.

>> it is a self-fulfilling prophecy. when everyone talks about the economy slowing down that is when it happens. one thing that has been very

missing is any sort of job loss. this is something i want to make crystal clear. 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 saying i think it might rain. jon: the weatherman is right here. multiple quarters of payroll losses. it is the standard recession. it is like the weatherman standing in the rain saying it might rain. that was lara rhame. a fantastic quote. fantastic. s&p 500 up by .5%. yield coming in a couple of basis points. real drama as we close out the year. the 10 year 3.66. tom: federal express and mikey, it is not a small issue. we are in the holiday season and we are ignoring it.

if this was july -- jon: what is the macro signal? maybe not a great one. the corporate signal, they are adapting to it. volume is down. that is your signal for the economy but for your stocks, may be for nike, the same thing. sales holding up but inventory going in the wrong direction. lisa: pricing power, how long do companies have it? that is the issue as volumes come down. is it companies consolidating share or is this a broader sense consumers have strength that continue inflation even as the economy slows? tom: the great zombie rollup next year, the other side of that is fuel and wind. the nike numbers are stunning. gina martin adams, chief marketing strategist to bloomberg intelligence describes the reputation on the street. she was one of those people who said you have to be in the game

to win. the idea the -- the cash. -- the idea the dash to cash. on the street, what is the earnings call or the vector of an earnings against for the -- and earnings guest for the quarter? gina: earnings peaked year ago. at the end of 2021. there is little acknowledgment of this. we have been in earnings cycle deterioration for a year. we see that cycle deterioration getting worse but looking nothing like the last three recessions. which creates a lot of complexity for the investor base. look at 2020, that is probably not relevant. but look at 2009, that is the most recent example of what a recession look like. there is little chance the recession looks like 2009 or looks like two thousand one

because the economic excesses today are not like those that existed in 2008 or 2000. that is creating a lot of challenge for investors thinking about what is ahead for 2023. the reality we see is a slow burn on the earnings stream which is so painful. it is what we have been through through 2022. it is probably going to persist through 2023. it is an and earnings contraction. -- it is an earnings contraction. tom: do you suggest across sectors there will be a few that win while others struggle? gina: absolutely. this year energy has been the dominant winner. we had massive dispersion in terms of earnings in the sector level. consumers sectors have struggled tremendously this year, they will probably bounce back in 2023. energy has been a big driver.

we see earnings contract for the energy sector year. there is a lot of discussion in the earnings. technology is under controversy right now. tech has been contracting as well. in 2022. they will stabilize likely in 2023. all these job losses we are hearing about in the tech sector are probably going to create some margin stability for tech in the first half of 2023 that leads to improvement in 2024. lisa: earnings decline, does it come from an ability or inability to pass along the costs? really the slow down in overall volumes? these are two components that have a very low profile when it comes to the economy. gina: that has been a part of the conundrum in 2022. earnings recession looks different than what we have become accustomed to because the inflation environment is so

contrasting to the last 20 years. we have had remarkable acceleration in inflation which is played out -- which is played out deteriorating rising power through 2022. with the exception of energy, you have seen a pricing on the index already this year. what we see happening in 2020 three is deceleration in volume sales would probably some stability emerging on the margin lines. completely contrary to what we have experienced in the last several recessions. inflation and growth moved hand in hand throughout the last 20 years rate that has not been the case this year and i don't think it is the case next year. we continue to see inflation decelerate. growth will continue to do celebrate with inflation. but at some point it will accelerate enough. lisa: is this positive? gina: it is ultimately positive

but creates a lot of volatility in the long term. if we get stability and margins -- if we get stability in margins in the first half of 2023, it should lead to stability in 2024. we have been talking about this recession coming for more than a year. we have been waiting for the downdraft in revenues. analysts have started to forecast this in their earnings lines. i would not be surprised to see by the second half of next year we are surprised how little recession in earnings we see. tom: if any of the last year or the guesstimates forward, is anything of traditional security analysis addition one, addition for, addition eight, does any of that really matter coming out of this pandemic? gina: it does. we have seen a very close response to price action relative to interest rates. very clearly at valuations respond to interest rate changes.

valuations were a normal silly high when interest rate was at zero and the fed was inflating all asset prices. valuations compressed remarkably over the last year. we have had enough valuation compression since the end of 2021 to match the compression we have had from 2000 to 2002. it really extreme reaction in the market related to interest rates. earnings likewise. we have to acknowledge orbit margaret -- corporate margins are adapting to the climate. we saw that this morning. you highlighted it in your notes before i started speaking. tom: that was all lisa. gina: thank you, lisa. the economy and the earnings stream are not the same thing. that is what investors really struggle with. at the economy is a slow moving machine. corporate earnings reflect the economy to some degree when it is not the same thing.

tom: gina martin adams is killing it. jon: how do you feel about it? gina: it is impossible to predict where we are going to be. you can get some degree of anticipation for the next three to six months but you have to impute some sort of historical analysis into your expectations. tom: you pump 55 pages out and they say you're going to get 150,000 frequent flyer miles out there. gina: it is a business for a reason. jon: a thought exercise for you. gina: it is a thought exercise. we go through it quarterly. we don't just go through it at the end of the year. we think where the market is headed, valuations and earnings are headed for the next 12 months based on a run rate of economic history compared with a forecast of where we are headed. with this particular period it is so difficult because the inflation dynamic is different.

then what most of us have lived through. tom: multiple compression. apples crushed down to a 21 multiple. jon: apple has always been an interesting question. it is a guess as we close out the year. gina, thank you. gina martin adams of bloomberg. equity markets up. tom: because of fedex and nike i would say so. the way they did it with clearing inventory. jon: the fact fedex didn't do a september repeat is good news. what they said in september, that sounded like the start of the global recession that came out of that statement when the deutsche bank called it the biggest misstep in 20 years. lisa: it was a reflection of the broader economy. it is not like there is screaming enthusiasm in this market today. jon: before i disappear for year end, thank you for always being sensible on the show. lisa: awe.

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>> global monetary tightening trying goes on.

>> the fed is not going at it alone. >> the biggest risk is the fed gave up the 2% target. >> it is a self-fulfilling prophecy. when everyone talks about the economy slowing down, that is when it happens. >> this is bloomberg surveillance with john keene -- with jonathan ferro, tom keene and lisa abramowicz. tom: staggering into 2000 23 after an historic day yesterday and follow-through today as ian continues to strengthen. we have a number of different stories here looking into next year. we will do that with david raphael kotok in a minute. fedex and nike show you can adapt and adjust. as the bank of japan did yesterday. jon: companies adapted. fedex didn't do a repeat. how terrible things had gotten and how quickly that happen.

looking at next year, the price to pay from a major tightening cycle from the federal reserve. we are seeing the market price to pay. s&p 500 down about 20%. nasdaq down about 32% year-to-date. that is the market pain we have seen. now we need to talk about the economic pain. where is the threshold for this economy? is it for 50? -- is it 450? tom: i am looking at a one-year trailing crater in the nasdaq down 30%. the others doing pretty good. the answer, it is about profit. if you're not making money, it was a really difficult year. jon: it is also about multiples and the valuations we assigned to some of these names. the performance of some of the major companies, such as tesla, meta down 55%. amazon down, apple is down 25%

year-to-date. we are going to find out if we have a supply problem or a demand problem. we have been asking that for a while now. tom: central of depression -- essentials of japan, china is well. it is the major mystery in the next year, this dominant economic partner. lisa: there are two sleeping till risks coming out of asia this year. it was china reopening, japan dropping -- japan dropping their control. markets are disrupted right now. have we gotten over that hump, what is next year's tale risk or can we not even see it yet? tom: i want to say yesterday's coverage of this news out of japan, the message i am getting,

you can link the bank of japan shock and follow on to some of the optimism. jon: it is getting harder and harder to try to control the bond market with yield market control. the 10 year in the u.s. and the u.k. and germany year-to-date are more than 200 basis points year today. the jgb had not done nothing. it was increasingly unsustainable to try to maintain that yield controller. is this a boj resetting policy to make it more sustainable or on the path to normalization? if it is the latter, we have had 10 years of yields by the ecb, deeply negative by the boj and the jgb market. what we have howard -- what we have heard in the last one for

hours, that era is over. mainly away from yield control. 50 on jgb, i want to know where that resets without the market manipulation. we can use it. not just manipulation but artificiality of what we are seeing in japan. that is not a market right now. tom: that is not a market. that is clear. what is changing right now on this wednesday at we are beyond the pandemic. we are getting this reset in japan. china. the mayor of new york city telling me we might to be -- we might need to be wearing masks and the covid death rate going above 400. and we have moved up. i wonder where we are in the pandemic continuum given the economic shock news we are seeing. lisa: are we post-pandemic? is the post-pandemic reality of the trifecta of different viruses and what does that look like from a financial point of view?

do we have this gradual shift or do you see more sudden moves on the heels of what has been telegraphed right now? tom: we are going to talk to the leader david raphael kotok in bit with his historic work in china on bird flu virus a decade ago 15 years ago to get an update on this linkage beyond the pandemic. i am going to go with the vix. 22, 20.76 is dampening. jon: equities up .7% s&p futures. yields lower by two or three basis points. 36545. qt and the ecb and the boj, we heard from several saying the boj is going to hike next year. that is something we haven't talked about for a long time. tom: the mystery to me is

inflation in japan. that is what their so-called qt will play off of. joining us in his outlook forward for 2023, he is david raphael kotok co-founder chief investment officer of cumberland advisors. on the state of a given portfolio but also looking at the bigger picture, david, you do this 20 47. are we be on the pandemic? -- are we beyond the pandemic? david: no, we are not beyond the pandemic, we are in another phase. otherwise we wouldn't have so many millions of people getting sick in china. in the united states we have quit, we have given up and said we are not worried about it anymore. we have 400 people die every day. this makes no sense but this is who we are and what we are doing. lisa: it seems that is what

china is doing as well when this is slowing the growth in china, slowing the economy down because people are still scorning seeming -- are self-quarantining to avoid getting sick. what does the new post pandemic normal look like as a lot of these diseases continue to circulate? david: we now have in the united states through circulate -- three respiratory diseases circulating. in china they are on the surge where we were two years ago. it has to run through as a fire burning through a forest. run for months and then it will settle down. that is when china starts to turn economically. right now it has to face the fire and the surge. lisa: we have been talking all morning about how the market has handled a lot of shock events. when you think about the prospect of china reopening, the possibility of a true shift in

the bank of japan's stance, do you think this market has been through the worst? are you expecting another shoe to drop or a larger disruption in the face of the bank of japan dropping their yield curve control or china re-accelerating? david: you had gina martin. talking about gradual deterioration and earnings. i agree with that. you have had discussions about the japan shock and you articulated is it a run -- is it a one-off or is this the first step? i believe it is the first step. japan now has to normalize it. long-term goals of, the yield curve, yesterday with the japan news, we saw immediate reactions in cross currency swaps in adjustments. all what you would expect. tom: we had to go in the

surveillance rolodex. i had to go back and find someone who remembered 74, 75, 76. at the year after that, horrific year we were up 38% and year following we were up 18%. is that the shock for the next 12 months? david: it is very possible. are we going to repeat 73, 74? cumberland advisors was founded in 73 with my partner. our firm was launched in the midst of 74. i remember that. i and worried about a repeat of 73, 70 4, 75 and the fed is to. that is why they don't want to repeat the arthur burns middle-of-the-road trying to satisfy everyone. they are going to stick to their guns until they see an inflation

rate they can accept. torsten's lock -- torsten slok quoted this morning there is a gap between job seekers and job openings. whether it is his 5 million or jay powell 4 million, it is there. that has to either close. one way, immigration, change rules, or suppressed demand before that realigns. that is what the fed is going to do. they are going to stick to the course. we have a risk of more serious recession. jon: david kotok, wonderful to catch up. enjoy the holidays and happy new year. david kotok of cumberland advisors. i believed chairman powell's speech that he believed the risk of doing too much, repeated that in the november federal meeting. the last few times i have heard

him speak, it feels the balance of risk has come into balance a little bit more. going into next year. maybe i am wrong. but that is what i am hearing from the fed chair. lisa: we have heard it from other members that too much pain would be hard to reverse in the unemployment rate if there is this inflation. it the data shows a decline in inflation. jon: changing the target to 2%, i don't think it is going to happen. raising a point they might tolerate 3% to 4%. it is going to be interesting to see how this develops through next year. tom: the yen is strengthening. jon: the science we have heard in the last few weeks, the last mile getting inflation down. futures right now up three

quarters -- up .75%. christian lindner, coming up. >> with the first word news i am leigh-ann gerrans. president biden will announce missile package to help ukraine. president zelenskyy is traveling to the u.s. to meet with president biden today. it is the first trip inside the u.s. since russia invaded ukraine in february. the center for economic performance is slower growth is weighing on the treasury's revenue and the tax increases in the autumn statement would not be necessary if the u.k. was still in the single market.

the findings on the latest to highlight the cost of brexit limiting prime minister release -- prime minister rishi sunak's efforts. equities since a global financial market more pain for 2023. that is the blunt message from top executives at j.p. morgan's thing you -- j.p. morgan goldman sachs and others. central banks remain hawkish. 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 leigh-ann gerrans, this is bloomberg. ♪ this is ge healthcare, creating a world where healthcare has no limits. this is ge vernova,

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>> i lean towards the fact we have seen the highs in yields. what the bond market is telling you, the fed is going to dial against inflation. growth is falling. not disastrously but definitely going low. the fed told us their prediction for next year. jon: that was a little bit earlier this morning from morgan stanley, investor, glade -- great to catch it with him. this is addressed to me but it is about to. on the 12th day of christmas

surveillance came to me 12 interruptions, seven cups of coffee, five crypto coins, for market shares, three tops goals, to barrels of oil and a bentley on park avenue. you want to sing it? [laughter] lisa: we will do that in the break. tom: we are going to be making eggnog in the 10:00 hour. here in new york with neil dutta . tom: neil dutta always writing

with skepticism and humility saying will everybody calm down with the american economic experience? he is at renaissance macro. the ceo of fedex and the ceo of nike agree with you on the path forward. that is what we have observed this morning. neil: that is a problem because the bond market does not yet agree. that is the tension. with gina in the last segment that talked about how we have been talking about recession for over a year, i have heard another guest talk about self-fulfilling prophecies. when everyone respect -- when everyone expects a recession, that is what happens. economics is not technical analysis. that is not exactly how it works. how it works is through an element of surprise. companies, if they have been preparing for something and it

doesn't materialize, then the risks start to build in the other direction. that means the risk going into early next year are skewed to the upside for precisely this reason. your own bloomberg consensus sees growth of basically zero in each of the next two quarters. that is despite a significant decline in gasoline prices. we had both the fiscal policy makers and the monetary policymakers shooting their bazookas at the u.s. economy. we had a massive fiscal sleeves -- fiscal squeeze. it didn't work out. the fed tightened 450 basis points in 12 months and the u.s. economy still stands. one of the things, people are looking for the catalyst. what is the growth catalyst? it is straightforward. shocks dissipate. is the squeeze going to be as

bad in 2023 as it was this year? probably not. jon: what is the data point you throw at the skeptics? what screams this and a recession -- this ain't a recession? neil: inflation is starting to moderate. production generally on the rise . we all talk about employment. consumer spending is still pretty healthy. by the traditional frameworks of how you would call a recession, we are just not there. lisa: neil, call me gloomy. i see what you're saying, what is good for the economy isn't good for markets. the scenario you are painting doesn't scream any positivity because of one thing. if you have companies that are doing better than good, that can

-- they can charge higher prices. that fuel price going up a bit and the fed is going to continue to raise rates. what is your pushback to that? rates are going to go up and there is going to be this feeling that bond rates have to go up that torpedoes equity momentum? neil: i sympathize with that argument. if the economy is doing better and if the fed is trying to slow things down then the fed has to respond i keeping financial conditions from loosening. as a result that would be bad for equities. tom: this year has been a lonely year. i was talking to david kotok about the loneliness and 74, 75. the american economic experiment

worked. we can look back and go that was then, this is now. you have in during faith in how america clears things, clears market. we find incentives and away we go. do you have a faith in that now that we will clear the system, clear markets and away we go? neil: i don't know about away we go but i think companies will learn ways to figure out their inventory overhangs. homebuilders are trying to make it work even though interest rates are so high. companies find a way. the issue for me really is that it comes back to this idea about positioning. how the consensus economic community, companies, how they are looking at things going into next year. it is way too one-sided. jon: do you see fed funds

finishing 2023 closer to four or six? neil: closer to six. the fed, you were sort of alluding to this, there is room for the fed to step down. the inflation data probably gets better or the -- better over the next couple of months. if they have already greenlighted 50 and you get a couple of inflation numbers surprised to the downside it doesn't take enough -- it doesn't take a lot to see brainerd and others talk about let's step down to 25. you raise the risk of the stop and go situation. you would be slowing down into a potential economic acceleration. jon: do you get that condition in the flip-flop? neil: they say they are but it is human nature. jon: the last few times i have heard from chairman powell i don't hear that in the same way. it is like the chair powell in november went missing.

neil: in the last first conference he took -- conference he kept talking about these are as of today. which tells me maybe in a few months this won't be their best forecast and things will change. you could come back in march and the fed may be revising down their unemployment rate forecast and revising down their inflation forecasts and holding off on additional hikes as a result. it could be interesting. tom: mark your calendars. neil dutta a valentine's day inflation report. cpi inflation valentine's day. jon: mark it on the calendar. lisa: how are things going? >> clearly not well. tom: to neil's point you have one or two data points. it doesn't have to be dramatic. even nudging away, what does the

fed do? neil: they also revised their inflation numbers. the bar has been lowered a little bit. jon: tom, i love you, thank you. lisa, thank you. we have got another show to go. lisa: happy new year. jon: a merry christmas neil dutta.

tom: bloomberg surveillance. good morning everyone on radio and television. an eventful week as we slide into the holidays. equities up a full 1% on the dow. spf up. stressors phase stronger down 140. has everyone checked out as greg

peters was checked out earlier? lisa: when it comes to yields higher. what we are looking right now is a bit of stability after yesterday of what happened. one of the biggest wildcards to me next year is going to be oil prices and gasoline prices. we talk about disinflation. how much is that due to oil prices coming down? as much as they have filtering into the manufacturing prices coming down, a little bit of reprieve, how do much does that picture change if gasoline prices, oil prices continue to surge? tom: your guesstimates for 2023, what we are going to do is deal with a core formula. neil dutta with us with

renaissance macro. thrilled you can continue with us. there is in. for japan, exports have been horrific. for america, what is the variability or the size of our uncertainty given export and import dynamics? neil: u.s. imports have been strong because our economy has been quite strong. we have been sucking in imported goods during the pandemic and since then. what is going to change next year is, the u.s. runs a sizable trade surplus in services. a lot of people coming to visit the u.s. and so forth. that has not normalized and it is going to over the next year. that is going to be a tailwind for u.s. growth. tom: that comes over to the other side of the equation about

domestic final sales. that resiliency of the internal american economy. you have been an optimist there. you continue to see domestic final sales. neil: so far it is running pretty good. consumer spending is tracking close to around 3.5% in the fourth quarter. tom: that is a nominal number. neil: no, that is in real terms. take a look at the atlanta fed gdp right now. it is pretty healthy spending. we should get healthy spreads. that is going to add a healthy chunk to gdp spreads. final sales look pretty healthy. tom: credit card receivables, 21% interest rate. lisa: you can play that role. you want to do that for me? the other side is much more insidious than that if you want to be honest. the other side is another leg up of inflation. that is the flipside to all of

this. if you have strength and wages going up and that is what we have been talking about. i want to go to gasoline prices. how much is that going to draw if so much of what happens next year, you say it doesn't happen without a shock, is that a -- is that the shock? without a resurgence of the u.s. government releasing a whole lot of oil into the market? neil: the big risk to the u.s. economy was earlier this year when the fight -- when the fed was hiking aggressively. gas prices were five dollars a gallon. we are on the other end of that now. the risks are somewhat lower. the fed is seemingly stepping back and gas prices look like they are going below three dollars a gallon nationwide on average. that is a powerful combination for the household sector. it is more positive in the long run. it doesn't mean oil prices cannot go up next year but the effects are not immediate.

lisa: when you read in the headlines, you laugh. the consensus right now is you are going to have a bad half for the first one and a good half in terms of equity performance. you pushback. you say perhaps it could be reversed and you get a really good first half. when i used to do these year ahead pieces working at firms and research houses, you spend so much time doing them at the end of the year and they have a shelf life of about a week and a half. you do your year ahead call and it is over. tom: we did this with gina martin adams in the last half-hour. you do the outlook and then you get on airplanes. it is that simple. lisa: and job declines. tom: neil dutta is having lunch over at the saint regis on fifth

avenue. you are in la guardia and you're not sure where you're going after omaha. lisa: that shelflife telling everybody this is what is going to happen, we have no confidence because this is a change to moment. how much is this time different when the forecast is what your inflation call is, what your sins is the fed to get down to 2%? neil: just follow the data. it is hard enough to get the situation today right little loan forecasting things to, three, four quarters from now. let's follow the data. generally speaking, it has been coming in better than expected. not only in the u.s. but frankly in europe too. indicators in europe have been moving up. even though those surprises have been building to the upside, does consensus have been slashing their forecast for next year. that kind of disconnecting is somewhat unusual but it creates

an interesting opportunity for market participants. tom: neil dutta, thank you so much. he is with renaissance macro. joining us now we look at the housing market and the granularity of what homebuilders are doing, gerald howard is with us. chief executive officer of the national association of home builders. how bad is it? christian: it is nowhere near 2008. people thinking the world is coming to an end, it is not that bad. there is a natural flora to how low these prices can go. the supply shortage may help us keep from going away into the depths of recession. lisa: we have seen a huge pullback in terms of incentive. your company has been tracking that. you have seen the number of

starts surprise the upside. how is that going to balance out going forward? is that going to reduce supply even more and cause prices to remain even stickier because of the lack of sentiment, the lack of positivity there? gerald: it is not only that. the lack of sentiment reveals itself in the decline in the number of permits being taken out. last month all those starts were not down as much as we thought -- as we feared they would be. permits reflected the planning now. you're not going to start working until -- you take out a permit now, you're not going to start until february or march. if we see a decline even more, the industry will be in real jeopardy. lisa: do you think there is a 10% the client in pricing at next year, housing prices follow by a rebound in 2024?

what is the nature of the rebound if it isn't fueled by rates but fueled by a lack of demand exacerbated by a week spring season? gerald: the rebound will be dependent in part on the fed slowing down and interest rates coming down a little bit more. there is still a great deal of pinup demand. the housing sector never got back to full production after the great recession. we were just about to come over the top and get back to running on all cylinders when the pandemic hid. there is still a great deal of pinup demand. that demand combined with growth in other areas of the economy will bring us back in 2024. tom: i sat with a guy once, i think the kitchen caused a quarter of a million dollars.

the rap here in america is homebuilders have been forced into only building mansions and mega properties for the fancy rich people, boxing out the greater middle-class in homeownership. now you have got the overlay of private equity money like blackstone when the scare tactics are buying up hundreds of hundreds of homes. how does this play out? you have only been doing this with nahb for a few years, how does this play out, how do we get back to middle-class homeownership? gerald: that is something i have been harping on for a long time now. this situation is caused by one thing, bad policies. policies that repress the ability of a builder to build a house for a certain homebuyer. they just cannot do it and make it pencil out so they are forced to build what they can sale. they can sell to the rich and

the upper-middle-class, the affluent section. we need to get our policies back to where we are promoting homeownership. through the tax code, which it doesn't anymore, through subsidies, but most importantly through an evaluation of overall american housing. that hasn't happened since 1990. tom: i grew up in this. i can tell by your accent it is not north carolina, it is south carolina. i want to build a $242,000 home in south carolina somewhere with four bedrooms, a two-car garage and a kitchelook like it is out of a sitcom in hollywood. we are not building those homes are we? why? gerald: we can do it in places like the carolinas, texas, florida, they keep regulations low. in places like new york, massachusetts, california -- tom: ok, what does new york needed to do to begin to mimic

the success of the carolinas? gerald: reassess its regulatory policies. i will give you the extreme example. san diego county, california where over 50%, 5-0, the cost of building a home is under regulatory compliance. that is why san diego county has housing have and housing have-nots. lisa: going forward after 2024, what will the nature of the housing market look like given that it grew up under this ultra low drop in rates? do you see a slow grind which -- slow grind with much more stable valuations? gerald: yes. a return to pre-recession normal -- you see that brings stability

back to the housing market. housing will always be a good investment because it is subject to so many policy destinations. you will see a much more stable market in 2024 and beyond. tom: gerald howard, thank you so much. he is the nahb. what percentage of people watching some of the major east coast, california's general statement? the dream is gone. lisa: you are talking about different places with different dreams. the san francisco question of you people working from home, where do you go in terms of the san francisco real estate market?

you have the flood into coastal areas. how this shapes out given how much it has been up. it is going to be a big question. this is the hardest thing talking about the u.s. housing market. it is so different depending what region you are looking at. tom: i agree it is different but there seems to be a polarity in the size of the land in the south and radically different economics versus almost the heartbreak we see in the greater new york area. lisa: basically low taxes. move there. tom: some of these taxes i see are jaw-dropping to say the least. equity markets, 1% moving the dow. we did that for jon ferro. a stay with us, this is bloomberg. bloomberg. coming up,

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tom: tom: good morning.

preparing for the next hour. right now the challenges of europe, the many challenges. we heard from deutsche bank many months ago on a difficult february morning europe at some point we need to rebuild. the appropriate moment to speak with the finance minister of germany, christian lindner. here are now in berlin, maria tadeo. maria: we are joined with the germany finance minister, christian lindner. inflation, i don't want to get you to comment on the ecb, but when you hear inflation is now the number one priority, we have to bring it down, there are no questions, is that a good thing

for you? christian: yes. it is a part of the language of the ecb and its measures. it is our top priority as well to bring down the inflation rates. they are a serious risk for economic development for people and business investment conditions. it is our fiscal priority to reduce inflation rates. it is the responsibility of the ecb while we play our role as government. maria: you say this is top of my agenda? christian: top of my agenda. not only now. when we hosted the g7 meeting in petersburg, we argued bringing down inflation should be our top priority. this has been before the policy change of the central banks and

it proves to be wise to do so. maria: that is for inflation but then there is a growth story. there is a lot of negativity around the german story in the short term, the energy crisis, the blackouts, the gas. when you look at the german economy do you worry about a recession? do you predict a recession? christian: this year has been difficult. we were harmed by the russian energy war. to hide dependence on russian energy. but now we have changed our policies. we are -- with lightspeed we are improving our energy infrastructure and bringing capacity of renewable energy to

the grid. who thought germany would the able to build new energy terminals in less than one year? this is the very best moment to invest in germany. the very best moment. maria: let me ask you again, on the recession, is there too much negativity built on the german story? some people say a recession is inevitable. christian: we will recover fast. in the midterm, i expect very positive perspective for the german economy. we are improving the framework

conditions for private businesses. immigration into the labor markets will be less bureaucratic than it had to be. we invest a lot public and private money in the transition of our economy. there will be a some tech benefits for investors in germany. after fighting inflation my second priority is strengthening the german competitiveness. and we will do it. maria: the crucial question, you like germany, you speak highly about it. you particularly like cars. would you look at the inflationary protection act, -- is that something that worries you?

are you on the phone with your u.s. counterparts, what do you want to see after this? christian: german car manufacturers are competitive. we mustn't fear tesla. german manufacturers are innovative and competitive. they have plants in the united states as well. they are less harmed by the inflation reduction act than public opinion in germany thinks. on the other hand, i take the inflation reduction act seriously. i have my concerns regarding fair level playing field between the u.s. market and the european

union. this is why we need to negotiate in favor for european businesses in the u.s. markets. maria: you don't want a trade war? christian: we have to avoid any kind of trade war. instead of trade war, we need trade diplomacy. we need pre-trade agreements. we have to make efforts to find a level playing field in the perspective of free trade between the u.s.. maria: what are your thoughts that yes, europe is a mess but why should we give them any favors? christian: who we are, we should be preferred trade partners. my vision is a free-trade zone

of liberal democracies in the world. one of the first steps could be to improve trade relations between the united states and european unions. we would benefit from this idea. there is an openness on the u.s. side. i remind you of janet jones idea of --. maria: today president zelenskyy will be meeting with president biden. it feels ukraine is worried about lack of momentum and lack of support as the war goes on. will you for this bill no matter what? there is a very serious question about reparations and what to do about the central bank assets.

who is going to pay for this? we are talking a trillion dollars. christian: european union has decided the macro economic assistance. 18 billion euros next year. to support the state. we will continue to support with military goods such as artillery. the sooner the better. then we have to find a base for the reconstruction of ukraine.

the ukrainian economy itself, they have very good perspectives. natural resources qualified labor force. they have a very good perspective after the war. maria: what is going to recover faster, the german economy or the german international team? the world cup was not good. christian: the economy. the economy will recover faster. maria: christian lindner, thank you so much. tom: you are ruthless. maria, i cannot wait for the friendly of germany and spain. we will have team coverage. maria tadeo in the german

government with their finance minister. 4:30 pm, a press conference. president biden, president zelenskyy.

jonathan: live from new york city, trying to stage a rally and the countdown to the open starts now. ♪ >> everything you need to get set for the start of u.s. trading. this is bloomberg, the open with jonathan ferro. ♪ jonathan: live from new york, we begin with what a year for bad forecast. the fed