>> nothing has really changed between the end of 2022 and 2023. >> we are seeing inflation normalize, that should support some of the values. >> a lack of inflation is not a bad backdrop for them. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa. jonathan: live from new york city. good morning to you.

futures unchanged on the s&p. confirmation from amazon as they will be eliminating 18,000 jobs. you do the math, amazon canning 0.011658% of employees, that is 1.17 times 10 minus two employees. how about scientific notation on a thursday. you need that. it is serious for the corporate side. it is not ripple on 3rd avenue, it is the corporate side appeared -- it is not people on 3rd avenue, it is the corporate side. would you pushback against that based on what you see? tom: they over expanded to. i do not think cfa types should find anyone guilty of trying to gain the pandemic -- blaming the

pandemic. they are going to pay it, it is over, we are going to appear back there are going to eliminate these jobs and higher other jobs, tech jobs. lisa: this is the actual decision, some of these jobs are tech jobs, these are the warehouse workers. what we are talking about significant proportion of human resources. questions around the echo devices. is this the tip of the iceberg from the tech companies that are trying to right size in a new era. jonathan: and said this year's review had been more difficult given the uncertain economy and we had -- hired rapidly over the last several years. salesforce, the leader of that company had to move people leading into the economic downturn.

we'll get back to the question you and i asked at the end of last year. are we talking about the excess of the last two years or the 10 years? this is the adjustment. it had been a 5% federal funds rate for this industry. it lisa: a lot of people think tech has not seen the brunt of it. there's more to go because it is not just a repricing of the assets as a result of high rates. it is a rethinking of the industry. tom: amazon makes 12, 13 14%. walmart makes five to 6%. amazon is profitable, they just overreached in coming out of the pandemic. that is all. jonathan: futures almost unchanged. futures up -- tenant

of 1%. 6882. we reset for 20 tony three. 2023. tom: it is a pretty resilient market. jonathan: yesterday, the fed speaking. we will catch up in about two minutes time. lisa: today at 8:15 we can get a climate change report. then at 8:30 we get a unemployment reports. we are looking at different ways to try to paint this. i try to do it for only the past

two years. you can see it has not picked up in terms of how many people are filing for unemployment benefits. it does continue, the house of representatives are adjourned until noon today. it is to avoid the public defeat of kevin mccarthy. tom: somebody stopped me on the streets and asked me this question. can they do options of treasuries if the house of representatives is not in session? lisa: i believe it closes the potential deliberations. jim bullard of the st. louis fed coming in at 1:20 trying to follow-up on what you were talking about yesterday. they talk about terminal funds right in the balance of risks being friendly with inflation

and not necessarily torpedoing in the economy. perhaps looking up today a little bit more. . jonathan: here's a line from morgan stanley. let's get the russ's view on that. >> there's this tension in the federal reserve. if there is not a new thing. you're concerned about the market getting ahead of itself, whether that is a function of the stock market going too high, credit markets getting two types. there is a concern that if financial conditions ease off too much, is that going to hamper their fight against inflation. tom: i look where we are. we have to piece this together.

you have the responsibility to piece it together with portfolio allocation. how are you reallocating? russ: we are going in 23 the way we left 22. we are not making a major change. what does the portfolio look like? underweight equities, underweight bonds. we are resizing and carrying the portfolio. we want to be able to earn income for our clients and focus on quality stocks. i do think we will get to a point later in the year, probably the first half where we are closer to the fed privet. at that point, i think you will get a very good tradable bottom. it is not the point where you want to load up on risks. tom: are the cost-cutting going to be efficacious? as every sector goes on and recalibrate as we see from tech. i do not mean to micro collect.

are they going to be efficacious in helping their markets, are they going to be having impact? russ: you raised an very important points. big tech. their cash flow, profitability is enormous. margins are still close to a record high. companies are going to try to manage costs that are going to be climbed up a little too much during the euphoria post-pandemic. these are still a very profitable companies. we are not talking about 2000 when you have the nasdaq 100 and barely any profitability. lisa: you think that with all of this backdrop and the potential payment with layoffs, there will be a perfect. what does that mean -- ba privet? be a pivot? what does that mean?

it is not practical to expect cuts this year. russ: where is the terminal funds fed rate. is it five. five and a quarter? the conditions force them to go much higher than that. i think that is the question the market is trying to resolve. as you see signs of acceleration and you get clarity, that is when you get a more tradable bond in financial markets. lisa: do we get a significant have it if we do not get -- pivot that we do i get financial trade-offs? russ: financial conditions are front and center. they told us what they are focused on the. if they have to focus on one factor, it will be the labor markets.

headline inflation's just coming down, goods inflation is coming down, what has been resilient is the labor market. that is where i think the fed is going to focus. jonathan: can you help me to understand what is going on with the labor market. >> are up. they picked up --quits are up. that screams a tight labor markets. i see this news from salesforce, amazon and others as well. what should i believe? what the official data is telling me or the core prices? russ: it is industry by industry and that is why it is a difficult labor markets. we are seeing layoffs in tech. if you look at other parts in the labor market, hospitality,

labor market, health care. these have lost hundreds and thousands of workers during the pandemic who have never came back. it is like quick rate is still high -- quits rate is still high. parts in the market is playing catch-up with all of the dislocation what has happened in the pandemic. we appreciate it. jonathan: tk, can you make sense of that? tom: i think it is a number of things. i am fascinated how bullard recalibrate. the job market is so strong you need a 7% rate to begin to adjust it. that is large reach for me. jonathan: the distance between three and a half and four and a half is a lot of hard work.

jonathan: especially because of the structural tightness in the labor market. we were talking about how the older and younger workers may not come back. jonathan: jobless claims coming up at 8:30. then onto payrolls. we come to the first week of the year. tom: i do not remember 20 30 years ago. i took the tree down. jonathan: next year we are getting a fake one. tom: i am like him i am coming through, i am taking down antiques. next year we are getting a tree like pharaoh. this is bloomberg. >> with the first word from i am

lisa mateo. lisa: amazon cutting more than 18,000 jobs in the round of layoffs and at the corporate ranks. most of the jobs at human resources. the company has 1.5 million workers worldwide. on capitol hill, kevin mccarthy and republican still have not reached a deal to make and the speaker of the house. he has been defeated in six rounds of voting. 20 hardline conservatives are blocking his bid. there has been a lot of process late negotiations, still no resolution. federal reserve officials have reaffirmed their resolve to bring down inflation. they warn investors not to underestimate their wealth to keep interest rates high for some time. the u.s. is edging closer to send armored vehicles to ukraine. on wednesday, president biden

acknowledged that fighting vehicles may be a part of another military aid package. the bradley is a true carrier a quick we anti-missiles. france said it will write write ukraine with global --. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪

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>> they want us divided and to fight each other. that has been made clear by the popcorn and when kids and -- popcorn and blankets that are coming over there. >> we are showing the american people that this process works. >> for my mom of the spread and aggravation of a disease faced with political chaos, there is a sharp question whether the political classes able to govern. jonathan: a few names being

floated -- the debate continues. tom: the distinction is in the note this morning, as lisa said in the news flow, mccarthy has got the up in that. he is so desperate he is giving an upward one representative were one can push a speaker of the house of representatives out. that was unimaginable. jonathan: this is the future of democracy. i think that should make us feel deeply uncomfortable about what is taking place. what would you prefer? would you preferred this or what happen only bureau a couple of months ago? lisa: the future of ms and the

muddled or something -- it might be more representative of the people's wishes. there is a question of getting work done during this week, during the year. there is a question about whether there is a desire to bring things to a halt because of how disorderly some numbers think the overall process is. it raises serious questions. jonathan: incredibly rare for this to happen. jonathan: yeah. there has been other times in the 19th century. tom: it has unusual. -- unusual. i noticed in the afternoon, what will speaker mccarthy, speaker to be mccarthy, speaker designate mccarthy, what is his to do list this morning before the session starts? >> count the votes.

does he have them? at least try to get 16 of them to vote for him. he can also try to get individuals, they're likely not going to come from the democratic side. bring down the number needed so he can win the majority. if it is not every single member voting, he does not need to 18, he needs much less. that happened in the past. he needs to get the math sorted. at this moment, it remains to be seen if he was able to move the needle last night. talks went late into the evening. what we are hearing, some of these concessions, which is giving away the kitchen sink are falling on the table, like one person, many one individual can call for a vote of confidence and oust him. what you are seeing now could foreshadow another fight for the speaker later this year.

jonathan: why does kevin mccarthy want this job? annmarie: when you are throwing out other names of individuals that potentially could be named, like skill ease, patrick mchenry, who having has the same stylist as tom. you think of why people want these jobs. it is really about who could win the numbers, more so on who wants the job. , credit has a long history -- kevin mccarthy has a long history of wanting this job. he had thought he was in to 15. he has waited in line on his time and he deserves this. lisa: what do mccarthy's opponents want? annmarie: depends on who you ask within this group? the majority of these individuals are ultra maga, many of them aren't election

deniers, most of them are back in the former presidents. they think he flip-flops. they do not want to see him when the gavel. if he is not able to sway the few of those, maybe just to not vote present for him, he could be in trouble. a deal could always be cut. for some of them, it is making sure you have more conservatives on really important committees, making sure there's this one individual of motion to locate -- vacate. for some, it is about changing the rules of the game on the floor. lisa: you started talking about some component that supported the former president and our election deniers and very much for the former president trump. he came out and say, vote for mccarthy.

what does that say for the so-called trump movement moving beyond trump? annmarie: we talk about having the house of representatives having a speaker. the conversation for 23 and a 24 is the presidential election. the former president is announcing he is running. they are shrugging off his urge over to social. he was making calls to a representative who went on the floor who said we are getting calls from her favorite presidents, which he said he needs to call mccarthy and tell him not to vote. they are ignoring his pleas. they do not have the confidence in him in terms of leading this party to 2024 if they will not even take his advice on who should be speaker. jonathan: what is happening with

the former president's campaign? annmarie: he is not really doing rallies. he just seems to be in mar-a-lago making some of these calls deciding on whether or not these issues he want to get involved in. people i talked to say it is pretty much not happening. it has disappeared. tom: i fired my stylist a year ago. just a year ago. it was emotional. jonathan: can you tell me how things developed after you got away?

tom: we get a job search. this is older burberry from way back. it has a bigger statement. jonathan: that was before chris bailey. tom: this was four stylists ago. jonathan: jobless claims coming up. just reflecting the labor market we have had so far. when are we expecting numbers like something around 250 k? tomorrow unemployment in and around three and a half percent. more constructive people in the market are saying they do not see the numbers. lisa: you access what we saw yesterday -- access yesterday about we saw.

you can see the openings upwards for october and coming in stronger than expected, more than expected, still about 1.7. tom: it is stunning move from october. rice mentioned this. we have come from a negative one two just stunning accommodations this morning. that is what they are watching in washington. jonathan: futures faith 10th of 1 -- futures a tenth of 1%. this is bloomberg.

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jonathan: 26 minutes away from the payrolls report. equity futures up. two hours away from jobless claims as well. good morning to you. the s&p 500. guess when the under performance has been over the last couple of days? energies and equities. crude is down 9% plus to kickoff 2023. tom: good morning all of the memories -- they did some

academic survey once, the correlation of net gas prices to the temperature of a subway church is about .74. it is warm in europe. record warmth. it was bizarre. jonathan: you know what is meant to happen, we are going to get absolutely pulverized. get comfortable for spring. tom: our conversation yesterday. this call switching thing. jonathan: i think it is really interesting to see. china is thinking about -- there has been -- china is thinking about trading coal again. there is a huge dispute on that.

she thinks the equity market is far too depressed. not the s&p 500. when you look at price hikes on the s&p, which is not much, if there is a gain at all, she is advocating buy stocks but thinking more on the moment. likewise with the energy story and staying on board of that. they do not like the s&p 500 in the index level stories. tom: tom is scheduled to be with us here on amazon. right now, an update. let's dive into tomorrow's jobs reports. we have been remiss on looking at it. a 200,000 euros statistic. -- payroll statistic. can we keep job formation off of

nfp? >> we are seeing a very strong job market. demand is still there. we still have not seen demand come down in a substantial way. euros have slowed. it is really about breaking the levels and it is really not clear that signs from household yet that we are going to see an adjustment. we are going to see payrolls slow and the unemployment rate go up. we are not seeing much right now in terms of moderation. tom: what is the wage dynamics? the nuance of a wages you will study tomorrow at 8:30? rubeela: wages are still rising at a pace that are not consistent with the 2% target. that is what the fed has already

told us and what they know. we are seeing wage gains. they are still rising at a very rapid they have operated -- moderated. we have also seen average earnings come down. without the supply coming back, this is going to be a sticky problem. we are not seeing the improvement you would expect to see with this much tightening. this is what the fed is looking at. if there is no response, the risk is they go even more than what we were expecting. lisa: the market does not believe what you are saying and pushing back against this. the fed is going to blink and pause the couple of months. what do you make of this dissonance? who is right? rubeela: the fed and the -- are in the collision course and the fed is not going to step back.

the fed's message has been very clear. the focus has been on inflation even at the cost of recession. the foster markets adjust to that message, the better it will be. it does not seem like it is going to happen. i think the fed is focused on one job will come on one job, bring inflation down back to the 2% target. as we move closer to that rates, how are markets going to respond? once we get to that rate, the fed says we will stay here for a while. i think that is when the adjustment will happen. let's not be confused about this weird the fed has been clear about what their intentions arm. . we are seeing a potential for a soft cpi come next week. is that enough?

does this entirely late with the labor market? can the fed justify going faster and higher than many people think just based on the extent that we see in the labor market? rubeela: the component of cpi which is related to interest, they want to avoid a wage price spiral. that is what they want to avoid. inflation, if we look at our numbers, we will be expecting the first quarter to slowdown from the 500 two four. that is still well above unless we are predicting a recession that just results in a collapse of prices. that might get the fed willing to ease. that is not what we are seeing in the numbers and economy. tom: i have been reading paul merton's iconic academic study of inflation and champagne and the effects it has had. forget about the fancy talk, on

a social basis, how is inflation affecting us day today in america? rubeela: inflation has been a very huge factor in households -- in 2022. household balance sheets are very strong. we still have excess savings, wages rising at a pace that aren't keeping up with inflation. they are still rising at a pace that are above the pandemic trend. in 2023, as prices start to ease , they are declining on a year-to-year basis. we are seeing changes. the are a lot of stresses.

food prices are still high. energy prices are still very high. we expect to see some relief this year as prices continue to come down. tom: i find it to be an original jobs reports. how far is this jobs report from where chairman powell wanted to be? is he looking at the job report this autumn? is he looking at it in 2024? rubeela: from their perspective, they are expecting to see the commutative effects of what they have done so far and tightening to start showing up quickly in the first quarter of this year and going forward. we are just not seeing that demand and balance. you look at jobless claims and it is just not happening. i think the fed is caught in a

very tough spot. they have delivered a lot. they will probably have to deliver maybe 75 basis points. that is not clear that it will be enough. they will have to wait and see what the q much of fx are on the labor market and inflation -- cumulative effects of the labor market and inflation. jonathan: i am going to get to these minutes right now. this is how the risk is set up. two risks they have to manage. one risk, and sufficiently restrictive monetary policy could cause inflation to remain above the target for longer than anticipated. the other, the q much of effect -- cumulative effect of tightening could be more than necessary. my thought in november, they

thought the biggest risk was under timely now i have no idea. clearly, that was pretend because there is one group that thinks one and another that thinks another. lisa: this is where you get to game theory. this is going to be complicated. jonathan: we want the ratings. lisa: this is a game theory aspect. ok, fair. the question that i have, how many people on the fed to in balanced risks, but want to signal that they do not, they want to signal that the risks are asymmetric so that people do not buy equities? if they do not get a tightening of financial conditions -- for your that is how they transmit their monetary policy. if they transmit it to the market, the market is not

believing them. this becomes a real problem. the market has called their bluff. tom: i do not agree. they are exposed. they are slaves to the data. they have to wait for the data. they are finally going to see if the job market cracks. they are going to look at gdp. all of the recession gloom, has there been enough recession gloom? jonathan: i think you're both right. ultimately, it will depend on when the data comes in. goes to a financial conditions point. when it comes to those two risk and how you manage them, they are still concerned about outside risks of inflation. participants noted that, because monetary policy works importantly through financial markets, especially if driven by a misperception by the public of

the committees reaction option, would complicate the effort to restore price stability. they do not want us to be talking about rate cuts, even if it is someone on the committee thinking that perhaps the data will require for them to respond to rate cuts later this year. that is why they will carry on the same thing until they are convinced inflation has gone down back to 2%. lisa: the fed is going to engineer a recession and could quickly taken away by cutting rates. this is a more complicated economy. jonathan: much easier to say when you are -- in the federal reserve. the global liquidity market cio. we will catch up with her. i am looking forward to it. lisa: in us another round of votes on the speakership.

or lawmakers will meet again after kevin mccarthy failed for basic time to be elected to -- a 6th time. a lot of progress was made by conservatives did not make it easy and there was no resolution to the standoff. imf first directing manager is urging the federal reserve to press ahead with interest rate hikes. inflation has not turned the corner. she also expects monetary tightening to be more prolonged. china's new foreign minister says relations between his country and the u.s. should not be --. an op-ed in today's washington post. he writes, the world is clients enough for both countries to prosper. strikes in the british rail network reach a peak today.

train drivers, representative by the union are walking out following a longer dispute over pay. dell, wants to phase out semi conductors made in china by 20 to before. according to japan, the computer maker also has told suppliers to significantly reduce the amount of other components reduced -- produced in china. dell has said it wants to diversify its supply chain. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪

>> they are growth companies, they tend to want to invest in today's downturns and invest aggressively.

they are good at cost-cutting. they're going to be late on that. they are probably not going to do enough. it will take longer than you think. jonathan: you can find the interview on bloomberg.com and the bloomberg terminal. futures drifting a little bit higher on the s&p 500. lisa has dr. the data a couple of times. 8:30 you get jobless claims. we are seeing more tech companies delivered. amazon announcing 18,000 jobs to go, the most in company history. the ceo says amazon's difficult economy in the past and we will continue to do so. these changes will happen with long-term opportunities with a stronger cost structure.

that last line, this 18,000 have you deliver a stronger cost structure? tom: it is focused in on corporate hr and the rest of it. this is whole new territory. my guess is, i am going to be optimistic. they are going to learn fast and to find out how easy. it is vindictive. they know they can do it every february. jonathan: do you think they can tweak it? tom: they are going to learn like banking, wall street. lisa: this may be different because they are cutting the tech staff, white-collar workers. a lot of them will get jobs elsewhere. it is not like they are not in demand. it is one of the most in demand industries. if they are cutting talented individuals, you will imagine a

lot of them will suck them up. jonathan: going in the days where you have the special floor were all of the quote kids get together and they throw things across the board and you see what sticks. lisa: i thought you were talking about the massage room. wasn't there all of the services? jonathan: i am talking along the lines of the -- this department that was just other --. i not sure if there's space for other ideas. tom: exactly. this is exactly from david rubenstein yesterday. all of a sudden, gravity is back. gravity is back in amazon. jonathan: that is a big change.

we will take a different take on this right now. alex is looking away from the financials in the broader social aspect of these jobs announcements. what is the social ramifications in salesforce? alex: i think as you guys have been alluding to come of perennial growth story. you go to these companies, these companies have not really done big layoffs before. you have to wonder whether there is a affects culturally on the inside. they're called financial stories. you look in salesforce, they have been enjoying 30% growth for the first part of the decade. that is going to come right down. all of a sudden, far from being growth stocks, they have to focus on the bottom line.

i think the number is interesting when you compare amazon and salesforce. is it looking at revenue for employee. it has come down because amazon overly expanded. salesforce has continued to climb. the revenue number itself is not growing quickly. as mike wilson was saying, they are getting in earlier than some of its rivals in ensuring that it has those healthy margins to perhaps be considered more than a valley category then growth as a consequence of these efforts. lisa: you have the retail segment of amazon. all of the boxes people get delivered, the fact that there may be few of them, but they have the tech spending side of things. this comes after microsoft had a warning sign about a potential

reduction of cloud computing spending. how does that underpay a significant portion of this move and indicates a broader reluctant by businesses to really spend on the capital infrastructure? alex: i am not sure if there is not to be a reduction in cloud spending, there may be a reduction in the growth of cloud spending. i think when you look at amazon, the narrative that was over in the 20 years came to be excepted septic by the market, if they wanted to be profitable, they could be. they could flipped a switch. the consequences has to do with aws, which has huge growth margins. the consequence of the lockdowns, they added extra headcount and a million people between 2019 and 20 to me to. more than the u.s. army, they have a far greater cost base. i feel like it is harder to flip that switch.

18,000 is a percentage of one million. it gives them more flexibility if they want to return to that narrative. tom: rightness jeff bezos fit in this? is there any validity to that? alex: he is the pioneer lay terms of amazon. it is something a lot of companies have followed in investing in growth. in the end, it will pay off. the lockdowns showed if you grow too quickly, you are left with a redundant capacity where you can't use -- in the future.

clearly that is hard for amazon employees. we have not seen big costs to the tech stock appeare for . they seem to be still in play. jonathan: can you describe the culture from amazon? how do the people from aws fell about the culture? alex: i think they recognize e-commerce would not exist. you think about people flying to seattle from london happens to go have meetings at the headquarters. they fly coach. they do not get the business class seats you might expect

from big tech. they tend to expect we are going to reward you by giving you generous paychecks and stock options. it is a pretty lean run organization. there's a lot of tech going into that stuff. it does feed into some of the stuff aws does because improved tech in one space, that is something you might be able to prioritize from a software perspective. jonathan: thanks for the clarity. one million rose from 2019 to 2022. have we ever seen anything like that at any point? tom: no. you have to distribute the product, that was the plandemic challenge. we will be talking about excess.

that depends on where you look. there's a company that hired one million people in three years, that just sort of blows my mind. lisa: are we talking about the excess of the past two to three years or the last decade? when you think about tech as a growth industry and how much it has assumed other industries in the other retells and other corporate offices, how much of this is paring back and taking as the tech world enters a new phase. it is no longer growth, it is more of the establishment. jonathan: i am just wondering if there is more to come from amazon, the cost giant. lisa: perhaps they are not going to publicize it as much.

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>> nothing has really changed between 20 to me to -- 22 and 23. >> if we are seeing inflation normalize come of the stock. >> this is a bloomberg surveillance with tom keene, jonathan ferro.

tom: good morning. jonathan: this is a bloomberg surveillance. equity markets not doing much. in little more data coming out this morning. no more fed hikes needed. tom: here's the word, it is cumulative, you have to go to vice chair, how do these rate hikes add up and how you would handle that, what i would call academically original territory. jonathan: he wants to take rates through 5%. he is conditioned by the experience of the 1970's. he does not think this fed should back away anytime soon. lisa: he basically said there

should not be a consideration into the fed is confident inflation is pete. wherever the end point is, we will not know if it is high enough to bring inflation back down to 2%. then you have the san francisco fed saying the demand side of inflation has came down dramatically. lisa: the 1970's weighs in on these guys so heavily. given the experience of the 70's, have inflation flare back up again. tk clearly weighs in on them. jonathan: tom: i strongly take your points . as you mentioned, this is widely symmetric. they are scared to stand of the first rate cut that permeates

monetary academics. jonathan: once you start cutting, what is this market going to be? did you enjoy the fed yesterday? tom: it was good. jonathan: let's work to this price action to get you up to speed. equity futures unchanged on the s&p 500. tom, crude up. tom: big deal. crude is a big deal. pushing against it is a china opening and some enthusiasm. the feeling i get from the $100 barrel crew, when it goes, it is going to go. we just do not know where it is.

it later this year, that is our call. lisa: we were talking about where the fed is gaining out rates. i have to wonder how much of the narrative is going to change if we get another pop in energy prices. his jobs data ahead of the claims this morning. i keep going back to this. i keep thinking about what you said yesterday. when i took a look at a longer term view of jobless claims to see how distorted things were during the pandemic. and has flatlined on any scale that you look like -- look at in terms of the number of people getting unemployment benefits. one does that start to pick up? people are saying it will happen. the house of representatives continue with their deliberations. they have been a joined to avoid

a public seven defeat. they are going to reestablish and they cannot do anything until they have a speaker. raphael bostic at 9:20. do they give a sense of where they fall on these balance of risks? all of the various machinations of fed speaks. are they willing to go fall kashkari and her say we are going to torpedo any growth and keep going because we will not even know if we have seen big inflation. jonathan: that meant something very different to years ago. tom: what would we do without her? you and i would have never came up. jonathan: lisa is a full class -- full-time world-class economist.

the global market strategist joins us around the table. thus -- does kashkari have friends at the federal reserve? do you think he has company? david: i think this is one of the instances where, what the market wants to hear and see is very different from what the fed is planning to deliver and to reintegrate the point, they are haunted by the 1970's. they are more than comfortable. they are more than comfortable overdoing it in a area on the side of caution rather than having inflation becoming more ingrained in the economy. tom: what's do i do if i go to a big fancy bank and i took the right courses in school and i got cratered last year like none of us have ever seen? what is the new 60/40 this year given the micro backdrop? david: despite the selloff, the expected return from the 60/40

portfolio is superior to where it was a couple of months ago. what i would say about 2022, the issue at hand and why diversification did not work was because interest rates and inflation was not the center of debate. there's is one variable when you are resting stocks and bonds. if you cannot figure out what rates are going to be, you cannot price stocks or bonds. when you think of this year, people are worried about recession. if we do see growth fears reinsert themselves over the course of the next couple of weeks, i do think it will reinsert itself. i'm not sure that 60/40 is dead. i think it is looking better today than it was 12 months back. lisa: what do you take from the jobs data we have been getting that indicates a very different picture? david: people are looking at the economy in black-and-white and are saying growth and recession. what they do not understand, the

echoes of this pandemic are things anybody is not really to comprehend. we have a very strong labor markets. we have similar sectors in the economy that are effectively aligned with our average. i actually think what could avail the economy out is a labor market that proves to be resilient. a labor market that too often because that is what they want to see happen. what we are seeing here is a reflection of the pandemic echoes. businesses not wanting to get caught on the other side of the train where they were for the better part of the next couple of years with not enough workers. lisa: basically coming out and saying that perhaps things will meddle along and we will avoid some big downturn in the economy. that does not mean that stocks are not going to get hammered. there is a chance that they will. david: everybody has a different take on earnings.

on average over the past 75 years when we had a recession profits have fallen by 3%. if you actually isolate, which i would argue is a inflation environment more similar than the one we are in today. the average decline was 15% year and i recognize that if we have a recession in your, corporate profits are going to decline. it is about pricing in the magnitude of decline. i think people need to be overly pessimistic. tom: to your good points on full kashkari, there is this event being made now with a lot of certitude out there. i do not know where it comes from. lisa: full kashkari moves to the mike wilson --. consider the question we were just hearing from david. this issue of profits.

can companies continue to mend profits if you have consumers who are having more -- with what they spend. jonathan: that is a difficult call you have to make on a company, like, say, tesla. he thinks we could still grow 30 to 40%. we have a rates pushing 5%. the last 12 months has been a story. tom: you guys have set up a more responsible determination of the set of outcomes in june, september. i hear others comically talking with certitude, almost a single point or tent of a point. why are we guessing with such accuracy?

haven't we been humbled enough? david: not only is interesting to see people so confident, so confident we will have a recession this year. the most predicted recession in the history of the data. depending on where you look in the economy, you can tell yourself whatever store you want. the labor market is very strong, the economy is not going to dip into recession. look at the interest rates, they have rolled over because of what the has done. taking a step back when we think about the distribution of outcomes to your point, it is not as binary as a lot of people believe it to be. it does not need to be black or white or growth or no growth. it can be an environment that we muddle through. we do not see the maximum violent side -- downside. jonathan: it is consensus. everyone saying the same thing with settled differences. thank you.

did you watch football yesterday? tom: we did the world cup weird thank you to everyone into football. it is an thing, we are watchingy four years. one guy did not participate from norway. all of the memory and what we witnessed and the joy we witnessed, this guy is special. jonathan: how many games have they played? 16 gangs? mes? i think it was about to make three. 23 goals in the complete season. tom: he got no love during the world cup. did i do ok? i could not have done that before i drink the pharaoh t.

just one trick and he doesn't better than anyone. he only wants to touch the ball when he is going to score. that is it. tom: he will mature into that, right? i think he is that special. jonathan: ok. from new york, this is bloomberg. lisa: it is another sign that a tech industry slump is getting worse. amazon cutting 18,000 jobs in a round of layoffs aimed at corporate. most of the jobs are being cut at amazon's retail division and human resource areas like recruiting. the company has 1.5 million workers worldwide. the u.s. is urging closer to send armored vehicles in ukraine. bradley fighting vehicles may be

another military aid package. it is equipped with antitank missiles, his five millimeter cannon. frank says it will provide ukraine with tanks. commission is pushing back on to buyback u.s. is plan. that deal is value at $1 million. the agreement does not include enough detail to close the deal. finance will provide any requested information. i am lisa mateo. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. . ♪

>> we have a lot of trouble. sorry for the noise. in a lot of trouble with the attacks on our that is what has worried me more than anything else. jonathan: the president of the united states weighing in on things in washington dc. we will pick up on that in just a moment. here's a snapshot of the market for you. it going into jobless claims in about a hour and 13 minutes.

equity futures up purity euro-dollar is not doing much. to the euro's favor, euro strengthening and little bit. china rally bounced back over the last couple of days. wti at 74 36. tom: future is up five again. i think there's a lift to it. ukraine's changing story. friends may be sending some tank. -- france may be sending some tank. the united states may be sending some vehicle. emery is with us from washington. they are not out of the movies are they?

emory: now, not exactly. you do see a push, at least ukraine is pushing the west to make sure they continue to extend military weapons. what you heard from ukraine, they are very concerned. this was sent to abc news in march. the fighting started to get hotter in march coming out of the winter months. annmarie: russia suffered a major blow over the new year's holiday and they even admitted it. they talked about the fact that they actually lost more people than they were expecting. this is the biggest casualty event that russia has admitted since the start of the war. 89 people. the defense ministry says this came down to the fact that soldiers were using mobile phones. new year's eve is a incredibly important moment in the russian culture. they were calling home. that is likely have the

ukrainians were able to find them. tom: i saw the reports. it is almost like a domino effect. france tanks whether tanks appeared is what we are going to see in the next six weeks, a arms buildup for ukraine or do we need to anticipate a war that heats up? annmarie: the foreign minister spoke about the fact that that process has already started. he did not want to say where they were, but the process of the u.s. transferring the missile battery has started. there's a bigger issue. nato might actually change the rules. 2% of your gdp. this is really what ukraine has made -- for a lot of countries that never hit the 2% gdp on a defense spending target, it will no longer become a theme. we are not there yet.

it will become the base. if you want to belong in nato, you have to spend 2% on the gdp defense spending. there potentially could be every thinking of how mental members think about defense and spending. they are going to have more stockpiles. lisa: we have been talking about the turmoil in the united states. how much does that affect the leadership role on the international stage like nato? annmarie: if you're talking about more funding to ukraine, right now in the spending package and the defense bill, they have got billions of dollars. now the road, when you are looking at a house that does not have any members or speaker, it is difficult to see a path forward in the house of representatives for a lot of aid to ukraine. kevin mccarthy had already made it weird a few months ago -- made it clear that there will not be a blank check cleared it

seems very clear these individuals cannot agree on a speaker. how will they view future potential aid packages over to kyiv? lisa: a number of people have been talking about the dissidents a between what has happened in the house yesterday and the minority leader mitch mcconnell was in kentucky yesterday to talk about a new bridge that is going to be built. some of the infrastructure spending that was put out there. others are saying we need to cut back because we are spending too much. how is this being received, the mitch mcconnells approach versus the house? annmarie: the president of the united states is standing beside someone he calls a friend by does not agree with with many issues, but gave him credit and said mitch mcconnell, because of

you we were able to get this infrastructure over the line. it bridges, roads, internet, these are things most americans want to see coming out of congress. they liked the idea of heart infrastructure being fixed in their town, especially this bridge, which has a lot of history. mitch mcconnell is talking about a different path forward. a chasm of what you are seeing in the house. he is talking about working with a democratic president and a bipartisanship that he wants to see governed. at the same time as they were speaking, you have kevin mccarthy trying to have some backroom deals with a altar right wing with his party that does not want to see bipartisanship in washington. very different approaches. this has been a big story for the republican, not just this year, but the past decade. it is going to be the thing that dogs of the house over the next two years.

this is the first of many fights. jonathan: the last thing you want to do is draw attention to itself. reports were circulating yesterday that the president might be visiting the border. annmarie: he was asked about it because he was going to mexico on monday. the three amigos meeting between mexico, canada, america. kind of like you three. they have not met since pre-covid. i will let you guys decide who is who. that has been huge issues. the president has asked about it, it is my intention to go to the border. it is a moment they are going to draw scrutiny with these photos if he is at the border that the republicans have been bashing him for months on. jonathan: our bloomberg washington correspondent. tom: i wonder if i was lucky.

she nailed it at like four topics. jonathan: you must have noticed. she sought to him like a child -- talk to him like a child. what i am trying to say. anyway. coming up deborah is going to be coming up very shortly and are talking about the bond market. tom: a wonderful morning note. he just said the theory is not there. get off the metrics and start looking into, since of a master fiscal him. pandemic. he also pointed out that today is maybe the first day or notes

outside of one year, there is no negative year. it is sort of cool. lisa: i got distracted. i am listening to you. tom: all of that good stuff. tom: if i just back up. lisa: negative yields, let's go there. it is really interesting. it is zero. it is japan actually going to e nd? jonathan: this is bloomberg. ♪ sale sale godaddy. tools and support for every small business first. sale godaddy. tools and support for every small business first. girls... the chess club has gained an edge on our bake sales. we need more ways of connecting with customers, fast.

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david: equities up. here are your numbers. on the nasdaq, .25%. more cuts, amazon cental avenue 18,000, we pick up on that in a moment. i want to talk about the bond market. lisa and tom were talking about the end of an era. approaching 20 trillion back in 2020 and now we are down to zero. your 10 year, 36845, and responsible for this, the shift away from negative rates over the ecb and the changes at the swiss national bank, changes across europe, changes of the

fed as we go from zero to four plus in about 12 months and, lisa, potentially changing in the coming quarters. lisa: this is shocking to see zero. as tom was mentioning, this is notable because of how much this distorted value is. have we seen the full fallout? last year's devastation 60/40 or is there more substance to to come. jon: from the ecb, the boj, they might be getting in the mix as well. not doing something fishy necessarily but perhaps interest rates. do we take the next step of the boj? i think some -- some people think they will. tom: when they announce the first move down to 130, jordan rochester has been brilliant on the uncertainty of what they do. i'm sorry, they will react out gdp, nominal and real gdp come off of a supposedly china reopening. there is more theory of yield

curve reserve. jon: let's talk about crude, brent and wti. we've had a move lower, 9% plus on crude and the last couple days. a real move lower trying to bounds. wti, 74.40, a by 2% -- up by 2%. lisa: something you talked about, is it with the crude prices the way energy stocks go or is there some divergence. that is one of the movers we are looking at, sort of ironic considering the 9% move we have seen in crude over the past two trading sessions before today. exxon shares are above -- are up on the day, ahead of the open, this is not necessarily because of the lift in crude but because people are looking at its refining business saying it can refute that -- saying it can refine that better than others. how does america adapt and

adjust? these stories highlight how they adapting and adjusting. amazon it is 18,000 job cards, how much do some layoffs bolster margins more than people expect in the tech complex? then you have western digital, emerging of a company potentially a data storage maker with a japanese company so it is merging its job cuts and dominance and with it comes to eggs on considering we see the potential for more refining when that is one of the preeminent concerns. jonathan: the vix really much -- tom: the vix, we very much come into this economic data. we have the jobs number, sorry january 12 this toki. jonathan: we have to talk about the ism as well. some 50 going in the wrong direction and you're like what is happening with the prices paid, the index level was in the 30's for prices paid. tom: does that indicate disinflation? jonathan: it indicates good disinflation, i think we should be clear. but then you have elevated quits level, job openings at 1.7, lots

of different things in different paths. this is always a risk when you have guests because you can pick a narrative and pick data to support it, can't you? lisa: david lieberman said that, this is a market where you can justify any narrative you have so where do you -- tom: sounds like "bloomberg surveillance." [laughter] jonathan: there we go. -- lisa: there we go. jonathan: you can say look at the jobs data, i can rattle off a long list of companies delivering massive layoffs including amazon. tom: again, the pandemic was a massive one-off and we are still -- jonathan: we are living it. tom: we are living it. that is the phrase to say. if you are a part of global wall street, stop, listen, get out the pen and pencil. she has decades of experience and deborah cunningham has, without question, the most listerine beginning of year

note, short, sweet, and direct. it's not over. deborah cunningham, you know the worst bond market ever, down 20 standard deviations. we bounced back one, we are negative for standard deviations off trend. the majority have a hope and prayer of recovery as you say cash is king. discuss what bond price will do this year. deborah: our overall goal is to maintain a goal from a bond perspective that is basically the coupon, so maybe a little up from a pricing perspective, may be a little down, but not necessarily a windfall that traverses what we saw in 2021. lisa, you mentioned world having no negative interest rates is shocking but that is really only the case in the last maybe let's

call it five years or so. if you have been in the market for longer, it is normal. so i think the federal reserve is really trying to get people acclimated to wyatt's is the real normal in the world, not the most recent normal with so much in negative rates part of the environment. despite the fact the market has rallied, both from equity and fixed income perspective, if you read yesterday's fomc minutes, they are not done yet. they are cautious, they will continue the process. yes they are aware and watching what happened from an economic perspective, but their goal is to bring inflation down. they are doing a good job of it. but it is not done at this point. thinking the world goes back into negative rate or low single-digit interest rates is

not out of the picture at this point. as you -- lisa: as a guest revealed earlier about the high economics, she was talking about the collision course of the fat and market seems to be on because the market is not acclimated to what the fed is trying to say. how do you think that collision course will get represented in this year's trading? deborah: i think it is up and down, a lot of volatility. the fed continues a unified fed speak around this topic but investors do not want to believe it at this point. i do see the up-and-down market to justify what the fed is saying. tom: with your -- i gotta go here because the fed basically invented the money making fun. steve all three members -- remembers when they invented the money market fund. i want to cut to the chase, open-end investment companies,

mutual funds are constrained on how much cash they can hold. his things so much up -- so messed up in a cunningham way that portfolios can have enough cash because their perspectives say they cannot have enough cash? deborah: no, i think that might have been an issue in 2000 when he won, maybe even 2020. i do not think that is as much of an issue in 2022. the king at the longer-term fixed income portfolios, equity portfolios, we are overrate -- overweight and cash, but not much overweight as we were in 2021. it is less of a constraint that it might have been last year or even less quarter. jonathan: wonderful to hear from you, happy new year. deborah cunningham, it is not over. to message briefly. tom: i would respectfully suggest this is an outlier.

this is a massive institution, hugely venerated, and she is saying on the bloomberg total return index you will not get a bounce. that is how this translates. jonathan: there is a belief held by many we could go back to the prepend of it world. that we can go back to -- tom: that's something you can see over the timeline of a 18 months or whatever. jonathan: then interest rates we would talk about the new normal. let's talk about the old normal, isn't this about resetting back to the old normal? last 10 years was anything but normal for central bank policy. tom: money for nothing. no question about it. jonathan: absolutely. we had a price-incentive buyer, a huge balance sheet, and not just 1, 3. pushing yields lower and lower until the point where we were getting satisfied with negative yields in bond markets because i remember the time it would take place in europe and people would say but it can go even more

negative so we were in bonds for price appreciations, remember? lisa: and the whole beer goggle comment we heard from the dallas fed that we have your goggles on. jonathan: back to the day i remember the speech. lisa: it was a fantastic speech. 2013 the high-yield bonds went to what people thought then was a high-yield low. [laughter] jonathan: read the speech, ok? [laughter] lisa: you really wanted to go there. i wanted to make a bigger point. there's a question about whether last year was it. what it means to unwind more than a decade of beer goggles if you want to go to richard fisher's comments. if you want to look at the entire ecosystem of debt to come of corporate structure, which got built up during the era, is it a decline on the total return index or is there something more significant that happens to reshape the way credit is disseminated in an economy with

rates that are the old normal. -- normal? that has yet to be determined. jonathan: i would go back to the question we asked about an hour 40 minutes ago and we talk about unwinding access, are we talking about the last two years or 10 plus? the consequences of that are very different if you think it is the last two years or the last 10. tom: i thing that is a fair assessment as well. what i would suggest and i've said this a million times, people will adapt on the way. lisa mentioned yesterday the economy and the navelgazing is separate from the markets, particularly the equity market, and i do not have a lot of certitude right now after the humility of everyone, including me getting crushed. the triple cash fund did ok but the payout on it killed me. jonathan: we are joking about with the federal reserve, ecb, and central banks did after they manipulated markets for 10 years. they're still doing it, just in the other direction.

i remember going around central bank -- central bank to central bank, got to fianna, social and, catch up with the s&p and the number one question you always ask after a selloff of any kind and deals pushing him, have we seen any unwarranted tiding -- tightening of financial conditions? thus the question uis asked sitting down with these guys. that has flipped 180, the number one question now, have we seen the number one easing of financial conditions? the story has totally changed in a couple years. equity futures on the s&p up 2%. from new york, this is bloomberg. ♪ >> keeping up-to-date with news from around the world with the first word i am lisa mateo. it is another round of votes on the speakership, today lawmakers meet again after kevin mccarthy failed for a sixth time in his bid to be elected to leave the house. the california republican set a lot of progress was made but

still hardline conservatives did not make it easy and there was no resolution to the standoff. imf first managing director is urging the federal reserve to push forward with federal interest right hikes and tells financial times inflation has not turned the corner yet. she specs monetary tightening to be more long than the fence. the turkey president has urged vladimir putin to declare a unilateral cease-fire in ukraine. the two spoke on the phone today . erdogan says the cease-fire could be accompanied by a vision for fair solution. turkey pitched itself as a mediator in the war. strikes on the british rail network reached a critical peak. some of london's biggest rail stations will be closed while some airports will also be deprived of trained service. train drivers are presented in -- represented by the union are walking out because of pay.

federal reserve officials reaffirm their result to bring down inflation and -- those points came from minutes from last month's policy makers meeting. global news, 24 hours a day, on air and on "bloomberg quicktake," powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo, this is bloomberg. ♪

>> they can break have it. jonathan: that was peter tribbett, the lse professor of international relations. we continue that conversation any moment. here's a snapshot of the price action on the s&p, we rollover little, unchanged on s&p 500 futures into the opening bell. still going into data, 43 minutes away. jobless claims in america, sprinkled data throughout the day and the big one tomorrow as payrolls friday, yields advance a basis point after moving lower by 18 basis points over the previous two trading days. going back to crude, it big move lower, 23. by more than 9% and here we are up by almost 2%. 7423. tom: into the claims in less than an hour, i would point out the bloomberg financial conditions index in the last three to four days hugely accommodative. yesterday, jon ferro dazzled me with his knowledge of mr.

mckinley of ohio and in a politics of long ago and far away. we thought we would get perspective on the madness in washington now and there is no one better than wendy schiller who owns crown university on american politics. i will cut to the chase. you and i were channeling the great allan nevins on grover cleveland and a time from another place and there was a guy from maine, tom reed of bowdoin college to changed the rules. what did they do in 1885 or whatever that matters to mccarthy today? >> you change the rules committee, the gateway to put legislation on the or. they determine what amendments you can offer and how long you debate the bill. so we stack the deck. to control the speaker of the rules committee and gave the rules committee and steering committee the opportunity to shape legislation and cut out individual members.

members gave them the power to do that, precisely what you mentioned, and the mckinley tower bill. they wanted to get it passed, republicans were united, they needed it to get through and the uniform process to squelch the opposition, particularly democrats who wanted free trade. that is not here, they don't seem to have an agreement in the republican party. tom: hello see had louise slaughter, who went with an iron grip and handled the rules committee in an mccarthy house -- a mccarthy house, does he have a rules committee when greg says he would give it up to one vote throwing him out of office? this is not even pelosi/ slaughter of five years ago, is it? >> no, they are clamoring for more open, legislative process. we are in the midst of all the opposition and name-calling and in the senate, the same thing, the parties consolidated leadership. senators complain they cannot to anything on the four -- floor offer amendments.

they are making a valid point that they want a bigger say. the problem is they do not share the ideological viewpoint or policy goals so they obstruct and with such a slim margin, it paralyzes the house. lisa: the democrats are remaining quiet, probably wisely so, to allow this to plaut without their input. i wonder, we had expected after the holidays to hear from president biden about whether he would run again. he has not announced or talked about that at all. when is he going to discuss that mournful? do you get any scuttlebutt about what is going on behind the scenes? wendy: that's a great question. it seems to me since the state of the union address would be earlier this year than last year like you, it makes sense to take that unique opportunity, do it is a bipartisan leader of the country event and then announce you will run. if you do it before hand, everything about the state of the union is tainted by the announcements on my guess is he waits until after and does announce he would seek a presidency, particularly if republicans are in disarray, it

stomps on whatever momentum challenges like ron desantis, donald trump have going into 2023 to look ahead to 2024. jonathan: some -- lisa: some people would argue the opposite, president biden would run again if former president trump is in the running. he is in the running but has taken a backseat with leadership, certainly with this latest house speaker nomination and vote we have seen go down in d.c. at what point does that factor into what president biden does? where does the leadership go for the future in the democratic party? wendy: that's a really good question but right now biden has a lead, a sports analogy, he has a lead in the game, the other team does not have their act together. why would you step off the field or give up the game? he has good cabinet members, good governors in the wings. given his political environment, people can ramp up quickly to run for president so i don't think it hurts the democratic party and as long as they say stolid -- say solid and united

while republicans appear to be in disarray. tom: the tuesday lunch bunch at broad university is something to have to do with pizza and providence, there is the moderates of the tuesday lunch bunch in washington. i do not think enough is being said about what i will call -- i know i will get a lot of hate mail on this, normal non-maga republicans, how do they move forward? wendy: that's a great point because there are 200 of them. mccarthy can say he is conservative and people sort of believe him but when you are from california it is a tough sell if it is not 1985. there are 200 republicans that want mccarthy to be speaker. how they come to the table and maybe steve scully's -- steve scalise is in the lead. they all one closer races than they expected and they want to win again. i think this is a really big problem, and they will not just lie down and let run the show.

-- let these 20 other run the show. tom: if they will not lie down, what did they do when this clown show is over? wendy: what they should do now is stick together. they should not relent -- they should not quit too soon. that is their exercise of power. the 200 that mccarthy should not there on the tell today or tomorrow and should make this go on, make them filibuster this for a longer period of time and certainly go out to contributors and say don't give these people any money. make sure you stay solid to signal to them you are not going to roll over today and not going to roll over six months from now. that is what i would recommend to hold their power in the republican power in the house. jonathan: a lot of investors try to be politically agnostic. i'm not sure if that's achievable but they try. they are wondering watching this play out when is this consequential for me? how can this go on for before it

is truly consequential? wendy: i think it can go on for a long time, actually. it is consequential today. the leader of the free world, the united states is a leader and economic and political powers are tied together. if one of the chambers is grossly dysfunctional, the world starts to wonder if they invest in the united states. if we want to issue new treasuries to fund the debt, we have to get more stable. i think it has applications starting today are the rest of the world is having issues but nonetheless, it matters today. whether that matters to matt gaetz or lauren boebert or the people leading the charge, i'm not sure. they are not particularly international in their focus but that is where the business community has stayed too silent. they have to weigh in and say we give you a lot of money and we want this thing settled so get it done. jonathan: lisa went on to the final point because that is the point you have been pushing repeatedly over the last one to

four hours, when does it become consequential for people in this market? lisa: i think underneath that question really is the debt ceiling debate and how much we get a new budget. something we were talking about yesterday, how much is this by design that a lot of the republican party does not want to see the spending they saw in 2021. how much will that be a feature of what happens in terms of fiscal response and ability to get some debt deal passed by the end of the year? jonathan: your thoughts? tom: i'm away of it. i do not think it is linked to the markets. jonathan: clearly not right now. tom: i don't think it will be. i've heard of the debt ceiling for 50 plus years, it gets fixed and that is all. to the professor's brilliance, and she is the best, and that was a clinic vote on 1880 and the american public but to the professors point, there are 200 other people not in the

headlines of the washington post. what is the level of fury they have? what is his level of fury? jonathan: i'm trying to work out what the objective is here. i've spoken to ann marie several times and i asked can you explain to me they articulated what they want, what is the objective? feeling answer is they don't like kevin mccarthy. [laughter] jonathan: it seems to come down to they don't like kevin mccarthy and that is a. lisa: it's true but as a foreigner it has to create a risk for the united states in terms of what is the policy going to be? what is spending going to be? jonathan: i don't think many expected much for policy shift. they are watching this play out and for now, maybe -- ignoring it. tom: they just don't like the guy. jonathan: sometimes it is that

simple, isn't it? this is bloomberg. ♪

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>> volatility was a laugh -- was

a lie last year and is still lie this year. >> overall investors are rethinking -- >> i think earnings will be under pressure and we forget how cyclical some of the stocks are. >> we will get a nasty earnings recession and those that can deliver on the cost efficiency will continue to perform. >> the biggest issue for equities is what is going on in the bond market. announcer: this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. on radio, television, into the jobs report of tomorrow in 30 minutes, 29 minutes. the claims report, a first look at the pulse of the labor economy here looking into 2023. i will look at wages tomorrow but we have claims today. jonathan: the official data says the labor market is type so job are -- tight so job markets are open. then you have the labs mounting from company to company. the quote of the last 24 hours,

revenue accelerated to the pandemic, we are -- we hired too many people, effectively hearing the same thing from amazon and the question i thing many people are asking this morning looking at the name, is 18,000 going to get it done at amazon if they want to address the cost structure of the company? tom: 1.5 million jobs at amazon, bringing it down by eight that -- 18,000. are they feeling the same angst as salesforce? jonathan: and when does this add up as we see -- so we see it in the official data? tom: it lags. jonathan: you mentioned wages in and around 5%, on a plummet could threaten to drop to 3.5%. tom: now we turn to abramowitz. everybody, calm down, some pushback on that but all of this is hinged off of the labor path john mentions. lisa: i will make his argument,

given especially what we see in the tech world, it is only 18000 and perhaps it is a sure of margins for a highly profitable company. we have a strong economy still. the labor market seems to show it. you can pick your data point and create a narrative around it but if you have a strong economy, what will stop the fed from going further than the market is pricing in and when we get ramifications? tom: i believe lisa said in the summary, bullet speaks today -- bullard speaks today. it will bullard say we have to reach out? jonathan: i don't know what he will say specifically but overwhelmingly the committee is wary about repeating the 1970's and to pick up on what kashkari said, that is what stood out to me, basically for many people watching and listening right now, i think they are off of the opinion this fed is committed to being late and perhaps they have done too much already and they won't know the answer to their

own question. they have two risks they want to mansion, one is under timing and the other is over timing. they won't find out until it is too late. tom: this insight is from deborah cunningham and has a lot of people to disagree with her. she says the bond market goes nowhere, cash is king, and we will not get price up and deal down. lisa: another also saying the collision course between the fed and bond market going to create more volatility at a time where people are betting for yields to go lower. how does the bond market respond to a fed that once you signal hawkish in this? regardless of what the intention is, that is what they want to signal because they want financial condition to tighten more considerably. tom: december 28 i think is the fee here, 3.88% on the 10 year yield. i guess it is priced up, yield down on the tenure. jonathan: so we got to about 430. on the two-year come i one point we were threatening to break for

80 a couple months ago, but and -- 480 a couple months ago. soon after they think it will not stay there long and it will deliver kospi there's a difference between what this fed wants to signal now, hike, hike, hike hold, versus what people think the fed will do. tom: let's do a quick data check. the twos 10 spread, -70 basis points, that bears watching because nobody's watching it. jonathan: equity market is a snooze, futures going nowhere. you had price action in the last couple days in the bond market and commodity market so previous two days, 10 year yield on 18 basis points, your tenure this morning 369.94. your previous today's on crew down 9% plus, trying to bounce back about 2%, 74.30 on delete see i. tom: the 2023 calculus is

varied. we get a brief from a chief market strategist and asset manager. let me cut to the chase, -- is always at a wonderful conservative reticence underpinned by the gdp call. what is the foundational bnp paribas u.s. and global gdp call this year? >> i think here we are probably not that far out of consensus. if anything what should worry us is how consensus the recession view is for the u.s. and europe erie we think that is what will happen but importantly we think at least in the u.s. it is what needs to happen, not so much a recession occurs per se because of a fed error. we were talking about the labor market and i think it is important not to get distracted by what is happening with the layoffs in the tech sector. we all know what happened with tech in terms of equity prices but in terms of employment. it was a boom during the lockdowns and that is

normalizing. i don't think it tells us all that much what is going on with the rest of the economy which is where the labor market is strong , wage growth is far too high, and to get that to a level that is comfortable for the fed, that is where you have to have the recession. jonathan: one thing to export for the tech industry was the boom in the last two years or last decade plus because if we are unwinding the excess of the last two, it could be the damage we have to do is nothing like the damage we gotta do to a market to industry -- market, any industry built up from the last decade plus. which is it? daniel: much more the two-year unwind. if you look at earnings forecast, clearly we are well above the trend you had prior to the lockdowns. with the new normal, that is what we're trying to find out. i think it's important to remember in the last two earnings seasons where you have the key earnings and appointments was tech. we think the broader

transformation we have seen over the last 10 to 20 years in tech in growth is very much in place, we just need to unwind what happened during the lockdowns. lisa: does unwind mean layoffs, mean prices have to go down more of the stocks of big tech? daniel: in layoffs, we think absolutely. in terms of prices, it is a little less clear. given we already had a significant boom in real rates and valuations are reasonable. in the near term, given they are buying into the near term pivot from the fed and we have seen fed expectations not recover to where they were, we think that has to reverse. we have a risk of a bit of a replay for the early part of 2022 where real rates go up, fixed income sells off, and equities and growth stocks selloff because we need to get back to a healthier place in terms of the rate outlook. that hopefully is read -- is a relatively small adjustment.

lisa: i feel like the p word is making a comeback, the pivot. let's talk about what it means to you and what we are pivoting to. we have been talking -- jon and tom had done well but the old normal versus the more recent normal of rates higher or rates at zero, what is the new normal we are pivoting to? daniel: if you think of long-term gdp growth in the u.s., 1.75%. maybe higher than where was before, nominal 4% yield i think is where we will want to be in a few years. that will be a much more attractive environment for a fixed income investor. even we -- even if we do not get the rates, you're getting a 4% coupon or close to it. i think that portfolio perspective is one of the key things that changes this year versus what we went through in

2022. jonathan: it is good to catch up. dan morris there out of london this morning. we asked the question a few times, we unwind of the excess of the last two years or 10? we talk with the senior read search analyst at do you davidson. for dan morrison, he believes about unwinding the excess of the last two years for this specific industry. lisa: on a broader level talking about negative yield, there clearly is an excess that needs to be unwind that has been built up over the past decade. what form does that look like. if we are going back to lower rates saved by the end of this year, end of next year, it will not be a problem, but 2025, what happens when the companies have to refinance? jonathan: that's the good news for credit for the next 12 months or two years, how much longer? lisa: yeah. but that is the whole thing, when do people realize we need to reset to an era costing something and something that is

punitive for companies leveraged to a zero rate environment? jonathan: what is the new zero, is it two? what do they cut down to if they cut? lisa: we don't know. is it 2%, 3%, 4%? either way, that is what you are getting on investment grade bonds not too long ago. tom: the most important research of the back half is virginia commonwealth university picked up by plane chart and we will have a reset of all this on a higher level from the gospel of 2% and that pulls into fixed income. jonathan: what's worth exploring over the previous two cycles we set lower and lower for each interest rate cycle. we -- will we see higher highs and higher lows every time they have to hike? today have to get to higher highs and cut to lower lows as well? tom: they are going to react to the data. alan greenspan did an interview the other day and i believe he

is 97. the grade chairman greenspan said you have to look at the data. whether you are at hyman, alan greenspan, or anyone else jonathan: i'm asking non- specific stuff more of a secular question, are we going into a new era of higher inflation compared to the previous? tom: we are going into an era with the cost of money. the bed, bath & beyond, it is all about zombies. 100%. jonathan: that company a zombie? tom: i will not say that on air. i will say it air. [laughter] the price of money matters. jonathan: on amazon, da davidson coming up, mike mckee will enter the studio and break it down. tom: there were so many i could not pick one. jonathan: i'm overwhelmed on the supply in that stock. [laughter] jonathan: tom went in and looked

back and i almost fell over. [laughter] jonathan: this is bloomberg. ♪ >> keeping up-to-date with news from around the world with the first word i am lisa mateo. it's another sign a tech industry slump is getting worse. amazon cutting more than 18,000 jobs in round of layoffs aimed at corporate ranks. most jobs cut are in amazon's retail division and human resources areas like recruiting. the company has more than 1.5 million workers worldwide. the u.s. is edging closer to send armored vehicles to ukraine . wednesday, president biden they knowledged bradley fighting vehicles may be part of another usa military package. this is a troop carrier equipped with antitank missiles and a 25 millimeter cannon. france says it will provide ukraine with light combat tanks. on capitol hill, kevin mccarthy and republican dissidents still have not reached a deal to make

them speaker of the house. mccarthy has been defeated in six runs of voting over two days . 20 hardline conservatives are blocking his bid. mccarthy says there has been a lot of progress in negotiations but there is no resolution yet. the man accused of killing for college students in idaho is now back in the state. bryan kohberger could make his first court appearance as soon as today. he was arrested at his parents house in pennsylvania last week. police flew him back late wednesday. global news, 24 hours a day, on air and on "bloomberg quicktake," powered by more than 2700 journalists and analysts in over 120 countries. chaim lisa mateo, this is bloomberg. -- i am lisa mateo. this is bloomberg. ♪

jonathan: the adp report out seconds ago, mike key at the table to break down that. what do you say? michael: we have a big beat on

adp. i'm not sure what that means and i'm not sure economists do either. do hundred 30 5000 jobs were added to payrolls, at least as cap elated by adp during the month of december, much higher than the 150,000 anticipated in the bloomberg survey and higher than the 100 when he 7000 we got in the last report. adp has come in underneath payrolls report for the last five months now. not clear what this means. they also now have an annual pay increase number and they say in december annual rate of pay increases was 7.3%. they are also in this case higher than the 5.1% in the nonfarm payrolls number but that is a fairly high number, biggest gain in terms of jobs was in leisure and hospitality?

no surprise there. tom: you remember how wide our lapels were in the 1970's? michael: i'm still looking for the photographs of you in neighborhood jacket. tom: we are going back to the 1970's. jonathan: i can't find a single person that takes this data seriously which is why he had so many caveats reading out the data. someone takes it seriously enough era deals are higher at the front end by six basis point on a two-year to around 441. deals were higher this morning but more of any dish no lift on the front-end. up three basis points. futures or slightly negative and now more so, down by .1% -- .25%. is this any indication of what payrolls will look likely four hours from now? lisa: it is not just the data point, it is the joel stated we got yesterday, consistently higher-than-expected labor market data has come out which is the reason why perhaps this matters more than previously

thought. it is just one data point but moves into the narrative we have seen consistent in labor. jonathan: mike mckee will be back with us in 12 minutes to break on jobless claims. the labor market focus, companies telling us one thing and the data tells us something different. tom: also joining mike mckee will be set carpenter. to get a global reaping on this labor economy as we move forward. right now, tom forte with us, senior research analysis -- analyst at d.c. davidson. what it really is is a guy that is encyclopedic at what goes on at amazon, the background story we do not hear of. i love how you end your notes and talk about revenge travel, brammer owns that. you also talk about we are going to see taylor swift. you gotta be kidding me. did amazon just blow this with a blowout growth track to the end of the pandemic? >> sure.

e-commerce companies in general overestimated demand for the current state of the pandemic, not just amazon. you see it in wayfair, you see it at shopify. i think what happened was initially when the stores were closed, consumers leaned into e-commerce to such extensive levels that there was an expectation those levels would hold. first what happened is consumers returned to physical stores and then they had inflation so they had more money spent on food and energy, and then they had revenge travel and then it taylor swift. i think you see a return to live events but from amazon's vantage point as well as wayfair and shopify, people are not shopping at e-commerce and that is a problem. tom: this has shattered the a and r screen on the bloomberg, there are 55 buys, three holds, and one cell. the streets violently against

what they're doing. lisa: clearly they do not see this as a massive downside, this might just be the medicine amazon needs to have the same profitability with pricing. i wonder, 18,000 corporate jobs cut, does that indicate a broader wave of job cuts among the rank-and-file in the months to come? michael: yes. i think part of -- >> yes. i think part of what you're seeing, if you look at salesforce layoff 10,000, a big company, did your, with layoffs. there was some element with bloated headcount. you had a tight job market, especially in the technology area, and companies that ram to their headcount significantly. some of it was a miscalculation of demand but i think some of it is turning out to be headcount. i think there is a possibility you could see some margin in amazon and big tech companies from scaling back their headcount. i think it is worrisome for the

current state of demand of e-commerce. jonathan: this is bizarre to me. this is like tom going to the barbers and asking for a haircut and someone pulls out tweezers. this is either a big problem and they are not dealing with it or this is not a big problem and they are doing something small. if they have 1.5 million people on the books, what is 18,000? >> amazon basically has two workforces, the blue-collar work force that employs at the fulfillment center, 100,000 reduction in headcount between the march and june quarter of last year because they basically did not how are -- not hire back and then the white color workforce, the white color workforce, 18,000 jobs instead of 10,000 jobs, and that is an indication of softer demand and a greater effort for cost controls. two different labor forces that amazon, here we are talking about white-collar job layoffs. jonathan: that is important

clarity. can you tell me where the other levers are and whether or not they might have to be called in the year ahead? >> the big challenge for amazon in the third quarter was not that there e-commerce was slowing, it was that their higher-margin, higher growth cloud computing in advertising were seeing a negative impact of a challenging macroeconomic environment. to the extent you can see more weakness, 10,000 could become 18,000, could become 30,000. we will see how they continue to manage costs as demand, especially for cloud computing in advertising, remains in flux and a challenging macro. tom: what is jazzy going to do about the john oh miss -- the china over his headache, the logistics of the last mile, for amazon? they have all of those boxes piled up and it seems like getting the last mile, getting the last four miles, getting the last 400 yards in new york city is the ultimate battle. are they going to fix that? >> i think this is their

strength. if you look at the duopoly of fedex and ups, one of my favorite moments in tech was in the last three months where fedex said we would enter a global recession, second statement we are raising prices. so i see an opportunity for amazon to use their first party delivery efforts for all retailers. they could break the duopoly of fedex and ups. i see that as an opportunity for amazon and i think that is something -- 57 percent of units sold in amazon where third-party growing to 75% over time. leveraging their delivery effort is what will enable it to do that. jonathan: that's fascinating. thanks for the details. the clinic from tom from da davidson. you mentioned the community on the street, the 55 buys, the average 12 month price target on amazon is 135.27.

return potential close to 60%. have we have the reality check here yet? tom: have we had a cathartic blowout? i don't think we have. we have not seen anything like a tesla cathartic field. on a long basis, tesla is ugly. amazon has been i do not want to own it. with a vengeance, someone will come in and say they clear the pandemic, let's move forward. i go back to march and at lsc, profit let -- profitability matters. amazon has a legit even down margin, unlike walmart picking up pennies out in the parking left. jonathan: you mentioned apple, big earnings report at the end of this month. tom: all of them. gina martin adams is fascinating -- fascinated by what we will see. jonathan: but we have a problem in tech? seems so. in the markets? absolutely.

lisa: if labor market data comes in a strong as it has, we have the print in five months time, expected where it has been. perhaps layoffs not making a dent in the overall data. jonathan: the two-year this morning up seven basis points to 443 let's call it. in the equity market we roll over a touch, equity futures down by .3%. jobless claims data still ahead, we break it down with michael mckee and catch up with seth carpenter from morgan stanley. ♪

jonathan: 15 minutes ago, about 15 minutes ago we had an upside surprise on the adp report they came in at 2:35. upward revisions so the jobs market data over the last one he for hours has been decent. jobless claims are to come, the estimate to 25, the previous number is 225. michael mckee will break that down into its. equity futures softer down .1% -- down .3%. let's get to michael mckee. michael: we are still waiting for the number to drop in terms of the computers but i can tell you the trade balance comes in much lower than anticipated, 61 point $5 billion, 78 point $2

billion the prior month and $68 billion -- $63 billion was the forecast. this means they are growing faster in the fourth quarter than we thought. as of yesterday, the olanta fed was suggesting we were rowing at a 3.9% annual rate in the fourth quarter so significant change there. jobless claims come in at 204,000, down from the initially reported 200 when he five last month -- last week. however, i will put a caveat in front of this and note this is the weak that included new year's, holidays, and christmas holidays and so probably this number is somewhat meaningless and will be revised higher and we will get a bit of a snap back later. it does show we are still in the very low jobless claims vicinity , and that is further evidence the labor market remains healthy. jonathan: equities roll over by .5% on the s&p 500 and yields push higher by a little bit more.

we are now up by nine basis point on the session on a two-year default and 10 year to 374, yields up by six basis points, michael mckee, we have to make sense of this. times are getting tough, they are announcing layoffs in one specific industry, starting to see houseware in the official data, the data this morning adp claims data yesterday, job openings, quits. michael: if you read through the whole minutes, the staff in particular was noting a lot of companies were saying it was so hard for them to find workers coming out of the pandemic recession that they are inclined to hold onto them as long as they possibly can. tom: across december, and i hope this number is correct. four weeks smooth moving -- moving average of weekly claims, 230 down to 214 across the span of december. that is not going in jerome powell way, is it? [laughter] michael: it's not suggesting the labor market is weak.

tom: the four-week moving average, a way better number given the ups and downs you're talking about with 200-4000. it is just stunning. michael: it keeps the pressure on. the big question tomorrow is service industry jobs, how many are created because that is where they see wage pressures so we go the -- go to that number first. lisa: has there been any labor market data in the past couple months that surprised to the downside? showing a weaker than excited labor market? has this been everyone coming in hotter than people expect? michael: almost everyone coming in hotter than people expect. the numbers of the jolts fell a little bit because the prior month was revised higher and hirings did not change. they stayed at the same level. we do not see a change in the labor market. jonathan: do you want a snapshot of where the surprises have been, go to ecs you on the bloomberg -- ecsu on the

bloomberg. everything is up except for housing and real estate, where the downside of prices are. everything else is up. michael: and it is not completely dumb because construction workers have been getting jobs, it is the mortgage brokers losing jobs. tom: i never even looked at that screen. jonathan: i know. that's where all the little -- tom: i'm learning something new everyday. michael: old dog, new tricks. [laughter] jonathan: up next hour, i will run richard bernstein of bernstein advisors. chris harvey of wells fargo and we will catch up with rent jeffries. a great lineup. tom: we are honored to give you the chief global economist at global stanley, they have a heritage defined by stephen roach and others. seth carpenter joins us.

i will go to the morgan stanley way, which is you guys under roach's leadership codifying a visible argument. what is the number one thing your team is arguing about as we enter 2023? seth: what sorts of things are we not arguing about? i heard you all before the segment talking about the adp data and labor market and whether or not the economy is slowing. in one place where we have tried to hold our ground, our chief u.s. economist, she and i have been saying we think the economy is clearly slowing but we are not calling for a recession in 2023. we are still there it i do not think we are in the majority with that view but the fact the economy is holding up is part of our view. you mentioned the initial jobless claims data. what we are thinking is going to happen, this is consistent with anecdotes from the minutes, businesses will try to hard labor, so what we're like to --

likely to cs lower payrolls will get to more data obviously where we look for 185,000. we're looking for a slowing in hiring and not looking for a wave of [indiscernible] picking up that territory has been where we have been. tom: what actually happens to our economy, frankly the global economy, if we get a neel kashkari 5.4%, a bullet six point 7% -- a bullard 6.7%, do we fall apart and die or do we move forward, right? seth: i do think we move forward but we are looking for a soft issue landing if i could steal that phrase from chair powell. i believe the committee now is dealing their way. they are close to being what they need to be. it will be up to the several

next data points to see when they call it quits on hiking. but then it will be a question for them, how long to stay restrictive like that and i think that is the part the market needs to internalize is the fed is not trying to trash the economy now, to bring inflation down next year. they are trying to slow the economy done over a multi-your process and that will be the difference i think between now and the 1970's. for the record, i was alive for all the 1970's. [laughter] lisa: there is this issue of how much do you actually listen to what fed officials say and do what they say versus take that as signaling playing game theory to try to get the market to a place where they can then say we are all good and we don't have to raise rates as much as we previously thought. i say this as kansas city feds esther george talked about how she raised her forecast for feds rates will ultimately end up, what was talked about yesterday, does that guy to in any capacity, do you trust them or

do you pushback against them with the rest of the market? seth: i trust them in the following sense. they are talking about what they think they would do based on availability of information now. so what we have to do is overlay what we think will happen with the data, what will happen -- what will happen with inflation. if inflation keeps coming off as it has been and job creation continues to slow, i think what they will say is we have gotten the traction we wanted for a restrictive policy and we are seeing the slowing we want to so we will be able to step back. i do not think they will get to the heights that the funds rate or members of the committee pointed to because i think the data will slow enough to give the core to the committee that comfort that they can stop. lisa: the problem is the date on the goods inflation has slowed, that you see some disinflation there but you do not see that in jobs.

let's really end where we began, this is the big dilemma, will the fed keep hiking rates in the face of strong labor market data, even if there are signs of disinflation elsewhere? seth: yeah, i think it is it is continued strong labor market that i think they keep going. we are looking for another stepped on tomorrow, 185. the adp data came in, looking at their numbers, i do spend time looking at commentary that comes through and they are pointing to a little easing of wage pressures as well. i think we are seeing signs we are going in the right direction, that things are slowing. there is no sense where things are we. if we went up to 300,000 jobs a week, there is no question. lisa: before we let you go, i want to market funeral for negative yielding debt. it is dead, over. will the consequences of the end of the negative yielding area born out over the next decade,

the next year, or have we seen it in what we experienced last year? seth: i think there is any number of repercussions to come. if we are right and the fed is able to stick with their strategy and not just hiking but staying there for the balance of this year, then those higher rates will be having an effect for some time to come. i think the other interesting question that will come up and will be a topic of discussion will be one of fiscal sustainability because, as the interest rates go higher and governments increased that, total interest payments they are making will have to go up as well. tom: be nice to ellen zener. don't be so argumentative like steve roach was years ago. seth carpenter, of morgan stanley, this is a joy and honor with michael mckee as well. yesterday was the 30th anniversary of bloomberg television and bloomberg radio. this goes way back.

michael mckee is one of the few that can reach back into the medieval epic of how we started out. [laughter] for those of you on radio, we are showing -- thank you catherine oliver -- a bloomberg radio, the single best promotion we have ever done and one radio station in the acclaimed bloomberg keyboard. this was started with obviously the inspiration of michael bloomberg saying can we do this by january 1? everyone said no but the bloomberg way of michael mckee is we can. we need to say thank you to frank traynor, the first guy i ever talk to ed bloomberg and catherine oliver and a guy name charlie pellett and john tucker, they were there. [laughter] seth: they were there and charlie and john are beavering away in the back as they continue their service to the company. tom: very quickly here, the global wreaths mike demanded.

others went more domestic, more narrow, and from day one, we said global radio, global tv. seth: it has been a hallmark of the whole country, it is global. we focus on the news people need wherever they are. tom: one thing that is so important as we have the fed got it wrong for 30 years. [laughter] seth: but we are in good company with that. particularly to catherine oliver and the founders on bloomberg tv, 30 years on for this institution. we are going to continue, futures deteriorating, -20 off the shocking set of economic statistics, 10 year yield how to nine basis points. this is bloomberg. ♪ >> keeping you up-to-date with news from around the world, i am lisa mateo. it's another round of votes on the speakership. republicans meet again after kevin mccarthy failed in his sixth time in his bid to leave the house.

the california republican said a lot of progress was made but hardline conservatives did not make it easy and there was no resolution to the standoff. strikes on the british rail network reach a critical peak today. some of london's biggest rail stations will be closed while some airports also will be deprived of train service. train drivers represented by a union are walking out following a long dispute over pay. turkey's president urged vladimir putin to declare a unilateral cease-fire in ukraine area the two spoke on the phone today, erdogan saying a cease-fire could be accompanied by a vision for a fair solution. turkey paged -- pitched itself as a mediator. shares of bed, bath & beyond plunged today. there is substantial doubt about their ability to continue as a growing concern. they are considering all strategic alternatives, including obtaining relief under the bankruptcy code area bloomberg learned abu dhabi bank

is exploring a bid for london-based standard chartered. it would be a cop like still aimed at building an emerging markets lender with more than $1 trillion in assets. shares of standard charter are soaring. global news, 24 hours a day, on air and on "bloomberg quicktake," powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

>> business leaders certainly at the moment, they say the headwinds they are facing now is almost more challenging than it was in the height of the pandemic.

lots of input costs coming in, higher prices offer businesses themselves meeting some of those are feeding through into the prices consumers are paying, there is a tight labor market, supply chains are a little easier and more straightforward than they were in the early part of last year, but freight costs are higher than pre-pandemic. tom: the british view there on retail going forward. this is great. lisa and i can do this we are thrilled to bring you john j edwards the third, an extinguished -- distinguished member of luxury journalism. this goes to your days at fargo. if you go to the wall street journal mansion section, near rapid city there is a guy who one the powerball, trying to sell his 50,000 acre ranch for 37 million. lisa: what is he trying to furnish it with question mark how many towels can he get and what are the colors?

tom: 14 bathrooms, 15 -- [laughter] the guy, it is his fault, it is like pouring for older people -- porn for older people. what is it like doing the mansion addition, launching it and doing it as you and your team get -- did you know it would be as successful as it is? >> yeah, it seemed like a good idea at the time and a good fit for our readership, very interested in the high-end luxury real estate. tom: really? [laughter] let's bring it to the latest crisis, which is bed, bath & beyond, those people are not going into bed, bath & beyond, nobody else is as well. why? >> they have had a lot of execution problems on top of the issues afflicting retailers in general. they have had multiple quarters of negative growth, they have been really struggling with merchandise makes, and it has

been cascading for some time. we have been reporting that suppliers have been holding off on giving them product because they are concerned that they will not be around forever, that they will not get paid. as we see today, they issued a going concern warning so they are worried they might not stay in business. lisa: i will piggyback on something tom has been talking about a lot, why has bed, bath & beyond existed in the form it has been in in so long given the distressed people knew about and people were penalizing it for? in other words, will this be the first of the zombie roll up? >> that is a good question. a lot of the problem has been their private label strategy. they bent big, starting several years ago on designing more of their own products. ideally, if that works, you get higher margins because you're

not paying outside suppliers for things. the problem is they executed extremely poorly, under two consecutive seniors. lisa: the other way of asking this, you get a lot of chances when money is free. people can give you a lifeline to keep going at it. is this the beginning of the end of what some of these companies that have been struggling for a long time -- i think of sears and how that whole debacle took to play out. you think of the laggards and is this basically where the music stops and have to justify performance and not just the dream? >> absolutely. it's going to be hard to see what ends up happening out of bed, bath & beyond. they might well end up being one of the names that we think back years from now and we remember. tom: on radio, they are putting up a chart on bed, bath & beyond on tv that spells zombie. [laughter] i don't want to bad martha companies other than their track

record is bleak as well. i will go to the bloomberg as john j edwards the third not do and look at the weighted average cost of capital. these clowns are in 81% debt and they are not a bank, with a blended cost of 5.3% which abramowitz would tell me is enormous, just what lisa said, money is not free. where they kept alive for 10 years because money costs nothing? >> i think that's gotta be a big part of it. they were able to skate along, sort of all to pull recovery plans and then they changed their management with mark from target who had success with private label there but he sort of tried to play too much of the target playbook. tom: did amazon ruin them? i was in there looking at the every day mauv glow towel, we

will get five or six of them for the spare bathroom, but they did not have the towels out. the people at bed, bath & beyond, they are walking over and are watching the show, thank you, and clicking on amazon and their phone -- in their phone saying i want those towels. did amazon kill bed, bath & beyond? >> it certainly did not help. they faced a lot of the issues other retailers faced, everybody has been competing with amazon and walmart and has been struggling to a greater or lesser extent but there were specific execution problems about bed, bath & beyond that made it worse. tom: did you visit any of those mansions? [laughter] did you go out and see one? >> i personally did not visit any of the ones we ran, now. tom: those things are like 15,000 square feet. lisa: we can tell where your head is. [laughter] tom: you look at them and you go -- lisa: let's go back, i want to go back to something you said and i thought it was a stellar

point, which is you did great, bed, bath & beyond, was this a company kept alive by free money? it raises a question on top of that which is how many more bed bath & beyond's are they? how much is this going to become a common story versus the idiosyncratic tail of it a -- of a company with issues. >> i don't want to name any other -- tom: no, there are very serious laws on this. don't mention the names but mid-level department stores get killed, is it the teenage stuff? what gets killed here? >> i think the middle level area where it is difficult to see what their appeal is overall. they are not high-end enough for the high-end enough for the high-end, not low-end enough for people looking for true bargains. they will struggle. i think everybody likes to see a nice transition from calendar year to calendar year but has bad as 2022 was for a lot of the

retailers, 2023 is not looking all that much better. a lot of these issues are still out there, the high inventories that they have to work through, so it will be a struggle, especially with money not being free. lisa: i love as you talk about this and i'm very interested, tom is looking at mansions. i guarantee he is looking at the mansion tour and trying to come up with something to ask about for his next purchase. >> this is beavercreek in colorado. ski in, ski out, 22 million. [laughter] lisa: i love that, thank you. i could guarantee that. i nailed that one. tom: 10,500 square feet. [laughter] lisa: it's for a select crowd. tom: none of those people will be shopping at bed, bath & beyond. lisa: how many of the retailers that are struggling still have real estate and how much will that be helpful versus hurtful? tom: -- hurtful?

>> it is better than not having it but it is a lot of these companies having real estate for a long time and it has not been the panacea people have thought. i think it can be hard to repurpose these retail facilities, certainly ones that are connected to malls. if you sell the part they own, it is still connected to a mall. tom: 15 seconds, your team leads on this, what about the empty stores in america, what to they do? >> what do they do? a lot of them are working to repurpose, go to entertainment uses, experience, that kind of thing. there is need for more residential conversions. tom: you think we will see residential conversions? tom: we are out of time, john j edwards the third with us. we will have him more through the year as well. i learned about that.

i never got bed bath and be on fine. john the pharaoh has the whole thing -- jonathan ferro has the whole thing right. lisa: it's hard to walk in and find what you want with internet sales. i thing about the idea repurpose and space is. you asked this question and do we get a lot of acts throwing, water parks? what experiences have power in some capacity? tom: last time i walked into bed, bath & beyond to get a shower curtain and nixon was president. lisa: how is the shower curtain holding up? tom: that is why they are hurting. lisa: is a brown? [laughter] tom: we won't go there. features -21, dow futures were jon ferro, -16 e six. the vix expands 22.46. tomorrow, join us for jobs day. good morning. ♪

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jonathon: the tech companies are indicating the labor market is weak. and the data is indicating it is strong. which one is it? we will discuss. the countdown to the open starts right now. announcer: everything you need to get set for the start of u.s. trading. this is bloomberg "the open," with jonathan ferro. ♪ jonathon: live from new york, the big issue. amazon to lay off 18,000. fed officials delivering a blunt warning, keeping big tech in the penalty box.