>> this whole episode will turn out to be transitory. the reason why it is transitory is because the fed reacted. >> the fed is a >> manager. >> this is a war that they want, and they are in danger of tipping the economy into recession with a fiscal problem. >> there is a prevailing view, added to has lower inflation, with a peak inflation. >> there are number of parts to it. they talk about an inflation onion. we have good news on the outer shelves. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. >> earnings season begins now. live from new york, worldwide, this is bloomberg.

i'm alongside tom keene. this is jonathan ferro. equity futures are down .1 percent. looking to hear from bank of america. perhaps a little bit more from j.p. morgan later. can you keep up? >> i can keep up. you think i am not here? happy friday to you. it is going to be interesting to see. it is always interesting, but evermore so with inflation. how banks deal with it, how banks deal with traditional banking, and what they do. the answer is they do exactly one thing. here in davos's, they will cut costs. >> let start with tesla. >> is a busy friday. 20% price cut. u.s. and europe. >> dick bove or was a giant at morgan stanley, and once it dinner, we walked through fixed

costs and variable cost to a company. i would suggest that a automobile company is a massively fixed costs business. when you cut 20% and pricing, revenue is a unit in pricing. you do need a real unit makeup to cover any of the marginal fixed cost changes. >> where does that come from? china reopening? >> the new innovation in ev's. i look at the ev's of new york city drive-by, not all of them are tesla's. next have you seen the performance of airlines. i went over that numbers. united is up 36%. this is jetblue at 25% and delta 25%. these are major gains. next there is a huge repositioning going on, and that is not only in equities, but also write on the screen. foreign exchange. we are not focused on the nuances of 20 or 30 different pairs, which you can do on the

bloomberg area there are some real, tangible moves that i did not expect. >> the dollar is collapsing. can we talk about that? 10% since then. it is stronger this morning, but we go from 150 to 130. repent cable go from 103 to 120, and the dollar is at 95 and were staring at 110. >> let's dive into this now. global wall street this morning with economics and finance, trying to get out front of 2023, and there is an unraveling in japan. i went back to look and i did and then -- i did a careful regression, and they are not out three or four standard deviations. my mathematics say they are out over six standard deviations off the hope and prayer of yield curve controlled from two years ago. the yield has come up and it is breached through. you can see it strong.

>> that's a massive question for us. going into that meeting. the threshold is 50 basis points. we've gone through in the last day. let's get some price action for the equity we had a looks little like this. were negative not even 1/10 of 1%. the kid j.p. morgan and bank of america a little later. it is higher by a single basis point. the 10-year is 335. euro-dollar right now -1/10 of 1%. joining us now is katrina dudley. she is a research analyst of franklin mutual. coming straight to you on just what you would expect from the bank earnings a little later this morning. >> i think what we are looking for is really an aperture of whether we are going into a recession because they will be the first line of defense, and the first people to see it. j.p. morgan will, and we will see what jamie dimon has to say about the economic cycle.

>> look. if the economic cycle, and i would suggest nine days and change, for a portfolio manager with all of the sell side advice, and your internal advisors, have you radically adjusted, or is there a change agent in the given portfolio because we've gone from december 20 to what we hope will be january 20? >> we are a value managers so we do not make those very significant shifts. >> you're not shifting on the inflation dynamic now as a value manager? >> in terms of the inflation, we continue to see the fed working and bringing it down. the question is, and the question we been talking about over 2022 is whether or not the fed engineers too much of a recession, or whether they are

walking the tight rope without tipping us into a deep recession. we continue to be in a position that if we go into a recession, it will be a mild one, and i've seen all of the signs of a very mild recession. there is a good implication because it is manageable, and a deep recession is difficult to manage. fixed versus variable cost curves. we think a mild recession could muddle through. >> on a value basis, which sector do you find the best dynamics to surprise in june or july. >> in terms of surprise, one area we are looking at is the industrial sector. i think that what we are talking about is not as much the autos like tesla, and we are aware of what happened there, but this morning, there will be industrial companies, well-placed, and there will be a really good theme. the electrification. the industry or .0. the inflation reduction act.

those will be structural drivers, and we are making sure that these companies have enough wherewithal through 2023. we think that the backlogs are very high level, and the variable costs are rising rages. it is really manageable. these companies are areas that we like. >> where do the minus fit into this? caught up with chris varona. he liked rio, bhp, glencore. where are you on those. >> we own a position in rio, and we disclosed that. we like the asset quality that we have there. but you are right. those types of moves have gone up substantially, which makes a valuation case harder than it was a few months ago. but as a value manager, we are looking at where they are positioned in the commodity complex. we are trying to make sure we have a good combination of companies that are dependent on

commodity prices, but they also have something they can do internally that will drive earnings, in addition to realizing the benefits of the commodity cost moves, both up and down. >> can you go a little further where they are exposed? where you want them exposed, and where you want them not expose? >> i think we can look at something like the copper market, which people are structurally bullish on, and we are seeing some signs that is coming into balance, and what does that mean? you are likely to have some level of usher on prices. the balance is ok. it is when we have oversupply that we need to be cautious. this is the type of market you want to avoid. from our perspective, we push them to the side, we focus on those types of commodities where we have it it -- inr exposure, or copper exposure and we are comfortable with the supply demand. >> thank you.

katrina dudley, franklin mutual. looking ahead to earnings for this hour and next week as well. let's get straight to sonali basak. from goldman, good morning. that was unexpected. >> we expected them to restate earnings for the last nine months. the first nine months of 2022. that is because they are reorganizing these businesses they're going to report earnings on tuesday. we have details of the reorganization. what looks like inside, you have a $1.2 billion loss here for the platform solutions business. where consumer businesses are rolled in. over two years, from the beginning of 2021 through the first nine months of last year, you have $2.2 billion lost in that business. that gives you a lot of contacts into how things are going there during this reorganization as he pivots what he was trying to do with the consumer, because remember, out of the business lines that have been announced, it is really the only money-losing disney at --

business at goldman sachs paid >> a host of banks today all at once. what are you looking for? >> a lot of losses are coming from provisioning for loan losses. in addition to expenses. we look at jp morgan, 2 billion are expected in provisions. does that worsen throughout the year? we know they will beat it on net income, relative to their initial guidance, and similar to expenses, they are going to start to moderate. mortgages are still under pressure. consumer businesses, remember last year, they did much worse than is typical for an environment like this. they were trying not raise earlier. that is a huge boon for the banks. they made a lot of money, and we keep making more money. >> i look at this folks, and this is called an 8k. the answer is, it's a nothing burger. except for one single black -- block of data.

what is a platform system? what is solutions? it sounds like mckenzie made it up at a cktai party at davos. >> left from solutions is where direct to consumer businesses are going, as well as other businesses which are much smaller. transaction banking. >> this is one of the worst paragraphs have ever seen. the rest is a nothing burger. is mr. solomon's job at risk? wax it is year five. it is hard to say. >> on looking at a vector trend. there are no ebbs. it is just one line item. 160 72 310, 4625. >> let me set up the stakes for you. >> let me set up the stakes for a minute because you have an investor in february. that is when the heat really started to get on him. once you get the next week, a few things that are there for you to ask yourself. morgan stanley and goldman are

reporting that connect. >>, safe and -- how much savings do they have? >> remember, some of those cuts are not even from the consumer business. a third are coming from businesses which are making money. the competitive dynamic we have to keep an eye on. >> you will be with us or the hour, breaking down these numbers. bank of america, j.p. morgan numbers so the company and we will get into all of the equity futures at -1.1%. live from new york, as we close down the trading week and kick off earnings on wall street, this is bloomberg. >> keeping you up-to-date with news from around the world, with the first word. i am lisa mateo. in germany, the economy stagnated in the fourth quarter. that is easing fears that the war in ukraine and inflation have triggered a recession. for the year, gdp rose 1.9%,

just ahead of the estimate on a bloomberg survey. meanwhile, the u.k. economy has avoided a recession for now. the gdp unexpectedly rose 1/10 of 1% in november. consumers cap spending through the warmest cost-of-living squeeze in memory. the numbers would strengthen the case for higher interest rate hikes. president biden's handling of classified documents are opted into a political crisis with potential legal repercussions. a special counsel has been named to investigate. meanwhile, the white house has confirmed a second set of documents was found in a garage storage area and the president's home in delaware. test list/prices, and major european markets after several quarters of disappointing deliveries. the electric carmaker lowered the cost of is cheaper modeled by 20%. buyers can save as much as 20 $1000 on tesla's most expensive vehicles the only child of elvis pressley has died. lisa marie presley had been rushed to a hospital in a los

angeles suburb on thursday after suffering cardiac arrest. she was a singer who earlier this week appeared in graceland. the mansion where elvis lived and meant this -- memphis tennessee. she was 54. global news, 24 hours a day, and on quick day, powered by more than 2700 journalists and analysts and more than 120 countries. i'm lisa mateo. this is bloomberg.

this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight.

>> we take this very seriously. the president takes this seriously. he was not aware that the records were there. he does not know what is in the documents. again, classified information. classified documents. he takes this very seriously. when they were discovered, and this is the right thing to do, his lawyers reached out immediately to the archivist. >> the president finds himself in a little bit of hot water. that was the white house press secretary. live in new york, our next attention switches to earnings

in america. on wall street, citi, bank of america, all coming in the next couple of hours, going into equity futures unchanged on the the i've hundred. -- s&p 500. the longest daily winning streak since november. it's been that long. yields are up by basis point. 3.4540. >> is a new feeling out there. the gloom clue -- group -- crew has been silenced. >> how about the 10-year? that is 90 basis point since october. >> i did a study of the trend of the two-year yield, and i cannot say yet that is broken down. other technician types can say that, but i cannot get there yet. it's made headway. >> 30 basis points are earned. >> comes in -67 basis ways. right now, we are joined in washington.

emory, what documents do we know what was next to the corvette in the garage aside from how to change the oil? wax a lot of questions remain unanswered with this unclassified document story, regarding the. what we do know is there was unclassified documents that should not have left the white house. that was at the biden washington office that he used after he was vice president, and in his house at wilmington delaware, in the garage, if you missed it. the president was asked why he kept those documents next to his corvette, and he made a quip that has basically gone viral, and i am not sure it helps his case saying that by the way, my corvette is locked up. is he waiting that the documents would have been safer there were in a locked garage. there were a lot of questions, and the white house really wants to make sure that they are not giving details on this, and leaving it to the attorney

general who has now made and announced a special prosecutor. they are going to the charge of this. the timing is not great for the biden administration. >> that's the point. he was going to make an announcement for 2024. >> give us this. the famous quarter and distraction measure. it's a very important meter. how much of a distraction is this fort democrats in washington? is it a kerfuffle or something tangible? wax at first, look like an isolated incident that was may be minor, and they could move past, but now you have a revelation of a second document, which was first reported by nbc news, and then the white house came out with a statement. this is the second time that a news organization came out but the statement read first it was cbs, and in the white house, following a statement of the documents. this is a lot of question to the white house about why they didn't disclose it to the public in statements before it was

scooped by a news agency. that is for one, and the second is, when they came out and just talked about this disclosure of the first batch of documents, at his office, why didn't they talk about the fact that there was a second set of dock at his house. now, this is become much more of a difficult political story. especially with the fact that there is another special counsel that is investigating the former president. biden has made it very clear that when he did what he did, he felt it was reckless, and while there are different back and really just how this has unfolded in terms of the buying administration, it is working with the lawyers and the national archives, and the attorney general. we do not see that for basically over a year. politically, this is going to muddy the waters. >> let's talk about policy.

is anything on the agenda as we kick off the air? wax on the agenda for the biden administration is really going to be foreign policy. that is on full display today when the japanese prime minister comes into town. for policy, domestically, it's going to be different. house republicans are moving forward with those that will never ever get a site on the senate floor because the democrats control the senate. gridlock, completely in washington, unless it is those must pass bills, which we've already talked about, which will come down to big rights. >> thank you. as always, tons of earnings coming through. let's kick things off with blackrock. eps in the fourth quarter. we will get to those numbers at blackrock. 893 is the eps. 8.5 9 trillion. that's a t. a .3 8 trillion. from the ceo of larry fink, flow is positive across each of our three regions. the restructuring charges $91

million from job cuts. we might see a lot of that in the industry. >> the prices are not clear. there is a beautiful presentation of 15 pages, and 91 million and you divide that over 90 days by 4.3 billion. so it is 91 divided by 4300. is it a rounding error? no. but they are spending as much on coffee in the courts if they're still buying that for their employees. >> cost discipline will be a feature of the quarter. >> they love it. i wish we had brian moynihan here to sit in with us today. lisa is on, but the answer is yes. they are genetically linked to cost-cutting peer that is the solution. >> the last couple of days, they plan to cut 500 jobs since 2019. it's been a while, and to the point with the goldman cuts, they judge decent job, and

sonali basak, introducing through the pandemic cuts that we usually make that were made. now, there'll be made at once. >> i'm in the camp that they are using this. 2.5% of their workforce is published by bloomberg. you can see the on the description screen. i would say paul sweeney is way more knowledgeable about this than i am. he is helping me at 9 a.m.. paul would tell you to or 3% is normal, and if you go to a percentage cut at bank of america or whatever bank that is tesla-like or salesforce light, that is a different story. are we going to see that in the earnings season, starting in this hour? i'm not sure. >> do we get a mike wilson earnings season that he expects? >> in banking, i don't think we will. >> you don't think we will in banking, but intact? >> they process right now. they will codify it in statements, but let's remember,

if they let 42 people go in mortgage finance or whatever is flat on its back, they are probably higher than -- hiring 45 people dakota computers with are not at the monkey bar having lunch. >>, be easier to get coders if you engineers. >> firms are letting up. tech firms did not lay off in the pandemic, nor did anyone else. who are the tech firms laying off? that's a big question. >> are we done with that? amazon when into the pandemic with 800,000 employees, and they came out with 1.5 or 1.6 million. those numbers are monstrous. i can't leave were comfortable with that. >> the big measure is --. >> they doubled the workforce in two or three years. >> in the conference call, how will they verbal the speed of change that they are doing with those big warehouses across this country. as a generalization, they felt

that, and it's with goldman snacks -- sax. goldman sachs. this is a loss to the consumer extremity of goldman sachs. it's a rate of change going in the wrong direction. >> february 3 for amazon if anyone is interesting. j.p. morgan and bank of america. , we'll hear from morgan stanley and goldman sachs as well. your equity market is just a little softer. .1% down. in the next 30 miss you hear from bank of america and j.p. morgan. city is up later. ( screams in joy) save 20% with the lowest transaction fees and keep more of what you make. with a partner that always puts you first. godaddy. tools and support for every small business first.

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>> were getting earnings later this morning pre-it were waiting for bank of a morgan -- bank of america and j.p. morgan. we are down 2/10 of 1% on the s&p 500 coming off a back of a three day winning streak. that's the longest daily winning streak since early november, believe it or not. we are looking at a little something like this on .2. it is peaking at 433, back in october, although it backed down to 34650. that is a little higher on yields with a couple of basis points on the tenure. the two-year is unchanged at 21355. it ended at about 426, so that's a move lower over the last couple of days. let's move to foreign exchange. in the at the moment come we are

shaping up as follows. 10814 on the euro-dollar. negative .3%. that is not the trend at all. whatsoever, since september. we've had a much weaker dollar. the dxy indexes down or than 10% over that. . it is a to keep -- tricky moment. then you see what is happening in the fx market. it is weaker. it's a trend that is in place, and there is some argument that we've seen it this week on bloomberg surveillance on dollar trends, and there is a question on the durability on dollar weakness. that is a debate, certainly, for the february fed meeting. >> looking at these moves, maybe in japan or the doj with 50 basis points. 50 basis points is that target curve through that briefly. that is a major move for next week, but certainly, threat and credibility. >> as we await for earnings at the beginning of the season, they are coming. american airlines are surprised

with some numbers. it is very quickly trafficking down 10%, capacity down 9%. i'm going to call it a bit of a mess and may be, there is a bit of a lightness in the stock in the second. >> they adjusted $.40. that is a wideband. an estimate of $.54 before that. fourth quarter adjustments at 130. you mentioned passenger revenue down in the fourth quarter. 10.8 9 billion is the estimate. 10.6. the fact of the matter is that these stocks had a massive run. it is down 8% in the premarket. i mention where they were, and but they've done so far over a trading -- eight trading days is 20%. >> it's been a real tangible move, and i think there is a mystery on domestic business travel. that seems to be the sell side. what we are going to do with some free minutes before the earnings extravaganza begins is to drop into nelly bassett read this is something we talked

about. i want to go to you on the financial times, looking at the future of carl. we know that david rubenstein is one of the founders, and he is active with uber television. this goes to two guys who are exiting or rumor to exit. mark mason at citigroup, and also the other day, it was reported mr. preuss in. it is fascinating about the turmoil we expect to see. we expect to see these companies rationalize a succession path. >> a lot of these folks have been in these positions for a very long time, especially at big banks were there is a lot of lack of movement at the very top of the banks. some people have been there for a certain amount of years now, so it is a progress story for them. but when you look at morgan stanley and j.p. morgan, it is a second rank you have to worry about with attrition. some people are retiring, and

you can see that in a recession. >> last week with morgan stanley. >> one of the reasons this is so interesting is that there is a cfo role. over at alphabet, you long watch john to see what his next move would be. >> mark mason and jane fraser at citigroup it is this from another place? >> they move together. mark mason and jane fraser are the left-hand in the right hand. so, --. >> she speaks to him on a daily basis. >> i like to sit outside in camp outside of the feds. but the reality is that they are close to jane in a very important part of her turnaround story, whether the -- whereas john grew send is not. the succession plan is thick and if you were to go into something like private equity, with a place like carlisle, where the politics are very very very challenging.

to have a cfo and ceo type two smooth that over makes a lot of sense. >> stay close. we'll break those numbers when they came out. winning for bank of america and j.p. morgan and that 60 miss. we are here with our next guest. what are you looking at for bank of america? wes what we are looking at for bank of america and its peers are a very strong topline revenue growth that comes from interest revenue. as you know, the rising rates has been very favorable to all of the banks, particularly for their margins. the right side of the balance sheet for the first time in the last 15 years is really important. you need cheap core deposits, and bank of america has that. on the other hand, we are we capital markets from merrill lynch, and that is a tale of two cities, as well as the other big banks. >> this conversation about that interest margins, are we approaching that p, is it behind us? >> i would say what we are going

to see is peak net interest margins in the first half of 2023. the important number for everyone to focus on is not the margins, but it is the interest revenue growth that we are going to see double digit net interest revenue growth in 2023. >> we have three companies coming out with a banking extravaganza to go further gray like me, trying to catch up, and what if i am fascinated about the traditional ratio like tangible book or i will let you decide, with a return on assets. parse those three banks. am i right that j.p. morgan is more profitable than the other two? >> you are right. certainly, j.p. morgan with the return on equity and tangible equities is more profitable than bank of america and citigroup. bank of america is more profitable than citigroup, but citigroup is being challenged and that they don't have the strength that the united states

and consumer banking does. j.p. morgan does. >> here on the bloomberg, the function is a gp function. >> thank you. that is useful. have you heard of that? >> citigroup is trading at $49 per share. but also like you and me doing a reverse 10 to one stock split. is this still trading at four dollars and $.90 pre-great financial crisis? >> that is the math. that's exactly right. it is unfortunate. citigroup is one of our premier events. and unfortunately, they still have not fully recovered. >> david westin is expected to speak with ms. fraser at happy valley at davos. how happy is jane fraser which mark was the urgency to launch off of $4.90. >> there is a sense of urgency,

but we have to remind ourselves they are turning around a giant ocean liner. it takes time. the conditions in which they are turning it around, rough seas, have been awful for them, so the timing has been very difficult due to what is going on with the world economy and with the tragedy in ukraine. >> and we just say i'm j.p. morgan, 12 months ago, there are all of these big questions that have been presented to jamie dimon that had not been asked in a long time. if ever. that was about cost discipline and the amount of money they were spending. in last 24 hours the last couple days, a renewed focus on acquisitions, and some sloppiness creeping in as well. i know they are not massive acquisitions, but what are you focused on? >> we are focused on the core banking businesses. that is taking in deposits and making loans as a core function of any bank it is also looking at investment banking and

trading businesses, even though that revenue in that industry will be down well over 50% year-over-year in the fourth quarter. the trading revenue is pretty good. do your point on expenses, j.p. morgan has a higher level of rate of growth and expenses, and that is unfortunately caught in a fraud and the most recent acquisition which is disclosed this week. >> what do you make of this? not in the last couple of months but the last year for this bank? wexford j.p. morgan? the thing is that they do have, if you look closely, some retirements that have been coming. they have not been the goldman sachs of the world where they said we are going to cut thousands of people on her head staff. in terms of the head count. but they have seen cuts in the mortgage business, so they have held steady, and that puts pressure on expenses. do they start to make moves as the environment softens? i think they sidestep problems, but bank of america goes heavier when they come onto risk-taking,

especially in the leveraged finance market. j.p. morgan has a bigger fixed income desk on wall street. there's another $70 million of losses in the high-yield trading. do they have more caution is my question for the year. >> and the stock since october, up about 37%, and let speak to that. the performance of the equities and stocks to a new year. what do you make of it? >> the banks are doing well as was just pointed out. it is very impressive, but even year to date, the banks are outperforming the general markets, and that is because investors are discovering that the economy is still very healthy. the real gdp number is pointing to a real gdp growth number, so the likelihood of a recession is quite remote. in the second half of the year, that's a different story, but it is interest revenue growth that is recognized that if the fed keeps rates around 5% for

extended. of time, banks like j.p. morgan and bank of america, they will do quite well in the environment. next to that point, how tethered are they to the market because yields have been falling. thank equities have been performing. >> that's a good point because it is interesting. the volatility in the markets last year helped particularly in fixed income trading, and that help j.p. morgan and others. believe it or not, if you get a less volatile market, it will be affected with weight on that, but it will offset with stronger capital markets. the lower yield is a good point because now, the markets to markets in the bond portfolio will be less which means an increase in back to capital when the marks come through at the end of the first quarter. >> thank you for sticking with us. rbc capital markets over j.p. morgan. we talked about j.p. morgan and the hurricane. jamie dimon is backing away from the idea that a hurricane is

coming. we have to tame down and dial back. >> at the keys trying to get out 200 pages on his annual letter this year. i have a chart that is soup or secret on a need to know basis. >> 40 looking at? i'm looking at five banks back to the six banks back to the beginning of the great financial crisis. basically, they are lagging take time. the other four are bundled together collegially, and then there are fortress timing. i don't know what happened at j.p. morgan in 2016, but it's a moonshot over the last five years. >> equity futures are down one third of 1%. bank earnings on wall street, coming up. >> keeping you up-to-date with news from around the world with the first word. i am lisa mateo. in alabama and georgia, violent weather killed at least seven people. much of the damage took place in alabama where tornado cut a 20 mile path across to rural communities.

six people were killed, and more than three dozen homes were destroyed or damaged. the faa is out with preliminary findings on the computer failure that grounded all departing u.s. flights on wednesday. the agency says it was caused when a data file was damaged due to a failure to all of government procedures. now according to the faa, unspecified personnel were responsible for corrupting the file. it's a major boost to one of america's top exporters and the most important foreign markets. boeing 747 return to commercial service in china after nearly four years of absence. china's southern airlines operated the flight. a chinese airline hadn't flown anyone on a 737 since the plane was grounded in 2019 following two fatal crashes. chinese exports fall as global demand continues to drop off. exports in u.s. dollars declined 9.9% in december from a year earlier. that is better than expected. it adds pressure to the economy

that is trying to recover from covid zero restrictions. a big pay cut in the works for tim cook. apple is reducing a compensation by more than 40% to $49 million this year. the company is citing investor feedback and requests to adjust pay. global news, 20 froze a day, on air and on quicktake, powered by more than 2700 journalists and analysts and more than 120 countries. i am lisa mateo. this is bloomberg. quickstart earnings on wall street because right now. $1.72 billion the estimate. $.85. a ton of numbers here. they're trying to distill it all. sonali basak is alongside us.

>> here's the problem, you do have net interest income which is the most important number for bank of america. we are coming in light of expectations. it begs the question of where the money comes from, even with rates rising. our consumers borrowing? it is highly leveraged. we are going to look closely into where those numbers are coming from. provisions for credit losses of 1.1 billion dollars increase. $1.6 billion according to bank of america. you do see an increase in provisioning and the environment. potentially deteriorating. >> to be fair to grizzled pros, you see a headline that says fourth-quarter network reserves. you cannot analyze this stuff over a cup of coffee and 12 seconds. on financial tv. you have to dive into it. >> you have to dive into it. what you dive into? when you are done and working feverishly, none of you see this, but she's killing yourself on air. what are you going to dive into? >> you have to look at where the soft numbers are coming from.

his continuously a mortgage market? there is a worry about the auto sector, and that is persisting into this year. i will give them a victory lap on the institutional businesses because they had a strong beat in fixed income. they are having the highest results ever in trading. her brian moynihan, structuring a business in terms of talent a year ago, that's a very big deal after the departure for senior trading executives, and they are keeping winning shares there, especially with softness in the european banks in a tough market. fixed income is up and equities are met. the consumer is where there is weak is. that is relative to what is expected. >> gerard cassidy is with us from tucker anthony. i dive into the press releases and the propaganda are fortress moynihan, but just as a basic idea, digital logins are 3 billion, digital sales grew 8%. it represented 49% of total

sales. two, 3, 5 years from now, are all of these banks digital enterprises? >> bank of america has been the leader in pushing the digital channel, better than anyone else, and even j.p. morgan in our opinion, but we are always going to have the multichannel approach. i don't think you are going to see branches ever disappear, but the amount of business is going to the digital channel will continue to grow. you are right. you are going to see companies like bank of america and j.p. morgan chase continue to drive profitability and product through the digital channel because it is convenient to consumers and also for businesses, but more profitable towards the bank. >> bank of america is up by 1.2 5%. j.p. morgan members -- numbers are a. investment comes -- j.p. morgan

numbers are out. overall revenue is just a little bit lighter on investment banking. headline revenue is adjusted for the quarter. 35 .5 7 billion. just a bit of commentary. able to reserve stock buybacks this quarter. going through the numbers, what have you got? >> a big number is the fix dales falling below expectations. the other concerning numbers the provision for loan losses as we are talking about concerns for the consumer moving forward, coming in 300 million dollars more than expected. that is one $2 billion for loan losses. the commentary moving forward about whether jamie dimon's hurricane, and whether he actually comes into fruition, that will be super important. when you have weaknesses on consumer and investment banking, to your question, where does the expense discipline come from, moving forward.

so, people are tweeting. not pretty when you watch the core businesses here fall short. it sets up a stage strongly for goldman and morgan stanley. >> we have to talk about those provisions that i want to come straight back to you. bank of america and j.p. morgan -- the fourth-quarter quarter provision for credit losses. 2.2 9 billion. the estimate is .05. what should we look at? >> is a positive number, leave it or not. it sounds counterintuitive for you hear that, but you have to remember, the new accounting known as cecil, current expected credit losses, those have to do global loss analysis, they anticipate a recession over the next 12 to 18 months, so building up reserves in the fourth quarter of 2022 is smart because most investors are looking at 2023 earnings, so they were able to build that up on the bottom line numbers that were better than expected, but i would point out that we are going into see the banks

continue to build reserves in case there is a recession right now, and it looks like we are going to have a slowdown in the economy, and possibly a shallow recession. by building up reserves, we compete the numbers, which does better this year. this is what investors are seeing. there is still a strong earning because the revenue growth is quite good. >> this is important stuff. how high quality as the loan book going forward into what should be a tough year? it might not be a tough year if you ask an economist. they have no clue. >> that includes $1.4 billion with the reserve bill. to the point, bringing this forward, that makes a lot of sense. it's bad news behind them. when you look forward, 20% to tom's point, the tangible return on equity here, that is through the roof. that is showing you that j.p.

morgan has leverage. it comes to an expense control, posting those numbers. 20% is nothing like you will see anywhere else. >> if you and i parachute on this from other bank worries that we have had over the decades, i have real trouble with any angst. i would say,'s -- and respectfully, they are trying to hide their profit. i look at the operating income of j.p. morgan, wrapped around a tangible return of 20%, to zero, and it was launched from 45 could billion dollars, and i don't know what that is, but it is, but they are minting money. are they underplaying it? >> you are right, and we have to come back to something very straightforward, and we have not looked at that in 15 years. that is the core deposit and the banks are in fed funding markets, that is approaching 5%. think about this.

a commercial loan to a worthy borrower will reach 8%. sometimes in the spring of this year, and the cost of funding that, think of the checking account deposits. banks don't pay interest on checking account deposits for consumers. that is an 800 basis point spread. think back to pre-pandemic when the fed was that zero to 25 basis points. you didn't get those spreads. that is what this is showing. >> i look just to make a comment on this. i am looking at this no different than a luxury manufacturing company. with any other sector, you have to go back pre-pandemic, and everyone, including mr. diamond and mr. moynahan and the rest, these guys -- i would suggest they are literally trying to hide how much money they are having to take. >> with the outlook, on the press ways, the economy remains strong. we still don't know the ultimate effect of these headwinds.

for the last 12 months, turns into a hurricane. it is interesting, this alignment about the ability to resume stock buybacks. can you run me through what you expect from capital returns on the street for this year? >> you just brought up a great point. the buyback being reinstated, that was not expected that is a positive surprise. they were struggling with capital levels in the second half of the year, so now, as we all know, these banks are generally paying out 30 to 40% in dividends, and prior to the pandemic, when there was a minimal loan growth, there was a buyback that we are presented with 60 to 70% of earnings. then we turned it off in the second half the air, including for bank of america. now, j.p. morgan comes out, and puts up numbers like this. it is a very strong statement, and there's plenty of capital,

and it will grow and support basic banking functions, but at the same time, there is even more capital in 2023. >> how conservative will they be with the reserve bill. how conservative do you think it will be one capital returns in the year ahead? >> i think on the conservative side, not so much with dividends that are sad, but that is an important point. if you get through this cycle without any banks cutting dividends like they did in the financial crisis, that is a huge positive the bank valuations coming out of this. i think that is different from what we saw pre-pandemic. . >> an important question, and for all our listeners, they know there is a credit card interest rate with the regime. they are buttressed up against 30% per year. the credit card business is stable for consumer banking in america.

do they have to go out and co-op fintech with a large profit? >> it is interesting that many people were concerned about this three or four years ago, and that has been thwarted by the banks as the banks have themselves been quite aggressive and investing in technology. it is a core banking business, and to your point, that is where consumers will go for a credit cards and other businesses, but you bring up a good point. the yield and credit card portfolios are generally in the high teens. it is quite good. >> up in portland, you are yielding lobsters, instead of killing them. it is a lucrative business, but debit and credit card sales volumes are up 9%. that is due to the basset counsel.

>> at 20%, that was a loan shark business in my youth did 20%. i don't know if anyone wants to associate with loan sharks. i would say this with the immense respect, but to every bun who is worried about loan loss reserves, i've never seen 20%. >> $800 million in the reserve business. volumes arise, and you see reserves else. they are taking on risks, still. how concerned are you about consumer? >> just for this outlook, that is a net interest income is 73 billion. 74 point four. the lighter softer premarket. also, wells fargo as well. a miss on revenue, but expected to repurchase in the first quarter. more to come. city is just around the corner. equity futures are down from new york. this is bloomberg.

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>> this whole episode will turn out to be transitory. but the reason why it is transitory is because the fed reacted. >> it is a risk manager. >> they need to stall. this is a war they of one, they are in danger of dipping the economy into a recession. it is a fiscal problem. >> that is a prevailing view, and it is right that there is lower inflation. >> inflation has a number of parts to it. john williams talks about inflation onions. we have good news in the outer shells. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz.

>> live from new york city, good morning. could morning for our audience worldwide. this is bloomberg surveillance on tv and radio on site i'm jonathan ferro. equity futures are down on the s&p 500 pre-and sonali basak is alongside us to break down bank earnings. jp morgan, bank of america and wells fargo are behind us pit we discovered j.p. morgan. if we get start to the j.p. morgan stocks, it is like to negative and premarket trading. fourth-quarter numbers have a massive concern. it's about the outlook with jumped 2.5 percent. let's run through the outlook line by line. 2023, that interest income of about $73 billion. the estimate is $73.4 billion. just a little bit. a little bit of a line about a modest deterioration in the firm's macro economic outlook read off the back of these headlines, the stock is up software. that is a dramatic move across the banks, but it will get your attention. >> when you and i grind this out on surveillance, are these bank

executives any different than the pundits we interviewed? they are to get out, and game and gas and -- and guess an economic slowdown. these are boffo earnings. these are really good. 20% tangible returns. that is fine, but not the gloom or tone or tinge, that is a firth quarters, second quarter. is a real structure. >> that's the reality we are in. i am asking myself some really simple questions that are difficult to answer. are we meant to be pricing growth slowdown off the bank of all of this tightening, or we pricing a growth rebound after -- off of what is happening euro. no one can answer that with confidence. what you do if you run a bank? you build reserves. >> to build reserves, i get that. and i thought cinelli was very articulate in terms of the fact that there is a credit build a reserve, but far more than that, there is just the reticence

post-pandemic, and all economists are saying they are still in supply-side shock. i would suggest, these leaders are managing out 100 days with far more acuity than they were five years ago. >> you have been running through this. just a short, quick word of what you are seeing so far. ask how incredible is this for the coming year. 66 billion dollars, 60 $7 billion in net interest income, and for j.p. morgan, the expectation is $73 billion this year. it is hard to think of that is a bad year for jp morgan. the idea that it just posted, we were talking about this in the break. 20% return on equity, even with what is missing on the business lines. cutting bonuses, telling you that the banks still have leverage, and that is with a head count rising, compensation costs, and expenses down. how they use that money is going to be absolutely fascinating in the year ahead.

>> i look at the financials, and let's go back to the social consequence. we a lot of viewers. for those of you worldwide, particularly on wall street, thank you for tuning in each and every morning, but these people have some quantification out there with a triple bonus for oil. other than that, the poor so, everyone is getting hammered. how are they supposed to respond when they see ratios on these pronounced? >> what is difficult here is knowing where you are supposed to work. there are some businesses that are under serious pressure like mortgages. when you look at that, he continues on. do your point on quantification, great year, but does that continue? this is a super cyclical business. jp morgan is showing you numbers. they are willing to hire more. perhaps, you can make less under a bigger workforce. >> stock is negative right now. the broader equity market with a third of 1% on the s&p.

coming off the bank -- back of a winning streak, the longest going only back to november. the bond market yields are higher by two basis points. in front of us, about an hour away, look at these numbers from city. let's get to kenley on. the cfra. fantastic to catch up with you on these early numbers. about 20 minutes to go through these numbers. what stands out for you? >> i think for the bigger picture, we go through the winter of down earnings for the s&p 500 for the first and second quarter of next year. we are getting more confidence, especially for large banks that they are going to have year-over-year increases in the first and second quarter. we have a strong base quarter reported today that will give analysts more confidence to look at a more constructive first half, as we cross the valley to a stronger recovery in the second half of next year. that is a big story.

>> can you think we are talking about reserves, pretty quickly? >> reserve releases will not happen until probably the third quarter. we are near historic averages just by building reserves right now. we don't have any distress industries, and the consumer is strong, as said. there is a net interest income. >> is there a point in the tensions of post-pandemic america to be strategic? do not acquire banks, it maybe they can't and the government won't let them, but is there a strategic vision for these banks to get larger? works -- >> they are too big. from a regulatory standpoint, it will be added pressure. we are talking about february and a new leadership for the vice chair supervisory. michael barr is going to increase the capital buffers, so, there is way too much capital, and it's it is down

with lending. i don't think size is an issue on thanks to these, but it is more of taking advantage of the deposits for increased loan activity. it is actually more constructive today than 30 days ago. >> that is a really intelligent,, and with that momentum forward, what i see in the verbiage in the pr of these press releases, these banks ours yield deploy cash share with shareholders. when they start on january 1 of this year, or next year, or two years out, when they start on january 1, what is your immediate cash on cash return from these big banks? i daresay it is a percent. or maybe it is 6% of media return. >> we certainly will look to have a management of regulatory regimes, and really, what is required, related to the stress test and other capital ratios.

these are regulated businesses. there is not a leash of older capital, but it is there. if your portfolio management says there is high quality companies, large banks that are flush with cash, and there is a return of capital with dividends and buybacks. not like disney. the are trading with the s&p 500. that is not an opportunity to let the banks rise the wave of recovery. >> three starter surveillance rumored that nelson peltz is going after jp morgan. >> that was a dig at the wall disney company. >> can leon entertain that with us? >> that was a dig. i don't think so and i'll he was any part of that. 7/10 of 1%, jp morgan at 5%. look at these banks. we have b of a, jp morgan, wells fargo. city is ahead of us. what does this tell you about city?

>> trading is going to be a tough thing to look out for for citigroup rid the reason is important is because as she pivots the bank, she wants to show that even though she is building wealth, she is taking it. this is a talent story. this is a time the buy side is growing. the global picture for rates and currency in commodities has been a killer. she wants to show some winning there. the place that jp morgan was at was securing -- securitizations. the fixed incomes are we, and again, i will have to bring up what kind of headcount reductions would we see on the back of weaker businesses? >> this is a question for gerard cassidy and kenley on. these guys are steel than this, but i will go on the more social aspect of this. is there room in america for or big banks? >> yes. absently. is there room for citigroup to struggle and try and catch up

over 15 years in the great financial crisis. >> you have to watch on these banks are changing because these banks are not the banks that used to be. >> is citigroup a big bank? >> they are a wealth manager. he used to call that a bank before. these are not companies that are lending homes across america anymore. you have to ask if european banks are getting weak. they start to find assets to buy , or a chance to grow cheaply at a time where the market is down? >> you get the final word here. favorite equity market in 2020. what is a? works will see a brighter outlook for 2023 for the banks, that's a change story from where we were before. >> you're not alone. kenley on. you are not looking your mom and dad's thanks. it is clearly different going into a recession for it if we do have one, there are some different opinions of when we might get one in the united

states. if you have one, there are people who have aches doing ok. >> he is way out on this. after give credit -- i have to give credit on this. gerard cassidy was way out front on this. these are changed beasts. one of the problems we have, and washington has, is that the size of these companies -- i'm trying to bring ratios into this, and i don't have them in front of me, and i have to look smart, but we keep in mind that the total assets of jp morgan, published, is 3.7 trillion dollars. you had them up in the four-year, but one of the great canards of financial media is that this is not walmart. is 288 people. >> is a lot of people. >> they are almost hiding profit

here. they are really worried about slowdown. they will address this among the others, but the real issue here is that they are hiding what they had in the fourth quarter of this year. >> docs are softer. equity markets are down .4%. there is another name to look at this morning. tesla. it is down 5% in early trading for it i will bring you some research and a couple mistimed. in your, this is bloomberg. -- in new york, this is bloomberg. >> keep you up-to-date with news from around the world with first word. i'm lisa mateo. in germany, the economy probably stagnated in the fourth quarter. that is easing fears that the war in ukraine and inflation it triggered a recession. for the year, gdp rose 1.9%. just ahead in the estimate, and on bluebird survey.

president biden is handling classified documents, and interrupted into a political crisis with potential legal repercussions. a special counsel has been named to investigate. meanwhile, the white house has confirmed that the second set of documents was found in a garage storage area in the president's home in delaware. japan's prime minister will be seeking public support from his new security strategy today from president biden. the two leaders world -- will meet at the white house. japan announced a radical upgrade of his security policy. that included a 60% spending increase with plans to acquire missiles capable of striking china. tesla is slashing prices in the u.s., and for major european markets after several quarters of disappointing deliveries. the electric car maker lowered the cost of his cheapest model by 20%. buyers can save as much as 21,000 dollars on tesla's most expensive vehicles. the only child of alice's -- elvis presley is died.

lisa marie presley was rushed to a hospital in a los angeles suburb after suffering cardiac arrest. she was a singer who earlier this week appeared at graceland, the mansion where elvis lived in memphis, tennessee. lisa marie presley was 50 four. global news, 24 hours a day on air and on uber take, powered by more than 2700 journalists and analysts more than 120 countries. i'm lisa mateo. this is bloomberg.

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>> as inflation is coming down, take-home pay for workers is going up. worker wages are higher than they were seven months ago, adjusted for inflation. wages for lower and middle income workers have gone up even more. it all adds up to a real break for consumers, reading room for families, --. >> that's the latest on inflation numbers from the president. the equity market looks like this. good morning. we are negative five .4%. s&p 500 is little higher by the 10 year. and around 346. the banks are looking out this morning you know them so far. jp morgan, wells fargo, b of a. we are all looking at jp morgan

at 2.3% down in the premarket. that is the outlook. an interesting a look, missing estimates. we are building on that story later. we will be back in 40 minutes to talk about the financials at city outside of that. let's talk about tesla. there are price cuts. not just 5%, 10%, were talking about 20% price cuts in europe and the united states. that is 5% down. southside research, and here's some from wells fargo. tesla is likely to use its -- lose its valuation. there is growing debate among institutional investors on how to value tesla, tec, and the price target gets cut from the 230 level, so that is a high price cut. if you want to be bullish, anheuser-busch is still out performing the stock. we believe that all together, these could spur demand deliveries by 15% globally and 2023, and it shows that tesla

will be on demand to spur demand in a back trough. the u.s. is -- who else is going to join them. >> good morning to you on tv and radio. the estimation still rock above $100 for tesla. 30 pe, multiple. ford, gm, seven and five. >> where does it fall? does it gravitate? >> where the surveillance corporate >> is not going to speak. i'm not going there. you are busting my chops, but all i can say is the stock is well behaved, in the southern direction. >> were down 5% this morning. we'll keep you up to speed. >> are washington correspondent amory always takes goobers and lifts in washington. she joins us this morning. if you were to huber,

anne-marie, through be a huge story reported in the oddities of january after a midterm election. that is virginia. if you go south to virginia beach, it is one of the great purple areas of america. the governor of virginia, i believe, had a modest defeat over the week, and this is a republican to dip -- two democrat tilt. that affects every conversation washington. going forward to the 2024 election, it is purple out there, and importantly, purple out there. >> no one wants to see me behind the wheel, i can assure you that. the second point is that is true. you will hear names like glenn youngkin and sooner new, and the likes of the governor of florida. we going to 2024, and democrats and republicans are trying to fear who will lead the party.

for democrats, it's a different situation because they are in control of the white house, and president biden, or his chief of staff have said that he will be announcing a presidential run in 2024. now, republicans have put the former president trump in the backseat. in his campaign, they will be doing something at the end of the month in south carolina, but his campaign is evaporating. it really is become a back page of the news. you will hear the likes of glenn youngkin, and it is important because of the proximity to washington dc. >> with your encyclopedic reading, we've busted chops, but you've got the zeitgeist going in washington. what is the response to narrow democratic victories like this small election in virginia beach. do they go with the names you've mentioned, or does trump have value in the republican party?

>> it remains to be seen what they do in 2024, but it was on display that they have a control of the republican party in the house of representatives. where you saw 20 individuals that are very conservative, and some of them are incredibly conservative. fringes of the far right. basically, they hold the speakership hostage for days. they wanted concessions from kevin mccarthy or they didn't want to see him as speaker. they feel like he doesn't have conservative values when it comes to ideology. you cannot say that these, even though you look at the broad spectrum of america, and who would make more sense for 2024 in terms of making sure you get moderates and independents to vote, which basically would swing the election, regardless of who it is, but the fact of the matter is that there is a massive control of the far right in the republican party, and they have been dealing with it for years since 2011 and 2015. but we saw it on display just

last week. >> let's talk about the former president for a moment. his campaign. we have questions over the last couple of weeks. just what is happening. under such a cow? >> we know he will be doing some sort of campaign event. not a rally, but it will be some sort of campaign event at the end of the month in south carolina. that will be key for republicans in terms of 2024. besides that, there hasn't been a lot from the former president. he has a nifty deal, and fts, and he is on true social. he has come out and lambasted this president with classified documents, but they haven't had these huge rallies, and there hasn't been a fundraising event for him. pretty much, it is a campaign in name only. >> thank you. anne-marie down in washington. a campaign in name only at the moment. that was her words. >> i was fascinated by these

elections, and i read briefly on the virginia beach story, but all of my focus with great who is just encyclopedic on this, is that's date elections are off the media radar. they are purple. i have no idea how this will cut, but that's the study. >> were running things through 40. >> let's get through that. >> equity futures are down .6% on the s&p. yields are higher by two basis points. 246 on the 10 year. a couple of names in the banks. jp morgan, wells fargo, bank of america. if you want a broad story this morning, wall street is preparing for tough times. whether we get those tougher times, that is a completely different question, and we are all having that in broader markets. that is in every single day. do we get a slowdown in recession or recovery in china and europe and elsewhere.

we have been seen this repeatedly, over and over, week after week. what is the slow down. there is a re-acceleration in the last quarter of 2022. banks are cutting tesla prices 20% in europe and in the united states. here trying to boost demand. you mention this. ford, gm -- if tesla goes to 20, who goes next? >> i think that is so convoluted. we have a wonderful detroit team that can tell us about the product, but i am not up to speed. we were joined yesterday with moments ago, this falls into our dotted view. apollo, combined with robust wage inflation, the bottom line is that it remains a powerful tailwind in place for u.s. consumer spending. i would suggest that into the weekend and are reading, that is a percolating idea. >> as we hear from neil, that's what we're hearing from other

people and the people who'd ensure that you month ago. >> a shifting, and why are they shifting? because of the market. >> it is setting a tone for that. >> it's a market out front. >> as we are talking, equities are rolling over. .75% on the s&p 500. citigroup numbers are 35 bits way. ken leon is coming later. from your, this is bloomberg. -- from new york, this is bloomberg.

jonathan: five from new york city equities down three quarters of 1%. nasdaq down 8/10 of 1%. let's talk about those bank earnings and the outlook as well. the outlook critical for jp morgan. the outlook for net interest income, about 73 billion for nii in 2023. $74.4 billion preparing for tougher times ahead. 1.3, wells fargo done point 3.7%. both setting the stage for share repurchases. jonathan: in their defense i

think the conference calls will be fascinating. the entire earnings season, people are going to lean forward to get the nuances of where are we in made? where are we in august? we don't have a clue, they don't have a clue. that's a fair march outlook. jonathan: i have no idea at the moment. let's talk about tesla. that stock has been hammered over the last few months. down another 5.63 percent waking up to the news of more price cuts in the united states and europe. up to 20%. stock down to 116. tom: there is a careful analysis. just on the simple case of who owns it and the index funds that own it. it's going to pay for the continued glide. not going to pontificate if are going to see $99.

that's where we are, futures done at -30. jonathan: tesla down by 67% off the april peak. that is quite a move. we will bring you more on that a little bit later. the latest inflation data, leaving investors quote to question. the report is consistent with our expectation for a 25 basis point hike on february 1 and a final hike of 25 basis points on march 21 to bring pike -- peak policy rates to 4.75%. tom: this is really important. we don't do this enough. this is what afternoon tv and radio do. it is not the province of the morning but we are going to do it because this weekend across this nation, a huge body of the nation is going to reallocate their retirement plan disaster. lindsay roster is a student of

this, is a cfa. i'm going to cut to the chase. greg peters and everybody else in the industry is picking up the pieces from a complete disaster, 60/40 allocation i don't mean to pick on page him but core this, core that. how do you reallocate after the debacle of 2022? >> i think you are right it was a debacle in 2022. nobody can deny that but i think what we got now, with the painful journey let us to is an unbelievable opportunity to fix the home market. you have an opportunity to do the right thing and the safer thing. the requirement to get any kind of return was to go out through the spectrum you don't need to do that now. you can get six, 7% yields in

high quality assets. tom: what is so important here and of course you are on the high ground of this, cfa level three territory where your eyes glaze over but the bottom line is due our listeners and viewers want to manage more towards an index fund or even higher or do they want to get a little more supple and flexible this year not like something like kathy, do you want to be a little more active this year or in dixie? >> you want to be active. we love bonds but we don't love all bonds and neither should you. this is the year of security selection especially as we face a recession. there will be winners and there will be losers. you need to ask a manager to sort that out for you. jonathan: let's have that discussion. what are you looking for? what is on the list?

>> things we really like her high-quality structured products. even if you have problems you are protected. also select names in the corporate world. there is a lot of opportunity to be had, a lot of yields but you need the resources to analyze the down sheets. jonathan: i will bring up high yields are broadly and you can go a little deeper and tell me what sectors and may be what names you are looking at. this is not for your benefit, it is for the benefit of our audience but a year ago back in the summer 583. we tightened a tremendous amount. so what do you like in that luke according -- low-quality core hold? >> it is really name specific. for example there are some in the higher-quality fallen angels

we think become those rising stars but names, specific homebuilders we really like which sounds crazy with mortgage rates or they are. the key thing is the default projections are extremely low. the recoveries are higher. these are all good things for high-yield remarks but you have to get the names right. tom: reg emails from new jersey and says, linzie are we clipping coupons or are we going for total return this year? help craig out. >> i try to. you know, we can click coupons. we have a ton of spread if we want to stay static that are in a case. we are going to keep looking for opportunity. tom: that's very good. let's keep this going. folks you don't see this on radio but behind lindsay is all the and so she's read over the

years. i'm sorry the world has changed all of a sudden the sharpe ratio matters as well. our viewers and listeners have to deal with a new cost of money. i get at that bonds at the place to be but what is the recovery line back in 2020 2019, do you have a three year vision to get back or is it a five-year vision to get back? >> it's longer-term tom:. thank you. >> we are long-term investors. i think people are quipping is .6%? is it .5? let's pull the camera back and think long-term and by the right companies, the right collateral that's going to do well. jonathan: can we talk about allocation to bonds from a cross asset portfolio? people may be looking to

allocate bonds to the traditional 60/40 this year. what snaps the correlation and between traditional fixed income ? do you think that brings this year and why does it break? >> i think it goes back to what tom just said, which is, we had two black swans. we had covid and a land war in europe. those are things that when you are looking at a theoretical model, funds are not part of it. we had a black swan style of year. we want to think about the risks or the unknowns but i think we are going to enter a more normal time and that is important. that is where the correlations you has directly studied come back into play. jonathan: the challenge to that view, and i would love your comment on it, the same reasons we are seeing equities and emerging-market strip, copper rallying aggressively. the same reason i think you

could make the argument that yields should be higher. to the central banks have to go further? the ecb being one of them. we will get the growth why doesn't that result in better risk profiles? also treasuries going lower and yields still going high from here through this year. >> i think you are bringing up the risk case that is not priced in. what i think is incredible if you just look at what is implied for february, forwards or think the fed is going to hike 25 basis points. this is the way i'm going to answer your question, 27 basis points everybody knows with the fed is going to do. no one is going to do going forward despite what it is telling you they are going to pause, cut. why are we so confident now? everybody was wrong last year and i think your point the risk of inflation being more persistent, the economy being

more robust, china flee ewing the account -- fueling the economy. that can't be on autopilot. jonathan: this was great, just fantastic. i am not sure what is happening over there why do they have such a fantastic lineup? tom: you seriously want to get me going on this? used to come out 15 years ago brought to you by prudential or whoever the voice was and they came out of an insurance company that just always lead with academics. you'd lined up -- you would lineup. you know, it's like pimco it's academics first. roster is lights out. cfa, she's of real freaking deal and that's what matters. you have to have the

intellectual context there. greg peters is lacking behind a little bit. jonathan: he's going to catch up. i think he is interning for lindsay. tom: that was brilliant, folks. that is what you need when you say to yourself what do i do with my 201 k? i? to tucker this morning. tucker is back to a 201 k. jonathan: after last year. tom: this is not a time of hold my hand while i open the envelope. jonathan: you joke about that, i wonder how that has gone done for a lot of people. tom: i have extended my retirement date out to two thousand 30. jonathan: i don't think you are alone. tom: i have my walker over there. jonathan: you'll be the last one standing. tom: where is lisa? jonathan: probably skiing. you always say were on assignment and we take a day off

but she's probably skiing. she's quite the skier. tom: she goes in the helicopter, darby manchester. jonathan: darby this weekend, north london to darby this weekend. we're going to be launching a sports podcast, seriously. tom: we are doing it sunday. important darby, thank you for the ticket offer. we really appreciate it. but i don't think were going to be there. jonathan: would you like to do that? we should do one of those. we just saw a champ people can drop by and they can take our commentary instead of the commentary on peacock and nbc. >>

keeping you up-to-date with news from around the world with the first word, i'm lisa mateo. in alabama and georgia violent weather killed at least seven people. much of the damage took place in alabama where a tornado cut a 20 mile path. six people were killed and more than three dozen homes were damaged or destroyed. china's exports keep falling and global demands continue to fall off. experts in u.s. dollar terms declined in december from a year earlier. that was better than expected performance. it adds pressure to an economy that is trying to recover from zero covid restrictions. the faa is out with preliminary findings on the computer failure that grounded flights on wednesday. it was because when a data file was damaged due to a failure to follow government procedures. according to the faa, unspecified personnel were responsible for confronting -- corrupting the file.

a setback for the carrier's efforts to capitalize on a rebound in air travel demand. delta is being hit by soaring labor costs. a big pay cut in the works for tim cook, apple is reducing the ceos compensation by more than 40% to $49 million this year. the company is exciting investor feedback and cook himself to adjust his pay. 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.

this is ge vernova, helping generate and move the energy that our world needs. ♪♪ welcome to a new era of energy. >> ed's policy has been able to keep inflation expectations under control and it's returned to levels consistent with the 2% inflation target and i am expecting actual inflation to follow behind. jonathan: give the boston fed,

the philly fed, 25 basis point hikes and jim bullard comes up and says let's get there like tomorrow, tom. unreal isn't it? i'm speechless. tom: was it better decades ago when there were less regional? i would be honored to sit with a phd from indiana, huge respect for jim bullard. the bottom line, review this, he was moving us up 5, 6 headlines of 7% and now we are managing down to 5%. jonathan: that's in their projections. tom: mckee would say it is in the dot plot. jonathan: they are looking at the data, it is coming their way, sing disinflation trends emerge. unemployment is still pretty

steady. you are looking at the data and they tried to wonder whether they need to be tighter to keep things tight or if they can sit along right where they are another 25 basis points. tom: i get all the hate mail but we have a guest coming on right now who is perfect for this. jonathan: you are distracted enough. tom: i am looking at twitter spaces, then is here and he puts us out with our title for our soccer thing. soccer for dummies is what we are going to call it. our first guest can be the guest right now. jonathan: bloomberg tv we get pulled over every morning without pharaoh acting as the --ferro acting as the designated driver. we have seen some real dollar weakness come through in the last couple of months. here is the quote, inflows terms of trade falling u.s. cpi and

mark to boost euro dollars 116 bay year and now in mind. tom: we will get to that in a moment. what will be the study over the weekends. he has to be delicate. he is with the japanese bank. jordan it is flat out there, suddenly, the death of yield curve control and pillared explained the ramifications if china gives -- if japan gives way. if the bank has to send out normalized rates what does it mean for the rest of us? >> it means a lot, tom. if you think about what japan has done over a long period of time much more than what we have had in europe and the u.s. first of all the carry trade's that built up over the best part of a decade or longer could be unwound and it could lead to fixed income markets having a

tightening therefore it's not clear how reassessment will do well if they were to suddenly abandon yield curve control. how does a local market and a look? tom: right. >> that is a significant day. these shock scenarios you get so many market reaction that it feeds through to u.s. treasury. one of the largest holders outside of america is japan. how will do treasuries handle japanese having tighter conditions having yields in japan? making it less attractive. the answer is it will be to quite big sales i think. tom: bent over at number talks about china exporting disinflation when you work through the dynamics. if we work through the dynamics through the experiment does a much larger, healthier japan

export disinflation or the opposite? >> the world is very much globalized. let's walk through this on how that can play out. the first chance in a long time for japan to have spirits and escape the trap of deflation. we are seeing rises from unions. the first they raised pay in 20 years. that is a massive number across the board. much less extreme, 6% or so. the wage negotiations, they all come up to us do we get pay rises over all for the whole of japan? then we can see inflation become a bit more of a topic that japan has not had for a long time. what does that mean for the rest of the world? we have one of the last few central banks coming to an end if that was to happen.

that is something to watch out for and a big risk for this year. jonathan: you said it, they see it as a once in a generation we see it as a policy mistake. they have to figure out what kind of policy-setting is sustainable. i thought that was the effort just a month ago and now there is a conversation about may be renewing the effort in a weeks time. what is it? tom: >> we shouldn't get much of a changed next week because of the risks we talked about. there is a trade-off. are the benefits of yield can troll having to do massive onto tate of to defend the target are they working against the potentials? are those positives or negatives ? japan is experiencing inflation. it is nothing like europe or the u.s.. but it is high for japan's standards. we are having wage gains so it is the wheeled curve control

which forces them to do quantitative easing working against the idea of inflation going up and maybe they should tighten. it's just how can we do the market? it can happen as early as next week so we are getting big news. new governor coming up, governor will start from april onwards. it is the risk for next week. another surprise from the bank of japan for us is just easier to have a short and trade. or to have anything specific. jonathan: we have gone from 150 two a break at one point -- 130. the lows at the end of september all the way back through 120. euro dollars went from 95 through 108 are looking for 110, 1 .16. what did the fx community get several at the end of september?

i remember the questions we would have. we would talk about parity on cable. we got close. look at us now. what changed, jordan? >> i don't miss last year at all, john. it was doom and gloom and i did not enjoy being right. we had a really good year in terms of p&l in our trades. it was a recession, it was european energy prices spiking to unbelievable heights. collapsing for the first time in a generation to levels that will -- were wider. what's changed is we had a few factors work in the euro's favor. number one, energy prices collapsed. that has been a massive tailwind for industry. it allowed steel, chemical manufacturing plants turn on production. we saw european indexes so to improve. number two, as thank you mr. u.s.. u.s. inflation is not decelerating.

that is a very different story the last year when u.s. inflation was accelerating and the stories about the hikes will do. now is when will the fed start to cut from september 2 this year. i think a lot has changed in the third factor is china reopening. that is the new one. china reopening is a bigger deal for europe than it is the u.s.. u.s. exports to china is less than 1% of gdp. for the german economy, it's more than three times more important. just exports to china, your biggest trading partner reopening it stores, opening tourism flows makes europe so much more attractive now with those energy stores and the inflation story in the u.s. too. jonathan: jordan, thank you. tough time over the last couple of months. what a change we have seen. tom: you say to yourself how do

saxophone players get hired at these big fancy thanks. phd level dynamics, that is what all these people do. therej,on is people go it's 12 hours away. i haven't been to tokyo because of covid. it really matters in those dynamics and they impute across the time zones. jonathan: if any was wondering how saxophone players get higher, thanks, tom. my favorite story great peters you mentioned him earlier. he liked control concerts. tom: he was at brown. jonathan: is that right? from new york, this is bloomberg. ything.

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>> you could still avoid a recession. >> i think the real story starts around the second quarter of the year if inflation can push through the barrier. >> we should expect to see the fed begin to cut rates may be in

the fourth quarter. >> a year from now inflation is too high. the fed will see that as a policy mistake. >> still working its way through the system. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: we will commute on a bank friend c. we heard from early banks and now we hear from city groups. jp morgan a little off the mark. solid earnings and the view forward for frazier, jon will be a mystery. jonathan: we can start with investment banking revenue that comes in later $645 million the estimate 722.4 million. going through the earnings release 789 million, the estimate 930.6 million. 3.1 6 billion the estimate 2.8

one billion advisory revenue the estimate 340.8 million dollars. if you look at the shared dollars, down by 2%. wall street correspondent, your thoughts on these numbers? >> even though you had the fixed income trading we wanted to see it's a good news. you have to pay attention to one of them being the fourth quarter return on tangible common equity of less than 6%. compare that to the other banks, that was 20% over jp morgan comparatively that is less than 6% over and citigroup. the challenges still remain ahead when you look at citigroup. revenues increased a mere 6% from the prior year. 5% when you include to vestiges. you are not saying the stock react positively there. citigroup has been trading very sluggishly lately.

it is about half of its book value when you look at how it s performance is moving forward. tom: a year into this? >> more than that now. tom: how do you judge for timing of change strategically and tactically at citigroup? what is the timeline? >> she is years ahead of her. the technology that they have had has been a decade plus old and it's led to serious mishaps when you look at some of the trades that have gone on our right. -- have gone awry. she has of regulatory storage a turnaround and a global footprint to turn around and that is where she is already making process -- progress. jonathan: overall revenue the estimate is 17.9 6 billion for the fourth quarter. looking back, the whole year is

a pretty decent year for wall street banks. looking ahead to the year ahead i have no idea what 23 looks like. >> you have to ask yourself where the money comes from. if margins are under pressure you still see pressures on headcount, down on paper up on headcount. you have to ask yourself if jc -- jp morgan is bringing less money than expected do they please wall street? how do they please their own investors as they try to invest in these businesses? this is becoming a hypercompetitive share gain in a market that is not growing as meaningfully as would warrant tom: -- i think we need to frame a size of the banks and the relative size of the banks, wells fargo is obviously a different story. citigroup on a quick ratio of operating income or net income i can't remember which, is basically 40% the size of jp morgan. how does she get critical mass at citigroup to compete?

i don't quit -- i don't get it. >> things to watch, focus away from traditional baking into asset and wealth management. tom: why isn't she just merge with morgan stanley and move on? >> they are too big. for citigroup because they are the most global of the u.s. banks you have to watch how she gains share in asset and wealth management at a time where the globe is in a pretty tough spot. tom: >> particularly the new credit squeeze. ubs. which is virtually nonexistent. tom: and wealth. i'm fascinated by this and the traditional way we report earnings or 14, 15 years on from the great financial crisis i got my hand on jp morgan's here. there are four or five other banks down here and citigroup is down here in the table i'm sorry.

i just don't, i don't understand. if i was talking to jane david wasted -- david westin the bottom line is i don't get with the mission is. >> can i draw a question also? if you look at the core institutional business here even when you look at jp morgan it is amazing to see how many miss cissy saw in the institutional businesses. we saw citigroup beat them but i'm talking about investment baking the drop-off is way worse. when you look at even jp morgan it spells the question do those things come back? jonathan: compare the reserves. what is happening with citi? >> the global nature of the business. it's as simple as that. if you take a look at that, what they are accounting for here is not just the american consumer but when you look at citigroup the question of the reserve

built, the question putting it behind you. the reason people will think it's a good thing is a lot of those builds come from credit cards. the credit card business is also a table game when you look at jp morgan. jonathan: equity down by 9/10 of a percent. a modest rebound on investment baking and wealth. a modest rebound. dare i say that slightly different? tom: i think after what we talked about there is a raging debate in the weekend reading about what the view is forward. he doesn't mince words in his headline. the fed outlook and consensus is just ludicrous. he feels they are way to quimby -- gloomy. i don't think we will hear that in the conference calls but it is a point to bring up. you get maximum gloom this year.

jonathan: i think a lot of people were tempted to go the other way. tom: right now, we will see. decades of experience and he can take us back to the 10-1 reverse stock split citigroup 14 years ago, ken, 15 years ago. can citigroup and ms. fraser with all her wonderful abilities can she's just a -- strategically compete with these other banks? >> tom, i think it is hard work for ms. fraser. who do they want to be? they have already announced they are disposing non-us consumer banks and the question is who they have meaning for -- meaningful outside of the u.s. to compete. i think investors are tired of looking at a stock that is trading at 50% to net present value or it's book value.

what that means is we are going to have to save -- see concrete signs of improvement. that gets to the point of competing with ubs. jonathan: given the year ahead's international positive or negative in 23? >> i think it is actually moving to a surprise over the positive. the reopening of china, potentially europe not getting crushed from natural gas prices. all of a sudden and for you, the other three about 15 or 20% of total revenue but for investment baking that could be interesting as we go into 2023. a little bit further down the road for morgan stanley. this is the heart of their business. it is really international and having this streamlined network for corporate treasuries.

but it is not there yet. they have to invest in their technology platform. jonathan: stocks down. city softer bank of america done by 2.5%. wells fargo down. negative across the board here looking at the financials. to sort of finish on this, just on the international outlook. tom and i were discussing it a moment ago. europe is warming up likely avoiding a technical recession. the fed is stepping down from an aggressive rate hike. the fed expects low gdp to slowdown to 0.5%. he says this, ken, good luck with that one. can you agree with that? >> i think if you have an environment of not too hot and not too cold, it's a great environment for financial sectors, particularly banks who are the expectations -- where

the expectations are not as high. that's actually in a pretty good position as we see it. we just want to see it one bank at a time have a more constructive you as we get through the earnings. jonathan: again, thanks for being with us this morning. breaking down the banks, jp morgan, citi, wells fargo. >> same time, same place. 6:30 both of them at the same time. their competitive dynamic is out of control and that will be something for the ages. tom: you said the stereotype that citigroup's international and you alluded, i may notice -- disparagement citigroup needs internationally and jp morgan and the others don't. i'm not sure i agree with that when i look at the total

international revenue. there is a bunch of statistics nobody cares about can a collegiate they say it is close to what citigroup is doing internationally? >> i think if you look at jp morgan they are the biggest in the world so the investment baking, yes. it's the asian consumer here. people see that play out. tom: if i walk into citigroup i'm not taking a toaster. i'm not going to get a compliment terry toaster. jonathan: i hope that changes. not happening. tom mentioned this the citigroup ceo in conversation with david westin that's happening on tuesday. from six a clock a.m. eastern time live from new york, this is bloomberg. >> keeping you up-to-date with this from around the world with the first word on lisa mateo.

president biden's handling of classified documents erupted into a political crisis. a special cancel has been named to investigate meanwhile the white house confirmed that a second set of documents was found in a garage and storage area in delaware. japan's prime minister will seek public support for his new security's tragedy today from president biden. the two leaders will meet at the white house. several weeks ago japan announced a radical upgrade of its security policy. it includes a 60% spending increase. three months ago goldman sachs created a new division to house with celeste -- what's left of its store on main street. the collection of businesses including the apple card is in platform solutions. it wrecked at more than $1.2 billion in losses in the first nine months of 2022. tesla is slashing prices in the

u.s. and major european markets after several quarters of disappointing deliveries. the carmaker lowered its cost of its cheapest car by 20%. buyers can save up to $21,000. global news 24 hours a day on air and on bloomgerg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo, this is bloomberg.

>> the last three months inflation has been in the right direction. while for all three months while the average dropped the median state hi. that is because the average inflation you see posted in the headline number was distorted by declining prices for goods like used cars and that escalated during the pandemic. jonathan: several policymakers start to shift to 25 basis point hike. the market softer this morning. we are done 9/10 of 1% on the s&p 500. on a 10 year, 3.4 815 if we can bring up the financials just briefly. going to look at the banks.

going into the up and about equities, individually jp morgan down about 2.8%. wells done 4%. -2.6%. tom: interesting to see we have to summarize this. it's important before we get to our guest here. value equities, jon a guy sent me a blistering up breaking up disinflation and six months trend that we saw in yesterday's number. dave and rosenberg, legendary moments ago he makes no bones about it the fed is doing a massive overreach and he goes on to say they are in clear deflation mode. subsets of inflation artists inflating. they are moving towards deflation. jonathan: a publish yesterday, i

can show you a quote from it the details of the report were constructive in our view. we see increased risk of the 25 basis hike over the last three-month core cpi has grown at a rate of 3.1% month over month. a significant deceleration from earlier this year. i think that is what people are trying to look at. the disinflation trends are starting to emerge and trying to figure out. tom: we look at level of inflation, particularly the media, 7% inflation and that, as you say correctly deceleration the rates have changed and the rate of change are moving sprightly as mr. rosenberg talks about. jonathan: how committed are you to the idea that it continues with china reopening? i think that is a difficult calculation they have to make. back to the 1970's, you can almost feel the weight of that around the shoulders as they

make these decisions. they do not want to make a pause all for that matter shift away from 7550 225. if they believe they get it wrong and have to start making a move again. tom: were going to move on here really through the morning get you set for the weekend as well. dollar-yen, 12855. stunning news out of japan. joining us now he has been lonely for decades, kevin holt joins us out of iowa. kevin, value has been a lonely outpost for a decade. why is now the time for value versus growth venus -- growthiness. >> i think a lot of things have come together. since the global financial crisis rates have been done since 2020 we had a lot of fiscal spots come into the system and rates are up.

the question as you guys were discussing how long will they be up? will they stay up? but it creates a more level playing field. the money is free, growth was fair that you have a lot of trends in technology that are also kind of maturing to a point where it's getting tougher for businesses to kind of growth recycles. tom: is there such a thing as large-cap value? mid-caps, etc. but identify large-cap value by sector or individual name. >> i think, you know we are looking and value mainly outside of financials. and then within the financials we are joined to look at normalized earnings. if you are looking at normalized credit cycles and kind of normalized interest we don't like to make expectations on rates going too far one way or the other. trying to discern mostly within the market where is free cash

going which is revenue and margins. and again, i'm excited because it's a very difficult environment it has been for the last, you know, three years. and we seem to do very well historically in those types of environments when taking in and trying to figure out what normalized is. is something a lot of people struggle with. jonathan: go with me if you can, kevin. can we pick up a sector and take a look at the airlines. some of those names are up 20, 30%. what is going on with those names? >> it's my expectation, and this kind of leads into the stuff i'm concerned about. i think the market is kind of in a very lofty state at this point in time. you are seeing a lot of rational trading. it is a sign of market top. i'm concerned, easy stocks up irrationally in a short.

-- short period of time. we are in for a rough earnings season across the board and i don't think, i think it's good to be tougher most stocks you know here in the next 36 months. jonathan: you understand the arc of earnings season it starts with the financials, where is it that you think we begin to learn some conclusions as to the idea that this is rough, it's going to get rougher? >> if you start to look, i think on the banks today the earnings are sloppy. we have seen a peak and then go. that's going to fear investors. expenses came in a little bit better than i thought so far. your revenue trend with investment banking and trading are very weak. i think you are starting to see,

you see is a sign of what the consumer is going to do. it's a sign of what corporations are going to do and i think we are seeing revenue we missed. i think expenses for a lot of areas, today i was actually surprised on expenses so far. i think expenses and wage inflation are going to be of public for a lot of companies moving forward. jonathan: kevin hall, thank you sir. things are going to get tough. it's going to be a focus. tom: there is value in growth, that is what we were taught and there was a period more may be value had a couple years there but maybe it's basically one out of every two or 10 years value outperforms. the answer is ok maybe this is values year spurred by weak dollar, spurred by international and what that does to mid and small caps as well that really wondered about valued the question i wanted to ask is that

apple value stock. tim cook is paid -- taking a pay cut. jonathan: i saw that. if my pay was that i wouldn't mind a pay cut. tom: mr. dimon will maybe take a pay cut. i've offered. jonathan: will have to have a chat about that. you offered. tom: i said yes. jonathan: that's very kind of you, thank you for doing that. tom: this is silly where we are with these banks. get the size, the billions of their profitability. we can frame it, it's so big. jonathan: we have mentioned this several times. unsure about the future. you build reserves. that's what you do. tom: and you are doing it with michael barr coming in. this is michael barr, first order academics, a clerk at the

supreme court and the answer is michael barr is going to come in as a new regulator on the block. i saw a presentation today. jonathan: i'm done, enjoy the long weekend. i'm not done done just on with you. are we hanging out this we can? watching football? tom: i'm watching the derby sunday. swiss the ball to. jonathan: we will coach up in the next half-hour of bloomberg tv.

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tom: welcome all of you on bloomberg radio and bloomberg television worldwide. others on our financial team lead into the conference calls you want to pay attention to what we are doing through the morning there may be some negative there. each company has a different character, a different approach and we will see how that goes. we are a little of, a little down as well looking at challenges. we are going to get briefed right now on that. futures don't a little bit off a buoyant week to say the least. the vix is moved for global wall street a huge deal. waiting, waiting for the measure

of volatility to give way. it gave way on number from 20 don't to 19.33 and that is often 18 shock overnight. watching the vix carefully i'm not going to call it a bull market but it has been a january surprise. not much going on, 10 year yield. oil $84 into the weekend and the currency market very important to see here continue. those just joining i want to make sure the bank of japan yield control very unravels. we want to get out in front of the story. others have said they will abolish yield control. some say it is under heavy control i will say obe overcome by events. that is what is happening there. 3% inflation and the japanese

public challenged by this new pain of inflation. i think we will move on from there. jon ferro focused on the swiss franc right now. 1.01 i'm going to call it noodling which is what we will see over the weekend. right now to make a smart and really important insight linking economics into what we see in the financial space dana peterson, chief economist at the conference board's with us. are we anywhere near a recession? >> sure it's really hard to say. that's our forecast for the early part of this year and extending into the middle of the year. consumers still seem to be spending. the labor market still seems to be strong especially with huge amounts of hiring in those in prison services and health care. certainly when you look at

housing, the housing activity is weakening. we are seeing starts and sales down. that is influencing pricing which is a good thing. hopefully it will show up in rent but it is tough to say at this point. we need more data. tom: you sound like an economist. you need more data. are you going to have the data to adjust dots or to have confidence in trends by the february 1 fed meeting? i don't buy it. i think you're going to say we need data into the spring. >> while, we will have gdp before the next fed meeting for the fourth quarter. and we are probably around 2% annualized which is pretty strong and do the year. a lot of that is because you have very strong momentum heading into the fourth quarter and also consumer spending was healthy in october. if you have a good first month

it tends to carry through. tom: a very important question, i mean this with immense respect for your contribution to citigroup, we have executives ceos of banks trying to be dana peterson. jane fraser, she's no dana peterson. they are trying to guess a recession. what is your advice to mere mortals like chief executive officers managing a strategic message who are trying to game economic recession? and they succeed? >> i don't think sake -- i don't think it is a self fulfilling prophecy. when you look at what the fed has been doing. they raised the federal funds rate by 450 basis points. we are probably in for a few more rate. that all signals significant slowing in demand and also a recession. the thing that is different this time around from other processions is labor shortages.

we have a number of industries that are still trying to recover and it so as long as you have labor shortages, businesses are less reluctant to let people go and as long as people are working and they are seeing their incomes rise, especially at the lower end of the spectrum, then it's really up to the consumer. will consumers stop spending if they think they're going to not have a job? tom: before we get into a brief into the weekend just rose simple i love your paragraph on experiential services. did you learn this at wesley and? were you -- what is in experiential service? >> anything you can go out and enjoy like a hotel, restaurant. tom: or bloomberg surveillance. keep it going. >> certainly. that is what people are demanding right now after being cooped up for 2.5 years and that

is really making it tough for the fed to prevent the inflation. in addition to the fact that rent is very elevated, people still want to go out there and enjoy things and as long as there is demand for that, it's going to put pressure on prices for those services. tom: dana, thank you so much. ms. peterson's with the conference board there with important research notes. treasured right now is a copyright of michael mckee has friday note is read far and wide across the bloomberg world and we are thrilled he can seven into the weekend. you and i know it was nuts. remember the old angry beavers cartoon on nickelodeon? that's the way 2022 is. >> it hasn't stopped but we are getting a little more defined. we are falling into a channel,

we are about to and with the fed rate increases if you listen to the fed. if you listen to the market they're going to start cutting rates. then it just becomes a manner of how long does it take the cumulative effort of the feds tightening to bring down inflation to a level at which the fed will start talking about some kind of pivot. tom: required and are of generous motorists, he would try to gain china gdp and that was the responsible thing to sell units in china a million years ago were caterpillar, dear, how do you respond too ceos acting as economists trying to gauge a u.s. recession? >> they have to do that. in a sense they are pretty much the closest tied of any sector. to the economy, they are going to be the ones who are responding to the fed by raising or lowering their borrowing costs. they are going to be the one to

see the impact from consumers who are either putting money in or taking money out. so for the bankers it is kind of interesting. i note that miss pesek has joined us here on set. listening to today from the calls what their forecast for consumer spending is going to be. and also are there any sectors that are reporting problems but together with their loans because so far, the consumers -- >> conference calls. of >> as far as the conference calls go, credit cards, they are holding on strong. that is where a lot of this is coming from but if you look at a lot of other areas like homes, auto, jp morgan just started their call so let's not get too excited. tom: you are not on the call? >> we have about seven people on

the call from bloomberg alone. tom: >> and other sales point there. there are many calls going on at the same time. the point here, how much of the consumer to they want to get as rates are higher even if they were to pause or decline. he saw have higher rates here and remember i think a very important point here is there is only so much money to be made when you expect that even though jp morgan's net interest is going to rise is still going to come in below analyst expectations this year. >> the trading, the banks, and their starks is your area where as i'm looking at what they are saying about the economy. so far, we haven't even seen sectoral problems outside of housing really and autos has been more of a supply problem. so are we seeing anywhere were in a traditional recession you

would see lending problems? tom: in the last 20 minutes i have had three people with nothing better to do this morning simply say the fed is wrong. how wrong is the fed, michael mckee? >> neal, data, and i were discussing this this morning. my argument is wall street has this tendency to look at what the fed forecast three months ago in this case is just one month but it's still a month ago. compare that to what the market sees right now and say the fed is wrong. the data we have on unemployment, the data we have on gdp, none of that was available to the fed on december 14 when they put at the last forecast.

then we just pick a middle, and median and say that is what the fed is forecasting. and that is not correct. tom: what are all these troops saying about traditional banking? mom and pop thinking? >> i don't want to be too extreme about it but is it dead? the question about it is, what happens to the main street lending businesses? there has been a tent of consolidation. there tends to be a lot more. i heard you talking about michael barr over at the fed will he allow that to happen? probably not. tom: you have 20 seconds why is michael poirier -- michael barr over at the fed such a big deal? >> clearly -- tom: is it elizabeth warren of yolo's goal? >> this is the last shot really before the next cycle.

>> a lot of decisions have to be made which have not been made yet. tom: dip into the conference call. covering all of our beings and michael mckee the only guy who knows who jack robin is. seriously this weekend just fascinating as we reset for january. features -37 dow futures -269 six 1.924. >> evening up today with this from around the world with the first word. i'm lisa mateo. in alabama and georgia by that weather killed at least seven people. much of the damage took place in a llama where a tornado cut a 20 mile path. six people were killed and more than three dozen homes were damaged. the faa is out with preliminary

findings on the computer failure that grounded all departing u.s. flights on wednesday the agency says it was caused when a data file was damaged due to a failure to follow government procedures. according to the faa unspecified personnel were responsible for corrupting the pile. two of the largest airlines are giving up on the new york stock exchange. they are joining a raft of government controlled firms and have announced their departures from u.s. exchanges. the companies attributed the decision to commercial factors including the cost of maintaining u.s. listing. delta airlines is forecasting a first quarter profit that fell short of wall street estimates. that is a setback for the effort to capitalize on a rebound in trouble demand. takeover talks at bed, bath & beyond the home goods retailer is on the hunt for a bankruptcy loan. sources tell bloomberg there may be the option to buy some or all

of the retailers assets so that others can offer less. 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.

>> i do think there has been a little more optimism than i expect around the sort of durability of the economic recovery and the fact that maybe we can put this sort of energy shock and the interest rate stock behind us. i do still worry about a global

growth over the next 3-6 months and beyond. tom: eric nelson at wells fargo generating strategy here in the some mulch was times. futures -38, it is think earnings day. we will have more on this. our team worldwide in conference calls right now generating a forward view for the great american banks. international banks reporting along the first quarter. euro 108. japanese yen with real strength now 128.38. you need to watch japan which is our sunday evening, that will be very interesting to see we pause now as we have done on a yearly basis to talk to someone who had the courage to make a success in a disastrous industry. it's easy to be a success when you have the wind behind you. the thinking business, long ago tyler brule said we need some

wallpaper and he came out with the magazine and i said yeah, yeah whatever. we did wallpaper and that was great on newsstands for years. then along came monocle. 15 years ago. if you don't know monocle, it's the magazine your kids are stealing. it's the magazine you can't get on airport newsstands because people have bought it. what's amazing about it is the vogue harper's bazaar thickness of it. pretty much every month, it's fall fashion. howard tyler finds us. you are based in zurich right now you continue this tradition. how do you keep the thickness of the magazine during the pandemic? >> good morning and the great to see you, tom. part of it was the hustle, just being out there crossing borders getting in front of ceos and having the conversations.

trying to be in studios and being face-to-face. that is what it came down to just being out in the world. tom: i want to get to the money question. for every single percent in economics, finance investment, and international relations what is the tyler relay this practice to create the enthusiasm for your product that you do? >> part of it is adventure. being exploratory, meeting interesting people, having those conversations. cameras like this are great, laptops maybe not. getting out of the house. tom: do you delegate authority? was monocle all zoom? >> parts of it resume but i have to say journalists are key workers. we were running in industry like you were. tom: in this magazine and for you on radio it is a big, thick magazine.

the whole idea here is this one part aspirational architecture. aspirational fashion in city, city, city. you are the biggest promoter of number two sized cities. thor is the city now to live? >> i'm on my way back to zürich. i think spain is interesting to look at right now. tom: portugal, spain, the whole thing? >> i think spain is very interesting to look at. they have digital passports that just launched. i'm not sure on the biggest believer in that as a currency. the second-tier cities market. tom: asked tyler about work from home. you want people together, mingling, talking. can you do that with work from home? >> you can, i just came from toronto. 18% in the office and this is

incredible. tom: and you invented this. this is really important. everybody battling, this is the voice. work from home, what's wrong with that? >> it is inefficient in many ways. it looks like it's caused savings where are you sitting at home? what is your company based but the most important thing, what are we doing for community? you go to the concourse among the big towers, empty. 50, 60% of stores empty and where is the serendipity? where am i bumping into you having that conversation? presume we are very on zoom. tom: maybe we have happy valley in the next we care. if you are sitting down for a cup of copy -- coffee and he screaming we need to get away from work from home what is your

process to get monocle away from work from home. >> i think he probably has decent workplaces but i think you have to have a narrative and may be to all of those people that say opportunity comes face-to-face. i'm going to find someone who is going to give a negative conversation. -- nugget during conversation. tom: the luxury still doing well. monocle on the pacific rim, how large will china preopening effect? >> we are not huge in china for a reason. we don't rely on china for advertising per se. sometimes you get regional governments spending money but it's not that important to us. tom: reopening singapore, does it assist the effervescence you people represent? >> look at thailand as well the way they are looking at vaccines, not vaccines.

for all of those markets, china is incredibly important. tom: the publishing business, can i editorialize what a train wreck? that i get that right? >> i wouldn't say in every corner of the world but largely a train wreck. we are about to do in many aces. tom: you strategically have to say whatever the magazine is what is the way that publishing can begin, can begin to improve? >> part of it is returning quality and this is pre-pandemic. you saw this trend of downgrading paper, lowest common denominator. we said no. you have to have an object that the reader wants to be seen with an advertiser wants to be in a quality environment. it was our push to go the other direction. you have to turn a journal like the one you are holding now, it has to be an object which is a collectible. you want to be seen associated with that. tom: i'm sorry for your

photographer, there's an emailed from brussels take the biscuit, brussels, this is classic tyler on radio. seven fancy people sitting outside a fancy pate story. >> it's a celebration of in this case a classic business. it's taking people to a city which is sometimes not most loved and we want to show even in a small example like that, entrepreneurship and later what -- leadership as well. tom: is it most loved right now? >> america did rank number one when it came to our soft power awards this year. america still has extraordinary soft power. sport, we look at and expensive mba going out into the world. as many things in america people on other sides of the atlantic and pacific are not so interested in. tom: what do we look for, we

have the world cup coming here next year. the basic idea of america assent, monocle, is not so much that you pushed against that but you said there are other geographies that matter. >> five years from now, currently still our biggest market. i think it will continue to be our biggest market. i was just in d.c., i want to talk to you about real estate where should we have our bureau? tom: i think a bloomberg monocle relationship would be good. what you could do for our client would be something you could bring from brussels. this is a celebration of someone who has succeeded in industry that failed. monocle, can't say enough about it. just like the zeitgeist of cities ascended in the world. tyler brule invented and is

monocle. don't forget monocle radio is well which is better than good. i'm going to summarize here a mostly historic day. we do this with our team going to tacos here. -- it would say more than anything as mr. schrock -- shop were going to be really incentive this year of trying to cover not so much the fancy people but the people as firing as tyler brule just talks about in monocle. people trying to reach up. we had these stunning inflation report yesterday. the bank report today. stay with us, this is bloomberg.

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jonathan: live from new york, good morning. equity futures on the s&p 500 down 0.9%. 25 minutes away -- 30 minutes away from the opening bell. announcer: everything you need to get set for the start of u.s. trading. this is "bloomberg: the open," with jonathan ferro. jonathan: live from new york we begin with the big issue. earnings season begins. wall street banks preparing for tougher times. tesla cutting 20% as the fed lays the groundwork for smaller hikes.