>> welcome to bloomberg markets. >> this is "bloomberg technology". >> welcome now to "balance of power". >> there are too many problems that investors have to overcome in the first half >> of this year. > now we are starting to see more dispersion in the data and economic outcomes. >> it will be a harder environment to see fiscal and monetary response. >> i think we are very much revisiting the more normal dynamics. >> the story this year is the earnings risk and recession risk. not the inflation risk anymore. announcer: this is bloomberg surveillance with tom keene, jonathan ferro, and lisa

abramowicz. jonathan: the morning, this is "bloomberg surveillance" alongside tom keene. i am jonathan ferro. equities up 0.1%. let's talk about this. alphabet, 12,000 jobs to go, 6% of the workforce. tom: no surprise there. in the number, 6% is key. into the new year, 2%-4% is the way a lot of industries go. but this is more than that. jonathan: i said this earlier this morning but tech appears to be going through its own post-gfc moment. years of access. the good times are not coming back anytime soon. tom: i cannot say enough about how you are right on this and it is a cultural moment for silicon valley. we make jokes about this but this is not funny.

google used to hold court at the piano bar. there was the silicon valley tone that permeated davos, switzerland but it is gone finally. jonathan: they were throwing money. they had money thrown at them. tom: fitbit. where is my fitbit? i wore it for three days. that was one of their acquisitions to save the world. i read a spectacular article on amazon. they just buy this, buy this, innovate, innovate. jonathan: the discipline of 4% rates, 4.50 at the fed or maybe five starts to bite. tom: it is that but also in the short rate market. i'm sorry, google puts their pants on one leg at a time. with the new cost of money, they are adjusting. jonathan: brian said these words "we are determined to stay the

course". these words from christine lagarde earlier. they want to stay the course. can they? tom: john: and i approach this very differently. he really reads these documents but i rarely do. they go through this idea of there was an intro like a good movie and an altra to get to the sequel. and the infantry was different. jonathan: the in between stuff is more important. at the start of the speech, christine lagarde talks about staying the course by at the end, concluding we need to keep working at all of that. in the middle of the speech, thinking out loud about the potential of a landing. reflecting on how much policy is already in the pipeline and how much damage can be done in the future. they're shifting towards 25. tom: we are shifting toward february 1 after some hard

economic data. the market reaction -- let's rep the dow. the fact is equities have come back from the early january rally. jonathan: features are just about positive, about 0.1%. were 10-year yield in america up for basis points. we .43. the two-year around 4.17. the euro-dollar is positive, 1/10 of a percent. the head of income at morgan stanley investment. are you picking up on the same thing? >> you guys are all over this morning. at some point, you have to move to 25 because you have done a lot. you do not know how much damage has been done but we know inflation numbers will fall. six months from now, we will see weakness with inflation so you

switch to 25. they have a different problem which is easing may go back up in search for highs so it is a delicate dance. tom: been evans absolutely nails this this morning. in the brian weinstein world, there is a massive fear of missing out. in the bond market, issuance is nuts. explain to everyone why everybody and their uncles is putting out bills, notes and bonds. >> i always find the first couple weeks of january confusing. people just have capital and feel like they are missing out on putting it to work. behind that are yields and income. everybody talks about recessions and big corrections and moves. what if nothing happens this year? if nothing happens, you get paid almost 5% and put money into t-bills. it we get more morality.

customers are not crazy. they have not seen this in a long time. if you think about credit markets, investment grade, new simple bonds, you actually get by. so customers are issuing -- markets are issuing rallies in customers are buying. tom: can i hope for a day -- total return? >> the bond markets are a bit ahead of itself. are we going to get 200 basis points? is that so certain that you can continue to buy take your notes and 340? i am a little bit skeptical. i do not know that we are going to go back toward 3.40. i think you can be careful of what you can buy and when. tom: brian is living large. you know how he has done at morgan stanley. he has the jeep wagon. he puts the kids in the back.

he has a bumper sticker. [laughter] jonathan: i want to come to you on the difference of what you think is going to happen with tragedies. do you really want to take credit risk going into what people think could be a recession? at a time, in and around 400 basis points. the -- is up 50. you have spreads that have been tightening at a time of the data has been getting worse. not a good time to buy high-yield credit. >> historically know. high-yield has been interesting in which it is pricing at a much rosier scenario. they are getting close to 9% or more on high-yield. at that rate, you get paid to make some mistakes. i do not know that you need to chase it here but i am not sure that you are paying for 2008 when high-yield spends pay out to 2008 bonds.

i think there is a relative cheapness of the more boring sectors. people do not love to chase the sectors i think we get better opportunities in some riskier sectors. jonathan: jonathan: what other boring sectors? what would you call them? >> pca big grade. some people love to talk about it. you have 20 basis points on treasuries. you can make more than your coupon. miscible bonds cut cheap in october. they look pretty good now. in some places that have low default rates and better liquidity. t-bills, money market funds will create given where the curve is. tom: this weekend, are you going to worry about the debt limit, the debt ceiling, the default of the united states of america? >> i am not. there is additional short-term risk if you are a bill trader but other than that, if you put it in the back pocket, this show

something about this function of government but we are not going to befall. tom: so we. and just replay this until -- jonathan: play this until the summer. tom: for those who are not a fish on this, you see how mr. weinstein just says like a move on. jonathan: for now. i wonder how it will be once we get toward the exit date in the summer. do you not think this could be somewhat different? >> we have seen them go really close before. we have been downgraded. we played chicken with the debt ceiling in a really big way. that's a major holder of u.s. treasuries, or any of us, should worry about not getting paid back, and do not think that is the number one thing. it will have short-term impacts as we get closer to midterm but it will not be my weekend. i we can fear is more big picture things like recessions

and job layoffs. tom: stop it. giant or eagles? which one? >> i am a giants fan. i hope the giants win. tom: there we go. with brian, you have to start with the sports segment. jonathan: thank you, buddy. brian weinstein, morgan stanley investment. remember the address from the former former president, barack obama. i remember the time he wanted marcus to take it more seriously. i remember the address from him when he was most pleading with markets. around 2011, it felt that way that it would have been easier for him if markets have reacted in a much more violent way to what was taking place. the fact of the matter is with treasuries, that is not how it works with people. when you get into a dicey moment with the debt ceiling, but to

investors -- what do investors start to buy? things are knocking the shift away anytime soon. tom: katie has a beautiful article today summarizing the reverse market. the land of ira jersey folks in the idl that when you do what they just said, and also put liens, if not trillions into the -- put billions, if not trillions, into the cash. jonathan: is solved with set about the plans they had? they had to look at this back in 2011 and they were talking about buying a secondary market and buying bonds of things the fan. doesn't that kind of encourage it to know that is there if things go too far? tom: they have the institutional responsibility to do this like banana republic but i am going to listen to annmarie hordern.

because this time is different. we saw the speaker soirée a couple days ago in that we have a certain group and how will they react when we get to important hours at midnight? jonathan: mitch mcconnell was pretty emphatic that the u.s. will never default. is he running the party the way he has in years gone by? tom: i think anne-marie mailed it yesterday. i thought she was off today? everybody in know was off today. sonali's office. anne-marie is off. jonathan: is bramo off? tom: i think so. jonathan: of the snow in europe wasn't there this year? that is what i hear. tom: she is like out of a bond movie. jonathan: futures up at 10.

from new york, this is bloomberg. lisa m: keep you up-to-date with news and around the world. google has become the latest giant to retrench after years of growth and hiring. alphabets will cut 12,000 jobs. more than 6% of its workforce. cuts will affect jobs across the entire country. the ceo says he takes responsibility for the decisions that led alphabet to this point. the beta agonist sending another major package of military hardware to your crane. it includes armored vehicles and millions of rounds of ammunition. the packages valued at 2.5 billion dollars. the u.s. and its allies are meeting in germany to discuss more aid. in japan, inflation has hit 4% for the first time in more than four decades. it is likely to lead more speculation that the central

bank will change its monetary policy. david crosby is being remembered as one of the most influential musicians of the class of what area -- classic rock era. he founded the birds and has died in los angeles. he performed for more than five decades in his group sold many of records. all the while, he battled drug addiction and a million other ailments. he was 81. global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo, this is bloomberg. bloomberg. ♪ we all have a purpose in life - a “why.” maybe it's perfecting that special place that you want to keep in the family or passing down the family business or giving back to the places that inspire you. no matter your purpose, at pnc private bank,

we will work with you every step of the way to help you achieve it. so let us focus on the how. just tell us - what's your why? this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight.

>> we will pay our debts. we always have and always will. how messy will it get? we do not know yet. we are going to charge the increasing of the debt and how we can prevent that from increasing as it does in star a downward trend. there has to be discipline and sacrifice. jonathan: that was senator manchin speaking in dapo's. you can find that on bloomberg.com and the terminal. equity futures right now positive. 0.9% on the s&p. been a pretty ugly week so far. the equity market. yields are high by three basis points. for the doom and gloom, let's go

back and revisit. jobless claims yesterday, 190,000. does that scream recession? tom: four-week moving average. i have a vix that tells the market it is not as ugly as we think. if you are just joining us, google layoffs this morning. this is original and comes out of a pandemic. i am going to lean on professor l arian and this and that. the answer is really smart people are thinking as hard as they can about the shift from pandemic covid over to something that they remember. who says we are going back to something we remember? >> except you can't shift away from something too soon. this is the third day of economics from china's reopening. i think it is really difficult. it is not the new normal but

maybe the old normal. rates of 4% and we stay there for a while. tom: one of the most intelligent conversations was james gordon and lisa abramowicz. he was heated about work for home. that falls into the labor picture. i am not sure how but gorman was brilliant, articulate, heated and passionate about where are we going in this new work from home society? how does this fold into mckee's job status? jonathan: i think we can talk about the tech jobs data as well. there is a feeling that things got too soft at many of these corporations. they were worried about first year at the banks and i wonder if attitudes have shifted in a big way after the last 12 months. basically if you worked at a tech company, you can work wherever you want to. now the springs discipline and job insecurity back. if james gorman says get back to

work, a lot people will when they see this on the street. tom: at box, i cannot say enough about the journalism on amazon. he describes exactly what you said which is he speaks to multiple x amazon senior officers that say the company got soft. that permanent -- i am not sure it permeates every sector but in tech, i think we can say yes. jonathan: when they are emptying the office and selling things like the pizza oven and all that good stuff? tom: i do me a -- i do not think it is appropriate for me to comment on twitter. i think i will get banned. i'm referring susan li is back on now. i think tech things, like bitcoin. sonali basak i am told is listening to us.

the bottom line is bitcoin this week has blown up and that is part of the tech is aiming is. jonathan: i have asked this a few times, is it the last two or three years of access or the last decade of access? tom: decade. jonathan: amazon going into the pandemic had about 800,000 employees. after the pandemic, that doubled to 1.6 million. if you look at their job cuts recently, we are talking about removing access. every seen anything close to what you expect to see from a company that had expansion that large? that is only last couple years. tom: speaking of access, annmarie hordern joining us now. i want to do a friday take to get to the sunday talk shows, many of what you can hear on bloomberg radio. it is real simple. where is the binding reset?

every administration known to mankind reset. where is the biden administration reset? annmarie: if you are talking about a reset in terms of personnel, because usually you see people leaving midway through the administration, it is not happening for i think two reasons. one is a life of the foreign policy folks are still deep in the trenches of dealing with ongoing crises in terms of russia's invasion of ukraine. the other is this is just a bide n aura. he does not get rid of staff. a lot of people work with him in the senate and then as vice president and now. you do not see him firing people. tom: is that true? this is a critical question. every administration has a cadence of debate.

obviously with former president trump, it was truly unique. what is the day-to-day method and process of debate? in the white house that you are standing by on the line? annmarie: the cadence has changed. they have lost the house now. it is good luck on capitol hill and there are only a few things they can focus on. at the start of the year, while it was going well, it has been overshadowed by the documents found in the president's former office after he was vice president and his garage. that is really overshadowing and creating headaches for the ministration. obviously, with a divided congress, they cannot push for the legislation and debates they wanted to have. and the ones they didn't have the prior two years. jonathan: what is the next steps in the investigation if there is one? annmarie: we are waiting for the special counsel. there is two special counsel's for one former president when it

comes to documents. the president, president biden said he has no regrets on how it was handled. he says documents were found, lawyers were brought in, they were alerted to the national archives and doj. he is really trying to paint a picture with how we handle these documents versus how the former president donald trump handle these documents. but there is obviously a lot of criticism and questions about the timeline. about why was there only a public statement after there was a cbs report? the president yesterday said there is no regrets but this is having the media will continuously focus on. the answers we are going to be looking for we will not get until the special prosecutor reps of the gym. jonathan: the timeline is odd. he let the obama administration and went away with some documents and then ended up at pennsylvania with the same documents. how does that work?

annmarie: it is a great question. these documents are the property of the u.s. government. it does seem like when boxes were packed in both instances -- in one, there was a lot more in terms of documents volume, but they ended up in private residences as they packed up their offices. the timeline, six years in terms of president biden's documents because this was when he left the obama administration. his documents, in terms of volume was less, but the timeline is interesting. this is what the press continually asks. the founding documents before the midterm election. the public's were obviously going after the administration for hiding this, saying this could have impacted the election. biden administration says they were going with protocol which is what they did. jonathan: thank you.

i imagine the story is not going away anytime soon. tom: it is there. it is a little bit off our radar of what we do at "bloomberg surveillance" but can we learn what the documents are without giving away the secrets? that would help, i think. jonathan: no idea. i just wonder how this keeps happening. tom: i asked did it happen before but nobody noticed it? president pharaoh in 1953 can hide had a classified document by the telephone. jonathan: i was not born here so that cannot happen. it could happen for you though. tom: zachary taylor, i think, how to classified document.

[office sounds] ♪upbeat music♪ ♪♪ ♪when the day that lies ahead of me♪ ♪♪ ♪seems impossible to face♪ ♪a lovely day (lovely day)♪ ♪(lovely day) (lovely day)♪ ♪(lovely day)♪ a bank that knows your business grows your business. bmo. it's official, america. a bank that knows your business grows your business. xfinity mobile is the fastest mobile service.

and gives you unmatched savings with the best price for two lines of unlimited. only $30 a line per month. that means you could save hundreds a year over t-mobile, at&t and verizon. the fastest mobile service and major savings? can't argue with the facts. no wonder xfinity mobile is one of the fastest growing mobile services, now with over 5 million customers and counting. get in on the savings and switch today. (jennifer) the reason why golo customers have such long term success is because we focus on real foods in the right balance so you get the results you want. when i tell people how easy it was for me to lose weight on golo, they don't believe me. they don't believe i can eat real food and lose this much weight. the release supplement makes losing weight easy. release sets you up for successful weight loss because it supports your blood sugar levels between meals so you aren't hungry or fatigued. after i started taking release, the weight just started falling off. since starting golo and taking release, i've gone from a size 12 to a 4.

before golo, i was hungry all the time and constantly thinking about food. after taking release, that stopped. with release, i didn't feel that hunger that comes with dieting. which made the golo plan really easy to stick to. since starting golo and release, i have dropped seven pant sizes and i've kept it off. golo is real, our customers are real, and our success stories are real. why not give it a try?

jonathan: friday morning. good morning. equity futures positive about 0.1% on the s&p. equity futures granting higher. by 0.4% on nasdaq. we will touch on netflix later. crushing estimates. i am trying to guess these subscriptions. netflix is like blind folding. tom: we will get there. i thought jessica yesterday was -- jonathan: she was great. tom: my major decision is do i

start watching wednesday this weekend? jonathan: what is that? tom: come on john. wednesday is a series, it is like the addams family. everybody at home -- jonathan: i have no idea. i was watching football yesterday on peapod -- peacock. yields down by four basis points on the 10 year. 3.4329. on the 2, 4 .16 39. christine lagarde this morning said stand the course is the mantra this morning. they are determined. the euro-dollar is 1.0836. i think you can say that is unchanged. the fed word before the choir period begins. governor christopher waller set to speak later today. you heard them so far.

john williams making the case for high rates. >> inflation has declined in recent months but inflation is very high. it is going to take time and resolve to get it back to 2%. policy will need to remain sufficiently restrictive for some time to make sure it gets down. jonathan: that is the punchline, tk, we are going to stay the course. the volume of the speech we heard from brain are there is far more interesting. perhaps it is possible. i would use her own words that it is possible that a continued aggregate demand could recently take -- could facilitate easing. and a significant loss of employment. that is what the soft landing is about. tom: what is important about the brainard speech is where she did it. jeff curry of goldman sachs taught micro at chicago which is

the height of economic acuity. what is important of -- is important is finding ambiguities in the debate and that is what she is addressing with the garbage phrase "soft landing". it drives the nuts. there are ambiguities out there we do not know and people like brainard cannot get there until we see the numbers. jonathan: a soft landing is just saying can we get inflation down without having too much unemployment. right now, unemployment is at 3.5%. tom: we have to get to our guest but my problem is this soft landing does not describe the socioeconomic structure of two thirds of america. two thirds of america in some firm -- performance flat on their back right now including 10,000 plus people at google. you are not having a soft landing because there is a group of people including tom pharaoh

and -- jon ferro and tom keene who are living it large. jonathan: dr. l arian -- el_erian. tom: i can see a cambridge that they turn into wednesday this weekend and i will do the same thing. jonathan: i don't know if i'm going to watch that. readjust also overt in. the only thing to watch is "i am georgina". that is cristiano ronaldo's partner if that helps. was the last time you heard from her. i have not at all. tom: is she at dollars -- davso? we are going to salvage the show

and get you to your weekend thinking and reading about what to do in a multi-asset strategy. she deals with this each and every day. all of my radar is up because so many people are telling me bonds is the only comfort zone. is that a consensus call the is that certain? >> thank you for having me. it is appearing to be a consensus call for two reasons. it makes a lot of sense. the economic data so far, including what came out this week on producer price index is indicating that inflation has peaked. all of last year was too much inflation van for bonds? this year, there he simply put is inflation has peaked. that is what we have witnessed in the last six weeks or so. yields coming off sharply. the second point from a multi-asset perspective as they

are once again acting like a hedge. this week, wednesday, we saw a selloff in equity space and bonds rallied. the all balanced question is back on the table. they are attractive because they are indicating this and acting as a hedge. jonathan: let me go right to multi-assets then. tom: so many of our viewers are going to say we are pitched by advisors and stuff. how do you look at the choices to make fixed income? is it a duration choice or credit quality choice? what is the most important factor there? >> both are two levers that bond managers use in trying to beat the index. the fixed income duration is the hedge part right now. because as yields come down,

duration rallies and that provides positive returns. credit is something we are quite nervous about right now because all indications are that we are having whatever the term might be, a soft landing or some sort of recession this year. you want to stay in good quality credits. we are underweight high-yield and underweight some of the risks of credit. tom: what are people say? columbia threadneedle does it all. i am interested in the -- you have a fixed income. >> that is a great question. equities are a little more hard to pin down. if you look at the valuation lens of equities, they do not seem to have fully priced in the recession fear that is out there. in the u.s. space, our managers are saying fairly defensive. they like the good quality

components of the u.s. stock markets. from a multi-asset space, we are seeing attractive opportunities to actually hold emerging-market equities where we have a massive valuation commission that has built up in the last decade or so. at the same time, there are improvements in the dollar view and the growth prospects from china. we each have a multi-asset disk and they like the emerging-market. pretty clearly emerging-market asia. but the bond market is staying high quality. tom: we are trying to stagger to q2. have been doing this for a few cycles. you able to frame out the fourth quarter of this year? >> in terms of earnings, the market is doing the standard it does every season. expectations are brought down pretty sharply. so far that is all we are seeing in data.

i would say it is early days expectations for q2, earnings will be down for about 2% so far. and so far with about 10% of earnings that have been released, we are beating those expectations. we might end up in this current run rate with flat earnings to mildly positive. expectations for the remainder of the year for 2023 are quite bleak. earnings are supposed to go down. tom: thank you so much. anwiti bahuguna here this morning from columbia threadneedle. i only discovered that today was january 2-0. i am discovering what i should have known december 3-0 which is the huge uncertainty of the actual allocation of a retirement plan. i do not think after last year and the blowup -- asterisk at

least as bad as 1974. we had one guest loop back to 1788. i do not think anybody with the good efforts is world-class has any clue how to allocate out of -- after a 60/40. jonathan: to make up for the downside of the portfolio, how much is that going to take? tom: gases telling us 18 months or two years, three years. i would go a little bit farther. i don't know. anybody who says they know. i am whispering because i am rich. jonathan: have you seen that comedian? tom: this is the comedian jen breasts -- bristo. jonathan: wednesday was fun but it was very 2022. you and jen should try out kaleidoscope. tom: we are having fun on a

friday as we get into the weekend. what is important about this is afterthought applied to nevermore academy. we're going to send her away to school for a disciplinary problem and she went to the academy. jonathan: do you think it is the fact that you called her child and afterthought? tom: maybe. but it is in the wind suki river . it is sort of south southwest. this is where wednesday is. jonathan: i'm going to make the serious for 20 seconds. netflix stock is up five -- 6%. guess what the average estimate was on wall street? four point 5 million subscribers. it drives me insane. are we going to stop this guidance around this company?

to try and project when subscribers come in just seems all over the place. tom: paul sweeney owns this with 30 and 40 years of serious entertainment analysis. he says it is a whole new world. in mr. iger's defense and at warner bros., it is a mystery. jessica yesterday said she is plus plus on wb d and netflix. jonathan: swells to put earnings on netflix. it is of 13%. of 7%, then down 20 5%. that is just how wild earnings are for netflix. tom: john tucker said we can see you at the wobbly barn with a beer in your hand. at the wobbly martin, there is no choice. jonathan: really? we cannot have a budweiser.

we have a word for bud. -- is coming from jp morgan. this is bloomberg. ♪ lisa am keeping you up-to-date with news from around the world. with the first word, i am alisa matteo -- i am lisa mateo. will is drastically scaling back operations. alphabet says it will cut 12,000 jobs, where than 6% of its global workforce. google has been dealing with a slowdown in digital advertising and its cloud division trolls amazon and microsoft. in germany, the u.s. and its allies are meeting to discuss more military assistance for ukraine. the u.s. unveiled a new aid package that includes 90 strikers and 59 vehicles. pressure is mounting on germany's chancellor olaf scholz to deliver leopard battle tanks. even says he has no regrets

about his handling of the discovery of classified documents at his private office and home in delaware. he predicts the investigation will find a wrongdoing. he told reporters he is cooperating. international sanctions are damaging china's demand for russian oil. chinese imports of russian energy fell to their lowest last month since march. in early december, g7 imposed a price cap on moscow oil. global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. 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.

>> with the exception of netflix, everybody is losing a lot of money.

viewers are going to streaming. they want to watch what they want when they want. the biggest issue about streaming with consumers, it is very easy to turn on and off the services. jonathan: a brilliant conversation with jessica reif e rlich. good morning equity futures shaping up. yields are higher on the 10-year yield, four basis points. the focus on netflix is positive off the back of earnings which has just absolutely crushed subscriber estimates. tom: we are making it up as we go. let's get right to it. thank you for the many comments on wednesday and the rest of it. mandalorian was coming out for disney plus. they're going to get true perspective here like jessica ruth ehrlich.

-- as with bloomberg intelligence but also links in the social and behavioral world of streaming with math and finance. thank you so much for joining. with the uproar this morning on wednesday, i will actually start watching it this weekend. our netflix's world and number streaming adjusted by binge viewing or is there any whisper of a netflix that is like cbs and then spoke three generations ago? >> it is not adjusted for binge viewing. they really benefited from binge viewing. this is something they have spoken to always and this is why we are seeing some of the biggest numbers because they give customers the ability to watch all episodes at once. i am going to join you on wednesday. this is become one of their biggest english-language series after stranger things fourth

season. this just speaks to the power of their content which was the main driver of the 4q subscriber blowout. tom: the subscriber dynamics. the uc a trend or is there so much noise turmoil that you need more corners to understand a stable vector of subscribers for netflix? >> i think there will be a love volatility and the company understands this as well. which is why they have already stopped providing guidance going forward. there are just too many different initiatives in the works whether it is the ad- supported tear or crackdown down on's were they expect -- on password sharing. they expect some bumping this. for the longest thing, we thought it would be 25 million subscribers year after year until we had the l down at the end of the last year. at the end of the year, they

posted nine millions scriber ads. as we look forward to that number, everybody is trying to parse out what that number is going to be as they tried to piece together their numbers. it will probably be anywhere from a 19-20,000,000. jonathan: let's talk about austerity which is hitting big tech. you can see that this morning. has the austerity hit the streaming industry yet? >> it has not but it has to. netflix has been the first example in terms of bearing down on content costs which is one of the biggest cost centers for them. they have kind of taken that down. it is about $70 billion is what they projected. the big question for streamers, and other streamers need to follow suit, netflix is the only company making money. they generated $5.6 billion last year in profits while the rest

of streamers made about $10 million-$11 billion in losses. what we are seeing netflix to effectively is not just barely content to fit -- is not just whether the constant buffet but also generate that. we are seeing real leverage there and that is something that disney now means to execute. warner bros. these to execute. with subscribers coming to an end, they need to see where they can trim costs. jonathan: can we build on strategy around content. if contents spending is under pressure, can you tell us how this affects the content they spend money on? this that change going forward? >> i do not think that changes dramatically. the reasons that we saw the earning through cash and spending much of front is because they were preparing for this day as they made the shift from licensed content to

originals. a lot of their investment is done and they have fine tune their algorithms and formulas and ai to see what content actually resonates. there is so much great evidence of that in 4q. multiple titles performing well. whether it was wednesday or knives out. they actually said that in 2022, five of their 10 most series came out. investors are kind finally comfortable with the idea netflix has the formula and the magic equation to produce its. tom: that is brilliant. i see that frankly in the tom keene household. it has certainly been a netflix for in what everyone is watching. to me it is about the margin. in the old world of comcast, there is $.30 on the dollar. netflix has models out a very successful lower margin of about $.20.

do you have any confidence at all of their brethren can get to a 20% margin or are they going to be taken out by three loan survivors? >> that is a great question and the bighead structure -- the big head stretcher. it is going to be a long road because at this point, no one else is making honey. yes, we finally see a light at the end of a ton aware a lot of these companies will probably get to be 20% margin but it will take a while. tom: i don't want to put you on any pressure. nobody is listening this morning. except mohamed el-erian was watching but went to start watching netflix. who will netflix buy? i was not rooted jessica and do this but i will be to you. give me the single best buy for netflix to make a consolidation splash? >> they already kind of have the content piece.

i think what they want to go after right now is aiming. so probably a gaming studio but we will have to wait and watch what happens with microsoft and activision. i think the one area they feel they can -- remember, the one thing everyone in the streaming industry wants is engagement and that is what you get with io games. the captive audience. people spending to work three numb hours. that works perfectly for netflix. jonathan: geetha ranganathan on netflix and beyond. the stock is up by about 6%. tom absolutely crushing subscriber estimates. tom: that is like column duty and all that stuff. our kids sit at home. the you do this? jonathan: absolutely not. do you want my rant on gaming? i think what to get to a certain age, you should not have a consulate that is on view. there is a whole industry dedicated to get people to stare at the screen. tom: of course. jonathan: whether it is consular

gaming, that is the same thing. tom: my answer here, and i feel like i am channeling robert iger of disney, it is still about content. as geetha said, but we can say now that we did not say 90 days ago is netflix is hitting the ball out of the park. jonathan: austerity. can we discuss that a little bit more? in google, in microsoft, in amazon, they have all caps that. it will have to cut back on content too. i wonder if things change. there were days when they use to dump the whole series. tom: i sort of like the way disney does it. use were of no in your head in your busy week that on wednesday or on friday, it is going to drop. i am speaking as an amateur by think that is where the industry is heading rather than the

bench. jonathan: isn't that what they did with "house of the dragon"? did you not watch that? i thought you love game of thrones? tom: there is only so much time. where is the tanning -- where is the time to watch this when i am riveted? jonathan: a minute left on the clock. tom: i did not watch the game but i watched carefully the afterwards. they do not have a defense. forget about the blood -- about the goalie. blame the goalie. no. jonathan: they have one good defender. tom: should they go get? jonathan: it depends how much money they have. i do not know what budget they have. tom: they can do a concert. jonathan: you want them to do a fundraiser with the dow. [laughter] tom: that is what it does.

jonathan: xoma it has come to?

- [announcer] imagine having fuller, thicker, more voluminous hair instantly. all it takes is just one session at hairclub. introducing xtrands. xtrands adds hundreds or even thousands of hair strands to your existing hair at the root. they're personalized to match your own natural hair color and texture, so they'll blend right in for a natural, effortless look. call in the next five minutes and when you buy 500 strands, you get 500 strands free. call right now. (upbeat music)

>> there are too many problems that investors have to overcome in the first half of this year. >> we are starting to see more dispersion in the data and in the economic outcomes. >> it will be a harder environment to see fiscal and monetary response. we think that leads to a market that could have healthy declines. >> i think we are very much revisiting the more normal dynamics now. >> the story this year is the

earnings and recession risk, not the inflation risk. likes this is blue -- announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro in lisa abramowicz. jonathan: this is "bloomberg surveillance" on tv and radio. good morning. alongside tom keene, i'm jonathan ferro. equity futures totally unchanged. the headline of the morning comes from google. 12,000 employees being cut. 6% of the global workforce. tom: far more importantly, with other sectors away from tech, you are going to see two and 4% cuts from other companies. some will not even make the news cycle but they are out there. it is a layoff. jonathan: this is feel like tech excess? just huge amount of cuts? tom: we have addressed this across the show.

folks doing asset allocation. what are we doing into february? john gullett and who is with us? hollen hurts? that is going to be interesting. to get back on this, there is a shift going on. silicon valley is not the banks. it is an attitude adjustment. i hate this word. we are going to innovate. john and i have not innovative in 30 years. jonathan: let's clarify this. i am not saying it is the financial crisis but we have one industry that has built up a time of access -- up a ton of excess. those days are over with rates around 4%. tom: sonali basak keeps right next to her desk white walls with pencils that have all the buzzwords. innovate is about 20 words down. jonathan: do your rubber

disruption, disruptors. i will say from silicon valley, i take full responsibility from the decisions that led us here. that is coming from the ceo of alphabet. we have heard similar things from salesforce and from the head of microsoft this week. microsoft has been so upfront about the challenges they face, not just this year but the next few years. have been very open and transparent. tom: here is the google comment, i mean alphabet. full responsibility for the decisions that led us here. these are important moments to sharpen our focus, reengineer our cost base, and direct our talent and capital to our highest priorities. this is mean they will get rid of google glasses? jonathan: you joke but ultimately there was a division where it was like they are throwing money at the wall. i think people have the luxury

have the ability to throw money at the wall. tom: there is also virtual-reality silliness and apple is pulling back. they are doing some kind of marker and i believe they are doing a low-cost idea. what is that about? they're listening to the customers. there is no audience. that is what google and others are dealing with. jonathan: also president lagarde this morning at davos, switzerland they stand the course is my mantra for policy. tom: are we staying the course? jonathan: we are hopefully going to be. after 9:00 a.m., mohamed el-erian is coming up later. a great lineup. mohamed el-erian to open the hour and to close the hour robert of gramercy funds. going to be very cool. are you looking forward to that? tom: yes.

i think i have tuesday to talk about wednesday. jonathan: equities on the s&p about unchanged. futures positive by about 0.1%. 3.4384 is where the 10-year yield is at the moment. tom, look at crude that goes from $80 to $81.04. tom: $86 on brent crude. that is the quiet story of persistence in oil. discussed at davos, switzerland, it does not matter about the great and mighty but about em recovery. jonathan: let's start the conversation with tracy mcmillan. great to catch up with the. i think you picked the money theme i love to talk about. it is that for the economy but good for the stock market. that mentality have persisted for a long time, have we finally

crushed it to pieces? >> we do think investors are now focusing on growth as opposed to values is good news and that will change the direction that the fed has taken with interest rates. but we have a fed that is not backing down. and we have an ecb that is not backing away either. investors are realizing now that a serious growth slowed down is ahead of us. that is consistent with our view that there will be a recession later this year. tom: wells fargo economics has a glorious heritage of measuring the american unemployment and american labor situation. the numbers yesterday were stunning. we have, i believe, a fully employed america and there is debate about that. how do you massive allocates if you believe at some point that labor breaks and becomes higher unemployment? >> the way that we have been

positioned since march of last year is over wage fixed income, underweight equities. are taking a defensive approach but we are not completely out of equities. we are allocating with them broad asset classes. within fixed income, we like investment-grade over high-yield and we specifically like short-term and long-term over intermediate term. we see the short-term particular in extortion funds for equities when the time comes to put money back into equities. we just think we need to get further through the cycle before we do that. tom: this is critical. you say further through the cycle. is it further through the corporate earnings revenue cycle or further to the fed babel central-bank cycle? >> actually, the two are in some ways going hand in hand. the fed policy will be the corporate earnings cycle but the fed policy cycle will probably

end early this year and a pot. then potentially even start cutting by the end of this year. that is consistent with history and how they have raised rate, then earnings tend to be hit afterwards. market bottoms and then the fed starts cutting. that is the cycle we are anticipating this time. we do not necessarily think it is different this time and we do not think we will necessarily see a soft landing or goldilocks scenario. we think we have to get through the recession. jonathan: as we speak, a serious low them with initial jobless claims, cratering to fresh lows. how is this consistent with what we are seeing in jobless claims america at the moment which yesterday came in at 190 thousand and is exceptionally low. >> we do think that there will be a recession but it does not necessarily mean jobs will crater. we are starting to see layoffs

in the tech sector and see layoffs in industries that over hired during the pandemic. he think that will filter through events with -- filter three eventually into other industries and sectors as we move through a period where earnings can just a hobby sustained. we do see unemployment in the 5% range by the end of the year. that is not cratering but is a slow down. jonathan: where is the growth backdrop against that? >> the growth is probably going to be in areas where there is more pricing powers. we like things like energy, health care for the defensive posturing, and believe it or not, we like information technology at these prices. we do think that longer term, what we are going to see out of information technology is companies moving or toward

technology to supplement a labor force that is likely to have low participation for a very long extended period of time. it is a demographic shift. jonathan: is it too early to make the move to tech given the cyclical challenges they may be facing. it seems to be about the cycle now in the discipline of 4% were 5% interest rates. are you worried about that? >> we are. of course interest rates are hard on companies that depend on growth. certainly technology is among those sectors that depend on growth. as we move again through this cycle, we think interest rates are going to come back in a little bit. that is going to provide support but we also's it as a longer-term a play. we would be dollar cost averaging in here but we would not necessarily be overweighting

technology significantly. jonathan: thank you for being with us. tracie mcmillion. the challenge at the moment. you have bond yields lower after the back of people worrying about economic data in the present and future. you have to think about do i get valuation relief off the lower yields in tech or the earnings headwinds as the reason why the yields have been lower? tom: on a friday, you look at asset allocation because that is what everybody has been doing. it is not funny. it is a weekend that you have to readjust your 201 k. i have not said that in years. we used to make a joke about that. but tracie is dealing with a bank with thousands of 401(k)s that are now 201 ks. jonathan: and everyone is saying fixed income. tom: all my radar is up. jonathan: do you get frustrated

by the fact the market seems to change whether it is up or down? we have the damage done to gdp off the back of policy tightening. two weeks of gains and it is all about china reopening. tom: that is the parlor game but people are trying to saw a message for a big think. jonathan: they are trying to sell fixed income. tom: they are selling caution after the carnage. i have a 11 -- 101 k, forget about 201 k. jonathan: 6% of the company. wayfarers cutting 1750 employees. when you hear from big players on wall street? the cautiousness and conservativeness but at the same time you hear bullishness from research departments. tom: i think there was a survey reissued in dallas as well. i have witnessed that.

from a distance. jonathan: do you miss that? i have not missed that the speed. tom: i missed that terribly. barley soup at $40 a cup. jonathan: futures positive 0.1%. this is bloomberg. lisa m: markets, headlines, and breaking news, 24 hours a day, at bloomberg.com, the bloomberg business app, and at bloomberg quicktake. this is a bloomberg business flash. -- keeping you up-to-date with news from around the world. with the first word, i am lisa mateo. alphabet will cut 12,000 jobs. more than 6% of its workforce. the ceo says the cost will affect jobs across the entire company. he says he takes responsibility for decisions that led alphabet to this point. the biden administration is sending another major packet of military hardware to ukraine. it includes 90 stryker armored personal carriers, 59 vehicles,

and millions of round of ammunition. it is valued at $2.9 million. allies are meeting in germany today to discuss more aid. the supreme court says it has not been able to identify fully the opinion overturning the constitutional right to an abortion. during an eight month investigation, the 97 employees were questioned. they call this a grave assault on the judicial process. global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo, this is bloomberg. ♪ get refunds.com powered by innovation refunds can help your business get a payroll tax refund, even if you got ppp and it only takes eight minutes to qualify. i went on their website, uploaded everything, and i was blown away by what they could do. getrefunds.com has helped businesses get over a billion dollars

and we can help your business too. qualify your business for a big refund in eight minutes. go to getrefunds.com to get started. powered by innovation refunds. this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight. [office sounds] ♪upbeat music♪ ♪♪ ♪when the day that lies ahead of me♪ ♪♪ ♪seems impossible to face♪ ♪a lovely day (lovely day)♪ ♪(lovely day) (lovely day)♪ ♪(lovely day)♪ a bank that knows your business grows your business. bmo.

>> of people assume is there will be a love drama but at the end the debt limit will be raised in time. that means if we mess up even just one time and do not raise the debt limit, it will be a huge market surprise. you go from the mobility of default is .01% to all of a sudden there is a technical default. it would be a huge blow to financial market. jonathan: bill dudley, the former fed president. equity futures up zero point the s&p 500. yields higher.

your 10-year yield looks like this 3.4347. tom: we were down yesterday. we were going to go to 3.99 of the 2-year yield but we have walked away from that. jonathan: sure. i am with you. back to about 4.17 on the two-year yield. tom: sonali basak coming in with bitcoin. the news flow in crypto is absolutely extraordinary. you look for crypto expertise tuesday with a somewhat moving story. in washington, there is a moving story. annmarie hordern joins us right now on the presidents weekend. does the president go to delaware to go into his garage and look at selected papers? i am a little lost. they used to go to camp david. nobody goes to camp david and. what is a presidents weekend look like?

annmarie: there are still some trips to camp david but are much less numbered than the president go to his home in wilmington. he does like to go home on his weekend. we saw this with the former president he used to go to mar-a-lago or his golf course in new jersey. he will not go home looking for documents. the white house made it clear that the is in the and justice department. there is a special counsel. the president commented yesterday saying he had "no regrets" about how it was handled but there are so many questions about this. someone actually writing into me after the last hour saying their questions were why were the documents found in the first place? what were they looking for? this administration is going to want to make it clear, black and white, how they handled it versus the former president. tom: the reason i brought this up is this weekend where he

decides to run for office, i do not understand. those the president president have to wait for the former president to announce he is running for office? annmarie: the former president has announced he is running for office. tom: but more announced. annmarie: maybe have rallies, etc. a lot of people are thinking potentially will be former president trump out? at the end of this month, he will be holding something in south carolina. they are starting to send out a lot more emails and advisories about this. it was a recent poll about suffolk county usa today five or six days ago that showed if it was between these three people, i am adding ron desantis in this, president biden would still beat trump but governor desantis has a narrow margin over president biden.

we are waiting for everyone to get in this race. we still have time. tom: what did you learn about ukraine this weekend? it is a jumble of threads which is like anymore. you're going to get different threads. i was struck by all of a sudden the word crimea is coming into the dialogue. but you were glued to this story. inform us what we need to know into the weekend about a war one year old. annmarie: battle tanks. today, you have this defense contact group meeting in germany. lloyd austin, the u.s. defense minister is there. there is a public spat. do not think they want it to become public but the reporting is germany is saying that we will not supply leopard two battle tanks or not allow other countries to supply the light:. it's already said whether germany gives the ok or not, we are sending them. germany said they will not send

them unless the u.s. sends their abrams which are almost comparable, a wartime battle tank. this has now become out there in the public. what you had from the economy minister, robert havoc of germany, saying it would be much easier for germany to do this if the u.s. was on board. there are logistical and technical differences between these two. if you talk to defense experts, they will say the abrams have jet engines and the or fuel. but with lepers, there are tons of them and many nato countries have tons of these tanks. but you can still see reluctance in germany. building commercial bridges, not being too defensive it comes to russia, they have made a massive u-turn. you can still see them lingering a little when it comes to these

decisions because they do not want to provoke russia and have the spread outside ukraine's borders. jonathan: so who is hesitating here? the germans or the u.s.? annmarie: the is the good question. at this moment, it feels like the germans hesitating because you have other countries like poland saying that they will send the leopard takes the because they are german-made, we need germany's signoff. if you have countries already lining up, waiting to send them in, and they are waiting for berlin's green light and they are not getting it, it looks like germany is hesitating. although, we did hear from the brand-new defense minister who has been in the job 48-72 hours and he says he was not aware of the package of i will set the lepers if you said the abrams. we'll hear what they say and if not the debate will go into next

week. jonathan: just out of interest, does this debt ceiling debate and how money is spent in this country shape how the war in ukraine is supported by the u.s.? annmarie: we saw more than 2 million already drawn down from this week to go to ukraine. but there is a linkage because what you have in discussions in congress and the back room deals that mccarthy was making his they want to cut spending. 130 billion dollars at least. it is reporting from us that this could potentially be defense spending which potentially means eight to ukraine. but potentially this will not be an issue for 2023. if this work continues into 2024 or 2025, this will be a major discussion. jonathan: thank you. as always, the latest from senator mcconnell, he said, "the

debt ceiling has to be lived there. the important thing to remember is america must never befall on its debt. it never has and never will". tom: this is strange. jonathan: this is bizarre. every single time we do this. tom: it goes back. up to 1917, after the realities of world war i, congress controlled this in a traditional way be learned in civics class or social studies. then it was a mentor through the depression and crisis of that. in 1930 and 1940, they change the rules. particularly for our international law, this is very foreign to the british process. there is a huge politics here wrapped around not so much religion but just what is debt? is debt evil? is debt good? jonathan: it depends if you are in power or not, right? tom: some have captured this in

books, is that evil or good? this is a moral thing that goes right over into potentially republican product. i think democrats may feel the same way. jonathan: is it different this time? cassie barrow is going to join us. portfolio manager at j.p. morgan investment. equity futures up 0.1% on the s&p. no real drama. tom keene and jonathan ferro. this is "bloomberg surveillance". ♪

hi, i'm katie, i've lost 110 pounds on golo in just over a year. golo is different than other programs i had been on

because i was specifically looking for something that helped with insulin resistance. i had had conversations with my physician indicating that that was probably an issue that i was facing and making it more difficult for me to sustain weight loss. golo has been more sustainable. i can fit it into family life, i can make meals that the whole family will enjoy. it just works in everyday life as a mom.

jonathan: equities up 0.1%. out of the nasdaq. positive right now by half of 1%. equities pushing higher. let the little something like this. your 10 year in the three 30's earlier this. up four basis points on a session. down and down hard from where we were in tober. look something like this on the euro-dollar. down 0.1%.

course. tom: the spread has my attention. -73 basis points. the difference in yield of .75%. all of sudden on this friday can we consider a yield that will fall below 10%? jonathan: with the fed pushback against that? tom: they would have to. i have a financial conditions index, and if you get a continued diminished inflation-adjusted yield what do they do february 1? hollen hoist in the next hour -- jonathan: looking forward to that. let's take a look at two names and start with alphabet.

google cutting 12,000 positions. we are talking about 6% of the workforce. the stock reacts positively to that print netflix up by 6%, just to go through those numbers. the company added 7.6 6 million subscribers in the final quarter of 2022. the estimate was about 4.5 million. the estimate game is just shut your eyes, throw a dart, and see what it lands on. tom: i wonder if it was a password thing. jonathan: maybe. maybe they cracked down on that a little bit more. tom: i'm going to bring this up until somebody can tell me i'm wrong. google is 10 times bigger than wayfarer, but google has 180,000-plus employees. wayfair has 18,000. i'm watching the wayfairs of the world. i'm watching the cumulative wayfair in the earnings season. jonathan: i'm comparing it to

jobless claims of 190,000 and wondering when it starts to show up. it's pretty impressive. we see headlines like this left, right, and center. tom: shall we move on? we are talking about asset allocation, but that rolls over into careful strategy. we enjoyed a lengthy conversation this week with mr. michael of jp morgan. why don't you bring in our next guest, who has a diametrically opposed view? jonathan: kelsey berro, it is wonderful to catch up. you have heard this communication from central banks worldwide. have we seen peak rate and how far can this fed take things? kelsey: i think we have seen peak rates, as it relates to the long end. there is this motto, higher for longer. i think this hire for longer motto could be the new transitory. the fed was saying transitory, transitory, transitory. the market didn't believe it,

they looked through it, they priced ahead of the fed. they pushed the fed to hike more. now we are seeing the reverse. the market is saying, let's keep rates higher for longer. and what -- what is the market saying? i don't believe you. it is pricing in rate cuts. it is already seeing the date of rollover. the fed is going to keep trying to communicate higher for longer, but the market is already looking through it. the market is leading the fed on the way up and down as well. jonathan: you think the market is right? kelsey: i do think the market is right. the market is seeing things in the data. it has been below 50 for two months. we don't just look at the headline index, we dig into the numbers. you look at the ratio of new orders to inventories, orders are falling. inventories are rising. not a good situation for companies. that level has never been this depressed outside of a recession. i think it is a matter of time

before we see in the jobless claim numbers what we are seeing in the rest of the economy. tom: what do you see in vanilla corporate debt? you don't remember when there was a blue s&p book. but corporate debt matters. and now there is a lot of issuance as well. what is that dynamic? how do we take advantage of that? kelsey: we see a lot of opportunity in investment-great credit. we think yields they are attractive to get investors, and we are getting very high quality. tom: what is a typical yield there? kelsey: you can get between 5% to 6%, but -- depending on the maturity. tom: that is almost what cash does. jonathan: how is that portfolio doing tom? tom: it is doing good. a nice pop, but the twos, 20's take -- jonathan: crazy inflows for you. tom: if you take out the fee it doesn't get down to kelsey's. jonathan: you have talked about

where you are at on this economy. some people might be different. they might look at jobless claims and say we are still resilient. treasury yields have peaked. you think the fed cannot go as far as it goes. what business does high-yield have rallying in that world? kelsey: we were talking to our portfolio managers within our high-yield desk this week, and you are getting that same sense. we are not seeing huge demand in high-yield this year. what we are seeing is more technically-driven. there is no supply. the people looking to get invested are driving spreads tighter. it is incongruent with the data we are seeing. i think it is more technically-oriented. and we are still staying defensive, looking forward to what the data is telling us, and what company earnings are going to say, which, you know, we are not particularly constructive on. jonathan: this is the salesforce all of these big asset managers go around saying, by fixed

income? ultimately you think that is going to favor some of these credit stories? kelsey: when we say by fixed income we are focused on high quality. when you think about somebody investing into the aggregate, that is generally treasuries, mortgages, and vestment grade. the whole spectrum of the fixed income universes going to benefit from those flows. undeniably. but when we are thinking about adding duration to portfolios, have to think about not just the mathematical calculation of duration, but the empirical duration. how does a trade when treasuries rally and there is a flight to safe haven? investment grade is going to get capital appreciation. prices are going to cup -- go up on those bonds. high risk, if yields are spreading out you are not going to get that. jonathan: do you expect high-yield spreads to blowout this year? kelsey: we are anticipating a widening of high-yield spreads.

we do see that recession, spreads tend to widen to at least 800 basis points. tom: kelsey, i would love to go to the individual. i'm looking at a high-quality piece which i bought, it is as close as i get to golf. jonathan: a century bond in austria? tom: no, it was better than that. i enjoyed the google piece of 50. i am out 30 years, 2.2% coupon, and i have seen a price reduction of 100 down to 64. is that an opportunity? something like that? is that high-quality corporate when a company like google is on sale for 30% under where it was? kelsey: yeah, so within the bond market, to try to translate that, one of the attractive opportunities we have been finding is when yields are rising you are having a lot of bonds you can buy below par at

discounted dollar prices. so, yeah, those are opportunities. and we want to be investing in companies where we have vision on the cash flow. we know what they are doing in terms of leverage. tom: right. i want to be fair here. bob and kelsey are not in the individual name. their mandate is not to give us individual names. i don't think our audience understands yields up -- jonathan: price down. tom: 100 to 63 at google. jonathan: do you want to take the 30-year piece at a tech company? is that the kind of risk you would want to take? kelsey: i think we were generally all of last year focused on keeping both our duration risk and spread risk concentrating in the front end of the curb -- the curve. so, minimizing the sensitivity of our portfolios. those long and bonds were going to get hit the most.

now that we are in the reverse of that story you can feel more comfortable extending out the curve and extending duration of your portfolios to those 10 year and 30 year high-quality instruments. jonathan: tough times ahead. 25 or 50 at the next meeting? kelsey: 25. jonathan: that's it. everyone is saying 25 now, tom. tom: and we have hollenhorst during the next hour. jonathan: have i never heard of this? kelsey: it is the addams family. jonathan: who is in it? tom: i don't know. jonathan: why is it called wednesday? tom: because that is the character. get with american culture. ♪ the addams family ♪ jonathan: i nailed that. that should be the jingle for the show. tom: she is at dinner calling me gomez, and i'm like, what is

that about? it is another example of narrowcasting two, what does kelsey berro want to watch? jonathan: "wednesday," apparently. what does a portfolio manager watch on netflix? does bob keep you too busy? you don't watch netflix? kelsey: i like the more mindless stuff. tom: "wednesday" is socrates. [laughter] jonathan: what is the mindless stuff? kelsey: like a baking show. cocktail competition. jonathan: the great british break. that thing. they changed the cast, kind of fell off. tom: kelsey, hold my hand here. it is not an hr violation. austria, 97 year, i bought it. 140, to 47. jonathan: that stuff. when you reflect, kelsey, on the last decade, tom will look back at the century bond. what will you look back on to say, this was crazy?

kelsey: $18 trillion of negative yielding data at one point in the last decade, now completely wiped out. that is pretty crazy. taking about this idea of higher structural yields, are we moving into that? i know you spoke to bob about that. but we noticed, this right-hiking cycle the first time we have peaked at a higher level than the prior cycle. first time in 30 years. tom: this goes back to the establishment of nevermore academy in vermont. 1788 was the last. jonathan: what bob said earlier in the week, the first time we have had a higher hike in how many cycles? kelsey: 30 years. jonathan: bob is a suggesting we could have a series of higher highs and lower lows at each additional cycle when we get a rate hike and rate cutting cycle. that is fascinating, thinking about unwinding the last few decades. this was great. fixed income, a bit of netflix.

that flakes is up this morning. do you want to take us out with a jingle? tom: i like the british chefs. gordon and jamie. jonathan: marco pierre is the man. tom: they are way better than the american chefs. they are not in quarter million dollar kitchens. they've got a knife, they've got an onion. [laughter] jonathan: futures responding to that, tom. this is bloomberg. lisa: my daughter, a huge wednesday fan. keeping up-to-date with the first word, i'm lisa mateo. ugo is joining a list of tech companies scaling back operations. alphabet says it will cut 12,000 jobs. that is more than 6% of its global workforce. google has been dealing with a slowdown in digital advertising, plus it's cloud division trails amazon and microsoft. in germany the u.s. and allies are meeting to discuss more military assistance for ukraine. the u.s. has unveiled a new aid

package that includes 90 stryker-armored personal carriers and 59 bradley fighting vehicles. meanwhile, pressure is building on olaf scholz to deliver leopard battle tanks. president biden says he has no regrets about his handling of the disc -- of the discovery of documents. he protects an investigation will find no wrongdoing. the president told reporters he is cooperating and there is no "there there." global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight. we all have a purpose in life - a “why.” no matter your purpose, at pnc private bank we will work with you every step of the way to help you achieve it. so let us focus on the how. just tell us - what's your why? >> in the u.s. our research team has a mild recession predicted this year and at the end of next year.

they pushed that out. why did they push that out? it is the strength of the deep -- of the u.s. consumer. just this week they moved that to a 25 point basis point rise. jonathan: on this one specific thing, whenever he is asked about the economy he always does this. he refers to his chief economist. in this instance it is mike capon. that is so classy, because it causes so many problems when the ceo goes out there pontificating on the economy, on interest rates, and not referring back to what their own research department is producing. every single time he does the same thing. tom: you're busting my chops because you know this is a third rail for me. we want to stop the show to talk about one of my favorite bankers. 24 hours ago somebody said to me how did bynum -- how did ryan moynahan come brian moynihan? this is a guy who grew up in the crucible of brutally competitive

new england baking. in the bank of america disaster, the heritage of san francisco, and the acquisition of the mid-atlantic states, this guy in pitched warfare survived, and mourn a hand -- monahan picked up the pieces of lewis by being a banker first. and, just as you say, farming out intellectual expertise within bank of america to his economists and the last -- and the rest. jonathan: it is classy. i would like to see more of it. tom: i strongly agree. are we done? jonathan: i just got this. the legends of charles schwab. sadly, i remember the original addams family. isn't that fantastic? we need to get him on the show soon. tom: frankly, she could give us a perspective on where these markets are and where these industries are. that is what we are going to do now. the culture of big tech.

there's no one better than mandeep singh of bloomberg intelligence joining us this morning. i'm going to go to a guy that was -- i'm still not over, folks, the great clay christiansen dying. it was cancer. he went very quickly. you know the effect that clay christiansen had on the religion of silicon valley. that was disruptive innovation. right now the disruptive innovation is being moved aside, with mass layoffs. tell us what the next disruptive innovation is for google, amazon, and the rest of them. mandeep: i think we keep hearing about how these companies are pivoting more so toward ai and language models. but for a company like alphabet, when you have got a cash cow in the form of search, $200 billion, a most 40% to 50% he

bit the -- ebitda margins, what will protect that cash cow? they are trying to diversify their revenue. the problem they have is the incremental margin is negative. look, these companies grew too much in the last two years in terms of expanding their employee base. this is just kind of making sure their operating income at least is flat, and they can prove to the street they can grow their operating margins going forward. tom: to jason delray's magisterial effort on vox overnight, jason delray makes clear there is a cultural change at amazon going on now. bezos out, and they are going to see if it works. is there the same issue at google or microsoft, there is a true cultural shift from founding tycoons over to actual

adult management? mandeep: yes. i think to an extent that is on the --that is the case in terms of how management pivots to the next phase of growth. you look at satya nadella, what he has done at microsoft, there were a lot -- there were a lot of doubts about microsoft around windows, cloud, or something else, and he did that successfully. a case of alphabet, you still have to ask yourself, this is still a search company. the -- that is where the majority of profits come from. what is going to drive the next phase of profitable growth? is it youtube? i bet would be on youtube, because that is a proven business, connected tv is a real secular trends. if i had to pinpoint one driver that would be viewed too. jonathan: this is a phrase that gets thrown around, it is right-.

they have to write-size the business. the question is, right-sized the business for what? satya nadella has been open about this lasting more than just a quarter, more than just 12 months. this could go on for a number of years. what kind of timeframe enters your mind? mandeep: ad pricing is tough right now, and we know ad revenue is cyclical. depending on the duration of this downturn -- and no one has a crystal ball in terms of how long this is going to be -- add pricing is set by the advertisers. it is a bidding mechanism. it is not software where you get to set your price and you can raise prices because it is a sticky. add pricing is eating-based, and i don't think it is going to come back until the economy rebounds. you will see pressure on google search revenue, youtube ad revenue, but i think they still have kind of the timeshare when it comes to people spending time

in their products, and eventually the cyclical rebound will happen. it is just a matter of controlling costs right now. jonathan: the labor force at these companies over the last couple of years have grown exponentially. get amazon. it basically double to 1.5 6 million. the question i keep asking -- and i would love your insight on it -- some of the excess in the last decade, i do you think about it? mandeep: i think there was a massive pull forward in pretty much every sector, whether it was gig economy, add side -- ad side, you name it. we are pushing for that pull forward right now, whether it takes three quarters or four orders, time will tell. the new and the interest rate complexity, because these are long-duration assets, so you

have to normalize the valuation. clearly on the top line from there was a pull forward over the last two or three years for pretty much all of the tech companies. that's why they are seeing slower growth. jonathan: i think a lot of people might reflect on the tech boom and the tech boom and tech bust. what is original about this moment in their current mature form i cannot think of a cyclical test they have faced in the united states. we had this long period of almost un-disrupted growth in america. in a pandemic that did not turn out to be a cyclical test for them whatsoever. is this their first real economic test? mandeep: it is, and given how much they expanded their employee base -- remember, all of these companies grew their employee base 20% every year. they were really taught that the growth of 30% growth will continue further foreseeable future. i think that is why they are right-sizing.

the transformation is a secular trend. it will come back, and that is where use -- that is where you will see these companies rebound and come out stronger. jonathan: this was great. you are one of the best and i think you are going to -- i'm going to catch up with you later. mandeep singh of bloomberg intelligence. tom: we are doing the same thing. jonathan: what are you up to? tom: i'm up to thinking about david crosby and there is a british angle here. jonathan: tell me about it. tom: i can't say enough about this. i'm not going to do the history walk now. the birds stunned the beatles. the beatles came out of hamburg in the 50's -- the 1950's. over on the west coast -- and david crosby, frankly, is an l.a. brat. the birds scared them. they went over to england as the

birds and they were not greeted too politely by the rock 'n' roll press there. they wrote a song that changed music called "eight miles high and go and buried and that is a town known for its sound. that is maybe the most famous single line. in the summer of 1966 it was the advent to a literal decade of what was called psychedelic music. jonathan: legacy is a word that gets thrown around a lot. when you look back at the lights of -- the life of this individual, what will be the thing that stands out? tom: on a music basis, and with great respect, i would say it is his construction of harmonies. the eagles came out of what he did with harmonies in the 19 60's. it was absolutely original at the time. jonathan: the legendary u.s. musician david crosby has died, age 81. ♪ ♪

the first time you made a sale online was also the first time you heard of a town named... dinosaur? we just got an order from a dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. godaddy. tools and support for every small business first. [office sounds]

♪upbeat music♪ ♪♪ ♪when the day that lies ahead of me♪ ♪♪ ♪seems impossible to face♪ ♪a lovely day (lovely day)♪ ♪(lovely day) (lovely day)♪ ♪(lovely day)♪ a bank that knows your business grows your business. bmo.

>> i think we are very much revisiting the more normal dynamics now. >> the fed probably will not be

in raising rates as much as they are telling us we need to worry about. >> the fed does have a responsibility to preserve market functioning. trucks we do think we have a recession this year. they tend to be deep and long. >> what scares me is the pricing in of the soft landing that has happened since the beginning of the year. >> this is "bloomberg surveillance." tom: good morning, everyone. bloomberg surveillance. jonathan ferro, lisa abramowicz, and tom keene. on a friday, setting up the weekend and the path to february 1. lisa abramowicz, maybe in transit. in davos. but what is important, and you know this earlier, vice chairman brainard spoke about the uncertainties, the ambiguities for this weekend as we get to february 1. jonathan: two words. risk management. when you start to get more conservative, you go in little

bit more slowly. that is what they are expected to do. chair powell will talk about walking around in a dark room, you have to be careful. they are worried about risk, overdoing it, and doing too little. tom: i would suggest it is uncharted territory, uncertain territory. they are making it up as they go and they are data-dependent, and they saw some lousy data. jonathan: dependent on what data? that is what we need to talk about. unemployment is at 3.5%. can we continue to see a softening in wages without the deterioration of the labor market? so far so good. cannot continue? how can you compare what you were seeing in claims, what you were hearing from multinationals, amazon making big cuts? tom: it will be interesting to see, this claims data, the shock of claims is in the nonfarm payroll report that is february 2 or third.

to your point, i think this is so important, is where are we on the inflation continuing? we have made some headway but there is still a long way to go. witness japan with that 4% cpi. jonathan: we have the boj still to come in march. if there was something to worry about in the data, it is a sub-50 ism. it is hard to start the year in the face of sub-50 isms. tom: i look at it as a disinflationary tendency. you look at rosenberg and you have in-place inflation, but the calculus of it, the rate of change of it to get to q2 or q3. everybody has a distant -- a different opinion on that. jonathan: it is made even more complicated by the fact china is reopening. and you have seen the reality -- the rally in commodities, the rally in the minors. -- miners, and the deceleration

in the dollar story. i don't know what we look at by the time we get to year end. tom: the 10 year real yield is now 1.18%. it was something to be said about inflation in the fixed income space, the gyrations of the week. you wonder where we are monday or wednesday of next week. jonathan: the 10 year right now, three. yields higher by three or four basis points. outside of that in the foreign exchange market, euro-dollar, 1.0820. up .3% on the s&p. crude, had a look at 81 earlier. tom: yes. $87 on brent crude, fatty bureau, most eloquent with iea in davos here in the last couple of days.

every equity strategist has a certain style. the acclaim of jonathan golub at credit suisse, right now with some real reticence, is he dies into sector analysis on page five and six of his reports. he darkens the door this morning. what does the sector analysis tell you this morning? jonathan: we put out a note on earnings that we are having a margin problem in the vast majority of sectors with the exception of, surprisingly, consumer discretionary's, better energies, and better industrials. outside of that you are seeing margin contraction everywhere. tech is really weak compared to everything else. that is just not something we are used to. the tech is -- this earnings season, if you take tech out for tech broadly defined, you have a 5% bs growth this quarter. who would think that tech is holding everything back?

i think this continues for longer than we think. tom: this is a hallmark of credit suisse. the linkage between securities and credit analysis. do you feel newsmaking layoffs can adjust those margins? can they heal that margin deterioration? jonathan: we were talking before we went on air about what is going on in terms of layoffs and young people coming into the labor market. a lot of this was an over exuberance. when we went into the pandemic and things were so strong for tech demand, the companies hired as if this was a new normal of strength. it really is -- and this is why tech is having a hard time -- it was a pull-forward of activity. everyone believed. the companies bought into it, and now it is unwinding. openings are laying workers off. do we work through this? yes, but we saw this with y2k. it doesn't happen in three quarters. it takes time. jonathan: y2k, pull-forward, and

you talked about how this could go on longer than people think. let's build on that. how much did we pull forward and what gives you the sense that this could go on longer than people think? what kind of duration are you thinking about? jonathan: maybe this ends up being a six to you bought a laptop because you are now working from home. when are you buying the replacement for that? not this year. my mother started using a streaming service for the first time. is she signing up for a second streaming service now? or the move toward global advertising, which kind of got pulled forward. it is not as if things, the long-term trend is necessarily a negative one, but there was definitely a bit of exuberance, and it takes a little while. we are also as an investment community, hedge funds in

particular, growth in tech has been such a huge win from 2008 until now. everybody staffed up there tech teams, everybody built processes around it. everybody wanted to be a growth manager. so it takes a while for this to play out. jonathan: you have mentioned this, this is not what we are used to. with that in mind this is the question of the moment. how compromised is the index story? what we are conditioned by is sitting on the index, s&p, and being rewarded for. jonathan: i'm not sure it is compromised. last night i had dinner with head to traders at some of the bigger shops and i said, if you had a choice between buying the tech basket cap-weighted or equal-weighted, how many would buy the cap-weighted? jonathan: what did they say? jonathan: not one hand went up, when i asked cap-weighted, every

hand went up. there is a lot of interesting things going on, these really big -- listen, two or three years ago all we were talking about was moats. jonathan: secular growth trends. jonathan: let's be honest, they are great businesses, but it doesn't mean they are impenetrable. tom: at the dinner last night, did you finish, as in the old days of credit suisse, with a brandy? or did you go a different direction, it out a sixpack? jonathan: oh yeah, we were drinking light beer? tom: this dinner, that's what i want to know. jonathan: we do this a fair bit. tom: it's your job. jonathan: if i look at where my ideas come from, so, last night was 10 head traders. next week you're doing 10 guys who are either hedge fund founders or cios. tom: what do they want to know

from you? we are making jokes about cognac. what do they want to know from you? jonathan: if the expectations now are for weaker -- if you look at forecasts, this may be the weakest year i can remember in terms of forecast. the question is, if you can't make money simply by jumping into the market and writing up a data trade, how do you play the game? where is that hedge you get in this environment? because everyone around the table really struggled last year. managers had a hard time, especially hedge funds. momentum traders have a harder time in this environment. we think this could be a big movement. last year the story was value. we think growth snaps back this year. jonathan: why are you only at 40/50 if you think that? jonathan: there is a couple of things. one is this will be a rare year

that earnings are down -- listen, i'm in the non-recessionary camp, but i think this could be the rare year earnings are down in a non-recessionary year, and it is because of margins. margins are down 8.5. i don't remember an environment where we saw that much pressure. jonathan: wall street challenged, main street ok? jonathan: i guess, but look at what last year was. wages went up slower than cpi, so companies didn't have to pay higher wages, but they got to move on pricing. that is a beautiful corporate environment. this year wages are sticking, they are paying their employees more, they can't pass it on. so, the individual is better off this year relative to companies. i asked you it was the opposite. jonathan: i want to talk about that recession call. can we come to the dinner next week? why aren't we getting an invite

to the dinner? we can ask questions. jonathan: listen, lisa has to check her bearishness at the door, though. tom: i love it. jonathan: she can have the cognac at the end, she just has to check her bearishness. tom: this is important. if you are at a dinner with golub you are getting cognac and it is a splendid copper gold. jonathan: can you give me a price on that? tom: i can't get there right now. good morning, zurich. jonathan: we are going to force you to stay with us for a few more moments. futures up on the s&p. this is bloomberg. ♪ lisa m.: keep you up-to-date with news from around the world, i'm lisa mateo. the parent of google has become the latest tech giant to cut about 12,000 jobs. that is more than 6% of its

workforce. sundar pichai says the cuts will affect jobs across the entire company. he takes responsibility for the decisions that led alphabet to this point. the biden administration is sending another major package of military hardware to ukraine. it includes 90 stryker armored personnel carriers, if t9 bradley fighting vehicles, and millions of rounds of ammunition. the package, valued at $2.5 billion. the u.s. and its allies are meeting today to discuss more eight. russia is trying to limit a plunge in budget revenue caused by eu sanctions and a price cap on its oil exports. the kremlin may change the way it calculates taxes on oil. one of the options would add a premium to the price of russia's key export blend in northwest europe. in japan inflation has hit 4% for the first time in more than ultra decades. that is twice the pace targeted by the ching -- by the bank of

japan. and it is likely to lead to speculation the bank of japan will change its monetary policy. genesis has become the latest crypto from to collapse. the cryptocurrency lender filed for chapter 11 bankruptcy protection in new york. it's claims amount to $3.4 billion. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

>> although we are seeing some signs that inflation is moderating, it remains far too high, and it is my number one concern going into 2023. if inflation is still high and supply and demand imbalance, it is clear there is still more work to do to bring inflation down to our goal on a sustained basis. jonathan: that was the new york fed president. some of the top officials at the federal reserve trying to get the last word in before the quiet period begins. equity futures right now, on the s&p up. in the bond market, yields of shaping up as followed. the 10 year up five basis points. tom: we are with jonathan golub. we are going to continue. the gentleman from credit suisse.

we have to use the dow jones industrial average in honor of louis rukeyser. 1974, the bottom, the world is coming to an end, sort of like now. the dow, six point -- 616. we are up 38% off the gloom of the 1973, 1974 let's -- pittsburgh is going to die recession. is that where we are right now? jonathan: i think whatever strategist wants to see is that the fred -- the fed crashes this thing, we get a v-shaped bounds, and you get a normal cycle. -- bounce, and you get a normal cycle. we were talking about how strategist expectations this year, are as weak as we have seen. the idea of a soft landing is way more likely than people think, but it is not something to get excited about, because it also means you are looking at an

anemic returns with a lot of volatility. tom: if we get a soft landing does that express out to a 38% up like 1975? jonathan: i don't think so. i think what you are looking at here is, the fed does raise rates enough to crush -- here is what people are getting wrong on this inflation story. headline cpi is falling, but wages are not falling, and rents are not falling. it is goods that are falling, which means we are not really addressing the underlying cause of this thing. so the market is getting very exuberant that the fed is going to pause. they are not pausing because they are stopped, they are pausing because they need more data. the market sees falling inflation, they are getting excited about that, but that is a comps issue. it is a one-off thing. we have gotten rid of that component temporarily. i think what you were going to see, like last year, a lot of chop without a lot of upward

movement. that is a hard investment environment for most people, especially those with shorter time frames. jonathan: you think recession is avoidable. what gives you the invitation -- the indication that we well? jonathan: the big surprise here is if the consumer gets what looks like a 5% raise, or for that matter retiree, gets an 8.1% cola.\ and we end the year with 2.5% inflation, this will be a great year for consumer purchasing power. their wages are going up higher than inflation. you have seen we are now at six months in a row of consumer confidence rising. we are going to see that all year long. think about it. jobs are abundant. your raise is going to be running 3% above your cost of purchasing things. and that is going to keep us out

of this recession. from a profit perspective, companies have to pay those higher wages. and don't get pricing power. you have this weird thing that the consumer is ok, the recession gets pushed off, and corporate profits are nemeth. and investors are shaking your head because they don't know what to do with it. jonathan: to pick a sector, discretionary. where is discretionary in that world? jonathan: if you are a retailer that has a lot of labor, you were to have a hard time. if you have a business model that is less labor-intensive, you do pretty nicely. tom: i took the dow math we were just doing, in 1975, up 38%. that obscures that over a 49 your -- 49-year period the dow was up 4.5%. when you go to work or have a fancy dinner with 10 fancy people like jonathan ferro, is

it a single digit return world for you? or can we get back to 9%, or 10%, a small double-digit return? jonathan: it is a lower return world. i asked, how many of you have taken some of your equity money personally and moved it toward something that looks like a bond? and, you know, the majority of the table said, how do you not? i'm not saying i'm panicked about equities, but if you can get after-tax-equivalent of 4.5% on a muni bond, do you put something in it? is that attractive in a world where you are looking at negative earnings growth? tom: does anybody look at the dow or just the s&p 500? jonathan: i don't want to see dinosaur, but there are not a lot of people that look at the dow jones. [laughter] jonathan: it is all s&p, tk. you know that. tom: i am in acquaintance with

that. jonathan: the s&p story, and i want to finish on this, has become the dominant story over the last decade because it has rewarded investors so hand that show handsomely. if you had to pick the tech sector, would you take it market weight or equal weight? can you tell me where you believe that story on the index level at the s&p 500, would you want a market cap-weighted exposure or would you want something more equal weight? how would you get your exposure? jonathan: i don't have a bias against a cap-weighted benchmark, but the outlook has to be -- at least for the next 24 months, has to be that people weight does better. i think it is because some of these larger companies, it is harder for them to deliver an above average growth rate, given their size, in perpetuity. there are areas smaller on the benchmark. energy, for example, underrepresented in the

benchmark. if energy does well the-weighted benchmark will lag. jonathan: this was great. what restaurant are we picking? what cuisine? what did you choose? jonathan: he is picking. jonathan: tk is doing the drinks. he will choose a bar. usually at the hotel. what is it with you and the hotel bar? tom: they just really good service as a general rule, they are quiet, and, critically, with a lot of conversations i have with the wonderful people of bloomberg, i don't want to be sitting next to somebody taking notes. they are just quieter. they are unlike the trashy disco scenes you are going to. jonathan: are you saying i go to the disco scene? tom: you have the ball going around and on the river -- what is it called? jonathan: you have the thin tie, the disco thing. jonathan: you think this is disco? tom: no, it is flock of seagulls, about 1979. that tie is back when tottenham

won. jonathan: what is wrong with this time? you can't throw rocks when you are wearing a bowtie. tom: that is ok. you don't have to talk quietly. we will be back. jonathan: coming up, hmmm it area and of bloomberg opinion. we will catch up with subadra rajappa. tom: he talks quietly. jonathan: we will catch up on this bond market and the debt default story of the year. jared woodard of bank of america. here is a conversation you don't want to miss. we will start on that conversation with mohammed, and go to their mercy fund. -- robert koenigsberger of gramercy fund. tom: damien captured this, it is underreported. jonathan: where do you want to be to leverage that story this year? how obvious is it? that is going to be the conversation we have. tom: and the debt dynamics of

this assumption, there is minimal equity visibility and the debt dynamic is where the return is. jonathan: and the greatest piece of it. it is what you were focused on last year. tom: domestically i'm going to focus on real estate this year. i'm interested to see how commercial real estate works out. jonathan: new york city, lower rents? tom: i'm unsure. jonathan: we are hoping for that, may apart from the landlords. tom: maybe catch up with the rest of the country. jonathan: equity futures up by .3% on the s&p. i can't believe you didn't -- i cannot believe he would insult this time. tom: i didn't insult your time. jonathan: we are meant to be friends. have i ever insulted your bowtie? [laughter] ♪ ial place that you want to keep in the family or passing down the family business or giving back to the places that inspire you. no matter your purpose, at pnc private bank,

we will work with you every step of the way to help you achieve it. so let us focus on the how. just tell us - what's your why? was also the first time you realized... we can do anything. cheesecake cookies? [together] the chookie! manage all your sales from one place with a partner that always puts you first. godaddy. tools and support for every small business first.

tom: good morning, everyone. a really spectacular week. a shout out to our team, and particularly our booking team, for just giving us wonderful discussions through the day. sonali basak will be with us here in 15 minutes, and whether you are like me, don't care about crypto and that, that world this weekend is blowing up. sonali basak will give us a brief here on it. much more going on, including the united states department of justice. right now to have a victory lap he has appeared in our studios.

andrew hollenhorst with a spectacular call last year on a regime of higher interest rates, and that is where we are. except at citigroup and went from 50 beeps to 25. hollenhorst at ucla, learning -- at ucla they taught jon maynard keynes. when the facts change, i change, and hollenhorst said, what do you do? what did you do yesterday to go to 25 beeps. andrew: when the facts change, you do change. we saw in the data softness in the price data. certainly we have have -- we have had softer core cpi readings. the consumer price index doesn't get a lot of attention. it definitely got our attention. that was softer also. it means core pce inflation is going to be softer.

i think there is enough soft price and wage data for this fed to -- i think the way they are feeling now is comfortable that they have maybe done enough for her getting close to have done enough. i am quite uncomfortable that they have done enough here, and i think we are going to see that in some of the upcoming data. tom: let's talk about the uncomfortable reality of the x axis. you have adjusted for february 1, but the cumulative path out into 2023, does that still give you your high news making terminal right? andrew: we are still at 5.25% to 5.50% on the terminal right. i would talk about what fed officials talk about relative to what markets are pricing. it would seem to me that is at the lower end of what would be a reasonable terminal policy rate for this federal reserve. it is possible. it is our base case that they are getting to this 5.5% range. but just like your previous

guest was talking about, if we see wage growth that picks back up again -- and we think it will over the course of this year -- if we see service inflation that stays sticky, we may see the federal reserve reassessing, is that the appropriate rate to get to? although we are hearing fed officials saying we are going to stay the course, you know, will we really be seeing the policy response that you need to slow down the economy's efficiency, to loosen the labor market, and bring down inflation? tom: i'm going to suggest professor bauder studied his phillips curve a long time ago. link this to unemployment. if i get hollenhorst gloom of a higher rate, what does that due to the unemployment rate and the societal change that will bring? andrew: that is something fed officials need to be honest about when they talk to the public.

the idea that the way monetary policy works is through things like the unemployment rate. it is by slowing down the economy, it is by creating slack in the economy, and dampening demand through those channels. if you think this is an economy where demand is outstripping supply, you will need to lean against that with higher policy rates. i probably will increase the unemployment rate. they have that in their forecast, but they have the rate coming up to 4.5%. when you are running above target inflation -- we still are substantially above target -- you probably need that unemployment rate to move further than 4.5%. we are probably going to need to see a 5%-plus unemployment rate to bring inflation down. could we be hoping we are going to get a better scenario where the unemployment rate doesn't need to move outside? certainly. everybody would hope for that, but the honest answer to your

question, the basic macroeconomics is to bring wage growth down you need to loosen the labor market. tom: we need to remember, allan meltzer wrote a 3000 page history. if we coming out of this pandemic shift from 3.5% up to 5%, there is going to be a societal scream about that politically, how does a federal reserve adapt to that? andrew: this is one of the reasons that central banks, globally and in the u.s., have been made independent and the idea they are supposed operate outside of politics. because politically this is a difficult thing to do. the education that needs to happen -- tom: is it happening now with these speeches and the parlor game we are doing? andrew: i don't think so. first, be honest. there were large errors in policymaking that led to much too high inflation. we are now recovering from that

period of time, and the recovery means tighter monetary policy. we are in a bad position. we shooting knowledge that. now, how are you going to get out of it? you could say, let's accept higher inflation. in some ways this is what happened in the 1970's. we know from that experience that that leads to worse longer-term outcomes. if we try to pivot too strongly towards worrying about issues regarding growth and unemployment -- of course we care about those things, but the bigger risk is inflation. that has been interesting in the fed speak. we have heard fed officials saying inflation is the bigger risk, but meanwhile we see markets pricing out future hikes, pricing out more hawkish policy, and fed officials being accepting of that. we are not there yet, but this is the early stages of something that could end up looking like the 1970's, where you declare

victory before that is attained. tom: we are going to expand this interview out to three hours. [laughter] i don't to get you in trouble with the general counsel at citigroup, but i'm going to ask a delicate question. one of my heroes, catherine man, is holding court at the bank of england. i would perceive her as a hawk. is there a catherine mann at the fed right now? andrew: i think what the fed is trying to do is be data-dependent. you want to watch the data as it comes in. if we are going to get inflation and wage growth cooling off and we can keep the unemployment rate at a 53-year low, that is something we would love to have happen. you have to put some probability on these kind of surprising but possible outcomes, right? the data has been favorable for that type of outcome. it is not incorrect to be paying the data it's due attention. on the other hand, what we have

heard in the rhetoric -- i think chair powell has been quite on-message in terms of talking about resolve in the face of higher inflation. if you look at those minutes from the december fomc meeting and they talk about, our markets miss perceiving our reaction function? they are concerned about that. you see that level of concern there. you that hawkish nose. the -- you see that hawkish this -- hawkishness. it is hard to maintain that messaging, and that is what they are struggling with. tom: i have eight ways to go here, folks. andrew hollenhorst of citigroup with one of the great calls of 2022. for this fed meeting he shifts down to 25. he maintains this higher interest rate regime. i've got to go to the glide path

and presumption of disinflation. even if it is curvilinear down to 2%, or dare i say 3%, are there kinks along the way or is there a good force here to keep disinflation smooth and stable? andrew: there are always kinks along the way. that is important to keep in mind. the softer core prints we have had recently, that has a lot to do with used car prices coming down, goods prices. chunky goods stuff. those car prices, we monitor the wholesale prices, and we have seen those stabilize and start to go higher. when we are looking at january core inflation, you will not have that same dish inflationary -- this inflationary factor. what does help is it shelter prices later this year. non--shelter services, that is a

mouthful, that is the -- that is what we should be concentrated on. tom: take the disinflation dynamic. great. rignet over to an initial claim statistic where you would begin to see fed success. i'm going to success that number is more giant norma stan a moving average of 26,000. andrew: incredibly high rates of people quitting their jobs. when we look at these headlines about layoffs, if you have layoffs showing you that there are some sectors where you are getting some loosening in markets, but you have very few people filing for jobless claims, if you have people that are very willing historically to quit their job because they feel so good about the labor market, that says to me this is still a tight labor market. tom: you are becoming a pro like catherinen -- catherine mann. you didn't answer my question.

what equates into a constructive fed policy? andrew: i think you would expect to see that coming up to something like 300. coming up over time consistently. we haven't seen anything like that in the data. tom: what are you going to think about this weekend? i'm reading olivia blanchard's new book. what are you doing? andrew: we are thinking about what this process will be between the tight labor market, and between that wage and price relationship. those are the big unknowns right now. it is not hard to believe in very tight labor markets. wage pressure is going to push up prices further. we think so, but margins are white. tom: we you talk to the other criminals at citigroup -- when you talk to the other criminals at citigroup, are they saying pricing power? andrew: goods maybe not so much, but services, yet. tom: andrew hollenhorst on a clinic and -- clinic on how you

get to 25 basis points. but decidedly he keeps that high interest rate regime that so many fear out there. red and green on the screen right now. the vix, 20.5. looking at the yield space, the two year yield, could we get to 3.99? the story over the weekend, brent crude, $86.52 a barrel. that is decidedly not giving way in any way, shape, or form. the dollar is stronger. stay with us. this is bloomberg surveillance. ♪ lisa m.: keeping up-to-date with news from around the world. i'm lisa mateo. google is joining a list of tech companies drastically scaling back operations. it's apparent says it will cut about 12,000 jobs. that is 6% of its global

workforce. google has been dealing with a slowdown in digital advertising, plus its cloud computing division trails amazon and microsoft. in germany the u.s. and allies are meeting to discuss more military assistance for ukraine. the u.s. has unveiled a new aid package that includes 90 armored personnel carriers and bradley fighting vehicles. meanwhile, pressure is mounting on chancellor olaf scholz to deliver battle tanks. in peru -- in peru police battle protesters. they are asking that new elections be held. bloomberg has learned that saudi arabia's sovereign wealth fund considered buying formula one motor racing. but a potential deal stalled last year when it's owner, liberty media, lost interest in selling.

they valued formula one well above $20 billion. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

>> we certainly see more demand for, if you like quality----and a separate custodianship. ---i think the providers of that will continue to do well.

and we will see some more of these principles you see in other parts of the financial system come to the crypto world. tom: if i was to trust anyone to analyze crypto, it would be the mathematician and engineer from edinburgh, and richard is absolute -- and richards is absolutely exquisite. speaking with bloomberg's at the meetings of the world economic forum. right now -- and this is really important, and frankly in terms of news direction may be our interview of the morning. sonali basak is going to attempt to brief us on the wide set of stories into the weekend on crypto and exchanges. and not even the price of bitcoin. 21,000 is not the story. away from the price of bitcoin, what is a distinguishing story? sonali: there is a reason this bankruptcy filing is the number one-read story coming into the terminal this morning. i was up until 1:00 in the

morning reading the bankruptcy filing myself. this is a company tied to the digital currency group empire run by a well-known name not only in cryptocurrencies, but also on wall street. the irony of that now is that a unit of his own empire now going under a bankruptcy process. you read the reports this morning for the bankruptcy process you see that creditors are at odds. remember, the number one creditor here is gemini, the winklevoss entity. tom: can you predict -- i have to be careful here. could the winklevii go bankrupt? sonali: if they get their money back that saves them time, but it is more than $700 million, and more than 300,000 clients of their own that they owed money to. tom: this reads like a james bond movie.

this is the dark parts of this story. it is not funny stuff, folks. i'm going to quote verbatim. "the financial crimes enforcement network of the department of the treasury wrote in an order that approximately two thirds of top-receiving and sending counterparties are associated with darknet markets, or scams." can rogoff wrote about this. are we right now where ken r ogoff was, where it is becoming about scams, darkness, and crime? sonali: after so much free money is it only in crypto? there was a lot of financial structures created that a lot of people had fun with. the thing that is important about the case you are talking about is this is a hong kong-registered exchange. the founder was arrested in miami.

remember, this is at a time where you have the sec going after traditional crypto players like genesis, which is one of the biggest not only brokerages in the industry. that helps keeping -- that helps keep the industry alive. the reason it is important for the department of justice is, you see them expanding their reach when it comes to clamping down on the crypto industry. tom: on a friday, sonali bassett -- sonali basak exhausted. over at jp morgan, jamie dimon is going to come back from davos, he's going to put on a hard hat and look at the palace he is building on park avenue, and there are people in that building that believe in the blockchain, believe in bitcoin. your boss is calling it a pet rock. now we have criminality involved. how can institutions believe in the pet rock or exchanges

involved with the department of justice investigations? sonali: there is a moment in which a lot of wall street, the goldman sachs, j.p. morgan's, it is an opportunity to bring traditional financial rows back onto it. is this technology that can change fx markets? is this a technology that can meaningfully change bond markets? j.p. morgan and apollo will tell you yes. there is another j.p. morgan story here. i just got off the phone with mike mayo. last night jamie dimon's pay package has come out. tom: $34 million large, right? sonali: the interesting part of that -- tom: so is his tax burden, i would suggest. sonali: i asked how he felt about jamie dimon's pay. he said it is easier to ask for permission then forgiven -- forgiveness than permission. that is because more than the pay, j.p. morgan has decided not to allow for the special awards

anymore. they had a special awards packets for jamie dimon of $50 million or so, and he is saying i wasn't happy last year, i didn't think it was fair that any bank ceo gets a bonus on top of a bonus. now they are saying they will never do it again. that is in old money, new money story. tom: we could go on about this, but is that w2 pay, like mere mortals like you and i have, or is it mostly stock treatment that will be taxed at a lower rate down the road? sonali: it is mostly stock treatment. tom: why are we conflating stock-treated assets and the risk of j.p. morgan in with his w-2 compensation? sonali: you have to look at their overall pay at the end of the day. when you look at it, glass lewis, the shareholder advisory firm, last you get -- last year gave him a d. what does jamie dimon feel

anything i check it is interesting to see shareholder speak up. tom: they are seeing -- they are saying he is making too much? sonali: it is relative to the median worker at jp morgan. tom: but he is not the median worker. how much time do we have? folks, stay with us. i'm going to use the great financial assets screen. i can see pre-pandemic fortress dimon has moved operating income out to $60 billion. i'm not saying he should be paid 157 and take the subway, did he earn the money? sonali: let me ask you something else. a ton of ceos are watching their bonuses decrease this year, no matter if it is stock or not. so how did they feel about it, and the top pay is quite stable? my colleague at cnbc who used to work with us, he had an interesting tweet earlier this week -- tom: on this channel we called

that the death star. continue. sonali: he is a friend. tom: and good. sonali: very good. he tweeted about how much per employee was being spent on the golden layoffs. it was about $140,000. tom: this is severance pay? sonali: what is interesting is, it is more lower-paid workers. it is younger bankers. if you take the two stories together the top end of the pay skill on wall street is sticky, and it shows you -- tom: is that news? it has been that way since 1788. sonali: it is new since you are starting to see pressure on pay. and wages are sticky. that is true if you are making $35 million. tom: what did you learn about bank earnings here? what have you learned? sonali: everyone is talking about the wealth experiment that has been going on at morgan stanley. tom: dead on.

where is it going to be here from now? sonali: we were talking about the succession experiment. it bodes well for the man who leads that business. you also have something interesting about dispersion. people say the stock on tuesday, fine. morgan stanley flying, goldman sinking, the best and worst it has been in years. let's take a look at the longer-term trajectory. the market cap of morgan stanley that they jumped $40 billion above goldman sachs. david solomon, the day who took over goldman sachs, it was worth more than goldman -- and morgan stanley. tom: don't keep us in sibs -- in suspense here. is mr. solomon's employment threatened? sonali: he is year five. every year after five is a test of time. investor day is when the pressure is. tom: when is that? sonali: his birthday was this week on earnings. in davos on an earnings day.

february 20 eight is when the investor day is. he has already said -- i forget which analyst -- the kitchen sink is what this quarter was called. is he going to give something to suit -- to chew on for investors? tom: the investor day, do they do that at the javits center? sonali: no, at the goldman sachs auditorium. tom: in the auditorium? sonali: with a big tv screen. tom: sonali basak on a big week here, not only at genesis and the bankruptcies, and trauma in crypto, but in the big bank effort as well. i need to say thank you to our team. i thought the guest quality this week was shockingly good. safe travels to lisa abramowicz back to zurich and on her way here at some point. the vix, 20.5. both jon ferro and i looking at brent crude. brent crude of $87. coming up, jon ferro with a

gentleman from cambridge. this is bloomberg. ♪ for future generations. ♪ welcome to a new era of flight. [office sounds] ♪upbeat music♪ ♪♪ ♪when the day that lies ahead of me♪ ♪♪ ♪seems impossible to face♪ ♪a lovely day (lovely day)♪ ♪(lovely day) (lovely day)♪ ♪(lovely day)♪ a bank that knows your business grows your business. bmo. as a business owner, a your bottom line is busin always top of mind.ess. so start saving by switching to the mobile service

designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network. with no line activation fees or term contracts. saving you up to 60% a year. and it's only available to comcast business internet customers. so boost your bottom line by switching today. comcast business. powering possibilities.

jonathan: good morning. let's get each to the we can. equity futures trying to bounce. countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg the open," with jonathan ferro. ♪ jonathan: live from new york, counting down. google preparing to cut 6% of the global workforce. mitch mcconnell said the u.s. would never default.