>> just about everything is worse in the leading indicators and it suggests that we are going to have some kind of recession. >> the market has been buying into this far better than expected story for your area >> it could start in q3. >> early expectations are soft but i disagree with the sequencing and the timing. >> this is bloomberg surveillance. tom: good morning, jonathan ferro is in london and it is a

time of new accommodation. the bloomberg financial conditions index screens j powell, do something. lisa: it screams that we will get perhaps less rate hikes and perhaps the fed being more accommodative sooner and i think yesterday's bank of canada decision was significant. tom: i agree it was important. lisa: it came out as an expected step down but they suggested they might pause and might not raise rates again and that's the reason why you are seeing greater accommodation in the rate space. tom: a lot of economics coming up, michael mckee with the gd. work at 8:30 a.m. and at us that is the data. he's taking a course in victorian history.

can you explain the stock market yesterday? lisa: this was fascinating because the market wants to go up. we saw it down more than 2% at one point on the nasdaq, cloying -- clawing back after people having negative things to say about the perspective outlook ahead. this morning, we see ibm shares lower after they reported that her than expected earnings because we don't know if they will be up three. tom: microsoft is almost a proxy for the bizarreness of where we are now, up on the headlines and then down doom and gloom and they crawled their way back yesterday. it was barely green. the ambivalence i'm seeing out there is extraordinary. lisa: if we have a soft landing does that mean any downturns are

short-lived? tom: thursday, it's a new accommodation which is what we have and you see it in the summation of the bloomberg financial accommodations index to reveal huge accommodations. not only do we grind positive but a positive .28 standard deviations. that's the statistic on the bloomberg screen. lisa: the economic data has been coming in disappointing more often than not. a different story in europe yesterday but in the west, you have seen this grind to a lower level so at what point does that inform some sort of negativity or is it priced and because of the sell off last year? tom: the chicago fed activity index is lisa's favorite. i don't want to steal your thunder. durable goods in the brief, there is a lot of excitement

there with dow futures up three. we so good news in the yield space yesterday but not a lot to talk about. a lesser inversion over the span of a number of days. i've got euro $1.09 which is important, a stronger euro. someone said yesterday $1.09 is feasible. lisa: we heard that because they are taking a look at the optimism you are seeing there. we are talking about fourth-quarter gdp. it's not just the absolute number which is expected to slow down to 2.6%. still positive but we are getting core pce, durable goods orders for december and initial jobless claims and we are seeing court gdp in the fourth quarter with a similar read in more

real-time. how much do we get deceleration and if we don't, does that matter in terms of reforming this lesser restriction that perhaps we will have to reverse. at 1:00 p.m. is auctions. tom: day after day. lisa: the u.s. is selling $35 billion of seven-year notes and it's been two straight days of successful auctions. last year, they were not successful. tom: we will have to see what it does. that's at 1:00 p.m. lisa: intel is coming to market and before that, we get american air, southwest and i'm curious about intel because we've seen such absolute carnage in the chips space so what do we get today and how much has been priced in? tom: eileen becker will be with us.

what to the airlines do? that way jonathan ferro can get home from london. he is in london testing restaurants and he talks foreign exchange how is london? jonathan: reflecting on 1901, it was a difficult year for us all. good morning. we have a european fx strategy sitting with us in london. let's talk about the difference right now between people constructive on the u.s. economy and people less so. the people less so claiming sub 50 cpi and the jobless claims data will come out which is in and around 200,000, which one is it? >> i think we are somewhere in between. there is a slowing and is

definitely feasible in the manufacturing sector especially with a soft survey. one has to watch this with that historically tight labor market. this is not going to be an easy one for the fed. mortgage pricing at 4.9%, the terminal rate, i think we could reprice a bit higher but to the extent that we won't reprice modestly higher, i don't think 35 basis points will affect the dollar. i think we have reached a point where the fed has been come close to the peak and know the drive is global growth expectations and that's been reignited by the chinese reopening. this is what is driving the markets. you can say that during the

first three quarters of 2022, u.s. yields explained around 90% of the dollar valuation. now they explained about 15% where as if you go back and look at the surveys, they are now in the lead and that's because expectations are higher. jonathan: so i'm trading copper? >> to a certain extent, yes. there will be some increased demand pull for commodities. the bottom line is that we are talking about a country who has been shuttered for the rest of the world for more than 1000 days. there was trait going on but right now, i think there will be some significant aspects of pent-up demand that will start showing and chinese imports and therefore upside pressure on commodities will manifest.

jonathan: this is the third year of pandemic economics. every single year of those three years we got wrong in the consensus has been terribly off course. what are we under pricing in regards to china? i could see it both ways. >> i don't think we have reached levels in the currency market better pricing a smooth chinese reopening. in the euro-dollar market, we are at $1.09 which is an important level. when we break it, we will see a lot of real money demand that will push it higher and historically, you tend to see that when you are in significant undervaluation and you correct for fair value, you don't just

correct value, you seek value so you overshoot. my point is that i think we still have some way to go to reprice the chinese reopening. jonathan: how much of an inflationary impulse do we import from china? >> in china, i think china will be much more relevant for europe compared to the u.s. this is an element about the upside pressure of commodity prices and inflation has come of frequently. my only observation is what is driving inflation is extremely important. in 2021 and parts of 2022, it was supply-side driven so you had domestic activity and you had inflation squeezing an already damaged economy. this time around, if inflation is being driven by the demand side of the economy by chinese imports, then it was still create challenges for central

banks but it's not the same, it's more transitional where you were dealing with inflation. you have increased demand and therefore you have some upside pressures on prices and that prompts a central-bank response but not to the extent it will squeeze incomes as it did during the course of 2020. jonathan: that should lead to a stronger currency in europe. what are you thinking about? >> i think $1.09 is important in the prediction next week will be a catalyst for europe to break higher. i expect the ecb to be hawkish and i expect the fed will deliver 25 basis points but there are risks in that meeting. if we break that, it will become painful for those who have not participated in the big move to chase the currency higher.

then we could convert to $1.15 and potentially higher absent any black swan. there are a lot of risks in that scenario. jonathan: this has been great, there is a feeling on this side of the atlantic that a lot of what we've seen over the last couple of weeks was short covering and the longs are just getting going. tom: how do we shift from short covering onto a true long and that debate is a huge part of what we are talking about this morning. we will get help with that and futures are up 10, this is bloomberg surveillance. ♪ lisa: keeping you up-to-date with nusra around the world with the first word, russia has launched a major barrage of missile attacks against ukraine. authorities say the attacks were aimed at energy infrastructure and other civilian targets in

and other cities. it happened the day after the u.s. and germany promised to supply ukraine with tanks which gives ukrainian forces a significant upgrade. meta-platforms is reinstating former president trump's facebook and instagram account after a two-year suspension. his accounts will be subject to at the company calls guardrails and there will be specific penalties for rule breaking. the former president was reinstated on twitter in november but hasn't posted there yet. business confidence in the u.k. has sunk to its lowest level since the global financial crisis. that's according to a survey from the institute of chartered accountants. it cites inflation and weakening customer demand and companies in the retail sector were downbeat area global news, 24 hours a morgan stanley has find some of its own bankers more than $1 million each for conducting business on what's app and other messaging platforms. the funds have either been clawed back from previous on us

is or will be docked from future payment the latest fallout from the investigation that's up banks dish out hundreds of millions of dollars in fines. asia's richest person is fighting back. the business empire he controls is considering legal action against an activist investor. the firm accused the business of market manipulation and accounting fraud. the empire lost $12 billion in market value on wednesday. global news, 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

>> i've been saying this for a long time, the expectation on the part of russia is that we are going to break up and not stay united but we are fully, thoroughly and totally united. tom: the president of the united states going from tank to tank. at some point, the tanks will get to ukraine. you can see the allied set up here as we tried to get ourselves out of this winter. i guess ukraine did not get the

memo about no war in winter. lisa: there is also a need to keep the nato alliance firm and agree on supplying tanks and the question of whether by an it to providing tanks in part to support olaf scholz in keeping the alliance together. tom: it will be interesting to see, to say the least. i will work off the new york times. i thought the article was just brilliant, we know the democrats are a mess but we never talk about the republicans are a mess and they speak to 100 80 or so members that will be out in california anointing a new rnc leader. from mack brown of kentucky, the pregnant statement, this is not shown t 16 -- this is not 2016.

explain the relationship between the former president and his rnc. annmarie: i think we talk a lot about some of the dysfunction in the republican party and it was on full display at the start of this year. when you look at the republican party into 2024, there is a lot of talk within this party that they want to move away from the trumpet euro politics. many do not see him as the leader to bring them forward into 2024 and that will be on display not just in california but also in georgia where we are waiting for the indictment and this could harm those individuals, either the former president and those individuals around him but that's a big conversation for republicans the next two years as they look to see who will be leading their campaign to the presidential race because we are seeing how divided they are at the moment when you look at what's going on in congress. tom: particularly for our

international audience, it's how the rnc uses facebook. if instagram and facebook ring the president back, what does it actually do? he's not sitting there at mar-a-lago tweeting, or is he? annmarie: he is certainly not tweeting because he still not on the twitter platform but he does frequently come almost every day post on truth social so the question remains that they want to make truth social a viable alternative to some of these social media platforms, what happens in the present of the united states starts to test the former president starts to ditch truth social and use facebook and instagram? he has millions of followers on these applications. it remains to be seen if he will embrace the message from the past. lisa: what about the question of

how much unity there is? how much is there and ratcheting up the pressure on china with respect to tiktok on both sides of the aisle? annmarie: this was a proposal from congressman hawley that wants to ban tiktok nationally. we've seen congress take steps to and tiktok on government phones and we have seen private institutions like colleges and tiktok an individual phones. for republicans, you are hearing that they want to go forward and he went rid of tiktok so far, democrats are waiting on a cue from the white house how they want to handle this potential legislation. you would be hard-pressed to find a congressman or woman or senator in washington, d.c. that does not want to look like they are tough on china and potentially tiktok is an avenue because many question how

potentially the chinese government is harvesting some american data. and also what kind of analysis they are using to push certain stories and many young americans are now turning to tiktok to get their news. there is one caveat and this is something the trump administration ran into. this has to do with some of these big funders in the community. if these individuals have investments in these kind of companies, will they start to call lawmakers and say you are pushing it too far? lisa: that's the bigger story. you have seen this bipartisan support for increasing the distance between the u.s. and china at a trade level and when you see is this is they are doubling down on the presence of china and how much is that dissonance coming to the fore from the business universe? annmarie: i don't think it's in the forefront at the moment.

none of this legislation has hit the floor for a vote but i think this is a tension we have seen in the past, especially when it comes to what the trump administration wanted to do with tiktok. this is something that could be lingering over the heads of politicians and remains to be seen whether there will be a massive pushback from these investors who are also lining the pockets of politicians but also want to make sure their investments are growing and are safe if they have them in china. tom: what does the president's day look like? annmarie: today, he is going to read union will give an economic speech i think the most important part is he is going to put the republicans on blast when it comes to the debt ceiling drama. tom: thank you so much, we will visit again in the next hour. i don't know what to make of

washington. it's january and i have attended the state of the union and it's like a religious service like where you go to a church you've never been before. everybody is taking it really, really seriously. then no one listens to the speech, they just decide when to clap or not clap. lisa: that's the only argument pulling together religion and politics in washington. people want to understand some of the turmoil after the state of the union is over in terms of who leads the cabinet and who joins the cabinet. tom: and what the president will do lisa: lisa:. and how much the president will announce that he is running again. tom: what i know is that president trump said maybe wouldn't run and is back on

facebook and instagram and the democrats have to respond to that and i don't know what that means. lisa: if he actually starts posting on facebook and instagram, what does he do to truth social? he's trying to push that forward to get that traction. will he come back? tom: i think he wants to get on various and sundry networks. we would love to have you join us here. futures are up 10 and doubt futures are down 14. what is germane this morning? lisa: oil prices are coming up but natural gas in the u.s. are lower. they have a 70% decline. the discussion about disinflation, is it -- is a discussion about oil and gas. how much is that going to be something we look back on this first half of the year? tom: you mentioned china, six

point 79 you one -- you want - yuan. we've got a number of people and it's not just a few, we have many people modeling 5% of gdp. that's double our gdp in china. lisa: how much of that money stays in china as opposed to flowing out? tom: the vix is 23ish weeks ago and we are down 19.23 on the vix area a bull rally and a bear market, this is bloomberg, good morning. ♪ ♪ welcome to a new era of flight. at allspring, we break away with purpose.

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tom: bloomberg surveillance, an important conversation in london with jonathan ferro. we will talk about an economic driven thursday. we've got to talk about the x host feel of this gdp statistic area the new york times thinks it will come out maybe more robust than the bloomberg survey. can you believe a 3.1% statistic? lisa: what is the importance of that? that is the question. if you look at the leading economic indicators, they suggest something different in a

rapid turnaround. if it comes in stronger than expected, does it move the markets? tom: michael mckee will lead our coverage at 8:30 a.m. and if you add in gdp real, that gives you a nominal equivalent of a 5.8% nominal gdp which is not where it was a year ago which is why revenues and earnings are coming off. lisa: the earnings we have seen are often really good and the market isn't trading on that. they are looking at the forecast, going forward. tom: i don't agree. they do not look at the forecast, they look at liz and sonders. wasn't that a good segue? liz ann saunders at charles schwab. i mentioned nominal gdp and as you and i talk, results come in. >> look at last year inclusive

of the blended estimate for top line growth for q4 but we are early -- early in reporting season. essentially 100% of s&p revenue growth for 2022 is courtesy of inflation. in real terms, there wasn't any. i think that's part of the reason you are seeing these high profile layoff announcements because of a rush to right size particular for companies that either have a high cost basis or don't have the kind of pricing power that keeps that topline growth strong in this disinflationary environment. i agree come i think the outlook in particular in this quarter is more important is what being reported against a lower bar. tom: looking at earnings, i'm looking at the train wreck known as the split up of down.

dow comes out with earnings today and they say this is a new one, they are optimizing labor. what does that stockmarket do when we cut costs, fire people and have the loney pr optimizing labor? >> in the short-term, if you look at what has happened in terms of the recent big layoff announcements, there has been a short-term top in the stock. i'm not sure that has legs in perpetuity especially if the rationale behind -- what was the term? tom: optimizing labor. >> so firing people. tom: thank you. >> if it's then reflected in more deleterious forward estimates, i think ultimately, that's more of a struggle, not just for the companies. from a market perspective, i

like a lot of what i've seen in the latest rally with higher lows, internal conditions looking better relative to what they look like last june when we had the rally. i don't like the low quality to what has happened but i think there is still the next hurdle for the market to get through which i believe is more downward adjustments to at least the first half of 2023 calendar assumptions, topline and bottom-line estimates which means further compression of margins. lisa: with southwest air, we know what happened with them and they reported earnings, $.38 versus the estimate of seven cents. you can see those idiosyncratic stories coming to the four with a gloomy overall feel. do you think the gloom amtech was enough last year to get ahead of the gloom and other sectors last year for them to outperform? >> i don't think we necessarily

have to hope for tech bringing leadership back as a necessary prop for the s&p. when you go through cycles, especially when you have these dual cycles where you have a fair market and you have some assertive downturn in the economy, whether they declare an official recession is academic area there are certain pockets of the economy that are in recession. i think it's what sort of happens coming out of that particular cycle and that tends to bring shifts, you see that within the equity market and you don't necessarily see yesterday's leadership. i think we see that reflected in areas like industrials and materials and energy for some reasons and i don't know that we necessarily need to see that pic

in tech leadership. it happens across broad asset classes. international has brought gains after u.s. investors just said why should i bother to be diversified outside the u.s.? i don't know that tech necessarily needs to be the next market leader for the market to do well. lisa: do you think what we've seen so far this year is a head fake? >> i think it's a process. one of the things you want to see is even if you retest a low like we did in october, retesting the june low, the underlying internals actually looked better than what we saw in june and that's part of the process. i don't think we are out of the woods yet but i think we are going through that bottoming process. i think there are still hurdles like further deterioration in the labor market and we are getting a flavor of that and in

turn, further ratcheting down up for forward estimates but a lot of the macro pressures are in the rearview mirror. tom: we've been here before. there is a raging debate if we have hit a low yet. and all of the months you've been at this, how do you determine the market bottom? >> would it be nice if i could say here are the three indicators and you can check all three boxes and you were off to the races. you often have significant pessimism in sentiment indicators and i would say that's with maybe lacking a bit with not just the mid june low but mid-october. i think the low was october 12 and i could be the low. we saw the washout, the kind of

panic phase but it was concentrated more in the behavioral measures of sentiment. it was the attitudinal measure of sentiment. we never really got what i lovingly call the puke phase. we don't need to get that but that's one condition, this washout in sentiment inclusive of things like fund flows and the call ratio. an improvement in breadth, underlying breadth even if your testing the lows and you start to see something a little bit better. the weakness has been rolling through the economy and kind of rolling through the market. i think we need to start to see stability in areas of the economy that got hit most and i would put housing right at the top of the list. that would be the macro thing i would look for is housing stability. tom: maybe off of fed policy on february 1. this is the key question -- what

are we doing with our money? i'm as guilty of this as anyone. lisa has reached the puke phase but i haven't. what does schwab say we are actually doing with our portfolios? >> what is reflected in things like etf lows of fund flows is kind of a renewed interest in fixed income again because there is income in fixed income and a risk-free rate. we see some were forced out the risk spectrum without the desire to take on the risk but were desperate for something that was income generating in a portfolio and now they can move back into relativelyl riskess areas like fixed income and you are seeing that broadly in fund flows. you have also started to see his shift to international. we talked to a lot of clients who say maybe i should've done a

little bit more rebalancing so as to not to let the international portion of the portfolio shrink. there is a real pete interest in non-u.s. maybe it's no surprise. lisa: do you think the go into long-duration has been overplayed given we don't know what kind of new normal we are heading back to? >> yes and you have kathy jones on all the time. it's talking about the 10 year being in a range that maybe you don't want to press longer duration when you get to the low end of the range in the tenure but we see of back -- a move back into long-term equities. that would be the part of the rally that i would suggest you use trader lingo and stay more focused on shorter duration which in this kind of environment is higher-quality. tom: we could have missed jones

on with ms. saunders and have some piano for ms. saunders and get it double neck jimmy page going. lisa: when with this happen? tom: i don't know but a schwab concert would be in order. liz ann, thank you very much. working with the wonderful kathy jones. i think that was a beautiful paintbrush of where is the catharsis. there are many people with a lot of experience saying where is the pain? i don't think there is pain because we have this massive stimulus. lisa: you think maybe rates will not go as high and maybe the economy will not be so bad and maybe the layoffs will take care of extra costs and liz and is pushing against that. -- and liz ann is pushing back

against that. how much are people secretly long tech? tom: they talk about the bidens stimulus night think we have under played the bidens stimulus. his may be what we haven't seen the catharsis yet. lisa: because it is still taking out and you have china coming back online. tom: we will see. important economic data in less than two hours, john gray of blackstone and we will do that in the 8:00 hour. this is bloomberg, good morning. ♪ lisa: keeping up-to-date with news from around the world with the first word -- in ukraine, the president of ukraine think the u.s. and germany for the promise to deliver tanks. the first of the german tanks could write within three month and now he is calling for allies

to provide other advanced weapons. he says ukraine still needs planes and long-range missiles. the mayhem at the new york stock exchange earlier this week has been traced to an employee who left a backup system running and that triggered wild market swings involving more than 250 companies and thousands of trades were canceled at a cost yet to be determined. george santos says he will hold a news conference to answer tensions about fabricating large parts of his background but he is not saying when. the new york republican is under fire for allegedly hiding the source of donations to his campaign. chevron plans to buy back $75 billion of shares after a year of record profits. it will increase its dividend and that's likely to lead to more this is an from those who accuse the oil industry of profiteering after the russian invasion of you sent energy prices soaring. despite an upbeat annual sales

forecast, ibm says it plans to eliminate about 3900 jobs or 1.5% of its global workforce and they will focus on the employees remaining after spinning off health units. ibm expects to recruit in higher growth areas. global news, 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

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>> just about everything is worse within the leading indicators and it continues to suggest that we are going to have some kind of recession. we still think that recession will be mild and brief but

nonetheless, that will be the outcropping of the fed raising interest rates close to 5% within a few months. tom: the chief economist was lights out. i thought she was absolutely lights out yesterday on the granularity in the leading indicators. lisa: that adds up to a short and shallow consensus that is fueling a lot of what we've seen over the past couple of weeks. tom: for most of the public come is not short and shallow. some say what recession and some say maybe is harsh. lisa: if you think your pool is short and shallow and you dive in and it's not, you got a problem. tom: you just described my childhood. lisa: i hope not, that sounds horrible. -- that sounds horrible. tom: have you ever seen that at

a summer party? >> i have not seen that. i would rather cover it up. lisa: how about those markets? tom: the gentle man from a straw you says move along. joining us now, this is their year, damiensassar is with us. your phone must be ringing off the hook, what is the question or the consensus mystery of the pros going to damien? >> in terms of trade come is better clarity that we are getting in terms of trade. it's how is the economy doing giving the move in commodity prices like oil and copper specifically. previously, you would not know that with oil and copper up and

you did not know they were then a fitting from an elation and now you're getting more clarity. south africa has the large commodity outflows and are performing better just because energy prices are coming off and they can operate more efficiently. more clarity in terms of trade goes a long way to play markets. lisa: the question about the metals that have been rallying, does it make sense with you with respect to what's happening in the oil and what's happening in the rallies and metals? >> i think it has to do with the china reopening and is justified in many ways copper is very volatile and i think it's more the fact that you had like positioning and buildout which has fueled the recent rally. right now, we could get central banks in places like south

africa that will announce later today to perhaps cause and maybe hike, pause and the receivers come on and that's how you make money in emerging markets. lisa: bank of canada indicates it will happen on a broader scale. when you talk about terms of trade with china and what they are actually going to buy, how much they will fuel the rest of the global economy, what terms of trade are you looking for? >> what does the reopening mean for them? is asia going to rise to the occasion and stimulate? all indication say they will stimulate but maybe not like 2010. you cannot really fight the china reopening. it's been a one-week trade. 674 now and it was at six of

72.5 early this morning so it's really moving. 6.72.5. tom: maybe i'm old school but you include the battle over the remember the desk the remember be - remembyi. you can do this on the bloomberg. the chilean peso back in the dollar boom we have had and with come in and we are plus one standard deviation with a strong chilean peso on a nine year trend. do you see follow-through of stronger c&h? >> you have a constitutional referendum coming up in chile where you have to be mindful of.

in china, at some point, beijing will not like depreciation. they have given no indication they are doing that right now. the yuan is competing against the yen for exports. that's not ending any time soon and i could see more runway for the yuan. tom: you mentioned receivers, you're talking about buying bonds? >> because rates are high. tom: i thought you meant ajay brown. who's got the best receivers in the super bowl? >> philly has great receivers. i think it's ajay brown and davon taste smith. -- davonte smith. lisa: it took four minutes and you started by saying i will not get into football and there you go.

he said that reminds me of the super bowl. tom: damien has one jargon. >> jamar chase is a great wide receiver and i'd love to have him on my fantasy football team. in swaps, when you pay that way, you think is dish interest rates will go higher so you are basically going to pay. you don't want to own yield but if you are receiving swaps, it means you like yields. we see that thinking interest rates will come down. lisa: i understand the analogy. you mention chile and i have lived there. this goes to the real economy question. how much do you lean into that? is that the trade when it comes to emerging arc it's him of the

mining, the commodity producers? >> there is a correlation between the chilean peso and copper. these jumps due to the political situation there is something you have to be mindful of. they know exactly when the allete -- the next election is coming but i don't know any of that area chile has more copper reserves than anyone on the planet. if you are looking for a relationship between the currency and commodities, that's where to look. lisa: how come you are pushing back a little against the wholesale optimism diving into emerging markets? >> because we had come very far, very fast since october. i am mindful of the fact of the speed of the move. i wouldn't feel comfortable telling my customers to go headlong into emerging markets. tom: is that what the flow says

right now? >> they are. the speculative money for sure but the retail money as well but the smart money, the institutions are pulling back on their dollar hedges. in men -- it means they are going 75 to 50. tom: we have witnessed this from time to time. >> the pain is not there yet, until people start feeling the pain -- tom: lisa knows you don't wear patagonia in chile. lisa: there is one highway and a bunch of alpaca blocked it and all the cars had to stop until they were done. >> i hear you can be on the road in the next thing you know you are in bolivia. people skied to the bottom of the mountain and they are in a different country. lisa: thank you for your travel tips.

when we talk about the dumb money, one of my offspring yesterday said i want to get some double takers -- double takers in the double long vix. tom: brilliant, what you just heard is really important. it's a look into the first part of this year, the idea of international em and doozy is in. lisa: a lot of people are saying maybe it's gone too far even though the story is still there. tom: coming up, the receivers of the san francisco 49ers. stay with us, this is bloomberg, good morning. ♪

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>> we are not in the worst economic outlook but things are.not good . >> everything is worse. >> the market has been buying into this far better than expected story for europe. >> we have a call for a recession in the u.s. starting in you -- in i3. >> i disagree with the timing. >> this is bloomberg

surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: good morning. these are the conversations we are having. the whole idea of 2002 uncertainty and this path we are on to becoming certain. lisa: certain of optimistic views is the tone and at what point do you push back? the certainty of the first three weeks of the year is up. tom: in the last three weeks, there have been tests of down and down quickly, and whether it is 10:00 a.m. or 2:00 p.m., a bid finds a market. lisa: do you buy into hope or get a gut check and understand where the consensus could be wrong? if the market is going to maximize pain, where will it be,

a resurgent dollar, tech selling off, long end yields going up? tom: we are going to give you both -- you bowties stuff on economics. we go earnings central. i'm looking at the red headline. american airlines, 189 the estimate, coming in large with a $2.5 to $3.5 looking out this year, a big lift. lisa: have you bought plane tickets recently? you go with the margins and people like them. you are not seeing them in other areas the same way but you are in travel and experiences. tom: how beleaguered is the roberts family? we say good morning to them. comcast ray -- raises a dividend. the amount of cash is the

mystery this year. >> we have seen that in the energy space in terms of buying back shares and giving out dividends. use of cash going to investing in the infrastructure, also still strong. when does this come to a margin story? you are seeing that in other industries in terms of how much they are seeing their profits go down. >> we will do that in the next hour, later in the hour, based on the schedule. don lynn murray reports that jonathan gray is saying blackstone have their real estate thing going on. let's be direct about it. they missed their forecast. i like what mr. gray says, i am more focused on returns, which seems to be the theme for corporations this year. >> how much can you double down on what you believe in? i want to ask him about real estate because they have bought so much into the real estate world. you have the institutional investment portfolios. how much can they raise rents at

a time when people are pushing back? >> real estate. it took hits in the fourth quarter with opportunistic best depreciating 2%. let me do the data. not much to tell you after the good day yesterday. a surprise it turned out great. vicks, 19.23. futures up nine. i will call it a bid. the yield space gives me nothing. 3.48% on the 10-year yield. oil giving back a few dollars. gold 1953 an ounce. good morning, dennis gartman. he is long on gold. of course, that is he -- that is what he would tell you, but he made clear it is a conundrum market. >> you pull up the bit dog screen and it barks at you. take a look.

the fourth quarter u.s. gdp is the highlight. within that, some of the granularity, core pce for the fourth quarter. it is about growth but also deceleration in inflation that's fueled a lot of the optimism we've seen about short and shallow. >> on radio, this chart looks spectacular. that's a great 30, 40 year chart of core pce, which shows how unusual the pandemic was. >> and are we going back to what we knew before? at 1 p.m., we get u.s. selling of seven your notes. the past two options have been good, a notable divergence from what we saw at the end of last year. do you see that in the belly of the curve and areas that are probably less liquid if people are looking for that yield, that income, that they now see as attractive? aftermarket, earnings continues. intel will be the latest. curious about the chip sector.

what forward look will we get? intel shares lower by 42% over the past 12 months. micron and qualcomm down over 20%. is there a theme? >> to it as we speak to liz ann saunders about the reality of the equity markets, taking a broader view with phil camporeale with jp morgan asset management. i love your notes, single sentences, observations. your major we've if the epsilon in the back of the equation, uncertainty will be less in certain and we will get to certainty -- less uncertain and we will get to certainty. when does jay powell have certainty? >> now. the key to our view is good riddance to 2022. as an asset allocator, what powell and his friends did last year was create really, really tough ways to manage risk. as an asset allocator, you

better have bonds on your side as your defense when stocks are down. the most risky downsides last year were conservative ones. when did we say that? it was the worst year we have had in that respect. windows powell have certainty? it is now. they are going 25 basis points in february. >> the charts that lisa showed on pce inflation --8.3%? it shows the one off of this pandemic. does jp morgan suggest we are beyond the pandemic? >> we are beyond the pandemic highs of inflation. that is why we are going to this step down in the aggressive tightening. last time i was here was at the end of the third quarter. i told you we had a record high in our fund in cash. that is not the case anymore.

we are putting money to work all over the world. we only have 2% in cash now. we stopped short of saying we will see an earnings re-acceleration or reignition of the cycle, but we are putting money to work. in the u.s., we have a 20% allocation to investment-grade corporate bonds, the most we have ever had in our portfolio, and a 9% relative value trade between u.s. and non-us stocks, and we have not had that since 2017. this is about being active and taking advantage of opportunities again. >> investment grade bonds in the u.s. have gained about 4% this year, akin to what we have seen in the s&p. at what point do you know that the gains are in and it is over? >> we are looking for more forward carrie, a yield story. if we were optimistic about the u.s., we would be in the u.s. equity market rather than credit.

the credit story is to get us more yield in our index. where we are trying to get total return is the non-us equity market. the way we would go back into u.s. equity would be core pce is falling like a rock. the fed funds rate does not need to be 5% anymore. what the fed is saying for 2024 will happen in the back half of this year. that is not what we are saying. >> in the u.s., when people start going back, energy will continue to be the leader, a redux of last year, because that is also a yield story? that is also a dividend play? >> if we are going to go back into the u.s. market, it will not be in yield place. it would be in total return beta stories. when people continue to go back into the equity market, it will be at a time when growth stocks are back. again, we are not talking about a reacceleration. we are talking about a more subdued growth environment. i think big cap tech stocks can do well in that environment.

>> you talk about core pce dropping. there was a mantra the past decade, do not fight the fed. this year, it is fight the fed because it is wrong. do you buy that? >> i think they go another 50 basis points and go on hold. >> if they cut rates by the end of this year? >> we are not saying that. that is premature. i think powell may push back on that with open-mouth operations on february 1, which could be a risk, which is about why we are more in the credit side than equity. >> there's a constant theme with the people we have conversations with that the market is out front of the fed. what do jp morgan clients do? are they telling you they want to be in the market or are they as a generalization scared stiff? >> every conversation i am having now is about should i be looking outside the u.s.? it is like the twilight zone.

because we have been asking people to do that for a long time. now i think the opportunity is, as yogi berra said, you would rather be lucky than good. >> was he a professor at fordham? >> when you come to a fork in the road, take it. >> you are kind of three standard deviations more the winter. >> you mentioned that. commodities, copper, the chilean peso, a three standard deviation move, strong dollar, week chilean peso, bombing through to a plus one. does e.m. pause here or is there an urgency to get in on it? >> it is the most volatile asset class that we deal with. the ways you manage risk in em, we are just buying calls on the index, so if it goes up, we are going up with the market, but if it tanks, we have limited downside with our premium. that is the way we are

controlling for near-term volatility. but remember 2021, when everyone was talking about how great the equity market was doing. em got crushed in 2021. even with the longer-term valuation component. >> i want to talk about toyota and investment in japan. you have to come back and do that. bring your japanese team. toyota down 31% in u.s. dollar terms from the beginning of last year, only 12 months. >> we can talk about that coming up. thank you. >> phil camporeale with jp morgan asset management, thank you. futures up 10. good morning. ♪ >> keeping you up-to-date with news from around the world, i am lisa mateo. authorities in ukraine say the missile attacks were aimed at energy infrastructure and other energy target. the assault happened a day after

the u.s. and germany promised to supply ukraine with tanks that give the ukrainian forces a significant upgrade. meta-platforms is reinstating former president trump's facebook and instagram accounts after a two-year suspension. his accounts will be subject to what the company calls guardrails. there will be specific penalties for rule breaking. the former president was reinstated on twitter in november but has not posted the area. business confidence in the u.k. has some to its lowest level since the global financial crisis according to a survey from the institute of chartered accountants, which cites inflation and weakening customer demand. companies in retail, property and manufacturing sectors were particularly down deep. southwest airlines posted a larger than expected loss. the carrier's scheduling meltdown will cost about $800 million. southwest says an increase in flight cancellations and a

deceleration and bookings will lead to a first quarter loss. asia's richest person is fighting back. the business empire he controls is considering legal action against activist investor hindenburg research. that firm accused the business of market manipulation and accounting fraud. the adani empire lost $12 million in market value wednesday. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪ conventional thinking delivers conventional results. at allspring, we break away with purpose. harnessing data-driven insights and boundless curiosity. we dissect the market from every angle. helping to build portfolios that redefine what's possible. because investing isn't one size fits all.

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>> these tanks are meant to help ukraine fight effectively on open terrain to defend their sovereignty and territory and win back territory the russians have taken from them. it is about coordination and the unity and resolve we all have together to help support ukraine. >> not another suit and tie. he will always be admiral kirby. he's out of the newport officers candidate program, serving in missile systems on big ships, before handling public relations across much of the navy and

pentagon, with strategic communications and national security council. lisa abramowicz and tom keene in new york, jonathan ferro in london. big economic data in an hour and 15 minutes. annmarie hordern. i want to go a different tack here, but i have to sit on kirby as well. what does the pentagon think of the debate in the media over tanks? what i see is loads of people who have never been near a tank, would not no one if it came down the street. their complete knowledge is bill murray in one of his movies -- "stripes" from years ago. what to the pros think about the tank debate? >> i think it is not really a debate that started because of the media. it started because we have seen a reversal from this administration. they were steadfast that they would not be sending these high tech abrams tanks, massive

gas guzzlers, logistically very difficult, the supply chain. to make sure they operate is difficult. the training involved. they said it did not make sense. you have these hundreds of leopards in these native countries close to ukraine, just send them. the nuance you need to look at is they are not sending the tanks that are already made. they need to build these tanks from scratch. so the end date on when these abrams get to ukraine we do not know. >> that is going to be out there somewhere certainly with all the reporting. i believe lael brainard at wesleyan did some tank training for rotc. we will have to check that source. day two of the brainerd mystery. i have seen some terse notes from economic pros, like adults, with the appropriate parchment they got the appropriate jobs, basically saying brainard is

nuts if she gives up the vice chairman. discuss. >> i think it is up to opinion. lael brainard, her term is up at the fed early january 2026, so this will not do any harm for her. it also sets her up nicely for a potential future for a treasury secretary, right? we know she was on the short list to be the biden treasury secretary. he obviously went with janet yellen. >> lisa wants to getting here. what is the date calendar of a comfortable transition from yelling to brainard -- from yellen to brainaard? >> secretary ellen is committed to the job and wants to stay on is the report we have. potentially that could change. i don't think you will see a shift at the treasury until

after the debt ceiling drama is over with, so that brings us to at least the fall of this year. >> let's talk about the position lael brainard could fill if she's chosen, the position brian deese has been in, and he's been one of the most vocal about the spr and what the administration was doing with respect to oil. yesterday, chevron reported it will have a $75 billion share buyback plan. the white house doubling down, saying it is an odd way to show the company is trying to increase oil production. is this getting traction at a time when the white house might be working against the market, pushing up prices, with refilling the spr next month? >> the president has been scolding the oil companies for months, so this statement, although it seemed maybe harsh for some in the oil industry, is not a surprise. chevron is coming out with a $75 billion buyback.

the administration maintains they are reaping profits as putin invades ukraine and they have a surge in energy prices. what they have wanted is for oil companies to produce more so they are less reliant on having to go ask neighbors. this has been a tense debate in washington. republicans have said this administration has been hostile to the oil history. there's new data that shows the biden administration allowed more drilling in their first two years than the trump administration, but there are still issues with the keystone pipeline and the like. you have individuals in congress, obviously on the democratic side, calling for things like a windfall tax on big energy, so this still very much resonates in the west wing. >> do you have a sense of the refilling of the strategic petroleum reserve and what this administration sees as the most important kind of security issue there to protect against possibly another disruption?

>> looking at today's prices, brent crude $86.94, wti 80 $.89, i don't think the administration will be filling out the spr. i think they will wait to see if there's more of a collapse. the issue is, when you talk to analysts, all they see as oil prices going higher. a lot of this comes down to the question of how china opens. is it a messy opening or will it be a clean one? we are already seeing higher demand on the roads in china. it does look like prices go higher. if they go higher, it will be difficult to buyback the spr. unless they want to do a solid for the industry. higher all -- higher oil prices is the time to buyback for u.s. oil producers, politically toxic. >> is a toxic -- it is a toxic brew. annmarie hordern, thank you. i had a dumb question and i looked it up. they emptied it to the lowest level in 38 years, i believe. i don't even know what i am

saying. how long does it take to refill it/ -- to refill it? i got mixed stories but it is like thoughts and prayers. months and years. i do not know. >> can you imagine joe biden going to the gas station and filling up the spr? this is a real issue, especially if they are saying $70 is the bottom. what happens if we do not get back? amory was just talking about that -- annmarie was just talking about that. if they don't start buying back next month, what happens? that is the pushback you hear. >> particularly if you want to win the politics of it. don't you just say, here is the plan, and you do a little bit every month? that would be, like, the sane thing to do. >> what with the implication be for oil prices -- what would the implication be for oil prices?

you have seen prices come down a lot for the big oil companies, $200 billion for the big five. >> they starved for years. they just did the $75 billion buyback at chevron. i will not opine on it. apple will do a share buyback. i will bet you it is somewhat equivalent with the profitability of apple. i am speaking out of turn, but is there a moral obligation to return profits, or, to the point of everyone, find investment? >> highly politicized. there is also this political aspect with the airlines as they come out with earnings. do they buyback shares? you marginally increasing capacity, which might be good news in terms of the supply-demand dynamic, but the margins are great. that is what you saw with southwest.

the margins are good. >> american expects top estimates for profit. it is out there now. jon travels like a rockstar. everywhere you go, it is a train wreck. you are always sitting in the airport. >> domestic is going to be turbulent. >> living the dream. >> when your trip to puerto rico ends up in atlanta. it is awesome. i put on sunglasses. the kids were crying. >> green on the screen. stay with us, i am begging. good morning. ♪

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>> bloomberg surveillance. good morning. i will get to the data check. deborah cunningham scheduled to be with us. she was brilliant on short paper. her idea of the austrian piece is the u.s. to year -- two year. tesla up a solid $10. help me, if you can. we have intel coming up tonight. tesla up nicely.intel coming up . >> up 6%.

>> a muskian move. intel coming out tonight. the 10 year per year return on intel, a jewel of my youth, is 3.1% per year. that is the challenge of intel. we will slow down here. complete earnings summary. lisa abramowicz, go. >> i want to start with armchair analysis of the airline sector. we are getting the data and it is a tale of two airline stories, domestic travel having more trouble, business travel, business class travel doing better. we have seen that with delta and others. southwest had their debacle, which led to a bigger than expected loss. it was expected to go over to the first quarter. 2.6% decline. american air up 2.3%. you can see that jetblue, also domestic, down nearly 3% after earnings. but how much is that the story, that business travel is back? >> business is back or domestic

business is on airlines? >> domestic travel had been back, but that arguably is a sector that might be more affected by a decline in overall consumer sentiment and ability. the others i am looking at -- sherwin-williams, the paint company, gave some negative guidance, down more than 9%. i wonder how much this is tied to homebuilding and what is going on there given all the concerns around what will be happening with mortgage rates. chevron, talking about them earlier. those cheers up about 3%. ibm, to your point about intel, where is the bar? has it already been set? ibm hurdled over a lot of the expectations on both actual profits and guidance, lower 2.3% because they outperformed last year, so the bar was different, the valuation higher. that is the takeaway. >> are you done with earnings? >> this is important.

this is about the humility and what we do with our guests. when you have on a legit legend, whether you agree with them or not, like lizzie and saunders -- she was on wall street week. you have these people there with a lot of experience. what they are seeing is strategic plans and models blowup like mr. roberts and comcast now with the losses they are publishing on paramount plus being brutal. $8.9 billion is the takedown there. jon busts my chops about the dow. it was the mother of all dow stocks blown up, tumbling. >> it will blow up your models too. will it be on the front foot here? is it chatgpt and artificial intelligence? where to the old tech giants go? >> is microsoft the next intel

15 or 20 years out? i am not willing to say but that's a humility you have to bring to this. elaine becker is with us. she will try and get a better seat for lee so she's stranded in atlanta -- for lisa next time she's stranded in atlanta. what will replace libor? is it working out? do you have a day-to-day short-term piece you believe in? >> we are getting more comfortable with the is -- the bsybi index. it has shortfalls in rapidly changing interest rate environments. it lagged by a day or two, but to a large degree, it has a lot of data points associated with

the, different firms associated with it, different input, and it is based on actual trades, so we are comfortable that that could be a good bellwether. >> what does your world out to your long-term two year yield, what does it say new to jerome powell? >> it says that his job may be slowing, you know, the economy. it may be keeping inflation in check, but really, he's not being heard, that that is going to take more than a month or two. so if you look at the fed funds futures rate, it is still showing, you know, a terminal rate of around 5%, so that is on par. that is what they are telling us. but where it gets -- where the market has it wrong at this point is looking into the second half of 2023.

225 basis point cuts, 50 basis points less by the end of the year, below the terminal rate, and powell needs to, in his press conference next week, emphasize that longer means longer. it does not mean longer in days and weeks. it means months and quarters. >> there was a call put out on bloomberg opinion saying in order to get ahead of what you are talking about, this market misperception from your vantage point, of a fed that will cut rates in the second half, that they should raise rates by 50 basis points despite the groundswell for 25 next week. do you agree? >> i do but i do not think they will. certainly, the fed speak before we headed into the silent period now, was centered around 25 basis points increase, and the focus was on the most recent inflation data. i guess if we had a pce number that printed way out of line,

that could potentially lead to 50, and although powell did not talk about 25 or 50, he did not deter others from going to 25 basis point route, so i agree. i think 50 would be a good wake-up call. i don't think that is what they will do based on fed speak. >> based on that, what is the bleed through into markets if this is what they should do and yet they will not? >> i think, again, you have to get to a point where inflation does not keep rearing its head. we have certain things that seem to be under control now from an inflationary perspective, or at least going in the right direction, but there are other areas of both goods and services that are not in that ballpark, and i think the danger is, you know, we have to go higher and it last for longer than what the fed is even looking for and

wanting for and what the danger is is recession from that type of an environment. >> are you seeing any sense of a danger of a debt ceiling debacle in the short-term financing markets or do you expect that later in the year or not at all? >> right now, it is just a lot of talk. we answer a lot of client questions. it is confusing to investors in the marketplace. but when you look at the yield curve, there's enough uncertainty about what an x date would be, probably between mid june and august, so 30 days worth of information that is uncertain at this point, that it's not causing huge issues in the marketplace. where it mostly is hitting in the supply side now -- we have a lot of supply in the market, which is great for short-term rates, but that will be cut drastically, probably starting in march or april. >> one of the great municipal products of my youth was the pennsylvania turnpike.

it was a miracle of god through the rough appalachian mountains. yesterday, we had a 26 year, $12.7 billion project launched at the wonderful grand central station in new york. it is going to be a 22 minute ride from long island instead of going to penn station. lisa knows this better than me. this is the vision that is out there in municipal finance, deborah. is the vision going to be there in the coming years for these big projects? >> i think the vision is good. i think the infrastructure of this country needs -- and certainly newark -- the infrastructure needs of this country and certainly new york are massive. it is subject to technical factors. they have a lot of cash that

came through from the stimulus perspective. there working on putting that toward projects. what i can probably tell you, given that i've traveled the pennsylvania turnpike regularly at this point, weekly at this point, and it is still a project in the making, i cannot believe -- what did you say? -- 26 years would be the right timeframe for this project and its considerations. >> new york, what they did with laguardia, they rebuilt it in six months? something like that. i am kidding. they have to rebuild the pittsburgh pirates. that is what they have to do. >> mccutchen is back. >> deborah cunningham, thank you. for those of you like me that are not on this you are in long island,, you have to go to the upper eastside or midtown, you have to go over to penn station to then come back to your daily

job. is that right? >> basically, how do you make the new york city train system more like switzerland or germany? >> $12.7 billion will get it done. >> i don't know that it will. is there the will to do that at a time when people are not going into the office in the same way? >> that is a whole different story. >> where are the revenues going to come from without that groundswell behind that? >> i had a lunch yesterday. beverages were taken and somewhere after the third martini the person said to me, she said, what do you think of davos? i said james gorman worked from home. you had the most important observation that i saw in davo's, that answer -- in davos, that answer from james gorman. >> you cannot put the genie back in the bottle.

going back to the office three or four days a week, is that enough to get it done? maybe in the banking sector, but is that on a broader base? is there a shift to other locales? this is a real question because a lot of people do not think we will go back to what it was. >> i have an offspring. she's got four degrees. her major line is may i help you. she makes clear that working from home is not happening. she has loads of friends isolated in their homes. >> have you seen the job listings? a fraction our work from home. the number of people wanting to work from home? everyone. >> lisa abramowicz with james gorman of morgan stanley. that was something. stay with us. this is bloomberg. >> keeping you up-to-date with the first word, i am lisa mateo. >> in ukraine, president volodymyr zelenskyy thanked the u.s. and germany for their promises to deliver tanks.

zelenskyy is calling on allies to provide other advanced weapons. he says ukraine still needs planes and long-range missiles. bloomberg has learned the mayhem at the new york stock exchange earlier this week has been traced to an employee who left a backup system running. that mistake triggered wild market swings involving more than 250 companies. thousands of traits were canceled at a cost yet to be determined. american airlines is out with a profit forecast for 2023 that beat estimates. they also posted fourth-quarter profit that was better than expected. american says it is on track to pay off $15 billion in debt by the end of 2025. the change at the top of toyota. the japanese automaker is promoting the lexus president to replace akio toyota as ceo. his job will be to guide the company through the challenges of electrification and automation.

toyota, the grandson of the company's founder, will become chairman. the number of smartphones shipped in the fourth quarter fell by the most on record. because signals more pain for manufacturing hubs like south korea and vietnam. according to research firm idc, phone shipments fell more than 18%. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪

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>> if you are in aviation, despite the macro headlines, it feels as good as it has ever felt in terms of our demand, and

you combine that with supply challenges. it is good. tom: the pilot scott kirby of united airlines, where he has piloted himself by many opinions to be the number one performer in the u.s. aviation market. that is open to debate but good to hear from scott kirby here across the bloomberg network. this is the interview of the day without question. i am going to lean forward. look at the market. i turned away to see about google flights, see where i am going in europe, the market goes up while i turn away. lisa: that is the point of travel, the gravitational force. tom: bitcoin, i am getting out at $25,000. lisa is pumped up on the earnings we are seeing. helane becker is with us, research analyst at cowan. she provides leadership forward. i have an answer.

i use as a proxy new york to paris but even that is down from the insanity of six or eight months ago. it is still stupid money, but less stupid. is international starting to rationalize in the aviation business? helane: we are seeing, tom, very strong international business travel, less so maybe on the leisure, but i expect leisure travel will pick up mid february and then increase through the summer months. the demand is still very strong and the further we get away from 2020, the more comfortable people feel about going outside the country. lisa: helane, how much is this a story of international travel to compensate versus a wholesale return to the way it used to be? helane: i think there are two things going on.

the first is with respect to supply chain, the supply chain issues from boeing and airbus being delayed on delivering aircraft, so you don't have a lot of capacity coming in, which props up price, but then, on international business travel, after all these zoom call's and people taking calls at midnight or 1:00 in the morning -- i did a call with a client earlier this week and it was midnight in his time zone -- i do not think that can continue indefinitely. i think you are going to see an increase in international business travel this year, and especially, you know, as more people feel comfortable traveling and covid becomes -- people continue to think of it as more endemic. lisa: what is the new model, having half the plane as business travel and the rest sandwiched into the back to get some sort of profitability overseas and domestic just the

ongoing mess that has been? helane: i think, to your point, the front of the cabin will get bigger in the sense of business travel, that cabin, and then you are going to get a bigger premium economy. when you are thinking about long-haul, it is the old lien-backseats, the reclining seats, versus the lie-flats, and a smaller section in the main cabin. what we are seeing, to tom's earlier point, the prices that would have been main cabin before seem to be lower, but prices in premium economy seem to be equal to what business travel used to be, and business seems to be more like the old first-class pricing. so i feel like the price points are going up. and it is shifting. tom: you are killing me. my father died on a 12 hour notice -- died.

on a 12 hour notice, i had to get on a plane and i flew economy for the first time since time began. the seat was so small, i flew, helane, to portland, oregon nonstop sitting on the edge of my seat the whole way. lisa: so there is this whole issue. i travel economy the -- economy all the time and there's economy and the economy if you want your kid to have a drink on a four hour flight. is jetblue, at the forefront of that frontier, what is the future for them if the prospects of domestic travel seems to be diminishing with the economic cycle? helane: tom, sorry about your dad, but the other thing in terms of outlook for those guys, they are going to slow their growth. they will have no choice. it is not the hiring part. it is the retention part that is an issue. and the aircraft have to keep

growing and they cannot get the aircraft. so i think there's always going to be a market for a deep discount. if you thing about hotel chains, there's a market for ritz and for motel 6, so i think you will always have that differential. people who have gotten used to traveling will continue to want to travel because that is what they do versus buying lots and lots of things that they do not really need anymore. so i think those guys will be ok, i just think the growth will slow, and i think american, delta and united will see strong international growth and growth in business, and i would pivot, as i'm thinking about investments, to those names. >> helane becker, thrilled to have you. she is at cowen. i keep track of the business to economy ratio of a given flight. from l.a., it was nine to one. nine dollars a business ticket

for one dollar of economy. it is now down to 6.321, newark to lax. with that said, what is the domestic constraint for kirby, bastion and the rest? is there constraint gates? is new airports like the magnificent new laguardia -- is it airports like the magnificent new look gordian? what is it? >> the biggest is infrastructure issues. there isphysically to put more aircraft at some airports. the two parallel runways are too close together to allow for simultaneous operations on bad weather days. that airport winds up getting extensive delays and weather is not blue sky every day.

and operations per our decline. infrastructure issues -- the government does not want to talk about this, but they did not train air traffic controllers for 18 months during the pandemic, and you've got a lot of controllers retiring. i get passionate about this because the airlines have a hard time talking about it because, obviously, they are dependent on the government for atc, but the faa should handle safety and security and private corporations should handle air traffic control. you would get more investment and we would be in the 21st century instead of the 20th. tom: the 19th century with the wright brothers. jon emails in and says what is your single best buy. what is your single best buy now at cowen? >> united is our topic for 2023. it outperformed in 2022 and we think it will outperform again. tom: terrific brief on a day of

earnings. she is with cowen. the other matter, which we have not talked about -- we don't need to do it now -- is boeing/airbus. the guy johnson expertise. i am hearing more percolation about what is boeing really doing in terms of innovation? they are so distracted by these other tangible engineering challenges they have. lisa: how much can they bank on the fact that all these airlines, particularly international, will be increasing capacity because everybody is business class and lining up for the different places, the different clubs and different airlines lounges? have you heard that, how crowded the lounges are? tom: i have seen it. i have seen lines stretched out the door. it is the longest line, frankly, i have ever seen in an airport. lisa: now they are trying to delineate the gold, the platinum members getting first steps, and everybody else, american

express, you wait in the other line. tom: i had a senior aviation officer off the record tell me it is their single biggest headache. it is a disaster. all this premium thing. i was just taken from iron down to balsa wood at one airline. lisa: how did that work? tom: i am not kidding. there's platinum, gold, copper, you know, the others. lisa: coal. tom: then you get steel and then balsa wood. lisa: what perks do you get? tom: starbucks is over there. helane becker. that is what we do here. we have conversations with people like that. thank you on the sell side of these different indices. she said united airlines. futures advance.

becker moves the market up 20. stay with us. good morning. ♪ ♪ 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?

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>> they have a lagged impact in their design to create unemployment. >> since late april of last year it has been about the central bank. >> look at what is priced in for

the fed. we have less than 50 basis points priced into fed funds right now. >> madame lagarde has more work to do. >> the ecb is likely to hike more, but the question is, is that in the price now or not? >> this is "bloomberg surveillance." lisa: we have gotten some earnings. here comes the u.s. economic data dump. good morning, this is "bloomberg surveillance." jon ferro in london, tom keene in new york with myself, lisa abramowicz. in 30 minutes we get the latest read on the fourth-quarter gdp. tom: you mentioned earlier within your briefs that pce, we see that at 8:30 as well, i look at the eeco screen and count the lines. i'm sorry, it is a 15-line thursday. there is a lot of data. lisa: a lot of people are going to be looking at the gdp number.

i'm looking also, though, at jobless claims. they are coming in lower than expected, this resilience. it might lead into this belief that we are going to see a complete rollover in inflation. tom: that's what it is, a belief in the way the price is moving. deborah cunningham was good on that. she is watching housing. we get new home sales, i think that is near the end of the fer ro soiree. do you realize i think he is doing that at 2:00 p.m. in london? jonathan: 3:00 p.m., i think. tom: i can keep track of the time. he is living large over there. the bottom line is, you can see a pandemic boom in 2020 on new home sales. it is -- then it is a crater. the now what is what liz and is looking at in real estate. lisa: it has been hard to get

your arms around a bifurcated picture. you have a earnings good in certain service sector is an not good in industrials. and where does tech play into that? that is the story we have seen, a rolling sense of a disinflation or a push. that is what i'm going to be looking for in this data. tom: and inflation is still the story here. it bit of an economic scare. futures advance. it has become a better market. futures up 23. the vix solidly under 20. after yesterday's festivities. the yield market not giving you much, a broad higher yield statement there. 1.16 percent. most important number on the screen for me, bloomberg financial conditions index, which is a screaming accommodation. lisa: especially at a time where the market wants to go up. we see that time and time again. i look at the s&p, over fourth

downing -- over 4000 in earnings. jon save us. how are you doing over there? what are you doing over there? did you have for breakfast? jonathan: it is not my job to save us every single day. that may be clear. the show starts at 2:00 p.m. local. good morning morning, good morning, london time. david page joins us now. great to catch up with you. good afternoon, good afternoon, to be precise. about 27 minutes away from data in america. it is cuts are no cuts. you are in camp no cuts for 2023. david: we think the u.s. economy looks like it will have closed the year from her, and we think that will give momentum for the year. we are looking for a recession. we think it is going to be mild. pending on the composition of the data, it could start later. you have a fed seeing the economy end the year stronger,

the labor market is resilient, the risk is we think they peek at 5% in march, but the risk is it could be more than that, and that pushes the timetable back. the story is the fed will deliver a slowdown. it will deliver a loosening in the labor market. what it is how quickly it can do that. we think it probably happens in 2024. david: not all -- jonathan: not all right cuts are continued equally. if there are cuts you can get cuts from one of two reasons. for this federal reserve you can get cuts because we got a soft landing that no longer work wires interest rates, or because we get a hard landing that requires much looser policy. which one is it and why only not framing the debate that way? david: i think it is going to be a mild recession. it is a hard landing, but not as bad as it was in the pandemic. we are not looking at a fed that cuts rates back to zero. we have an inflation story that we think is going to be

stubborn. we think it is easy to get headline inflation to 3.5% by mid year. it then starts to level off. that is when you start to see the fed taking about, what do we need to do to keep it or drag it down into 2020 four? it is unlikely at that point they are going to want to be tightening policy further. it adds to the view that they hold the position they have got for a little bit longer, and that adds to the view that we are seeing a contraction in the economy. jonathan: investors don't buy a second phase for this. the first phase is you get from zero to 4% really fast. they have done that. the second phase is you get to about 5% and then you wait. what is it about the then you wait that people don't get? david: i think part of it is what markets are doing. markets are pricing amen outcome. they are not talking about a central case. my central case is we do not see

cuts until 2024. risk is you see something deeper and the fed has to act more aggressive. the market puts the probability wait on both of those and gives you something that is obviously skewed. not so sure that when we have 50 basis points or so priced into the market that that is a central forecast of all of the market. i think it is a range of views. jonathan: i want to talk about the potential this recession get purged out further. published in the last 24 hours are questions of whether we should be pushing out this recession call and endorsing the idea that this rally can continue. he said, real household income after falling for a year has grown solidly for the last five months, supporting real consumption. what do you say david: back to that? i think what is supported -- and it does look like consumption was solid in the fourth quarter

-- but it has not necessarily been strong income growth. households have been happy to use excess savings much more aggressively than we thought. they are drawing down their savings profile much more quickly. does that mean overall there is more excess savings and we underestimated that? that is plausible, and therefore you would see a stronger backdrop. or a household getting through savings more quickly? we think's sake -- we think savings have supported consumption. the question is how long that can last. we think they are being used more quickly, and therefore at some point you will start to run out of that savings and the savings rate will have to rise more quickly. that, we think, adds to some of the downturns. but the uncertainty of timing of her sessions is renowned. it is very difficult to predict. we have probability models that suggest we will have a recession now, but over the course of the next 12 months. that is why the composition of the gdp number is important. jonathan: i want to talk about 190,000 as well.

it seems like the most bearish people right now have to sit there and look at 190 thousand, and it forces them to question their view on the economy. how do you look at that number? we get another release of claims in a bit. david: we see it in the context of also the payrolls number and also the employment, comparing the household surveys employment number, which is also been resilient. the labor market is more solid. with claims we always get a little bit flighty, particularly over seasonals. seasonals are a question, given the issues we have had over the pandemic. we are wary of putting too much weight on jobless claims. but taking in the round, all of the labor market is really tight. that is why we are thinking of pushing out the timing of our recession till later this year. to some extent that reflects the dynamic we have seen in growth, but it is also a driver going forward. jonathan: do these bears turn

around and say, wait, it's going to change, the labor market data is going to change? you think we could get a recession and get to 4.5%? david: we are forecasting 4.5% by the end of the year. the average recession sees about a 2% increase in unemployment. we do think there is some validity to the fed's view that on this part of the curve that we might see is a reduction in pent-up demand. we might see vacancies without the need to see job cuts, and the combination of those factors could see wage inflation come down. pending on what happens, on what number you take, the last payrolls report suggested that actually average earnings is not far from the golden zone the fed would be aiming at, around 3.5%. in november it was 5.8%. we are not putting too much weight on that. depending on the indicators they

look out labor markets -- the fed. jonathan: david, this is great, thank you. tk, that is the debate. tom: also the ecb division in the last 24 hours, as long as it is taking you to celebrate australia day, i know you went over to london and had some vegemite butter to celebrate australia day, but something seriously has happened in 30 hours. the bloomberg financial conditions index for europe and the united states has sharply diverged. accommodation in the united states, and almost a new restrictive tendency that lagarde has to face at the ecb. jonathan: we talked about this in the past 24 hours. you have to compare the incoming data to expectations.

the surprise indexes. it has been clear over the last few weeks that the data in europe is coming in to the upside. the united states has started to surprise to the downside. there is a belief that this ecb is going to go a whole lot further than the fed. we will talk about the extent they can catch up over the next 12 months. tom: i hope you get better whether, manchester whether -- manchester city against arsenal. i know it is not today. jonathan: it is freezing, tom. tom: you can freeze in manchester city watching arsenal. jon ferro in london, he continues with good discussions there as well. dow futures up 58. jon, the 9:00 hour, look for that. this is bloomberg. ♪ lisa m.: keeping you up-to-date with news from around the world. russia has launched a major barrage of cruise missile attacks against ukraine. authorities say the attacks were aimed at energy infrastructure and other civilian targets.

the assault happened a day after the u.s. and germany promised to supply ukraine with tanks. that gives ukrainian forces a significant upgrade. bloomberg has learned that the mayhem at the new york stock exchange this week has been traced to an employee who left a backup system running. that mistake triggered while the market swings involving more than 250 companies. thousands of trades were canceled at a cost yet to be determined. u.s. health officials would like to get the frequency of covert shots down to just one a year. today they will start discussing how to do that. food and drug administration advisors will talk about which strains of coronavirus would be in an annual vaccine and how they would be chosen. american airlines is out with an earnings forecast for 2023 that beat estimates. the carrier also boasted fourth-quarter profit that was better than expected. american says it is on track to pay off $15 billion in debt to the end of 2025. in a change at the top of

toyota. the japanese automaker is promoting the lexus president as a ceo. his job to be to guide the company through challenges of electrification and automation. toyota will become chairman. 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. ♪ ♪ and it's easier than ever to■ get your projects done right.

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>> we have basically a cold recession in the u.s. the second quarter, keeping it in line with the recession playbook historically we have the market going sideways. that is still 4500. if the recession happens in q3, we have a pretty severe selloff, which would take us down to 3250. tom: taking notes. he is chief global strategist at deutsche bank. he is the optimist out there. he has moved the timeline up. it has not given way to the gloom that is out there. no bloom in the last three or

four days. lisa: basically people have pulled back from that gloom and say everything is great now. tom: we are going to have to see on that. we are going to pause and talk japan. i have had the privilege of attending japan for bloomberg many times. it is always unique. and spanning across three generations is a company that started literally in fabric, and three generations back said maybe we ought to make cars. they ran into the immense challenges of world war ii, and pick up their pieces up. his father invented modern toyota. there is no question about it. at keio -- akio toyota announcing his move from ceo to chairman. the moonshot of performance he has done versus other auto companies, we spend way too much too time on the dalliance of autos, where this guy literally

saw a worldwide -- on a worldwide basis said we can do this. the lessons learned for all automobile engineering have been humbling. lisa: it is something we are going to be talking about. people that are the old guard transitioning to a new era. toyota very much in the forefront of that in this transition to electric, trying to deal with the japanese economy versus the rest of the world. it has been interesting with earnings. people are optimistic, but not that optimistic. tom: exactly. we don't talk between the sets. lisa and i can't stand each other. it is like a tweak quarter. they tweaked like four dollars or six dollars. we are tweaking. lisa: tweaking is a good thing if you do investment-grade credit. tom: stop talking to me. [laughter] lisa: we will have a great time with that. this is why investment credit

has been in the sweet spot. they are not optimistic enough to go into u.s. equities, but they do want to get that income. that brillo suddenly -- matt brill suddenly found himself a pariah to the golden child. a senior manager at invesco. has it gone too far? matt: last year was really tough, and we were far from the golden child last year. then we got to the fourth quarter and things started looking extremely attractive. nobody really wanted to buy it. there were still very nervous. they said, we will enter when the fed starts hiking. all of a sudden we have ripped about 100 basis points since the end of october. we do look at things now and say they are still around 5% for credit, which looks attractive over the long term. we think yields are going to go lower and you are going to get that carrot. lisa: is over the long-term the past 10 years for the past 50 years? matt: definitely over the last

10 years, but then we look back in the 2005-range, pre-distortion by the fed. he did not tend to get yields much higher than 5%. we think that is attractive over the long run. and over the near term looks attractive. tom: microsoft. 4.3% in debt. are you going to see the mother of all issuance here? every cfo is going, i missed the bottom. do they like lemmings over the cliff dive now? matt: a lot of companies are saying it is expensive to borrow right now. what we are finding is that most companies are finding that if they want to borrow for three or five years it costs them 3%. to them they think 30 years at 5% is expensive. we are seeing companies only issue three and five year bonds. the issuance of 20 years or longer is only about 5% year-to-date. companies are still finding this expensive.

i do think with the type of companies where they have had some troubles in laying off workers they might want to borrow, but then -- but they do not want to borrow at these levels. they find them punitive. tom: the reality is that -- they dial 1-800-matt brill. is your phone ringing off the hook? matt: it is really fascinating. they are not issuing a lot of paper right now. the banks -- only morgan stanley has issued any significant amount of debt this year. the other banks have not issued at all. typical corporations on the industrial side of things are are owing, and at a amount. it is different than 2020, where everybody was borrowing, because they were borrowing for 1%, 2%, for 30, 40 years. lisa: this is why you saw this migration to a more leveraged kind of company. are we going to see the reverse

of that as companies see rates as punitive, as companies look to paydown what they have rather than borrow more? matt: yes, and that is great for us. we hate when companies go borrow to buy back stock. right now they are saying it doesn't make a lot of sense to borrow at 4.5%, 5% to buy microsoft. for the most part people are paying down debt and companies' balance sheets are getting better. which we need, because the economy is going to start to slow. if they are not in front of that they are going to have problems. tom: can i just say what you are hearing here is real pontotoc? -- real bond talk? it's not what is the fed going to do? what is inflation going to do? it is real bond talk. when do we get back to confidence in longer duration paper? i will go seven years. forget about 20. when we get back to boise cascade holdings out a nine-your

case or 18-year piece. matt: the confidence comes back when the returns are already there. tom: top of the market is what we call that. [laughter] matt: we have started to see flows pick up, but people are barely dipping their toes into the water. i'm nervous that rates could run too much before people get involved. i think there are a lot of investors in t-bills. tom: the cash charts are stunning. am i right? lisa: yeah. matt: we think refinance risk -- reinvestment risk is a real thing for investment -- for investors this year. tom: what does that mean? matt: if you bar for six months that is great, what do you do when that bond insurers? lisa: do you think that the fed is going to be cutting rates by the end of this year? matt: we think early 2024 it is on. that is when you could see 100 basis points, in the first quarter of 2024. tom: his entourage, did you see his entourage?

they are sending smoke signals back to atlanta right now, what he is saying. it is fun, though. after the carnage -- seriously, last year was worse than 1788 or whatever. are you having fun this year, finally? matt: we are having fun. we have a crew with sunglasses on feeling the love. tom: work from home is what we call them. matt: last year was tough. i want to be honest. we have not made up even a third of the losses. tom: when do you make up the carnage of last year, three years, five years? matt: i think it is a two-year timeframe. this year you could see double-digit returns. i think you could get tightening and it gets you 10%. lisa: tweaking is the way to go, i guess. tom: that is the happiest i have ever seen him. lisa: a bond portfolio manager, this is the sweet spot for them, if you have slowing growth, companies deleveraging, and rates coming down. tom: that is the happiest i have

seen matt will in 2.5 years. we are trying to give you these seismic changes here in the yield market. to me there is never a discussion about the issuance flows. that is what you did. lisa: issuance has been down. all of the technicals, supporting some of the rally as well if companies are not selling that. tom: matt drill moving the equity markets higher. futures up 17. stay with us. this is bloomberg. ♪ ♪

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tom: bloomberg surveillance, from new york. jonathan ferro at 9:00 in london as well. we are getting ready for economic data. i thought it was yesterday. lisa corrected me. thursday with claims, but with a lot of other data. there is no one better to lead our coverage then michael mckee. part of that, not just thursday in claims, but thursday in a look back to the 90 days, the q4 of 2022. michael mckee, we don't see gdp yet, do we? mike: we don't see gdp, but we are looking for it shortly. there we go. better than expected, 2.9

percent. that is down from 3.2 percent in the third quarter, but still a very good number. we are not going to complain about that at all. i will get you the breakdown on that in just a second. let's go through all of the other numbers, which is a lot. the trade deficit actually widens in december, $90.3 billion from $82.9 billion. that is a bit of a surprise, and i'm sure it will have some effect on the overall gdp numbers. speaking of gdp, the price index, the pce index on a quarterly basis drops to 3.5% from 4.4%. those are better than the prior quarter, but not as good as what was forecast. make of that what you will. we get the rest of the gdp, the december numbers, which really matter to the fed, tomorrow.

wholesale inventories rise .1%. inventories, .5%. jobless claims, hold onto your hat, tom. tom: i'm holding. mike: and you have a good-looking hat. 186,000. these are not the droids we looking for. that is revised down. tom: folks, i'm going to sell this to you. we have a busy half-hour. we are coming to you without commercial interruption this 30 minutes or so. sonali basak will be with us. after that, mckee and i will grill on the stunning jobless claims numbers. it go back to the four-week moving average. dovetail claims right now into a 2.9% gdp statistic. i'm worried. it is terrible. mike: you get to the breakdown on gdp, but at this point it tells you the economy in the fourth quarter was reasonably

strong, and the economy, the labor market economy is still strong right now. but there are reasons for that. stay tuned, as tom says. a couple more numbers here. 5.6% is the durable goods orders increase in december. that is up from a -1.7%, so that is good. but transportation down. we know boeing had a poor quarter, so that probably has had a major impact. capital goods orders, this is what goes into gdp directly, down .2%. shipments were down .4%, so that is going to have an impact on gdp as well. tom: lisa, look at the markets here. yields are higher. to me, is tuition a capital go? lisa: perhaps a service? i'm looking now at that two year yield. it is 4.18 percent and climbing higher from earlier.

honestly, when you take a look at this data, do you buy the story that people say this is backward looking and that what we have gotten in terms of leading economic indicators shows a much more rapid shift that supports the soft landing that people talk about now? mike: some of the data seems to be pointing in that direction. but a lot of people are ragging on the index of leading indicators. some of the numbers we are getting a better than expected, so there is a feeling that maybe inns are not as bad. certainly gdp is a backward-looking number, but it does give us some idea of where we are and where we are going. taking a look at some of the gdp numbers, we can say the gdp for the year of 20 group 2.1%. forecasts are we are going to have a bad year this year, but 2.1% certainly better than people thought. personal consumption was up two point 1% in the fourth quarter.

that compares with an anticipated 2.9%. that comes in wider, down from 2.3%. goods spending was up 1.1% after declining .4% in the fourth quarter, whereas services were up by 2.6%. that is down from 3.7 percent. the mix is different and people anticipated. investment by businesses, business spending up .7%. residential investment, where the fed has had an effect, -26.1%. tom: all of that was in six blocks of lisa's house. [laughter] have you ever seen a number that big? mike: we saw it in the wake of the great financial crisis in 2008. tom: one more number. mike: this is one that people really want to pay attention to, because it kind of strips out

the effect of inventories and trade. final demand for domestic product up 1.4%. it was 4.5% in the fourth quarter, but one point 3% in the second. in general it has held up, but it is not extraordinarily strong. tom: this is a big number, q4 adjusted. michael mckee with an important comment in about 15 minutes. we are going to continue now. lindsey piegza joins us, chief economist at stifel. are we near recession? lindsey: i think we are teetering toward recession. the fourth quarter number does look good, especially against the backdrop of a stronger rise in the third quarter. and we look at what is happening with the consumer, which is the backbone of the u.s. economy, we are seeing a clear loss of momentum. doubt the consumer happy and healthy in the marketplace we cannot expect to maintain

positive growth, let alone more robust growth similar to what we saw this morning. i do think as the fed continues to raise rates savings are depleted, real income remains negative, fiscal support fades there is going to be an additional burden on the consumer that leads us into, or near, negative growth. tom: under the religion of peter lynch of fidelity, domestic final sales reign supreme. michael mckee mentioned that trend, that tendency they're away from the back-and-forth of imports, exports, and the rest is a pretty lowly number. do you have a belief that a slowdown in domestic final sales brings on the reality of recession? lindsey: it certainly does. just like when we look at inflation we strip out the more volatile components of food and energy. that is what we are doing when we are looking at real final sales numbers to domestic purchasers. we are stripping out the volatility of inventory, the volatility of trade. what we see is a more clear,

defined downward trajectory of growth, slowing from 4% to near 1% at the end of the year. still, there was enough resilience in the u.s. economy to maintain positive momentum in q4, but the bigger question is, are we able to maintain that momentum as we turn the calendar page? most of the data suggests we do not. lisa: do you think that the market is wrong? because we are seeing consumer stocks do well? lindsey: i think the market is severely under-appreciating the amount of tightening that the fed is going to have to embark on an order to reinstate price stability, and thus under-appreciating the amount of pressure that is going to be put on consumers and businesses and the overall economy. lisa: when you start to see the data to prove that before thinking maybe the fed is going to be on the side? you see inflation coming down and we are going to get that soft landing everybody is talking about? lindsey: i think we are already seeing it. when we look at retail sales

negative in december, consumer spending still positive, when we look at overall goods and services that is trending down. production now in contractionary territory. housing taking a sizable hit. there are multiple data points that are suggesting the u.s. economy is not going to be able to maintain this momentum in the new year. tom: thank you so much. lindsey piegza, great that she has with us today. michael mckee mentioning that housing hit, which is a -25% statistic. liz ann saunders mentioning housing is critical to her in the previous hours. it is original right now, is how i would put it. lisa: the view ahead is what we have been trying to clean from the earnings. in the companies, manufacturers, as well as asset managers. sonali basak has been covering it for us. especially with blackstone and their earnings, what are we going to hear from jon gray as

he joins us now? sonali: we are going to hear from jon gray shortly. we are going to be joined by the president and ceo of blackstone. just shy of $1 trillion in assets. thank you so much for joining us this morning. you take a look at your results for the year you had a tougher quarter than you have had in a while. a lot of that underperformance was in real estate. my question to you is, when does the pain and? jon: it is great to be here. the fourth quarter was a tough backdrop in markets. we also had some timing issues that make comparisons hard. when you look for the year we really delivered for our shareholders. we had an earnings growth -- distributable earnings growth -- of 8%. and most importantly, although in the fourth quarter we had some modest declines, we delivered in terms of performance.

we protected the capital of our limited partners, generated positive performance in real estate in particular, and that was a reflection of where we deployed capital. when you allocate capital to the right places you can overcome a challenging environment. if you focus on travel and travel-related assets, energy, floating-rate credit, logistics, and rental housing and real estate, want and macro headphones, that made a difference. when we get these headwinds behind us, i think the good news is the inflation pressure seems to be abating and the 10 year treasury moving down. the biggest headwind has been on multiples. goods sectors have performed well. the pressure has been on multiples. some of that pressure seems to be going away now. sonali: we are well into this year, so how are you positioning blackstone to capitalize on the market of today? jon: the great thing about our

business is, because investors have so much confidence in us have allocated $226 billion to us last year. you mentioned nearly trillion dollars of assets. we have 187 billion dollars of dry powder. what we are looking for right now are the most compelling opportunities. i would say private credit, very interesting. base rates are up, spreads are wider. you get paid equity-like returns for being a lender, in corporate credit, real estate credit. i think there are also companies out there that may not be defaulting. default rates remain very low, but may need some capital. our tactical opportunities business can help them with some structured preferred act need to help them get through a tough patch. then i think the public markets and in some of the sectors where there are big trade-offs in technology, in real estate, it will be opportunities to buy some good businesses that are

trading at what we think of as attractive prices. lisa: let's talk about the opportunity of the past and whether it continues going forward. i know a single-family home was a big point of play for blackstone. is it still? jon: i think the single-family space was very favorable coming out of the financial crisis, because new construction fell, home prices were at discounts. we continue to like housing generally because there is a shortage. we have been under-building housing, about half what we need relative to obsolescence and population growth, really since the financial crisis. i think you have to draw a distinction between for sale housing driven by mortgage rates , and homes that are rented out where there is still upper pressure on rental rates, albeit slower than last year. i think it is still a good long-term area. obviously the housing market

faces some challenges, and rental housing is much stronger. lisa: perhaps for a whole situation, i'm wondering given the auctions that people talked about, that used to be bought up by institutional investors without it really even getting an open house, are those days over? jon: the market is definitely cooler. cost of financing has gone up. and that has resulted in, you know, an adjustment happening with prices. that is happening across private markets. i do think it will not be as heated as you describe going forward. but as an asset class i think selectively single-family for rent is interesting, but it is worth noting it is a tiny piece of the overall u.s. housing stock. i think it represents less than 1%. it is not a key driver. with some of these large companies can operate and deliver customers an opportunity to live in a community at a reasonable cost. sonali: i want to jump in the

whale in the room, this interval find you have tied to the real estate sector that has certain pressures on it. i'm wondering, you have this extra $5 million that the university of california had given you. how much of this is to read and -- to meet new redemption requests, and when did the redemptions stop? jon: breet is something we are proud of. it was started to give individual investors access to private real estate. it has delivered 12.5% annual returns over that period. more than three times the public right market. it has happened because we focused in the right sectors, in rental housing, in logistics. huge concentration in the sunbelt, places like texas and florida. and we have delivered for customers. there have been some elevated redemptions. it happened over the summer. then there has been what i

describe as a challenging media cycle, sort of relentlessly negative news focused on redemptions. and we got this large investment, now $4.5 billion, that really affirms the quality of the portfolio and its outlook. they have a structure with us that gives them some protection on the downside, but they made this investment because they believe in the quality of the properties. i would say one other thing. what we found fascinating was that the focus is all about float. it reminds me a little bit of a sporting event, where people are focused on how many fans are in the stands. they are not looking at what is happening on the playing field. yesterday we announced that estimated same-store cash flow growth was 13%. that is really powerful. the press is not focused on that. that is what we are focused on, because if we deliver for the

underlying customers the flows will take care of themselves over time. sonali: i want to put this in context here because there has been this huge move to private markets. but your stock took a 43% hit last year. it is back up this year, but how do you play against your peers here when you look at the investments you are going to make this year? are you slowing hiring? do you have to pull back in a meaningful way, given what the environment looks like? jon: the underlying trends in our business remain incredibly strong. the fact that we grew aum 11% in this difficult environment. we are seeing growth with our drawdown funds. we have $150 billion as a target. we are going to say on our earnings call today that we have raised $100 billion of that for our drawdown funds. we have very fast growth in our insurance segment. our institutional vehicles like

infrastructure continue to grow. and in the individual investor area private wealth, which you focus on, we were up significantly. we were up 25% in assets for the year. as a result of that, to your question, we will hire more people, but at a slower rate than we did in 2022. lisa: is this the beginning of the end of the peak, the heyday of private equity delivering 15% returns? are we entering a slower grind that is perhaps more back to reality? jon: we have been hearing this now for nearly 40 years since we started investing in private markets. every time there is a downturn there is a sense that the era is over, that private markets can't deliver. and yet we have had a durable premium across the board in our funds. it is the reason we have continued to grow. we feel like in downturns that tends to expand. our confidence in our ability to

deploy capital, also add value to the assets with our teams, is as high as ever. obviously if the market is tougher that makes it harder, but i think the premium return we can deliver to customers, that continues to exist. that is really the fundamental value proposition for us. sonali: on one hand i know you have to prepare for all scenarios, if you have to calculate your worst-case scenario, what are you preparing for as far as how bad things could get this year? jon: i think the good news is the really bad and a big challenging risk was a wage-price spiral in inflation. it appears based on what market data is saying and what we are seeing in our portfolio companies, that is not happening. commodity costs, shipping costs are coming down. the labor market is starting to cool. we have one third less job

vacancies and our company. wages, which had been running at 7% last year are now down to 5.8%. so, inflation coming down takes off the biggest risk. i think the main risk that exists is the economy decelerating as a result of this fed policy. i think we are going to take rates up into the low 5%, hold it there for a while, and that medicine takes a while to work through the system. i think a sort of cumulative deceleration is probably the biggest risk, but i would say when i compare this to 2008, 2009, and we had access in housing, access in commercial real estate, access in the financial industry, just don't have that. our estimation is things are going to slow, but i do not think it is going to be one of those worst-case scenarios. lisa: jonathan gray of blackstone, thank you so much for being with us. honestly this is the question, does the fed get to the low 5%

in terms of the terminal fed funds rate given the data that shows resilience? not this tapering off a lot of people are talking about. tom: i would point out there are a lot of other people not in financial instruments that are feeling the same way. it has really picked up. lisa: at what point does the reality pushback? tom: futures up 22. dow futures up smartly. the nasdaq really on a roll. jon is in my ear, saying give the percentage move. yields higher. this is a real luxury with 6.5 minutes here to talk to michael mckee about all of the work he does, the papers he piles through, the detail he does that i don't. about a fully-employed america. he and i know if you look at the claims statistics, mckee 101 is, it is a fully employed america.

but it's not, is it? mike: all we have had lately are these announcements, particularly from tech companies and financials that they are cutting thousands of jobs. yet jobless claims are only at 186,000. how can that be? there are a couple of reasons. this time i'm not even going to cite seasonal adjustment problems. the first and biggest reason is they may not have taken place already. companies are required to give employees 60 days morning with what is called a notice of impending mass layoffs. google, for example, announced 12,000 layoffs this month, but it'swarn notice -- it's warn notice said layoffs will not begin until april. tom: is that the envelope i have at home on the kitchen? mike: yes, but the good news is chipotle is hiring. we are not going to see a rise of people are not getting laid off yet. that could push unemployment up

later in the year. whatever cut means people are losing a job, because companies may not fill currently opening -- currently open jobs, or employees that already made plans to leave. not all of the job cuts are in the united states. 3m, job cuts, but globally. they may find new jobs quickly and they are not even getting the jobless claims because they have some severance they are going to live on in between. no question with interest rates rising, we should see more people lose their jobs. we should. economists surveyed by bloomberg forecast that unemployment will rise to 4.8% by the end of the year. that would be more than 1.8 million jobs. lisa: i'm going to ask a sacrilegious question. is this data reliable? is this a bit distorted from some of the leading indicators that we are getting? mike: you could use that as a fifth reason. there are some concerns about

the way states are processing claims. they got overwhelmed during the pandemic and some of their systems are old and antiquated. saw a lot of fraud before. that pushed up claims numbers, so it is hard to state this is totally accurate, but it is the best we have at this point, and even if you are just looking at the trend, the trend is rather amazing. tom: i just looked at one of jonathan gray's apartments. i'm thinking of sliding into three bedrooms, three baths, $2300 a month. it is something completely outside the frame of reference of anybody sitting at this table. the unemployment rate in kansas is 2.2%. are we fully employed? mike: at this point we appear to be pretty much fully employed. by the fed's definition, which is 4% or above, we are more than fully employed. so we are below the number.

at this point the fed is looking at the fact that we are fully employed, that all of these people have jobs, and they are looking at the spinning possibilities, which we saw in gdp, and saying we have to do more. tom: the last time i suggested the neru number had validity i was wearing a neru suit. mike: the problem is what level of unemployment makes inflation go up? the problem is that is not a number you can observe in an -- in real time. tom: mckee is on fire. lisa: we were talking about rents in this component of inflation, and u.s. apartment rents rose 4.7 percent in december, which is the slowest pace going back to july 2021. and this is a huge deal. rents.com expects this may be declining on a year-by-year basis by the summer.

tom: bring up this banner here. this is so important. three bedrooms, three baths, 3002 in a $20 a month for a house in kansas. where we live, lisa, it is completely artificial. lisa: but it is catching up. if you look at the price increases they have happened much faster in the kansas' of the world and the new york city's of the world. at what point do you see the softening they are a disproportionate pace? it has been a motley picture. mike: the question for jay powell is going to be, are you seriously looking through the rental numbers? because it takes a long time to get into the price indexes. you look at the core pce for the quarter, 3.9%, that should be a reason to celebrate. it should be lower if you are looking at the numbers. tom: the market celebrates. we go to jon ferro in london with futures up 24. please stay with us. this is "bloomberg surveillance."

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jonathan: live from the city of london for our audience worldwide, how about that data? equity futures up .6% on the s&p. "the countdown to the open" starts now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: coming up, following jobless claims pushing back against the bloom. tech rallying in tesla rally after better-than-expected results. the white house