>> if you look at the economic data today, it is so significantly consistent with a downturn. >> stocks are in a wait and see mode. >> feels like anytime there is a part of the market that gets leadership, it cannot sustain it. >> the federal want to keep it soft. >> the fed is well ahead of other central banks. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning. jonathan ferro, lisa abramowicz, and tom keene. we are costumed, treating,

tricking. it is october -- the 31st today? halloween. i am going as yield curve control, is what we are trying to do. mrs. keene said, is that a diet? she wore black today. i went with a sort of gray motif. but it is inspired that you went as toxic brew. lisa: i was inspired. i had to dig deep to find it. but yield curve ambiguity -- i do not know what that means now. tom: jon going as the head of -- of the next head of chelsea football. maybe it was manchester. in the western world, we are looking at one thing. the act in japan. this is not funny. lisa: what did they do? created more ambiguity about

what 1% as a band was, increased their inflation forecasts for this year and the year after, then they put this out from governor wade up. uncertainty is -- from governor ueda. uncertainty is high. tom: they have to adapt what is out there, and it is a busted theory. we will be hearing a lot of this into the fed meeting. is it tomorrow? i am working the three day work week, so cut me some case. we will rebut the script here. we have to do that, with euro area third-quarter gdp -- the word is there. contracts. lisa: your area third-quarter gdp on it psychically dipped 0.1%, contracted -- eyro area -- euro-area third-quarter gdp

unexpectedly dipped 0.1%, contracted. this is good news for christine lagarde. tom: with the fed meeting and the imports of apples earnings, we will touch on that imports as well. lisa is buying all the macbooks for the fam. lisa: actually, i did have to go to the apple store. i will -- i've been giving you grief for your prognostication about apple, and i had to pay for all of these instruments and the things he had to get for it. it is the bank of apple. [laughter] tom: ferro just emailed in. he is not in brazil. i saw he just made it through immigration. lisa: from your cruise? tom: he might move to florida.

let's share data for you. green on the screen and more green on the screen as well. the vix at 19.35. two-year-10 year, 4. 82. we went to the real yield yet? it is giving me a nice number. dollar, and we go to the yen here. 151 dollar-yen, a weaker yen back 40 years. and euro-yen -- i want to slow the show down. i'm gasping here -- too many baby ruths. this is serious. we are making jokes, but this is his arming to global finance. lisa: i want to get a sense of what some of the important indicators are today. u.s. employment index, the

drumbeat to what we get friday. do we see disinflation of wages, especially after what we saw with the uaw the past couple of days? secretary of state antony blinken and secretary defense lloyd austin trying to argue for more money. the split between senate republicans and house republicans key, especially with the new house speaker. 29 companies reporting earnings today. before the bell, we hear from jetblue, caterpillar, pfizer -- the question over whether there was a bubble in health care ring the pandemic -- and amd. tom: trying to give you a smarter coverage on earnings, not only looking earnings but looking at revenue dynamics. we will look at that today, and of course, apple. right now, back in israel, oliver crook joins us for a brief. really distressing to see the headlines overnight.

can i state this morning, in new york, that there are battles in tunnels? oliver: well, it is a complicated question, because a lot of what is happening in the ground offensive, which we understand is expanding, is the israelis are not being transparent about what the mechanics of what is happening are. we have to watch closely from the idf and the comments they have made, and what they have said is they are continuing to expand around northern gaza, not just in one occasion but in a number of different locations. they say they have been killing dozens of fighters coming from tunnels, so you have to assume that will be part of their game plan there. they say more than a hundred thousand people fled to the north. this is part of the ground they laid bisecting gaza, focusing most of the fighting in the north. they also updated the hostage figure, 240. they say they recovered a

hostage, an israeli female soldier, who is in good health and good condition, and who they were able to get some intelligence from. but it is a new dimension to get new impetus for escalation. lisa: syria, lebanon, yemen our new friends, although they are not in extreme forms of writing it. how do you reconcile non-escalation with fighting in these places? oliver: this is the question. in syria, the israelis have been striking. so, too, have the americans. that is one place to look at. lebanon, we talked about a great deal. we talked a little bit less about the west bank, where we understand from sunday to monday, six palestinians were killed by israeli forces in terms of skirmishes, but a really important story about the skirmish in the southwest of saudi arabia, with yemen, the houthis, that killed four saudi

arabian soldiers. now there military is -- now their military is on high alert. tom: oliver crook in tel aviv, thank you so much for the early-morning brief here. now to consider the finance and investment of where you are into the fed meeting and eurozone. a portfolio manager for blackrock joins us now. you are beginning to write up a year-end report. it will be 17 pages. what do you do after page 2? i am fascinated how you construct a view forward to 2024. >> i hope it will not be 17 pages. no one will read that p of this has been an extraordinary year. it is not just the fact that we have seen a resilient economy, which we think will continue, has been the move in rates, rocket --

market resilience with the move in that rates, and success in a small group of companies that have defined the u.s. market much of 2023. tom: bill gross started in pimco a few years ago, literally clipping coupons. folks used to take a bond and cook the coupon, and you would get your interest payment. are we clipping the coupon forward 12 months, or are we total return? russ: i think it is part of a total return. we think about what we have been doing in the fund, we bought a lot of bonds of the last few years, bought a lot of credit in 2021 and 2022, when spreads were wide. we have been holding that. it is not the i think right now that you want to pile into any particular area, but looking at the short end of the curve,

there are opportunities. if you are thinking about building in a 6%, 7%, a percent yield in part of the portfolio, that gets you part of the way to the goal, and that is not and we have been able to do since before the financial crisis. it is a different way of thinking about the portfolio versus five years ago, when we will -- you were getting nothing on the front end of the bonds. lisa: how do you think about it in other places where growth is less certain? russ: we are still underweight bonds, underweight duration. that is partly a function of the fact that there is a lot of uncertainty about the fed, but the main concern on parts of the bond market, particularly the traditional part, is the premium you are getting. that is as much to do with the supply and changing demand dynamics as it does about inflation of the fled, so you -- of the fed, so you want to be

cautious on bonds. equity side, we are close to home, close to our benchmark. i do think you have an opportunity, if events do not erupt in the middle east, for a year-end rally. but right now, everything we are hearing is idiosyncratic risk. so taking your spot, looking for the part of the portfolio that align with long-term themes rather than just buying lots of stocks. lisa: you said something very interesting there, that this has more to do in the bond space with supply than it does inflation dynamics or growth, at least in the u.s. yesterday, we got a net our estimate from the treasury that was slightly lower than people were expecting. part of the reason people are saying you see a bit of a bid in bonds today, how much is that the entirety of the story behind the yield move we have seen in the u.s.? russ: i do not think it can attribute it to one factor, but you are right to point it out. it is an interesting story,

because five years ago, nobody was paying attention to these releases -- i should not say no one, but it was not moving markets. as you point out, this is likely to move markets going forward, because if you look at the move we have had, people worried about how much of a premium you need to open the long end of the curve. tom: is this a time for active management, or do you shelter out in passive portfolios index funds? russ: there is always a role for passive. by think this is an opportunity for act. i will go back to the fact the portfolio will probably look different than it did in the post gse world. in that world, you can take two allocations, u.s. equities and u.s. as, put them together, get remarkably better return. now, you need to think more about stock specific risk.

tom: thank you. russ costa rica -- russ ko esterich of blackrock. breaking news here, which was widely anticipated by ecb authorities. euro-area inflation to its lowest level in more than two years. the economy strength. i will editorialize and call that "stag-disinflation." lisa: what i find interesting is the euro is gaining versus the dollar on this report, which raises the question, what exactly are people looking for? are they looking for growth through invest in a currency, invest in a nation, or are they looking for just some sign inflation is coming off the boil? the fact that that took preeminence in terms of the response of markets was telling. tom: you had the brief today, the eci index, wages and

benefits combined, and i do not know what that number will be, but if you establish a disinflation vector in the wage package of america, that gets your attention. further disinflatoinay trends. lisa: wages have not really led through all of this. they actually picked up more over the past year than they had. what i find interesting is they continue to disinflate as much as people say, especially with the strike in detroit? tom: for global or street, take out the dollar. euro-yen standing over a span of 30 plus years. a 161 euro-yen. we will talk about that through "surveillance" this morning. on radio and television, this is bloomberg. ♪

>> how concerned are you that japanese buyers in particular,

big corporate debt buyers in the u.s., will pull back, especially with some of the adjustments we are expecting? >> we think the risk is moderate, but the return on head -- hedge spaces is not good, so we need to watch that, see if the flows on an unhedged basis continue. tom: andrew sheets always good, global head of credit research at morgan stanley with a piercing conversation yesterday. jon ferro on assignment. he is back in the country, good to see that we hope to get him here in the next couple of days. what are you going for halloween? lisa is going as a toxic bre. someone emailed asking you we trick-or-treat together? no, it's too much. you take manhattan. lisa: you take, what, brooklyn? how often do you go there? tom: i want a couple years ago.

the bridge was broken then as well. [laughter] the vix, 19.137. jon ferro highlighting the dow jones industrial average as a benchmark worth watching as well. the dollar flat. let's go through those levels. the yen, 151 rounded up here that is stunning on dollar-yen. the euro -- let's look at the chart of euro-yen. this is what the adults look at. or those of you, lost in translation, pick the maroon carpet. the euro-japanese yen is a depreciation of the yen of a stunning 40% from 2012. the dollar trade weighted, including all other indices, up 46%. dollar strength, as president trump used for screen about.

we are living it now. a brief from mark mccormick at td securities. i want you to actually to our audience why a superstrong dollar from running 12 and a super -- from 2012 and a super weak yen is disturbing? mark: it shows the massive divergence in central banks. one of the things you can unpack as there are certain currencies that care about growth, certain currencies that care about commodities, certain currencies that care about different central-bank functions. the thing the yen cares about is the 10 year ports. the euro cares about the two-year point in the curve more than the 10 year. if you take the combination of what we had, and this is one of the most important things in fx, japan is also a massive importer of energy and other commodities. you take the commodity story and the rate fragile story, and take the aggressive bear steepening in u.s. curves this summer, and you have a tri-of things that

will weaken the yen. tom: to the trifecta, i mentioned this with vice chair clarida -- is that tomorrow? lisa: yes. tom: the fed meeting is tomorrow. my people just weaved me. i will echo what i talked to professor clarida about, which is something has to give here. when something gives, what is the instability our audience should be worried about? mark: in the context of the yen, it is the currency itself. there is an interesting policy mix, where fiscal policy is quite favorable in terms of growth. also inflation. the boj is expecting higher inflation to be more sticky than markets are looking for. they also basically said we do not have a cap anymore. it can go above 1%. i think they are trying to synchronize them a bit, which

have been u.s. yields rising, which would contain the weakness in the yen. but this is not a policy mix that is coherent. it is no longer sustainable. a big thing is chain -- things will change, change up properly. but the move we had overnight, where there is no longer a 1% cap, is quite a significant change, but it will take time for this to work through the market. again, the thing that needs to break is yields need to be higher, yet needs to be stronger. it is just going to take more time, because we need to see a peak in the u.s. yields story, which is not even about the fed anymore, it is more about supply and demand or 10 year bonds. lisa: this is a big mismatch -- mishmash. do you have a sense of what the response from the bank of japan is, what they are looking at? we were talking about some of the capacity -- opacity they put forward. mark: obviously, most central banks, it is common language at

this point. they care more about currency movements. the yen has not been as volatile. the report came out this morning, they did not intervene last month. i do not think there is a redline, per se. they are doing what everyone in the market is doing. they are very confused about the drivers, confused about the actual themes in the market. fx has become challenging for many people. the line in the sand is loose fiscal policy, loose monetary policy, the weakest currency on record, it deviated from longer-term models by magnitudes. so what you are looking for is the pressure points that will cause these things to break. a big part of it is u.s. data needs to rollover, u.s. yields need to come down a little bit, and the boj, one thing we are on a consensus on his we are looking for them -- right around

the way to negotiations, we suited -- we should see higher wages. as a result of higher wages and higher nominal rates coming up, we should see real rates in japan move substantially in their favor versus the u.s. next year. lisa: there is a question of slowly or all at once, and you are saying it will be all at once at some point. how disruptive is this going to be at a time when so many people are talking about japanese flows suppressing yields globally and keeping things a little bit more in sync? mark: that is a big component, because, since the summer, since the boj opened up the yield curve control, the suppression they had on it, we have seen term premium rise across the world, u.s. 10 year rise, so there is a blowback happening slowly behind the scenes. a lot of people make the point that the 10 year yield has now advanced above fed x vacations for 2024, above u.s. data

trends. it is no longer affecting the correlations we saw in july. i think the boj and the fact there moving out of it -- obviously, quantitative tightening is a component as well, but the boj has the ability to kickstart rises in u.s. yields as well. tom: i have to review this -- i did not do this. ring up that board. yen, 151. weak, weak yen. two year yield on above 0. 10 year yield almost 1%. i talked about this years ago. like, let's go to toronto dominion bank. you get up to 142 and it gets fixed. is that where we are heading, where the system just fixes itself? mark: no, i think the system is quite dynamic. we brought on variations of if

and models, trying to understand what is going on in the market. the ins driving a weaker yen are fundamentally based. they make a lot of sense. the commodities story behind the scenes is important, especially from the hand over to last year, because it eliminates the trade surplus. that is fx. essentially everything we talk about everyday is trying to predict the balance of payments free. for the yen -- the balance of payments. before the end, nothing is stable. the dollar-yen should be 140 five, based on rate differentials and equities and risks. markets are looking for a trend to trade, and dollar-yen is the only thing that makes sense right now. tom: if you only understood half of that like i did, he is mark mccormick of td securities. can i talk about the greatest

act campaign ever? lisa: please. tom: i remember when halloween changed. it was kids, fun, all that. and the people out in colorado invented elvira, and now -- there's a survey of the three top things for halloween. kit kat bars -- duh -- m&m's -- peanuts is what i like -- and coors lite. think about it. coors beer changed a holiday in america. lisa: to take it from kids going around and getting a candidate to parents sitting there and getting drunk as they hand out candy, is that what you are saying? tom: i'm tom keene of "bloomberg surveillance." who's with me? the queen, lisa abramowicz. ♪

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tom: bloomberg surveillance. and they said is it really yield curve control? and i said yes. lisa: how has your outfit change for this. tom: yield curve control is good but i go is a japanese boy band and everyone understands what i am doing. it works out. futures at nine, we are under 20, and we have serious news.

i will try to get this before we go under surveillance. i'm sorry, everyone is fighting a last -- the last war and everyone is shifting attention. two macbooks in the last 24 hours. she ordered the new toys. lisa: [laughter] let me tell you those are expensive and all the different plugs they charge for everything is expensive. tom: i'm here on bloomberg surveillance with the queen of halloween. lisa: operations in gaza are expended. a military spokesperson saying tanks and vehicles are moving through northern gaza looking for hamas and engaging with the combatants. this is as the humanitarian crisis versus -- worsens. more aid will be allowed into through -- in through egypt today.

the humanitarian catastrophe is deeply upsetting. it is something we are watching unfold in real time, in pictures, on social media, and a lot of it has been cut out. and there's been a loss of electricity. there is a -- opacity about what the situation on the ground looks like. tom: and i read every word of robert gates a secretary cia in -- we talk about that later. but the immediacy of what you think i think and everyone thinks and expanding into to a broader frontier and more, it is what oliver crick said about yemen and saudi arabia overnight. lisa: we will follow this story for quite a while. the bank of japan easing its grip on long-term government bond yields in a modest tweak. it says it will take a easing

approach on yields. they say the previous level is a reference point. whatever that means. they declined against the dollar b expected more. you do see the 10 year yield climbing significantly. tom: do they have dots? lisa: it would be impressionistic dots experience. tom: the yen is an experience. i don't -- lisa: to that point we do have dots their inflation forecasts this year, next year, and the one after. you see core inflation climbing for the target for 2023 and 20 24, but not 2025. it will be interesting to see how this moves into other markets. tom: what else do you have? lisa: x, formerly twitter, it is valued less than half of what must paid for it.

this is largely due to loser content safety rules. the plan is to move away from advertising and have paid subscriptions. but less than 1% of users signed up for the monthly premium service. there's a lot of debt tied to this, but it also used to be the town hall where people would voice their opinions, concerns, news. tom: get the surveillance card out and put it out. lisa: i'm curious to see what you have to say. tom: no you don't because i will go in the timeout chair. just shut up tom. let's move from twitter and go to the other banks and editorialize quickly. you have earnings coming out. jetblue craters like other airlines caterpillar up 3%. caterpillar with a nice pop pr of industrial american -- pop pr of industrial american.

jetblue does not have pricing power. period. lisa: they reduce their forecast. and they also saw a bigger adjusted loss per share in the third quarter of $.39 versus $.28. but how much of this is domestic versus international? with what we see with oil prices, and fixed costs, how much is this in general people getting it out of their system. it is done and their experience has not gotten better. it has gotten worse. tom: another figure is to talk about industrial america -- employees at caterpillar. the cfa is widely followed because of level 1 cfa. you tear apart john deere and caterpillars accounting statements. 2.42 out to 2.50 here. if you look at the profit

margins for caterpillar it is terrible. they are dropping things on your toes and it hurts. they are making $.22 per dollar and then the net income is double for in 15%. this company is making money. lisa: there's a lot of questions such as the video credit -- idiosyncratic story. why they are doing well and would there is the question of services inflation, is it cooling a little bit? are we seeing a re-inflation of goods as people go back to stuff and build stuff. that will be interesting. tom: there's goods and then services to worry about. maybe in europe it is a different story. we get an update from chief economist and head of research. joe, happy to have you on with us. how happy is christine lagarde this morning?

joe: she probably feels vindicated because she was cautious last week. and i think she changed tone more than what could be expected. and the salute of data we have is confirming this and that we need to be cautious. we have reducing inflation, disinflation has been confirmed. it is not about headline but also core. and unfortunately this comes with the price and the price for disinflation is the economy not doing well. we had a small contraction in gdp. and i do not know if the hawks were vocal at the meeting last week with the cautious line from the ecb is supported. tom: tell us the relative dynamism to still from ned phelps of columbia tell us about dynamic america in europe and may be less dynamic where lagarde has fewer degrees of freedom to move with

disinflation. with what i am calling this morning stag-disinflation. with that does she have fewer choices forward? gilles: this comes with a steep decision in the euro. that is the particular challenge for the euro zone which is a more open economy than the u.s.. if you're a central bank and you see your credit function is falling and the economy is softening faster than the u.s., you may be tempted to say not now, but may be 2024 i will cut faster than the fed. the problem if you do that is you will enter the trigger for depreciation of currency. in fuel imported inflation through the core. that is the significant issue for the ecb. there's another problem which i think is the governing council

is not ready to contemplate a change of stance. there is a group of hawks that are not now clamoring for more tightening but will probably resist a quick change of stance. arguing the ecb is being too slow to react to the insurgent inflation. my impression is with the fed, the consensus is probably higher with the fomc. there are nuances, but there seems to be a stronger consensus. lisa: you say europe is paying the place for disinflation. it does not seem like the u.s. is paying for it. it does not seem real because of that. is the disinflation more transitory in the u.s. than europe? will we see a greater chance of

inflation in the u.s. because we are not paying the price for the pace of slower inflation? gilles: for sure this resilience is one of the industries reasons for the resiliency. the collection of data is obvious. there's more than one key issue that the u.s. has, but they still have no sense about the labor market if it is really landing. wage growth seems to have -- lending. wage growth seems to have slowed down. it is a relief, there is so much creation that can be excused for being a hawk at the fed right now saying we are definitely not in the market for cutting rates anytime soon. and yes they will have high charter. i think the situation is different in europe. we will watch what we should've expected all the time. when you bring interest rates

and currency rates to what is twice now, what is estimated to be the future in europe triggers pain. the pain is a pain to see. it is not all because of monetary policy, we have weakness and the legacy of the energy shock we had a year ago. it has nothing to do with monetary policy, but it is not helping. lisa: i wonder what is driving borrowing costs, is it banks or something else? with the u.s. yields were lower even with the bank of japan tweaks around the edges. people pointing to the refinancing agreement and the fact the treasury department is coming at a little below estimates and how much they have to borrow in the third quarter. how much is this the whole story right now in terms of the incremental gain or decline when it comes to borrowing costs in the u.s.? gilles: honestly we have had a lot of focus in the last few weeks. to me it seems to be pretty

technical and it seems that every time the u.s. gets close to the five cent it is like a threshold when it comes to the 10 year yield and it triggers a rally in the market and things improved a bit and then you have the news around the environment -- requirement and may be the treasury is going to be falling -- on the long end of the curve may explain it. i am actually from the fundamental point of view i am interested in the current debate on the neutral rate where the neutral rate is in the u.s. right now. it is fairly easy in the u.s. to build a case for the right having risen. in the resilience of the u.s. economy in the current tightening would be one of the pieces of evidence toward this. you do not have that evidence at all in europe. and that problem as usual i would say it is lowered contagion. there is no reason why the yields should be as high as they

are. we are getting some contagion from the u.s.. tom: thank you. we greatly appreciate that. shocking news in europe as we see disinflation and contraction as well. this is the heart of the matter. i see it in those like ice the last -- i see it in the last 72 hours, the restriction away from the actual mike mckee data. we are talking 5% or so and adults are looking at how the markets have moved and you throw 200 bps on there and it is a 700% that policy right now not 5% because of a -- 7% policy of right now and not 5%. lisa: and the constriction is bleeding over into credit. you see strands widening out. and the potential that companies will have a weaker business

model if they have to pay that much higher borrowing costs. tom: we will have to see on that but i want to go back to japanese yen and remove for some of those not part of wall street, we are getting up to speed of what is going on. we have two currency pairs, dollar-yen which was 95 and it is at 151 rounded up. it is weaker. and euro-yen is what the pros look at a stunning 161. -- 1.61. coming up on japan damian sassower will join us on bloomberg intelligence. the television star, damian sassower will join us. he is like, you know, it is like saying see you, tom. this is bloomberg, good morning. ♪

>> what we try to stress is not

that china is unclear -- on investable but you cannot invest like you did 10-5 years ago -- 5-10 years ago. they invest in their big tech companies. they were used to collecting dividends and watch that go up. that area is over. tom: smartest guy on the block. leland miller on china and i cannot say enough about the gentleman from the university of virginia. he is an encyclopedia on the granularity of china. it was good to get that brief as well. you may have noticed, is japan and emerging-market this morning? tom: maybe the opposite lisa: -- maybe the opposite with they wear -- what they are experiencing. with the latest data out of china we are signaling massive weakness in the nation's economy

with manufacturing and nonmanufacturing pmi's for october falling below estimates and down a month earlier. this has been the question, how weaker they? damien, i have not seen you in a long time. damian: happy. are you sick of me yet? lisa: it is a toxic brew, but from your vantage point how weak is the economy? damian: we knew china would have a week number. we had the meeting at the beginning of october but manufacturing pmi is back in a contraction and slipping back into weakness. it is a big deal. on the small firm sign -- decide which is responsible for most of the employment it is weak. a contraction. we expect five point 2% gdp growth this year 4.5% in 2024 and a rate cut by the end of the year. lisa: does this matter if the

question has not been how weak is the economy or how much firepower the chinese economy will put behind it? is that the question after they make moves and some people say maybe not enough? damian: we talked about this yesterday. lisa: we did? damian: dear and this is unprecedented. the fact is they will cut rates in order to smooth out liquidity in the market and digest the debt they have to issue to fund back. it will be an interesting -- find that. it will be an interesting year in japanese currency. some of the measures, sorry to cut you off, but i have to say the boj -- it was priced in by the market. $155-yen, you see the market

already bringing it back a bit. the levels are low in japan and rate differentials are wide compared to europe and the u.s.. tom: i want you to explain with how you make money in the damian sassower world with currency depreciation. if you were president now, he would be excited about the strong dollar right now. i've got fx depreciation in the e.m. like indonesia. you pick a country better than me. what in gods name does it do to my e.m. total return? damian: total return is exactly the point. spot is moving in the currency itself. it reflects the theme of the day may be growth, inflation or what have you. and then we have the interest rate return. that is key. you go to places like japan, china, and they have tended to be good funding currencies relative to the high yield in brazil, colombia.

i use both of those economies this because colombia has a policy rate today. 13.2%. tom: ok stop there. this is why we have damien on even when i am not here. what are they do besides call one 800 -- help us. ? what is the choice there. -- help us? what is the choice there? damian: it is liquid and once you're in the economy clipping the coupon getting out is not as easy. tom: you are addicted to it. damian: you cannot sell your colombian peso and get your dollars back. it takes time it takes days to pull your money out and in that time you can move the market considerably. tom: ok pick the date 1992,

1994, are we getting narrow point where -- near a point where there's not enough oil in the engine to make that go. damian: he's been reading my research because this reminds me of the mid-90's period. tom: it does. damian: currencies have been devalued by 50%. we do not feel it yet. this reminds me of the mid-90's but we are not as close to it as we were in the mid 90's when asia got the rollover, but it does feel to me to be quite similar. lisa: is there long-term capital management? if you go to the mid-1990's and talk about something breaking, always the glue. he was basically leaving it off. damian: i don't like to think so. i never said that.

there are big firms out there better not your traditional hedge funds, banks, players -- there could be pockets of the distress that bubbled to the surface when things get tight. i think what we see in cross asset volatility is that market valuations are responding to tightening financial conditions. if you look at rightful it is trading at a premium relative to equity volatility. lisa: we were trying to pinpoint what could break when the yield curve goes up. now we talk about the potential for the economic growth and the engine for china rolling over. the former fed governor new is stellar for -- who is colorful with his words he said recently if you would have told me the fit would hike this much in this short of a time -- are you

saying they are just taking longer? damian: cinnati bell is a rate company -- citadel is a great company. i just got a vision of him calling me -- but there are investors in this environment. lisa: when you talk about the emerging-market complex and the fragility's they are seeing did they look again to what people are expecting when you raise rates by 500 basis points in less than two years. damian: i think soap years have been calling for it in a while. you cannot invest in e.m. local until the u.s. cuts. the u.s. is on hold for longer. that is expanding by the minute. they've given up so much performance in the last month. tom: robert mundell said that they should dollarized but

should argentina dollarized? damian: date -- they can't. they do not have enough dollars in the system. tom: they don't have a wealth. they don't have the balance sheet. when people say the united states is poor, it is about wet -- it is about wealth. strange word. damian: you look at domestic households in japan, they are funding a local currency and investing abroad have little trading accounts where they are buying dollars, indonesian rubio, and their personal accounts. the volumes are exploding for some time now and that is indicative of what is going on in japan. it's embedded in the sentiment and how households operate and invest their money. tom: the distinction is that people of japan and other

nations are wealthy versus argentina does not have underlying wells in dollar. damian: that is correct the economy would cease to function if they tried to dollarized. i don't know how they would do that. we have a big election coming up in argentina. it also looks like it may be sergio masa again. tom: your big buns with ken griffith. did you go to disneyland in tokyo? damian: i did not. i will definitely not get the invite next year. no, not today. tom: every day with damien i feel like i am on the view. lisa: oh my god. next halloween. tom: thank you please come by tomorrow. damian sassower brilliant on emerging markets.

he's with bloomberg intelligence. markets on the move futures up 9%. emily rolen of boston next. ♪ ...before you even step inside? ♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines.

>> if you look at the economic data today it is significantly consistent with the downturn. >> stocks are in a weakness mode. >> when the market gets leadership it cannot sustain it for long. >> the fed is well ahead of this. >> this is bloomberg surveillance with tom keene,

jonathan ferro and these are our bronwyn's -- lisa abramowicz. tom: good morning. tom keene and lisa abramowicz on bloomberg tv and radio. it is halloween. we see from japan from global wall street this morning the yen moves. and i got a 161 -- 1.61 euro yen. the dollar-yen is 1.51. it is far away but it is not in matters. lisa: japan was one of the biggest buyers in u.s. securities. if they pull out of the market and get yield that will make a big difference. suddenly they can get yield you get almost 1% in the japanese 10 year. it is a market. tom: and we look at the narrative what blair at 6:00 a.m..

the dish inflationary -- disinflationary trend in place for the year it -- euro. maybe a contraction like we saw in germany. lisa: we saw a contraction in the third quarter expected it to be flat. we saw disinflation. to me it was a big takeaway. people know european economies are not doing great but disinflation with consumer prices coming in increasing at 2.9% versus 1.3% moved the market. tom: and last night. lisa hung on this every word, apple, let's go to the store before work at 3 a.m.. lisa: [laughter] tom: the three macbooks you bought will not be in the earnings this time around but we have surprises in their jetblue and caterpillar. what do you think? lisa: caterpillar came out

better than expected in the shares are off we have to understand what is behind that. with jetblue we understand they would be facing costs but with the magnitude of their costs came in as a surprise. the shares are down. tom: we will touch on that in surveillance this morning as well. we need a brief and we start this morning with what matters in america, strong jobs but wages the mystery. lisa: this week is about the labor market data and all its nuances. today people are pointing to 8:30 a.m. as one of a key data points this morning even with the other date of this week. we get the u.s. employment cost index. it gives you a sense of how much pace is increasing -- how much of the pace of increase. we see it slowing but we need to

see it come down so that others stop worrying. tom: and we see the chart on tv. it has a ways to go before we get back to pre-pandemic. lisa: this is something people are watching closely. on the geopolitical front we hear from antony blinken and wade lost on -- lloyd austin they will testify before the senate. it will be interesting to see how they try to get them to jawbone the house. so far the proposal is a no go from the house and senate. tom: and i'm looking forward to anne-marie joining us in about 12 minutes here. amh on washington does a multi-front war and to me that is away from the humanitarian agony. the multi-front of this.

it is really something. lisa: and how the u.s. passes $105 billion of spending when there is a concern about the deficit and the financing for it. tom: i love to front run this. she spends hours with her interns putting this together and to get in front of our earnings and crush you as you talk about jetblue, power -- caterpillar, and pfizer, help us with the further earnings report. lisa: i'm just crush. i'm just crying inside. no actually i'm happy. there's s&p 500 companies reporting about that. halfway through. i'm most interested in pfizer and amd. you did not steal my thunder. i wonder how much they got a boost from the pandemic that is now fading. tom: so they are back to normal. lisa: are they? with amd and the chips, is

everyone buying a new complete -- computer? some are getting sicker shock where they buy their hardware. tom: apple theoretically in the last couple hours. you have some when you need to call on this. lisa: [laughter] tom: right now she pulled a short straw. worst child abuse on halloween. emily rolen of the john hancock company eight her kids go as red sox players for halloween. this is abuse they were so bad this year. you've got to do better, may be the bruins are doing better than good. emily rolen from boston on a halloween. what is your biggest fear out there aside from trick-or-treating in the market? emily: my fear is that we are in a scary movie right now but it

is not over yet. you think about the villain being wounded but not -- but still alive we have the fed raising interest rates in the shortest amount of time in the greatest extend in several decades. we have not felt the stain from that as far as consumers believe and earnings getting hit by that. profit margins crushed. we start running to the say part of the houses. we are getting chased by the villain but we need to remember the movie is not over. lisa: i am thinking about you at the sleepover with a bunch of 11-year-olds saying it is a scary house and the bond yield is coming to get you. at some point i'm wondering how much we are looking at a scenario where yields reached a peak and uncertainty lies. i keep harping on this but it lies with the debt financing and will begin tomorrow with the treasury department. what we got yesterday we are underwhelmed with the amount the u.s. would have to borrow.

that is what is leading yields lower this morning. emily: peers around supply have been key to the narrative around bond yield. it's not likely woke up one morning in the last few weeks and found out treasury will have to issue more debt. that has been known in. that is not the primary reason bond yields have picked up. it is an unrelenting strength of the economic data in the u.s. and fiscal spending has played a role in that. excess savings have played a role in 2020 one, but it has been the strength of the data. there's something really unusual happening in the bond market right now. when we are facing potentially the third consecutive year of negative returns for high quality bonds. dust never happened before in history. where looking at in environment where if this is done in july, it is unusual to see the 10 year treasury yield rise.

typically the 10 year peaks around the same time or just before the fed pauses. very unusual. and the elusive bear steepener. a dynamic that is not consistent with what we have seen in recent history. our view is that we could be closer to the peak in the yields. lisa: this does not sound like a scary story as gina martin adams was saying yesterday this speaks to a pain train of more -- pain trade of more momentum. because of yield is rising because of growth isn't that a good thing? emily: hours standards for growth have shifted a little bit but there is strength in the labor market. we all know that is liking data and the crack starforming. i think this week will be critical in terms of the jobs report friday. initial claims, we have to remember the data is subject to heavy revision.

we see a lot of kayaks in the consumer story emerging with headwinds out there. the resumption of student loans, credit card interest rates at 25%, auto loan 7%. mortgages over 8%. tom: ok part of a carefully managed portfolio is to look at three years or five years or when the red sox go below -- go above 500 again. people are scared stiff, how much cash in five x percent should they own versus reaching out 36 months? emily: i think the critical scary part about being in cash right now is you are subject to significant reinvestment. the normal relationship with the economic cycle in bond yields remarries as we head into the economic contraction next year. that environment you want to move out the curve and really be able to cash in the 5% or 6%

income that you see. and i we've been talking about this for a while with the significant by dislocation in the bond market but if you're in cash right now you may not get that next year. we have opportunity to log that in for years. i think we will look back on this as an incredible opportunity to unlock the value in bonds. tom: thank you emily low -- emily rolen joining us this morning. this is tangible in the fed meeting tomorrow. seven basis point on the 10 year yield with the weekly volatility maybe it is banded, but they are moving bonds and i'm watching the relentless move of intraday dollar-yen. we can show this on tv and it is a great chart on radio as well. and the answer is up, up we go. nobody is looking for a ¥49 this morning. lisa: even though there is a relaxation in the old curve

control. that could constrain inflation and allow the currency to normalize. on the flipside everyone is expecting this. and they are expecting that much more with respect to a guidance about taking greater actions from bank of japan. tom: will see what they will do overnight around 7 a.m. i don't know where pharaoh is this morning -- jonathan ferro is this morning but maybe he is watching. to me, i do not think the lagarde press conference a few days ago where we thought about euro disinflation. lisa: that will be good news for the ecb. we heard from joe moak, europe is taking pain as a result. the u.s. is not as much. tom: is it a live meeting tomorrow? lisa: the market is basically saying no. tom: we will have to see.

and the s&p 500 up .3%. lisa: i say i don't think it will be is because the market is inspecting them to stay on path -- expecting them to stay on path. there is no reason for a move unless there is surprising data coming to that. i don't know what that is is that still data-dependent or are they being driven by a wait and see mentality with the belief and the view that we will see disinflation over in europe. jonathan: november 1, december 13 or 15. january 31 of next year, to meetings out seems like a year away. how does anyone model a guesstimate of disinflation for january 31? lisa: i don't know. how do you model disinflation for the next year or month. it is a real question about how the long end of this curve is doing the work for it. i was looking at the bloomberg financial connection index. it has tracked material between

a tighter level. you see it more meaningfully as credit breads widen and long-term yield rises. how does this feed into equity that has been resilient, and the global sorry, this is a confusing group. next year i will do that for halloween. confusing brew. tom: we make the joke of toxic brew but is it with the vix at three? i do not think there should be a panic with the market. lisa: that is a fair assessment although equities are not expressing panic. but it depends on where you look. think about regional banks. tom: we will talk about small-cap. and coming up optimism on the market, with joe's -- john stole for us -- john with

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we will resigned them to the dust fed it is. that is my goal, the responsibility and what i am willing to do area tom: prime minister of israel, benjamin netanyahu has been active in the last 24 hours. good morning to all of your bloomberg surveillance, radio, and youtube and television. and we are focusing now on the currency market. a lot of action in the euro and japanese dynamics. 10 year yield seven basis points back and forth and back and forth. lisa, to set this up, i am surprised by the pictures of gaza, i am speaking as a complete amateur on this. it looks like syria from a complete devastation. there is no other way to put that. lisa: i agree with that entire

neighborhoods flattened. there's a question about when this will end, how far it will go, and what it will take to end this especially after hearing the prime minister's saying cease-fire will not end. both of you joining us now, oliver and anne-marie. what is this look like for israel as they go deeper into gaza? oliver: good question. we have heard the figures of how many hamas operatives, 30,000 potentially, how many of them will they be able to get and how debate -- how do you dismantle something that is an ideology. this is a question for many people as the ground invasion continues to get underway. with all the mounting rushers externally, we heard from the prime minister on the defensive both as the defense of the israeli nation and the actions in gaza where more than 8000 are dead running to the authorities

there. and defensive personally alluded to the soundbite that we heard that he as a journalist -- by a journalist you are losing support in israel how are you going to lead? and he said he does not -- the only thing he wants to resign is hamas. lisa: saudi arabia yesterday representative coming to meet with u.s. officials to talk through some of the issues with -- and others. do we have a sense of how some players are trying to negotiate and maneuver? annmarie: what is very apparent is most players want to avoid a regional conflict. they want to avoid what is going on with israel and hamas. that's why they call it the -- the crown prince is brother and the saudi defense minister was here in the capital yesterday. it also came at a moment at height -- on the southern border

they have been dealing with and they did deal with over the weekend with missiles coming over from the who these which are -- backed by israel. and what makes this incident more nerve-racking for the saudi's as opposed to previous incidents, i've been in saudi arabia myself where missiles came over. this is not new. before saudi's die in this incident. you can see there is phonetic diplomacy throughout the region. tremendous amount of phone calls a happening over the weekend and visits because most of the players especially in the arab world what to avoid a regional conflict. lisa: we keep thinking about hostages and the number goes up. i think the number currently is at 240 as there is more clarity and one person who was brought back to israel yesterday. what we know about how that complicates things not just with

logistics but on a political level with the families of the hostages? oliver: we mentioned a number of the pressures that the prime minister faces and one that we did not mention israel and that is precisely that. can this military campaign and the round invasion part of it does it jeopardize the safety of the hostages being held by hamas? the number continues to change as you said 240 as the number we got today and after there was one it was recaptured or somehow dislodged in gaza over the weekend. again, this is one of the many issues they were dealing with. one note we need to make every now and then is we do not know how many of the 240 are still alive and how many are just the bodies being held by hamas said the moment. tom: in the debate is the voice of robert gates, all can agree that his voice is important. the former defense secretary and the -- other roles.

his article in foreign affairs magazine is my read choice. it is an incredible intense essay of the dysfunctional superpowered, the dysfunctional beltway. is there a middle ground in washington that wants to get things done? annmarie: there is when you look at the center of both parties, they want to move forward, but when you talk about some of the paralysis we see in washington, we will see it in the next few weeks when it comes to aiding israel. right now what you see on thursday is mike johnson the new speaker put on the floor aid to israel but to balance that he will resend williams of dollars that have been in the inflation reduction act to go to the irs. what you hear from senate democrats is that this is dead on arrival. that is what patty murray said and the chair of the appropriations committee. and more importantly, mitch mcconnell yesterday was in

louisville at the university standing next to us on a mccarver the ukrainian ambassador for the united states. he's been staunch, forthright, emphatic about the fact it cannot be a just to israel it must be israel, ukraine, taiwan, and the southern border. you will see a mass amount of republican fighting on that in the next few days. tom: politicians have to educate america. does america want to be educated by those looking for an international washington or is it a new isolationism? annmarie: i think it depends on who you ask. what polls have showed since the invasion of ukraine is that while americans did at first support ukraine there have been more concerns about how long this conflict is going to last and how much money u.s. taxpayer money is being sent to ukraine without an end goal or end in

division for the conflict. the longer these conflicts drag on, the harder it is for politicians to sell them. the number one priority for americans right now if you look at every single hole is the economy. and then and it comes to the economy it is their concerns with inflation. tom: oliver we are tonight in the eastern mediterranean when things happen. should we look for in the israeli evening? oliver: what is interesting ever since i came back sunday, there's not been a single air raid siren in tel aviv or israel that i have heard which was a regular occurrence 2-3 times a day. this may be speaking to some of the depletions of resources hamas has in terms of longer-range missiles but what you're watching again is the same thing with the fear of

escalation. what does it actually mean? in the form of hezbollah, this is a 150,000 rockets that sit on the southern border of lebanon this is the trigger that we watch with a meaningful escalation. tom: thank you oliver and ann marie. and front running this, there has been a radical shift in four days. there's been a shift in terms of the expansion on some levels and the humanitarian crisis in gaza. also the question around where the balance of support is in the united states given some of the battles over how you deliver aid. it is a difficult moment to parse this incredibly polarizing around the world. tom: balance tonight we will drive this forward. a data check shows in vance and equity are market with features up at the 4200 level. and 14,400 on the nasdaq 100 up .2%.

and the dow jones leading the charge this morning. we've seen that with the vix at the 19.24 showing normalizing equities. the 10 year yield is 4.82%. and the 10 year is 2.3 9%. i see the amazing restrictive nature of the bloomberg financial conditions index. will they cut rates tomorrow? lisa: [laughter] they will not cut rates in the near future. and there is the question of if this moves away from the fed purview. tom: we will purview tomorrow. and richard clarida data is going to join us as well. and brent crude, i mention this morning $88 a barrel. sonja martin joining us next. ♪

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tom: bloomberg surveillance. jonathan ferro is on assignment as they say. it is the queen of halloween with us. she is known as toxic brew. and i have yield curve control. gina will join us in a moment. it is a -- we have historic moves -- on yen.

it is not as cookie-cutter as getting interventions. euro one is 659 off of stunning year dust 10659. -- 106 59. we look at movers. i suggest friday apple will be a mover. and right now jetblue this morning a mover, caterpillar a mover. they are very out looking with caterpillar lifting on the headlines and then they reversed on the up look. people looking forward. and they did not like what they see. lisa: order backlog is falling and that seems to be driving the action. the forward look more than anything else and jetblue forward look as revised

downwards with a big a selloff. with the stock move what i thought was interesting about caterpillar, listen to this line caterpillar as favorable site -- favorable prices and i guess basically they are raising up prices. tom: i have a caterpillar zamboni whether you have a lawnmower or bulldozer why is it different than that number to value meal at mcdonald's? lisa: there might be some differences between donald's and a caterpillar equipment. but we will save that for later. in the prime minister of israel accuse -- refused to accept responsibility for security losses leading up to the attacks by hamas. he vowed to fight hamas into the battle is won and calls for israel to surrender. i do not want to get into the

conflict as much as how this is in the market. the question of are we seeing escalation, yes we see that. we see fighting in places but is it something that will continue to cast depression over the whole world? in a -- humanitarian way, of course, but on the market level. tom: tbd is pretty important. and more than currency i would look at global oil prices $88 a barrel. that could change suddenly. lisa: were seeing a bit of the lift in gold. that's an area to watch. bank of america loosening its script -- it's grip, tom keene's favorite halloween costume of yield curve.

and the japan 10 year yield is below 1%. and surely they climbed at 1% right now. tom: we talked about the emotion for america as toyota being exported but it is also about the imports they have to bring in with a weaker end. of 40% depreciation over the last 11 years. they've been grinding, but can you imagine this discussion in america with a 40% depreciation of u.s. dollar? lisa: there's good inflation and bad. there's also inflation you have to deal with and you cannot ignore. you cannot have operational out stretches as it is called. at this point do we see that or are they not doing enough? the currency market is unimpressed seemingly. and a story we've been following with bonuses given to morgan

stanley ceos. they are offering $20 million of ceo candidates -- of awards to ceo candidates. they say it is more, then realized and they pay executives to stay whether it is because of compensation or culture. tom: i get this and we will talk about this with sonali basak but my take on this is that is why they are there. i mean every banker will say we will cut costs but our top 15% people we have to keep them this week and i believe these two characters are -- gorman really went after me the other day. these guys say or do they go? the executive chairman was all out of shape -- bit all out of shape, i'm not saying if they should stay or go but they will

not stay without compensation. lisa: in less they believe in the vision with andy saperstein, in particular, stiffed for the ceo job. i'm not saying that's how it was worn out, but it was one of the perceptions out there. they are basically bribing him to stick around for a little while. and you can totally agree, a lot of people would agree with that but mike mayo raising that question about governments. -- governance. tom: sonia martin joins us on foreign exchange monetary policy had at d -- ndc. what is your best trade in this turmoil and what do you do? sonja: it is interesting. we have seen weakening of the dollar of late. and we see a rise in the euro

again today in particular. -- i think the reaction of the market to be u.s. data last week is an important signal. we had strong qt, gdp reading, and yet the -- the market has priced in all of the good news and we are now primed for the downside disagreement. i think dollar weakness is what we will look at in the next few months. tom: what should we watch as the tea leaves that will signal the dollar we miss? sonja: it's going to have to be a clear sign that all the pressure points that are working on the u.s. economy, as you mentioned, interest rates are rising, mortgage rates, credit card debt is rising, credit card rates are rising. all about his with consumption. the u.s. household has been resilient i suspect because of the strong labor market but that will change.

when we look at signs of consumption, the consumer confidence is declining and that will be the signal. if you start to price in a weaker outlook for the u.s.. lisa: that's where i wanted to go. europe is taking the pain to get the disinflation that we saw today. it is not clear that the u.s. just dead. we have massive acceleration in gbp, the biggest into years, is that enough pain or lack thereof to continue disinflation? sonja: that is the problem for the fed. no one is expecting them to hike rates this week. but that is the problem. the economy and real fundamentals are surprising and inflation has come down but will like continue to decline? if it does not show signs of weakness soon, that would be a problem because the fed may find itself facing the lag off of the

high but it will remain too high and be a trigger for a while more rate hike before the year in. lisa: you mentioned no one is expecting the fed to raise hot -- hike rates tomorrow. good assessment but if they are data-dependent how high is the bar to hike at this point because the data has come in strong. in other words could we see something this week that could make you change your impression they will have to do more later? sonja: well, the best way to move forward for the fed tomorrow is to actually be relatively hawkish. they have to keep an eye on explict tatian's -- on expectations. when you look at household income it is still too high. and it is an impact from the oil prices situation. that could change and we have a strong labor market. it suggests that there is underlying inflation pressure in the economy. that is what i keeping -- what

i'm keeping an eye on for. tom: what you listen for tomorrow from jerome powell -- what will you listen for tomorrow from jerome powell? sonja: the key point is how he has read the latest strength in the u.s. economy. will he give any indication as to whether the fed believe there is round -- real downside risk from here? will he signal that the fed may still have to do more of what is necessary. there may still be more to come. that is the key. not much to say with the financial market. in the fed will hike will more time. in terms of yields are the dollar. but i think -- that is the key. tom: thank you so much. -- we draw your attention to the fed show tomorrow.

always a good lineup of guests, one of the guest will be jerome powell the chairman of the fed reserve. it is a 1:30 start and it will be interesting to engage in conversation scheduled with the former vice chairman with columbia richard -- richard clarida do. i had a panel with him the other day in it was great because there was no policy urgency to it but we wandered through the economic confusion with the heavyweight that claire that has. lisa: the confusion leads to a question about the fed if they will do more than expected. art of the debate right now underpinning the fed is how much is policy -- and how much are yields being driven by inflation and the economic both. how much is supply and demand? we see that also tomorrow. every funding announcement from the treasury. tom: what was great about

richard clarida data, we have the math on this. stay with us on this halloween. i will go as something better busier. -- next year. what surprised him at his tour of duty was the partial derivative, the taking big things and looking at the smaller dynamics in the many partial derivatives that he was not aware of the data making policy. tom: it's been a fascinating time with micro economies coming together to make a larger tour of economic momentum and inflation. are seeing those out in understanding how the policy pours into that. it is confusing. tom: that was our calculus for the day. jonathan ferro will email us and say enough of that. futures up .3%. lisa: gina martin adams ended

up yelling at me yesterday saying focus on apple it is all about margin and apple. we have a earnings report coming out, thursday, how much will it take center stage or not? there is a damper of punishment of stocks more than anything else. tom: and labor said this morning that 80% of earnings -- stocks that reported so far have beaten the plan but this is not really happen. lisa: outside of big tech, lori was saying yesterday that the russell 2000 has reached levels that we've not seen since november 2020. that is before we had a vaccine, before we had lockdowns, and she says the actual economics do not

justify that and the companies are not doing badly but they are coming around a bit. people still have a dramatic aversion to the risk. the question is do you go with sentiment or something more fundamental? it's kind of driving people bonkers because you have people that make a good argument but it will be wrong in market practice. tom: i'm looking at the bank index be kx right on the bottom of 2023. not bad compared to where we were in 2020. lisa: same story. there is pain out there but it is max -- masks to buy the boheme us. tom: and kids will be having fun today. because if all -- kids, be careful out there tonight. we will be right back on

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tentative agreement with gm, ford, and stellantis as being a very positive outcome of what can happen when parties really work in good faith and stay at the collective bargaining table. but we are seeing is faith -- good faith negotiations leading to workers getting the fair share of the gain in the industry in a time when american companies are really doing so well. lisa: allow brainerd -- that national economic council director. and i've got to suggest they've got to be happy. it is bloomberg surveillance. tom keene and lisa abramowicz. you know where they try to lift the balloons on central park the night before. i'm one that watches this, it is very cool i went over before you get -- where you can get close to the balloons.

lisa: and the crowd is kind of sectioned off. tom: but jonathan ferro is so into halloween. he came back from his crews but he said i am in preparation for my costume. lisa: we expect significant costume pictures. and when we talk about the auto manufacturers, it seems like a seven-week strike is largely over and you see stellantis shares up for example. even though they camp out this came out with earnings 3 billion euros stoppages. there were some concerns with the loss but not really to change anything. tom: before we go to gabriela coppola, real quick, to me the

news flow on ev over the last three or four weeks has been everyone that wants one has but one. now what? they need to get back to diesel and oil engines. lisa: and with workers getting their fair share in auto industry. and the second thing is how to u.s. companies remain competitive with the emphasis on electric vehicle action when consumers do not want them because they are out priced. there are competing goals and questions. is it wage or the other compensation like an offense, pension and other things? tom: we uncover this story with all the distractions. gabriella does not have that luxury out of dearborn, detroit she is up to speed on a big strike. how big is the strike?

gabriella: this was historic. it has never happened that they struck all three companies at once. it was a different strategy than in the past. they would just take one. they went with one automaker in the past and took out all the players. but this was almost a 45,000 people on strike would you -- when you at all the different plants on strike. tom: we have the bloomberg headline that gm reaches a tentative deal with uaw i guess it is ford, chrysler, not gm. is the strike over this morning? gabriella: where i think the leadership of the uaw and workers have to vote to ratify the agreement, so technically it is not over, but people are going back to work and i think for early reactions of the

workers who have seen this, they are overjoyed. people cannot believe what an incredible deal they got. there's really not, they did not get the inefficient pension back. i'm not saying it is perfect. there's some people that still lost a lot into thousand seven or 2009 and they want everything back and that will still be disappointing but overall it is pretty an incredible deal for people. way better than what they got in 2019 area lisa: there is a question about how much uaw has gotten support outside of the union. eu membership does not represent the bull of electric vehicle workers -- bulk of electric vehicle workers. how much this is give uaw cloud the negotiating for a broader swath of employees? gabriella: i think it gives them

the best shot they have had in a long time. it is not mean they will be successful, but they do have, the union was negotiating with the goal in mind. we were stories about the magic number where they wanted to be able to show at 30% wage increase which they basically got if you add the 25% plus the inflation adjustment they want. that is something they wanted to be able to bring to their car companies. especially in the bottom, the big issue for uaw workers is that since the financial crisis there were two tears and tip workers. the middle-class jobs that are kind of the stuff of political speeches and stuff like that only part of the workforce had that. and other people if you are a temp worker i met people in the pickup line started at 15 or 16 in our and they been in the temporary status for years. not getting the benefits of a

full-time worker. this deal brings those people out and i think that will be more attractive to temps if they abided toyota, volkswagen or tesla. lisa: what about u.s. auto manufacturers standpoint? there is a concern of how u.s. automakers welcome with china when it comes to electric vehicles? how concerned are people that that will be a setback with the agreement? gabriella: i would say i am personally very concerned about that with my knowledge as a reporter speaking with people in finance, audit consecutive's -- executives and things like that -- auto executives and things like that. and many on wall street are relieved that this is over and they knew they would have to pay up. i keep reminding people that over the past four years these people did not get any benefits. or they can only negotiate their previous contract.

while inflation was popping they were not getting those gains. i think they are relieved it is over. i think the concern, i think the companies are talking about how they offset the new labor costs in other ways. that is fine. that i would not put too much of this on uaw, with labor for all the automaker problems. certainly it makes it harder, but the tougher they get, they make combustion vehicles of a nice profit and then scale of vehicle production. if you do not get experience in working on all the kinks, -- tom: let me rip up the script here. our ev's dead with the last few weeks of the strike as we go into 2024, will we see a massive

adjustment in the american ev market? gabriella: i would say it is not dead, i think they are still growing but the growth is slowing. carmakers are pivoting to hybrids more because they've got to beat the strict emissions rules. i think gas is not that cheap it is still expensive. hybrids are popular and doing well, but there is no way ev's are dead. i feel like long this is the future. i was talking about this with somebody yesterday there's a lot of people asking what if the u.s. has gas cars and builds around that and we stick our heads in the sand and do not do ev because people do not want them and you cannot do that. and at another day that you weigh on that you hope it is getting better. lisa: you are to the lions raiders games last night in for field. and here she is on bloomberg this morning. gabriella: it was a great night for the lions.

tom: thank you for the detroit lions update. i watched a few minutes for michael barr. lisa: you are just basically doing a hat tip to michael barr. tom: it was 6-2. this was mack's first step in winning and the tots are in first place, primarily foot all, completely dropped out -- drummed out of the lions. and thanksgiving football. i can see the thanksgiving foot all at your house. the tv goes on at 11:00 a.m.. lisa: just goes all day long. tom: and then the cowboys? lisa: my family will more likely be out in the park and tackling each other. tom: frisbee or something. lisa: [laughter] playing ultimate frisbee. tom: i play frisbee when i was 17 and they said it was ok. lisa: i'm pretty bad it frisbee to be honest. tom: jonathan ferro you should

see him. lisa: he is in a set all sorts of things. tom: he is scary. john's office --stoltzfus will be joining us to discuss the market.

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♪ >> the problem is that the

market is losing confidence in any narrative. >> the fiscal support at both the federal and state level was reducing the odds of recession. starts the federal reserve needs to target growth that is under potential. >> we think the fed is getting very close to being finished at this point. >> we need to start having some very key conversation about whether the interest rate will be stable over time. my sense is that it will disconnect somewhat. announcer: this is bloomberg surveillance with tom keene jonathan ferro and lisa abramowicz. lisa: it's about the american paycheck. welcome back. jon is off exploring the apple store ahead of earnings on thursday and honestly, to me, we haven't talked enough about this. 30 minutes time, wages are very much in focus. tom: the jobs report after a fed meeting and the basic idea is what does it mean for wages? not only salary wages, but also benefits of all different indicators.

eci is the thing i look at the most. not 60,000 feet, but 25,000 feet. about that level. and what i am looking at here is what is the labor economy doing? we are going to get a lot of information on that. lisa: and how does it matter at a time when the fed is saying they are data-dependent but everyone has written off whether or not this is a live meeting and what is it going to take for them to raise rates further? tom: to me, that is the heart, melding the themes of the fed meeting. the basic idea here is that disinflationary is in place if you look it what we saw from the european union this morning. lisa: although we also saw the weakness in the european union with a contraction there. tom: what are you going to do, raise rates? literally borderline european austerity.

does that work? lisa: there is a big question about whether you need something of economic pain, weakness in order to drive disinflation or whether you can get both. a lot of it hinges on productivity. at the same time, we are looking at the economic data of companies and what we see time and again is they are able to raise prices and increase volume. we saw this with mcdonald's and with caterpillar. how much can you put together a big mac and a caterpillar back home? i don't know, but there is some sort of rhyming here outside of certain sectors like the airlines. tom: yeah, but the pricing power into a resilient american economy is the shock of 2023. i want to get out ahead and say what is the shock of 2024? a sobering look at caterpillar today, and then they pull it in as well. that is the outlook that maybe we need to adjust. lisa: was the outlook so bad, or

was it just that people were looking for weakness? what we heard yesterday is that the biggest pain trade is actually a rally. tom: i agree totally. leave the data check, the answer is futures up 10, no one is looking for vick 16, bics 15. no one is looking for what she is talking about. lisa: stocks have not been very volatile relative to bonds and that is one of the big conundrums, who is right with stocks looking forward and bonds, i don't know, bouncing around. the idea that you could have an eight basis point draw and that is not leading the coverage, which is sort of thinking it is more volatility. tom: precisely, more volatility within the market. what is so great about our guest? i'm going with yield curve control. george bunker and simon reinoehl

before mike bloomberg, we had bunker-ramose. bloomberg shows up, there was a guy who kicks footballs name charles koch elect. he says tom, there is this new machine. and i'm going, it is gorgeous compared to a bunker raymo. he is going is one of the old machines. lisa: i don't even know what that is. tom: before bloomberg. it was lousy compared to what you can do with bonds in the bloomberg. everyone knows bunker raymo. lisa: he actually had previously expanded his target earlier of 4900 at one point, then the s&p entered a technical correction and he lowered his year-end forecast for the s&p back 400, kind of where it was earlier this year from that 4900 mark. john stouffer's has been listening to this -- john

stoltzfus has been listening to this. how much are you basically saying we have run out of time to get to that 4900 mark? >> we had to right size the expectations. we always suggested that to investors as they considered what happens for markets. what we got to consider here is the calendar is telling us we are getting close to the year-end. the average rallies are positive. but it is smaller amounts and there is still a lot of uncertainty that bears and nervous investors and those who are skeptics can use data

-- >> give investors a prozac because frankly, there is a lot of optimism, they are just not seeing it. how much can you really hinge on fundamentals if the sentiment is so gloomy and prepared for the worst? >> the real problem is i think that when you are in the fed funds high cycle, it takes a while before the marketplace gets a sense that the fed is indeed not trying to destroy things and that the fed might actually succeed. the fed isn't infallible, but the fed has a remarkably simple mandate, essentially. stable economic growth with maximum employment. of course, a few weeks ago i think was the daily quote on the bloomberg was martin scorsese, and it was something like simple

is the best but it is the hardest to achieve. that is what happens on the fed fun high cycle. what happens is eventually, the marketplace -- and you can see it related to higher prices being accepted by consumers and business that you were just mentioned before, there is a sense that ok, we can deal with this now and we keep moving forward. the fed has been so sensitive in applying its mandate that it has not knocked apart the resilience in the consumer in business in the overall economy. tom: michael mckee out with a brilliant idea on the magnificent seven. steve mcqueen, charles bronson, robert vaughn, james coburn. they are the magnificent seven. what do you do with "the magnificent seven", is apple going to deliver here? if you are group got -- going gloomy, do you sell the big tech?

>> i'm not gloomy at all, this just more realistic from here to the end of the year to wait until we put a price target for next year. that will be later on. tom: no one is watching here. give me a number. can you pop a 5000 for next year? >> i've got compliance breathing down my neck, but when we look at this, we don't even see competition return in a lot of spaces. competition is when all of a sudden, you got everybody passing on the old higher prices, getting away with it and then some guy or gal in business discovers the idea of well, maybe if i give up a little of what i get in per unit cost, maybe i can make it up big time in volume. and that will happen across the sectors but in the meantime, tech is empowering everything.

today, corporations are doing better navigating very tough environments. whether it is the financial crisis, the pandemic, post-pandemic, the supply chain stabilization, getting away from one country's centricity in terms of a global supply chain. all of this technology is enabling a lot of things both for the consumer as well as the business, and it is a dramatic change. that, combined with sensitivity by the fed communication transparency that we think is the legacy that is still being practiced by jerome powell in his own way. lisa: i keep thinking the economy is not the stock market and this is not necessarily a stockmarket representative of the broader economy. that really is maybe the russell 2000 or the banking index, the regional banking index. does your optimism bleed over to small caps, to the kbw index?

>> not necessarily to the kbw yet, we've got to wait for the economy to show a greater sustainability going forward and not as many concerns in terms of commercial real estate and things like that. but what we would say is when we look at this picture, overall things are getting better. it is being led by the large caps but if we get to that point where we get to see the sustainability of the economic expansion of becoming predominant in the picture, you are going to want to own smalls and mid-caps and you will probably want to consider -- when you are market cap agnostic in some ways, our goal is beyond in the valuation are ridiculously low in many quality indices. tom: thank you so much, greatly

appreciate it. the graphic that lisa put up earlier is really profound about where people still are on an equity index. that gets us back to 4400, but you wonder if he is out front of the adjusting here what we will see from citigroup. lisa: we are running out of time, that is the bottom line. tom: it is just a date. what are you doing new year's eve? lisa: you want to hang out and go around trick-or-treating a few months late? tom: right now, up 11, up 3/10 of 1%. lisa: coming up, we are going to get an employment cost index and again, it sort of goes to this question, do fundamentals matter any time when people are feeling

gloomy to mark tom: thank you for the emailed. i mentioned charles, he was out of princeton and play for the redskins and the patriots and his brother, i'm going to say maybe more well-known was pete, and they get confused. they played one game years ago, 1966 where they kick extra points one at a time and between the two of them they scored 14 points in one game. i mean, the score was like 100-70 or whatever. but it is a little bit of football history. he was great. the first guy that introduced me to the bloomberg terminal. he showed it to me and said what does this mean? i said it means getting a field goal-traded is over. mike bloomberg is going to narrow the spread on bonds. lisa: it has been pretty wild to watch, especially because the tracking of the bond market has

been such a volatility over the past couple of months. again, to say stocks, and why is the vix not moving? volatility has not been in the stock market? that has been on mooring a lot of stock traders that want to just feel some sense of stability, and they are not getting it from the market that is supposed to be the deepest in the most liquid. tom: 60 is now the center tendency. did they do ok there? lisa: truly, this is the divergent that we see. bonds are more volatile than stocks, and this is new. tom: what is new is a fed meeting tomorrow and then apple earnings. good news in the equity markets two days in a row. it is bloomberg, good morning.

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closest friends. they are extraordinary leaders, they are to drive these businesses. >> a lot of questions here around ceo candidates, now they are going to be copresidents. how do you keep them around? >> they've got phenomenal job opportunities. these are phenomenal opportunities, they are high quality people these are some of the best jobs on the planet and we are delighted to have them. tom: james after he does his tom keene imitation, talking to sonali basak here if you days ago. lovely to have you here this morning. october 30 this year, hsbc, they are in hong kong and shanghai. hsbc sets aside $300 million extra for performance pay. i'm going to suggest in this uproar, everyone is doing this. am i wrong? lisa: the last couple of years

we have seen these extraordinary bonus rewards go to different executives at the biggest u.s. banks as well. something else is happening here, a couple years of really metered activity and therefore poor pay across all of wall street. what is happening at morgan stanley is more in line with what we saw over goldman and jp morgan where there were tens of millions of dollars in special awards handed out. by the way, often contested by shareholders but handed out to executives. tom: when they leave if they didn't get half this package? >> that is the $20 million question, isn't it. you are joking right before we set down for that interview, he was joking around with me saying there is nowhere to go, where is everyone going to go? these are some of the most amazing jobs in the world. tom: i.t. adapt. >> it is -- i teared up. >> if there is nowhere to go, what do you need a hand and $20

million for? lisa: and there is a potential war from some of these smaller upstarts, i'm thinking of a lot of the goldman sachs alums that were taken away from that whole unit. so there are all of these shop that started up especially if people want to feel like they are starting something new. the question is, is this something that people inside the firm feel like is an indictment of the culture, or is that making a mountain out of a mole hill? >> on one hand, these are promotions for these three men. one is becoming ceo, one is taking on another unit, and one is becoming copresident. so there are promotions. but on the other hand, you do see mike fighting back here saying does this say something about the firm's culture, that they need to keep them around via compensation rather than just the status quo. there are promotions in itself. the $20 million packages are

essentially the average that all three men get for a year, so it is $20 million on top of the $20 million that they would give or take get every year. lisa: i imagine it is going to be rough for them to swallow the pill of getting -- knocking ceo when they are giving so richly compensated but there is a large question about how to continue the culture after james gorman who was of a home for so long. is that a concern, extrapolating from some of these financial renumeration? >> of course it is, and it is a concern for morgan stanley and many other shops losing talent at this place in time as well. you think about some of the very closely-held talents that were at morgan stanley over the last several years. people that were close to ted pick. someone with kelly smith who is going to another hedge now that is starting up or even -- tom: he has got a job in europe. >> at a big competitor now.

tom: this is sonali basak's real house, folks. let's clear the air here. morgan stanley, 80,000 employees and a small nonprofitable upstart named apollo. 2500 employees. we talked to james in london. you telling me he doesn't want to hire one of these beasts from morgan stanley to jumpstart wealth management? >> the special awards at a place like apollo or some of these other private asset managers, they are like $200 million. tom: let's go there. that is the reality we're talking about. they've got 3000 bodies and he is going how do we get to 30,000 bodies? >> he has me roundup. one of the biggest question marks on wall street is what assembly like a scott cap nick have under his belt right now, because he started hps, one of the biggest private credit managers in the world. how is he going to create some

liquidity for himself in this massive private credit shop that is only taking more share? remember, this was a jp morgan employee once upon a time, a goldman employee once upon a time. how do these new firms keep creating employees? >> there used to be a hierarchy on wall street. you would go to the credit rating company first, get the information, get some skill under your belt, then you go to a big bank, then into a hedge fund a private credit shop. that with the trajectory of someone on the compensation scale. so now the question is, are they going to be more questions asked about the renumeration at some of these private equity and private firms that have gotten very big and are raising money and facing some interesting times to deliver returns and that a bank, if you can be safe and secure and make that kind of money, you will be challenged more, but it has that stability.

how much is this the equation that you hear people talking about? >> when jamie dimon and dana pinto's awards were contested by shareholders, it was a nonbinding vote, they got the money anyway. but to your point here, it worth drilling into that. private equity hedge funds, the performance this year is not what it was last year or even the year before that. so what happens? there is a sense in the market that there can be a much broader shakeout when you look at the private equity industry. i got a tip the other day that said look at all of the people losing their calendar because a private equity firm can see from the outside in and not the inside out. it takes a long time to figure out what the troubles are in this environment. bankruptcies are starting to mount, they are putting more equity into the companies and performance is shrinking year-over-year and the cost of leverage is going up. meanwhile, hedge funds have passed, they are asking investors for money. tom: do we see compensation headlines coming up toward the

end of the year to get the february bonus? >> they already are. we already see that coming out and that is paired with the culling. tom: i mean, i get it. lisa: that has been a little bit more than a culling. we are hearing about cuts being privately distributed under the hood. how much is this unequal distribution of wealth where you have the people of the top or dictate a lot more and people already cut on the bottom as ai takes over and everything in between? >> 1000% and you have executives at least privately making no bones about it. they know they need to do it because otherwise how are they going to keep the people around who are making that extra dollar for the bank? jonathan: are you going as a restrictive stock award for halloween? >> what does that look like? tom: a vast, you can wear a vest. >> i will go downstairs and put one on for the next segment.

tom: lisa in the gossip column this morning. lisa: these abstract concepts, someone in college went as a freudian slip and had a slip on with all these different sayings on it. just fantastic. moving on, the whole idea of what mike mayo is reaping, there are a lot of questions here which is how are they going to maintain a culture at a time where james gorman had such a crush on them? the question is does this be to a lack of commitment in some sort of inner passion? on the wall street, isn't it always someone about money? i did what he is saying, but i'm

sorry, this is the normal game, fair compensation. and then you go, we have to keep dominic constant or lisa --, on and on. lisa: one person who is much smarter than i who works in the recruiting field in wall street said the excess is not at the top, it is in the high-level middle where people are replaceable and are necessarily driving the culture. that is what you are seeing in the culling. two year yield, 5.01%. futures up 13. on israel, on hamas, aaron miller next.

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♪ tom: jonathan ferro, lisa abramowicz and tom keene. mr. ferro in costume preparation , we will have to see as well. i'm going as yield curve control. it is working out. right now, a lift to the market, futures up 13. better than good ability as well. michael mckee, with bated breath we wait to hear about his halloween costume, but first,

employee cost index. you care about that, don't you? >> we do, and this one kind of sneaks in under the radar. one really important number before the fed needs. the employment cost index comes in up 1.1%, higher than it was in the second quarter. the internet page is overwhelmed at the moment, so we don't have the breakdowns for wages and things like that, but i'll get that for you in just a second, we hope. but it does suggest that employment cost have stayed. let's see whether wages have gone down or not and benefits gone up, but the fed is looking to see continuing decline in wage gains. tom: we have michael mckee, vectors of disinflation in the e.u. this morning. is there a sense of disinflation in wages and benefits?

>> there has been if you look at pretty much all the measures, the average hourly earnings. if you look at the eci, even if you look at what we've got in the gdp income numbers. essentially, things have slowed down significantly. we were 4% to 5% for quite some time. now we are in the roughly 4% range for wage and salary gains. the fed wants to see maybe 3.5% but they are getting closer. lisa: so what we are seeing in markets is really nothing much. the euro fading a bit from some of the gains from earlier with a disinflation print out of the euro region, and what we are seeing right now is basically a shrugging off of yet another better-than-expected u.s. read on the economy, and this comes as canada's gdp is tracking back contractions in the second and third quarter. we could see a surprise contraction in the euro region. how long can the u.s. remain a loan shift in the storm around

the world continuing with strife and kind of disinflation, kind of not as much thought? >> if you have an answer to that, i have jay powell's phone number for you because he would like to know as well. we don't know. there are a lot of reasons you can argue why the u.s. has been doing much better than everybody. trace it back to pandemic aid. but how long can that last? nobody really knows at this point because things aren't working the way they used to. let me throw this in here just because we finally have it, compensation cost. wages and salaries up 4.6%. 5.1% for the year-over-year number. tom: that is a big number. >> benefit costs up 4.1%. so we are seeing some gains. private industry workers up 4.3%. compensation cost 4.5% for wages and salary. tom: you got to move immediately but that break down.

it was lower earlier. we are going to get back to the 30 year bond. we are not there yet. 4.97%. there is a bit of a surprise there of wage growth. >> a little halloween surprise. tom: what are we going as? >> 22 years ago today there was a murder. five years after that it came back to life. i'm going to go as the 30 year bond. tom: very good, a benchmark. >> which sets us up for your guest because he was around then and he remembers. that was a hollering to remember if you were in the bond market. tom: the dynamics year of moving from a benchmark 30 year in tighter to a tenure as well. stephen stanley joins us with santana or u.s. capitol markets. you are a claim for analysis of gdp.

how do bond market affect your analysis? >> i think the fed is overstating the importance of this little backup in bond yields that we've seen over the last month. as we talked about the last time i was here, i see it maybe as a little bit more of an excuse than a reason. i think they wanted to hold off and that provided them a convenient reason. financial conditions have tightened, but as you all discussed, the economy is still rolling at this point, so it is wishful thinking that the last 20 or 30 basis points on the bond yield. tom: i will go with this easy question. it is a cliche, but it is after right now. are they fighting the last war? >> i think it is too soon to say that. i assume what you're suggesting as well, inflation has already lifted. tom: i've got people saying the 5% reality overlay on the bond

market is 7% in the economy as well. are they working now in a restrictive million? >> i think policy is restrictive, but is it restrictive enough? until inflation really comes off, it is hard to say that. i think that is why at a minimum they are going to want to keep options open. they signaled another pause, but powell has certainly kept the door open to future heights. lisa: how long can the u.s. continue surprising to the upside with economic data and showing momentum at the same time that you see europe running into a session, canada coming out. around the world, a lot of pain. >> maybe not to be based -- over the glib, but basically forever. i think economists and particularly the fed has systematically over the years overestimated the importance of

the global economy for the u.s. economy. we are between 10% and 15% of the economy's trade. for most, it is 30% or 40%. lisa: i will challenge that in one way. i would love for you to push back if this is the case. people say the international transmission mechanism is the u.s. yield. it is how many international buyers are going to be coming in and picking at treasuries at a time of the bank of japan is not going to be buying, or not really going to be pushing investors out of that asset market, where you have certainly around the world yields going higher and china not buying. how much does supply chain's that narrative and create more of an international transmission mechanism than ever before? >> that is an interesting angle. i think the root of the problem is the fact that we are running such large deficits. if we had a smaller deficit, this wouldn't be so much of a problem, the fact that the

treasury has to borrow an extra $2.5 trillion per year, they need to demand anywhere they can get it. that actually does bring a good point which is that it feels like the international community has pulled back a little bit for various reasons, and that is part of it, a piece of white yields have backup recently. tom: pete ricketts twice today. the united states is a relatively closed economy. are we in economy of fiscal stimulus thinking of refunding all the other debates vs. europe and austerity stimulus? are we living a fiscal stimulus that makes us different? >> we don't have to worry necessarily about what is happening in europe as much as europe has to worry about what is happening in the united date and china.

we can stimulate the economy and we can run deficits for a lot longer. nobody knows exactly how long, but it doesn't have the same kind of effect. interesting to note where we are with yields these days is where we were in the 1990's when we were growing at 4.5% per year. can we live with this? for now, we can. tom: i'm not going to go higher for longer but just pick one of them. are we going to go higher or are we going to go longer? >> the more important thing is the longer part. they may go one more time, but we are pretty close to the end so i don't think the higher part of the more important of two right now. the more important issue is how long are they going to stay? tom: can the american economy equilibrium through a higher nominate in real yield? >> i think we are in the process

of that. in my mind, the neutral rate is anywhere from 50 to 100 cases went higher than it was before covid. tom: so the 10 year real rate. >> i think it is probably 1.5%, something like that. lisa: we look at the data we are getting this week, the fed seems to be looking for an excuse and it is not really that they are so concerned about what you call the backup yields. so what data could make it difficult for them to use the backup in yields as some sort of excuse? >> boy, we are really testing that. we had a high inflation number, stronger-than-expected consumer spending and now a firm wage number. pretty much a clean sweep and yet they are clearly going to pause. if we continues to seek a data, it just becomes increasingly

compelling. >> tomorrow based on what they say and based on the economic data, what are your chances they have got to go significantly further than currently markets are pricing? >> significantly further if there were the important part of that question. as i said, i have one more hike but whether they do one more or not is not important. there is a scenario where inflation of the accelerate and you end up having to go multiple times. that is the scenario you might have in mind. to me, i see that as a bigger risk than the risk that the economy slides into recession and the end of easing much sooner than people expect. but at this point for me it is a risk scenario, not a base case. tom: is it true for halloween you're going as a dot plot? >> that is a rumor, i cannot confirm or deny that. i have a lot of room on my head for dots. tom: also, jon ferro -- jon

ferro is going as brenner. i don't know if you knew that. stephen stanley out with santander, just outstanding on american economy. we've got to get back to talking about 5% gdp. the markets come in a little bit off of the gloomy benefits, wages and all that. lisa: it highlights the nervousness. the fact that suddenly, again, good news is bad news it higher wages is good news for everybody in the rank-and-file, but we are looking at a scenario that went up really well, which is that the risk of the salacious greater than the risk of recession. tom: up five points right now, i'm going to call that 1/10 of 1%. lisa: how durable, how sticky are some of these employment costs that are going up leading

to higher wages, but also perhaps pressure and basically -- >> they been relatively sticky because there is almost no change in the quarter over quarter numbers, the wages and salaries overall up 1.2%. that is an acceleration from 1% before and the second quarter, and in the private industry, one point 1% after 1%. we are still seeing wages go up. a little bit faster pace, benefits go down a little bit in cost. part of that is timing, but the point is that we are seeing sticky wages at this point, and it will be interesting to see what happens with hourly earnings on friday. tom: the fed meeting, jerome powell is going to have to be saintly, to say the least. what does he not want to say in your press conference? >> he definitely doesn't want to say recession or give the idea

that inflation is to accelerate. he wants to be on the progress bandwagon. the biggest method she wants to leave people with is that the fed might be done but we are not going to say that because we don't want the markets to price that sort of thing in. tom: again, the former vice chairman will be with us as well. lisa, red and green on the screen. that's all there is. lisa: the fact that good news is still bad news tells you everything you need to know. it is not a massive move yet, but just wait. housing data coming up. kathy jones of charles schwab, and aaron brown of pimco ahead of that key fed meeting, but also the financing agreement which might be actually more important. important.

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>> the power that we are able to get. i just want to repeated. every loss of life should be prevented. john kirby at the white house, the white house, national security council spokesperson. we say good morning to all of you. lisa abramowicz getting ready for the 9:00 hour here. the markets pulled back a little bit. a fed meeting tomorrow, apple earnings the next day off of the announcement we saw last night from apple, their marketing campaign on new products as well. we are also considering a data check here, and i'm going to go to oil right now.

given the tragedy that we see in the eastern mediterranean, he is aaron david miller, a senior fellow of the carnegie endowment. definitive and international relations, and he wrote a book in 2008 that was shockingly prescient 15 years on about the mess we are in and the eastern mediterranean. david miller, thank you so much for joining us this morning. when you wrote your masterpiece in 2008, did you expect the tragedy we are living now? >> i expected a proximity problem. israelis and palestinians are living on top of one another and frankly, i think it was mark

twain who said that proximity breeds contempt in children. i figured that this consulate would endure, it would go through accommodation perhaps, as it did, but also conflict as we've seen. but i will put myself at the top of the list. i never anticipated the kind of trigger to this particular phase of the israeli-palestinian conflict. that is to say, what happened on october 7 with the brutal and savage attack, and the willful and intentional, indiscriminate murder of men, women and children. i did not anticipate that and clearly one of the two greatest intelligence failures in the history of the state of israel. neither did the israelis. tom: robert gates writes a piercing essay in the new foreign affairs magazine, read every word of it. former defense secretary on a

dysfunctional america, a dysfunctional superpower. you are someone that straddled the line within the politics of washington. what is aaron david miller's best practice now for the biden administration? >> when it comes to this particular crisis, we have a major crisis in the middle east with the potential of escalating even further. if you end up with a war, not to mention the prospect of iranian involvement and direct confrontation between israel and iran which could lead to spike in oil prices and pledging financial markets and even more uncertainty with respect to the global economy. you got russia's invasion of ukraine, tensions in the indo pacific. look, i have long believed approximate solutions to unsolvable problems. this is a world that cannot be resolved.

that is to say, i'm not sure there is one conflict out there you could identify that had a definitive or conference of solution. this is all about smart management, and a judicious and very balanced view of the projection of american power in areas that, in fact, we can't affect. this is not a world to be redeemed or resolved. only to be managed if we are lucky and smart. >> the loom of time is my book of the gear, a sprawling treatise on morocco all the way over to persia and indeed on to afghanistan as well. and what permeates the realpolitik is the basic idea that we have a human rights-led foreign policy. if a human rights-led foreign policy at risk given what we see in the eastern mediterranean region? >> he is a really smart guy.

based on my experience working for republicans and, crowds over 30 years from jimmy carter to bush 43, i don't think we have a human rights-based policy. in fact, a human rights democracy a human rights democracy of promotion, responsibility to protect, intervention to prevent or even respond to mass killings. from the holocaust to cambodia to rwanda to south sudan to syria, where has the united states been with respect to protecting human rights? i'm not saying that that isn't a role we need to play, but i think human rights is a factor. based on my experience, from carter to bush 43, it is at the top of our agenda. tom: there have been shades of isolation off the shock of jimmy carter. what does the new isolationism

look like? >> clearly we are not there now. i mean, i think the america first notion largely would have translated to putting america last. we've got to find the right balance between doing too much in the room and not doing enough. the united states is been referred to as the indispensable power. the cemeteries a fr -- of france are filled with indispensable people. we can't be an indispensable power if it means we need to be everywhere to everyone all the time. we have a dysfunctional political system. that is the strength, by the way. repairing that is critically important to our capacity to lead, and as joe biden says, not by the example of our power, but by the power of our example. tom: from where you sit in

international relations, is the pentagon properly funded and specifically, does the navy have enough ships and submarines? >> probably no and no. i suspect even though some will argue that defense spending is way out of whack that it will be fascinating to try to see how we are going to resource going forward because each of these problems i refer to which are seen in the middle east right now which is working against ukraine, all of these things that have to be properly resourced, that is a concern that i have given the nature of our to mr. politics. tom: one final question to circle back to your 2008 treatise. there is a much to promised land. what should be advocate to israel and the palestinians this november? >> a lot of people believe that

the to -- so-called two state solution has gone the way of the dodo. it is the least bad solution to this conflict. israelis and palestinians need to separate from each other. there is no precedent but i can think of of two national movements, living happily ever after under one roof. cyprus, lebanon, syria, iraq. the beat goes on. it is just a hop, skip and jump to understanding that if, in fact, you're going to have anything resembling a conflict- ending solution, you really do need to have separation through negotiation. you need to satisfy the political, territorial, emotional, psychological and religious underpinnings of this conflict.

the only thing that does that in my judgment is to separate through negotiation state of israel living peacefully next door to a palestinian --. that is the only way to even begin to think about fixing. tom: usually valuable. i really can't say enough about the overview from dr. miller and the immediacy that we see in washington as well. we can look tonight to balance as we go into a difficult eastern-mediterranean evening. tomorrow, bloomberg surveillance. it is our special the fed decides honor to have richard with us. honored to have jerome powell with us. michael mckee leading our

coverage. this is bloomberg surveillance. if you're trying to get a view of the whole organizational financial health and you're trying to do that through multiple systems, that makes it very, very cumbersome. ♪ it's not just tech, it's not just people. it's how they work together to provide that experience to the customer. as a finance organization that is what you want to do. ♪

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lisa: good news, is it bad news? the countdown to the open sites right now. announcer: everything you need to get set for the start of u.s. trading. this is bloomberg: the open with jonathan ferro. lisa: coming up, futures steady as stocks close out the worst