>> if you look at earnings, topline, growth of revenue, we started to see weakness. >> the equity market has become more expensive in absolute terms, relative to fixed income. >> markets are a little more volatile than the under coming -- than the underlying economy. >> ultimately, there will be an earnings reset. >> you have to look for opportunities in things that have struggled as you go into 2024. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: let's get you to the weekend. live from new york city, good

morning. for our audience worldwide, this is "bloomberg surveillance" on tv and radio. alongside tom keene and lisa abramowicz, i am jonathan ferro. equity markets totally unchanged. a one to punch snapping and a day winning streak. we have a sloppy bond auction at 1:00, chairman powell at 2:00. tom: would you close the door over there, please? [laughter] close the door. what was more important, the auction yesterday, the comments of the chairman -- jonathan: would you mind translating that? lisa: close the -- door. jonathan: chairman powell was disrupted by climate protesters and he politely said close the door. he left open the door to another right move, but did he really say anything week -- different from the week before?

this reads hawkish compared to what the market was looking for. given we are talking about a market priced into get a bunch of cuts in 2024. tom: we need a pullback after eight straight days up. i am fascinated what you think. bramo right, tom wrong. the 30 year auction did matter. i look at the technicals, and the yields stayed constrained within the recent pattern. it is not like we had a breakout to a new high yield. lisa: we have no clue that was the conclusion and what we got was an auction that, by some measures, was the worst on record after the terms it traded at. that was bad. a lot of bad internal technicals care than fed chair powell says the same thing with different emphasis, which is we will respond to the data, but this time, we might be more hawkish, and everyone says, oh my goodness, it is different. it was not different. the fact there was such a big

response leaves people scratching their heads and pointing to conspiracy theories, like ransomware attacks, for the possibility that is what is disrupting the bond market. this just highlights how little we know. jonathan: icbc, the world largest bank, is going around with a usb settling treasury trades. lisa: basically, i believe the night before -- have been going on for quite a wild. it is very unusual for a bank to get hit with a ransomware attack, where they have to pay off hackers to really some of their systems, and some of their counterparties chopped off doctors to their systems, because they did not want to be infected. in order to transact, they were walking around, hand delivering usb sticks to amke t -- to make this whole. tom: so the bloomberg covers today, what do the vaunted cyber departments of america's big banks to? how do we respond? do we say, oh, those chinese,

it's them, not us? jonathan: at the moment, we have no idea what is going on. based on certain reports, it is a gang with ties to russia suspected of the attack, but it speaks to a longer concerned -- worried about these issues for a long up -- for a long time. bramo picked up on the right theme here in the bond market. absolutely spooked by big swings and treasuries. same again yesterday. 20 paces point move on a 30 year bond following a sloppy auction. have we confused a bond market rally over the last two weeks with bond market stability? because nothing about yesterday looked stable. lisa: i was thinking about you in that point you made yesterday when i saw the 22 point swing, 22 basis point swing in 30 year yields. it raises the question, what is really going on? is the lack of certainty going to tamp down the potential

buy the dip? tom: for people not in the game, the people in the game are worried about one word, and that is "liquidity." isa just part of it is going into year end, but i wonder how deep the market is now. and go to the 30 year auction, which i got wrong, there will be another one, right? lisa: there are always -- they are always options coming up. jonathan: a lot of people complained there was not a 100 year it couple years ago. s&p's, we snapped the eight day winning streak in yesterday's session. coming into friday, we are down, added towards a weekly loss. 4.64 on the 10 year yield. i want to sit on the dollar just for a moment. the euro 1.0687.

the euro is bouncing back to it as of yesterday, the dollar index was heading for its best july. even with this equity move that developed over the past week. tom: it is a dollar move, but we have not talk enough about this that we have not talked about euro-yen. take out the dollar and look at this audit relationship. if you had said a week ago we would be at 1.62 on euro-yen, that is a persistently weaker yen. on a friday, you have to get the sunday night, the morning in japan -- when do they finally act? we are way past that, looking at your-yen. jonathan: euro-yen at session highs. lisa: we have been hearing about money coming out of japan and going to u.s. bonds in particular. it raises some questions -- tom: close the door. lisa: alright, really?

we have been talking about speak and have been making fun of fed speakers, but it is not just in the u.s. christine lagarde is speaking today. also at 7:30, lori logan, and at 9:00, raphael bostic. today is day to have discussions between treasury janet yellen and the chinese vice premier in san francisco, ahead of next week's meeting between joe biden and xi jinping. how much can we lower the bar? is anyone paying attention to this meeting at all? jonathan: this one no, next week, yes. fair to say this lays the ground for next week. a lot of people accepting some kind of charm offensive from chinese officials with the united states, given the foreign direct investment data we have

seen in the past few weeks, which is not encouraging for the chinese economy. tom: which is interesting, the balance of leverage here. and what this team focuses on. the university of michigan sentiment survey. how much do we see a deterioration in sentiment? we are seeing inflation coming down. we see signs the economy is slowing, especially given we are seeing some sort of forward look for inflation. tom: this is a little off the radar here -- jonathan: just keep talking, bramo -- tom: united kingdom gdp. navarro -- nabarro said what is the quality of growth in america, the quality of growth in the united kingdom now? essentially it is into next week. jonathan: i can tell you the level of growth in america is so much better than the level of growth in europe, but a lot of people might point to the fiscal action that took lace in the

last few years. the price we had to pay for that is high inflation. the politics is fascinating. we have a new poll out, bloomberg news and morning consult. take a listen to some of the bullet points. about the times as many voters that immigration is their top issue in the 2010 before residential contest as though -- as of those who said the same about the israel-hamas war. 68% of respondents said they approve of funding for border protection. that really sets things up going into an election year for president biden and the gop. lisa: especially when you pair it with other polls, including those by bloomberg and morning consult, that talk about the rise of independents, that talk about the distaste for a biden-trump rematch. it comes just as joe manchin drops out, says he will not announce a reelection bid, and

there are people saying maybe we will see a joe manchin-mitt romney ticket running as independents, which could really throw a wrench into the matter, considering the distaste on both sides for both potential candidates. when you take a look at this, who wins from this? jonathan: manchin was very vague yesterday. to share the quote from the senator, what i will be doing is traveling the country and speaking out to see if there's an interest to mobilize the middle and bring america together. if you will travel of the country. one of those things. like a listening tour, if you wi ll, t.k. tom: they are all doing that right now. lisa: is he going to rev an rv and sit at a campfire? jonathan: is there someone in the middle right now? tom: i urge people to look at this bloomberg poll article. it has some fabulous charts. i will go back to yesterday.

i am not sure foreign policy is part of the debate next year. texas border is a domestic issue to a lot of people. people yesterday emphasizing the economy and inflation matters. israel, ukraine, gaza, taiwan, will this matter in the voting booth? jonathan: the gop will take a much harder line on the border, and clearly that is pulling well. the president wants to maintain america's role on the international stage to support two military fronts at the same time. clearly one is popular -- more popular than the other. lisa: now. jonathan: it could change. lisa: at this point, it is good to get the sort of tea leaves to understand what is stacking up and what is important to people. how much can we change -- how much can it change, given events are transpiring more quickly than we can keep a handle on gives you a sense of the shifting landscape. tom: it is november 10-ish and monday -- not even sure what day

monday is, paulo a sudden, november 15 is on us. to me, that is the end of the business year. i had no idea, 90 days ago, we would be in such a jumble coming up on november 15. and a november 17 government shutdown, which is clearly in the zeitgeist in washington. jonathan: there might be christmas parties elsewhere. not sure there will be any in washington, d.c. 12 months is a long time. i keep reflecting on the note that came out from goldman. what if you get this extension of the cycle, a continuation of disinflation? what a different story we would be talking about the american economy going into the november economy compared to the one we are telling right now? lisa: that would be a perfect scenario for president biden. of course, who knows, because of all the other events that come

around it. if you think about disinflation and a strong economy, that would set him up in a much better position than is currently seen. jonathan: -- week expect several tailwinds to growth, and increased willingness to cut, even if growth slows. that last point, i think this is what jpmorgan is getting out. not like the message changed from chairman powell yesterday, it is that the market excited something else compared to what it got. tom: the math on this, -- people like hatsias and forolli are subduing their view. a 4.2 unemployment rate is high.

these are gases we are making intimately next year but 2026. lisa: which is the reason why people took such a signal from the tone of jay powell last week. they heard from him and openness to understand that the economy was slowing and the rates and restrict of this was much higher than otherwise implied. he hinted at that yesterday, but again, the emphasis was on we are not sure if you have to do more. we are not even talking about cuts. stop being so bullish on it. close -- jonathan: close the door to rate cuts. something like that. coming up, we will catch up with a.m-h in washington, and christian horner from red bull racing. ♪ a smart coffee grinder, that orders fresh beans for you. oh, genius! for more breakthroughs like that- i need a breakthrough card. like ours!

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>> i have made one of the toughest decisions of my life and decided i will not be running for reelection to united

states senate. but what i will be doing is traveling the country and speaking out to see if there is an interest in creating a movement to mobilize the middle. jonathan: i will go with him. senator joe manchin of west virginia announcing his retirement from the senate in a video posted on x and the last 24 hours. would you like to travel the country? tom: the definition of the middle right now is open to a lot of debate. i would say the middle has swung right here. the manchin calculus in west virginia must be a fascinating story. jonathan: does he have a boat? lisa: i think he should represent the van life in america. jonathan: just unplug. tom: then they take -- lisa: then they take pictures

and posted on social media. jonathan: not really unplugging. we snapped the eight day winning streak in yesterday's session. chairman powell repeating what chairman powell said the week before, but it gives a different meaning given the easing we have seen before. yields are higher by a couple of basis points. on a 30 year, higher by about three no basis points. can we check out shares of richemont? coming out with earnings not rate. down about 6.8%. this line stood out for me. the chairman of richemont basically saying the luxury industry will not put up prices for two years. if they have lost pricing power, who is left? lisa: this goes to something we have been talking about a lot, which is where is demand coming from? from the middle class people stretching or the will of individuals who since there is a problem around the corner?

or is it because of something else, like people moving away from watches? i am not sure because we have not seen it across all luxury. hermes posted really good results. but there are running signals across all of the earnings spheres. tom: if you look at the stock charts, they are cyclical like this. there is a cyclical nature where people pull back from luxury. to your point, we say luxury where there is actually 4 or 5 subsets of luxury. richemont, they are across a set of those subsets. they are in 3, 4, 5 universes. you mentioned hermes, who is choosing not to be in those lower level subsets. jonathan: you mentioned a watch business. the pandemic watch boom is over. tom: the way we look at this as we look at lisa's closet.

it's full. and reordering's closets, plural. she has closets across all the district of washington. when you conflate two stories here. we have a wonderful bloomberg poll, real acuity about where we are 12 months out from an election, and also, of course, mr. manchin's comments from west virginia. joining us now, and reordering, bloomberg injury corresponded in washington. let's get that out of the way now. is luxury over in washington? annmarie: i do not know if it was ever alive in washington, but there is a sale at the moment, private sale, if you k now, you know. tom: i want to conflate these two together. you have joe manchin who has lived 50% votes from west

virginia against robert byrd eight years ago. to cut to the chase, did he make this decision because he really thought he couldn't win? annmarie: i think that is part of it. if you look at a recent emerson pole and have him against republican governor jim justice, he is trailing by about 13 points. this will be an incredibly challenging race for him. and he has already flirted with the fact that this will be the end of his time in the senate. he has talked about the fact he does think there needs to be a conversation about the middle, but also have to look at the reality of what he is facing in west virginia, and that is likely going to be a defeat. tom: it will be talked about across all of your world today. is there a middle in our bloomberg poll, or does it show mass polarity? is the joe manchin middle out there in the bloomberg poll? annmarie: there absolutely is. there is one key finding when it comes to rfk, and that is he is taking from both.

when you look at 2020 voters, he is definitely taking from biden, but if you look at how voters are feeling now, he is attracting democrats because of his name -- he is a kennedy -- but he is also attract trump voters, and that has a lot to do with the fact he has had a lot of dialogue when it comes to covid-19 and this anti-vax movement. he has a ton of name id and recognition, but there is idea of what we are calling "double haters," and that is about 19% in our poll. that is people who do not like the current president, joe biden, and deftly do not like former president donald trump. lisa: double haters, we will have to use that care there is a question of how president biden could turn this around. we have a year left. is there some material policy projection you could hear about from the democrats coalescing around the border, some sort of bipartisan agreement to try to

deal with some of the problems people are highlighting? annmarie: i think there are two things that stand out here. one is, overwhelmingly, in this poll, they want to see more being done at the store then -- southern border. it is 68% versus 20%. 20% disapprove of what is being done. what you are seeing here is not a lot of people -- a lot of people really want to see more work done on the southern border. biden has put this all together in one big bill, and potentially because people are less concerned about what is going on in ukraine or china at the moment, that they are fine with having separate bills, what we see republicans trying to do. i would also note this is a hard line for the president to walk right now, because still in our poll, like our poll showed last month, the economy rates number one. or than 40% of respondents say that is their top priority. when you look at foreign policy

concerns, 1% because hair -- care about china, 3% care about israel. the economy, the border, abortion is what matters in this poll. lisa: when we talk about economy, are we just talking about inflation? annmarie: that is what people are feeling. the data shows there is a lot of other optimism happening in the economy. this administration continues to use the superlative that, for 21 months, the unemployment rate has been below 4%. that is a huge achievement, and that shows we do have a very strong labor market. but, time and time again, what people are concerned with is price of gasoline, price of groceries, price of rental insurance, that spiked over the summer. mark zandi and came out and talked about, before them had namic, an average family making median income is paying 700 $34 more, and that is a problem -- is paying $734 more, and that is

a problem when the president is saying the economy is strong. jonathan: how frustrated are people about these bowls? annmarie: the president came out and is saying you're are just looking at cnn -- this is our second bloomberg poll that focused on the states that matter. what the white house deals right now, tuesday, they had a great night. by tuesday was all about abortion, and will that be top of mind for voters next year? these are very interesting races. in glenn youngkin, he made about eight 15 week limit. kentucky was a unicorn race. ohio was specifically about abortion. when you have ovi laid being struck down by the supreme court , it means states are looking at abortion. tom: i find you dead on on the zandian point.

i think everyone out there, including me, is looking at every single item back to late 20 19, very early 2020. that is how you get to that $700 paycheck. jonathan: that is the issue, without a doubt. amh, thank you. we will catch up with amh later on that pole. talk about price change year-over-year, people are comparing what they paid now compared to before the pandemic. tom: i am so fortunate. i am shocked when i look at groceries. every item -- just stunned at what it has become. jonathan: the conversation continues. your equity market just slightly negative. ♪

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jonathan: you're almost there. one more trading day to go. on the s&p 500, equity futures pulling back just a touch, down 0.1%. yesterday snapping and eight a winning streak on the s&p 500. nine days of gains on the nasdaq is responsible for the move higher, also responsible for the move lower. a big focus yesterday on the 30 year maturity. very sloppy auction. 4.78 is the yield right now, up a couple basis points right now.

yesterday at one point higher by most 20 basis points following that mess in the afternoon. lisa: we have been asking, is it over? how forgotten calm back? no. do we know why? no. we could offer five refrain reasons and conspiracy theories. what is it going to end? what economic data point will it take to have clarity on the path going forward? tom: close the door over there and put up the bramo banner -- "bramo right; tom wrong." lisa: right now, what we are looking to is cpi next week. it is the economic data as it comes out. and frankly, understanding the technicals, -- underpinning this. when we talk about countries he theories, the icbc, the u.s. unit of this chinese bank, and

the question about hacking and if this had any affect on liquid markets. the fact we are even focusing on that highlights the uncertainty. jonathan: mohamed el-erian said even if the fed is done, volatility is not. tom: maybe the most interesting geek global wall street quote this week was dean curnutt with a nasdaq vix of 19.01. the quiet out there, the measurement of volatility, these statistics give pause to a lot of people on wall street. jonathan: i want to finish on foreign exchange and take a look at the euro versus the dollar. the dollar index, four days of strength coming into friday. a bit weaker against the euro this morning, but we have a real week of dollar strength off the back of equities doing ok, which is interesting. lisa: and something that neel

kashkari pointed to as the dark matter, the uncertainty of why yields are higher, because normally when you have worries about fiscal policy, you would not see strengthen the currency. jonathan: i think it is interesting. once "surveillance," israel saying it agreed to limited positive in fighting, short of what the u.s. said was an agreement for a four-day hold. tom: what struck me, we are all reading the war coverage as we can come a real courageous people giving us that coverage. we are having all these discussions of humanitarian issues and what i believe is hand-to-hand combat in tunnels. they are underground, fighting, which is frightening. lisa: there is the war on the ground, the deaths,and there isn

information world that has been unseen before. the number of reports highlighting some very clear efforts in miscommunication and disinformation from lots of different corners around the world. this question on how we get a handle on what is truth and what is not. this is something i am focusing more and more on, because this is a new regime and a new front. jonathan: including domestically here in the united states. our next story, the world's biggest bank, icbc, having to trade through a usb thumb drive after its cyber unit was hit by a cyberattack. it had to send settlement details with a courier carrying a usb stick. the criminal gang tired russia suspected of this. given how people were spooked by that sloppy 30 year bond auction, some people are wondering if this contributed to

that mess. lisa: and we have a little clarity on it. this pack shut down systems as early as earlier wednesday night, so this would have affected trading volumes. the details are lacking, in my opinion. tom: but is it -- isn't the arch issue of any bank of any nation, do they pay these criminal actors? jonathan: that is what the criminal actors would like. tom: do they just do it secretly? is it like you looking at real estate in manhattan, with suitcases of euros and pounds? jonathan: what are you trying to start? just for the record, i rent. [laughter] no houses in my name. a one-two punch in sentiment yesterday. one was the sloppy pond option, two is chair powell saying he would not hesitate to raise rates, saying, quote, closely --

[laughter] no. if it becomes appropriate to tighten policy further, we will not hesitate to do so. on a serious note, there was another interruption to a chairman powell address. we saw this at the economic club of new york a couple weeks ago. this time around, again by climate protesters. chairman powell with a hot mike paying close the -- door. thought it was a real authentic moment for the federal reserve chairman. incredibly frustrated. he turned up to deliver an address, be part of a panel, and that happens. tom: do we have a new level of protests now? the thing i was doing with michael roman, we had protesters within six inches of us. i've been on stage afraid. their faces were this far from me. lisa: i do not think he comes

out looking too bad because his frustration was so relatable. what his highlight -- comments highlighted to me something we have been talking about. our fed officials going to come out and jawbone the market to tighter --are they looking at stocks? are they saying things are looking hot, pump the brakes? tom: ian shepherdson is fabulous, from pantheon, with a real focus on chinese economics as well. i love your phrase. the royalty check in the mail to pay for newcastle tickets. we are looking at our pending immaculate disinflation. is our immaculate is inflation in place right now -- is our immaculate disinflation in place right now? ian: i think it is, but i am not surprised chair powell is not

ready to say so in public. the moxie made yesterday is a slightly more amped up version of what he has been saying for a while, which is recent data is the but are not yet definitive. i think they are very nervous about declaring victory and then having to undeclare victory. i think this disinflation is pretty ably embedded now. they cannot afford to be wrong again in the same cycle in the same direction pair that would look like they did not learn from the first time around. so they need to maintain this optionality. every couple of weeks, they will keep reminding us, until they stop, that inflation might come back and they cannot yet be sure and we will hike again if we have to. fundamentally, i do not think he said anything very new, he is just reminding us that is still a chance we might have to hike. i do not think they will, but he will not let go of it yet. jonathan: they will certainly not have a conversation on rate

cuts anytime soon based on what you said, but is this a reason to tolerate some kind of easing in financial conditions? ian: yes. i am not at all concerned that using conditions is somehow dangerous or it will spark any sort of resurgence in inflation. the underlying disinflation forces are pretty ably embedded in the u.s. economy. that applies in europe and other places as well. maybe you just run a little too fast for some people at the fed. there are still some hawks. chair powell has to juggle the views of a fairly wide spectrum of opinion across the fomc. he just wanted to dampen things down a bit. and they are not talking about cutting it yet. nobody things they will be cutting yet to the real question is what they are saying in three or four months time, if we get more good inflation data and more soft payroll numbers and lower wage numbers, then the conversation will shift. i think chair powell is keen on

not letting that conversation happen in a way he would consider -- jonathan: and maybe more messy bond options. michael chow sat in this chair and talk about what is happening and suggested maybe this federal reserve may have to move away from qt. what is your feeling on that given the developments in the last 24 hours? ian: the qt question is something i am hearing increasingly from people from markets, how long can they carry on taking 20 billion out at this steady pace when the funding requirement is still pretty big and we have had messy auctions? so far, the official line is we will just keep doing qt for the foreseeable future, but i am not sure how long that can hold, and

i would not at all be surprised to see a change in the spring, but not yet, as far as i can tell. lisa: you get the sense this is a liquidity issue, or do you get the sense there is profound uncertainty around their trajectory around a hard landing, a soft landing, or a acceleration we could see in the economy? ian: it's both. i've just spent the last couple of weeks talking to a large number of investors, large and small private funds, hedge funds, and the message i'm getting is clearly that there is still a huge spread of views. people are, all across the spectrum. there is no consensus to where we are going with growth in inflation. i am talking to people saying there -- there is a lot of disagreement within markets, and that generates volatility, especially when you have low volatility. lisa: it seems like both fed officials and market

participants have been spooked by how wrong they got the momentum in the economy this year. do you have an understanding of why people have gotten it so wrong? ian: this is the gazillion dollar question for economists. firstly, we all assumed people would slow down the rate at which they would spend savings, and so far, that has not happened. it has carried on in pretty much a straight line. whether or not it can carry out over the next year is a different russian, because now it looks as most of the remaining savings are in higher income households who probably will not spend it so quickly. up to right now, the third quarter, has been pretty much a straight line run that i do not think anyone expected. on the investment side of the economy, we have seen a huge surge in capital spending from the inflation reduction act. nonresidential business infection -- investment, chip factories mostly, 20% annualized

rate in the first half of the year is astonishing. playing it forward in the next six months, there is much less chance of seeing that repeating. tom: with the san francisco eating's eating's coming up, with pantheon's focus on china, is that economic last cap full -- economic glass half full for president xi? ian: no, and he will not have that for the foreseeable future. the problems are still extremely deep. we are now coming to starting our second year of the inflation in ppi. there is huge excess capacity there here they are not willing to do very large stimulus. they are sticking with this targeted line and hoping they can dampen the impact of the property catastrophe, and you have now got consumer deflation as well. mostly food prices, but the signal there is of an economy where growth has not reached any

sort of take off point. it is unlikely to do that. the problem of china's economy run deep and go way beyond the business cycle. they have demographic problems of the shrinking population and they have political problems as well because president xi is scaring away capital, investors. all of these things at the margin will constrain china's economic growth for a very long time. returning to that 5% plus story, you might get the occasional bounce, but it will be a struggle. jonathan: thanks for the update. picture this. the year is 2023, and the world's largest bank is going around on a moped with a usb stick settling treasury trades. team coverage of icbc up next. ♪

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i'm sam morrison. my brother max recommended you. so my best friend sophie says you've been a huge help. at ameriprise financial, more than 9 out of 10 of our clients are likely to recommend us. our neighbors, the garcias, love working with you. because the advice we give is personalized, hey, john reese, jr. how's your father doing? to help reach your goals with confidence. my sister has told me so much about you. that's why it's more than advice worth listening to. it's advice worth talking about. ameriprise financial. >> if it becomes appropriate to tighten policy further, we will not hesitate to do so.

we will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data and the risk of over tightening. jonathan: shut the -- we will not do it. i am so tempted. lisa: all morning? jonathan: i wish we could. we cannot even play it. we can? we can't. let's turn to the price action. equities on the s&p 500 were negative by 0.1%. on the s&p, yields are higher in the bond market by two basis points in the 10 year, nothing like the drama of yesterday, with the 30 year yield higher, one point, by 20 basis points. a sloppy 30 year bond auction. the supply came with a much higher yield than where the market was trading. ultimately, we priced something like five basis points yesterday, which is phenomenally high. lisa: it is a record, according

to some measurements, in terms of how much higher it traded immediately after the sale, which raises the question why? did people not show up? was this some sort of hack that interrupted things? this is what people pointed to. at the same time, people are saying it is all sloppy because people do not have a compass of where the economy is going. jonathan: zero at all and easily spooked. the 30 year at the moment is higher but only by about four basis points. bramo was talking about this icbc hack. icbc, the world's largest bank, had to send a usb stick around manhattan to clear treasury trades off the back of his hat, which is crazy to try and get your head around. tom: i guess it could happen to anyone. to give you an idea, the wikipedia is one small paragraph care that is not the case for jpmorgan and other banks. there is this mystery to this

"biggest bank in the world." lisa: it is a chinese bank and there is this question of if chinese banks have invested as much as u.s. banks on cybersecurity. u.s. banks know they have in targeted peer they have more complicated types of protective mechanisms. does this mean the icbc was that much more susceptible, or is this a new level of susceptibility for the banking system for some of these hacks? tom: it will be interesting to see. we have to address this before we go to jennifer surane. jonathan: thanks have been worried about this for a long time, which is why they have been spending so much time trying to prevent them. tom: we could spend the whole hour on this. jennifer surane is in london and on this pa this is an active reporting story for bloomberg news.

what is the response from london banks on this, the response of new york banks, and other state-owned enterprises in china? jennifer: the entire industry really takes not just this incident every cyber incident pretty seriously. they have been investing billions in this space. i think every bank ceo, if you get them off to the side at a conference and ask them what keeps you up at night, almost every november will say cyber. it is something they can spend billions on and still fall susceptible to. the entire industry is watching carefully how icbc is handling this, how it could impact the markets. but really, the lesson is this is a persistent and scary for these banks. tom: can i assume the decision-making for this beleaguered large bank will be done in china? that all movements will be back to beijing, shanghai, hong kong? jennifer: they have made clear

in statements they have put out that this is only affecting this one u.s. unit, and it has not yet affected other divisions, but they are apparently reaching out to their home office to make sure this does not spread from here and really trying to make sure the effects are limited and are contained. lisa: do we understand the mechanics of what actually is getting interrupted? my understanding is counterparties closed off their connections with the u.s. unit of icbc in order not to get infected with the virus, which raises this question of how icbc delivers and closes some of the transactions it has gotten orders on. is that kind of what is going on here? jennifer: i think that is exactly right, and it is interesting because that is generally the response we see from banks. as soon as they identified a risk in the system, they tried to close themselves off from that, which is why he sought a lot of folks yesterday citing this incident as to why it was so sloppy. lisa: although it would not

affect the number of people, particularly from china, that would be coming in to look to buy those treasuries. ostensibly, those transactions would come to the four, even if it is on a usb stick going to another bank. do we have a sense on if this has prevented chinese buyers from coming in and buying u.s. treasuries? jennifer: i think there are a lot of market participants who have hit back on the idea this is the sole reason for yesterday's auction activity. we are still trying to get a sense of how exactly those trades will ultimately be handled. does this and up fundamentally changing how those transactions are handled going forward? we are still in the information gathering stage on that. lisa: my understanding is that shutdowns or interruptions really began wednesday evening, heading into thursday's trading hours, in new york. do we have a sense of whether the volatility had been

increased or if there was any strange activity affected in markets from a liquidity or purchasing standpoint ahead of that auction? jennifer: i think there has been a lot of market participants pointing fingers, so it is hard to nail down -- it is sort of a chicken and an egg situation. are they pointing at this because this is a known issue or is it some of the sentiment issues? tom: who are these guys, these people -- do we have any clue or is it a complete mystery? jennifer: sources are telling us this is the result of lockbit, a well-known criminal gang with ties to russia. they were the ones behind the ion trading hack that happened earlier this year in the u.k. this is definitely not a u.s. issue or a china issue. this is a global issue that every single financial services firm --this is something they are all really paying attention to and are all at risk of. jonathan: when things like this

happen, our other countries, other clients are nervous about doing business with the banks that are under seizure at a moment like this -- that are under siege at a moment like this? jennifer: i think so. you do not want to make a bad moment worse. a lot of these banks are getting together every month in different forums and doing a lot of affirmation sharing about the risks they are seeing, but there is really not a good international setting body for that standard. it is very much country by country based. this will call into question whether that needs to be a more global effort. jonathan: jennifer surane on the latest. this crazy story, icbc is basically under attack by what could be lockbit, a criminal gang with ties to russia, which has led them to struggle to

settle trades and center around -- send around this usb stick around manhattan. tom: i would defer to someone like dan tannenbaum, who has really has experience here. our the billions of money we are spending on cyber, are we holding meetings just to have meetings or are we just getting something done? lisa: you can get something done, but in this chicken and egg game, you have to advance further than the perpetrators advanced technology to attack you. if i were advising children who have any capacity in cybersecurity ever, it might be a good history to go into -- jonathan: are you speaking to your kids? lisa: i have not speak to anyone. [laughter] jonathan: if you are looking for anything to blame that we treasury -- that weak treasury auction on, a lot of people are pointing to this one. tom: it is a bad treasury

auction -- lisa: we don't know. tom: come on. our debt and deficits are out of control. lisa: we have no clue, which is the reason things happen bouncing around, because we do not know whether the economy will outperform or underperform. people completely got it wrong how much the economy will grow this year. they completely did not get how much inflation was going to tick up. we have gotten so many things wrong. how can you have conviction of knowing where we are going? jonathan: we have gone things wrong all year. the narrative is just changing, flipping. fs investments going to weigh in on this. here are the scores. futures and s&p, negative zero point -- -.05%.

higher by two basis points today, from new york city, good morning. ♪

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>> if you look at earnings, topline, growth of revenue, we have seen weakness. >> the equity market has become more expensive relative to fixed income. >> markets are more volatile than the underlying economy. >> ultimately, you will get to an earnings reset. >> i think you have to look for opportunities as you go into 2024.

announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: the lungs winning streak in two years is over. live from new york city, good morning, good morning. for our audience worldwide, this is "bloomberg surveillance". alongside tom keene and lisa abramowicz, i am jonathan ferro. tk, pick your poison. do you want to blame powell or the soft auction? tom: i am going to blame powell but i think the auction was of value. bramo was right and i was wrong. the idea that he pulled back but i got a vix of 15.32. even with the one-day pullback it is remarkable where we are. jonathan: i am going to blame the auction. lisa, to see the yield move higher more than 20 basis points following that auction speaks to

how nervous people are about fixed income. lisa: and the lack of certainty around benchmark yields. as you pointed out, bonds leading stocks once again. stocks were range bound and then, boom, down 8%. bond yields are in control and that is unusual. tom: i do not agree that stocks are range bound. a lot of strategists reassessing this. lisa: yesterday. tom: fine but this eight day move was somehow different. i will let the strategists explain. jonathan: inspired by bond market moves. lisa: absolutely. jonathan: and then further up the curve to be spooked again at the long end. that is where we said the test would be on 10 and 30. it was the 30-year auction that

got things going. lisa: you could say it was jay powell but he said the same thing. you could say it is because people are not coming to markets. we do not know anything about that. the volatility is going to continue until we have more clear direction. i do not understand what is going to give us that direction. even jay powell said we have gotten this head fake before. jonathan: volatility continues even if the fed is done. welcome to the program. equities almost totally unchanged on the s&p 500. we snapped the longest winning streak on the s&p 500. day nine would have been rare. you would've had to go back to 2004. yields are higher this morning by a single basis point. lisa: we talk a lot about fed speak. we get fed speak today. christine lagarde speaking at an event in london.

she has a harder story to tell with some of the declines in the economic momentum. we also get lori logan of the dallas fed and at 9:00, raphael bostic of the atlanta fed. next week we are going to be focused on this and this is going to be laying the groundwork. day to of discussions between janet yellen and china vice premier in san francisco. biden and xi jinping will meet next week. key issue for me -- and i think you touched on this earlier, jon -- where is the balance of leverage? will this be xi jinping trying to court u.s. businesses to come back? jonathan: data point. dreadful. the meeting i am more interested in is the meeting between the chinese leader and business leaders in america. can they really calm things down and send a predictable message out of china to allow that money to return? tom: after the photo op and the chinese takeout in san francisco

what is going to be the message? i am lost. i do not know what the message is going to be. lisa: how do you create certainty to try and foreign direct investment to turn positive after turning negative for the first time on record? tom: i would be more strident sitting at the mandarin hotel in hong kong. can you give us back the hong kong we knew? they have no interest at all. lisa: how do people feel? jonathan: how do you feel? lisa: i feel glad that it is friday. jonathan: have you told the university of michigan? lisa: how i feel? i call them up and say, hey, how am i feeling. i want to talk about my feelings. [laughter] at 10:00 a.m. people will be sharing their feelings. [laughter] highlighting this frustration at how high the grocery bills are. the inflation protection does not matter until it does. maybe that will spook markets more. tom: they are out with rental

changes in new jersey. jersey city is as expensive as manhattan. jonathan: i was just thinking about the small print in the press release. we accidentally called lisa abramowicz to skew the results negative. [laughter] chief market strategist at fs investments, troy, wonderful to have you. did we confuse a bond market rally for bond market stability? troy: yes. first of all, humility is in order for any forecaster right now. but so much of the cycle whether it is rates or equities there is market price action and then there is narratives that follow that action. if you think about the way yields have gone higher, we got the rally back and we got to 4. 25% for a second. we got to 5% and then we came back down hard and the narrative

builds that we reached the peak in yields. of course, you either have a bad auction or you have powell pushing back and you have 20 basis point gap higher. tom: troy gayeski, get out the calendar. everybody has got to catch up. i am going to give credit to goldman sachs. hedge funds were out of the market before an eight day rally. you talk about the edge. you own the word alpha. how do we create alpha out to the summer of 2024? troy: i think in a time like this most of your positioning should be in the frontier. you are accepting consistent return. there is a few areas we have been focused on heavily. one would be sensitive prepayment.

spreads are relatively wide. we are not counting on spreads to tighten any time soon until this fed stops qt. but if there is a harder landing and they do qe, you get income plus price depreciation. not speculative on the direction rates but yield curve steepeners. we are fairly agnostic. for those that can tolerate less liquidity, when you think of this environment as a private lender you have the bank stepping back. you have higher for longer and these are floating rate loans. the dare to dream scenario is where we keep rates high. you have very attractive income and you're not going to have a hangover of recession. tom: to translate the jargon, he is trying to capture the coupon. tell me about the equity markets and technology stocks.

they have been on fire recently. does the fire continue? troy: when you are looking at asset allocation there is no reason not to own growth. i never understand the argument why you should not own growth. you should own international, you should own japan. this is a winner take all economy in the u.s. and globally. unfortunately, or fortunately, it is concentrated in the top five names in the s&p. the issue we have had with cap tech's are the valuations reasonable given realistic earnings going forward? earnings are not going to be as strong as they were the last five or seven years. we look at those multiples and in the event of another compression driven by qt, you or more than likely going to have price declines. but as far as secular holding we do not know why you would not want some in your portfolio. and then you look at things to complement that in a very

volatile market. lisa: can you give us a window into the debates you have at fs investments about your outlook for 2024? troy: oh, yeah. the debates are fun but when you think of the economy we have always been in the higher for longer camp. that said, even we were surprised at how resilient the economy has been. what we are trying to find tune -- and we do not claim to have a crystal ball -- what is the probability of recession in the next 12 to 18 months? it is argued higher than 40%. probably no higher than 60%. whether it is 40% or 30% or even 50%, because of the increased construction spending, because state and local governments can spend, because the housing market is not a dramatic drag on gdp, what does that mean for inflation? from a macro standpoint it is

trying to understand in which scenarios to certain trade expressions generate attractive returns and which other scenarios do get better upside? a phrase that i know tom loves. lisa: given the range of potential outcomes are longer term treasuries virtually un investable unless yields are so high as to compensate for those scenarios? troy: we have cautioned everyone in fixed income that every time market yields have popped up just be aware before it is said and done, before we have the next recession, you could get hammered with a bear steepener. that happened until recently. you have better risk/reward than a year ago or two years ago. but until we have that recessionary outcome or until markets truly price it in, you know, all you are going to earn is your yield and you will have tremendous amounts of volatility. we do not think it is time yet

to extend duration, but you more than likely want to think about that and understand it in a recessionary scenario. where is the 10-year going to go? you have upside but not like the gfc or the euro zone crisis. you are going to have slow yield compared to inflation in the past and you could get adverse market price action like we did yesterday. jonathan: a repeat of yesterday. not what people want. good to catch up. troy gayeski of fs investment following a steep day of losses on the s&p 500 following a selloff in the bond market. if you are just joining us, welcome. the s&p positive 0.01%. the bond market unchanged on the

10-year. if you want to get long dated debt away in this market, do you need a steeper curve? lisa: especially if you end up believing that the fed is going to effectuate a soft landing. if that is the case, does that mean yields are going to have to come down the front end? that they are going to have to cut rates not in response to pain but proactively in response to lower inflation and you will get higher yields in the long end, but the long rates have to be lower than 3.5%. jonathan: this fed does not want that conversation based on the comments we heard from jay powell yesterday. tom: ok, but i think he came out with his handlers and they said we have to readjust the market. to me what is important is not the comment yesterday. i think we all knew that it was coming. what is the next comment and what is the comment after next week's fireworks cpi?

jonathan: wait for the data. lisa: and that comment is the 1 -- tom: and that is the comment that really matters. jonathan: it seems to be this consensus that the labor market is no longer a reason to be hawkish. ultimately, the focus is going to go back to cpi. morgan stanley think we get back to the 2%'s. lisa: fantastic conversation, coming up. christian horner from red bull racing, coming up. from new york city, good morning. ♪ (sfx: stone wheel crafting)

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>> i have made one of the toughest decisions of my life

and decided i will not run for reelection to the senate. but what i will be doing is traveling the country and speaking out to see if there is an interest in creating a movement to mobilize the middle. jonathan: senator joe manchin announcing his retirement from the senate in a video posted on x. tk, greeted by surprise. were you surprised by this? lisa: i was not surprised -- tom: i was not surprised and that he was a significant number of points behind in polling against said republicans in a very republican state. lisa: 2024 or 2028? is this a mitt romney/joe manchin ticket? tom: to those younger, show be a third-party effort that has worked. it has been a challenge. it is a struggle in the system. i have great respect in the u.k.

for the liberal democrats. i do not even know what the difference is between the three parties. [laughter] at least you have three parties. jonathan: i have never met a bigger fan of the u.k. system then you. tom: where do they fit in? jonathan: somewhere between. tom: in between. that is what he is looking for. the middle. jonathan: let's get to the latest polls. tom: please. jonathan: state voters see the u.s.-execrable orders security as a greater priority than the foreign policy crisis that has dominated the president's agenda. three times as many voters said immigration is their top issue in the 2024 presidential election. tom: wendy benjaminson joins us now. when we go in the voting booth after the october dash, when we

go in the first tuesday of november, what we care about? to me foreign policy is never what we care about. right? wendy: right. foreign policy never wins elections but the biden administration has absolutely consumed the israel/hamas war and fighting to get more funding for ukraine while republicans are saying, fine, but let's fund the border. the seven swing states biden needs if he wants to win reelection -- the majority said we want more funding for israel and we want more funding for ukraine, but two thirds said we want funding for the border and to do something about immigration. the administration is really going to have to, you know,

perhaps pivot and come up with a way to address those critical concerns. tom: when you have the clearest memory of the celebration of the george h. w. bush win, and then it was the economy stupid. is this about the economy or is this the culture were election? wendy: i think it is going to be about the economy if the candidates listen to the voters. 41% of the swing state voters say the economy is the top issue. so if they focus on school boards and other culture were issues like that, it will lose. the one issue that falls under the culture war umbrella that is clearly winning elections is abortion-rights. a majority of americans want

abortion-rights and the republican party lost a couple of elections this week because they focused on researching abortion. lisa: do we have a sense of whether there are more swing voters than there have been in the past? wendy: i think there probably are because, as josh green wrote this week along with nancy cook, no one wants biden and trump. we call these the double hater voters. which is why a guy like robert f. kennedy is gaining double-digit support. yes, i think disenchanted, disillusioned, all those words describe the electorate a year out. lisa: tom was saying earlier that typically independent running mates do not gain any traction in general elections. that the independent candidates have always taken votes from one party or another. is there a sense as joe manchin does his van life around the

country that this time is different? that there is enough of a critical mass of swing voters that an independent candidate could gain traction? lisa: i think that could be true because of the double haters. the trouble is a guy like joe manchin with a d behind his name and the character he is will tend to pull more votes from joe biden that he will from donald trump. that would damage biden and probably split enough democratic votes for trump to win. robert f. kennedy is more interesting because right now he is polling equally from trump and biden voters. he would be a non-starter. but i think manchin could have an effect if he runs for president. he would be 80 by the time 2028 arrives. i do not think 2024 is in the

cards, but he could turn it around for trump. tom: tell me about the governor of kentucky. beneath the radar of the tuesday elections was a 45-year-old in american politics. jonathan: wow. tom: a mere infant. [laughter] maybe he is a democrat that climbs on board. what did they do with andy beshear of kentucky? wendy: he was extremely popular and you are right, this is mitch mcconnell's state. a former coal state. very republican. but it has also enshrined abortion-rights after roe v. wade was overturned and andy beshear is a very popular democratic governor able to win in a red state. democrats might be looking at him in 2028 or 2032 because he is, as you said, an infant in american politics. it looks like he will have a nice career ahead of him. jonathan: thank you.

it might last another 40, 50 years. appreciate your time in washington. amazing stats in this poll. gloomy signal for the current president. swing state voters say they prefer his rival on key foreign policy issues. they trusted donald trump to navigate the israel-hamas war and preferred the former president more on the russia-ukraine war by an 11 point margin. tom: it is not only swing states. lisa, on the five ohios, you look at central ohio -- which is as purple as you get -- and that is going to be the swing of the swing state. lisa: i wonder how much of that is informing some of the poll results.

democrats are not in agreement if you try to get some sense of what people want to see happen. whether it is with the hamas-israel war or in ukraine. same among republicans. maybe there is enough of a critical mass of people who support the former president at a time when everyone else is splintering. this is such a unique moment in both parties in terms of lack of agreement. jonathan: the fringes of each party. the republican issue around the ukraine war and for the democrats, they cannot get consensus on how to support israel given the french on the left of that party -- fringe on the left of that party. lisa: biden came out overnight and said israel is running out of time. israel has a certain amount of headway ford expands the conflict -- before it expands the conflict. jonathan: some of the latest

from our morning console poll. more on that, still ahead. will catch up with amh. equities positive close to 0.1% on the s&p 500. trying to bounce back from yesterday's losses. we are down to basis points on the 10-year. on the two-year yesterday we had the first loss of the month in the equity market on the s&p 500. we had the first close on the two-year above 5%. tom: i went to cash late yesterday. i was already in cash, excuse me. jonathan: how is that working out? tom: i miss the rally. jonathan: from new york, good morning. ♪

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jonathan: attempting to end the week on a brighter note. we look a little something like this. positive 0.1%. we are down on the week on the s&p 500 even with eight days of gains. yesterday's lost took us below that line of assent. the nasdaq just about unchanged. responsible for all of this is the bond market. the 10-year down and the 30-year down about four basis points.

is the move yesterday at the long end of the curve just spooking everybody? lisa: the two-year auction was -- the 30-year auction -- [laughter] it was the three-year auction. we are looking at a situation where auctions are raging successes and completely dreadful auctions are really disruptive to this feeling of stability that has been a fiction every time people try to coalesce around it. tom: i looked at the difference in yield between the 10-year and 30-year spread and it did not give me a lot of information. they are going up and down in tandem. lisa: you are not getting a lot of information from the volatility. that is perfectly said. this week, last week, the week before, etc. jonathan: you agreed on something.

i am shocked. [laughter] it was jarring. on the euro we are positive. up until today the dollar having a four day run. attempting to close out with the strongest week going back to july. just trimming those gains right now. the industrial and commercial bank of china, the world's largest bank, launching a thorough investigation after being hacked in a ransomware attack. a criminal gang with ties to russia suspected of orchestrating the attack which forced the bank to send trades through a courier across manhattan. still try to work out what is going on and ultimately, is there any connection between this and the story we were talking about in the bond market yesterday? lisa: how many computers can accept usb cords to get the information? all these questions at a time when everyone is mobile.

this raises questions, a, about the security of banks, and should we move to a central clearing model for treasuries or something less bifurcated. the second question is what does it say about everyone jumping to the conspiracy theory to explain a failed auction -- not a failed auction -- but a poorly received one? that to me highlights the lack of uncertainty around what is behind the moves. jonathan: when you have to take comfort from a hack because you do not know what is going on elsewhere speaks stature give the moment is. lisa: well set. jonathan: please tell me it is the hack that messed up the bond market and not something more sinister. joe manchin will not be seeking reelection in his term ends in january 2025. hinting at a potential presidential run as a third-party candidate saying, "what i will be doing is traveling the country and speaking out to see if there is an interesting in creating a movement to mobilize the middle and bring americans together."

tom: in a polarized america, we have to understand most of his elections have been close in a very republican state. back to the special election on the death of robert byrd. i believe that was 53% he won. it is a state where he has a tough election. lisa: there is a question of whether he is avoiding losing the election. tom: i will let annmarie hordern answer that. lisa: for this question around is he looking into an independent bid and is this time different? or could an independent candidate gain traction in a way that has not been possible? jonathan: let's finish on the story. janet yellen wrapping up her to do -- two day meeting in commercial relations ahead of the much anticipated meeting between president biden and xi jinping. the leaders expected to discuss foreign investment, tariffs, and

greater transparency going forward. on foreign investments specifically, that is a big topic of conversation, particularly given the data we have seen. lisa: in the past couple of days the foreign direct investment declining into china for the first time in history. this really highlights the concern for xi jinping and possibly his motivation for coming here. but you asked this question. how does he create certainty at a time where the roles have flipped and flopped and ideology has ruled over economic policy? tom: i go to jon's point earlier. the body language is going to be far more interesting. how can they get anything done? one example, china is bumping up boats in the south china sea. the idea we are going to get substance or even the theater we saw with president trump, i just do not see it.

jonathan: you know what corporate america wants? they want predictable policies to make long-term investments. in some parts of the world they are not getting that. maybe we can provide some soothing words. i do not think we are going to get that in a week. tom: the headline from morocco just out. lagarde, if kept long enough, rates will take us to 2%. jonathan: get back to 2% inflation. that is ago. how much damage you do in between to the european economy? the backdrop for european growth very different. tom: will get back to 2% yield? that will be a great story. i believe that is price up, yield down. kathy jones gives perspective, chief income strategist with charles schwab. i am fascinated with an always open question to you and liz ann sonders. what are people at schwab doing with their fixed income money?

kathy: what we see among the majority of the clients's they have been staying very short on duration and starting to get some confidence that they can move further out. very popular along the cd's. not really dipping their toes into low-quality but at these yields any bonds, investment grade corporate is looking attractive and they are getting more confident about stretching out duration. tom: the pros are worried about liquidity. should our viewers and listeners be worried about liquidity and full faith and credit? kathy: i do not think for the average investor the liquidity issue is going to be a big one. i think for traders, for people like us navigating the markets for our clients, it is an issue. but i also do not think it is a

critical issue in the market. lisa: you are the one person i was most looking forward to speaking to today. i really want to get your understanding of what happened with the failed auction and whether you give any credence to this idea that the hack of icbc had anything to do with how poor it went off. kathy: i do not really know for sure. it is an open question because we have not had something like this happen before. it seemed like the market was ok going in. there were a lot of questions because we have had such a big rally at the long end. who would show up after rates dropped so much? and then you start to get the powell comments and then you got the hack, whatever that may have had to do with it. i think it is a constellation of things. but we had such a big rally going into it after the 10-year went well and the three-year went well. i think that had to do with people stepping back. lisa: what signifies we are

getting stability in longer-term bond yields to get conviction, to have some sort of trade that can last more than a couple of days? kathy: we do not have it yet, especially the further out you go. found the 10-year you do not have it -- beyond the 10-year you do not have it. i think the market needs conviction that the fed is really done and the hold has some sort of timeframe you can anticipate and then we get that stability. we thought we had it and then powell spoke and then powell spoken we do not have it. lisa: how much does this have to do with the fed and its policy when people are citing potential inflation or people are citing where are the buyers going to come from at a time of changing policy overseas? kathy: i tend to think it has the do with three things that always influence the trend and

rate. what the fed is doing -- because you have to discount that. you cannot get around the fed no matter how hard you try. what inflation is doing, which is tending to recede, and how the economy is performing. and then you get into other things like supply and who is buying and china and japan. but the foreign flows have been pretty steady despite this chatter. we have had the foreign flows hold steady. the reserves are pretty steady. i am less worried about that. fiscal policy, obviously, a concern, but is it a concern today versus yesterday versus a week ago? that is a hard argument to make. tom: my clipping coupons or can i invest for total return? kathy: i think you can get total return. hate is not that hard and you have a coupon this large to have a total return. tom: i am going to get some capital gain out 12 months. kathy: 12 months from now yeah.

if we get even close to their, you are going to have a positive return. lisa: going into next week when we get cpi how volatile is the market and how massive could the moves be on the heels of an upside or downside surprise? kathy: i do not think we are done with the volatility. [laughs] i think it is here to stay until we get either that confidence about where the fed is and where it is going -- which i do not think the fed wants to give us much confidence. i think they want to keep the market a little off center. or we get those labor market numbers that are so soft that the market says, ok, now the fed has to start easing. jonathan: kathy jones of charles schwab. andrew hollenhorst just published, listen to the shift in language.

the fed is on hold. the barter hike will not be surrounded even by the upcoming inflation data they expect. that is a massive turnabout from citi saying this is much higher than you think. lisa: given the fact they were talking about another hike this month and that even then the momentum might be difficult for the fed to take on. this raises the question does the long end yields are going to come down? or could they go up further if the actual economic growth continues to be stronger than expected and inflation does too, and the fed remains on hold? jonathan: if you are joining us, welcome. equities pushing higher on the s&p 500, up 0.2%. yields are lower, 4.5983. kathy, i am with you. i would love your thoughts on

it. the labor market data -- the federal reserve no longer views labor market data as a reason to be hawkish. at what point -- and you alluded to it -- is the reason to be bearish on risk assets given it starts to to suggest something worse? kathy: i think we are kind of on the cusp of that possibility because what you are seeing is real income growth slowed down when you look at the labor market data. i think the fed knows they do not know. but if you start to see the unemployment rate rise, the average hourly earnings continue to slow, you were talking about that income growth really starting to slow down. that is going to have the impact on the economy. that is the constellation of numbers that is really important. jonathan: is this soft landing

talk a moment or the destination? it is the moment right now and if you get to 4.5%, might be having a different conversation. lisa: especially if you look at historical precedent. that has never happened. tom: it is a journey? close the door before you go. [laughter] jonathan: close the door. close the -- door. lisa: he just wants to curse on air. jonathan: it is a more authentic me if we were able to curse. tom: you going to las vegas? jonathan: i wish. it is cheaper to go. tom: you and i looked at road trip and it was ridiculous. jonathan: we are going to talk with christian horner of red bull racing as we anticipate a much anticipated race in las vegas. that conversation, next. ♪

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very boring if they were all the same. yes, i am aware that we should not go to old commercial places, but las vegas gives you a unique opportunity and time will tell if this is the right way to go. jonathan: what a great season for that guy. absolutely dominant heard red bull racing speaking to us earlier in the summer. looking forward to a race that is around the corner. tom: would you say that f1 is still large and moving off the huge success of netflix? jonathan: without a doubt. although there are indications that maybe next week's racing figures were not as popular give an indication that ticket prices have come down, hotel prices as well. tom: i loved brazil. it was an old course up and down. loved it, loved it, loved it. this is going to be fascinating. first time in las vegas and what you need to know is in the

vicinity of tuesday it will be 73 degrees in las vegas. that does not matter if you run a race at 10:00 p.m. at night pacific time, 1:00 a.m. eastern time, 6:00 a.m. in england. christian horner, team principal and ceo of oracle red bull racing. it is about tires. jonathan: it could well be about tires. good morning and thank you for been with us. congratulations on an absolutely dominant season for you and the team. we will spend time talking about that. let's go where tom went. approaching a new track. you have not raced on this before and track temperatures could be very low. what is the approach for you and the team going into an event like that? christian: take a jacket. [laughter] jonathan: it is that simple. christian: i was watching max on the simulator yesterday. looks like a great track. it is going to be superfast.

there is going to be a lot of overtaking opportunities and the tires, it could be like driving on ice. it just adds another dimension. particularly on a street circuit. that can test the drivers and the team to the maximum. jonathan: when it comes to stuff like qualifying how do you prepare to put that fast lap in? what do you do? set up with three labs before you go for the qualifying lap? christian: that is going to come out on friday when we run for the first time. thursday for the first time. we are going to learn what it takes to get these tires up to temperature and is it going to be multiple labs or a single lap? it could be interesting to see how that is going to play out. there is going to be a lot of data to look at and the simulators are going to be working flat out on thursday evening. jonathan: any worries this could be a bit of a disaster and could end up in chaos? christian: street races are

always dramatic. we have seen that in singapore, azerbaijan, and monte carlo. this one promises to be a big one. i think it is going to be one of the biggest events in the sporting calendar this year. i am confident it is going to be a great success. tom: i was appalled by the accident very early in the brazil race. perez was very much involved. how do you make the start of the races safer? christian: i don't think you can. you have got cars that will accelerate to 100 miles per hour in less than two seconds and 20 very competitive drivers all going to make position into that first turn. inevitably there is going to be contact. but the safety of the circuits has increased dramatically and thankfully, we are seeing drivers walking away from what sometimes look like nasty

accidents. jonathan: you sit 20 competitive drivers. arguably, there was 19 and one guy on his own in the front. the domination of max, he is so young. he is basically on course to take over in the next couple of races in terms of wins. where does max rank for you? christian: it is always incredibly difficult to compare drivers from different generations but what is safe to say with what max has achieved in the short period of time with three world championships, 52 grand prix victories, is an incredible record. he can now be spoken about in the same sentence and category as some of the greatest drivers

the sport has ever seen. jonathan: how far do you think he can go? christian: he is still so young. he is evolving as a driver and he gains more experience. a lot depends on the equipment we give him but i think he can achieve more. he is motivated, he is hungry, and he loves his racing. he is not interested in anything else other than racing. jonathan: he has been dominant. your whole team has been dominant. i remember for ari being accused -- for robbery of being accused -- ferrari of being accused of making the sport boring. christian: the one thing that is guaranteed as nothing stands still. we can already see teams improving and i think next year is going to converge. we are in for a more tight championship next year and also

2025 before a new reset. i am expecting a much tougher year in 2024. tom: i have my auto sport at home. i try to understand it. a lot of your brother and are really sure --are trying to fix their teams for next year. do you leave it alone? do you leave a car the same? or do you try to make improvements? christian: you are always looking to improve because you guarantee competitors are going to be copying the philosophy of our car. we just have to move the goalpost and tried to develop and improve ourselves. for the last few months the factor have been focused on that.

but you start to get into diminishing returns and it'll be tough to improve significantly from where rb19 has been. tom: i watch netflix and think i am an expert. i am not. take us into the pit. how do you train for that excellence versus the other teams? christian: same as in any discipline. it is all about practice. it is about analysis. it is about where the driver stops. if he is two inches too long, that will affect the timing of the stop. 's rehearsal, his practice, his positioning, is having the right attitude and the determination to continually improve. jonathan: you have two drivers

under contract. there is a question mark over one of them. the drivers you have in the cars in the coming weekend, are they the same next year? christian: the people putting in the question mark are you guys. he has had a tough six weeks but he has started to find his form. the race he drove in sao paulo was strong. he is finding his form again. second in the world championship again. over 30 points ahead of hamilton with two races to go. let's see what he can do over these next couple of races, but he will be our driver alongside max in 2024. jonathan: are you expecting max to help him secure that second position or does he have to do this on his own? christian: i don't think you will need the help from max. i think he needs to finish either ahead or just behind lewis this weekend to secure

that second position. we are treating these remaining races as cut finals. each race holds huge importance. the race in vegas is going to be a phenomenal thing and we are going to be chasing our 20th victory of the year. it is very nice of them to have put a race on to celebrate my 50th birthday. [laughter] jonathan: you asked for it. happy birthday. christian: thank you. jonathan: congratulations on a dominant season. it has been phenomenal to see play out and thank you to you and the team for being a fantastic partner with this program. christian horner, team principal and ceo of oracle red bull racing. tk, absolutely dominant. tom: i was not into las vegas and at 10:00 p.m. pacific time, when :00 our time with the danger of losing -- 1:00 a.m.

our time, with the danger of losing. jonathan: equities just about positive.

>> you need to be comfortable

with the fact that if the market comes in 10, 15%, the buyer dipped. >> it is a reflection of stability in the multiple and profits. >> we can expect some kind of santa claus rally. >> the problem with soft landing and recession might look the same for a short time. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, jonathan ferro, lisa abramowicz and tom keene on television and radio. forget about it. futures up. green on the screen. it was a one-day upset. jonathan: you are saying that is a one-day upset. tom: i am looking at the screen and that is what it says. jonathan: the one-two punch to sentiment the last 24 hours. 1:00 p.m., sloppy action, 2:00 p.m., jay powell. the equity rally the previous

eight days, it is fired by this move in the bond market. 4.50, spooked yesterday by a long induction. 30 year bond coming to market. priced much higher in yield the way the market was trading. tom: legitimate news yesterday. i mean, a hat trick of angst. we looked at the bloomberg reporting, the chinese bank, but, lisa, which of these 30-your auctions did you nail where the powell comments move -- or did the powell comments move the markets? to me, it was the powell comments. lisa: it was a confluence to make people wary. and then jay powell came out with a different tone than people expected, at least based on last express conference. here's the issue, and i go back to what kathy jones talked about, volatility is here to stay. her words. if that is the case, what do stocks do? is this an acceptable level of

volatility's were -- where stocks can ignore them? or is it for the foreseeable future? tom: the cpi report gives more data next week. maybe this week will have to do with this eight day lovefest. jonathan: wednesday, november 15, president biden and president xi said to meet on the sidelines of the apec summit, just confirmed, in san francisco. two leaders who have not spoken since the g 20 summit of last year. on the agenda, ai, fentanyl, on the agenda. let's go back to our poll that we released in the last 24 hours on swing states in america for the 2024 election. just 1% said u.s.-china relations were their most important issue. 1%. tom: annmarie hordern has been wonderful on this. i think it gave perspective that

it is domestic issues, yet, that pole confronts the geopolitics of the moment. it is 5, 6, 7 things that are a november distraction. lisa: there is a question of the crossover of other issues. there is a lot of intertwining of the issues when you talk about border security and other things. i will say, notable that president biden is doubling down on the international, even as some of the polling is saying, hey, people are focused on the domestic more. tom: no one else is talking about it, three to four days in a row, euro-yen with challenges on why ccn japan. -- on ycc and japan. that is what i will be looking at sunday evening. jonathan: what will i be doing? tom: socializing in manhattan. jonathan: you can see me on sunday afternoon, and you will see a green dot and a red one

next to you. on the s&p, positive 0.8%, up by a couple of basis points. 4.60, 10-year, the rally is back. tom: we have to mention oil, $76 a barrel. that is an underpinning to the market of this talk of disinflation. jonathan: and an associated fear, you get a break of 4.50 on the 10-year. i would like to have the conversation about slower growth into next year. tom: the ambiguities into the weekend. senior vice president of ambiguity, bank of america private bank, john quinlan -- joe quinlan joins us. joe quinlan, what are you doing in asset allocation? let's start with cash. i have it in the money fund making a percent. am i over-cached right now? joe: not really.

i got back from the midwest, talking to clients. they're happy to be in cash because they're worried about the election and geopolitics. from our perspective, take the cash flow be ready to lean into equities. get your shopping list ready to rebound over the first half, maybe the first quarter of 2024. cash is ok now, but long-term recurrence. tom: what sector are you going to lean into? is a growth or value that will drive us out 24 months? the sector specific joe: like technology -- joe: the sector specific is health care, we really like technology, cybersecurity and the realit of the world, so it is a mix of growth and value that large-cap meters are in the various sectors. jonathan: on cybersecurity, the icv story got a ton of attention the last day or so. a cleared treasury trades after

this attack of the suspected criminal gang with ties to russia. how much money has been spent on that area on wall street, financials and companies all across the country? joe: when you add it up, it is billions of dollars from big banks. we have to move it to the regional banks. of care. hospitals. -- health and hospitals. cybersecurity is a growth industry, something we don't talk about. cybersecurity is invisible but very active and just as dangerous in terms of the overall level of activity. unfortunately, that is a growth industry across various sectors. jonathan: and then there are stories that you would like to be attached to, growth stories. joe: any other growth stories? i think we like the hard assets, the infrastructure story. we have seen a pullback with renewable spending, but i think we are on the cost of a

manufacturing structural buildout that will extend well into '25 amd '26. it is too early to go with cyclicals, but on a pullback where you can get a good company at a cheaper level price, do it. lisa: how much of your time do you spend talking to clients and same that long-term returns come from equities, regardless of the day-to-day fluctuations in bonds? just ignore that. it is becoming noise. joe: quite a bit because they are worried about the middle east and election. i am amazed how many clients when i talk about the election now, we are going to be exhausted one year out. we are having that conversation. really, since 1945 to 2022, the annual average compound returns on the s&p 500 are over 11% because we have a great private sector. i know everybody loves cash at 5% plus, but when you look at the long-term returns of u.s.

equity, the s&p 500, it is double. that is the point we keep pounding home to investors. so you have pullbacks, you step in and you buy. lisa: it has come on the heels of yields going higher and this has been a part of what is spooking a lot of people, that, yes, those 11% compounded returns since 1945 came on the heels of a massive bond market rally that fueled a lot of the gains over the past 40 years. suddenly, we might be setting up for a different scenario. does that matter to you? how much do you say it doesn't matter because the private sector will remain strong? joe: a little bit of both. the private sector will be the private sector, but remember, we only had zero interest rates, very low interest rates. we had a 10 year yield, that was the anomaly. we are going back to normalization, so if you get a 10 year yield that 4%, 4.5%, a 30 year mortgage rate that got 6.5%, that is normal.

so we are normalizing a healthier level actually, which is going to help set the foundation of more growth and more earnings and upside for u.s. equities. tom: you know the ballet, it is november and i am going to "window dress" until the end of the year. tell me about the quinlan window dressing. how far behind big tech's institutional wall street? joe: many mystics. we saw last year tech that crashed, so a lot of people said i am not touching this. we saw that mr. rally in general -- miss the rally in general, not just tech. people are realizing that core holding for portfolios is the ai revolution, the cybersecurity risk, that really leads to technology, and we, the big seven, and other companies, we are the leaders, so when we want

to have that -- so you want to have that as a core holding. unfortunately, we are looking at flows coming in from overseas. everybody would like to own the u.s. and come to the u.s., so it is still that type of world. you do not want to be so u.s. centric, but all roads when it comes to innovation and productivity, it is the u.s. jonathan: you are not lonely on that point, thank you, joe quinlan from bank of america. the latest on the international front. i think china would like some of those flows. getting confirmation moments ago that biden and xi will meet november 15 on the sidelines of the apec summit. first conversation between the two leaders so far this year, widely anticipated, simultaneously played down by the white house. it will deliver any kind of breakthrough anytime soon. a lot of people have doubts. lisa: expectations are low but people have framed this as just

having discussion for the first time between these two leaders in a year is a good sign of softening ties. it comes at a time when there is speculation that china is behind an increasingly tight ring with iran, russia and china, all the names put together around geopolitics that if there is a dialogue between xi jinping and president biden, a lot of people are saying that alone might be a good sign. tom: i wonder if it is a meeting of complexity or simplicity? i don't have a strong opinion. it will be fascinating to see if they stay on first order niceties or they dig into details. jonathan: i can tell you what is on the agenda, according to officials, on the agenda, the military issues involving artificial intelligence, fentanyl, and attained americans in china. if you are joining us, welcome. increase on the s&p 500, positive by 0.3%.

4.5944 on the 10-year, a quiet and to the week potentially into the weekend. lisa: i love watching premarket trading activity and seeing how different it is at 2:00 p.m. in the afternoon. it changes on a dime. it very well can and it has. the conviction here has to come from either long-term or short-term following certain momentum. to me, it was interesting. kathy jones said that bond volatility is here to stay and joe quinlan same, ignore it all, buy stocks, bonds are noise, and stocks will keep doing well because that is what has happened the past 60 years. jonathan: if in doubt, blame the hack. tom: it will be fascinating based on bloomberg reporting. get out the calendar. it is november 10. i believe one week from now, we will enjoy a government shutdown. nobody is talking about it.

normally, there was a countdown clock for government shutdown. usually, this is the number one topic and now it is buried behind seven stories. jonathan: because we have had this story so many times. desensitized to it. i am with you. tom: it is creeping up. the biden administration shutdown planning calls on thursday. you know, it is a conference call. 400 people were on it. jonathan: annmarie hordern is on the call, talking about what they can do and how to get ready ahead of that shutdown. just in case anybody ever believes some of the stuff that tk is talking about. equity futures on the s&p 500 positive by 0.3%. live from new york, good morning. this is bloomberg. ♪ (sfx: stone wheel crafting)

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>> the united states has no desire to decouple from china.

a full separation of our economies would be economically disastrous for both of our countries and for the world. we seek a healthy economic relationship with china to benefit both countries over time. jonathan: treasury secretary janet yellen speaking in a meeting with the chinese vice premier in san francisco as president biden is set to meet with china's president on november 15. they do not want to decouple but diversify. decouple has become this word that nobody would like to use anymore. i don't think they even want to stay de-risk. they want to say diversify. tom: catherine mann over at the bank of england really codified the dysfunction of the relationship and the key phrase they use is not decouple what codependency. maybe the question in san francisco is how much does china need our commercial business?

to me, with the executives meeting, that is the background. jonathan: the data that came out more recently, negative. so we have been talking about this offensive that china officials need to go on a charm offensive here and provide u.s. leaders with clarity because if you are making a 10 year, 15 year investment in the country, you want some form of predictable visibility. tom: recall that hong kong. jonathan: something stable. tom: speaking with lord patton the day of hong kong, he was in tears and the interview. it is as simple as that. look at the facts and observation. that is where you get this true bipartisan approach to this important meeting out of washington. jonathan: it looks like they would like to calm things down. i would be surprised if you got anything but that in the next week or so. we will see. tom: joining us is annmarie hordern, i washington correspondent. we can tilt towards the meeting

with china. i mentioned this earlier, but let's do it with china on this important meeting on the 15th, does anybody really care about foreign policy? or is that the province of people like you? annmarie: well, the president of the u.s. does. it means he has to use a lot of capital. these are things potentially not top of mind for the american people but the president is dealing with issues that he did not run on, issues he has to deal with. two massive conflicts right now in the world, russia's invasion of ukraine, what is going on with the conflict between israel and hamas. when we look at china, it is not just this concern about economics or whether or not what the future holds for china and are they going to invade taiwan? the fact of the matter is, the u.s. and china are on opposite ends of these conflicts. you see a power struggle right now. i think that is why the global

community, even if americans are not paying attention, leaders around the world would like to see these two countries, even though jonathan said earlier, there is no deliverable, but they want to see the dialogue between president joe biden and xi jinping. tom: i believe the president of china will fly back and the government will not be shut down two days later. is the president of the u.s. going to fly across the country to a november 17 shutdown? annmarie: i guess that is why xi jinping has his central planning. listen, president biden should be back in time for this deadline. remember, the government shuts down 12:01 a.m. saturday, november 18 morning. so they have all of next week to figure out, potentially we will get it text before the weekend or at least before the end of the week it is up about speaker mike johnson and what he plans to do when it comes to keeping the government open. is it going to be a clean cr? he has potentially voted a resolution to keep the

government funded until next january, january 15 or april 15, and there will be this laddered approach, which some lawmakers are struggling to understand what it means, but basically having multiple fiscal clips, keeping some agencies open and having different due dates, but we will see how the republicans plan and the house of representatives to get this through. speaker johnson says he does not want to shut down, but that is what cost kevin mccarthy his job. lisa: i want to stick on what we are looking at internationally in respect to the meeting, you are talking about complex with ukraine and the israel-hamas war and how they heightened awareness of an increasing closeness with china and russia and iran. how realistic, how close are these ties becoming as the conflicts escalate? annmarie: i think these ties are very close. look at the derose russia is using an ukraine -- look at the drones russia is using in ukraine. this is something the administration wants to put a

lot of pressure on to stop. china has a lot of power in these conflicts. he can put his thumb on the scale and put some weight and pressure on president putin and he ran to honestly -- and iran to honestly hold back and to stop some of this, but china for the most part has said some of the right things in public. not all. it took them days. i don't know if they have cited -- if they have said it expressly to condemn hamas' attack on october 7, but china is getting a lot of cheap fossil fuels at the moment. right now, they are getting tons of crude from iran, and they are getting basically russia, someone said to me, has become a penal colony for xi jinping in his fossil fuels, and their hoarding the fossil fuels from russia and iran. china has a lot of stakes in this, as does the u.s. one thing we should look forward to in this meeting, which i will be covering this.

they have not spoken since the last g20. this time we are going to san francisco. this military to military potential is engaged -- engagement potential, that was cut off when nancy pelosi made the trip to taiwan in august 2022. who is lloyd austin's counterpart at this moment? china has yet to name someone after their previous was ousted. lisa: do we have a sense of how much geopolitics will dominate? there are other issues at play, but how much of these escalating conflicts and the tit-for-tat you are talking about in the south asia see will be at the crux of what they are dealing with? annmarie: well, i think it will be a slew of issues. fentanyl is going to come up. i was looking at the fentanyl data and the deaths in the u.s., and republicans have been pointing to china as this number one influence when it comes to fentanyl in the u.s. they have increased every year over the past decade, and last year it was the most we have

seen, tripling the prior three years, so this is a concern and that is showing up in our pool. more americans would like to see eight to the u.s. southern border than aid going to ukraine -- aid to the u.s. southern border than aid going to ukraine. so the military to military engagement and what is going on right now with these two power struggles in ukraine and israel, these will be top of the agenda. jonathan: thank you for the latest in washington, d.c., on a meeting between the two leaders of the u.s. and china next week. let's sit on china, what was it for the economy this year? we were meant to have a boom, but it did not happen. look at the luxury class, hitting hammer today. ultimately, it is down double digits on the year to date. earlier in spring, we talked about a boom for european luxury. it is up today by only one percentage point. we have basically wiped out all of the gains for the year.

there's luxury story has not materialized the way people thought it would in 2023. tom: i would take it broader, this has a china angle to it, and i would take it broader with retail sales, 70% become -- 70%. i will draw luxury down to the basics of big-box retail. it is a mystery. that is all there is to it. lisa: it is more of a mystery in china than the u.s. because the u.s. with savings and fiscal impulses kept people spending at a pace that surprised everyone. in china, the reluctance to spend, even when people had money, surprised people. they have savings, but they do not want to spend it because there is not the confidence, and people underestimated that. tom: and someone in china beige book would say it is just about that, their confidence and the only conduit they have, which is

the property sector, separate from what they do and shanghai. jonathan: huishan has had a difficult quarter. softer demand for watches, carte'are. tom: i mean, they have cartier, how are they doing? jonathan: they were seen coming out with an orange brand bag. lisa: what is it with watches? the idea that somebody wants to wear $30,000 on their wrist? jonathan: it is a status symbol. that is a different conversation. if you are someone who really admires the workmanship and craftsmanship that goes into something -- tom: that is why swatch exists, i got one and it works. lisa: there is no way you had one of those. no way. jonathan: from new york, this is bloomberg. ♪

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tom: bloomberg "surveillance" off of the tragedy of yesterday, dow futures up 106, 6 written in a 14 level. we go to lisa abramowicz for team coverage. what happened to the gloom yesterday? lisa: it might be able to come back. the issue is people are trying to fumble around different levels. i go back to joe quinlan saying it is getting exhausting, ignore it and stick with stocks. how many people are going to coalesce around that? tom: or is it the good feeling of the banter that we talked to

and recording about, the president of the u.s. will meet with the president of china? that is germane to me. lisa: you think that is giving people confidence to going to risk assets? tom: he takes one level of fear away. -- it takes one level of fear away. it is a good take this morning. jonathan ferro in preparation for -- i don't know? is he doing real yield? he is working all afternoon i think. dana peterson is coming up. futures up 12. right now, this is important. down in honor of the annual research conference at the imf, michael mckee was holding the door for jerome powell yesterday. michael: we are not going to go there. lisa: all morning, mike. tom: in your years and years of doing this, and we will not go through the litany of his stories, it is the biggest risk for all these people, that dreaded off. michael: everybody in public

life goes through that at one point or another. the most famous of all was ronald reagan when he was joking around and said we would begin bombing in five minutes. that went out over a live microphone. that caused consternation around the world. tom: let's talk about the consternation we saw yesterday and our data dependency inflation report. this next week's report cure all if it shows a disinflationary tendency? michael: it probably makes things a little less volatile for a while. let's put it that way. it is hard to know with everything going on in the world where you would like to end up, and i noticed that several bond market strategists are singing, the one thing you do not want this to go long into the weekend because nobody knows what will happen. but basically, powell tried to push back to where he was the day before the fed meeting or right after the fed statement came out when everybody was

taking that as relatively hawkish and then his press conference, as it often happens, turned out to be more dovish. and they started pricing in rate cuts. but whether he is going to be effective at holding that, it is hard to say. when you look at where the bond yields are today. lisa: we joke all the time, but in reality, how often do fed officials look at the bond market and then calibrate their discussion points around what they see there? michael: very rarely. as long as it trades are not feeling, they realize that markets go up and down, and there is not always logic to what is happening. so they are not going to get overly concerned. they look at the fed funds futures and they know they can change on a dime. by next wednesday at 8:30, we get cpi, and who knows where yields could be. as the fed looks at this stuff, we cannot control that or do anything about it. lisa: we talked about citigroup

coming out earlier today, and andrew said earlier he expected the fed to hike one more time, now he isn't. now he said the bar to hike again is infinitely high at a time when we do see signs of a slowdown, particularly in the employment data. do you agree? do you think all things being equal, the fed is done unless something catastrophic happens or incredible? and that they are more willing to cut rates? michael: no. that last phrase would be where i would disagree. i think the idea of infinite is not necessarily true. i think the bar is higher for another rate increase, but not as high as the bar for a rate cut at this point. the fed accepts the idea that as interest rates stay high and inflation goes down, in theory, if it goes down, that real rates rise, and they may want to back off a little bit to keep

essentially the same amount of tightness in the markets, but they do not know when that will happen because they do anticipate, and jay powell said this yesterday, the last percentage point from three to two will be really hard. therefore, they need to keep the pressure on, so they will not put any date on it and they do not want the markets doing that. so they are staying away from the rate cut part. tom: one quick question in the zeitgeist this weekend, this is claudia, who has been a supporter of what we have done, she is trying to gain recession and has been clear about what her data says in her equation. army anywhere near a recession? michael: not based at this point . if unemployment continues to go up, you could see that. right now, she points out, you have to go basically 50 basis points higher and we are only 30 basis points higher, so you have room between now and then.

she also things because this has been an unusual recovery, maybe the rules will not apply this time. change to rules. tom: sounds like career soccer. michael mckee, thank you so much. a brief, wonderfully positioned board, dana peterson, how are we into the retail sales report next week? dana: interesting things that they complained about, they are concerned about high food and energy prices, saying interest rates are too high, impacting their ability to buy homes, and they are more concerned about geopolitics on the state of washington. with all of that, consumers are saying they are concerned about job availability and their finance and incomes. lisa: i love that we will have a segment about feelings ahead of

the survey we get out, the university of michigan sentiment survey we get at 10:00 a.m. how closely related our people's feelings with their doings and with what they are actually buying? dana: the interesting thing is when we look at current conditions, consumers are still purchasing things, but they are putting it on the credit cards. earlier this week, we received data from the new york fed that shows that credit card use is still up, rising, and so are delinquencies, for credit cards, auto loans, and other loans, now slightly above the 2019 level. consumers have run out of that excess savings, especially at the lower end of the income spectrum, and they are shifting to expensive debt to finance purchases. lisa: is there some correlation historically between a downturn in sentiment and a recession in the labor market? and other indicators that are more closely followed i people at the fed and beyond? dana: if you look at the consumer confidence index, it

almost never tells you what is going to happen with consumption and the gdp dipped of data, but it does give you a sense of how consumers are feeling, and if they start worrying about the future, especially jobs and business conditions, it often times pre-stage or something negative. we have a new indicator in our consumer confidence survey and we asked them, do you expect a recession at some point over the next 12 months? those expectations have eased, but it is still 69 percent of consumers saying there will be a recession. tom: i think that is really valid. in all the work you did and economic history you do that west lane, which leans on economic history, is there any ability to pick and call a recession? dana: we do have our leading indicator, and it is usually pretty good at signaling recessions. it has been negative for 18 months, signaling recession for quite some time. the thing is that it does not

have much in the way of services. service spending has been very strong, and that is a product of the shifting and demand post-pandemic, less on goods, more on services. it may not be telling the entire story, so we are watching other measures of services. tom: absolutely brilliant. the basic idea here, and the question to dana peterson is, ok, if it is a services america, and a kind of services america which we really do not understand, can we utilize friedman -- friedman could be your great-grandfather, could we utilize friedman from 1950 whatever with long and variable lags? could we have that conceit? dana: i think long and variable lags are relevant. we look at monetary policy, it hits the economy at different points in time, so higher interest rates have subdued the housing market. when we look at the gdp from the third quarter, businesses are

getting bitten by the higher cost of capital. the next is consumers. in our survey, they are complaining about higher interest rates and that is going to start affecting consumers when they have to start paying elevated credit bills at those high interest rates. lisa: how political our people's feelings? dana: well, we don't ask them how do you feel politically, but we do ask what they worried about. more are saying they are concerned about gop politics and what is going on in washington. we really should look to what happens in elections to get a good sense of how consumers feel. we had one this past week. lisa: the reason i ask is there have been a number of surveys showing big divides in this sentiment among different voters based on specific issues and how they are being portrayed in certain circles. i and wondering whether that is becoming a more polarizing factor in sentiment surveys in

recent years or if it has always been that way dana: dana:? when you look at one of -- if it has always been that way? dana: one of our competitors ask people how they feel by political party, and it is usually the case that whatever party is in power, folks usually feel better than the other party if they are depending upon the political affiliation. it is not really a great measure because if your guide is in the white house, then you feel good about it. tom: thank you, dana peterson, terrific brief on the data we look for next week. i think everything is topsy-turvy right now. we are seven days out from a government shutdown. nobody cares. i don't care what annmarie hordern says. the idea that we have huge data next week and nobody is really talking about it. lisa: i love that you say that anne-marie was trying to make us care about the government shutdown, you are trying to make her care about it and give us information about it because we

don't pay attention to it. and the reason why people are paying attention is because it seems to happen every other month. you are right, i think the cpi data will be a big deal. tom: really big deal. lisa: especially because of the volatility and lack of certainty and the trajectory going forward. to me, the amount of jumpiness you get in bond yields and risk assets is keeping everybody a little bit on their toes. tom: i think we have had a dearth of holiday shopping microanalysis, not that i have ever paid much attention to it. the market surging here, it is a rally. the vix, 15.02, trying to give us a 14 print. the s&p is up 14 points. app .3%. lisa: when you talk about holiday shopping season, do you shop before thanksgiving? have you ever waited in line for the store?

before a store opens on the morning after thanksgiving? tom: in the old days of a more graceful wall street, you would work christmas eve, take somebody to lunch or late breakfast, whatever, and then you would begin shopping. you would begin your shopping 11:00 p.m., 11:00 a.m. christmas eve. you would go and find something for somebody. not a lot of planning. lisa: is at the tom keene description? tom: a lot of people used to do that before retail madness that we all invented. lisa: why is it that we are here today? because there are a lot of places that are shut down the day before veterans day. i am trying to understand what the bond market holiday is and the stock market holiday is. tom: i had the honor of giving a speech about this, the oddities of when we trade stocks is comical. like, we are off good friday, but we are not off choose your major jewish holiday.

i find that completely non-modern. i think that is from the 19th century. and you have it here with veterans day, which for the people who served -- i did not -- but for the people who served, i am sorry, this is an important date to remember world war i. lisa: and they will be a moment of silence at 9:20. later this morning. in honor of veterans day. it is an important holiday. to me, the confusion around -- tom: well, there are 35 days left of the year and i have 40 days of vacation, so see you then. [laughter] coming up, our last interview of the year, sonla meskin. futures up 15. bloomberg's "surveillance" from new york. ♪

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less of an influence on where rates go from here. unfortunately, that does not mean that it is going to go away. why is the fed done? because they will be at headline inflation coming down rapidly, so even though core inflation will be sluggish, they will get head cover from headline inflation. lisa: that was our bloomberg opinion colonist speaking with jonathan ferro yesterday at a time when many people are expecting volatility and treasuries to continue, regardless of what the fed does. jon is preparing for the 9:00 a.m. our. tom keene and lisa abramowicz as we head toward the opening bell. straight to the s&p futures, up .4%, as yields continue -- tom: the vix is under 15. 14.95 because of the 30-year bond auction. lisa: so does it stick or not? forget to our next guest, i would like to give you a sense

of one share moving this morning, diageo, in addition to richemont, the swiss watchmaker, diageo shares plunging after cutting the outlook with the head of the company saying that there are materially weaker performances in latin america and the caribbean. tom: this is a huge deal and there are number of ways of looking at this. a singular disappointment for l vah, it was all thing cognac sales in america, but in the fancy liquor part of the luxury business, i think crater is the operative word right now. lisa: do you think this is specific to the liquor market? is it something that people are moving more to craft or specialty things? tom: maybe. lisa: or is this indicative of

luxury demand? that is one of the key questions with the two prong spirits and watches. tom: i will make this up, and deal with people in london who are experts in this, but the bottom line is i think there was a pandemic acquisition. you do not down a bottle of cognac in one night. i don't think that is the way it works. so they bought in. so there is a long and variable lag. lisa: arguably, that long and variable lag during the pandemic was less. let's move on. joining us is sonia meskin, as we head into a potentially volatile week. do we have eight cents, sticking with luxury, of how much some of the warnings that we are hearing in the spirits and in the watchmaking stocks, indicate something broader? >> it is tough to say. i would point out that these are

items that were popular during the pandemic and they may be subject to an ongoing reversal with long and variable lags that you just mentioned. but those are just a couple of sectors. there are others that are doing much better. tom: do you take a more cautious view here? if you are capitulated from a more hard landing and strident 2024, do you ease that back or stand with a cautious view on disinflation? >> here is the thing, we have been pretty sanguine on the possibility of a soft landing for a couple of months now. we do not really believe that has changed much. we still also believe that the tails of the distribution remain fatter than usual. we do think that heading into 2024, you could get a delayed a bit harder landing. tom: i love that you called it a slam on the brakes 2024.

is the fed, "slam on the brakes? " sonia: what if inflation stays sticky and employment stay strong? they are trying to thread the needle that not only will inflation stays sticky, but employment might actually weaken considerably. what if it does not happen? tom: in front of this was jim bianco of chicago who said to me what you are saying, ok, celebration, and then we go level. that is what lagarde is talking about, we go level. lisa: the gap in the range of potential outcomes is shocking to me, and the fact we have some people saying exactly what you are saying, the risk of celebrating inflation and growth is significant, and others saying we will head toward a hard landing and rates will go near where they were before as a benchmark rate with inflation, just highlights why you are seeing a ping-pong and yields because nobody can figure it out. what will be your guide to understand when that risk shifts and becomes more visible in

terms of which of those two extremes we end up with? sonia: in terms of economic data specifically, it is important to watch what happens with the potential component in the early 2024. we know that some areas, such as inflation and medical care, there are some dynamics there. they are just base affects. how will that play out in 2024? and also what happens with the participation rate and employment gains because with what we discussed here, a lot of the participation gains have been helpful to contain some of the wage growth, but it is mostly coming from foreign-born workers. will continue in 2024? lisa:lisa: do you have a sense if the long and variable lags are very long where they have been baked in more than people previously expected? this has been one of the big debates, and chair powell talked about this yesterday. he said it has been perpetually surprising how strong the

economy is, given how much tightening we have done. have we gotten clarity on that? sonia: i think the bigger corporate's that are refinanced early during covid are still doing well by a large. the smaller businesses are suffering, but for that to percolate into the broader economy may take a long time. tom: futures of 19. standard futures up .4%, now up 1.44. we are basically 15% back to where we were before the carnage yesterday. the vix with a stunning 14.88, the 10-year at a solid five basis points. lisa: we have seen this incredible volatility, particularly with credit unions, does that affect economic outlook in a material way? sonia: it could, but over time because it affects how corporate's refinanced themselves. the bigger the needs, the bigger the impact. i think that will be a theme into 2024. tom: do the formulas work right now? or are we just making this up

post-pandemic as we go? sonia: dana peterson, who was on me before made a good point that the leading indicators are mostly indicated on the good sector, not services. the big question now is more in services, will it remain sticky? tom: so retail sales next week, that is a services view, even though we are buying goods? sonia: i think it is both. lisa: that highlights why this has been such a difficult period to get your head around. earlier this year, we talked about a rolling recession and different industries -- tom: that worked out. lisa: there was a question on whether we would see coalescing on downturn or recovery. where are we in that revolving chain of economic cycles that does not seem to be coming together? it may be sonia: sonia: a longer cycle than anticipated -- sonia: it may be a longer cycle than anticipated. it looks like we are watching

gentle decelerating and a robust economy at the end of the year. 2024 is the bigger question. tom: i have a chart at the vix, too quick to make it on television. i have a double leg vix move yesterday. we just made back all of the powell comments move, and now we attack the 30 year yanks of yesterday. lisa: this has been the volatility, with people trying to get a handle on how much to have faith. you say next year will be when we see this massive deceleration. the lack of conviction around this is shocking. how much conviction do you have that we will see a real drop off and potential downturn? sonia: i think people do expect some deceleration and potentially a bigger one that is currently priced in. i think the big issue is timing. because it is difficult to time, it is difficult to price in. tom: thank you for the brief. sonia meskin.

you talk about whiplash, this is seriously, you mail the auction from 12:00 noon yesterday, let's call it 21 hours. lisa: you nailed the optimism coming out today and that it was all over. tom: who am i borrowing from? many others. something is in the air. it is not me. lisa: it is the holiday spirit. there is something in the air. i like how michael hartnett at think of america said we have gone from bearish to full bowl. tom: i missed that. lisa: the idea of greed taking over, fear in a massive way. and people, lean into it, embrace it because you only have so many months left of 2023. kumbaya. tom: thank you for all of you with jonathan ferro's interview with christian horner. join us on monday. a far more troubled leader a

formula one dealing with a difficult car. toto wolff will join us in a six block our on monday before the las vegas grand prix. from new york, good morning. ♪

jonathan: a bit of a snoozing morning, good morning, good morning, your equity market is up by 0.1 percent. your countdown to the open starts now. >> everything you need to get set for the start of u.s. trading. this is bloomberg, the open with jonathan ferro. ♪ jonathan: live from new york, coming