when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. >> slow down is here and it will continue. we still have the worst ahead of us. >> we could see inflation moderate without a recession. >> by the end of december into january is when we get the moment we went too far. >> you have to have humility. >> the market is volatile because nobody knows what to do or expect. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: slow news day. david solomon, "it is clear my

djing has become a distraction." this is "bloomberg surveillance" on tv and radio. alongside tom keene and lisa abramowicz i'm jonathan ferro. slightly negative on the s&p 500. tom: did you see yields yesterday? i woke up to lower yields. what i am focused on is housing and how it folds in with housing data today. we are all laid up for a lazy path into december but i have my radar up. jonathan: cumulative inflation is what you are focused on. "it is hard to find an area of household budget that has been spared. groceries are up 25%, same with electricity, used car prices have climbed 35%, auto insurance up 33%. rent roughly 20%."

that is the reality a lot of americans are living. tom: the pushback is there are rising ranges and i think the public does not buy it. the public saying we do not feel the rising ranges but i'm focused on rent and multi family folded into today's economic data and how that follows into the stock market. jonathan: dip keebler to inflation of the last three years is why so many people indicated they do not feel good about this economy. lisa: even if their wages went up the same amount research has shown the prices you pay are stickier than the amount you are earning. people do not deposit checks anymore so they might not see the same kind of wage inflation. the other thing i say, it is a slow news day, so you want to talk about the djing. you want to slip that in. i think that is interesting. you did lead the show without. jonathan: now david solomon is

saying it has become a distraction. a media distraction. it is out how they would like to frame it? lisa: not a distraction from his focus on the company, but it shows where we are at in terms of the news flow we are focusing on. tom: is a fragile time for executives and those who are receiving bonuses. we are into the year end season. how do we recalibrate into next year? i would go as much as the berkeley news with a troubled bank trying to figure out what the path forward was. we do not talk about barclays london-based but all of the banks are doing a barclays. they are saying what is the future? jonathan: a big conversation in london, manus cranny and dani burger talking about it, the financial times indicating they could be cutting clients to save costs. tom: anything goes.

we will be at apollo next week. what are we doing? coffee? danish? jonathan: great line-up. tom: this is important because they are at the nexus of this debate. is it private industry, private equity? jonathan: fed speak is back today. lisa can go through some of the names but it climaxes with chair powell on friday. tom: the fed speak, i will go to jay powell, but what will we hear? but i am seeing is what david rosenberg is talking about. the housing data moved the market. a lot of these narratives are not moving the market. the stock market is half-asleep after a big rush. jonathan: we might be too. lisa: 100%. tom: i think the housing data is a big deal. jonathan: equity futures slightly negative on the s&p 500.

we need to talk about holiday spending. black friday, tremendous. all indications much much better. the tsa record travel over the thanksgiving holiday, back to a record. america is getting back to it. lisa: isn't it nice? it is curious how they are paying for it and we can talk about leverage going up with by now, pay later. tom, you are focused on housing prices. we will get the 20 city home price index and at 9:00 we are also getting other price indications. yesterday new home sales came out much below what people had expected but the median price of those home sales has fallen 18% year over year which a lot of people focus on. the key question, is this just builders discounting existing homes they build to clear inventory or is this a market decline in prices for houses? i am curious about that.

10:00 the fed speak commences. austin goolsby and chris waller speaking at separate event. later we hear from michelle bowman and goolsby again. tom: auction update? lisa: at 1:00 the u.s. treasury $1 billion verdict of seven-year notes. it was partly because the auctions came out pretty well. tom: -18% on housing which is a stunning number. it leaps past 2008. the 30 year mortgage has cratered to 7.81%. that explains a little. jonathan: jonathan: what was the last time you read a story about sam altman and openai? lisa: it fell off the radar. jonathan: thank goodness.

we have not got a price target yet from you for year end next year. i know you will be putting that out. one thing you're looking for is this rally to continue. what is interesting about your call is this is not a rate cut call. you are not looking for rate cuts until next year. what is this bullish view based on? john: it is based on a lot of things. thanks for having me on the show. the big story is it is technology is changing the way we live. we all know that but we get jaded about it. the whole concept of the investment going into ai, the efficiencies that already ai as it exists create for profitability for companies, even in tough times, and the changes it can make that are positive for consumer and business as well as questions as to what is negative about it,

overall says stock prices to move higher as technology feeds all 11 sectors, or the other 10 sectors or the other nine because two are predominantly tacked -- are predominantly tech. tom: you nailed the year end bull market rally. back in the summer you were a piñata, the market moved, and here we are with the bull market. is it a bull market and will all of that cash, will a part of all of that cash buildup we have moved into stocks? john: i believe it will. there are several things involved. the baby boomer generation has begun to retire quite a while but there is still a lot coming. the problem is they may live longer than they ever would have expected when they first opened up their ira. in retirement people will need

to own equities. interest rates, we have yields much more attractive than they were before. net after taxes do not look all that good based on where inflation is today and even if it goes to 2%, a 5% yield does not turn into that much attraction. owning good businesses -- past performance is no guarantee of future results -- but owning good businesses that are well-managed seems to be a good way to invest in the intermediate to long-term. this looks like the best opportunity in this time, this looks like a great time for investors in equities and a good time when all of a sudden a bond issuer has to pay for the privilege of borrowing money so you can diversify. lisa: it strikes me that this does not sound like a late cycle market. do you think we are actually

midcycle? john: i think the midcycle is as wide as the amazon, not a reference to the company by that name but the river. we have thought that since ben bernanke changed the way the fed operates. the end cycle has been distorted by the changes the fed has made in communication and insensitivity to house mandate affects the economy, both the consumer and business. it is a positive change. the imperative is the personality of the fed chair be attuned to the ben bernanke legacy and we think powell is attuned to it. lisa: i was struck by the midcycle call because you like cyclicals and financials at a time we see them looking at ways to cut costs. why are you bullish on financials given everything we

have seen in capital markets being as slow as they are? john: looking at costs is a positive thing. we saw when technology looked at costs, we saw one of the biggest technology names go from down 70% to a huge rally. we think banks may not do that, but related to banks they are in a good position to fund what is coming forward. tom: as the world awaits your 2024 bull market call, what is the attribute that is the greatest mystery? is it some cfa ratio? is it something the fed is doing? what is the thing that determines whether you will be at 6000 or 5800? john: a lot of it has to do -- the markets are like music. they are a combination of mathematics and emotion. if you look at sheet music it is hardly mathematical -- it is

highly mathematical but what brings it to life is the interpretation. we have to beware of darkness, the projection of anything that looks negative the bear camp can take and negatively into the future up we have to watch for that because markets have good days and bad days but the overall trend looks like because of the rate of innovation we have come and the positive effects on the consumer in business, we think there is more upside than downside. we would say beware of darkness. that is a quote, i think george harrison. jonathan: lisa feels seen. just had you out of the corner of my eye feeling quite seen. beware of darkness. lisa: i feel like he is seeing into my soul. he is saying it is not a straight line up. it will be choppy. there'll be moments of angst.

jonathan: let's catch up before year end when we finally get the price target. i mention the price target is higher. tom: i tried to get 6000 but he would not comment. jonathan: you think he is at 5100? tom: this goes back to gina martin adams, you cannot participate in the american investment and economic experience unless you play. if you're on the sidelines, whether it is 5% cash or whatever, you did not get to play. that is their thesis. jonathan: then you mess -- then you miss big days and months like the month of november. news on israel. israel and hamas have extended their truce after agreeing to release more hostages and prisoners and washington, secretary blinken visiting israel for the furred time since the attack -- for the third time since the attack. tom: it is the ballet.

there is so much coverage i do not read the articles, just gaze the headline and the tone. it is a constructive tone. my answer is what we talked about yesterday with a qualified guest, aaron taylor miller. how does the military of israel respond to this blanket hostage coverage? lisa: everyone is resetting and that is a question of resetting for what? jonathan: we will reset the conversation up next. coming up next, bill dudley on the fed speak. the fed speak resumes later on. from new york city, good morning. ♪

>> we have to expect of group like hamas, which does not abide

by laws of war, will try to take advantage of any pause in the fighting to their own benefit. we are watching that closely as well as our counterpart, you can bet there watching that closely. we have also heard the israelis say that once the pauses are over they intend to go back to military operations. jonathan: that was national security council spokesperson addressing the press as israel and hamas extend a temporary truce. live from new york city, good morning. on the s&p 500 equity futures pulling back .1%, snapping a two winning streak on the s&p 500 with a small day of declines. yields higher. went through all of the fed speak. america getting back to it. we have record travel at the tsa over the weekend. a record going back to 2019. black friday strong, cyber monday strong. tom: i will go to bed late lurk

in his christmas eve bull market call. -- i will go to ben laidler and his christmas eve bull market call. what we have seen in the pandemic and after the pandemic is the resiliency of the american consumer. everybody got this wrong. jonathan: can we extend the cycle? chris harvey and the team suggesting that good news might be -- do you want to say it? lisa: bad news. tom: that is the bad news side of the table. the hate mail i'm getting from bears is unbelievable. lisa: from me. tom: lisa email me again. it is that time of the year. jonathan: beware the darkness. lisa: there will be periods of darkness. tom: in the next hour joseph conrad will join us. we take immense pride for the wonderful team we have working

20 47 at giving you people of experience as we look at the horrific war in the eastern mediterranean. we have a former u.s. strategic intelligence official at the center for strategic international studies. i want to cut to the chase. my amateur reading of fiction is a cease fire is an intelligence opportunity. is this cease fire good for the israelis to develop intelligence in gaza? norman: good morning. you're absolutely correct. keep in mind the israelis have a variety of intelligence they must ingest. prisoner interrogations take quite a while. laptops have thousands of pages of data that must be reviewed and you are looking to identify locations of individuals, weapons capacity, movement profiles so that your troops can

use this as they plan operations when hostilities resume. this is probably one of the busiest periods for israeli and partner intelligence. tom: does their military effort want a longer cease fire? norman: their military is supportive of the hostage release. they are concerned bailout hostages to be taken because of the failure of october 7. this period is allowing innocent israelis are returning home but that does not undermine their commitment to eradicating hamas. jonathan: have they articulated an end game? norman: no, and it may be unfair to think about what an end game may be. we are in some ways in the easiest period of hostage negotiations. once the negotiations turned to israeli soldiers or men you will see hamas demand a lot more from

the israelis that the israelis are likely to give and this could extend the hostage negotiations far longer than israel could permit. we are also looking at a time when the american presence among the hostages remain significant. only one american has been released, likely because hamas wishes to keep american political pressure on israel. it may well be americans will not be released in the initial period. jonathan: something you've said that you should explain your audiences come is important not to explain procedural hangups with differences on hostage releases. norman: in the early days of hostage negotiations you have issues such as how to bring hostages to a safe location, which hostage will be released, and what that group holding the hostages feels about their loss of that influence. on the israeli side you prisoners who have committed quite horrific acts and the

families of the individuals behind those sentences are going to be unhappy about the release. you will have a process of working through this. that does not mean each side in this issue is not interested in the cease fire. all sides involved, hamas, israel, the united states, qatar , they'll benefit from a cease fire and hostage release. lisa: can you elaborate on the different factions within hamas that are holding hostages and why they might be reluctant to release certain hostages? how this is playing out in a political sphere in gaza? norman: we not only have different factions among the palestinians, primarily hamas, the palestinian islamic jihad, criminal groups that may have taken hostages and seek to sell them to their own palestinian partners, but we also have a communications problem. imagine if you are these various

groups, you know the israelis are looking for your communications and movements. how do you exchange the data and conduct those new beige asians to get that process going -- and conduct those negotiations to get that process going? lisa: what you expect antony blinken to do in his next visit to the region? norman: it will push for continued pressure on hamas to release not only hostages but to consider how they would consider a day after event. there is no personalization of what day after means. you may have international police presence to hamas thinking it can still survive because it will retain hostages. these talks are ongoing among all of the various partners. most important will be the saudis because they are leading such a large portion of the islamic world. in israel it is to make sure that he has a sense of where the

coalition is in terms of resumption of hostilities and how benjamin netanyahu is handling the hostage debates within his own government. tom: aaron david miller with us yesterday on how this is not 1967. if that is true and there will not be at camp david visit, eight camp david accord, our memory of normal diplomatic ties, will be the administration's approach to finding some kind of accord? where are we a year from now? two years from now? norman: very difficult to think forward. first you have to identify which partners will show up for eight camp david style agreement meeting. will benjamin netanyahu survive in his current political situation? it is doubtful. who will be the leader of the palestinians? the head of the palestinian authority is 88 years old. there will be no hamas presence

at the table. who do you bring to the table? those entities do not exist at present. jonathan: a massive question. great to get your view. it always is. we could have a six-day truce. this is a much more constructive moment. hostages returning to israel. six-day cease fire, temporary truce. the yuan indicating they been able to scale up delivery of humanitarian aid across gaza. that is the good stuff. let's talk about where we are in a week. tom: what is so important to me is every day this is improving. the moment we are in seems to be better than the first day of cease fire, second day of cease fire. cease fire's end and then what is the question? lisa: the fact that norman was talking about tony blinken wants to talk about what is next. we have not got much of a sense.

elon musk talking about how he will help rebuild gaza gives you idea of how much of an open slate this is. well be the involvement of surrounding nations? this will be a key question of other nations who said we want no part in this. how they evolve from this? tom: not that it is 1938, but how does the ministration respond to elon musk's efforts? i don't know. lisa: they ignore it and they move on. jonathan: i think if you leave elon musk to one side, norman nailed it. negotiations are hard enough, who are you negotiating with? that is all that matters. from new york city, this is bloomberg. ♪

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all of the work that we're doing, all over the world, and looks at the most effective ways, to get resources to them, to get services to them. the idea that we have saved five million people's lives, it's overwhelming. it's everything. jonathan: slightly negative on the s&p 500. same as yesterday. a soft start to the week. on the nasdaq going nowhere this morning. luxury in europe having a difficult day. blame hsbc, blame china. tom: a couple other shops as well. the year ahead outlook is to compare the price targets. 3% decline. far more importantly off of the joy of six months ago, something like lvmh, louis vuitton down

12%. there are no sales in the store but the sales -- but the shares are on sale. lisa: how much of that is the by now, pay later because i know this is something you're thinking about. how much of that is because those names are some of the entry-level luxury that a lot of people try to get into when they were flush with cash during the pandemic and will have to refrain from indulging in. jonathan: it is the goods. things like a leather belt. the buy now, pay later. that has faded coming out of the pandemic. lisa: some people are talking about that. it is also that people have to come back and maybe people are feeling uneasy.

you have always hated it. jonathan: cannot stand the big logos on stuff. tom: i am looking at buying now, pay later, the firm. jonathan: it always shocks me every time you tell me that. tom: i cannot stand charge cards with a 30% interest rates. jonathan: a prefer to do by now, pay layer -- pay later? tom: you end up paying less. lisa: there is no interest on credit card debt if you pay it off every month. tom: but people do not. this is how james dimon makes the bacon. it used to be 18%, you could rationalize it. 30% is biblical. it is old testament. jonathan: i thought you would go after the points on the credit card. tom: i don't use them, the kids use them.

jonathan: bond market shaping up as follows. two year down one basis point. backing away. auctions yesterday, the front end was soft. five-year decent for the curve. lisa: the five-year came in better than the two year. pretty low drama. have we seen the end of volatility and is the next big move down? because of economic data coming in softer than expected, and then you have people actually buying that is triggering. jonathan:. basis points coming up or down? tom: what you just said is an interesting call. jonathan: you often talk over me so let's move on. the euro on course for its best month of the year. 1.0 957. positive on the euro for the

month. tom: 1.10. jonathan: pushing it. israel and hamas extending their truce. the pause and fighting the last six days. antony blinken will make his third trip to israel since the war broke out. his office saying his visit will be aimed at pressing for a long-term solution to the crisis including the creation of an independent palestinian state. those concerns to the side, the longer the truce goes on, the pressure that builds domestically in america on this president to try to lean on israel to change course when they are not going to gets greater and greater. tom: in america it is obvious that i am interested in the less obvious germany, united kingdom, the other allies. to me each country is a different story about israel. to me the length of time helps the tragedy, but i do not know

and what it does to diplomacy. lisa: the message from hamas has been quite clear. they want to eradicate israel. how do you come up with a two state solution. israel has said they want to eradicate hamas. i do not see a resolution. who will step into rule, to oversee any new palestinian state, any kind of rebuilding? it is not clear. it will not be hamas if israel has anything to do with it. jonathan: is this about changing the objects the administration when they know they are under pressure to start pushing for an end to all of this. they were shoulder to shoulder in october 7 and now you can feel the tone changes. what was once a fringe view has started to become a consensus view. lisa: there is a consensus about a cease fire.

how does he deal with the fact that people are calling on him to dramatically reduce civilian casualties and civilian deaths, people dying in the tragedy we've seen unfold in gaza. it is unclear how we will proceed forward and will this be a cosmetic or optical gap between israel and the u.s. or will it result in conditions on aid and things like that. jonathan: former president jimmy carter expected to travel to atlanta to attend the memorial service for his wife. president biden scheduled to attend as well as all the living former first ladies. rosalynn carter died at her home earlier this month at 96. quite a day said to unfold in atlanta. lisa: melania trump will be there. that was interesting. former president trump will not. she will be there. it will also be wonderful to see jimmy carter. 99 years old. tom: and very fragile.

late together it will always be -- linked together will always be misses carter and mrs. ford. they took it are -- they took it on from nancy reagan it was more assertive but i would give the credit to carter and ford. jonathan: lisa nailed this. what a phenomenal love story. in hospice care since february making the effort to attend this funeral. lisa: they were married for almost 80 years. 77 years they were together. to me that is an epic love story that started when she was born and he was three years old and that gives a sense of that connection. tom: whatever your politics this was the humility of president carter. it came out of annapolis and him being quiet and southern and many would credit him with being our smartest modern president.

bill clinton would probably disagree with that. clinton and carter certainly had epidemic shops. jonathan: that is bill clinton's opinion of himself. tom: bill clinton was whip smart and so was president carter in his own way. they had to fight us through the dismal 1970's. jonathan: it was a tough time. let's finish on something far more commercial. no spending slow down for the u.s. shopper after online sales broke records, adobe predicting american spent as much is $12.4 billion on cyber monday. the record black friday numbers played a part in adobe boosting the outlook come as did the popularity of by now, pay later options. tom: i got just under 12.4 billion emails telling me something was on sale. was your phone just mental? jonathan: five a day from the cap. -- from the gap. in the sales get greater as the

day progresses. lisa: do you message them back? deal with your back end channel and how it is delivered. jonathan: it took me a long time to figure out. i did not realize you could go to the bottom of the email and hit unsubscribe. it took me years to figure this out. tom: i will sit there with a beverage and do 10 of subscribes. -- and do 10 unsubscribes. we will move on to the greater debate of what this means for economist. jennifer mcewan's chief capital economist. i want to go narrower on you. the importance of rent disinflation. it seems very different in america. i saw the scotsman in edinburgh and glascow talking about rent inflation in scotland. tell us how rent affects our economics. jennifer: ranks are a major part

of expenditure -- rent are a major part of expenditure for a lot of people. they are expecting spending power to spend on discretionary items and how confident they are feeling. also there is an influence on house prices so rent is affecting the whole of the economy. the extent they feed into consumer price inflation is quite different. a much bigger factor. tom: how does capital economics feel about that? we feel disinflation is in place on the cost of housing? jennifer: certainly in the u.s. agreement suggest there will be a further slow down in rent. i think probably we will seek rental disinflation in europe as well. as with other aspects of this disinflation story i think is likely to be the case will slow

down is a longer time coming. lisa: what is your rate cutting forecast? we are seeing 175 basis points of fed rate cuts next year from deutsche bank. we are looking at 100 basis points from the same team at the ecb. do you agree with those projections? jennifer: we do. we think the disinflation story is entrenched in the u.s. since it is clear core inflation will come down further. or that in the core pce deflator later this week. the economy is still very resilient but there is evidence the labor market is starting to -- wage growth is coming down. we think that will plan to further core inflation even if the u.s. economy remains resilient. we expected to see something like 150 basis points in cuts from the fed next year. lisa: are 150 basis points next

year consistent with the idea of a soft landing? jennifer: i think it is very much consistent with that idea. that would still leave interest rates not in accommodative territory. if we were in a recessionary situation, and may be the fed will cut by even more to try to get interest rates lose and to try to get more stimulus to the economy. instead what we see it doing is easing rates back towards more normal levels as the economy softens. of course with -- as with all of these soft landing stories there are downside risks. it is quite possible either inflation is sticky and rates have to stay higher or it comes down much further. our view is in this instance it will be a relatively soft landing. jonathan: we nail the threshold for the fed to cut interest rates?

standard chartered saying unemployment at 4.5%, core pce at 3% should set the stage for rate cuts at the federal reserve. how do you see it? jennifer: i think it probably should do. wage growth is going to be really important. currently it is slowing. as long as it gets down to rates of about 3.5%, that should be consistent with the fed inflation target given what we are seeing relatively positive signs on productivity in the u.s.. further softening of the labor market will be really important as is the further decline in rental inflation we mentioned earlier. if those things are in place i think that is a situation in which the fed could cut, even if the economy is continuing to grow. jonathan: jennifer, thank you. it is an argument they refuse to entertain. i see that not changing anytime soon.

it is frustrating, the soft landing talk, what is the bet? substandard growth, below potential, but not a recession. unemployment climbs and inflation is on a convincing trajectory back towards target and they can deliver rate cuts. is that it? lisa: it is transitory delayed. inflation is coming down after the distortions of the pandemic and that will lead to low inflation but solid growth and everyone can be happy. jonathan: they get to say they are right. it was just transitory for longer. we let them get away with that? lisa: let's see. maybe that will prove that is the case. jonathan: from new york city this morning. kum bay ah. ♪

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>> china is not going to be a

growth or positive story next year. this is not what we could call -- i think the authorities will continue to keep a close eye on this and we have seen this happen in recent weeks and months. that will not change. what we need is growth in china and not disinflation. jonathan: that will not change. that is the view from the head of fx and monetary policy at d.c. bank. equity market on the s&p 500 shaping up as follows, -.1%. fx doing nothing this morning. the euro 1.0 954 and totally unchanged. this month big moves. the dollar heading for its worst month in a year. traders continuing to bet on rate cuts. mike mccormick seymour week missed. "there is -- mike mccormick seeing more weakness.

the euro is back to 1.0 950 this morning. tom: this is an important conversation because we are all asleep. lisa: i thought you were talking about us. tom: some joy, turkish lira 30-1. mark mccormick joins us now because we're not asleep. his 2024 a year big figure moves? mark: i think it can be. one of the biggest questions is whether or not inflation will be lower and rates coming with it is good or bad for currencies. one of the things we saw in g10's 2023 with the inflection point. 2022 all we cared about was inflation. then we get the transition from inflation to growth. now what we are handling over is inflation is coming down and central banks can cut rates. what that will do is boost

growth expectations for 2025. how much the transmission comes through, and there countries that have housing issues, and there are countries that will come to the fore, especially next year, but the transmission issue will be what countries could outgrow the other. tom: on the bloomberg dollar index or pick a pair, what is the call? mark: as an anchor point i would say the euro is around 1.15 for the end of next year. big moves there. i would say be dxy, we start to include -- i would say bdxy, when we start to include emerging markets, it is a drop from the levels we have seen. where there is broader participation -- one of the most interesting things about fx has been g10 emerging markets doing different things. they trade differently in terms

of trade in commodities. they trade differently on carrie and those have been the factors that have been the most dominant things driving fx. jonathan: let's not bury the lead. canada, u.k., australia, what are you thinking about, how big are the moves going to be? mark: i think sweden is a case study. what a lot of fx strategists are doing is trying to figure out a mortgage structure. the u.s. has been insulated from this because of the 30 year fixed. if you look at the u.s. we are struck to see lots of different things trickle into the economy would permit the economy fall over next year, which is our anticipation. sweden was one of the first to go because most of sweden's mortgages are variable under a two year. if you think about which countries better next year, i think canada will be a big story because the mortgage resets from

the pandemic will start to reset in 2024 or 2025. the other thing is canada has been cushioned by excess savings, which is a function of the lockdowns. sweden was more open and has a different mortgage structure, most of the mortgages were short-term, the currency has been one of the biggest laggards , and we see a bigger recession and domestic drivers. if you think about a story they'll be interesting for next year, north america is the center of the slow down. asia is the center of the recovery. europe sits somewhere in the middle but the assets are correlated to asia. jonathan: what do i want to play that against? sweden versus watt? mark: we have seen a lot of interest in this because it neutralizes the dollar. sweden versus poland or hungary. hungary is your carrie story. poland is the recovery story for core parts of europe, core parts

of manufacturing, of the stability you see in the euro zone. the indicators we track saw a significant jump in poland as an attractive alternative to sweden as a laggard. lisa: i want to understand how housing plays into this. will this be a weakening in the overall economy or if this basically pushes bankers to lower rates more quickly in order to stave off mass defaults and evictions across the country. which is it? mark: it is a mix of both. we could all feel the disinflationary forces and an important point is central banks will cut regardless of the set up for next year, largely because as inflation comes lower real rates will be punitive if they do not lower nominal rates. in simple terms the need to keep the real rate consistent. and for inflation is dropping

the need to bring nominal rates lower to maintain a preferred real rate. part of it is a lot of central banks to know the structure -- they know when they will reset. in a country like canada a big issue will be its biggest trading partner slowing and its domestic market is going through a massive reset where we are going from mortgage levels associated with the start of covid, talking sub 2% in some mortgages that will jump to 4% or 5%. you think about sweden, what happened is its core market, the places is exporting to come of the places associated with growth, that market slowed dramatically and that it dealt with its domestic housing issues. that is the playbook. we like looking at north american currencies, canada, mexico. mexico underperforms brazil, canada underperforms australia and new zealand come as those

are associated with more robust growth in china for the first half of next year. lisa: how much distance is there in the inflation stories between different developed market nations given the fact there is this global inflationary push that is leading to disinflation different depending on the region? mark: i would say the diffusion indicators we track are all synchronized so there is not a huge amount of variation across different countries for inflation profiles. most of it is seen in the g10. a big part of which central banks are moving, you can see it in em. em was the first in and now they are the first out. you start to see it in hungary, we see it in latin america. these central banks are starting to cut because they are ahead of the curve. i think in the g10, inflation is

probably driven much more by a common factor outside of the housing stories we mentioned. that will be a differentiator. tom: i have to ask about dollar linkage to bold. the great call of the pandemic is dennis gartman looking at gold and the japanese yen up 70%. lake gold dynamics to your weak dollar call. mark: i feel like it comes through one variable. essentially it is a real rate story. the number one indicator you can use to track goal is to look at real rates and that is the same length you see when people talk about bitcoin or crypto, which is that one common link is the correlation to the plumbing of finance. essentially on our call, we look at it this way. the delta of growth, the delta of rates, and the yield curve,

we are moving into apel steepener regime, which is unequivocally dollar bearish in all other yield curve frameworks. real rates are lower. we are seeing growth delta switch between the u.s. and china. that is essentially when you look at a broader framework from the dollar, that is what would push the dollar lower along with the yields and the fed being repriced are things that would drive gold higher as well. jonathan: thank you for taking us down the foreign-exchange rabbit hole. tom: that was great. jonathan: mark mccormick of td securities. the surprise index that citi uses, where is the data relative to expectations? tom: rolling over is an understatement. jonathan: the next hour, clinic on fixed income. the people who are right on this

bond market. katie kaminski. bill dudley. all the next hour. from new york, this is bloomberg. ♪

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>> the slowdown is here and will continue. >> we can see inflation moderate without going into a recession. >> january is when we get that up -- that auto moment. >> the market is volatile because no one knows what to do or to expect. >> this is bloomberg surveillance with tom keene

keene, jonathan ferro and lisa abramowicz. jonathan: live from new york city this morning, good morning from our audience worldwide this is bloomberg surveillance on tv and radio. i'm jonathan ferro. your equity market slightly negative on the s&p 500. the busiest day in history. black, best on record. cyber monday expected to be the biggest on record. where is that slowdown? tom: i'm sure around the nation you are all seeing it on radio and television. every time you bring these up you go what's the problem here. economic data today that he underscore that. we are really going to find out if there is price elasticity with yields coming down. jonathan: jobless claims around the quarter -- corner as well. 209,000 jobless claims.

unemployment still low. sadii looking -- citi looking for 200 k+. pretty tremendous spending. lisa: consumers are doing well. how do you compare that to walmart ceo saying they are seeing a dramatic pullback in consumers in the last three months. we heard from a lot of the retailers. it does not really work unless there are different trends in different sectors with the way -- the reason this has been hard to get this economic cycle right. >> we spoke to dana and oliver. those are two hugely competent. she -- i saw dana once in il-4 of t.j. maxx. people clear out she is so intimidating. jonathan: this is from reade pickert at bloomberg.

it now requires $119 and $.27 to buy the same goods and services a family can afford with $100 before the pandemic. if i can pick any one number that matters right now to how the consumer feels in america that number right there. tom: economist of the year lael brainard silent to the white house. she gives credit to the idea of cumulative. it's not year-over-year. it's not month over month it's a cumulative study. the latest number i saw from the beginning of the pandemic up 17 or 18%. jonathan: that's the number that matters. no two ways about it. do you think we need to talk how we talk about inflation in this country on programs like this when you sit here saying month over month it is this, inflation is slowing.

. what on earth are you talking about. >> we have always talked to both audiences. our answer is we have to have a responsibility to do both. as you say claims coming out extremely important. the adjustment second-quarter gdp. 5%, an uptick is the model right now. then we have to look at the real world as well. jonathan: a lot of economists have been saying yes but i don't think people should be telling people how they should feel. when people stare down again saying we should feel better about this economy this is how you should feel about things and then you go through numbers like that. you look at inflation, talking to people about how they should feel. >> things are more expensive and what people feel is they cannot spend, they cannot buy as much with their money and that is a real feeling. the key question is what is the remedy?

given the fact people have earned more or is it a material deflation which is typically negative although if goods deflation could that give a bet. >> the answer on the x-axis, what i suggest as we have a massive pandemic stimulus was the choice of america did that stimulus was an equally applied across 300 million people, of answer is no. the stimulus benefit went to the haves. jonathan: tuesday morning pulling back, just a touch lighter over the last 24 hours. yields a little bit higher by a couple of basis points up to 440. >> the volatility seems to have ticked off and slowed down. watching housing pricing data. index price data as well as a whole host of other series.

to me we got new home sales and the median price had fallen 18% year-over-year. is this a blip with homebuilders discounting their availability or is there more going on. the chicago fed president and the fed president kick off, we also hear from michelle bowman as well as michael bar later. at 1:00 p.m. u.s. treasuries will auction off $39 billion of seven-year notes. the duration bid i think it is important. can we say it's gotten back and really dampened more significantly in the bond space? jonathan: chief investment strategist at alpha simplex joins us now. the journey, of the low on the 10 year yield in 2020 in spring, 50 basis points. the high over the last couple of months through 5%, it paid to be

short this bond market. the turnaround has been brutal the other way. we've gone from 5% down to 440, you've been short. are you still short and if you have been, why? katie: that has to do with different signals having different views. if you look at the year chart, the last month has been a miraculous turnaround relative to where we've come. we are way ahead from where we began the year. so i think the key question to ask yourself about bonds right now is where are we going next. we have been looking all year for a decent version of the curb -- curve. the next point is still really uncertain. are we moving to a steeper curve and if so, which way or are we just going to move around this range until we figure out what's happening with the fed.

>> why is it not as simple as taking a look at the economic data showing it is disappointing more frequently than it is outperforming and leaning into that. >> this is a good question because what i find the most concerning about the last month is there's been a massive risk on rally and weaker economic data and that to me is sort of a relief rally from where we've come because we've been through a lot particularly in bonds. most people are buying right now because they are saying if we see cuts soon then we know yields are going to come down. my concern is it could take longer than people think pointing out that inflation is still way above target or at least 1% above target so we could take a year or so to get there. when they take time to actually get through the system. >> i want to go back to the

advent of this, working with alpha simplex, john henry and the rest. the germane question 20 years ago is the same today. if you look at studies for the complexity of trend-based set ups are they elegant right now, is the math good or are you blind? katy: turning points are notoriously difficult. it's because we are not really set up to pick the tops and bottoms of big moves and what happens in these turning points is we have to figure out where is the next step of the trend and that is where right now is an inflection point and i'm looking forward to seeing if we can see that steeper curve and when we've done historical analysis what you do see is flat curves or the steepening's of curves which is very difficult for trend signals because it is moving. tom: a stochastic environment

and you have to find a new trend. what is the key attribute for listeners and viewers to establish the trend. katy: the key thing we think about is we try to blend different views so right now the long-term view is still cautious. the short-term view is very optimistic. if you combine those two together you are sitting in a situation where we need more data and more time to understand where the market is going next and that's why i think the market is so focused on every data point that comes out because we are trying to sift through which view is correct. have we moved to a new phase of the curve shift or are we still sort of trending -- treading water. lisa: time is expensive for shorts and that something we have seen play out again and again. how much are those short positions being washed out. the stability over the past week

and something that you think may be cannot last. katy: of course but i think there's been plenty of shorts this year especially last year as well when you think about where we've gone. we need a balance between shorts and longs in this market. we have seen more buying pressure which has been perhaps causing some deceleration or deleveraging in short positions but from the trend space that's a strategy that's more slow-moving than some you might be discussing. there are potential that they are mining shorts as well. jonathan: still short on this market. here's an update we mentioned yesterday, of the outlook for bond yields. this is what i think is interesting about fixed income. if you ask for the forecast of the price target into next year there is far more confidence about this and then there is the long end.

the fed is going to cut seems to be the consensus view. by the long end you've got a very different range of views. take deutsche bank for example. on the tenure there call was to move. bear in mind deutsche bank thinks you get a ton of rate cuts next year and a recession and yet the 10 year call on the u.s. treasury is 4.05%. the two-year call is radically different. looking at moves of over 100 basis points lower. that's what's interesting about the calls. lisa: monetary versus fiscal policy. how much is that essentially what you're seeing between two year and 10 year calls given the glut of issuance but we keep talking about. tom: the basic idea of will there be a gdp slowdown and with that some change. you've mentioned twice your claims this week i will take the four-week moving average.

that flat-out does not get it done. >> based on the estimates this morning, a sneak peek looking for claims. it's the best gas. if you are just joining us, your equity market negative zero point 1%. yields a little bit higher. cameron joining us in the next hour. with us here in new york folks shortly in 15 minutes time. one of your favorites on this bond market. tom: a general statement with lower yield. you make a call that bold. is he the georgia banks for your -- 405? that's the kind of dynamics you can make some real money if you have some conviction. i'm worried about the high drama

. what we've got is low drama bram o. she says there is low drama. we are just sort of -- lisa: i'm going to add to the whole feeling. tom: that's low drama. lisa: pointing to low conviction. chris harvey and his outlook for next year just going against everyone else. jonathan: i saw that note this morning. good news is bad news and it will be volatile. bill dudley will join us later. the former new york fed president, that conversation. from new york city this morning, good morning. ♪ (sfx: stone wheel crafting) ♪

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negotiations. once they turn to israeli soldiers you will see hamas perhaps demand a lot more from the israelis and this could extend the hostage negotiations far longer than israel would permit. >> that was former senior u.s. official -- official as israel and hamas agreed to release more hostages and prisoners. good morning. your equity market looks like this. worldwide in the equity markets we are negative zero .1% on the s&p 500 into the bond market. yields higher by a couple of basis points. in the commodity market, accrued higher by 1%. in foreign exchange unchanged today based on the euro. but still potentially best month for the euro against the dollar of the year so far. lisa: otherwise a pretty

lackluster year for the url. really nothing going on which is actually news in and of itself. we have so many weeks of volatility and it seems to have died down. is it because they don't know what to do? i'm not sure. jonathan: investors coming back after thanksgiving. lisa: basically people are seeing at least you guys aren't freaking out we can come back. there is something to be said for that. tom: they are smaller but i think i get it it is quiet, we are waiting for data, the late jobs report as well into the fed meeting but the answer is they will come up with something and it will serve it back to powell, friday what is he going to say? lisa: a whole lot of nothing. jonathan: we will proceed carefully has been the message so far. jobless claims coming in was a

wake-up call for us all as we think about them may be climbing higher. >> spending looks good monday. tsa record travel on sunday. wondering still if we are restrictive enough. tom: right now a perfect timing for five plus which is massively accommodation. the idea of an accommodative stance says it all. this is a real treat. fighting traffic out to dulles. joining us for our deputy leader of all of our efforts in washington. at the houston chronicle and texas journalism. how tough and angry is the house right now?

i am stunned with the level of retirements. both sides of the aisle. everybody is saying sia to the house -- see ya to the house. >> a lot are exhausted by the drama and the partisanship on both sides and the inability to get something done. they can even pass -- even decide on who their leader is. they've gone through so many speaker elections in the last couple of months. they can get what would normally be a simple very brief passage of aid to israel or continuing aid to ukraine or getting a budget passed. we have gone through shutdowns before but this fight that was passed before the holiday and all of those bills that pass is just taking too long. tom: a guy before you kept the

phone and say we need to fix this, we seem incapable of doing texas politics. wendy: that may not be a bad thing. but the biden camp called the house. president biden the republicans control the house. the senate seems to be moving along and they are now actually trying to fund raise senators running for reelection, trying to fund raise off of we are not the house, we are the grown-ups and we can get things done. that's their messaging and i don't think will house. jonathan: can you frame how big a fight this will be. wendy: we will be writing the beginnings for a year. we are talking about the iowa caucuses january 15. that's right when the government would shut down again if they

don't get the spending passe. is everyone going to be thinking about the good of the country or whether their guy wins iowa and new hampshire and south carolina. >> we've been talking about dysfunction and the republican party with respect to the house. i'm wondering how much the schism in the democratic party is growing as a result of a lot of the disagreement over the israel, hamas war. can you give us a sense of how that will play out politically early next year. wendy: it will play out over a number of angles. there will be arab-american voters and people who sympathize with the palestinian cause who are very upset with biden right now for his up until now i would say full throated support of israel's campaign in response to the october 7 attacks. then you have people behind him on that. young voters, voters of color, arab americans all seem to wish

he would be a little more critical of israel and that's one of the reasons antony blinken is in israel today is to begin a slight pressure campaign on his real to be more careful about civilian casualties and just sort of show some restraint so that the u.s. can begin to have some sort of balance in its position there. but also young voters and people of color are very disenchanted with what they perceive as the state of the economy right now and are planing biden for that. so then you have young people on the left side of the democratic party and bidens crowd on the center-right and then joe manchin retiring entirely. lisa: possibly launching his own campaign. what does this mean in terms of who that faction of younger voters is coalescing around. is there a candidate or will they simply opt out and there

won't be the same kind of voter participation? wendy: we have had such good young voter turnout, some of it driven by anti-trump, some driven by interest in issues like police brutality and things like that. this time they have a choice between trump and biden, two guys old enough to be their grandparents or great-grandparents and they are not excited about either of the options. it is possible young voter turnout will plummet again this year and i think both sides are trying to get them interested but biden has a mixture -- has climate change, of the student loan thing didn't go through the way he promised it would. then you have the split over israel and hamas. jonathan: what do you make of that in dubai? >> it saves a lot of jet fuel so there is that argument. we should also note many presidents have skipped this. not every president goes every

time. obama skipped it his last one. i'm not sure if donald trump went, george w. bush did not always go. jonathan: i skipped that. tom: you were supposed -- we were supposed to go to one and i never went. jonathan: what stood out for me was 2021 glasgow and the contradictory messages from the administration on fossil fuels. i think it was in rome going to italy. i tried to remember my year but ultimately they were pushing for the saudi's to pump more crude. are they becoming more pragmatic or overcome by events? wendy: i think tom is right. there you go. i think biden is sort of caught in the middle. he needs to keep gas prices down so that donald trump has less of an argument about the economy and things like that and for the good of the people and at the same time he has this problem

with the youth that thinks climate is one of the top arguments so he has to thread that needle and they are not doing that very well. jonathan: we should do this again soon. wendy with the latest. tom: we did not get to it but overnight president trump going after obamacare and the reports are thundering silence from gop going oh really. that's just a republican divide. could be high drama. jonathan: division and both parties on some big issues. it's typical but don't you think they are bigger? tom: it seems bigger now. jonathan: from new york, this is bloomberg. ♪ well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com

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all over the world, and looks at the most effective ways, to get resources to them, to get services to them. the idea that we have saved five million people's lives, it's overwhelming. it's everything. jonathan: the stocks look like the follows. s&p 500 negative by zero. on the nasdaq down as well. small moves lower yesterday on the s&p. i think -- tom: the nasdaq 100, there are a lot of excuses to go down. jonathan: down about 0.07%. the s&p down 0.2. bond 10 year, 10 year, 30

year. lisa, i am saying may be. you want to hold on still? resume. basis point on the 10 year, for -- 4.4021. tom: can you envision three point 9,000,000%? i cannot get there. jonathan: 41, tom. tom: a three-day rally. jonathan: foreign-exchange talked a lot about the euro potentially having its biggest month of the year so far, the euro against the dollar at 1.09 50. massive euro strength, 3.5% points across the weaker u.s. dollar. the fed potentially cutting interest rates next month, but the data, relative to

expectations, a surprise index, surprising to the downside over the last few months. lisa: in the u.s.. on the flipside, surprising to the upside on the margins in places like germany. things aren't as bad as people feared. you have both things going for the euro. i'm not sure what that means for the disinflation standpoint, but it has been a year for the euro that has been kind of rocky. jonathan: the dollar getting beaten up on both sides. the u.s. secretary of state antony blinken heading to israel for the third time since the war with hamas and last month with hamas releasing 11 more hostages to extend the truce with israel until thursday. israel is releasing another 33 palestinian prisoners and allowing more aid into gaza. john kirby telling the media that he doesn't expect americans to be among the latest be released. tom: extend is the key word. as i said earlier, it becomes

ever more efficacious as you get out one day, two days, the feel-good tone is there and growing as we wait for what the next is. jonathan: and then there is a reality check. the objectives haven't changed. constructive that you see the hostages being released back into israel, that you see aid getting into gaza, constructed that the truce might last a few more days. reality check, the objectives have not changed. this conflict at some point will surely resume. lisa: israel wants to eradicate hamas and hasn't done so yet. hamas wants to see israel disappear and that won't happen if israel has anything to say about that. you have those two conflicting messages. how will they resolve it without an external voice? i wonder with the negotiating, acting as the go-between between the hostage releases, are they having other discussions about what's next? jonathan: that is in the next

hour continuing this conversation. the ipo's, class of 2024, it could be reddit, skims, shein. working on a listing that could value the company as much as 15 billion u.s. dollars. elsewhere,shein looking at a valuation at much as 90 u.s. dollars. it has been quiet for this part of the banking industry and there is potential to come into next year. tom: are they legitimate ipo candidates? are they essentially almost micro caps that should not be looking at an ipo? the froth is let's cash out, get the equity going. where will we be in six months? lisa: we haven't seen any froth. this year has been so quiet when it comes to ipo's. not just in general going back, but there is a question if this will be some kind of private equity exit.

our founders exiting some kind of investment? or do people see the market thawing in a concrete way and want to move forward with investment? i'm not sure. to me, the idea that things are coming out is a positive sign. tom: i think that the exit pressure is tangible. rubenstein with this wonderful show on bloomberg, this goes to apollo. when we visit apollo next week, what the incentives are. they are out of patients and they want an exodus of some kind. jonathan: i don't think that the bank's care. they just want the action. i want to finish on a mover, a big move in yesterday's session. dropping 17% after the eu warned the planned merger with amazon would lead to competition issues. amazon is looking to buy the romba maker. a reuters report said that the eu would clear the deal.

they will address the issues with competition on amazon's marketplace and data collection. tom: there is no one that we know that is more qualified to have a roomba then jon ferro. can you see him on saturday morning with two of them going at once? jonathan: i am so tidy and organized. i find it therapeutic to get the dyson out and clean up a little bit. saturday and sunday. really relaxing stuff. wake everyone up. tom: it is well-known that 50% of dogs go after the vacuum cleaner. at one point, the vet bill and the kennel fee are going after that beast. we are all about the roomba. this is the interview of the day on fixed income. his visit with us last was the interview of the quarter. exceptionally dense must-read notes every morning on u.s. full

faith and credit here at last time around he said load the boat on the 10-year. are you going to continue to load the boat on the 10-year, price upcoming yield down? >> i think that we are at a moment of consolidation and will ultimately end up with lower rates than we have at the moment simply because the fed is effective in re-anchoring price stability and making sure that we end up on the others of the cycle. not in a dissimilar place than where we entered the pandemic. they have been successful thus far, so i would still be long treasuries between now and the end of next year with a nod to the fact that it will be a choppy ride. jonathan: have we reentered the bond market? ian: i think we have. i don't think that we will retest 5% but the two-year sector is going to remain wedded to monetary policy expectations meaning we will fluctuate in the range that we are. maybe we will see a five handle again if the fed is effective in

reintroducing the idea that they could still hike another time during the cycle, which we don't think they will. jonathan: conviction levels. do you have more confidence on how things evolve on the front end or long end of the curve? ian: at this stage, i have strong convictions on both with a nod to the fact that we tend to think of the two-year sector is nothing more than a 24 month rolling window of policy expectations. we think that the fed is done. the nuance within that is that the fed has a very high incentive to continue to keep another rate hike on the table even if they don't believe that it's going to happen. they want to push rate cuts out as far as possible, which is what makes the december update of the sep so fascinating. we know that they are going to drop this year to 5.3 to match where we are at the moment. the question is, what happens to the 2024 dot?

they will tell the market they are only cutting 24 basis points next year. lisa: i love this game theory. the market isn't going to believe this. they will say we know you are game and you're trying to jawbone us into removing rate cuts from our expectations. you agree with deutsche bank that c 175 basis points of rate cuts next year? ian: one of two outcomes will occur. and it's not to use the cliche overly, it is a gray rhino versus a lax one. the fed projecting occurs, a slow and steady increase in the unemployment rate, the real economy slowing down, and inflation coming back in line with expectations. or there will be an event that we don't see on the horizon. a stock market crash? a blow and credit? some geopolitical contagion that leads to a flight? one of those will occur. at the moment everything appears skewed towards a slower slow

down and more moderate adjustment on the rate front, which would suggest, from my perspective, that 100, 1 hundred 25 basis points of rate cuts, which is effectively what is priced in at the moment for the market, is probably a good base case, but there is a potential for the fed to make it all the way to the fourth quarter of next year without having cut. lisa: is this positive for the overall economy? is this stimulative or indicative of a slowdown that people expect? ian: the longer that it takes the fed to cut, presumably the more dramatic the cut will be and the more economic destruction will occur. to some extent, that is exactly what powell is attempting to orchestrate at the moment. when we look, and, this point, at overall financial conditions, the fed has to view that as somewhat problematic because they want financial conditions tighter. the easier conditions are the higher the likelihood that the

fed delays rate cuts as long as possible risking a slowdown. tom: i busted lisa's chops about auctions and i understand that auctions have validity and are serious. who is the bid on full faith and credit united states paper? partial derivatives there? what is the partial derivative that matters? we want to own that paper? ian: a fascinating question that we spend a lot of time debating over the last year. at its essence as a market we have lost the motivation of their traditional incremental buyers. japan has slowed down and they're buying. we have seen other major central banks be a little less aggressive as a theme. what has occurred is we have come to what i would characterize as the buyer of last resort in terms of the incremental willingness to add treasuries. and that is real, domestic

money. whether that is pension funds -- and they are the most sophisticated. they are the most price-sensitive buyers. that is one of the reasons that we've had real conversations over the last several months about the reintroduction of term premium and why it should be based positive. tom: this goes to the heart of the matter, 5% money market funds. that is the whole study. when do they shift to the world of lincoln? jonathan: i am with you. it is good to see you. if you are just joining us, welcome to the program. the stage is set like this this tuesday morning. equities are negative by zero point 1%. yields are higher by a single basis point. just 40 basis points away from talking about a three handle. it feels like it was only last week, only last month that we were talking about the potential of maybe six after breaking

through five on u.s. 10 year. lisa: it has been unprecedented volatility if you look at the bond space, and that has to underscore what we are seeing in markets, that we don't see that now. that ian said that we basically have seen the volatility behind us. we have seen the ceiling. we aren't going to get back to the 5% level in the 10 year. if that is the case, how much conviction do people get? jonathan: you have seen the volatility in the data that might be behind us but other inflation is more predictable. i'm not saying that that is the right view, just making a judgment on where i think a lot of people are right now. that extends to fed policy. gone are the days where they were talking of going to 50 to 75 back to 25. not being done, needing to do more. everyone is on the same page, proceed carefully. we are still talking about the doj potentially raising interest rates. qt is still on the table. i don't think that we should

normalize the amount of debt that will come to market in the next 12 months. i will throw in the spending debate set to take place in washington and a few months. that will be at the start of the year. if you're worried about washington's ability to agree on anything, we will have to confront that inability early in 2024. lisa: i would agree with all of those things. that is why we heard that katie kaminski isn't willing to say that this is the new reality aced on all of these factors and that we have seen a rally and risk even with disappointing economic data. jonathan: the former new york fed president is up next on this program. live from new york city, good morning. ♪ ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf

that inspired the world to invest differently. it stilloes. what can you do with spy? ♪

get help reaching your goals with j.p. morgan wealth plan, a digital money coach in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach. from your first big move to retiring poolside - and the other goals along the way. wealth plan can help get you there. ♪ j.p. morgan wealth management. pres. biden: we know the prices are still too high for too many things. at times -- times are still too

tough or too many families. we have made progress but have more work to do. let me be clear. any corporation that has not brought their prices back down as inflation has come down and supply chains have been rebuilt, it is time to stop the price gouging. jonathan: the president of the united states at the white house as he launches a new council on supply-chain chain resilience. good morning. let's get to the financial markets. stateside equity 0.1% yields up a single basis point, 4.40. yesterday, four point 3982 on the u.s. 10 year. the euro squeezing out a little strength against the dollar. one point 095 five. unchanged on the currency pair in the session. anything but on the month. the euro positive 3.5% against the dollar. crude and what is happening in commodities, up 1%.

$75.60. tom: i looked at the bloomberg commodity index today, and i'm sorry. all into say low global demand disinflationary trend. you blended it altogether. orange juice, tang sale, substitution effect, people are piling into tang off of the orange juice search. jonathan: i'm not sure if that is true. i'm not sure what you had to say right then is true, but coffee is up 23% since 2020. i am never sure. lisa: i am pretty sure that there is no tang index. tom: now, there is a substitution effect. come on. jonathan: it is like a made up story for children. lisa: it is an unclear message. jonathan: i think we are done. tom: we are done. 37,000 here.

it is important to look at the people thinking about this will be a constructive outcome. i will play this off of my book of the year several years ago. "the curse of cash." writing about where we are with digital currencies in the bank of international settlements in geneva thanks, what the new york fed inks. bill dudley joins us now, writing an important column on d bdc, central -- cbdc, central bank digital currencies. we saw criminal trials, guilty verdicts, maybe appeals involved, but are we getting away from the presumed criminality, the punishment, the secrecy that he had the courage to talk about? bill: i think that the crypto space is in disarray right now. the question is, are you going

to introduce central bank digital currencies to take up that slack? i think that will happen. it will probably be more evolutionary than revolutionary because it depends on what payment system you're starting with. central bank digital currencies could play an important role. it is really on cross-border payments. we had a system of central bank digital currencies with the interfaces harmonized we could execute payments on a cross-border basis at a fraction of the cost of today. for a lot of workers sending payments abroad, it costs 5% of the payment just to execute the transaction. it's very slow. we could do a lot better than we're doing right now. in this process, the fed is very, very far behind in terms of their work on central bank digital currencies. in the u.s., there is skepticism about such a need for such digital currencies. tom: raffaella at bis has

documented the incredible friction of transactions in the real world.we thought that we would be trading at bitcoin and john would be at celine trading bitcoin for sweater, but the answer is we are not. could we get down to where this is efficacious for central banks? we could really squeeze this down to where there is no transactional friction? bill: there will always be a little bit of transactional friction, but we can do a lot better than we're doing right now. in theory, central bank digital currencies should be a significant improvement over cash, just as safe as cash, but in terms of the default risk because you will be guaranteed by the sovereign nation. you don't have to worry about storage. you can transact digital cash across long distances.to me it is like cash plus. the security of cash and something that the u.s. should innovate on. lisa: there is a concern that those agents that really

capitalize from those frictions that exist, that some of the functioning of markets that traditionally have supported things like treasuries starts to ebb away. how concerned are you as you adopt less friction-filled methods and capital markets slow in the wake of rate hikes? how does that this intermediate banks that are essential for the functioning of the market? bill: they will have a two-tier system where the banks own the customer relationships.central banks don't want to have customer relationships with hundreds of millions of households. so, they should hand that off to the banking system. the second thing is to make sure the central bank digital currency doesn't pay interest. it is basically being used for payments and not investment preserving the role of commercial banks as intermediaries. if you do those two things you essentially protect the

commercial banking system as providing financial intermediation services. the central bank helps provide better payment. lisa: the reason that i ask on a broader sense away from digital currencies is there is an increasing concern about how much a financial market functioning has moved outside of the highly regulated banks into the private sector. earlier this morning there was a warning that there is a bubble in private markets and that there is risk building as an increasing amount of lending moves to that area. are you concerned? do you think that there is a situation forming on the heels of rate hikes on the heels of tightly regulated banks that deserves better scrutiny? bill: absolutely. the notion that all we have to do to fix the problems of 2020 and the banking system is to apply higher requirements on the largest banks i think is misguided. the previous capital

requirements on the biggest banks you will push activity to the nonregulated banking system making it more insecure and less stable than current regimes. we have to think about what are the problems in 2020. jonathan: thank you for catching up with us. the former new york fed president. we were talking about this in the commercial break. a paper years ago out on this, and this is perhaps why people are suspicious of government moves in this area, and he talked about if you banned cash you would have money on deposit at banks and deeply negative interest rates that forces people to spend their savings. that is one example why people are deeply suspicious about moving in this direction. tom: rogoff's compromise is to always have modest amount of cash efficacy in the system. he doesn't want to eliminate cash in the system. sweden is the most out front on this. the bank of international

settlements, what this is about is they want to rip out the criminality threats and secrecy threats of the modern system. you won't have that with the united states doing cross-border fed transactions with the bank of sweden. lisa: tell us who you want to set the parameters for your ability to use cash? now it is banks and the private markets and people feel like they can choose what they want versus the u.s. government. otherwise, how much of transactions at this point are in actual hard cash? tom: i would say that katie greifeld knows this. what does bitcoin do? jonathan: that is a separate conversation. sweden largely being a cashless society the number has dropped to 10% of the population using cash. it is about having the cash option. i don't use cash, but i want the option. you see a double-edged sword. can you plan down on criminal activities? that is intuitive, but what happens next after that?

don't you think that you outsource government control in a way that we've never seen before?you saw what happened in the pandemic, the control that the government took over our lives. what do you think that that looks like down the line? take the climate issue on the left. will they get to a point where they say that tom, we looked at your bank account and you've traveled too much this year? tom: i don't think that's part of the dudley debate. the dudley debate is will we get something more sufficient then present cash transactions. people smarter than me are saying that you can get to a more friction-free system within governments, not outside wondering whether grand mall is using -- grandma is using -- jonathan: equity market. from new york, this is

bloomberg. ♪ (sfx: stone wheel crafting) ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪

>> we are going to have recession and we're going to stay with someone high inflation

because of all of the rebuilding -- somewhat high inflation because of all the building were doing. >> we are not convinced that has to be a recession. >> the trend is clear. the fed is getting what they want, slow down. >> when everyone is pessimistic that is usually a fantastic time to buy. >> this is bloomberg "surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: it is not a snooze fest on this tuesday. we set up for important housing data. jon mentioned claims on thursday, markets are turning. we are struggling. jonathan: record travel in america, the busiest day in history for u.s. airports. like friday shopping online, record.

cyber monday is expected to be another record. jobless claims, 209,000, thinking about a slow down, causes of recession and rate cuts in 2024. tom: the use of standard chartered's modeling out we need to get to 4.5% unemployment to wake up and do something. how distant is that? i would suggest quite distant. jonathan: it is too difficult to say with a crystal ball this is when the fed will cut. get ready. it is more constructive to work out what are the thresholds? one part is unemployment at 4.5%. the other is core pce at 3. is that the threshold to get the fed to cut rates? tom: incomes are up 20%, expenses are up 18% or 19% cumulative. but i think that it is wildly skewed. i think that it is difficult math given the haves and have-nots in america.

the divide is substantial right now. lisa: squaring how people feel, they are continuing to spend yet they don't feel good. at what point does that come together? do we see some sort of meeting of the minds in between? that is what i'm struggling with. is it the story of two halves, or people feel bad and they are still traveling, shopping, doing everything because they have the money in their bank accounts? i don't have the answer. jonathan: here is the bad news. that is the cumulative inflation. that is the story that is underpinning the dissatisfaction with the economy across the country. tom: i am still going to go to the have boom. someone was talking about florida and jeff bezos is moving down there with amazon. can you imagine what it would be

to buy into a rental or ownership in port st. lucie where the mets have spring training? think about the boom economy in florida. that is the haves right now, including spring training with the new york mets. jonathan: warmer weather and lower taxes. tom: lower taxes. if it was alaska with the taxes, it would be a boom. jonathan: i don't think it has anything to do with baseball for you? tom: it has nothing to do with the baseball for me. i think it's an interesting time even though we are talking about snooze fest tuesday. jonathan: equities down by 0.2% on the s&p. yields aren't doing much, up a couple of basis points, up three. talk about the journey this month. talking potentially about double-digit gains, percentage point gains month to date for the nasdaq 100 yard we have seen

the bond market go down 5%. i get it that maybe we would see big moves on the screen over the last month. we've had major moves. tom: i would submit that you cannot develop an internal personal conviction unless you think in quiet times. you can't do that when things are nuts. lisa: is this a quiet time or a pause? tom: the screen is telling me that it's quiet. 12.88 on the vix. jonathan: low vol. you fell asleep? tom: i just want some depth to the data check. jonathan: the s&p going into monday, we snapped that. we are down again today by .2%. coming into this week, for gains on the s&p 500. the longest weekly winning streak going back to june.

outside of that into the bond market, 4.4 118 on the u.s. 10 year. think about where we've been, t.k.. north of 5% a few months ago. the cycle high on the two-year this morning. up to 4.88. tom: cameron dawson is teary-eyed over the quality of that data check. the conviction next year, do you have a lot of conviction? >> as we go into the end of the year, when we look at the year with positioning and sentiment and valuations, if we get to a point where people have been drawn into the market and everyone chases it into a rally into year-end you want to ask questions about how sustainable or durable it is. we learned that lesson powerfully this year in the opposite direction.

people were underweight, valuations came in, positioning was light and that set up for powerful year this year. jonathan: one difficult thing is to get to things right. one is the economy and to was with the economy means for financial markets. i was looking at deutsche bank's call. they have a recession. 175 basis points of cuts. it is good news bad news or bad news good news? cameron: it is sort of the i want it all and i want it now mentality. i want to fed that is supportive and an economy and earnings that will be growing strongly. we need to ask the question. if a strong economy and strong earnings are consistent with fed rate cuts and of recession, and if we can have both at the same time -- meaning of the fed is cutting rates, can we grow earnings that will percent next year -- do we have the potential that we could have a third year in a row of earnings been closer to flat if we have a recession?

lisa: people think that we are late cycle but we are midcycle. if the fed cuts rates it is mechanical year-over-year trying to adapt restrictiveness to inflation paving the way for companies to evolve, particularly in the consumer cyclicals. thoughts? cameron: you go back to the time when the fed cut rates when we didn't have a recession. 95, 28, 2019. the fed was fearful of a recession in each of those times talking about the u.s. not being an island. what is interesting is that the market was not scared of a recession, there was no impact to earnings come you had the market hitting all-time highs as they were cutting rates. if it starts to sniff out that the data is weakening, that it's coming in where we need to cut earnings estimates we don't hit all-time highs in markets. that is when you say that maybe the recession risk is higher. lisa: is it shift away from the

conviction of everybody else? that equities are going to go higher? to take the other side? cameron:cameron: it is important to remain invested even in times of uncertainty. the way that we do that is focus on quality, on companies that can block and tackle. i want to take out the risk that the economy will roll over and we will have big earnings downside. i don't want to be overextended on risk. having to have the best case scenario for my investments to work. a middle ground has worked really well this year and likely works well next year. we think that we are still in the late cycle environment. tom: what is so interesting to me is the idea of developing the conviction with 5% money market fund trillions out there. as part of your optimism that that money shifts given disinflation, lower yields? cameron: it is a good question if all of the money market funds is investable capital.

we know that investors compared to the 2020 two are 3% less allocated to equities than they were the peak of 20 22 the aaii data. that would suggest there is money on the sidelines, that there is positioning to be drawn back in. the good news is there is cash, liquidity, to do that. we will have to watch that data because once people are fully invested -- tom: i don't mean to interrupt, but 3% is the data through aarp, or whatever. the answer is, if that money shifts it makes up the 3% difference. what does that do? cameron: we can likely continue the rally. it calls into question the durability of the rally. do we test the 2022 high, breakthrough with gusto and have the type of rally that we saw coming out of times like 2018-2019? or do we have a sideways trough that looks like what we experienced in the

1970's or 2000s? jonathan: did you request a dell forecast? tom: i did. cameron: do you have a dow forecast? i don't. because it is a price weighted index. jonathan: is that enough? tom: spx 5000 is 41,000. lisa: you guys are just going to troll each other all morning. jonathan: that is the perfect ending to this exchange. cameron, thank you. it is good to see you. you're welcome back anytime. t.k. mentioned wells fargo, looking for choppiness. it is a traders market, 2024. lisa: basically, lean hard against conviction. tom: is that where we were 12 months ago? lisa: it is hard to know. it has flipped so quickly, conviction on any given day. if you have conviction into next year the equity markets will do

well. jonathan: we will see. when you see bad data i'm interested to see how the market responds to it. the conversation that we were having last week, when it turns the other way. stuart kaiser has been pretty definitive on this and conviction on all of this that this is a rally built on decent data and when the data turns in the labor market he wants to turn the other way and run quickly. lisa: it always looks like a soft landing like goldilocks, until it isn't. i keep thinking that but the data keeps coming and strong. tom: cameron dawson agrees with bramo cameron: cameron:. we have seen a huge diversions. they moved higher together since the october low. since july economic surprises have rolled over meaningfully and yet the s&p 500 has soared higher. jonathan: bad news is sort of good news until bad news is really bad news. something like that. thanks again.

welcome to the program, session lows on the s&p 500, negative 0.3%. yields are higher by a couple of basis we will bring you are market checks throughout this morning. wells fargo on the impact on banking. we will catch up with him in 30 minutes in the next hour on bloomberg tv. coming up, out of the three of them interesting calls. they believe that inflation will fall much quicker than the federal reserve believes that it will in 2024. what we heard about 15 minutes ago on this program, the projections in december from this federal reserve i think are going to be pretty interesting. is this a best guess from them or is that just a device to signal something for the market?

lisa: how much do they lose credibility in doing that because everyone is expecting them to game theory them into pricing out rate cut so they can cut rates next year because the market is so restrictive? it is mind-spending stuff. inflation might come down, that is the two year yield call. what about the fiscal picture and how that fits in and a time when auction sizes are getting bigger? jonathan: tune in the next hour on bloomberg tv. this was beautiful. s&p 500 negative. the dow is down 46 points. it is like the weather, it is kind of cold outside. ok? ♪

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humanitarian assistance. along with hamas releasing another 20 women and children over the next two days. we would like to see even that extension extended further until all of the hostages are released. that is the goal. to get all of the hostages home with their families where they belong, however long that could take. tom: he is not a politician. he doesn't sound like a politician. admiral kirby on the fleet in the eastern mediterranean and continuing efforts that we see of israel-hamas and gaza. mr. ferro is on assignment right now. i look at where we are in politics and it is fascinating in the digital news sites how above the fold is one thing, israel-hamas, and mystic politics going on as well under the radar. lisa: it is deeply related. one thing that i'm curious about

and we keep hinting at is how divisive this issue has been, hardening different lines, and how it has split the democratic party in a way that is new and dramatic. the consequences of that will be born out over a long time. tom: the politics of the democratic party and the gop, it seems to be heating up. that is the calendar. it is almost december. the party starts in seven weeks. january 23 in new hampshire. that is the thing that were missing because we are distracted by two wars. lisa: and because people are not excited about this particular election based on who the candidates are. tom: a data check for jon ferro who is slacking off today with no data checks. futures deteriorating -13. dow jones, -49. the vix explodes to 12.95. what do you see besides a seven-year auction?

lisa: stability, which is the most noteworthy thing considering that we hadn't seen it for quite a while. it has been range bound with small incremental moves to the downside. tom: right now on our politics, wendy schiller joins us. your textbook is definitive, framing and beating freshmen to death as she does at brown. thank you for joining us. percolating overnight was the former president boldly saying that he would get rid of obama care. there was a thundering quiet among republican senators who said, oh really? once a law becomes a law, how hard is it to change it? wendy: that is a great question. as you know, you know your history, in the 1960's after medicare/medicaid passed there was a fairly significant effort to repeal or undermine medicare.

the insurance program for people over 65. that failed after about 10 years because people get used to the benefit. the same with the new deal, with social security. conservatives, democrats, and republicans try to get rid of it for a long time. people get used to the idea of the program of benefits available to them and once it is entrenched and it affects the job market and the economy the way that obamacare does, giving people the opportunity to take different kinds of jobs and have more mobility because their health insurance is not necessarily tied to their job, that's difficult to shake once people get used to it.that is a six to 10 year window, which we have now passed when it comes to obamacare. lisa: we will be doing a lot of he said she said heading into election season. there will be a big focus on how the parties have changed. i would love your perspective on how much the israel-hamas war has shifted the discussion of

the democratic party in terms of enthusiasm of younger voters and how big the schism is on the progressive wing versus the bulk of the party? wendy: when we look at younger voters and democrats, we have to remember that the base has shifted. democrats used to be the party of what we call the working class and people who did not necessarily go to college and republicans where the party of people who have gone to college. now it has flipped. now those with a college degree identify as democrats. that means that the activity on college campuses has a disproportionate effect on the democratic party given that those people either vote democrats or will when they get out of college. that hurts democrats. on the other hand, 48 percent of registered people under 30 boat across the whole country across all educational levels. 72% of people over 65 vote. these statistics are important to think about the actual impact

state-by-state of young people on the electoral outcome. lisa: a lot of recent polls have come out and shown that more than half of democrats inc. that there should be a cease fire and have pushed back against some of the president's perspectives on this. you are saying that you don't think it will weigh the election that significantly? wendy: it is november 2023. we've seen a couple of days of cease fire so that there can be hostage and prisoner exchanges. the biden administration has been supportive of that cease fire and getting those hostages out. if they can get most of the hostages out and persuade israel and hamas and other terrorist groups working with hamas in gaza to tone it down, we will see if that happens. if they can minimize some of the civilian casualties that have been extraordinarily high in gaza, if they can do that eight to nine months from now do we think that this will be the most paramount issue for the voters that matter in the selection,

the voters who were sure that they will get out the door and vote? lisa: i am curious from your perspective because you work with younger people who are politically interested and politically active, i am curious about the role of social media in fostering a lot of the views and propagating certain ideas? what is your sense of how significant a role that is in terms of shaping the dynamic in the younger cohort of the democratic party in particular? wendy: i think the people of my generation and the generation before underestimate the impact of social media and the self-selection that young people engage in when they are exposed to information. we also don't teach enough history. i know that there has been a lot of exclusion of history of a lot of marginalized groups and that has to be remedied, but there is history, world conflict and history, and we don't teach enough of it. by the time kids are getting into colleges, elite colleges,

they don't necessarily have the same view of the world that we do. and that policymakers have. there is an increasing disconnect between what they know and what they experience and what older generations have known and experienced. part of that is the distortion of history from the lack of knowledge of history. tom: your gateways to democracy is definitive. we used to have western save 101 and now we have wendy schiller 101. i need you to comment on the 60th anniversary of an assassination. it seems ancient. it was a different type of democracy. what are the lessons that we can take away 60 years on from the assassination of president kennedy? wendy: one thing is we have been a violent nation with gun violence against our leaders for a very long time. abraham lincoln, mckinley, among others.

bobby kennedy, not in office, but -- one thing is we are shocked by gun violence but we have lived with gun violence at the highest levels for a long time. the second thing is, who is in the oval office matters. john f. kennedy took a different route in terms of civil rights, health care policy. a lot of the things that johnson passed were not necessarily on kennedy's agenda. there is no good or bad with that, it is just the fact that when we have a different person in office policy changes and the trajectory of american social welfare policy changed considerably because johnson was in and not kennedy. that is what i think about biden and trump for young people going forward. what that will mean all of the trajectory of your entire infrastructure policy. tom: wendy schiller of brown university, thank you. my study of this, and this has been said by those far more

qualified than me, all of the centers in the left legislation of the 1960's was passed over the shock of the assassination. 64, 60 five, pre-vietnam, 66, much of that legislation was put through with democrats and select republicans because of the assassination. lisa: how much going forward will the definitive features of the next 10 years be the pandemic, the wars that we've been experiencing, and some of the other key features of the next couple of years? tom: we will continue forward. futures negative nine. next from chicago, carl tennenbaum, always of interest. the northern trust company. from new york, this is "bloomberg surveillance." ♪

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good morning. jonathan ferro on the assignment into the 9:00 hour. he has david beyonca, which will be interesting. he -- i am interested in what he says about 60/40. lisa: i am also interested in what michael c says, given the uncertainty of a government shutdown and how much of a fiscal impulse will roll over into 2024. tom: -- inside the about the

doing policy for morgan stanley. we are bringing you the research. thank you to those who protect their copyright. to toronto to get david rosen's love note on disinflation. even rosenberg does not mince words. he says, tom, straighten your bow tie. and also he says adoration. lisa: you me, -- to me, this is why i am focused on the housing market we get housing data at 9:00 a.m. in terms of house prices. yesterday, it was the focus of debate amongst a whole host of market prognosticators that you saw the home sales, the median price fall 18% year-over-year for october. this raises the question, does this indicate a significant decline in home prices ahead? or is this builders who have

overbuilt that are dealing with higher mortgage rates, having to come up with prices to move inventory that does not necessarily bleed through to existing home sales? lisa: andrew hallman horwath called this a shift of regime. and that is opposed to what we heard from katie kaminski, who is looking for a higher yield regime. maybe katie is lonely. lisa: this to me is one of the big questions. enter hollow hearth is -- andrew hallman horwath is with her. this could be a head fake with home prices. it hinges on that for them, too. this goes to rent, perceived costs, sentiment, and how the cumulative effect has been massive when you look at home prices. tom: carl tenant bob -- tannenbaum will join us in a moment but first, a brief from

bloomberg intelligence. i have got to cut to the chase. the emotions lisa encz and of -18% -- mentioned of 18% year-over-year and housing. how in disarray is real estate? jeff: on the housing site it is interesting. with mortgage rates where they are and nothing for sale, it is not surprising that home prices have stayed elevated. what is interesting is that demand is shifting to the rental side. the apartment rates that i cover, demand is still there. they are facing some new supply issue in some markets, but rents are holding up. for the most part, commercial real estate has some trouble spots about residential real estate is doing fine.

lisa: this raises a question for the next phase of this economic cycle -- do we start to see a plateauing in valuations or do we see significant price declines in houses as rates come down, as people sell to get inventory? that will lead to greater disinflation that people are expecting to see year? -- next year? jeff: that could happen but it is hard to predict when and if people who own home self, depending on where rates go. if rates move to a level where homeowners are willing to sell, prices are going to fall as inventory rises, but i do not know -- i think the biggest issue for disinflation on the housing side is the significant change that has happened on the

rent growth side. 2021 and 2022, rents grew on average 20% aggregate. that is fallen to zero but it is not showing up in inflation numbers yet. there is a slowdown coming. i think that what happens in the for-sale housing markets and in valuations broadly, it is too early to say. if rates stay where they are, not sure there is much of a change in inventory. lisa: will this be a significant driver of the story next year, whether rents continue to plateau and that works his way into the data? jeff: they have plateaued. now we are getting to a more normalized rental growth environment. if home sales stay stagnant and

it is impossible to buy homes, rent demand can theoretically keep up with the new supply that is coming and you can get rents growing at a normalized inflation rate, but it comes down to rates. if rates fall and homes start to move in home prices fall, then renters have another option. tom: thank you. we will talk to him about office challenges that another time. this is a joy. carl tannenbaum with the national association for business economics, chief economist northern trust. what is macro economics? simply more eco economics. he joins us now. let's talk price theory of chicago. are we done with the supply shock of the pandemic?

carl: as a graduate of the university of chicago, i am obligated to begin by saying that the only thing that matters for inflation is calling for the first time in at least 60 years. the relationship between money and inflation had been afraid before the pandemic, but like many of the identities we used to use pre-covid, that relationship has changed. the reserve levels are different , the fed's balance sheets is different. hard to make that translation. that is one of the reasons why the fed remains conscious. it is hard -- cautious. it is hard for them to feel confident inflation will be at the target level. that is why they have continued to state and sound conservative. in their dot plot and suv's that we will get in september, i not only look at their median forecast for inflation but what they see the risks are around inflation. people do not look at it but

risks to them are still on the upside. tom: you talk to carl tannenbaum and you have got to rip up the script. rules be of chicago, his position is dovish. if we get disinflation, is that dovish or does it provide a hawkish tendency? carl: we have disinflation now. we need a little bit more. most prices are hovering below 4% on a core basis. if you look at the last three aunts, it is getting closer and closer to the target but the last few yards will always be the most difficult. on real estate, we have seen that come down slowly. rebutting has been expecting it to roll over. it is coming down slowly. the dynamic of the housing market is still confusing to the fed. still have core services rising at about a 4% pace. the labor market is looser than six months ago but still robust.

people are getting higher wages. lisa: housing is confusing for the fed. it is confusing for everybody, counter to what everybody thought would happen when mortgage rates to 8%. how important to check years -- to years disinflation? carl: critical. the housing component is 30% of court pce. without lower inflation in that category, you will not achieve defense target. goods inflation is basically zero right now, core services and 4%, housing at 4%. if you can get that component down to two, that will require a slower job market. that is one of the biggest supports of housing of all kinds. lisa: how much do you understand what we were talking about yesterday with home prices coming down 18% year-over-year for the month of october at a time where the only market open

was new home sales. is this a specific market story having to do with home builders overbuilding and facing higher rates, or does this indicate greater price deflation going forward? carl: in spots, you are seeing some of that dynamic. housing is regional and hard to decompose. to your point, the turnover of existing homes has been slow. even with that, about 5% of homeowners moves every year, down from the normal level, which is about 8%. but as they do, they will be trading from a 3.5% market to a 7.5% market. that has impacted fed policy. tom: this is chicago language. jason furman with a terrific tweet moments ago. lisa, this goes to the heart of

your discussion, furman identifying 36 months, thanksgiving dinner was up 30% in three years. it should be at month over month, year-over-year -- should we look at month over month, year-over-year? or does carl tannenbaum look at america back toward the pandemic? carl: having hosted 27 people, i felt their pain and had to get special financing. lisa: did you get a by now, pay later turkey? carl: it did ease a bit but this is one of the reasons why people feel inflation differently. costs were down 4% over the prior year but still much higher. people experience levels, especially on the supermarket, so there perspectives on inflation are different from those who follow it from an academic perspective. that is a frame of reference that shapes inflation expectations. the fed has to pay close

attention. lisa: are we too confident about a soft landing? by the, i mean the market. carl: i have never had a recession in my forecast. my track record is now 2-23. i am sticking without forecast for next year but a lot has to go right. we do not think the fed will feel comfortable enough to cut rates until the middle of the year, later than the market. that dynamic will be critical. how do you land with rates exactly where they need to be to avoid employment getting too far off? that will be difficult. tom: the that our economics is landing on the head of a pin, standard for's down .1%. lisa: i like how we were just talking about the this tree of the housing market and how that is key. that ghost sentiment, consumer

spending. how much of that is underpinning the fact that people do not feel good but keep spending on airline tickets and clothing? to me, if you cannot afford to move and you are in a small space and lucked into a low mortgage rate, that affects -- locked into a low mortgage rate that affects sentiment. tom: there are two or even three america's -- one that has really fallen behind, does not have real wage income growth. they are middle or up or -- up or middle. and in the pu -- upper deciles, there is real wealth. lisa: it has bgetting the markem that right has been incredibly

difficult. tom: economic data that 9:00 including case-shiller. the real yield is 2.17%. some say real yield could add with a disinflationary tendency. i have got to go back to oil. for a gallon of gas, where will that be at the end of the year? in the equity space, futures at negative seven down, the vix, a bull market, 12.85. lisa abramowicz, john key -- tom keene. jonathan ferro out there somewhere. at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most.

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hey, doc, quick question. the ink business premier card from chase for business. okay? if you had to choose, would you give yourself a root canal or run payroll? run payroll, no question. you know how tough payroll can be, right? no. we switched to gusto, and paying my team couldn't be easier. gusto gives me unlimited payroll runs, next day direct deposits, and automatically files my taxes. ooh, taxes! sounds like you know the drill. good one! can i run payroll too? sure, after this. choose payroll without the pain. lisa: 45 minutes until the u.s. that's working with gusto.

open, little action, little drama. some news -- according to the israeli defense forces saying three explosive devices were detonated adjacent to israeli troops in two locations. this violates the cease-fire agreement. we will update you going forward. some soldiers, they say, were injured. the -- tom: summarizing this form bloomberg, this story is huge and moving right now, but certainly, is there always is in cease-fires, there always are violations. lisa: we will keep you updated, but we have been talking about the home that has been so welcome. we will talk about whether this changes the scenario and bring you the latest. tom: you will have that for you

on balance of power. futures at negative 8. let's bring in mr. mayo. he is all ai in banking. lisa: which makes me happy. thanksgiving dinners, several, all the discussion was about artificial intelligence. mike mayo said it will not just be in big tech but also in banks, you need ai talent at financial institutions, saying the marriage of banks with tech is a long-term positive that can help the industry trend toward record efficiency. thank you for being with us. tell us just how much banks could benefit at a time where people have written them off as utilities that are overspending and will not make big returns. mike: if you are a bank and to do not have an ai strategy, you do not have a strategy. if the bank across the street

has calculators or spreadsheets or bloomberg terminals and you do not, how are you going to compete? ai is here to stay. the marriage of angst and tach has been good. i think ai can rekindle the relationship by taking the productivity benefits. they have improved by one third over the last decade. banks since tech have been working but i think ai can take that to another level. tom: you mentioned goliath. is it the kind of thing where four or five will win and the rest will lose, or can the benefit be distributed across the industry? mike: most jobs at banks will be impacted. i am an analyst. analysis can be improved by this tool called ai. there will always be a human in the loop for most cases.

to prepare for your show today, i went to chatgpt and said, what should i say in one sentence about this? they said it is a revolution that will enable productivity and better customer service. that is a starting point but it is partly wrong. i am not sure it is a revolution. banks tend to be more than evil lucian. simply by enabling -- evolution. somebody by enabling that potential does not mean it is a reality. the.com bubble 1.0, you remember these internet banks did not survive. i am positive on the implications of ai, but i am aware of the caveats. tom: george ball, ef houten, they blew it, could not keep up on technology. this is where there were cards with holes in them. i want to know who the losers

are going. i know you've got single best buys, but what is the scale of losers that you see in technology and banking in three to five years? mike: you have this pole. they have an all-day conference in new york tomorrow. jp morgan is number one, front and center right now. your investments in technology are paying off. i am surprised to see citigroup in the top 10. for all their issues with their back office, they are making some efforts with ai. on the other hand, those banks who have not advanced with digitization and the cloud and the cloud in getting their data together can struggle, i wonder about these midsize banks -- do they have the scale to leverage these solutions? talent is a big issue. you cannot just buy talent off

the shelf. you can get solutions, but who will implement them? lisa: how much will they pay them? we were talking about openai paying $800,000 to engineers, base level. how much will banks have two pay? mike: you will see a reduction in headcount and some of those savings put back into paying other employees more money, especially ai engineers. they are in serious demand, but if you go to one of the largest banks, you can scale these solutions across tens of millions of customers, as opposed to going to a smaller bank. what is your pitch? there are smaller banks in this survey the proposal that -- performed quite well. those winning in technology can keep winning more. those that are behind are going to have an existential moment here. lisa: this can work if banks have the cash to invest.

you put a pause on that daytime went potentially there could be a slowdown, could be some reduction in revenues tied to slowing capital markets. this is a longer-term call, but how much do you see a thawing in that environment next year versus a tightening the screws? this is one of the disagreements at a time when yields are high but we will potentially start seeing the effects of that. mike: i will be the first analyst to ask that question if banks are spending too much money. thanks have no choice because the headwinds from rates, recession possibilities, and regulations, they must get more efficient. if you are coming with -- to me and want to invest a lot of money, i would say where are you saving the money to fund that? tom: 12 months ago, nasdaq flat on its back. magnificent seven moon shot.

right now, index is 25% above the pandemic flow. his 2024 the euro -- is 2024 the year of the banks? mike: the long arc of the benefits de-risking has yet to play out. banks did not get credit for the pandemic. right now, you have some smaller regional banks fail earlier this year. i think over the next two to three years you see the benefit of improved banking resiliency play out. they read rate at least back to historical. the bigger question longer-term, can they re-rate above? you get better inflection points when it comes to bank spread revenues, interest rate affects and more clarity on regulation, which is a big issue still. lisa: to follow-up on ai, what

is the right ai investment? is it getting some application to write reports for you? is it being able to collate data from customers to prescribe what they will do or want? what is the correct way? mike: there is no one-size-fits-all when it comes to ai investments. banks are telling them the unique use cases. anything related to compliance, fraud, cyber is where you are seeing some low hanging fruit. when it comes to additional automation, i love what it can do for technology, the idea of changing to python, c++. the ability to change archaic code. most large banks still are advertising for cobol programmers. tom: you are killing me. mike: my first programming class

punched cards, too. tom: lisa is like what are you talking about? single best buy? mike: jp morgan and citigroup. tom: mike mayo, thank you so much, of wells fargo on ai. we need to get to the serious headlines, this is a movable story, alyssa reporting for her. first word on framework of operational pause violated. that is reported from the israeli defense forces. lisa: there is no indication that the truce is not intact, but the israeli army coming out and saying that the truce terms were violated due to an explosive device detonated in northern gaza that did injure several soldiers. tom: stick with us. we will have that for you on

radio and television. futures at negative nine. kit schiller at 9:00 a.m. good morning. ♪ you want to be able to provide your child

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city, good morning. negative by 0.2% on the s&p. countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading, this is bloomberg: the open with jonathan ferro. ♪ jonathan: live from new york, brace yourself, fed speak resumes.