>> the equity market can move higher, but obviously people are worried about rates. >> rates are the things that pressure equities. >> a lot of entities in terms of bond yields. >> inflation, it's all in the mix. >> i think the bond market is pricing in the worst case scenario for what the upcoming administration could or might do. >> this is "bloomberg surveillance," with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city this morning, good morning, good morning. for our audience worldwide, good "bloomberg surveillance" starts right now. what a choppy start to 2025. equity futures shaping up as follows, this morning we look like this, equities down .5%. the nasdaq 100, down by .16.

on the russell, we are little changed. check out the u.k., the 10 year, the highest since 2008, the 30-year, the highest since 1998. bond yields can rise for a lot of different reasons, but when yields are up in the currency is down, it is usually not good. lisa: it usually represents something we see in the emerging markets. this is the point jordan rochester put out this morning when basically saying can we say the united kingdom is acting like an emerging market? right now, can we say it is not a moment and may be a reflection of this country losing some of its reputation on the global d'este? jonathan: i'm glad you brought up rochester. he brought up three options to get out of this and the u.k. one, abroad. two, maybe the bank of england can end ut. or three, tighten up your spending plans, if something on the fiscal side. lisa: can the u.s. have an

efficient government when you cut spending without raising taxes in a punitive way that discourages job creation, which a lot of people are saying is happening in the united kingdom? the answer is, we have not seen it. good luck. let's see what happens. that's the difficulty. that's why people have one eye on what is going on and washington, d.c. and can make of the house in order was something close to efficiency. jonathan: keeping in america, putting a lid on a four-day selloff in the u.s. bond mark as more dovish than expected governor waller. check out those minutes. is this federal reserve, or at least parts of it, getting a little bit political? lisa: a number might be. if you are looking for clarity from the meeting members of the fomc, you got a number about the clarity of the number of people who took into account potentially tarrifs and other

policy changes. this all goes to so that eventually it is a black box and we have less of an understanding of what the scenario analysis is at the federal reserve aside from basically individual speakers. we will get a whole host of them today -- really giving their sense of "it wasn't me, guys." jonathan: who are they? and did they do the same thing in 2021 when this sitting president came out with massive spending plans and put them through a supply constrained economy? that will keep the door wide open to accusations. lisa: pretty much everything right now is wide open with political bias. the fact that waller said he does not see inflationary impulse. immediately, everyone had a knee-jerk reaction of, oh, is he running for fed chair?

putting all of this aside, the fact that this is on the table shows how politicized the fed is getting, whether or not they are politically motivated, in terms of how their moves are interpreted and a lack of understanding exactly how the fed is analyzing incoming information and policies coming down the pike. jonathan: stay tuned for more coverage on this. i want to get into today's schedule just briefly. annmarie is down in washington, d.c., our nation's capital observing the day of morning, the funeral of president jimmy carter. that will have implications for markets in the united states. equities futures are open, but they will close early at 9:30 a.m. eastern time for the cash equity market will not open today. the bond market, cash treasuries are open. they will close later at 2:00 p.m. eastern time. lisa: yeah. futures i believe closing at 1:00 p.m., which puts all the more emphasis on the bond market, which, frankly, has been

one of the main drivers of the concern that is rising. in equity markets, this i think is important, the fact that equity markets held in as far as they have in the face of some of the bond market selloff, highlight how much they are on growth in a downside surprise. this according to christian of goldman sachs. jonathan: your lineup for the next 60 minutes looks like this. we will catch up with george ghosn call this of -- ongcalves of mufg. looking for high yields over the next year or so, a hawkish fed, fiscal policy uncertainty, and more supplies higher in 20. george, welcome to the program, sir. it's not just america, it is global. what do you make of the backup

worldwide in bond yields? george: of course that markets are acting very much em like, and if it is a real consideration, i think this is par for the course. all of this test is negative, it is a negative feedback loop, and until you get the fiscal house in order, i don't see it ending. jonathan: in america, yields are higher, people are spending too much, ok. in europe, it is different. it looks like a dyer growth factor, and people are spending too much. how do they get out of that mess? george: a set of issues will be much harder to get through, a lack of growth, a vision and the plan of how to actually motivate innovation and productivity. that is what is lacking. the u.s. has benefited. lots of government spending. you cannot deny that fact.

i think that really creates a stagflationary environment in the europe and u.k. lisa: how much is this spending directly from the united states, essentially the u.s. catches the cold, the rest of the world catches the flu. the source of the proper get and borrowing. george: yeah. that is a great point. one of the biggest push-ups -- push backs we've had is that links don't matter, and obviously they do. it takes time, but they exert their force in different ways. one of the most prominent has been through the dollar, right? there are elements of we are acting e.m.-like in ways we are spending, e.m. markets, the rest have been suffering. it causes issues for all markets going forward. lisa: something you said i want

to pick up and tie this toward what someone goldman sachs said which is essentially u.s. has growth and europe does it, and that is the saving grace that has been saving the united states markets. i'm wondering how susceptible the u.s. equity market trade downsize economic -- downside surprise economically, whether it is payroll or something that comes down the pike at the time. even if you get a rally in the bond market, you could potentially get a selloff. do you agree with that type of scenario? george: actually i do. i think tomorrow poses a lot of risks. on the one hand, if nft is strong, the fed comes out of the table, or at least get pushed back further. the bond market is a concern. that will be negative for equities. equities will probably look up and say hey, maybe the economy is not as strong as we thought it was. i think that growth shock, and

given the concentration risk in the u.s., and u.s. markets are such a dominant player in global equity space, there's only three ways you can fix that outperformance. either the rest of the world catches up, the u.s. goes sideways, or the u.s. goes down. if you have a big and financial conditions correction, it has been through the wells affect channel that has also been a driver of u.s. growth. so government spending, sdi shock, you have a protracted pullback. jonathan: still close to all-time highs come nominal growth these in america, haven't we established over the last 12 months we can handle rates at these levels? george: i think it is to be determined still. we've been fortunate because of all the influence of overseas investments in the u.s. if any of that were to change, it is not as if we are going to pay down our debt that quickly come up or reduce deficits fast enough that we still need our foreign investors. i do think if there is any sort

of repatriation, pull back on capital coming into the u.s. into the equities space, i think the jury is still out. jonathan: the policy seen in the risk management business, you've got to figure out what are the biggest risks right now, holding too long or cutting too much too soon? what is that? george: on the fiscal side or just kind of risk appetite? jonathan: at the federal reserve? george: i think the risk is that the fed deviates for a consistent message that they need to still be easing, not get into the kind of concerns about what the fiscal outlook may look like, then you can focus on delivering a consistent message and slow down to every other meeting cutting. if things get better, they can stop in the future, but they have a long pause. the risk is, you know, this will actually make things worse. lisa: how much is the fact that we are questioning the political influence, not the donald trump is calling them up and saying,

"guys, cut rates?" more that people are jockeying to be the next fed chair, saying actually this is a responsible policy. we want to push back against it. whatever that may be, does that potentially introduce more volatility? does this undermine some fed messaging? is there is basically the way it has always been at it is just being highlighted more now? george: i think the focus is more hypersensitive now. he mentioned the minutes from yesterday. that meeting was the most hawkish meeting in quite some time. even though they still cut rates, there are a number of folks that really don't want to see rates heading lower. you have that, you know, that action, and then you think about what is the right prescribed policy prescription, they should still be cutting. a kind of puts them in a tough spot, but nonetheless, they need to take into account that the u.s. government needs more rates, too. this is all very circular and

interdependent. u.s. treasury market in the fed are linked at the hips through the interest rate channel. i think that matters. if you ignore that for too long, eventually the risk is you have to do ycc or something more dramatic, right? you can't divorce those two. lisa: you recently talked about the lack of conviction in markets and how it will basically be treading water until we get some sense of, some clarity of what policies will look like from president-elect donald trump and his administration. what policies in particular are you looking for that really turned the tide one way or another? george: it really comes down to come as we've all been saying, implementation risks, unintended consequences. a lot of the markets euphoria. let's not forget, the stock market is up, but it is actually flat to the election. it's a little bit lower. if you look at the s&p 500, we are basically to october levels. i think euphoria is present and high beat risk assets, but they

kind of gone sideways after all the euphoria. i think it will come out that there's a lot of good news priced income a lot will try to get embedded. i think it will be the tariffs, you know, how aggressive, how fast is that initially put it? immigration policy. and how do you have your fiscal house in order? if you have a credible plan, the bond market will respect it, and rates will come down. you have to get your fiscal house in order. jonathan: george come appreciate your time as always. down two basis points to 4.67. with your bloomberg brief, here's dani burger. hey, dani. dani: we begin in los angeles, which is experiencing its worst natural disaster in decade. at least five people were killed and more than 100,000 residents were forced to flee their

homes. there is a major evacuation warning for major landmarks, including the chinese theater as well as hollywood boulevard. the biden administration is plenty more chinese export restrictions. it would create three tiers of chip curves, as allies will have unmitigated access to chips. adversaries will be basically blocked from importing. the majority will face limits. the regulations could be issued as soon as friday. they national day of mourning in the united states for the late president jimmy carter, who died on december 29 at 100 years of age or. a state funeral for carter starts at 10:00 a.m. eastern at the washington national cathedral. president biden is expected to deliver a eulogy. carter was a former georgia peanut farmer who served one term as president and he was most noted for his post-presidency humanitarian

work, especially with habitat for humanity. jonathan: thank you. pretty shocking pictures coming out of los angeles. we will bring you updates throughout the morning. up next on the program, unified behind trump. chair powell: it's going to get -- mr. trump: it's going to get done one way or the other. the end result is the same. jonathan: we will head to washington, d.c. and catch up with annmarie. live this morning, good morning. ♪

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crowd: stop it! ...only you can see. american anncr: rose, back in the winner's circle. (crowd cheers) (♪♪) jonathan: we are down by close to .2% on the s&p 500. the bond market, the 10 year 4.6729. on "surveillance" this morning, unified behind trump. mr. trump: we will get it done

one way or the other. we talk about two, we talk about one, but it does not matter, the end result is the same. we will get something done, reducing tax, creating a lot of jobs. this is a really unified meeting. jonathan: the latest this morning, donald trump praising a unified meeting with senate republicans on capitol hill, discussing his priorities. republicans in the house and senate are still divided on how to get his agenda through. annmarie joins us in washington, d.c. for more. are you seeing or hearing any details on this front? do we know about size, sequencing, process, how quickly the timeline? do we know anything? annmarie: whatever you are hearing about the fact that they are divided on the sequencing, wait until you hear about the size of this and the top line budget. can you imagine what is going to go on? i think you see reflected right now, and i was on capitol hill

yesterday speaking to some representatives about how they see and differ on this approach. what you have to remember is this is going to be very challenging, whether it is one big beautiful bill or two track approach, they have a very slim majority. more so in the house of representatives. remember in the house, they have to make sure they fill seats, representative matt gaetz's sea elise stefanikt, they have to make sure they fill those seats to make sure they have the votes to get these through. or maybe the entire debate will play out open. the fact of the matter is, we don't know, and if you were looking for clarity, we did not get that yesterday except for the fact that trump has made clear he does not really care as much about the procedure. he's not there counting votes, and, frankly, that's not his job, but he does care about his agenda, whether it is one bill or two, he wants to get that agenda through.

this line stuck out to me. after meeting with house speaker mike johnson, senate majority leader said this, that the plan is "as clear as mud," and i expect that for a few more weeks. jonathan: more from amh in a few minutes. talk about one big beautiful bill, how is it going to be? >> i think in terms of growth numbers, looking for something in the mid for trillion dollar range, but the bill depends a lot on the length of various provisions. there will be some on the provisions to minimize cost. it will be a big deal, and it will need to be at least partially paid for. lisa: total ban, how is a going to be paid for -- tobin, how is it going to be paid for?

some talk about a balanced budget, than analysts say there is no feasible way to cut the deficit in any material way going forward. is that your take on as well, are you seeing policies being put forward or discussed? tobin: our base case does income incorporate -- does incorporate the process. the gdp will remain in the 6% range or higher for the foreseeable future. balancing the budget, we are a long way from that. that being said, the one big beautiful bill strategy reflect the fact that the house is taking points more so than the senate come and i think house conservatives are going to demand, you know, some tough choices to partially offset the cost of that. we are looking at partial roebuck of the inflation reduction act, clean energy tax cuts, rolling back reforms on medicaid. some policies could bring that number down but i think you're going to end up being in the mix.

lisa: do you have a sense of what kind of check markets are going to be on some of these proposals, getting them on board with potentially a degree of cost-cutting? tobin: i think we probably need to see yields get materially higher before that starts to be a huge driver of the conversation. the debates about the budget matter are much more about 10 years and so forth then they are about people watching day by day movements in the 10 year. but if yields push about 5%, i think that changes the conversation. in a very significant way, you know, because it has been 4.6%, i don't know if that changes the conversation much. jonathan: when we speak to republican lawmakers, they talk about being responsible. we could see what develops in the bond market. but when you ask where they can do to offset some of the spending, you don't get much detail appeared what can doge do to counter all the spending? tobin: i think it is less what

doge can do. i don't think much of the spending cuts are going to come on the spending side. i think doge, you know, is very much looking at the ongoing way of the market, you can't really go after that reconciliation. when we are thinking about reconciliation reports, we are thinking about tax expenditures like the i.r.a. credits. when you look at the spending side, medicaid is the thing that offers potential source of cuts, they are not cutting social security and medicare. the next big spending program, mandatory spending program in terms of entitlement is medicaid. i think they will look at that, even though they are not talking much about it now. i know it will not be that popular. but i think it will be heavily in the mix. jonathan: we are talking about so many different things. we are 11 days until inauguration, and we are already herding cats, panama, greenland, the gulf of mexico, and it goes

on and on to are these negotiation tactics, or do you think the incoming administration is rethinking a forceful realignment of the global order? tobin: jon, i think you mean the golf of america -- gulf of america. it certainly keeping with the trump approach from the last administration. i don't think this is going to be what the administration is about. when it comes to mexico, i think we have bigger things on the agenda for that bilateral relationship. we have the 25% tariff threat ou t there. immigration i think will be the biggest item in terms of day one executive order that trump does unilaterally the day he comes into office, and mexican cooperation on enforcement will be a huge bid. jonathan: forgive me, the gulf of america. tobin marcus of wolfe research,

thank you, sir. are you on board with that, gulf of america? lisa: did you see claudia sheinbaum of mexico, her response? she gets a press conference where she put a map on the wall, and it shows with a map look like more than 100 years before the united states is created. as she set them at the time, north america was viewed as america mexicana, and she said that sounds nice, no? jonathan: we will see a lot of trolling, don't we come over the next 12 months. lisa: this is the reason people are overreacting to this, denmark's a not really, guys. canada saying there's no chance in hell that this is coming -- becoming the 51st state could what is the distraction keeping people from paying attention to? that is increasingly what people will be focused on. how do you look at the signal? jonathan: i wonder at the seriousness of the attempt to realign global order. i think he is serious. i don't think it is just

trolling. lisa: do you think they will take military action against denmark? maybe tariffs? jonathan: no, i'm not going that far. lisa: i think some would argue because there's a big military base already and they have access to the minerals, they already have it. but you are correct, there is a role at focus here. jonathan: we head back to d.c. in a moment. annmarie will be speaking to former assistant u.s. senior intelligence official norman roule. this is bloomberg. ♪ i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management.

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jonathan: drama this morning on the equity side of things. on the nasdaq, we are down by 0.2%. treasury settles down just a touch. across the curve, a basis point of 2. 4.6729 on a 10-year, on the 30-year, 4.90, getting closer and closer to the line in the sand. 30 year in the u.s., 5%, the sixth trading day, that was back in october 2023, in 2007. pretty rare over the last two decades or so to have yields at or close to these levels. lisa: yet here we are. ultimately as we get there, the

test will be whether it gets bought. yesterday, the signal from the bond market was the 30-year got bought at these levels because of the successful option. that was one thing that supports this market. does that continue as we get more details, particularly about the budget? jonathan: let's look at what is happening with sterling right now. the pound is breaking down once again by 0.6%. 1.2284. you can see this is playing out much more heavily for the sterling side of the trade compared to the euro, down about .2%. this is happening even if gilt continues. approaching 4.90 for all the wrong reasons in the united kingdom. lisa: yesterday, a cease and desist letter was sent, saying that he needs to stop saying that he crash the u.k. economy, saying that is a libelous

statement. there is a real ultimate question here. was it the liz truss moment or was it a much deeper selloff in the bond or the pound or was it a u.k. moment? this question of, have they lost their cloud on the global debt marcus days, especially as they look to potentially increase taxes and cut spending in order to get a budget under control? now it becomes a rachel reeves moment or maybe, again, this is a moment the country cannot afford. jonathan: yes. i think it evokes memories of 2022, but i'm with you, speed, magnitude, completely different back in the 2022 occasion. we also have the overlay, the pension issues as well. it is very different this time around, but i think you are right, this is becoming a u.k. issue. they are losing fiscal space. when you see yields up and currency down, that is a very emerging-market type phenomenon, not something we see play out in america. lisa: jordan rochester made this point, and i think a lot of people are drawn parallel between the u.k. and the rest of the world, but there is a message here.

i think this is why people keep bringing up the liz truss moment in the united states appeared when interest rates start rising enough, that increases your base cost, and that is what the u.k. is facing. jonathan: it just gets worse and worse. you mentioned jordan, what is a come of the great british peso? lisa: talking about other emerging markets. jonathan: brutal, united kingdom. los angeles is facing its worst national disaster in -- natural disaster in decades. five people are dead and more than 100,000 residents has had to flee with hurricane winds expected to last through thursday. brutal images coming out of that region. lisa: the most devastating fire in the region in l.a. in history, potentially come at a time when they are real questions around, a, what could have been done to prevent this, b, how do you bring everyone to

safety at a time when people are saying, where was our plan? why were we stuck in gridlock? the question going forward, how do you build and insure homes in areas that are prone to this type of fire, especially in a changing climate? jonathan: you will get the democrats blaming the republicans for not taking climate change seriously. i think the republicans will make it very obvious counterpoint to that, which you guys are in charge. do something about forest management. make sure you have the water to begin with. i'm not sure people who lost their homes care. they want this fixed and quickly. lisa: they want it fixed to prevent this going forward. they want assurances that things can be done to mitigate this going forward. they want an assurance from the mayor that he's going to come back to the country and possibly come up with some sort of plan. jonathan: and not be in ghana. yeah. angry. i can imagine they are just angry for leadership coming out of california and los angeles. lisa: meantime, our hearts go out to them.

watching homes get destroyed without anything to stop it. jonathan: we will bring you updates. the morning. that is out of california. good news on the horizon where u.s. dockworkers and their employers reaching a tentative labor deal. they would have shut down at east and gulf coast ports is not rectified. guaranteed union jobs when certain technologies implement it, 62% pay raise agreed to back in october. lisa: what is interesting to me if this was not at the last moment. normally these deals happen at the 10th hour, right before january 15, when it was set in stone. i wonder if this is the sign of a realization that you kind of have to take what you can get. the rules are changing faster than maybe you can demand certain provisions to stay up. jonathan: i would say it is the union workers of the docs right now, but i'm with you, the broader story, i think the labor market and the employees are losing leverage to the

employers, and we've seen that now with jp morgan, portably asking people to come back five days a week, not typically what you see when the labor market is supertight. lisa: yeah. i wonder if this is the beginning of an ongoing slew of union negotiations, something you've mentioned in the past, sort of the last gasp before a different change we have the market. jonathan: yeah. without a doubt. the latest segment and showing the central bank is looking to slow interest rate cuts in the months ahead. officials citing high inflation readings and strengthen consumer readings. also using placeholders for possible possible see changes -- possible policy changes in income in trump administration. a number, how many people? and i just wrote "a number." [laughter] super helpful yesterday. lisa: you said "we are looking for a number," they gave it to you. "a number." they are kind of stuck between a

rock and a hard place, in fairness. if they don't take into account policies coming down the pike, that could be potentially irresponsible. if they do, that could be potentially irresponsible, politically. saying the quiet part debt out loud, that is going to be proven to be. jonathan: it's basically what they are telling us. if they are between a rock and a hard place. lisa: what would that be, just to stay quiet? jonathan: forecast, get rid of the dot plot, all of the above. and i running to be the fed chair? nobody wants that. the israeli ministry finds a body of a hostage in gaza. this comes as trump's incoming team looks to host a cease-fire deal. let's head to washington, d.c. where annmarie is sitting down

with former senior u.s. intelligence official norman roule. annmarie: thank you so much. what we are hearing from steve who went over to joe how to be a part and witness the negotiation and really lend some support is that they think they can have good news to deliver. of course we want to bring in norman roule, who spent decades at cia, dealing with the middle east and conflicts. the understanding is potentially we could get a gaza hostage agreement before president biden leaves office? norman: good morning. yes, that is correct. the incoming trump administration and outgoing biden administration have been working very closely with no reports of any disagreements or frictions to achieve this. these statements by president trump, beginning in december, there would be "all hell to pay" if these hostages were not released injected new life into

this issue, and both hamas and the israelis have claimed they have made concessions to make this hostage deal, which would be the first phase of a longer deal, happened. this set them of the very cautious optimism has been used repeatedly in the past. hamas has not dropped his primary demand, which is that israel end the war and withdrawal. israel has not dropped its primary demand, which is hamas cannot be allowed to regain control over gaza. so the exit strategy for this conflict continues to be tied to this hostage deal. annmarie: norm, i am in washington, d.c. today because of the funeral of president jimmy carter, president biden on his final days of office is working to secure americans abroad. obviously these hostages, i'm talking about the iranian hostage crisis card are dealt with, the conflict, the crisis, very different in nature, but

all roads lead back to iran. given your work and decades of experience dealing with iran, what has changed from jimmy carter's presidency to now? norman: in some ways, the modus operandi of iran and its proxies of has a chain gang remains identical. there is 1979, during the carter administration, the algerians played a prominent role in engaging with the iranians. today, we have the qatari government playing its large role in dealing with hamas itself and sometimes the iranians. so you do have strange echoes of this period. but since 1979, not only the carter administration but the reagan administration in lebanon, and the united states repeatedly with iran, have dealt with a drumbeat of hostagetaking by iran and its proxies, and these events tend to be multi-months, multiyear come in

many cases, where in the end, significant financial or political concessions are required to release hostages. iran and its proxies have very little care for human life and dignity, but focus on their own interests. annmarie: many observers would point to the peace agreement between egypt and israel that carter was able to get over the finish line. how do you see that shaping the region? norman: it was dramatic and significant, but at the time, it was not something that was a sure thing. the carter administration entered office hoping to follow the steps of its predecessors, large international conferences involving the saudi union, the geneva process. in fact, the carter administration was not initially enthusiastic about solo diplomatic engagement. "the washington post" at the time famously described in a cool carter reception, "otilia

could freeze the nile," -- "so chilly it could freeze the nile," but under the trump administration became the abraham accords. things move slowly on these issues. annmarie: i would love to end on that point, because we do have an outgoing president who wanted to expand peace in the region, the abraham accords between saudi arabia and israel. he was not able to finish it. now the incoming trump administration that certainly wants to make sure they can get that over the finish line. do you see that doable in the next four years? norman: yes, and in fact some of the biden administration can also build on the previous trump administration's work to pull together a gulf security agreement with an important agreement with the government of bahrain. and this agreement with ball rain, which is a bilateral security agreement, includes the united kingdom, and it is open

to other partners. we will see is perhaps not an expansion of the abraham accords, though that is possible, we may seek economic immigration, we may see greater expansion of the bahrain agreement, we may see a variety of different architectures. if a tuesday process can be established, i think it is inevitable -- if a two-state process can be established, i think it is inevitable that it would mean an expansion of the abraham accords and the peace process. annmarie: norm, thank you so much. jonathan, that was norman roule, a former u.s. intelligence official. one thing clear to me, this iranian hostage that engulfed the final year of carter's administration, when you talk to people like norm, not much has changed about tehran and the iranian regime. jonathan: he is one of the very best, ann marie, thank you for your time. in about an hour from now, catching up with the former speaker of the house, kevin mccarthy, at about 7:45 eastern time.

with your bloomberg brief, here's dani burger. dani: at least five massive wildfires are burning across los angeles. president joe biden has canceled his trip to italy, instead to focus on response to the fires. in a meeting in germany, defense secretary lloyd austin said the pentagon is ready to provide aircraft to help extinguish the flames from the sky. mexican president claudia scheinman has -- claudia sheinbaum has countered president trump's proposal to rename the gulf of mexico with a suggestion of her own. she claims the u.s. should be renamed mexican america for she said a large part of the western u.s., including texas and california, had previously belonged to mexico. former google ceo eric schmidt has invested in 3d rocket maker. the company is developing the rocket that is set to launch

in 2026. it would see a 22 any to -- he received a $22 billion valuation back in 2021. jonathan: up next on the program, counting you down. >> we are not seeing much hiring. we are not seeing much quitting. the labor market is unstable. policy direction over the course of the next few months will be key in determining which side of the ledger the employment market falls. jonathan: that conversation up next. you are watching bloombergtv. ♪

jonathan: for the moment, a little softer, check out the bond market, back in september 18, your 10 year yield, 3.64. why september 18? that's the same day chairman

powell cut interest rates. yields are higher by more than 100 basis points. lisa: it has been relentless. this raises the question, how much is debt exhaustion, and how much is tied to an economy that really is showing inflationary pressures? jonathan: next up is economic data. we are counting you down to payroll. greg: what we see is a frozen labor market, not much hiring or creating. closing the labor market is unstable, because you can see a reduction of confidence, policy direction over the course of the next two mess will be key in determining which side of the ledger the employment market falls. jonathan: here's the latest this morning, tomorrow's payroll report, 165,000 jobs added at unemployment to state flat. richardson of a d.c. p -- of adp

says the labor market and shifted to a more modest pace of growth in the final month of 2024. good to see you. happy new year. where did you see weakness, and where do you see some strength? nela: well, we saw weakness in manufacturing. this is doubling down on a trend we have seen all year, three consecutive months of shedding jobs in manufacturing for that very cyclical. on the strength side, we have to turn to a very noncyclical sector, which is health care. health care has been posting strong gains for the last six months did you see that in the adp data and also in the bls data. it's what's driving the jobs market now. is enough for 20 2025, for healthier -- health care to be in the dominant position. jonathan: are workers losing leverage? is it coming from areas outside of cyclical sectors in the economy? are we seeing a loss of leverage for workers more broadly?

we've been talking about this over the past few days. jp say and get back to work, get back to the office five days a week. we talked a little bit this morning, maybe that's why the unions and dogs are settling a bit earlier. what are you saying about pay and size and loss of leverage? nela: we are seeing a lot. it workers have lost leverage from the heyday of the great resignation where they were clearly in the driver's seat. nobody is in the driver's seat right now and the labor market. it is pretty calm and quiet. pay growth has declined. we are seeing the lowest pay growth since 2021, so that is significant. also, we have to look at hours worked, and that is where companies are kind of fine tuning their labor cap. layoffs are very low. historical lows for the past two years, but the number of hours people are working have been declining consistently over the past year and a half. that means workers are making less. also, i will point to the data

that came out this week. everybody made a big hubbub about it opening. people are staying put in their jobs, and that means there's been very little turnover in this labor market. lisa: i agree with you, 1.9 percent, tied for the lowest rate of quits going back to 2020, raises eyebrows about how much agency workers feel. i'm wondering the why behind this. is it because of policy uncertainty? is it because borrowing costs are higher, and they are not making big expansion removes? or is it because they are still watching what is going on in the artificial intelligence front, with the potential that this might make big changes to their workforce, and they are not exactly sure how jacob nela: let's take those pieces together. i think there is uncertainty about policy. when you look at the weaknesses in terms of firms i commit has really been in small firms that we see in the hit, the slowdown in hiring. big firms are still hiring. you see that clearly in the adp

data. that brings more financing constraints that it does to ai investment or uncertainty about the next policy, where most small firms don't operate in that macro scenario on a consistent basis when adding one or two employees. so when you are looking at that, interest rates matter in terms of financing costs for small firms. longer over 2025, i think ai investment in those trade-offs will become much more relevant starting this year but also into the future. lisa: are you saying that on the ground and bottom up, what you are seeing is long as variable lags still exist, and they are just a lot longer, and they are still risking smaller companies? nela: it has gotten a lot more valuable -- variable. [laughter] lisa: and that is the reason you only see it in smaller businesses. but are you saying that it may look like it is not necessarily hampering financial conditions, but they are impacting the labor market to a more significant

degree at this point been maybe six month ago? nela: firms that rely on big capital and small business firms are feeling the effect of higher interest rates. it may not be translated into the larger firms yet, but in terms of on the ground, the mom and pop, main street businesses, they see that in hiring decisions. so yes, small firms are the engine of growth for the labor market and for the economy. if you want that dynamism to continue, it really has to be at the small firm level. jonathan: what is your reaction to the recent shift at the federal reserve? nela: well, there have been a couple of shifts. i think what we are seeing in terms of the commentary around the fed is that they have put out this idea of being more patient, and this is a fed that we are not really used to seeing historically. usually the fed, when it is starting a policy change, it is moderate, protectable, modest moves every decision meeting. now we are seeing a fed that says hey, we might take a break,

we might, you know, go on vacation for this one and do a rate cut at the next meeting. i think that as a little uncertainty to what the future path of interest rates will be. jonathan: and some of that might included changes to policies we might expect, and some of us might not come and that has been part of the confusion as well over the last month or so. lisa: how does the market factor in what the fed is going to be looking at when we don't have a sense of what policies, the input data will potentially be going into their equation? jonathan: does that make it more confusing for you, nela? nela: for me, it is about the data, right? some of it is animal spirit, it matters for the market commit matters for the mood of making investment decisions. but does it matter to that hr director in a company who is trying to figure out how to grow a business in a particular area? those policy changes are not going to hit that hr director this month. it might play out over six month or a year, but they have to

figure out the here and now in terms of the economic conditions that they are confronting with their customers, not what the fed is doing. jonathan: it is increasingly complex, that is for sure. good to see if you and nila richardson of adp. -- nela richardson of adp. coming up next, jim of apollo in 30 minutes. then we will speak with alex desilva, and annmarie hordern catching up with kevin mccarthy in washington, d.c. how big is that bill going to be come how quickly can he pass it? lisa: and how many offsets to the potential deficit increase? jonathan: it is just around the corner. the second hour of "bloomberg surveillance" up next. ♪

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>> if you would like this to close the primary outperformance in the u.s., we expect to continue. >> we should have a positive year in the s&p 500. >> the second half of the year could be much better for everyone. >> re-think you will get the broadening this year. the regulation act drop we are about to have an incoming administration is profound. >> these policies do matter quite a bit. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: one of those mornings, that time of the year we look at

, it is the gilt market, waking up in new york city, yields up by a couple of basis points, a by three in u.k., levels we have not seen since 1998 on the 30 year, up another two basis points. problems for the united kingdom. lisa: you mentioned jordan rochester earlier, and the response in the currency market, you said something about the great british peso, something he said, and then this is basically the sentiment right now. have we broken the normal connection with markets and their ability to finance deficits through the bond market?

jonathan: lisa: this goes to the crux of the essential issues, the u.s. gets a cold, the rest of the world catches of flu. it is the highest it has been an absolute basis when you talk about the fact that it is affected in the bond market. it is being carried over into other economies that are much weaker, that are not seeing the same growth. what happens if the u.s. has the same deficit, yields, but not the growth? jonathan: we live in a tripod world, and if you go through each of the three regions, it is a growth backdrop. people think they are spending too much. in china, growth is not great, yields are down and people think the government does not spending enough. europe is stuck between getting the worst of all worlds. growth is bad and people think they are spending too much, what do you do with that? lisa: you try to get a leader first, just part of the problem

because there is a great leadership in europe. even though the prospect of ecb rate cuts is greater than fed rate cuts, people are not flocking to the sovereign debt market in europe because the backdrop is so uncertain, and they are stuck between the two poles that are whipped sign them in different directions. jonathan: january is down in washington, d.c., to observe a day of mourning for late president jimmy carter. the funeral taking place later this morning. that has implications for markets here in the u.s. if you are just joining us, 9:30 eastern, equity futures will close. cash equity market will not open today. the cash bonds and treasury market will close at 2:00 p.m. eastern time, so some names, numbers to keep in mind later this morning and into the afternoon. the next 60 minutes will shape up as follows. in a moment, we catch up with apollo asset management gyms alter --jim zelter, we will

speak to alex dasilva of accuweather, and then annmarie hordern will catch up with kevin mccarthy on president-elect trump's agenda in a moment. we begin with stocks and she bloomberg, jim zelter said, if interest rates remain higher, as we expect, we see private credit as an attractive alternative to overvalued public abilities. he joins us now for more. good morning and happy new year. jim: good morning. jonathan: i will kick off by stealing one of lisa's questions start 2025, the stocks to rich bonds to cheap too -- too rich or bonds to cheap? jim: it is our view that they have been consistent.

the u.s. economy has been the begin of opportunity the last several years. strong economic growth, capital from around the globe, so in terms of -- i do not want to talk about the stock market but i'd like to talk about the underlying economy. it looks like a place to invest. i don't think it is any surprise that when you peel the onion back, private capital, which has been embraced in the u.s., gives diversity of funding, lets companies grow, expand, and all the things we are talking about the global renaissance, has been the place to invest and is attracting capital. contrast to what is going on in the u.k. in continental europe, where they have a financing system that is 15, 20, 30 years behind the rest of what is going on in north america and tells us the u.s. is the place to invest. jonathan: you think some problems in europe are more structural in nature? jim: it is easy to focus on the

last three to six months and we talk about the liz truss moment in the u.k. it is a great reminder for the current administration as they have great ambitions in terms of u.s. investment, capex, big initiatives, it is good for this reminder of the liz truss moment in the back of their minds, no it could happen if you lose confidence, but there's no doubt if you look at what the mario draghi documented later last fall, he pointed out in 158 some pages of all the challenges that they have not really embraced, and while thanks are in better shape than they have been in a couple of decades in europe, the u.s. is the standout. we have the greatest financial services sector in the world and the deepest, broadest capital markets. we've undergone a tremendous amount of regulations around the banks, and they continue to thrive in a more narrow world,

and that is the page europeans should be looking at, embracing securitization and private capital. they have a massive amount of infrastructure needs, and they should be embracing that further long-term economic success. lisa: people are saying the coast of liz truss is hovering over the administration and u.s. treasury market, especially given the rise we have seen with longer-term yields. how susceptible are you to changing your view on how constructive the u.s. economy is? if you get more negative data prince, yesterday, they talked about frozen job market, and neil richardson talked about how companies are feeling rates where they are. jim: rates have been higher the last 12 to 18 months. obviously, we are in her time right now or what the fed did and its actions in the fall in with the market is responding to is a unique time. you are right, we are in a little unique time with regard

to macro rates in the u.s. i think we are in a time where rates can look attractive versus where equities are, and we are in a time right now where we are still at a place of economic growth but it is a warning sign for that administration about how much they can push. i would probably not be lowering rates right now. i think you have full employment, economists doing quite well. i'm not sure i see a need other than economic textbook with grades to the target but it creates a lot of room for the new administration if they have weakness in the economy because of initiatives. the fed put us back and have a lot of room to move. lisa: your colleague is edifying your points as you say them. inflation accelerating, to your point, about not necessarily needing to lower rates further. you talk about credit being the sweet spot, maybe even over equities, and that has been the story over a long time the past years, if inflation could be

accelerating, could you see that story changing at a certain point? jim: yes, you could. there is a lot of consensus on where the s&p will go and where the rates are going, but in our view of the backdrop, the u.s. economy still strengthens the globe and is the beacon of opportunity, and we still have a lot of economic growth in terms of the industrial renaissance we've been talking about. in our view, the breadth of credit investment rate, -- investment grade and noninvestment grade, we tried to find areas of mismatch of capital opportunity, and we are still seeing it in credit versus equity markets. when you look at the s&p 500, i would say it is interesting. we all know with the magnificent seminar, but the other 493, a lot of unloved opportunities in that basket, and there is probably an opportunity in a non-consensus view in terms of not just those companies but.

economic growth. but private credit and private capital has been the engine of economic growth in the u.s. i said earlier that it is not a great irony that the u.s. has been the bastion of economic growth with the embracing of private capital, but one of the greatest investors in u.s. capitol's warren buffett and berkshire. when you pull the covers back on berkshire hathaway, of the trillion dollars of assets at the end of 2023, 30% are in the public equities that we know about, apple, coca-cola, american express, but 78% are private companies. it is the growth engine. he's the greatest capitalist and has been doing it for 50 years. that is were growth and opportunity is in america. private capital and private companies. and they have access the debt markets. they don't need to go public to raise capital anymore, 8000 public companies to 4000, that's the trend in the future, and we

are sitting in an intersection trying to bring those two retirees and around the world. jonathan: you mentioned europe, and in europe, the beach analyst overburdened. we have been talking about it for years. i would like to understand from your perspective how you will work with the banks in america going forward because this is not a new trend with the banks original the loans and you provide -- originate money and you provide the money. jim: i think 2024 was a pivot year. for us as a leading firm in this industry and sector, you know, there was a great headline that we talked about many times, where the great battle between private capital and banks, the reality is, if you look at the commercial dialogue going on between the top five, top 10 institutions and a handful of us that lead the industry, the

amount of integration, dialogue, working together on big deals has never been deeper. those are citibank transaction, there was a transaction that was standard chartered, bnp, so i think we are still in the early days. these partnerships need to have substance. they cannot be shotgun marriages. you have to be ones that have substance, dialogue, trust, and some history of a lot of transactions together. we have been fortunate in all of the ones we have put together weather has been a lot of history of personnel or activity, but i think it is still early days. there are a lot of headlines, just grab headlines, and there's not a lot of substance behind them, but i think that trend of private capital and bank partnerships will extend in 2025-2026. if you think about the economic backdrop, i sense there's a great opportunity for strategic,

and a. m&a. i'm a little more skeptic about the massive ipo window. if you look at the last 10 years, equity issuance has been 250 billion ipo's, 250 billion secondaries, that is removing other stat numbers, and we still have valuation issues with a lot of private equity companies that have wanted to come out and give their ipo, so i think we have a nonconsensus view with apollo that that number will not be as large as people think, so the big mismatch, if you have a big credit market or equity market, this area of hybrid in between, which we have talked a lot about, applying capital over opportunities, that is 2020 five and. 2026 jonathan: his ipo evaluation issue or do the companies that need to go public anymore? jim: i think it is a valuation issue for 50% to 60% of them.

i think it is very clear now, private companies have access to all sorts of capital, debt and equity, whatever it may be, and so the typical room you need to go to, have your employees be able to monetize investments, broad-based capital, equity, so it did several months ago, and there is tremendous pools of capital, private capital to finance these companies, so going public is by no means the ticket to liquidity that you needed in the past, a lot more options. lisa: in five to 10 years, will there be a difference in private and public markets? jim: we don't believe so. there will be some differentiations. the u.s. will also have a -- always have a massive compression in yields, and the advantage will go to those who make money on the origination.

you make the 3, 5, 7, 10 billion commitment to x, y's, z company and that is where you garner the extra spread, but all the things we are doing our capital formation and trying to bring some liquidity in these markets in terms of secondary activity with transparency and price discovery. i think the barriers and what is private is risky and what is public is safe. i think those barriers will be coming down. i go back to brookshire, nobody talks about it, but it is quite an irony that the greatest public investor of all time, 70% of those companies, when you look at the webpage, these are some great american companies, and over 50 years, he has assembled them and their massive compounder's, and that is 70% of the underlying value, geico at the top, bnsf, many other great companies, and that is a lesson for us all.

there are companies that are private and there is private equity, but we would clearly like to be part of the big trend and offer those to investors around the globe. a big change in market structure. jonathan: you will stick with us to talk about the changes we could see in washington, d.c., later this year. let's give you an update on stories elsewhere, here is your bloomberg brief with dani burger. dani: more than 100,000 los angeles residents have fled their homes as at least five massive wildfires burned across the region. it is the worst natural disaster in the city in decades. accuweather estimates the fire will cost 52 to $57 billion in damage, taking it likely the nation's most expensive wildfire. apple says it never used data from siri to build marketing profiles and it did not sell the information to anyone for any purpose. the statement comes after apple agreed to pay $95 million to

settle a class-action lawsuit, alleging user privacy was violated when human reviewers listened to siri recordings. apple said contractors listen to recordings only to improve voice recognition and recordings are only retained if users explicitly opt in. and in english football, big upsets. liverpool was edged out by tottenham in the semifinals. the 18-year-old middlefield are scored the winning goal and it follows another upset, newcastle beating arsenal earlier this week. the arsenal coach blamed the quality of the balls used in the tournament. they will face off in early february. that is you brief. jonathan: who put tottenham in the brief? next, cutting the red tape. >> any business that invests $1 billion or more in the u.s. will be eligible for fully expedited

permits and approvals, including environmental approvals from the federal government. jonathan: that conversation next, live from new york city. this is bloomberg. ♪ (♪♪) (♪♪) what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com

jonathan: equity futures on the s&p 500 negative by close to .20%. bond market stabilizing, down two basis points, close to three on the 10 year, 4.60 six. things are stabilizing a little bit. yields are higher by three basis points and the 10-year, 4.82. under surveillance, cutting the red tape. >> any business that invests $1 billion or more in the u.s. will be eligible for fully expedited permits and approvals, including an environment till approvals

from the federal governments. they took away 620 5 million of offshore drilling. nobody else does that. we will be drilling soon. we will be opening up and warrant and doing all sorts of things that nobody ever thought was possible. jonathan: president-elect donald trump pledging to draw global investment to the u.s., cutting permits and approvals with investments of $1 billion or more, and they will overhaul the energy sector by opening more space for oil. jim, how close were we to losing mark thurman to the swamp in washington, d.c.? jim: i think the administration saw an amazingly bold thinker, and would have had a huge impact on the future trajectory of our economy and the far ranging responsibilities of the treasury

secretary, and i think he was very engaged in the process. but america's loss is apollo's game, and we feel we have a great management team that could carry the water in his absence, but he was very engaged in the process. jonathan: in early november when he got the selection outcome, yield stock was like a rocket. what were investor seeing? what did you see as the opportunity for the incoming ministership what changes will benefit the business? jim: i think they have seen, in our example, we have been in company that has grown over the last decade by being at this intersection between retirees and investors around the globe, and companies needing to raise capital. as the markets have evolved, we have continued in a low rate and hybrid environment. we have been able to continually, 50 to 20% of our business growth every year, and they see that in an environment

we go from an administration that is not pro-business or not as progrowth to one that is clearly progrowth or unless regulatory environment that has changed, so i think the view has been that if these folks have succeeded so well in an environment where there was an administration that was not cheering them on to one that is, that is a better backdrop of broader success. i think that is what we are seeing now. certainly, the refreshed view of a regulatory backdrop is a refreshed view of m&a, bring capital to the u.s., and having it provide a lot of this growth, whether in technology, whether it is beyond the on showing of companies, we are feeling the back draft of that, which i think is positive. lisa: the idea of financing technological advancements, we have heard a lot about that, whether it is somewhere houses

or energy grid, what areas is apollo going to double down on as far as more frankness, and some of the sentiment you are talking about? jim: when you look at the big hands of infrastructure, data centers, of the utility grid and that brought infrastructure, all of those, on many investment-grade companies, even the highest-rated witness what we did last year with intel and there's a whole slew of those looking at massive liens, and we talked about it here in the past, as much as the investment-grade market is a robust and open market, a lot of the growth of these companies are confronted with well in excess of what could be advanced with their existing rates, so you have identified four or five, and they are really in those big pools of economic growth of infrastructure technology, digital data, all of

those areas, which many, many u.s. companies, as well as the on ensuring the foreign companies coming to the u.s., wondering how they're going to finance activities. as i said before, since the transaction, we have been incredibly busy in terms of the phone ringing off the hook, we have been in with a variety of these investment-grade companies, looking to finance their business in a variety of manners. jonathan: they will have a more pragmatic approach that will be required to support their shifts. that is for sure. lisa: with respect to drill, baby, drill, there have to be other energy provisions that we are hearing the how consistent can the regulatory --

jim: in terms of what the market has embraced, the duration of the capital that we have with our annuity and retirees that many of our peers have, as well, but the skill and the integrated manner that we brought back to the forefront i think is what the market has embraced. jonathan: we appreciate your time, jim seltzer of apollo asset management. next, alex dasilva of accuweather, as wildfires continue to threaten los angeles. ♪

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jonathan: equity futures at the moment, down by about 30% on the nasdaq 100, and would you believe it, the rest -- the russell basically flat after that massive length of gains in november, we took almost all of it back in december and then some. lisa: it is amazing until you see bond yields and then you say, wait a second, this is what people warned, the stock market would like proposals and the bond market would not, and the might be in the driver seat. jonathan: let's get you fireworks now with manus cranny. manus: there was a debate about term premium and not inflation, and there was a debate about the trajectory of the fed. this is a non-vigilante is that

has got to be put in context. it is not to the extent of 1994, but it erected here, and it triage is for the rest of the world. we will discover who is swimming naked when the tide goes out, fiscally speaking. this is where the description is. level since you have not seen since 2008. this is not a liz truss moment in the bond market yet. in 2022, the bond market erected by one hundred basis points over a couple of days. this is 30 basis points in the space of a week, but what we have here is how you constrain this? i like what you said going from rochester's note, the great british peso, the question is physically what happens in the united kingdom -- fiscally, what happens in the united kingdom? 1976 is on the u.k. went to the imf for bailout. that is not what people are

calling for, so how do we stop it? one big dutiful bill, that is the narrative and mantra from the biden administration and president-elect, but the question is, what triggers a real dislocation of the bond market? is it additional tax cuts above 5 trillion? what you are seeing is a mini bear raid in the u.s., walking into a global dislocation, but this is a lesson for the u.s. bond market, and if you push the fiscal envelope too hard, too fast and too aggressive, the whipsaw could be on you mental. 1994. jonathan: thank you. looking forward to payrolls tomorrow morning. 165,000 is the estimate in our survey, the previous is 227. we have said good evening, tokyo because we believe they are 30 to follow given would have been so closely. we have to say good afternoon,

london, tomorrow morning and that will be a big issue for the u.k.. lisa: even more so than good afternoon tokyo because tokyo is doing fine with wage increases they have seen. it is really know about the united kingdom and europe that is feeling pressure that is impacting markets don't have the same amount of growth. jonathan: a fourth day of losses extended on concerns the u.k. government will struggle to keep the deficit in check. some investors have conspired -- comparisons to the field crisis and debt crisis when they u.k. government asked for a bailout. the pound also fall into a multiyear low. sterling that 172. lisa: as yields go up, fewer people would like to come in, and that is going to be the hallmark of the great dish peso, as we heard about from jordan rochester, this is really the concern, how much is this becoming an emerging-market type

of behavior that really does make it difficult for this ministrations to alter the ship? -- administration to alter the ship? jonathan: the internal problem is spending too much money, and on the monetary policy side, qt, and then there are external issues were weak growth is being imported from china and then you have what is happening with global markets, driven by the u.s., which is the point being made. external issues are harder to address. it will not pick up anytime soon on the continent. it is basically flatlining, and in the u.s., this administration is making sure we live in a high nominal world in the u.s. of america, and as long as that is true, there will be pressure on the bond yields, and that will be exported to the rest of the world, and we are seeing that play out in the gilt market. lisa: there is one future you paint well that is interesting

to me, which is in the u.k., they are trying to raise taxes to pay for some of what they are doing. in the u.s., the goal is to cut taxes. that divergence is benefiting the u.s. at the behest of the likes of the united kingdom, and i'm curious about the history books of how that gets written. jonathan: the theme of the program for the past few weeks, let's keep it here in the u.s., president biden planning and additional round of restrictions on ai chip exports, sources telling us that biden is looking to curb a set of ai chips, including on company basis, focusing on development in friendly nations. lisa: there are a lot of questions, how long will this remain in place through the trump ministrations, but it remains this issue of where is it ok for u.s. technology to be implemented outside of the u.s.? what is a friendly nation?

this becomes the heart of the issue of it is not just nvidia, this is a matter of google or microsoft creating a data center in another country because that is also one country creating those chips to create a center, so homero is our group of allies and what was the goal at the twilight of his term? jonathan: it has been very busy the last few days, and the white house saying the president is staying in the u.s., and they remain focused on directing the full federal response in the days ahead. lisa: this is probably more on par with the tone, they say the mayor of los angeles, who i believe is still not in the u.s. but gonna, but there is a question about how you prevent this from going forward and then how you tackle this in real time when they're running out of water. it is a catastrophe and it raises questions about how you prevent this, we develop and ensure properties, were a lot of

them had stopped being insured because insurance companies could not raise the premium, so they got out of california altogether. we will call it what ever we would like but we are dealing with the aftermath for quite a while. jonathan: i think the issue the mayor has got is that issue of the u.s. president, i'm not sure how much the president of the united states is doing now to help powell, but if he was in italy, he would be criticized. lisa: so it is a public relations thing. he's not fighting the fire, a lot of this is important tone. if you have 100,000 people who have been evacuated from their homes, and hundreds of homes are demolished, i mean, ajo right -- a joey right? -- a joyride? jonathan: accuweather estimated total economic damage will be between 52 and 57 billion u.s. dollars.

joining us is alex desilva of accuweather -- alex dasilva of accuweather. alex: we still have three major fires burning on the north side of los angeles, all three less than 10% contained. and a few others have popped up. there fortunately is some containment, but the three major fires, the palisades and all three, 10% or less containment. what are the winds doing? are these fires going to get worse? i have good news, the winds dated back down considerably last night and it looks like they pick up a little bit today into tonight, so we are looking at winds of 30 to 50 miles-per-hour, down from the 70 to 90 miles per hour that we have dealt with over the last day or so, but still windy across the los angeles area. i do think the fires continue to make progress, but the winds have come down a little bit, so firefighters should be able to

make a little progress throughout the day today. like mentioned, accuweather estimated 52 to $57 billion of economic damage from wildfires, not just the physical damage for the tourism damage, and it is a lot of repercussions that come after the event, so it is not just about what is going on currently but how will these impact the future? that is baked into the estimate of 52 57 billion dollars of damage but how does this compare to other natural disasters? on top, you see the 52 to 57 billion dollars in the california wildfires, and many of us remember that destructive season, that was 130 to 150 billion, but that was over the course of the entire wildfire season. this is almost half of that, and it is in a couple of days, and then you can see how it compares to hurricane helene with over $200 billion in damage. lisa: do we have a sense of who is paying for the damages?

alex: i'm not sure, i'm sure the federal government will be aiding in repairs that have to be made. like i said, the damage is not done yet. it looks like some wildfires will continue to spread. certainly disaster declaration will have to be declared in the area, and federal money will have to come in to the los angeles area. jonathan: we will catch up with you before the weekend, alex dasilva of accuweather on the latest in los angeles. an update to stories elsewhere with your bloomberg brief, let's crossover to dani burger. dani: the latest and the battle to stop the wildfires, the u.s. military is ready to help, defense secretary lloyd austin said the pentagon will provide aircrafts to extinguish the flames from the sky. at least five massive wildfires are burning across los angeles. 27,000 acres have been scorched, five killed and 100,000 have been forced to flee from their homes. a union representing u.s.

dockworkers reached a tentative deal with port operators for a new six-year contract to avoid a strike. bloomberg learned that it guarantees union drops when certain technologies are implemented, including semiautomated cranes that had been a sticking point. the deal still needs to be ratified by the two sides. hershey is asking the u.s. government for permission to buy huge amounts of cocoa with concerns of the shortages of the commodity soaring and record high prices are expected to persist. they are seeking to purchase over 90,000 metric tons of cocoa and that exceeds the u.s. commodity futures trading the limit. and that is your brief. jonathan: i'm surprised there's that much cocoa in hershey's. lisa: you are going to go there? jonathan: i'm surprised. lisa: i was going to say, that explains it. jonathan: how much chocolate is actually in the chocolate? lisa: do you actually look at the percentage? of course you do. you only eat 70%.

jonathan: 60% and up. lisa: you can do that. jonathan: there has to be analogy there somewhere. seriously. next, donald trump's agenda turning into reality. >> even with our small margin in the house, we will need everybody's vote, arsenic and house republican majorities will have to work together. jonathan: seriously. next, we catch up with the former speaker of the house kevin mccarthy, sitting down with anne-marie. ♪

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reality. >> given our small margin in the house, we will need everybody's vote and everybody on board. ultimately, arsenic and house republicans majorities -- our senate and house republican majorities will have to work together. nobody is going to get everything they would like out of this. they will have to be good-faith negotiation if we have any chance of passing a reconciliation bill. jonathan: president-elect trump is back on capitol hill, discussing his priorities with senate republicans and telling reporters there will be results. and record on his with kevin mccarthy. annmarie: good morning. i love what majority leader john bloom said, it is clear as mud in terms of sequencing with the priorities are clear for president-elect trump. we will talk about that right now with former speaker of the house kevin mccarthy. you know how challenging it is and senate majorities to get anything done in congress, what is your advice to president trump, does he go for this one

big beautiful bill debt ceiling on the senate? kevin: i think one bill is the right answer and this is why. it is different. this is the first time in modern history the majority in the senate is larger than the house, so the senate is going to have a different view. they have 53, but they really have 54 by having the house present -- vice president. the house has a small majority. plus, come january 20, they are going to lose two more members for a time. those two florida seats will not get billed until april 1, and then the new york state not until after that. so you cannot take that many bites of the apple. and remember why you are doing reconciliation, it is a special provision that allows you to pass the senate without 50 votes but you cannot write a perfect bill, so that is how we do tax reform. you have tax reform you have to

get done by the end of the year, otherwise, taxes all go up, so pressure is on you. if you make the bill too big and too beautiful, it collapses because it is too big. the reason why they are looking at two different bills, they need money now for the border, but i believe the border is a disaster, declared a disaster, pull money from the disaster fund, and let you do the border right now because tax will take a little longer. the other problem they have is they made a mistake. they never dished the funding from last year, and this is a disadvantage for trump. they hurt trump by making him worry about last year's funding now. annmarie: was that a fault of speaker johnson? kevin: i don't know whose job -- faulted is, but they should've gotten the job done. this is what they can use to slow down their agenda, so the first thing i would do, you still have time, finish the

funding from last year, take care of the debt ceiling so president trump can have a honeymoon or agenda he would like to put forward because we are now -- they have him confirmed in the senate, the new cabinet, he has got to get his people in line to start working, but president trump knows this job already. he has four years and will not waste a moment. he needs the legislative body to catch up to him. annmarie: who will be the moderating voice to make sure it is not too big and it is not actually collapsed? kevin: what i love is the free market. annmarie: you think it is the bond market question mark have seen yields go up, do you think the bond market -- does congress have room to spend as much as trump's rhetoric is talking about? kevin: it is like taking over a company, you have to give him leeway. it is paying the debt the last

people spent, but -- annmarie: but the market is pricing in his future plans and spending, will that be the moderator? kevin: i think this is good because it gives people the opportunity, but the way to handle this, and i tried to get widened to go over this, in 1989, the soviet union collapsed, so we need to reform our military, but what number is going to raise their hand and say, close my military base? nobody, so they created a condition. the important part is they got their work done, and have a vote in the house and senate with no amendments, and they need to do something like that for doge. let them work with no evidence and you will know if you can get it. our greatest threat is our debt, but we have got to do a lot of things going forward. the debt ceiling is not a part of that. we should take that out of the way, let the president to the

job that has to be done. annmarie: are you feeling that they should be done in april, what speaker johnson is talking about? all of this, i reconciliation and a disaster. kevin: it's hard to say by april 1. i would wait until the florida seats because those are two more seats, you cannot get taxed on that fast because, remember, they have got to do something about salt and tax on tips, that costs money, but you have to start working on the borders, and do the executive orders and get that done. if you would like to do something on energy, get that done, but if you put the debt ceiling to reconciliation -- annmarie: which is what people are talking about. kevin: that will not work and this is why, there are members of the republican party that will never vote for that. annmarie: who wins the fight, trump or the house freedom caucus? kevin: trump will always win,

the house freedom caucus loses from that perspective because the house freedom caucus as to the american public, your taxes are going to go up. you have watched in the house freedom caucus, their former chairman was auntie trump. they had auntie trump people and it is unfortunate, so nobody can fight him. they have to focus on priorities and the policy. you will not get 100% right but government is not designed that way. but you will get this done. it is in the sequencing of how you do it. annmarie: you mentioned california, how do you think trump is going to deal with when he is inaugurated and the incoming tragedy, devastating fires that are apocalyptic, people not having their homes, water, not having enough firefighters, how will he work with gavin newsom to solve the pricing? kevin: there is a third point, a lot of people lost their insurance because of gavin

newsom. annmarie: insurance companies wanted to raise rates. kevin: they wanted to be able to afford insurance. when he would not focus on that issue, they had left the state. my mother lost her home holder -- her homeowner insurance from geico and had no claims because california was uninsurable and they ignored the problem. you know the saddest part about all of this? we have had these fires before, i went out to california with then president trump, november 17, 2018, 85 people died in paradise, and we toured that with gavin newsom, who had been elected, last sworn in, and then we feed down to malibu who had a fire, as well. i was in the meeting, walk into places where president trump said you have got to take the fuel away. yeah, you're going to get a fire when there is wind and pushing, but if it doesn't have fuel, it cannot keep growing. the other problem, how you worked on evacuation ahead of

time instead of cars getting stopped with people, that is what happened in paradise. what about the infrastructure? you cannot go to a fire hydrant and not have water customer you know who fought him on it? gavin newsom. annmarie: trump is going to want to make sure that california gets the money they need customer -- they need? kevin: trump will be there for california. i think you will see executive orders really about the water again, and president trump did that last time and had gavin newsom follow-through, there would have been water. he was very serious about protecting it and managing that. you will see him double down even harder. but california, the state, they have got to change their behavior, and what i think president trump will do is put the mechanism where gavin cannot make the mistake again. annmarie: since you left congress, you have been focused on ai and have become an

informal adviser to president-elect trump. use years of going into government or do you like me and that call on the outside? kevin: i served for a long time, i would like to utilize the knowledge i have from being speaker and everything else, and also on the outside, that congress looks at the next issues for 50, 60 years. we are losing the battle for the next century. these are all the issues i worked on as speaker. i went to m.i.t., which teaches a course to all the generals in the military. four years ago, they developed a course to teach it to all members of congress, the china select committee, the ai committee. whoever captures ai and quantum has the advantage, but if you would like to capture them, you have to get the energy policy right. otherwise, it will never happen. so the off institute is literally policy, showing a roadmap for the policymakers to solve the problem. just continue what i did while i

was working there to help the policymakers and america succeed and be successful. annmarie: former speaker of the house kevin mccarthy, thank you. it is clear, he thinks one bill that it might not be so big. jonathan: maybe a really big space or maybe not at all. we are talking about 4, 5, 6 trillion. we spoke to a guest yesterday who expected a bill as big as 6 trillion u.s. dollars. lisa: that is ultimately going to be the question but this is the issue, how do they get the cuts through when this is not necessarily a cabinet position? jonathan: in the third hour of "bloomberg surveillance," here is your lineup. from new york city, this is bloomberg. ♪

♪ >> the equity market to move higher but obviously people are worried about more of the rates. >> a lot of uncertainty in regards to what is happening in terms of volume. >> fiscal deficit, inflation that is not solved, all that is in the mix. >> i think the bond market is

pricing in the worst-case scenario for the upcoming administration could or might do. announcer: this is "bloomberg serveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: equity features on the s&p 500 just a little bit softer, down 1/10 of 1% on the s&p. anne-marie is down in washington, d.c. jimmy carter's funeral taking the cash equity market will not open today. equity features are trading but they will cease trading at 9:30 eastern time in the cash treasury market will close a little bit early today at 2:00 p.m. eastern time. some things to think about as we progress through the market they. down by four basis points. pulling back from these multi-year highs. in the u.k., things stabilize as well.

the yield curve just about unchanged. lisa: which raises the question of how much the u.s. is setting the tone for the rest of the world. does that give a reprieve to rachel and the entire u.k. government that is grappling with something that rhymes with liz truss? liz truss came out yesterday with a cease-and-desist letter saying guys, i did not torpedo the economy. jonathan: every time there is a bond market selloff it is called a liz truss moment. jonathan: here is a liz truss moment. lisa: that is a reason why she is sending a cease-and-desist letter. as we get something that rhymes somewhat with a liz truss moment. jonathan: the global bond market will be focused on one data point tomorrow morning. payrolls friday. 165k, the mid-an estimate in our survey. the previous number is 227.

i think that the polish authorities are doing that. a downside surprise. lisa: i've been thinking a lot about this. would it be something positive for the risk assets in the u.s. and you can get a downside surprise, maybe a treasury market that a lot of people are expecting. on one hand you take some of the pressure off from yield. on the flipside, there is this issue that if you have weaker growth, what is the argument to keep going into stocks with elevated valuations at a time when we still haven't left inflation behind? jonathan: equity futures down by a little more than 1/10 of 1% on the s&p. coming up, we will catch up with greg boutle, craig moffett, and jonathan pingle with the most accurate forecaster of payrolls on wall street. stocks edging lower.

volatility dynamics have been consistent with what we described earlier in the year as late cycle exuberance. stretch valuations, decisioning access and volatility russian have already started to amplify risk of disorderly corrections. greg, good morning. that is a bramo-type statement, disorderly corrections. >> i think we got a little bit of a sense of that in december were equity for trending higher huge influx came to the market post-election and when we had a negative catalyst we broke from this very low volatility regime into a big risk off move. locations based off state -- the fomc. we think that is a little bit of a playbook for some of the environment this year. jonathan: that goes against the hopes and dreams of a market

that broadens out and then we saw brett the russell, the small caps which start performing in the basically the russell has rolled over and we are unchanged election day. what is it going to take for this market to border beyond the mag seven? >> got these huge one-day move that they after the election, totally evaporated. what we need to see is evidence of rep coming in from earnings season, and we need to see this macroenvironment remain in the goldilocks-type state where the data is good, but not too hot that the bond market derails things. lisa: i will take your disorderly corrections and counter it, he lived to the 1995-1999 period and the subsequent 2000-2002 period. he said the hallmarks of a selloff with higher volatility you're not seeing that so given the fact that there is something behind some of the dynamism

people are talking about, he remains fully polish. why don't you think that this is an indicator that we haven't seen a real spike up in the vix? >> what we see it a volatility market. if you look at behavior through the second half of 2024 you do have some evidence that it is starting to become more reactive. we are and environment where there is volatility which has a self-feeding mechanism of suppressing volatility locally, and then potentially you could get some breaks out of that when the market becomes more volatile. one in august, one in december we had some very large spikes in the vix. i think that a slightly different behavior that what we've seen prior to that. lisa: is that what you're talking about with disorderly correction, is that the contours of it or are you expecting something slightly different? >> i think the regime that we saw in the back end of 2024 is something we are waiting for into 2025. this isn't to be confused with a

pervasive bearishness. we think q4 earnings season is going to be the most important catalyst in january. but as the market moves higher and we get more and more risk building in the system, it then leaves us vulnerable to believe very rapid unwinds where the vix can spike aggressively and you can move to a higher volume regime very aggressively. lisa: i think delta is actually the first, but jp morgan kicks it off and that is going to be something to share. we were laughing because i pay attention to delta report is first. jonathan: even though another company thousand. lisa: he is taking off earnings season. what is more important, growth or the rate regime? >> i think it is both. we need strong growth, a little bit of inflation. high now growth that drives high earnings growth.

and maybe we can digest gradually higher rates, but what we need to avoid is a rapid spike in yields. if we work to see the 10 year yield plunged through last year's highs very rapidly, that would drive a risk off move for equities. what we need to see is this classic old a lack environment where rates can stay higher for longer but don't move in a very volatile fashion and we did strong nominal gdp as well. jonathan: what degree of confidence do you have that we are going to get that? >> i think we might get pockets of the. there will be some part of this year when it feels a little bit like 2017 donald trump's first term, along with volatility year despite headline risk equities and the years. then we moved into 2018 will have trade tariffs dominating. and i think that is a good example of where volatility suppression and ultralow realized volatility environment and 2017 built up too much risk

that then unwound very aggressively. jonathan: so it is a blend of 2017-2018 that you are expecting. >> it's going to be very episodic and we could bounce from one to the other very quickly. we think that there are ways to position yourself to try to navigate that, but we do think we will get these strange conditions were volatility is not homogenous. it is not a high or a low environment. jonathan: what is the opportunity right now then? >> one is looking at the stocks or sectors that you like where you think there could be good releases. we think we have seen a big retracement and some of those stocks from the highs. then i think there opportunities to hedge. when we have periods of de-risking, the fix will be exposed. jonathan: like 2018 explosive or 10 points in a day explosive? it's >> we had 12 points in a

day in december, so i think we can get bigger move than 10. lisa: is this a way of saying play with the market on a day-to-day basis? >> the right tail can essentially overshoot and then you can have the last periods of de-risking. it is month-to-month, quarter to quarter. we are much more focused on where we think the market is going then we are thinking about where the market will be. lisa: how much are you trading january 20? >> i think january 20 is one of the key catalysts. tomorrow we have the payrolls print, then cpi. q4 earnings i do think it's probably more important than january 20, but january 20 i do think is something we should be mindful of. it falls today's before the

january fix expiring so if you were to get headlines of the market like, i think the vix to the explosive. lisa: no one is listening so no one is going to get mad at you, but as jensen long more important to donald trump to the market? >> i think what is more important is whether we start to get brett. we've had this huge rally that has been driven and what the consensus is actually looking for if you look at the consensus forecast for things like equal weight s&p relative to market cap is a bit of a catch-up trade this year. i think if we end the year higher and equities it will be because the cyclical outlook has been ok. whether that is chair powell with the macro data or donald trump or a combination of all of these things. jonathan: a couple of times on this program. lisa: which is bold. they could be a phone call, excuse me, let me tell you from the white house.

he could call greg and be like billy, you think i'm not the most important guy in the room. the coal has been somewhat challenging. i think of windswept avenues are cold. >> i think this is a little bit like the markets, we are concerned about inflation and about growth, we are not concerned that new york. i think we have to be vigilant on the weather front. jonathan: on stories elsewhere this morning, let's cross to dani burger. dani: los angeles is experiencing its worst natural disaster in decade. five fires are burning across the city driven by hurricane wind. at least five people were killed and more than 100,000 residents were fourth theater homes.

major landmarks including the tcl chinese theater and the home of the academy awards as well as parts of hollywood boulevard were under evacuation warning. federal reserve bank boston president susan collins favors fewer cuts in 2025. she expects inflation to decline but does war that progress will be bumpy and uneven. she's less concerned about the labor market but will be watching closely for any deterioration, noting that she believed the u.s. economy is in a good place. poland's president has asked the government to protect benjamin netanyahu from arrest in the country. that yahoo! is speculated to be considering attending the commemoration of the 80th anniversary of the liberation of the auschwitz death camp later this month. an israeli from your subject to an arrest word by the international criminal court for alleged war crimes in gaza. that is your brief. jonathan: up next, one big morning paul.

it's -- one big morning call. craig moffett on apple. this is bloomberg. ♪ i can't believe you corporate types are still at it. just stop calling each other rock stars. and using workday to put finance and h.r. on one platform. tim, you are a rock star. using responsible ai doesn't make you a rock star. it kinda does. you are not rock stars. (clears throat) okay. most of you are not rock stars. oooh. data driven insights, and large language models. oh, that's so rock roll. it is, right. he gets it. yeah. for generations. ♪♪ we helped the lost generation find their way. the greatest be great. we watched boomers grow. [laughing] we are x, y and z.

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♪ jonathan: equities right now -50.1% on the s&p 500, almost one hour from the opening bell. there won't be an opening bell today. we got some trading in the bond market, anoth, treasury's, yields lower. going into payrolls tomorrow morning, the estimate in our survey is 165. we kicked off the train leak by catching up over at j.p. morgan. making the point that she believes that risks are skewed

to the downside for yields, and that the possibility of things like growth and inflation -diminished somewhat. lisa: and certainly that's partly because of the set up we've seen with the increase in inflation expectations, the increase in growth expectations that have been baked into yields. my question is if you get a number and you do get a bid into the bond market, do you get a commensurate bid or a selloff in the equity market? that i think is going to be real tough. jonathan: that i think depends. goldilocks downside surprise. you think i'm running to the next fed chair? who do i need to get in touch with? treasury. i sent this earlier, i'd like to see brando in the seat. we are jacking rates up, i don't know. because things are so bad.

lisa: nobody wants that either. jonathan: apple down over 6% with week iphone sales and errors sentiment. craig moffett is now one of those bears writing as great a company as apple is, the outlook for shares given its challenging backdrop is unfortunately decidedly unattractive craig joins us now for more. let's talk about why it is decidedly unattractive. what is that about? craig: it's mostly about valuation. by the way, i think you would have been fantastic the treasury. lisa: that's an endorsement. craig: that is an endorsement. this is a valuation issue. apple is a great company but it is not a broken company, it is a broken valuation. the point we were making as apple has appreciated particularly in the last six weeks or so of 2024, there was

all this commentary about the fact that apple was sort of melting up with no real news. in fact there was a lot of news, and it was bad news. you had very negative reviews of apple intelligence and lukewarm sales reports coming out of both the u.s. and china for the iphone. you also have the introduction of retaliatory tariff risks when donald trump was elected, and over the time since we had initiated coverage back in august, you had the judge in the google case come out and specifically say that the payments that google makes to apple for storage placement, which by the way represent 25% of apples operating in him, are patently illegal. in the face of all about bad

news, apple stock actually went up instead of down to the point with evaluation simply wasn't at all attractive. to put the frame that, and we can talk about rates in a second, but they just frame it relative to the rest of the mag seven to which it is typically compared, it's trading at a ratio of about three. the peg ratio for the rest of the mag seven is about two. so you've got a really unattractive set up. even relative to a group that i don't think anybody would argue is cheap at the moment. jonathan: the question i've done for you on the multiple would apply to tesla as well that you can answer it with regards to apple. you got a company with a high multiple even though the core business has grown facing headwinds because there are hopes about what the company could be elsewhere at a time when interest rates are still around 5%. so i think this applies to companies just beyond apple. what are we doing up here and what is the appropriate multiple

for a company like that one? >> this goes back now a few months but when the initiated coverage back in august, we were comparing the upgrade cycle and apple to the upgrade cycle back in 2016 -- sorry, 2021 with the iphone 5g, will you have this globally synchronized growth cycle for apple at the time. and just comparing where rates were then in the wake of covid vs. rates in august of this year, they are now even higher, suggesting he would need about 30% faster growth rate today in order to justify the same alterable. the growth rate is actually slower now. the multiple is higher. so you really do have this mismatch between growth expectations and interest rates

and rates are historically low, as you said, but still relative to most of the past decade are actually quite high. lisa: your dog is very cute. going forward there is a real question about whether just in general some of the technique he that's are going to be pressured by virtue of where rates are because it challenges the growth story that you could potentially get. craig: whether it challenges the growth story isn't as much the issue of simply what is the appropriate discount rate to use? and i think the risk-free rate in calculating, i think i heard you say earlier no one is listening today, but your viewers are more sophisticated i think an understanding that the risk-free rate as an input makes a real difference for how you about multiples.

for the risk-free rate may be higher because growth expectations overall for the economy are higher, but the growth expectations for apple specifically haven't really kept pace. you have to expect not just a big upgrade cycle for apple, in handsets were potentially some big ai-driven services revenue stream, but for the upgrade cycle specifically you have to assume that that is a permanent upgrade cycle. that is, that it doesn't just create a big bubble of one-time upgrades for ai, but in fact is a permanently faster growth rate in order to justify the multiple, particularly in the face of higher interest rates. lisa: is there anything that apple announced what comes to artificial intelligence, adaptation or anything that you've heard about them working on that could change your view? >> i want to be really clear, i am quite positive about apple's

strategy in ai. all of the things that are said about apple and how good their strategy is, that they have a trust advantage with customers, that they had a unique position for ai because they control the calendar and the contacts in the wallet and what have you, all of that is true. we think apple is incredibly well positioned for ai. it's just that all of that is already priced into this stuff. so you have to question what is dramatically different beyond that story about winning in ai, and by the way, we haven't talked about the risk associated with the google antitrust case which is very real. again, a judge saying that the payments are illegal. we haven't talked about china and the challenges that will never the case china not just

because the competition in china is much stronger than it was, whether it is while -- huawei for the handset competition, but the limits that ai is almost inevitably going to face in china because the chinese government is simply not going to allow western large language models to answer questions like what happened in tiananmen square. so there are going to be all these limitations in china and the potential for retaliatory tariffs, all of which says that you have to be sober about the multiple that you apply. jonathan: the dog is not impressed at all. finding the pictures of the dog just instantly we ask -- relaxing. lisa: i would agree. jonathan: we need a puppy in the studio, we are going to borrow rags across multiple dimensions. lisa: what is interesting to me

is 34 of 49 analysts have by ratings on it. this is actually really out of consensus and to me it is interesting especially in light of just the obvious valuation pressures. you start to sue mount, where else is that applicable? jonathan: up next, we will catch up with jonathan pingel for the most accurate forecast of payrolls. more accurate than his dad. we will talk about that any moment. from new york, this is bloomberg.

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♪ jonathan: equity futures this morning down by just a temp of 1% on the s&p 500 similar move on the nasdaq. we are done by 2/10. the rest of the small caps just about unchanged. basically unchanged since election day in america is absolutely phenomenal. lisa: i will give them credit, they tried. december was not the christmas that people were looking for and i guess the question is how much is dependent on growth and how much is dependent on the bond market. jonathan: we can take a look at them of the price action elsewhere with manus cranny. he joins us now. manus: all dreams of the equity markets are crashing to the beach with this bond market. this bond market, it started as

a depth charge in the fear of overturn premium and dissipation of fan rate cuts, so that depth charge exploded in the u.s.. four basis points lower, is that the top, if any positive that all priced in? but that is where washout in japan, in the united kingdom. we're looking at rates that we haven't seen in the u.k. since 2008 and japan since 2011. so this is the triage. the triage from the u.s. and the rest of the world is about fiscal restraint. it is a lesson for the u.s.. marvin lowe is with us this morning and he said look, if it is just inflation getting contained, that is a job for central banks. but when it turns to the term premium, that is when the casualties show up in the rest of the world. when you have the x bank of england governor talking about -- not governor, but on the board talking about a nightmare from 1976 of the united kingdom, a fiscal nightmare when they have to go to the imf, they had to borrow $4 billion from the

imf, that is what is being talked about in the u.k., so one of the lessons of the triage for the rest of the world from here in the united america, this is the risk of one day beautiful show bill. those extended tax cuts and then some will materially impact the united states of america and that is where you begin to see them steepening. not from where you are at the moment, but that triggers a much bigger global phenomenon. again, not just triage, but serious, serious hospitalization. jonathan: honestly, you and lisa should have a show, just the two of you talking like that about bond market. lisa: i wouldn't say hospitalization. jonathan: tragic. that is an original moment. december payrolls dropped

tomorrow. a bloomberg survey of economists showing median estimate of 165,000 jobs added over the last month 20. expecting a print of 100 75000 and for unemployed and hold steady at 4.2. i'm pleased to say that jonathan joins us around the table. have we got a fix for the control room, because we have to have a fit for the control room jonathan is the number one forecaster of payrolls on wall street. number two is his father of ups who did a fantastic right about this over the holidays. how does it feel to be dad and go back at christmas and tell him? >> it was definitely a positive. jonathan: what has help you be as positive as you have been, what has been the guiding light for you? >> certainly the outsized seasonal distortion post-pandemic. in my entire forecast has been post-pandemic, and that has been the largest month-to-month in variations.

but a general if i was getting advice for forecasting more broadly, you get most of the games through disaggregation. breaking it down by sector and subsector and really trying to figure out where this is. lisa: this comes at a time when a lot of people would look at any data point and they would come up with completely opposite interpretations that both seemed justified by the data. you can either say it is a great market because job openings increased and we are much higher than the active or it is a terrible one because the chris wray fell off a map. which one do you look at and how do you sort of understand conflicting signals like that? >> you really have to look at the three-month moving average of people gains. if our fork after that be correct, it will be cut down to 146,000. that is coming down from an overall yearly pace of 100,000. if you look at where we were last time, this is a moderating labor market. it is cooling, going into softening, and that is not want

where you can look at an individual outline number and really changeable forecast for that. lisa: do you have a sense of how fragile it is? this is a frozen market. you are not seeing people hired or fired and everyone is just waiting to see what happens on january 20 you actually see that? >> i heard greg yesterday call it frozen. i'm not sure if it is simply frozen. we do see the unemployment rate gradually rising over 2025 up to 4.4% at the end of next year. we do think that there is room for payroll to slow down and we do think that there is real reason that postacute -- post q1, there will be real discussion on whether the labor market is weakening. jonathan: how improbable would it be for unemployment rises much as it has an not to have a recession out the back of that? >> i guess you look at the psalm

rule indicators -- sahm rule indicators. we are at a place right the second where hiring is stalled. quits have stalled and we are now in a world where businesses are really uncertain and don't really want to take the next step to figuring that part out. when you are in this kind of rolled the movements are really slow. i'm not saying that there needs to be a tipping point, but for me, keeping the trend seems like the right action. lisa: one aspect of his labor market that has been very confusing to me is historically as a student of history, labor market has been a lagging indicator. it is the last one to field some of economic cycles. this time people are looking at almost as a leading indicator. how do you square that, the idea that this will be the real tell that we are heading toward something negative? >> you are looking at a fed that is looking at it as the deciding

indicator. to put so much pressure on individual inflation prints, in this state of let's keep looking at this, where this is going to change, in general i do think we take a step back. i think there's a lot of outsized looking at the unemployment rate changes. the statistical significance of the changes is very hard. you need a 600,000 employment change to be statistically significant. that is like a 30 basis point move. that is not a normal occurrence, and that is why you need to be looking at the print. lisa: there's a lot of skepticism about the accuracy of the a lot of people simply say that is what we are going to find out next year anyway. how do you account for that noise? >> again, that is looking at moving averages a lot of the time but i do think that this world where revisions to

payrolls are getting the wrong message, it is the most accurate look of where a month to month is. on a month-to-month basis, payrolls is like 130,000. it's going to be the best place for that. it gets benchmark you might claims and there is a really great revision process to this for the right reasons. i think you need to keep that in mind. you have to mentally adjust. cap the last numbers, mentally adjusting down by 100,000 for the impact of hurricanes and drought and strikes. there's a lot of mental adjustment going on. but with context you could start to look at the bigger picture of a moderating, cooling, and not all that great but not all that bad labor market. jonathan: congratulations on the performance, just stellar. payrolls of course dropping tomorrow. the median estimate is 165. the previous number to order 27. let's cross over to mike mckee

for more. >> good morning. everybody's going to be watching what the fed is going to be watching and that is the women rate because that has become sort of their lone star for where they think the employment side of their mandate is going, and we saw that in the minutes yesterday where they talked about the fact that it doesn't look like the labor market is weakening at all. i want to show you this year. a lot of talk about whether or not the fed is tight and people on wall street say well, economic conditions are loose, but borrowing costs, look at that. from when the fed started cutting rates, borrowing costs have barely moved. credit cards, home and auto, even the prime rate. we are still seeing some tightness in the economy and if they leave it this way, that might help bring down inflation in the future. that is kind of the big deal for people right now, does the fed move anymore given where they have moved?

it's going to be a question of where they think the economy really needs it or not. jonathan: next stop, the payroll report tomorrow morning. just getting confirmation to people at work. i don't know a single person who has gotten laid off. >> i'm going to get hate mail some therapy watching. -- some people watching. craig was excellent, i will say that. i will note the bond market has it right, the stock market has it wrong. it is important for us to remember jimmy carter. jonathan: keep digging it, this is great. lisa: i just think that to have a moment -- not going to do this to myself. jonathan: let's move on. not sure where you were going. fireworks and the global bond market in the last 24 hours. the u.k. 10 year yield hitting its highest level since 2008. the 30 year high since 1998. investors nervous about

inflationary pressures and debt sustainability. what is behind these big bond market moves not just in america, but worldwide? >> let's keep in mind and put the u.k. on the move in context, there has been a rally around the world for the last few months, and i think a lot of it does have to do with the concerns, if you will, about debt sustainability in higher deficits and the inability of some of these governments to bring down the deficits. but of course this has been also magnified to some extent by the concerns around president trump assuming power in the u.s. and the tax cuts presumably that will happen here, at least the inability to reduce the deficit here as well post-election. so there has been this general theme of higher deficits, more bond supply. this is certainly not the first time in the last few months the u.k. is being subjected to these concerns. with the budget announcement in

october, and until we get a situation where these governments are willing to commit to deficit targets that are much lower in the current projections for 2025 and 2026, bond will unfortunately be under pressure. jonathan: markets change and investor attitudes can shift as well. a good example of that with eurozone debt crisis when investors began to treat certain ones on the periphery as a credit and not a sovereign. what has happened were the u.k., how arbitrator u.k. government bonds? >> what is happening today is a little bit different than what was happening in october. if you recall when the government came into power, there was also talk about not committing necessarily to a lower deficit, but actually more spending. and if you recall the budget announcement in october committed the budget to more infrastructure spending and as a result of this there was going to be more bond supply. what was different at the time was that yes, gilt yields rose

just as they have in the last 48 hours, and they rose significantly but the market was not very concerned about sovereign risk act and. if you look at spreads in the u.k. back in october, they're rose by maybe two basis points. yes, a move up, but not significant in the grand scheme of the general trend of sovereign spreads for the u.k. over the last 48 hours this time however, spreads have risen by more, by about four or five basis points, twice as much as we saw in october. and this suggests that the market is transitioning away, a little bit away from the worries about simply more bond supply to concerns about whether or not the u.k. in the long-term will be able to honor its obligations. that is a qualitative difference in what we saw in october. should it be seen as more worrisome, absolutely. but in the context of a bond market where everyone all of a sudden certainly since november

has become more concerned about these deficits and debt sustainability, maybe this isn't much of a surprise. lisa: which really goes to the point of the great british case so that we were hearing about from jordan rochester that some people have discussed. i wonder if there is a simpler take, and i am stealing the idea from john about crowding out, and that the u.s. bond market is basically sucking the oxygen out of the room given the fact that it has risen so much and yet the u.s. is actually displays growth in contrast to some other economies. >> when yields go up in one country, left, the asset class, you do see pressure on yields elsewhere. that makes complete sense. they like to go where yields are higher, they like to go where the rate of return is highest. no doubt about it. but at the same time, if we have

been seeing a situation where the u.s. was not getting into that sort of control but europe and the u.k. were, i certainly don't think that yields in the u.k. and europe would have written by as much as they have over the last few days. this is part of a global glut of bonds that the market envisions coming out in 2025 because of these deficits, and it is specific to the u.k. as well because they had a budget announcement in october that specifically intended to raise the amount at a time when other european countries, france, for example, are at least making sounds as if they are trying to get their budget under control. lisa: this is a historic day and i want to take a historic approached what we are looking at right now. are you seeing increased yields as investors demonstrate exhaustion with financing the deficits of economies across the world and essentially, this is the new regime and there isn't going to the a free lunch in the same way that there was before, and this is just the beginning,

not the end? >> somewhat ironically the reason we are seeing this exhausted is because in some countries, the u.s. being a primary example, growth is actually pretty good. and when growth is good people feel good about themselves and as a result they don't save as much. there may be structural reasons why saving rates are low in the u.k. and europe, but keep in mind that if there is a lot of bond issuance, the way to effectively solve that is to have bond buying to keep yields low. to have demand for the bonds. nationally come from national savings. yes, the government can save more by issuing less, but the public and businesses can buy those bonds to reduce their own spending. the problem in part is that we have a situation globally where growth is not so good as to help revenue growth sustained spending at the governmental level, but growth is not so bad that we should have a flood savings coming in because of concerns to buy the bonds.

we are in that middle range where governments can't seem to draw on enough savings from their domestic economies to have that market clear at a lower yield. the irony of course is that if we were to have a global recession including one in the u.s., i'm not suggesting we will, bond yields would still go down because all of a sudden the money would fly out of these risky investments stockmarket, consumers would stop spending as much as they have, savings rates would go up and all of a sudden you would have let the of savings to sustain the bond issuance of these governments. i'm not saying that recession is a solution to this problem. let's keep in mind that this is one of those things in the outlook that could bring yields down. jonathan: that is the real test. if we go into a downturn the deficit is going to cap out. will they rally, will they selloff? >> i think they would rally. if you look at the history and the u.s., and i don't claim to have historical knowledge or every detail globally, but in the u.s. even those from time to

time deficits to expand during u.s. recessions because revenue growth is poor at the federal and governmental level. you typically see yields come down. nine out of 10 times when there is a recession in the u.s., yields come down despite what might be happening in the background at the deficit level. jonathan: that is what a developed market sovereign should do. good to see you. if these issues were taking place in the united kingdom and elsewhere and we just took the treasury market in isolation, anchored around fed funds, some steepness in the curve, does it really look like this market is starting to question the debt sustainability of the united states of america? i would say not yet. lisa: not yet enemy for that from manus cranny several times. however, the timing is curious. the fact that we haven't gotten hugely inflationary data or increased inflation expectations of the 40 basis points in december that will he had to do

with something else. jonathan: i hear you. any comments on your earlier comment? lisa: first of all i think it is a historic day, i think it is incredibly important for a member jimmy carter. it is not a national holiday. you are looking at me with incredulous this. people are in their seats and we have a moment that jimmy carter would want to go on. so i think that that is a point. everyone is at work, it is not a holiday. jonathan: you say that the late president would want the equity market to trade? let's move on quickly. you had five or 10 minutes to think about that. let's get your bluebird brief. >> the national weather service has downgraded the fire forecast for southern california. outlook has gone from extremely critical to critical for friday. five fires are burning across los angeles driven by hurricane strength wind. at least five people were killed and more than 100,000 residents

were forced to leave their homes. a union representing u.s. not workers for contracts will strike. that the agreement guarantees union jobs and certain technologies are implemented. the deal still needs to be ratified by the two sides. morgan stanley promoted 173 employees to the top rack of managing director. that is 12% more than last year but lower that each of the two years prior. major u.s. banks have been bulking up promotions to the top ranks, reflecting their strong performance and expectations for a robust business environment ahead. and that is your brief. jonathan: thanks for this morning. up next, we set you up to the day ahead and we will catch up with anne-marie down in washington, d.c.. this is bloomberg. ♪

♪ jonathan: equity futures on the s&p just a little bit softer,

negative by close to 0.2%. stability another word for a rally. the trading diary through this week and into next week today, u.s. equity markets closed for a national day of mourning. the former president jimmy carter tomorrow, december payrolls on wednesday. next week data, cpi and earnings from jp morgan. that's going to be a big week. thursday more bank earnings plus another round of jobless claims. we will have special coverage of president carter's funeral starting a just a few moments time. annmarie is going to be leaving that coverage for us. aamh, some final thoughts from you on what you are hearing down in washington and what we can expect to the next several hours. annmarie: the next several hours is really going to be about americans and also passed, former and future presidents gathering at 10:00 for the full-service furnace funeral for the late jimmy carter, 39th president of the united states

and we will be hearing a eulogy from president biden about jimmy carter. i think americans are really going to take away how he is going to end the day. there will be a private family ceremony. how he came to washington, wanting to really take away the pomp and circumstance and how he has become very popular at 100 years old when he died. for the 44 years he spent after his ncy woing on things like human rights, like global health policy, like making sure there are fair elections around the world. i think that is what americans are going to take away from today and that's what you will probably hear from his family and president biden when they reflect on his life and legacy. jonathan: ecstatic coverage. we will be asking your thoughts on any of that whatsoever. lisa: i think it's very important to have reflection. this is totally independent i

think it is actually really important to remember the history and where a lot of the current policies stem from and what happened. i think it is very important. jonathan: i'm just winding you up. lisa: i know you are. jonathan: do you want to talk payroll? lisa: the most interesting thing about tomorrow's payrolls is going to be the market's reaction to it. jonathan: couldn't agree more. lisa: the idea of the bond market potentially seeing a big rally. what does the stock market do with that? jonathan: mohamed el-erian to close out 2020 four wrote that the vigilantes were back. mohammed is joining us tomorrow morning. do not miss that. he will join us from 7:00 to 9:00. we will also hear from chris of strategic's, nadia lovell of ubs, and a whole lot more. thank you for choosing bloomberg tv. serveillance."

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annmarie: welcome to special coverage of jimmy carter's state funeral on bloomberg tv and radio. i am annmarie hordern. we will take you to the national cathedral in washington where the 39th president will be honored by president biden along with former u.s. presidents and other dignitaries. after the service president carter will be flown back to georgia for a private service. a motorcade will take the former president and his family on a final journey through his hometown in georgia. he will be next to his wife, the former first lady, rosalynn carter. it is very symbolic of who jimmy carter was as a person, how he came to washington and how he will be remembered. >> it is