Nothing has really changed between the
end of 2022 and the first day of 2023. Inflation and interest rate shock that
drove markets weaker in 2022, I think that sort of fever is breaking.
We're seeing inflation normalize that should support some of the value stocks
for equity markets in and of themselves. The lack of inflation was not a bad
backdrop for them for the last decade. Their case is actually kind of we avoid
a recession, but not the slowdown. This is Bloomberg Surveillance with Tom
Keene, Jonathan Ferro and Lisa Abramowicz life from New York City for
our audience worldwide. Good morning.
Good morning to you all. This is Bloomberg Surveillance on TV and
radio alongside Tom Keene and Lisa Abramowicz.
Some Jonathan Ferro features right now unchanged on the S&P.
Confirmation from Amazon in the last 24 hours they will be eliminating 18000
jobs. T.K., deep in the ocean for a company
that lasts. You go to the Bloomberg D screen, you do
the math. Amazon Canning zero point zero 1 1 6 5 8
percent of employees. That's one point one seven times turned
to the minus two employees.
How about scientific notation on a
Thursday? You need that.
But it is serious for the corporate side.
They're taking it out. This is about people on Third Avenue on
loading boxes. It's the corporate side.
Their extended sales force extended. Who is not extended?
I think you're right. To make that distinction is serious for
the individual who is in that job. When Andy Jassi, the CEO of Amazon,
comes down and says it will help us achieve, quote, a stronger cost
structure, you push back against that based on the scale of what you've seen
day over expanded. I don't think, you know, CFO types
should find anyone guilty of trying to game the pandemic.
I think company to company, a company, they're going, hey, it's over.
We're going to pare back.
But what I think you'll really see,
John, is they're going to eliminate these jobs.
And frankly, Lisa, they're going to hire other jobs, tech jobs, whatever.
Well, actually, this is the actual distinction is that some of these jobs
are tech jobs, but these are the corporate jobs that this isn't the
warehouse workers. Yes, we have one and a half million
employees at Amazon. But we're talking about a significant
proportion of human resources. Yes.
Question around the IBEX devices, some real initiatives are trying to pare
back. Is this the tip of the iceberg for some
of the tech companies? They're trying to right size in a new
area. Lisa, this is where the excesses we've
talked about this repeatedly. And I have to say there was a line in
that statement from Andy Jesse that sounded a lot like Marc Benioff
yesterday from Salesforce when Andy Jassi said this year's review has been
more difficult given the uncertain economy and that we've hired rapidly
over the last several years.
Yesterday, Salesforce, the leader of
that company, as our revenue accelerated through the pandemic, we had too many
people leading into this economic downturn.
I'll go back to a question that you and I asked at the end of last year as we
closed out 2022. Are we talking about the excess of the
last two years or the excess of the last 10 years?
Now it's the last two. This is the adjustment.
If it's the last 10 with a disciplined a 5 percent federal funds rates for this
particular industry, then there might be a lot more to go, which is the reason
why a lot of people think that perhaps tech hasn't seen all of the brunt of it
that hasn't seen the full of it, even despite some of the underperformance
last year. There's more to go because it's not just
a repricing of the assets as a result of high rates.
It's a rethinking of the industry. We need to put things in perspective
here. Amazon and the IBEX lying down the
income statement makes 12, 13, 14 percent, maybe even 15 percent.
Walmart makes 5 or 6 percent.
Amazon is hugely profitable.
They just overreached. And coming out of the pandemic, that's
all futures right now. Yeah, almost that changed.
You really put a blunt full stop on that anyway.
Futures up by a tenth of 1 percent on the S&P 500 tickets.
We check out the market just briefly look at the bond market basis points, 20
basis points lower on a US 10 year over the last couple of days.
Latanya, right now, 368 82 Tom Keene reset for 23.
The markets you saw the VIX has barely moved.
The Dow's barely movers picks up a little bit.
Aspects did better yesterday.
But, you know, I go with the pundits.
Matt Hanbok was talking about this. You know, it's a pretty resilient
market. It was a resilient market in the face of
some pretty punchy Fed yesterday. The Fed speak in a new category is
harsh. We'll pick up on that a little moment.
We'll catch up with RUSCOE Strict in about two minutes time.
Bravo tons. Coming up, tons of data going into
payrolls Friday. Joel Weber.
Yeah, a lot of it has to do with the labor market.
Today at 815, we get U.S. ADP employment change report.
We can discuss whether it's relevant. Either way, it will be one of the
tealeaves that are 830 am. We get us initial jobless claims chart
crime of the day. I'm going to look at initial jobless
claims and there's no way for me to not make this a chart crime.
John, I actually was looking at different ways to try to paint this, and
I tried to do it for only the past two years.
It still is a heart crime because of how high things work.
That said, you could see it really hasn't picked up in terms of how many
people are filing for unemployment benefits today.
The circus that we've seen down in D.C.
The House of Representatives is adjourned until noon today.
Basically, this is to avoid having. Public defeat of Kevin McCarthy.
How much can they really get people to come to the table time?
This is a big deal. Lisa, what's important is somebody stop
me on the street and ask me this question.
I said no less. Can they do auctions of treasuries?
If the House of Representatives is not in session, I believe that it just
closes the potential deliberations in the House of Representatives, not the
entirety of government.
Today, we also get a host of Fed speak,
including Atlanta Fed President Rafael Bostic at 920 and James, while our Jim
Bullard of the St. Louis Fed coming in and 120 trying to
follow on to on to what you were talking about yesterday with Neel Kashkari.
Do they talk about a five point six percent terminal Fed funds rate and then
staying there for a long time? Do they talk about the balance of risks
still firmly being with inflation, not necessarily torpedoing the economy?
And how come the market hasn't responded more to the meeting minutes that were
firmly hawkish to your trade? Perhaps waking up today a little bit
more. Lisa, thank you.
Thank you very much. Here's the line from Alexander over at
Morgan Stanley. Financial conditions are too easy,
reflecting a misperception among investors that the Fed's reaction
function lets get rest constricts you on that day.
Portfolio manager for the BlackRock Global Allocation Fund.
Russ, would you agree with that line from etc.?
Well, good morning, Jonathan.
I think I'd agree with the fact that there's clearly this tension right now
within the Federal Reserve. This is not a new thing.
This is what derailed the market back in August.
We're concerned about the market getting ahead of itself, whether that's a
function of the stock market go into high credit markets getting too tight.
There is that concern that if financial conditions ease off too much.
Is that going to hamper their fight against inflation?
And I look, Russ, where we are and we have two pieces together, you have the
responsibility to piece it together with portfolio allocation.
How are you re allocating to.
Honestly, you know, Tom, we're pretty much going into 23.
The way we left 22.
We're not making a major change right
now. So what does the portfolio look like?
We're underweight equities were underweight funds.
We're emphasizing carry in the portfolio because in a market that's range bound,
we want to be able to earn some income for our clients.
We're focused on quality stocks. Now, I do think we're gonna get to a
point later in the year, probably in the first half, were closer to a Fed pivot
at that point. Evaluations are where they are a bit
lower. I think you get a very good tradable
bottom. But this is not the point where I think
you want to load up on risk. Are there other cost cutting is going to
be efficacious? Is every corporation and every sector
goes out and recalibrate here as we see from tech and all that?
I don't mean to micro call it, but are they going to be efficacious in helping
their margins? Are they actually going to have impact?
Well, let's start with a couple of things.
I mean, tell me, I think you raise a very important point.
You know, a few minutes ago, you know, big tech is ridiculously profitable.
You know, if you look at most of the companies in the Nasdaq 100,
particularly the mega cap tech names, their cash flow, their profitability is
Margins are still close to a record
high. So, yes, companies are going to trying
to manage costs that arguably climbed up a little too much during the euphoria
post pandemic. But the reality is these are still very
profitable companies. We're not talking about 2000 when you
had the Nasdaq 100 and barely any profitability rose.
I can't let you get away with saying the word pivot without really precedent to
what that means. You think that with all of this backdrop
and the potential pain that we're seeing in terms of layoffs, there will be a
pivot. What is pivot mean?
Does it mean rate cuts? Does it mean a pause?
I think it's more of a pause.
I think the Fed has been very clear and
again, conditions can change. They reserve the right to change their
minds. But it's not necessarily practical to
expect cuts this year. The question is where's the turmoil Fed
funds rate? Is it five, five and a quarter market
right now is, you know, forecasting somewhere in the zip code of 5 percent
or 2 conditions forced them to go much higher than that to five and a half,
five and three quarters. I think that's the question the market
right now is trying to resolve. You see signs of deceleration and
deflation as you see some salt in the labor market and you get clarity around
that. That, I think, is when you get a more
tradeable bottom in financial markets, can we get to a pivot, Russ?
If we don't get a significant sell off in equities, if we don't get the
tightening in financial conditions that the Fed has been looking for?
Yes, I think you can.
I think the Fed is clearly financial
conditions are front and center. But at the end of the day, they've told
us what they're focused on. And if I to focus on one factor, it's
going to be the labor market, because we know that headline inflation is coming
down. Goods inflation is coming down.
What has been remarkably resilient has been the labor market.
And that's where I think the Fed is going to focus, not necessarily on
whether the S&P 500 is at thirty seven hundred and thirty nine hundred.
Russ, can you help me understand what's gone on with the labor market?
So I looked at the quits rate yesterday because the jobs report job openings
quits are up quits, picked up for the first time since February.
That screams confidence in the labor market.
Job openings still about one point seven openings for every single unemployed
Again, that screams a tight labor
market. Then, Russ, I see this news from
Salesforce, from Amazon, from others as well.
Russ, we're trying to work out what should I believe here?
Well, the corporations in one industry autonomy, what the official DAX is
telling me month on month, we come week. Well, I think I think you've hit it.
It's what it's industry by industry. And that is why this is such a difficult
We're seeing layoffs in tech. We're seeing softening it in parts of
the professional class. But if you look at other parts of the
labor market, hospitality, restaurants, health care, these segments of the
economy lost hundreds of thousands of workers during the pandemic.
Let it never come back. There's still missing workers, which is
why the quit rate is still high. And it's why the labor market may remain
somewhat resilient, at least in those parts of the market that are playing
catch up with all of these dislocations that happened during the pandemic.
Russ, this was great. We appreciate it.
Happy New Year to you in the team. Thank you, sir.
Roscoe strict tapping of black drum take.
Can you make sense of that? I think is a number of themes here.
I think Ben has nailed it along with James Bullard, who rightly so we hear
I'm fascinated how bullet recalibrate
your Emmons says it's simple. The job market is so strong you need a 7
percent rate. Well, to begin to adjust it.
That's an intellectual reach for me. I can't get I'll go back to what's the
batteries app set of such? Just a couple of days ago, she said to
me, Lisa, ultimately the distance from three and a half to four and a half.
A lot of hard work. She thinks the Fed needs to do a fair
bit more through the rest of this year, especially because of this structural
tightness in the labor market. We were talking yesterday about how a
lot of the older and younger workers haven't come back, may not come back.
How do you get to an unemployment level when we need workers?
And we still do. Even with certain companies laying
people off jobless claims coming up at 830 Eastern Time, more economic data.
And then on to payrolls tomorrow.
I always find the first week of the year
kind of jarring because we have payrolls.
Pretty clumsy on that Friday. I don't remember it 20, 30 years.
You're not a me. You want to start off slow build up.
I took Katrina. You played no way to treat of, did you?
Yeah, that's true. Did you make a mess, Secretary Baker?
You've got to. I'm sitting there holding up the kids
like this. I'd come and throw.
I'm taking out antiques with your.
Next year, I will get a tree like Faro.
She's a wise woman from New York. This is pulling back.
Keeping you up today with news from around the world with the first word.
I'm Lisa Matteo. Well, it's another sign that a tech
industry slump is getting worse. Amazon cutting more than 18000 jobs in a
round of layoffs aimed at the corporate ranks.
Most of the jobs being cut are in Amazon's retail division and human
resource areas like recruiting.
The company has more than one point five
million workers worldwide. On Capitol Hill, Kevin McCarthy and
Republican dissidents still haven't reached a deal to make him the speaker
of the House. McCarthy has been defeated in six rounds
of voting over two days. 20 hard line conservatives are blocking
his bid. McCarthy says there has been a lot of
progress in negotiations. Still, there's no resolution just yet.
Federal Reserve officials have reaffirmed their resolve to bring down
inflation. They also warned investors not to
underestimate their will to keep interest rates high for some time.
Those points came from minutes of last month's policymakers meeting.
The US is edging closer to send armored vehicles to Ukraine on Wednesday.
President Biden acknowledged that Bradley fighting vehicles may be part of
Military aid package.
The Bradley is a troop carrier that is equipped with anti-tank missiles and a
25 millimeter cannon. Meanwhile, France says it will provide
Ukraine with light combat tanks. Global news 24 hours a day on air and on
Bloomberg Quicktake, powered by more than twenty seven hundred journalists
and analysts and more than 120 countries.
I'm Lisa Matteo. This is Bloomberg. They want us divided.
They want us to fight each other. That much has been made clear by the
popcorn and blankets and alcohol that is coming over there.
We are making history in this process and we are showing the American people
that this process works. And just a couple of quotes from Chinese
state media. The events are chaotic phenomena of
spread and aggravation of the disease of the U.S.
political system. Faced with the political chaos in the
U.S., there is a sharp question whether the political class of the country is
able to govern.
Six rounds of voting over two days and
still no House speaker, 20 Republicans voted against supporting Kevin McCarthy.
The question now, if not him, then who? A few names being floated.
Some included Steve Scalise of Louisiana, Patrick McHenry of North
Carolina, and the debate tea cake. D.C.
continues floating this morning. And the distinction, John, to me is in
Greg values note this morning where, you know, is least a certain news flow.
McCarthy's got the up and up and up and that baloney.
He is so desperate, it's rumored that he is giving it up where one representative
can push the speaker of the House of Representatives out.
That to me was unimaginable, just to be clear here.
This is a feature of democracy. I want to be clear about that.
We included some sound. There are some commentary by Chinese
state media and what was taking place in the United States of America.
I think that should make us feel deeply uncomfortable about what's taking place.
What would you prefer? Yes, this is chaotic.
What would you prefer this or what happened on the Politburo Standing
Committee just a couple of months ago? It's a great point.
The feature of a mess in the muddle, the muddle through to something that is a
consensus that isn't necessarily going to be a straight line.
It's less efficient, but it might be more representative of the people's
That said, there is a question of
getting actual work done without it daring the debt during this week, during
this year. And there is a question about whether
there is a desire to bring things to a halt because of how disorderly some
members think that the overall process is, which raises some serious
existential questions. As you've indicated, incredibly rare for
this to happen some first time in a hundred years, 1923 to see it go on this
Yeah. And there's been other times back in the
19th century, but it's highly unusual. It's her fault.
Let's go to Annmarie Horden Bloomberg Washington correspondent Nina Emery.
Let me just go to the daily agenda today.
I know this afternoon, I guess Shery Ahn vote 7 vote whatever.
What was Speaker McCarthy? Speaker to be McCarthy speaker
McCarthy What is his to do list this
morning before the session starts? Count the votes.
Does he have a right can he line up those 20 dissidents in his party and at
least try to get 16 of them to vote for him?
He can also try to get individuals likely not going to come from the
Democratic side, but individuals to at least vote present to bring down the
number needed so he can win that majority.
Because if it's not every single member on the floor voting, potentially he
doesn't need 218. He needs much less.
That happened in the past with Pelosi.
Boehner. But anyway, he needs to get the math
sorted. And at this moment, it remains to be
seen if he was able to move the needle last night.
The Internet APM talks went late into the evening.
What we are hearing, though, Tom, is that potentially some of these
concessions really, which is giving away the kitchen sink, are now fully on the
table like a motion to vacate by one person meeting.
One individual could call for a vote of confidence and oust him if he's speaker.
So what you're seeing now potentially foreshadow another fight for the
speakership even this year.
With that in mind, why does Kevin
McCarthy want this job? It is a great question.
I think that when you're throwing out other names of John, of individuals that
potentially could be named like Scully's, like Patrick McHenry, who I
think has the same stylist as Tom. You think why would any of these people
want these jobs? No one is talking about the fact that
they want this job, but it's really about who can actually win the numbers
more so than who wants this job. Kevin McCarthy has a long history of
wanting this job. He thought he was gonna get it in 2015.
He did it. And now he feels like.
And, you know, the reporting is and he's made very clear behind closed doors that
he has waited in line and it his time and he deserves this.
And Marie, on a larger scale. What do McCarthy's opponents really
want? It depends who you ask.
Within this 20 group of dissenters, right?
The majority of these individuals are ultra mega.
Many of them are election deniers.
And the whole majority think besides,
two of them are election deniers. Most of them were backed by the former
president in the latest mid-term election campaign.
So some of them are just never Kevins. They do not trust him.
They think he flip flops and they do not want to see him win the gavel.
If he is not able to at least assuage a few of those, never Kevins, maybe even
just to vote present, not for him. He could be in trouble.
The others, like Chip Roy, ultraconservative from Texas, was
saying, you know, a deal can always be cut.
So for some of them, it's making sure you have more conservatives on really
important committees, making sure potentially there is this one individual
of a motion to vacate.
Only one person to call that up.
For some, it is about changing some of the rules of the game on the floor.
Well, this is where it gets really interesting to be, Marie, because he
started talking about some component that really supported the former
president and our election deniers. And very much for the former president.
Trump, a president Trump former President Trump came out and actually
said, come on, vote for McCarthy, get behind him.
And that did not sway anything that didn't move the needle.
What does that say about the so-called Trump movement moving beyond Trump?
I'm so happy you brought this up, Lisa, because after we talk about obviously
having a House of Representatives having a speaker, the conversation with 2023
and 2024 is obviously going to be the presidential election.
And the former president has announced he is running, right.
He is running a campaign that all but seems evaporated.
But what you do see is they are absolutely just shrugging off his urge
over truth social.
Apparently, he was making calls,
according to Representative BOVESPA, who went on the floor and said, you know,
we're getting calls from what she called her favorite president.
But she said, actually, he needs to call McCarthy and tell him not to vote.
He doesn't have the votes. They are ignoring his pleas, which just
shows that they don't actually have the confidence in him, do they?
In terms of leading this party into 2024, if they won't even take his advice
on who should be speaker. Well, just briefly, can we finish that?
What is happening with the former president's campaign?
Where is it? What is it?
What does it look like? It's a great question.
I mean, he's not really doing rallies. He just seems to be in Mar a Lago making
some of these calls, deciding whether or not on some issues he wants to get
People I talked to say it's pretty much
not happening. It's disappeared.
So DAX, let's see what it looks like at the back end of 2003.
Yeah, I am. I still got a few more questions.
Do you let that go, Lila? And that day I just your style escape.
You're not gonna stick up for yourself. She does that, you know, most.
Well, first of all, I fired my stylist a year ago.
No, no. I fired my style a year ago.
Many years ago. Was that just a year ago?
A year ago in Chino. You know, the.
It was emotional. Could you tell us about how things you
know, to Lisa's point, how things developed after you parted ways with
your stylist? Like we did a job search, the new
channel. You know, we did a job search.
You overhaul different IBEX, a massive change here.
Did you know of my oldest bow ties today?
This is like 40 years old. This is old Burberry from way, way.
Nice. Very British.
It's sort of it's got a bigger statement.
That was before Chris Bailey.
Yeah. This was like four styles ago.
Also three waffle studies. Okay.
That was. Yeah.
You said that and I did. And the Bush folks have a small thing
like a 38 home jobless claims coming out a little bit later.
I'll be Jihye Lee. Just to give you might just reflect on
the labor market data we've had so far. Can you construct an argument that this
labor market is weak when we're expecting numbers, Lisa like to injure
case something in and around 225 on jobless claims later today, 200000
payrolls tomorrow. Unemployment in at around three and a
half percent and wages of about 5 percent.
That's the argument of more constructive people in the market right now saying
that I just don't see it. Yeah, I see it in big tech.
I just don't see in the numbers. And this is what the Fed is looking at.
You ask gross cost roach about what we saw yesterday with the JOLTS data and
job openings coming out incredibly strong.
Where are you looking for this labor market weakness?
If you can see the openings actually revised upward for October and then
coming in stronger than expected, more than expected, still at about one point
seven per each.
Unemployed Americans come out of
surveillance now yesterday. First thing you did is look at Bloomberg
Financial Conditions Index. It's stunning.
Words move from October. It's gone the wrong way for Paul.
Russ mentioned this. We've gone from a negative one.
Standard deviation, restrictive to stunning accommodation this morning.
Negative point 2 9 6 standard deviations.
That's what they're watching in Washington.
We'll build on that in just a moment. Features right now up a tenth of 1
percent. Live from New York.
Good morning to you. Twenty six hours away from the payrolls
report. We're counting down equity futures up by
a tenth of 1 percent on S&P 500 NIKKEI ISE.
Those clocks two hours away from jobless claims as well.
Good morning to you.
Equity futures on the Nasdaq up two
tenths of one per cent, the S&P 500 yesterday.
The broader equity market faced down some pretty tough hawkish Fed speak
traded higher yesterday. But guess where the underperformance has
been over the last couple of days? Energy.
Over the last two days, home is down by nine per cent plus to kick off 2023.
Good morning. All the memories of Al Goldman, A.G.
Edwards in Saint Lewis and the team of Mark CAC.
They did some academic survey once that the correlation of nat gas prices to the
temperature of the subway station by Trinity Church is about a point seven,
And the answer is it's warm in Europe.
Record warm. Warm here.
Here. Could you come here today?
Yeah. It was bizarre.
It was spring like, wasn't it? Yeah.
Beyond that, it was just like the air Jamaica.
I got to say, it's a bit of a head fake. You know, it's going to happen.
We're gonna get absolutely pulverized by the entire family.
You know, they hate that it does my head in that you sort of like get
comfortable, get ready for spring. Feeling good about yourself?
Fourth of January. Covid nothing.
Yes. And then winters like get a grip.
But Cole hasn't come down. You know, this hot call switching thing
is what savvy to say yesterday. I think the cold story is really
interesting to see the reports that we're putting out here at Bloomberg that
China is thinking about importing Australian coal again.
There's been a big dispute over that for the last couple of years.
As for Savita yesterday, just in terms of sentiment, she thinks sentiment in
the equity market is far too depressed.
She's thinking about buying or at least
advocating that people should buy in January, but not the S&P 500 sort.
To be really clear about that. When you look at Savita Shery Ahn price
target on the S&P, which isn't for much of a gain of the S&P 500.
If there is a gain in it at all, she's advocating buy stocks, but thinking more
along the lines of the small caps at the moment, the small caps in sooner.
Likewise with the energy story, stand on board with that.
But just hate in big tech.
You just see that a lot of a lot of
people, which is why they don't like the S&P 500, the index level story, CNN that
right now. Tom Ford is scheduled to be with us on
Amazon here. And that's good.
He's really, really smart on Amazon right now.
Smart on the American economy with high frequency economics for real.
Farooqi joins us with an update. Robbie Lowe, let's dive into tomorrow's
jobs report. We've really been remiss on actually
looking at a job shocked me with the 200000 non-farm payroll statistic
Can we really keep above 200000 job
formation of NFP? I mean, right now.
Good morning, happy new year. Right now what we're seeing is a very
strong job. What job market demand is still there.
You know, 400 basis points of tightening more than that.
And we still haven't seen demand really come down in a substantial way.
Payrolls have slowed, right. We do know.
But really. Well above break even levels.
And it's really not clear that without the supply and without the risk from
households and businesses yet, that we're actually going to see an
adjustment. IBEX cases is that yes, we're going to
see payrolls slow. We're going to see the unemployment rate
go up maybe to four and a half percentage point.
You know, that's a that's our base case, but really we're not seeing right right
now in terms of a moderation. What is the wage dynamic?
Is it wage gains for the bottom quintile?
Is it? Is it?
What's the nuance of wages? You will study tomorrow.
Did 30. I mean, wages are still rising at a pace
that is just not consistent with the 2 percent target.
That's what the Fed has already told us.
That's what we know.
We are seeing wage gains. You know, if you look at visa and
hospitality, they're still rising at a very rapid pace.
If you look at the rear near changes that they have moderated, we've also
seen the year on year change and average hourly earnings come down.
But you really, you know, without the supply coming back, this is going to be
a sticky problem. We're just not seeing the type of
improvement we would expect to see with this much tightening.
So all this does is that, you know, if this is the what the Fed is looking at
and, you know, if there is no response, that the risk is that they go even more
than what are estimating.
Ruby, let the market doesn't believe
what you're saying. The market is pushing back against this.
The market is saying, look, if you look at the disinflation, the Fed's going to
blank. They're going to pause.
Certainly in the next couple of months, despite the fact that there still is
very apparent strength in the labor market.
What do you make of this dissonance? Who is right?
I think with the Fed and the market on a collision course and the Fed is not
going to step back. So I think there's going to be a lot of
volatility. The Fed's message has been very clear.
The focus is primarily on inflation, even at the cost of a slowdown or a
recession. So I think, you know, the faster markets
adjust to that message, the better it would be.
But it doesn't seem that it's going to happen.
I don't think the Fed is going to blink. I think the Fed is very focused on one
job. And the job is to bring inflation back
down to 2 to the 2 percent target. The issue now is, you know, as we move
closer to that terminal rate, how are the you
know, how are markets going to respond? And once we get to that terminal rate
and the Fed says we're going to stay here for a while, I think that's where
the adjustment is going to happen.
But, you know, let's not be confused
about this. The Fed is very clear about what they
what their intentions are. Perhaps the market is also looking at
some of the disinflation that we're seeing or the slowdown that we're seeing
over in France, over in Germany, over in Spain, seeing a potential potential for
a softer than expected CPI come next week.
Is that enough or really does this entirely lie with the labor market?
Can the Fed continue to justify going faster and higher than many people
think, just based on the strength that we see in the labor market?
Well, they've been very clear, right? I mean, they're talking about the
component of CPI, which is directly related to wages, which, you know, they
want to avoid a wage price spiral and they're not seeing it yet.
But that is what they want to avoid inflation.
If we look at our numbers, we'll be expecting all year on year inflation in
the first quarter to sort of sort of slow down from a five handle to a four
and then end the year around three and a half ish.
So that's still well above.
You know, unless we are predicting a
recession that just results in a collapse in prices that might give the
Fed room to ease. But that is not what we are seeing in
the numbers. That's not what we're seeing in the
economy. Bill, I've been I've been reading Paul
Martin's iconic study, academic study of inflation in champagne and the profound
effects it's had on Bollinger. Forget about the fancy talk on a social
basis. How is this inflation affecting us day
to day in America? How strapped are we as we go into this
jobs report? Inflation has been, you know, a very
huge factor in how households have fared over the 20 22.
But household balance sheets are still very strong.
You know, a 40 year high in prices and we still did not see contraction in
We still have excess savings.
We still have, you know, wages rising at a pace are not
keeping up with inflation, but they're still rising at a pace that is above the
pandemic trend. Now, in 2023, what we expect is as
prices start to ease real disposable incomes.
We're already seeing that right in the quarter that declining on a year on year
basis. But we are seeing the quarterly changes
turn positive. So I think there is there are a lot of
stresses across income groups. Food prices are still very high.
Energy prices year on year are still very high.
It's just that we expect to see some relief this year as prices continue to
come down. I look for below what we see tomorrow
and I just find it to be an original jobs report.
How far is this jobs report from your chairman?
Powell wants it to be like in timeline.
Is he looking at a jobs report this
autumn? Is he looking at a jobs report, dare I
say, in 2024? I mean, from their perspective, they
expect to see the cumulative effects of what they've done so far and what would
probably be 500 basis points of date me to start showing up pretty quickly,
probably in the first quarter of this year and then going forward.
The issue is that, you know, we're just not seeing that demand rebalance.
If you look at the jobs. If you look at jobless claims and it's
just not happening. So I you know, I think the Fed has just
gotten a very tough spot in that they have delivered a lot and they're
probably going to deliver maybe another 75 basis points, but it's not clear that
that's going to be enough. But, you know, from their perspective,
they have to wait and see what the larger cumulative effects are on the
labor market and inflation.
Peter, thank you. Rebecca, for that of high frequency
economics reporter going through some of the issues.
Forgive me because I'm about to quote Fed minutes.
So if you want to go away, make a cup coffee or a cup of tea, do whatever,
you've got to take me some time. I'm going to go through these minutes
right now. So this is how the rest are set up for
the Fed. And they articulated to rest that
they've got to manage. Now, here's the first one quote.
One risk was that an insufficiently restrictive monetary policy could cause
inflation to remain above the committee's target for longer than
anticipated. Here's the second risk quote.
The other risk was that the lack cumulative effect of policy tightening
could end up being more restricted than is necessary.
Now, how do you manage those two risk? The fact of the matter is you either
believe the balance or you think is one bigger risk in one direction.
Now, I thought in November that the risk were asymmetric, that they thought the
biggest risk was under tight neck.
Bram, I've got no idea. But clearly that was put in because
there's one group that thinks one. And another group that thinks the other.
This is where we get into game theory. And this is where forgive me, you could
turn off the TV. This is kind of complicated to me.
There is a question. I want that premise.
But we want the rating John Micklethwait just to walk away from this.
This is the game theory aspect where peace basically people on the streets of
my boat, I started twirling. The question that I have is how many
people on the Fed believe in a balanced risk, but want to signal that they don't
want to signal that the risks are asymmetric so that people don't buy
equities, because if they don't get a tightening in financial condition,
worried about people. But that's how they transmit their
financial part, their monetary policy, if they transmit it to the market and
the market isn't believing them.
They're trying to talk about a balanced
risk. This becomes a real problem and the
market has called their bluff. I do not agree.
This is ex ante. The answer is they are exposed, exposed,
exposed source a Bank of England. So as the ECB, they have to their slaves
to the data. They have to wait for the data and
they're going to finally see if the job market cracks.
They're going to wait for the data. They're going to look at GDP.
And, you know, they're all this recession gloom that's out there who's a
broad enough recession gloom. And unless we can get some more, I think
that sitting in the Middle East both. I think both.
Right. I think the country has deficits where
you do what they want to signal what they do best.
And ultimately what they'll do will depend on whether data comes in.
And I think this goes to the financial conditions point when it comes to those
two risk and how you manage them.
I think overwhelmingly they're still
concerned about upside risk to inflation from policy, make its policy makeup on
the financial conditions point. That was the standout thing in the Fed
minutes yesterday. Participants noted that because monetary
policy worked. Importantly, through financial markets,
an unwarranted easing in financial conditions, especially if driven by a
misperception by the public of the committee's reaction function, would
complicate the committee's effort to restore price stability.
That you don't want us to be talking about rate cuts, even if there's someone
on that committee thinking that perhaps the data will need require them to
respond with rate cuts later this year. And that's why they're going to carry on
sand the same thing until they're convinced that inflation is going back
to 2 percent.
The problem is how many people believe
what Bill Dudley does, that the Fed is going to engineer a recession and
quickly take it away by cutting rates? This is a more complicated economy.
Much easier to say what Bill Dudley says when you're no longer the Federal
Reserve. That's very true.
And that's the big difference. 730 Eastern Time.
Deborah Cunningham, absolutely fantastic on all of this.
Much better than us. The global equity markets CIO of
Federated Hermes will catch up with her in about 50 minutes time.
Looking forward to it. From New York, this is Glenn Beck.
Keeping you up to date with news from around the world with the first word.
I'm Lisa Matteo. It's another round of votes on the
speakership. Today, lawmakers will meet again after
Kevin McCarthy failed for a sixth time in his bid to be elected to lead the
House. The California Republican said a lot of
progress was made, but still hard line conservatives didn't make it easy and
there was no resolution to the standoff. IMF first deputy managing director Gaeta
open Athens, urging the Federal Reserve to press ahead with interest rate hikes.
Goldman Sachs tells the Financial Times that inflation in the U.S.
has not turned the corner yet.
She also expects monetary tightening in
Europe to be more prolonged than the Fed's.
China's new foreign minister says that relations between his country and the
U.S. should not be a zero sum game.
Jim Chin. John has Oprah has an op ed in today's
Washington Post. Now, Chin writes that the world is wide
enough for both countries to prosper. Strikes on the British Rail network
reach a critical peak today. Some of London's biggest rail stations
will be closed, while some airports will also be deprived of train service.
Train drivers represented by the asleep union are walking out following a long
dispute over pay. And Dell reportedly wants to phase out
semiconductors made in China by 2024. According to Japan's NIKKEI, the
computer maker has also told suppliers to significantly reduce the amount of
other components produced in China. Dell is said to want to diversify its
supply chain because of concerns about U.S.
Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than
twenty seven hundred journalists and analysts and more than 120 countries.
I'm Lisa Mateo. This is Bloomberg. It concerns me about tech companies on
news that they are not good prospects traditional right there.
Their growth companies, they tend to want to invest into these downturns if
they want to invest aggressively through all periods of time.
They're just not good at getting into they're going to be late on that.
They're probably not going to do enough. It'll take longer than you think.
Into the margin degradation can be more severe in those areas.
Just putting into catch up with Mike Wilson and Morgan Stanley and chief U.S.
equity strategist, you can find that interview in full on Bloomberg Telecom.
And of course, on the Olympic terminal, you're equity markets set up as follows.
This morning, futures drift in just a little bit higher on S&P 500 up a ran
about a tenth of 1 per cent leaves his country the day to a couple of times 830
You get jobless claims and it's on to
payrolls tomorrow. Looking forward to all of that.
So far, we're seeing more tech companies deliver more cuts with sales force.
Yesterday was Amazon announcing the following.
In the last 24 hours, 18000 jobs to go the most in company history.
The company's CEO, Andy Jassi, saying, quote, Amazon has weathered uncertain
and difficult and cost economies in the past.
And we will continue to do so. These changes will help us pursue our
long term opportunities with a stronger cost structure.
That last line, some just 18000, how we deliver a stronger cost structure.
Lisa Montgomery, very, very focused, is focused in on corporate Asia and the
rest of it. I think Mike Wilson's done on that.
This is whole new territory for the Silicon Valley crew.
They've never really been through this before, I'll say, with some certitude.
And my guess is I'm going to be optimistic.
They're going to learn fast and they're going to find out how easy it is
It's like the financial Wall Street
business. They know they can do it every February.
You think they keep tweaking quarter to quarter, though?
I think it's used to the efficacious ease of cost cutting.
They're going to learn like banking and learn like Wall Street.
They're going to learn like ball bearing companies in the Rosalind Chin.
This may be a little bit different just because they're cutting some of the tech
staff, they're cutting some of the white collar workers.
And as we've talked about, a lot of them will get jobs elsewhere.
It's not like they're not in demand. This is one of the most in demand
industries. So if they're putting talented
individuals, you can imagine the banking industry, the car industry, a lot of
others are going to suck them up.
So this is the question, right?
How much do you start to get this kind of paring back of some of the talent
that removes some of the upward dynamism for some of these companies?
I think gone are the days where you have that special floor, you know, that floor
where all the cool kids get together and they throw things against the wall.
You see what sticks. We call them.
And it's just you just throw money at them.
I think you're talking about the massage room.
And I know it's not sort of IBEX here where but it was there like all these
services and perks, yoga studio and magic.
Much. I saw the headlines recently about the
coffee going at Goldman Sachs and not going in that direction, talking more
along the lines of the likes of Alphabet Tom Keene and the story of Rick Google
that there is this department.
There is just like other.
Right? Well, I'm not sure if you want to read
the right days and moon shots right now with Fed funds at exactly ISE percent
strong direction. This is directly from David Rubenstein,
analysts yesterday and Mike Worth all of a sudden gravity is back, as Taleb says,
and the gravity is back at him. And of course, that's the big change.
No question about it. We're going to take a different take on
this right now. Alex Webb is really quite good at
Bloomberg critique of looking away from the financials of the broader social
aspect of these jobs. Announcement Alix Steel.
Let's start there. What's the social ramifications?
It's salesforce, it Amazon to the shock of layoffs and firings.
Well, I think it's you guys have been alluding to this sort of perennial
growth story that you go to these companies and yeah, you can rake it in
for a few years and find a job elsewhere that these companies have not really
done big layoffs before.
You have to wonder whether there is an
effect culturally on the inside. But I do think ultimately these are very
core financial stories that you look at Salesforce.
They've been enjoying 25, 30 percent growth for the best part of a decade.
That is going to come right down. Analysts expecting a 10, 15 percent
growth in the next two years. So all of a sudden, far from being
growth stocks, they have to focus on that bottom line.
I think the number that's super interesting when you compare Amazon and
Salesforce.com to slightly different stories is looking at revenue per
employee. And revenue per employee has come down
over the past three years because Amazon massively over expanded, added to many
warehouses, added too many employees.
Salesforce is revenue per employee has
continued to climb. It's just that the revenue number itself
is not growing as quickly. So what they are doing is, you know,
Mike Wilson is saying Salesforce, it seems, is getting a little bit earlier
than some of its rivals in ensuring that it has those healthy margins, even
perhaps, you know, be considered more in the value category than than growth as a
consequence of his efforts. Alex, it's a very difficult story to get
your hands around it for me anyway, because you have on one hand the retail
segment of Amazon, all of the boxes that people get delivered, the fact that.
There may be fewer of them. But then you have this tech spending
side of things that the cloud computing. And this comes after Microsoft had a
warning flag put on it from UBS about the potential for a reduction in cloud
computing spending. How much is that underpinning?
A significant portion of these moves and indicates a broader reluctance by
businesses to really spend on the capital infrastructure.
So I think you're right. I'm not sure necessarily that there's
going to be a reduction in cloud spending, but there might be a reduction
in the pace of growth of cloud spending.
And of course, these are growth stocks.
That's therefore very important. I think when you look at Amazon, the
narrative that had over time, over the past sort of 20 years come to be
accepted by the market was that, yes, Amazon might not be terribly profitable,
but if they wanted to be profitable, they could be they could flick a switch.
And all of a sudden, you know, the faucet gushes forth, profit when they
want to. The consequence that a lot of that is to
do with AWB w of course, it has huge gross margins of 80 percent plus the
consequence of the lockdowns where they added all this extra headcount.
They added a million people between 2019 and 2022 more than the whole U.S.
Army. All of a sudden they have a far greater
cost base, a little bit harder to flip that switch and turns profitability.
So what they're doing here is perhaps rightsizing a little bit 18000 as a
percentage of one million. Clearly not that considerable, but it
gives them a little bit more flexibility if they wanted to return to that old
Alex, where does Jeff Bezos fit into
this? Was he the entrepreneur, the tycoon who
said, build, build, build, girls, girls, girls, and the guy from the cloud
business has to come in and mop up Mr. Businesses mistakes?
Is there any validity to that? That is certainly a thesis that a lot of
people have been flocking to. Andy Garcia's background is very much in
a W assets in that that cash cow. And, you know, business is the pioneer
certainly in terms of Amazon, but it's something that a lot of other companies
have followed of late, investing in growth, just throwing all your money at
your surplus capital if you have it into driving that growth story, because in
the end it will pay off.
What the lockdowns showed is that if you
grow too quickly, you're left with sort of redundant capacity that you can't use
anytime in the near future. Maybe that capacity does come through in
a couple of years time. But they don't want to have, you know,
what they would see as extraneous capacity in the near term.
Now, clearly, that's hard for Amazon employees.
And as you say, these are not necessarily the employees in the
warehouses that are being cut, many of whom are in short, on short term
contracts. These are people administering it from
the headquarters. They hate H.R.
teams and so on.
We haven't seen big cuts to the tax
staff, the people at Amazon at least going on these big new bats.
They seem to be still in play. Alex, just briefly, can you describe the
culture at Amazon and of the people from Adobe West, feel about the other side of
the business? Well, I mean, look, I think they all
recognize that without the e-commerce business, AWB wouldn't exist.
It was basically built to support that business.
The culture, broadly speaking, at Amazon is very thrifty.
You know, you think about people flying to to Seattle to from London, perhaps to
go to meetings, the headquarters. They fly coach.
They don't get the sort of cushy business class seats that you might
expect from big tech companies out there.
They tend to think that we are going to reward you by giving you generous
paychecks, by giving you good stock options as a whole.
It's a pretty legally run organization, which is why you see so much automation
in the warehouses.
You know, there is a lot of tech going
into that stuff and it does feed into some of the stuff that Amazon that AWB
does because they've improved the tack in one place.
That's something that you might be ISE a product ISE from a software as a service
perspective for your AWOL clients. Alex, thank you, buddy.
We appreciate it. Thanks for the clarity.
Alex Webb there out of London from Bloomberg NASDAQ Alex mentioned a couple
of minutes ago. Can we stay on that for a moment,
please? One million rolls from 2019 to 2022.
Have we ever seen anything like that in history?
At any point, a million wrote in three years is about distribution.
Unreal. If you do an MBA program, there's like
There's there's this.
There's nobody talks about distribution. You have to distribute the product.
And that was the pandemic challenge. And that's what we're talking about,
access. You know, a lot of people talking a
short and shallow. A potential downturn will be short,
shallow because we can build up enough access in the last couple of years.
Well, it depends where you look, because there is a company that had a million
people in three years that just sort of blows my mind.
This goes to the question that are asking.
Are we talking about the excesses of the past two or three years or are we
talking about the excesses of the past decade?
And you think about tech as the growth industry and how much it's subsumed by
other industries, whether it's retail or whether it's just what happens in the
corporate back offices? How much of this is paring back and
tweaking as the tech world enters a new phase?
It's no longer road growth.
It's more the establishment, of course,
say 18000 for a company that takes feels like a tweak, doesn't it?
Yeah. So I'm just wondering, there's more to
come from Amazon on the cost side. Where does it come from given.
Alex Webber's talked about how the company's already ran and perhaps are
not going to publicize it quite as much. Precisely features on a S&P 500 up two
tenths of one percent. David Leibovitz of J.P.
Morgan Asset Management coming up next. Nothing was really changed between the
end of 2022 and the first day of 2023. Inflation and interest rate shock, but
talk markets weaker in 2022. Think sort of fever is breaking.
We're seeing inflation normalize. That should support some of the value of
stocks for equity markets in and of themselves.
The lack of inflation was not a bad backdrop for them for the last decade or
bear case. It's actually kind of we avoid a
recession, but not the slowdown.
This is Bloomberg Surveillance with Tom
Keene, Jonathan Ferro and Lisa Abramowicz.
How many more rate hikes do we need from New York City this morning?
Good morning. Good morning.
This is Bloomberg Surveillance Life on TV and radio alongside Tom Keene and
Lisa Abramowicz. Some Jonathan Ferro T.K.
equity markets not too much. A little bit more data coming out this
morning than onto payrolls tomorrow. Thorsten Slop moments ago over at
Apollo. The title of that piece, Tom No More Fed
Hikes needed a question mark. Right on from Dominant Constant and a
few others looking at where are we on a restrictive basis.
Ben Emmons has been out front, too, and Slack just says he hears the word is
cumulative. You have to go to Vice Chairman Brennan
of how do these rate hikes add up and then how do you handle that?
In what I would call academically original territory.
And there is slack weighing in.
Neel Kashkari, if the Minneapolis Fed
was pretty punchy yesterday in that piece, it and if you had the opportunity
to read it. But basically, he wants to take rates
through 5 percent. He's conditioned by the experience of
the 1970s and does not think this it back away any time soon.
Yeah, he basically was saying that it shouldn't even be a consideration until
the Fed is confident that inflation is peaked.
He said I have as posing a five point four percent, but wherever that end
point is, we won't immediately know if it is high enough to bring inflation
back down to 2 percent.
Then you've got towards this last citing
San Francisco Fed saying that it's clear that the demand side of inflation has
come down dramatically. Sophie Kamaruddin came off as the 1970s
weighs on these guys heavily, really heavily.
You see every time they speak in a speech.
I mean, this was from Kashkari yesterday.
Given the experience of the 70s, the mistake the FOMC made and must avoid is
to cut rates prematurely and then have inflation flat back up again.
Remember Al Shery Ahn writing about the risk of a 70s flip flop last year and
T.K. clearly weighs on them.
Yeah, it weighs on him too, because the Bank of Japan had the same flip flop
happened different terms, different moment.
But I strongly take your point that at least you mentioned this before we went
on air this morning.
This is wildly his metric and they are
scared stiff of the first rate cut that permeates monetary economics.
I think vice chairman clarity would would agree.
Because once you start cutting, what's this market going to be?
It's not gonna cut him. It's not good pricing.
Well, yes, we just got a price in a cycle of cuts, and that's the issue.
Did you enjoy the Fed minutes yesterday? I read.
It was good. It's certainly going to be better
surveillance. That's the nap start at 2:00 p.m.
Eastern time. Let's wait for this price action for you
and get you all up to speed. I'll give you a comprehensive market
check in just a moment. Let's start with a brief one.
Equity futures right now unchanged on the S&P 500.
Yields coming up, not even a basis point on a 10 year, three sixty nine.
Any affects market 1 0 6 eleven, some crude 74 22, up by one point nine per
cent over the previous two days, down 9 per cent plus to kick off 2023.
Big deal. I think the crude is a big, big deal and
pushing against it as a China opening and some of that enthusiasm and the
feeling I get from the the hundred dollar a barrel crew is when it goes,
it's going to go.
We just don't know when that is waiting
for this mountains to click back in particular from China.
You heard on Rita set of energy aspects like the triple digit crude brammer
again later this year, that circle. Honestly, I was thinking about that when
you were talking about where the Fed is gaming out at rates.
And I have to wonder how much the narrative is going to change in its head
if we get another pop in oil prices, in energy prices, especially in the face of
really volatile weather today, what we're looking at is jobs data ahead of
the jobs report tomorrow. ADP employment change comes out of eight
fifteen a.m. U.S.
national jobless claims claims comes at 830.
I keep going back to this. I keep thinking, John, about what you
said yesterday. It was a chart cry when I took a look at
a longer term view of jobless claims because of how distorted things were
during the pandemic. That is true.
However, it has flatlined on any scale that you look at in terms of the number
of people filing to get unemployment benefits.
When does that start to pick up like the Fed wants?
We haven't seen it yet, even though a lot of people are saying it will happen
How House of Representatives continue
with their deliberations. They had been adjourned since last night
to avoid a seventh public defeat of Kevin McCarthy as speaker of the House.
They're going to re-establish some sort of vote perhaps at noon.
They can't do anything until they have a speaker.
So let's see how long this drags on. And today, Fed speak includes Atlanta
Fed President Rafael Basket, 928 a.m. and Jim Bullard of the St.
Louis Fed at 120 p.m. Do they give a sense of where they fall
on this balance of risks? John, we've been passing through all of
the various machinations of Fed speak.
There really is a major question here.
Are they willing to go for Kashkari and basically say we are going to torpedo
any growth, keep going, because we won't even know if we've seen the peak in
inflation full Kashkari July. That something Jonathan Ferro Kashkari.
That meant something very different two years ago to do without her, you know,
would never come up with the kinds of Kashkari.
You have to remember that, Lisa, this is her part time job.
She's a full time world class financial columnist right in those beautiful head.
That's right. If she wrote something this morning
would be full.
Ask David. Who knows what's the first question is
now the global market strategist at JP Morgan Asset Management joins us around
a table. David, this Kashkari have friends.
And good morning to you and happy New Year.
This Kashkari have friends of the Federal Reserve.
Do you think he's got company? So I do think that he has company.
I think that this is one of these instances where what the market wants to
hear and what the market wants to see is very different from what the Fed is
planning to deliver.
And to reiterate the point that you just
made. They are haunted by the 1970s and they
are more than comfortable. And I think that investors need to come
to terms with this more than comfortable overdoing it and erring on the side of
caution rather than allowing inflation to become more ingrained into the
economy. So what do I do if I've gone to a big
fancy bank and I took the right courses in school and I was 60 40 and I got
cratered last year like none of us have ever seen.
What's the news? 60 40 this year?
Given the macro backdrop? Well, the first thing that I'll say is
that, you know, despite the sell off, the expected return from a 60 40
portfolio today is far superior to where it was 12 months ago, nearly double
based on our estimates. What I would say about 2022, the issue
at hand, the reason why diversification didn't work was just because interest
rates and inflation were at the center of the center of the debate.
And the one common variable when you're pricing stocks and bonds is rates.
So if you can't figure out what rates are going to be, you can't price a bond.
You can't price a stock.
Everything sells off together.
And that was very much the story that last year.
This year. Do you think about what people are
talking about? They're worried about recession.
They're worried about growth fears. And if we do see those growth fears kind
of reassert themselves over the course of the next couple of weeks, I do think
that that negative stock bond correlation will reassert itself.
And so I'm not so sure the 60 40 is dead.
I think that the 60 40 is actually looking better today than it was 12
months back. I wonder, though, about that downturn
everyone has confidence in.
What do you take from the jobs data that
we've been getting that indicates a very different picture?
So I think this is what's so interesting.
You know, people are looking at the economy in black and white today and
they're saying, you know, growth or recession.
And what they don't understand is that the echoes of this pandemic are things
that I don't think anybody was really ready to comprehend.
Right. We have a very strong labor market.
We have a housing market in recession. We have cyclical sectors in the economy
that are effectively in line with their long run average.
Everything is at somewhat of a different place.
And so, you know, I actually think what could bail the economy out next year is
a labor market that proves to be more resilient, a labor market that does
soften because that's what the Fed has said they want to see happen.
But I actually think that what we're seeing here is just a reflection of this
pandemic echoes and a little bit of labor hoarding.
Businesses not wanting to get caught on
the other side of the trade where they were for the better part of the past
couple of years with not enough workers rights.
And now they're they're hesitant to let people go.
So why is Mike Wilson wrong then, from your view, and basically coming out and
saying that perhaps things will muddle along and we will avoid some sort of big
downturn in the economy, but that doesn't mean that stocks aren't going to
get hammered. In fact, that actually ups the chance
that they will see the great debate is about earnings and everybody has a
different take on earnings. A lot of people like to say, well, on
average, over the past 75 years, when we've had a recession, profits have
fallen by 30 percent.
If you actually isolate the period from
the late 1960s through the early 1980s, which I would argue is an inflation
environment more similar to the one we're in today, the average decline in
profits was 15 percent. And, you know, I'm not I'm not Pollyanna
I recognize that if we have a recession next year, corporate profits are going
to decline. I think it's more about pricing in that
magnitude of decline. And I think people may be overly
pessimistic, not recognizing what inflation does for revenues at a moment
or a broom or wind for Kashkari. I think so.
I mean, your traction on Mike Wilson, I mean, as you know.
But to your good point on for Kashkari there, there's this bet being made now
with a lot of certitude out there. I don't know where the certitude comes
from. Mark Gurman Well, fill Kashkari.
HEADLEE Move to the Mike Wilson point of view, which is that they can go to that
level of rates and then not necessarily see a complete recession.
But the question that we were just
hearing from David is this issue of profits, can companies continue to mint
profits if you have consumers that are having more discretion with how much
they spend? And if you have a resilient labor
markets very quickly think they cannot. But at what rate, how big are those
margins going to be in the big tech firms that are been churning out double
digit growth for a long, long time? Does that growth level come down and
what's the motive? We want to put on those names and that's
a difficult call you've got to make on a company like, say, Tesla.
I caught up with PFLAG yesterday.
He thinks we can still grab a 30, 40
percent if that's the case, what multiple to put
on that name? Now we've got rates pushing 5 percent.
Smith The big change over the last 12 months has been the multiple
storytelling and now we've got to work out its Jihye Lee through earnings and
growth. David, This is really critical.
You guys have set up a more responsible problem, probabilistic determination of
the set of outcomes into June into September.
I hear others now comically talking with certitude, almost a single point or
tenth of a point.
You know, John, you do better at this
than me on the S&P guess. Why are we guessing with such accuracy?
Haven't we been humbled enough? Well, I think not.
Is it interesting to see people so confident in their S&P forecasts, are so
confident that we're going to have a recession this year?
Right. This would be the most predicted
recession in the history of the data. And what I what I think the problem is
today, going back to what I was saying earlier, Lisa, is depending on where you
look in the economy, you can kind of tell yourself whatever story you want.
Oh, the labor market is very strong. The economy is not going to dip into
recession. But look at the interest rate sensitive
sectors. They've completely rolled over because
of what the Fed has done. I mean, that really is going to be the
question. And I think you're taking a step back
when when we think about the distribution of outcomes to your point.
It's not as binary as a lot of people believe it to be.
It doesn't need to be black or white.
It doesn't need to be growth or no
growth. It could arguably be an environment
where we muddle through and perhaps we don't see that maximum downside.
That has become very consensus. To go out there and espouse it is
consensus, without a doubt. Yes.
Everyone put an end to say almost the same thing with some subtle differences
here and there. David, thank you.
It's good to see you, buddy. As always, David liberates that J.P.
Morgan Asset Management to watch the football yesterday.
I looked at a little bit of it, but I will watch tonight.
I really want to bring this up. We did the World Cup thing and thank you
to all of you actually end football and those you like.
It's like an American thing we're watching every four years.
One guy did not participate. He was from Norway.
Yeah. And he.
You know, all this Pele memory and all that we witness and the joy we witness
this guy for Man City. He's special, isn't he?
Oh, without a doubt. How many games that they played now?
Was it 16 games? Something like that.
Score 21 goals to the top scorer was in a Premier League last year.
Yvonne Man son.
Yeah. And Salah over Liverpool.
I think the tally was about 23 23 goals in complete season, which is 38 games
and this guy's done in half the time. This guy is like 20 yards.
He's like a tiny pick, an NFL football player, and he got no love during a
World Cup. I think you've tried to make that
comparison. I do.
Okay. I never would have done that before I
drank. The Ferro tank is what you would call a
one trick pony. Just one trick.
And he does it better than anyone. He only wants to touch the ball when
he's going to scope. It has no interest in coming back.
Happen at the midfield, doing all that stuff.
But he'll mature into that.
He's so young.
He's just he's just an epic one of a kind of throwback back.
No, no, no. Goal scorer from back in the day.
It's going to be watching that game. I think so.
I think he's that special. So you'll sleep for the Fed minutes, but
you won't sleep. You got that right.
Okay. This is Glenn Beck.
Keeping you up to date with news from around the world with the first word.
I'm Lisa Mateo. It's another sign that a tech industry
slump is getting worse.
Amazon cutting more than 18000 jobs in a
round of layoffs aimed at the corporate ranks.
Most of the jobs being cut are in Amazon's retail division and human
resource areas like recruiting. The company has more than one point five
million workers worldwide. The U.S.
is edging closer to send armored vehicles to Ukraine.
On Wednesday, President Biden acknowledged that Bradley fighting
vehicles may be another U.S. military aid package.
The Bradley is a troop carrier that it's equipped with anti-tank missiles and a
25 millimeter cannon. Meanwhile, France says it will provide
Ukraine with light combat tanks. The Securities and Exchange Commission
is pushing back on financing. US has planned to buy bank crypto lender
Wager Digital. That deal is valued at about one billion
dollars. In a court filing, the FCC says the
agreement doesn't include enough detail about finances ability to close the
deal. Finance says it will provide any
requested information. Global news 24 hours a day on air and on
I'm Lisa Mateo.
This is Bloomberg. Congress cannot function.
Conversely, the greatest nation in the world
and without a lot of trouble with I'm sorry for the noise, a lot of trouble
with the attacks on our institutions already.
That's what worries me more than anything else.
I President of the United States, Joe Biden is weighing in on things over in
Congress in Washington, D.C. We'll pick up on that in just a moment.
If you are just tuning in on TV and radio, welcome.
This is Bloomberg Surveillance.
Here's a taste, the flavor, a snapshot,
the market for you waking up this Thursday, going in to jobless claims.
In about an hour and 13 minutes, ton of speak as well.
Lisa will run you through that in a moment.
Equity futures up by a little more than a tenth of 1 per percent on the S&P.
You're right, Donna. Not doing much here.
Want to 611 up a tenth of 1 percent. Also to the euro's favor.
Euro strength there just a little bit in the bond market.
Not much. And got a 10 year, 368, 64 tons
happening in the previous two days. Move lower on a 10 year yield of about
18 basis points into round things out and crude trying to rally bounce back
from the losses over the last couple of days.
WTI right now at 74. 36 take okay, very good.
Futures up five again and you know, I think it's a lift to it.
And that one thing we do see here is on Ukraine, a changing story.
We just had it in the news there of France, maybe sending some form tank,
the United States maybe sending some form of, quote, vehicle.
My vast knowledge on this as well.
Peyton in the movie and the tanks of
another time and place. Emery Hardin is with us from Washington.
Anne-Marie, these tanks we may send. They're not out of the movies, are they?
No, not exactly at. Not out of the movie, especially one
possibly coming from France. But you do see a push at least Ukraine
is pushing the West to make sure they continue to send the military weapons.
And what you heard from a top Intel individual from Ukraine is that they're
very concerned that they said to ABC News about March and really the fighting
starting to get a lot hotter in March coming off of the January, February,
We should note that Russia really
suffered a major blow over the New Year's holiday.
And they even admitted it. And they talked about the fact that they
actually lost more people than they were expecting.
This is probably the biggest casualty event that Russia has admitted since the
start of the war. Eighty nine people.
And this is with fighting in the Far East.
And the defense ministry said this came down to the fact that soldiers were
using mobile phones. New Year's Eve is an incredibly
important moment for the Russian culture.
And they were calling home. That's likely how the Ukrainians were
able to find them. I saw that in the report.
The what I would point out here is it's almost like a domino effect of France
with tanks, U.S.
The pressure in Germany with tanks is what we're going to see in the next six
weeks, say an arms buildup for Ukraine, where, as you correctly say, we need to
anticipate a war that heats up. Well, also, we have the Patriot missile
system, right, which Dimitri collab of the foreign minister spoke about the
fact that that process has a rally already started.
He didn't want to say where they were in the process, but the process of the U.S.
transferring that missile battery has already started.
But, Tom, there's a bigger issue at play right here.
And is the fact that NATO may actually change the rules so that 2 percent of
your GDP and this is really what Ukraine has laid bare for a lot of NATO
countries that never hit that 2 percent of GDP on defense spending target.
It will no longer become an aim potentially.
We're not there yet, but it would become the base.
Meaning if you want to belong in NATO, you have to spend 2 percent of your GDP
on defense spending. So why we're seeing almost piecemeal
from some countries, there potentially could be a rethinking of how NATO
members think about defense and their spending on defense, which would mean
they're going to have more stockpiles.
Given some of the turmoil that we've
been talking about, the internal scene turmoil in the United States, how much
does that affect their leadership role on an international stage like veto?
Well, if you're talking about potentially more funding to Ukraine
right now, obviously in the spending package, in the defense bill, they got
billions of dollars. But down the road, when you're looking
at a house that still does not have any members or speaker, it's very difficult
to see a path forward in the House of Representatives for a lot of aid to
Ukraine. I mean, Kevin McCarthy had already made
it very clear a few months ago that there would be no longer a, quote, blank
check. But it seems very difficult.
These individuals cannot even agree on a speaker.
Many of them have been critical about some of the funding and the money going
How will they view future potential aid
packages over to Kiev, talking about what's been going on with the House of
Representatives looking for a speaker? A number of people have been talking
about the dissonance between what happened with the House yesterday and
the fact that Senate Minority Leader Mitch McConnell was with Joe Biden in
Kentucky yesterday to talk about a new bridge that was going to be built to
herald some of the infrastructure spending that was put out there that
others in the Republican Party are saying we need to cut back on because
we're spending too much. How is this being received?
Mitch McConnell's approach versus what's been going on in the House?
It was a great moment for the administration in terms of
The press, United States is standing
alongside someone who he calls a friend but really does not agree with on many
issues, but gave him credit and said, Mitch McConnell, because of you, we were
able to get this hard infrastructure over the line, bridges, roads, Internet.
These are things most Americans want to see coming out of Congress.
They like the idea of hard infrastructure being fixed in their
town, especially this bridge, which has a lot of history.
Mitch McConnell is talking about a different path forward and very much so.
CAC chasm almost that what you're seeing in the house, he's talking about working
with a Democratic president and a bipartisanship that he wants to see
govern at the same time as they were speaking.
You have Kevin McCarthy trying to have some backroom deals with a old show
right wing of his party that does not want to see bipartisanship in
Washington. Very different approaches.
And this has been a big story for the Republican Party, not just this year,
but the past decade.
And it is going to really be the thing
that dogs the house over the next two years.
This is just the first of many fights, Emery, when the opposition is digging a
hole. The last thing you want to do is draw
attention to yourself. I just wonder why the reports were
circulating yesterday that the president might be visiting the border.
Well, he was asked about it. Right.
Because he's going to Mexico on Monday. This is the three amigos is what it's
called, meeting between Mexico, Canada, America.
They kind of like you three. They could have not met since pre Covid
under President Trump. And there's been huge issues.
I'll let you guys decide who's here. There's been huge issues, immigration
and trade. The president was asked about he said,
it is my intention to go to the border. Maybe the administration feels like now
is an OK time with the midterms behind them.
It is a moment, though, that they are going to draw scrutiny with these photos
if he's at the border, that the Republicans have been bashing them for
months on a march down in Washington, up Olympic Washington correspondent.
She said last state topics there.
Yeah, I know.
I do wonder if I was lucky. And she nailed it like four topics.
Boom, boom. She gets up like two.
Yeah. Did we ever talk about that treat I see
at the G 20 when he was with she I didn't even notice.
Oh, come on. You must know.
Come on. No, I'm a wet sheetrock.
Treat him like it. Like a child.
He was there in that sort of child's gray suit and sort of wandered off like
it just got in trouble. And the latest petition, I think one
sartorial, I'm going to sidestep it. But if anyone's treat.
I know. Anyway, coming up, Deborah Cunningham
could have time.
Does a guy at Federated Armies.
She's gonna be coming up very shortly, Tom, and she's gonna be talking about
what's happening. This bond market with the Fed speak.
We've had T.K. in the last couple of DAX.
Oh, first big Peter Boockvar, who writes a wonderful morning note.
Peter Boockvar just just talked and he went full bore M.O.
on Kashkari. He just ripped to shreds.
What did he say? He just said the theory is not there.
Get off the econometrics and start looking at the common sense of a massive
fiscal impulse off the pandemic as well.
He also did point out, Lisa, to your
world that today is maybe the first day where notes in bills outside one year
there are no negative yield. We had a sort of cool.
It's very cool. We can go into that.
But I got distracted looking at the negative rates that we're going to get
into that of an era. Oh, good stuff.
But again, I mean, you get that suit. Yeah.
You just thought that the way I was done, I just if I just back obviously
negative yield. Let's go there.
It was really interesting. It seconds.
What you got to say. It's so.
It's over there. No, they're zero.
But this is the question, is Japan actually going to end?
Let's pick up on this story next week.
This is Glenn Beck. Could ease up this morning by about a
tenth of 1 percent on the S&P 500 price action this Thursday morning.
Coming into jobless claims about an hour from now on, the NASDAQ were up by a
quarter of one per cent more job cuts for big tech.
This time, Amazon set to lay off 18000 will pick up on that story in just a
moment. I want to talk about the bond market.
Lisa and Tom were talking about the end of an era in negative yielding debt was
approaching 20 trillion back in 2020.
And now we're down to zero.
Your 10 year 368 45, your two year 438 26 responsible for this, the shift away
from negative rates over at the ECB and elsewhere.
Big changes at the Swiss National Bank, changes across Europe, changes at the
fat as we go from zero to four plus in about 12 months.
And Lisa potentially changes the PIIGS well in the coming quarters.
This is shocking to see 0 Mark Gurman on this chart, as Tom was mentioning.
This really is notable because of how much this distorted values.
My question is, have we seen the full fallout from this?
Is this basically the extent of it? Last year's absolute devastation, 60 40?
Or is there more substantive kinds of elements to come?
Alix Steel Kuti To come for the Fed Reserve from the ECB mentioned mention
the BMJ, they might be getting in the mix as well.
Some not doing something she necessarily, but perhaps raising
interest rates. Do we take that next step at to be OJ?
Some people think we will. I think it's as unpredictable.
It was the day they announce the end of the first move.
You're sure you own 50 down under 130. Other journal register and others have
been brilliant under the complete uncertainty of what they do.