'Bloomberg Surveillance Simulcast' Full Show 12/30/2022
>> NOW GOING INTO NEXT YEAR EVERYONE IS BEARISH. WERE GOING TO HAVE THIS MASSIVE RECESSION. >> WERE GOING TO HAVE A HUGE RECESSION ROLLING THROUGH HOUSING, RETAILERS AND OTHER SECTIONS OF THE ECONOMY.
EVEN IF WE HOLD UP AGAIN, WE COULD ROLL INTO A RECESSION. >> WE ARE EXPECTING A MILD RECESSION BUT WE DON'T THINK IT WILL LAST LONG. >> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO AND TOM ABRAMOWITZ.
LISA: GOOD RIDDANCE LEAVING THE WORST YEAR. WE HERALD THE LAST TRADING DAY OF THE YEAR TO FORGET. KAILEY: THAT'S ACROSS ASSET CLASSES, 401(K) PORTFOLIOS AND GLOBAL BONDS. IT HAS BEEN BRUTAL IN A WAY THAT NO ONE SAW COMING THIS POINT A YEAR AGO. MATT: THERE WERE SOME PEOPLE WHO KNOCKED THE BALL OUT OF THE PARK. IF YOU WERE IN SHORT RATES YOU
WERE ON FIRE. SOME PEOPLE HAD A GOOD 2022. KAILEY: BLOCKBUSTER IF YOU ARE SHORT TRACK OF AND SEE IF YOU WERE LONG. 25 PERCENT LACK IN STOCKS. HOW MUCH DO YOU PIPIT FOR NEXT YEAR? HOW MUCH DO WE SEE THE WORST OF IT VERSUS JUST THE BEGINNING. MATT: HOW IMPORTANT IS THE CHANGE IN THE NUMBER AT THE BACK OF THE FOUR DIGIT YEAR? THE CALENDAR CHANGE DOESN'T MEAN YOU HAVE TO CHANGE YOUR STRATEGY. MAYBE YOU PIVOT AFTER THE NEXT QUARTER IF YOU GET EXECUTIVES THROWING THE KITCHEN SINK AT IT AND SAYING THINK INCESSANT -- CONFESSION IS FOR Q1 WE THROW EVERYTHING THERE. LISA:
YOU BEEN TALKING THAT DESPITE OPTIMISM, WE HAVE NOT SEEN THE SANTA CLAUS RALLY. WE HAVEN'T SEEN THE YEAR-END MELT UP. YOU HAVE HEARD ABOUT TAX SELLING, LIQUIDITY. THERE IS SOMETHING GOING ON AS WELL? KAILEY: IT WOULD BE TOUGH TO BE LONG TO A YEAR AFTER THIS ONE. THE CALENDAR CHANGES THE PROBLEMS WE'VE BEEN DEALING WITH DON'T MAGICALLY GO AWAY ON THE FIRST. WE HAVE A FEDERAL
RESERVE HIKING, ONGOING WAR IN UKRAINE, COVID TRAJECTORY IN CHINA AND CORPORATE EARNINGS THAT HAVE NOT SEEN THOSE ESTIMATES FALLING AND THEY HAVE TO CATCH UP AT SOME POINT. LISA: THE ONE POSITIVE IS THAT PERHAPS WE HAVE SEEN INFLATION PEAK AND THAT HAS BEEN THE BIG QUESTION. 2022 WAS THE YEAR OF INFLATION. THE BIGGEST SINCE FOUR DECADES AGO.
HOW MUCH IS THAT TO GIVE PEOPLE THE UMPH TO KEEP GOING. MATT: THE SPANISH DATA WE GOT THIS MORNING WAS A SURPRISE AND IT COULD BE A RAPID DECLINE. IT'S PROBABLY LIKELY WE COULD GET A SOFT LANDING, OR NO LANDING AT ALL. AND THEN IT DEPENDS ON YOUR BELIEF IN YOUR FAITH IN THE CREDIT.
- IN THE FED. IS HE WILLING TO BE PAUL VOLCKER AND DO WHAT IT TAKES OR DO YOU THINK HE WILL FEAR HIGH UNEMPLOYMENT. FEAR REAL CONTRACTION IN EARNINGS AND THEN TURN TAIL AND CUT RATES. LISA: WE WILL NOT RECOUP OUR LOSSES TODAY BECAUSE WE ARE DOWN IN PREMARKET TRADING.
A MILD DECLINE IN THE S&P WAS SHARES DOWN ABOUT ONE THIRD OF A PERCENT TO START THE DAY. YOU ARE SEEING DOLLAR WEAKNESS, INTERESTING IN LIGHT OF THE STRENGTH. TENURE YIELDS ARE UP JUST MARGINALLY. TO START THE YEAR OF 1.5 PERCENT GIVES YOU SOME SENSE. TO YIELDS IN DID LAST YEAR AT 0.72 PERCENT.
CRUDE, FASCINATING TO SEE THE ROUND TRIP AND CRUDE. 78.388, ESPECIALLY AFTER UKRAINE. HOW MUCH DOES THE DEBATE GET COLORED BY WHAT WE HAVE SEEN AND OIL PRICES, NATURAL GAS SLUMPING FOR SEVERAL MONTHS BECAUSE IT IS BEEN A WARM WINTER? KAILEY: THEY SAID IT WILL BE T-SHIRT WEATHER IN BERLIN ON NEW YEAR'S EVE AND THAT HELPS ON THE ENERGY SIDE. SO MUCH OF THE INFLATION WAS COMING FROM FUEL IN IS BLEEDING INTO OTHER AREAS. NO LONGER IS IT ABOUT OIL IN THE PRICE AND THE PUMP IT IS GONE EVERYWHERE. LISA: LET'S GET A SENSE OF WHERE TO GO NEXT YEAR AND HOW TO FORGET THE ONE WE HAD.
HOW BAD WAS THIS YEAR? HOW WRONG DID PEOPLE GET IT AND WHAT IF THEY GET WRONGHEADED INTO 2023. MARK: WHAT I GOT WRONG WAS THE PERSISTENCE OF INFLATION WHICH MEANS I UNDERESTIMATED INFLATION AND OVERESTIMATED RATES, I GUESS WHAT I'VE LEARNED FROM THIS YEAR AND LOOKING INTO NEXT YEAR, THE PATH TO LOWER INFLATION IS OBVIOUS. YOU WERE TALKING ABOUT GOOD AND PLAISANCE -- GOODS INFLATION CONTRACTING.
THE PROBLEM TO GETTING IT BACK , THERE IS NEW STRUCTURAL INFLATIONARY FORCES THAT WILL COME IN AND 2023 JUST AS SOME OF THE COVID SPECIFIC RELATED INFLATION HAS PROCESSED. THOSE FORCES ARE RELOCALIZATION OF THE SUPPLY CHAINS IN THE STREAM OF TIGHT COMMODITY SUPPLY THERE. CAPACITY DISCIPLINE FROM THE CORPORATE WORLD. THE EMPLOYMENT STRUCTURE IN OUR COUNTRY. MATT: WHEN YOU TALK ABOUT EMPLOYMENT, DOES THE FED HAVE TO RAISE RATES UNTIL UNEMPLOYMENT IS UP NEAR 5% BEFORE THEY CAN GET INFLATION BACK DOWN TO THE 2% TARGET? OR IS INFLATION COMING DOWN. IN SPAIN, THEY HAD GOOD DATA
TODAY? MARK: GASOLINE PRICES HERE, I FILLED UP THE CAR AND WAS PLEASANTLY SURPRISED. A LOT OF THAT IS REFLECTING THE SELLOFF IN COMMODITIES. THE LAYOFFS WE'VE BEEN SEEING CAME FROM THE PLACES WE DIDN'T GET UNEMPLOYMENT FROM, BIG TECH FOR EXAMPLE. MANY FACETS OF EMPLOYMENT, GAS RATES ARE LOWER THAN SIX MONTHS AGO. THAT IS A ROBUST SECTOR. I KNOW PEOPLE IN OIL AND GAS WHO CAN'T HIRE PEOPLE TO GET ON OIL RIGS EVEN THOUGH THEY MASS OF PREMIUMS FROM BEFORE. WE HAVE THE REVENGE OF THE OLD ECONOMY WHICH MEANS A LOT OF THE EMPLOYMENT PICTURE IS TIGHT HERE. KAILEY:
I WAS SPEAKING WITH ONE OF OUR COLUMNISTS AND HE SAID WHAT PEOPLE GOT WRONG IS HOW RESILIENT THE LABOR MARKET WAS REALLY GOING TO BE. THAT IT WOULD REMAIN SO TIGHT AND THAT WOULD MAKE THE FEDERAL RESERVE'S SO STRONG. IF THAT CONTINUES TO HOLD TRUE, IS SOMETHING THAT SHOULD BE TRUE WHICH IS A RESILIENT CONSUMER AND LABOR MARKET, HOW DISTURBED DETRIMENTAL IS THAT FOR RISK ASSETS? MARK: I THINK THAT POWER WILL BE HAWKISH AS LONG AS HE STILL SEES WAGE INFLATION. THERE IS A SECOND ORDER QUESTION WHICH IS DOES HE DO IT BY VIOLENTLY SIGNALING RATE HIKES OR DOES HE GET TO TERMINAL 5.25 AND THEN CHANGE PLASTIC KEEPING IT AT THAT PH PLATEAU NUMBER? TO ME, IT'S ABOUT HOW HE WILL BE A HAWK AS OPPOSED TO IF YOU WILL BE HOT. YOU WILL START SEEING THE EFFECTS OF CAPITALIZATION, IT'S 80%. IF YOU GET THIS CAPEX BOOM FROM
RICOH CAUSATION -- RELOCALIZATION, THAT SOME THINK I'LL HAVE TO DEAL WITH. IF CHINA DOES CONTINUE TO REBOOT ITSELF THAT WILL PUT UPWARD PRESSURE ON COMMODITIES. I THINK IT'S A COMPLEX AND NUANCED INFLATION PICTURE. A LOT OF COLLAPSING INFLATION THE NEW STRUCTURAL FORCES KEEPING THE FLOOR HIGH. IT'S GETTING FROM 3% TO 2% WILL BE TOUGH. HE WILL KEEP IT AT A HIGH LEVEL FOR A LONG. OF TIME. LISA:
UNFORTUNATELY WE HAVE TO LEAVE IT THERE. INC. YOU FOR ALL YOUR CONTRIBUTIONS TO BLOOMBERG. TALKING ABOUT THE POTENTIAL VARIABLES I HAVE TO TAKE A LOOK.
WE ARE TALKING ABOUT A WEAKER DOLLAR. FALLING TO ITS LOWEST LEVEL OF 6.9067. THIS FEELING THAT PERHAPS THE COVID CASES HAVE BEIJING AND OTHER BIG CITIES AS THEY CONTINUE TO SPREAD IN OTHER AREAS. THE FACT TO SEE ECONOMIC
ACTIVITY SURGING BACK, PUBLIC TRANSPORTATION AND MOBILITY DATA IS SO TELLING. KAILEY: WE ARE APPROACHING THE LUNAR. WHICH USED TO BE A BIG ECONOMIC. BANK. C PERIOD. THIS IS BLOOMBERG. LISA: WITH THE FIRST WORD I AM LISA MATEO.
PLAYDOM ARE PUTIN AND XI JINPING HAD A CONFERENCE CALL TODAY. HE SAYS RELATIONS ARE THE BEST IN HISTORY. CHINA IS READY TO EXPAND THE RELATIONSHIP OF BEIJING IS IMPATIENT OVER THE POLITICAL AND ECONOMIC IMPACT OF RUSSIA STRUGGLING IN UKRAINE.
THE APPOINTMENT OF CHIN HAS DELIVERED SOME OF THE MODERATE MESSAGES IN CHINA. THE BIDEN ADMINISTRATION MASON BRADLEY FIGHTING VEHICLES TO UKRAINE AS PART OF ANOTHER MILITARY SUPPORT PACKAGE. IT IS USED TO TRANSPORT TROOPS BUT ARMED WITH MISSILES AND GUNS. SAM BANKMAN-FRIED HELD AT LEAST FOUR MEETINGS WITH SENIOR WHITE HOUSE OFFICIALS.
IT WAS PART OF A PUSH FOR CRYPTO POLICY. HIS TIES HAVE COME UNDER SCRUTINY SINCE THE EXCHANGE COLLAPSE. THE COMPETITION TRIBUNAL RULED IN FAVOR OF ROGERS COMMUNICATIONS $14.8 BILLION DEAL.
GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I AM LISA MATEO, THIS IS BLOOMBERG. >> THE PROBLEM IS YOU CANNOT CHANGE THE GOLD COAST. CHANGING THE INFLATION TARGET FROM 2% TO 3% WOULD BE A SERIOUS RISK TO THE FED'S CREDIBILITY. LISA: A CHOPPY ROAD AHEAD. THAT'S FROM THE FORMER ECONOMIC ADVISOR TO PRESIDENT BIDEN TALKING ABOUT WHAT WE WILL EXPECT IN 2023 WITH THE FED THIS SEEMS DETERMINED TO KEEP GOING REGARDLESS OF A HIGHER UNEMPLOYMENT RATE.
THE FED IS GOING TO DO WHAT IT TAKES BUT NOT TOO MUCH. MATT: EVERY ECONOMIST SAYS INFLATION COULD GET UP TO 4.7% EVEN IF THEY SAY NEHRU WAS HIGHER. IF THE IDEA IS TO FIGHT INFLATION AND SERVICES PRICES YOU NEED TO DRIVE UNEMPLOYMENT HIGHER WHICH IS SCARY. LISA:
THE OTHER THING THAT WAS CONSENSUS EARLIER THIS YEAR, YOU WOULD NOT SEE ANY LEGISLATIVE SPENDING OR STIMULUS. BIDEN SIGNED OFF ON 1.7 TRILLION, A LOT OF PEOPLE ARE PUSHING BACK AGAINST THIS BECAUSE THERE IS NO LEGISLATIVE WELD TO REDUCE THE DEFICIT DESPITE THE INFLATIONARY CONCERNS. KAILEY: I WONDER HOW THAT BECOMES MORE DIFFICULT WHEN YOU HAVE A REPUBLICAN HOUSE AND DIVIDED CONGRESS. IT RAISES THE QUESTION, YOU WILL NOT HAVE THE SUPPORT ON THE MONETARY SIDE IF YOU HAVE A SOFTENING OF THE ECONOMY. WHAT DOES THAT MEAN ABOUT SUPPORT FOR THE AMERICAN PEOPLE IF WE FALL INTO A RECESSION? KAILEY: THAT MIGHT BE THERE ANYWAY DESPITE INFLATIONARY CONCERNS.
THEY'VE ALSO BEEN CONCERNED ABOUT SOUTHWEST AIRLINES WHICH SAYS THAT WILL BE RESUMING A NORMAL SCHEDULE AFTER CANCELING 13,000 FLIGHTS OVER THE COURSE OF THE LAST WEEK. LET'S GET TO ED MILLS, FROM RAYMOND JAMES. IF YOUR CONSTITUENTS ARE ANGRY YOU HAVE TO EXPRESS FRUSTRATION AND ANGER. WHY HAS SO MUCH ATTENTION BEEN PAID TO THIS? IS IT TIED TO THE WAY THAT AIRLINES WERE SEEKING -- RECEIVE SO MUCH AID DURING THE PANDEMIC? ED: WHEN YOU LOOK TO SO MUCH MONEY THAT WENT TO THE AIRLINE INDUSTRY DURING THE CARES ACT AND WHEN THEY BOUGHT BUYBACKS AND THE IMPACTS ON LIVES. THERE WOULD BE TWO THINGS I'M LOOKING AT FROM HERE. WHAT DOES THE DEPARTMENT OF TRANSPORTATION DO? WE HAVE PETE BUTTIGIEG AS SECRETARY OF D.O.T..
HE HAS TO SHOW SOMETHING FOR HIS TIME. HE'S HAD AN INFRASTRUCTURE BILL BUT IF HE DOES NOT SHOW THAT HE UNDERSTANDS AND RESPONSE TO THIS THIS IS A POLITICAL CRISIS. THE SECOND THING I WOULD BE LOOKING FOR IS THE FAA REAUTHORIZATION WHICH EXPIRES NEXT YEAR ON OCTOBER 1. THAT IS A GREAT OPPORTUNITY FOR CONGRESS TO ADD CONSUMER PROTECTIONS OR RIGHTS, ESPECIALLY THE REQUIREMENT TO REBOOK ON ANOTHER AIRLINE AND THE MELTDOWN LIKE WE SAW THIS LAST WEEK OR WHAT WE SAW EARLIER IN THE SUMMER. THIS IS NOT THE FIRST PROBLEM IN THE AIRLINE INDUSTRY THIS YEAR. SO NEXT YEAR THERE IS A REGULATORY AND LEGISLATIVE RISK FOR THE INDUSTRY BECAUSE OF THE PERFORMANCE AND BAILOUTS FOR THE INDUSTRY FROM COVID. MATT: JUST SOUTHWEST HAVE TO PAY
PEOPLE BEFORE THEY PAY THEIR DIVIDEND? THEY ARE SCHEDULED TO RESUME DIVIDENDS NEXT MONTH BUT 13,000 FLIGHTS WERE CANCELED. THAT'S OVER A MILLION PEOPLE. IF YOU GIVE THEM EACH $400 THAT'S WHAT THEY WOULD PAY FOR A DIVIDEND. ED: FOR CONSUMERS, THE POLITICAL PRESS, THE FINANCIAL PRESS, THAT WILL BE THE QUESTION. CURRENTLY, THE REGULATION, THIS IS A PERCEPTION PROBLEM. IN POLITICS, WHEN YOU ARE EXPLAINING YOU ARE LOSING. TO HAVE TO SAY WHY DID CONSUMERS NOT WORK OUT THE WAY THEY SHOULD HAVE? WHY WERE THEY STRANDED AND WHY IS THE SHAREHOLDER GETTING COMPENSATED? THAT WILL CREATE A POLITICAL PROBLEM AT THE DEPARTMENT OF TRANSPORTATION AND WITHIN THE HALLS OF CONGRESS.
IN THE PAST, GOING AGAINST THE AIRLINES CAN BE A BIPARTISAN EFFORT. IT IS A BIG RISK. MATT: THEY COULD ADOPT A COMPENSATION LEGISLATION. WHICH IS LIKE 400 EUROS FOR THIS KIND OF SITUATION. LET'S TALK ABOUT OTHER CHANGES WITH THE REPUBLICAN CONGRESS. IS PRESIDENT BIDEN LIKELY TO BE IMPEACHED? ED: IT IS UNLIKELY RIGHT NOW. THE ONE THING WE ARE LIKELY TO SEE IN THE HOUSE OF REPRESENTATIVES IS AN UPTICK OF INVESTIGATIONS.
A NUMBER OF REPUBLICANS WILL CALL FOR IMPEACHMENT WHETHER OR NOT YOU COULD GET TO 218 VOTES IN THE HOUSE REMAINS TO BE SEEN. YOU NEED TO UNCOVER SOMETHING WE DON'T KNOW RIGHT NOW BEFORE YOU GET THAT. DOES THAT HELP OUT REPUBLICANS OR IS THERE A FURTHER BACKLASH, POLITICAL INVESTIGATIONS HAVE POLITICAL BACKLASHES AS WELL. KAILEY: EVERYTHING WE HAVE SEEN STRIKES ME AS WINDOWDRESSING AT A TIME WHEN YOU HAVE THE CONFLICT IN UKRAINE AND THE REOPENING IN CHINA THAT'S FACING CONCERNS ABOUT THE POSSIBILITIES OF A NEW VARIANT. WHAT WILL BE TOP OF THE AGENDA WHEN THE CONGRESSMAN'S GET BACK TO D.C. IN JANUARY? ED:
I'VE ALWAYS THOUGHT THE NUMBER ONE THING WE COULD EXPECT AFTER DIVIDED CONGRESS , THE TOP OF MIND AND D.C. IS GETTING TOUGH ON CHINA. THE ONLY PLACE OF POLITICAL VULNERABILITY IS SEEN TO BE SEEN AS SOFT ON CHINA. WHETHER THAT IS TECH RESTRICTIONS, TRAVEL RESTRICTIONS, COVID SPREAD FURTHER. YOU SEE THAT REACTING FROM THE
BIDEN ADMINISTRATION PUTTING TRAVEL RESTRICTIONS ON INBOUND FLIGHTS FROM CHINA. WE WOULD BE LOOKING AT INVESTMENT RESTRICTIONS, IS THERE A PUSH FOR A BAN ON TIKTOK? HOW MUCH DOES THAT EXPAND? A LOT OF REPUBLICANS AND DEMOCRATS FEEL AS IF WE STILL HAVE A LOT OF CONCERNS ABOUT THE TRAJECTORY OF CHINA AND THE INVESTMENTS GOING FROM THE UNITED STATES AND TECHNOLOGY TRANSFERS GOING FROM THE UNITED STATES INTO CHINA. THAT'S THE NUMBER ONE LEGISLATIVE ACCOMPLISHMENT WE COULD SEE IN 2023. LISA: THERE IS A QUESTION ABOUT WHETHER THERE IS A PHYSICAL RESPONSE TO A DOWNTURN IN 2023.
IS THERE A POLITICAL WILL TO PUT MONEY IN THE ECONOMY DESPITE CONCERNS ABOUT INFLATION? ED: NO. OVER THE LAST THREE YEARS WAS THE FIRST TIME SINCE A FINANCIAL CRISIS THERE WAS SOME LEVEL OF COORDINATION BETWEEN THE FISCAL MONETARY SIDE. OFTENTIMES, THE MONETARY RESPONSE WAS BECAUSE OF FISCAL SIDE WAS SO RESPONSE. -- RESPONSIBLE. THERE'S A CONVERSATION ABOUT HOW MUCH LEEWAY DOES THE FED HAVE ON THE MONETARY SIDE BECAUSE YOU SEE A BIPARTISAN GROUP QUESTIONING THE POWERS OF THE FED. WHY DO THEY HAVE THIS MUCH POWER? IS THE POLITICAL WINDOW TO RAISE RATES WITHOUT A BACKLASH TO THEIR FUTURE POWER CLOSING ON THE HILL? I WOULD BE FOCUSED ON THAT WIND IS THE FED HIT THE TERMINAL RATE BECAUSE THEY DON'T WANT TO LOSE THEIR POWER AFTER THE 2024 ELECTION IF THEY GET THIS DISINFLATIONARY PUSH WRONG. LISA: THANK YOU SO MUCH, GIVING THAT UNEMPLOYMENT RATE HAS NOT YET INCREASED. WE WILL WAIT FOR THAT TO HAPPEN
BEFORE YOU WAIT ABOUT THE POLITICAL INTEGRITY OF THE FEDERAL RESERVE. KAILEY: THE POLITICS OF HIGHER UNEMPLOYMENT WILL BE MORE DIFFICULT AS WELL. LISA: LISA: NINE POINT FIVE HOURS LEFT IN THE TRADING DAY FOR 2022. KAILEY LEINZ AND MATT MILLER. I'M LISA ABRAMOWICZ TAKING A LOOK AT A TEPID DAY. A LOT OF PEOPLE ARE ON VACATION AFTER THE WORST YEAR OF LOSS IN THE DECADE.
KRITI: I'M SURE A LOT OF PEOPLE ARE SIGNING OFF AND NOT LOOKING BACK AFTER THIS YEAR. WHEN YOU LOOK AT THE STOCK MARKET, FUTURES ARE DOWN .3 PERCENT. NASDAQ IS DOWN .3%. THE STOXX 600, IS DOWN .61%. ASIA PERFORMED IN THE GREEN, THEY PERFORMED POSITIVE. IT IS THE LAST TRADING DAY OF
THE YEAR SO IT IS A DAY OF REFLECTION. IN THE LAST FIVE YEARS, WE HAVE SEEN THIS COMPLETE MOVE AND SINK WHEN IT COMES TO EQUITIES. IN 2020, OUTPERFORMANCE WAS A STORY AND NOW IF YOU START TO ZOOM INTO WHAT THE CASES BEEN FOR THE PAST TWO OR THREE MONTHS, U.S. OUTPERFORMANCE IS ONCE AGAINST THE STORY. HOW MUCH DOES THAT TRANSLATE INTO 2023? IT WILL BE A FUNCTION OF WHAT THE CROSS ASSETS ARE DOING. THE BOND MARKET, NOT DOING A WHOLE LOT.
THE 10 YEAR IS ONLY UP .03. THE U.S. DOLLAR IS DOWN .26%. NOTHING TO WRITE HOME ABOUT, AND AND THE NEW YEAR WE COULD HAVE A CHANGE IN THE EQUITY MARKET. LISA:
A LOT OF PEOPLE ARE THINKING THAT WE COULD SEE IT REVERSE AND MATT, YOU ARE OUTPERFORMING. THE EPICENTER OF THE CRISIS THAT WAS NOT AS BAD AS WHAT PEOPLE EXPECTED. MATT: EUROPE NEVER OUTPERFORMS. IT'S PERPETUALLY UNDERVALUED. BARBER AND BERNARD FROM WHEN CREST CAPITAL JOINS US TO TALK ABOUT THIS.
IN TIMES OF CRISIS, INVESTORS WOULD TURN INWARD AND INVEST IN THE U.S. BECAUSE THINGS THAT ARE FAR AWAY ARE SCARY, DO YOU EXPECT THAT AN EAR BARBARA: WHAT'S DIFFERENT TODAY IS THAT IT IS AT AN ALL-TIME HIGH. IF YOU TAKE THE ALL COUNTRY WORLD INDEX, THE U.S. COMPRISES A MAJORITY OF IT. IF YOU READ ABOUT GDP, THE U.S.
WOULD BE 25%. INVESTORS ARE IGNORING WONDERFUL MARKETS OUTSIDE OF THE U.S. AND I DON'T DISPUTE THINGS CAN BE POPULAR BUT NOT SAFE. THE U.S. IS POPULAR BUT I DON'T THINK IT'S SAFE BECAUSE IS EXPENSIVE. WE FIND HAVE MULTIPLE AND TWICE THE GROWTH OUTSIDE OF THE U.S..
I FEEL SAFER INVESTING OUTSIDE OF THE U.S. AND WE ARE NOT SHORT IN THE U.S.. MATT: EVEN THOUGH WE ARE LOOKING AT 7% EARNINGS GROWTH OR IS THAT AN OVER ESTIMATION BY ANALYSTS? EVERYONE ALSO SAYS THERE WILL BE A RECESSION AT THE SAME TIME. BARBARA: THEY SAY WE ARE GOING TO HAVE AN EARNINGS RECESSION BUT THEY ARE CALLING FOR 10% GROWTH. YOU HAVE THE S&P AT A 17 TIMES MULTIPLE ABOVE THE HISTORICAL AVERAGE OF 15 TIMES.
IN Q1, COMPANIES COME OUT AND DEAL WITH 2023. YOU WILL HAVE MULTIPLE COMPRESSION AND EPS COMPRESSION SO THAT MAKES ME NERVOUS ABOUT THE U.S. MARKET. LISA: SOME PEOPLE WOULD ARGUE THAT THE U.S. IS IN THE BEST POSITION FOR TECHNOLOGY WITH THE ONSET OF THE INFLATION REDUCTION ACT. HOW DOES THAT FACTOR INTO YOUR
VIEW? BARBARA: I DON'T WANT TO DETRACT FROM THAT, THE U.S. IS AN ENGINE OF INNOVATION. WHAT'S DIFFERENT NOW IS THE HIGHER COST OF CAPITAL CHANGE THE BUSINESSES THAT GET UNDERWRITTEN. THIS IDEA OF WINNER TAKE ALL WHICH WORKED LAST DECADE DOES NOT WORK FOR THE NEXT TAKING.
PETER DRUCKER HAS THIS QUOTE, THE HEROES OF THE BOOM ARE THE VILLAINS OF THE BUS. IF YOU LOOK AT TESLA, YOU SEE THIS REGIME SHIFT AND THAT IS WHERE I GET EXCITED ABOUT WHAT MAKES A GOOD BUSINESS MODEL. IF YOUR BUSINESS MODEL IS CONTINGENT UPON CAPITAL I DON'T WANT TO GET NEAR IT. LISA: IS THERE A TYPE OF BUSINESS,
EUROPE, CHINA OR IS IT JAPAN WHICH SEEMS TO BE EMERGING FROM WHAT HAS BEEN A LOST ERA? BARBARA: IF YOU WANT TO ALPHA, YOU HAVE TO BE CONTRARIAN. I AM NOT A FAN OF JAPANESE EQUITIES BECAUSE I DON'T THINK A HIGHER AGAIN IS GOOD FOR THE EXPORTER. I DO LIKE CHINA, INDONESIA AND AFRICA.
INDIA HAS BEEN GOOD TO US THIS YEAR. IT WAS A BENEFICIARY OF CHINA BEING ON INVESTABLE BECAUSE OF THE COVID LOCKDOWNS AND THE REGIME CHANGES THEY PUT IN PLACE. THIS YEAR, MONEY FLOWS OUT OF INDIA AND BACK IN THE CHINA AND THE REASON I LIKE E.M. IS BECAUSE INFLATION IS LOWER, GROWTH RATES ARE HIGHER, THEY HAVE LACKED RESEARCH COVERAGE WHICH CREATES OPPORTUNITY FOR PEOPLE WHO WANT TO SHARPEN THEIR PENCILS AND DO THE WORK, ACTIVE MANAGERS. KAILEY: THE FACT THAT THE DOLLARS PEAK HAS BEEN FIRMLY IN AND WE ARE LOOKING AT THE DOLLAR THE WEAKEST SINCE JUNE. BARBARA: THAT'S WHEN EMERGING MARKETS STARTED TO TAKE OFF, PEAK DOLLAR. THAT'S GOOD FOR COMMODITIES AND
EMERGING MARKETS. KAILEY: ON THE POINT OF COMMODITIES AND YOU BEING LONG, WE WORKED FOR TRIPLE DIGIT OIL PRICES. WE HAVE A VERY MODEST GAIN FOR OIL AND WE HAVE NOT SEEN THE BENEFIT OF THE REOPENING OF CHINA REFLECTED IN THE MARKET. TO WHAT EXTENT WILL THAT KICK IN? OR ARE WE LOOKING AT A TRADE THAT IS EXHAUSTED? BARBARA: CHINA REOPENING WILL STILL PRICES IN YOU HAVE OPEC PULLING THE STRINGS IN THE BACKGROUND. THE COMMODITIES I PREFER TO FOCUS ON OUR GREEN ENERGY TRANSITIONS. I DON'T HAVE TO GO TO EMERGING MARKETS FOR EXPOSURE.
I CAN GO TO CANADA, OR AGREEING COPPER MINER THAT'S IN CANADA THAT HAS THE TRAIL WHEN THE ENERGY TRANSITION. THE INTENSITY OF THE ENERGY TRANSITION MAKES UP FOR DOUBTS I WOULD HAVE ABOUT DEPRESSED COPPER DEMAND. IT IS A TRICKY YEAR IN 2023. THERE WILL BE LOTS OF OPPORTUNITIES FOR ACTIVE MANAGERS. MATT: THE PHRASE OF THE YEAR HAS BEEN TAX LOSS HARVESTING. IT HAS BEEN INCREASINGLY USED AS WE GET TO THE END OF THE YEAR. IF EVERYONE IS EXPECTING A RECESSION AND INVESTORS ARE MANAGING TO HARVEST SOME TAX LOSSES AT THE END OF 2022.
DO WE GET A Q1 WHERE EXECUTIVE SAY, THERE ARE LOW EXPECTATIONS I WILL THROW EVERYTHING INTO THIS QUARTER AND THEN YOU HAVE THE BOTTOM THERE AND INVESTORS WHO SOLD OUT FOR TAX LOSS PURPOSES CAN BUY IN TO STOCKS THEY WERE CONVICTED ON A 2023? BARBARA: IT MAKES PERFECT SENSE TO ME. I CAN'T WAIT TO TAKE THE SHORTS OFF BUT Q1 WILL BE LUMPY AND BUMPY AND I THINK CHINA'S REOPENING WILL NOT GO AS SMOOTHLY AS PEOPLE THINK. EVEN THOUGH CHINA HAD A HUGE RUN THERE WILL BE A PULLBACK AND AN OPPORTUNITY TO GO ALONG FOR THE LONG RUN. Q1 IS THE KITCHEN SINK AND THEN WE RESET EXPECTATIONS AND NORMALIZE FROM THERE. LISA: TO FINISH UP ON THE POINT YOU WERE MAKING ABOUT ACTIVE MANAGEMENT, IT IS THE ULTIMATE ANTI-FUMBLE BECAUSE OF HOW MUCH PEOPLE HAVE WITHDRAWN IN FAVOR OF INDEXING. ARE PEOPLE WILLING TO PAY FOR ACTIVE MANAGEMENT IN THE WAY THAT THEY WERE TO DECADES AGO? BARBARA: I THINK 2022 WILL CHANGE THAT CONVERSATION.
YOU LOOK AT THE NASDAQ DOWN 43%, FOR 1% YOU COULD HAVE SAVED 25% OF YOUR INVESTMENT. 2022 HAS JUST BEEN TO CONSERVE CAPITAL. THE LOSERS DON'T COMPOUND WELL AND YOU HAVE TO HAVE ACTIVE RISK MANAGEMENT. AS AN ACTIVE MANAGER YOU CAN SHORT AND RAISE CASH. YOU CAN GO INTO THESE UNLOVED MARKETS.
THERE IS ALWAYS SOMETHING TO DO IF YOUR READY TO TREAD AWAY FROM THE GROUND AND SEEK THE OPPORTUNITY. IT GAVE US THE ABILITY TO SHORT CONSUMERS, HOUSING, CAR RETAILERS, THAT WAS A WONDERFUL OPPORTUNITY. WE DID NOT SEE IT AS A NEGATIVE. I THINK FREE MONEY MADE THAT HAPPEN IN THAT GAME IS OVER. THIS IS BACK TO THE FUTURE IN TERMS OF ANALYZING COMPANIES ON THE BASIS OF CASH FLOW, AND THINGS THAT ARE SUSTAINABLE AND TERMS OF SELF FINANCING. THIS IS HEALTHY, THIS IS A GOOD THING. LISA: THANK YOU FOR THAT. A LOT OF PEOPLE SAYING IT IS
THE YEAR OF ACTIVE MANAGEMENT. THIS TIME THEY SAY IS DIFFERENT BECAUSE YOU SEE THE INDEX UNDERPERFORM SO DRAMATICALLY AND PARTICULAR SECTORS. KAILEY: MAYBE THIS TIME IS DIFFERENT FOR MULTIPLE REASONS AND WE MADE THIS POINT YESTERDAY, BOTTOM UP WE GOT IT MORE RIGHT THAN BOTTOM DOWN. LISA: NEXT UP WE TALKED TO JUSTIN HOOGENDOORN. THIS IS BLOOMBERG.
LISA: AFTER A WEEKLONG MELTDOWN SOUTHWEST AIRLINES PLANS TO RETURN TO A NORMAL SCHEDULE TODAY. THOUSANDS OF PASSENGERS WERE STRANDED ACROSS THE U.S. BECAUSE OF CANCELLATION CAUSED BY WINTER STORMS. SOME STARTLING ESTIMATES OF JUST HOW BAD THAT COVID OUTBREAK IN CHINA COULD BE. THERE COULD BE IS MANY AS 25,000 DEATHS A DAY. THEY COULD PEAK AROUND 3.7
MILLION CASES DURING LUNAR NEW YEAR CELEBRATIONS NEXT MONTH. IT'S BEEN DIFFICULT TO RECEIVE ADAPTATIONS -- ACCURATE DATA. U.S. MILITARY SAYS THE AMERICAN PLANE HAD TO TAKE EVASIVE
MANEUVERS TO AVOID A COLLISION WITH CHINA'S PLANE. IN THE BAHAMAS THEY SEIZED $3 BILLION AT FTX SHORTLY AFTER THEY FILED FOR A CURRENCY PROTECTION. THEY SAID THEY ARE IN A RISK OF DISPARATE DISTRIBUTION OF ASSETS. HE WAS CALLED THINKING AND CAUGHT THE BEST SOCCER PLAYER EVER PRODUCED. BRAZILIAN START PAY PELE DIED AFTER BATTLE WITH CANCER. HE WAS 82 YEARS OLD.
GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN >> I AGREE THERE NEEDS TO BE CLEAR FEDERAL OVERSIGHT HERE TO REALLY PROTECT CONSUMERS AND AT THE SAME TIME, TO BE ABLE TO PROVIDE CLARITY FOR THE INDUSTRY TO OPERATE. I WILL BE HERE FOR THE LONG TERM. LISA: THAT WAS SAM BANKMAN-FRIED SPEAKING TO KAILEY LEINZ AND MATT MILLER BACK ON SEPTEMBER 27 BEFORE HIS COMPANY WENT BANKRUPT AND HE WAS ARRESTED IN THE BAHAMAS AND NOW HE IS BEING TRIED AND POTENTIALLY COULD BE JAILED FOR MORE THAN A CENTURY. THIS STORY HAS FASCINATED ME FROM THE PSYCHOLOGICAL PERSPECTIVE AND THE? QUESTION MARK AROUND THE INDUSTRY. SOME CRYPTO ASSETS HAVE MAINTAIN POWER DURING THIS, WHERE DO YOU SEE SIGNS OF DOUBT CREEPING IN THAT THIS WAS A BYPRODUCT OF THE FREE MONEY ERA? MATT: I DON'T THINK YOU CAN DISENTANGLE THE COLLAPSE OF FTX FROM THE UNDERLYING TOKENS FROM CRYPTO, HOWEVER, WHAT HAS BEEN ALLEGED HERE AND I DON'T KNOW EXACTLY WHAT HAPPENED. IT SEEMS LIKE YOUR
RUN-OF-THE-MILL FRAUD THAT COULD'VE HAPPENED 100 YEARS AGO WITH THE DIFFERENT ASSET. I DON'T KNOW HOW CONNECTED IT IS TO BITCOIN. THIS GUY IS CLEARLY SO INTELLIGENT.
HIS PARENTS ARE STANFORD LAW PROFESSORS AND YET, HE MANAGED TO LOSE BILLIONS AND BILLIONS OF DOLLARS. LISA: HIS INTELLIGENCE ISN'T IN QUESTION HERE. THIS IS WHY PEOPLE ARE ALLEGING FRAUD BUT AGAIN, I KEEP GOING BACK TO THE LARGER CHRISTIAN WHICH IS THAT SOMETHING ENDEMIC IN THESE ASSET CLASSES THAT DON'T HAVE THE SAME KIND OF PROTECTIONS WHERE THERE ARE PEOPLE WHO ARE TRYING TO INNOVATE AND IT COULD BE CONFLATED WITHOUT NOT FRAUD? KAILEY: THIS IS THE QUESTION WE HAVE RAISED IN THIS EPISODE, IF REGULATION HAD BEEN ABLE TO KEEP UP, WHAT I HAVE IT PREVENTED IT? IF THIS WAS ABOUT SOMEONE MOVING MONEY AROUND, IT RAISES THE QUESTION OF HOW MUCH THIS IS AN INDUSTRY THAT IS MOVING TOO QUICKLY FOR ANYONE TO CATCH UP WITH OR HOW MUCH THIS IS JUST A BAD ACTOR. THE LACK OF DUE DILIGENCE ON THE PART OF MORE TRADITIONAL PLAYERS IN VENTURE, PEOPLE WHO BACKED IT , MATT AND I CONDUCTED THAT INTERVIEW TWO MONTHS BEFORE THIS CAME CRASHING DOWN. THERE IS A LEVEL THAT IT FEELS LIKE IT'S OPAQUE? MATT: WHY ARE YOU IN THE BAHAMAS IF YOU'RE SUCH A CHAMPION OF THE LAW? LISA: YOU MENTION VENTURE CAPITALISTS, INCLUDING PENSIONS. NOT TO BE EXTREMIST, RAISES A QUESTION ABOUT WHAT ELSE WAS NOT SUFFICIENTLY CROSS-EXAMINED BEFORE INVESTIGATED? HOW ARE WE SEEING THE OUTGROWTH OF THE FREE MONEY ERA IN VENTURE CAPITALIST WHO HAD MORE GREED? WHAT ABOUT THE OTHER COMPANIES AND VALUATIONS IN ELON MUSK AND HOW MUCH SHE BOUGHT TWITTER FOUR. KAILEY:
THIS IS AN INTERESTING CONVERSATION TO HAVE WITH ED LUDLOW WHO COVERS THESE STORIES. HOW MUCH IS THIS A SYMPTOM OF MONEY NO LONGER BEING FREE AND FOR CRYPTO, IS IT BECAUSE OF THESE SEISMIC COLLAPSES OF THESE PROJECTS? ED: TO THE POINT YOU WERE DISCUSSING, WE HAD VENTURE CAPITALISTS WHO DID INVEST IN FTX THAT RECEIVED MONEY FROM FTX AND THEY SAY THE SAME THING, HE WAS INCREDIBLY IMPRESSIVE. WE ALL DISCOVER IF THOSE ALLEGATIONS ARE TRUE.
THE BAHAMIAN SECURITIES COMMISSIONER SEES $3.5 BILLION IN ASSETS FROM THEIR MARKETS. THAT'S THE REGISTERED ENTITY. THE REASON THAT IS IMPORTANT IS BECAUSE WE'RE STILL TRYING TO FIND OUT WHERE THE HOLES ARE AND WHERE THE MONEY IS GONE.
WHEN GEORGE RAY THE THIRD SAID I AM WORRIED ABOUT THE SITUATION BECAUSE I DON'T THINK INTERNATIONAL CUSTOMERS WILL GET THEIR MONEY BACK. THIS 3.5 BILLION RELATES TO INTERNATIONAL BUSINESS. LISA: WITH YOUR EXPERTISE INTACT, KAILEY WAS TALKING ABOUT VENTURE CAPITAL AND OTHER INVESTMENTS THAT WERE MADE IN THE TECH SPACE. WE SAW A 35% IN THE DECLINE IN THE S&P. DO WE HAVE A SCOPE OF THE SCALE OF LOSSES, THOSE VALUATIONS THAT HAVE NOT FULLY BEEN MARKED DOWN YET. ED: YOU CAN'T UN-ENTANGLE THE STORY WITH CRYPTO, D.C.
BACK FIRMS OFFERING THIS TECHNOLOGY, WE STARTED THIS YEAR WITH THE GLOBAL MARKET VALUE AT 2.5 TRILLION. WE HAVE BEEN SO FOCUSED ON FTX THAT WE HAD ALREADY DROPPED BY ONE TRILLION BY JUNE. THE SEC OPENING AN INVESTIGATION INTO BINANCE. IT'S BEEN A VERY VOLATILE YEAR AND A PART OF THE STORY HAS BEEN DIRECTLY LINKED TO THE FED AND THE PATH TO HIGHER RATES. NO MATTER WHAT THE DEBATE, THE VOLATILITY WE SAW IN EQUITY IN THE PULLBACK IN PRIVATE MARKETS, AND THAT NARROW WINDOW AT THE END OF THE YEAR WE JUST KEPT GOING TO THIS TWO-YEAR LONG -- MATT: INSTABILITY IS BEEN UNREAL.
THE MOST FASCINATING ISSUE IN TERMS OF THE COMPANY IS THAT THERE WERE NOT RECORDS KEPT. JOHN J RAY CANNOT FIND THEM AND WE CAN'T GET BACK OF THE NAPKIN ACCOUNTING ON ASSETS AND LIABILITIES. THEY HAVE 3.5 BILLION THE BAHAMAS, THEY HAD A STAKE IN ROBINHOOD, NO ONE HAS SAID THERE IS ROUGHLY 5 BILLION IN ASSETS AND 9 BILLION AND LIABILITIES EVEN AFTER EIGHT WEEKS OF THE MOST SKILLED EXPERTS IN THE WORLD GOING OVER THESE BOOKS. MATT: WE HAVE BEEN DISCUSSING THIS
OFF-CAMERA FOR WEEKS BUT ALSO THIS MORNING, BLOOMBERG HAS DONE REPORTING AROUND THIS. SPF GOT A SPREADSHEET OUT AND THEY WENT THROUGH TOGETHER WITH THE BLOOMBERG REPORTER AND THEY IDENTIFIED TOGETHER IN THAT PROCESS WHAT WE BELIEVE TO BE 8 BILLION MISSING FROM THE BALANCE SHEET OF FTX. LIABILITIES IN FTX THAT THEY'RE UNABLE TO RECOVERY. THIS ETF SEES MOST RECENT FILING STATED THAT BY APPROXIMATELY THIS YEAR, FTX INTERNAL LEDGERS REFLECTED THAT ALAMEDA IS FIAT LIABILITY TOTAL 20 BILLION DOLLARS. A LOT OF FORENSIC WORK WILL HAVE TO BE DONE AS PART OF THIS LEGAL PROCEEDING. A GOOD TIME TO BE A FORENSIC ACCOUNTANT. LISA:
OR PERHAPS SOMEONE'S NIGHTMARE FOR AN ACCOUNTANT. THANK YOU FOR JOINING US AND LAYING THAT OUT AND IT IS A FASTENING STORY. IT IS DEEPLY PAINFUL PEOPLE WHO HAVE LOST MILLIONS OF DOLLARS ESPECIALLY GIVEN WHAT THIS WAS INVESTED IN. TALK ABOUT THE LACK OF ACCOUNTING, IT WAS INVESTED IN TOKENS WITH AN ARBITRARY VALUE THAT COULD TAKE IF THEY SOLD IT. HE BORROWED AGAINST IN ROBINHOOD. MATT: THAT IS SOMETHING THAT HAS INTRINSIC VALUE. IT'S HARDER TO PIN THAT DOWN
WHEN YOU TALK ABOUT CRYPTOCURRENCY. ON THE OTHER HAND, WHO LEAVES THIS MUCH MONEY ON THE EXCHANGE. THE WHOLE POINT IS TRUST US WITH YOUR MONEY. YOU CAN KEEP EUROS KEY. LISA: THANK YOU, THIS IS BLOOMBERG. ♪ >> NOW GOING INTO NEXT YEAR, EVERYONE IS BEARS.
WE WILL HAVE THIS MASSIVE RECESSION. >> WE HAVE A ROLLING RECESSION, STROLLING THROUGH HOUSING, RETAILERS AND OTHER SECTORS OF THE ECONOMY. >> EVEN IF WE SEE GROWTH HOLD UP OK, WE DON'T GO INTO A RECESSION. >> WE ARE EXPECTING A MILD RECESSION BUT WE DON'T THINK IT WILL LAST LONG. LISA: IT IS ALMOST OVER.
THE WORST YEAR FOR STOCKS AND BONDS IN A DECADE. THE LAST TRAINING DUE OF 2022 -- TRAINING DATE OF 2022. I AM SO LUCKY TO HAVE MATT MILLER AND KAILEY LEINZ WITH ME HERE TODAY. WHAT ARE WE HEADING INTO? WILL WE GET A BREAK AND SOME OF THE TRENDS THAT CAUSES CURRENT STATE? MATT: IT IS BEEN A HORRIBLE YEAR IF YOU ARE LONG OR YOU WERE LONG. THERE ARE SO MANY OPPORTUNITIES THAT COME AFTER BIG DROPS. LOOK AT WHAT HAPPENED IN MARCH OF 2020.
I WAS ON THE PHONE WITH MY MOTHER WHO WAS IN TEARS ABOUT HER 401(K) AND YET JUST A FEW WEEKS LATER, WE BOUNCE ALL THE WAY BACK. KAILEY: THE FED WAS THE DRIVER. THERE WAS STILL FREE MONEY AND NOT INFLATIONARY ENVIRONMENT. WE HAVE SEEN REGIME CHANGE. LISA:
THIS HAS BEEN THE YEAR OF GENERATIONAL INCREASES IN RATES. THAT DOES THAT SHIFT BACK TO 2020 OR DOES THE LEAD TO WHAT LEVEL OF HIGHER INFLATION AND LOWER RETURNS? KAILEY: IS THIS THE START OF A WORLD WHERE WE NEVER SEE THE ZERO BOUND AGAIN. WE HAD A FISCAL BACKING AND IF BOTH OF THOSE FORCES GO AWAY, RECORD-BREAKING FISCAL STIMULUS. IF YOU DON'T HAVE ANY OF THOSE
BACKSTOPS, IF WE SEE A GLOBAL RECESSION WHAT FORCE WILL BRING US OUT OF THAT? LISA: THE BIGGEST VARIABLES FOR NEXT YEAR ARE THE REOPENING OF CHINA, THE BANK OF JAPAN, WE GOT AHEAD OF OURSELVES BECAUSE WE SAW CHINA RELEASES ZERO COVID AND WE SEE ECONOMIC ACTIVITY REBOUNDED SOME OF THE MAJOR CITIES. I WHAT POINT CAN WE TAKE A LOOK OF THAT, THE BANK OF JAPAN WHO WAS BUYING A RECORD AMOUNT OF BONDS TO KEEP A HIGHER PEG IN PLACE. I WHAT POINT WILL THAT CREATE A NEW SCENARIO THAT HASN'T BEEN PRIZED IN YET? MATT: I HAVE BEEN WAITING 1.5 HOURS FOR YOU TO BRING UP THE BANK OF
JAPAN. ONE OF THE MOST EXCITING CENTRAL-BANK NARRATIVES, INCLUDING THE FED AND ITS 450 POINT HI. THE INTERESTING ARGUMENT FOR 2023, YOU MENTION THE IN OF THE FED PUT. WHAT'S THERE TO BACKSTOP US? MAYBE IT COULD COME BACK. IT IS NOT NECESSARILY DEAD.
WE HAVE HEARD SOME PRETTY BIG INVESTMENT CELEBRITIES LIKE HOWARD MARKS WRITING THAT THIS IS A SEA CHANGE. THIS IS ONE OF THREE TIMES IN HIS LIFE WHERE THINGS ARE COMPLETELY DIFFERENT. THE MICHAEL MILTON JUNK BONDS ERA, THE LOW RATES ALAN GREENSPAN ERA AND NOW THIS BACK TO HIGHER RATES. THAT'S PRETTY IMPRESSIVE. LISA:
WE ARE LOOKING AT MARKETS THAT ARE STILL REELING AND CAPITULATION IN TERMS OF A BRIGHTER FUTURE. WE ARE SEEING STOCKS LOWER BY .4%. 3856 DESPITE CALLS ENDING ABOUT 5000. YOU CAN SEE A BIT OF DOLLAR WEAKNESS. I WONDER HOW MUCH OF THIS IS BECAUSE OF THE YEN STRENGTH.
THIS IS ASIA RECOVERING AND LOOSENING OF POLICIES DRIVING SOME OF THIS. 10 YEAR YIELD, AND VEER 3.85 CONSIDERING IT STARTED AT 150 SHOWS YOU HOW MUCH FAR WE HAVE COME. CRUDE IS AT $78 34. DURING THE PEAK OF THE CONFLICT WITH RUSSIA UKRAINE THEY CALLED FOR 100 $20 CRUDE. NOT SO MUCH. DANA JOINS US RIGHT NOW, WE'RE SO GLAD TO HAVE YOU. I WANT TO START WITH ONE SECTOR THAT GOT BEATEN UP WHICH WAS TECHNOLOGY. WE HAVE SEEN THE NASDAQ 100
LOSE 35% AND COMPONENTS LOOSENING -- LOSE ANYMORE. IS THIS OPPORTUNITY YOUR WRIST? DANA: IT'S INTERESTING WHAT IS HAPPENED WITH TECH. RISK ON DAY TECH DOES WELL, BUT IF YOU GO BACK TO THE BEGINNING OF THE YEAR AND TECH WAS DEFENSIVE. WHEN WE WERE LOOKING AT THE PANDEMIC WE THOUGHT TECH WAS A PLACE TO BE A NASA DEFENSIVE POSTURE. WE HAVE COME A LONG WAY AND IT IS INTEREST RATES.
IT'S WHAT HAPPENED OVER THE COURSE OF THIS YEAR TO GOING FROM A FREE MONEY POSTURE TO ATTORN OF FUNDAMENTALS AND THE COST OF CAPITAL. EVEN IF THE FED DOES EASE NEXT YEAR AND COULD POTENTIALLY PRIVATE, MONEY WILL HAVE A COST TO IT. THAT IS A KEY POINT TO UNDERSTAND ABOUT TECH. TECH AND GROWTH GETS A LOT OF VALUE IN THE TERMINAL VALUE. THERE IS AN ARGUMENT FROM MY PERSPECTIVE, I WOULD NOT SAY DON'T GO THERE BUT THERE IS AN ARGUMENT THAT EXPECTING THESE HIGHS THAT WE WERE SEEING WITH 22% OF THE S&P IN THE TOP FOR STOCKS, WE ARE NOT RETURNING TO THOSE DAYS. MATT: IF THIS TIME IS DIFFERENT FROM THE FAANG DECADE, WHAT ELSE CHANGES? THE U.S. DOMINATION IN STOCKS, AND
BERNARD WAS SAYING THAT MAY BE OVER FOR NOW AND THERE IS REAL OPPORTUNITY IN EUROPE. DANA: I AGREE. MARKETS ARE CYCLICAL AND TIMING THIS PERFECTLY IS DIFFICULT. IF YOU THINK THE 10 YEAR, IT WAS A LOST DECADE FOR STOCK TRADE. A LOT OF OUR CLIENTS HAD PORTFOLIOS IN THESE QUESTIONS, BUT AFTER 10 YEARS, SHOULD I EVEN BE IN THESE MARKETS? YOU SHOULD BE DIVERSIFIED IN AT HER NATIONAL MARKETS UNLESS YOU ARE SO ATTACHED TO TRACKING LOCALLY. VALUATIONS OVERSEAS, THE FACT THAT MARKETS ARE CYCLICAL.
WE JUST WENT THROUGH IT. OF DOMINANCE BUT WE HAVE CHANGING FUNDAMENTALS. WE HAVE DEGLOBALIZATION PRESSURES, AND PINPOINTING WHO WILL BE HURT THE MOST IS A DIFFICULT THING TO DO. YOUR ANSWER TO THAT RISK IS TO HAVE YOUR MONEY SPREAD ACROSS. DOLLAR STRENGTH HAS BEEN DRIVING A LOT OF THE U.S. OUR PERFORMANCE AS WELL.
I DON'T EXPECT THE DOLLAR TO COLLAPSE, I DON'T EXPECT IT TO BE A STRONG MIXTURE. AS THE DOLLAR WEAKENS AND DEPRECIATES, THAT WILL HELP INTERNATIONAL. KAILEY: WHAT ABOUT CHINA WITHIN THAT INTERNATIONAL SPACE? DANA: CHINA IS SUCH A PUSH AND PULL. YOU HAVE PRESIDENT XI'S PRESIDENT FOR LIFE OVER THERE. WHAT WILL THE POLICIES BE? WE SAW THE CRACKDOWN ON THE PROPERTY SECTOR. NOW WE SEE A REVERSAL OF THOSE
THINGS. OUT WITH THE ZERO COVID TO THE EXTENT WHERE YOU HAVE COUNTRIES LOOKING AT LIMITING CHINESE PASSENGERS ON FLIGHTS. THAT REVERSAL SUGGESTED CHINA REOPENS NEXT YEAR AND IT COULD BE A HUGE FOREST. MY CAUTION WOULD BE, YOU WANT TO BE THERE AS YOU WANT TO BE IN ANY ECONOMY BECAUSE PREDICTING WHERE THAT WILL GO IS DIFFICULT. I WOULD HEDGE MY BETS THERE. I WOULD HAVE A CAP. IT'S A VERY HIGH WAY FOR THE PORTFOLIO.
I WOULD LOOK TO CAP THAT. LISA: SINCE YOU DON'T THINK BIG TECH WILL RETURN TO THE SAME KIND OF ERA, WHAT WILL BE THE LEADERSHIP OF THE EQUITY MARKET WHEN IT RESURRECTS ITSELF? DANA: SHORT-TERM, THE TRADITIONAL ADVICES TO GO FOR DEFENSIVE SECTORS, CONSUMER STAPLES, EVERY ONCE US TO BUY THESE THINGS. EVEN THOUGH INFLATION IS MADE THAT MORE PAINFUL. THOSE ARE THE TYPES OF SECTORS YOU WOULD GO IN DEFENSIVE. ANOTHER INTERESTING ONE TO
THINK OF IS ENERGY AND WHERE WE WILL BE IN THE NEXT FIVE-10 YEARS AS WE TRANSITION OUR ENERGY PROFILE. BECAUSE YOU HAVE LESS FOSSIL FUEL, DIGGING NEW WELLS, ETC. YOU. THOSE PRICES CAN GO BACK OUT. ENERGY IS AN INTERESTING PLACE TO LOOK AS WELL. LISA: THANK YOU SO MUCH HAVE A WONDERFUL NEW YEAR'S AND SEE YOU ON THE OTHERS OF WHAT HAS BEEN A VERY DIFFICULT YEAR.
IT'S INTERESTING TO SEE YOU WHAT WILL BE THE NEW LEADERSHIP? A LOT OF PEOPLE SAY ENERGY BUT THERE'S A LACK OF INVESTMENT. IS THERE ENOUGH IN THE INDEX TO BRING IT UP TO THE SAME LEVELS IF TECH DOES NOT PARTICIPATE? KAILEY: TECH HAS LOST SOME WEIGHT BUT IT IS STILL 25% OF THE S&P 500. THE ENERGY INDEXES 5%. THAT IS NOT ENOUGH TO CARRY THE MARKET HIGHER EVEN IF IT DOES WELL. MATT: IT'S A HUGE PIECE OF THE STOXX 600. OVER THE LAST SIX YEAR WHEN I ASKED WHEN EUROPE WAS UNDERPERFORMING AND THEY WOULD SAY IT'S ALL ABOUT TECH.
EUROPE DOESN'T HAVE THE FACEBOOKS, ALPHABETS, MICROSOFT AND AMAZON'S. BUT EUROPE DOES HAVVE BRITISH PETROLEUM. LISA: BUT YOU COULD ARGUE GERMANY AND WHAT IS HAPPENING THERE IT WOULD CREATE HEADWINDS TO SOME OF THESE ENERGY COMPANIES. HOW MUCH ARE WE LOOKING AT A NEW VERSION BECAUSE BIG TECH SAW THOSE INVESTMENTS PERCOLATE INTO OTHER INDUSTRIES. MATT: WE WERE TALKING ABOUT THE JOB SITUATION IN REGARDS TO THE TECH LAYOFFS AND I SAID WHERE ARE THEY GOING TO GO? HE SAID THEY CAN WORK IN AUTOS, THAT'S TECH NOW. LISA: PEOPLE WILL BRING UP TECHNOLOGY ESPECIALLY WHEN IT COMES UP TO SOUTHWEST AIRLINES.
3850 FIVE ON THE S&P TO END A TUMULTUOUS 2022. THIS IS BLOOMBERG. LISA: KEEPING YOU UP-TO-DATE FROM NEWS FROM AROUND THE WORLD. VLADIMIR PUTIN IN XI JINPING HELD A VIDEOCONFERENCE TODAY. PUTIN SAYS THE RELATIONS ARE THE BEST IN HISTORY.
PRESIDENT XI SAID THEY ARE READY TO EXPAND THE RELATIONSHIP. BUT BEIJING IS IMPATIENT WITH THE STRONGLY INVASION OF UKRAINE. U.S. GAVE UKRAINE'S GROUND OPERATIONS ABUSE. THEY MAY SEND BRADLEY FIGHTING VEHICLES TO UKRAINE AS PART OF A SUPPORT PACKAGE. IT IS USED TO TRANSPORT TROOPS BUT ALSO ARMED WITH MISSILES AND A 25 MILLIMETER GUN.
SAM BANKMAN-FRIED HELD AT LEAST FOUR MEANINGS WITH WHITE HOUSE OFFICIALS. IT WAS SUPPOSED TO INFLUENCE CRYPTO POLICY AND BILL CONNECTION BEFORE THE FTX COLLAPSE. BANKMAN-FRIED GAVE MILLIONS OF DOLLARS TO DEMOCRATS. IN THE U.K., THE SIZE OF THE CHALLENGE FACING THE PRIME MINISTER. THE SURVEY SHOWS THAT LABOR HAS
A 26 POINT LEAD OVER THE CONSERVATIVES. THE NEXT ELECTION IS EXPECTED TO BE HELD IN 2024. IN CANADA, THEY HAVE CLEARED THE WAY FOR TWO OF THE UNION'S BIGGEST TELECOM FIRMS. T
ROGERS COMMUNICATIONS 14.8 BILLION DEAL. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I AM LISA MATEO, THIS IS BLOOMBERG. >> WHAT'S INTERESTING ABOUT THIS MARKET, IT'S SO EMOTIONALLY BASED RIGHT NOW. SO MANY INVESTORS WERE WRONG ABOUT WHAT WAS GOING TO HAPPEN IN 2022 AND THEY WERE OVERLY BULLISH.
GOING INTO NEXT YEAR, EVERYONE IS BEARISH. LISA: WILL IT BE THE YEAR OF THE BEAR? WILL IT CONTINUE NEXT YEAR? DESPITE SOME OF THE OPTIMISM WE ARE HEARING I JUST GOT A NOTE THAT SAYS THERE IS A 90% PROBABILITY OF RECESSION AND THE U.K., AND IT HAS BEEN RISING. THIS CONTINUES TO POINT TO LOWER RATES ON THE LONG AND. THIS IS THE INTERESTING THING, YOU HAVE A GROWING NUMBER OF PEOPLE THAT SAYS THE DATA DOES NOT SUGGEST RECESSION BUT THEN EXPERT SAYING IT IS LIKELY. KAILEY:
IT DETERMINES ON THE LACK EFFECTS KICK IN. BECAUSE RIGHT NOW, THE DATA IS HOLDING UP BUT WE HAVE SEEN A RAPID PACE OF TIGHTENING. THE ECONOMY HAS NOT FULLY FELT THE EFFECTS OF THAT.
IF YOU ARE ON TEAM RECESSION YOU ARE SAYING JUST WAIT UNTIL IT HITS. LISA: THAT WOULD BRING BACK THE IDEA OF THE CREDIBILITY FOR THE FED. THAT BRINGS US TO OUR NEXT GUEST, AND ESTEEM MEMBER OF THE BLOOMBERG TEAM. MATT WINKLER, YOU WROTE A COLUMN THAT IS FASCINATING THAT PUSH FACT AGAINST THE PEOPLE THAT SAY THE FED IS BEHIND THE CURVE, THEY'RE GETTING IT WRONG, IT SEEMS LIKE THEY'RE BEEN ON TARGET. MATT: A YEAR AGO THIS TIME, THE PREVAILING NARRATIVE WAS THAT THE FED WAS BEHIND THE CURVE.
WE ALSO NEED TO BE REMINDED OF THE FACT THAT THE U.S. WAS MAKING THE MOST DRAMATIC RECOVERY FROM THE PANDEMIC RECESSION WHICH WAS THE WORST SINCE THE GLOBAL DEPRESSION EIGHT DECADES AGO. AND WE WERE GETTING CLOSE TO WHAT IS NOW THE 3.7% UNEMPLOYMENT RATE. THE U.S.
ECONOMY WAS DOING VERY WELL, BETTER THAN ANY OTHER MAJORED DEVELOP THE ECONOMY. THE FED SAID THE DATA IS WHAT DRIVES US. WE ARE NOW GOING TO TIGHTEN CREDIT AND EVERYBODY SAID THEY WERE TOO LATE, ETC.. WHAT HAPPENED AS HE SAID, AND UNPRECEDENTED TIGHTENING BUT A TIGHTENING THAT CAME WHEN THE U.S. ECONOMY WAS MUCH STRONGER, RESILIENT THAN IT OTHERWISE WOULD HAVE BEEN.
I THINK THAT IS THE PARENTHETICAL CLAUSE LEFT OUT OF THIS. THE U.S. ECONOMY WAS STRONGER WHEN THE FED TIGHTENING. HERE WE ARE TODAY, INFLATION IS WAY BELOW THE 9.1% PEAK IN JUNE WHEN THEY SAID THE FED HAD LOST ITS WAY. THE BOND MARKET NEVER GAVE UP ON THE FED.
IT WAS ALWAYS CONFIDENT THIS INFLATION PROBLEM IS GOING TO BE RESOLVED. LISA: THE BOND MARKET GOT THE FED WRONG AT THE END OF 2021. WE LOOKED AT A TWO YEAR YIELD THAT WAS 0.7%, WE SAW A MASSIVE RISE. PEOPLE UNDERESTIMATED THE FED WOULD HAVE TO DO IN ORDER TO COMBAT INFLATION. INTO 2023, HOW MUCH CREDIBILITY DO YOU GIVE THE IDEA THAT WE ARE IN A NEW HIGH INFLATION REGIME THAT WILL CAUSE OF QUESTION FOR THE FED IN TERMS OF HOW THEY HAVE TO GO? MATTHEW: I'M NOT SURE THE BOND MARKET EVER LOSS HIS WAY. WE ARE TALKING ABOUT RELATIVE
VALUES BUT THE BOND MARKET WAS NEVER CONVINCED THAT RUNAWAY INFLATION WAS HERE, EVER. THAT APPEARS TO BE STILL CORRECT. WHAT THE BOND MARKET GOT WRONG IS THAT IT DID NOT EXPECT THE FED TO TIGHTEN TO THE EXTENT THAT IT DID TO CONTINUE FIGHTING INFLATION BUT IT ANTICIPATED THAT INFLATION WOULD BE MUCH LOWER THAN MANY OF OUR OTHER STRATEGIST PREDICTED. THE FED IS STILL GOING TO KEEP INTEREST RATES ELEVATED. THEY HAVE ALREADY SAID THAT. THE BOND MARKET IS ANTICIPATING
WE WILL STILL SEE 5%, 6% INFLATION BUT A YEAR FROM NOW IT WILL BE CLOSER TO THE 2% TARGET. MATT: THEY SAY THEY HAVEN'T SEEN ANYTHING BREAK. YOU'VE SEEN IMPLODE AND'S, CRYPTO NOTABLY. BUT THERE HASN'T BEEN CONTAGION ACROSS THE SYSTEM AND HE SAID THAT MAYBE THIS FED HAS GOTTEN A RIGHT. THEY ARE CLOSER TO A SOFT LANDING AND THERE IS A CHANCE THERE IS NO LANDING AT ALL. DO YOU THINK WE ARE STARTING TO SEE A GROWING VIEW THAT WE COULD HAVE A VERY SHORT AND SHALLOW RECESSION OR EVEN NOT HAVE A RECESSION? MATTHEW: A YEAR AGO WE WERE ALL CONCERNED ABOUT SUPPLY CHAIN BOTTLENECKS IF YOU RECALL.
THE SHIPS AND THE PORT OF LOS ANGELES WERE BACKED UP AS FAR AS THE EYE CAN SEE. MAYBE 65 SHIPS WAITING TO UNLOAD THEIR CARGOES. WHEN WE CAUGHT UP WITH GENE SEROKA JUST A MONTH AGO THE WHOLE WATERFRONT WAS BLISSFULLY FREE. THERE IS AN EXAMPLE WHERE COMMON PREVAILING ASSUMPTIONS A YEAR AGO TURNED OUT TO BE THE WORST AS FAR AS IT WENT.
NOW IT IS GOTTEN BETTER. IT'S SIMILAR WITH THE REST OF THE ECONOMY WHICH IS EVERYBODY YOU CAN THINK OF WAS WORRIED ABOUT A RECESSION IN JULY. MATT: AND DOUBLE THE PRICE FOR A USED CAR. PRICES WERE OFF THE CHARTS AND IN THAT MARKET, USED CARS IS JUST COLLAPSE. WE GOT DATA OUT OF SPAIN THAT SHOWS INFLATION IS COMING DOWN FASTER THAN EXPECTED. DO WE GET CLOSER TO 2%? MATTHEW: THE BOND MARKET IS A COLLECTION WITH EVERYONE AT THE MOST TAKE. THEY HAVE RESOURCES EVERYWHERE,
THEY ARE BETTING THEIR REPUTATIONS ON THEIR FORTUNES AND THEY ARE ALL OVER THE WORLD. TREASURIES ARE THE MOST WIDELY HELD SECURITY ANYWHERE IN THE WORLD AND THE MOST LIQUID. THAT COLLECTIVELY, IS THE MOST EVIDENTIARY WAY OF LOOKING AT THE DATA. THESE PEOPLE ARE SAYING THAT SOMEHOW, SOMEWAY, THE INFLATION THAT WE HAVE BEEN SEEING WILL NOT BE RUNAWAY. IT WILL DECELERATE IN THE
MONTHS AHEAD AND BY THE WAY, THE ECONOMY STILL ENDS IN 2022 UP. NOT DOWN. KAILEY: 2022 WAS A HARD YEAR TO PREDICT AND SO MUCH HAS HAPPENED INCLUDING ELON MUSK BUYING TWITTER. ANOTHER CURVEBALL NO ONE SAW COMING. BACK IN APRIL 1 OF YOUR PIECES SAYS IN DEFENSE OF ELON MUSK'S M MANAGERIAL INTELLIGENCE. HOW DOES YOUR VIEW CHANGE IN HINDSIGHT? MATTHEW: I NEVER UNDERSTOOD THE TWITTER DEBACLE FROM THE BEGINNING. I THINK WHAT IS MISSING IN THE DISCUSSION OF TESLA RIGHT NOW, WHICH OBVIOUSLY HAS BEEN THE BIGGEST CASUALTY OF THE TECH INDUSTRY.
IT IS STILL VALUED MORE THAN TOYOTA AND NO ONE MENTIONS THAT. IT LOST 60-70% OF ITS VALUE IT IS STILL 350 BAL YEN AND THAT IS WORTH MORE THAN TOYOTA. -- 350 BILLION. THE AUTO MOBILE ITSELF IS WAY AHEAD OF WHERE THE REST OF THE AUTO INDUSTRY IS BEEN. BY FAR, AND THE U.S. THE MOST POPULAR EV AND THAT IS THE REALITY. MATT:
EVEN IF YOU ADD GENERAL MORTARS, GM, TESLA'S WORTH MORE. MATTHEW: MAYBE THAT'S ALL A MIRAGE BUT GIVEN THE CARNAGE WE'VE BEEN TALKING ABOUT, NO ONE MENTIONS THAT THE MARKET CAP OF TESLA TODAY, IT IS STILL WORTH MORE THAN TOYOTA. LISA: SO GLAD TO HAVE YOU HERE, COMING WITH A GREAT PERSPECTIVE HERE. INTERESTING TO POINT OUT THAT
THE VALUATION OF TESLA IS UP, BUT BUT NOT BY THAT FAR. MATT: I WONDER HOW MUCH OF IT IS OVERINFLATED IN THE AIR OF FREE MONEY? LISA: IN THE FUTURE, WE WILL BE TALKING ABOUT THAT COMING UP. THIS IS BLOOMBERG. >> THE LAST TRADING DAY OF 2022 AND EVERYBODY IS EXCITED ABOUT IT. MATT MILLER, KAILEY LEINZ, LISA ABRAMOWICZ ARE OFF TODAY THEY WILL BE BACK AT THE START OF 2023.
LOOKING AT A YEAR OF CARNAGE ENDING WITH A WHIMPER KRITI GUPTA TAKING A LOOK. >> THE S&P 500 ACCELERATING SOME OF THEIR LOSSES DOWN ABOUT 5/10 OF 1%. NASDAQ 100 FEATURES DONE BY 8/10 OF 1%. ACROSS THE ATLANTIC, STOCKS
STILL WHERE WE LEFT IT ABOUT AN HOUR AGO. I HAVE TO TALK ABOUT THE BOND MARKET BECAUSE OF COURSE TO YOUR POINT, THAT'S GOING TO BE A MAJOR STORY GOING INTO THE NEXT YEAR. WE KNOW IT HAS BEEN INVERTED FOR ALL OF 2022 THE QUESTION IS BY WHAT MARGIN WE ARE LOOKING AT -54 BASIS POINTS THIS MORNING. BUT THIS IN SOME CONTEXT. IF YOU ARE WORRIED ABOUT 2023
OR 2024 BEING DEJA VU WE ARE AT LIKE I SAID -54 BASIS POINTS. COMPARE THIS BACK TO THE 1970'S AND 1980'S WE SAW CONVERSIONS OF -200. IF YOU ARE BETTING ON A DEEPER RECESSIONARY STORY, THIS METRIC HAS SOME WAYS TO GO. YOU PERHAPS SEE THAT SAME ARGUMENT IN THE CREDIT MARKET WERE SPREADS ARE STILL NOT AT RECESSIONARY LEVEL. LET’'S BREAK IT -- BRING IT BACK TO TODAY'S TRADE. THE 10 YEAR YIELD AT 383. TO ME, I THINK THE STORY IS IN
ASIA TODAY. THERE IS A STORY EVEN THOUGH IT IS THE LAST TRADING DAY OF THE YEAR. COPPER IS OUTPERFORMING THE ENTIRE COMMODITY INDEX.
MORE AND MORE PEOPLE LOOKING TO COPPER AS THEY GAUGE FOR THE GLOBAL ECONOMY, NOT OIL WHICH I THINK IS INTERESTING. OF COURSE, THE DOLLAR-YEN STORY THE JAPANESE YEN STRENGTHENS. WE ARE LOOKING AT 131.86. >> MATT, TO YOUR POINT YOU WERE WAITING FOR US TO TALK ABOUT THE BANK OF JAPAN ENDING THE YEAR WITH THE MEASURE -- MAJOR ASIAN STORIES.
THIS IDEA, THE BANK OF JAPAN IS SPYING A RECORD AMOUNT OF JGB'S. THIS MONTH ALONE AND THE YEN IS STRENGTHENING BECAUSE THE MARKET DOESN'T BELIEVE IT'S GOING TO GO THROUGH WITH MAINTAINING THIS. >> I WANTED TO ASK YOU ABOUT THIS. WHAT DOES IT MEAN? THEY HAVE WIDENED THE BAN. YET, THEY ARE SPENDING SO MUCH MONEY TO KEEP THEM THERE DOES THAT MEAN THEY ARE NOT PLANNING ON WIDENING IT AGAIN? BECAUSE THEN WHY SPEND THE MONEY? >> BASICALLY THE THEORY IS THEY DON'T WANT THIS TO BE AN UNCONTROLLED MOVE. THESE ARE BONDS THAT HAVE NOT TRADED. WHERE IS THE AUDIENCE FOR THIS?
ANYONE INDEPENDENT STILL OWNS JGB'S THEY'RE GOING TO PUSH AGAINST WHAT THE BANK OF JAPAN IS GOING TO DO. WHY NOT? AT A CERTAIN POINT, ESPECIALLY WITH THE INFLATION TARGET COMING AND ABOVE THE TARGET FOR THE JAPANESE FOR SEVERAL CONSECUTIVE QUARTERS, YOU HAVE TO WONDER, IS THIS THE PRELUDE? >> IS IT GOING TO LEAD TO HIS SUCCESSOR BECAUSE HE IS OUT THE DOOR IN APRIL. >> THAT WOULD BE SO UNCOOL. >> THAT'S WHAT PEOPLE THINK, BECAUSE IT IS SO UNCOOL, THEY THINK YOU WILL DO IT EARLIER.
>> NOT ONLY WITH RESPECT TO WHAT HAPPENS IN JAPAN BUT ALSO U.S. YIELDS AND HOW THIS CAN TRICKLE BACK CONSIDERING THE JAPANESE BUYERS CONSIST OF A HUGE PROPORTION OF HOLDERS OF U.S. TREASURIES. SECURITIES, I WANT TO START THEIR HOW UNDERAPPRECIATED,, JUSTIN, IS THE BANK OF JAPAN'S POTENTIAL GIVING ABOUT THE YIELD CURVE CONTROL AND PUSHING LONG AND YIELDS HIGHER? >> I THINK THAT'S A GREAT QUESTION AND THANKS SO MUCH FOR HAVING ME ON THE SHOW TODAY. I THINK YOU WERE JUST TALKING
ABOUT COPPER AND I THINK THE FACT THAT COPPER IS GOING UP IS A GREAT SIGN. I THINK THE FACT THAT THE BANK OF JAPAN IS PUSHING RATES HIGHER, CHINA IS OPENING UP WE ARE STARTING TO SEE SOME GOOD SIGNS. THAT IS REALLY GOOD THE 2022 IT WAS A RATCHET HERE. A SICKLY BUT WE ARE LOOKING AT, I LIKE HOW YOU SAID IT, WITH A WHIMPER. STOCKS DOWN 18%, BONDS HAD THEIR WORST YEAR ON RECORD. THE WORST YEAR EVER FOR BONDS
AND THE BLOOMBERG AG WAS DOWN 2.9%. I THINK THERE ARE A NUMBER OF TRENDS AROUND THE WORLD WE NEED TO PAY ATTENTION TO AND 2022 WAS HORRIBLE BUT I THINK THERE ARE BETTER TIMES COMING FOR US. >> DOES THAT MEAN YOU GET IN HERE ON THE BOTTOM FLOOR HERE? YOU HAD THESE HUGE DECLINES IT'S ALMOST LIKE THERE IS NO VERTIGO BUT UP. IT CERTAINLY FEELS -- THERE IS NOWHERE TO GO BUT UP. IT CERTAINLY FEELS THAT WAY.
>> I BELIEVE WE ARE GOING TO GO INTO A RECESSION IN 2023 BUT IT WAS HERE YET. IN OTHER WORDS WE FELT LIKE WE HAD A RECESSION, WE HAD THE FIRST TWO QUARTERS OF THE YEAR NEGATIVE GROWTH. IT COULDN'T KEEP UP WITH INFLATION. EMPLOYMENT WASN'T GOING UP. IT'S GOING TO BE A LITTLE BIT MORE PAINFUL IN 2023. I THINK WE WILL GET THE RISING UNEMPLOYMENT.
I THINK WE WILL GET MORE NEGATIVE QUARTERS BUT FROM A FINANCIAL MARKETS PERSPECTIVE I THINK WE WILL SEE MUCH BETTER, BETTER FOR STOCKS, I EXPECT IT BETTER FOR BONDS. EVEN CRYPTO, I THINK IT'S GOING TO BE BETTER. IF YOU LOOK AT BONDS, WHEN YOU LOOK AT OK WE PROBABLY HAD THE LOW MUNICIPALS. THEY LOST 9.2% YEAR TO DATE IN 2022. THE WORST YEAR EVER WERE DOWN 1.6%. JUST ABOUT FOUR WEEKS AGO
EUNICE OPPOSE HIT A CYCLE LOW. >> YOU TALK ABOUT PAIN THAT'S GOING TO BE FELT IN THE REAL ECONOMY WITH EMPLOYEE -- EMPLOYMENT GOING HIGHER AND YET YOU TALK ABOUT HOW THERE WILL BE LESS PAIN IN FINANCIAL MARKETS. IS THAT PREDICATE ON THE FED REACTING? WHAT HAPPENS IF THEY DO AS THEY SAY THEY WILL AND LOOK THROUGH IT? >> I THINK THE FED HAS TO TALK TOUGH BUT I THINK IT HAS A SOFT HEART. THEY JUST A MILEAGE MARKETS IN 20 -- THEY JUST DEMOLISHED MARKETS IN 2022. THAT'S JUST BOUND TO CRUSH MARKETS. ULTIMATELY, THEY HAVE A
BENEVOLENT HEART MEANING THEY DON'T REALLY WANT TO SEE THE PAIN. THEY KNEW THEY HAD TO CREATE THE PAIN OR ELSE INFLATION WOULD GET OUT OF CONTROL. THE BEST ONE THAT KNEW THE POWER OF CRUSHING INFLATION AND THE SIN AS A FORMER COLLEAGUE OF MINE SAID STOP INFLATION NOW OF ALLOWING IT TO KEEP GOING AND PEOPLE LEARN THAT IN THE 70'S AND 80'S. >> IF YOU THINK IT IS MOSTLY TALK AND NOT ACTUALLY GOING TO BE WALK, WHAT DOES THAT MEAN FOR THEIR CREDIBILITY GOING FORWARD? >> I THINK THEY HAVE EARNED IT THIS YEAR. I THINK THEY ARE GOING TO KEEP DOING WHATEVER THEY NEED TO DO TO MAKE SURE THEY ARE NOT CREDIBILITY.
I THINK THEY'RE GOING TO PAUSE FAIRLY SOON. I THINK THEY PROBABLY GO MAYBE ONE, MAY BE TWO MORE HIKES IF WE DO START GETTING A RECESSION I THINK THAT'S WHEN THEY START TO TURN THE SHIP. THAT IS ALSO WHEN THEY CAN SEE, -- SAY, AT LEAST TEMPORARILY, THEY BEAT INFLATION. IN THE 70'S WE SAW A
DOUBLE-HEADED MONSTER OF INFLATION. I THINK IT'S DIFFERENT TODAY I DON'T THINK WE WILL SEE THAT. THE FED HAS TO BE AWARE OF IT AND THEY HAVE TO BE ON THEIR GAME. >> WHAT ABOUT RISK ASSETS? ARE WE GOING TO SEE HER PITFALLS CONSIDERING THE PEOPLE DO SEE SOME SORT OF DETERIORATION IN THE ECONOMY AND WE HAVEN'T SEEN IT IN SPREADS? >> I THINK CORPORATE DEFAULT IS MORE LIKE THE COMMON MAN. IT'S NOT ANTICIPATING THE FINANCIAL MARKETS.
WE HAVE SEEN LEVELS DOWN SIGNIFICANTLY. IF YOU LOOK AT THE BLOOMBERG CREDIT INDEX IT'S DOWN 16.5% JUST ON A PRICE RETURN HERE TO DATE. THERE ARE A LOT OF PRICES ON THE HIGH-YIELD MARKET AND WHEN PAR IS 100 THAT'S NOT A GOOD SIGN. WE HAD UNNATURALLY LOW DEFAULT RATES IN 2020, 2021 DUE TO THE GOVERNMENT'S SUPPORT.
ALL MONEY, YOU KNOW, THE GOVERNMENT WAS SUPPORTING BUSINESSES IN ITS PLANS. ESSENTIALLY, WE HAVE THAT TURNING AROUND. WE SEE A NUMBER OF SECTORS EVEN IN THE MUNICIPAL MARKET SUCH AS SENIOR LIVING THAT DEFAULTS. I THINK BETTER TIMES WILL COME BUT IT HAS SEEN TOUGH TIMES. ULTIMATELY, I THINK THAT YOU HIGH-YIELD CREDIT MARKET AND ARE A LOT OF PEOPLE ARE SAYING 2.5-3.5%. I SAY 3-4% TYPE OF DEFAULT RATES IN HIGH-YIELD MARKETS.
>> TOUGHER COMPANIES BUT PERHAPS NOT A REPRISAL OF 2008. THANK YOU SO MUCH FOR BEING WITH US. HILLTOP SECURITIES. WE DO HAVE A FINAL NUMBER FOR 2022. MATT MILLER? >> WE ARE LOOKING AT A FTSE INDEX. IT'S A HALF-DAY AS WE GO INTO THE NEW YEAR THEREFORE YEAR FIGURES AND THE FTSE IS UP 1.2%.
HOW THEY ENDED THE YEAR, WE ARE DOWN 20% RIGHT NOW ON THE S&P. WE ARE LOOKING AT DROPS OF 12% ON THE DAX, BUT THE FTSE IS UP YEAR TO DATE. I THINK IT'S REALLY INTERESTING. >> IT COMES TO YOUR POINT EARLIER ABOUT ENERGY EXPOSURE. IT HAS DONE WELL AND IS A MUCH
LARGER WAITING. >> THIS IS GOING TO BE AN ONGOING ROLLING DAY OF TALLIES AS WE TRY TO GET A SENSE OF WHAT HAS HAPPENED. THE COUNTERINTUITIVE MOVES, BECAUSE THAT IS COUNTERINTUITIVE CONSIDERING WHAT THEY WENT THROUGH.
HOW MUCH IS THIS A CURRENCY MOVE? HOW MUCH IS INFLATION-ADJUSTED? IF YOU INFLATION-ADJUSTED SOME OF THE REVENUE STREAMS IT LOOKS PRETTY BAD BUT IF YOU LOOK AT IT AT A NOMINAL LEVEL, YOU ARE ACTUALLY GETTING A LOT MORE MONEY. RIGHT NOW WE ARE LOOKING AT HOW MUCH MORE WE HAVE IN THE DAY. WE HAVE ABOUT 8.5 HOURS LEFT. 2:00 P.M. CLOSE FOR BOND MARKETS.
COMING UP, THE LATEST ON COVID AND THE REOPENING IN CHINA. THIS IS BLOOMBERG. ♪ >> KEEPING YOU UP-TO-DATE WITH NEWS AROUND THE WORLD. AFTER WEEKLONG MELTDOWNS SOUTHWEST AIRLINES PLANS TO RETURN TO A NORMAL SCHEDULE TODAY. THOUSANDS OF PASSENGERS WERE STRANDED ACROSS THE U.S.
BECAUSE OF CANCELLATIONS CAUSED BY WINTER STORMS. THE CARRIER SCRAPPED MORE THAN 13,000 FLIGHTS IN THE LAST WEEK. IT'S BEING CALLED ONE OF THE MOST INTENSE MISSILE AND DRONE ATTACKS. THE BARRAGE ROCKED CITIES
ACROSS THE COUNTRY INCLUDING THE CAPITAL OF KYIV. UKRAINE'S IS THAT SHUTDOWN 54 CRUISE MISSILES. STILL IT IS LIKELY UKRAINE WILL ASK WESTERN ALLIES FOR MORE DEFENSE SYSTEMS. JUST TOP AT THE COVID OUTBREAK IN CHINA
COULD BE ACCORDING TO LONDON RESEARCH FIRM, THERE COULD BE AS MANY AS 25,000 DEATHS A DAY. DAILY INFECTIONS COULD POINT -- COULD PEAK. IT HAS BEEN DIFFICULT TO MAINTAIN ACCURATE DATA. SOME TENSE MOMENTS OVER THE CHINA SEA. A FIGHTER JET FLEW WITHIN 20 FEET OF A U.S. RECONNAISSANCE PLANE. THE PLANE HAD TO TAKE EVASIVE
MANEUVERS TO AVOID A COLLISION. CHINA ASSERTS RIGHTS TO MORE THAN 80% OF THE SOUTH CHINA SEA. HE WAS CALLED THE KING AS THE BEST PLAYER SOCCER HAS EVER PRODUCED. BRAZILIAN STAR PELE DIED AFTER A BATTLE WITH CANCER. HE PLAYED FOR THE NEW YORK COSMOS FUELING NEW INTEREST IN SOCCER BY AMERICANS.
PELE WAS 82. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON BLOOMGERG BY QUICKTAKE. POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I'M LISA MATEO, THIS IS BLOOMBERG.
>> IT DEPENDS ON THE FLAVOR OF THE STIMULUS IF IT LOOKS MORE LIKE INFRASTRUCTURE AND THE KIND OF OLD ECONOMY THINGS THEY USED TO DO THAT CAN PUT UPWARD PRESSURE ON ECONOMY -- COMMODITY PRICES. >> IS CHINA'S REOPENING A TAIL RISK OR TAILWIND? SHE FOR INVESTMENT OFFICER, THIS HAS BEEN ONE OF THE BIG QUESTIONS. ALSO WITH RESPECT TO COVID, WE HAVE TO CARE ABOUT CORONAVIRUS AGAIN. I WAS, I LOVE SPEAKING WITH YOU. I SAW YOUR NAME POP UP AND I THOUGHT TO MYSELF I REALLY WANT TO SPEAK TO YOU.
WHY DO WE HAVE THE REPRISAL OF COVID ONCE AGAIN? IS SAYS YOU ARE A ABREAST -- PROFESSOR AT THE UNIVERSITY OF NEBRASKA. IT IS GREAT TO SEE YOU AND IT IS ALSO TERRIBLE TO SEE YOU BECAUSE PEOPLE ARE STARTING TO GET WORRIED ABOUT A NEW VARIANT. HOW MUCH ARE YOU CONCERNED ABOUT THIS? HOW DOES IT TIE TO THE MESS INFECTION LEVEL IN CHINA? >> I AGREE HAPPY TO SEE YOU BUT SAID TO SEE YOU. WE ARE BACK TO SEEING LARGE NUMBERS OF COVID. ONE OF THE BIGGEST CONCERNS IS LESS THAT A NEW VARIANT IS EMERGING AND MORE ABOUT THE CASES THAT MAY BE COMING OUT OF CHINA. WE HAVE SEEN SOME NUMBERS THAT
LOOK LIKE THE EARLY DAYS OF COVID WHEN WE WEREN'T EVEN CALLING IT COVID AND WE WERE WATCHING IT FROM AFAR. I THINK THE NUMBERS OF CASES ARE WHAT WE ARE WORRIED ABOUT SINGH COMING TO THE U.S. AND THE GLOBAL ENVIRONMENT IF WE DO SEE NEW VARIANTS EMERGE IT WILL BE IMPORTANT TO CHECK WITH THEY ARE, WHAT THE SUBVARIANTS ARE AND MAKE SURE WE CAN ADJUST OUR TOOLS. >> CAN CHINA BE TRUSTED TO DO THAT AND COUNT THE CASES PERIOD? >> IT'S NOT WHAT WE ARE SEEING RIGHT NOW. WE ARE NOT SEEING THE DATA WE WOULD LIKE TO SEE ESPECIALLY ON THE DEATHS ON THE SEQUENCING THEY ARE DOING, SO THEY REDUCED THE AMOUNT OF PEOPLE THEY ARE TESTING SO WE ARE NOT SEEING TESTING DATA BUT WE KNOW THE TESTING IS MUCH LOWER THAN IT WAS A FEW WEEKS AGO. I THINK THE PRESSURE HAS TO BE
ON CHINA TO SURE EVERY SICKLE NUMBER THEY HAVE, RIGHT? WHAT ARE THE CASE COUNTS THEY ARE AWARE OF? WHAT TESTING ARE THEY DOING AND WHAT VARIANTS ARE THEY SAYING? >> IS IT ONLY THE VARIANTS? HOW MUCH OF THE POPULATION IS GOING TO BE RELATIVELY IMMUNE OR NOT HAVE ANY FORM OF SEVERE DISEASE BECAUSE OF SO MANY INFECTIONS AND VACCINATIONS? >> THAT'S A GREAT QUESTION. LARGE NUMBERS OF COVID ARE PROBLEMATIC AND DANGEROUS NO MATTER WHAT BECAUSE THE MORE CASES YOU HAVE THE MORE LIKELY YOU ARE GOING TO SEE THE SEVERE CASES AND DEATHS. NO MATTER WHAT, WE ARE GOING TO HAVE LARGE NUMBERS COMING OUT OF CHINA IMPACTING THE GLOBAL HEALTH ENVIRONMENT, THE GLOBAL ECONOMY AND THAT CAN BE REALLY DANGEROUS. ANYTIME YOU HAVE A LESS IMMUNE POPULATION YOU ARE GOING TO SEE THE POTENTIAL FOR VARIANTS SO EVEN THOUGH WE ARE NOT SEEING VARIANTS RIGHT NOW WE COULD SEE A NEW VARIANT IN THE FUTURE. >> HOW DOES THE U.S. SITUATION LOOK RIGHT NOW WITH REGARDS TO COVID INFECTION RATES SPECIFICALLY THE NEW YORK CITY AREA BECAUSE I'M GOING THERE TOMORROW WITH 20,000 OF MY CLOSEST FRIENDS.
>> I WOULD DEFINITELY RECOMMEND WEARING MASKS IN MADISON SQUARE GARDEN. RISK IS SO HIGH AND WE ARE SEEING A LOT OF REPORTS OF ILLNESS ACROSS THE NORTHEAST AND REALLY ACROSS THE U.S.. IT IS A RISKY TIME TO BE IN CLOSE QUARTERS WITH PEOPLE AND WE ARE SEEING A LOT OF ILLNESS STILL.
I THINK THERE ARE A LOT OF PEOPLE WORRIED ABOUT AN ONGOING COVID SURGE AND ITS COUPLED WITH A RESPIRATORY IRIS SEASON -- VIRUS SEASON LIKE WE HAVE NOT SEEN IN MANY YEARS. JUST IN THOSE CLOSE QUARTERS. >> IS IT EVER GOING TO GO AWAY, LAUREN? IT'S BEEN ALMOST THREE YEARS, RIGHT? YOU HAVE THE RESPIRATORY INFECTION PEOPLE ARE WORRIED ABOUT FLU AND PNEUMONIA, I HAVE HAD I THINK SIX SHOTS SINCE MARCH OF 2020. ARE WE EVER GOING TO GET OVER THIS? >> I DON'T THINK COVID IS EVER GOING TO GO AWAY. I THINK THAT'S ALSO PART OF WE ARE SEEING IN CHINA.
ONE OF THE THINGS WE ARE HOPING TO SEE IS WE GET ON A CADENCE SIMILAR TO FLUOR WE GET VACCINATED ON A REGULAR SCHEDULE, WE ARE MINIMIZING THE IMPACT OF THE DISEASE AND REDUCING SPREAD WHEREVER POSSIBLE. I THINK WE ARE STILL IN THIS. EMERGENCY PHASE AS WE GET ON THAT ROUTINE VACCINATION SCHEDULE AS WE
2023-01-01 06:27
