'Bloomberg The Open' Full Show (11/15//2022)

'Bloomberg The Open' Full Show (11/15//2022)

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The equity folks are getting it that way. That's for sure right now. Live from New York City this morning. Good morning. Good morning, PPA. Downside surprise, equity market higher, much higher. The countdown to the open starts right now. Everything you need to get set for the start of us trading.

This is Bloomberg, the open with Jonathan Ferro. Live from New York. We begin with a big issue for how long can investors during. The key issue at the moment is the sequencing of hitting the Fed's dual mandate.

So this sequencing happens to be in the right way for markets, namely, first inflation is coming down. We have seen no inflation come down from the peak in June without an increase in the unemployment rate. Looking for a sweet spot between inflation rolling over and growth getting Smash City. Stuart Kaiser saying time is running out. The investment windows are really, really short. It's the window between hay inflation.

Looks like its peak. The Fed can back off on rate hikes and oh, you know, the unemployment rate is rising and other other forms of economic growth are slowing. Morgan Stanley's Mike Wilson putting an end date on that Shery Ahn, bracing for the growth shot to hit in Q1. The earnings forecasts for next year are substantially too high. That process readjusting those estimates will begin in the fourth quarter predictions because that's when companies will have to address 2023 forecasts, which they haven't done yet. And that's the catalyst.

It's basically the slowdown that will hit earnings significantly next year. Joining us right now to discuss is Bank of America's Janet Word and Economics, Peter Tom Keene. Jan, I want to begin with you and go to that quote from Stuart Keiser over at City.

That sweet spot for markets, timing matters for markets. He said when inflation crossed before growth deteriorates and let the FOMC deal with those risk to its mandate separately for markets, how long and investable window is that between those two waves of economic risks? Can you walk us through that chart? How why do you think that window is? I think it's a very narrow window, John, for investors to try to take some sort of tactical bullish trade, really. Right now, the big risk, though, that we see is that the lags between monetary policy tightening and the effects in the real economy could be much longer than investors have priced in. Think about the the mortgage market. United States, something like 90 or 95

percent of mortgages in the US are fixed versus a two thirds the rest of the world. That means monetary policy is biting harder elsewhere. Not here. The United States also only has the only place where you saw massive fiscal stimulus a trillion dollars on the balance sheets of U.S. households in excess of historical norms.

That means that rate hikes take longer to hit harder because of all that excess consumer cash. And I think you're you're going to see a big lag. And that means it's going to be very difficult for markets to digest both slowing growth and tighter financial conditions at the same time. So how would you fight the moves on the screen at the moment? Equity speeches at one point eight percent on the S&P up much, much more on the NASDAQ. Absolutely, John. We think this is a structural shift.

We're in the very middle of early innings, though, really between the 2 percent world of the past two decade, 2 percent real GDP growth, 2 percent inflation target. If you look at the broader 20th century, 5 percent was more the norm in that shift from 2 to 5 percent from from from growth stocks, the value stocks from from atoms to bits from from digital to real. It's very early days. And we would use rallies like this within a bear market to take profits and growth, pick profits and long term treasuries and rotate back to the inflation friendly types of trade pay. Do you agree? Yeah, no, I agree with Jared on this. You know, you referred to it as a structural shift. We've referred to it as a regime shift.

And I and I agree with that. You know, investors over over a forty year plus period have become quite used to that secular downtrend in both short and long rates, which was finally met with a thud at the zero bound. The other challenge that the Fed now faces is once it's done combating inflation, wherever that terminal rate ends up, whether it's 4 percent or higher 5 percent, it will struggle with its ability to use a shock and awe strategy to get us out of whatever recession we're in at that point.

And that's something that the Fed has been pulling out of its playbook again for 40 years. So I agree with that. It is it is a regime change. Monetary policy is not what it was throughout most of that 40 year period. People got used to Goldilocks. And I think that's a thing of the past. I think active investing is going to do

a lot better in an environment where monetary policy is in a persistent tailwind when it comes to the chance that Goldilocks. I think most people agree with you. According to the Bank of America Fund Manager survey stagflation phase, when 92 percent of the feedback in this survey, 92 percent, an overwhelming consensus in this survey. Nobody thinks Goldilocks is come in. CAC says more. Hi, Kyra. Hey, John.

Yeah. The title of this survey is Stagflation. It's so hot right now because as you just said, pretty much everyone thinks it's coming next year. And actually, 77 percent of respondents in this month's Yvonne Man survey think a global recession is coming.

And as a result, sentiment is what Bank of America describes as still, quote, uber bearish. As for how that's reflected in allocation, investors are the most overweight cash and most underrate equities with tech allocation, actually the lowest level since 2006. And for the fifth straight month in a row, long U.S. dollar is the most crowded trade. 72 percent of investors say that the dollar is overvalued, which is the most on record.

And then for the other crowded trades you have. Number two, short China stocks. Number three, long oil, followed by short European equities and long ESG assets. And finally, as we do every month, when you rounded out looking at the biggest tail risks, inflation staying high remains number one, 32 percent of people gave that answer. And then the next three actually all are tied. Geopolitics worsening hawkish central banks and a deep global recession, each getting 18 percent.

One could argue all of those things are really tied together. And then rounding out the list, a systemic credit event. But really, John, the takeaway of this survey is pretty much everyone sees stagflation coming. Stagflation so hot right now.

Thank you. That title is CAC. He mentioned a few times stagflation that below trend growth, a bunch above trend inflation. The overwhelmingly consensus view in the fund manager said at 92 percent. No one thinks Goldilocks pizza. When you hear that. Does that make you uncomfortable?

Given the overwhelming size of the consensus gone, it's a twenty three. It most certainly does. You know, the broader the consensus, the more likely one is to be wrong. That's been my experience over my investing career. That said, this is one of the reasons why you see the kinds of rallies we've seen over the past week and change we noted in mid-October. In fact, that breadth across indices,

but in particular on the NYSE and the S&P was about three standard deviations below its its trend line. And that got us actually tactically construction constructive in mid-October. And we've actually been slightly too not hedged at all since that. But that's a tactical view within the more strategic view, which I do think despite the fact that it's consensus will be correct.

Things are going to get worse from here. Jared, you understand this, Seth, I better than most because you used to help put it together. I'll go through those numbers again for you.

I'm sure you've read it. Stagflation, the overwhelmingly consensus view at 92 percent. Nobody thinks Goldilocks in a fund manager survey. When you hear stuff like that, Jared, in that survey that the team can over a BFA.

How do you use that information? Well, it's still a fantastic piece of work, John. Even though I'm not involved. Thank you, Rosalind Chin. It's a it's it's a very important truth to reveal there, which is that investment professionals understand the shift that they're taking place. I think that the big warning from my

mind is that this is not a time to get too cute. It's not the time to be too contrarian too quickly. Because if we're right that we're under the very early stages of a big macroeconomic shift, then the valuation reset could be substantial and it could be prolonged. We wrote a report recently about the Nifty 50 stocks in 1970s, which had very similar both macro and investment profile to today. Investors had piled into these very expensive, seemingly high quality growth stocks. Valuations were sky high. The macro turned and the inflation that

the Fed had to fight was very serious. And you saw valuations reset over the course of many years, not not months, not quarters. And anyone who stepped in front of that freight train of a great valuation reset got burned. And I think that that's the environment investors have to contend with today. Two decades. Seventy trillion dollars of assets invested for a 2 percent world.

How many analysts, how many investors have reset their valuation models? They're just kind of cash flow frameworks for a world with higher interest rates, higher cost of debt, higher rollovers in the bond market. And if you do those resets, you reset those model. I think you get very different valuations of where the market is today.

It's not a time to fade. What could be a major structural shift in this issue? So let's go deeper. You've come there a few times now. I've been asking a question. And we are unwinding the excess of the last couple of years, post pandemic of the excess of the last 10 years. Plus, I hear from you, it's the last 10

years. Plus, not many people share that view at the moment, Jarrett. And as you point out, that's going to have profound implications for how we value the market. If that fund stays at 4 5 percent less, even if it stays in and around three and a half as a major change from ten years ago.

Can you run me through, Chad, the challenges to the index level passive investing in the last decade? Well, those challenges will look like in the years to come. Given the weightings of growth equities like Tic TAC. Yeah, I mean, I think that that is the conclusion, the big investment impact here is it is a rotation from the winners of the past few decades for tech stocks, consumer discretionary. Think about Amazon Communications.

These growth stocks that did so well in a world of record low inflation, record low interest rates, high globalization, deflationary demographics, those secular trends are all reversing offshoring, globalization, demographics. Now inflationary. And you don't have the kind of tech disruptions that are sweeping across the economy that is over the past 20 years. That means that those growth sector winners, I think, become the losers of the future. And who picks up the slack?

Who's the new leadership? Most likely from our view. The real economy, sectors like industrials, energy, materials, maybe financials, lending into those those companies, these these sectors. By the way, if you look back at history, it wasn't that long ago that these sectors accounted for more than half of the market cap of the S&P 500. They've they've since retreated to about 10 percent.

I think they could regain that leadership in the years to come. Dare I say, the leadership then might come abroad as well. What's should feel on that? Well, look, there's a lot of challenges in the developed world are our economists expect a recession in Europe next year? Japan still sort of struggling along. But if you look in emerging markets, especially emerging markets, DAX, China, even China on a very tactical basis, very nimble basis. There's some reason to be more optimistic. So I think it's very fair to say that given how ahead of the curve emerging market central banks have been and central banks around the rest of world locally, you may see a period over the next 12 months in which certain countries, certain markets actually outpace the US in terms of moving through this bear market and onto the other side takes on a what have place.

Yeah. I think it is a new investment paradigm, and I think there's there's gonna be plenty of opportunity in what we do, which is structured products. And in particular, I think the levered loan market is at risk here with this alongside this interest rate reset. When you look at when you look at the names in the speculative grade loan index, about 45 percent of them are actually less than one time coverage.

That's where the opportunity is going to come. Smaller companies and value. It's a gloomy conversation relative to what's on the screen. The S&P up by one point eight percent. The Nasdaq absolutely ripping chariot and PE going to stick with us. The S&P 500 up by around about 71 points right now.

Coming up on this program, President Biden making his rounds at the G 20. I'm convinced we're going to come out of this crisis. We've been through the pandemic. Be stronger than

that conversation. I'm next. I'm convinced we're going to come out of this crisis. We've been through a pandemic be stronger than we were. Every time we engage, we get better. And

today, we're focused on investing together and investing stronger than we have in the past. President had a meeting with world leaders at the G 20 summit in Bali. His predecessor, Donald Trump, gearing up for another run at the White House. Despite disappointing midterms weakening, his case for the Republican ticket really do hope that President Trump sees the writing on the wall. He lost in 2020. We lost Georgia because of his behavior in the Senate race in 2020. That's a second loss.

And then this year the Republicans lost the Senate because the Trump backed candidate in the Senate races were rejected by American voters. That's a three time loser. And I'd like to think that the Republican Party is ready to move on from somebody who's been for this party. A three time loser. Team coverage starts right now with Anne-Marie joining us from Bali. Emily Wilkins down in Washington, D.C. Emily, first to you. What can we expect from the former

president later this evening? Well, we are expecting Trump to announce that he will be running for president in 2024. Certainly he still has a good amount of support within the Republican Party. But you are seeing party officials, folks in Congress, other Republican groups start to raise concerns and say, hey, this is a guy who has lost three times for us. Now we need to start finding someone else. And you've also seen that in the halls of Congress here. You heard several Congress members say that they're a little hesitant on Trump right now.

They want someone who can make sure that can deliver for the White House as well as Congress. And after Tuesday's really disappointing elections for Republicans, they didn't get nearly as many seats as they thought. They're not going to control the Senate and they're only been able to control the House by such a small majority. And so that really is going to leave them looking for someone else in 2020 for, of course, putting Trump now back in the spotlight means that we're going to have to start following him again, watching what he says. And some Republicans, they're just not ready at this point to sort of be responding to every single thing that Trump says and sort of contrasting their opinions against some of Trump's more controversial statements. I know you've been following the current president.

We talked about this a little bit earlier this morning. The president left the United States a happier man. Is he gonna return even happier? He certainly is.

Jonathan, when you see that the Democrats have now retained control of the Senate regardless of what happens December 6 in Georgia. And Jonathan, I have to say, that's really on display here in Bali. I spoke to Admiral Kirby. He says the president has the wind in his back. I just spoke with the president's deputy national security adviser, Mike Pyle. He didn't want to delve too much into

politics because he's an economics guy. But he said what foreign leaders see in the United States right now is a resilient economy. And the strength that President Biden has now off the heels of these midterm elections is the fact that they are now willing to listen to him, especially with open ears and open arms. And a third conversation I had was with

the European Commission president, Ursula von der Leyen. And I said to her at the same time, you have a number of countries in Europe taking aim at the United States when it comes to live free inflation reduction act. And what that means for subsidies for U.S. companies when it comes to the US

putting these sweeping curbs on semiconductors to China. You have these issues with United States. Isn't it all the same in terms of trade policy between Trump and Biden and she insinuated she preferred working with the Biden administration. I might get a catch up from Bali. Emily Wilkins down in D.C.

said about the fantastic as always, equity always got what they wanted in the last week. Gridlock, almost the downside surprise on CPI last week. Got that PPR this morning. Got that, too. Earnings will mop better than expected

and throw in a big buy back into the mix as well. Wal-Mart in the free market up by more than 5 percent going into the opening bell. Joe, wanted to come to you on that. I don't know. Maybe you can't touch.

Name specific stuff, but just give me an idea of what you think when you see a name like Wal-Mart outperform the way it has done. Is that good news or bad news? It's it's been said too many times already, John. But that's the moment we're in right now, is one in which I think good news really is bad news, because as as we were discussing before, there are so many ways that the Fed can normally cause an economy to cool off and achieve a stable level.

Today, unfortunately, it seems that the only way that the federal will achieve its its goal is by causing some meaningful unemployment. And so easier financial conditions, the stock market rallies at the bond market recovers. If if companies find that their earnings are doing better, if retail sales remain strong. Of course, that's good news in the broad sense.

But from the standpoint of markets and also from the standpoint of short term economic equilibrium, you need to see, I think unfortunately cooler labor market to to have confidence over the next one or two years. Governor Cook speaking right now, saying she wants the Fed to have a sustainably strong length of market paid. Is that wishful thinking? Well, you know, there's what needs to happen in the near term and then there's what needs to happen over the long term. And it's interesting when you speak to former Fed officials, when one does and you ask them, is there a place in policy for cyclical recession? It almost causes us a short circuit of sorts. And they look at you and they sort of say, well, as policymakers know, we never want to see a recession. But the fact of the matter is, you know, recessions are part of the business cycle in capitalist economies and societies.

And one of the things we're dealing with right now is this hubristic attitude that recessions can and should be prevented at all costs by the monetary policy authority. I think that the folly, frankly, and that leads eventually to, you know, quite to quote Nassim Taleb, you know, a more fragile marketplace for assets and a more fragile underlying economy. And I think that's what we're on the cusp of right now. And notwithstanding that, you're talking about this with futures up two and a half plus percent. Yes. It doesn't change that. What happens when we're all expecting

the same thing? No. DAX Renaissance Macro said this with me a little bit earlier this morning. I think it's important to go through it with you both. He said recessions work through an element of surprise. What if recession has been what they expected, but growth is picking up? He went on to say At the moment, consumer spending is running 4 percent in real terms. What would you say? Back to that, Jared? Well, it's true that consumer spending is up high. And I think the key question from an

investment point of view is, is whose expectations? Because as we saw there, the survey data earlier this morning, you can see in the market now fund professionals, investment professionals have a certain set of expectations. But that's such a tiny sliver of the broader equity market and the economy as a whole. And it's the expectations, I think, across the broad economy and even across the broader investment landscape. Look at what household investors are doing, for example. They're not bearish.

You haven't seen major outflows from the broad swath of American investors this year, something that you did see before prior market lows in 2009 after the dot.com bubble, even 2015 and 16. If we if we find a low in this market and rally to a new bull market of the next five to 10 years, it would be the first time in history that we would have gone through some type conditions and a difficult period without seeing major outflows from investors. So I think the important thing to remember about expectation is whose expectations? How big a deal are they? And sometimes, you know, investment professionals overstate a little bit how important they are in the broader scheme of things.

Final word and almost laughing at Chad. Final word on that one. But you know how much you love it. When I answer your questions with a question, some tell you it. When is the last time you have seen a

consumer look at a full punchbowl and go? No, no, no, no, no. I've had enough. Happens every single time the consumer spends until there's no punch in the punch bowl. Finish your chaotic childhood. ISE got into the up tempo, so it's unclear to me given where equity futures are up by one point six percent on the S&P 500, you know, to lower the dollar's weight of a down 5 basis points at a front and on a 10 year down about five basis points as well. Euro dollar back to one eye for euro

dollar, let me say a year and a September ninety 536. That's close to a 10 percent rally just like that. Coming up, the money kills in late Sacha Seaney of Advisers Capital expecting Fed speakers to pour cold water all over markets.

That conversation at the open about. Five minutes away from the oven about equity high by one point five percent on the S&P. That's the price action case of Monaco's. First up, Jeffries initiating coverage on Harley Davidson with an underperform rating. The stock's recent rally is overdone. Bank of America resuming its coverage on Netflix, whether by seeing a stronger outlook for international subscriber growth. And finally, most nicest and stunning

Amazon with an outperform rating, expecting further market share gains through 2023. That stock is up by 4.5 percent. Coming up, Wal-Mart kicking off big retail results, topping estimates and boosting the outlook. More on that conversation with Joanne Feeney. Coming up. Equity market bulls, your sense rally came out. What a run we saw Thursday, Friday caused Monday picks up again on Tuesday. Equity futures up by one point six percent on the S&P, on the Nasdaq 100, up by 2.5 percent, a catalyst for this morning.

We kick kind of the back of another downside surprise and inflation. The metric of this time, CPI last week, CPI this year up an ambassador to the board and get to the bond market treasuries look like this yields on a 10 year right now down 3 or 4 basis points. We're off session lows, 381, 162 on a 10 year. And the effects market Eurodollar mentioned this briefly earlier in the hour.

Cable, the pound against the US dollar has gone from one to 360 at the end of September to about 119. Euro dollar has gone from about ninety size to one of four in the same period. So we're talking about nine per cent moves on euro dollar and even more than that potentially on sterling. I'm real outside of that crude. Eighty five twelve.

We're down nine cents of one per cent and outside of that there's only one stock going on right down right now. It's Wal-Mart and Wal-Mart. Thirty seconds into the session is flying up more than 5 per cent with that story is epic. Hey, John. Yeah. Wal-Mart is flying this morning, its best days since the spring of 2020. But it's not just Wal-Mart. It's also Home Depot. And the reason we want to bring in Home

Depot is the contrast between these two reports now on the surface. Home Depot's report is OK. They beat, however, when you dig beneath the surface. Unlike Wal-Mart, their transaction

prices were up about 9 percent. But foot traffic down 4 percent. That's not the right kind of detail that you want. Inventories also remain loaded up 25 percent. They only held the outlook, which suggests they could miss the fourth quarter. Wal-Mart, on the other hand, strong,

strong, strong. They beat earnings by double digit. SALES also beat by three point three percent. Inventory below was halved. And they're also talking a strong game

for the holiday season that folks will probably be out shopping. One question could be that if folks are going to Wal-Mart, more so because of the price being more attractive there. Will it steal from other places? We don't know. But it's interesting, John, from a stock perspective, if we go into the Bloomberg terminal, it's very interesting because back in 2020, we've seen both staples and can discretionary a peak. The P E that we're looking at in blue, that is discretionary to Staples coming in as so interesting, John, what in white, real wages coming into a negative. So as Americans have less money to spend discretionary P E, it's still high that 26 times forward.

But it's coming in closer to staples of a great work. As always, thank you. Wal-Mart this year up by more than 5 percent on the session on the year. I'll bring you the year today as well, because compare this to the benchmark, the S&P 500 on the index and compare the yearly performance of Wal-Mart. So what's happened with Amazon this year? Wal-Mart's now just about positive for 2022. Amazon is down by 38 percent. Compare and contrast the fortunes right now, what we've heard from Wal-Mart this morning. So what you're hearing from Amazon at

the moment. Amazon preparing its largest ever layoff, planning to cut 10000 jobs. This coming after the tech giants chairman warns of a recession coming. The economy does not look great right now. Things are slowing down. You're seeing layoffs in many, many sectors of the economy. People are slowing down. The probabilities say if we're not in a

recession right now, we're likely to be in one very soon. So my advice to people, whether they're small business owners or, you know, is take some risk off the table. At Ludlow joins us now on the West Coast a moment again. Yeah. Good morning, John. That softness in US producer price is clearly the catalyst across technology is the Nasdaq 100 pushes to its highest level since mid September. You look at Amazon and Apple, the two biggest points, drivers to the upside on that index, seeing tremendous gains in both of the stocks. Amazon perhaps feeling some read

through, some feel good from what we saw in Wal-Mart, given that a big part of that story is hiring, come spend hours going into Wal-Mart stores ahead of the holiday period. Both the weaker PPA print and also the Wal-Mart results might bode well for Amazon in the last three months of this year. This story, according to Bloomberg sources, is 10000 jobs to be cut as soon as this week, according to sources. But context, this is less than 1 percent of its workforce. That chart tells the story. Higher energy and labor costs from an

already bloated business really impacting Amazon, not just on the retail side, but it's a W.S. in the form of margin erosion in the third quarter just gone. And this is what the street has been calling for and therefore cheering as you see the stock push higher on news, not just at that soft inflation percent, but also on the efforts to cut prices. Apple is another one that I am keeping a close eye on. John, this story here. They're going to be offering discounts of 8 to 10 percent for business customers who are buying up Macs.

This is a rare move, a rare promotion from Apple. It's a different level that they can pull right in the demand side when things are difficult at this end of the year. But again, that stock higher by 3 percent. Caught up in this broad feel good we see in the technology sector losing your job before Christmas. Just absolutely brutal.

Ed, thank you, sir. Looking forward to the show a little bit later. Atlanta, like from San Francisco Giants fan, he's got things to say. This is what she has to say.

Market volatility reflects the eagerness to catch in recovery versus the fear that more rate increases must come for the Fed to control inflation. Expected downswing with a big bucket of cold water this week. Opportunities are growing, but patients will be required. Jan joins us right now. Joining us, amazing because the Fed is pushing back. I heard that from Governor Wilder in a

massive way Sunday evening. But it's not shaping this market in amongst a way in the way it used to. What you make of how the markets responded to the Fed speak for the last couple of days. Well, you know, John, we've gotten a couple of data points that have really been encouraging the lower CPI front, the lower PPR print than expected. The Fed closed all has a lot more work to do. And we've seen these kind of rallies in the past over the last nine months or so. And the Fed, you know, speakers have

been coming out and saying, hey, wait, don't you know, don't discount the fact that we have a lot more work to do to get inflation under control. We're a very long way from that 2 percent target. And so, you know, my concern is people should just be aware that there's a reasonable chance that some of the Fed speakers are going to come out and say, don't you know, don't discount the fact there's a lot more work to do to bring inflation down. We're going to continue to raise rates and we're going to be paying attention to the data. These are just two data points. There's a lot more work to be done from the Fed. And so just be a little cautious to

expect volatility to continue here. John, let's discuss how corporate America is handling some of these issues. We'll start with retail and then move over to big tech, the retailers that are reported so far. Home Depot, Wal-Mart. Wal-Mart's flying. I know you like Target and TJX the last time we spoke. What are your thoughts on what's happening there now? Yeah.

Now what we're seeing, right, is that consumers are bifurcating. We have folks at the very high end of the income scale who really aren't affected very much by gas prices, food prices, small part of their budget. But in the middle and lower right, clearly they're feeling the pinch from inflation. They're still in better shape in terms of their balance sheets. And so I think, you know, one of the reasons why Wal-Mart saw the increase in foot traffic and transactions is that, you know, folks are shifting down to cheaper alternatives for retail and for food. Wal-Mart has seen that increase in foot traffic. And I think for T.J., Max, and for

Target, we're likely to see the same thing. They've all done a good job of clearing up the inventories of the more discretionary products that didn't sell well. And they're holding more necessities. And I think what we're going to see is a consumer shift from higher priced alternatives down to these bargain opportunities. And I think that's worth targeting, T.J.. Max, really thrive.

Plus, T.J., Max is getting an inventory on the cheap as other retailers have to offload stuff that didn't sell very well. The inventory pace of the story is massive for the inflation backdrop.

It's fed goods, disinflation, and you start to see that in the data. And BlackRock has picked up on that thing. Goods inflation is easing as it needed to. But the labor constraints, driving wage growth and core inflation persist.

So the Fed is still on a path to create a recession via policy over timing. BlackRock goes on to say stocks on pricing that and we stay underweight. John, can you work with me that just how much work do we still need to do to bring expectations for earnings lower down and to wall? You know, clearly that we have a significant labor shortage in this country, and that is problematic for the pressure on wages. And that's a contributor to inflation, obviously.

I don't think is necessarily the case that we have to necessarily end up in a recession. But the job openings numbers are extremely high relative to folks looking for jobs. And so if we just see enough discouragement of economic activity to reduce job openings, that could take a lot of the pressure off of wages.

But as you pointed out, Jonathan, the next shoe to drop may be further reductions in earnings expectations for next year. And that's something that reflects that consumer spending power in real terms is going to decline, even though their balance sheets are pretty strong. And you know that that's, I think, the bigger concern now going forward, as you know, inflation numbers come off peak. The next question is how much will

earnings estimates for next year have to be reduced from where they are today? Let's talk about it. They've come down a lot already. BlackRock say expect zero earnings growth next year. Are you alongside them? You expect it to be that bad? You know, John, the way we like to look at it is look at the individual companies and individual sectors, right, since we build portfolios out of individual stocks for clients. We don't have to own the whole market.

And so that overall expectation isn't as relevant to, you know, to our selection. But we'd like to do is look in areas where growth can continue. You look at health care, know earnings there look very solid. They've actually been constrained by shortages and those shortages are easing. So that's an area where you can still find growth. But, you know, in some of the places in software, for example, we could see more declines in certain areas of retail.

We would expect to see more decline, especially in those sort of mid to high end, high end retailers. So really, it's it's definitely a time for investors to be more selective, because overall, yes, we do agree that average earnings estimates will be coming down 0 overall, perhaps even negative in some areas. Joanne, let's pick one name, Amazon blend the two stories, the Southwest story cloud and what's happening with e-commerce. The secular secular growth themes that people were so bullish about had a name like this one. Are they stronger than the cyclical test this company's going through right now? Well, yeah. I mean, if you look at Amazon, clearly,

you know, they had to build a massive warehouse capacity. They had to really load up on labor in order to handle the increase in demand through the pandemic. And now what we're seeing is they're being pretty nimble. They're saying, OK, we're going to we're going to offload a number of warehouses. We're going to reduce that footprint. We're going to scale back on the workers because we just don't need them anymore. We're seeing online sales as a percentage of total retail revert back to pre pandemic levels. And we think that overall that when you

look at Amazon as an opportunity in your portfolio, you really also have to look at how they're going to emerge from this with the cost cutting on the warehouse and labor side. And then that's going to point to a bigger share of their earnings coming from the cloud side, from Amazon Web Services. And that's an area where there's still a lot of growth ahead as companies continue to ship to the cloud, as more and more Internet traffic pushes the demand for data handling and Amazon Web services. So that's a you know, they have a dominant position in there. It's profitable. And we think that's going to be a bigger share of valuation for the company going forward. So, you know, we continue to think that

Amazon is a good opportunity here, provided that you have a long enough term view to get through this retail cycle. Stock is up this morning by three point five percent. Juliette Saly fantastic to catch up with you. The broader equity market up by one point six percent on the S&P 500, on the Nasdaq up by more than two point three percent.

Coming up on this program, FDA spreading down right the way throughout the crypto industry. If you're running a background check on somebody like Sam, you're not going to find anything. You know, he's unblemished, if you will, prior to this incident.

That conversation next. Is Bloomberg's the Open? I'm Lisa Mateo, live in the principal room. Coming up, former ECB president John Claude Trichet. That's at twelve thirty p.m. New York, five thirty p.m. in London. This is Bloomberg.

You keep showing a balance sheet that may or may not be accurate. You're being shown the income statement as it may not be accurate that have been validated by your reporting. That's pretty rough. That's very hard to see through. If you're running a background check on somebody like Sam. You're not going to find anything

unblemished, if you will, prior to this incident, the dramatic collapse of ISE RTX wiping out roughly 200 billion in crypto market value. BLOCK chain CEO Peter Smith weighing in on the longer term implications. I don't think the institutional beat is actually going to fade here, but I do think it will delay, you know, the Wellingtons. A T Rowe Price is the truly like enormous asset manager is that you'd find in the equity space. Team coverage begins right now with that low on the West Coast. Alongside me here in New York, Glenn

Beck Sonali Basak. John, you hear what the blog Tidjane Thiam had to say about your DAX. But you do see it now. Ken Griffin also telling Bloomberg and I'm quoting him here, FTSE X is an absolute travesty in the history of financial markets. People are going to lose billions of dollars and that undermines trust in all financial markets. Now, when we look at the Chapter 11 filings as they pertain to RTX, possibly more than a million creditors here are at play. In fact, there's so many creditors that they are trying to toss out the traditional rules of contacting the creditors by physical addresses and instead use customer email addresses.

We'll know by November 18th, the 50 largest creditors. There's also a more at play here as new directors are named and SPF himself posts a series of very cryptic tweets spelling out what happened is what he is asking. He also tweets out, not legal advice, not financial advice. This is all as I remember it, but my memory might be faulty in parts. Now, remember, other exchange executives are also testifying. You have by NANS executives and galaxy obsessed executives testifying just yesterday over in Europe.

Galaxy executives saying this is less of a crypto issue and more of a governance issue. While you have by announcing that they will submit evidence in regard to their pending acquisition that they had then since stepped back from, as well as that sale of FTSE tokens that had led to a lot of the demise and the roll forward towards the bankruptcy. I've got to say, given that people have lost lifetime earnings on that platform, it is shocking the attitude he's taken out on Twitter recently.

Love to like this asset class still grappling with this loss. Yeah, I mean, broadly, crypto currency is now rallying. Go on, C.R., wipe crip, go on your Bloomberg terminal. You see a lot of green on the screen and particularly some of the tokens associated with FTSE. And Sam brings them freed, including

Salina, which over a 48 hour basis continues to make gains. The main piece of news driving this is buying and saying that it plans to launch a crypto recovery fund that will help otherwise strong projects in the industry that are facing a liquidity squeeze. I think what's really interesting is focus on what happened here with the FTSE Kotok in itself. Some analysis from Bloomberg Intelligence FTSE printed one hundred sixty nine million new FTSE tokens, about three hundred and three million dollars worth. On November 13th, which inflated supply to the tune of one hundred and forty four percent. There are some strange dynamics at work

here. But ultimately this is the roots of what was happening here. The other piece of news overnight is not just that finance will submit evidence to UK lawmakers on what their talks were to buy RTX, but also their decision making behind selling out of the FTSE token the native token FTSE. One final term, which I if I may, John,

a sign of how quickly things changed at the end of October. Bitcoin was less volatile than 99 percent of stocks on the S&P 500. Look at the bottom panel. Well, that change pretty quickly. And a lot of the anxiety we've seen in markets stems from what has happened there. And I laugh because actually to me, that

is an astonishing chart given how much we've assessed and analyzed the relationship between risk assets over the last 12 months. Thank you, Mike. We're going to leave it there. Now I want to give you the final word, leverage. Talk to me about leverage. One thing that was interesting that Peter Schiff had said online in response to Cece's effort to the industry bailout fund is crypto is really the first shoe to drop. You had Sisi there by Nancy ISE speaking to 40000 people on Twitter yesterday, saying that he didn't really take a lot of venture capital money.

This all goes to say is this draws a lot of X substantial questions, crypto or not quite crypto. Who do you take money from? At what price and with what protections? Unreal. Jihye Lee. Thank you. Wonderful work. We going to catch SHOWBIZ TONIGHT through the week on this, of course. Well, to get to the broader market,

about 20 minutes into the session, the equity markets higher. The S&P 500 just just off session highs up by one point thirty five percent on the S&P, on the NASDAQ, up by 2 percent into the bond market, yields lower. But off session lows again. So that move post PPE this morning.

Downside surprise on P.I.. It's a little bit on a two year with down only two basis points to four thirty six on a ten year were down four basis points to three eighty one. The dollar weakness sticks for now. The euro dollar gives up 1 0 4 1 0 3. Ninety three is where we are on euro

dollar right now on that currency pound on the session. Euro dollar is just about positive still, but by six or seven tenths of one percent. Let's break down this equity market from the top. Lift the lid on the index and get some sector price action is happy with more. Hey, John. Well, that weaker dollar and yields down.

Well, that, of course, does have stocks up on the day, maybe off the highs, but nonetheless up one point four percent. And not surprisingly, all eleven S&P 500 sectors are higher. Now, the big mega cap tech sectors, those are the ones leading tech communications services and discretionary, as you've been saying all year, yields down, tech stocks up, stocks up. But tech stocks up in a big, big way. But even materials and energy are higher, too. Now, I really want to show you something that's outrageous because these are big gains. But China Tech, John, over the last four

days, it is up an incredible twenty four percent. Well, at this point, twenty three percent, that's still a huge gain for four days. And this, of course, has to do with the positive developments out of China, including the property save, lowering the Covid zero policy. And then what seems to be a positive meeting between President Biden and President Xi.

When we break it down further, this is helping out the chip space. We have the stocks trading higher by more than 3 percent. Some of those components and video and AMG up sharply on the hope perhaps that maybe some of the tensions between the U.S.

and China around chips will fade. And then there is Alibaba and AECOM China. Tad, back up on. If you bought CAC Web four days ago, you'd be up 25 percent. Wow. What a rally it's been.

Abbi, thank you. Now, just trying to take the Hang Seng more broadly. And Hong Kong is ripped as well. The DAX could finish today in a bull market. There could be benchmark in Frankfurt, Germany. What a turnaround it's been in European markets.

More recently, we heard from the Philadelphia, said President Patrick Harker just moments ago. We've been talking about crypto. This is what he had to say. I do not see the crypto market posing financial stability risk. He went on to say that Congress must decide which regulator oversees crypto on the inflation backdrop, which some of you might be more interested in. Patrick Harker did a speech last week on inflation. He set up like a rocket and down like a feather. This is what he had to say about

inflation this morning. The Fed can keep inflation expectations anchored. One thing we don't talk much about and should is balance sheet policy. What's going to happen with Kuti? He said the balance sheet belongs on the back burner as a policy tool.

Let's see if that remains on a back burner going into 2023. Coming up, more Fed speak. Still to come, I bring you the trading loss in New York this morning. Good morning to you.

Will you? Equity market rally resumes on the S&P 500 at one point four percent. This is Belinda. There's no reason for the tensions over Taiwan to come to blows or to come to any kind of conflict. Nothing's changed about our policy. We're obviously going to continue to support Taiwan self-defense. What we still adhere to a one China policy.

So there's no reason for this. And we want to see the tensions across the street to be solved peacefully. And no change in the status quo by force or unilaterally. And the president was very firm about that. Yes. Taking out some of the heat and the conversation between China and the United States, contributing to the overwhelmingly bullish theme of the last week. Things are getting better seemingly for

some of you. CPI downside. Surprise. PCI downside, surprise. Equities up by one point five percent on the S&P and the Nasdaq up by more than 2 percent. The price action. Let's get to the trading diary. Coming up, the Fed vice chair for supervision Michael Barr testifying on Capitol Hill at the top of the hour.

Retail sounds and a host of Fed speak coming up on Wednesday. Williams and Barr speak in once again. Plus, President Biden meeting with UK Prime Minister Ritchie soon going to G 20.

Looking forward to that. Another round of claims on Thursday as well. And more facts speak up about the mess that Jefferson and Kashkari all on deck. From New York City, thank you for choosing Bloomberg TV. Good luck for the rest of the trading day. This was the countdown to the openness


2022-11-18 16:22

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