'Bloomberg The Open' Full Show (12/23/2022)
Good morning. Good morning from New York City. For our viewers around the world, I'm Matt Miller in for Jonathan Ferro. And if he's watching this morning, I will see John. Merry Christmas to you. We are looking at S&P futures that are unchanged as our NASDAQ futures a slight gain in the small caps. 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. I will take it off, as John does every day with the big issue, wrapping up a messy year for markets and volatility to start the year.
It's been a pretty volatile time. We're seeing that volatility play out. We have had 10 year Treasury yields break 4 percent in this bear market rally in recent months. Inflation is still elevated. The biggest factor this year has been man made volatility, whether it's fixed income, equities, commodities, currencies have a war. We have Federal Reserve tightening rates. We have all types of things going on in the oil market that are beyond anybody's control. There's another shoe that has to drop
and that is the economy. We'll start to see some disappointing maybe as we move into 2023. You can go right in 2023. We don't think it's going to be necessarily a year of robustness. There's so much pessimism. This recovery isn't going to be easy. Joining us now is sides. Barry Knapp, as well as Ed Perks of Franklin Templeton to talk about the year that was and the year to come.
We got the last data points of the year trickling in with the personal consumption expenditure, the Fed's preferred measure of inflation coming in in line for the most part with expectations, although the core PCG year over year was four point seven percent. We were looking for four point six percent. Nonetheless, it's better than the previous figure of 5 percent. Barry, I'll start with you. What do you think about the inflation story for 2022, does it continue into 2003? Yeah, I think the the path from 9 to 4 or actually looks like 9 to 3 and a half by June is is very clear.
Goods inflation, which is the first order effect of the pandemic related inflation is coming down hard. The comparisons are such that those year on year rates are going to drive that headline number well below the current Fed policy rate. So they will be at sufficiently restrictive. It's quite clear that that housing related inflation will come down as well. And then to use Chairman Powers framework that he laid out at the Brookings Institute a couple of weeks ago. Services less rent of shelter or non housing related services.
Inflation has missed or been much cooler than expected the last couple of months, and that looks like it's coming off as well. The Fed's particularly concerned about wages driving that higher, but when you look at that, it looks more like an accounting identity that he's describing. Meaning? Yes, sure, wages are a big component of service sector inflation, but when you actually run the statistics on it, wages explain something like 18 percent of the movement in services prices. So it's a little more complex than Chairman Paul's been describing it. And I think it's it's quite clear that
inflation is on its way lower. The question is how low does it go? I think through the first six months of the year when it's falling, that'll be a good period for risky assets, for equities, even for treasuries, which remain overvalued. However, I expect it to stall around midyear and the Fed to have a bit of a quandary in the second half of the year. Do we continue to press his hard for or to get at the two as we did to get it from nine down to three? And let's bring it in and see what his take is. So add Barry thinks inflation is going to keep falling for the first six months.
The second half could be a little bit more difficult. What are your expectations, especially considering, you know, one more data point seems to show that inflation is indeed coming down. We peaked in June and now we're looking at a four point seven percent year over year core P.S.. Yeah.
Yeah. You know, I really agree with a lot of what Barry just described. I mean, I think the first half really doesn't present a lot of uncertainty for investors. We the feds really anticipated what the path is here.
Yes. We have some interesting data before that March 22nd meeting. But at this point, whether or not we peak at a 5 percent Fed funds or a or a five and a quarter is is really in the scheme of this last year, pretty irrelevant to to us. And I think Barry really hits it on the nail on the head, really. The second half of twenty three is where the uncertainty lies.
Does it take longer for inflation to get to the level that the Fed is going to be more comfortable with and certainly make any kind of pivot to what markets expect? Which is kind of cuts as we get closer to the end of twenty three. So that's where the uncertainty lies. And I think that's what the challenge for investors will be. But the good news is most of what's happened in markets, in monetary policy and in straits is behind us. So 2023 will not be 2022, which is good
news for investors. Well, we have Bloomberg economist Scott Johnson has forecast global growth of two point four percent this coming year, which is bad, right? It's if you take out the crisis years of 2020 and two thousand eight, then it's the worst in the last 30 years. Now, if you break that up between the US and Europe and what you see going on in Asia, the US looks a little bit better than Europe, maybe not as good as China post reopening. He sees the same kind of thing, BARRIE. He says the US is going to have a decent year, although the second half is going to be problematic. Why? Why is that? What's wrong with the second half that we can't fix now in December? Right. Well, the question is, why did we have
disinflation for 20 years and why will we not have disinflation for the next five to 10? And the answer is there. When you decompose inflation into its parts during the 2000s enthuse 2010s, all of the deflationary impulse came from one place. It was core goods prices. And I would attribute that to the massive labor supply shock that took place in China, which was the integration of 750 million workers or so that migrated from mud huts into the cities and put that downward pressure on goods prices. So as we go through a restructuring of supply chains d globalization process, it's unlikely we get that disinflationary impulse.
Additionally, the the amount of fiscal transfers that are going on right now and likely to persist even with some tweaks related to this omnibus bill are much higher than they were pre pandemic and have been rising for four years. And so that implies higher services sector inflation than the 3 percent or so trend we have for the last 20 years. So there's a whole range of things that argue that it's going to be very difficult to get back to two and that there's a question about whether we should go back to two.
I saw Ben Bernanke speak back in October and he said there's a good argument that, too, shouldn't really be our target, but now is not the time to have that debate. I almost wonder if at Jackson Hole next year, Michael, please be there. He's saying 3, maybe it better might. It might be. The real point is it should just be stable. We had stable prices in the nineteen nineties with a very low standard deviation of inflation and we had a capital spending boom in the 60s. We had again very stable prices until the end of the decade and we had a capital spending boom.
We just need stability. Whether it's around a 3 percent mean or a 2 percent for me is almost irrelevant. It can't be around a five or six. But that's that's going to be the debate that's going to take place in the second half of the year. And the question is, do they have the will to keep pushing? I would argue probably not.
It took 10 years of inflation. I create the political environment that made Volcker possible. We've had 18 months of it, so I doubt it. Ed, what do you think?
And especially as you know, as chief investment officer at Franklin Templeman, you've got to make investment decisions. So it affects, obviously, the path of rates, the corporates that you're buying. So what does what does it look like to you? Yeah, you know, I think we we've clearly set the trend, and if you look on the month on month numbers, they are coming down. We are trending towards that point. We can certainly envision getting to mid 2023. As Barry mentioned, maybe the Jackson Hole debate is around what level should we be thinking about for the next five to 10 years? And maybe that will look very different than the prior 20.
But it still doesn't change the fact that directionally we're heading in the right we're on the right path. And that certainly impacts how we think about about markets. We've obviously we're starting the year and a very different zip code, one and a half percent, 10 year to start this year, obviously, where we're sitting at 370 today. If you look at corporate investment grade, corporates in particular are much more attractive yield opportunity, a much lower bond price dynamic at play in today's markets then than where we started the year.
So we certainly are finding a lot more opportunities across fixed income markets. And the path that we expect for higher rates really indicates a somewhat benign market to invest in in that area. I think in the equity markets, it's a little bit more difficult. We you know, we do have some challenges, I think, with with corporate fundamentals coming out of earnings, you know, certainly may get through this period, particularly if economic damages is more muted or if it's more of a soft landing overall impact on the economy. But the reality is generating earnings growth or seeing a market that could that could benefit from multiple expansion really doesn't seem to be all that likely to us. So we're going to continue to be relatively cautious with equity markets and favorite companies that that potentially can deliver some total return with dividends.
And that'll be it. Well, it's certainly a focus. Well, we're going to talk about that. And you know how big a component yield makes up of total return. How important that is to investors in
2023. And also talk about how corporate earnings turn out in 2023. I've been talking with Barry about this a little bit, so I'm excited to get into it. Right now, I want to get back to the economic data, though, the big P.C. number that came out really the last big data point of the year. I think let's get over to our economics and politics correspondent, Mike McKee, to tell me if I'm right or wrong and walk us through what we saw.
You're always right that that's why you're in the big chair there. We're looking at, as you were saying at the beginning of the show, what's going to happen to the first part of the year. The Fed has already laid out its path and we didn't get anything that would deviate from that path. Today we saw inflation drop. The PCC measure, of course, is the Fed's
favorite measure of inflation. It's what their 2 percent target is based on the headline. And we've dropped now to 5.5 percent from six point one percent, a fairly major drop. That's got to continue, but that is progress of the core up two tenths.
Now, the core didn't fall as far on a year over year basis because October was revised higher, but it is still down. We're getting in the right direction. And here's something that's interesting. The Fed forecast at its last meeting, we're going to get four point eight percent PCG at the end of the year core PCG. Right now we are below that. It would take a major rise in inflation in the month of December and then we would look for us to actually go over what the Fed's thinking in terms of the economy, watch income and spending both down, which is something that the Fed wants to see. Durable goods orders down. So as we're capital goods orders. So basically we're seeing the economy slow. We are seeing inflation drop.
We are seeing what the Fed wants to see. All right, so we are seeing what the Fed wants to see now, and it would have to go haywire in December to get us above the danger zone that they have outlined buried Ironside. I know you do channel checks. You're looking at what's going on in this holiday spending season. We saw I think consumer spending actually ticked down a little bit, although personal income was up. If that happened in my household, my wife would kiss me.
What are you seeing for 4 December? What do you think the end of the year is going to really show as 20? It turned out. I agree with with Mike's general CAC characterization of the economy that growth is slowing. I think a lot of people have been thrown off this year by looking at the GDP numbers. I actually despise them and much prefer gross domestic income. Right. Because income drives spending both at
the household level and at the cap ex corporate level. Those numbers, particularly on a nominal basis, have been steadily declining. I will offer a little word of caution about the retail sales number we got. And that personal spending numbers the last couple of years, we've had real distortions in seasonal adjustment factors. So on a nominal or unseasonably adjusted basis, those numbers have surged late in the year. And then the seasonal ISE have actually
pushed the aggregate real number or the unadjusted or adjusted number excuse me down, but then they've bounced hard at the beginning of the year. So I think this is what happens in a you know, in a recession or big pandemic is a seasonal adjustment. Factors get distort the data for period of time. That same thing happened after the global financial crisis. So I think overall spending patterns are still pretty. OK.
All right. We're going to talk about that as well as how much consumers actually have left to spend because savings rates have been going down. But it looks like the stock of dollars, as Mike was telling me a couple hours ago, are still really high. Barry Knapp is going to stick with us from sides. Ed Perks from Franklin Templeton with us as well.
Coming up, the Senate passes a one point seven trillion dollar spending bill. A lot of hard work, a lot of compromise, but we funded the government with an ingress, aggressive investment in American families, American workers, American national defense. We'll talk about that potential inflationary impulse next. This is Bloomberg. A lot of hard work, a lot of compromise, but we funded the government within Greece. Aggressive investment in American families, American workers, American national defense. We believe we have real needs on the defense side.
Now with Ukraine more than ever. But we believe there are just as many and just as important real needs on the domestic side. Now, we got a whole lot done here. Chuck Schumer speaking there. The Senate passing a one point seven trillion dollar spending bill, doubling down on U.S. support for Ukraine with a fresh dose of aid as well. This as Russia considers cutting its oil output by 700000 barrels a day in response to the G7 ISE price cap on exports. Russia's deputy prime minister Alexander
Novak saying, quote, We'll try to find some common ground with our counterparts. But right now, we'd rather take a risk of production cut than stick to the policy of selling in line with the threshold. Team coverage starts right now. Bloomberg. Jack Fitzpatrick down in D.C.. Abigail Doolittle here with me in New York City. Jack. We'll start with you.
Give us what we know about this huge omnibus that Barry Knapp was referencing earlier. Yeah, it was. So this is the whole government funding bill. Plus some other stuff. There's about 47 billion dollars tacked on separately for Ukraine. This was a reflection of how lawmakers debated government funding. With inflation in mind, looking at the
purchasing power of the military, the Republicans pushed hard for roughly a 9 percent increase in defense spending. They tried to hold down the nondefense domestic stuff as much as possible. But that was difficult because Veterans Affairs health funds have their spending rate has has had to increase quite a bit. So you see a significant increase in discretionary spending more as a response to the inflation numbers that we've seen. Discretionary spending is the the minority of all federal spending doesn't include things like Social Security. So I haven't heard a ton of concern from lawmakers that this is something that would trigger more inflation and really that would be responsible for a growing deficit. But it's something where you get an
increase in the defense and nondefense spending and you get enough support on the Republican and Democratic side so that they were able to get this through the Senate. All right. And Abigail, you know, we talk about the Russian, the Russians possibly curtailing their oil output. We do see a bit of a bump in oil prices today. We're back up to eighty dollars a barrel in WTI, Brent. Over eighty two.
Yeah. Well, you know, it's not so surprising at all because in terms of this response from Russia, it's been long awaited after that price cap put on by the G-7, up 60 dollars per barrel. Traders really waiting to see how Russia would respond. One key point is it's not certain that this is going to happen.
It's made. Russia may cut its daily output by 500 to 700000 barrels a day. So the headline optics are very good. Not surprisingly, have oil popping on at the spike in energy, the war premium. The bigger picture, though, is the demand destruction that we've seen over, let's call it the last year, especially with China having been largely locked down. So we really have oil locked in this range at this point. Let's call it between.
I think you see oil go back up toward eighty seven on this war premium. This response from Russia and the deputy from Russia just talking about ISE, a conversation doesn't sound like it's set in stone. And then on the other hand, you have this demand destruction. It wouldn't be surprising after going back up toward 87, maybe down toward 65. The uncertainty here around the fundamentals on oil.
All right. Abigail and Jack, thanks very much for joining us on that. Let me get back to our guests here. Barry Knapp from Ironside. With me on set. Ed Perks, also with us from Franklin Templeton.
Ed, what do you think about the oil situation? I think it's interesting, not the Russian kind of noise. If we're not going to buy from them, they just sell it to the Indians or the Chinese and then we buy the refined products anyway. But that the Covid 0 reversal, I think is fascinating in that it's not really driving oil or commodities prices much higher. Yeah, well, I think we're in the early days of seeing exactly what it will play out in the Chinese economy as they move beyond the China, beyond the Covid zero policies. So I think as we think about twenty three and unwind of that or the demand weakness or destruction that happened in 2022, we might see the other side of that, particularly in the middle to back half a twenty three. You could see some demand strains. I think you also have to think about
things like the Strategic Petroleum Reserve and the draw down of that in a twenty two is unlikely to occur in twenty three, and in fact we'll probably see the opposite at some point. They need to restock some of the inventories we have in the US. Barry, what do you think about you know, I think it's fascinating to follow what's going on there, because in China, you know, there's the potential for huge demand. On the other hand, we've got a headline across the terminal earlier that they're looking at. Thirty seven million new Covid cases a
day. And that's just what they're telling us. Right. So how do you gauge what used to be really the driver of global global growth? Yeah, I always viewed China's impulse to the rest of the world first from it. Just trying to track it perspective, looking at their ordinary imports and those have been decidedly weak. So we've seen no pickup.
You'd assume that after they get through this Covid wave that you'll have two offsetting inflationary shocks. One will be disinflationary, which will be supply chains clearing further and further downward price pressure on goods prices, but then commodity prices headed back up. I think the energy market is undersupplied.
It was one of the things that was missing from the omnibus spending bill was Joe Manchin deal to get permitting reform, wasn't there. So I like the energy stocks for a myriad of reasons until going into next year. Yes, in part because what shale did was fundamentally changed. The elasticity of supply used to take four years to drill a well in the Gulf of Mexico. If you capped it, it was gone.
You can now restart a well in approximately three weeks. So those companies should have much more stable return on invested capital over time. And it's an undersupplied market for for a myriad of reasons. And I think those stocks are going to they're gonna be secular outperformance. All right. We're gonna continue to talk about the effects of that bill that you brought up and we talked about with Jack Barry Knapp and Ed Patrick sticking with us coming up the morning calls. And later, a miserable year for big tech heading for its biggest annual decline since the financial crisis.
More on that at the opening bell. This is Bloomberg. This is the countdown to the open ISE Matt Miller in for John Barrow. Time for our morning calls. First up, Loop Capital downgrading
Paramount to a sell. The analysts seeing a challenging return to profitability next August, raising its FedEx price target to two hundred dollars a piece highlighting the stocks attractive valuation. And finally, Wedbush cutting its Tesla price target down to one hundred and seventy five dollars. The analysts expecting the automaker to miss production targets coming out. The five biggest names in tech shedding nearly four trillion dollars in market cap. This is the countdown to the open on Matt Miller in for Jonathan Ferro moments away from the start of trading on this, the last trading day before Christmas. We looking at futures that are doing a
whole lot of nothing in terms of S&P futures now down about three tenths of one percent. NASDAQ futures off half a percent. They have crept down over the last few minutes. Small caps, little changed right now. There you hear the opening bell on the
New York Stock Exchange. Let's take a look at how other asset classes are moving right now at 930 on a Friday morning in a very cold and well, no. A slightly cold and very rainy. New York City was dumping it down this morning. Take a look at Tesla. First of all, there one stock that is we're going to focus on in a moment. But the dollar, the euro dollar 1 0 6
right now and the U.S. 10 year yield a little bit under 370. Tesla trading at one twenty five ninety eight. It's up about two tenths of a percent. I might have expected a bigger pop had I not known that Elon Musk has gone back on his word a number of times.
He reiterated in a Twitter spaces, which I don't know what that is. But apparently some kind of public interview forum that he's done selling shares is not going to sell shares for another two years after dumping nearly 40 billion dollars of his holding. Take a listen. I'm not selling any stock for I don't know, but at a minimum, 18 to 24 months. So you can count on me like most. No stock sales to probably order twenty five point twenty five or something. But he's promised already twice this year that he wouldn't sell any more stock and he's come back with huge billion dollar sales. So here's Bloomberg's ad Ludlow in London with an explanation.
Good morning, producers in the control room. Let's bring the shares back up. We're now down six tenths of one percent, sixth straight day of declines. The higher open was very short lived.
Six straight days of declines on this stock. That's the longest streak of declines for Tesla going back to March of 2020. We're trading at the lowest level since September of 2020. Musk said as you played that sound bite, he will not sell any test.
The shares over the course of the next two years or in the next two years. Not this or next year. 2023, at least you are right, Matt. He said something similar in April and August and then followed by selling big trunk shares of the stock. He has sold 40 billion dollars of Tesla shares today in large part, of course, to finance the equity portion of the package to buy Twitter. What was really interesting, actually, this decline in test the shares, if you strip out options. Oh, look at the timing on that. Terrific.
Space X is actually now his most valuable holding. It's the biggest individual piece of his net worth. According to Bloomberg Billionaires Index Net Wealth Analysis, which I think is interesting. Musk has been on Twitter a lot now. I mean, you were gracious enough to have me on your show earlier. We were talking to Craig Trudeau about the emphasis Musk has been putting on the macro and also the Fed's. Raising rates, the outlook for rates is
being sort of indicating that that's been what's weighing on the shares. But there's also elements. That's his brains. I think that's right. Well, that's what he's saying, at least. And I think Dan ISE of Wedbush had an interesting note out overnight, actually, where he says essentially that right now Tesla needs a leader, it doesn't need a TED pilot. I think, you know, the film I'm referring to, Dan ISE is referring to in that.
But, you know, keep looking at my screen because it's really interesting, this reaction. We were up, you know, sort of 1 percent in pre market and we very quickly turned negative again. So, again, you know, I guess it's a question of how much the market believes that Moscow will follow through with what he said. Can I say, first off, Ed, it's our privilege when you join us on Bloomberg Surveillance EARLY EDITION. So we were glad to have you with us.
You talked a little bit with Craig Trudell. You and I both talked a little bit with Craig Trudell, Bloomberg's global auto czar, about Tesla shares about Elon Musk this morning. He does. The CEO blame the Fed. He has in a tweet blamed the Fed for the collapse and Tesla shares. Meanwhile, shares of Ford shares of General Motors, they've climbed. So it begs the question, why does the
Fed herd this Eevee, you know, start up, if you will, and doesn't hurt these giant gas incumbent players? Yeah, I would point out and you know, I'm trying to get the data up on my Bloomberg Markets Tesla. When last I checked is a stock that trades at thirty three times forward earnings. It is a stock where analysts on the sell side and investors that hold the stock that I've spoken to, they acknowledge the macro headwinds. Right. Particularly around the story in China where there is a want for more information about production because they spin disruption to production. We also want to know about the demand picture because there are indications, for example, the seventy five hundred dollar incentive as of yesterday on new test of vehicles before the end of the year at all.
Price cuts in China. There's a lot of unanswered questions and it's a very good point. And Tesla trading at 30 times forward earnings. GM and Ford trading at five times forward earnings. Ed Ludlow there covers well, he covers a lot of stuff for us tech mostly, but also cars in a sense.
So tech stocks getting hammered really across the board in twenty twenty two is a horrible year for big tech, the biggest player shedding 4 trillion dollars in market value, as we were telling you. Let's bring in Bloomberg's Abigail Doolittle to talk about really the crash of these mega tech stocks. Abigail? Yeah, it's really pretty incredible, Matt. And the crescendo seems to be here in December. Overall, we have that Nasdaq 100 down about 8 percent heading to its worst month well, since September because it has been a rough year. But the percentages are pretty staggering for the month of December.
Apple down 11 percent, Amazon down 13 percent. Microsoft down six point seven percent. Alphabet down 13 percent. Any way you slice and dice it pretty brutal in there is that 10 percent decline for the Nasdaq 100. Very interesting.
Out of the October low, it had actually been up 15 percent. So really giving a lot of back about it. And you know, the reason that Tesla has that higher valuation, well, it does have the technology piece. It is down in this month down. Thirty six percent revision, though,
down 80, 38 percent. Lucent down 32 percent. So EMV overall taking a big hit in December. A piece of this having to do with yields rising. That 10 year yield up about 13 basis points.
That, of course, makes these companies look even more expensive. But to your point on the year, Matt, while the Nasdaq 100 has now been below its 200 day moving average for much of the year, the longest period since going back to 2008, 2009. So it's been a rough, rough year. One point I would make, though, Matt, we still have that Nasdaq 100 up more than 5 percent from its October low. So let's see what the new year brings.
Absolutely. Abigail Doolittle, thanks very much for that. Got to get back to Barry now from Ironside and Ed Perk from Franklin. Franklin Templeton to talk about a little bit about valuations. Barry, you heard Ed talk about Tesla's valuation compared to GM and Ford. Obviously, it's huge.
I just looked at the NASDAQ trading at I think forty five times earnings overall. But if you just look at those that actually make money, it's about 20 times earnings. The S&P trading about 18 times earnings are valuations. Do we need to rethink valuations for the end of 2023? I think Elan Musk should thank the Fed and the Treasury, for that matter, for the excessive valuations that were created in 2021 when the Fed was injecting a trillion and a half of liquidity into the market. And the Treasury, through aggressive management of their their account at the Fed, injected one point seven trillion in two thirds of the time. That drove valuation to levels that
still look excessive. I mean, without that kind of froth, he would never have been able to pay forty four billion dollars for Twitter. Right. So if you break the equity market into three components, tech and tech related defensive sectors and then the economically sensitive cyclical sectors, tech is still rich.
It's been getting valuations have been getting crushed all year, but still expensive. The defensive sectors are now excessively valued because people piled into those as we're going through this broad fed related correction and the cyclical stuff all looks cheap. So in a microcosm that was your Ford GM versus Tesla dynamic. And you know, given my relatively optimistic outlook for nominal growth next year and limited earnings downside as a consequence of that, I think the cyclical sectors are still the place to be.
So I think tech has another year on the stocks here. And I think adding I mean, Ed, jump in here. What do you think about these companies from a fixed income perspective? You know, our yields high enough now that you want to be involved. You are already involved there. Are you worried about a wave of defaults? Maybe not for the big cyclical, you know, established cyclical players. Yeah, you know, this great point, Matt.
I think when we look at at the comparison of of investing in the equities of companies, they just probably in the S&P 500 versus the prospects of investing in their longer term debt securities. If we were to go back 12 months, especially for dividend equities, I mean, those yields compared very favorably to the yield you can get by investing in their bonds today. That's a very different situation with investment grade corporates now yielding well into 5 percent.
So what used to be a deficit in yield from bonds relative to stocks is now quite a premium. So in many companies we've actually seen that dynamic and have aggressively repositioned out of equities where valuations still look somewhat unattractive in and in favor of debt securities. So, you know, as Barry laid out, though, I think those three kind of ways to think about tech tech related defensives and and cyclicals, you generally agree with that assessment. I think for tech, we do need to step back. You really can't look at just this past year and those major declines in the real mega cap technology companies that were listed on the screen shortly ago.
If you step back and look where they're trading relative to certainly pre pandemic levels, it really is an unwind of a lot of that. Just hyper growth that we experienced from June of 2000 through the end of 2021. All right. Ed, it's been great having you on the program. Ed Perks, Ed from Franklin Templeton, Barry Knapp, as well from Ironside. We've got to get you guys back and preferably together in the same studio.
Right. It was really great talking to both of you. I want to get to some of the other stories that must have caught your attention as we get closer to the end of the year. Yesterday, for example, Sam Banks freed,
released on a 250 million dollar bond just 48 hours after touching down in New York City. It's one of the largest pretrial bonds in U.S. history. But fascinatingly, at least to me, it's secured by his parents house in California, which isn't worth two hundred and fifty million dollars.
It's not even worth twenty five million dollars. So who knows how these bail bonds work? And educationally, Bassett has the details on everything else we want to know now. What can you tell us about Sam Bank when freed and his cohorts at the bankrupt RTX? Yeah. If you think about it, Matt, that 250 million dollar bail package, one of the largest in U.S. history, it compares with two hundred fifty thousand. When you look at the bail set for his colleagues who are cooperating with authorities right now, that is Carolyn Ellis and Gary. Gary Wang was an RTX founder.
And of course, they themselves are facing a number of charges by the U.S. attorney's office. Now back to swimming with freed himself. To your point, this 250 million dollars at his parents house is securing this bond, except for even his parents house is not even anywhere near that amount. According to our own Crystal Nash, typically you only need assets worth about 10 percent of the stated amount here. The idea here is for harsh punishment, harsh financial consequences of bail jumping. So really the idea here is to make Sam
make me free. Now that this is serious. This is a long fight ahead. He is expected to appear in court again in early January. January 3rd. Certainly, this case has quickened very, very meaningfully. Of course, concurrently we have the bankruptcy proceeding happening for RTX as well, in which they're finding out more details about how the assets have been used, as we know from the S.E.C. and CFTC cases.
There is a lot of allegations about signing personal loans to themselves from FTSE acts as backed by the customer money over at RTX to buy things like luxury homes and make political donations. So following the money is going to be what's next. All right. Sean, Ali, thanks very much. Nellie Bassett there reporting on FTSE. I will say that The New York Post.
Reports that the bank men freed home is worth about four million dollars. So it's not quite 2 percent of this giant bail bond that we're talking about. Coming up, a weird warning from a much more expensive house. The White House in Washington, D.C. Please take this extremely skittish and bush to let you have travel plans. Leave now. We'll talk travel accounts. Paul Allen Becker. Still ahead.
This is Bloomberg's The Open. I'm Lisa Mateo, live in the principal room. Coming up, PGI, Ms. Michael Collins on Bloomberg Real Yield. That conversation at 1 p.m. New York, 6:00 p.m. in London. This is Bloomberg. Please take this to your boss to let your travel plans leave now. Not a joke to my staff.
My staff leave tomorrow morning. We leave now. Don't leave now. That was a warning from the president yesterday. Leave yesterday is what he was saying. Surging Covid case is weighing on China's economic activity. A huge storm working its way through the US.
All of this. Maybe a caution to investors in transportation and airline stocks. Maybe you want to watch out whether you're investing here or there. You're not. You shouldn't maybe be expecting a pickup anywhere around the world, said Secretary Anthony Blinken. In terms of China urging more
transparency amid concern that officials there are downplaying the impact of reopening. We've got team coverage of both of these stories right now. Michelle Cortez joins us from Hong Kong alongside Brian Sullivan in Boston. And Michelle, let's start with you on the China story. I saw a headline this morning that China
itself says 37 million new Covid cases a day. Is that true? A single day, that is what we are learning from our reporting inside China's top health officials. They're saying that they expected on December 20th that there were thirty seven million infections on that day alone. So far in the month of December, almost a quarter of a billion infections. Two hundred and forty eight million. Of course, the thing to keep in mind is
that testing has fallen off the radar screen entirely in China. So we don't really have great data, but that is the number that they are estimating from the very top in China at this moment. So a massive amount of infections. And I guess the result is, Michelle, that a lot of people in China are just staying home. They're not going out and booking trips or they're not taking the trips they have booked. They're not driving around, filling up their tanks and using oil everywhere. They're just going back home, even if
they're allowed to leave. Exactly. They have lifted all of the restrictions, of course. There have been incredibly tight lockdown measures and other types of mobility limitations in China throughout the entire three years of the pandemic. Even when just a handful of cases pop up, they shut everything down, that there is nothing to what we're seeing now where people just aren't going out themselves. They're allowed to go out. The stores are theoretically open, but there aren't people to staff those stores. There are people to run those trains. And people are staying home either because they're sick, their family members are sick, or they're desperately trying to not get sick.
There is definitely not a lot of action happening right now in China. All right. What an awful situation. Michelle Cortez for Bloomberg News, thanks very much for that, Brian Sullivan. Let's get to you in Boston. We have our own travel issues here, but those are all weather.
What does it look like right now? We just heard the president warning last night. So we've got a widespread storm that's going to leave a lot of people home alone in the dark without their Christmas gifts. You know, more than twenty three states have power outages. Thousands of flights have been canceled. Ground transportation is tied up both on the roads and the rails. And FedEx said that they can't deliver,
they can't guarantee deliveries for Christmas. All right. So I'm looking to fly back to Jamaica tomorrow morning, Brian. What are the chances that my flight actually leaves LaGuardia? So, you know, you probably have a good chance. But the thing that might get you is that
all people did evacuate before their flights. And, you know, they're having traffic problems moving planes around the country. You know, there might not be a plane for you. There might be no room for you. So that's the kind of thing that you
might encounter or lots of delays or long lines at the airports for people to go through security. Well, let's let's hope against hope that I make it. Brian Sullivan, thanks very much for that. Brian Sullivan giving us the latest on
the weather and there could be delays to your Christmas deliveries. Let's talk a little bit more about what's going on with the airlines. Cowan's Helene Becker joins us now. Lynn, thanks very much for your time on this Christmas Eve Eve. What is the general situation for the
industry now? You know, we've reopened. We've passed, I guess, the pandemic, as far as I can tell, for months and months now. How has has the recovery been? It's it's been better than, I think expected domestic leisure travel is is above 2019 levels. International is about 20 percent below
as this business traffic. So we're routinely screening between two point one on the lowish and in two point four or five million on the high end people a day that are traveling. And that's pretty much equal, very close to the 2019 average. So we've definitely seen an improvement. We've seen a shift in mix away from very deep discounts to people buying up into either premium economy or the business class section for that extra comfort. And I think that that spend on services this year, this quarter and this holiday season have been very strong. So I know you've got basically buy ratings, outperform ratings on a number of these airlines.
I'm looking through Delta, for example, United Southwest. What gives them an advantage over the others? Yes, I don't I'm not sure United has an advantage today as the storms have moved across the country. So it goes from San Francisco, Denver, Chicago and a. Kind of in that order in their hubs, just get hit on a rolling basis. But that said, in general, Delta, United
in and southwest here, I think that most some of the more interesting names, Delta and Southwest just have very good balance sheet. Southwest has a fortress balance sheet. They came through the pandemic really well. They have net cash. They announced earlier this month that they're going to resume the dividend and which we expected we expected them to announce that I didn't expect them to go back to the full 72 cents a share, of course. Annual dividend, which they did. So the stock will yield about 2 percent. Delta, we don't expect them to reinstate the dividend before the first first half, I think of 2024. Basically, they're paying down debt.
They've got a deal. They've got on the table with their pilots. So they want to get through that. And then we expect that first half of 24 is when they'll resume their dividend. Elaine, you have an outperform on FedEx and just a market reform neutral rating on U.P.S.. They're going to be ISE, I expect,
equally hit by this bad weather right before Christmas. Yes, yes, yes. And the difference really is more to do with the U.P.S. Teamsters contract coming due July 30 first. And the prolonged negotiations we see for most of the year, because both are really, again, great companies, good balance sheets. U.P.S. commits to returning 50 percent of adjusted net income to shareholders in the form of dividends. So really high quality balance sheets
for both companies. FedEx is going through their continual cost reduction program, which I think for all the three decades I've covered the stock, they've always and they've always had in place. But yes, this is this is just unfortunate. There's nothing you can do about the weather. I think everybody probably understands that. And the packages will they'll do their best, right? They'll do their best to get them there and they'll deliver Christmas Day if they have to. All right.
Elaine, thanks so much for joining us. Lane Becker there from Cowen. We wish you a merry Christmas and happy holidays as well. Time now for the trading diary. What you need be watching this week. You miss consumer sentiment survey coming out at the top of the hour.
Then, new home sales. Rounding out the week. Markets are closed, obviously, on Monday. That's Boxing Day. But we get it because Christmas comes on a Sunday. Wholesale inventories for inventories, if you're British, come out on Tuesday. Thanks, John.
And finally, another round of jobless claims on Thursday to wrap up the data for the year. Take a look at what's going on in the markets right now. Just 25 minutes into the session, the S&P 500 down half a percent. The Nasdaq down 1 percent. No Santa Claus rally today. This was count down to the open.
This is Bloomberg.