Bloomberg Markets (01/07/2022)
When Guy Johnson. It is 30 minutes into the US trading day on this Friday January 7 Peppy Jobs Day. Here are the top headlines that we're following for you at this hour. Is it a green light for a March hike. The market looks through the stingy headline number the unemployment rate drops and wages rise. Does this mean the Fed can start hiking in March. And you got that yields spike. How
far can that go. The five year yield at one point topping 1 5 the highest since January of 2020. Its Treasury space the biggest weekly loss in two and a half years to infinity and beyond. Virgin orbit goes public through a spark at the end of twenty twenty one. It's been a rocky start for the year. So we're going to sit down with founder Richard Branson and its CEO Dan Hart. We're about their satellite launching dreams from New York. I'm Alix Steel with my goals in London. Guy Johnson.
Welcome to Bloomberg Markets guy. The story that jobs number that unemployment rate under 4 percent under the neutral rate for the Fed. Yeah under the hood this number looks pretty good though. That is the real takeaway here. I think if you look at the unemployment number it looks really strong. We got an inflation number coming up next week that is going to be super strong. Marty Walsh is the US labor secretary. He's with John Farrow. Thank you Team Secretary Wallace. Joining us right now from Washington D.C. secondly Walsh always fantastic to catch out with you sir. Let's just start with this labor market. Tremendously difficult to read. I look at unemployment. It looks
fantastic. The payrolls number just a little bit disappointing. Secondly was how would you characterize where we are right now in America in this labor market. Well I think if you look back on 2021 the president passed the American rescue plan. Since that time six point four million jobs have been added to our economy. Eighty four percent of people are back to work. We are prepared Demick. We've dropped almost three points off the unemployment number in 2021 which is the lowest since the 1940s. We're seeing a lot of positive signs that we did. We know in 2022 we're still that we still are living within the pandemic.
So we have work to do as we move forward. You mentioned inflation. The president is focused on bringing inflation down. The president's economic policies continue to work. We're going to continue to move forward here in 2022 to try to make sure we get Americans back to work and continue our strong economy and economic recovery. Well let's focus on what we need to do some work. Right now the unemployment rate the headline number with a three handle. Secondly was two years ago that was unthinkable.
It's fantastic to see. But the black unemployment rate actually climbed from the data that I'm looking at right now. And secondly what I'm trying to understand what you're doing in your department specifically to help do something about that. Well it's really unfortunate. You know last month we had nearly a four point drop in for the black unemployment rate. And today we had an increase in the black unemployment rate. And what's even more alarming we saw the black female unemployment rate even go higher. So we're working to make sure that we continue to to create opportunities whether through job training workforce development. When the president talks about building back better aside from the legislation he wants to create
pathways into the middle class and in communities of color in particular. Our community is a community that that he wants us to focus on. Equity has to be at the forefront of our recovery. In the bipartisan infrastructure law as we passed we've been talking about you know as we get these dollars out into the street these investments aren't history. We need to make sure that the black community Latino community also benefits benefit from these investments and create opportunity for these jobs. As you know so another big focus for the administration and for you personally has been on vaccines and vaccine mandates. I
understand the Supreme Court will hear some appeals today related to those mandates. You can litigate that now sir. I want to focus on this. How do you plan to enforce those mandates. Secondly Wolf. What's the plan. Well well let me just say today is a big day here. You know on the issue in front of Supreme Court number one legal experts we say that we clearly have legal authority to do it. Number two emergency medical experts support us as well on this. And number three getting this passed would
be a tremendous help to make sure we keep people safe and certainly making sure people with the undercurrent variant jumping up without support whether it's vaccines testing or masking. So we're going to be doing it. We're going to be interested to see what happens. And quite honestly I think with enforcement many companies are doing this already. I said to America I think many companies is going to do it. We will enforce it. We will go out and make sure that if the Supreme
Court comes back and rules in the way that I hope they do today that we'll be able to we will enforce it. But I don't think there's going to be an issue of enforcement. I think many companies are going to be very helpful. I'm very hopeful that this does go into existence because they want to get people back to work and they want to keep their employees safe. Quite honestly there is a testing option associated with this mandate. So let's talk about testing. The CDC says that if you've tested positive for Covid five days passes and you no longer have symptoms you can go back to work without a test. Secondly what is that something you support. Well the testing option here is that if you if you are somebody
who does not want to get vaccinated you show us that weekly. That's the option here with with the with the emergency temporary standard that's being debated today in front of the Supreme Court. On the other rules I mean I know the CDC you know this virus is changing in the rules that the recommendations change often. It's very when I say this that the virus is very unpredictable. And I think when the CDC comes down they're following the science and they make a ruling like that. It's based on science. Do you think it's based on science or scarce resources. Because as you know there's a problem finding the test not based on science or scarce resources. No I believe it's based on science. So I don't think it's about resources. You
know the president talked earlier this last month about getting more testing out to America. You know companies are ramping up that their ability to create more tests are way out of this is really going to come down to vaccines and testing. We're going to have the test more people so we can really get a good understanding of what the variant is and what the Corona virus is. You know I've said this more than one time but when I saw before I started this job I was mayor of the city of Boston. And you know in the beginning days of the pandemic we put a big emphasis on testing. When that when when the when the
vaccines came we didn't put such a big emphasis on testing. It's important for us now to continue testing. There are obstacles to get back to work for those individuals even if they follow the CDC guidelines. And as you say you believe it's shaped by the science. There are corporations that still require a negative PCR test. So I'm trying to understand from your perspective
whether that's the right approach because I can't reconcile the two. Secondly whilst on the one hand the CDC and yourself say after five days no symptoms you've had Cosette you vaccinated you don't need a test go back to work. The companies are stopping people from going back to work unless they have a negative PCR test. The CDC is saying don't get a PCR test after
you've had a positive test from Covid. If you no longer have symptoms you may well test positive for up to 12 weeks. Don't worry about it. You can go back to work. Secondly once you've got some work to do to help people get back to work are companies doing this wrong using the PCR test to make sure people come back to work with a negative PCR. Well I'm not as familiar with how many companies are demanding negative PCR tests. I don't want to give the wrong answer. So I wanted to somewhat do some homework on that before I gave that answer. But I will say this you know companies companies want to make sure that their works for workplace are safe. And if their requirements
are requiring something above what the CDC requires then I commend them for it to make sure that their employees are safe. Some people staying away from the city less than away from work altogether. As you know Mayor Adams of New York City the new mayor who I'm sure you've spoken to recently as well sir said this to us recently. You can't run New York City from here. We must have everyone on. Depending on our financial system to allow the low skilled and unskilled hourly employees to actually
be part of our ecosystem how important is it. Secondly WALSH To get people back into the offices. That's something that you share a belief that you believe in to. Well certainly as a mayor you want to get people back in the office because you downtown communities your businesses your restaurants your shops your retail depend on having people in there. But I think again right now where we are right now we just need to continue to be vigilant in making sure that we're
keeping people safe and creating that opportunity for telework. Right now as the undercurrent variant is getting higher is important. I think Mayor Adams is talking about long term as well. And certainly that's something if I were mayor of Boston I'd be wanting to get people back in the office as well. I'm sure leadership down in D.C. wants people back in the office back in Washington too. Secondly well see if you move there yet full time. You know what I'm here. I mean I'm here. I'm here. Often I don't have an apartment. I don't know what why that became such a big
issue. I guess I can live where I want to live when I'm down in D.C.. So you know I can live where I want to live. But certainly in D.C. you can see the capital behind me today. You know why. Was because they believe that at some point you come back up north. You go back to Massachusetts again. You come back to Boston.
I listen I'm going to retire in Boston. I'm going to live in Boston and the rest of my life and certainly. And you know right now I'm here in D.C. working for the president last year. You know I've traveled to 30 states 60 cities all across America getting the word out on the great work that the president is doing. We're going to continue to do that in 2022. Secondly
Walsh thank you Marty Walsh getting a warm Marty Walsh the secretary of the Labor Department down in Washington D.C. from New York. This is pulling back. Let's get to the Question of the day then you just heard Marty Walsh talking about those strong job numbers and how Covid interplay is with all of this. The U3 rate under 4 percent so
below the Fed's neutral natural rate of employment. So raises the question is the data a green light for a march like green light for a march hike. We're going to break this down over the next couple hours. Julia Coronado macro policy perspectives founder and president. And at Mona Mahajan Edward Jones a senior investment strategist. Guys thanks so much for joining us. Julia. Is this a. Is this a green light for a march hike. Deutsche Bank says more hikes starting March. Yes I think I think it is. I think what we're seeing is whether you know despite the discrepancies between the household and payroll
hiring numbers all of the signals are that the labor market is tightening and is tight whether it be the wage gains the unemployment rate all of the measures of underemployment including people working part time in voluntarily and other dimensions of underemployment that were such an important source of downward pressure on wages last cycle. They're tightening very quickly. So this is a workers job market. There's more demand and supply. A lot of that for the prior discussion is still tied to Covid. But those frictions aren't going away. And so the Fed needs to calibrate to the current economy and at least get going on rate hikes. I think a March rate hike is definitely a go. Mona what's your view on that and if the Fed is in a hurry how different does my portfolio look in 2022 than it did in 2021. Yeah absolutely. Look this job market was once again indicative as Julie mentioned of a tight labor market. It's really a supply
issues still. You know where are the the labor supply. Whereas labor supply in the U.S. we're still about three point six million jobs short of where we were back in February of 20 20. So you know increasing demand short supply this is a Fed that's still going to be worried about labor force participation rates about being brought in inclusive in the labor market recovery really about what's going to be the impact of the AMA cron variant and the virus uncertainty going forward. So I'm not
quite sure if it's a complete all clear here. Tightening rates and tightening policy aggressively at this point may not address some of the issues we're seeing on the supply side certainly on the supply chain side. So it's one thing to keep in mind as we go forward. I do think we do think as a team the Fed still has room to be patient to be deliberate especially as we head to the
second half of this year from a portfolio and market perspective. We continue to favor those value cyclical parts of the market especially in the first half of the year. We're certainly seeing that play out and we won already. But as we move forward and as growth moderates you know investors will be looking toward sources of growth and maybe a little bit more defensive in quality. So tech areas like Staples health care all become part of a balanced portfolio in 2022. So Mona to that point first of all I'm glad we all got the color coordinated memo guys. That's a big win for us right now. But Mona so on that. Do you buy the dip in tech then in sort of just set yourself up for that kind of shift in the back half of next year. Yeah you know we think the risk reward is getting more and more interesting especially if we get a few more days
of this sell off. Look historically since a pandemic we've gotten about three times where we've seen this movie play out. Rates move higher parts of tech move lower. In fact on average it lasts about 21 days or three weeks. And the NASDAQ sells off from its recent peak about seven to eight percent. So the Nasdaq is off about 5 percent. Now if we get a little bit more downside from here we do think the risk reward becomes interesting especially for longer term investors and for those investors who really haven't built the exposure to this. This area that they've like to it's come much earlier than we anticipated. But
we do think kind of taking advantage of these opportunities and in periods of volatility is certainly what we've been calling for in 20 20 to. Julia to that patient points the Mona raises. What do you think next month's number looks like. I macron would have had some impact in this data. What about the next set of data. Yeah and then let me start by saying I agree with Mona that the Fed does have scope to be sort of methodical. But the stronger the data are the more it needs to get going on that methodical approach to policy normalization and hence the March rate hike. But what did the numbers look like in January. Well you know we are already seeing the moderation in hiring in leisure and hospitality. That is not just a function of Arma KRON but just a function of the ongoing pandemic in general and leisure and
hospitality sector that may remain below its prior level of employment. People just aren't going to go out to the extent that they did before. And I'm Macron only reinforces that. And I think the broader point of what we're seeing in the slowing in hiring is that the sectors that are most impacted by Covid health care state and local governments leisure and hospitality. This is where the hiring has slowed the most is likely to continue to remain pretty sluggish especially taking into account macron. So I don't think that we should expect to see hiring numbers in the neighborhood that we saw last year. And we're going to have to get used to a slower pace of hiring in 2022. We're just going to see slower numbers and those
sectors impacted by Covid are going to struggle to find the workers they need and want. So how does that forecast then for the label. Labor force participation rate because as John and Marty Walsh were just talking about minority unemployment didn't really move the needle. Women didn't come back into the workforce to the same extent. Julia. Yeah I think this is a process that's going to take time. There are real frictions for people. How many schools and daycares
right now are having to shut down because of outbreaks. And that puts parents in a difficult position to navigate that. So yes that's a friction that's going to keep hold people back for longer. And sorry I can't. No we love it. We love this. No one's in. So yeah I mean those frictions and I think we saw that in the minutes from the December FOMC meeting. But now there is an acknowledgement on the committee that this process of healing
in the labor market and labor force participation we still expect it to happen. They still expect it to happen but it's going to take some time. Mona where does this all leave the consumer. We're going to get the CPI number next week. Wednesday seven point one percent is the headline number. Ali earnings coming in much like much below that. Are we going to see a
consumer squeeze this year or what is going to be the impacts of that. Yeah. You know look we're still seeing a consumer that's actually quite healthy and that's thanks to not only some of the people in stimulus programs we got earlier in this year. It's also due to an elevated savings rate. You know people are at home more. They're not spending to the extent that they were prior to the pandemic. And so that really puts us in a position
heading into 2022 with the consumer with a very healthy and strong balance sheet. The question will be you know some of the demand that's pent up as the supply chain issues kind of you know unfold will that demand still be there as we start seeing easing in supply chains. You know labor markets easing as well. If that is the case we think this could be an interesting year. You know we still expect economic growth which keep in mind GDP growth is 70 percent driven by consumption. We still expect above trend economic growth in the 4 percent range. We still expect earnings growth to be 7 to 10 percent. Consumer and
corporate balance sheets remain healthy. And so really what we're looking at here is an economy that perhaps is somewhat delayed but not entirely derailed by both the virus uncertainty and the supply chain uncertainty. Quick question 20 seconds for each of you. This year curve steeper or flatter. Sara you Mona. We expect the curve to actually steep and we've already gotten a bit of it this week but we expect some steepening as the 10 year heads to 2 percent. And as those Fed expectations are flattened. Julia I think it's a more open question with front loading of said rate hikes. You could end yet a lot of indications that trend growth isn't necessarily higher than it was before. What we can see is just an earlier path of normalization which could mean a flatter curve even though the whole suite of rates goes higher.
OK so a bear flattening uncertainty is the word I would take out of all of that. A lot of it seems to be around at the moment. The path forward looks a little hard to read right now. Julia Coronado Macro Policy Perspectives founder and president and the camp. Thank you very much indeed. Tomorrow Rajan Edward Jones senior investment strategist. Thank you very much indeed as well. What are we going to talk about next. Capital as ETF getting battered. Tech turmoil certainly hitting every single U.S. ETF led by Kathy Woods. There's one ETF that's gaining on ox pain. Want to talk about that story next. This is Bloomberg.
Payrolls Friday but it's also ETF Friday. Will it be at how Kathy Woods funds are hurting from this huge tech selloff we've seen since the start of the year. Let's dig into the details. We play books. Katie Greifeld Well guy we know that last year was rough for Cathy Woods. So far 20 22 doesn't look much better if we look at her biggest fund the ARC Innovation ETF fell over 7 percent so far just in the first five trading days of this year. If you will get the other side of the trade the total Capital
Short Innovation ETF that tracks the inverse performance of ARC CAC. You can see it's higher by oh I'm sorry it's up over nine and a half percent that arc in these vacant ETF down by over 9 percent. And it's really interesting if what this means for the flow show you can see that the investors really poured billions of dollars into that arc k funds in 2021. They hung tough for a while but now you're starting to see some outflows. Six of the last seven months have seen investors actually pull cash from Arc K and the fund is on track for a second straight week of outflows. So far this week and that cash is finally starting to come out as you see the ETF start to hit its lowest levels since about September 20 22 which really comes as no surprise if you look at some of its top holdings that you can see it's really a lot of tech names and Roku in particular. That is the third
biggest holding in the fund. It's down about 19 percent just this week alone. Yeah it's been a pretty brutal brutal week. All right Katie thanks. Slap them with Katie Greifeld joining us there. And this dovetails with the market action today. The Nasdaq now down by three tenths of one percent. Terrible start to the year. Yields pushing higher here. The five year one point breaking 1 5 which lead us to the question of the day. The payrolls data. Is it a green light for a March hike. IRA Jersey chief U.S. rate strategist for Bloomberg Intelligence joins us now. Is it.
It is. I know the the data was good enough that there is no reason to think that the Fed's going to wait to hike at this point. You know we had been thinking they were gonna hike probably in May. Kind of give it one meeting after they were done with asset purchases before they hiked. But at this point it seems like they're pretty keen on hiking and this data certainly helps their case. Mike I'm sorry IRA. I'm always good to talk to Mike. I need to get that straight from one of those kind of data. I apologize. Your patience has also been amazing. IRA talk to me
about the sequence here. How is this actually going to work. The Fed is basically compressing a lot of stuff into a very short period of time potentially here. We're going to have taper. We're going to have hikes. And we potentially could have Kutty just talk me through the timeline of how this is now going to work in your mind. Yes. So the way that we're thinking about
this at this point is is you know the minutes on Wednesday made it pretty clear that the Federal Reserve is worried about flattening the yield curve too much. And the only way that they can avoid significant flattening of the yield curve this year is by not hiking as much as the market currently has priced. You know maybe maybe hike more over a longer period of time as opposed to hiking a lot very early. So so and they explicitly said that they might use balance sheet policy as a way of avoiding a significant flattening of the curve. So what does that mean. Well that means maybe they go three times this year. We're thinking maybe March June and then probably December at that point but then start in July with their run off of their portfolio. So basically letting their mortgage backed securities and treasury securities mature and then the Treasury Department has to sell more bonds on the other side. And that should keep the curve from flattening too much over the course of 2022. It
will flatten probably one way or the other. The Fed is going to be in hiking mode. But it will flat and maybe a little bit less severe than the market's currently pricing. OK. So what is the path of least resistance for yields then on that forecast. Let's go with the five year because it is underperforming and then also really yields. Yeah. So I think the belly is likely to underperform over the next couple of months. But the but but ultimately you know you mentioned that hey it hit one point five percent today which obviously the tenure was only there at the beginning of the year. So but but I think that that the bear flattening case is pretty strong this year. That is our what we think will be the major theme for the market is just generalized
bear flattening. We think the 10 year will reach right around 2 percent by year end. I mean it could could reach there in a couple of days. Just given the strength of some of these moves. But people have reset short. So one of the reasons why you saw that big move the first couple of days of the year was people had basically gotten out of short positions in December. They reset those at the beginning of this year. So I think that the market is a little bit better prepared for higher rates now than it was on December 30 first. It's going to be an interesting year isn't it. There's a lot to squeeze in. IRA thank you very
much indeed. Always a pleasure. IRA Jersey of Bloomberg Intelligence. What's next. Well let's talk about Virgin albeit the stock is up today but it's had a really rocky start. This is a spark that we're talking about here. The company has gone back. I'd gone to this bank recently. Richard Branson is going to be joining us. Dan Hart the CEO is going to be joining us. That's next. This is Bloomberg. We are one hour into the U.S. trading session. Such an interesting week after that jobs number two yields higher tech lower. But it feels very different than what we saw earlier in the week. Abigail Doolittle is looking to all the moves. Here
with us Nasdaq 100. Now I'm looking at down one six tenths of one percent. Yeah. You know Alex. Alex another weepy day and a weepy week. This start this new year lots of chop and volatility. So the S&P 500 the NASDAQ 100 earlier higher. Now we have that NASDAQ to Alex's point dead about six tenths of one percent right now on pace. The last time I looked for its worst week since October. At one point though yesterday it was on pace for its worst week since February depending on the level of the decline. Interesting though is the fact that the China Tech Index is higher up two point three percent. This despite the
fact that yields are higher. It seems like a little bit of a bounce back or catch up for a badly beaten down sector of course last year. This index falling more than 4 percent. Now this source of pain for tech this week is clearly this 10 year yield backing up over the last five days. This is extraordinary backing up 25 basis points or a quarter of 1 percent. One seventy seven basically the highest level since January of twenty twenty one. And of course this brings into question valuation on tech stocks. It also helped out the banks and the energy. So this week we have this huge divergence between my gosh Wells Fargo up 14 percent on the week. I believe that's its best week since June of 2020. That's the kind of buying power of
course. It's one of those big money center banks. So when yields go higher it really helps out their lending activities. Exxon Mobil up 12 percent this week. That's extraordinary. This is not a year not a month not a quarter in one week. Of course being helped out by oil. But the cycle value reflation trade it is in full force. On the other hand Apple down two point nine percent this week off of its lows but nonetheless not a great way to start the new year. And in video down even more down six point two percent. Now one reason to think that more volatility could be had. I love this term. Chris Murphy of Susquehanna joined us
on Options Insight yesterday. And he's making the point he doesn't think that the tech selling is over. The reason being there's not enough stress showing in the market. So one way to look at it on bottom here is the 10 year yield. So back in March of 20 21 when the 10 year yield was around current levels. That's when we had a pretty big sell off for the Nasdaq 100 in particular that showed with the VIX VIX in which is the Nasdaq 100 VIX relative to the VIX spiking super high. So telling you that the tech index that there was a lot of stress there. Right now we're not anywhere near that level. Alex and Guy suggesting
again there could be some more pain ahead for tech traders. We've got great stuff. Thank you very much indeed. That is a fantastic final chart by the way. I think Alex was going to use it a little bit later on in our battle not battle of the charts. So that's right. Emily Chang now looking for a substitute. Well I think that's something that involves backwardation. Maybe
that's that's commodities. Maybe go down that road. Go go go. I'm busy now. OK. I got work to do. So I'm looking at a shot. I got bars on my screen. Right now we're waiting for the president. He's going to be speaking with theoretically at around 45 minutes past the hour. We'll see what happens in terms of when the president arrives. But we are going
to hear from him talking about what happened today with the payroll number. What that means for the economy that he manages. We heard from Marty Walsh a little bit earlier and we may also potentially get some news in terms of the Fed picks as well. What are we going to hear. Well let's go to D.C. right now. Amari hold Bloomberg's Washington correspondent standing by.
She's at the White House Armory. Over to you. What are we going to hear from the president. Well the president's likely going to talk about the fact that even though the payrolls number was a mess there's two big importance of it component of it there were positive. First would be the revisions for October and November and then that unemployment rate dropping to three point nine percent. We are just a smidge off of where we were pre pandemic of the three point five percent level. That is something the president is likely going to focus on the fact that this there is a recovery
and then he'll probably try to take a moment to push through his economic reforms and the challenges he's having within his own party to get build back better through one of them is the child tax credit. And if you look at what's happening with women and the participation rate much of the partition patient rate for women still remains low. Very much so. Women are on the sidelines of this economic recovery. But the past four months we have seen women coming back into the workforce potentially. That could be. And I'm sure the president would like to make this argument because there's extended child tax credits. This can be an avenue for him to try to pivot on what more needs to be done in terms of his economic legislation.
We will look forward to that as it happens. We will bring you the president life when he speaks in a few minutes time. As I say I'm looking at color bars. The shot coming out of D.C. right now. We are expecting the president to speak in around 10 minutes time. We'll see exactly what the timing looks like. Let's completely change gears. Let's talk about something completely different. Virgin. Orbitz its stock is up today but it's been battered since it started trading on the Nasdaq a few days back. It's the world's first responsive launch system. Basically it's sending smaller satellites into low earth orbit.
This is technology they're using. It involves a 747. They fly the 747 pretty high. They launch this thing up into the atmosphere. It's a different tactic obviously to the one that's being used by Space X and others. Here to talk about this and where the space business is going next. Sir Richard Branson Virgin Obeid founder and Dan Hotz the company's CEO. Gentlemen
happy New Year. Welcome. Thank you very much indeed for your time. We're looking forward to talking about all of this. So Richard if I may start with you. When we'll talk about Virgin Orbit in just a moment. But I want to get an update on how you're feeling. I understand you've been hit with Omicron over the last few days. How are you feeling. How are you coping with it. And does this change your attitude towards testing when it comes to travel. I'm feeling great. We've had about 30 family members and friends get home a crime over the last few weeks.
Fortunately none of them have had it worse than. The common cold and some of them my wife didn't even realize that she had it. So I think the positive thing is that we were all we all were vaccinated and we will boost it. And I think that as long as people can get backstage and boost it it's likely that for the vast majority you're hardly going to know you've had it. Richard just one quick follow on that. It's
Alex here in New York. And Guy was mentioning is it change how you feel about testing to go on vacation and go on airlines. It is quite confusing to figure out what's what. Well I think that the British government the German government have just basically made very good moves and that is to say the testing is is no longer needed.
And that becomes is a fact of life and that people should be able to get up and travel again. So people should be allowed to go on holiday. People should be able to go on business again without without the big expense of testing. And I hope hopefully other countries that are still left to remove that will do it. Because you know I think you know the facts are that you know
this is just something we're going to have to have to learn to live with. We've had it for 30 30 months. We've just got to get people back. We've got to get people to sit. And then we've just got to get on get on with things. Dan let me turn to you. Let's talk a little bit about Virgin Orbit. It was a really tough year last year for space related stocks. You've come to market. You've done this back. The stock has taken a little bit of a hit. I think over the last 10 days I just checked the numbers were down by around a quarter in terms of the value. What is it going to take to get space into people's minds into investors hearts to convince them that this is a place that they want to allocate money to. We've seen
obviously huge amounts of money pouring into the evey sector other high technology areas. What is space to do. What does this business need today. What does Virgin Orbit need to do to convince investors that this is the place to invest in. Well so no one 20 21 was an incredibly exciting and successful year for the company. We proved our technology. We went into commercial
operations. We put 19 satellites into orbit from paying customers from NASA to international the international community the commercial community and the national security community. So for our company we pierced the pandemic and drove a new technology into space launch. And what will we have to do. We've got to continue to do that. In the last eight weeks we
penetrated the market more than we ever have. We signed a deal with Asiana Airlines for 20 launches out of Japan. We signed agreements with new space technology companies like hyper set for hyper spectral imaging of the Earth. Arquette The quantum encryption from Space Spire Boeing other companies. It's it's frankly a very exciting time for us. What we need to do is continue to do that and that's what we plan to do. We have a rocket that's in my hobby right now. Being ready for launch over the next few days will launch that. We have launches coming behind it. We have the first launch out of the UK coming this year. Our system is unique in that we can launch
from pretty much any airport that can handle a 747 across the world. I suggest that guy go on location for that. We'll be circling back with you guys. Yes. For the UK launch Dan there are different aspects to space. One is going to be deeper space exploration like Mars one's the moon. One space travel on one is low earth orbit. And that's satellites that are closer to Earth. And that's really where the fundamental moneymaking ability is going to be. How big is that addressable market in the market for for space you know is growing overall space is growing to be a well over a trillion dollar market from about 400 million right now over the next 15 to 20 years. So the forecasts are very strong. Low Earth orbit small satellites is the the strongest part of that growth. And our system is geared towards making sure they can get to the right
orbit at any time to maintain the connectivity to their customers or from the national security point of view to do critical missions. Dan is there a plan to evolve the business model beyond launching the rockets the satellites from below a 747. Is there a a different model that you could ultimately end up pursuing here and as an extension to that question. If not do you see yourself in a different market for instance to space X. So we
have reached into very unique markets. I mean for instance you know I mentioned the U.K. We can set up shop and give countries the capability to launch from their sovereign shores without them doing much except use an air an existing airport their environmental benefits to it. That ground launch doesn't have as well as flexibility and affordability. So I mean there are almost 80 space agencies across the world right now. Only about 10 countries have space launch. That's a huge business opportunity. Additionally in national security which is becoming more and more important. I mean you've read about the the Russian anti satellite test for instance. We can be available in case a satellite is threatened or damaged and put them up in a moment's notice. And hopefully that that disincentive in incentivizes aggression in space. Dan it feels like every
company out there is trying to get involved in space to some capacity. Recent Chinese complain to the U.N. about space X Starlink a near miss with the space with their space station. How crowded is it getting up there and does that limit the addressable market for you. You know the what's needed in space really I think everybody is in agreement on this is is more international collaboration and cooperation in infrastructure so that we can do space traffic management just like we do air traffic management. Today we have the technology but we haven't made the investment as an international community yet. So the U.N. working with the main space providers really need to provide that once they do. I mean you know think about the
number of aircraft that fly every single day. Space is much bigger. If we can control it and coordinate it in a similar way. There's a huge amount of upside to space. It's pretty much balance. Things move things move pretty fast up there. So Richard the spec that you're celebrating today is one of a number potentially that you could be involved with. There's been
some reporting in the U.K. over the last few days that you are looking to sponsor a spike let's call it circuit to 100 million. That could be that could be launched on the the Amsterdam market potentially in Q1. Is that something that we can confirm. Is that something you're talking about. Can you give us an idea of what your plans are around that. Not talking about it today. I love Sudan. I live in a houseboat for a lot of my life. And so you know maybe I need a new houseboat. So maybe you'll see me in Amsterdam sometime sometime soon.
Okay let's. Let's turn to another potential IPO. She's done a great job strengthening and stabilizing Virgin Atlantic. You recently injected some money. Delta also injected some money into the business as well. Does that mean that an IPO is not happening for V.A. or are you still considering that as an option. I personally haven't actually considered it. The team explored lots of different ways of keeping Virgin Atlantic going and strong over the last 30 months. And I have enormous respect for what shined the team have done and where they're coming out on the other side. Now I think with the new moves by the British government in getting rid of testing that's going to mean a lot
more people travelling. You know I think hopefully we can start looking for the red mirror when it comes to coding. So you know so where they've got them they've got the money to do the job without IPO knowing who's to know what might happen in a year or two or three years time. You you wouldn't know. All right Richard thank you very much. Richard Branson founder of Virgin Orbit and Dan Heart CEO of Virgin Orbit as well. Guys really appreciate it. Thank you so very much. OK. We are awaiting President Biden's remarks in December. Jobs
report. In the meantime quick check in here on the markets. NASDAQ. One hundred rolling over by a full percentage point. Now around the lows of the session. You also the 10 year yield now rising to 1 7 7 8 the highest since January of 2020. The bell is still under performing though. The markets definitely on the move. Higher yields weaker tech. That's the story. This is
Bloomberg. This is Bloomberg Markets I'm rich could get to you're looking at a live shot of the principal room coming up from the New York Fed president and Bloomberg opinion columnist Bill Dudley joining Bloomberg TV. That's at 3:00 p.m. in New York. This is Glenn Beck. Let's check in on the Bloomberg Businessweek News Farmers could get day was the weakest U.S. jobs report of the year. Employers added just under 99000 jobs in December. That's less than half of what the median estimate was in a Bloomberg survey. But the
employment rate fell more than expected to three point nine percent and average hourly earnings surprised economists rising four point seven percent for the year. So all of that suggests a shortage of workers may be holding back the hiring in Kazakhstan. The president has ordered security forces to shoot protesters without warning. He's declaring victory and putting down demonstrations with the help of Russian troops. Dozens of people have already been killed and hundreds wounded. It's the most serious challenge to Kazakhstan's leadership since independence back in 1991. And Citigroup was the first major Wall Street bank to impose a strict coronavirus vaccine mandate. Now it's telling office workers that those who don't comply by January the 14th will
face termination. Books are a message to stop. It said their last day even women would be the end of the month. More than 90 percent of city employees have complied with the vaccine. Rules for U.S. workers globally globalise 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts.
More than 120 countries. I'm Richard Gupta. This is Bloomberg guy Alex. We're NIKKEI. Thank you very much indeed. Alex increasingly feels like if the carrot doesn't work we're going to use the stick. Yes. And you have to wonder at the stick is going to wind up having to go to court. We know the Supreme Court is looking at President Biden's vaccine mandate. The arguments start today. Is this sort of the result of something that we might see in the
private sector as well. Also what is this one of doing the job market. I mean I understand that 90 percent of the workforce is vaccinated but still we have a labor shortage in some respects. And then you have to wind up firing and then rehiring has not to work. Well I think it's going to be really difficult particularly for those those areas. You think about the frontline retail job you think about a frontline job anywhere where people are nervous worried they don't want to wear a mall school day. Now they're being told that they basically have to get the shot as well. It's going to mean that those jobs I think you've got to be harder and harder to fill. Yeah I should point out Guy Johnson
to switch gears for a second on Mary Daly is talking right now. Some interesting things are coming out. She's saying that the Fed could adjust their balance sheet after one or two rate increases. And that goes to your point earlier that there could be a scenario where we're gonna see a lot of tightening happening kind of in a small window and that might support that. We are in a time where we need to adjust policy. She says. Yes. And that raises the prospects of a policy mistake doesn't it. The Fed has basically been wait wait wait hurry up. And now we're in the hurry up phase and that's where kind of things can
get broken. So I think it's going to potentially get really tricky for the Fed. They've left themselves in this position now. They've got to deal with it. Yep. And she also said that she prefers a flatter funds rate path more balance sheet adjustment that was under question this week. Which tool will they use more of rate hikes or the balance sheet adjustment. All
right. Coming up we are still awaiting President Biden in his remarks. The December jobs report marketable and over NASDAQ. One hundred offer her 1 percent. This is Bloomberg. Live from New York I'm Alix Steel Guy Johnson over in London. This is Bloomberg Markets. Every Friday that guy and I are here.
We pick one of our favorite charts of the week. So here's mine and it has to do with technology. Also crash this in the last 10 minutes. So bear with me on this one. So the S&P 500 is the purple line here. These are the other areas of tech. For example the yellow is hedge funds crowded stocks. Then the blue is profitless tech and then the white is expensive software. Morgan Stanley looked at other times where we've seen US tech sell off in relation to higher yields and found that we're kind of near the bottom of where we traditionally are when it comes to tech. They do say though the S&P is that we're nowhere near where we usually get and that you could see the S&P come under
more pressure as rates especially that front end continue to rise. Guy. That was a nice shot. And as he said crashed very nicely together to make it happen. This is a shock and I think it is kind of at the roots of what I think is going to be a major problem for Europe. And it speaks to the inflation that we are going to get. We had very strong inflation data out of Europe today. But the green transition is
going to happen. And how inflationary it is going to be is going to be absolutely critical for Europe going forward. So I want to take you to China. I want to talk about lithium the lightest of metals and what is happening here. Basically as China tries to migrate towards. It is pushing up battery prices. It is pushing up lithium prices in fact to records. The move has been absolutely eye watering and it is going to be replicated elsewhere as battery technology picks up. Lithium is going to be
absolutely critical. And how much it costs will determine how quickly we can make this easy transition and how much that even transition Alex is going to cost and how inflationary it is going to be. We saw record inflation out of the eurozone today. Is that number going to continue to creep higher gas. Looks like it's going to be the swing factor this year. The question is will lithium and other metals like it be the swing factor going forward from there as prices continue to rise. We're going to talk about this in the next hour. The European close is coming up. As I say eurozone inflation skyrocketing cucumber. JP Morgan Asset Management global market strategist joining us to talk about that. The closes next. This is Bloomberg.
2022-01-10 03:09
