Bloomberg Markets (01/26/2022)
From the financial centers of the world. This is Bloomberg Markets with Alix Steel and Guy Johnson. It's 30 minutes into the U.S. trading day on Wednesday January 26 here at the top market stories we're following for you at this hour. Decision day the Federal Reserve gets set to signal its first
rate hike since 2018. March liftoff is baked in. But investors are looking for clues on the fate of the balance sheet. The cloud to the rescue. Microsoft shares swing from losses to gains on an optimistic growth outlook for its ISE cloud business. Tesla at the next high tech tech titan to report after the bell today. And a rebound for now after two volatile days of trading and a drop to the lowest level since June of last year. The Nasdaq 100 is leading a bounceback for U.S. stocks. The question will it stick. From New York I'm Kelly Lyons with Guy Johnson in London.
Alix Steel is off today. Welcome to Bloomberg Markets. And Guy just about four hours to go until we get that Fed decision. What is that going to mean for this equity market. I think we're all going to keep a careful eye on what is happening but I think in some ways the main event is happening right now. And that's the news that we get out of the Bank of Canada which has decided to leave rates on hold despite the fact that the Bank of Canada is saying that economic slack is now quote essentially absorbed. It's slightly lowered its GDP forecasts to four point six in 2021 4 percent in 2020 to three point five in 2023. Inflation forecasts are high as these four point two percent average in 2020. So I think we're circa four point eight right now. So certainly a slowdown there. But the main headline is
that we do not have a rate hike. The market had expected a rate hike. Economists had thought that we would see a story of what we got basically which is a hold. But the candidate Bank of Canada removing its exception exceptional forward guidance and basically saying slack has been absorbed. But we're going to keep the benchmark overnight rate at 25 bits. So let's talk about this a little bit because in some ways this was going to be the second major G7 central bank to hike rates. And if they had I think maybe that would have stolen a little bit of thunder from the Fed might NIKKEI. Joining us now
Bloomberg's international economics and policy correspondent to give us his take on this. Mike a surprise. I don't think so. A majority of economists thought they might hold but a significant minority were predicting a rate increase. I think they're kind of in the same situation as the Fed. They're trying to condition the markets for a rate move going forward. They do in their monetary policy statement raise their forecast for inflation. So they're acknowledging there is an issue out there. It may be they don't want to get too far ahead of the Fed because of course the interest rate differential could hurt the loonie and their efforts to provide growth in Canada. So not a surprise but I don't think it probably just means that it's coming soon.
And guide this of course. Bank of Canada is coming on Federal Reserve Day and that actually is our question of the day whether the Fed is facing a big problem given the volatility in the equity market we have seen but I write really has been confined to the large part in the equity market the volatility of the last week or so. Do you think the Fed has a problem here if the rates market is relatively calm. Well it's not so much that the rate market is calm I think that the Fed's problem now is you know are they do they think that they're behind the curve and do they think that because of their actions that the market will price for significantly slower growth in 2023. And I think that repricing of risk assets is
something that they're going to have to acknowledge today that certainly Jay Powell in the press conference going to have to acknowledge I will say something about the Bank of Canada decision because you know even though economists thought that the Bank of Canada was going to wait this this meeting the market was pricing for about a 70 percent chance of a hike today. So so you've seen actually the loonie actually start to come off a little bit on the back of this decision. So. So the markets were kind of prepared. Now I. The way that I read some of the headlines and I haven't read the full report yet obviously it's rather lengthy is that the that the Bank of Canada might still move before the Federal Reserve because they have another meeting prior to the March 16th meeting by the by the Fed. IRA. IRA do you think coming back to the question do you think that the Bank of Canada in any way has reacted to the recent volatility we've seen in markets. It's not just been
confined to the United States. This has been a global phenomenon all. Do you think. There's something else at play here. Why did they decide not to go this time. Is the background of what we're seeing on our screens on a day by day basis. It's going to be a factor. I think it's just that hey why don't we wait a month. We'll just prepare everyone. The language that you mentioned earlier guy you know about them saying that basically the slack is
essentially gone from the from the labor market. That that's the kind of information I think they wanted to convey. So to Mike's point you know the economists weren't expecting it. So I think they were maybe looking at what the what the economists were were thinking for this meeting as opposed to anything else. But. But we're still going to be priced for another hike. And I
think the challenge that central banks are going to have is not so much when do we lift off. But it's what's the pace and then what ultimately is the terminal rate. So how how high do interest rates get this cycle. And for the most markets they're not thinking that they're going to hike more than more than six ish times. In the terms of the Bank of Canada and the Federal Reserve this time. All right Bloomberg's Michael McKee an Irish jersey a Bloomberg intelligence. Thank you so much for joining us. Of course remember to tune in to Bloomberg's special coverage of the Fed Decides. That starts today at 130 p.m. New York time. And Guy of course it's a very
interesting picture we're looking here. As we look ahead to the Federal Reserve but also for the outlook for fiscal policy here in the U.S. So fiscal policy absolutely front and center in all of this as we think about what's going to happen with Bill back better. We've got a meeting taking place with CEOs. They're going to be talking about that today. So that's a factor that we need to bear in mind when we think about what is going to be coming out of this administration.
So let's talk more about that and figure out what is going to be happening here. We need to now go to Washington D.C. We have the commerce secretary standing by. We welcome our TV and radio listeners and we welcome of course Bloomberg's Joe Matthew because we are joined now by Gina Raimondo. She is the U.S. secretary of commerce. Don't take it away. Thank you indeed. We are joined by the secretary of commerce Gina Raimondo. Madam Secretary thanks for being with us once again on
Bloomberg. As we consider the chip shortage. It's somewhere we'd like to start at this moment in steps that the administration is taking to loosen this up. We've talked a lot about it before we get into the next phase of this. I'd like to just set the baseline with you for our conversation. The White House was out with a report yesterday showing that this chip shortage is going to last longer than many people believe likely straight through this year. And I wonder what that means for prices. Will this get worse before it gets better. Good morning. It's always good to be with you guys. And thank you for having me. I don't know that it will get worse before it gets better. But there's there's no reason to believe it's going to get
meaningfully better anytime soon. The Commerce Department put that data out yesterday. And what it showed is that there is that there's a real shortage. Demand is 20 percent higher than it was a couple of years ago. You know there's a huge mismatch in supply and demand. Prices are high. You know prices are higher. So what has to happen is you need to make more chips. Unfortunately there's no easy solution. The solution is increase domestic manufacturing of chips which is what we need to do. It brings us to one of the big steps you're taking a
legislative solution to Competition and Innovation Act that's made its way through the Senate. There's the House version was released last night. It's a massive bill. A lot of us tried to get through some of the thousands of pages that are in there. But once this dropped from Speaker Pelosi's office we heard real pushback from Republican leadership in the House. Representative Michael McCaul the ranking member on foreign affairs said Democrats decided to torpedo any chance for a bipartisan bill. Is he wrong. I think that's an unfair characterization. Speaker Pelosi worked incredibly hard with her team with the chairs in a bipartisan way to put together as you say a two thousand plus page competition proposal. Let me say this. There is broad bipartisan agreement. You know a bill very similar to what came out in the
House was passed at the end of last year in the Senate with 19 Republican votes. And I've you know nearly every Democrat. So to my mind this is very reminiscent of the bipartisan infrastructure plan which the president signed last year. You know there is raw bipartisan agreement that we have a national security crisis on our hands. If we don't increase the domestic
production of chips right now we make no leading edge the most sophisticated chips in the United States of America. We purchased nearly all of them from Taiwan. Congress can not you know sit on their hands and refuse to take action on that. And I've talked to many Republicans including McCaul as recently as last week who assure me they fundamentally
support the goal and vision of the bill. So what has to happen is pass the bill. Let's get to conference and let's hash it out. There will be disagreements. But the one thing I will predict to you is that the bill which is the president ultimately signs will not look exactly like the bill that came know proposed last night. So you know let's get
together. The bones are bipartisan. Let's get you a conference. And this is a good starting point. And let's let's solve the problems that right now Americans are facing. Time being of the essence here. So let's try and get a timeline for when it will clear the bill when it will clear the House. When do you think that's going to happen. When do you think
we'll actually start to be able to take action. We obviously have the news over the last few days about the plant that Intel is going to be building in Ohio but that's a long way off. Madam Secretary how quickly can we resolve this problem in the United States. Well as you say these things take time I was in Ohio on Friday. Intel made a 20 billion dollar investment in what will be the biggest semiconductor fab in the country. If not the world. But here's what they also said. They could go from 20 billion to 100 billion in the next handful of years in America. If and when the
chips act is passed. So we have no time to waste. We have no time to waste. We hope that the bill goes on the House floor next week. You know we hope for a swift passage and then we get to conference and we have to move quickly. We just I cannot emphasize it enough. The chips we need go into the most sophisticated military equipment. This is about our competition with China. This is about creating jobs. This is about fundamentally shoring up America's economic competitiveness and national security competitiveness. Let's get into the national security aspect of this. Secretary if we could for a moment we hear a lot about that. We hear that line a lot. So what does it mean as we hear talk of war on the other side of the world the
standoff with what Russia Ukraine what is the U.S. doing to stockpile enough chips to take care of our defense. Of course we do do stockpiling. But again I adjust it you can only stockpile so much. We need to make this in America. And by the way I have spoken I spoke with probably 50 members of Congress since January 1st. Democrats Republicans many Republicans they agree. The only solution is to make war chips in America. Purchasing 60 70 percent of the most sophisticated chips from Taiwan is a vulnerability that is obvious. It's staring us in the face and the bills before Congress are the
solution. So I understand Republicans don't like every aspect of what the speaker put out last night. So then do your job solve these problems find compromise and get the bill to the president. Madam Secretary. Are we in danger of weaponized the chips industry. Is that what is happening here. The Washington Post was talking last week about the fact that the administration is looking at the foreign direct production rule to use against Russia to restrict access to the chips industry to lead to the most sophisticated chips that are out there. Even some of the less sophisticated chips. Is that what is happening here. So I obviously am not in a position I will not comment specifically on specific tactics and strategies that we might use Visa Ukraine and Russia. But the president is very clear
that the United States with our allies is preparing a range of very severe economic measures to impose on Russia if it if it further invades Ukraine. And I will say you know it's not weaponized semiconductors but the fact of the matter is semiconductors are a vital component of every piece of technology including military equipment. Madam Secretary we will watch with interest. We'll watch certainly what is happening in the House and to watch the progress of the bill as it works its way through. We look forward to seeing some results there. The U.S. secretary. Commerce Secretary of Commerce Gina Raimondo thank you very much indeed. Our great thanks as well to Bloomberg's Joe Matthew. And be sure to tune in to Joe's sound on that is on Bloomberg Radio weekdays at 5:00 p.m. in New York. Okay. Let's move on get some reaction to what we just heard and
look ahead to the Fed and think about the implications of what we heard from the Bank of Canada as well. Jan Hatzius Goldman Sachs chief economist joining us now. And can I just start actually and think a little bit about what is happening with the economy. We just talked to the commerce secretary about what is happening with the supply bottlenecks that we're seeing in the
semiconductor sector. How much of a problem is that going to be as an ongoing issue that we need to think about in terms of the inflation narrative the inflationary narrative that is currently currently working its way through the US economy. I do think it's still going to be a factor that is important for the price level as we go through 2022. That doesn't seem to be a quick solution. So I do expect that prices in a number of goods producing sectors and especially ones that rely on semiconductors are going to continue to be high. With that said inflation is about the rate of change of prices. And so I think the goods producing sector is going to go from up very sharply on the year on year basis to much more stable a year from now. The question around inflation is really more in terms of how much of an acceleration you get on the services
side and how tight the labor market is and what that means for me for wages. So there are definitely some clear risks upside risks through the expectation that inflation comes back down to something you know two and a half to 2 3 percent which is basically the Fed's view. But I don't think it's as much about goods. And it's really more about services and the labor market. Well let's talk about how the U.S. consumer factors this factors into this as well. John I want to point to a tweet from Claudius on who is over at the Jain Family Institute previous economist at the White House and at the Federal Reserve. And she says the Fed is not going to have to do as much as the markets think because Congress is doing its best to slam people. The child tax credit was putting two hundred billion dollars at an annual rate in the hands of parents in December 0 and January also letting Covid run wild. And John I know that the child tax credit and the lack of a fiscal impulse this year played into your
downgrade in a forecast for U.S. growth. How do you square square those two things where we're talking about potentially less consumption consumers maybe having a little more price and tolerance and also a Federal Reserve that you think could hike at every meeting from March in theory. Well there are a lot of moving parts in the immigrant outlook and I would certainly agree that fiscal policy is going to be a drag on growth in the short term basically because the amount of support is being stepped down. No more tax rebates no more extended unemployment benefits and probably no more expanded child tax credit. So that is going to be a drag on the other hand. There still is a significant amount of recovery that we can see from post pandemic sort of normalization especially in the sort of sector of the economy. And that's been on hold a
little bit in the very near term because of all Micron. But we do think that that's still going to be a factor. So when we come out is that the economy is still going to grow somewhat above trend 2000 and 22. And in an environment where many labor market indicators are quite close to full employment that the Fed's probably going to want to slow things down to more of a trend pace. And I think that's still going to require higher interest rates. So we have four hikes in 2022 which is consistent with
market pricing but the risks are potentially that they would have to do more. And we think even on our baseline that as you go into 2023 24 we'll see additional rate hikes. You've got terminal rates a two and a half two and three courses. How quickly do you think we get there. You talk about the four hikes this year. Presumably we'll have to have more next year. I only get to circle one percent this year. Is that going to be enough to get to the point you're talking about. Where where is where is neutral. Do you think you can. In terms of where the Fed is likely to get to and kind of think about what is
happening in the economy. Yeah neutral. Neutral is always difficult to estimate of course. And B there are a number of estimates out there. The Fed's estimate is two and a half nominal dramas or half a percent in real dramas. And we have a similar estimate. So you know I think there is a reasonable case that maybe you go a little bit young that if the labor market continues to improve and inflation is still somewhat above the longer term 2% target which is our expectation. But it's
obviously going to depend on the data. There's not going to be a sort of preset plan to get to a particular level nor should there be. The Fed will need to respond to the incoming information on the economy and on financial conditions. And when we look at that incoming information isn't going to be wages that is critically important John. Do you think we are either on the precipice or are already in a wage price spiral. Well I think wages are definitely an important issue for the inflation outlook has as we discussed. I think the question is what do wages tell us about where output and employment are
relative to potential. We've seen some very rapid wage increases in the last couple of quarters on a sequential basis quarter on quarter annualized. Our estimate is that that's between 5 and 6 but that's been between 5 and 6 percent. But there are also I think some reasons to believe that maybe some of this is more temporary because of one of retention bonuses and things like that until the end of the summer. You still have the expanded unemployment benefits which we think had an impact on wage growth at the at the bottom end of the pay scale. So some of these things I think are going to be normalizing. We should see in our forecast somewhat slower sequential wage growth as we go through this year. But I think it's one of the key questions
over the next six months. Yes and the phrase I hear at the most the most at the moments is is threading the needle. He talks about the Fed threading the needle. Do you think the Fed is going to have to choose ultimately and I think this is relevant to what you just said about wages. Do you think the Fed is ultimately going to have to choose between tackling inflation and growth.
And which side do you think they're going to come down on. Do you think they're going to be prepared to tolerate a little higher inflation just to maintain the growth level to try and keep people employed and see wages going higher. Where do you think the balancing act lies and do you think the Fed is going to be able to now that Hackney phrased again Threadneedle.
I do think it's you know threading the needle I think that's that's a reasonable way to look at it. They have a dual mandate on both inflation and employment. And so they're going to want to put some weight on on both. They would like to bring growth down to more of a trend pace and thereby you know stabilize measures of labor market slack before you get clearly past full employment. And I think that's going to be the goal. I don't think we're necessarily so far away from that. I don't think we need a very aggressive tightening of policy to get to more of a trend growth pace especially if financial conditions didn't continue to tighten. We've seen some tightening in financial conditions hasn't been very big so far but I think that is ultimately probably necessary to see a slowdown to more of a sustainable growth phase. Well John I'm glad you brought up the tightening of financial conditions because our question of the day today is if the volatility we've seen in the stock market the sell off we've seen creates a problem for the Fed. Do you think it makes their
job easier or harder down the line. I think it is what usually happens when you see a change in direction on monetary policy. I mean a few weeks ago I think you would have said it's been surprising how little impact we've seen on the equity market from the shift in the in the near term longevity policy outlook. So now we've had obviously some very volatile days and you wouldn't say that anymore. But I would still say that
overall financial conditions while tighter than they were four weeks ago still haven't tightened so much that the Fed would would would would want to abandon the idea of a March rate hike for example. We're not when we're not close about in my view. Yeah and can you just give me your thoughts on how we should think about hikes vs.. Balance sheet runoff. And it's not one for one another. Hey you should think about it but can you just explain your thinking around how your trying to work out this problem about what effect run off is going to have. And how does that compare with rate hikes and what the Fed is going to be thinking about around this issue.
But our expectation is that they're going to rely predominantly on rate hikes for normalizing financial conditions and an end the stance of policy and the balance sheet runoff occurs in the background and is much less responsive to new information about the inflation outlook or the growth outlook. So it's not quite autopilot because of course if there are large changes then the balance sheet policy could be revised as well. But we don't think that's nearly as activist. We also think based on our estimates of the translation of balance sheet size or asset holdings into financial conditions we don't think there's going to be a very large impact from the balance sheet adjustment. Most of the impact on financial conditions based on our estimates and the academic literature that has looked at QE and its impact really says that it's more interest rates and the policy rate in the funds rate. John we only have about a minute left. But market pricing already has come quite far in terms of
expectations for future Fed policy. What do you think would be the biggest talk biggest hawkish surprise that the Fed could deliver today. Yeah. I wouldn't expect necessarily large hawkish surprises here. I mean what in theory they could say were stopping QE right here. That's something that has been talked about. They if
they're still currently signalling to go and and only in March they could do that. But we don't expect them to do that just based on what we've heard from everyone. See members. Jim Paul and his confirmation hearings for example was asked about the QE program and he said it would end in March. So it would be it would be a surprise but I would not expect that. I think you
know otherwise the tone of how they talk about the inflation outlook obviously it's going to be important and there is always going to be something for the hawks and the and the doves. But I wouldn't expect that you know very disruptive type of communication. They're trying to get ready mobilization. And unfortunately we have to leave it there. But thank you so much for your valuable insight on this Fed day on Hatzius Goldman Sachs chief economist. Appreciate your time. Of course in addition to monetary policy we are watching geopolitics and the US is now urging Americans in Ukraine to consider departing. Now we are seeing stocks off of session highs still up 120 percent on the Nasdaq. This is going. We're about an hour into the U.S. trading session. Stocks are rallying and Bloomberg's Abigail Doolittle is tracking the
moves. Abigail I gotta be honest I don't know if I trust a rally after the action we've seen over the last couple days. Is there a sign this one might stick. Well your point is well taken. Business has been so much volatility. Who knows how we'll end up. But there may be some signs here that we could see these gains for stocks stick. We have the S&P 500 up more than 1 percent the best day of the year. The same deal for the Nasdaq 100 outperformance up there up one point eight percent. Also the best day of 20 22. No encouraging signs in terms of the possibility that maybe these gains will stay around. We do have
that VIX coming in right now below 30 and bonds about flat. This is of course going to depend on the Fed but you have that 10 year yield back at 177. Anything above 170 suggests that yields are probably likely to go higher. So if haven bonds are selling off that would support maybe the idea that stocks will continue higher. The other big deal here of course is earnings. If we take a look at Microsoft we are going to see that shares are higher. Now of course in the premarket or the afterhours I
should say yesterday initially there was a sell off because even though they put up 50 billion dollars worth of revenue for the first time the cloud growth was slow but forecasting big big growth for the cloud helping the stock go higher. Tesla reports today after the bell off to put up a blowout quarter some analysts are saying to support the valuation and then perhaps the biggest of them. Apple reporting tomorrow today really helping those markets up one point one percent. Let's see how that quarter comes in. And this company also getting a nice little piece of news from China around the iPhone being the top smartphone in the fourth quarter. As for Microsoft last week we were talking about sell the dips. This chart makes a very strong case for sell the rips excuse me and not by the depth by the dips and sell the reps. You could probably do both here. But what we're looking at is a one year chart in blue. We're looking
at the 50 day moving average. Technicians love looking at the slope of the moving average. As you can see that 50 day moving average. The near-term buyers the strength of the dip buyers it is starting to dip down. You can also see that Microsoft has been trading in a trend of lower highs. That is makes a very strong case for sell the rips. There is a reason to think there will be a rip to sell because you can see the RSI climbing back up. So we could very likely see Microsoft climb back toward the top of that range. But unless it makes an all time high a new high guy. This chart suggests that there's a near-term rally
ahead for Microsoft but there could be a pretty bearish fall at some point later this year. It's all about timing. Tough to do. Abigail thank you very much. Abigail Doolittle on what is happening with the tech sector. Let's continue the discussion and talk more about the earnings that were getting. Mark Lehman GMP Securities CEO joining us now. GMP specializes investing in technology. He is the perfect person to talk to me. Let's talk a little bit about the big picture story first of all. Then we'll dig into the earnings. It's been a really tough start to the year for big tech. Is this
an opportunity for investors. Do you want to put money to work in this sector right now. What do you make of the price action. Well it has been and the end of the year was exactly like the beginning of the year which was difficult especially for the high growth high multiple stocks. And that's not been tempered by some of the action in the first few weeks of the year. I think we saw some stocks really get much lower than I think even some of the most bearish people expected. The stocks to go and that's what happens in these kind of violent rallies and violent contractions in stocks. I think the VIX is telling you that we're gonna have more days like this. And I think you're also going to get an opportunities. I mean Microsoft frankly is
a perfect example. That. Right. It's the most understood stock. Let's call it that as one of the highest if not the highest market cap company in the world. And that stocks traded at a 10 percent range from the lows of after market trading last night to right now. Think about that 10 percent range for the most well understood stock. That's problematic I think for the market
in general which is we want these to be a little more tempered. And days like yesterday and there last week are showing that we're buying more days ahead. But I think again the valuation umbrella for some of these stocks is intact. I think there's lots of capital on the sidelines. And I'm not talking about you know people's investment and they're going to put a few bucks to work. We even talked about private equity. We haven't talked about some of the people who swoop in here when the valuations contract. And I think there's lots of that potentially on the sidelines. We just haven't seen that yet which gives me
confidence that the year is going to be just fine. Well we're talking about kind of a valuation contraction Mark. Already the NASDAQ 100 is trading at a multiple of about 25 times the lowest since May of 20 20. That's still 30 percent above the 10 year average. How much further do you think we could see that multiple contraction. I think the opportunity for the overall market to contract is high. What I also think is some of the less value company the lower valuation companies probably get a second look. And the companies that are in trading frankly at market caps the revenue that are infinite because again profits are farther down the road those will contract. We're going to see kind of the lower
valuation companies I think go higher and some of the highest valuations stay lower. And that's a good backdrop for the overall market. It's never a good sign in my opinion when there's a small band of stocks are doing extremely well and the overall market's doing poorly. Even before the last couple of weeks half of the Nasdaq was down 50 percent from its high. It was hidden by the fact that the things I called I don't think they include Microsoft and Tesla. But it was hidden by the fact that those stocks held up until a couple of weeks ago. I think this is cathartic for the market. But these things take time and everybody likes a quick fix. There's no quick fix here.
What's the read across from Microsoft let's talk about that now in terms of the details on the earnings. What's the read across from Microsoft into the rest of the sector Mark. I think the read across is that the health of the economy and the health of technology is real. There is good proxy about corporate America. Like you said I'm a cloud and some spend it's
healthy. The economy is getting better. And yes we have this Omicron wait that's probably going to lift in the next six weeks. I thought the Pfizer CEO's comments were pretended a much better back to work and back to normal marketplace and that's going to happen through the rest of the year. We have so many more weapons that we're going to have to combat Omicron and get the supply chain intact. That's going to happen as the year progresses. That means that I think rates will start to
dissipate or the fear of rate rises will start to dissipate. The health of the economy will continue throughout the global economy will continue. And I think that's great for the overall read. And Microsoft is as good a lens on that. And again the report was just fine and their outlook was just fine. That's what was I think more important than anything than the printed number presents in the rearview mirror. But on those outlooks how good is good enough for some of these really richly valued tech stocks. How high is that bar. It's really high. I mean if you love the stock at one hundred
times revenues what do you. Why do you love it now that it's at 60 or 50 times revenues and profits are in the rear or not even in the rearview mirror. They're not even in the mirror right now. That's the question for the market. And I think that the richly valued the profitless companies are getting repriced. But what I'm seeing from the investors that we talked to and some of the funds that we talked to is that they're ready if these corrections stay permanent to put more capital to work. And
frankly I don't think we've seen that yet. OK I have what I have walked and talked with a lot of portfolio managers of last few weeks. I felt no fear from these people. In fact you know I always say the market is getting close to a bottom. And my mother calls me it says are you OK. OK. Or she called on Monday. And she said are you OK. That kind of put a bottom into the market. These portfolio managers are ready. They're doing the work that they need to do with these stocks take another leg down because again the fundamentals of the economy what's change in the economy the digitization the fintech companies some of the other things that we've talked about in the show have not changed one iota. Despite some of the multiple compression that
we've seen. Another market indicator we now have to look for Mark's mother and your phones. Let's talk a little let's talk a little bit about about some of those companies that you talked about having the potential to go down here. Microsoft has just stepped up to the plate on the MDA fronts. It is tricky for large tech companies to do that right now. Nevertheless Kathy Wood talks about innovation being sort
of on sale right now. Is there a potential for some of these big big companies with a lot of cash with a lot of potential to generate cash to do some consolidation here. Can they go shopping. They will. They will. I mean these are the most richly valued companies with the most cash on their balance sheet. And like
you said we saw a company get acquired for cash recently. We're we're. I'm getting old enough where 2016 seems like a long time ago. But there was a time of you this time of year in 2016. We called it Tableau linked in Friday. OK. Both companies missed earnings substantially. And those days stocks went down 30 40 percent. The SAS DAX went down 30 or 40 percent. And guess what. Microsoft stepped in then about LinkedIn. Tableau got purchased then too. OK. I think we're going to set ourselves up potentially for that backdrop. That's right. Down that time a year was more substantial than we've seen today. But innovation
is probably more substantial to date. So obviously that hasn't happened yet. We've seen the rebound. You know the Nasdaq is up 10 percent or so off the bottom from from the lows of Friday. We will see that OK. Because innovation never dies. And I think there's lots of opportunity for these big companies to buy these broken angels if that happens. And I think they're assembling their list. And that example of that acquisition is a perfect one for what we saw recently. Innovation never dies. I'm going
to get that printed on a T-shirt. Thank you so much to Mark Lehman GMP Securities CEO which of course is a citizen's company. We do want to get some to some breaking news for the oil market now. We just got the EIA inventory data. Crude oil inventories up two point three eight million barrels last week. That is far larger build than the estimate for just a million barrels. Interestingly though you are still seeing crude climbing right around to session highs on WTI were north of eighty seven dollars a barrel. And on Brent crude the global benchmark we just got a little taste of 90 right now at 89 87. But the gains continuing for the oil market in this risk on day. And of course when you're making a shift even as you don't need
oil so much. But Ford is investing in an electric truck startup Caribbean. It's now worth more than eight billion dollars. And we'll hear from Ford CEO Jim Farley on how long the automaker will hold onto that stake before it cashes out. Stay tuned for that conversation. This is Glenn Beck. This is Bloomberg Markets Summers can get drawn you're looking at a live shot of the principal rim coming up Scott Minor at the Guggenheim CIO at 2 p.m. New York time 7 p.m. in London. This is been back. Let's check in on the Bloomberg first one these numbers get to the Federal Reserve's in the spotlight today at the end of that two day meeting. Policymakers are expected to signal plans to raise interest rates for the first time since 2018.
That rate hike is not likely to happen until March. The Fed's trying to contain the highest inflation in four decades. President Biden has wrapped up the effort to deter Russia from war. He says he would consider personally sanctioning Vladimir Putin if the Russian leader orders an invasion of Ukraine. President Biden has already threatened some of the most severe
economic penalties the U.S. and its allies can muster if Ukraine is invaded and OPEC and its allies are expected to stick to that plan and ratify another modest production increase next week. The twenty three nation coalition will probably rubberstamp a hike of 400000 barrels a day for March. Oil is trading at close to a seven year high. Global News 20 closed down out on
Bloomberg Quicktake Paul Allen by more than twenty seven hundred journalists and analysts and more than one hundred and twenty countries which could get death. This has been that Kelly. Radical. Thank you. Well Ford CEO Jim Farley is one of 10 business leaders who will join President Joe Biden today to discuss the stalled out big build back better economic package. Earlier though he sat down with Bloomberg's Emily Chang to discuss Ford's finances and what he intends to do with their stake in electric truck startup within. That's now worth more than eight billion dollars. Take a listen. Well it's been a
great investment. And we really like R.J. We really like what he's doing. The fact of the matter is we're both in the same almost same segments. And so you know we'll work we'll work through that. We really. I've always seen this as strategic investment. So there's a lot of possibilities said that we could do with with
Reeva and beyond just building a vehicle together. I won't go any further than that. So no plans to sell. No. Just no. Our. But you know we'll look at everything. Everything is on the table. Our lockup period ends in the middle of May. And do you see cross shopping between. Not yet. Not yet. The maverick is an R F 150. Lightning isn't out yet. You know they're just scaling up. So it's early days when I don't expect us to be in the same cross shopping in early days after 150 lightning. RJ and I
talked about this a very different than their truck. It's much smaller. This is really for a lifestyle off road. Ours is really kind of a work truck. A working person's vehicle e transit is very different than their Amazon van you know site in the early days. Here is a brand spilled out. I don't really see us being cross shopped initially but we are in the same segments. Jim Foley really interesting conversation you want to hear more of it. It's coming up a little bit later right here on Bloomberg Bloomberg Technology today 5:00 p.m. New York. Time is where you will find it. Let's talk more about this story. Let's look ahead to what is happening with Tesla which reports a little bit later on at Ludlow. Joining us now from San Francisco. Ed let's talk a
little bit about revision first of all and then come off my graceful way towards Tesla. Reverend Ford that's a really interesting combination. The F 150 lightning is going to be a huge product for Ford. You've obviously got revision in terms of a potential competitor to that. How would revision do if Ford was no longer a partner if
they actually saw revealed as a competitor. Yeah it's a really good question. Yes. Remember that Ford made that kind of initial 500 million dollar investment in review and at a time where there evey strategy wasn't as focused as it is present day you know the marquee hadn't yet been really revealed. They hadn't revealed the F 150 lightning their production strategy their investment commitment wasn't clear. So this was them kind of hedging their bets a little bit on an upstart that was not really up started yet hadn't started production. You know I've reported along with Keith Naughton here at Bloomberg News that in kind of relies on Ford a bit more than Ford perhaps relies on revision. You know Ford has helped revving get set up with its stamping presses for example in the factory in normal Illinois. But clearly you know Ford's stake has taken off and it
represents a really nice healthy return for the company. But Farley seemed really transparency me in that video clip. Right. He's saying we're kind of competing against each other. I call it like frenemies enemies. I think that's an accurate description. AD And what we're talking about competition. It's not just Ford and Rebbie and there is a ton of players in the space. And of course the dominant one is Tesla. And when it comes to trucks specifically are we going to get some more information about when we're expecting to see a cyber truck today. Yeah yeah. I think that
that's what the Tesla fans want to know. Right. You know Tesla such an interesting company to cover. You have the big institutional investors that hold the stock partly because they track the S&P 500. Right. But the retail investor which is also a Tesla vehicle owner or a Tesla fan is so present and they want to know about this stuff the product roadmap. You remember that Elon Musk kind of made this big splash about not wanting to be on earnings calls anymore because it wasn't a great use of his time. But then he turned around and said well actually this quarter I'm going to participate because I want to set out the
product roadmap. Cyber track is really key to that. It's so anticipated pickup trucks it big in the U.S. but there's so many other big ticket items. And I think you guys had the data. I ran this Twitter poll. And what surprised me is how much interest there is in the status of the new factories in Austin Texas and in Berlin in Germany. Yeah because that's going to have the biggest impact in terms of production. This is a company that needs to ramp up production. It's efficient. It is doing well but we need more. And I'm wondering what could Kurt kind of hold that story back. I
thought I was a poll that those that took part focused on this. When do those profits start to really get into gear if you can get them to go with an electric vehicle and ISE semiconductors gonna be an issue in terms of getting that production line. Yeah and this is interesting. In the conduct tax of earnings season and the moves we've seen in major indices. Right because they
had a strong fourth quarter of deliveries 300000 vehicles well above expectations. That is almost a leading indicator for sales growth. Right. The Street sees 46 percent top line growth for Tesla throughout full year 2022. But if we've learned one thing from the early days and days of this earnings season it's that beating the top and bottom line in any given quarter. That's not really the focus. What what the street wants to see is a strong outlook. And how many vehicles come out of Austin and how many
come out of Berlin this year is a big part of that. I think the consensus model is for one point three million vehicles. Tesla delivers this year but again the ramp is big pipe that we know for Tesla. Ramps were paid for in Fremont California but very successful in Shanghai. And then in ramping in Berlin for example guy in Europe. You know you can get a Tesla in the U.K. right now but it's Bill in Fremont or it's Bill in Shanghai. And a big part of the course growth strategy for Tesla has been
building vehicles in the markets where they're due to be delivered. And there's a lot of excitement about that because you might see sort of deeper penetration in Europe where Tesla faces more competition from the European legacy place which we don't even talk about in the US. Right. Like Peugeot Renault. You know they have real models in the real world and real streets. And Tesla has to combat that. All right. Thank you so much to Bloomberg's ad Ludlow. We'll look out for those results after the bell today. Right now in the cash and Tesla shares are up about two point six percent. This is Bloomberg. It's time for the Bloomberg Businessweek to look at some of the biggest business stories in the news right now and words can get to. AT&T posted fourth quarter earnings that were better than expected. That gives investors less reason to be concerned about the cost of lavish free phone promotions and 5G and fibre network expansion. AT&T had already announced that its
subscriber growth in 2021 was the fastest in 10 years. And the controversial cryptocurrency project that Mark Zuckerberg wants defended in front of Congress is unraveling. The reason regulatory pressure. The Fed was uneasy with the crypto initiative now known as the DRM Association. It's now weighing the sale of its assets return capital to its investor members. And a new survey finds that most global finance firms are planning to establish or expand operations in the U.K. this year. That comes from the professional services firm E y. It's a boost for the City of London. Its credentials as an international finance center have been questioned since the U.K. left the
European Union. That is the latest business. That guy Kaley. Really. Thank you very much indeed. Kelly Long have people talked about the idea that we're going to see the city of London suffering as a result of Brexit. There's that word. You have seen some evidence of it. So a number of big American firms have moved out of the city moved trading etc. over to places like Paris and Amsterdam. But we're not seeing the destruction that maybe a lot of people had anticipated. And it's going to be interesting to see ultimately whether or not the ECB and other regulatory bodies in Europe push back on that. Yeah and I wonder how much this is just a case of the post Brexit UK picture evolving over time. Because when I initially did the survey in
2019 only 11 percent of firms wanted to build up a presence in London. It was 50 percent in early 2021. So this is a significant shift. And I wonder if it comes as it's seeing it's being seen that the UK is actually more stable post Brexit than maybe initially thought. Yeah I think if you take a look at the politics in the UK I think stability wouldn't be the first
night. But but we'll see how that develops over the next few days. Talking about let's talk about where we are with the markets right now. The pound actually not on the move today. There was some speculation that maybe we'd get to see great reports into Boris Johnson's parties today. Maybe we don't get that today but the pound certainly is stable right now barely budging. The stock 600 though is definitely on the front foot. We have seen a rerating this year but today we are bouncing back really quite strongly. And one of the reasons for that is the
energy sectors. On top Brent crude as Kelly was bringing us a little bit earlier on touching ninety just a few moments ago. We're trading at 89 98 right now. So we're kind of flirting with that ninety level. That is the reason why European stocks certainly on the front foot Stephen Engle the global head of G10 FCX Research at Standard Chartered joining us next. As we count down to the Fed this is Bloomberg.
2022-01-30 09:34
