'Bloomberg Surveillance Simulcast' Full Show 12/13/2022

'Bloomberg Surveillance Simulcast' Full Show 12/13/2022

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I think 2023 is opening the door for a recession. We're expecting either slow growth or a mild recession. There's a lot more signs now, but pretty clear inflection points in both the growth and the inflation numbers that we've had is a flop. We're still kind of waiting for the chop.

You've got to concentrate on. I think surviving the difficult start to next year. This is Bloomberg Surveillance with Tom Keene, Jonathan Ferro and Lisa Abramowicz.

26 is not cult. It's not called that is negative 3 centigrade. By definition, that is forensic. The so-called death rate from New York City this morning. A freeze in New York City. Not freezing.

Just when it is freezing. Good morning. Good morning. It is CPI Tuesday. Can we agree on that? The data coming out a little bit late today on a very new one. This is not this is not normal. This is a really nuanced reportedly giving into the Federal Reserve tomorrow. Some the week ahead is a pretty big one. I frankly wonder if this is more interesting than the Fed meeting last.

I was wrong and the Fed meeting last time was wrong. But it's going to set the time scenarios. Is not folks another inflate? You know that CBO Tuesday and all that. It's serious. It could be JP Morgan with a publication of an equity pop. If you get under 7 percent, that's if we get a visa. DAX ISE.

Mark Gurman CPI. Yes, I think, you know, sub 7 percent a little bit later this morning. Lisa Abramowicz. Thinking about is not CPI juicy CPI Tuesday. They were actually enjoy it. I mean, honestly, I'm curious to see if

you look under the headline number services inflation versus goods inflation and how that gasoline price really weighs in. Given that gas prices are the lowest since October 2021. You're on the fences, I'm on with my stable coin, people outright trying to find out if my stable coin is is still stable.

It still is that it's still stable. John, to talk about the Iraq, about three, we'll talk about this later. But I want to move the story forward. I want to do that. Sonali Basak Jihye Lee is going to join

us down in Washington alongside Ann Marie. We still got a hearing that's going to come at 10:00 a.m. Eastern Time. I'm moving right now. I'm MAXINE Waters. I'm looking at finance.

I'm learning about finance as fast as I can. I really don't know that much about it, but this is serious stuff. We're now at the point where it's the legal dash. What you focused on that this morning and now some might not read. Because this is the next thing to fall in their way bigger in it's way more international. This was one guy. We're gonna get the actual complaint. The indictment will be unveiled today

and I will understand what the allegations are and how broad it will be. The focus very much still on the treatment of him. Where are the allegations of malfeasance really are that will color the whole discussion for the broader industry that worried about the inflation report. I'm moving on again to Boehner's job. I think it's way serious if percolating. Reuters with an important article about the Department of Justice divided inside about what to do with finance. But what if what intrigues me is this idea of stable coin, which is the same debate as a money market fund years ago. Do you break the buck was a question.

Do you break the value of a stable coin to miss the heart of the man? Just to be clear here, you mentioned the Reuters story that's about the risk of criminal charges over breaking money laundering grows, correct? Yeah. And there's a debate within Department of Justice, but we're all of a sudden things are getting sped up. That's my number one question nationally. Let's wait for the price action or cash optionality in about 10 minutes time. Equity futures are positive by four tenths of 1 percent on the S&P 500. CPI data coming in about a couple of hours and 30 minutes to us and minutes away. Look at the bond market yields just a

little bit lower by 2 basis points on a 10 year 358, 91 time, a whole lot lower since the Fed last met on both the two year and on the 10 year as well. Big pop yesterday afternoon and you know, a correlation there. You know, the real yield, John, is sort of like where it is, is how I put it. And version didn't do much, but equity markets moved in, as you mentioned. They move again, four or five tenths of a percent on the inflation front and we'll get to this through the entire show.

Domini constant with this move. Smartest note this morning. And he made it very clear service sector inflation is going to be tough to tackle. Donna, a whole lot weaker since the Fed last met aswell. You wonder if that breathed some life back into the inflation story. Brahma, euro dollar this morning,

basically unchanged at about 1 0 5 are to get some direction ahead of this report. A thirty a.m. is the key data point of the day CPI year over year. If it comes in at six point nine percent, then you could see a 10 percent pop in the S&P 500. That was J.P.

Morgan's prognostication, the idea of a severe downside surprise. I think that time your point about service aside, inflation is the key one. How much do you see that continuing to percolate up and offset some of the goods disinflation that we see? That is definitely what the Fed has said that they have been looking at today. We will also be awaiting that 10:00 a.m. hearing in the U.S. House of Representatives or saying Sam Bank, when freed, will not be attending because he is currently being held in a Bahama court and going to be indicted in the U.S. Federal prosecutors coming out with that indictment later this morning, unveiling the charges. He will be extradited to the US.

What do we get in terms of what the problems were here? How do they cast this? That's why I really am curious about that indictment. At 1:00 p.m., the U.S. Treasury will sell 18 billion dollars of 30 year notes. And it is worth Tom waking up before the 2 p.m.

game that you will go and wake up for, honestly. Yesterday's 10 year auction was a terrible time. By some metrics, it was the worst since 2000. Why? Because the rally has left a lot of people wondering whether there still is value. It came in. People demanded yields that were the bit most relative to where it was trading pre auction going back to 2009.

And it raises questions about whether perhaps this rally has gone too far, too fast. Jonah, how do you respond to a more retail analysis that says the 10 year yield is three point five, three point six 0 percent and inflation's whatever it is, 6, 7, 8 percent? That's a massively negative inflation adjusted 10 year yield, not like the real yield that we talk about day to day. So next week or rather tomorrow, we're going to get adult fluff from the Federal Reserve and it could show a terminal rate climb to his highs 525. What you're doing by looking at a 10 year at about 360, a suggesting that we've got rate cuts in our future and inflation is going to be a whole lot lower and growth as well. So that's ultimately what you're doing care. And ultimately also you're making the call that maybe yields go lower from here, which I think is what a lot of people are lining up to say coming into this week and going into the new year, mostly in certainly based on the last you know, I mean, the market to me was two parts. It was before 2:00 p.m.

yesterday and after. And clearly yesterday's lift in the market was to get out front of a 30. I don't think it's unusual to have a sloppy auction gone into a lot of event. I agree. CPI this morning, Federal Reserve tomorrow it came out.

Barry joins us now, global head of effects analysis at Citi. Ebrahim, if we can just begin with a CPI report a little bit later this morning. Could you run us through what you and the team are looking for? Yeah. Great to be with you, and we do think this is a really interesting CPI report. It's gonna determine the narrative.

We had a low report last month, but this year we never got two soft readings in a row. So if we get at the consensus expectation, we should also cities of a point three percent a month increase in CPI. Then I think this idea that inflation is peaking out and is more or less on track for the Fed will gain a lot more traction and that will weigh on yields, would weigh on the dollar and probably support broader risk appetite for choice. I think the risk is a little bit to the upside. Again, the House Call is just in line with with the consensus forecast of three tenths. But I think it's between three tenths

and four or five. And that is mostly because we did get some very large and probably noisy declines last month and that might be allowed a retracement after the big figure fun of 2022. Are you enthusiastically positioning for big figure moves next year or are you just trying to get to see January 30 first as a working number? I have a lot of sympathy with the idea of getting to January first and then maybe even beyond the first month. So we're looking at 2023 as a big transition year and particularly for the dollar. We think we're transitioning from the most dollars supportive regime.

A lot of safe haven demands, no other safe havens. And the US was up performing to probably something closer to the opposite of maybe very late in the year, bottoming global growth, bottoming equity markets and if yields are peaking plenty of other safe havens. But where exactly that transition takes place during the year I think is very hard to call. And just as Lisa said earlier, we do have a lot of sympathy with the idea that that rally in fixed income that we've seen over the last two months has gone a little bit too far. So we see upside risk in rates and the dollar into the year early in the year. But that's not going to be as durable as it was this year.

Abraham, how much conviction do you have around that in order to perhaps lean against the narrative if this comes in as a softer CPI? In other words, basically say the underlying factors are still there to cause inflation to be persistent and more certain the market is currently pricing in. Well, we have learned over the last couple of months that you really have to take each trading day as it is, and these moves can be so large, even on a daily basis, that you can't stand in their way or ignore them. So if the number comes in low, we are pretty confident that the market reaction is going to be significant, not nearly as significant as last month, both because it's the second soft number and because we have the FOMC tomorrow. Nevertheless, certainly if the number is low, we wouldn't be buying dollars on the day and we would be cautious going into tomorrow and that and the rest of the year. So you have to be you have to be tactical. And the price action yesterday did show us that investors, generally speaking, are still minded towards selling, selling the dollar, selling dollar rallies and maybe buying. And many of the other assets, both fixed

income and in equities for 2023. How much you're looking at global housing markets. The differentials there in order to determine what your colleagues. So we think housing is a is a is a very big topic and in three ways. Number one, we think overall it underscores the idea that we're drifting into global recession.

So we have fairly synchronized housing market weakness coming in. Number two, we do have significant deteriorate earths. It's a significant differentiation because there are many economies where there are much, much larger housing vulnerabilities, where the share of floating rate mortgages is higher, house prices have risen, more household debt is higher in in Japan. That includes Australia, Canada, New Zealand, Sweden, Norway, but also perhaps the UK versus, let's say, the US. Many countries in the Eurozone or or or

Japan. So we do think there's differentiation that will be reflected in in relative value, in exchange rates. And then number three, the big elephant in the room for 2023 is what happens to China and then also what happens to the real estate market. If that has some signs of life, then that's a major topic for markets, but it's also a major topic for the dollar, because stronger Chinese growth, generally speaking, is associated with a much weaker dollar. So we think housing is a really big story for 2023, really across markets. Dani Burger Ibrahim, wonderful to catch up with you.

You're not alone thinking that it seems that every single affects strategies we speak to right now is talking about housing in respect, respective geography, CPM. Mike Barry of Citi, the latest from the S.E.C.. Lisa, just reading this one, three as you are as well, charging Samuel Benjamin Freed with defrauding investors. Yes.

And this comes alongside. We're expecting to hear from the US federal prosecutors in the southern district of New York to come out later today with their indictment. And failing that, how much this really raises questions about the broader implications.

What he basically is saying that he promoted FTSE acts as a safe, responsible crypto asset trading platform, especially touting its sophisticated automated risk measures to protect customer assets, perhaps overstating the risk protection. Gary Gensler, SBA felt, quote, a house of cards. Here's the quote. The Securities and Exchange Commission today charged Samuel Backman, freed with orchestrating a scheme to defraud equity investors in FTSE trading the crypto trading platform of which he was the CEO and co-founder. Investigations as to other securities law violations and into other entities and persons relating to the alleged misconduct are on going. Much more on that coming up next. We're going to catch up with Sonali Basak down in Washington, D.C., alongside Bloomberg's Amber Light from

New York. This is Bloomberg. Keeping you up today with news from around the world with the first word. I'm Lisa Matteo. Disgrace RTX co-founder Sam Beckman,

freed, has been arrested in the Bahamas after U.S. filed criminal charges. The Bahamian government says Bagman Freed is being held pending an extradition process.

Now, that arrest comes a week after weeks of speculation that FTSE his client funds were misused before the crypto exchange collapsed. Investors are waiting U.S. inflation data that could shape the outlook for Fed interest rate hikes into next year. The consumer price index is out at eight thirty New York time. A subdued CPI number would justify the Federal Reserve's projected half point interest rate hike on Wednesday. Bloomberg's learn that China is delaying a closely watched economic policy meeting this week.

That's because of a surge in Kobe infections in Beijing. No word when that meeting will be rescheduled. China has warned it faces a big jump in the number of Covid cases after scrapping most testing and isolation of infected patients. Elon Musk's SpaceX ex is offering to sell insider shares at a price that would raise the company's valuation to about, wondered, 40 billion dollars. Sources tell Bloomberg the shares are being presented for seventy seven dollars apiece. Space X was valued at one hundred and twenty seven billion in July, according to data provider pitch book.

No word on whether the company will look to raise capital in a primary funding round. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I'm Lisa Matteo. This is Bloomberg. Breaking just moments ago, the FCC with this quote from the FCC chair, Gary Gensler. We alleged that Sam Pacman, freed,

bought a house of cards on a foundation of deception while tanning investors that it was one of the safest buildings in crypto. An even stronger quote a little bit later in the statement released by the director of the S.E.C. division on enforcement, who said the following FTSE operated behind a veneer of legitimacy. So Mr. Bank went free, created by, among other things, touting its best in class controls, including a proprietary risk engine and FTSE adherence to specific investor protection principles and details terms of services. But as we allege in our complaint, that veneer wasn't just then, it was fraudulent.

The S.E.C.. And just moments ago, it is typical S.E.C., John. And you know, not to play lawyer here, but I go to paragraph two, item three, which I think is the heart of the matter. It is the heart of the matter forward

for the industry, including finance. Item three undisclosed risks stemming from FTSE exposure to Mr. Vonnie Quinn Freed's Almeida significant holdings of John overvalued illiquid assets such as FTSE X affiliated tokens. To me, that's the heart of the matter. It's just discussion of tokens. I go back to Bank of International Settlements in Geneva. It's like it's like Butch CASSIDY and

the Sundance Kid. Who are these tokens? Do we know? I don't think we know. A lot of people have been asking, where are the authorities? Unlike Madoff, Madoff admitted to thought. Straight out the gate. Basically, which allowed authorities to clamp down on it pretty quickly. These guys are clearly been put in a

case together. And Lisa, the headline has just come through in just the last couple of minutes for those who just tune again. Samuel Backman Freight charged with defrauding investors by the S.E.C.. What took so long? Right.

It's perhaps the implication because there is a lot of questions as Sam Mark Gurman freed, paraded around with a series of interviews and public relations and talking about how, yes, he messed up or stronger words, but he had good intentions. What I thought was interesting about this release, RTX collapse highlights the very real risks that unregistered crypto asset trading platforms can pose for investors and customers alike. That goes to your point. Let's get to this. And this will be through the morning as we look at inflation here in two hours. But also, these events to Ternium this morning will have much more on this on Bloomberg television and radio. Sonali Basak Annmarie Horden in Washington, Shinola, you look through this statement.

It's widely expected, but there's always a surprise shadow it. What a surprise. And Mr. Gensler statement. We are looking at what the FCC is doing and remember, we have now a charge to the scheme to defraud investors. Remember, we are expecting also the southern district of New York to also unseal an indictment later today, according to The New York Times.

What that will include is charges of wire fraud, securities fraud, conspiracy of both, as well as money laundering. And so the scope of which this scheme had unraveled relative to what we know sandbagged and freed himself, which is that he didn't knowingly commit fraud or he didn't knowingly commingle assets. There's a lot of detail. I just started looking through the S.E.C. complaint that shows that he was responsible here for what happened at Alameda. And the US authorities finally weeks later are taking note.

Shouldn't we? Sure, of course, Jim, but things are moving so quickly with a Reuters report last night of discussion that the Department of Justice and debate over Binyam answers, keep it as simple. Is that. How is the rest of the industry going to watch these hearings today in the news flow out of the Bahamas in legal authorities in the United States? There are a few things, Tom.

One is a very simple discussion about how the S.E.C. treats tokens. Do they treat them as securities? And remember, there's a lot of anxiety here in the venture world about this because there has been so much fund raising through tokenization in recent years. There's also this issue of how these assets are promoted. Remember, there's a House hearing today, but there's also the Senate hearing tomorrow regarding RTX, one of the speakers being Mr. Wonderful Kevin O'Leary, who was paid by

FTSE acts as a sponsor here. The other thing here, remember to your point that you're making about finance, these investigations have been going on a very long time, years usually. But over the last 24 hours, according to a report here by Nansen, data finance and finance has endured outflows, as well as facing some issues here regarding withdrawals of stable coins. Now, we don't know what kind of alarm there is in that scenario yet, but it's something to keep your eye on here as the industry really faces pressure. You do have seized the head of finance saying that these are 1 to 1 conversions, no margin or leverage involved, and they're trying to establish fluid swap channels in the future. But he said to feel free to withdraw any other stable coins, whether it's be USD, USD, T, etc.. And so it's unclear what kind of

pressure there is on the industry. But that is a situation to your point. There's a political aspect here, not only because of the hearings in Murray, but also because in this FCC complaint there are allegations that banks been freed used commingled FTSE funds to make undisclosed venture investments, lavish real estate purchases and large political donations. This has come under a huge focus because he has been a huge donor politically.

How does that color some of the hearings that we're going to be seeing today and tomorrow in Washington, D.C.? Well, he's going to be showing up to the hearings, right. We do know that he was going to open up with a pretty blanket and direct statement saying that he messed up.

But using a different, more explicit live word for that, what we should look back when it comes to how Washington has treated this individual. And he's talked about this saying, you know, maybe if I give some more money to some lawmakers, they're a little bit more quick to pick up the phone and speak to me. Open Secrets has tallied it. And when it came to the 2022 midterm election cycle for the Democrats, he was donor number two after George Soros. I had mentioned this yesterday because this was millions of dollars to the Democratic Party and an individual.

A few individuals are saying that's not fair. He also gave to Republicans. That is true. He did give to both sides of the aisle. But it was millions to Democrats and it was thousands to Republicans. And I think what you've seen with this individual we've talked about this on this show, is that whether is the media, whether it was celebrities, whether it was lawmakers, there was a little bit more of a put the gloves on approach. This person. Everyone wanted him to succeed. At this point.

He did it. And it also raises question about who would be a mega donor in the next election cycle because he was up there. Emory, how much focus is there on trying to crack down now, perhaps compensate for the lack of focus, perhaps the lack of protection that we have seen over the past recent months? Well, when I'm looking through the S.E.C. statement this morning, there's one thing that stands out to me is that FTSE collapse highlights the very real risk that unregistered crypto asset trading platforms can pose for investors and customers alike. So maybe they're going to get a little

bit more serious and double down on some of these trading platforms in this industry. But I also think about what Senator Tester from Montana, Democrat, said over the weekend on NBC on the Sunday shows. I want to read you this. This is I knew I was going to ask you regulation. He says, I've not been able to find anybody who's been able to explain to me what's there other than synthetics, which means nothing. The problem is, if we regulated it, it may give it the ability of people to think it's real.

People in Washington don't even think they should regulate it because they don't want to give the message to investors that you should be in this space. MH Thank you. Now I want to squeeze this in. What do you make of the timing of this, that this is all taking place? The authorities are stepping in right before Congresswoman MAXINE Waters has a big day of testimony on Capitol Hill. It's interesting. I was taking a quick look here at all

the people on this committee alone, by the way, that took money from SPF. It's a super awkward situation. Absolutely. And you wonder if they're going to be giving any of that money back. So to their point, I think whether you're a lawmaker or a regulator here, you have to wonder how this had happened under their watch, especially with the closeness that the lawmakers had to this industry. But to the point that you're making here, MAXINE Waters herself said that it's time that this setback, when freed, had faced the process for justice. But the American public also deserves to hear from him directly under oath.

Sonali Basak. Am anxious to debate you. Thank you, Kate. What do you make of that coincidence that this is all taking off like Brad Stone was dead? ISE. Whether you were rude to me, I was thinking the same thing. I don't think it's you know, I think it's a catalyst to get to it before the hearings here because they must know things we don't know. I'm going to a victory lap here for Lisa

Abram Woods, Jonathan Ferro and myself. Our quiet nailed this over the last three years. I'm not going to mince words. Is that your every day? You and me. Lee said to take the surveillance pencil and put it in our mouth so we would grit teeth, peaches positive this morning. Much more on this breaking story. Still ahead.

Two hours away from inflation data in America, about 24 hours away from hearing from the Federal Reserve chair, Jay Powell, equity futures coming into all of that shaping up as follows features positive. A half of 1 percent left here on the Nasdaq by half of 1 percent. Also, the move on the S&P yesterday, biggest daily move of the month so far on the S&P 500 in the bond market, yields look like their some Tuesday hands. Thursday's yields just a little bit

lower by couple of basis points on a 10 year to 359, 27 down by three and a 30 year to 354. So this curve just a little bit flatter going into that Fed call tomorrow at CPI later this morning to finish on euro dollar. Just to wrap things out for you, euro dollar looks a little something like this, one of 545 positive, a tenth of 1 per cent as the price action. Let's get you the breaking news of the

last 30 minutes or so. The FCC charging Samuel Backman freed with defrauding investors. They say bank was freed, orchestrated a years long fraud to conceal from FTSE access. Investors won the undisclosed diversion of FTSE customer funds to our meter research. The undisclosed special treatment afforded to Alameda on the FTSE platform, including providing Alameda with a virtually unlimited line of credit funded by the platforms customers and exempting Alameda from certain key FTSE risk mitigation measures.

And finally, three and some you picked up on this a little bit earlier this morning. Undisclosed risk stemming from FTSE exposure to Alameda, significant holdings of overvalued illiquid assets such as FTSE affiliated tokens. The complaint further alleges that bank meant freed used commingled FTSE customer funds allocated to make undisclosed venture investments, lavage, real estate purchases and some large political donations. She goes to the events this morning at 10:00. I assume staffs of these politicians are

rewriting the script. This morning, I really want to say, John, that the token discussion at item three goes to the heart of the research of Rafael, our own his team at the Bank of International Settlements. VIX is hugely suspect about stable coin and its supposed stability with an open, visible audit market. As we were reading through the statement, some went straight to that quote from Gary Gensler. So allow me to share that quote with our audience again, the S.E.C.

chair, Gary Gensler. This morning, in a statement, Lisa, we alleged that Sam Backman, freed, built a house of cards on a foundation of deception, was having investors that it was one of the safest buildings in crypto. Basically talking about risk controls that ended up being less than Joel Weber. There is also this hint two times point about broader investigations, broader potential malfeasance within the crypto space. What I find interesting, Tom and John, is that if you look at either if you theorem, if you look at bitcoin, they're both up on the day.

There is a question of why there hasn't been some sort of market based wholesale skepticism as we watch potentially this as the first domino of potentially others. Emma Chandra. Well, it's now. Have to see. And it's going to unwind here as you go through the morning. Again, to be clear, I'm watching the Bonanno news yesterday of the Reuters article and comments this morning at NASDAQ Ghost. And, you know, some of it is pretty sketchy to be to be fair. And we'll just have to see how that unfolds.

We really try to stay on the rails here over a report in almost two hours on inflation. It is the focus of everyone in economics, finance, investment. We speak with Bruce Kurzman, chief economist at JP Morgan. Bruce, I don't want you to play equity strategist, but your sharp made a splash overnight with a 10 percent lift in equities if we get under a 7 percent inflation, six point nine percent. Translate that for your strategists in our audiences this morning. How do we get to six point nine percent? What kind of inflation is that? Well, it's hard for me to say that we're looking for a number that prints 7 3.

So I think you'd have to get that with a pretty big surprise. The downside? On energy prices and then of course, have the core numbers surprise. I think from the point of view of the Fed and from the point of view of the market going forward, what really matters is the Fed's reaction and how it looks at the core. I think what we're seeing and what we believe we're seeing is a fairly sharp slide in inflation, but one that's incomplete, one that's getting us into the 3 to 4 percent range on core inflation here.

That's very good news in terms of where we've come from. But it's not enough to stop the Fed. And it does hold the risk that we get stuck here as we go through twenty three. And that that requires more action. And the market is currently expecting

your Friday weekly prospects as world class in analysis of housing, not only individual homes, rentals and that, but also multi-family properties as well. What is the housing dynamic that we should look for in these inflation reports in two hours? Well, I think what you're seeing in the housing market is that the rental prices on the margin are coming off. But I think when you look at what's actually measured, which is the average price for the economy as a whole, it's going to continue to be up. We're looking for a 7 percent rise in shelter costs.

I think the the dynamic in the core, if we leave aside energy for a moment, is really that goods prices are being pushed down by fading supply chains, rising dollar weakness in goods demand we've had globally with with particular weakness in China and the continued stickiness in service prices, shelters, the big part of it in the CPI. But the broader story actually is services outside of shelter have not actually showed any signs of moderating. And I think as Chair Powell has made this point, it's much more closely tied to what's happening in labor markets. And this is why people are also looking at that pool of savings that people have. JP Morgan's Jamie Diamond came out and said could be eaten up by the midyear of next year. How do you sort of look at that dynamic, at the ability of the consumer to borrow, keep spending? And that service aside, inflation has proven to be sticky.

Well, I think we have a multiple of forces working on the consumer right now. One is you're saying is we have used up a lot of that cushion and probably will use it up entirely over the course of the next year, year and a half. That, though, is not a deficit. It just means you have less of a cushion. On the other hand, the fall in inflation is a rise in purchasing power. The dynamic of government policy has been taking away transfer payments through the first part of twenty two. And so he turns to twenty three.

We're gonna get big cola adjustments. So I think the key here is where labor markets are right now. Labor income is still growing at a pretty rapid pace. If you don't hit that pretty hard, if you don't hit business spending, business hiring, the consumer is going to be fine. It's got lower inflation, strong labor income and rising transfer payments. I've also been looking at China's reopening and trying to gauge how this is going to affect inflation next year, and if service and inflation comes under control, how much could a reopening that's happening a lot sooner than people expected.

Spur inflation? Back in the commodity sector that has seen disinflation recently and caused another bout later on next year. I think there's two issues, first of all, when China reopens, it's not quite ready to reopen in terms of its health care system, its immunization position. So there's a lot of uncertainty about how much lift you're going to get in the immediate sense. I think one of the things we're going to see this week is the November data, China. It's gonna be pretty ugly. The economy is looking quite weak as it

ends the year. So I want to make the point. I think there's a big reopening to come in China. I don't think it's happening now. I don't think we're going to have. Markets in the next two or three months. Having said that, when it does happen, I think you are going to see a very strong lift in growth.

China has been seriously depressed by the Covid problems and it's going to continue to be so for a little while. And I think it will boost commodity prices. But inflation in the US is not going to be driven primarily by commodity prices. It's going to be driven by the combination of tight labor markets, inflation, psychology, and what the Fed is doing to demand that Cousin Dominic cost him over at Mizzou.

You and I have studied him for years, really talks about the shift here from a supply side analysis to a demand side analysis. In that service sector, inflation will be more persistent. We'll have an inertial force will have trouble coming down. Do we risk, as he talks about as doctor constant talks about do re risk the Fed, quote unquote, fixing service inflation and getting itself into trouble. Well, the feds got a difficult job. Let's let's make that clear.

What we're seeing right now is the supply chain problems. The commodity price pressure has come up. Those forces and they come off is giving us a relatively sharp drop in inflation. We've got up to about 9 percent. We're going to get down as if we're right below 4 percent, largely on that alone.

However, as that stuff is coming off, the tightness in labor markets, the pressure is there, the underlying continued support for demand in the service sector. And I think psychology are all factors you can call that demand. But I think it is a mix of things that we want to understand is driving it. It's moving in a way that's limiting and probably not going to allow inflation to get all the way back down to the level that the Fed is going to be comfortable with. And the Fed has to deal with that, even if the source of those was a supply driven, endemic dynamic. And the Russian invasion, the Fed still has to deal with the consequences of that.

And the way they deal with it is to weigh on demand and unfortunately, labor markets. Bruce, wonderful to get your thoughts, as always. I had a CPI and a Fed Bruce Katzman of JP Morgan. Lisa, you mentioned reopening a China

Covid ripping through that country right now. We had a story out this morning. The currency volumes have been falling in China. It was traders call in sick.

Yeah. Well, this is exactly what Bruce is talking about. They might try to reopen, but can't. They don't have the infrastructure. They don't have the jobs and the arms. And that's what we're seeing with the numbers climbing, even as they move away pretty dramatically. I mean, it's shocking how quickly they have wholesale dropped a lot of the requirement.

I've gotten used to for a while. I know you sort of fund manager, survey CFA, just expectations around global growth, just improving just a little bit off the back of this China story. Except you're not seeing it in the commodity trading. We've been talking a great tat. So how much is Bruce CAC view? Really, what's driving at the action and people saying you could try to be open, but you just don't have the infrastructure in place just yet? Maybe, though, it is a story for twenty point three dollars CNY right now. About six 98 will pick up on that story a little bit later. If you just turn again on Bloomberg TV

and on Bloomberg Radio, the headline across the Bloomberg terminal about 20 minutes ago, 30 minutes ago from the S.E.C. charging Samuel Pacman freed with defrauding investors and Thompson pretty bruising quotes. Oh, yeah, in this statement. RTX operated behind a veneer of legitimacy.

Mr. Bank went free. Created by, among other things, touting its best in class controls, including a proprietary risk engine and FTSE access adherents, specific investor protection principles and detailed terms of services. But as we allege in our complaint, that veneer wasn't just thin, it was fraudulent. There's a history here and they do say 30 through sort of the advent of the Securities Exchange Commission out of the first debacle of the Depression. And this goes to what we've seen from, say, Harvey Pitt or Arthur Levitt of Bloomberg LP board member for the years when the S.E.C. speaks. There's a certain tone different than courts, different than prosecutors.

It's very line by line in this press release. Has it line by line feel to it. Lisa, picking up on that time this morning, that's for sure. Yeah, trying to send a message that's very clear to a broader industry that potentially there are other risks.

FTSE collapse highlights the very real risks that unregistered crypto asset trading platforms can pose for investors and customers alike. How broad is this? How many individuals? What type? Bitcoin flat. Seventeen thousand four hundred off this news. I'll be honest, I would not have expected Lisa mentioned the same thing a little bit earlier this morning. But there is a distinction to be made

her right as they know that this is a fouled platform versus something counts that Lisa, a lot of people still have a ton of faith in. That's the question. Right. Because if people start withdrawing their money, how much is this people just hiding out in the best case scenario? But how much does this broadly diminish the investor interest in? You've got three groups, nor Roubini sitting here. It's not accurate. Yet are another group that's taken the cooler. And Jane, you mentioned the group at the middle looking at troubled platforms, but a legitimate coin or token? It's a it's a currency key on the Bloomberg.

What's that about? That's the conversation we're going to have for a long, long time. I suspect equity futures right now positive by half of one percent on a S&P 500. It is CPI Tuesday, your data, eight thirty Eastern Time. Keeping you up to date with news from around the world with the first word.

I'm Lisa Mateo. The disgraced co-founder of Crypto Exchange FTSE now in custody in the Bahamas. Sam Beckman, freed, was arrested after the U.S. government filed criminal charges. He'll now await extradition after he declared bankruptcy last month after it ran out of cash.

There is speculation that client funds were misused before the firm's collapse. The Securities and Exchange Commission filed separate charges against bagman Freed, saying that he defrauded investors of one point eight billion dollars. In Ukraine, President Vladimir Zelinsky warns that a low in Russian attacks won't last. He says the break in aerial strikes is likely a sign that Moscow is preparing another wave of attacks. So let's be also suggested Russia start

withdrawing troops from Ukraine around Christmas. As a good faith gesture, Hong Kong is scrapping some of its last remaining Covid restrictions that follows China's rapid shift away from its zero tolerance approach. The government will lift a ban on international arrivals going to bars or restaurants.

It will also stop requiring people to scan a QR code on their phones to enter venues. Covid curbs have hobbled Hong Kong's economy. The White House calls attacks by Twitter owner Elon Musk on top medical adviser Anthony Fouchier disgusting. A White House spokeswoman also said musk sweets are dangerous.

Over the weekend, moss moss. They use my math, the use of gender pronouns and call for legal action against voucher tweeting. My pronouns are prosecute patchy global news 24 hours a day on air and on Bloomberg Quicktake. I'm Lisa Mateo. This is Bloomberg. There's a lot of minefields to cut and navigate in the first half. It's soon pointing towards an economic contraction and therefore that is really, I think, the overhang on the market right now.

We're worried less about supply and more about dwindling demand for the new year. It is the conversation going into 2023. That was Stephen Schork that the principal at the Schork Group. Let's check out the markets for you. Inflation data in America coming out a little bit later this morning. Equities up by half of 1 percent. Marco, Marco, Marco Kalina over at JP now underway. We shift our equity allocation to.

A moderate underweight, I saw that from overweight. We trim risk and commodities that maintain a sizeable overweight and fund these by increasing our allocation to corporate bonds. Tom and Cash Clinic yesterday. What do you make of that?

Right at the end of the year. After all, the loss sets in after being a chef. Careful here, 2010. You speak your mind. Speak your mind. You know, we have a great humility here, folks.

For people, it now it. Think, think, Mr. Wilson this year and others, great year. And people that maybe miss it on the x axis, but they stay where they are and they say out there somewhere, we still see our framework. I'm going to pick this morning on the

wonderful John Stoll office at Oppenheimer and Company, who's been bullish and has stayed that way and is looking pretty good here after what we've seen. And then you've got these people, you know, Mr. Klein, you could be right. He could be correct here. But it is an odd swing in a late swing, to say the least. Our view is that market and economic weakness may occur in twenty three as a result of central bank over tightening with Europe first and the US to follow later next.

Yet. The issue that many people have is that the view of many other people is they've been grappling with that storytelling for the last nine months. I am going to ISE with great respect to these strategists. It's always brutal and this year everyone to a person says tremendously difficult, tremendously difficult.

But what I like is when they're clear and Mr. Covid is credit, he's been very clear in the last number weeks as he ebbs away from is it safe that I should call him a previous over bull? I think you can call him. Just look at the forecast to start the year, a lift. Bob, I'll talk about that later this week. Just the forecast to start the year for year rent radically. Do we have any news on the current bank been freed at all in the last 10 minutes? I don't think we. Not right now.

I think everyone publish in my calendar for access. But IBEX just moments ago, I would submit it's the opening line for the ages that we'll have to wait. The testimony that we thought we were going to get at 10 a.m. a little bit earlier, a little bit later

this morning. I would like to start by formally stating under oath I ended up as what he was planning to say. I think that's appropriate for radio. We'll go with it this morning. Is is will really continue to follow this story again, Sonali Basak and Annmarie Horden in Washington. We have inflation here in 2 hours and part of inflation has been your gallon of gas and for business diesel and read a sun has been of huge value to Bloomberg Surveillance.

And Bloomberg Worldwide joins us now from Energy Aspects. I'm Rita. Is oil distant floating or is it becoming a true deflationary item within the reports report's 830? I mean, look, in the near term has obviously been deflationary. We've seen oil prices come ups, but I will say this has gone very little to do with fundamentals. Yes, there were good fundamental reasons why we were expecting a rally DRM that didn't materialize, given the new Chinese lockdowns, trend strikes, all of those factors, right? Sure. We should have probably been in the low 90s, late 80s, but not collapsing down to where we have.

I'm talking about bank tellers. This has been a massive yard and liquidation event. Lots and lots of funds have liquidated. And I think that's what's driving prices. And that's obviously been deflationary, at least in the near term. I just don't think this is going to last.

Well, it's not going to last for ones are going to go. And what will make it go? Is it a sense of Pacific Rim demand? Is a global demand or is it some supply adjustment? I think it's going to be demand and I think it's going to be Asia. China in particular, that's going to be the biggest driver of world markets next year. They are finally giving very clear

indications of reopening. So far we've been very cautious and we've been kind of expecting April onwards. But yesterday we put out a note. We raised Chinese demand numbers because these are the very first concrete they have taken. And I think that is meaningful. Again, it doesn't mean overnight China

can reopen. It will be a slow, gradual reopening. But imagine it's been three years. Come February that China would have had Covid. We've seen the kind of pent up demand in the west when the West opened up. And you're talking about billions, 1

billion plus people. The pent up demand is going to be huge. And you'd appreciate this is the multiplier effect the impact is going to have on the rest of the region. Korean exports, Thailand's tourism everywhere. I think that's where the big demand push is going to come from. So why is that not being priced into markets at all? Why is nobody following through on the story that everyone seemed to be on board with not so long ago that a reopening in China would be bullish for oil prices? I say two things for me. One, I have a feeling this is a we need to see it to believe it, because we've had a couple of quote unquote, false starts. Right.

Even earlier this year, people after Shanghai were expecting loosening of restrictions that didn't quite materialize. And they are still not buying crude in the market the way they used to. That's because they've bought a lot of gold in November. They need to run that down. So I think both of those things need to coincide and more gender needs. Your read, right. People have squared off their books. They're not want to necessarily put on

positions. Now, having said that, if you look at the curve, if you look at the price set right now for 2023, it does look extremely attractive. You don't need me to supply losses today to this market up just the end of the SVR and China reopening does provide some huge, huge briefcases for next year.

I was going to say the Strategic Petroleum Reserve releases are still ongoing. The last one having just been finished with respect to the distribution. How much has that influenced the price? Usually if you take a step back this year, what has actually happened is that we haven't lost much at all from the Russian invasion, right. Because the embargo has just only kicked in since the invasion. We have had 270 million barrels of global SVR released and maybe half a million barrels of day of Russian losses.

So you can do the numbers and yet commercial inventories. Yes, we build, but only built by about 250 million barrels. So had it not been for the strategic petroleum reserves, we would have run out of oil in several places and ready set of energy aspects, not the year end to crude. I think many people were looking for a catch up. As always, if you are just tuning in on TV and radio this morning has changed. At 10:00 a.m.

Eastern time, we were expecting testimony from Sam Backman free to the House Financial Services Committee, led by MAXINE Waters. And then in the last hour. This headline from the S.E.C. bank and free to him, charged with defrauding investors. The charge of defrauding investors doesn't care for January. Agreed about reading out the testimony. I went to one item on tokens as well, but I just think charge doesn't. I've seen charges from the S.E.C.

and they're never fun. I mean, these are, you know, civil criminal issues. But this is line by line going after him. I mean, there's there's no padding in this statement. Lisa, you're better at this than I think

many the defense of this individual. What did you make of the media or is race suggestion within the media tour of the last month of the line of defense that he's trying to take incompetence? Just being clumsy, naive. I didn't know exactly. I messed up.

My intention is to make everyone whole. I am so sorry. I feel like I've failed. It's my missed doing. I didn't necessarily have any engagement with Alameda.

If you look at the statement that he prepared for the congressional testimony, he says, I was no longer in charge of Alameda, the personal trading arm that the S.E.C. accuses as being his private crypto hedge fund. He was saying he had no knowledge of what was going on there. So this is partly a plea of ignorance and incompetence, which is the real issues here. This guy's physics, mathematics from the Massachusetts Institute of Technology. This ignorance thing drives me mental. It just drives it.

Absolutely not. This kid was a sterling high school student in math. I don't think that's a character assessment of Lisa. Lisa ISE, I'm tired of the media tones.

What was me? This guy is so dumb. So come on. He's no ISE man. I think from Matt Miller Tom Lisa Shery Ahn decision that we're good. We're getting the accolades worldwide. You know, the opinion I've been for my feeling on Big Dog. Well, but but bitcoin has been holding

in. There is a question mark RTX channel nine thousand seven. But there is a distinction right now and the line is important to draw. We don't know how thin that line is or you're going to have an idea how crucial we're going to find out. Is what, over the next couple of months? Who else is going to be indicted here? Who else is going to be driving off this web? How broadly within the crypto sphere? Or is this the bad actors? When you speak with crypto in people in the industry, they say we welcome this. We want to weed out the bad actors so that we can get back to what we do.

Whether that story works to me. What do they do? I'm asking for Nora. Who is they? The industry. What do they do besides promise people? There there is a banner at the World Cup crypto dot com on their website.

They promised you, John, 8 percent. They're going to struggle to attract the capital that they've been attracting over the last several years. 8 percent use Lisa's point. He spent the last month talking about being clumsy, naive. The S.E.C. this morning saying it was systematic. Suggesting it was deliberate and

accusing bank freed of defrauding investors. More still to come from New York. This is Bloomberg. I think 2023 is opening the door for a recession. We're expecting either slow growth or a mild recession.

There's a lot more signs now, but pretty clear inflection points in both the growth and the inflation numbers that we've had is a flop. We're still kind of waiting for the chop. You've got to concentrate on. I think surviving the difficult start to next year. This is Bloomberg Surveillance with Tom

Keene, Jonathan Ferro and Lisa Abramowicz. What a 24 hour CPI, 90 minutes away. Inflation data in America tomorrow. The Fed decides and some this morning. Already the S.E.C.

charging Samuel Backman free the defrauding investors. Talk about the news flow this morning. News source extraordinaire are going to bring it all to you. Getting into the Fed meeting tomorrow, you wonder if this comes up with, frankly, with Chairman Powell in the press conference tomorrow as well John. I really don't know where to start with Julian Emmanuel on equity markets. Going to be great right now, but I think

we've got to go to this breaking news and not the bitcoin is removed from these headlines and is not going to break things up. Summit about 10 minutes time. We'll catch up with Sonali Basak down in Washington, D.C., alongside Bloomberg's Ann Marie to get the latest, because,

Lisa, there is still a hearing set to take place at 10:00 a.m. Eastern Time. I think the tone of that hearing has changed somewhat, perhaps just a little bit. His prepared testimony was going to plead ignorance and incompetence and talk about the timeline, his greatest hits of how he dealt with the whole situation. Perhaps the tone has changed now that he is in custody in the Bahamas, going to be extradited to the United States. We will also get later this morning. That indictment unsealed from the

southern district of New York, federal prosecutors to get more detail of the criminal charges than that. So I think a lot of people asking Lisa, what took so long? What took so long? My question this morning is why now? Why yesterday evening? Why this morning? Why hours before we were set to hear from him on Capitol Hill? It's a great question. I'm not gonna pretend to have an answer. We don't know what the coincidence.

Oh, could it coincidence factor is there was an issue with how he was gonna get back to the United States. Was he gonna be taken into custody if he came from the Bahamas on his own volition to the United States? I do wonder if that expedited some of the proceedings on the criminal side simply because of the logistics of coming to the U.S. for those hearings, possibly the quote, the morning sun from the S.E.C. chair, Gary Gensler. You picked up on it almost immediately. We allege that Sam Backman freed built a house of cards. Yeah, the house of Cards is there with all the allusions to Hollywood.

And now but then I go down and say they make careful note of the validity of tokens. I'm not going to opine on that. I'm not qualified to opine on that. I would lean on who Mr. Gensler is leaning on, which is the Bank of International Settlements in Geneva. And Rafael, ours put together a body of literature over the last four years and part of the heart of that mining all this idiot thermodynamic electric stuff, his recent one on retail. But also, John, looking at the token validity, a house of cards on a foundation of deception. More coverage still to come. Let's get straight into the price action

in 90 minutes. Away from inflation data in America going into all of that. Equities have been rallying. There were ramming yesterday, biggest one day pop we've seen on the month so far. A lift again today, up by a half of 1 percent this morning on the S&P. Futures elevated again this morning.

Gilts just a little bit lower by couple of basis points. 358, 54 and euro dollar, I have to say, euro dollar not doing much, 25, 34. Yeah, I mean, the data's there and it's, you know, it's moving and that and the oils have got it all together. And I'm reading as good. I really don't know where to look on the data this morning, John, off of CPI other than equities. Gave us a little bit of a tick of that at about 2:00 p.m. on the Cheap Guide for Equities. I was going through the numbers yesterday, September 21.

We opened up at 30 789. That was fed meeting day November 2nd, Fed decision day. We opened that day at 38, 52. We closed yesterday at thirty nine ninety. Lisa parameters, this equity market is hardly down I think since September. Just a lot of chop in between. Perhaps the index level underneath the

index level there has been a rerating, a very specific sectors and companies and that has been a massive shift. We'll get a better sense of which areas of the economy are continuing to chug along here with the 830 AM parenthesis CPI. The headline number is expected come down to seven point three percent from seven point seven percent. J.P. Morgan saying a softer than expected read extreme softer than expected read a six point nine percent could trigger a 10 percent rally in equities again. Which side is that going to be driven by? Is that big tech that's going to suddenly get a boost from this idea of massive disinflation or something of that nature to be looking at services sector inflation very carefully today? We're also going to be perhaps reading that indictment that's going to be unsealed by the southern district of New York.

Federal prosecutors coming out. Sam Banks been freed currently in custody in the Bahamas as the U.S. House of Representatives prepares for a hearing that had expected his attendance, his prepared testimony, perhaps creating the contours of his side. Now we deal with the politicians and how they deal with this and tried to discuss perhaps some of the donations that he made to a number of different campaigns. At 1 p.m. EDT, those 30 notes are being auctioned

off. Joe Weisenthal. I do think it's interesting considering the failed auction yesterday. Not yet. It was really messy. Obviously messy was a soft one, but I think understandable. And I think you'd agree. Going into CPI this morning, going into the Fed tomorrow, we get lucky this morning.

Joining us roundtable, Julian Emanuel, the chief equity strategist at Evercore ISI. Julia, good morning. Good morning. We haven't had the cathartic moment, according to you, but the LO earlier on this year is a low, not

2022-12-17 01:28

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