tv Bloomberg Markets Americas Bloomberg November 12, 2021 10:00am-11:00am EST
guy: 3:00 p.m. in london. 10:00 a.m. in new york. 30 minutes into a soggy trading session in the united states. i am guy johnson in london. alix steel is in new york. welcome to "bloomberg markets." we are about to get some news. i am looking forward to the inflation component of these numbers. alix: we will break that in just a second. i am not going to talk about the weather. but i will talk about the markets. the s&p pretty much flat. you have materials doing pretty well, tech doing pretty well within the s&p. but it does feel soggy. i want to point out the dollar because that along with yields has been interesting. king at the bloomberg dollar index, the highest in november,
2020. that really sets up whatever central-bank divergence that we are seeing which leads to the bond market and inflation expectations, 30 year yield up by about two basis points. the belly was getting hit earlier in the session, but it feels like it is moving toward the backend. crude down by 1%, but i wanted to highlight that because apparently there is a really big options dad in the market. oil equivalent of 5 million barrels, spreads of $250 million. that is a really big bullish bet potentially on where the prices could go. guy: that would take us back to the 1970's and that would take us beyond the 1970's. the 1970's saw the huge oil shock. that would be an inflationary story. inflationary stories, let us delve into the data and begin with the university michigan consumer sentiment survey that is hitting the screens right now. headline number, 66.8.
the breakdown is important. that is down from 71.7 and below 72. current conditions that are coming off, 73.2 down from 77.7. expectations also dipped to 62.8 and then we get to the kicker. basically one year inflationary expectations up from 4.8 to 4.9. the longer-term story stays at 2.9, but nevertheless, one year inflation, this is what is going to be worrying the president. the consumer is expecting much more to come and for to continue and that will hit current expectations. alix: 100%. let's get a look on the jobs market. the jobs openings came in higher than expected, but did fall in september. this is two months old, but he gives a good indication, coming
in at 10.4 million jobs opening. to .6 million jobs opening. the opening following -- falling justin little bit. -- falling just a little bit. a lot of jobs openings there. we will bring you new details as they cross. what you do with all of this? we are heading into the end of this year and into 2020. jp morgan released a 2022 capital market assumptions, a gloomy picture for the global economy. one expert reads that the reality of weak demographics will weigh on, growth across developed and emerging economies. joining us now are david kelly, j.p. morgan asset management strategist and gabriella santos, market strategist. the bigger takeaway when we are going into a world of higher inflation, higher rates, and a higher dollar and record stock
markets, what was the biggest take away when you went through the report? gabriela: it is great to be here. i would lead with a different headline in terms of our takeaway for the economy. it is weaker growth than 20 years ago because of weaker demographics, but it is better than it could've been. we see very limited scarring from the pandemic and we are actually optimistic about going forward given all of the productivity gains we have seen during this time period. there have been so much monetary and fiscal support that is likely to continue to provide a boost to overall nominal growth. the most surprising thing to us is if you compare the beginning of this cycle versus 2008, we are starting already with much higher valuations for both equities and bonds. it is really the return figure that is very gloomy. it is 24.3%. we have to do better than that, look at different asset classes, look at different markets, think about alpha. that is the way to get the
returns that clients want and need during the next cycle. guy: david, let me bring you in. we are going to get 4% over 60/40. what kind of inflation rates am i going to be dealing with? how much is inflation going to eat into that return over the period we were talking about? david: a little bit higher. we pushed our inflation forecast up from 2.0% to 2.3% over the next 10 to 15 years. i want to emphasize that this does mean we think most of this is transitory. it is an inflation sky right now. we have supply chain disruptions. we have monetary policy pumping through the system. a lot of things that have kept inflation low over the years, the increased global trade, increased inequality, we think those will stay in place. we are looking for a small agree to long-term inflation expectations even though we are seeing a big upgrade in the current numbers. alix: david, good to see you.
let's get to that 60/40 portfolio. you guys see high volatility, but a return of 4.3%. you say you could see it get to seven if you can allocate correctly. can you walk me through your allocation? david: the key is to recognize that the things that people are overweight in are the areas that we expect to see slow growth. u.s. equities only by 4.3% -- 4.1% over the next 10 to 15 year period. corporate bonds giving you less cash, less treasuries. once you go outside the united states, we think there are better returns overseas and those will be amplified by what we think will be a falling dollar over the next 10 to 15 years. but now you are talking about numbers in the 6%, 7%, 8% range when you look to emerging markets. if you look at some alternatives, there are plenty of alternatives.
real estate, infrastructure, global transportation, private equity, private debt. these can give you better returns than a 60/40 portfolio. we have been in the world of beta for the last two years. momentum has carried you. you did not need to do much thinking. this is the dawning of the age of alpha. you have to look outside the box and think about where the mixed valuations are because this pandemic has left a lot of things wearily valued relative to each other and that is true in terms of what i just mentioned. but even within portfolios, the top 10 stocks in the s&p are trading at over 30 times earnings. the rest of the home market in the s&p is trading at about 20 times. this is a time for active management within portfolios and also total a la -- asset allocation. guy: we have some weird valuations, you have to look more outside the united states, emerging markets will be an increasing feature of a
successful portfolio. gabriela, is china in the box or outside the box? can i ignore china or do i have to include china in terms of my asset allocation? a lot of people are scratching their heads trying to figure out the answer to that one. gabriela: we absolutely have to include china. we are talking about onshore chinese equities and chinese bonds. one of the big papers we wrote in this year's long-term capital market assumptions was about the growth and the potential of chinese onshore markets. they have superior returns. they have diversification benefits. they really hold the risk of justice. we did a study. if you just have a 50-50 portfolio, a 4.8 percent return expected, you add chinese onshore assets and you can boost that to 5.8% without sacrificing on the volatility. we want to have this -- take this opportunity in a tricky
year for china to underwrite the view that more and more of china will be a key for growth of asset portfolios. alix: even though we are getting a tough year, property restrictions, a crackdown on tech, it will still provide that boost? gabriela: yes. we are very much in the midst of a new reform cycle in china, but we have been here before. the volatility we have seen this year with business -- is business as usual. investors go toward the crises and adjust to the new reforms and we move forward. and they do not all net out to positives for chinese onshore assets, but you can still pick up significant returns over what you can get another equity and bond markets and it is all about the growth of the market and their tilt toward new economy sectors, their growing institutions, and their continued openness to foreign investors. guy: david, we have not mentioned europe. i looked at the earnings season
and it was solid. it surprised people by how solid it was. eurozone does not seem like it has an inflation issue. it probably does not have the growth of the united states. how much do i want to allocate to europe and to the u.k.? david: there certainly is a good opportunity in terms of valuations right now. we are seeing a situation where broadly, equity markets outside the united states are about two standard deviations cheaper than they have been on the last 25 years. the thing about europe, this is true of japan, is they are quite cyclical. if you look at the structure of the markets, the cyclical sectors are much more dominant in europe and japan than the united states. we think we get a tactic, a cyclical rebound. it is true that the long-term growth story for europe and the long-term growth story for developed countries outside the united states is pretty slow in terms of economic growth. we think that is right. we're also looking for a little bit of a productivity boost across the developed world as we
grapple with labor shortages and that is another theme in the long-term capital market assumptions. how can you implement labor saving technology with rates low, profits high? just -- this should be a good period for capital spending and enhancing productivity. there is a short-term opportunity for cyclical reasons and a valuation opportunity. we think the yen and-year-old will appreciate over the next 10 to 15 years and amplify the return from those sectors. they are very unloved and un-held in this is an important opportunity if you want to get out of that 60/40 trap of mediocre returns in the long run. alix: 10 to 15 years, that is a solid outlook. i don't know what is going to happen tomorrow. i wonder in the short term, central bank divergence is going to take front and center. we have seen that play out in the bond market and the fx market last week. i wonder how you see that evolving and how that leaves
certain central banks behind in some ways. david: i don't think that it is going to last for that long. it is very refreshing when we sit back and get out 10 to 15 years because you can just get through some of these cyclical issues and political issues. right now the u.s. is looking like it is going to tighten more aggressively and europe and japan are lagging behind. but we expect to see more inflation there also and there is no reason why u.s. monetary policy should be tighter in the long run than european and japanese monetary policy. we think they will catch up and over the course of 10 to 15 years, the massive trade deficit will push the dollar down also. gabriela, i know you have written on the fact that emerging markets in a lot of countries who are being forced to be much more aggressive on monetary policy overseas than the united states. gabriela: that is true and china is not necessarily one of them. i think that really emphasizes how chinese bonds really beat to
the music of their own drums as opposed to following the u.s. or other central banks and that adds to the diversification benefit of holding chinese onshore bonds, which has some of the best ratios around. alix: we will leave it there, but we appreciate your time. david kelly and gabriela santos. thank you very much. guy: really appreciate it from over here. it has been breakup week. we have had ge and now we need to talk about johnson & johnson. johnson & johnson breaking up pharmaceuticals. we will be speaking -- david westin will be speaking with the company's chairman and ceo. that conversation next. this is bloomberg.
david: i'm david westin and want to welcome a very special based -- special guest. johnson & johnson's chairman and ceo alex gorsky. we had a very big announcement. you are breaking this iconic company into two pieces. johnson & johnson was known forever as being proud of having both the consumer side, a little less return, but a little less risk, and the pharmaceutical side. more return, but also more risk. you wanted them together. what made you change your mind? alex: thank you for the opportunity to have a conversation today. you are right. this is a historic day for johnson & johnson. this is something we have been looking out for years. we have given a lot of reflection and careful consideration to. we have long said that our diversified portfolio strategy
was one that was founded based on where the markets were going, where we saw innovation going and as we have seen things switch in a significant way, we think it was important to make this announcement today. we are going to separate our consumer division to form an independently traded public company. there are a lot of factors that play into it. some of it has to do with the way innovation and technology has evolved, the way the consumer channels, particularly e-commerce has changed. covid-19 brought about a fundamental change in the way that people and families think about personal care. when we compare and contrast that to our pharmaceutical and medical device portfolio, we just felt that this was the appropriate time so that both these two companies can really accelerate their growth and reach even more patients and consumers, and be more targeted in their strategies and executions and ultimately create
more value for stakeholders. david: both of those businesses have really changed a lot. both the pharmaceutical and the consumer facing one. tell me about the finances of it. johnson & johnson has always been out of its aaa rating. do you think you will keep that rating and is it not as important to have that today because of low interest rates protect it into the future? alex: we think it will be maintained but we have also always said the aaa rating was not in another itself a goal of ours to maintain. rather, it was a reflection of the way that we run our business at johnson & johnson. what is really important at this moment is that we are doing this from a position of strength. if you reflect back just over the last quarter, all three of our businesses are operating at very strong competitive positions, growing at a rate faster than the markets in which they compete. we have been growing shares, the pipelines are stronger than they have ever been. we think this is a way to unleash additional growth across
both companies as we go forward. david: talk about what i described as high returns and high risk. that is the patent covered medical treatment. devices as well as prescription drugs. does this free up cash to invest because those are very expensive. alex: the way we try to manage our business for the long-term is one where we are always looking for that next level of innovation because we understand that whether it is patent expert reason -- expiring, that is part of our daily business. when we do our planning, we are always trying to think 3, 5, 10 years ahead. if you look at the track record we had a nonpharmaceutical business, whether it has been over the last 10 years, five years, or three years, in spite of literally billions of dollars of losses due to those other types of patents or competitive
launches, we have been able to maintain an above market growth rate based on the innovation, the new product launches we have been introducing throughout that period. we take the same approaches with their medical devices and both of these businesses have the potential to be growing at least single digits and above going forward and we think this is going to better position our consumer business in this evolving environment that i mentioned earlier to be even more agile, more flexible, and more innovative to reach more consumers around the world. david: i want to come back to consumers, but just for one moment on the pharmaceuticals and medical devices, do you anticipate a faster rate of growth because it will not be held back by consumers? alex: part of all of our objectives here is to accelerate growth. absolutely, that is part of our goal. we see that possible by just be more focused, being able to better allocate capital, to have a better balance perhaps in some
cases between the corporate and organizational structures. we think that by allowing each of these businesses to take that path forward that they will be more successful on the top and efficient on the bottom as well. david: as you said, the markets have changed. one of the things i have seen is how much social media, tiktok influencers, things like that are driving consumer products in some of the areas you are in that did not happen before. is that part of the decision? is that an odd thing for johnson & johnson? alex: we are seeing the way that consumer products are being introduced and developed has evolved. we have always tried to take a very science-based approach that is professionally endorsed by physicians and other experts and we think that having that fundamental underpinning and science in technology is really important. absolutely, we think by being an independent unit, it is going to give the consumer group an even
greater level of flexibility and agility to make sure that they stay competitive as that environment continues to evolve. the whole e-commerce world has changed. it makes up a significant way higher percentage of our business. we have grown at a solid rate in those areas. we expect that to continue to accelerate in the future. david: one of the issues you have had on your agenda has been the potential liability. you have various legal structures you are trying to deal with, but it could be substantial. does that stay with the consumer part of the business and will it be capitalized enough to handle that? alex: no. this is about the future. we have been very clear in all of our public announcements about the legal strategies that we have in place. but this is about really unleashing our consumer business as an independent public traded company going forward and we think it is an exciting time for them and as i mentioned earlier, improve our pace of innovation,
our ability to execute, as well as prospects for the future. david: just to make sure i understand, i think you are seeing that your strategy will not be affected by this division of the two companies. is that correct? alex: that's correct. david: i want to ask you a personal question. you and i talk about the credo of johnson & johnson and how important it is to you. who gets the credo between these two companies? alex: i hope everybody would take the credo. it is very consistent with what the purpose of a corporation should be, by placing patients, by placing consumers who use your products first, by taking an inclusive look about what we are doing for our employees at the same time. i would like to give a shout out to all of our employees across johnson & johnson, particularly those in our consumer group for their hard work and commitment. to think about our communities as we are making these decisions and the impact that it can have and it ultimately leads to our
shareholders. we think taking a credo based approach is in every company's best entrance -- best interest. david: how much of the decision to do this has been an ability for shareholders to make more informed targeted decisions on which of the businesses they want to invest in, consumer or the higher profile pharmaceuticals? alex: that is one of many factors. i think it has to do with how do we make sure that our strategies involving, that while it is tied to what our strategy has been in the past, that we are constantly evolving. this is a bold move and we think it is consistent with the way that we are seeing the market adjust going forward and as a result, we think both of these companies are going to be more competitive, better positioned to really help more people around the world. david: it is a big bold move. how long will it take and how does the johnson & johnson management make sure that your employees stay focused because you and i have been through
situations where it is easy to get constructed and it consumes a lot of management bandwidth. alex: i have been very proud of the way that our teams in all of our sectors responded and stepped up to this period. it is interesting. if you look at our financial performance, if you look at our competitive shares, if you look at our r&d pipeline, if you look at our internal engagement scores, all of those have actually improved during an incredibly challenging time for our industry, let alone the company. we think we are better positioned today than we were 24 months ago. we see the way that we are considering the financial implications as really an outcome of the way that we are fundamentally running the business. we innovate. if we execute, if we are taking a stakeholder approach, the results will drive themselves and we think our shareholders will ultimately recognize that. david: thank you for taking a
few minutes out of a very busy day. that is alex gorsky, johnson & johnson chairman and ceo. back to you. alix: really appreciate it, david westin bringing us that interview. j&j stock up by 1.4%. it comes on the heels of ge splitting into three businesses, totally different sectors. it feels like the era of the big business in traditional may be over in the u.s. coming up, scotexit. could the worst be over for the global chip shortage? we will get some answers from kurt sievers, nxp semiconductors ceo. they had a long-term growth report yesterday. we will talk about what we learned and what their view is in 2020. this is bloomberg.
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and actually -- nxp is depending on the auto industry and things are looking pretty good despite the chip shortage. let's look at the details over the sector and this company are going. abigail: things are looking very good for nxp semiconductors. a big quarter. big on the top and bottom one. adjusting -- adjusted earnings up a little bit more than three dollars per share. not a small number. about $3 billion in revenue. that was a 20% beat. not so shabby. if we take a look at revenue because this is a bigger story, you can see 2018, 2020, a little bit of a depth of $8.6 billion. 2021 estimated to be $11 billion. if we go forward a couple of years, $15 million. that is 36% growth. really incredible. what makes this interesting relative to the last quarter,
automobiles and we are hearing about these chip shortages, largely in line about 1.5 billion dollars worth of revenue, more than 50% of the overall sector pie. interesting because if we take a look at the lea thompson in the order and when it actually comes through, we will see there is a pretty decent lag up in 2021 to greater than five months. that is one of the challenges that has to be managed at this point. right now, nxp semiconductors seemed to be doing a great job. alix: thanks a lot. also, they had their investor day yesterday. kurt sievers, president and ceo is here with me on set. this is your first trip outside, right? kurt: absolutely. alix: you had investor day yesterday and you were quite bullish. you are looking at sales that could reach $15 billion in 2024. you are looking at a growth rate of 14% over the next three years. there is a lot to unpack.
just in terms of automakers and chips, wind does the shortage end? kurt: i guess it is going to get better through next year, but i don't think it would be unbalanced through the end of next year. there are still some quarters to go until it is coming back. i have to remind all of us, we are shipping like crazy. you just showed a few numbers. let me put it in perspective. this year, our automotive revenue will grow by 4% over last year. you might want to say last year does not compare because everything was down, but it will still be 30% above our revenues in 2019. if you compare it to the pre-pandemic period, this is 30% growth from a year-over-year perspectives. supply is going up every quarter and as part of the forecast which we have just seen, automotive is going to grow 9% to 14% compound annual over the next three years, which is a
massive growth. i think we do a lot for the auto industry, but i have to admit they are still shortages in places. guy: this is an industry that is well known for peaks and troughs in and busts. you are pointing to a positive picture. are we at peak growth now? is this cycle going to be different? is the shape of the cycle going to be different? sustained peak growth for a long period? kurt: this is the beginning of a longer-term cycle for the businesses we are focusing on. we really look after secular desk -- growth drivers, and mark on the end, it is about this computing theme. our analysts talked about this. i think the next 10 years of semiconductor market growth will be characterized by what we call the rise of the action, business
applications that are all about us connected to the cloud and the compute performance, the connectivity performance does allow these applications to boom these days. i do not think we are at peak. we are starting a longer-term sustainable growth cycle. alix: to that point, is there going to be more stuff that has chips in it or is it going to be stuff that we have with chips has more chips in them? kurt: the latter. it is the things that you are used to operate with will have heavier silicon contact because they have voice recognition, they are connected to the cloud, they have better activation algorithms. think about the car. the car is the ultimate. the kind of convenience and safety the car is allowing today is bar none. thing about electric cars.
electric cars have twice the semiconductor content of a construction engine car. you see the fast pace in acceleration going to electric cars. the world is going to see 20% of the global production already being electric. we forecast 60% by 2030. again, each car that gets converted from a combustion engine a truly electric car is doubling the semiconductor content so it is about content. it is not more devices, but it is more content per device. alix: -- guy: where are the gaps now that are open as we make this transition to ev? what to ev's needs that are different and what -- where'd you need to invest to fill those gaps? kurt: the biggest difference is the electric drive chain. you get risks off of the conventional powertrain, which was more about metal and stuff and it is replaced by electric drive chain and nxp has a sharp
focus on the motor control. to keep it simple, this is all about solutions which are extending the range of the electric car. in my view, i think the biggest smile electric cars -- the biggest mile electric cars have to go is all about semiconductors. we are investing heavily in this field. we will grow 30%. we have just seen overall semiconductor growth over the next few years. if you zoom into our electrification systems, we will grow 30% over the next few years. alix: what is your capex for that? kurt: i could not say it specifically for this because we pull technologies into different -- alix: overall? kurt: the company is moving to 10% next year over sharply growing revenue, which is about twice the rate we have fed in past years -- we have had in
past years. that is a big commitment because that falls into the capability to ship more over the coming years. guy: will you have problems with getting what you need to manufacture the chips that you are looking at? if i listen to the big companies, they are struggling to keep up with demand at the moment. there are key areas in which they are focusing. where are the bottlenecks? are there issues that you will face to do what you want to do going forward? kurt: i would say the entire semiconductor supply chain is under pretty heavy stress these days. i feel confident with the numbers we gave out earlier because we have suppliers for those numbers. we want to do better and midterm, it is supply constraints and it is various things. it is about medals like copper,
it is about substrates. i feel very confident we will grow at the high end of our longer-term guidance next year. that speaks to about 12% growth for next year and supply for that is growth -- supply for that is done. alix: tell me where you think the industry is going to start making all of these chips. on shoring became something very popular last year with the supply chain issues, particularly with support issues with china. europe wants to create and build out their semi space. is that realistic? kurt: the industry has been building in the past. you had one factory in one place serving the world. i agree with you, there is a strong trend to technology sovereignty currently in the u.s., europe.
the chips in the u.s. are under discussion. i think it is needed and i think the government is great in addressing this. alix: we love having you. we love talking through all of this with you. it is great to see you in person. that is two people in one hour in person. so weird. kurt sievers, nxp semiconductors ceo. i don't think i have had that in a year guy: where'd, but utterly fantastic -- weird, but early fantastic -- utterly fantastic. alix: thanks, much more you can make fun of me if we were face-to-face. it would mean so much more. guy: that is exactly where i was going. so many opportunities. hopefully soon we will be able to do that. i look forward to that with anticipation. coming up next, the u.s. is
ritika: you are looking at a live shot of the principal room. coming up, the ceo of capital advisors. this is bloomberg. ritika: let's check in on the first word news. in japan, the government is coming up with an economic stimulus package of more than $350 billion. the package will include benefits for those 18 and younger. japan's economy has forecasted contraction number on the quarter that ended in september. in germany, the fourth coronavirus wave is hitting with force and there is no sign of infections easing. no infections have passed 50,000 this week for the first time.
some hospitals are already overwhelmed. officials say germany needs to ramp up its vaccination campaign. a warning from the u.s. on russia. washington has told the european union that russia may be considering an invasion of ukraine. the u.s. has been monitoring a buildup of russian forces on the ukrainian border. all this is occurring as tensions flare between russia and the eu over energy surprised -- energy supplies and migrants. russia says it is unfounded. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am ritika gupta. this is bloomberg. alix: let's stay with that story. antony blinken speaking earlier this hour, saying it would be a mistake for russia to attack ukraine. the latest from annmarie hordern, our washington correspondent. where is the risk for a geopolitical mistake? annmarie: things are brewing in europe. first, you have this buildup
that we saw on the spring. about a hundred thousand troops were building on the border and that was tempered in president biden called president putin and that led to the geneva summit. russian papers are reporting there can be a virtual talk between the two before the end of the year and maybe at the start of next year. then you compile this with the fact that there is a border control issue between belarus and poland and because of that, the eu and allies are thinking of putting sanctions on belarus and president lukashenko is saying if you do that, i am cutting off gasoline. 20% of russian gas goes through belarus. chancellor merkel has called putin twice this week. she is gotten nowhere with him. he does not want to do any favors for the europeans as he is waiting for the go-ahead on nord stream 2. there is one calculation of potential risk in the future. merkel is about to leave. she speaks fluent russian. she grow up in -- she grew up in
eastern germany and putin's german is excellent. i think you -- this is a place in the road we will want to watch more closely. guy: do we know what putin wants? do we know what he is looking for? is this about nord stream 2? is this about something else? he wanted a meeting and we got that in geneva and as a result, he calmed down. what is the exact of here -- what is the objective here? he is trying to play long game tactically. what are we looking at? annmarie: two things he wants. first is a little more overreaching. he said the break above the soviet union was the worst thing that could happen in the 20th century. he wants crimea. he wants to maintain that control and you can bet he wants to move that influence well into ukraine as well. he is also talking about the provocation from the united
states. they are saying they have warships in the black sea. why are you doing that. putin wants a pop line -- pipeline. he wants nord stream 2. he does not want anymore sanctions. it is ready to go. it is just going through the regulatory proceeding and he wants that set up. there is no reason why president putin is going to try to help the europeans with belarus and his ally lukashenko when he is not getting what he wants. guy: ukraine is aware of it a little bit. bloomberg's annmarie hordern on what is happening between the west and russia. going to be interesting to see how this works out. we will talk to the danish energy ministry a little bit later. investors looking for clues on the fomc leadership. bloomberg policy correspondent mike mckee joining us on set. where are we?
i feel like we have been going round and round the wheel on this one, waiting for some news as to what exactly is going to happen. there are lots of empty seats. the key one is the top. what happens next? mike: we have to wait until the biden administration settles on who it will nominate and finds a window of opportunity to make the nomination. it has been busy with the build back better. they had to get through the entrance russia plan through congress. what going on further congress, but it is about time. let's leave aside the question of the fed leadership because we talk a lot about jay powell. let's talk about the other seats that have to be filled. if powell is reappointed, you end up with receipts to fill. the vice chair for supervision, which is what they are talking about brainerd for and there is an open governor's seat. the qualifications, usually if you have a chairman who is not a macroeconomist like jay powell, you get somebody like richard clarida has deep macroeconomics background.
he also want some diversity. the vice chair for supervision, often a regulator, former bank supervisor, or a lawyer and you are looking for diversity. as a governor, you are looking for diversity now and diverse experience. one of the problems with the fed, they have had only three black governors in history and there has only been one black fed bank president, rafael bostic, who makes many people's list for one of these jobs. if you are looking for people who might be on the list, you can look for minority candidates and here are more very highly thought of people. the chair of the council of economic advisers, cecelia. lisa cook from the university of michigan -- michigan state university. i have to get that right or the football fans will be mad. and seth carpenter who is the morgan stanley chief economist. a couple of women for these posts. sarah raskin was the mayor of
banking supervisor before she was appointed to the fed and she went on to be deputy treasury secretary. karen dinan was the treasury chief economist, also a possible candidate for the boston fed. alix: it feels like the conversation on wall street is who president biden picks will be more dovish. it may be an opportunity to install three more dovish individuals on the fed. is that the right conversation because if you're worried about inflation, why would he do something dovish and can we assume that they would be dovish? mike: there is a political answer and an economic and are -- economic answer. the fed is dealing with high inflation and politically, it is difficult to avoid someone who is seen as significantly dovish. but the forecast from all economists is that inflation will go back down and sunday, when it goes back up again, do you clampdown more quickly? do you stick with the framework that you have now and wait it out?
that is where the new policy makers come into effect. also, they have their framework that says they want to -- want a diverse labor market expansion which includes bringing down the black, hispanic, asian unemployment rate and if you put people in who have lived through those unemployment rates, then you get more sensitivity to that. so there is an argument for going that direction. alix: thanks a lot. bloomberg's michael mckee. but i think is really interesting is the two stories show how much president biden has to deal with and the third story is what has happened with the energy crisis here in the u.s.. very high gas prices. there are a lot of things we have to figure out. he signed an infrastructure bill on monday. the human effort structure bill still has large questions when it comes to the senate. how does he make all this work? guy: he has to have a guiding principle in all of this and that will be the american people. the american people, judging by
the data we have just seen, are worried about inflation. he has to figure out a way of dealing with that. in some ways, the two plans may go some way to hopefully resolve some of these issues. they may hopefully raise long-term productivity for america. that would be something that would help for the inflation narrative. in the short-term, his problems are enormous. he has to figure out how to get inflation down and get inflation down quickly. alix: $3 trillion worth of spending? i don't know about that one. we will break down something that relates to this. on friday, we did a chart of the week. we will bring that to you next. this is bloomberg.
our favorite chart of the week. i will go first and it is not commodity-related. i found that sentiment was interesting. it fell to a 10 year loan. the blue line is the small business optimism. it has held up relatively well. you have to wonder doesn't wind up a meeting that sentiment and what does that do to hiring and growth at small businesses. what i thought was really interesting is that you had 24% of households expecting sales the worst since 2008. guy: one of the things you can roll into that, the jobs number from today on top of that. jobs are plentiful in america. interesting that we are seeing decline in consumer sentiment. clearly the inflation factor we saw before the break. i will turn my attention to the european earnings season and i
will make it brief. everybody was worried going into this european earnings season that things would not work out. they did work out. they worked out huge. we had amazing numbers coming through. we have seen this, as we come through august and september, we go into the q3 earnings season, we see the number of upgrades really starting to fade dramatically. now we have gotten through the earnings season and we have started to see a pickup. european earnings upgrade are exceeding global earnings upgrades which is really interesting as people are starting to invest in ink of america and turn more cautious on europe. starting to turn things around a little bit. absolutely pivotal. "the european close" is coming up next. this is bloomberg.
johnson and alix steel. ♪ guy: friday the 12th. 30 minutes to the close. what do you need to know out of europe this hour? cases klein across most of -- cases climb across much of the continent. then netherlands excited to announce restrictions. in the u.k. the numbers are starting to decline, declining at the fastest rate since april. . tensions rising in eastern europe. u.s. warns russia may be planning an invasion of ukraine. the ruble has been under pressure. stellar, massive beat. clearly one of the pendant winners. which stock am i talking about?