tv Bloomberg Surveillance Bloomberg November 22, 2021 6:00am-7:00am EST
it down over the next year probably had too much confidence. >> economists are all over the map. >> this is "bloomberg surveillance." town: -- tom: kailey leinz already a lengthy monday for her. she is in for jon ferro. an exceptional monday morning. with news from russia. right now, lisa, countdown to tuesday where the president jets off to nantucket. lisa: the expectation is he will deliver a speech on how to lower prices for americans. it means he will announce the fed chair nominee and release
some detail on whether he will open up the oil reserves. a big speech on tuesday right before it goes dark in washington. tom: we are expecting to give you full perspective. i looked at where we are in the market and so much of this is the raging debate over the weekend of what inflation will due to yields. lisa: the ideal that richard clarida, powerful and poignant, not ideological but comes to the rate hike divide came out and said we have to accelerate the pace of taper. this was a game changer on friday. it was lost in the shuffle. another had an even harsher view. this is a game changer. you are not seeing that in the markets. tom: the st. louis fed, hugely
respected. this is a carefully written article, but the bottom line is paragraph three or four says russia has a plan. the kremlin has responded in the last minutes. lisa: the kremlin came out and said this is normal it we are not doing anything exceptional and not going to invade ukraine. this is the background unscheduled and scheduled maneuvers. but the rule falls that tells you what the concern is. tom: the kremlin not responding to the bloomberg article. it was ruble as well. kailey leinz has been looking out of london. you have to look at the equity market. mastec 100 now year-to-date -- nasdaq 100 now outperforming s&p.
kailey: the s&p still up 25%. we are looking at features north of 4700. a number of strategists publishing overnight saying look through any coven -- covid related. tom: i just featured with anna edwards in london, amazon is the one that has come on and we see it with retail. it is a celebratory holiday season. it is for amazon and everyone else. kailey: it will be interesting to see how it translates into black friday or if a lot of people did shopping earlier. have seen people frontloading buying because of supply chains and the deals started weeks ago. tom: we are going to take an hour later this week. does anybody care about black friday anymore? kailey: about shopping? tom: you should survey your
household. equities rebound off of friday. dow futures of 136. good morning, jon ferro, i did those were you. yield market, we will get to that across the morning with a lot of economic data loaded into wednesday there there is some economic data today. lisa: home sales expected to come out for the united states. interesting to see, what we see a dip? the expectation is it will decline because it is seasonal but will it be smaller than this time a year. how much of this speaks to the need for more supply, which speaks at 19% increase in housing we have seen in october versus the average in 2019. a huge gap. 1:00 p.m. for you, tom, welcome
back. at 1:00 p.m., $59 billion of 5-year note. if you look at the two-year yields, the highest of all since the pandemic, hit peak in march 2020 but still way below where it was to start 2020. five yields have increased more significantly relative to they started the year last year. this indicates a rate hike debate. can the fed just execute a couple of rate hikes or are they going to enter a cycle that is marked tightening? and the atlanta fed president joining bloomberg television. i am curious to see how he reiterates, if he does come richard clarida's comments on friday. clara. it may be -- clara said -- clara
ida said he will be watching the data. tom: brian weinstein, headline that gets my attention is the bank framing up 5% plus inflation just under 6%. to you and me that is unimaginable. how far from transitory are we? ryan: the question everyone wants to know. the more we talk about it and the more people say it the further it gets. -- brian: the question everyone wants to know here the more we talk about it the more people say it the further it gets. if we can make it to the next four or five months we will see inflation numbers fall.
on a more psychological basis, i wonder if inpatient stays for longer. lisa: the debate seems to be how many it will execute in the cycle. where do you fall in that? brian: i think there is actually a decent amount of uncertainty whether it is due to into 23. i think central banks want to go later. the second debate is right, 1%, 2%, or do we have to go back to was 3% or 4% which is more normal. we don't have evidence that we have to go to 3% or 4%, rate hikes still shallow and the economies are still fragile and we are not really looking at it. it is a question of timing and how quickly the fed will be forced to do it. i think they want to be slow. lisa: the fed has we had rated
that tapering is unrelated to lift off, trying to divorce the two ideas. kailey: we had the idea of an accelerated taper circulating. if it ends quickly does that mean lift off will come sooner? brian: it is hard to separate the debate. the quicker you do it the sooner you are able to raise rates. i think we may see the fed become creative, figuring into the markets that ending taper is a more on the -- i'm sorry ending qe earlier was more of a qe emergency policy. once they are done, the market will pull the rate hikes forward unstrung data. it will be an interesting to see how the language for the dovish taper. tom: you model out some form of
the 3% inflation. the great fear, destabilization fear is the jump condition to 3% inflation. do we do this in a grind or do we jump? brian: i feel like we are jumping right now certainly. but i think it ends up being more of a grind. if you look at inflation over history, you think the 2% target which we haven't done, you would be hard-pressed. over time we tend to have inflation moving. i do think there is the chance that inflation gets higher and stickier, but i do think it is more of a grind. you fall before you start to rise unless there are external shocks. tom: brian weinstein, thank you.
i really want to talk to what americans aren't looking at with stability and utility prices. a remarkably different story in europe. someone tweeted that a surge we are seeing in electricity, german this, danish that is something we don't know in america. lisa: it is a global issue and europe is feeling it acutely. how does this affect the political discourse over there? i wonder how it translates into the relationship with russia with the idea that angela merkel is leaving here she was the main conduit between the kremlin and the rest of europe and the major source of the oil. that is why this ukrainian story is significant. tom: kaylee, what did you learn
with anna edwards about the european utility story and the 5:00 a.m. hour? kailey: it is another aspect of the crises europe is dealing with. you have the energy story and nord stream 2 becoming more important and you have the covid conversation the protests we saw in places like vienna and elsewhere, with more restrictive measures coming into place now not just an energy crisis but a fourth wave of coronavirus. tom: and excessively busy week. -- an excessively busy week. lisa and i are scheduled to be here friday. stay with us. this is bloomberg. ♪
leigh-ann: i'm leigh-ann gerrans with bloomberg's "first word news." milwaukee, a barricade into a christmas parade. five people were killed and 40 injured. police arrested one person there they are not saying anything about the possible motive. growing concern that russia's vladimir putin may be planning an invasion of ukraine. the u.s. has shared intelligence with european allies that shows a buildup of russian forces to prepare for a large-scale push. the kremlin says russian troops do not present a threat to anyone. he said the u.s. allegations are and at building up tensions. the u.s. and japan may reportedly make an announcement this week on the release of oil reserves, according to a newspaper. president biden has tried to build international support to
bring down the price of oil. in the u.k., prime minister boris johnson will lay out plans for expansion of electric vehicle charging network to add up 145,000 charging to the system until the end of the decade. that is when the british government will ban the sales of vaseline and diesel cars. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm leigh-ann gerrans. this is bloomberg. ♪
december meeting. it may be appropriate at that meeting to have a discussion about increasing the pace at which we are reducing our balance sheet. tom: the vice chairman of columbia economic and at pimco. do we know when his term ends? lisa: it is next year. one of the positions president biden has to fill? will he fill them? tom: it is one of the announcements we will have here. is it betting on to right now? lisa: that is my betting. i find it fascinating. they said they were going to have the decision before thanksgiving. heelys and tuesday and said he is giving a speech. -- he said he leaves tuesday and he said he is giving a speech. tom: i look and off he goes to
nantucket for vacation. understood he is going to announce this on monday or tuesday at what is the back story? anne-marie: tuesday he said in about four days. that came and went and we didn't get an announcement and then it was before thanksgiving and then we heard from the press secretary that she does expect it will have something on the fed before thanksgiving. but the economic advisor yesterday on fox news would not touch it. he said you'll hear more about substance and timing on the fed from the president. we know it is scheduled for tomorrow before it nantucket a speech on inflation. does that mean will give us the fed or potentially the other slate or is this going to be another build back better, inflation, gas prices speech, we just don't know. tom: how does it play over the
weekend in your neck of the woods that we need a chairman who is focused on climate change? i am fascinated whether it is brainerd or powell and a dual mandate of the fed. annmarie: if you listen to the latest comments from chairman powell, it does not fit into the core mandate. he was asked a question whether or not should banks be giving loans to call companies and he said that is not a decision for the fed. it is for the congress to decide it we had the white house coming out with a statement saying because of climate change and the fact that policy makers need to take a tougher stance, they do not think chairman powell is the right individual. he didn't bring them into global working from 80 central banks focused on thymic change. he does talk about the risks but potential he they think some of the progressive lawmakers think
if you elevate governor brainerd to chair that she will be more stressful on it. they think that maybe she will lean into the multilateralism. you see the european central bankers talk about it. lisa: how much is this a distraction into policy? over the weekend, it was said, we can't fight inflation to beget heavy fed chair that is effective at doing what his job is if he doesn't necessarily have the term that follows. how much is the democratic pushback increasing? annmarie: he is coming out squarely for powell and thinks he deserves reappointment. he said all this wavering puts the current fed chair powell and if he was going to elevate brainerd, into a delicate position and wait and see whether they should make a policy move to combat inflation. this is how he feels. he feels the decision should be
made sooner. if we don't get a decision today -- tomorrow, it will go into next week. tom: we are into december. it is unthinkable they would punt this into december. lisa: it raises questions about deadlines. i want to get your view on the other aspect of the speech, whether they are going to announce a strategic petroleum release, with japan saying they will potentially coordinate with the u.s. and china having made a move. annmarie: china making a move. the united states has been courting did -- big consumers, like japan. if we don't get a fed decision tomorrow, potentially the president will announce more barrels from the strategic reserve. this is something they have been talking about.
one credit to the white house, we are waving the decision on the fed, but the intervention in the oil market has been stunning. i have been on the other end of the camera with saudi oil ministers talking down the market. i have never seen the white house do this quite the way they have over the past few weeks. his verbal intervention enough to keep a lid on oil prices? -- is verbal intervention enough to keep a lid on oil prices? everyone is worried about inflation, it comes back to consumers in the pump -- at the pump. kailey: could you argue that runs counter to the climate agenda we were talking about? annmarie: it does run counter to the climate agenda but you have seen democratic senators coming out saying you have to tap the strategic reserves.
he also have people that don't want to potentially pay four dollars a gallon for gasoline. they will take it as this has to be done in order to protect the consumers at the pump. and concerns about rising inflation. tom: annmarie hordern on the watch with. we look to have a -- on the watch. we look to have an announcement. there is always a theme every weekend to the gloom. the gloom is omg, transitory is dead. inflation is here. i am thunderstruck by the optimism on equity strategists. lisa: some people are saying we are at peak liquidity. we haven't tapered substantially and still pumping money into the system and helping about the economy. and to add to all that we have the reopening trade. why would equities go downs,
especially with bonds yielding? that it the nasdaq still is outperforming. tom: market is pushing back. mike wilson talking about the valuation that will pull back. lisa: mike wilson has been talking about valuations. kailey: potential margin compression because of elevated pressures that did not transpire in the earnings season. on that front, over at goldman sachs published as inflation eases, that will feed into the fundamental story for some of those sectors more exposed to headwinds and will turn into a tailwind. tom: i will give credit to joe weisenthal for hitting and -- forgetting up at this hour.
tom: good morning, everyone. jonathan ferro off this week, lisa abramowicz with us and kailey leinz as well. before we get to adam parker, i want to look at the data. oil coming in away from the $80 level. stronger dollar, inmate dxy, bloomberg dollar index, huge dynamics in europe of the protests we saw this weekend. not surprisingly swiss strength. lisa: the idea that the euro is the weakest going back to 2015. the weakest versus the dollar going back to the summer. this comes from the lockdowns and protests kaylee was talking
about. austria entering lockdown, 64% of the population fully vaccinated, germany 69% fully vaccinated. in the united states, if the 8% paid white -- 58%. why are the lockdowns not the popular sentiment in the united states. tom: on the euro swiss chart, this is when i met young jonathan ferro, the collapse you see of swiss franc and then coming back with weakness. new strength over the last three or four years is really stunning to see swiss franc go to 103, 10 two would be earthshaking for global wall street cash 102 -- 102 would be earthshaking for global wall street. everybody said get out of tech, that worked out. what is the distinction in 2022?
adam: i think you previewed it. people want more caution on the stock market, worried earnings will be too high and i also think people think the fed is going to act and cause a big rotation. i am optimistic on u.s. equities and i don't think the fed will ask for a long time. tom: this is the parlor game we've got is fed watching. adam parker saying, it may take longer. annmarie: -- kailey: remember when we said we will let the fed pick after labor day. now we are past thanksgiving. the other question is, if it is a second term for jerome powell or a new term for brainerd, inflation is proving persistent at the same time the labor market recovery isn't where the
fed would like to see it. how do you think they do that dance? will they have to react to inflation regardless? adam: i always thought the fed was smart. it always bothered me when some guy two years out of college saying the fed was done. -- dumb. it goes all the way through to powell. i think, first of all, they were smart enough to look at work it's. 10-year has been stable. the five year breakevens, 2.25. i don't think massive. in terms of the point on cost, we know, lumber down 40% to 50%. we know we will see commodities rollover pending on which one they will be looking at inflationary prices in certain
areas to figure out stable pricing in the middle of 2022. your labor point is spot on. we are confused and bewildered about labor participation. we know participation is part of the issue when we get wage growth and all of that. i think the fed will wait and i am guessing it will be 2024, 2025 before they move it on the front end. we know the call to back up every quarter before it happened at the end of 2015. kailey: you made the point that the bond market looks sanguine and the equity market you could argue too. both markets benefiting from liquidity that is abundant and having a conversation about an accelerated taper. what happens when the tap turns off? adam: i have always been confused about that. what we are analyzing is will we
be facing the fed balance sheet. tapering just means you are adding at a lower rate than used to be before. you are not massively declining the balance sheets. i think it will come down to the actual moving of the front end higher. my sense is the 10 year yield went back up without growth being strong. if both is strong, the u.s. equity market can still do ok. i think mostly corporate earnings in the u.s. will be higher next year than the sheer and if they are higher, the equity market will work. there will be a rotation underneath but at the top it could still go up. kailey: are you part of the yukon call for the s&p 500 -- are you on the call for the s&p 500? adam: long-term average is 17
times 4, 15 times trailing. is it relevant? maybe not. we have a different set of companies, less capital, inventory focused. we have very extreme interest rates. i believe and long-term reversion. that doesn't work, because the market is different than it used to be. the multiple might be reasonable right now. you have a dividend yield at 3%, you should get organics earning growth in the single digits. if the multiple expands, i think it will. you could get double-digit returns. i don't think it is impossible. lisa: you had an interesting point among your many in your research when you are talking about the increasing dominance of the 60 companies at work capitalization exceeding $100
billion. you talked about coming up with strategies for you overweight those large-cap names and under cap the rest of the universe. can you talk about where you are on that and the theory behind it? adam: there are 93 companies that hundred billion cap or larger, 60 more than there used to be. if you are a generous manager, a few years ago you had an opinion on the 30 minute -- 30 companies. now that there are 90, it is hard to know how to be on top of all of them. we came up with the framework we have a quantitative model, assessments, consensus of hedge fund ownership, growth margin expansion, share gain, etc. we came up with a way to rank the stocks. it probably favors a lot of the tech heavy part of the market. tom: your phd out of boston
university in statistics. i want you to look at the great statistical miss on growth. the answer you stated is growth has been stunning. what ratio or dynamic of ratio are you using to see a continued growth excellent? is it sales growth or something more esoteric? adam: in my mind, it is gross margins. i have never had a period in my life where i started doing different research and the answer at the end of the kind of paper from the teacher so to speak was gross margins matter. we have done work to identify compounder's and how to get names consistently compound and we look at revenue, earnings growth. the answer was gross margins. we are in an environment where we know rising commodity and
transportation costs, rising wages are what companies face. those that can handle them will be great stocks in 2022. those others who can't going to work. you need the revenue and gross margins to expand the winners. tom: if you take gross margins as your study, how far up do we need to go? i would suggest in the bull market the bulls are extending out fx to rationalize ownership. adam: i think that is right. i don't know the answer to your question but for the foreseeable future. it might be shorter than you and i want. if people think gross margin and expand the next two to three quarters, they will have a sharp pencil and will have to see what happens. on the revenue side, better pricing, that is what helps your gross virgins. on the cost side, some combination of labor or materials -- gross margins.
on the cost side, some combination of labor or materials. tom: adam parker, thank you very much. this is important, as you go down the income statement, that that many people are at gross margin and maybe that is how you rationalize the big tech companies. lisa: they are cash machines, the idea the margins have held up. at the point of margin retraction everyone was talking about, as prices go up, people will pull up and shot less. it was a survey released by deloitte today, and the response to higher prices is spending more for holiday budgets. that is the response to the survey. more than one third of holiday shoppers plan on spending more than they anticipated in september. 41% said the reason was because of higher prices. higher prices means spend more, not pull back on what you by here that is significant.
tom: and we do further research on this with the line. we did research and deloitte is head on. kailey: i have not even started my shopping at. people still have the ability to spend more because you have seen a lot of excess filled up over the course of the pandemic. many economists say, what happens when people start to tap savings if the price increases keep coming and you have to keep paying more for food and the gas station remains the question. tom: we begin the shopping somewhere in the vicinity of december 3. stay with us. ♪ leigh-ann: i'm leigh-ann
gerrans with bloomberg's "first word news." president biden giving a speech on the economy and the fight against inflation. waiting on the decision on the next federal reserve chair as a possible move to bring down energy prices. the white house said the announcement on the fed will come before thursday. in china, the center bank signaled easing measures to eight economies for recovery and monetary policy, removing a few key phrases from previous reports including sticking with "normal monetary policy." beijing expected to pick up on monetary easing and fiscal stimulus. bloomberg has learned that a beverage maker has reconciliation and coca-cola major shareholder and it has a market value of $47 billion.
it is valued at $44 billion and a potential deal. the u.s. private equity giant kkr has offered to buy a company for $12.2 billion, a 46% premium. they are likely to be opposed by the biggest shareholder. shares have lost half the value in the last five years. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm leigh-ann gerrans. this is bloomberg. ♪
an mrna vaccine, six months or more ago, get roosters. if -- get boosters. we hope that people get out and utilize this important tool to optimize their status with regard to protection. tom: dr. fauci, abc this week. pfizer drives the story forward. 100% efficacy and long-term analysis on the teenage vaccine, 12 to 15-year-olds. further research along the way. lisa abramowicz and i channeled each other this weekend and we looked at the percent vaccinated in america and then compare and contrast with other nations, and it is absolutely stunning.
usually regional and distinct. 59% does not get it done. lisa: 59% does not get it done and we are not talking about lockdowns. austria having more lockdowns with violent protests with 64% and ocular did. in germany -- 64% inoculated. is there no discussion about the united states, we are joined by the bloomberg public school of health what do you make of this? dr. sharfstein: a lot is compared to what? we still have thousands of deaths a day. compared to where we were, things are getting better and people feel optimistic in different parts of the country. people on the other hand feel like we did not have mandates and now they either have to get
a vaccine or get tested for my job and that seems like an imposition. if you compare that to what is going on in other countries where people are taking -- countries are taking more stringent measures piggy figure what we are doing in the united states is reasonable. lisa: can we take a step back? there is a messaging aspect, but why is it the united states is not facing the same wave we are seeing in europe, even though the vaccination rate is so much higher in europe? dr. sharfstein: we had that wave in many parts of the region. this is to be has had that wave and florida has had that wave. we were building intensive care units and hospital beds in parking structures. in other parts, the vaccination rate is so much higher and parts of europe having problems, we are just not seeing the surge in cases. tom: we had the plague to the
keen household -- keene household in one of the cherubs had to be tested and they are fine. can you tell if you have covid? if someone gets a cold, can you say it is covid? dr. sharfstein: it is good to get tested so you get the right thing. the most distinguishing thing is the loss of smell than it is a high likelihood. if you don't lose your snow you can still have covid. tom: that was good i didn't lose might smell. kailey: i couldn't taste anything for months. it was horrible. tom: we will have to look at where we are and as lisa brings up, 59%. what is the plan to get to 62% or 63%? dr. sharfstein: i see that in
baltimore and they are focusing using maps on neighborhoods where there are still a lot of people unvaccinated, going door to door and set up clinics. they are continually getting more in. the other major strategy is to rely on requirements for jobs where it really matters for people to be safe in the workplace given the nature of the work. sticking with that for hospitals, nursing homes and other employers that are going to be at risk for outbreaks make sense. there are a lot of people who show up to get vaccinated and u.s. them why it has taken them so long, but they say now they have a job requirement. kailey: given current vaccination levels and a surge prior to europe's worth wave, does this mean -- fourth wave,
does this mean the winter won't be as bad? dr. sharfstein: it is predictable we will see more cases but will it really lead to more hospitalizations and a very serious way that threatens the health care system? the projections, some are very confident we will not see that kind of crisis. but you never really know. what we find with covid is until it happens you are not completely sure and the best thing is to take precautions. obviously getting everyone vaccinated matters. people in close quarters unvaccinated not wearing a mask is on sensible -- is on sensible -- not sensible. tom: enthused on the retail
season. the two year yield, i will call this stasis in yield. am i right? lisa: we already had the move. even you had vice chair richard clarida talking about accelerating the tapering didn't move that much in the yield. tom: will yield negative 1.10, but it has nothing to do with the path jp morgan framed out of a cyst and tilt lessening of the negative real yield statistic -- framed out of the lessening of the negative real yield statistic. kailey: the equity market seemed immune because real yield have stayed negative. that aids risk assets. when that changes, does it make
harder for equities to move on? tom: headlines out from angela merkel on the germany you were speaking about on covid. i look at james burns murdoch's work at the financial times and it does not dovetail. germany's numbers are not that much different than the united states on deaths, look at the headline. can you imagine biden says the american covid situation worse than anything so far. lisa: this is the key, tighter curbs are needed. will they enter some sort of lockdown akin to what we are seeing in austria. i have to give you a victory lap. i was optimistic about herd immunity and that we would get to a certain threshold of people vaccinated and everybody would be happy. you pushed against that and you were right. tom: there is a complexity that
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♪ >> the call on the fed really is the derivative of the call on the u.s. economy. >> anybody who says they can nail down inflation forecasts over the next year probably has too much confidence. >> it is unsurprising that economists are all over the map. >> probably -- going forward in our economic process. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. a simulcast, bloomberg radio, bloomberg television. ferro off. we had to beg kailey leinz to come in. we are thrilled she could join us this morning. so many stories this morning centered on the president. does he pardon the beast? have the turkeys already been pardoned? lisa: have you seen the pictures
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