tv Bloomberg Surveillance Bloomberg December 6, 2021 8:00am-9:00am EST
>> you find a -- you've had a spectacular level of support for asset inflation across all markets. >> the bubble right now is not in stocks. it is in bonds. >> the messaging is very pessimistic. >> at some point valuation will matter again. >> i don't think this is the time to chase steep value. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. -->> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. on a monday, a full and even for week ahead for us. on radio, on television, we say good morning.
lots of different news flow here. china, maybe 2, 3 hours ago, but i am seeing now is a look to the inflation report of friday. jonathan: this friday, your cpi report. are we facing a repeat of 2018? the prospect of choking on the prospect of higher rates from the federal reserve. tom: we will get to that with an important guest any moment. please stay tuned for robert tipp. history never repeats itself, and the overwhelming reality now is the fiscal deficit and what washington may do. jonathan: there are some really key differences. 2% on inflation then, close to 7% now. the federal reserve was already hiking. we still got qb running north of $100 billion and they have to wind it down. there is some key differences. but the call from pgim over the
last few months, they think the highs on 10 year yields are behind us, not in front of us, and this morning we are south of 1.40%. tom: the sharp differences we see on wall street, what is so important here is to dovetail it into the global view. james foley making really clear china, we have to watch every step. kailey: also making it clear that the strong dollar story is not over. that was a non-consensus view coming into 2021, but there's a lot of calls strategists got wrong. tom: let's review this quickly. what i saw were two stories out of china. one was in accommodative bank due to a real estate crisis, and the second was a reaffirmation of the real estate crisis seen in price down for evergrande paper. jonathan: they tap the brakes, and then pushed the accelerator again. when they cut rrr, the reserve requirement ratio, i see that is boosting the supply of credit, not necessarily dropping the
price of credit. that seems to be what they are doing, alleviating the pain just to support the real estate market a little bit. jonathan: tom: on -- tom: on debt, the 10 year yield 1.39%. i am stunned we have moved from 1.74%. jonathan: go through the data. cpi close to 7%. a labor market report beyond the headline number that seemed to be pretty decent. a federal reserve set to respond to that. the 10 year yield at 1.39%. robert tipp is going to explain it in a moment, but a lot of people have been confused by it. tom: what sticks out to you? to me, it is the vix coming in at 29.80. a constructive tape. jonathan: better than where we were a couple of hours ago. positive on the s&p 500 by 0.3%. the nasdaq -0.4%. bonds all over the place. down 10 basis points friday, up four or five this morning to
1.385%. tom: the real yield comes in a little lesser. he writes the team at pgim. pgim has had a terrific run in the fixed income market because they have been able to move, and it has given them a really interesting track record. robert tipp joins us this morning. the basic idea i am hearing is yields have hit the high. you'll down, price up. how opportunistic is the first months of 2022? is it like the other times we have seen since the great financial crisis when you can make total return in bonds? robert: i think that it is. i think it is a matter of what the relative benchmark is. we passed the peak in long-term yields and we are probably passing the peak in the front end for yields now, and the
return on the bond market is likely to exceed cash. we are likely to stay range bound, centered around where we are now. i think traders are going to have to be very skilled at trading that range. investors are going to have a much easier time. that is a lesson from the past tapers. that is a lesson from the earlier analogues in history that are like this environment we are in now. jonathan: at the long end, i have heard that call from you before months ago. it turned out to be right going into year end. we are well south of where we were at the highs of the year in q1, pushing 1.8 percent. you just said maybe that beget the front end might be behind us as well. why? robert: for yields out to your three year for now, once you get 12 months down the road, if it turns out we are in that part of the probability spectrum of a very strong economy, inflation staying high, the fed is really hiking rates three times next year, you are going to have a step higher in the front end.
but for now, you were at that point where the fed has really shot all their bullets. they announced paper in november , basically an inter-meeting move to accelerate the taper, which is really, it raises some questions. the market has moved on a 1-1-year basis, so on average, where will the rates be over the year from .1 years out to one to two years out over 1%? that is a lot of rate hikes to price. so now the market has to sit and wait. i thing it is unlikely they are going to push those further on the front end of the curve. jonathan: i think it is such a fascinating moment because the likes of deutsche bank are asking over the weekend how much work they need to do. maybe they need to go even higher to tighten in an economy like this one. you are saying they have shot their bullets already, and they
haven't really done anything yet. can you reconcile with that debate sounds like from your perspective? robert: could be wrong on this, but from our perspective, the way this goes is by the time they have the information set to project the rate hikes the fed is projecting, to have the nerve to do the taper, look at where we were at the end of 2013 when they announced the taper to begin in january 2014. you are at 3%. by the time the fed got around to hiking it just writes at the -- hiking interest rates in 2015, you had a big rally. by the time just before they were ready to really get into the hikes in 2016, you were in the low ones. so you are in a very dangerous period where the fed accelerated the taper against a backdrop of going into flu season, and
variant hitting, oil prices falling, so they did get one higher inflation number -- jonathan: but let me put you on the spot because this is critical. do you see the risk of a december 18 repeat -- december 2018 repeat ? -- december 2018 repeat? robert: i think powell was not on the right track of trying to keep the markets away from that. he was trying to focus on the here and now, now they have lost that narrative a little bit. we have seen two weeks of stocks falling and yields falling, so i am assuming there's been a learning curve and that he is going to corral the committee and say if we want to have the flexibility to raise rates next year, if we think that is appropriate, we have to give the markets on track that we are progrowth with stable inflation,
and that we are not going to have an imbalanced reaction, as opposed to last time, which was we have a long way to go to neutral to freak the market out. jonathan: how do you -- kailey: how do you think the fed is factoring in the fiscal equation? we don't know what build back better looks like, if it will get passed, but does that force the fed's hand to some extent? robert: fiscal is another factor i would have put on the economically negative side. it is not that we are having a little bit of stimulus kicking presumably in the years ahead based on these programs. the amount the government will be spending through these programs is so much less than what we had in years past that effectively, growth has been inflated over the last couple of years by a couple of things. one is physical, -- one is fiscal, and then a related item of that which is a spending down of the high savings rate that that is great.
in terms of growth, that should cushion the deceleration in growth you would otherwise get, but it is not a big step up on the fiscal side. it is a step down. jonathan: that was a clinic. send our best to greg and mike. it clinic on a very different view on this bond market. tom: it really partitions out the call, and we will see how this plays out. frankly, it is wonderful. it is what keeps us going. jonathan: on tens, he's been right. when he said months and months ago the highs are in, we have been lower since. to say that at front end of the curve as well, scratching my head, but i feel the same way i felt when he said this about tens six months ago, and he is saying bp we have peak at the front end. kailey: andkailey: maybe the
bulk of the flattening is all wary -- is over. the question is, what is 2022 look like if you're faced with a normalization of policy more quickly than we previously anticipated. jonathan: what is normal? that word, we keep picking up on it. what is normal in the world of nominal growth where it is, where inflation is close to 7% and rates are still new a bottom? tom: for anyone tuning in on radio and tv, here's the conundrum of this monday. how does america react to 9% nominal gdp? no one has a clue. jonathan: equities of 16 on the s&p. greg valliere of agf investments, that conversation coming up. heard on radio, seen on tv, this is bloomberg. ♪ ritika: the first word news, i'm ritika gupta. in china, the central bank is
trying to give a boost to a slowing economy, cutting the amount of cash that most banks must hold in reserves by zero point 5%. that will release 188 billion dollars of liquidity. the move puts the people's bank of china on a different policy path than many of its peers. president biden's chief medical advisor says initial data from south africa on the omicron variant is encouraging. a report says while the number of patients surged, patients need less medical intervention. still, dr. anthony fauci says it does not look like there's a great deal of severity to the variant. the u.k. will push the u.s. to remove trump era tariffs on british steel and aluminum. the you take -- the u.k. trade secretary will meet with u.s. trade secretary gina raimondo. he said that improved trade relations with the u.s. will be one of the major benefits of leaving the european union. shares of lucid are plunging today.
the electric vehicle maker said it has received a subpoena from the sec, suggesting its merger with a plan check company is being investigated. lucid completed to deal with turtle capital corporation before it's -- with churchill's capital corporation before it's stockmarket debut in july. the building materials maker has agreed to buy u.s. construction chemicals company gcp applied technology. that were prisons in a prison premium over friday's close. -- that represents an 8% premium over friday's close. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪
somewhat longer-lasting than anticipated, and i think more importantly than just the duration, it is the magnitude. wheeler looking -- we are looking at 7% cpi coming q1, and we have seen the fed realize that in order for inflation expectations to remain close to 2%, that they do have to make adjustments, and i think we will see that very soon. jonathan: sarah house of wells fargo setting us up for 7% cpi in america, q1 of next year. she's looking physics .9% this friday. your estimate nudges up to 6.8%. we are days away from that inflation report in america. from new york city this morning, good morning. alongside tom keene, i'm jonathan ferro, together with kailey leinz. yields higher by four or five basis points on tens to 1.3 9%. it bit of news out of new york city. kailey: mayor bill de blasio talking about the vaccination requirement, saying it is now required for kids ages five to 11 to be vaccinated to enter restaurants.
he is also saying they will impose a mandate for private sector workers starting on december 27. we knew already mandates in place for public sector, but now that will be extended to the private sector in just a matter of weeks. jonathan: dear may, tk -- dear may, tk. to go out -- dear me, tk. to go out in new york city now, you either get a vaccination or you cannot engage in public society. i have to say, new york city is probably already there. it is pretty close to what we have seen take place in europe. you show up at the restaurant, so your vaccine passport, and you have to show photo id as well. tom: we had the photo id thing this we can. that was a bit of a surprise. we want to dive into the politics of washington as we can come about we want to dig a moment with greg event with greg valliere, -- with greg valliere with agf investments.
he buttressed up against names like john, alan simpson of wyoming, who i always found entertaining and incredibly shrewd, and a senator from kansas as well. bob dole, it was a simple as you mentioned in your note, you are confronted with his realities with a shake of the left-hand. he was different. greg: he certainly was. and he was in pain every day of his life after his injury, and he never once complained about it. a true giant in the senate. how to get things done. i would say a giant in the senate compared to the pygmies we have now in congress. this was a very impressive guy. he was sarcastic, he was sardonic. sometimes his humor cut a little too much. but we didn't walk in his shoes. he suffered a horrific injury and never really fully recovered. tom: senator schumer has to
provide leadership here. in the house, there seemed a given that the democrats will give way to the gop. does that work for schumer right now as well? is he assuming a republican senate in november of next year? greg: he has to assume a republican house. i think that is a given. the senate is certainly possible. they need to get everything they can in the next month or two. i think things will get pushed into january. i don't think they can get a debt ceiling done fast enough. we will get a defense bill in the next week or so. as far as build back better, i think that gets pushed off by quite a bit, and we still have not heard anything definitive from joe manchin. kailey: of course, there's already been the bipartisan infrastructure package past, and the president is traveling the country touting that. given that so much of that won't be realized until years down the road, will that have any real boosting impact for democrats in the midterms?
greg: not really. i think it is going to be difficult for the democrats to have a lot to brag about. there's still going to be urban crime. as we have been hearing all morning, there's still probably don't to be inflation, a lot of it next year. this is a pretty grim outlook for joe biden with his job approval rating sliding. they lose the house for sure. the senate is still may be in play. kailey: especially in regard to the debt ceiling, given it is somewhat of a deadline before the end of the year, is schumer going to have to cave because any default, or the prospect of it, would be blamed on the democrats? greg: i think he has to cave. he would like to get republican fingerprints on it, but mitch mcconnell will not allow that, so i think you will see schumer in the next week or two cave. if he doesn't, there might be another extension. if he still doesn't do anything, the federal reserve would have to step in as a last resort. tom: i want to turn to your new
hampshire. you and i have always identified with what is going on in new hampshire. i am absolutely thunderstruck by the covid statistics out of new hampshire. they must distress you deeply. can you give us the why? can you give our global audience why this island a beautiful green mountains in new england struggles with covid? greg: well, it is nationwide. we are losing over 1000 people a day. the numbers have been horrible lately. that has got nothing to do with the new variant. it is all delta. but in new hampshire, there are a lot of people who don't want government to tell them what to do. people are very independent. they don't want to be pushed around. you see these waves come in different states in different weeks. i we ago it was minnesota. i would for that, it was michigan. so i think you have to conclude we have not turned the corner yet fully. jonathan: changing the way americans engage with society, that is taking place in new york
city. to go to a restaurant now, you need to show your vaccine pass, you need to show photo id. i wonder how long before we start having this conversation about a very sensitive issue in america for a number of years now, voter id. how do you think that changes? does it extend towards that, something democrats have pushed back aggressively against republican demands for the last few years? greg: you may have to see something stronger. i don't think we are out of the woods. my wife and i canceled a trip. we always go to europe and christmas time, and we canceled. i think there's a chance of quarantines. there's still big complications, and one of them would be photo ids, no question. jonathan: greg valliere, thank you, sir. we have talked about this through the last two years now. every time there is a policy shift, we are asking how much of it sticks beyond the pandemic. how much of this becomes the so-called new normal? tom: the new normal is adjusting
to the omicron, and we don't need to walk through the different news we have on omicron today. the news tomorrow will be different as well. but i do take greg's point in what kailey said about new york city, that there is clearly a trend towards politicians that are flat-out exasperated. if quarantine is issued within italy, there's a hotel on the canal in venice that possibly we could quarantine in. jonathan: what it be vacation canceled if that got introduced? on the way back, if you had to come to the united states and foreign team for five days? tom: mabel would go to naples and capri instead. jonathan: we can do the show from capri. that would totally devastate hospitality over the holiday if that got introduced. tom: this is important. the leader of italy mr. draghi has made clear tourism matters. jonathan: big time in italy, and in spain and others, too.
jonathan: cbi on friday. -- cbi on friday -- cpi on f riday. tom keene, kailey leinz, jonathan ferro. lisa back with us tomorrow. off the highs of the session. tom: we have a lot coming up. the economics, we have a staggered friday. we get a little more post jobs data. jonathan: a little bit. we have claims on thursday. the lapid ties or. -- a little appetizer.
tom: we stop the show with the chief economist at milken and expert at the get -- at the international monetary fund on the pacific rim and china. what do we get wrong in united states? what did we get wrong about present-day china? >> we have this image of china as a monolith working in unison and i think that is far from the case. there is a huge amount of debate and dissension within china as to how to sustain growth. at the same time -- and the light of their covid shut down policies. there's a lot of tension. we talk about our finances.
china can say to themselves they need construction to sustain gdp. tom: i have a great respect for what foreign affairs has done on this. bill lee, what i hear from experts is the monolith is flat out wrong. how powerful is the beijing leader? william: i think that is a key that will come out of the next conference. xi jinping -- in doing that, he has essentially got rid of all opposition. his strategy is to consolidate
the communist party will deliver safety, growth, and by doing what mao did witches is turned to sources of growth and sources of export growth, at the wto is also saying we want the advantages of being in emerging market. jonathan: a stocks move. tencent down. kailey: it is reportedly an ftc investigation according to a subsequent move in tesla shares. we understand this is for claims on solar panel defects. we will continue to monitor tesla. jonathan: they cannot check that off. we will revisit that later in the morning on bloomberg tv and
radio. i want to return to the chinese communist party. on the outside looking in, we see lifelong term limits how much control does he actually have? william: the tension between what he does at the federal level and what the local parties are doing is different things. the local authorities are caught in this place with the revenue. beijing wants to crackdown on property companies and the need to cut down on the only source of staples for china. the supply of assets available -- lots of problems. jonathan: what i've always found
amazing is how much confidence they seem to have the chinese policymaker when they do things like this. china has control. as you look at things, what is the risk of a policy mistake as they try to engineer the inevitable soft landing nearly always around the corner for china. when does it become something else, something to worry about? what does that look like? william: they have cut the reserve requirements. at the same time, they try to deleverage like crazy. how they pull that off -- they also have to accept china's growth reduced under 5% or even below 5%. the shift towards -- lots of
venue factoring activity leaving china, that is a lot of people. tom: kailey leinz mentioned the modest uproar in bridgewater of connecticut. you are the kind of guy who sits in fancy offices in hong kong or new york and advises western commercial banking on the future of china and hong kong. what do bankers who need to set up shop -- william: everyone knows the strategy for asia in general and china in particular is diversified. you cannot pull it all of your deck you cannot put all of your e -- you cannot put all of your eggs in the china basket.
he advised anyone, including my former colleague at citi is start diversifying. that is become less dependent on china being the hub of the global supply chain. unfortunately, from jamie dimon all the way down to whoever else , china remains their central focus. tom: can singapore be opportunistic? william: this is a phenomenal opportunity for singapore and asia. where the center of trade, customers, and finance in the rest of asia.
much more militaristic and returned to be a major power supported the kind of trade in the global supply chain. jonathan: want to turn to the federal reserve quickly. what are the spill losers -- what are the spillovers of that? does it have the same spillover we used to talk about? william: it still has that spillover because we are global supply chain. one thing that is underestimated is the biden appointments. whether the vice chair for supervision -- that expanded mandate -- that is something the
was economy might not be able to recover from. jonathan: looking had to next week, it is the big one. tom: the fed meeting is different. we will have omicron by the time we get to the fed meeting. some of the economic data will come in. i understand finance people are all bent out of shape about inflation dynamics versus real economic dynamics. two corporations it is 9% nominal gdp, it just that. it is a boom economy. jonathan: for after quarter through this year. tom: history tells us that -- jonathan: -- kailey: what is
interesting is companies have been able to pass on cost. consumers have been able to continue to spend since they have a lot of savings they can call upon. still elevated prices. not seeing the wage gains to keep up with that. does the ability to pass on the cost start to get more difficult? jonathan: the question this morning, whether the consumer confidence has been eroded. kailey: exactly. you're not seeing the wage gains. you had all of the savings. the impulses no longer there. if these price pressures prove more persistent next year there is not the extra money coming in. jonathan: we will do this again tomorrow with lisa to return. kailey: scheduled to return. tom: it is what i heard.
jonathan: futures up 19 on the s&p. we turned briefly negative. for tory agreed -- victoria green will join us very shortly around the opening. from new york city, kicking up a brand-new trading week and coming you down to the main event, it is cpi on friday. your median estimate -- sarah house of wells fargo this morning talking up the prospect of 7% cpi through q1 of 2022. i am jonathan ferro. lisa back with us tomorrow. on radio and tv, this is bloomberg. ritika: south africa's is so far
the them across -- -- the omicron -- south africa is the epicenter of the outbreak of the new strain. president biden's chief medical advisor said it does not look like there's a great degree of verity caused by omicron. the u.s. -- according to cnn, the decision not to send any u.s. officials to the games in february will be announced this week. you u.s. officials are likely to visit china anyway due to quarantine. saudi arabia is a going that it seized -- sally has raised prep -- saudi's have raised prices -- launching an ultrafast
grocery delivery service. it is instead of the large freelance workforce the company built its businesses on. doordash faces increasing competition in the grocery delivery business. in october consumer reports said t-mobile has slipped -- from best to worst -- the company says expecting to fix the problem. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪
price of gasoline on the wholesale market has fallen around 10%, that decline is picked up in recent days. that is a drop of about $.25 per gallon. the savings are beginning to reach americans. tom: the president of the united states, when he has a cold he sounds like tom keene. kailey: a deepening of his voice. tom: we welcome all of you on radio and television. this is the conversation across the station on oil. last week i thought bloomberg as a company was exceptional in driving the hydrocarbon story forward. those looking for a new level of $80 or even $100 a barrel or even higher as jp morgan calls for, and then abrupt opposite views led by deutsche bank. it is a battle over the gaming of oil. amrita sen is with energy
aspects and street is hugely -- and she is cute -- and she is hugely qualified to look at global dynamics of a few years ago and a few other selected schools. we are thrilled to welcome you to bloomberg in new york. here's what i thought -- here is what i saw on the jp morgan powerpoint. there is an assumption by the oil price pools it will be different this time. shale oil pricing has not come in as oil price goes higher. what do you say? amrita: i think the price of shale production has changed dramatically. tom: this is not three or four years ago. amrita: at least light now it is not. i was in texas. some companies that initially said they would grow by 5% revised it to 0%. why would they increase
production? also there facing huge constraints. labor, equipment, fuel shortages. tom: is it something that clears with a better pandemic environment? amrita: the supply chain shortages will clear but it should suit -- it should still take a year. those things should ease over time. tom: is that true in saudi arabia as well? amrita: not as much. ultimately, shareholders are not rewarding them to raise production. kailey: when it comes to opec-plus, they surprised market to a large extent last week when they decided to proceed with hikes in january. you think that means they will have to slow or dial back in the following months? amrita: i think a lot will depend on how demand is doing
where the headlines because of the new variant and potential new restrictions. that'll be critical in determining what opec-plus does. given the fact the group, the current meeting is still ongoing in theory -- it is a very clever move. that means there is enough uncertainty amongst traders they will not go necessarily short this market. i would not rule out a cut if demand numbers get worse and the headlines get worse. kailey: what would you need to see that you would consider a headline getting worse? amrita: who are holding a press conference on opec-plus. we'll be listening to that very carefully. the question is how much of a travel impact will we get to the next couple of weeks? we are in constant conversation with opec member countries about the impact on jet fuel demand.
i think they are going to be looking at that very closely because on their own numbers, q1 bills are huge, close to 3 million barrels a day. any drop-off in demand will make that worse. tom: demand is still visible, and an unknown right now? amrita: unknown. we had just started traveling. this is my first trip to the u.s. since march of last year. a lot of people were planning christmas holidays. let's see how much that goes ahead. there's a lot of pent-up demand. asia did not have a summer this year. they were still in forms of lockdown. there is a lot of pent-up demand amongst consumers. tom: what is your call on oil as we speak all of these experts? is $80 the new $60?
you see a trend up to the headline grabbing $100 a barrel? amrita: we have had $85 for 2022 for three years based on the underinvestment. we are not changing that. structurally, $80 is the new $60. to get $100, we need an event. i do not see is going to $100 in the near term. ultimately covid is still around and that is capping demand. we need to look to 2023. that is where you can see $100. kailey: we learned over nice that sally was raising prices -- -- that saudi arabia was raising prices. amrita: they are based on a formula -- you could argue the increase is a little bit more than the market was expecting, but going into this meeting we
were being told that a cut could be on the table, then politics got involved in we saw what opec-plus had to do. saudi arabia is absolutely not been to allow a surplus to build. increasing prices dickie consumers suggest they are going to keep a good -- increasing prices to consumers suggest they are going to keep -- tom: don't be a traitor full -- don't be a stranger. we hope to see you in london soon. we other 31 -- we had a 31 vix on friday -- kailey: a little bit lower than what we have seen on friday. we've been eyeing out below 20. the question is are we going to see volatility -- elevated volatility into year end as we see the fed decision next week and investors try to digest what
a more hawkish fed would mean. tom: research calls -- betsy gray sick throwing love to wells fargo and goldman sachs. kit jukes with that euro call to a 100 -- two a 1.10 and even framing out a .05. kailey: one point and is not that far away. 1.05 is an entirely different animal many people are not prepared for. tom: the lira has just now lifted up 13.80. something we have not mentioned is the turkish lira now sustaining at those ever weaker levels. it is not a record weakness, but in terms of the persistency, 13.80 is a weaker lira. thank you to damian sassower for wisdom. we are looking to friday in the inflation report.
"the count of the open" starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: from new york, we begin with the big issue. a taste of things to come. >> heightened volatility. >> a lot of uncertainty. >> equity appetite. >> a wacky market environment. >> the fed is taking away the punch bowl, possibly. >> uncertainty around the fed reaction function, around covid. >> saying it is time for them to exit the market. >>