tv Bloomberg Surveillance Bloomberg December 29, 2021 7:00am-8:00am EST
>> the fed is behind the curve. they should act fast. >> we are going to see higher inflation then we have seen in the past. >> what remains to be seen is how quickly the fed will be. >> the conversation about tapering and tightening i think it's overdone. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: what a year it has been for the keyword -- for the t-word. good morning. this is "bloomberg surveillance" on tv and radio. alongside kailey leinz and matt miller, i'm jonathan ferro. 1.49 percent on tens. yields higher by a single basis point. the story of the year, inflation, the t word, transitory, no. kailey: we thought we would be
looking at something like to present at the end of this year. instead we are 50 basis points below that, well below the peak that came in the first quarter. is it because the fed is still active in this market ? i don't think anyone knows. jonathan: that is the struggle going into year-end and starting 2022, trying to work out what the data means for the bond market. if we are going to have inflation through q1 at seven sent, do we have numbers pushing 1.80% on tens? right now we are 30 basis points south. matt: the basics i learned 20 years ago in mark gilbert's bond class is that when you expect the central banks to raise rates and therefore issue new debt with higher interest rates, you don't buy the ones that are out now with the lower rates. that is just a six. i also wonder, what is your take on the style issue with which we
should treasuries? when stock prices rise, would make them green. the up arrow is there, and it is green. when bond yields rise, we have the up arrow, and they are red. why? jonathan: because treasuries are lower, so yields are higher. matt: but we are showing the yield. jonathan: tom keene has a problem with this as well. kailey, is this something you stay up late at night and think about? i show you the treasury board and what it looks like so everyone watching on tv at least knows what matt is talking about . equities higher by three, advancing 0.1%. treasuries lower, yields higher. you will thing is in red, ok? matt: and up arrow in red. jonathan: you want it to be green? matt: yeah. jonathan: you disagree with the format of the bloomberg terminal? matt: i won't say that. [laughter] jonathan: there you go.
1.4 911% on tens. we've got to work this out, what is going on in the economy and what it means for this market because it has not been so obvious this year. kailey: of course, we saw euro-dollar at $1.13. there's a very different five between the inflation picture and what is happening in europe, where the ecb still stands by the fact that it is transitory. jordan rochester, the fx strategist from nomura, sees something that is not music to matt miller's ears. they be he sees us going up to 5000 by year end next year, but he sees a correction along the way. i guess the question is when will that happen and what will the catalyst the. on a more micro level, we will talk tech with dan ives of wedbush. then of course, we still have questions as to who is going to sit in those three remaining fed seats. will we get them from the biden administration? maybe not this week, but david
could dock of cover land advisors -- david co. talk -- david kotok of cumberland advisors has some thoughts. jonathan: tesla up by about 1.65%. elon musk close to closing out that 10 percent stake he wanted to close things out. matt: we are looking at a market cap of over $1 trillion now, so he has been able to raise more than $13 billion thus far. he's going to need that to cover his tax bill if he executes all of his options. he's got an $11 billion tax bill to pay for 20 11. jonathan: the stock is in the green -- for 2021. jonathan: the stock is in the green. it is opposite in the china
market, isn't it? red is the up because red is a lucky color? matt: i have been programmed to understand that an up arrow should be green and a down arrow should be read. if i were talking about a bond price, i could understand showing down in red. but if i am talking about yield rising, i want to show it up in green. jonathan: people listening to this conversation can guess that this is the week after christmas. joining us is tom from strategas. it has been so difficult to call , even if you nail the inflation number for 2021. would it help you and your bond the ark it -- in your bond market to get the 10 year yield forecast right? tom: clearly it did not. the big story of 2021 is that
10-year gilts have paused around 1.50% today. we peaked at 1.75%. the second story is that two-year yields have been rising steadily for the last several months here. there is a tie to get to between these two because two-year yields have been rising sooner than folks expected because it means the fed has to tighten sooner that expected. so there is a cayenne between the two. there are other factors why the 10 year yield hasn't risen, but template but -- but simply put, there's a lot of reasons, and it is going to be the same next year as well. matt: what is the flattening yield curve mean for the u.s. economy next year? tom: what it means is we are heading for a midcycle slow down for 2023, presumably because the
fed does lift off three times next year, does end tapering by march, so you start to see some kind of midcycle slowdown. it also means that the fed has way too many treasuries into my market -- into a market where even if they finished tapering by march, the net float in the treasury market is not going to begin rising until april. that slope after bank purchases probably doesn't drive -- doesn't rise. that is telling us there's a shortage still and a short squeeze that has been on hold. matt: how much do you expect conditions to tighten up? tom: probably between 100 to 125 basis points of effective tightening.
every basis point increase in the fed funds rate, you get two to three points of effective tightening kailey: -- effective tightening. but there is a liquidity drought that starts happening in april. same thing in the mortgage market. by the end of the year there should be quite a substantial liquidity drought that should be affecting all financial markets by the end of 2022. kailey: at the end of the day, is it going to be when qt starts that is going to be the matter? matt: when qt starts -- tom: when qt starts, but when the fed says we are talking about it. you could see discussion from the fed meeting minutes say that quantitative tightening, the balance sheet reduction is likely to happen sooner than folks expect, but in the end, you've got to reduce the size of the balance sheet in the treasury market, the mortgage market, and even it is going to
be more of a signaling factor. jonathan: could that be a surprise next year, the balance sheet reduction gets accelerated, and maybe that comes before the rate hike? tom: very much so, but it is how soon they get there. if the fed tapered in july like somewhere expecting, it would've been the story of the year. if the fed begins balance sheet reduction as soon as april or may, that is going to be a huge surprise. that is going to be the story of the year for 2022. jonathan: still trying to work through 2021 and work out what has happened in the bond market.
balance sheet reduction has come in much more quickly because we are going to accelerate the paper much more quickly. there is a conversation that you move on balance sheet reduction before you move on interest rates. i wonder how that plays out in the early part of next year. kailey: it is a question of sequencing. there's a conversation about march being a live meeting for rate liftoff, but could it also be a live meeting for qt? ira jersey thinks that you will see the first rate hike in tandem with some balance sheet runoff. i wonder how the market would react to that. jonathan: this goes back to something jim caron brought up yesterday, several of my guests on the 9:00 program brought up as well. if you want to tighten financial conditions to do something about inflation, can you do something about inflation without tightening financial conditions?
matt: it depends obviously on with whom you speak, but you can't make an omelette without breaking any eggs. that is the same thing with fighting inflation. you can't fight inflation without slowing the economy somewhat. jonathan: come you don't to the opening bell in about two hours, 20 minutes time. crude, $75 $.41. on radio come on tv, this is "bloomberg surveillance." ritika: with the first word news, i'm ritika gupta. no sign that the pandemic is slowing. for the second day in a row, the
coronavirus cases around the world went over one million. overall, they appear to be triggering a lower rate of hospitalizations. the resolution foundation think tank says wages will effectively stagnate in 2022 and inflation may hit 6%, the highest in three decades. in hong kong, the last pro-democracy news outlet has closed after police raided its newsroom. that after seven people were arrested for conspiring. bloomberg has learned -- are going to select software and hardware applications groups.
former democratic senate majority leader harry reid has died. reid helped implement president obama's agenda by rounding up the votes to pass obamacare and other key bills. he also a sweeping change in procedures that cut off debate on most presidential nominees with a simple majority. later, republicans would use the same tactic to eliminate the super majority threshold for supreme court justices. harry reid was 82. 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. ♪
jonathan: from new york city, for our audience world wide, live on tv and radio, what a year at is been. up almost 20% on the s&p 500. futures advancing about 0.1 percent. yields higher by a single basis point to 1.49 28%. crude is -0.7% to $75 40 eight cents. the s&p 500 closed while time highs. joining us now is gina martin adams, the chief equity strategist for bloomberg intelligence. we have been working for a series of guests trying to understand the big lessons for 2021 and what that means for 2022. what is the big lesson for you? gina: the big lesson is don't underestimate corporate earnings, and my opinion. we were worried about margin compression in earnings as early as the spring of 2021, and none has even occurred, despite the fact that supply chains have been disrupted, labor shortages
are a persistent problem, and a lot of that is because economic growth continues to shock to the upside. think back to the beginning of this year. for the s&p 500, we ended well above $200 in earnings. really incredible eps growth for the s&p 500 in the face of some pretty extraordinary conditions. kailey: as we look ahead to the risks for 2022, is it not omicron, not monetary policy normalization, but any deterioration in earnings expectations that is the biggest threat to the equity market? gina: absolutely. we are talking a lot about monetary policy compression, talking about fiscal policy risks with what is the fate of build back better. we are not talking a lot about earnings. there is one prevailing assumption in the optimism, and that is that earnings growth will overwhelm any sort of
policy compression or multiples compression. it is our assumption, we continue to model close to double digit earnings growth for the s&p 500. consensus is pretty optimistic. but we do need that earnings to come through in order to offset any sort of policy related multiples compression. matt: i will say that we are talking about it on bloomberg surveillance yesterday. we had ed yardeni on. he said he sees 8% which is close to double digits earnings gains for 2022 on the s&p 500. i want to talk about something we spoke about on monday. check out this chart. for those of you listening on radio, we have seen some massive gains over the last decade. we have had seven double digit gains in terms of equities. really over the past number of decades, this goes back to the 1950's, the trend has been more
up and down. the norwegian sovereign wealth fund i believe on sunday, and an interview in germany, said we need to get ready for a decade of much lower returns, and he has one point $4 trillion worth of equities. i think they are the world's biggest holder of equities. do we need to expect lower returns over the next 10 years, and is that start in 2022? gina: i don't think so. over the last 10 years, while you have had very strong double-digit gains in earnings, you've also had many relatively large corrections, despite the fact that we had a near 20% correction in 2011, another near 20% correction in 2015, another one in 2018. we had a 30% drop in 2020. the story of the last decade for me is really the market has these nice spreads higher, but
despite the fact that it goes to steps forward, it also takes a pretty significant step backward. we have not seen that kind of price action since the 1960's market. it also strikes me that we are 10 years into this bull market and we are just now starting to see flows coming into the equity market. if you think about next -- about net household exposure, it has increased an average pace of 0.3% on net per year since 2010. that compares to the 1990's market where households added 1.2% per year on net to equities, so a really slow sort of adoption of this equity market trend has been the story. i would go the opposite direction. i think we are underestimating how much capital needs to flow into the equity market, where the last 10 years has will he been more about risk intolerance. we could be moving into more of
an environment of risk tolerance, which may amplify gains that crazy so-called bubble that many people have been looking for. matt: that is bullish, and you have been bullish, but you have been right. i think jon just said a 26%, 27% gain year to date. what are you expecting in 2022? gina: our fair value model says we could get up to 5000 on the s&p 500, just pressing in pretty modest expectations for continued earnings growth, as well as pressing in some multiple compression related to the fed. a lot of it will depend upon those two moving parts. how fast will the fed move? i have argued -- i have heard you talk potential distressed --
if we can get some in inflation within the first quarter and some supply chain easing. so i think generally, they are pretty constructive conditions for stocks, and the big wildcard is just how much rotation you can get into equities. we could very well be in the beginning innings of this game of rotation where the bond market has just dominated over the course of the last 10 years, even close to 15 years now. maybe it is time for riskier assets to shine, and equities should perform a little bit better if our conditions are changing into an environment of slightly faster growth, but higher potential inflation. matt: wonderful -- jonathan: wonderful as always. gina martin adams of bloomberg intelligence. not just bullish, but bullish and right. matt: absolutely.
she has been right. we are going to talk to dan ives , who has also been bullish and right. i'm excited about that. he is still bullish on most of the major tech stocks out there, so we are going to get a chance to talk to him about apple after this bonus story and tesla after elon musk's sales have not deterred the gains in market cap. apple could reach $3 trillion relatively soon, and tesla is worth over $1 trillion. jonathan: i was talking about this in the last 24 hours on why we associate bearishness with intelligence, and somehow if you are bullish you are naive and don't appreciate what is going on in the world around you, but the last couple of years, given everything thrown at this market , covid-19 and all the rest of it, given the support from central banks, the bounce back in earnings, this is been a second year of gains. kailey: absolutely. get the question is, we lose the upside surprise materializing in 2022? the expectations are for a year
that will not look quite as good as this one, but given how the market has gone this year when we also did not expect it to look as good, is there upside potential that is may be realized at this point? jonathan: coming up, the conversation matt miller has been waiting for on the fx market. jordan rochester of nomura. that is next. this is bloomberg. ♪
jonathan: it has been a year of the unexpected in this market come across asset. from new york city, live on tv and radio, this is "bloomberg surveillance." your equity market up about 0.1%. on the russell, up 0.07%. that's the equity story. up almost 30% on the year on the s&p 500, around when he percent higher. much more bullish than the biggest bullish call out there 12 months ago. it was 4400 on the s&p year-end this year. that was the call 12 months ago from mr. kostin out of goldman sachs. here we are looking at 4800. if i told you where cpi would be year-end, would you tell me that
10-year gilts would be at 1.4928%? probably not. yields are higher by is in go basis point. the curve a little bit steeper with the front end coming and almost a basis point to 74 basis points on the two-year. in foreign exchange, the story of the year. the beginning of 2021, when we saw 1.23% on euro-dollar, some people out there thought that was the start of it, the start of dollar weakness, the star that global sinker night growth that we would equate to even more dollar weakness. that is not what happened. that was a high of the year. from there, euro-dollar lower. that currency pair negative almost 8% over the last 12 months. right now, 1.1299. matt: it is still up a little from when i moved to germany on november 11 of 2016. not that it is all about me. jonathan: for me, for that
matter. matt: no, we are concerned about the moves for the market. but it is a lot weaker than it was at the beginning of the year, and it doesn't look like it is moving in any other direction. jordan rochester from numeral joins us, the g10 affect -- from nomura joins us, the g10 affect strategies -- the g10 fx strategist there. do you see a change for the euro and most other currencies in 2022? jordan: i don't think there is a chance that the euro goes higher in the next few weeks, but we went into this year expect in the euro to strengthen, and we had massive surprises with those gorgeous end results in the u.s. leading to dollar strength for the rest of the year. we adjusted once we saw those results coming from georgia, but it took time for the market to give up on that weaker dollar trade, and now we are going into
2022 near the lows of the range, and i am wondering whether in the same scenario, have we fallen significantly has positioning -- have we fallen sick? has positioning -- fallen significantly? has positioning extended? the first few weeks of january is this pent up demand in fx flows that comes through from the christmas low, and it can lead to signet again volatility. one of the reasons would be if the fed was to not raise rates in march as we expect. the market pricing is around 17, 18 basis points for that meeting. is there a significant invent -- acing the end even in january that could lead that to happen? may be spending from the government slows down to get lee. i don't think that is going to materially happen in the market. matt: what about buy the
rumor, sell the news? it is not like what the fed wants to do is a secret, and it is not like anyone expect inflation to suddenly collapse that way in january. haven't people already positioned themselves for those scenarios? jordan: i agree on your point there. but let's talk about it. in terms of positioning, the leveraged hedge funds, no. they are short, but not insignificant size. they are about 1/3 of what they were in 2018. the real money, they have been holding dollar shorts for a significant longer time, a losing trade, and only in the last few months have been throwing in the towel in march. interesting timing because that is when we get the french elections in early april. that is when we start to see
wage data in europe picking up from q2 onwards. maybe that is when we start to readjust because if the fed raises rates in march, maybe that is the end of the dollar strength. from there onwards, that is when i expect euro-dollar to gain back. kailey: we talked about how the euro pete early in the first half. the dollar is now around 1.34%, in that ballpark. some strength coming back at the end of the year. do you expect that to fix, is julie -- to fix, or do we revert back to weakness? jordan: if you have a bullish view for sterling, you do it against the euro. if you have a bearish view, you do it against the dollar. at the moment i am trading on the short side, so i am short the pound, the dollar. it is pretty much a net neutral carry trade. when it comes to the table view, the reason i have that is that
euro-dollar goes lower. i am looking for 1.30. one of the big surprises is the bank of england has raised interest rates. we've got that call right. but real yields, the inflation-adjusted real yields for the u.k. have recently really shot higher, and that has boosted sterling significantly in the past few weeks. that is because of cooling inflation expectations and the u.k. the natural gas selloff has helped sell that story. january, the u.k. will be facing new customs rules. the u.k. could heighten restrictions as well. we've got currently very few restrictions come about for january onwards, there might be changes to that. so a sentiment change will take place for sterling in early january. kailey: those factors outweigh potentially more hikes coming from the bent of england because yes, they hike, but i know jonathan ferro wasn't all that impressed with a 15 basis point move. at what point, to what degree will a more hawkish boe and more
hikes coming down the line offset some of those other factors you are talking about? jordan: listening to my research over the past six months has been weird, not normal to hear these words. we are on the hawkish side. we expect to raise rates again. we got the december call right. we think they will raise rates in february, they will raise rates in may. the problem is for markets, that is pretty much priced in to a significant amount. that is why i have been saying that the risk reward, the bank of england aren't going to raise rates by more. from here, you just get some bad news, a slowdown growth in the u.k.. there are omicron fears of a european slowdown. china not yet turning on the gas , helping global growth. that is why maybe you get less price for the second half of next year. jonathan: what have you learned from the way the bank of england
has communicated over the past couple of months? jordan: i don't listen to central bankers. i think about what they will say next. what they say now is already 100% priced in. i just look at the data. i see where our inflation forecasts are versus what they have, and if we are above or below, that determines my trade. in terms of the bank of england, they were currently on 10 basis points before they raise rates, which was quite annoying for them. they did wanted to get back onto that, for me, the 50 basis points in december was an easy decision from the bank of england. it has very little impact on the economy. the best way to trade central banks is to try to not listen to their latest speech, but thing about what they will say next. jonathan: are you more confident
in aston villa and in governor bailey right now? [laughter] jordan: i definitely confident on villa, i can say that. we lost the game, but we had a great first half, i thought. we were playing against top four level like chelsea and holding our own. jonathan: a local club for you and i when we were kids. get to your from you. jordan rochester of nomura. i was not that impressed by 50 basis points, but that could set us up for a move of 25. for the central bank and the u.k., it has been so confusing for 70 people to get a read on what they are trying to communicate for this market. as for that matter, even if they are trying to communicate. kailey: the unreliable boyfriend. i do think it is interesting, the difference between the boe and the fed. jordan basically saying the boe moves are priced in, whether or not their communication has been effective. the market and the fed seem
misaligned between what the fed has indicated. we can tell about how much you actually need to rely on the indications from the dot plot, but the market not where the fed says it will be going into the future. jonathan: it is clear there has been an emphasis shift with a couple of key central banks trying to restate some inflation credibility. we keep going back to that question in the last hour. can you do anything on the inflation front without tightening financial conditions, and do you need to tighten financial conditions to do anything on the inflation front? isn't that some thing that needs to happen in the next 12? what does that mean for market calls going into 2022? matt: historically, it looks like that is the way you had to deal with the problem of inflation. you had to throw a wrench into the machinery of economic growth. maybe with new tools, and we are in a new territory here, the
smart minds at the federal reserve will be able to figure out a way to do that. but as far as now, it still looks like you can't make an omelette without breaking an egg. jonathan: and you have a federal reserve that is to incredibly accommodative going into 2022. they have been heavily criticized around the conversation around inflation, but qe should have been wound down in the summer. kailey: we talk about the potential of a future policy mistake. a lot of people saying the policy mistake has already been made, and that they kept money easy and flowing for far too long. jonathan: and it will stay easy for much of 2022. you'll's or higher by us on tens. equities near all-time highs, up three on the s&p, advancing almost 0.1%. from new york, this is bloomberg. ♪ ritika: with the first word news, i'm ritika gupta. there's more evidence the fast spreading omicron variant leads
to milder symptoms than other strains of the coronavirus. the u.s. surge is featuring a lower rate of hospitalizations than the earlier wave. the number of people admitted is under the peak recorded last january. elon musk is closing in on his goal of reducing his stake in tesla by 10%. the world's richest person has sold another $1 billion worth of stock in the company. he is selling shares to cover taxes. bitcoin is set for its worst month since the cryptocurrency rout back in may. it is down 16% in december after hitting an all-time high just the month before. some analysts specked bitcoin -- expect bitcoin's pullback will be brief. a shortage of potatoes has caused mcdonald's to ration french fries. mcdonald's has been limiting
japanese customers to only small sizes of fries. john madden has died. madden guided the oakland raiders to it a pro football championship and walked away from coaching at age 42. he then became one of the best-known sports tv analysts of his time. madden was also the brand name for the leading football videogame, "madden nfl." john madden was 85. 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. ♪
that is the stockmarket keeps coming up, people get nervous about having made so much money and they are rebalancing back into the bond market. jonathan: the legend ed yardeni of yardeni research there. kailey leinz with matt miller and jonathan ferro. your s&p advancing 0.04 percent. something funky is going on in the bond market. 1.49% on tens. inflation could be at 7% into 2022, and here we are sub 1.50% on the 10 year yield. kailey: so far below where we thought we would be at the end of this year. about 50 basis points lower than many strategists on the street. the one person who called 1.50% is steve major at hsbc, and even that was capitulating from the earlier 1% call coming into the year. so he got something right that pretty much everyone did not. as you have said so many times, you can talk about the economy and whether or not you got this call on inflation rate. that has no bearing on if you call this bond market or equity
market right. jonathan: 1.50 present on tens next year as well. i thought steve englander at standard chartered made a good point. maybe it is about financial conditions going forward, that people just don't think the fed can do a whole lot before financial conditions start to tighten and they need to back away. that is the belief of a lot of people out there. matt: that is concerning. hope for the good of the is economy that that is not the case. if they tighten just to 50 basis points, that really shoots financial conditions in the foot. that would be a concern, right? we are at incredibly low levels already. i can three number the exact numbers, but i think paul volcker raised rates up to may be 19% when he was dealing with inflation, so half a basis point or even 75 -- sorry, 50 or even
75 basis points shouldn't really do that much damage. jonathan: we are in a very different economy compared to where governor voelker was back then. do you think going to 50 is even tightening? do you think 1% is tightening, given where we are going? matt: you make a good point that we are in a very different situation then we have been in before. that is always going to be the case into the future. so i don't know. but to me, it does not feel like that would be very tight. i can imagine, for example, if my mortgage rose by 50 basis points, i would not be thrilled about it, but it would not be the end of the world. it would still not be the 17% that my parents paid on their mortgage in 1980. jonathan: you can't help yourself, can you? got to come back to you. matt: i would argue that is the case for everyone doing any good reporting. jonathan: we do try to take ourselves out of it sometime.
matt can talk about himself a little bit more in just a moment. let's bring in kriti gupta for more. kriti: we have to talk about bitcoin because a lot of the headlines you are seeing is that bitcoin volatility is added again. yesterday you see a 6% drop in bitcoin against the dollar. here is the thing, a 6% drop isn't even a two standard deviation move. for our radio listeners, it is bitcoin on a classic tom keene logarithmic chart. the line over the last five years, a kind of trades basically sideways for the first three and a half years. this massive boom in 2020, then you hit 2021, where once again kind of see bitcoin largely trade sideways. a slight uptrend. but at the end, not as much of again for the risk you are taking on. not just regulatory risk, but the idea of volatility. you can make gains, but you can also lose a lot. that's what my chart illustrates
here. kailey: wasn't this supposed to be the year that you would get more institutional adoption, you are going to start to get the regulation coming in, which might stabilize the market and give it more credentials, and you were going to get a bitcoin etf? we got the futures one. all of those things didn't necessarily have the effect they thought they would. kriti: a lot of the optimism was based on the monumental gains you saw in 2020, a massive boom that kind of plateaued in 2021. the assumption was that it was all because of this institutional adoption. if you look at what the trade was, a lot of it was kind of macro, based on this recovery trade that bitcoin became this risk proxy of. if you compare emerging markets to the s&p 500, to those inflation breakevens, five-year forward breakevens, that is going to be the risk proxy that bitcoin follows. it really brings in the question, how much of that trade was actually fundamental in
nature based on this broader adoption, as opposed to how much of it was more of a symptom of the broader macroeconomic trade? matt: i would argue the drop we have seen in december is really related to the macro trend as well. as jon knows very well, i started covering bitcoin about 10 years ago, and delved deep into the community at various bitcoin bars and online in forums. a lot of the concern at the beginning of this thing was that fiat currencies would just be endlessly printed and devalued, and that is why they would argue you saw bitcoin rise as we saw the fed balance sheets well -- balance sheet swell and u.s. debt levels rise. as the fed turns around, and we have seen that happen in the beginning of the month, at the same time as bitcoin begin to come back down from another high, that is when you see this big drop in december.
as they start to take away the punch bowl and talk about ending bond purchases and starting to unwind the balance sheet, kailey points out the sequencing is in clear, but we know that is their plan. maybe that is why we see bitcoin coming down. kriti: totally a possibility. what is also crucial in this conversation is the dollar, and how much is the dollar not only with the fed, but was haven flows around the world. when you are kind of evaluating the long-term ability of bitcoin, compare it to the dollar, compare it to the idea that bitcoin is being used for more transactions. but it is not bitcoin alone that is growing. it is cryptocurrencies broadly. the bull case for cryptocurrencies isn't just in the use case of bitcoin. it is in things like blockchain technology, which is becoming essentially the new early adoption of what will be a revolution in application
software. that is something to consider as we go into the longer-term bitcoin and cryptocurrency trade. jonathan: thank you, as always. kriti of bloomberg on her chart of the day. i have to give you massive credit for the work you did about a decade ago because you were far more open-minded about it at a time, i remember you were covering the story in new york, i was very shut off about the story. you were very open minded it was humbling to see it explode in the way you anticipated, and i didn't. what did you see in that time that made you think it was more than a gimmick, that it could be bigger? matt: to me it was really about the community around it. as i saw not really big institutional interests, but big money interests coming from the winklevoss twins, coming from old-school bank names like matthew mellon, getting more involved in it, and then as i saw contracts starting to be built on the blockchain, i knew
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>> the story ahead has got to be earnings. >> the early part of the cycle where we see rapid growth is behind us. >> what we haven't seen is how they react when that easy money gets pulled back. >> you want companies that aren't predicated on free money. >> what matters in interest rates and for bond investors is the pace and path of rate moves. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: what year for ear