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tv   Bloomberg Markets Americas  Bloomberg  January 12, 2022 10:00am-11:00am EST

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guy johnson. ♪ alix: it is 30 minutes into the u.s. trading day on this wednesday, january 12. inflation hot like 1982. prices see their biggest jump in nearly 40 years. food, cars, and clothes all costing more. and investors shrug off the data. equities rally, yields fall. markets close to pricing and a march rate hike from the fed. private equity rakes in the cash. blackstone collecting almost $9 billion for its latest credit fund. we will speak to allie set thought -- to ali satvat of kkr. welcome to "bloomberg markets." i wonder if it was a cell the rumor, by the fact situation when it comes.
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to the market. -- when it comes to the market. guy: the market has already had a big move this year, and we have yet to reverse the downside in the nasdaq. it is still down circuit 2.5% year-to-date. we are obviously not very far into the year, so we have seen a lot of action, and that has come relatively quickly. so i think you are going to get quite a lot of gyration around these markets, but there's an interesting question to be asked around all of this, which is basically if we've got to the point where we are pricing in four hikes, i.e. if inflation is fully priced, what comes next? does the fed get more hawkish? if we have priced in those kinds of moves, what does that mean for the growth-value rotation? does it start to pause as many are starting to suggest? certainly that view coming out of barclays. let's talk about whether or not hot inflation is priced. mike mckee, bloomberg
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international economics and policy correspondent, joining us , and ira jersey, chief u.s. rates strategist for bloomberg intelligence. ira, is hot inflation now priced? ira: i think it mostly is or get if you look at what the inflation swaps market is, this is what the market thinks cpi will be over the tenor of this particular instrument. if you look at that, we are thinking 4%-ish inflation this year and slowing inflation in 2023 and 2024. so the market is certainly pricing for deceleration of inflation growth, but for percent inflation is still relatively high to what we have gotten used to over the past two decades, so i do think that at least in the rates side of thing, the rates market is kind of their already, thinking that we are going to have continued inflation well above 3%, which of course is well above the fed target. alix: mike, same thing. is hot inflation fully priced?
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michael: i defer to ira on the fully priced idea, but it would say the fed probably think that is at this point because we have not had a secret about the fact that the fed is going to be raising rates, and they have talked more and more about it as the weeks go on. it is more a question of what is the price, what is the appropriate price for each of the different tenors. that is what the market is trying to figure out. jay powell noted that yesterday, talking about the fact that the markets tend to overreact and be somewhat volatile as they try to piece together where they should be on these things. it has been to and a half years since this round began, two years, and then we went for seven or eight years before that at zero rates. so what is the actual price? what is a 5-year note actually worth? guy: let's talk about what the fed's job is going to be going forward. we heard it articulated
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yesterday by the fed chair, jay powell, up for llama nation -- up for renomination. he talked about being able to bring inflation down without damaging the u.s. economy. that is a very tough needle to thread. in terms of the pricing on inflation, there is this kind of expectation that ira talked about of inflation coming down. my question is, can it be brought down without damaging the economy? if that is something we now need to think about, is that the focus for markets going forward from here, rather than worrying about where inflation is an the fed reaction? it is what action we get from the fed moves in terms of the real economy. michael: i think you will see the fed move very cautiously. their track record in this area is not very good over the history of u.s. recessions. a lot of them have come about because the fed over tightened. but it reminds me of the saying, it is better to be lucky than good. the fed could do at this time without doing a whole lot if the
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reasons they think we are seeing this inflation are correct and they start to go away. if supply chains start to rationalize at the same time that consumers start to spend a little bit less, particularly on goods rather than services because of the government support they were getting has slowed down, then inflation could come back down noticeably. not necessarily to their 2% target, without them having to tighten too far. that is going to be the question. is the fed going to have to do this, or is it going to be things that happen organically? alix: right, and in some ways, rents, for example, immune to both of those things. we will break that down in a sec. if the scenario that we are talking around here works out, that inflation will peak and then slowly move lower, and the fed is not going to make any more policy mistakes, where using we need to see the biggest rewriting and assets? ira: for the rates market, that
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probably means we get a steepening of the yield curve if the fed does it correctly. the risk is that the federal reserve hikes too much and too fast, and that goes to guy pop -- to guy's question from before. if they go too fast too quickly, that is when you can get to get flattening of the yield curve. that is probably when you see risk assets do pretty poorly, and kind of forcing the fed may be slow down their interest rate hikes. so i think there is a tough balancing act here, and as far as market repricing, there's not a lot of markets right now that are very out of whack in the fixed income space except maybe the tips market a little bit. there's been a lot of people putting in tens of billions of dollars into tips products like etf's and mutual funds in a market that is relatively illiquid compared to the regular u.s. treasury market. so you see real yields at -80 basis points for 10 year tips. that is way too low, and over
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time, that is where you can see a significant repricing as the fed hikes start to run off their balance sheet, which seems like it is a done deal that the fed is going to start doing that very soon after they initially hike. guy: how quickly? ira: we think the fed is going to hike in march, and probably may or july will be when the fed will start their runoff. we think midyear for runoff would be the right time because they can basically prep the market with two meetings and let us know how they are going to actually conduct their runoff in a significant way, plus get some feedback from investors and broker-dealers. so i think july is when they start. we think they will start around the pace of $190 billion of runoff a month, which would be a little bit slower than they were buying, but that is to a reasonably fast pace, so there will be market repricing on that information.
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so things like the mortgage-backed securities market could see their spreads widen, which obviously will slow down the economy if you have slightly higher mortgaged interest rates. that would certainly have an effect. alix: assuming we can build all the houses we are trying to build, that it is definitely one thing. powell made the point yesterday that all of this is just to get to neutral. it doesn't even count yet as tightening. what is the sequencing for actually tightening? michael: that is a good question because they don't know where neutral is. they are betting it is about 2.5%. there's a great debate in the markets about whether you can get to 2.5%. you didn't when they were coming out of the great financial crisis. there are some on the other side of that trade like larry summers , even bill dudley saying they will have to go 3%, 4%, 5% before they get to neutral. we don't know what the demand side of this is going to turn out to be, and that is the problem for the fed. so i think they are going to be very cautious. bill dudley make a good point in
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a bloomberg opinion article this morning that may push back at what you were saying about when they start the balance sheet runoff. he thinks if they want to get the fed funds rate up to at least above 1%, if things go pear-shaped, they can start cutting again and not have to immediately start qe again. so it could get a little bit faster than the two years before they start tapering, but letting the runoff go. then when they get above 2%, they start to look around, they start to see what is happening with the economy and what is happening with inflation. alix: thanks a lot. really appreciate it. thank you very much. really good round table conversation. we will continue the conversation with our next guest, saying u.s. monetary
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policy would need to be tighter than what is discounted. we will break that down with rick about h -- with rebecca patterson, bridgewater associates. this is bloomberg. ♪ ♪
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♪ chair powell: if we see inflation persistent at high levels longer than expected, then if we have to raise interest rates more over time, we will. we will use our tools to get inflation back. alix: that was fed chair jay powell speaking at his confirmation hearing at the senate banking committee yesterday, which leads us to the question of the day. is hot inflation fully priced? it feels a little bit like sell the rumor, by the news.
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rebecca patterson is going to help us answer that question. is it fully priced? rebecca: no, it is definitely not fully priced. obviously, 7% cpi, what we saw this morning, that is not likely to stick around, but even if inflation moderates, you have to think about the components. what are each of those doing? two of the most important in our view, wages and housing, including rents. those are going to be sticky, and they have a lot of upside risk. so we think inflation is likely to be significantly above what is discounted, and of course, the fed's target, unless they decide they are going to hike a lot more aggressively than what is priced. guy: good morning, and happy new year. how are you position for that? rebecca: happy new year to you. it comes down to how much is the fed going to tighten. if they want to get to percent inflation their target over a
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reasonable timeframe, they will have to tighten more than expected. if they don't want to do that because they are worried about undermining the recovery, then they will still tighten, but they are not going to tighten as much as needed. so you have two possible outcomes, higher-than-expected inflation or more than expected tightening, and the amount of each you get is going to depend on exact what the fed does. so we are positioning for both because we can't read the fed's mind, sadly. they're looking for higher u.s. bond yields. i think the median forecast for the end of this year is around 2%. we think the biased risk there is clearly higher. we are looking at inflation sensitive aphids -- sensitive assets. we are looking at equity markets that are going to be less sensitive to changes in liquidity if the fed has to pull back liquidity faster than expected. so we are trying to position for either of those outcomes in our portfolio. alix: where does that leave you in tech? ? we have seen a lot of hedge funds starting to sell from their tech holdings, and clearly the last eight days of this year
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have been quite to multiple -- quite culture was -- quite tumultuous. rebecca: you have capex that continues to be strong. these companies are very cash rich. but at the same time, you have high valuations, people extrapolating the growth of these companies going forward over the next decade. some companies may hit that mark. they may beat expectations. but we think the bulk of them probably won't. so if you have at pricing and now you have the fed removing liquidity, these are very liquidity sensitive assets. long-duration cash flows. so they are going to be vulnerable in our view. the question is how much, given those offsetting supports i mentioned. we think that is one reason you want to look overseas with equities, places that are going to benefit from strong nominal global growth, less sensitive to the liquidity pullback, and probably offering much better valuations. place like japan, that would be
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a place we are looking now in equities. guy: is that value you are looking for? i am assuming it probably is. and if so, how much more does value have to go? is this a trade? is this a theme? is this something that has legs? rebecca: the value play, if you will, i would say is going to be dependent to a degree on what goes on with the global economy this year. we think the u.s. is going to have nominal growth that is still very much above consensus expectations, and even with our high inflation expectation, real growth is still going to be quite a bit above potential, so the u.s. economy is moderating, but still quite strong. i think a big question to thing about afar value can go is china. china obviously slowed a lot last year, and now we are seeing increasing, albeit more fine tuned, easing steps to support growth. can china get the economy back up to that 5.5% growth pace this year? i think if you had both of these
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big economic engines humming in 2022, that would make me a lot more confident that this cyclical or value leg is going to have sustained legs. so i would not just watch the u.s.. i would keep an eye on china, given its importance for all of these growth sensitive socks, and economic growth terms. alix: there is a bit of a narrative that since they saw their economic data come down a little bit, there may be more room to ease there. does that thesis extend to europe? most individuals say if you're going to play the value trade, it is europe over u.s.. do you buy into that? rebecca: i do think you see investors who want a certain u.s. exposure rotate within the market, so i don't necessarily think there is access from the u.s. but i also think europe is pretty interesting right now. the european central bank, even though they are also seeing high inflation, seems so far in the transitory camp, and they are likely to lag economic
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conditions there and let monetary policy stay quite easy, so different from the fed. fiscal stimulus there is continuing to roll out things to the eu recovery plan, so that is another support for growth. if you also have a decent little backdrop, i think europe is going to be a huge beneficiary of this combination of factors, so i do think there is some upside on european stocks. in recent years we have just seen these large luxury brands and multinationals benefiting. i think this year, the thing to look for is could you see that stimulus backdrop plus a little bit of improvement in china and a still strong america help some of those domestic sectors as well. guy: pull this all together for me. what kind of rate of return do you think you will be penciling in at the end of the year? rebecca: i think it is going to be a bumpy year when you consider that the fed is going to be feeling its way a little bit. it knows it needs to tighten, but how much and what shape of the rate hikes, what the data is
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telling us, what is happening with the pandemic. i think that will create air pockets along the way, so we will see volatility this year because of the pandemic and how the fed is going to navigate that. i think you want to make sure you are positioning for higher yield, either through the bond market itself or thinking about, if i have a long only portfolio, what assets are going to protect me against higher yields. equity markets i think are still well supported, but some of those big measures of support, the fiscal and monetary stimulus we had over the last two years, those are starting to fade, so i think you are looking at lower equity returns this year. it seems like a pretty easy thing to say after the returns we got last year. in one market -- and again, this is where diversification is so important -- if china is in a different place in its cycle, we are all tightening, removing liquidity. they are adding liquidity to their market, trying to support growth. we got a regulatory clampdown in china as they deepen their
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ecosystem, but you also have really attractive valuations and easing conditions, so being long chinese bonds, looking for opportunities to belong chinese equities, there's a lot of differentiation in the global economy today. even if returns overall for equities are lower, i think there's going to be some really interesting opportunities out there. just have to dig around a bit. guy: rebecca, it was great to catch up. we really appreciate your insight. thank you so much for giving some of it to us. rebecca patterson at bridgewater associates, thank you very much, indeed. what are going to do next? bank earnings start at the end of this week. we are going to talk about that next. this is bloomberg. ♪
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guy: the nasdaq is up by 0.9%. live from london, i'm guy johnson. alix steel is in new york. this is "bloomberg markets." les spend, driven volatility starting to eat into fixed income trading revenue. this was to a certain extent a little bit. people -- a little bit predicable. the talk about what it means i'm about the rest of the earnings season as well. we welcome sonali basak. walk me through the jeffries numbers and what the take away is for the sector. sonali: did biggest take away is that wall street has gotten very used to hitting records. we are seeing jeffries which has been doing extraordinarily well in trading, finally see that slump in fixed income trading and that jump in investment banking, which many banks are expecting is not offsetting total revenues. even with a 5% rise in
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investment banking, you have a 3% decline in total net revenues. that is really the big question moving forward into the bank earnings. how much will some of these businesses offset the declines in others? alix: that chart is very stark because we kind of knew this was going to come down, that trading revenue was not going to be the same as what we saw in 2020, yet it still is somehow surprising the market. i wonder, how are we going to be set up into friday? sonali: one interesting thing is what this means for consumer banks because finally, consumer businesses can shine a little harder. credit card loan balances have gone up as we have seen for federal reserve data more than any other kind of lending in the most recent period. so if you are at j.p. morgan, if you are at citigroup, that is very good news. there are some other trading businesses that can show some bright spots moving forward. rates, for example. equities in the last quarter. goldman sachs and morgan stanley, that could still be a bit of a bright spot. what i am really interested in
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is these investment banking figures because for some banks, we will see much bigger gains at other banks. it was such a competitive year in terms of m&a, and terms of financing, so jp morgan, bank of america, goldman sachs should be big beneficiaries of that. guy: what does this year look like? we were just talking to rebecca patterson of bridgewater. she talked about a bumpy year coming up. is that going to further separate the pack? sonali: a lot of people have been talking about bonuses, but when i talked to executives, but they are also saying is don't expect this to continue because there are a lot of concerns on the horizon, not just when it comes to inflation. we saw that print today. but a lot of executives i speak to are still worried on the go forward figures. so inflation, potentially choppy or markets. people are very worried about geopolitical affairs as well and what the rhetoric in washington
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and a midterm year will look like. so with all of those things on the horizon, caution is really the name of the game, as well as rising interest rates that could really start to eat into the story. alix: really great stuff. looking for to all the coverage on friday. coming up, you've got cars and clothes driving u.s. cpi higher. we will take a look at those numbers and dive a lot deeper. what does it mean? services numbers weren't as high as some expected. have they piqued, or is there more catch up with prices? we will break down -- we will break that down with omair shar if, inflation insights founder. the dollar index dropping like a stone. this is bloomberg. ♪
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alix: we are in our into the
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u.s. trading session. abigail doolittle has more. you sell the rumor, you buy the fact this time around. abigail: for the second day in a row, the second time we have seen two up days in 2022. what is super interesting here is this golden dragon china index, up 1.6%, up along with the banks. yields are down just a little bit after that, in cpi print the highest and i believe 40 years at 7%, but largely priced in. fed chair jay powell's comments yesterday largely priced in. on the year we have both the s&p 500 and the nasdaq 100 down. interestingly, the china tech index up on the year, along with the banks. sort of an interesting pairing. the big driver for all of these indexes, the yield. les took at a year to date yield chart. the 10 year yield, we will see a massive backup of 22 basis points, so a very big move in a short time.
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over the last couple of days, sort of wondering down, backing off a little bit, giving a little bit of relief around inflation fears, along with valuation concerns for technology. relative to fed chair jay powell's comments, what is more important, rates were balance sheets, obviously they are integrally tied in. in yellow, that is the 10 year yield. in blue we are looking at the fed balance sheet, close to $8.8 trillion. in white, the s&p 500. you can see where the 10 year yield was going much higher last year, it really did not do anything to the s&p 500, just following the balance sheet. the balance sheet is still going higher at this time. the s&p 500 reasonably choppy. if you think about the s&p 500 as a forecasting tool, this chart may suggest that stock traders are little more worried net-net about the balance sheet, the idea that it could shrink into q3, which i think was your
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point the other day. guy: absolutely. we will wait and see what happens here. there seems to be a little bit of ambiguity around what the timing and the pace of that is going to look like. the rate hikes, march looks increasingly nailed down. abigail, thanks very much, andy. let's get back to that inflation story. 1982, "i of the tiger -- 1982, "eye of the tiger," as carl riccadonna pointed out. alix: in my head all day. guy: that is a massive challenge for president joe biden, and a throwback to the 1980's, when then president ronald reagan battled inflation close to 9%. >> a majority of americans correctly had enough i'd as harassing your most pressing long-term problem, inflation. inflation and high interest rates are the real culprits. they create the economic climate
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that leads to unemployment. pres. biden: i want to be clear, i am confident the federal reserve will act to achieve their dual goals of full employment and stable prices, and make sure the price increases do not become with the independence that they need. guy: volcker, powell. start thing about that one. is higher inflation now fully priced are we near a peak? how quickly does it come down? rent is another factor that could be more sticky. omair sharif, founder of inflation insights, joining us. what did you make of today's numbers? omair: it is obviously largely as expected. i think we are probably right at the peak on headline inflation now. but the core is probably going
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to move a little higher over the next few months. i see the peak probably in march 2022 for core inflation, and from there i think we should see the base effects starting in april and a steady decline on inflation moving forward. we have had this huge run-up to such high levels that we are going to have a lot of wood to chop in the back half of 2022. i do want to point out there are a couple of things that i think are beneficial in terms of the inflation outlook, and terms of lower inflation moving forward. in the spring of 2021, we were looking at 9%, 10% per month. more recently that slowed to around 2.5%, 3.5%. the indicators suggest the next couple of months will be extremely soft for used car prices, so there is a little bit of silver lining in the underlying data we got today. alix: so what you make of rents? it is the biggest single portion
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of cpi. you look at used car prices, but i am wondering how rents play into this, and how that maybe pushes off the peak a little bit. omair: rents, we are right around -- core inflation right there in just those two indexes. that is going to be a positive source of upside for inflation moving forward, but just to give you a little bit of quick math, right now we are looking at 6.2% year-over-year. one thing that moves up close to 5% by the end of the year -- the amount that is going to adjust for core inflation, much more than offset -- use vehicles by the end of the year. so if you look at the expeditions for those two components in particular, you are probably talking about on a drag about 4% by the end of the year.
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[indiscernible] -- for six to nine months now, but the expectation is that we should see a year-over-year change in used cars offset that, so the overall impact on inflation should actually be to push it lower. guy: in terms of wages, just give me a sense of what is happening. we saw the earnings data today, and clearly wages are not keeping up. does that start to flip? if headline inflation comes down , do wages stay higher? does that negative number become a positive number? i am wondering what could change here in terms of the ability for the consumer to keep spending and keep delivering on the demand side of the economy. omair: i think you are exactly right. let's look at the pci, which is probably the best measure of inflation we have.
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salaries are actually falling year-over-year in most sectors outside of leisure and hospitality, for example. so yes, inflation is eating away at these wage gains we are seeing right now, and as we move throughout the year, as inflation comes down, we should start to see those real wages kick out. one things that is continuing to power consumption going forward is that they have to keep moving away from sectors, as you would expect, where prices have been increasing to other sectors. so couple of examples, we have seen real spending on autos decline very sharply over the last six months. we have seen real spending on items like beef prices going up over the last year, even the production is down 12% over the last six months. so you see consumers making decisions to shift away from items that are seeing big price gains to other areas. so net-net, i think the
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functions should be ok, even the wages right now are hurting because people are making the decisions away from higher priced items. alix: i want to direct your attention to a chart we are going to have hear that guy brought up earlier in our editorial meeting. take a look at china ppi versus u.s. cpi. china ppi is really about the input cost to the world, and that u.s. cpi is really the output cost to the world. you have seen china ppi, the blue line here, rolling over, definitely at its peak, whereas cpi has not yet hit that. what is the correlation and the relationship you notice between these two indicators? how do we read those tea leaves? omair: i am not a big fan of the china ppi has a great deal of information for the u.s. cpi. it definitely correlates much better with import price data and u.s. ppi, but that growth of
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what consumers are paying is not that strong. it is sort of confined to a couple of items that we import a lot of from china. for example, the imports coming from china for apparel and footwear is incredibly high. there is some pass-through there. but for most of what we are reporting from china, it tends to be more materials for manufacturing. so for me, i don't see a lot of downside risk to inflation because of china ppi, especially the fact that retailers pay more for transportation, for example, higher wages and so on, and those are some of the costs that could make their way what the consumer pays at the store. don't think the china ppi has a lot to do with anything in terms of the final price. alix: on the flipside, you have the supply chain issues and the zero-tolerance covid policy in
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china, which support the other side of that. omair, thanks a lot. we really appreciate talking to you on cpi day. one part that we are really watching is what happens to energy prices. that is hot particularly in europe, and here as well. we have the latest oil inventory, a big draw overall, down by about 4.5 million refiners sort of shut their doors a little bit. refinery utilization down by over 1%. this is the kind of season where you switch over into maintenance , so there is that going on. you saw a solid build in
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gasoline inventories, as well as distillates. experts also sell whopping 23%, which is so odd considering there's lots of worries about how much opec can really meet the demand. we will break through those numbers. oil around the highs of the session. the future of health care. we will talk to kkr's head of health care strategic growth, coming up next. this is bloomberg. ♪ th, coming up next. this is bloomberg. ♪
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alix: this is "bloomberg markets ." suzanne clark is coming up, u.s. chamber of commerce ceo. this is bloomberg. ♪ >> we expect by the time we get through the end of 2022, we will hit the guidance range we have indicated previously of about $5 billion to $7 billion of revenue. >> to invest a lot of capital that is a kimye laded, that needs to be an investment of science. >> but when we look at growth in 2022 come our sources are going to be more from our ongoing pipeline of cancer medicines and medicines for other serious diseases. >> we see as a megatrend in
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biology over the next 10 to 15 years, i really believe this is going to be the century of biology. alix: those are some of the top health care executives from the j.p. morgan health care conference talking about where they see growth for 22. kkr is also taking a huge bet in the health-care industry, raising $4 billion to launch a new fund focused on high-growth health care companies. join us for the investor perspective is ali satvat, kkr cohead of health care strategic growth. what were some of your big takeaways? obviously a lot covid related, but when you look at growth, where is that opportunity? ali: thanks for having me. it is strange times in the world these days, but great question. as we look at it, fundamentally, as with about where we are in the market, a lot of companies with strong balance sheets, a lot of companies doing portfolio reviews, looking to bulk up. as we look in 2022, we see another strong year ahead for
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companies on one hand to not only take advantage of the stability and sustainability of health care, but also to take advantage of the innovation. how can we be a partner in helping fuel and partner with these companies to benefit from that innovation and grow? guy: the focus during the pandemic has been on messenger rna technology, the huge excel ration we have seen their. -- huge acceleration we have seen there. as covid becomes endemic, where does the innovation, post-pandemic? ali: i think the beauty of health care is you have this large, sustainable market, a $4 trillion market in the u.s., and a lot of things remain the same. we will go back to the product and service needs that are out there to help patients across various subsectors. you will also see some things reimagined, what our new patient care delivery models, what does the supply chain look like on the backside of covid.
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so i think this dichotomy of having the stable pieces were companies like pfizer go back to doing what they do well internally will be part of what they do, but when you look at an area like pharma, the r&d gap and big pharma will fuel the need to go out and find new capabilities. so when you see some of the partnering's struck this week at the conference, you are seeing larger strategic's looking for ways to bring in other capabilities they may not have to help grow that way. alix: you have lots of different ways to invest. the big private equity fund, the core fund, the high-growth fund. with a lot of money sloshing the lounge -- sloshing around, how are valuations, and where do you find the best bang? ali: we use a strategy called teams and themes, and a lot of what we spend time on is identifying strong executives who we can partner with, and we have done that in several cases, where we find platforms were maybe there is not a scaled
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transaction to do, and may be the best return is from voting something or buying and building something. that is a size range were maybe some of the strategic's are less interested. if we can go into a spacelike diagnostics, we are in a space that is more topical than less now on the backside of covid, and we can be innovative there at a scale where others might not play, but when we scale and commercialize, we get to a place where they might be interested. we have similarly done that in a company called gamma in the bioprocessing space, a first derivative play where we can be a very strong enabler of the broader ecosystem. guy: in terms of the supply chain story you mentioned a moment ago, diagnostics is probably an interesting space to talk about.
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clearly supply chains are going to shift, are going to change post-pandemic. we have all learned a lot about the need to have what we need to close at hand. what is the opportunity for the supply chain story in the health care sector? ali: in our existing portfolio, we have companies like headwinds research, companies that mention in bio process, different points along the way of a drug ultimate coming to market, whether it is the trial side, develop inside, manufacturing assets. we have seen that in the human health side and the animal health side. there are all these different parts that may be belong under a strategic's roof, but where the outsourcing thesis is alive and well. when we tie things together, we are learn a lot of that from an investment we have done called pra. you look at that, kind of a consummate outsourcing play in the drug develop in space, and as we have looked at the market, these ways to play the
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ecosystem, whether it be in diagnostics or biofarma, we think it is a great place for firms like us to play back to this teams and themes model, and look at the themes that are interesting, look at where the growth is happening, back really strong execs. we have done that and biofarma are -- in biofarma, and i think it is a great sector for us to play. alix: another theme is what is happening in the macro world, and that is the passively resistant themes, higher rates for this year, at some point maybe inflation picking, but very high price pressures in the meantime, and questions as to what to do with technology stocks, but volatility most differently going to be there in many different asset classes. what does that mean for you as someone who is trying to put money to work? ali: i think volatility has a was been a part of health care. there's this dichotomy of viability and sustainability of the defensive space and the volatility that comes from innovation, so when you add to that the macro pressures that we
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may see coming into this year and beyond, we think that is actually a very interesting time for firms like us to play. if you look historically, kkr has garnered best returns across multiple strategies when markets are choppy or come and we can be a unique and differentiated source of capital. that is where we can actually thrive. if we do that, we go back to the fundamentals of where good companies identify great teams and businesses that we can help scale. maybe some of those businesses stay private for longer. maybe would go to public markets at the right time, seek strategic exit at the right time. but that long-term capital we think is someone that differentiates us even in choppy or markets. guy: my sense is that the rate of change within the sector is increasing. what does the delta look like? what kind of innovation, and how quickly does it come? we have seen incredible innovation and incredible pace during the pandemic. does that continue?
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how does that affect the way you think about the lifecycle of a fund? ali: i think the great thing is we have funds that have long-term horizons. have patient clients who partner with us to see opportunities over time. i think the pace of change is significant, and that is one of the benefits of health care. if you are an expert instant best or in this space, we have deployed over $18 billion in health over time. you see pattern recognition. you get to a pace where something that you might see in the future looks like something you may have seen before, and i think that is interesting about what we do. we can capture some of those point changes, capture them and platform form, pat folio -- port folio form, but we also have the ability to have those things happen over time, so you take advantage of a near-term move, but you are able to build on that. you are able to scale that. you don't have to go sell it immediately. so building that value and compounding the return over time i think is something that pulls capital while taking advantage
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of some of these point changes. but again, just back to health care in general, what we love about the industry as you do have this long-term stability, so while there are these dynamics from time to time which we think the pandemic, if there is one positive that has come out of it, it has really shown the importance of this sector, so people are turning to folks like us who spend a lot of time in this space already. guy: really interesting conversation. really interesting insight. thank you for spending time with us today. ali satwat, thank you very much, indeed. this is bloomberg. ♪
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guy: 34 minutes to go until the european close. let's talk about what the price action looks like. the stuck up by zero point 7%. we are coming up towards the
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four 90's. we are up by another 3.2% today. what is interesting is what is happening to the dollar right now. you've got dollar weakness on the back of that inflation number. euro-dollar now with a 1.14 handle. this is dollar weakness rather than euro strength. we are up by another 0.5 percent on euro-dollar right now. a lot of people beginning to talk about the idea that we could potentially start to see some fx volatility. it is one area of the market where we really haven't seen it thus far. one area to pay attention to is what is happening with the gas market. u.k. gas down by 6.5% today. left of cargo coming from the other side of the atlantic. the fear capital -- the f iera capital portfolio manager going us next. this is bloomberg. ♪ next. this is bloomberg. ♪
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guy: european stocks up off their highs. it is the mining stocks that are really doing the heavy lifting
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today. the countdown to the close starts right now. >> the countdown is on in europe. this is "bloomberg markets: european close," with guy johnson and alix steel. ♪ guy: 30 minutes to the close. quick refresher on the price action. european stocks up. energy stocks, mining stocks doing the heavy lifting. we are potentially, according to some, about is he some fx volatility. this is u.k. nat gas, down by nearly 6% today. similar story when it comes to the contracts as well. basically, we are all kind of responding to the cpi number. the highest number since 1982. alix: it is definitely hot, yet you are looking at some kind of relief rally in the u.s.


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