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tv   Bloomberg Surveillance  Bloomberg  January 19, 2022 8:00am-9:00am EST

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>> something has got to give this year, and it might be margins. >> i think we are heading for the titus labor market since the 1950's. >> we expect the measure to rise. that does not mean the fed will go away. >> we think the fed will have more difficult he raising rates rapidly than the market believes. >> we think we are moving towards the next new normal. with ink it is a positive move -- we think it is a positive move. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. on radio, on television, we dive into the middle of january, bank
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earnings season. lots going on. a prime minister under threat in the united kingdom. maybe we will get to that. let's get out front of andrew sheets, chief cross asset strategist at morgan stanley. it is the jumble we are in right now. what is the thing you are watching most? jonathan: the thing that jumped out for me at morgan stanley is that multiple valuations get hit off the back at what this federal reserve is doing. i mentioned the work from standard chartered. andrew hallman horst -- citi saying four rate hikes is possible, but not probable. i think that sums up the conversation, where we have gone from a month ago, talking about a debit news conference, and a month later talking about a monster fitbit. tom: -- monster fed pivot. tom: what is the data that matters to you right now, lisa? don't tell me it is the
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auctions. [laughter] lisa: no, although there are 20 your auctions later today. the wages are the focus, and that is the reason why the narrative has shifted so much this week. the quiet period for the federal reserve ahead of next week's confab, you still have this narrative changing with respect to yields. this to me is the key aspect driven by real yields. this is a bet that the fed will move away from accommodation, and it will not act as the same put that it has in the past. tom: we will talk to sheets about staying out of america. ben laidler reaffirms the bullishness this morning. he calls it a policy correction. he speaks of the new defensive's. i think that includes microsoft. jonathan: the acquisition we saw over at microsoft, some of the names and the ark fund we talk about some up -- about so much. some of those hyper growth names
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have been absolutely hammered. at the index level, we might have had a 10% correction or close to one on the nasdaq, but some of the single name stories have been beaten down by 50%, 60%, 70%, 80%. tom: bank of america doing a great job on that on a sector basis. i would suggest is this earnings season, we've got some other noise here in the next couple of days, and then we see from those new defensive's what they are doing. it is a bit of a mystery. jonathan: we've got a great guest coming up. up 13, let's call it 14 points higher on the s&p, up 0.3 percent. nasdaq 100 futures up 0.5%. yields essentially unchanged at 1.8682%. crude threatening to break $90 a barrel at $86 and very close to doing so on brent after blasting through $88 earlier this week. tom: $89 print earlier today. that's get right to it. andrew sheets is out of brown university,'s taggart --
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university, staggered into morgan stanley one-day. he's the kind of guy who writes a 14 page research report and has 14 people writing with it. he coalesces all of the morgan stanley view worldwide, from mike wilson over to economics and ellen zentner and the rest of them. what is great is his ma thiness gives you a really interesting opinion. jonathan: great to catch up. why is this year where the index starts to struggle? andrew: great to be with you. i think you have a couple of factors coming together that we think will drive the u.s. index underperformance, and a lot of that goes back to the point lisa made about real yields, that real yields did no rise last year. that was a surprise given how strong the recovery was. we think real yields start to rise this year, and the rise is both more pronounced in the u.s., and the u.s. market is more sensitive to it. we do think u.s. earnings will be relatively strong. we think the u.s. economy will
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be relatively solid. but the evaluations need to come down like they have come down in a lot of other markets, and we think that leads the u.s. to underperform lisa: this is an important distinction. is the underperformance driven by fed policy, or is it driven by margin compression from the inflation we are seeing, from wages and other input costs? andrew: we think it is more by fed policy, or more specifically the market pricing in a more realistic interest rate and realistic discount rate over time. on the margin front, it will definitely impact a lot of individual companies. it will definitely drive idiosyncratic risk for companies that do not have pricing power. but for overall earnings this year, our estimates are near consensus, a little bit above consensus. from that basis, it is hard to argue that margin disappointment at an overall index level is the big problem. instead it is the valuation and the discount rate. tom: -- says margin scrutiny in
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the united states is front and center. your lead sentence is you are away from american stocks and towards europe, i believe, and japan stocks as well. won't they have the same margin scrutiny, the same margin pressure? andrew: it is fair that i think some of the issues are universal. rising commodity prices, tighter labor markets. but i think two factors are at work. first, in aggregate, we are less worried about that margin compression overall. we still have a very strong nominal gdp growth next year. with it nominal gdp in both the u.s. and europe is 6%, 7%. that is pretty strong revenue backdrop that should be somewhat supportive of margins. also, i think especially for europe, our european equity strategist notes that consensus expectations are just very low. the market is not expect a much out of european
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companies, which is understandable. but we think that bar is so low that it is going to be very easy to clear, even if growth expectations are a little short of what we think. jonathan: i can take those few comments and look back maybe five or 10 years, and they somewhat the same comments i have heard over the last decade when it comes to europe. what is new about this? andrew: you're absolutely right. europe has underperformed a long time. i think it is important to look at why it has underperformed. it is not that the u.s. has outperformed because the fed has been active. the ecb has been buying bonds. the bank of japan has been active in the market. the reason the u.s. market has outperformed has been because it has had superior earnings growth, or that has been a big part of the story. i think something we think is different this time in europe is we think the earnings can actually come through. we think we have a much stronger commodity environment, which helps europe.
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we have a stronger economic recovery in europe with a very strong consumer. i think you have a better political backdrop in europe then you've had at many points over the last years, and you have a much better ella to valuation argument of europe relative to other regions, especially in the u.s., so putting all those factors together, that is why we think it can ultimately do what it hasn't really done much of over the last 20 years and outperform. lisa: if there is a debt of surprise from the federal reserve, if they see the move real rates, if they see the repricing and say, wait a second, we are perhaps getting a little ahead of ourselves in the pushback in the months to come, is that a risk case to your scenario? do you see that reversing this trade and making u.s. equities more attractive? andrew: i think that is fair. i think if the fed does blink as you describe, that would make investors more constructive towards u.s. assets. it would probably weaken the
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dollar, and we have moved to a neutral dollar stance. but the part about that that is interesting is can the fed do that credibly, because we are still in a window where inflation has not come down yet. inflation is still quite high. if the fed is more dovish, but the market thinks it is too soon for the fed to make that pivot, and that causes longer in yields to rise, the market thinks the fed is going to have to catch up and do more later. that might not necessarily be good either. so i think that the fed is probably a tougher policy pretty meant then the ecb or the bank of japan, and that is one of the reasons why we think equities in those markets can ultimately outperform. jonathan: enter sheets, thank you, sir, of morgan -- andrew sheets, thank you, sir, of morgan stanley. tom, i know you're reading through steve englander at standard chartered. the message there, the doves on the back. tom: i am going to call it march
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11, if my eyes don't fail me here, on the bloomberg. that is the inflation report for february, five days in front of the fed soiree march 16. to me, that is the key day. englander nails it. he says q1, you will see inflation peak, what ellen's and their is talking about it market -- what ellen's and her -- what ellen's and -- what ellen zentner is talking about it morgan stanley. jonathan: until then, doves are on the back foot, and there is nothing to prevent further backing up a policy rate expectations. lisa: the only thing that could change this narrative would be the data because ultimately, the fed's hand could be called, as we were just hearing from andrew sheets. if the data keeps coming in this hot and we see wage inflation take hold, how can they back away without disrupting markets, particularly on the long end? jonathan: and can they wait until the march meeting to communicate that maybe there's another pivot coming, and this
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was all jawboning? i don't know what this is. this has happened really quickly. do you think, are you convinced by what you have heard from this federal reserve chairman, that he is ready to go four times this year? tom: i think he is advantaged to be in a quiet period with his team right now. their big advantage this week is they don't have anything to say. i've been told that. lisa: i miss it. jonathan: overwhelmed by the fed speak last week. how many people did we hear from last week? lisa: i think at least five a-day. jonathan: i like three. three hikes, balance sheet reduction. what do you like? maybe four, perhaps. [laughter] helpful. the meeting is next week, so no fed speak until then. a ton of research guessing what the fed speak might be. [laughter] futures up 20, up 0.4%. tom: is boris still prime minister? jonathan: i understand the prime
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minister is speaking in parliament, and his name is still boris johnson. that is the update from the u.k. [laughter] from new york, this is bloomberg. ♪ laura: yes, boris johnson still in power, and the prime minister says -- will be lifted next week. guidance to work from home will be lifted. so will mandatory covid status justification, and will no longer require the wearing of masks. u.s. secretary of state antony blinken's has a double medic resolution to the standoff with ukraine is in the hands of russian president vladimir putin. lincoln is in you blinken is in the ukraine -- blinken is in ukraine to meet with that country's president. russia has deployed one hundred thousand troops near its border with ukraine. the price of oil staying about the highest level since 2014, and the international energy agency says the market looks tighter than previously thought. according to the iea report, the global supply is shrinking and
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demand is on track to hit repent of levels. new york we will traded above $86 a barrel. inflation in the u.k. has unexpectedly surged to the highest level since 1992. consumer prices rose 5.4% in december from year ago. that adds to pressure from the bank of england to raise interest rates again next month. the rollout of 5g wireless service in the u.s. is disrupting airlines scheduled around the world. they are concerned that the new 5g signals could interfere with their meant. 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. ♪
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>> you can raise rates more aggressively, but that is not going to ease the supply constraints that are the underlying cause of this higher inflation. central banks need to think very carefully, what can they achieve by raising rates given the underlying cause of the higher inflation environment? they need to reflect on that and then make it clear to the market. jonathan: the blackrock vice chairman there. your equity market up 20, advancing 0.5% on the nasdaq 100 -- advancing 0.5 percent. on the nasdaq 100, we were almost down 10% from the highs. yields come in a couple a basis points to 1.8575% on tens. $86 and wti, up 0.75%. tom keene, this from the team
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here at bloomberg. this second paragraph, "dubai's emirate said it will suspend flights to several american cities. two other airlines said they won't fly there 777 jets to the u.s. mainland after a warning from boeing about how the models ultimate or -- models' altimeter will be affected by the rollout of 5g." can you ask plane it for me? tom: yeah, gigahertz. [laughter] lisa: thank you. tom: it is about the sine waves, the signals you get off of radio antenna. the gigahertz of 5g nicely dovetails closely with
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altimeters. helane becker joins us now, managing director at cowen. we are going to lose formula like -- boeing is saying this is important. is anybody listening? helane: i think the airlines are. it is kind of interesting that you bring this up because i did a crash course in this in december to figure out what this was all about, and what you are saying is accurate. in europe and the u.k., where this has already been implemented, the implementation levels are at a lower level than they are in the u.s. that is a big difference. the cell towers in the u.k. are turned away from the runways, and apparently what you just said is completely accurate. as an airplane is approaching the runway, the signal from the
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cell tower interferes with the readings the pilots are getting. on a blue sky day, that is not a problem because the pilot can see the runway and can see where they are landing. on a bad weather day when you are landing using instrument landing, that is a problem. lisa: i am struggling to understand why we are talking about this now, at the cusp of the rollout of 5g. who messed up that this is now an issue versus five months ago, versus two years ago? helane: i suspect it is a case of the government not talking to each other. . it seems to me the ftc and the faa were not really communicating. not to defend one or the other, the faa has really had its hands full over the last couple of years between not only the pandemic and the havoc that has caused on supply chain and for fedex and ups, but for the
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airlines in general. they have also had to deal with the max and delivery issues they have had. i feel like people were thinking 2022 is far away, and all of a sudden it is here, and everybody says, wait a minute, this is not going to go well for us. jonathan: i am trying to work out now, you are looking at these names right now, is it too premature to say any company, any airline that is heavily boeing dependent, i am going to revise their revenue forecast lower? is it too early to do that? helane: i think it is. obviously, southwest airlines has the biggest boeing fleet in the united states, so that would be problematic for them, but it is problematic across the board and problematic for every airline if they are not comfortable flying into the u.s. you made the comment earlier that emirates pulled their u.s. flights until this issue gets
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resolved. tom: let's move from physics to sell side analysis. what is your angle best buy? ? helane:helane: we picked united -- helane: we picked united as our top idea for 2022. they are increasing service internationally to leisure destinations. a lot of people are worried about united's exposure to the corporate client, and obviously corporate isn't coming back in the air that fast. i think we are 60% recovered. they will report earnings tonight after the close and hold a conference call tomorrow morning. we think they will lose money in the fourth quarter. we also think they will lose money in the first quarter, but turn that around in the second. they are 50% domestic and 50% international, and as i said, more leisure destinations. so we think they are pretty well-positioned, at least for this year, as we have borders
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reopening and people wanting to travel. we think we will see this summer , at any rate, three years of demand on about 80% of the capacity. obviously if united does well, american and delta should also do well, and delta has that fortress balance sheet. jonathan: was that just a warning for how expensive it is going to be to travel this summer? helane: i think so. i think inflationary pressures are really hitting the airline industry. one of the things people have not realized as i talked to investors this week and last, oil is $85. that equates to about $250 a gallon for jet fuel. then you've got libor rate inflation. the airlines are hiring. america said late last year -- american said late last year they are hiring 18,000 people this year. that is not met of retirements,
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but you're still looking at hiring an awful lot of people. each of them said they are hiring between 100 and 200 pilots a month. so it is a good time to be a pilot, actually. jonathan: if you can find them. that is the issue right now. this was a clinic. helane: thank you for having me. jonathan: got this comment on twitter, and i could not agree more. listening to tom keene educate on 5g is the lecture i did not know i needed this morning. +1 from me, tk. that was brilliant. tom: i got it all from paul sweeney. i did really poorly at this in school, fold disclosure. lambda equals the speed of the frequency as divided and compared to the request he. jonathan: i will admit, it is all foreign to me. if you are on radio and not seeing this banner, it is a special one. [laughter]
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we will sit down and have our morning coffee together later on, and you can translate all of that for me. tom: -- has a tattoo of that equation on his arm. jonathan: 1.69% -- 1.862% on tents. from new york, this is bloomberg. ♪ bloomberg. ♪
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jonathan: economic data just round the corner stateside. good morning. futures up 23 on the s&p, up .5%. on the nasdaq we bounce back. with housing data here is mike mckee. michael: housing starts out and housing starts on the month for december are up 1.4%. much lower than 11.8% last month. building permits up 9.1%, that is better than the 3.9% we saw in november. overall housing starts running at one million 702,000 annual rate. we should expect some sort of change in the housing industry as mortgage rates rise in the market start to price in fed
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tightening but it does not look like that happens in december, even though mortgage rates are up. one of the interesting things if you look at the overall housing starts and interest rate environment is that affordability has dropped. new home sales have dropped the last couple of months because affordability is down as interest rates rise and as people do not have as much money as they do and prices rise because construction materials are going up in cost. something to keep an ion going forward. tom: you think the rate of change in housing can rollover in q1 like we are hearing from steve englander and others? michael: there are two things to watch. one is the backlogs in the housing industry. you also have to see what happens with mortgage rates. they continue to rise and have we pull forward demand? if that is the case then we could see a rollover.
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tom: michael mckee, thank you so much. lots of economic data. the hallmark of the work that deutsche bank is to have a group of economist, people that battle the side and you acute published research. jon ferro no exception in the last couple of weeks. mr. hooper and mr. luzetti have looked at the movement we will see and the rates of change we will state. jonathan: i happy to say matt luzetti of deutsche bank joins us now. the work knowing into the weekend with peter hooper, the risk the fed needs to do more stop this argument we have experienced longer like for policy. are they already behind the curve? matt: thanks a much for having me. we did argue the fed is behind the curve. that is mostly a byproduct of the rapid improvement we have seen on the labor market front. it is important to remember that as of june we were at 5.9%
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unemployment. the unemployment rate has fallen by 2% over last six months. very much so on inflation. given the rapid developments and the rapid improvement we have seen with the labor market front and high inflation, the idea the fed should be at their current policy setting is zero interest rates still adding to the balance sheet with an economy that has satisfied the dual mandate goals and strong growth, there is a disconnect between those two things. jonathan: you've put numbers on balance sheet reduction. $1 trillion more in 2023. you also equate balance sheet reduction to interest rate hikes. somewhere between 2.5 and 3.5 basis point increases. can you help us understand whether that balance sheet reduction complements the rate hikes you are already calling for or replaces them? matt: the interesting thing from
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our forecast is we have brought rate hikes forward at the same time we are building in a faster drawdown balance sheet. our baseline as they hike rates more times this year. march seems very likely in terms of lift off at this point. we have more hikes in addition to the balance sheet wind down. there are different views within the committee on this. we have heard from mary daly, governor waller, jim bullard, who want to actively substitute during more on the bound sheet and less on the front end. we have not heard much from jay powell on this, but i anticipate the rest of the committee will want to allow the financial condition tightening to happen as a result of that and do with the need to on the front end. not actively substitute between the desk of and understand both of them will be tightening. lisa: what you disagree with peter tchir who says this could be the fed jawboning.
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matt: the economic reality is we have very easy financial conditions. inflation is well above target and they expected to remain well above target. wage growth and inflation expectations, the broadening of inflation pressure suggests the risks are to the upside. in that environment i think it would be surprising for a central bank to jawbone their way towards tightening monetary policy. i they for the actual tightening needs to take place via policy rates and also the balance sheet and i expect the fed will deliver on that. lisa: one research -- one reason your research has been's original as you try to game out the effect of quantitative tightening which has people questioning what the ramifications will be. how difficult was it when you came up with this call of 2.5 to 3.5 rate hikes that that would be the equivalent of what
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quantitative tightening would exact on the markets. matt: it is clearly an uncertain one, one the fed still grapples with. they are still discussing the effects of qe and qt. i would highlight there are of uncertainty around this. i do have a lot of research. we have the fed research from the board and the regional fed, we have done a lot of our own work. it interestingly and thankfully clusters around a range of estimates which suggests, that politics entered $50 billion give or take of qt, which had to equate to one rate increase? the drawdown would be expected at the end of next year. we think of material enters the tightening it has, 2.5 to 3.5 rate hikes. tom: landau and peter hooper have been into you a respect for history. let's go back to 1970 nine where 50 basis points was not under
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debate. it was a major emergency. they moved rates from 10.5% to 15.5% to break inflation. that is not happening right now. what is the price to the greenspan credibility earned over decades if we jump 50 bps now. what we lose? matt: if you go back to that episode and later we had a change in the monetary regime, looking at supply instead of focusing on interest rates. there was a need to shock the system. here we do think 50 basis points move is possible at some point. at this point it does not seem like the most likely case for march for two reasons. for fed officials, we are hearing from even more hawkish members not supporting the 50 basis point height at this point. you also hear chair powell talk about policy at this point in
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his testimony last week. he basically said we want to move from extremely accommodative to less accommodative and officials want to do it in a way that does not disrupt the labor market. i do not think you have seen a shift in communications or thinking from the fed, which is just the need to actively tighten monetary policy. possibly the fed may change at some point and that would change if we get clear evidence inflation is not coming back this year, clear evidence the labor market continues to tighten, and perhaps inflation expectations, that they were to continue to rise, could be a part of that. tom: i was going back and forth with mohamed el-erian and we were talking about the extrapolation of all of these markets. nobody in history cares about that. it did not happen until the bloomberg game began. this is a fed that will get on a path. why can't they say we will raise
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50 beeps and then we will sit on it. that is what they used to do? why can't they do it again? matt: i think the idea of raising 50 basis points and sitting on it is a difficult one to communicate. the market reaction of going 50 basis points in march will simply pull forward the entire tightening cycle and may reduce the flexibility and scope of what they can do moving forward. from that perspective, a forward-looking market will not take the fed is saying we will pause and waiting to see how things happen. we will see more significant tightening as a result of that. your point we are in a world where forward guidance is curtailed, and it has eliminated its effectiveness. looking back at the past two tightening cycles, we have one where the end point was well known. the pace of rate hikes was well known. the starting point was well known, and markets were able to
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clearly predict where the fed was going. the most important point from my perspective about this cycle is that it will be less predictable. we are talking about 50 basis point rate hikes. we are thinking of real scope for the fed moving. we are drawing down the balance sheet more aggressively. this is not something we have seen in terms of the pace and the extent of tightening over a relatively short period. jonathan: that final point is the important one. right workable a few weeks. the research has been -- great work the last few weeks. the research has been outstanding. "events argue for the return to a more preemptive approach to setting policy in order to avoid the hard landing down the road having to deal with a persistent inflation problem." lisa: this is what we hearing from andrew sheets. if the fed surprises to the dovish side that could be disruptive to markets, pricing
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in runaway inflation, or the fed moving more quickly and having to curtail growth and later the hard landing. it is a tough time for the fed. tom: is the push -- jonathan: the pushback you get. there'll be someone who just listen to that and said i've seen this movie a couple of times. the more hawkish the fed gets the less hawkish the fed is able to be because financial conditions tighten too much. tom: i agree the exhaustion is conditions tightening is a key thing that is underestimated. jonathan: coming up, monica dicenso, specialist at j.p. morgan. looking forward to that conversation in about 20 binance. futures up on the s&p. from new york, this is bloomberg. laura: president biden will
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defend his record as he approaches the one-year anniversary of taking office. he holds a news conference at the white house and he is ending the first year with multiple setbacks and falling approval ratings. those ratings are tied to the highest inflation in almost 40 years. white house is set to release 400 million nonsurgical n95 masks from the strategic national stockpile. americans will be able to pick them up from tens of thousands of sites beginning later next week. the cdc upgraded its guidance unmask last week, suggesting americans may choose to wear n95 masks. the biggest challenges for american businesses and expatriates in hong kong is travel restrictions. that is according to a survey by the american chamber of commerce in hong kong. it found 44% of those responding said they are likely to leave. procter & gamble has raised its sales outlook for its current fiscal year will stop growth
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likes help offset round of higher cost. among procter & gamble's main lines of business, organic sales growth of 8%. u.s. biotech billionaire plans to build the biggest coronavirus vaccine plant in africa. the factory in cape town, south africa is expected to produce a billion vaccine doses a year by 2025. that could help the least vaccinated continent tackle the pandemic. 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 laura wright. this is bloomberg. ♪
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>> i think the model of philanthropy over many decades will continue to exist, but the
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exciting thing about this moment is there are new models. what jeff is doing as well as mckinsey -- as well as mckinsey scott, all of these are part of the landscape. we should celebrate. no country in the world has the diversity in ways of giving as we do in the united states. tom: the longhorn from austin, darren walker with the ford foundation by way of the rockefeller foundation on philanthropy. part of the conversation with david rubenstein tonight at 9:00 p.m. david rubenstein joins us right now. darren walker, really interesting character on changing philanthropy. what you learn from him on the new philanthropy? david: darren walker is someone who has as much impact on the philanthropic world is people who are worth billions of dollars because he has
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transformed a lot of philanthropy and what he is done at the ford foundation and also by influencing a lot of other well-known philanthropist. tom: what is important is you dude these peer-to-peer conversations -- you do these peer-to-peer conversations they never dovetail with the news as nicely as they do today. darren walker was at ubs. we see ubs today move exxon out of their climate funds. the ford foundation and others, many were directly related to, are having the same discussions. what did you learn from darren walker about how to manage esg in the new philanthropy? david: darren walker, when he became head of the ford foundation, he said i will focus the ford foundation on one thing come inequality in our society. he got rid of a lot of the things the ford foundation did, but he also influenced other things like esg and other areas of inequality. he has a transformative figure.
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he came from poverty and was raised by single mother in texas, went to public schools, came to new york to be a lawyer and a banker. he decided life would be more important if he would spend time giving back to society. he rose up to be at the rockefeller foundation, now the ford foundation. he is a charismatic figure who influences everybody he comes in touch with because he is so passionate about the things he believes in. i would not be surprised if someone would say he had an impact on the ubs decision because he has an impact on so many things in the philanthropic world. lisa: i see a connective link between darren walker and your prior gassed melanie hobson in coming from poverty and coming to a place of respect, power, and monetary largess. i'm curious whether their perspective on the modern american dream has changed in our new moment, whether it is
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more difficult for people from that background to get to the place where they find themselves today? david: an interesting question. generally people would say if you have darren walker on your show and melanie hobson, it shows how people are rising up from minority backgrounds and poverty. they would say that the situation is probably worse than it has been before because the level of income inequality has gotten much worse as result of covid the number of people below the poverty line is increasing. although you can see melanie hobson and darren walker in great examples of people rising up from modest circumstances, the truth is they would say that the problem is worse than it has been in many years because of growing income inequality in the united states and the chances of work melanie hobson and darren walkers are reduced. lisa: an unfortunate take and what i do here a lot. dovetailing this into the corporate picture, i'm wondering whether there is a similar type
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of worsening and the outlook of smaller companies, particularly in the face of some of the inflationary pressures and supply chain disruptions, the labor shortages. we have heard how bigger companies have been more flexible and smaller ones are struggling more. what has been your on the ground experience? we have become -- david: we have become a tale of two cities. the large companies, we are doing reasonably well and our employees are doing reasonably well. companies that have blue-collar workers that have uneducated workers who do not have high school degrees or college degrees, companies who have a lot of people that are not well-paid, well educated, they are falling behind. many of those people are being laid off because of covid another concerns that some of those employers have. the better-known companies in the united states are prospering reasonably well. nothing is perfect but they are doing reasonably well.
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i'm worried about people working at food trucks come at walmart, at drugstores, things like that. many of those people are laid off quickly and do not have a lot of all back on. if you watch television and you watch business news you will see a lot of wealthy people talking about how good the economy is and how may billions of dollars heard people are making. if you talk below that line, i think we have real challenges. tom: i must ask, your observation of a new phrase, the new defensive's, the big texan their massive balance sheet. we saw that yesterday with the microsoft all in transaction. tell us the power of the cash these behemoths have. david: we have never seen anything like this. we have never had companies that had cash forwards of $100 billion or more. microsoft has about $150 billion
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of cash, so they are using for this transaction maybe half of that. google has enormous amounts of cash. so does facebook. apple has an enormous mentor cash. we have never seen anything like that in corporate america. companies are under pressure to do something with it. give it back to the shareholders or make acquisitions. i think you will see much more of this cash used because regulators and members of congress are saying what you need that cash for? maybe you are charging too much and maybe you are too strong? tom: is a silicon valley conceit? the conceit of the generation behind you? david: there a lot of people who work in silicon valley and feel that they are masters of the universe to use a phrase we all know. if you have $150 billion of cash in the bank you think you can do anything. humility is not the greatest
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virtue of some people in some parts of silicon valley. tom: david rubenstein, master of the universe and a member of carlisle. his interview with darren walker, look for that tonight. lisa, i think it is a huge deal. i do not know with the social outcome is, but the norm is this of the cash on this profit making, i love the phrase new defensive's. the caches draw dropping. lisa: so is there market scope. we talk about this all the time. washington, d.c. is increasingly talking about when is it too big and what they could do and what they should do in their more talks today, although people are like, yeah, you will not do anything. tom: my answer is due something postop do something creative. i do not know what would be. i did not have the numbers in
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front of me mama but i think it adds up to four gazillion. libby cantrill at 12:00 today. the president of the 4:00 hour. stay with us on bloomberg -- on radio and television. this is bloomberg. ♪
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jonathan: your equity market pushing higher by 22 points on the s&p. good morning to you all.
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the countdown to 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: we begin with the big issue. the battle for talent. >> we are going to see higher wages. >> we are already in the wage price spiral. >> concerns over competitiveness. >> those hot wages will stick around. >> there is a talent war. >> he sought not only jp morgan's numbers. >> the bigger players continue to compete for the best

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