'Bloomberg Surveillance Simulcast' Full Show 11/23/2022

'Bloomberg Surveillance Simulcast' Full Show 11/23/2022

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This has been a really rout. Alan Brown bear market and it's been very orderly so far. The economy's probably going to be flat next year and that incorporates a couple of quarters of recession. We're looking at a recession here in the United States.

Shallow Europe, I think is already in recession and China's flatlining. What matters right now is when we're going to have inflation peaking and coming down steadily. It's pretty clear that goods prices start to normalize, but the market is also hoping that services prices will also normalize. If that's not the case, it's going to be

a big problem. This is Bloomberg Surveillance with Tom Keene, Jonathan Ferro and Lisa Abramowicz. Good morning, everyone. Jonathan Ferro Lisa Abramowicz Tom Keene you are sliding into the Thanksgiving holiday, we are not. The news flow is just extraordinary. And Lisa Rose, Joan fell off today,

again recovering from Saudi Arabia, Argentina and Lisa. There's no other story today from Globe for Global Wall Street. And then in Zurich, it's not the Wednesday before Thanksgiving. Credit Suisse fights for its life. It's the Wednesday before a fraught weekend as Credit Suisse tries to come up with new options, basically reporting that one point six billion dollars of losses with nearly 10 percent of international wealth management clients pulling their cash, 10 percent of that money going away. And this really raises questions about the mainstay of one of the profit makers for the past couple of years.

Let's be clear right from the start and we'll repeat this for our coverage. Marian Altmire will join us here in the B BLOCK here in 10 minutes with her expertise on what's going on in Zurich. This is not a run on the bank. We don't want to be inflammatory like this. This is not people. It's not it's a wonderful life to get in

the holiday mode. But what it is, is asset management. And as you mentioned, foreign investors saying give me my money out of wealth management just to put this in a perspective. The bank is saying that the outflows are more pronounced, that beginning in October amid all of the turmoil about what the plan would be and has actually tapered off. If you look at some of their perpetual

bonds, they actually aren't seeing the same lows that they saw back in October. They said there is a feeling right now that Credit Suisse needs to make some very hard decisions, capital raisings, selling assets, whatever it takes in order to create some confidence of investors that it's not getting. Just 30 minutes ago, Marion announces that they did approve the four billion dollar ask. This is a dilutive effect on equity

shareholders. They go out and look for new. Why did they do that? It's equity. Let's go to the Bloomberg terminal and look at the equity ratios of, say, three given banks. Credit Suisse is down to a paltry 4.5 percent of their pie is equity. Deutsche Bank improving under Mr. Savings is up to six point seven. And Fortress Diamond, this is gospel to

James Diamond at thirty six point nine percent. Shows you how fragile and how far Zurich is on this Wednesday morning. It's fragile in China, too. Apple doesn't know if they're going to get iPhone. Well, this has been a big issue.

How much does China create this real tension, prioritizing economic growth and Covid lockdowns and preventing some sort of rampant spread. And you're seeing this in a factory, the main iPhone factory, four out of five of the latest smartphones and the latest iPhones are manufactured here, protests because they don't feel like they're being told, well, according to their they're protesting, I believe, 200000 people at this, quote unquote, factory. It's like Henry Ford in the 1920s. There's video. To me, that's the big thing, is Beijing has images here of protests in China. They don't like images of protest. They want to tamp down the social unrest

that is clearly percolating up. The images of 200 protesters are more really becoming violent in some cases and really pushing back against some of the managers of this factory, basically saying we are not going to take it anymore because I've got nothing to say. Sonali Basak is going to come on with a brief here to see if Bitcoin can get through Thanksgiving and onto a productive December. What before we do the data check? Can we just say that what we've underplayed here and maybe it's because is not in the Dow Jones Industrial Average desk is up to a single digit decline. You are trombones trailing.

Bring it up. Amy, if you can't. 12 months trailing. Where are we in the equity market before we start the day data check and get into a Wall Street pro as well in basically single digit Dow decline. Standard Poor's 500 is down 14, 15

percent. Twelve months trailing. The Dow was down single digits, 12. Everyone's trailing and NASDAQ comes in at a negative 28 percent as well. That gets us to the data.

I'm going to go to. Oil. Geoffrey Curry scheduled to be with us. We pull back from ninety dollars Brantley to eighty six. Fifty three dollars churning today.

Let's be honest. It's quiet. It's Wednesday into Thanksgiving. I don't have much data to talk about. It's quiet for now. The data perhaps is not necessarily in the markets yet. It is going to trickle in starting at around 7 am. I get some mortgage data, 830 a.m. We get a host of data. The U.S.

is basically consolidating all of the information ahead of the Thanksgiving break. Initial jobless claims, durable goods orders at 945, U.S. Manufacturing and services GM ISE. It is a huge data dump, 10:00 a.m. University of Michigan sentiment for

November and October. New home sales. I am keyed into sentiment. How much has that deteriorated or not? Have we seen a surprising up shift, a kind of support? The rally that we've seen, we saw those PMI is out of Europe coming in better than expected. How much do we see that repeated here in the United States today? This is interesting. You mentioned oil. The Group of Seven nations are aiming to announce some sort of price capital of Russian oil today, perhaps are going to be. Guinness on December 5th.

That's the goal. What does this do in terms of pushing OPEC players to produce more? Will Russia co collaborate with this scheme? They basically said no. People say it's not going to be the case.

It's complicated. It's complicated. Having a blast, trying to provide clarity out on Twitter says, look, this is 60 dollar oil we're arguing about. Maybe it's seventy dollar oil, but it's already priced down because it's Russian oil and they're capping, I guess, above it. So that if there's not a lot of tension here and I didn't understand a word of what they said, you know, I try to look impressive. The big issue here is how do you

penalize Russia, not allow them to profit from the need of the world for crude, for the need of the world of natural gas, while still fulfilling that need at 2 p.m. FOMC meeting minutes from the November meeting. Very curious to see it. Whether there is any fuel to this feeling in markets at the Fed narrowly is about to step down. That will reconsider how significant the

lag effects really are into our guest. And this is timely. John Deere is an arch company. It is in CFA level one. It is studied as an accounting exercise and they account moments ago. And there is a single headline which speaks to the entrenched optimism of John Stole Office. Chief investment strategist at

Oppenheimer Asset Management, John Deere and company expects strong year in 2023. You look like a genius in this Q4 of 2023 with an equity rally. How did corporations adjust to this historic 2022? Well, I think a dumb but you've got to say the word that you all just used. It's complicated and it needs to be essentially for investors. You need to exercise patience, use some of your historical context and consider fundamentals over technicals. If you're going to be able to reap the rewards is what we think always C.D. out of Paris.

Two days ago, with entrenched inflation for 2000, I think 23, maybe 24. Do you expect the nominal GDP reality, whether it's inflation or real GDP, to support revenue of American companies in 2023? I think it's very possible. And it's indicated by what we've seen this year in terms of we've seen revenue growth in all 11 sectors and the most like the latest in Q3 data. And in the quarter, it was expected to be tough. You know, last I looked, earnings were more positive overall. And it was, of course, that it was

energy carried the ball. But you also have other sectors participate, including, as I recall, consumer discretionary actually had decent earnings in there. And you've got when you look at it, it's you know, managements have learned to work through periods of adversity since the great financial crisis, through the pandemic, and likely now through this period, which is really the end of free money and a normalization or a new normal, in essence, where a bond issue is paid for the privilege of borrowing money and bond buyers get something back in terms of yield. A lot of your view heading into 2023 and a lot of people would agree with you, John, is predicated on this idea of some sort of soft landing, shallow recession, basically something that is less bad than what's been priced in.

How much does that cohere with this idea that the Fed is going to keep rates around 5 percent, five and a quarter percent for at least a year? We would have to think that it's very likely that that five and a quarter, five and a half percent gets gets realized and apt. We think the Fed is really determined to try to avoid a recession. I think it's more talking about the potential of a recession than anything else. When when Powell speaks and offers that thought of discipline to highly leveraged players or formerly deleveraging players, let's put it that way under the trading area of the market. So we'd have to say we expect the Fed

will likely, you know, do it 50 to 75 in December and after which we think the increases will be more modest with with it unless it's required by any month where we got an on board levels and inflation in the CPI or in the core. John, Sofas, thank you so much. Congratulations on optimism here through a fourth quarter where equities lift and we see Deere lifting nicely, a 417 handle out up about 8, 9, 10 dollars as well. John Deere with a nice pop here as well. I'm going to go back to the great Phil Caray Pioneer Funds. Boston does at 101 years old.

I used to go up the elevator with Mr. Caray, who was just extraordinary value investor, and he would talk about the bright lights of inflation. Inflation makes it easier for everybody out there because you get revenue growth with inflation. You wake up every morning not like Credit Suisse, you'll wake up every morning. Hey, inflation, it's helping me. It's also the bright lights of exposure for those that don't have the revenue streams that can be maximized in an inflationary environment. It's almost the bright lights of turning

on the overhead and getting a sense of what's actually on the ground. A company like Deere great. A company like a number of these retailers that do have incredible business doing well.

A company like Covid flat on its back because I know I'm just saying some of the online pandemic darlings not doing so well. And there is this question about how many more of those are going to fall out, even as you do see this resilience, as you've pointed out, as John Soltz has rightly pointed out. What's next for Credit Suisse? They have to restore investor confidence for a million dollars. You've made it big. You've got 24 million dollars in wealth

management. What do you do after the news flow? How much do regulators or how much is the Swiss National Bank? No. There is a headline. We'll talk about those marrying here in a moment. Our expert on Credit Suisse for the breach. Some regulatory barriers in Zurich. That's a pennant formation for those that know your technical analysis. Credit Suisse deeply under for Swiss

francs per share. Really important that they announced in the last 45 minutes they will do a four billion or they're asked to do a four billion Swiss franc equity raise. Stay with us. It is an eventful Wednesday before Thanksgiving. Futures up one. Good morning. Keeping you up to date with news from around the world with the first word. I'm Lisa Mateo in Chesapeake, Virginia. A shooter opened fire in a Wal-Mart

Tuesday night. Police say six people were killed. The shooter is also dead, although authorities aren't sure how he died. At least five people were wounded. Chesapeake is Virginia's second largest

city and it's located this Norfolk and Virginia Beach. Bloomberg has learned that the European Union is discussing capping the price of Russian crude oil at between 65 and 70 dollars a barrel. The Group of Seven is also involved in the talks. EU ambassadors are meeting today with the aim of approving the cap mechanism and a proposed price level. There were violent protests at Apple's main iPhone plant in China. Hundreds of workers at the Foxconn

factory battled security personnel after almost a month of tough restrictions intended to curb Covid outbreak, according to a witness. The protest started overnight over unpaid wages and fears of spreading infection. Credit Suisse is warning that it will report a loss of up to one point six billion dollars for the fourth quarter. And losses are expected in both the wealth management division and the investment bank. Credit Suisse is undergoing a sweeping overhaul today. It will ask shareholders to approve a

capital raise of about four billion dollars. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I'm Lisa Matteo. This is Bloomberg. We want to go through that transformation of the next four years with very, very strong capital base and leave the transformation. Also addressed on capital base. It will become profit driven. Definitely from 2024 onwards. The good Mr.

or Kerner in charge of a Swiss bank under siege is Credit Suisse. You know the story. If you're part of global Wall Street, it has been a challenge for years. Maybe signals by the acquisition of Donaldson Lufkin Jenrette years ago. But the fact is, today in crisis, again, as Lisa and I mentioned earlier, folks who want to be clear, there is not a run on the bank. This is not like what's a wonderful life or anything like that. But there has been an exit of assets

from their wealth management that has shocked the financial world this morning, including our Marion Haftar Meyer in Zurich. And we welcome Mary Ann. Thank you so much for taking time out from your reporting. Will more assets exit from wealth management? That is the million dollar question Tom Keene. Listen, everyone's watching that. Everyone's concerned about that. I think the thing we have to think about

for this quarter is that it was a unique scenario. There was a lot of anticipation for how are they going to restructure this bank? How are they going to save the bank from the demise? Everyone is speculating about. So you had this situation early October where you had the stock lean stock situation where a lot of speculation was happening and that sent people into a panic. And so a lot of wealthy clients pulled assets.

And that's the number we're seeing come up to the equity moments ago. Last 45 minutes, we've got the approval for four billion Swiss franc equity raise. But the question to me and you've reported this and everyone else has as well, they have breached entry level or local level regulatory requirements. Is this today where the Swiss government or some authority steps in to assist Credit Suisse forward? No, we're not at that point, at this point that the breaches they've made are at different smaller entity levels, and so from an overall regulatory perspective, they've they've maintained the levels that are supposed to keep regulators comfortable. And on top of that, you know, with the capital raise that was approved today, we are seeing a strong bank. They're also issuing more debt so they don't have trouble financing themselves.

The liquidity ratios that were breached on those specific entities were really related to like the assets that were being pulled out of those different entities. Marian, what is the profile of the new Credit Suisse? Once it has raised, if they do fully approve the four billion dollar capital raise. If they do continue with their plan to cut about 9000 positions and in the face of some departures of senior executives. Yeah, the profile of the bank is it's gonna be interesting to see what we what we end up with in 2024 when they go through the bulk of the restructuring. But we're looking at it a bank that wanted to really become a wealth manager and it's sort of following the same path as UBS did post financial crisis where they're downsizing the investment bank quite significantly. You know, we have the spin off of First Boston revival of that boutique. We have the sale of certain parts of the

business, like the securitized product group to Apollo. And then in wealth, they really want to be set up. Now, the key difference here is that for them, they don't have the US, which which UBS can rely on. They have to focus on Asia and other emerging markets, which can be a little bit more volatile. And in particular, that's what we're seeing with the reaction of all these asset outflows. So hopefully, I mean, that's what they want is they want to be a strong wealth manager and look like a strong private bank with hopefully a couple trillion dollars of assets.

But right now, they're having a hard time reaching the 1 trillion level at this point. Meanwhile, one of the big investors is come in to rescue them as the Saudi National Bank. How much controversy is there around where some of the investments are coming from as they try to raise money? That kind of thing has always had strong investors from coming from the Middle East to Guitar ISE and the Saudis have long held positions in credit say so from a U.S. perspective. They've always been involved from. From a Swiss geopolitical stakes perspective. There have been some concerns raised, but I think Credit Suisse sees it as well.

We have diverse backing. We don't just have Middle East investors and there will be other investors coming in different parts. The business. Mary? Mary, come on. Saudi Arabia beat Argentina in football. Is it? Today was where the Middle East beats the Swiss and Swiss banking. I've got the screen, 12 percent kingdom

of Saudi Arabia. Qatar, when they're not watching football, has a 5 percent position as well. What point does the Middle East take over this venerable Swiss bank? That's that's the question all we'll have to see. I don't think that, you know, from a nationalistic perspective, I doubt the Swiss regulators would be interested in letting a Swiss bank with such Swiss roots be completely controlled by, you know, a foreign foreign entity.

I think for most banks in most national countries would not want their nationals banking champion to be owned by someone else. So they were far away from that fully. But, you know, they they've always relied on Middle Eastern investors. And I think that they will continue to see them as strong investors in their bank. Drama in Zurich, Marion Hall tomorrow. Have a great Thanksgiving.

Thanksgiving, Marion is where the bird is cooked in America and the pilgrims came over. I don't they don't do. I've been over there for Thanksgiving. What, the pilgrims? No, not the pilgrims. I've been in Zurich for Thanksgiving, but I wasn't sure what you were in Boston. Left is not Turkey. I mean, off tomorrow. There's really on top of this story with Steve Aaronson in Frankfort is well, and I'm sorry. Go back to the ratios, folks, and you do

it. Do compare the book value of Credit Suisse now as zero point to two on the Bloomberg screen. It's this feeling like is it a going concern? And we get the conference there from Marion on what Zurich is doing and a four billion dollar dilutive equity raise as well. Okay, great. But what the wealth management clients

do, this becomes a real time, especially given the fact there's lots of. Right. And that's a lot of them are not. The question is, can they get the rest to stay? And can they build a franchise around it? I do think the idea of casting some sunlight on the entire market is a really good one. And it can mean that cuts are companies

that are healthy do better because they do capitalize on inflation. The fact that there just is more cash running around and those that are struggling still even more because there definitely is a weeding out of the haves and the have nots in terms of strength. The urgency here and the beleaguered Swiss bank. We really didn't do a data check. And we've got one statistic today in the Brahma world, which is critical further curve inversion to vanilla spread down to negative 78 basis points.

The two year yield is point seven, eight percent higher than the 10 year yield. I went back and looked on the chart. We're back to autumn of 1981. That's right. Mr. Powell is back. Mr. Volcker's time. Well, this is the first time since 1981 that we have seen the central bank hike rates to the same kind of degree.

They same kind of pace. So this is exactly what we saw in terms of the pace of rate hikes. So it's not that surprising, perhaps, that the curve inversion. Is that what it is? I guess the issue that I have and this goes to a John Stoltz first start of the show on there is this belief that the Fed is not going to torpedo the economy, that there's going to be a soft landing. And that's what's baked into a lot of prices that's was baked into a lot of the optimism that you're hearing about the second half of 2023. That needs to be seen.

But that is right now one of the consensus is heading into 2023. Now we go mainstream, the Thanksgiving obligatory. What's it going to cost? Shery Ahn. I saw on the zygotes yesterday. Restaurants are cheaper than home if

you're at home and you look at the sweet potatoes. I mean, it's. Are you looking at sweet potatoes? Sweet potatoes, potatoes? It's an outrage.

I mean, come on. People loved her. And that's like nothing. No, the stuffing is the real is the real conducts 99 percent. Yeah. That's not it. I've been on radio. That's not the stuffing I cook. What do you got?

It's terror. It's on its own. How to book? Yeah. Bloomberg Surveillance The news flow is so extraordinary today, particularly out of Zurich, Switzerland, with Credit Suisse, that we barely had the lightness and the touch of a magisterial Wednesday before Thanksgiving, Lisa and I were dining together. The families, we decided both of our families are so miserable that we might as well get together an exponentially comp pile in the midst of this dive. Top Chef with us stuffing and see who

does it work. I think Swanson has an order. The spontaneity at dinners is what keeps a man, I think. Well, actually, I saw a flesh city on YouTube giving a rave reviews to Swanson broth. You check it out. I think that might be my homemade experimentation.

We will see. But we're trying to get into Thanksgiving mood and it's tough with the news flow. It's been extraordinary in Zurich. We're looking at China, serious protests and an Apple manufacturer, Foxconn, and also the big dogs that I believe is Sonali Amy scheduled to be with us later. Did we talk to her? Yeah, we talked to Jihye Lee people and she's going to be with us and the 8 o'clock hour for an update. Right now, one of the other stories out there is the ping pong ball known as oil. Jeffrey Curry provides leadership at

Goldman Sachs. And I can only think of the great Adam Sam Minsky at Deutsche Bank years ago. Here's a guy who actually goes into the Excel spreadsheets of figuring out supply and demand. Jeff Curry, what did your Goldman Sachs Excel spreadsheets say about oil price next year based off the mystery of global demand? Well, we're definitely bullish come next spring.

But what happens between now and next spring? That path is highly uncertain. You have China Covid cases surging, so you're getting forced lockdowns that were not planned. Which is impacting demand up to about one point two million barrels per day.

Coincidentally, the same size as the OPEC cut. So know I think that's important development there. First time ever, OPEC ever cut in anticipation of a demand loss.

And then you have the G7 price cap, which just they keep rolling the dial and it gets milder and milder every day. You know, it's, you know, at least enforceable through shipping insurance. And then you also have the cap coming out at sea growing ISE 70, well above the 60 that really put the clamp.

Let's go back to your Chicago microeconomics. What is the elasticity or responsiveness of demand of China wakes up and moves forward and comes out of Covid? How rapidly will that demand pick up when an if? Well, I mean, that's why, you know, we're sticking to our guns of one hundred and fifteen dollar price target for next year, because when they do come out, they're going to put a lot of pressure not only on oil, but the entire commodity complex. And you can think about, you know, 2022 as really being an environment in which the second largest economy in the world, the largest commodity consumer in the world, was hibernating. So I think you're absolutely spot on. It's a game changer. Now, their base case is that, hey, they're making the preparations today to re-open into Q but what did we learn in Hong Kong and Taiwan is that eventually it spirals out of control. The cases get, you know, go out too

quickly and then you get a forced reopening. And I think a lot of fear of that happening right now. One of the great realities is you pull an all nighter at the University of Chicago. McCurry teaching micro in Chicago years ago. You do that had to be IBEX. Lisa Abramowicz is very familiar with the Retro Diner in Chicago.

So the the last from Chicago greets her colleagues. All right. No need to. It's history of relive those moments ahead of Thanksgiving. Jeff, I am wondering, though, when you talk about the supply and demand dynamic and demand picking up with China on the supply side, how much of Russia's oil has actually been taken off the market, given the refineries in India and the exports over to Europe? I mean, it's relatively small and somewhere in that, you know, three to four hundred thousand barrels per day.

You know, our expectations, it grows modestly as the sanctions begin to take place and you have frictions and other issues involved. But, you know, it's nowhere near as large as what people anticipated. But the offset on that is the investment across the space is far less than what people anticipated. Look at drilling in the US. Expectations of U.S. shale have been ratcheting down decline rates in nano CAC to us beginning to set in.

So the supply problem or the underinvestment thesis, what we called the revenge of the old economy is actually much stronger than we thought six months a year ago. And again, it's not just an oil story. It's everything in the commodity space. This is really important, Jeff, because a lot of people think that we've already seen the supply shock.

We've already seen so many barrels taken off the market because of the sanctions on Russia. What you're saying is that's not true, that we have yet to see the true supply constraints that have come from a lack of investment in the shale patch, a lack of investment by oil majors around the world, and now potentially some sort of disruption with Russia if they don't comply with the price caps being imposed by G7 allies. Is that your idea? When will it kick in? The supply constraints that you predict, this is not a, you know, a tactical trading view. I mean, two years ago, in October of 2020, we called for a commodity supercycle and we still stand by that view. And a commodity supercycle is not an upward trend in prices. It's spike after spike after a spike.

And this is going to go on and on until we have adequate investment to be able to grow supply. You need to grow hydrocarbons. And until you have enough green energy to be able to meet global demand. Right now, 81 percent of global energy still comes from hydrocarbons.

You can't go to zero there and expect the other 20 percent to carry you. It's got to be an energy transition and we need that investment. And then to do the green investment, you need the metals, you need to conquer the algae, the nickel, lithium, cobalt, silver. You need all of those minerals to be able to invest in the green cap DAX to be able to solve the the long run decarbonisation problem. So this is not a near-term tactical view.

We just came off the back of one of the spikes that was well underway before before the events in Russia. And we'll probably see another spike in 2023 as China begins to to reopen. But in terms of solving this problem, it requires large scale capital investment and in terms of trillions of dollars and we're not even close back. We haven't even scratched the surface yet, although, by the way of good. A one point I want to say is this cycle is no different than the ones that we saw in the 70s, the 2000s. It's the same kind of commodity supercycle.

And what I actually want to make a point. What preceded the 70s? The Nifty 50 new economy? What preceded the 2000s? It was the dot com boom. What preceded this one thing? Boom. That's what we call the revenge of the old economy. New economy takes all the capital from the old economy started to the investment it needs to grow a supply base, which then shifts you into this super cycle environment. The flip side, what do you say is the revenge of the supply demand dynamic that when you hit one hundred and twenty three, one hundred and twenty five dollars a barrel on WTI demand, destruction really comes into play and we learn that over the past couple of months. How much does that cap where oil prices

could go? Well, it depends on where the dollar is trading. You know, obviously in a really strong dollar environment, you know that the prices that many countries around the world experience were all time highs. While in the U.S. in a real term, they all time high. And somewhere around a hundred and ninety back in 2008. And we reached one hundred and thirty, it wasn't even close. But for Europe, pound sterling, Japanese yen and many of these other currencies around the world may experience all time high prices. So, you know, that answer that question

may end up having to ask where is the dollar or trading? Now, I think the key view here in 2023 is, you know, you've seen a big run up in the dollar as we see growth start to materialize in China and other parts of the world. We would expect the dollar to begin to taper off and then you could open it up more for dollar denominated commodities. But the big event in 2022 was not the fundamental side of the commodities, but it was the dollar. Jeff, I want to jump to the Chinese wall here and I want to go from Jeffrey Curry out to Neil Mehta. You've got is any other firm has a sell side looking at individual companies.

How do you link your world in these constraints that lead to a higher Brent crude barrel over to their world, which is single stock selection like his call, stunning call on Exxon Mobile. You know, when you look at the way the equity has been trading, they've been looking through this. Yeah. No.

Yes. In the commodity price, because they're beginning to see that long term storage. And by the way. Exxon versus Microsoft exemplifies this revenge of the old economy story. You know, Tom, you've been there as long as I have. How many times have you seen Microsoft, the largest company in the world? And how many times have you seen Exxon? The largest company? Right. You go back to 2000.

Microsoft on top. Exxon Mobil, right. You found it. Then you didn't invest in oil and then you had that super cycle. 2010, Exxon on top. Microsoft on the bottom. Jeff, in reverse.

In reverse. I've got eight other questions. Well, we don't have time for Jeffrey Covid. Thank you so much. With Goldman Sachs there with a view on oil. And it's something we've heard, folks. And what I would say, I'm not going to throw the charts up right now because it's a Wednesday before Thanksgiving is really like for people in today.

Right. Everybody else is off. Time is off. Amy's off. Can I just tell you that that was actually a fascinating conversation. And the idea that we know she's you know, I'm sorry, that's not true.

China's really interesting, this question of where that dynamic comes from, what the price caps are actually going to do in Europe. But more importantly, have we actually seen supply constrained by what's happened in Russia? The answer is not yet. And that really is salient. I'm not going to give you buy, hold, sell, but I'm going to tell you, as Mr. Curry said, as Dr. Curry said, it is simple. These oil stocks have not pulled back on the move from 120 down to 90. They look at the charges.

Get them out. I don't have a charger. It's Thanksgiving. I love it. Next one day, I'll pull up the chart. But you're absolutely right. But when you talk to investors, it's the same story.

They all say they're still bullish on commodities. They're still bullish on oil. They're still bullish on this idea that the real economy requires more investment and is going to do well in an inflationary cycle. And it has defied what you've seen yet.

Exxon near all time highs. I mean, this whole question here of how long can they keep rallying in the face of weaker energy prices? Seems like quite a bit. Is this exciting? Morocco. My eyes are failing me there in the 80s. Second minute. Morocco. Croatia. There's a lot of 0 0 games in the World

Cup. I mean, it's like The Simpsons. I mean, I'm sorry. I'm sorry. I'm just celebrating the Saudi Arabian pitch the ball from farther out. That's what I tell Pharaoh. Did you hear it? Lionel Messi is representing Saudi Arabia in some promotional kind of football thing, which is interesting because he just lost to them in the World Cup. So so they depth of knowledge. Just absolute. Sure.

I mean, in Japan, Germany, Japan. What do you think? I think that it's going to happen. I don't have any insight yet. Why don't we go? Thank you. Really? It's a. Keeping you up today with news from around the world with the first word. I'm Lisa Matteo.

For the second time in just a few days, there's been a mass shooting in the US. This time it took place in Chesapeake, Virginia, where a shooter opened fire in a Wal-Mart Tuesday night. Police say six people were killed, at least five others wounded. The gunman is also dead, although police

aren't sure how he died. The disgraced founder of the collapsed crypto exchange, FTSE X, has apologized to staff in a letter. Sam Beckman, freed, outlined what he called a crash in the collateral from 60 billion to 9 billion. So far, bankruptcy proceedings have depicted RTX as a business with unusual lax documentation and financial controls. It's a major blow to Donald Trump. The Supreme Court has cleared the way for a House committee to get six years of the former president's tax returns. It's a resounding triumph for Democrats

after a three year battle. Still, they have only a few weeks left to review the returns before Republicans take control of the House. Shares of Manchester United are higher in the U.S. premarket as its American owners consider selling the English football team. The Glazer family is working on a partial sale of the club or investments, including a stadium and infrastructure redevelopment. Now the news comes after the team announced its parting ways with C.A. Rinaldo after he publicly criticized the

owners manager and many of his own United teammates. Now, though, is playing in the World Cup with Portugal. Global news 24 hours a day on air and on Bloomberg Quicktake, powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I'm Lisa Matteo.

This is Bloomberg. It's a choppy market, it into 23. But we do think on the other side, say second quarter, third quarter of next year, we're going to be buyers of equities, ruinous reset here in the United States will lead the way. But it's a chop in a churn as we go through the central bank tightening endemic in China and recession. Energy related in Europe, as John Stone faced earlier. Joseph Quinlan, he is at Merrill and

Bank of America Private Bank. And it is always good to speak to these people that have seen a few cycles, seen a few moments. Joe Quinlan has some good perspective there. Yesterday, a sleepy Wednesday, if you're just tuning in, guess what? It's not a sleepy Wednesday into Thanksgiving. I'm sorry. We've got protests and Apple manufacturing in China. We'll get to that in a bit.

We've been covering Credit Suisse with stunning withdrawals from their wealth. Management is not a run in the bank, but the stock drifts below for Swiss francs. Apple shares stunning there as well. And also, Jeff Curry here on the conundrum of oil. Now we talk about the great readjust. We do this with data. I'm sorry. Let me do the data. Futures up five.

Dow futures up. Twenty one dollar churning today. It's a Wednesday. German bond market giving me dough live. Only Abramowitz understands what economic data matters today. Lisa is University of Michigan confidence mission.

The initial jobless claims, durable goods orders. Is everything leaking well? No. And we've got them. Probably hibernating ahead of the Thanksgiving break. But we are also getting Kim ISE in the U.S. following the PMI that we got in Europe

to see whether that potentially the manufacturing and service sectors also did better than bad. I think Jerome Powell that they don't cook turkey, they cook eagle shrimp, think it's endangered. I think that that's actually that's a joke from Stan Free Bird from 50 years ago. Well, clearly, I'm on it.

You know, you cooked the wrong bird. You know, there's lots to cook, eagle. But the cook, the turkey, the Thanksgiving laugh for killing the ferals here. He wouldn't put up with it to put up. Get out of it. You give me since I'm going to get out of it by going to Jennifer McKeown. She's just wonderful. She's at a wonderful shop. Capital Economics. Think of them like ex CEOs. Ex CEOs came out of media day one.

Jim and Michael Rock. And it's same with Capital Economics. Day one, they published and everybody took him seriously as they should. Jennifer, you are readjusting in the next year. You bring down the so-called terminal rate.

You're ratcheting down your interest rate. Guess into March of next year. Discussed that. Yes. For the U.K., we've just reduced our forecast. We had a relatively high peak and 5

percent, and that was partly following the mini budget, the fiscal stimulus that we saw coming at that time. We've just revised that peak down to four and a half percent next year. Partly partly because of that fiscal stimulus not coming and in fact, turning to tightening or B, it'll be a debate later on, partly also because we're seeing some signs that perhaps the labor market isn't quite as tight as it was. There are some signs in surveys of wage negotiations of a bit of a letup. So we're not quite as worried about the inflation. Can you take it over globally?

Can you look at a miss guess here of a higher term? My rate will be off the mark next year. Yeah. Well, we thought for a long time that the U.S. terminal rate will be a bit lower than is priced into markets. We have a terminal rate of and full of 4, 7, 5 to 5 and there. And I think in the U.S. we're seeing much clearer evidence of

price pressures easing up and that the U.K. seems to be following suit a little bit in that regard. So the labour market is not as tight as it was. There is signs in some of the PPA elements that the U.S.

consumer price inflation is going to come down further. So I would say we're pretty confident that the peak isn't too far off in the US, despite the fact that official still sounding hawkish. Jennifer, I got to say, I got a I got to kind of bother Tom here because he's raising questions about what we're cooking and that we might cook ego, which is endangered species, and then, you know, catching me off guard. So I will catch you off guard and say at this point is the better than bad news in Europe, very bad news for what the ECB has to do for ECB officials to come out and hike more than people previously expected in the face of perhaps better, stronger economic output. Yeah, I mean, I draw limited enrichment strong from the recent European data. Industrial production has been a bit more resilient. Retail sales to some of that's temporary

factors. There's some statistical quirks in the Irish data that have been driving up eurozone industrial production. Also, I think there's simply a lag before.

Remember, the ECB has not been hiking rates for long. There's going to be a lag before the the effects of the tightening of financial conditions start to come through. Also, the survey is that the PMI ISE we had this morning offered a little bit of relief, a slight uptick, but they're still pointing to falls in U.S. GDP.

So I think we all are still heading into a recession and there's less evidence in the Eurozone have a let up in price pressures. So I think the ECB is going to need to continue hiking. So it is generally a pretty, pretty bad picture from the eurozone perspective. Let's be optimistic for a second. Let's say China reopen.

Supply chains are normalized. How much of a boon does that give to Europe with both potentially lower supply team pressures and higher economic activity? Yeah, that's a good point. I'm not sure it does give a massive boost, although during China's lockdowns, it's made huge efforts to keep to keep ports open, to keep industrial production going. So the implications for global supply

chains haven't been as large as you might expect. Of course, the virus numbers still picking up in China. I think 80 cities now affected D.C. It's looking as bad as the first wave

and the virus. So it seems very unlikely really now that we're going to see the reopening that people were hoping for just just a couple of weeks ago. I Jennifer, just very quickly here, the turmoil is centered on a stunning headline, one of the great headlines of Bloomberg this year. The governor of the Bank of England modeling a two year recession. How does he extricate himself from that? Does he amend that in the next year? Well, yeah, it's a yes if the data starts to look persistently better, but I think on on the UK front too.

Retail sales a little though they rose a little bit in the latest data. They've not reversed the previous falls. And I think there's more there's more to come. So I think probably.

Andrew Bailey is right to expect of a fairly deep recession in the U.K. We're expecting about a 2 percent peak to trough fall, which would be which would be quite weak. But of course, if the data continue to surprise on the outside Dani Burger calibrate, that's and it would be well received optimism we need on a Wednesday. Thank you. Jennifer McEwan's so much at capital Egon Knox. I think we've got to go into the

Thanksgiving vamp. I'm looking over at our friends at Fox and they're doing Thanksgiving cocktails. I'm jealous. We can't top that.

And this is about Thanksgiving CAC. Let's talk about the inflation that's out there. And I'll be honest, I don't think this is funny because it speaks to what's in a grocery store. Is it absolutely stunning? And it speaks to this idea of challenge, of difficulty, of souring sentiment, of what we might see at 10 a.m.

today? It doesn't feel good for you're paying. Sixty nine percent more for stuffing mix, especially when I cook it. This goes on after Thanksgiving, not because of food, cause as we heard from CONOR Hake yesterday, but because of petroleum costs, ology.

Can you imagine, Jeff CAC you what that's going to do, the grocery store clerk. I'm curious what that means to her. For a first rate of growth, given the concern that he doesn't see this necessarily crimping demand if you do have a weaker dollar. I do think, though, on a more positive note, I can't believe I'm the one doing this. People are getting together, which is actually awesome. And so even with oil prices. Come on, it's nice. I mean, I'm not.

But I think it's really nice that people are prioritizing. You know, I have two thoughts. And can I get shack seamless? Can we get, you know, get you it? Oh, yes. I think, you know, Kim, Thanksgiving, stay where this Troy guy asked. He knows how to cook the bird. This is Bloomberg.

Good morning. This has been a really well, Alan Brown bear market and it's been very orderly so far. The economy is probably going to be flat next year and that incorporates a couple of quarters of recession. We're looking at a recession here in the United States. Shallow Europe, I think, is already in recession. China's flatlining. What matters right now is when we're

going to have inflation peaking and coming down steadily. It's pretty clear that goods prices are starting to normalize, but the market is also hoping that services prices will also normalize. If that's not the case, it's going to be a big problem. This is Bloomberg Surveillance with Tom Keene, Jonathan Ferro and Lisa Abramowicz. Good morning, everyone. Bloomberg Surveillance. The Wednesday before Thanksgiving when the nation travels. We welcome all of you coast to coast on

radio and television. Jonathan Ferro off for the holiday. What does that does he celebrate Thanksgiving? We could ask him when he gets back. He gets back and he goes on Sunday. I don't know. You know, Morocco play Correia. I wasn't found. There's all this laughter except it's not a funny day. It's a really serious new slow day.

And let us begin not with the protests in China and DAX scheduled to join us, not with big dog Sonali Basak with an update, but we're to get right to it. This morning, futures are five and Credit Suisse doesn't matter. In Zurich, they are in crisis. They have reported that they are seeing withdrawals from their international wealth management unit, which was the stalwart was the profit maker, 10 percent of the assets out going out in the past few months. How much is this a precursor to a huge

risk shift that we've seen them kind of telegraph? They could actually regain investor confidence down 24 percent from the October glow in the breeze through four Swiss francs per share. That is a stunning comment. And then following on just before we went to air, reported by Miriam after Myer in the Swiss press, they have approval to go out and find four billion dollars to dilute the present shareholders even further. This feels like it's been a slow burn until it wasn't slow anymore. It feels like it has. Exactly. And it feels like there's been constant struggles, constant mishaps, constant, you know, pain in the face of some of the cannibalization of their business from American banks.

And all of a sudden now it's, you know, they make it or break it kind of kind of plans. They've got to make their investors feel good about it. Thanks for listening. Peter in Connecticut agrees with Bromo saying, yes, it was a slow burn. Thank you for e-mailing him. Peter, good to see that this morning. I mean, they got to do something. But the next question is, what do you do

if at the margin, if you had 24 large I mean, Ferro, I mean, you know, pheromone, if you had federal money in Credit Suisse, what would you do with the barge in today? What would be the decision tree given 14 other opportunities in wealth management? Oh, yeah. John just called in. He's saying that that's you and he doesn't have any stake whatsoever in Credit Suisse. Just want to clarify that. There is this point, though, right now of what do investors want to see? Who is left? Right.

Saudi Arabian Wealth Management Fund. I want to raise something else. Tom, please. We've been talking all morning about how much more expensive Thanksgiving dinner is. Huge controversy. They the Farm Bureau putting out that the price of Thanksgiving dinner is gonna be 20 percent more.

The Bite administration's U.S. Department of Agriculture saying it's only gonna be 1 percent more and that that's sensationalist headlines. So just want to put that out there, sort of. There are no Democrats that whole paycheck.

That's what I would say. You've got to be kidding me. I'm with the Farm Bureau. I'm going through the store. At basic stuff, you know? I only shop like once every three months. But basic stuff or something esoteric some is gluten free baloney. You've got to be kidding me.

It's all of the moon. It's zero. But how much does this really highlight the tenuous moment that we're in, where on one hand you can pick out you could cherry pick where inflation is absolutely skyrocketing. In other places, you can find instances in which it's not depending on where you shop and people are migrating to those places. Well, to see, what else do you see this morning, the data check here and we got to do a brief here. Futures up for Dow, futures up 18. I don't have much going on on a

Wednesday except seriously credit squeeze sells for Swiss franc per share. Lisa, what I'm watching today is a whole host of data is the data dump before Thanksgiving, consolidating three days into one 830 a.m. We get initial jobless claims, durable goods orders and 945 S&P Global U.S.

Manufacturing and Services PMI ISE. That follows on what we got over in Europe. And then at 10:00 a.m. at the University of Michigan sentiment for November, as well as some new home sales for October. I'm very curious about consumer sentiment in light of the inflation that we're seeing, in light of some of the easing pressures in some areas while still seeing rents continuing to go up. Curious about how that plays out today. Group of Seven nations are aiming to announce a price cap level for Russian oil.

I don't really understand how exactly is going to be OMXS only have you? I'm just a bit wary understating it somewhere between 60 and 70 dollars. Russia says it won't comply. The rest of the world says, yes, you will. We'll find out more.

And it's supposed to be enforced on December 5th. We shall see. 2:00 p.m. FOMC meeting minutes from the November 2nd meeting.

This to me will be. The big event of the day. How much is there a fissure among some of the consensus on the FOMC, the Federal Open Market Committee? How much do people start to say, wait a second? We could potentially cause more damage than help the economy by continuing to raise rates for too far? Let's dive into it right now. And what we do is you don't kill two birds with one stone. We kill two. Turkey's with one stone. Give me a Thanksgiving angle.

We do that with Troy VIX, chief market strategist, FSA investments with a ton of experience of global Wall Street and New York, Wall Street. Troy, before we get to your 60 40 comments, I want to talk to you about the state of hedge funds given the stunning year we've had. How is 80? Twenty two and 20 doing? How are they doing this year? Yes. So it depends on the strategy, Tom. I mean, it's actually been a very good year for multi strategy solutions, whether they're daily 40 act or whether they're the classic kewpie structures. There's been big dispersion across Mark.

Yeah. So take a look at rates versus currency or you look at trade opportunities like shorting mortgages versus treasuries. So that's been a very attractive place to be. Systematic trend followers have also had a very strong year. There's been huge trends, as you know, whether it's the dollar or commodities or rates moving higher IBEX. And the strategies that struggle the

most, of course, have been the growth oriented, long, short equity strategies that, you know, got a little too over their skis in terms of growth and global growth and perhaps got a little too involved in privates and elevated valuations. So, you know, in general, we think, you know, liquid molto strategy solutions continue to make sense. You know, if you're going for income, you can look at things like FTSE, which we recently listed, which has income plus appreciation potential that trades at a discount to NAV. So lots to do in the hedge fund space. Lots. The only alternative space when you look at 60 40 in the heart of your note, we've had a lot of different conversations of bond price up, yield down is the big shot next year. That's 60 40 comes back with a vengeance.

Yes. Still coming back with a vengeance to be a very strong term. I think one of our major themes, you know, our major themes this year has been protect capital.

Don't be a hero. Be in the northwest quarter in the efficient frontier. Right. Accept lower risk and either get a total return from income or through multiple strategy solutions as we move through this cycle.

The next theme or the next several years will be, you know, cash flow is king in that you don't need price appreciation to make a reasonable return. As long as you don't have a horrific recession where default rates skyrocket, your loss adjusted yield on cash flow should be pretty attractive. So that doesn't mean it's time to dramatically ramp up risk or rotate back aggressively in the 60 40. What it means is if you're going to accept risk in your portfolio and be in that northeast quadrant, make sure you're doing it in strategies that have an ample income and that can provide a buffer and also give you positive convexity if next year turns out better than we think it will. So where does bitcoin fit in considering that you're bullish on the asset class? Not so long ago were so cruel. Yeah. So again, we sat and talked about this

many times. Right? Bitcoin is the most sacred glass on the planet. It goes through media work or markets like it did in 2021. Eventually, as demand exhausts itself, supplies inelastic the price. Right. So whether bitcoins at a million dollars

or a dollar 900 come out a day, and that's the reason you have these huge cycles. So there's really two approaches to owning crypto. And when we talk about crypto, you bitcoin specifically either have a tiny allocation, your overall asset mix ride the higher highs and higher lows or trade the cycle.

But clearly, as the Fed continues to tighten monetary policy, any direction long asset is going to have a much more challenging environment than it did in 2021. Hold on a second, Troy, because what you're saying right now challenges the sort of existential angst that you hear across the board of people saying Bitcoin's done is all a Ponzi scheme. Forget about it. And we've heard that for the likes, even if Neel Kashkari of the Federal Reserve, how much are you pushing back against that, saying this is here to stay? And are you among those tracking or when there could be a good entry point, not necessarily bailing with all the get out? Yeah. Look, so I mean, it's same as it ever was.

Right. Like, Bitcoin has incredible cycles, you know, meteoric gains, whether it's 64 acts or 32 acts or eight acts in the last cycle. And then 70 to 80 percent drawdowns. But it always survives because of the strength of the network. So we certainly think Bitcoin will be around for the long haul, but it's very, very volatile. And, you know, most of what's gone on here recently is just bad actors in space. It really doesn't speak to the negativity or negatively reflect on Bitcoin itself. It more reflects negatively on some of

the actors that were attracted to the asset class, which is incredibly unfortunate. And just cause for the fact that we need more regulation. Without a doubt, Trigg ask. Thank you so much for their fierce. They're on two and 20. I misspoke there and the banner was my fault. Wrong. I made a mistake.

That's my that's my Thanksgiving mistake, folks. 2 percent and 20 percent payout on hedge funds and also, of course, on his investment view forward with efforts and investments as well. Ferro never would have done that. You were ruthless in your Bitcoin questions. I ask that. I asked him about Bitcoin. Not really.

In his view as well. Well, his view isn't ruthless. It's fascinating. And it really highlights that there are people that come in and buy bitcoin. And that's what we're seeing. People are not necessarily bailing. They're not liquidating everything. It's not going to zero across the board regardless of RTX, which is interesting.

It's why we haven't seen more contagion. This is the broader market story. Why have we not seen bigger fallout from the fact that those a her voice? It's like at the Thanksgiving table when the brand, Gwen Abramowitz and Keith from here together is your voice changes to what when you're lecturing me on how I feel about this stuff. I know that you think that it's all ridiculous, but there a lot of people who don't. Which is the reason I'm not hearing people really cogent. And as you say, he stated the case for being opportunistic, given 20000 to 16000. And there is a stark difference in view between those who are going to be opportunistic and those who are saying it's the end of an era and end of an industry that grow out of extrao

2022-11-28 07:03

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