Oil Shock | Bloomberg Surveillance 12/07/2023
>> THERE IS ROOM FOR INFLATION TO COME DOWN WITHOUT GROWTH TO SLOW. >> INFLATION HAS BOUNCED AROUND BUT IT IS ON A GLIDE PATH DOWN. >> FOR THE MOMENT, THIS IS PERFECT. >> IF THE FED DOESN'T START -- CUTTING WE WILL HAVE A HARD LANDING. >> WE WILL SEE WHAT THE SECOND HALF BRINGS.
>> "BLOOMBERG SURVEILLANCE THIS IS" -- THIS IS "BLOOMBERG SURVEILLANCE" WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOWICZ. JONATHAN: GOOD MORNING. I AM JONATHAN FERRO. YOUR EQUITY MARKET ON THE S&P ABOUT UNCHANGED. DOLLAR-YEN, A BREAK OF 145, BIG MOVES. TOM: THIS IS MACRO MACRO, ONE BIG SO WHAT. THERE OVERCOME BY EVENTS WE SEE TODAY, CLAIMS WE SEE TOMORROW, JOBS, THE JAPANESE FINANCIAL WORLD, THE ECONOMIC WORLD IS ADJUSTING TO WHAT WE HAVE SEEN THE LAST NUMBER OF DAYS.
JONATHAN: ECB, BECAUSE OUT THERE, 150 BASIS POINTS OF GUTS. -- OF CUTS. YOU HAVE THE BOJ, SEEMINGLY OVERNIGHT LAYING THE GROUNDWORK TO HIKE INTEREST RATES. LISA: THE DEPUTY GOVERNOR SAYING IF YOU ABANDON NEGATIVE RATE POLICIES, THAT COULD BE GOOD FOR CONSUMERS.
AND THEN FOR THE KICKER, YOU HAD THE GOVERNOR SAYING IT IS BECOMING EVEN MORE CHALLENGING HEADING INTO NEXT YEAR TO CONTINUE WITH NEGATIVE RATES. THE RESPONSE IS A PLUNGE IN THE DOLLAR VERSUS THE YEN AND INCREASE IN YIELDS IN JAPAN. THIS IS SUPPOSED TO BE THE ARMAGEDDON MOMENT FOR U.S. RATES. YIELDS WERE SUPPOSED TO GO TO THE MOON WHEN THIS HAPPENED. NOT THAT BIG. JONATHAN: WE ARE IN A VERY DIFFERENT SPOT
IN DECEMBER THEN MAYBE WHERE WE WERE A MONTH AGO. TOM: THE FED MEETING, IT IS GOING TO BE FASCINATING. USUALLY THE DECEMBER MEETING, PEOPLE ARE PACKED UP, POWELL IS DOING HIS SHOPPING, YELLEN WAS WAY OUT FRONT. YOU GO TO THE NEXT MEETING AND THERE IN THE OPENING TALKING ABOUT THE CERTITUDE THAT WE ARE NOT GOING TO SEE RATE MOVES UNTIL THE SECOND HALF OF THE YEAR. SAYS WHO? I DO NOT HAVE A CLUE WHAT THE PARLOR GAME IS. JONATHAN: CRUDE IN THE 60'S, THE 10 YEAR AT 4.1%. WHAT DOES IT MEAN?
LISA: BAD NEWS IS BAD NEWS. THIS IS WHAT PEOPLE HAVE BEEN TALKING ABOUT. THERE MIGHT BE SOMETHING BEHIND THE OIL NARRATIVE. TOM: JONATHAN FERRO ON TWITTER WITH A NICE SET UP OF THE TWO NARRATIVES OUT THERE ABOUT SLOW DOWN OR NOT.
I DO NOT THINK WE ARE ANY DIFFERENT THIS MORNING. I DON'T THINK WE WILL BE ANY DIFFERENT THE FIRST SHOW OF THE YEAR. FEBRUARY 1, MARCH 1, IT IS GOING TO BE THE SAME THING. WE DON'T KNOW WHAT THE NARRATIVE IS. LISA: -- JONATHAN: I THINK I KNOW WITH THE BEARS WOULD SAY, I THINK I KNOW WITH PEOPLE'S WOULD SAY. THE BULLS WOULD BE -- THE BEARS WOULD BE -- LOWER ENERGY PRICES IS GOING TO BE ACCELERATE GROWTH. LISA: ONCE WE GET THE LANDING. IF YOU NEVER GET TO THE LANDING, THAT IS THE PROBLEM.
WE NEED A RECESSION, IT JUST NEEDS TO BE MILD AND THEN WE CAN GET PAST IT. CAN YOU PRICE IN A RECESSION BEFORE WE EVEN GET IT? THAT IS THE EXTENT MOMENT FOR THESE BALLS. JONATHAN: S&P 500, TOTALLY UNCHANGED. FUTURES GOING NOWHERE. LISA IS GOING TO RUN YOU THROUGH SOME OF THE DATA YOU CAN EXPECT ON PAYROLLS. THE BOND MARKET, YIELDS HIGHER. 4.14 ON THE 10 YEAR. CRUDE, $70 10 -- $70.10. LISA: U.S.
PRODUCTION, WE CAN TALK ABOUT THAT AND HOW IT IS OFFSETTING CUTS. TODAY IS THE DRUMBEAT BEFORE THE JOBS REPORT. WE WILL GET INITIAL JOBLESS CLAIMS AT 8:30 A.M. CONTINUOUS JOBLESS CLAIMS HAVE CONTINUED TO CLIMB. CAN WE PAY ATTENTION TO THIS AND GET A SENSE THAT SOFTENING IS ACCELERATING. WE ARE ALSO FOCUSED ON CONSUMER FINANCIAL HEALTH.
LAST TIME WE GOT A READ ON THIS, IT SURGED TO A RECORD. WE ALSO GET CONSUMER CREDIT AT 3:00 A.M. THIS WILL -- THREE 4 P.M. -- 3:00 P.M. WE GET A LOT OF EARNINGS TODAY, INCLUDING LULULEMON, RESTORATION HARDWARE, BROADCOM. SOME OF THESE I HAVE CLOSER AFFINITIES TO THAN OTHERS. JONATHAN: LULU?
LISA: I WOULD SAY BOTH OF THEM. LET'S MOVE ON. JONATHAN: THEN JOINS US NOW -- BEN JOINS US NOW. WE STARTED TO HEAR THIS IN THE PAST WEEK, THE FED PUT US BACK. YOU TOLD US THAT AND LISA AND I STARTED LAUGHING. HAS THAT BEEN NORMALIZED, EVERYONE IS ON THE SAME PAGE AS YOU? BEN: A LITTLE BIT.
IT HAS ALL ARRIVED A LITTLE BIT EARLY. SANTA IS HERE IN NOVEMBER BUSTING THE DOORS DOWN. IT HAS PULLED RETURNS FORWARD A BIT. PUT THAT ASIDE, THAT IS THE DETAIL ON THE TIMING.
I THINK THE DIRECTION IS ABSOLUTELY RIGHT AND WE HAVE ALL BEEN GIVEN A PRELUDE TO WHAT IS COMING IN 2024 WHICH IS INTEREST RATE CUTS AND THIS BIG ROTATION FROM EVERYTHING THAT WORKED IN 2023 TO EVERYTHING THAT DID NOT WORK IN 2023 AND IT IS GOING TO GET A REVISIT IN 2024 WHICH IS RATED SENSITIVE, WHICH IS REAL ESTATE, ALL OF THESE CHEAPER ASSETS WHICH YOU STRUGGLE MONEY ON AND BECOME MORE BEARISH ON AND THEY FLY -- SPRINKLE MONEY ON AND BECOME MORE BEARISH ON AND THEY FLY. TOM: ALMOST AT THE ANNIVERSARY OF ONE OF THE GREAT GOOD CALLS WHICH IS BEEN LABELER SAYING -- BEN LADLER SAYING GET COURAGE. WHAT I FIND FASCINATING ARE THE NARRATIVES OUT THERE, THE CACOPHONY OF OPINIONS AND THE IDEA THAT WE REDO 2023. WE JUST KEEP GOING WITH THE GOOD NEWS BULL MARKET. BEN: I THINK THAT IS RIGHT BUT DIFFERENT STARKS -- DIFFERENT STOCKS ARE GOING TO PERFORM.
WE HAVE RATE CUTS AND ACCELERATING EARNINGS GROWTH. A DIFFERENT SET OF STOCKS I WOULD YOU DO WELL. THE LEADERSHIP WILL BE DIFFERENT. BIG TECH AND HUGGING THOSE DEFENSIVE TEDDY BEARS. NEXT YEAR WE ARE GOING TO BE REACHING OUT MORE. IT IS GOING TO BE RATE SENSITIVE, IT IS GOING TO BE A DIFFERENT GROUP OF STOCKS. IT IS GOING TO BE EUROPE, IT IS
GOING TO BE OVERSEAS, IT IS GOING TO BE SMALL CAPS. THE HEADLINES MAY NOT LOOK AS GREEN BUT WHERE YOU GET THAT FROM WILL BE DIFFERENT. TOM: ARE YOU GOING TO SELL TEDDY BEARS TO GO INTO OTHER NONPERFORMING AREAS OR HOLD ON TIGHT TO THE VERMONT TEDDY BEARS AS YOU GO INTO SMALL CAPS? BEN: YOU HOLD ON TO MOST OF THAT FOR NOW. THE STORY IS NEXT YEAR AS WE GET CONFIDENT MOVING THROUGH THE U.S. SLOW DOWN, AS WE GET THE CATALYST RATE CUTS, YOU EASE OFF ON THE TEDDY BEARS AND GET COURAGE AND BY THE OTHER ASSETS. I THINK THE U.S. IN TECH IS GOING TO DO FINE,
YOU WILL SEE GOOD EARNINGS GROWTH. A LITTLE BIT OF MONEY GOES A LONG WAY. TECH IS 10 TIMES THE SIZE OF REAL ESTATE AND THE U.S.
IS FIVE TIMES THE SIZE OF EUROPE. WE DON'T NEED REALLOCATION FOR THESE ASSETS TO FLY. LISA: -- FALL INTO THE LOWEST IT HAS IN FIVE MONTHS? BEN: I THINK IT IS A BIG TELL. LOWER OIL PRICES, WEAKER OUT OF CHINA. BMI IN -- PMI IN RECESSION. THIS IS TELLING YOU UNDERNEATH
THE TECH COATED SURFACE, THINGS ARE NOT GREAT. RATE CUTS ARE GOOD FOR STOCKS. THIS IS A LONG-DURATION STOCK MARKET. IT IS MUCH MORE SENSITIVE TO INFLATION AND INTEREST RATES THAN IT IS TO THE REAL ECONOMY.
THAT IS WHY WE HAVE DOUBLE-DIGIT EARNINGS GROWTH NEXT YEAR DESPITE AN ACCELERATION IN THE U.S. ECONOMY. LISA: WE ARE SEEING GERMAN STOCKS RISE TO THE HIGHEST LEVEL EVER LET EVEN BY AUTO MANUFACTURERS.
MERCEDES VALUATION SURPASSED LVMH. EVEN AS OUTPUT IN EUROPE IS FALLING, INCLUDING IN GERMANY AND WE ARE LIKELY IN A RECESSION. HOW DO YOU GET OPTIMISTIC ABOUT BUYING SHARES IN THESE VALUATIONS IN THE FACE OF DECLINING OUTPUT AND THE POTENTIAL OF BAD NEWS TO BE BAD NEWS. SECTORS HEADED TO RECESSION ARE ALREADY IN RECESSION. BEN: GERMANY HAS BEEN IN RECESSION AT LEAST SIX MONTHS.
EUROPEAN JOB VALUATIONS ARE 30% TO 40% LOWER THAN IN THE U.S. I THINK THAT IS THE STORY HERE. THE ECB WILL PROBABLY GET THE COURAGE OF ITS CONVICTIONS OF BEING THE FIRST MAJOR CENTRAL-BANK TO CUT INTEREST RATES. TOM: THE COMMERCIAL BANKS, ARE THEY ATTRACTIVE HERE? BEN: I THINK SO.
THANKS HAVE BEEN SOME OF THE BEST-PERFORMING STOCKS IN EUROPE AND SOME OF THE WORST IN THE U.S.. IT DEPENDS ON WHERE YOU LOOK IN THE WORLD. THE LESSON FROM THE U.S. BANKS HAS BEEN -- THE IS A NARRATIVE IS HIGH INTEREST RATES ARE GOOD FOR BANKS. THE OPPOSITE HAPPENED. I THINK BANKS WILL DO VERY WELL IN THE U.S.. JONATHAN: GREAT CALL OVER THE LAST FEW
MONTHS. BEN LAIDLER. LET'S TURN TO CRUDE, $70 RIGHT NOW, BRIEFLY INTO THE $60. I'LL CATCH UP WITH SOPHIA OF SOFI -- HER HEADLINE IS THIS IS A MARKET OF MASSIVE CONTRADICTIONS. LOOK AT CRUDE, DIDN'T STOCKPILES FALL YESTERDAY? LISA: THEY DID. JONATHAN: HOW DOES THIS HAVE TO DO WITH WEAKER GROWTH IN AMERICA? LISA: WHICH IS THE REASON PEOPLE ARE LOOKING TO SUPPLY SAYING THIS IS THE U.S. REACHING RECORD HIGHS AND FORCING THE HANDS OF OPEC+ MEMBERS TO CUT FURTHER TO MAINTAIN THE PRICE THEY ARE OFFSETTING AND THEN SOME.
OTHER PEOPLE SAYING SOME OF THE CUTS TO PRODUCTION IN THE OPEC+ NATIONS WERE VOLUNTARY. THEY ARE NOT GOING TO ACTUALLY DO IT. THAT IS THE OTHER SPECULATION. JONATHAN: I WANT TO PRETEND TO KNOW THAT I KNOW WHAT IS GOING ON. JUST A HIGHLIGHT, SOME MASSIVE CONTRADICTIONS IN THE PAST DAY. TOM: LIKE 1986, THAT IS THE FEAR OF THE SAUDI'S AND TRADITIONAL OPEC. THEY HAVE LIVED THIS BEFORE. I WOULD SUGGEST THE PLUS PART IS REMOVED FROM THAT.
THERE IS INBRED SOBRIETY IN OPEC ABOUT THE OF OIL SLIPS AWAY AT ALL THE SUDDEN YOU ARE $50 A BARREL. LISA: I AM NOT SURE WHERE SOBRIETY IS RIGHT NOW. I DON'T UNDERSTAND OIL PRICES AND PEOPLE SAYING THERE ARE WEIRD THINGS GOING ON MEANS NO ONE KNOWS WHERE THIS IS HEADED, WHETHER THIS IS A BULLISH SIGNAL OR A BEARISH SIGNAL OR A RETURN TO THE FUTURE. JONATHAN: INACTIVE IS BASED ON THE PRICE OF THE MOMENT -- THE NARRATIVE IS BASED ON THE PRICE OF THE MOMENT. TOM: I TOTALLY AGREE. I THOUGHT YOUR TWEET WAS BRILLIANT ABOUT SOMEONE HAS A NARRATIVE ABOUT GLOBAL SLOWDOWN AND SOMEONE HAS A NARRATIVE ABOUT THE BENEFICIAL EFFECTS OF THE INTEREST RATE.
SLOPPY ECONOMICS WITHIN MACRO WHERE THERE ARE OTHER MOVING PARTS. THURSDAY, TODAY, AND FRIDAY, TODAY MATTERS FOR TOMORROW. IT IS ABOUT JOBS. JONATHAN: JOBLESS CLAIMS INTO PAYROLL ON FRIDAY. TWO MONTHS AGO WE WERE TALKING
ABOUT THE POTENTIAL OF TRIPLE DIGIT CRUDE AND WE HAD MULTI-DECADE HIGHS. WE WERE ASKING THE QUESTION, IS THAT A REFLECTION OF AN EXTENSION OF THE CYCLE OR INGREDIENTS TO END IT? WE ARE IN THE 60'S ON CRUDE, YIELDS GOING LOWER. ARE WE REFLECTING THE END OF THE CYCLE OR THE INGREDIENTS TO EXTENDED? LISA: THIS IS WHY IT IS INCREASINGLY GETTING CONFUSING IN THE NARRATIVE. I LOOKING AT EARNINGS SPECIFIC COMPANIES OF CONSUMER SENTIMENT, OF CONSUMER CREDIT. THIS IS NOT MAKING SENSE. TOM: DO YOU KNOW VERMONT TEDDY BEAR? VERMONT TEDDY BEAR WAS A BOOM START A FEW YEARS AGO. THEY WENT PRIVATE IN 2005. LOOK AT THAT, UNDER JONATHAN'S ARTIFICIAL TREE, VERMONT TEDDY BEAR ON SALE TODAY.
>> 800 LEFT COMES AFTER HER, THE MEDIA COMES AFTER HER. >> YOU HAVE REID HOFFMAN FINDING LAWSUITS ACROSS THIS COUNTRY AGAINST DONALD TRUMP. WE DISCOVERED HE IS ONE OF NIKKI HALEY'S LARGEST SUPPORTERS.
>> I HAVE KNOWN HER 12 YEARS, THIS IS A SMART COMPASS WOMAN. YOU SHOULD STOP INSULTING HER. >> I LOVE ALL OF THE ATTENTION. JONATHAN: NIKKI HALEY IN THE FIRING LINE. THE FORMER PRESIDENT STILL THE FAVORITE IN THE GOP RACE. TERRY HAINES WARNING THIS, THIS IS A REAL RACE.
"6/10 OF THE GOP EARLY PRIMARY VOTERS DON'T WANT TO TRUMP. THEY ARE A RESISTIVE ELECTORATE AND IT IS LIKELIER THAN NOT THAT IT SHOWS IN THE PRIMARIES. THE RACE WILL FEEL DIFFERENT." TOM: HUGE STATEMENT AND IT GOES TO THE HEART OF THE PANIC I SEE RIGHT NOW IN NEUTRAL PRESS. JOINING US, TERRY HAINES OF PANGAEA. EVERY TIMELY DISCUSSION. -- A VERY TIMELY DISCUSSION. A REPUBLICAN NATION, A REPUBLICAN PRESIDENCY, A REPUBLICAN SENATE AND NOW A REPUBLICAN HOUSE, MAYBE, MAYBE NOT. ARE WE HEADING TO A REPUBLICAN
SWEEP? TERRY: I THINK WHERE WE ARE HEADING IS WHAT LIKE YOU SEE TODAY. WHETHER THE PRESIDENT IS DEMOCRATIC OR REPUBLICAN, I GIVE -- IN A BIDEN-TRUMP RACE, I WOULD GIVE TRUMP AN EDGE. YOU HAVE A SENATE MORE LIKELY TO BE REPUBLICAN MAJORITY AND A HOUSE MORE LIKELY TO BE MARGINALLY DEMOCRATIC MAJORITY. IT IS ANOTHER VERSION OF THE SAME THING. PEOPLE WILL SPEND THE NEXT YEAR WINDING THEMSELVES UP. THE REALITY IS UNLESS YOU HAVE A SWEEP OF ALL THREE PARTIES PLUS A 60 FOOT MAJORITY IN THE SENATE WHICH NOBODY HAS HAD FOR DECADES, NOT MUCH CHANGES. TOM:
DO YOU SEE A TRUMP-HALEY TICKET? IS SHE RUNNING FOR VICE PRESIDENT? TERRY: NO, I THINK SHE IS RUNNING FOR PRESIDENT AND SHE IS DOING REASONABLY WELL. SIX OUT OF 10 REPUBLICAN VOTERS DON'T WANT HER. EVEN THE TRUMP NUMBERS IN PRIMARY STATES, ONE THIRD OF THOSE PEOPLE ARE SOFT, WILLING TO ENTERTAIN OTHER OPTIONS.
IOWA HAS A HISTORY OF SURPRISING. SHE IS VERY MUCH RUNNING FOR PRESIDENT AND SHE MIGHT WELL GET DENOMINATION. THAT IS THE CASE, POLLS SHOW TODAY SHE WOULD DO BETTER THAN BIDEN WOULD DO. THERE IS A PATH FOR HER AND SHE SEES IT. LISA: CAN YOU DEVELOP MORE WHAT THAT
PATH IS GIVEN TRUMP IS PULLING 60% OF REPUBLICAN VOTERS? IS SHE AT 15%? TERRY: THROW OUT THE NATIONAL NUMBER. AT NO POINT DURING THE PRESIDENT TO RAISE IS A NATIONAL BEAUTY CONTEST NUMBER EVER RELEVANT. IT IS ABOUT GETTING A NOMINATION, ABOUT PRIMARY STATES. IOWA AND NEW HAMPSHIRE, TRUMP
IS THAT 40% TO 45%. YOU HAVE 55% TO 60% THAT DON'T WANT TO TRUMP. ONE THIRD ARE WILLING TO DETAIN ANY ALTERNATIVE TO ENTERTAIN AN ALTERNATIVE -- TO ENTERTAIN AN ALTERNATIVE. QUICK CONSOLIDATION PLUS A TRUMP UNDERPERFORMANCE. A LOT OF PEOPLE DECIDE WHAT I HEARD FROM CHRIS CHRISTIE IS RIGHT. TRUMP IS NOT GOING TO BE ABLE
TO GOVERN. AND MAKE A BREAK. WHAT YOU HAVE IN THE FIRST RACE OR TWO IS A REAL RACE WHERE TRUMP LOOKS LIKE HE IS UNDERPERFORMING AND THE NON-TRUMP FIELD IS COALESCING. THAT IS THE RACE HALEY SEES. THERE IS A MUCH BIGGER CHANCE OF THAT THAN MOST PEOPLE ARE WILLING TO ENTERTAIN BECAUSE THEY ARE BLINDED BY THE NATIONAL NUMBER. LISA: THERE IS THIS QUESTION AROUND THE ABILITY TO GOVERN BEFORE THAT, ESPECIALLY GIVEN KEVIN MCCARTHY IS STEPPING DOWN, THE FORMER HOUSE SPEAKER WHO IS GOING TO LEAVE AT THE END OF THIS YEAR. HOW MUCH MORE LIKELY GIVEN THE THIN MAJORITIES DOES THAT MAKE A GOVERNMENT SHUTDOWN? TERRY: I THINK MARGINALLY. THERE IS A LIKELIHOOD WHAT YOU SEE EITHER IN JANUARY OR FEBRUARY FROM HOUSE REPUBLICANS IS A SHUTDOWN.
A VAST MAJORITY OF THIS IS PERFORMATIVE. THEY ARE WRANGLING OVER WHAT WAS THAT CUTS IN 30% OF THE BUDGET. IT IS NOT AS IF THEY ARE TAKING AN AX TO ANYTHING. WHAT THEY WOULD LIKE IS SOME BACKTRACKING IN SPENDING. YOU HEARD THAT FROM THE
PRESIDENTIAL CANDIDATES. HALEY PROPOSED SOMETHING TO RETURN TO PRE-COVID LEVELS. THEY WANT A NOD IN THAT DIRECTION. TOM: THE MIDDLE OF JULY NEXT YEAR, THE X --THE YANKEES WILL BE PLAYING .700 BASEBALL WITH ERIN JUDGE AND WADA SOTO -- AA RON JUDGE AND JUAN SOTO .
ARE THESE GOING TO BE NORMAL CONVENTIONS? TERRY: IF BIDEN IS THE NOMINEE, IT WOULD BE FAIRLY NORMAL CONVENTIONS. IF TRUMP IS THE NOMINEE IN THE REPUBLICAN PARTY, I PREDICT MASS DEFECTIONS AND EVEN A TEMPORARY SPLIT IN THE PARTY AS PEOPLE WALK OUT. NOT UNLIKE WHAT HAPPENED IN DEMOCRATS IN 1972 WERE A LOT OF THE TRADITIONAL COALITION REFUSED TO SUPPORT MCGOVERN AND SUPPORTED NIXON. I THINK YOU SEE A LOT OF THAT
STUFF. THE OTHER GREAT UNKNOWN IS WHAT HAPPENS WITH THIRD-PARTY RACES, WHETHER IT BE WITH BOB KENNEDY, POSSIBLY WITH JOE MANCHIN. THERE IS A HUGE RESTIVENESS ENTITY ELECTORATE AND YOU COULD SEE A THIRD-PARTY CANDIDACY GAINING QUICKLY. TOM: WHEN DO WE SEE THE MACHINE WE
DO HAVE A THIRD-PARTY CANDIDATE? IS THAT AN -- A JANUARY EVENT? TERRY: I THINK MORE LIKE A MARCH TO APRIL EVENT. THAT IS WHAT THE LABELS PEOPLE HAVE PROMISED. WHAT NO LABELS HAS PROMISED IS ONCE THINGS BEGIN TO TAKE SHAPE AND WE KNOW WHETHER THERE IS A TRUMP VERSUS BIDEN LIKELIHOOD, THEN WE WILL MAKE A DECISION. YOU ARE LOOKING AT SUPER TUESDAY IN MARCH AND AFTER THAT YOU PROBABLY GET A DECISION.
JONATHAN: TERRY HAINES OF PANGAEA POLICY, THANK YOU. WE JUST GOT A NEW OUTLOOK FROM BNP PARIBAS. STILL SEARCHING FOR A LANDING. THE OUTLOOK FOR 2024.
HERE IS THAT QUOTE, "GDP GROWTH IS SET TO DECELERATE IN THE U.S. AND REMAIN STAGNANT IN THE EURO ZONE. THE CHINESE ECONOMY HAS PASSED ITS TROUGH BUT WILL LACK MOMENTUM GOING INTO 2024." NOT EXACTLY CONSTRUCTIVE. LISA:
GREG OVER THERE HAS BEEN ONE OF THE BEARS CONSISTENTLY AND NOW IT IS A QUESTION OF WHERE WE WRITE IT JUST CAME A YEAR LATE? THAT IS INCREASING HERE. WITH JP MORGAN, THE RATIONALE PEOPLE CAN GET BEHIND. WE HAVE NOT REALLY CONNECTED TO NARRATIVE WITH ANY CONSISTENCY TO THE PRICE ACTION. TOM: WE HAVE THE GREAT WALL OF 4, 5, 6 ESTIMATES OF WHERE THE STANDARD 500 IS GOING.
WE NEED THE BLAKEY -- BLINKY WALL WITH DIFFERENT URGES UP THERE. JONATHAN: THE DISTINCTION BETWEEN THE CALL ON THE FRONT END AT THE LONG END. WE BELIEVE HIGHER FOR LONGER WHEN IT COMES TO LONG AND YIELDS, BUT NOT THE SHORT END. I HAVE SEEN A LOT OF THAT KIND OF THING. LISA: GIVEN THE FACT THAT PEOPLE ARE EXPECTING GREAT CUTS BUT THEY DON'T EXPECT THESE NARRATIVES TO GO AWAY. THINK ABOUT THE DEBT U.S.
IS SELLING. REMEMBER WHEN WE USED TO WORRY ABOUT THE BANK OF JAPAN -- I CAME IN TODAY AND I WAS LIKE THIS IS GOING TO BE A BIG MOVE. IT IS A COUPLE OF BASIS POINTS. TOM: THURSDAY, TODAY, AND FRIDAY TOMORROW IS ABOUT THE AMERICAN LABOR MARKET. JONATHAN: THIS IS WHY I THINK IT IS A
BETTER TIME TO DO IT. YOU CAN THINK ABOUT HIKING INTEREST RATES WHEN OTHER PEOPLE ARE THINKING ABOUT CUTS. OCTOBER, DROP THIS KIND OF LANGUAGE, CAN YOU IMAGINE THAT? VERY DIFFERENT.
>> STOCKS ON THE S&P 500 LOOK A LITTLE SOMETHING LIKE THIS, POSITIVE ON THE S&P. GOOD. POSITIVE BY 0.0%. STOCKS GOING THREE DAYS WITHOUT GAINS ON THE S&P 500. THERE HAVE NOT BEEN MAJOR MOVE
SLOWER BUT THREE DAYS WITHOUT GAINS, BABY EQUITIES MEETING GRAVITY A TOUCH OVER THE LAST FEW DAYS. LISA: YEAH YEAH WHAT IS GIVING A BOOST TO BONDS IS NOT THE GREATEST THING FOR EQUITIES. ARE WE REACHING THE POINT WHERE BAD NEWS IS BAD NEWS? JONATHAN: SHALL BE SOME BAD NEWS -- SHOW ME SOME BAD NEWS. PRODUCTIVITY WAS GREAT, PAYROLLS, 180 ON FRIDAY.
ROBUST ON THE HEADLINE, PRICES PAID A LITTLE LOWER. JOB OPENINGS CAME IN LOWER SINCE MARCH 2021. ISN'T THAT WHAT WE WANTED? LISA: IS THERE INDICATION THIS IS TOO CUTE, THIS IDEA WE WOULD GET PERFECT DISINFLATION WITHOUT SLOWING DOWN IN THE ECONOMY? MAYBE THAT IS THE REASON YOU ARE SEEING A PAUSE. A LITTLE SHIFT FROM THE EVERYTHING RALLY. JONATHAN: LET'S HIT THE BOND MARKET UP.
THEY WILL BE A MOMENT WHERE THE YIELD DROPS TOO MUCH AND THEN PEOPLE START TO SAY SLOW DOWN. I DON'T KNOW WHERE THAT IS. 4.1% YESTERDAY SEEMED TO GET PEOPLE'S ATTENTION. WHEN WE ARE AT 5% OR 5% PLUS -- FIVE OR FIVE PLUS, NOW WE ARE DOWN AT FOUR, AT SOME POINT YOU GET THE BEARS SAYING THE BOND MARKET IS SCREAMING END OF CYCLE. LISA: -- ARE PORTED TO SUB FOR PRESENT AS THE LINE IN THE SAND WHERE PEOPLE START TO GET -- AND SAY THIS MEANS SOMETHING AND IT IS NOT POSITIVE. JONATHAN:
THERE WAS A LINE IN THE SAND IN CRUDE, THAT WOKE EVERYBODY UP. HE WAS THE PRICE, WTI, BRENT, WTI IS $70.01. WE ARE POSITIVE. TODAY WAS INTRIGUING. I AM NOT GOING TO OFFER MY OPINION ON WHERE WE ARE, PAUL IS GOING TO DO THAT. YOU SEE CRUDE DROPPING AND TO HEAR THE CROWD COME OUT AND SAY THIS IS ABOUT ECONOMIC SLOWDOWN, WHAT IS GOING ON WITH STOCKPILES IN AMERICA? WHY ARE THEY GETTING DRAWN IF WE ARE TALKING ABOUT A SLOWDOWN? STOCKPILES ARE BEING DRAWN IN THE U.S.. TRY TO MAKE SENSE OF THAT.
TOM: THAT COMICS OF OIL, SUPPLY AND DEMAND AND A ABILITIES ARE SO TIGHT THAT LITTLE BITTY CHANGES REALLY CAN MOVE PRICE. IN BRENT CRUDE, THERE IS 75 MORE. CAN YOU IMAGINE GLOBAL OIL AT $69? DOES IT UPSET THE VARIOUS APPLE CARD'S IN THE MIDDLE EAST? LISA: THIS IS WHY PEOPLE ARE NOT SEEN THIS AS BAD NEWS. THIS FEEDS INTO DISINFLATION BECAUSE WE HAVE RECORD AIR TRAVEL, RECORD AMOUNTS OF TRAVEL FOR THE THANKSGIVING WEEKEND.
WE ARE SEEING A DRAWDOWN ON INVENTORIES. YOU ARE SEEING THESE ACTUALLY SLOWDOWN IN CHINA AND THAT IS SHOWING SIGNS OF REVERSING. IS THIS JUST SUPPLY FROM THE U.S. AND THE FACT THAT THERE ARE MORE EFFICIENT USES OF ENERGY? I DON'T KNOW BUT THIS IS HOW PEOPLE MIGHT READ THIS. JONATHAN: LET'S TALK ABOUT THE MAIN EVENT. TRADERS INCREASING BETS THAT THE BIG JAPAN WILL SCRAP ITS NEGATIVE INTEREST RATE REGIME AND HIKE AS SOON AS THIS MONTH.
THE BOJ GOVERNOR SAYING HANDLING MONETARY POLICY WILL GET TOUGHER NEXT YEAR WHILE THE DEPUTY GOVERNOR PRESENTED A HYPOTHESIS FOR WHAT MIGHT HAPPEN IF THIS DRAWBACK WERE TO END NEGATIVE RATES. DOLLAR-YEN, A MUCH STRONGER JAPANESE YEN THIS MORNING. TOM: YES, IT IS THERE BUT WHAT IS REALLY THERE IS OBE. THEY ARE BECOMING OVERCOME BY EVENTS AND OVERCOME BY EVENTS IS WHAT IS GOING ON IN EUROPE, GOING ON IN AMERICA. IS IT A DOMESTIC STORY? I WILL LET ROBERT FELDMAN HELP YOU WITH THAT. LISA: THEY ARE OVER, THE FACT THAT
U.S. AND EUROPE MIGHT CUT RATES IF THEY DO END THEIR NEGATIVE RATE POLICY, JUST SAYING WHAT DID THE HYPOTHETICAL ACTUALLY SOUND LIKE? THEY WOULD BE A POSSIBILITY OF ACHIEVING AN OUTCOME. A WIDE RANGE OF HOUSES BENEFIT FROM THE VIRTUOUS CYCLE BETWEEN WAGES AND PRICES, ESPECIALLY GIVEN THEIR GETTING INCOME. SUDDENLY THIS IS A WHOLE NEW WORLD FOR THE BANK OF JAPAN. JONATHAN: DECEMBER 19 IS THE NEXT BANK OF JAPAN DECISION. THAT MIGHT BE FUN. FOUR CANDIDATES TAKING TO THE STAGE IN ALABAMA.
NIKKI HALEY'S CAMPAIGN RECEIVING A BOOST WITH SUPPORT FROM WEALTHY DONORS. >> HER DONORS, THESE WALL STREET LIBERAL DONORS MAKE MONEY IN CHINA. THEY WILL NOT LET HER BE TOUGH ON CHINA AND SHE WILL CAVE TO THE DONORS, SHE WILL NOT STAND UP FOR YOU. >> HE IS MAD BECAUSE THOSE WATERY DONORS USED TO SUPPORT HIM AND NOW THEY SUPPORT ME.
>> I DON'T HAVE A WOMAN PROBLEM, YOU HAVE A CORRUPTION PROBLEM. THAT IS WHAT PEOPLE NEED TO KNOW. NIKKI IS CORRUPT. >> WOULD YOU LIKE TO RESPOND? >> NO, IT IS NOT WORTH MY TIME. JONATHAN:
WHAT YOU THINK OF PEOPLE WRITING THINGS ON PIECES OF PAPER? TOM: AMERICA IS EXHAUSTED BY THIS. THEY SEE THE COMMUTATIVE INFLATION AND ACCUSATIVE STUPIDITY. THEY ARE LIKE, EVERYBODY GROW UP. LISA: THAT CANDIDATE IS LOOKING TO OUT TRUMP TRUMP AND MAYBE THAT IS THE KIND OF METHOD. TOM: IS HE A LEGITIMATE CANDIDATE?
LISA: THAT IS A GOOD QUESTION. JONATHAN: HE STOOD ON THE DEBATE STAGE. TOM: WOULD THIS HAPPEN IN ENGLAND? JONATHAN: WE HAVE SEEN CRAZY POLITICS ALL OVER THE WORLD THE PAST 12 MONTHS. TOM: AMERICA IS EXHAUSTED BY THIS.
HALF OF THE NATION IS FALLEN BY, WE DON'T NEED TO BORE PEOPLE WITH IT. THE BOTTOM LINE IS THERE IS ANY EXHAUSTED AMERICA FROM PANDEMIC INFLATION THAT IS LIKE WE DON'T CARE. THERE IS ONLY ONE ISSUE. JONATHAN: A FEW YEARS AGO WE HAD JERRY TALKING. TOM: THAT IS BRITISH. JONATHAN: PRESIDENT BIDEN URGING -- URGING CONGRESS TO APPROVE ADDITIONAL AID FOR UKRAINE. BY THEN SAYING HE'S WILLING TO CONSIDER CHANGES TO IMMIGRATION POLICY TO SECURE A DEAL AND WINNING OF THE CONSEQUENCES OF FAILING TO APPROVE ADDITIONAL FUNDING. PRES. BIDEN: PUTIN TAKES UKRAINE, HE WON'T STOP THERE.
IT IS IMPORTANT TO SEE THE LONG RUN. HE IS GOOD TO KEEP GOING. IF HE ATTACKED A NATO ALLY -- ATTACKS A NATO ALLY, WE HAVE COMMITTED TO DEFEND EVERY INCH OF NATO TERRITORY. WE WILL HAVE SOMETHING THAT WE DON'T SEEK AND THAT WE DON'T HAVE TODAY, AMERICAN TROOPS FIGHTING RUSSIAN TROOPS. JONATHAN: A SHOCKING WARNING FROM THE PRESIDENT. THE LAST 24 HOURS, WE WERE TALKING ABOUT TWO PROXY WARS FOR THE U.S..
THEY ARE IN ONE CURRENTLY WITH RUSSIA AND POTENTIALLY IN ANOTHER WITH IRAN. TOM: THERE ARE TWO WARS BUT THERE IS A THIRD WAR AND THAT IS THE HEADLINES WE ARE NOT MENTIONING BY THE PRESIDENT WHICH IS MR. PUTIN IN THE MIDDLE EAST. THIS IS A SET OF MOVABLE PARTS. UKRAINE IS A COOKIE-CUTTER MYSTIC ISSUE, MITCH MCCONNELL IS LONELY IN THE SENATE. THE REAL ISSUE HERE, TWO WARS AND PUTIN ON A SHOW DIPLOMACY. LISA: I WANT TO UNDERSTAND WHAT THE DETAILS ARE, THE BORDER CONTROL ISSUES HOLDING UP SOME OF THIS SPENDING. I WANT TO UNDERSTAND WHERE THE
PUSH AND PULL IS GIVEN THE FACT THAT THERE DOES SEEM TO BE CONSENSUS THAT THERE DOES NEED TO BE SOMETHING DONE. AT THE SAME TIME, WHAT IS SO OUTRAGEOUS THAT BIDEN CANNOT GET BEHIND IT? WHAT WOULD BIDEN BE WILLING TO ALLOW TO GET FUNDING THROUGH? TOM: WE WILL TOUCH ON THAT THIS MORNING. LET'S GET KATHY JONES FROM CHARLES SCHWAB. THE CASE FOR LOW INTEREST RATES IS STRAIGHTFORWARD BUT THE PATH IS LIKELY TO BE ROCKY. WE EXPECT BOND YIELDS TO -- BUT UNCERTAINTY ABOUT THE FED'S POLICY MOVES WILL LIKELY BE A SOURCE OF VOLATILITY.
WE ARE OPTIMISTIC FIXED INCOME WILL DELIVER RETURNS NEXT YEAR." TOM: THE POSITIVE RETURN IS THE HEART OF THE MATTER IN 2023. KATHY JONES JOINS US NOW, CHIEF STRATEGIST AT CHARLES SCHWAB. WE WERE WITH APOLLO MANAGEMENT, THEY HAVE A MULTIYEAR ANNUITY YIELDING 5.70%. LOCKED IN FOR SEVEN YEARS.
HOW DOES THE REST OF THE WORLD COMPETE WITH WHERE YIELDS ARE RIGHT NOW? KATHY: THAT IS A GREAT POINT. RIGHT NOW WHEN YOU'RE LOOKING AT INVESTMENT-GRADE CORPORATE BONDS OR SOME MIX OF HIGHER CREDIT -- HIGHER-QUALITY BONDS, TREASURY, CORPORATE BONDS, ETC., YOU ARE LOCKING IN YIELDS IN THE 5% TO 6% RANGE. IF YOU ARE IN THE HIGHEST TAX BRACKET, YOU COULD BE LOOKING AT 6% TO 7% EQUIVALENT YIELDS. IT IS TOUGH TO COMPETE. THE BEST OF THE WORLD SEEMS TO BE COMPETING. FIXED INCOME OFFERS SOME
ATTRACTIVE RETURNS FOR PEOPLE OVER AN INTERMEDIATE TIME PERIOD. LISA: WHY IS THERE A BIGGER SELLOFF TODAY OFF OF THE RHETORIC OF THE BANK OF JAPAN LAST NIGHT? KATHY: THAT IS AN INTERESTING QUESTION, I WAS WONDERING THAT MYSELF. WE HAVE LONG WAITED FOR THIS MOMENT WHEN THE EGG OF JAPAN EXIT YIELD CURVE CONTROL. THERE ARE SOME THINGS I WOULD BE CONCERNED IN THE FUNDING MARKETS AND IF THERE IS SPILLOVER EFFECT.
I GUESS WE HAVE GRADUALLY GOTTEN ACCUSTOMED TO THE IDEA THAT JAPAN WILL DO THIS AT A TIME WHEN YIELDS ARE FALLING ELSEWHERE. MAYBE THAT IS A BIT OF ANY OF SAID. I AM STILL NERVOUS ABOUT THAT AS A POTENTIAL SOURCE OF VOLATILITY IN THE MARKET. LISA:
ESPECIALLY GIVEN THE FACT THAT THIS IS ONE OF THE NARRATIVES -- ONE OF THE MANY NARRATIVES PEOPLE ARE PUTTING OUT THERE FOR WHY 10 YEAR YIELDS ROSE. PEOPLE WERE SAYING IT IS NOT JUST BANK OF JAPAN ABANDONING YIELD CURVE CONTROL, IS THE DEFICIT, THE FACT THAT WE ARE DEALING WITH GOVERNMENT DYSFUNCTION. HOW MUCH COULD THIS CONSPIRED TO CAUSE YIELDS TO GO HIGHER FROM HERE AND NOT NECESSARILY MUCH LOWER? KATHY: THE QUESTION YOU HAVE TO ASK IS YIELDS ARE 70 BASIS POINTS LOWER SINCE THE NARRATIVE HIT IN NOVEMBER AND NOTHING HAS CHANGED. WHAT WAS REALLY THE STORY THAT THROUGH -- THAT THROUGH YIELDS OFF? I THINK THERE ARE A LOT OF CONTRIBUTING FACTORS BUT I THINK THAT WAS AN OVERREACTION. AT THE END OF THE DAY WHEN YOU RUN RELATIONS BETWEEN BOND YIELDS AND VARIOUS FACTORS, INFLATION AND INFLATION EXPECTATIONS TEND TO HAVE THE HIGHEST CORRELATION.
THAT IS WHAT HAS CHANGED HERE. WE HAVE GOTTEN LOWER OIL PRICES, WE SEE MORE IN THE WAY OF DISINFLATION ON THE CONSUMER SIDE, SLOWER LABOR FORCE GROWTH WHICH WOULD INDICATE LESS INFLATIONARY CONSUMER SPENDING. THOSE ARE BIGGER FACTORS THAN THE OTHERS THAT YOU CITED. TOM:
HAVE WE COME SO FAR SO FAST THAT WE HAVE GIVEN UP ON TOTAL RETURN AND IT IS A CLIP THE COUPON 2024? KATHY: I DON'T THINK SO. WE RAN SOME SCENARIO ANALYSIS AND IF YIELDS STAY WHERE THEY ARE, YOU ARE CLEAVING THE COUPON. EVEN A MODEST DECLINE FROM HERE, YOU ARE GETTING A BIT ADDED TOTAL RETURN IN TERMS OF PRICE APPRECIATION. CLIPPING THE COUPON AT 5% IS NOT A TERRIBLE THING. JONATHAN: KATHY JONES OF CHARLES SCHWAB GOING INTO PEOPLE'S FRIDAY. JOBLESS CLAIMS COMING OUT LATER, 220 IS THE ESTIMATE.
THE PREVIOUS ESTIMATE IS 218. THE ESTIMATE IN OUR SURVEY CAN CHANGE. MORE ESTIMATES TO COME BETWEEN NOW AND TOMORROW. 185 IS THE ESTIMATE CURIOUSLY. 150 -- 30 K TO 40 K COMING OFF OF THE AGREEMENT. IT IS HEALTHY STUFF. TOM: EVERYBODY HAS A CLAIM -- HAS AN OPINION ABOUT WHERE WE NEED TO BE ON CLAIMS. JP MORGAN IS SPLIT ON THIS, YOU
HAVE TO COME DOWN UNDER 100,000. LISA: THAT RAISES THE QUESTION OF BNP PARIBAS. THIS IS THE NO LENDING SCENARIO. THIS IS DISINFLATION WITHOUT PAIN THAT JAY POWELL PROMISED IN 2022. IF THAT IS THE CASE, IS THIS A GOOD THING FOR STOCKS OR A BAD THING IF STOCKS REMAIN HIGHER FOR A LONGER PERIOD OF TIME? JONATHAN: WE HAVE TO ASK THE SAME QUESTION ABOUT CRUDE YESTERDAY. WTI BREAKING DOWN INTO THE 60'S. THE FIRST TIME WE HAVE SEEN THAT KIND OF LEVEL SINCE JUNE.
WHAT IS GOING ON WITH CRUDE? IN UNDERGROUND 70, 69.94. COMING UP, PAUL SANKEY ON CRUDE. TRY TO EXPLAIN THE MOVES WE HAVE SEEN IN WTI AND BRENT OVER THE LAST FEW MONTHS. WE ARE TALKING ABOUT 25% MOVES FROM SEPTEMBER.
TOM: HE IS AN EXPERT ON TEXAS AND THE PERMIAN BASIN. JONATHAN: EQUITY FUTURES ON THE S&P GOING NOWHERE. JOBLESS CLAIMS LATER THIS MORNING. PAYROLLS REPORT ABOUT 24 HOURS AWAY. FROM NEW YORK, THIS IS BLOOMBERG.
>> WE HAVE FOUR SEPARATE FACILITIES FOR OUR STRATEGIC RESERVE. WE WILL BE DOING AT LEAST 3 MILLION BARRELS AND WE HOPE WE CAN BRING MORE CAPACITY ONLINE TO BUY AS MUCH AS WE CAN TO REFILL TO MAKE SURE WE HAVE THAT AVAILABLE WHEN WE NEEDED IN THE FUTURE. -- WHEN WE NEED IT IN THE FUTURE. THERE ARE PHYSICAL CONSTRAINTS. JONATHAN: THAT WAS THE U.S. DEPARTMENT OF ENERGY DEPUTY SECRETARY SPEAKING IN DUBAI.
WE DROP BACK INTO THE 60'S THE LAST 24 HOURS ON CRUDE, THE PRICE ACTION LOOKS LIKE THIS ON WTI AND ON BRENT. 69.92 ON WTI. WE ARE POSITIVE ON THE SESSION BUT STILL IN THE 60'S. BRENT, A BREAK OF 75. UP ABOUT .9% ON THE SESSION.
TOM: WHAT IS DIFFERENT IS THE U.S. DIALOGUE IS ALLUDED TO. A HUGE BODY OF AMERICANS DO NOT UNDERSTAND OUR SOMEWHAT INDEPENDENCE HERE. WE HAVE ALL OF THESE IMAGES FROM THE PAST THAT ARE OUT THERE. JONATHAN:
I AM LOOKING AT THE NUMBER, 13.1 MILLION BARRELS A DAY. TOM: AMERICANS DON'T GET THAT. JONATHAN: STILL NORTH OFJONATHAN: 13 MILLION. TOM: -- HAS AN OIL RIG IN THE BACK HERE. LISA: I AM JUST SPEWING OIL. YOU KNOW ME. TOM:
THE ANSWER HERE HERE IS THAT AMERICA -- JONATHAN: THERE IS A SPECIFIC NAME FOR IT. TOM: THE THINGY. >> -- JONATHAN: I KNOW WHAT YOU'RE TALKING ABOUT. TOM: THERE IS NO OTHER ISSUE TALK ABOUT WHERE WE HAVE INSTITUTIONAL LEARNED MEMORIES WHICH ARE LONG TO MAKE US SMARTER.
PAUL SANKEY JOINS US NOW WITH SANKEY RESEARCH, SOME OF THE MOST READ NOTES ON THE STREET. I WANT TO GO TO 1986, OPEC ABSOLUTELY BLEW IT WITH A PRICE PLUNGE. CAN WE GET A REDUX ON THAT, PARTICULARLY WITH NEW AMERICAN PRODUCTION OF OIL? PAUL: IT IS NOT ELECTED SIX. AND BY -- NOT TO 1986. AND BY THE WAY IT IS A PUMP CHECK. 1986 IS NOT THE RIGHT ONE. THAT IS WHEN OPEC INCREASED
INTO THE ASIAN FINANCIAL CRISIS AND THAT IS THE OPPOSITE HERE. WHAT WE HAVE HERE IS THE 2014 -- PROBABLY NOT 2020 BUT WHEN SAUDI FLUSHED THE MARKET BECAUSE THEY GOT FRUSTRATED WITH CUTTING BACK AND CUTTING BACK PRODUCTION TO MAINTAIN PRICES, SUCH AS 2014. THEY WERE LOSING MARKETSHARE TO IRAN WHICH WAS COMING BACK THROUGH SANCTIONS.
YOU HAD TO GROWTH IN U.S. PRODUCTION WHICH WAS SQUEEZING SAUDI. THEY CANNOT GET THE REST OF OPEC TO AGREE WITH THEM. THEY FLUSHED THE MARKET. WE WENT IN A STRAIGHT LINE FROM 110 IN THE SUMMER TO 50 BY 2015. IN SIX MONTHS WE HAVE CUT IN HALF AND BOTTOMED AGAIN. I DON'T THINK COVID, BETWEEN 20 MARKETSHARE WHICH WAS MORE EXTREME, SAUDI AT ANY ALL-TIME HIGH PRODUCTION WHICH WAS IN APRIL 2020 WHICH WAS TRULY CRAZED BECAUSE IT'S MADE FOR NEGATIVE OIL PRICES. YOU HAVE A SITUATION WHERE
SAUDI HAS CUT PRODUCTION AND IS FACING A STRONG DEMAND ENVIRONMENT. ANY ALL-TIME RECORD DEMAND ENVIRONMENT. IT MUST BE FRUSTRATING FOR THEM TO LOSE MARKET SHARE TO IRAN AND TO A BOOM IN U.S. INDUSTRY. EVERYBODY HAS TURNED NEGATIVE OIL, NOT LEAST BECAUSE THE U.S.
HAS ACCELERATED INTO THE SECOND HALF IN TERMS OF PRODUCTION AND TAKEN MORE MARKET SHARE FROM SAUDI. OUR CONCERN IS THAT SALLY SAID HE WILL PUSH THROUGH Q1 WITH CUTS -- SAUDI SAID THEY WILL PUSH THROUGH Q1 WITH CUTS. YOU COULD SEE SAUDI DUMP THE MARKET AND TRY TO MAKE EVERYONE HONEST AGAIN. JONATHAN: I WANT TO BE CLEAR ABOUT WHERE
WE ARE NOW. A LOT OF PEOPLE TRADING EQUITIES, COLONISTS MAKING CALLS. YOU THINK THIS IS ABOUT SUPPLY AND NOT DEMAND CURRENTLY? PAUL: I DON'T KNOW HOW YOU CAN GET HIGHER DEMAND THAN ALL-TIME RECORD HIGH DEMAND. WE ARE AT OVER 1200 BARRELS A SECOND OF DEMAND.
CHINA HAS BEEN GOOD IN THE SECOND HALF WHICH HAS ALWAYS BEEN THE BALANCING ITEM. KEEP IN MIND IN COURSE -- KEEP IN MIND OF COURSE IT IS A SEASONABLY WEAK TIME FOR OIL. WE ARE DUMPING INTO THE TRADITIONAL POST LABOR DAY WEAKNESS. ONCE WE ARE NOT WORRIED ABOUT
THE SAUDI MARKET SHARE MORE, THE MARKET IS STRONG. IT IS COLD IN BROOKLYN BUT IT IS CALLED IN EUROPE. WE ARE OVERSOLD IN OIL HERE. IT DOESN'T CHANGE THE FACT THAT IT IS A STRUCTURAL PROBLEM IN THE MARKET WHICH IS TOO MUCH SUPPLY AND TOO MUCH SPARE CAPACITY. LISA: YOU THINK WE ARE OVERSOLD AND YOU THINK THERE IS A GOOD CHANCE THAT SAUDI ARABIA FLUSHES THE MARKET, INCREASES PRODUCTION , GOES AWAY FROM SOME OF THOSE CUTS TO MAKE EVERYONE HONEST AGAIN. HOW LOW COULD PRICES GO?
PAUL: WHAT YOU ARE TRYING TO DO IS SHUTDOWN U.S. SUPPLY GROWTH AND THAT BECOMES THE DEBATE. THAT IS THE QUESTION. WHAT SAUDI IS TRYING TO FLUSH IS EXXON, CHEVRON, CONOCO. IT IS NOT EURO SCHOOL E&P'S WITH A LOT OF DEBT. THESE COMPANIES ARE PLANNED AT $60, MAYBE LESS IN TERMS OF WHAT THEY'RE DOING AND HAVE GROWTH TARGETS THEY WANT TO MEET. IT IS GOING TO BE MORE AN ELASTIC SUPPLY SIDE FOR THE
SAUDI'S TO ATTACK. IN 2025, WE ARE ADDING EIGHT FLOATING STORAGE VESSELS WHICH ARE THEY IN GUYANA AND SENEGAL. THOSE ARE PRICE SENSITIVE. ONCE YOU HAVE BUILT YOUR HUGE PRODUCTION VESSEL, YOU DON'T SHUT IT DOWN. IT IS A FASCINATING MARKET. THE PEAK OIL QUESTION IS LIKE, WHAT WERE YOU TALKING ABOUT? THE SUPPLY-SIDE HAS GOT ACCESS AT 102.5 MILLION BARRELS A DAY OF DEMAND. I THINK A LOT OF TECHNOLOGY -- I THINK IT IS A LOT OF TECHNOLOGY AND I I. TOM:
I DID NOT BELIEVE HE OIL FOR ONE MINUTE. THAT IS ONE THING I GOT SOMEWHAT RIGHT. WE SEE MR. PUGIN ON A JUNKET TO SAUDI ARABIA -- MR. PUTIN ON A JUNKET TO SAUDI ARABIA.
DO THE SAUDIS TELL RUSSIA WHAT TO DO? PAUL: THE PROBLEM IS THE RUSSIANS LIE. IT IS POSSIBLE THEY REALIZE THERE IS ENOUGH OF A PROBLEM AND THEY WANT THAT RELATIONSHIP WITH SAUDI TO BE GOOD. I THINK IT IS THAT PUTIN IS MEETING THEM BECAUSE THERE MUST BE SOME QUID PRO QUO. WE SUSPECT THAT THE SAUDI'S HAVE ASKED THE U.S. TO SITE -- TO TIGHTEN SANCTIONS
ON IRAN BUT ALSO RUSSIA BECAUSE THOSE HAVE BEEN OTHER MAJOR PROBLEMS FOR THE SAUDI'S. THE U.S. HAS BEEN ALLOWING ADDITIONAL OIL INTO THE MARKET IN AN ELECTION YEAR. WE THINK THE SAUDI'S HAVE SAID IF YOU TIGHTEN SANCTIONS, WE WILL MAKE SURE THE OIL PRICE DOES NOT GET TOO HIGH FOR ELECTIONS.
THE PREFER DONALD TRUMP. I AM NOT SURE ABOUT THAT SPECULATION. THERE IS EVIDENCE THE U.S. HAS BEEN TIGHTENING SOMEWHAT THE IRANIAN AND RUSSIAN SANCTIONS WHICH WOULD HELP SAUDI. JONATHAN: DIDN'T THEY TRY THAT GOING INTO THE MIDTERMS LAST YEAR? PAUL: -- TRY TO GET STUDIES TO BOOST OUTPUT TO GET PRICES LOWER? PAUL: SAUDI-U.S. RELATIONS HAVE IMPROVED AND I THINK TO THE HAMAS NIGHTMARE WE HAVE SEEN A LOT OF WORK FROM SECRETARY BLINKEN TO TRY TO GET EVERYONE BACK ON THE CASE. IT IS SAID IN THE PRESS THAT THEY KEPT BLINKING AND WAITING FOR A LONG TIME AT A TIME WHEN HE WAS INSANELY BUSY WHICH I'M SURE HE DID NOT APPRECIATE. HE IS SENDING MESSAGES THAT THE
ORIGINAL LANGUAGE OF THIS ADMINISTRATION WHICH YOU WILL MEMBER BEFORE THE ELECTION WENT BY THAT NEGATIVE ABOUT OIL AND ABOUT THE SAUDI'S. THEY DON'T FORGET THAT STUFF EASY. THEY ARE VERY PRAGMATIC PEOPLE, THEY REALIZE THE U.S. IS HUGELY IMPORTANT AND SUBSEQUENTLY WE HAVE HAD SECURITY AGREEMENTS BETWEEN SAUDI AND THE U.S.. IT IS VERY COMPLEX AND A LOT OF PEOPLE ARE SAYING A LOT OF THINGS. THERE ARE A LOT OF MULTIPOLAR WORLDS GOING ON HERE.
I DON'T KNOW HOW MUCH THEY TRULY LOVE THE RUSSIANS. THE HISTORY OF THAT RELATIONSHIP IS NOTHING LIKE THE HISTORY OF THE U.S.-SAUDI RELATIONSHIP. JONATHAN: I APPRECIATE THE EXPLANATIONS. PAUL SANKEY OF SANKEY RESEARCH. NODDING DONKEY. GUY JOHNSON, THANK YOU.
THAT IS NOT THE OFFICIAL TERM. LISA: THAT IS SO ACCURATE. JONATHAN: THAT IS WHAT I WAS SEARCHING FOR. TOM: I HAVE NEVER HEARD THAT. LISA: AUTOMATED DONKEY. LIKE R2-D2. JONATHAN: SOMETHING LIKE THAT. IF YOU ARE JUST TUNING IN, THERE IS REASON FOR THAT. >> THERE IS STILL ROOM FOR INFLATION TO COME DOWN WITHOUT A NEED FOR GROWTH TO SLOW.
>> INFLATION HAS BOUNCED AROUND BUT IT IS CLEARLY ON A GLIDE PATH DOWN. >> FOR THE MOMENT, THIS IS PERFECT. >> IF THE FED DOESN'T START COMING IN MARCH, THEY WILL HAVE A HARDER LANDING. >> WE WILL SEE WHAT HIS SECOND HALF BRINGS.
>> THIS IS "BLOOMBERG SURVEILLANCE" WITH TOM KEENE, AND LISA ABRAMOWICZ. JONATHAN: LIVE FROM NEW YORK CITY, GOOD MORNING FOR OUR AUDIENCE WORLDWIDE. THIS IS "BLOOMBERG SURVEILLANCE" ALONGSIDE TOM KEENE AND VISA REMOVE ITS, I AM JONATHAN FERRO. THE S&P 500 ABOUT POSITIVE.
CAN THE GROWTH INFLATION MIX GET ANY BETTER THAN THIS? TOM: I WOULD TAKE GROWTH IN VISION MIX. -- GROWTH IN INFLATION MIX. IT IS TOMORROW'S JOBS REPORT, CLAIMS IS AS KEY THIS MORNING AS IT HAS BEEN. JONATHAN: THE ESTIMATE, 220 FOR TOMORROW. 185 IN THE PAYROLLS REPORT. LISA: THIS IS GOING TO BE NOT TERRIBLE JOBS MARKET WHICH RAISES THE QUESTION, IS THIS AS GOOD AS YOU CAN GET? ESPECIALLY WITH DISINFLATION IN DIFFERENT PLACES, INCLUDING THE OIL MARKET. THIS IS ANY AUDIT TAILWIND TO COME AT A TIME WHEN THERE IS RECORD OF DEMAND. THERE IS RECORD PRODUCTION AND MORE EFFICIENT YOUTH -- EFFICIENT USE OF ENERGY.
IS THIS THE DISINFLATIONARY FORCE THAT COULD DRIVE A NOTE IF? JONATHAN: BULLISH FLAMING FROM BRAMO -- BULLISH FRAMING FROM BRAMO. YOU'VE GOT CRUDE IN THE 60'S, CRUDE -- ASK AND YOU WILL LEARN A LOT ABOUT THEM. THERE IS ONE GROUP THAT WILL SAY THAT IS IN THE ECONOMY THAT IS GOING TO SLOW DOWN. ANOTHER GROUP WILL SAY WE ARE FIRMING THE RUNWAY FOR A SOFT LANDING. LISA: YOU LIKE THAT. TOM:
YOUR TWEET YESTERDAY ON THIS WAS BRILLIANT. YOU CAPTURED THIS, THIS MASSIVE AMBIGUITY WE HAVE TRYING TO PUT TOGETHER THE DYNAMICS OF THE MOMENT. YOU SAY WHAT IS THE SINGLE DISTINCTION IN THAT DEBATE? I HAVE TO GO BACK TO SURVEILLANCE 101, IT IS CHINA. IF CHINA UNDERPERFORMS, BOOM. IF CHINA IS AVERAGE, DIFFERENT
SCENARIO. WHAT IF CHINA SURPRISES TO 5% OR MORE GDP? JONATHAN: CHINA UNDERPERFORMED THIS YEAR AND AMERICA OUTPERFORMED. LET'S GO TO CRUDE. WTI, 69.69. WHAT IS THAT TELLING YOU?
IS THAT ABOUT WEAKER DEMAND IN OUR FUTURE OR IS THAT ABOUT BOOM IN SUPPLY? I AM NOT GOING TO ASK THAT FOR YOU, PAUL SANKEY DID. PAUL SANKEY SAYING THAT IS ALL ABOUT SUPPLY, DEMAND IS TOTALLY FINE. LISA: GIVEN THE FACT IT IS AT A RECORD HIGH, THAT CONVERSATION WAS FASCINATING. THIS IDEA THAT SAUDI ARABIA IS TRYING TO GET EVERYBODY ON BOARD WITH PRODUCTION CUTS TO GET PRICES UP. THEY MIGHT GET SO FRUSTRATED THAT THEY FLOOD THE MARKET WITH SUPPLY, ABANDONED THEIR CUTS AND SAY HOW LOW -- AND SAY LET'S SEE HOW LOW WE CAN GET THESE PRICES. THIS IS AN INTERESTING NARRATIVE. I IMAGINE THE BIDEN ADMINISTRATION WON'T MIND IT
GIVEN IT IS HEADING INTO AN ELECTION CYCLE. JONATHAN: THEY WERE WISTFUL -- WHISPER U.S. OIL PRODUCTION IS NORTH OF 13 MILLION A DAY -- 30 MILLION BARRELS A DAY BUT THEY WILL SCREAM WHERE GAS PRICES ARE GOING. LISA: IT GIVES A FOUR LOOK TO INFLATION. ALL OF THIS PANS INTO THIS ROSIE GLASS NARRATIVE THAT BESIDES THAT MEANT WEAKNESS MEANS NOW IT IS OKAY. JONATHAN: 69.70 ON WTI. THE PRICE ACTION LOOKING LIKE
THIS. ON THE EQUITY MARKET ON THE S&P, GOING NOWHERE. YIELDS ARE HIGHER IN 10 YEAR. UP FIVE BASIS POINTS, BACK TO 4.1533. LISA:
WE GET JOBLESS CLAIMS AROUND 8:30 A.M. THERE ARE SIGNS OF WEAKNESS THAT PEOPLE ARE POINTING TO THAT IS SHEER OUT AND OUT WEAKNESS. THERE IS FOCUS ON CONSUMER FINANCIAL HEALTH. WE GET THE THIRD QUARTER HOUSE CHANGE NET WORTH. NET WORTH WAS AT ALL-TIME HIGH WHEN HE LAST CAME OUT IN SEPTEMBER. CONSUMER CREDIT AT 3:00 P.M., HOW MUCH THE RETAIL THERAPY OF AMERICANS IS BEING FUELED BY AMERICAN EXPRESS. THAT IS SOMETHING WE WILL GET
AN SENSE OF TODAY. IN TERMS OF WHAT PEOPLE ARE BUYING, LULULEMON, RESTORATION HARDWARE, BROADCOM, SOME COMPANIES REPORTING EARNINGS AFTER THE BELL. JONATHAN: THAT IS HOW -- HAS BECOME DEEPLY PERSONAL. TOM: IT IS TOWARD THE END OF THE YEAR. LISA: THERE ARE OTHER NAMES. TOM: PRICE OF YIELDED DOWN, DEEPLY
PERSONAL. LISA: I AM CONNECTED TO THE AMERICANS ARE -- THE AMERICAN CONSUMER. TOM: THERE IS A FLAT ON THEIR BACK AMERICAN CONSUMER AND THIS BOOM ECONOMY CONSUMER. JONATHAN: IT IS DREADFUL OUT THERE. THE HEAD OF EQUITY AT ALL SPRINKLED INVESTMENTS JOINS US NOW. LET'S TALK ABOUT EQUITIES AND EARNINGS. LOOK FOR WHERE EARNINGS GROWTH
CAN BE MORE EASILY ACHIEVED, WHERE DID YOU GO FOR THAT? >> HEALTH CARE IS A PLACE BUT THERE ARE OTHER PLACES IN DEFENSES. HEALTH CARE SCREAMS TO ME THE PLACE TO BE WHEN YOU LOOK AT WHERE EARNINGS GROWTH COULD COME IN 2024. TOM: YOU ARE TOO MODEST. AND MILADY -- ANN IS AN 80 9/5 PERCENTILE ONE YEAR, THE 90TH PERCENTILE FIVE YEAR. IT IS AS IF THE BREWERS WON THE WORLD SERIES, YOU ARE KILLING IT. YOU ARE KILLING IT WITH MAGNIFICENT SEVEN, BIG UGLY GROWTH STOCKS. DOES THAT STORY CHANGE NEXT
YEAR? ANN: I CANNOT TAKE CREDIT FOR MENTIONING THAT FIND ANYMORE -- FOR MANAGING THAT FIND ANYMORE. I USED TO. OUR MANAGERS HAVE NOT BEEN OVERWEIGHT THE NEGATIVES AND SEVEN, THEY HAVE NOT IGNORED IT, BUT THOSE STOCKS HAVE DONE FAIRLY WELL THIS YEAR. THE EARNINGS GROWTH FOR THOSE NAMES 2023 HAS BEEN 7%. ACROSS THE S&P, 0% OR WORSE. AS WE LOOKED AT 2024, CAN THOSE LARGE CAP NAMES REPEAT THAT SAME GROWTH? TOM: THAT IS THE MONEY QUESTION. ANN: THE COMPS ON THAT ARE TOUGH.
IF YOU LOOK AT HEALTH CARE WHERE EARNINGS GROWTH HAS BEEN SANGUINE AND YOU SEE MULTIPLE COMPRESSION ACROSS THE DEFENSIVE SECTOR OF MORE THAN 11% RELATIVE TO THOSE OTHER NAMES, THAT AREA SCREAMS GOOD RISK REWARD TO ME. TOM: HUGE MONEY QUESTION HERE. LISA, JOHN, AND I, WHAT WAS BNP PARIBAS? JONATHAN: 4300. TOM: YOU ARE IN THE 90TH PERCENTILE DOING WHAT EVERYBODY IS TALKING ABOUT BUT YOU ARE DOING IT, OWN APPLE, OWN AMAZON. YOU ARE TELLING ME TO GET OFF OF THAT GRAVY TRAIN? ANN: TAKE SOME DOLLARS OFF OF THAT GRAVY TRAIN AND START TO REALLOCATED THEM INTERFACES THAT MAY BE THE MARKET DOES NOT CARE ABOUT RIGHT NOW. ONE OF THE THINGS I HAVE ALWAYS
LEARNED IN MY CAREER, YOU HAVE TO GO THERE BEFORE THE CROWD DOES. YOU WANT TO BE THERE BEFORE EVERYBODY ELSE DOES. THE FIRST 25% IS PROBABLY THE MOST IMPORTANT. YOU DON'T WANT TO SELL TOO EARLY. THE FUNDAMENTALS REALLY ARE MUCH BETTER IN THESE OTHER AREAS THAT PEOPLE DO SEE. LISA:
HOW MUCH OF THE HEALTH CARE BET IS ON WEIGHT LOSS DRUGS? ANN: THAT HAS BEEN THE MULTIPLE COMPRESSION WE SEE IN THE AREA, A GOOD PART OF IT. WHENEVER YOU SEE THE BABY BEING THROWN OUT WITH THE BATHWATER, ALL HEALTH CARE HAS BEEN DISCOUNTED BECAUSE OF WHAT THESE DRUGS ARE GOING TO DO TO THE SYSTEM. IT IS GOING TO DO SOME GOOD TO THE SYSTEM LONG-TERM. NOT ALL DEVICES, NOT ALL HEALTH CARE COMPANIES IN GENERAL WILL BE HEARD FROM THIS. THERE WILL BE SOME BENEFIT.
IS IT GOING TO HURT NEAR-TERM? 2024 EARNINGS APPEAR TO BE STRONG, MULTIPLE COMPRESSION HAS BEEN DISCOUNTED. LISA: WHAT COMPANIES HAVE BEEN THROWING OUT THE IDEA OF ILLNESSES THAT GET REMEDIED THAT YOU ARE SAYING, PUMP THE BRAKES, PEOPLE WANT TO GET HEALTHIER MORE QUICKLY? ANN: FROM WHAT WE KNOW, THESE DRUGS DEFINITELY HELP DIABETES. THAT IS WHAT THEY ARE DESIGNED FOR. ALL OF THE OTHER ILLNESSES AND COMORBIDITIES THAT GO ALONG WITH THAT, IT IS CHALLENGING THOSE COMPANIES. THE GLUCOSE MONITOR COMPANIES AND ALL OF THE OTHER THINGS.
I CANNOT TALK ABOUT SPECIFIC COMPANIES, BUT THOSE ARE THE COMPANIES THAT HAVE BEEN HEAVILY DISCOUNTED. ALL OF THE COMPANIES ACROSS THE HEALTH CARE SECTOR HAVE BEEN IMPACTED. IT ACTUALLY WILL DRIVE GROWTH IN SOME OTHER AREAS. WHEN I'M TALKING TO OUR PORTFOLIO MANAGERS, THEY ARE EXCITED ABOUT THAT. ALTHOUGH, NOT IGNORING. THE MARKET IS PROBABLY NOT WRONG ABOUT THE DIRECTION OF THESE DRUGS LONG-TERM.
I THINK THAT IS THE WHERE DO YOU GET IT RIGHT? DON'T IGNORE THE LONG-TERM. JONATHAN: S&P 500, MODEST UPSIDE. SMALL CAPS BOTTOMED AT THE END OF OCTOBER, A DOUBLE-DIGIT PERCENTAGE POINT MOVE OFF OF THAT BOTTOM NORTH OF 10%. WHAT YOU LIKE ABOUT SMALL CAPS? ANN: YOU HAVE TO DIG DEEP INTO SMALL CAPS. NOW IS NOT THE TIME TO ON THE INDEX, EVEN IN 2024 YOU DON'T WANT TO ON THE INDEX. SMALL CAPS ARE ACTING LIKE A LEOPARD PLAY ON THE TREASURY MARKET. JONATHAN: IS THAT THE REGIONAL BANKS AND
IT INDEX? ANN: THEY ARE AND I THINK THAT IS WHAT YOU ARE SEEING. I WOULD SUGGEST INVESTORS NEED TO DIG DEEPER. WHEN YOU GO INTO THE NUMBERS AND THE DATA, THEY ARE NOT ALL LEVERAGED BETS TO THE TREASURY MARKET. THERE ARE SMALL AND MID-CAP
COMPANIES, COMPANIES THAT HAVE FREE CASH THAT HAVE MARGINS ABOVE 20%. THOSE COMPANIES ARE TRADING AT 25% DISCOUNTS TO LARGE-CAP TEARS. THAT IS TOO GREAT OF A DISCOUNT. THOSE ARE SIGNS THAT SIGNIFY
QUALITY. THEY DON'T HAVE TURBO BALANCE SHEETS. JONATHAN: LET'S TALK ABOUT THOSE BETS. WE HAVE HAD A 20% MOVE OFF OF THE LOW FROM THE END OF OCTOBER. IT IS A MONSTER MOVE. AM I TRADING BANKS FOR HIGH YIELDS OR LOWER YIELDS? BASED ON HIS PERFORMANCE, I THINK IT IS THE OPPOSITE FROM WHAT WE WERE TOLD. ANN: I THINK OUR MANAGERS ARE OVERALL UNDERWEIGHT THE BANKS.
IT IS BECAUSE THEY LIKE TO FOCUS ON THE FUNDAMENTALS AND NOT JUST PLAY THIS SWING IN YIELDS. ALTHOUGH THE FUNDAMENTALS ARE GOOD FOR SOME OF THE REGIONAL BANKS, IT IS NOT GREAT ACROSS THE BOARD. DEPENDING ON THE MACRO CONDITIONS, THINGS CAN SWING HEAVILY FOR THE BANKS. IT IS SOME OF THE OTHER DEFENSIVE AREAS I LIKE A LITTLE MORE. JONATHAN:
INCLUDING HEALTH CARE? ANN: YES. JONATHAN: THANK YOU. THIS RUN IN THE BANKS HAS BEEN UNBELIEVABLE, IN LINE WITH THE RALLY WE HAVE SEEN IN TREASURIES. LISA: WHICH RAISES THE QUESTION, IS THIS THE IDEA THAT YIELDS ARE STABILIZING OR IS THIS SOMETHING ELSE THAT HAS A COUNTER NARRATIVE TO WHAT HAS TRADITIONALLY BEEN HIGHER COSTS IN TERMS OF BORROWING COSTS? THEY TEND TO DO BETTER FOR THE BANKS. EVERYTHING HAS BEEN TURNED AROUND. JONATHAN: THE WHOLE YEAR HAS BEEN UPSIDE DOWN. THIS WAS LOOK LIKE THIS ON THE
S&P 500, EQUITY FUTURES GOING ABSOLUTELY NOWHERE. WE ARE ONE HOUR 18 MINUTES AWAY FROM JOBLESS CLAIMS. -0.01%. SOME PRICE ACTION DATED MY MARKET, YIELDS UP FIVE BASIS POINTS. 4.1552. PRODUCTIVITY WAS THE STORE YESTERDAY. MIKE MCKEE DID A WONDERFUL JOB COVERING IT. TO PERFORM MIX FOR THIS FEDERAL RESERVE. TOM:
IF WE SUSTAIN PRODUCTIVITY IS THE MONEY QUESTION. THAT GOES INTO THE PROPONENT OF PRODUCTIVITY, UNDER PLACEMENT FOR 20 YEARS. I GO BACK TO THE POLARITY SIX WEEKS AGO OF GOLDMAN SACHS VERSUS MORGAN STANLEY. THE ONE DISTINCTION IS WHAT DOES THE LABOR MARKET TO DO? THAT IS WHY THE NEXT 25 HOURS ARE IMPORTANT. JONATHAN:
A PUSH BACK AT GOLDMAN . WE TRIED TO HIGHLIGHT THIS, WE WILL CATCH UP WITH THIS YOUNG ON THE CONTRADICTIONS IN THE LABOR MARKET. THE CYCLICAL'S ARE STARTING TO LOOK BETTER FOR MARKET GROWTH. WE ARE PRICING IN RATE CUTS
NEXT YEAR, TRYING TO RECONCILE SOME OF THOSE FORCES. LISA: IT REMINDS ME OF THE BEGINNING OF 2023 WHEN PEOPLE WERE SAYING YOU HAVE TO TRADE THE RECOVERY BECAUSE WE ARE GOING TO GET A RECESSION AND YOU DON'T WANT TO GET IN TOO LATE. IT IS LOOKING AT WHAT HAPPENS AFTER THE DOWNTURN. JONATHAN: WE HAVE NOT HAD IT YET. WE KEPT A SAINT YOU WANT TO
TRADE THE RECOVERY INTO THE RECESSION WE HAVE NOT HAD YET? LISA: AND WE SAID YES. JONATHAN: DAVID IS GOING TO JOIN US OF CITY GLOBAL WEALTH. LOOKING FORWARD TO THAT. FROM NEW YORK CITY, GOOD MORNING.
>> DO YOU THINK THERE IS ANY -- THAT WILL DEFEAT TRUMP OTHER THAN YOU? PRES. BIDEN: I AM NOT THE ONLY ONE BUT I WILL DEFEAT HIM. >> WHO ELSE DO YOU THINK COULD DEFEAT DONALD TRUMP? JONATHAN: PRESIDENT BIDEN ANSWERING A QUESTION ABOUT THE 2024 ELECTION THE DAY AFTER HE SAID HE PROBABLY WOULD NOT HAVE RUN IF TRUMP WAS NOT RUNNING. WE HAVE THIS CLEANUP AND I THINK WE HAVE CLEANED THAT UP. IT WILL BE INTERESTING TO SEE IF THE FORMER PRESIDENT IS NOT THE CANDIDATE WHERE THAT WOULD BE THE PRESIDENT AFTER THE COMMENTS HE HAS MADE. TOM:
AND THE COMMENTS TERRY HAINES GAVE US IN THE LAST HOUR. IF YOU DOVETAIL IS DECADES OF PERSPECTIVE ON WHAT REPUBLICANS AND REPUBLICANS IN NAME ONLY, BUT DO THEY DO IF THE FORMER PRESIDENT IS THE FORMER CANDIDATE -- IS THE CANDIDATE? LISA: THERE IS THIS MYSTERY WITHIN THE DEMOCRATIC PARTY, I WAS LOOKING AT A POLL CONDUCTED THROUGHOUT NOVEMBER THAT SHOWED 63% OF DEMOCRATS DISAPPROVE OF ISRAEL'S MILITARY ACTIONS IN GAZA, 60% WHO ARE YOUNGER THAN 35. 64% OF PEOPLE OF COLOR. THIS RAISES THIS QUESTION, DOES THIS MATTER? IS THIS GOING TO FADE BY LATE NEXT YEAR? IS THIS POINTING TO A DIVISION WITHIN THE DEMOCRATIC PARTY THAT WILL MAKE IT TOUGH FOR BY THE? JONATHAN: -- GETUP FOR ABIDING? JONATHAN: YOU EXPECT THERE TO BE DIVISION IN WASHINGTON. IT IS HEALTHY. MY KEY ISSUES, YOU NEED SOME POLICY CONTINUITY.
WE HAVE TWO WARS THAT MAY OR MAY NOT GIVE SUPPORT DEPENDING ON WHO IS IN WHITE HOUSE. YOU HAVE REPUBLICANS QUESTIONING GOING TO UKRAINE AND, KRATZ QUESTIONING ADA GOING TO ISRAEL. THAT IS GOING TO COME TO GET THINGS IN THOSE COUNTRIES ENGAGING IN WAR ON THE GROUND. TOM: ONE MORE THOUGHT, WE ARE IN A GERITOL CHRISSY -- THERE IS A GENERATIONAL SHIFT GOING ON.
THE POLARITY WITHIN THE ONES OF THE EASTERN MEDITERRANEAN IS A STUNNING. JONATHAN: LISA BROUGHT THE POLLS , YOU CAN SEE THAT SO CLEARLY IN THE POLLS FROM THE PRESIDENT AND HIS OWN PARTY. TOM: TO GET A BRIEF ON THIS, JACK FITZPATRICK JOINS US, BLOOMBERG GOVERNMENT AND A KNOWLEDGE OF CAPITOL HILL. I LOOK AT THESE DEBATES AND I HAVE TO ASSUME SENATORS AT THE HOUSE ARE RIVETED BY THIS DEBATE. GIVE US THE UPDATE ON THE -- WE
ARE LIVING IN VERSUS THE GENERATIONAL DIVIDE? JACK: IT IS A COMPLEX LINE TO DRAW IF YOU ARE MAKING A DISTINCTION, ESPECIALLY AS YOU TRY TO PICK AN ISSUE. GENERATIONALLY, THERE IS SOME MOVEMENT AS IT RELATES TO SUPPORT FOR ISRAEL, YOUNGER VOTERS EXPRESSING IN POLLS A LOT OF CONCERN ABOUT THEIR ACTIONS IN GAZA. IF YOU TRY TO APPLY THAT LOGIC TO CONCERNS ABOUT A GERIN TOCRACY, THE ONE PERSON WHO VOTED AGAINST HIS PARTY IS BERNIE SANDERS SAYS HE IS NOT SUPPORTIVE OF THIS VOTE ON AID OF THEIR HAVING OVER CONCERNS OF ISRAEL'S ACTIONS IN GAZA. CONCERNS OVER THE AGE OF OUR LEADERS ARE A MAJOR ISSUE IN POLITICS IN THE PRESIDENTIAL RACE AND GOING DOWN THE BALLOT IN CONGRESS. IT IS DIFFICULT TO APPLY -- TO PROJECTED THAT ONTO CERTAIN POLICY DEBATES NEXT TO PROJECT -- TO PROJECT THAT ONTO CERTAIN POLICY DEBATES. PART OF THIS CONCERN IS ISRAEL
AND FOREIGN AID ON CAPITOL HILL. LISA: WHAT IS HOLDING UP THE UKRAINE FUNDING? BERNIE SANDERS WANTED TO SEE ISRAEL FUNDING PUT IN THERE AND THAT IS ONE REASON HE OPPOSED THAT. OTHER PEOPLE POINTED TO THE FACT THAT YOU HAVE SOME INCREASED CALLS IN WERE SECURITY AND BIDEN HAS ACCUSED REPUBLICANS OF PUTTING CERTAIN MEASURES IN THE BILL THAT HE DID NOT WANT TO PASS. WHAT ARE THOSE MEASURES? WHAT ARE THE MAIN STICKING POINTS? JACK: THE REPUBLICANS WANT ANYTHING THAT INCLUDES FUNDING FOR UKRAINE TO INCLUDE A BORDER MEASURE -- A BORDER MEASURE. THEY WENT TO GET ASYLUM RESTRICTIONS.
THEY DO NOT JUST WANT BORDER SECURITY FUNDING, THEY WANT A REDUCTION IN THE AVAILABILITY OF ASYLUM CLAIMS OR CASES IN WHICH PEOPLE HAD TO WAIT IN A DIFFERENT COUNTRY AS THEIR CLAIMS ARE BEING ADJUDICATED. THE CONCERN AMONG REPUBLICANS IS IF DEMOCRATS AGREE TO THE WHERE THE BASIC NUMBERS ON ASYLUM CLAIMS AND PEOPLE ALLOWED TO COME ACROSS THE BORDER THAT PAROLE WILL BE USED IN SOME CIRCUMSTANCES TO CIRCUMVENT THAT. THERE IS A TRICKY DEBATE GOING ON IN WHICH THEY DISCUSS NOT ONLY THE AVAILABILITY OF ASYLUM CLAIMS, BUT ANY POLICIES THAT COULD SUBVERT AN AGREEMENT ON THE BASIC NUMBERS OF ASYLUM CLAIMS. THAT IS VERY COMPLICATED AND POLITICALLY TRICKY. UNLESS THEY GET AN AGREEMENT ON THAT, UKRAINE FUNDING IS HELD UP. LISA: IF ANYBODY EYES BY PLACING OVER, THEY WILL GLAZE OVER MORE KNOWING NOTHING WILL GET DONE WITH SO MUCH POLARITY.
WE TALKED ABOUT THE DEMOCRATIC POLARITY, BUT WITHIN THE REPUBLICAN PARTY, WE CANNOT SOLIDIFY AROUND LEADERSHIP. KEVIN MCCARTHY DECIDING TO STEP DOWN. HOW MUCH DOES THAT COME GET THE EFFORT TO PUSH THROUGH THESE INITIATIVES -- COMPLICATE THE EFFORT TO PUSH THROUGH THESE INITIATIVES? JACK: KEVIN MCCARTHY LEAVING DOES NOT COMPLICATED. THE HOUSE CHOSE TO GO IN
ANOTHER DIRECTION. THERE ARE QUESTIONS ABOUT THE NEW DIRECTION THEY ARE GOING UNDER THE NEW SPEAKER WHO IS A BIT OF AN UNKNOWN. HIS RELATIONSHIP WITH THE CONSERVATIVE FREEDOM CAUCUS AND HOW WE APPROACH IS NOT ONLY FOR NATE WHICH IS SOMETHING THERE HAS BEEN A LOT OF IDEOLOGICAL MOVEMENT AMONG REPUBLICANS BUT ALSO GOVERNMENT FUNDING DEADLINES. THAT IS A BIG X FACTOR, BUT IT IS CLEAR THE HOUSE REPUBLICAN CONFERENCE WAS READY TO MOVE ON FROM KEVIN MCCARTHY. IT WAS NOT CLEAR WHAT ROLE HE WAS GOING TO PLAY. THEY HAVE A TWIDDLING MAJORITY BUT THE THINGS THEY ARE NEGOTIATING NEED A LOT OF DEMOCRATIC VOTES.
IT WAS A TOUCHSTONE MOMENT TO SEE THE FORMER SPEAKER DECIDE TO LEAVE CONGRESS. IT DOES NOT NECESSARILY CHANGE WHAT WE KNOW AND DON'T KNOW ABOUT THE DIRECTION OF REPUBLICANS IN CONGRESS. JONATHAN: EMISSION TO THE FUNDING DEADLINES, REMIND US OF THE STATES IN 2024. JACK: JANUARY 19 FOR THE FIRST FOUR, FEBRUARY SECOND FOR EIGHT.
FEBRUARY 2 WOULD BE A TOUGH DEADLINE. JONATHAN: THANK YOU. JACK FITZPATRICK THERE. THE 19TH AND THE SECOND. I THINK WE ARE GOING TO HAVE A BIG FIGHT NEXT YEAR OVER BIG ISSUES EARLY ON. TOM:
IF YOU TALK TO WENDY AT BROWN, SHE WILL TELL YOU PHYSICAL ISSUES AT DRIFT AWAY WHEN YOU GET TO AN ELECTION. WILL THIS TIME BE DIFFERENT? DOES THE DEBT AND DEFICIT ACTUALLY MATTER AT THE LEVELS WE ARE AT? JONATHAN: THE FISCAL ISSUES ARE PART OF CAMPAIGNING GOING INTO NOVEMBER. LISA: HOW MUCH DO PEOPLE ACTUALLY CARE? THIS IS THE DIFFERENCE BETWEEN THE PARLOR GAME WE PLAY NOW AND WHAT DRIVES VOTERS TO THE BOOTH. OFTENTIMES IT IS SOMETHING ELSE, WHERE IS INFLATION, MAYBE THEY WILL FEEL BAD OR MAYBE THEY WANT. IT IS THINGS LIKE ABORTION, BORDER SECURITY, EDUCATION.
JONATHAN: AGREED. BORDER SECURITY IS GOING TO BE MASSIVE AS WE PUSH FOR MORE FOR NATE. TOM: -- FOR MORE FOREIGN AID. TOM: IT IS PARTICULARLY KEY IN THE
SWING STATES. IT IS MORE THAN JUST A NATIONAL ISSUE. JONATHAN: MORE POLITICS LATER IN THE PROGRAM. MEGAN ROBSON OF BNP PARIBAS ON CREDIT COMING UP SHORTLY. THAT IS AROUND THE CORNER.
THE PRICE ACTION LOOKS LIKE THIS ON THE S&P 500. THERE IS NOT MUCH PRICE ACTION. THE EQUITY MARKET GOING NOWHERE. YIELDS ARE HIGHER BY FIVE OR SIX BASIS POINTS ON THE 10 YEAR. 4.1% ON THE U.S. 10 YEAR AND CRUDE IN THE 60'S. SHOULD YOU BE CONCERNED ABOUT CRUDE IN THE 60'S? PAUL SANKEY SAYING THIS IS NOT ABOUT DEMAND, THIS IS ABOUT A SUPPLY IN THE UNITED STATES. -- ABOUT BOOMING SUPPLY IN THE
UNITED STATES. ♪ JONATHAN: FOR ONCE, A LITTLE BIT SUSIE OUT THERE IN THE EQUITY MARKET. GOING ABSOLUTELY NOWHERE ON THE S&P 500. POSITIVE 50.01%. THERE IS A MOVER OUT THERE. WE NEED TO TALK ABOUT THIS ONE,
A CHALLENGER TO NVIDIA. AND D. AT LEAST, THAT'S WHAT THEY LIKE TO BE. TOM: LISA: THEY CAME OUT WITH THE -- WHAT THEY'RE CALLING THE MOST ADVANCED AI ACCELERATED. LISA HSU CAME ON BLOOMBERG TELEVISION YESTERDAY AND WAS JUST TALKING IN GENERAL AS ANDY RELEASED THIS NEW PRODUCT. THEY HAD BEEN PREDICTING THAT THE MARKET FOR AI CHIPS WOULD REACH $150 BILLION.
SHE SAID IT'S CLEAR DEMAND IS GROWING MUCH FASTER AND PROJECTS $400 BILLION IN THE SAME TIMEFRAME. MORE THAN DOUBLING IT WHICH GIVES YOU A SENSE THAT EVEN THE REALITY IS OUTSTRIPPING SOME OF THE HOPE AND DREAMS. TOM: THIS IS GOING TO BE A SEQUENTIAL LOOK FOR MICROSOFT TO COME OUT WITH CHIPS AS WELL. IT IS LIKE FRENCH FRIES BUT THEY ARE CHIPS. JONATHAN: THANKS FOR EXPLAINING THAT. IS THAT WHAT THEY ARE IN THE BUSINESS OF DOING? THAT IS A GOOD YEAR, RIGHT? NVIDIA IS UP 211 SINCE LAST YEAR. LISA: THEY ARE GOING TO TRY TO SORT
OF CLING ONTO THAT. CAN THEY COMPETE IN A REAL SENSE? THIS HAS BEEN THE STORY THAT HAS CONTINUED TO SURPRISE THE UPSIDE DESPITE ALL THE SKEPTICISM FROM PEOPLE LIKE MYSELF. JONATHAN: LET'S TURN TO THE BOND MARKET.
10-YEAR, YIELDS A LITTLE BIT HIGHER ON THE TENURE MATURITY TODAY BY FIVE BASIS POINTS. THESE ARE KIND OF NORMAL MOVE THESE DAYS. THERE IS SOMETHING, AND IT IS JAPAN. IT IS THE BOJ AND A SIGNAL THAT MAYBE THEY WILL MAKE A MOVE BEFORE THE END OF THE YEAR. DOLLAR-YEN GAP LOWER. LOWER BY 1.4%, THAT IS A STRONGER JAPANESE YEN. LISA: I WAS SURPRISED THAT YIELDS
WERE NOT HIGHER IN THE U.S. THE BANK OF JAPAN OVERNIGHT WAS SIGNALING THIS IS MAYBE GOING TO BE UNSUSTAINABLE TO HAVE NEGATIVE RATE POLICIES, AND THEN ONE OF THE BOJ OFFICIALS SAY MAYBE THIS WILL BE A GOOD THING, A VIRTUOUS CYCLE OF WAGE GAINS AND PRICES. SO HERE IS THE QUESTION, WHY ISN'T THE MOVE HERE? KATHY JONES SAID I DON'T KNOW.
IS THIS JUST THAT THE NARRATIVE IS MOVING IN THE OPPOSITE DIRECTION? JONATHAN: YOUR PRICING IN BIG CUTS. TOM: IT'S A BUSTED THEORY, BUT WHAT YOU'VE REALLY GOT TO WATCH AS A BENCHMARK TO 10 YEAR YIELD. I WILL LET SOMEBODY IN JAPAN GIVE ME A BETTER MATURITY. GIVEN THE INFLATION REGIME, THAT FLAT DOESN'T WORK. THEY'VE EITHER GOT TO BRING THE INFLATION DOWN, OR REMEMBER, THEY WANTED TO REINFLATE, WHERE THEY GOT TO GET THAT 10 YEAR YIELD. JONATHAN: AS WE SAID A MILLION TIMES, JGB IS NOT IN MARKET. TOM:
IT'S NOT A TRUE MARKET. JONATHAN: QUICK UPDATE, CRUDE DROPPED INTO THE 60'S YESTERDAY. WE STAY THERE BRIEFLY. HEAD ABOVE WATER AGAIN INTO THE
70'S, POSITIVE ON THE DAY BY 0.6%. THAT'S JASON TOP STORIES. FORMER U.N. AMBASSADOR NIKKI HALEY LOOKING TO CEMENT HER CLAIM THAT THE GOP ALTERNATIVE TO DONALD TRUMP. FOUR CANDIDATES TAKING THE STAGE LAST NIGHT WITHOUT THE FORMER PRESIDENT. TAKING CRITICISM FOR HER SUPPORT FROM WALL STREET WHILE CHRIS CHRISTIE WAS THE ONLY ONE TO DIRECTLY ATTACK THE OVERWHELMING FRONT RUNNER. THE FIRST CONTEST IS LESS THAN SIX WEEKS AWAY IN IOWA, AND YOU WONDER OF THOSE COINTREAU ARE LEFT WEEKS TIME? LISA: IT IS BECOMING A TWO-WAY RACE BETWEEN NIKKI HALEY AS WELL AS RON DESANTIS. NIKKI HALEY IS EDGING OUT.
LOVE HER LINE TO RON DESANTIS WHEN HE WAS SLAMMING HER ABOUT WALL STREET DONORS AND SHE SAID YOU ARE JUST JEALOUS. SHE HAD A BUNCH OF SINGERS THAT SHE WAS QUITE PREPARED FOR. THANKS, ELLIS, FOR ALL THE ATTENTION. BUT THERE IS A REAL QUESTION OF WHETHER 15% OF THE VOTE CAN REALLY GET HER TO BE THE NOMINEE. JONATHAN:
SHE WAS SHARP LAST NIGHT, THAT'S FOR SURE. ELON MUSK AND SPACE X LOOKING FOR SOMETHING SADDER SHARES, PUTTING THE COMPANY'S VALUE OVER $175 BILLION. ACCORDING TO BLOOMBERG, C-SHARES AND START AT $95.
IT WOULD BE ONE OF THE TOP 75 COMPANIES IN THE WORLD ALONGSIDE NAMES LIKE T-MOBILE NIGHT, BOTH VALUED AT JUST UNDER $180 BILLION. WHATEVER YOU THINK ABOUT THE MAN, HE'S POLARIZING, BUT WOW. ANOTHER PHENOMENAL COMPANY WITH A POTENTIALLY HUGE MARKET CAP. TOM: AND WHAT IS FASCINATING HERE, IS THE BASIC IDEA OF RICH GUYS DOING THIS, AND HE SEEMS TO HAVE HAD A MUCH GREATER IMPACT AND MR. BEZOS AND MR. BRANSON. YOU LOOK AT THE THREE PROJECTS AND IT'S LIKE, YOU CAN HAVE AN OPINION THAT THIS ONE OR AN OPINION ABOUT THAT ONE, BUT HE AND HIS TEAM ARE GRINDING THIS OUT DAY BY DAY THROUGH AEROSPACE FAILURE WHICH IS WHAT NORMALLY HAPPENS. JONATHAN: ENTROPY TALK ABOUT MR. DIAMOND? RUMOR HAS IT THAT MAYBE THEY ARE EXCHANGING CHRISTMAS CARDS THIS YEAR. IT IS A BIG CHANGE. TOM: I'VE TEARED UP.
JONATHAN: PUSHIN
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