>> IN ORDER TO REALLY ENSURE
THAT INFLATION IS BACK TO TARGET, WE THINK THAT YOU NEED
TO SEE MORE LABOR MARKET LOOSENING. >> WE HAVE MORE EVIDENCE
POINTING AT THE LABOR MARKET SOFTENING. >> I THINK THERE IS UNDERLYING
STRENGTH IN THE LABOR MARKET. >> COMING INTO QUESTION AS TO
HOW RESILIENT IT REALLY IS. >> WE WILL PROBABLY HAVE A
HEART--ISH LANDING. >> BLOOMBERG SURVEILLANCE WITH
TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOWICZ. JONATHAN:
IT IS PAYROLLS FRIDAY. GOOD MORNING. THIS IS BLOOMBERG ON TV AND
RADIO ALONGSIDE TOM KEENE AND LISA ABRAMOWICZ I AM JONATHAN
FERRO. YOUR EQUITY MARKET IS JUST
ABOUT POSITIVE ON THE S&P 500. YOUR ESTIMATE, 183. TOM: YESTERDAY THE CLAIMS CAME OUT
AND IT WAS A SNOOZE FEST. WE HAVE A SNOOZE FEST TODAY?
EITHER WAY, DO WE GET SOME FORM OF MAJOR MARKET RESPONSE?
IT HAS BEEN INTERESTING HOW MARKETS HAVE LOCKED DOWN SINCE
6:00 P.M. YESTERDAY. JONATHAN: THE FIRST CHAPTER OF A
THREE-PART ACT. LISA: HOW ARE THEY GOING TO INTERPRET
THIS GIVEN THAT THEY HAVEN'T PUSHED BACK BEFORE THE QUIET
PERIOD AS MUCH AS SOME THOUGHT THAT THEY MIGHT TO THE EASING
FINANCIAL CONDITIONS. TO GIVE YOU A SENSE HOW MUCH
FINANCIAL CONDITIONS HAVE EASED, THE EXTRA YIELD ON
HIGH-YIELD BONDS IT IS NOW THE LOWEST GOING BACK TO 2021.
WE ARE TALKING ABOUT A MASSIVE RETRACEMENT OF SOME OF THE RISK
ON TYPES OF FIELDS WHICH RAISES THE QUESTION, HAVE WE EASED TOO
MUCH GIVEN THE FACT THAT WE STILL HAVE A ROBUST LABOR
MARKET? JONATHAN: THE PUSHBACK THIS MORNING COMES
FROM J.P. MORGAN. HERE IS THE QUOTE ON THE RISK
REWARD AND EQUITIES AND OTHER RISK ASSETS, WORSE THAN CASH OR
BONDS? HE CALLS IT A CATCH-22 SITUATION THAT WE WOULD NEED TO
SEE MARKET DECLINES IN VOLATILITY BEFORE EASING OF
MONETARY CONDITIONS AND A MORE SUSTAINABLE RALLY. TOM:
HE LEADS IT WITH A SINGLE SENTENCE OF 2023.
HE THOUGHT THAT IT WOULD BE SLOW. IT WASN'T. HE WAS WRONG. PERIOD.
HE RE-CALIBRATES, LIKE EVERYONE ELSE, AND BETS FOR A MORE
SUBDUED MARKET. LISA: HOLD ON. THERE WAS THIS QUESTION WHERE
PEOPLE ARE BETTING ON HOW TO SLOW AND GROW.
DO YOU BET ON GROWING BEFORE THE SLOWING?
CAN YOU EXPECT SOME KIND OF REBOUND IN GROWTH IF WE HAVEN'T
EVEN SEEN THE DOWNTURN THAT IS NECESSARY TO GET THERE?
JONATHAN: THANK YOU FOR CLARIFYING. LISA:
YOU'RE WELCOME. JONATHAN: ON THE S&P, FUTURES JUST ABOUT
POSITIVE BY 0.05%. THREE DAYS WITHOUT GAINS ON THE
S&P. WE BOUNCED HARD LED BY BIG TECH, FOUND MARKET YIELDS A BIT
HIGHER. ON THE 10 YEAR, 4.1797. LISA:
THERE'S ONLY ONE EVENT TODAY, THE PAYROLLS REPORT FOR
NOVEMBER. EVEN IF WE GET A GOOD PAYROLLS
NUMBER, DO WE SEE AN ONGOING TICK UPWARD AND THE
UNEMPLOYMENT RATE? THE EXPECTATION IS IT TO STAY
AT THREE POINT 9%. IF IT GETS TO 4%, EVEN THOUGH
IT'S A GOOD NUMBER, DOES THAT CHANGE THE NATURE OF WHO IS
GETTING HIRED AND STAYING IN THE LABOR MARKET? IN THE 9:00 HOUR, OUR BLOOMBERG
ECONOMIST AND JULIE SU WILL JOIN JONATHAN FERRO.
I AM EXCITED FOR THIS ONE BECAUSE THIS IS IMPORTANT, IT
ACTUALLY IS, THE FIVE TO 10 YEAR INFLATION EXPECTATIONS
TICKED UP WITH THE HIGHEST LEVELS GOING BACK A DECADE.
DO SEE THAT CONTINUE OR COME BACK DOWN? THE EXPECTATION OF 3.2%, WHICH
WENT UP EVEN AS GASOLINE PRICES WENT DOWN. TOM:
HOW CAN WE LOOK OUT FIVE TO 10 YEARS? WHO IS MAKING THAT GUESS?
JONATHAN: YOU ASK THAT QUESTION EVERY
MONTH, TOM. IT'S A BEAUTIFUL THING. TOM:
I DON'T KNOW WHAT THE VALUE IS. JONATHAN:
A LOT OF WEIGHT ON IT AND ALL OF A SUDDEN DID NOT PUT A LOT
OF WEIGHT ON IT. KIND OF TURNED ITS BACK ON ALL
OF THAT. THE CHIEF ECONOMIST AT CITI,
GOOD MORNING. BEFORE WE GET TO THE BIG
OUTLOOK FOR 2024, LET'S TALK ABOUT A: 30 THIS MORNING. >> THE FORECAST FOR 180,000,
THIS IS NOT THE SEASONAL EXTREME OF THE YEAR.
WE ARE STILL IN A SEASONAL UPSWING IN HIRING IN THE MONTH
BUT NOT AS EXTREME AS OCTOBER. THE BIG PICTURE ON THIS IS THIS
YEAR EMPLOYMENT GAINS, A LITTLE MORE THAN HALF OF LAST YEAR'S
GAINS. WHAT IS COMING WILL BE SLOWER
STILL. THAT WILL MATTER FOR THE FED.
IT WILL BE IN A DIFFERENT SITUATION FURTHER PARTS OF THE
ECONOMY WHERE WE HAVE HAD THIS VERY LARGE REBOUND ON
LABOR-INTENSIVE SERVICES HIRING FOR A COUPLE OF YEARS NOW. IT HAS GIVEN US THIS PERIOD OF
MONETARY TIGHTENING DEEP INTO A PERIOD WHERE A LOT OF
INDUSTRIES HAVE ADJUSTING BUT LABOR HAS BEEN STRONG.
IT WILL BE INTERESTING WHEN THAT REVERSES IN THE COMING
YEAR. LISA: YOU AGREE THAT BAD NEWS IS NOW
BAD NEWS? ESSENTIALLY, IF YOU GET A RALLY
AND TREASURIES THAT IS GOING TO BE NEGATIVE FOR RISK ASSETS?
STEVE: BAD NEWS FOR WHO? FOR WHAT? I DON'T BELIEVE THIS. I THINK THE PRODUCTIVITY GROWTH
IS REBOUNDING. IT MAY HAVE GOTTEN EXAGGERATED
IN THE THIRD QUARTER. THE LABOR MARKET HAS BEEN
STRONG. MEASURED INFLATION WILL COME
DOWN. THE FEDERAL RESERVE WILL SWERVE
TO TRY TO PROTECT EXPANSION THAT WE HAVE AND THAT WILL BE
GOOD FOR FINANCIAL MARKETS. TOM: FIRST OF ALL, BAD NEWS IS BAD
NEWS IS DEFINED AS ONE SOTO GOING TO THE NEW YORK YANKEES
-- JUAN SOTO GOING TO THE NEW YORK YANKEES. YOU ARE THE SINGLE BEST I KNOW
AT FOLDING PROFITS INTO OUR ECONOMICS.
THE KEY THING ON LISA'S WONDERFUL OBSERVATION OF GROW
AND SLOW IS CAN YOU GET BOTH? CAN YOU GET A SLOWING ECONOMY
AND CORPORATIONS WILL ADJUST TO A LOWER NOMINAL GDP AND WILL
STILL GROW PROFITS? STEVE: IF WE LOOK AT THIS YEAR, FOR
THE MOST PART IT HASN'T BEEN A GREAT YEAR FOR PROFITS.
THE MIDYEAR EPS WAS DOWN 6%. THE MAJORITY OF INDUSTRIES HAD
A DECLINE IN PROFITS. THIS IS WHY THE S&P EQUAL
WEIGHT INDEX IS UP 6% AND THE HEADLINE IS UP 19 FOR MARKET
CAP. THIS IS WHY MOST STOCKS ARE NOT
DOING WELL, RIGHT? THIS IS NOT A COLLAPSE.
THIS IS NOT A DEPRESSED PERIOD WHERE YOU CAN HAVE A V-SHAPED
RECOVERY. PROFITABILITY I THINK WILL BE
COMING BACK. MANUFACTURING ACROSS THE WORLD
IS CONTRACTED FOR A YEAR, TRADE FALLING AS MUCH AS 9% ACROSS
THE WORLD. IT IS QUITE COINCIDENT WITH
WHAT IS GOING ON WITH PROFITS. YOU HAD THIS PRE-RECESSION IN
INDUSTRY. THE EMPLOYMENT SIDE, AGAIN, HAS
BEEN HELD UP I REBOUND IN SERVICES.EVERYTHING HAS BEEN
OUT OF SYNC SINCE THE PANDEMIC, AND EVERYTHING FOCUSES ON THAT,
BUT THAT'S THE PIECE THAT I THINK SLOWS GOING FORWARD. TOM:
GIVE US THE SP X PARLOR GAME. I DON'T KNOW WHAT CITIGROUP
SAYS, JUST YOUR BASIC IDEA. IF CORPORATIONS GROW CAN WE
HAVE A MORE OPTIMISTIC RESULT? STEVE:
A NEW RECORD HIGH IN CORPORATE PROFITS BY 2025.
HE WON'T BE AS GOOD AS THE CONSENSUS ESTIMATES, BUT THOSE
ARE KNOWN TO BE BIASED UPWARDS. I THINK WE WILL BEAT ESTIMATES
FOR THE NEXT COUPLE OF QUARTERS HANDILY WHILE RATES ARE COMING
DOWN AND THE FED IS SWERVING. TOM:
YOU ARE WHISPERING 6000 ON SPX? STEVE: SOMEDAY. JONATHAN:
UNBIASED TO THIS CALL ON STOCKS? STEVE:
WE, FOR THE LAST THREE OR FOUR MONTHS, HAVE BEEN FOCUSED MORE
IN ON U.S. PERFORMERS, SMALL AND MID-CAP
GROWTH STOCKS THAT ARE UNDER LEVERED.
WHY WERE THEY ALL LEFT BEHIND? LAST YEAR'S MAGNIFICENT SEVEN
HAD EPS DECLINES AND NOW THEY HAD BIG GAINS.
IF YOU LOOK AT THAT REVERSAL, I THINK THAT WE WILL GET OTHER
PIECES OF THE U.S. MARKET TO REBOUND.
THEN WE CAN BROADEN OUT TO THE WORLD LATER ON IN LATE 2024
INTO 2025. JONATHAN: ARE BANKS PART OF THAT STORY?
STEVE: IT IS INTERESTING. THEY ARE TRADING AT 45 RECORD
LOWS IN TERMS OF PERFORMANCE. THEY COULD BOUNCE BACK.
THIS ISN'T ABOUT LONG-TERM GROWTH.
WE SEE INTERESTING LONG-TERM GROWTH THAT I THINK WOULD BE
SUSTAINED FOR A LONGER PERIOD OF RECOVERY THEN BOUNCE BACK.
LISA: LOOKING AT CREDIT INTENSIVELY,
BECAUSE IT HAS BEEN MOVING ALONG WITH EQUITIES AND THEN
SOME. HIGH-YIELD BOND SPREADS WERE
THE LOWEST GOING BACK MORE THAN A YEAR, APRIL 2022.
OUTPERFORM THE SMALL CAPS, OUTPERFORMED A LOT OF ASPECTS
OF THE EQUITY MARKET. PEOPLE TALKING ABOUT A GOLDEN
ERA FOR CREDIT OF ALL SORTS. IS THAT FADING? STEVE:
I'M NOT SURE THAT THE RATE ENVIRONMENT SHOULD BE
DISCOUNTED ENTIRELY. IF YOU LOOK AT PRIVATE CREDIT
YIELDS, 12%. COMPANIES THAT ARE NOT PART OF
THE BOND MARKET PAYING 15% THAT ARE MONEY GOOD.
YIELD LEVELS, BORROWING COSTS ACROSS THE ECONOMY ARE UP A LOT.
LISA: RIDDLE ME THIS. HOW WE CAN HAVE COMPANIES THAT
GREW UP WITH PAYING 4% OR 5% FOR THEIR DEBT SUDDENLY HAVING
TO PAY 15% AND THAT DOESN'T SOMEHOW DIMINISH THEIR CREDIT
WORTHINESS IN A MATERIAL WAY? HOW HAVE WE GOT TO THE SPACE
WHERE THEY CAN SUDDENLY MANAGE PAYMENTS THAT FIVE YEARS AGO
PEOPLE SAID WAS AN IMPOSSIBILITY? STEVE:
WE NEVER REALLY GOT TO THE POINT TO EMBEDDING ZERO FOREVER.
I THINK THE FORTHCOMING MATURITY WALL IS PRETTY EMPTY
FOR 2024 FOR BOTH HIGH-YIELD AND HIGH-GRADE.
FURTHER OUT IT STARTS TO BECOME AN ISSUE.I THINK THAT WE
OVERSHOT ON RATES. THESE ARE MORE NORMAL YIELDS
THAN 2020. WE AREN'T GOING TO 1980 EITHER.
TOM: 2023 HAS BEEN ONE BIG VALUE
TRAP. IT IS A GENERAL STATEMENT. WHAT ARE THE SIGNALS WHERE ALL
OF A SUDDEN VALUE IS NOT A VALUE TRAP, IT HAS A VALUE?
STEVE: 2022 WAS THE PERIOD WHERE DEFENSIVE VALUE PERFORMED
REALLY WELL. LARGE CAP PHARMA. NOW YOU HAVE INTERESTING
STORIES, TALKING ABOUT A NARROW MARKET, DRUGS WITH TWO
COMPANIES. JONATHAN: IT IS MORE THAN JUST THAT.
STEVE: THROUGH TECH, THROUGH HEALTH
CARE, IT IS AN INCREDIBLY NARROW TAKE.
THE VALUE TRAP IS PARTIALLY A CONSEQUENCE OF THINGS ARE NOT
THAT GREAT FOR MOST COMPANIES. WHERE ARE THEY HEADED?
THEY SHOULD HIRE EVERYONE, THEY SHOULD HAVE 230,000 JOBS A
MONTH? NO, THEY WON'T. A LOT OF THE CYCLICALS I THINK
WILL RECOVER IN THE COMING YEAR. JONATHAN: ENERGY TOO? STEVE: WE ARE AT AN OIL PRICE, LET'S
REMEMBER THE LAST SESSIONS WHERE BRENT REACHED LOWS
AVERAGING $24 A BARREL AFTER THE LAST FOUR DOWNTURNS. WE THINK THAT OUR TAKE ON
OPEC, THEY ARE MANAGING TO DECLINE IN TERMS OF THEIR
OUTPUT AND INFLUENCE BUT BOOST THE OIL PRICE IN THE PROCESS.
THEY ARE GIVING A GIFT TO OIL PRODUCERS. TOM:
YOU HAD TO CALL THE YEAR. WHAT DID YOU DO WHEN MORRIS
WALKS OUT THE DOOR? HE HAS ANNOUNCED HIS RETIREMENT.
WHAT DO YOU DO ON HYDROCARBONS IF A GUY LIKE MORRIS EXITS
STAGE RIGHT? STEVE: HE HAS BEEN A GREAT PARTNER AND
WE WILL CONTINUE TO USE A STRONG COMMODITIES TEAM. 75, NOT 24. JONATHAN:
THE AVERAGE IS 24 OVER THE LAST FOUR DOWNTURNS. STEVE:
THERE IS A LOT OF RISKY OIL AROUND THE WORLD.
RUSSIA AND IRAN ARE 20% OF WORLD OUTPUT.
THEY HAVE ALL OF THE INCENTIVES IN THE WORLD TO KEEP PRODUCING,
THE OIL PRICE ON AVERAGE THAT WE THINK OPEC CUTS WILL BE
HIGHER AND THAT WILL BENEFIT ALL SORTS OF CONVENTIONAL
HANDHOLDS COMPARED TO WHERE THEY WOULD BE BEFORE THE
COLLAPSED OIL PRICE. JONATHAN: THE NUMBERS COULD BE DISTORTED
FROM THE NEGATIVE PRICES WE HAD THREE YEARS AGO. STEVE:
I'M NOT COUNTING FUTURES, I AM COUNTING SPOTS. JONATHAN:
INTERESTING. APPRECIATE THAT CLARIFICATION.
BROADER PRICE ACTION GOING INTO PAYROLLS, THE EQUITY MARKET,
FUTURES JUST ABOUT POSITIVE BY 0.05% ON THE S&P.
YIELDS NORTH OF 4.1%, GETTING CLOSER TO 4.20%. LISA:
REALLY, THIS IS THE STABILITY THAT PEOPLE WERE LOOKING FOR.
THE SENSE THAT WE ARE NOT CRATERING OR SKYROCKETING EVEN
ON THE HEELS OF A POTENTIAL SHIFT IN THE BANK OF JAPAN
POLICY. THAT WE ARE GETTING SUCH MINOR
MOVES HIGHLIGHTS HOW MUCH THE LANDSCAPE HAS SHIFTED AND HOW
MUCH PEOPLE ARE STABLE IN THIS LANDSCAPE. JONATHAN:
THERE IS NOTHING STABLE ABOUT DOLLAR-YEN YESTERDAY AFTERNOON.
3.8%. THAT CURRENCY CRATERED IN THE
AFTERNOON. TOM: SOME OF THE MOVEMENT PERSISTS
THIS MORNING AS WELL. IT SETS US UP FOR SUNDAY
EVENING OUR TIME. THEY ARE GOING TO DO THIS OVER
THE WEEKEND. JONATHAN: HIKE RATES OVER THE WEEKEND?
TOM: I HAVE BLOWN OUT MY ENTIRE
WEEKEND CALENDAR. I WAS GOING TO DECORATE THE
TREE, BUT WE WILL WAIT. >> THEY SAY THEY WILL ELIMINATE
HAMAS. I DON'T THINK THAT THAT IS A
POSSIBLE GOAL TO ACHIEVE BECAUSE HAMAS IS IN LEBANON,
THE LEADERSHIP EVERYONE KNOWS IS IN QATAR, THE WEST BANK, AND
SO ON AND SO FORTH. WHAT IS NEEDED, REALLY, IS A
SITUATION IN WHICH PALESTINIAN UNITY SHOULD BE ALLOWED THE
FUNCTION ON A VERY CLEAR AGENDA. LISA: THAT WAS THE -- JONATHAN: THAT WAS THE PALESTINIAN PRIME
MINISTER AND THE WEST BANK ON THE CHALLENGES THAT ISRAEL
FACES IN ITS GOAL OF DESTROYING HAMAS.
PAYROLLS ARE JUST AROUND THE CORNER INTO TWO HOURS AND 13
MINUTES. THIS MORNING, T.K., VERY CLOSE
TO 180K. EQUITY FUTURES ARE GOING
ABSOLUTELY NOWHERE. TOM: I WILL GO TO WHERE LISA WAS
EARLIER ON SOMETHING AS BORING AS THE UNEMPLOYMENT RATE. YOU WILL HAVE CONVERSATION
WITH THE DEPARTMENT OF LABOR. THERE'S A DIFFERENCE OF 3.9 TO
4.0 TO THREE .8 THAT MAY BE -- 3.8.
THAT MAY DO MORE THAN ANY OTHER DATA POINT. LISA:
HALF A PERCENT INCREASE IS A KEY METRICS AS WE HEAD INTO
WHATEVER IS NEXT. TOM: THERE IS OVER ANALYSIS, EXCEPT
TODAY IT MAY MATTER. JONATHAN: EVERYONE WILL BE TALKING ABOUT
THAT RULE, MAYBE BUTCHERING IT. WE WILL GET CLARIFICATION ON
WHAT SHE THINKS IT MEANS. TOM: INTO THE WEEKEND WE WILL SEE
MORE NEWS AND MYSTERY OUT OF THE WAR IN THE EASTERN
MEDITERRANEAN. THE HUGE ADVANTAGE OF THE
SERVICES, FORMER SENIOR U.S. INTELLIGENCE OFFICIAL AND
NONRESIDENT SENIOR ADVISOR OF THE TRANSNATIONAL THREATS
PROJECT, THANK YOU FOR THE FRIDAY VISIT THIS MORNING.
I SEE SECRETARY BLINKEN ESSENTIALLY LECTURING THE
ISRAELIS. IT IS THE ISRAELI MILITARY, I
BELIEVE FOUR MILES FROM THE EGYPTIAN BORDER, THERE SEEMS TO
BE TWO CONVERSATIONS. A MILITARY PROSECUTION OF WAR,
CONFLICT, AND, AS LISA HAS BEAUTIFULLY SAID, THE AFTER THE
DEBATE MATTER. WHICH IS MORE IMPORTANT? >> GOOD MORNING.
BOTH ARE NOT ONLY IMPORTANT BUT THEY MUST TAKE PLACE IN
PARALLEL. THERE ARE SEVERAL CONVERSATIONS
IN THE REGION. YOU HAVE THE ISSUE THAT
ISRAEL REMAINS COMMITTED TO THE ERADICATION OF HAMAS AS A
MILITARY THREAT. THE UNITED STATES IS COMMITTED
TO PROVIDING THEM WITH MATERIAL SUPPORT IN THE POLITICAL SPACE
TO GET THIS DONE AND RECOVER HOSTAGES. YOU HAVE A VERY REAL
HUMANITARIAN CRISIS THAT IS GETTING WORSE DAILY THAT MUST
BE ADDRESSED. THIS WILL PUT LIMITS ON ISRAELI
OPERATIONS. THE DAY AFTER, YOU HAVE A
SERIES OF GROWING DIPLOMATIC EFFORTS INVOLVING MULTIPLE
INTERNATIONAL PARTNERS TO PUT TOGETHER A STRUCTURE THAT
DOESN'T HAVE VERY STRONG SCAFFOLDING.
THE PALESTINIAN AUTHORITY, ISRAELIS, EVEN THE
INTERNATIONAL COMMUNITY IS NOT WELL STRUCTURED TO SUPPORT A
DAY AFTER ARCHITECTURE AT PRESENT. LISA:
YOU ARE SAYING THAT ISRAEL'S GOAL HAS NOT CHANGED AND WE
WERE JUST HEARING FROM THE PRIME MINISTER OF THE
PALESTINIAN AUTHORITY SAYING THAT IS NOT POSSIBLE TO GET RID
OF HAMAS. WHAT IS YOUR SENSE ON THAT?
NORMAN: IT IS POSSIBLE FOR ISRAEL TO
KILL HAMAS' SENIORMOST MILITARY LEADERSHIP, AND THEY ARE DOING
A PRETTY GOOD JOB WITHIN GAZA RIGHT NOW.
THEY HAVE TAKEN OUT SEVERAL DOZEN HAMAS LEADERS.
THEY WILL ALSO BE ABLE TO DESTROY MUCH OF HAMAS’'
MILITARY CAPABILITY, BUT I DON'T THINK THAT ISRAEL
BELIEVES IT WILL BE ABLE TO KILL 33,000 FIGHTERS.
THERE ARE OPERATIVES IN THE WEST BANK, LEBANON, AND QATAR.
IF YOU GO INTO THE PALESTINIAN PRIME MINISTER'S COMMENTS, IF
HE WANTS TO MAKE, SAY JUNIOR MEMBER OF THE PALESTINIAN
COALITION WILL THEY ACCEPT THE STATE OF ISRAEL OR WILL WE HAVE
A COALITION IN PALESTINE HAS A PROMINENT PARTNER THAT WOULD
LIKELY WIN AN ELECTION THAT IS DEDICATED TO THE ERADICATION OF
THE STATE OF ISRAEL? LISA: I HAVE TO WONDER WHAT ISRAEL IS
LOSING IN THE PROCESS AS THIS DRAGS ON, BECAUSE THERE ARE
THOUSANDS DYING AND YOU MENTIONED THE HUMANITARIAN
CRISIS THAT IS MOUNTING. A LACK OF ACCESS TO CLEAN WATER
AND HEALTH CARE, CROWDED CONDITIONS.
THIS IS CREATING AND BREEDING DISEASE AND HUNGER THAT COULD
POTENTIALLY KILL MORE PEOPLE THAN THE CONFLICT.
AT WHAT POINT DO YOU GET ON BOARD WITH LLOYD AUSTIN WHEN HE
SAYS THAT ISRAEL RISKS A STRATEGIC DEFEAT EVEN IF THEY
WIN IN THEIR OBJECTIVE? NORMAN: ISRAEL PROBABLY HAS A MATTER OF
WEEKS LEFT TO CONDUCT THESE OPERATIONS THROUGH MID TO LATE
JANUARY.IT IS IMPORTANT TO UNDERSTAND THAT HAMAS KNOWS
THIS AND IS USING THESE HUMANITARIAN LOSSES TO BUILD
WORLD OPINION AGAINST ISRAEL. HAMAS' SURVIVAL RESTS WITHIN
THE CONCEPT OF THERE IS ENOUGH TREASURE ON ISRAEL TO STOP
OPERATIONS HAMAS SURVIVES, THE RESISTANCE IS PROVEN
SUCCESSFUL, AND THAT COULD DOOM A TWO STATE SOLUTION BECAUSE
HAMAS, WHICH SURVIVED, IS COMMITTED TO THE ERADICATION OF
ISRAEL. TOM: HOW DO YOU HAVE A TWO STATE
SOLUTION WITH A STATE LIKE,'S? -- LIKE HAMAS? NORMAN:
YOU CAN'T. YOU NEED A PALESTINIAN
GOVERNMENT THAT IS WILLING TO ACCEPT ISRAEL JUST LIKE YOU
NEED AN ISRAELI GOVERNMENT FOR PALESTINE. TOM: YOU ARE SUGGESTING BASED ON
DECADES OF EXPERIENCE THAT ISRAEL IS DONE WITH WHATEVER
THEY ARE DONE WITH. THEN WHAT? NORMAN:
THERE IS A SIGNIFICANT, ROBUST, DIPLOMATIC EFFORT BEHIND THE
SCENES NOW TO BUILD THIS. THIS IS VERY CHALLENGING.
WILL PRIME MINISTER NETANYAHU SURVIVE?
CAN THE PALESTINIAN AUTHORITY RUN GAZA?
IS THE INTERNATIONAL COMMUNITY WILLING TO PUT SKIN IN THE GAME
AND RESOURCES FOR WHAT WILL BE LONG-TERM CONTENTIOUS
NEGOTIATIONS? NONE OF THIS SHOULD BE TAKEN
FOR GRANTED BUT ALL IS REQUIRED IF WE ARE TO PREVENT THIS FROM
HAPPENING AGAIN. IRAN AND ITS PROXIES WON'T
STAND BY IDLY WHILE THIS IS OCCURRING.
THEY WILL WANT TO DO THE SAME THING IN TWO-STATES TALKS GOING
FORWARD. JONATHAN: WHAT CAN WE DO ABOUT THE IRAN
ISSUE? NORMAN: IRAN HAS TRADITIONALLY
CONSTRAINED ITS ACTIVITIES WHEN IT FACES MULTILATERAL PRESSURE,
ECONOMIC PRESSURE, DIPLOMATIC ISOLATION, AND A GENUINE
FEELING OF MILITARY RETALIATION. FRANKLY, ALL THREE OF THOSE ARE
ABSENT AT PRESENT. ITS PROXIES FIRE WITH LITTLE
RESPONSE, THE INTERNATIONAL COMMUNITY IS FRAGMENTED, AND AT
PRESENT WE JUST HAVE TO HAVE ASSETS IN PLACE FOR A WORSE
CASE SCENARIO AND ACCEPT THAT IRAN WILL KEEP THINGS BUBBLING
IN VARIOUS LOCALES, MUCH LIKE THEY ARE DOING AT PRESENT.
JONATHAN: NORMAN, THANK YOU. WE HAVE TO GO BACK ONLY A
COUPLE OF MONTHS. WE ARE ON THE BRINK OF SOME
KIND OF DIPLOMATIC AGREEMENT BETWEEN SAUDI ARABIA AND ISRAEL
THAT IS NOT IN IRAN'S INTEREST AT ALL. TOM: EVERY TIME HE IS ON I LEARNED
SOMETHING AND ALL OF A SUDDEN I HAVE A FIVE-WEEK WINDOW.
HE IS EXPERIENCE SAYING THAT THIS MILITARY EFFORT IS FIVE
WEEKS, FOUR WEEKS, SIX WEEKS, GIVE IT SOME WIGGLE ROOM.
IT IS EXTRAORDINARY. LISA: THERE HAS BEEN A QUIET FROM
SAUDI ARABIA. I THINK IT IS IMPORTANT TO NOTE
THAT THERE IS A REAL QUESTION AROUND WHAT THE POLITICAL
PRESSURE IS TO STOP THIS WAR FROM OTHER COUNTRIES THAT WERE
PREVIOUSLY PUTTING OUT RHETORIC THAT DID NOT MATCH THEIR
ACTIONS. IT RAISES THE QUESTION, WHAT
ROLE WILL SAUDI ARABIA PLAY? WHAT ABOUT QATAR AND SOME OF
ITS NEGOTIATIONS TO GET MORE HOSTAGES? TOM: I DID A PANEL YEARS AGO THAT I
WON'T NAME THE UNIVERSITY WITH FANCY PEOPLE AND THEY WERE
TRYING TO FIGURE OUT WHAT THE AFGHANISTAN SOCIETY WILL LOOK
LIKE AFTER THE WAR. SERIOUSLY, IT WAS THE MOST
SURREAL PANEL I'VE EVER DONE, AND THERE HAVE BEEN SOME
DOOZIES. THE ANSWER IS THAT IS HOW I
FEEL ABOUT THIS. WE ARE TALKING ABOUT WHAT WILL
BE OUT THERE AND WE ARE PROSECUTING A MASSIVE
HAND-TO-HAND COMBAT FOUR MILES FROM THE EGYPTIAN BORDER. JONATHAN:
I DON'T KNOW THE SECRECY IS ALL ABOUT, BUT ALL RIGHT.
WE WILL TURN TO THE LABOR MARKET TWO HOURS TO GO. YOUR ESTIMATE, 183,000, THE
PREVIOUS NUMBER 150K. JONATHAN:
TWO HOURS FROM THE JOBS REPORT, THE S&P 500, DESCENT DAY OF
GAINS. THE NASDAQ DOING NICELY AS WELL.
THIS MORNING, LITTLE BIT LOWER BY .1% ON THE NASDAQ, A LITTLE
HIGHER ON THE S&P 500. GOING ABSOLUTELY NOWHERE.
IN THE BOND MARKET WE HAVE BEEN GOING SOMEWHERE.
DOWN A TON FROM THE MORNING OF THE LAST JOBS REPORT NO CLOSE
TO 4.50 .DOW - 12,123.45 (NO COMMA -- CLOSE TO 4.50. TOM:
4.99 PERCENT THE LAST JOBS DAY. JUST THE DAY BEFORE TO 4.62 ON
THE TWO-YEAR. THE 10 YEAR YIELD WAS FOUR
POINT WHATEVER. I THINK THAT FRAMES IT ACROSS A
JOBS REPORT LOWER YIELDS. JONATHAN:
IS THERE A SPLIT BETWEEN THE ECONOMIC DATA, THE PRICING AND
WHAT WE ARE GETTING IN TERMS OF COMMUNICATION FROM THE FEDERAL
RESERVE? TOM: THERE HAS BEEN A CONSENSUS VIEW
THAT THE JOB MARKET WILL WEAKEN AND WE ARE WAITING. JONATHAN:
LISA, HAS THIS BEEN VALIDATED BY THE DATA? LISA: NOT WITH RESPECT TO ECONOMIC
DATA. WE HEARD STEVE WHITING BASICALLY SAY, BAD NEWS FOR WHO?
I HAVE SEEN AN INCREASE IN PRODUCTIVITY AND EMPLOYMENT IN
DIFFERENT METRICS. THE DISINFLATION HAS BEEN
NOTABLE AND THAT IS THE DATA THAT HAS SHIFTED AND SPURRED
PEOPLE TO HAVE A BID INTO BONDS EVEN WITH A CONSTRUCTIVE BACK
DROP IN THE LABOR MARKET THAT WE COULD GET IMMACULATE
DISINFLATION, THAT IT WAS TRANSITORY.
IT IS THE RETURN OF A NARRATIVE THAT NO ONE IS SAYING THAT THIS
IS THE NARRATIVE THEY ARE FOLLOWING. JONATHAN:
THE DATA WAS DECENT, DISAPPOINTING TO EXPECTATIONS
BUT THE OUTLOOK WAS STRONG. WE HAVEN'T SEEN A
RE-ACCELERATION OF INFLATION. THE BEST WAY TO CAPTURE THAT
THIS WEEK IS THE ISM HEADLINE NUMBER WAS DECENT.
TO LISA'S POINT ON PRODUCTIVITY, BETTER.
LABOR COSTS, AND DOWN. THESE ARE THINGS THAT THE FED
WAS SHOOTING FOR 12 MONTHS AGO. TOM:
THE DISINFLATION BENEFITS THE HAVES WITHIN THE FINANCIAL
WITHIN THE AMERICAN EXPERIMENT. THOSE DOING FINANCE WIN AND THE
REST OF AMERICA, THERE IS A LOT OF PAIN.
IN THE LAST 48 HOURS IT WAS GRIM. LISA:
YOU CAN SEE THAT THE DOLLAR STORES ARE NOT DOING AS WELL AS
YOU WOULD EXPECT DURING THIS KIND OF TIME.
THERE ARE MANY DIFFERENT LAYERS, AND THIS IS WHY WE KEEP
TALKING ABOUT ROLLING RECESSIONS, ROLLING ECONOMIES,
ROLLING MARKET SHIFTS. NONETHELESS, THE BOTTOM LINE
IS, CAN WE HAVE A JOB SLOW DOWN WITHOUT ANY PAIN?
CAN WE GET SOME SLOWING AND COOLING WITH IT NOT BEING BAD
NEWS? TO EVERYTHING BEING GOLDILOCKS
UNTIL IT IS JUST AMAZING? IS THERE A BAKED IN
UNDERSTANDING OF WHAT 2024 WILL LOOK LIKE?
HOW MUCH OF THE REBOUND HAVE WE SET OFF THE BACK OF THE FEDERAL
RESERVE? HOW MUCH HAS BEEN ABOUT FEDERAL
RESERVE POLICY? IF YOU DO BELIEVE IT IS YET TO
COME THROUGH, IT IS COMING TO AN ECONOMY NEAR YOU? LISA:
THAT IS WHAT WE HAVE TO KEEP IN OUR MINDS AND WHY I WAS ASKING
ABOUT CREDIT. YOU HAVE TO THINK COMPANIES
THAT GOT USED TO PAYING 5% WILL BLINK AGAIN IF THEY HAVE TO PAY
15%. A LOT OF PEOPLE WOULD SAY THAT
THE TIGHTENING AND DISINFLATION IS THE IMMACULATE DISINFLATION,
TRANSITORY, AND HAS TO DO WITH YEAR-OVER-YEAR COMPS ON THE
HEELS OF THE PANDEMIC. TOM: YOU MENTIONED TRANSITORY THREE
TIMES. LISA: BECAUSE THAT IS WHAT PEOPLE ARE
SAYING. JONATHAN: BIG ON THE T-WORD, THIS ONE.
LET'S GET TO THE EURO AGAINST THE DOLLAR SHAPING UP AS
FOLLOWS. 1.0783. HERE ARE YOUR TOP STORIES ON
SURVEILLANCE THIS MORNING COUNTING DOWN TO THE JOBS
REPORT TWO HOURS AWAY. THE MEDIAN ESTIMATE ON OUR
SURVEY CALLING FOR 183,000, A WIDE RANGE OF VIEWS ON THE
STREET. DEUTSCHE BANK DOWN THE LOW END
AT 130K. IAN SHEPHERDSON OF PANTHEON
ECONOMICS, 275. LISA: I HAVE THIS IN EVERY LABOR
MARKET REPORT, BUT IS IT GOING TO MATTER OR WILL IT BE IN THE
PAY RAISES, THE JOBLESS RATES, OTHER METRICS THAT PEOPLE ARE
LOOKING AT TO CONFIRM EITHER GOLDILOCKS, SLOWDOWN, OR
REACCELERATION DOWN THE LINE? JONATHAN: WHAT IS THE UAW BUMP?
40K? WE HAVE TO SUBTRACT THAT AND
FOCUS ON UNEMPLOYMENT WAGES. THAT IS LIKE THE GUIDEBOOK FOR
LATER. OUT OF CHINA, THE TOP PARTY
LEADERS PLEDGING TO BOOST THE ECONOMY.
PRESIDENT XI JINPING SAYING THE COUNTRY WILL STEP UP AND BE
FLEXIBLE WITH MONETARY POLICY HAVING PREVIOUSLY TALKED ABOUT
BEING FORCEFUL. WE ARE READING THE TEA LEAVES.
CHINA LOOKING TO FEND OUTFLOWS IN THE PROPERTY MARKET AND A
CREDIT DOWNGRADE FROM MOODY'S EARLIER THIS WEEK.
THE FINANCIAL TIMES GIVING A BIT OF COLOR.
THE LEAD PARAGRAPH, MOODY'S ADVISE STAFF IN CHINA TO WORK
FROM HOME AHEAD OF ITS CUT TO THE OUTLOOK FOR THE COUNTRY'S
SOVEREIGN CREDIT RATING. A SUGGESTION THAT STAFF
BELIEVED WAS PROMPTED BY CONCERN OVER BEIJING'S POSSIBLE
REACTION. TOM: ON LIBERTY, JOHN GRAY, THE
BOTTOM LINE IS THAT YOU HAVE TO CLEAR MARKETS.
HOW DO YOU CLEAR A BALANCE SHEET CHALLENGE LIKE PROPERTY
MARKETS WITH THE GOINGS-ON, THE INCOME STATEMENT-LIKE MATTER OF
THE CHINESE PEOPLE AND CHINESE ECONOMY GIVEN A TOTALITARIAN
REGIME? THIS IS AN ORIGINAL EXPERIMENT.
LISA: THEY DON'T REALLY WANT TO INCREASE LEVERAGE, SO THEY WILL
HAVE THE MARKETS BASICALLY TAKING SOME OF THESE
PROCLAMATIONS OF WE WILL SUPPORT RINGS, WE WILL SUPPORT
YOU, AND EVERYONE IS SAYING, YOU HAVE BEEN SAYING THAT. TOM:
HOW DO YOU WRITE DOWN BALANCE SHEET LOSS? JONATHAN:
CAN WE TRUST RESEARCH ON CHINA RIGHT NOW FOR ANYONE WHO HAS A
PRESENCE IN CHINA? MOODY'S REPORTEDLY KEPT PEOPLE
AT HOME AHEAD OF THE DOWNGRADE BECAUSE THEY ARE WORRIED ABOUT
RETALIATION AND WHAT WOULD HAPPEN? LISA:
THIS, BUILDING ON THE FACT THAT CHINA ADVISED RESEARCH ARMS OF
BANKS NOT TO PUBLISH ANYTHING NEGATIVE.
IT RAISES THE QUESTION, WHAT DO YOU WANT TO PUBLISH.
IF YOU CANNOT BE ANALYTICAL AND YOU CAN'T BE SKEPTICAL, WHAT
ARE YOU DOING? TOM: IT IS A WAIT-AND-SEE ISSUE.
WE HAVE SEEN THE CYCLE MANY TIMES BEFORE ON THE CHINESE
BALANCE SHEET. DOES IT UNRAVEL WITH
WRITE-DOWNS AND POLICY PRESCRIPTIONS OF THOUSANDS OF
PEOPLE IN CONGRESS? IS THERE A NEW CALCULUS FOR
PRESIDENT XI? WE DON'T KNOW. JONATHAN:
THE FAMILY BEHIND THE LUXURY BRAND HERMES IS EUROPE'S
RICHEST WITH WEALTH OF MORE THAN $150 BILLION ACCORDING TO
BLOOMBERG REPORTING. THE FAMILY FORTUNE UP 59% FROM
LAST YEAR WHILE SHARES OF HERMES HAVE RISEN 35% THIS YEAR
FAR OUTPACING RIVALS. T.K., YOU KNOW THIS FAMILY
INSIDE AND OUT? TOM: THIS IS THE FIRST OF THE
WEEKEND, NOT BECAUSE IT IS A FANCY LUXURY THING, BUT BECAUSE
IT IS WHERE A FAMILY SAID NO. 15 YEARS AGO, THEY SAID TO THE
GUY THAT RUNS LVMH YOU ARE NOT GOING TO TAKE US OUT.
THAT IS PART OF THE STORY AND IS THE WAY THAT THEY DID THAT.
THE ONE THING THAT I WOULD SAY IS IMPORTANT WITH THE FAMILY
AND HERMES IS THAT THEY HAVE TAKEN OVER THE CRAFT FRENCH
LABOR ECONOMY BY SETTING UP LITTLE OUTPOSTS ALL OVER FRANCE
BASICALLY TO CO-OPT THE POLITICIANS.
IT WORKS LIKE A CHARM, PARTICULARLY ON FRIDAY JOBS DAY
WITH GUILT YOU HAVE TO MAKE AN APPEARANCE. LISA:
THEY'RE GOOD WITH SELECT RESTRICTIONS IN TERMS OF
SCARCITY AND REALLY GOOD AT SAYING CHOICE WORDS TO LVMH
AFTER RISING 1000%. JONATHAN: WHAT ARE THOSE CHOICE WORDS?
LISA: THEY ARE FANTASTIC WORDS I WON'T SHARE, BUT A GREAT WAY OF
SPURNING LVMH. [LAUGHTER] JONATHAN: LISA. TOM: SAVING US SHOPPING DAILY AT
HERMES. JONATHAN: THERE IS AN EXTRA LAYER TO
BRAMO. YOU JUST HAVE TO KEEP PUSHING.
TOM: HIGH-FREQUENCY ECONOMICS, I
LOVE YOUR REPORT. IT IS VERY WHAT I WILL CALL
CENTRIC. PREDICTABLE ABOUT THIS JOBS
REPORT. WHAT IS THE UNPREDICTABLE ITEM
AT 8:30 THIS MORNING? >> GOOD MORNING.
LOOKING BEYOND THE HEADLINES NUMBER WE ARE SEEING JOBS
GROWTH IS STRONG. IT HAS DECELERATED A LITTLE
FROM THE 2023 NUMBERS FROM 2020 TUBE, BUT IT IS THE
UNEMPLOYMENT RATE. WE SAW A DECLINE IN THE
CIVILIAN LABOR FORCE AND THAT IS THE PART THAT I WOULD EXPECT
-- THE LABOR FORCE PART WAS AN ANOMALY.
IT IS THE EMPLOYMENT PORTION OF IT, WILL THAT PERSIST?
THE UNEMPLOYMENT RATE WILL BE IMPORTANT AND IS SOMETHING THE
FED WILL BE WATCHING BECAUSE AS INFLATION CONTINUES TO
ACCELERATE -- TO DEACCELERATE, WE THINK THAT IS STILL IN THE
PIPELINE AND WILL AFFECT THE GROWTH TRAJECTORY, LABOR MARKET
AND GROWTH TRAJECTORY. LISA: ONE THING WE HAVEN'T TALKED ABOUT IS THE HOURS WORKED EVERY
WEEK. THIS IS SOMETHING THAT I SEE
INCREASINGLY AND ECONOMIC REPORTS, THAT THEY ARE COMING
DOWN. THIS IS THE PRECURSOR TO A MORE
SIGNIFICANT SOFTENING. HOW IMPORTANT IS THE HOURS
WORKED EACH WEEK? >> EXTREMELY IMPORTANT.
IT GIVES A SIGNAL ABOUT THE CONDITIONS IN THE LABOR MARKET
AND HOW MUCH LABOR IS BEING PUT TO USE. THE END OF THE DAY WE ALSO HAVE
TO THINK ABOUT THE UNDERLYING MOMENTUM. THAT IS STILL STRONG.
THE UNDERLYING MOMENTUM IN THE ECONOMY IS STILL POSITIVE. WE ARE GETTING SIGNALS OF JOB
OPENINGS DECLINING, BUT WE ARE NORMALIZING.
WE ARE NOT SEEING YET ANY SIGNAL ABOUT THE SUBSTANTIAL
WEAKENING THAT WILL BE THE LAST SIGNAL FOR POLICYMAKERS. LISA:
HOW MUCH OF WHAT WE ARE SEEING WITH A DISINFLATION AND
NORMALIZATION IS DUE TO FED POLICY AND HOW MUCH IS DUE TO
THE T-WORD THAT I KEEP REPEATING BECAUSE NO ONE ELSE
WILL? THIS IS TRANSITORY AND A NORMALIZATION AFTER THE
PANDEMIC? >> THIS IS SOMETHING THAT WE
DISCUSSED FREQUENTLY AND WE FIND THAT WHEN WE LOOK BACK
YEARS FROM NOW THAT MAYBE THIS WILL BE REFERRED TO AS A
TRANSITORY PERIOD OF INFLATION. A LOT OF IT IS SUPPLY SIDE
EFFECTS. DEMAND IS STILL STRONG IN THIS
ECONOMY AND THE FED'S RATE HIKES HAVE WORKED ON CERTAIN
SECTORS LIKE MANUFACTURING AND HOUSING, BUT THE HOUSEHOLD
SECTOR HAS BEEN EXTREMELY ROBUST AND RESILIENT.
THIS IS WHERE WE THINK THAT THE RISKS LIE.
BUT THE FULL EFFECTS WILL SHOW UP.
PANDEMIC-RELATED EFFECTS, LIKE DEMAND FOR CERTAIN SERVICES,
THOSE WILL RECEDE AND WE WILL SEE A MORE SUBSTANTIAL SLOWDOWN.
WE ARE STILL LOOKING FOR A SOFT LANDING, WE STILL THINK THAT
RECESSION IS NOT THE MOST LIKELY OUTCOME, BUT WE THINK
THAT RECESSION RISKS ARE LITTLE HIGHER NOW BECAUSE OF THE
EFFECTS OF WHAT THE FED HAS DONE AND WHAT THAT WILL DUE TO
THE DEMAND-SIDE OF THE ECONOMY. JONATHAN:
THIS IS WHY FOR SO MANY BAD NEWS IS JUST BAD NEWS. TOM:
I LOOK AT THIS ON A DEMOGRAPHIC BASIS.
EVERYONE DISAGREES WITH ME ON THIS. I DISAGGREGATE LABOR
STATISTICS. TO ME THERE ARE THREE AMERICANS
IN THIS JOBS REPORT. THERE IS A WHOLE PART OF
AMERICA THAT WITNESSED THE BANKRUPTCY CHART THAT I SAW THE
OTHER DAY THAT IS NOT PARTICIPATING IN THE FUN AND
FESTIVITIES. JONATHAN: THANK YOU, HIGH-FREQUENCY
ECONOMICS. IN THE LAST 24 HOURS AT J.P.
MORGAN IN THE INVESTMENT BANK, A CATCH-22 SITUATION.
WE NEED TO FIRST SEE MARKET DECLINES AND VOLATILITY BEFORE
THE EASING OF MONETARY CONDITIONS AND A MORE
SUSTAINABLE RALLY. TO YOUR POINT, YOU NEED TO SLOW
BEFORE YOU SEE THE GROW? LISA: DO YOU HAVE TO?
LIKE WE HEARD FROM STEVE WHITING, IF YOU GET
DISINFLATION THE FED DOES NOT NEED TO SEE THIS LOW IN THE
ECONOMY JUST THE SLOW IN INFLATION.
THEN EVERYTHING IS COPACETIC AND THEY CAN KEEP CUTTING RATES.
THE BOTTOM LINE, ACTUALLY YESTERDAY I WANT TO APOLOGIZE
FOR SOMETHING. THERE IS ESSENTIALLY A STIMULUS
EFFORT TO INDIVIDUALS. JONATHAN: I LOVE THIS. YOU GOT HOME.
I WALKED BACK THIS SHOW EVERY DAY -- TOM:
I'VE NEVER DONE THAT. JONATHAN: I AM LISTENING TO LISA AND I'M
THINKING THAT THIS IS TOO BULLISH. YOU DID THE SAME THING
YESTERDAY. LISA: I REALIZED I WAS MISSING
SOMETHING. I GOT IT. PEOPLE ARE GOING TO SPEND MORE
AND IT WILL FUEL INFLATION BECAUSE OF THE TAX CUT.
JONATHAN: WHAT WAS YESTERDAY ABOUT? >> ALL HEALTH CARE, IT FEELS
LIKE, HAS BEEN DISCOUNTED BECAUSE OF WHAT THESE DRUGS
WILL DUE TO THE SYSTEM. AGAIN, IT WILL DO SOME GOOD
PROBABLY TO THE SYSTEM LONG-TERM, BUT NOT ALL MED
DEVICES, NOT ALL HEALTH CARE COMPANIES IN GENERAL WILL BE
HURT FROM THIS. THERE WILL BE SOME THAT BENEFIT
FROM IT. JONATHAN: BULLISH ON THE HEALTH CARE
SECTOR. HEALTH CARE LIKELY TO PLAY A
BIG PART IN TODAY'S JOBS REPORT ACCORDING TO THE TEAM AT
BLOOMBERG ECONOMICS. AND -- ANNA WONG, WRITING WE
EXPECT TO SEE FLAT TO MARGINAL GAINS AND OTHER SECTORS WITH
OUTRIGHT DECLINES IN MANUFACTURING, FINANCIAL
ACTIVITIES, AND PROFESSIONAL AND BUSINESS SERVICES. LISA:
IAN SHEPHERDSON, 275,000. BACK OUT 40,000 FROM THE STRIKE
AND 50,000 FROM GOVERNMENT HIRING AND HEALTH CARE, CAN YOU
SAY THAT IS A BULLISH SIGN FROM OUR ECONOMY WHEN THESE ARE
STAPLES AND HIRING THAT GOES TO SOMETHING OTHER THAN GROWTH?
TOM: I'M GLAD THAT YOU BROUGHT UP
THIS QUOTE FROM ANNA WONG, BECAUSE SHE HAS HAD A TERRIFIC
2023 GOING UP TO HIGH RATES AND BOOM IT TURNED ON A DIME. FOR SOMEONE LIKE WONG, THAT IS
WHAT HAPPENS. YOU GET THE CALL AND, BOOM, IT
CHANGES LIKE THAT. TODAY IT WILL BE BOOM FOR
PEOPLE WHO LOOK AT LABOR ECONOMICS. JONATHAN: YOU CAN GET A FED CALL RIGHT,
THE CALL ON THE ECONOMY DEAD WRONG.
IT HAS BEEN LIKE THAT FOR SO MANY PEOPLE.
EVEN IF YOU CALLED 550 WHAT WOULD YOU CALL ON THE ECONOMY?
Q3, NORTH OF 5% GDP. SHOCKING TO SO MANY PEOPLE. TOM:
IS THIS REPORT AT EIGHT: 30 THAT KIND OF BOOM STATISTIC
THAT UPSETS THE APPLE CART OF PEOPLE TRYING TO MAKE THREE
CALLS? LISA: HOW MUCH IS HEALTH CARE
BULLISH, A BULLISH SIGN OF THE ECONOMIC TRAJECTORY?
I DON'T KNOW. HONESTLY, THIS IS ONE OF THE
THINGS THAT PEOPLE ARE BACKING OUT TO UNDERSTAND THE
COMPONENTS WHEN YOU BREAK DOWN THIS EMPLOYMENT REPORT. TOM: I WILL GIVE JON FERRO MAJOR,
MAJOR CREDIT FOR DRIVING THIS FORWARD.
I WAS LIKE, WHATEVER, I WILL TRY TO WALK ANOTHER MILE.
MY PHYSICAL TRAINER, FINE TRAINING, TED FINE -- HE RUNS
MARATHONS. HE WANTS ME TO RUN A MARATHON.
IT IS FRONT AND CENTER RIGHT NOW. WE WILL DIGRESS WITH THE SENIOR
PHARMACEUTICAL ANALYST WHO BARELY DESCRIBES HIS COMPETENCY
ON THE MOMENT, WHICH IS OZEMPIC AND THE REST OF IT.
SAM, WHAT IS THE FUTURE OF THIS WEIGHT LOSS EXPENSIVE DRUGS?
SAM: THANK YOU FOR THE WONDERFUL COMPLIMENT, AS ALWAYS.
THE FUTURE, FOR ONE THING TALKING ABOUT EXPENSIVE, THE
FUTURE WILL BE REDUCED PRICES, NO DOUBT.
THERE WILL BE MORE COMPETITION, MORE DRUGS ON THE MARKET, AND
THE PRICES WILL CONTINUE TO FALL, EVEN IF YOU ARE NOT
SEEING THEM IN THE NET PRICE, CERTAINLY THE NET PRICE THAT'S
COMING TO PAYERS IS WHERE YOU WILL SEE PRESSURE.
AND THE VOLUME WILL KEEP GOING UP. LISA:
YOU HOLD THE ANSWER TO THE MYSTERY THAT WE SEE EVERY MONTH
WHEN WE LOOK AT SOME OF THE INFLATIONARY'S AND JOB RATES.
WHEN PEOPLE SAY THAT HEALTH CARE COSTS CREATE A LOT OR
HEALTH CARE HIRING INCREASED A LOT, WHAT IS GOING ON AND HOW
MUCH OF IT IS THREE INFLATIONARY VERSUS
DISINFLATIONARY VERSUS COSTS IN A LOT OF OTHER SECTORS? SAM: IT IS INTERESTING WITH REGARDS
TO THE HEALTH CARE EMPLOYMENT BEING A KEY DRIVER IN THE READ
THAT IS COMING LATER TODAY. I THINK IF IT IS IT WILL BE
FOCUSED IN SPECIFIC AREAS. ON THE CORPORATE SIDE, WHAT WE
KNOW FROM THE LARGE SECTOR IN OCTOBER 2023 WAS RESPONSIBLE
FOR 800,000 JOBS. IN THE INNOVATIVE DRUGS WORLD. THAT HAS BEEN LOSING PEOPLE ON
AVERAGE 6000 TO 9000 PER MONTH. HIRING HAS BECOME MUCH HARDER.
HARDER FOR EMPLOYEES THAN EMPLOYERS.
FOR EACH JOB THERE ARE NOW 50 TO 100 APPLICANTS.
IT IS OTHER AREAS OF HEALTH CARE THAT ARE POTENTIALLY
DRIVING THIS POSSIBLE INCREASE. I HAVE TO SAY THAT IS PROBABLY
LIKELY BECAUSE WE ARE STILL DEALING WITH AN AGING
POPULATION. THAT HAS NOT CHANGED.
THAT IS WHAT THE BASIC DEMOGRAPHIC DRIVER IS OF HEALTH
CARE AND HEALTH CARE SPENDING. LISA:
HEALTH COSTS ARE ONE OF THE BIGGEST COSTS FOR A LOT OF
HOUSEHOLDS. WE TALK ABOUT GASOLINE, FOOD,
AND BASIC GOODS THAT PEOPLE BUY. THOSE THINGS ARE GOING DOWN IN
TERMS OF PRICE. WE TALK ABOUT HEALTH CARE COSTS.
HOW MUCH CAN THIS CONTINUE? HOW MUCH ARE THESE EFFICIENCIES
LIKELY BEFORE WEIGHT LOSS DRUGS TAKE EFFECT AND IN THE LIGHT OF
THE FACT THAT PEOPLE ARE GETTING OLDER AND FRANKLY THE
AGE EXPECTANCY IS GOING DOWN, BUT NOT IN A GOOD WAY? SAM: I THINK PART OF THE LIFE
EXPECTANCY ISSUE IS BECAUSE OF WHAT WE WENT THROUGH WITH THE
PANDEMIC, ETC. YOU KNOW, THERE WAS A HIATUS IN
TREATMENT FOR MANY PEOPLE. THAT COMPOUNDS THE SITUATION.
IN TERMS OF THE FUTURE IMPACT, THE SORTS OF DRUGS AND
THERAPIES THAT REALLY REDUCE THE BURDEN ON THE HEALTH CARE
SYSTEM, VACCINATION IS ONE OF THEM THAT IS UNFORTUNATELY
GOING IN THE WRONG DIRECTION IN TERMS OF ATTITUDES, AND DRUGS
THAT ARE NOW GENERIC AND ACHIEVE THAT REDUCE THE RISK OF
HEART DISEASE, WEIGHT LOSS DRUGS, WEIGHT LOSS AND GENERAL
-- YOU DON'T NEED A DRUG TO LOSE WEIGHT, BUT UNFORTUNATELY
THE IMPETUS TO DO IT, EXERCISE AND DIET, IS VERY TOUGH AS WE
SEE IN THE EVIDENCE AROUND US. JONATHAN:
CAN IT BE ABOUT TREATING ADDICTION? SAM: I THINK THAT THOSE DRUGS, IN
GENERAL, TEND TO BE ADDRESSING YOUR INCREASED APPETITE FOR
THINGS. BE IT FOOD, ALCOHOL, SMOKING.
CAN THEY BE PROVEN TO BE THAT EFFECTIVE? TIME WILL TELL.
IF THEY ARE, THIS COULD BE SOMETHING THAT COULD PAY OFF IN
10 TO 15 YEARS TIME. JONATHAN: IT COULD BE MASSIVE. THANK YOU. WE HAVE TALKED ABOUT THIS A
MILLION TIMES, I KNOW. THE USE CASE OF THESE DRUGS,
STILL TRYING TO FIGURE IT OUT. STILL TRYING TO WORK OUT
ADDICTION AND OTHER SPACES WITH WHAT HAS BEEN UNVEILED OVER THE
LAST COUPLE OF YEARS. TOM: JON, YOU PROVIDED GREAT
LEADERSHIP ON THIS. LOOK AT THE CAUSES OF OZEMPIC,
NAUSEA, DIARRHEA, IT IS THE SAME AS TANG.
THE SAME SIDE EFFECTS AS TANG. WHERE IS THIS GOING TO BE IN A
YEAR IS THE MONEY QUESTION. JONATHAN:
NO ONE KNOWS BUT IT IS ALWAYS ABOUT A STORY.
AT THE MOMENT YOU LOOK AT THE STATISTICS.
ONE OF THE BIGGEST KILLERS IN THE WEST IS HEART DISEASE. TOM: CAN I SEE PEOPLE ON TV OR
WALKING DOWN THE STREET TAKING OZEMPIC? LISA: OF COURSE. SAM CAME ON AND SAID, PEOPLE
ARE TARRING AND FEATHERING IT BUT IT HAS BEEN USED FOR LONG.
TIME. THERE ARE THESE COROLLARY
EFFECTS TO BEING OBESE THAT ARE SIGNIFICANT. NOT TO MENTION WHAT JON WAS
TALKING ABOUT WHICH IS ADDICTION AND THEIR STUDIES
THAT SUGGEST THAT THEY CAN CURB CERTAIN ADDICTIONS.
IT RAISES A QUESTION ABOUT HOW MUCH WE COULD POTENTIALLY LOWER
COSTS GOING FORWARD. WE WERE TALKING TO MARK ROWEN
OF APOLLO AND HE WAS SA -- AND HE SAID PEOPLE WILL FIND WAYS
TO KILL THEMSELVES IN OTHER WAYS. JONATHAN:
YOU THINK WE STOP SHOPPING AND TAKE UP EXTREME SPORTS?
PULL BACK ON THE BOOZE -- LISA: AND INCREASE THE SKYDIVING. TOM:
WHY ARE YOU LOOKING AT ME? JONATHAN:
I'M NOT SURE WHO IS LEFT LISTENING. TOM:
YOU HAVE NAILED THIS. PEOPLE ARE RIVETED BY THIS
DEBATE. $9,000 PER YEAR DRUG. JONATHAN: AS THEY SHOULD BE.
WE GO OVER THE STATISTICS AND WHEN YOU'RE TALKING ABOUT A
NATION WHEN CLOSE TO 40% -- TOM: OBESE. JONATHAN:
THIS COULD REVOLUTIONIZE NOT ONLY THE LIVES OF THOSE PEOPLE
BUT THE ECONOMY AROUND THEM THAT WE HAVE BUILT UP OVER THE
LAST FEW DECADES. YOU SEE HOW THIS COULD BE SO
BIG. TOM: AM I WRONG THAT THERE IS A FREE
LUNCH THIS? IS THAT TOO CALVINIST THAT IT
IS TOO GOOD TO BE TRUE? JONATHAN:
THERE IS NO FREE LUNCH. WE TALKED ABOUT THE SIDE
EFFECTS. LISA: WHEN YOU TALK ABOUT HOW MUCH WE
SPEND ON DIALYSIS EVERY YEAR OR THE CONCEPT OF KIDNEY
TRANSPLANTS, SOME OF THESE COROLLARY THINGS, THESE ARE NEW
THINGS. TOM: COULD YOU SEE HER AT
THANKSGIVING DINNER? LISA: I WAS THE ONE THAT MENTIONED
SIDE EFFECTS. JONATHAN: AT THE MOMENT I PREFER
THANKSGIVING DINNER WITH BRAMO. YOU'RE TALKING ABOUT SHOOTING
UP OZEMPIC ON THE STREETS. TOM: IF YOU WALK BY SOMEONE, CAN YOU
TELL THEY ARE TAKING OZEMPIC? JONATHAN:
IN THE DARK ALLEY WAYS. LISA: I THINK THAT HE MEANT IN OTHER
WAYS. JONATHAN: J.P. MORGAN ASSET MANAGEMENT COMING
UP SHORTLY ON THIS BOND MARKET ON JOBS AND NOT ON OZEMPIC.
THE BOND MARKET YIELDS LOOK LIKE THIS.
YIELDS ARE UP HIGHER UP BY THREE BASIS POINTS ON THE 10
YEAR. FROM NEW YORK CITY, THIS IS
BLOOMBERG. >> YOU ARE GOING TO SEE A
SLOWING ECONOMY AT THE BEGINNING OF THE YEAR. >> THE REAL SIDE OF THE ECONOMY
DOES NEED TO SLOW. >> IF RATES ARE HIGHER FOR
LONGER WE WILL SEE CARNAGE. >> WILL SEE A HARDISH LANDING. >> THE PATH TO A SOFT LANDING
LOOKS LIKE SLOWER ECONOMIC GROWTH. >> THIS IS BLOOMBERG
SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO, AND LISA
ABRAMOWICZ. JONATHAN: PAYROLLS FRIDAY.
FOR OUR AUDIENCE WORLDWIDE THIS IS BLOOMBERG SURVEILLANCE.
ALONGSIDE TOM KEENE AND LISA ABRAMOWICZ I'M JONATHAN FERRO.
YOUR EQUITY MARKET PULLING BACK JUST A TOUCH, DOWN .1% SUB OUR
SURVEYS SAYS 183,000. TOM: I AM MORE ENGAGED THAN I WAS AN
HOUR AGO. THE CONVERSATION SHOWS HOW
INTERESTING THE DATA WILL BE. NOT JUST WAGE DYNAMICS BUT BACK
TO COURSE NUMBERS. YOU WILL SPEAK WITH THE
DEPARTMENT OF LABOR AT THE 9:00 HOUR AND THEY WILL GO TO THE ON
RATE. WHAT WILL IT DO? JONATHAN: FOR YOU DISENGAGE THE PREVIOUS
HOUR? TOM: NO EVERMORE ENGAGED IN THE 8:30
REPORT BECAUSE I THINK IT IS A HUGE MYSTERY. JONATHAN:
183,000 THE HEADLINE NUMBER. UNEMPLOYMENT 3.9%.
THE DRIFT TOWARDS 4%. LISA:
WHICH COMPONENT OF THIS REPORT WILL TAKE THE HEADLINE?
IT IS ROULETTE AROUND THE HEADLINE NUMBER PEOPLE WILL
TALK ABOUT. IS IT GOING TO BE THE PAY RISES?
OR IS IT GOING TO BE THE HEADLINE UNEMPLOYMENT RATE
GIVEN THE FACT THAT IT HAS BEEN CREEPING HIGHER AND IF YOU ENGAGE WITH ALL OF THE CAVEATS,
IT HAS REACHED THE POINT WHERE HE THERE WILL BE SOME SORT OF
RECESSION. JONATHAN:
RESILIENT JOBS REPORT WILL CONTINUE TO PROVIDE THE FED
WITH COVER AS TO NOT HAVE TO MOVE PREMATURELY IN CUTTING
INTEREST RATES. TOM: RATES COMING DOWN NOT BECAUSE
OF THE FED BUT BECAUSE OF GROSS DONALD GDP IN REAL GDP
SHRINKAGE. ATLANTA GDP NOW UNDER 2% THIS
MORNING. LISA: I AM NOT SURE THE FED HAS ANY
REASON TO HIKE RATES FURTHER. THE QUESTION IS HOW BIG IS THE
THRESHOLD TO CUT RATES. TOM: PRIYA MISRA WILL JOIN US.
SHE IS TAKING NOTES WILL SHE IS TALKING. LISA:
SHE IS DEFINITELY NOT. TOM:
TOM DOES NOT KNOW WHAT SHE IS TALKING ABOUT. JONATHAN:
THEY GIVE THAT TO GUESTS WHEN THEY COME ON.
THEY GIVE THEM OUT. LET'S GET TO THE SCORES ON THE
S&P 500. GUILDS HIGHER THREE BASIS
POINTS. THE 10 YEAR 4.18%. LISA: I AM WATCHING THE HEADLINE
NUMBER, HOW MUCH WE GET THE 3.9 UNEMPLOYMENT RATE HIRED A 4% OR
DOES IT STAY AROUND 3.9% TO DICTATE THE NEXT MOVE FOR THE
FEDERAL RESERVE? TODAY JEFF ROSENBERG OF BLACK
ROCK AFTER THE REPORT AND THEN AT 9:00 WE HEAR FROM MOHAMED
EL-ERIAN AS WELL AS ACTING LABOR SECRETARY JULIE SUE.
CURIOUS TO HEAR THE ADMINISTRATION'S TAKE ON A
MARKET THAT LOOKS PERFECT. CAN THEY KEEP CELEBRATING?
I AM SURE THEY WILL GREAT TIME DANCING RATHER NUMBERS BECAUSE
IT IS A PERFECT SCENARIO FOR THEM. JONATHAN:
VISIT THAT WHAT THEY ALWAYS DO? DANCE AROUND THE NUMBERS. TOM:
IT IS NOT WORKING. LOOK AT HIS POLL NUMBERS, IT IS
TERRIBLE. THE BIDENOMICS THING IS NOT
WORKING. LISA: SENTIMENT HAS COME OUT AND IT
HAS NOT BEEN AS BAD AS PEOPLE EXPECTED. THIS IS THE KEY RATE. HOW MUCH PEOPLE'S INSPECTION --
EXPECTATIONS FOR INFLATION CONTINUES TO REMAIN AT THE
HIGHEST LEVELS FOR MORE THAN A DECADE. IS THIS PART OF WHAT IS
UNDERSCORING PEOPLE'S SKEPTICISM ABOUT THE ECONOMIC
BACKDROP? JONATHAN: THANKS FOR THE PROMO FOR 9:30.
IT WILL WORK. TUNE IN AS THEY DANCE AROUND
THE JOBS NUMBERS. LISA: WHAT YOU THINK THEY WILL SAY?
JONATHAN: I GET IT. YOU ASKED A GOOD QUESTION.
HOW HIGH OR LOW IS THE BAR FOR INTEREST RATE CUTS.
PRIYA MISRA WRITES "I THINK THE FED STARTS TO CUT LATER THAN
MARCH BUT CUTS 250 BASIS POINTS IN A SOFT LANDING SCENARIO, 400
IN A HARD MATIC SCENARIO SO THERE IS MORE ROOM FOR RATES TO FALL FROM HERE -- IN A HARD
LANDING SCENARIO SO THERE IS MORE ROOM TO RATES TO FALL FROM
HERE." PRIYA MISRA JOINS US. HOW ARE YOU THINKING ABOUT THAT?
PRIYA: THE FED RAISED RATES BECAUSE
THE ECONOMY WAS STRONG AND INFLATION WAS MUCH HIGHER THAN
TARGET. THE REASON WE ARE TALKING ABOUT
CUTS IS BECAUSE INFLATION HAS COME DOWN.
ALL OF THE FACTORS TO BRING INFLATION DOWN ARE STILL THERE.
THE MARKET IS PRICING IN A QUICK PACE OF DECLINE.
THE MARKET IS SAYING WE HAVE THIS IMMACULATE PACE. THE FED CAN START TO CUT.
I'M NOT SURE ABOUT THE IMMACULATE ASPECT OR THE
DISINFLATION CONTINUING TO 2%. I WILL BE WATCHING THE AVERAGE
EARNINGS NUMBER CLOSELY. IF YOU GET .3, YEAR-OVER-YEAR
WAGES RUNNING AT 4%, HOW DOES THE FED LOOK AT THAT AND SAY
INFLATION IS 2%. THEY WANT COMPLETE CONFIDENCE
INFLATION IS GOING BACK TO 2%. WE HAVE HAD YEARS OF MUCH
HIGHER THAN THE 2% NUMBER. RECESSIONS ARE NONLINEAR.
THE ECONOMY DOES NOT NECESSARILY RESPOND TO RATE
CUTS. IN A SOFT LANDING SCENARIO THEY
WILL WANT TO TAKE RATES BACK TO NORMAL, 3%, 2.5% TO 3% BUT THEY
WILL START LATE AND THAT IS WHEN ALL OF THOSE CUTS WILL
HAPPEN. IN A HARD LANDING THEY START
LATE. UNLESS THE UNEMPLOYMENT RATE
SPIKES A LOT THEY HAVE A LOT MORE WORK TO DO BECAUSE THEY
HAVE TO TAKE RATES TO ACCOMMODATE. LISA:
YOU SAID TWO THINGS THAT ARE POLAR OPPOSITE OUTCOMES.
ONE IS THE IMMACULATE ASPECT YOU DO NOT BY.
THERE IS PAIN OR INFLATION THAT IS STICKIER.
THERE ARE TWO POLLS THAT SEEMS TO BE AT PLAY.
WHICH SEEMS MORE LIKELY? PRIYA: THE ECONOMIC DATA SUGGESTS
CRACKS, BUT NOT ENOUGH FOR ME TO SAY A HARD LANDING IS RIGHT
HERE. WE SHOULD ALL BE VERY HUMBLE
ABOUT RECESSIONS. THEY NEVER HAVE BEEN RIGHT WHEN
YOU EXPECT IT. WE ARE NOT FOLLOWING ANY
RECESSION LABEL. I WOULD SAY THE DATA SUGGESTS
SLOWING DOWN. ON THE INFLATION FRONT I WOULD
SUGGEST THE DATA SUGGEST IT IS SLOWING BUT THE TRAJECTORY DOWN
TO 2%, THAT SPEED IS WHAT I STRUGGLE WITH.
I WOULD SAY WE ARE LOOKING LIKE A SOFT LANDING.
IMMACULATE DISINFLATION IS WHAT IS HAPPENING BUT WE HAVE TO GET
HUMBLE THE DATA GET DONE QUICKLY. LISA:
IT SEEMS LIKE EVERYONE IS BUYING TRANSITORY WITHOUT
SAYING TRANSITORY. MAYBE THE FED HAS SOMETHING TO
DO WITH IT, MAYBE NOT, MAYBE WE ARE JUST IMMUNE BECAUSE THEY
WILL CUT RATES BACK TO WHERE THEY WERE BEFORE.
DO YOU BUY THAT? IS WHAT WE ARE SEEING ENTIRELY
THE TRANSITORY ASPECT AND NOT DUE TO THE FED POLICY RATE?
PRIYA: I THINK THAT WORD HAS BEEN
BANNED FROM FED SPEAK. THE SUPPLY-SIDE, WHICH I HOPE
THE FED BRINGS UP, THE SUPPLY-SIDE WORK.
SUPPLY CHAINS ARE MUCH BETTER. GOODS INFLATION HAS BEEN
DECLINING. I WOULD SAY THERE ARE COMPONENTS OF DEMAND.
I DO NOT WANT TO SAY INFLATION WILL RE-ACCELERATE FROM THE
HOUSING SECTOR. I THINK RATE INFLATION WILL
CONTINUE TO DECLINE SLOWLY. WHAT I STRUGGLE WITH IS FORCES
EX-SHELTER. THAT CAN GET STICKY ON THE WAY
DOWN. IF IT GETS STUCK AT 2.5% THE
FED IS TELLING US OUR TARGET IS TO PERCENT AND NOT 2.5%.
THAT IS WHY THE TARGET FOR THEM TO CUT RATES IS HIGHER THAN
WHAT THEY'RE PRICING. TOM: I DO NOT THINK BUSINESS PEOPLE
UNDERSTAND THE NONLINEARITY YOU CAN HAVE THE INFLATION-ADJUSTED
YIELD. ARE WE GOING TO GET A RAPID
DECLINE IN THE REAL YIELD IN 2024? LISA:
FOR THE REAL YIELD -- PRIYA: FOR THE REAL YIELD TO DECLINE
THAT MUCH YOU NEED TO HAVE THE FED STARTING TO CUT IN ECONOMY
INTO A HARD LANDING. AS MUCH AS I THINK REALLY
YIELDS ARE WHAT YOU SHOULD PUT ON YOUR CHRISTMAS LIST, IT WILL
ONLY COME DOWN BELOW 1.5% WHEN THE FED STARTS TO RESPOND.
THEY NEED TO SEE THE UNEMPLOYMENT RATE GET CLOSER TO
4.5% OR 5%. THAT IS WHEN THEY SAY THIS IS
NOT A SOFT LANDING. TOM: THE REAL YIELD GOING UP HAS
BEEN EXTRAORDINARY. ARE YOU TALKING 1.50 AT THE END
OF NEXT YEAR? PRIYA: I THINK THE ECONOMY IS HEADING
INTO A HARD LANDING OR A HARD SOFT LANDING. JONATHAN:
WHAT IS THAT? PRIYA:
THE OTHER IMPLEMENT RATE IS AT 5%?
I WOULD ARGUE IT IS A HARD SOFT LANDING, OR A SOFT HEARTLAND A. -- OR A HARD SOFT LANDING.
AND OF CYCLES ARE ALWAYS HARD. -- END OF CYCLES ARE ALWAYS
HARD. I THINK IT WILL STAY VOLATILE.
JONATHAN: YOU HAVE SAID THIS BEFORE AND
LISA HAS TALKED ABOUT THIS, WHEN YOU START TO SEE THESE
CONTRADICTORY SIGNALS WE ARE GETTING, I WONDER WHAT THAT
MEANS FOR THE FEDERAL RESERVE? LET'S PLAY SEP ROULETTE.
YOU GET THE SUMMARY OF ECONOMIC PROJECTIONS.
TALK TO ME ABOUT WHERE THEY WILL BE NEXT WEEK ONCE WE GET
THE NEW FORECAST FROM THE FED? PRIYA:
I THINK THERE FORECAST FOR THE EMPLOYMENT RATE WILL BE HIGHER
IN THE FORECAST FOR INFLATION WILL BE LOWER.
THE DOT PLOT HAD SHOWN 50 BASIS POINTS OF CUTS.
I THINK IT WILL SHOW 75, IT EVEN 100.
THAT IS LESS THAN WHAT THE MARKET IS PRICING IN BUT THE
MARKET AS THE PRICE ECONOMIC OUTLOOK AND REACTION FUNCTION.
THE REACTION FUNCTION WILL SOUND HAWKISH BUT THE MARKET
COULD PRICE AND WE WILL HAVE INFLATION. JONATHAN: -- PRIYA:
I THINK IT SHOWS THREE CUTS. JONATHAN:
IS THAT ENOUGH OR IS THAT PUSHBACK? PRIYA:
I THINK IT IS ENOUGH FOR THE MARKETS TO PUT THOSE CUTS IN
THERE. DEPENDING ON WHAT HAPPENS ON
PAYROLL THE MARKET MIGHT INCREASE CUTS IN 2024 BUT IT
WORKED RODS IN 2025. IF WE SEE THE SLOW DOWN, DOES
EVERY CUT OF THE FED MATTER? THE HIKES DID NOT MATTER.
WILL 75 OF CUTS HELP THE ECONOMY?
WE SHOULD BE READY PRICE AND MORE CUTS IN 2025. JONATHAN:
IF THE HIKES DID NOT HURT WILL THE CUTS HELP? PRIYA:
THEY HELP FINANCIAL CONDITIONS. THEN WE HAVE TO LOOK AT THE
DATA AND REALIZE IT MIGHT TAKE A LOT LONGER.
THE LAGS WORKED BOTH WAYS. WE ARE IN FOR A VOLATILE NEXT
FEW YEARS. JONATHAN: THANK YOU. A SOFT HEART MANDATE OR A HARD
SOFT LANDING. DID YOU GET THAT? TOM LOVES THIS STUFF. TOM:
IT IS PARSING IT TOO NEAR. I'M INTERESTED IN WHERE THE
AMBIGUITY OF WHERE THE REAL YIELD IS GOING. JONATHAN:
SESSION LOWS ON THE S&P 500, NO REAL DRAMA. DOWN .2%. YIELDS UP TWO OR THREE BASIS
POINTS. 4.17. GOOD NEWS GOOD NEWS TODAY OR
BAD NEWS BAD NEWS? HOW ARE YOU PLAYING THAT? PRIYA:
IF YOU GET A WEEK NUMBER THERE IS NERVOUSNESS IN THE MARKET
AND WE ARE PRICED FOR A SOFT LANDING.
IF YOU GET 100,000 ON PAYROLLS THE RATE MARKET IS SAYING THE
FED STARTS TO CUT RIGHT AWAY. RISK ASSETS ARE SAYING THAT IS
NOT SO GREAT, THIS LOOKS LIKE A HARD LANDING.
YOU GET A BIGGER REACTION WITH A WEEK NUMBER.
THE STRONGER NUMBER IS PRICED IN. JONATHAN:
ED GOOD NEWS IS GOOD NEWS AT THE MOMENT. 100 SO 100. IF I WANTED FANTASTIC
ENTERTAINMENT AT 8:31 THAT IS THE NUMBER I WOULD PICK.
I'M NOT SAYING THAT IS WHAT I WANT, I AM SAYING YOU WOULD
LEARN A LOT. IF IT IS 90 SOMETHING WHAT YOU
DO WITH THAT? TOM: WHAT YOU DO IS CALL DAVID KELLY
AT J.P. MORGAN. DAVID KELLY NAILED IT.
HE HAS BEEN CALLING FOR THIS TRAJECTORY TO A NEGATIVE
NONFARM PAYROLL STATISTIC. JONATHAN: -- LISA: TO ME WHAT PRIYA MISRA SAID IS
LAGS WORTH -- LAGS WORKED BOTH WAYS. THEY WILL MATTER FOR THE
MOVEMENT OF CASH. AT SOME POINT PEOPLE WILL NOT
WANT TO HOLD THEIR MONEY IN MONEY MARKETS.
INTERESTING DYNAMICS. JONATHAN: FOREVER CYCLES.
PAYROLLS AT 200000 AND EVERYONE IS HAPPY. LISA:
WHERE DID WE PUT JON FERRO? JONATHAN:
I WILL ENTER MISS UNIVERSE. >> ISRAEL PROBABLY HAS A MATTER
OF WEEKS LEFT TO CONDUCT THESE OPERATIONS.
HAMAS IS USING HUMANITARIAN LOSSES TO BUILD OPINION AGAINST
ISRAEL AND HAMAS SURVIVAL IS IN THE CONCEPT THAT IF THERE IS
ENOUGH PRESSURE ON ISRAEL TO STOP OPERATIONS HAMAS SURVIVES.
THAT COULD DOOM A TWO STATE SOLUTION, IF ONLY BECAUSE HAMAS
IS COMMITTED TO THE ERADICATION OF ISRAEL. JONATHAN:
HE HAS BEEN ONE OF THE ABSOLUTE BEST ON THIS TOPIC. NORMAN ROLLE, FORMER SENIOR U.S.
INTELLIGENCE OFFICIAL. YOUR EQUITY MARK ON THE S&P 500
LOOKS LIKE THIS. -.2%. NEAR SESSION LOWS AFTER THE
BOUNCE YESTERDAY. THE NASDAQ FLYING. IF YOU'RE TALKING ABOUT AI, MD,
GEMINI, GETTING EVERYTHING EXCITED.
GOING INTO A JOBS REPORT JUST AROUND THE CORNER.
I WILL GO THROUGH THE NUMBERS FOR YOUR BENEFIT.
183,000 IS THE ESTIMATE. TOM:
ESTIMATE IS DOWN A LITTLE BIT, IT WAS 188,000? JONATHAN:
MICHAEL MCKEE TELLS ME THE WHISPER NUMBER IS LOWER THAN
THAT. TOM: PUT IT UP ON THE SCREEN IF YOU
CAN. I KNOW YOU'RE HAVING DOUGHNUTS.
PUT THE SCREEN THAT IS ALL OF THE DIFFERENT NONFARM PAYROLLS.
THAT IS NOT WHAT I WANTED BUT I WILL GO WITH THAT. THERE IS. GOLDMAN SACHS 238, DEUTSCHE'S
230,000. LOOK AT THE WHISPER NUMBER NOW
IS HIGHER. 200,000. TOM: WE ARE LEARNING BY THE MINUTE.
JONATHAN: THE WHISPER NUMBER. PEOPLE TYPE A NUMBER ON THE
TERMINAL. LISA: PEOPLE GIVE YOU A SENSE BUT
THEY DO NOT WANT TO PUT THE FIRM'S NAME. TOM:
JOINING US THE WHISPER OF WASHINGTON, AND REORDERED,
BLOOMBERG -- ANNMARIE HORDERN, BLOOMBERG WASHINGTON
CORRESPONDENT. THERE IS NOTHING FESTIVE THIS
WEEKEND IN THE EASTERN MEDITERRANEAN FROM THE FAR
NORTH DOWN INTO A STRESSFUL EGYPT AS WELL.
WHAT WILL BE BIDEN APPROACH THIS WEEKEND TO WHAT WE SEE IN
GAZA? ANNMARIE: TODAY THE PRESIDENT IS HEADED
TO LOS ANGELES, RAMPING UP ON HIS FUNDRAISERS AS HE LOOKS
AHEAD TO THE PRESIDENTIAL ELECTION.
OBVIOUSLY THERE IS TREMENDOUS PRESSURE ON HIM AND THIS
ADMINISTRATION WHEN IT COMES TO WHAT WE ARE SEEING IN GAZA.
THIS MORNING YOU HEARD FROM THE DIRECTOR OF THE YUAN AGENCY
THAT WORKS WITH PALESTINIAN -- THE DIRECTOR OF THE U.N.
AGENCY THAT TALKS ABOUT WILD STREETS IN GAZA, CIVIL ORDER
BREAKING DOWN, AND NORMAN ROULE WAS POINTING TO THIS ABOUT THE
HUMANITARIAN ISSUES IN SOUTHERN GAZA.
THIS WILL BECOME A BIG ISSUE TODAY FOR SECRETARY BLINKEN
BECAUSE YOU HAVE A NUMBER OF ARAB FOREIGN MINISTERS IN THE
UNITED STATES LIKE THE PRINCE OF SAUDI ARABIA, THE QATARI
FOREIGN MINISTER, THEY ARE HERE TO TALK ABOUT THE SITUATION IN
GAZA. I IMAGINE THERE'LL BE PRESSURE
IN THOSE MEETINGS. TOM: WE ARE NOT HEARING FROM THE
SECRETARY OF DEFENSE. I LOOK AT ALL OF THE DIFFERENT
NEWSPAPERS AND IT IS BLINKEN, BLINKEN, BLINKEN.
WHAT DOES THE SECRETARY OF DEFENSE SAY? ANNMARIE:
WE HEARD FROM HIM LAST WEEKEND WHEN HE WAS SPEAKING AND HE
TALKED ABOUT THE FACT THAT HE WANTS TO MAKE SURE THAT WHAT
ISRAEL DOES IS COMPLYING WITH INTERNATIONAL LAW AND HE PUT A
WARNING OUT THERE. YOU HAD SENATOR LINDSEY GRAHAM
CALL HIM NAIVE BECAUSE HE SAID WE SHOULD NOT TURN A STRATEGIC
WIN INTO A STRATEGIC DEFEAT. HE WAS TALKING ABOUT
PALESTINIAN CIVILIANS AND DRIVING THEM INTO THE ARMS OF
EXTREMIST GROUPS. THAT WAS HIS WARNING.
YOU ARE DEALING WITH A SITUATION NOW THAT HAS BECOME
INCREDIBLY DIFFICULT. IF THE ISRAELIS ARE TRYING TO
GO AFTER HAMAS LEADERS IN THE SOUTH, THE SOUTH SOUTH OF GAZA
IS WHERE THEY TOLD PALESTINIANS IN THE NORTH TO FLEE. A HUMANITARIAN FRONT IS
INCREDIBLY CHALLENGING AND THE DEATH TOLL CONTINUES TO RISE.
LISA: HOUSE AND AFFECTING THE POLL
NUMBERS FOR PRESIDENT BIDEN. THEY WENT DOWN SIGNIFICANTLY
BUT HAS IT EVOLVED? ANNMARIE: THERE NEEDS TO BE MORE WORK
DONE ON THIS POLLING BECAUSE WE NEED TO SEE HOW THIS PLAYS OUT.
WE KNOW THE PRESIDENT IS SUFFERING IN THE POLL NUMBERS
IN THE YOUTH VOTE AND A LOT OF REPORTS ABOUT PALESTINIAN
AMERICANS, MUSLIM AMERICANS, WHO DO NOT LIKE HOW THIS IS
BEING CONDUCTED FROM THE ISRAELI SIDE.
WE HAD FIVE DEMOCRATS TALK ABOUT THE FACT THEY WANT TO SEE
MORE BEING DONE ON U.S. AID SENT TO ISRAEL TO MAKE SURE
HOW THAT IS BEING CONDUCTED, HOW THOSE U.S.
MISSILES ARE BEING USED. THERE IS A TREMENDOUS AMOUNT OF
PRESSURE ON THIS ADMINISTRATION. WE HAVE TALKED ABOUT IT A LOT
ON THIS PROGRAM, EVEN WITHIN THE ADMINISTRATION, THERE ARE A
LOT OF INDIVIDUALS WHO DO NOT AGREE WITH THE U.S. POLICY.
LISA: JUST TO SHIFT GEARS, I'VE BEEN
FASCINATED BY WHAT CAN GET DONE IN THE HOUSE AS WE DEAL WITH
VERY REAL ISSUES, WHETHER SOME OF THE CONFLICTS YOU'RE TALKING
ABOUT INTERNALLY OVER AID TO ISRAEL, EIGHT TO UKRAINE,
BORDER SECURITY. PUNCH BALL CAME OUT AND SAID
THERE IS AN INFINITE'S DO-NOTHING CONGRESS OF THE
1940'S AND WHAT YOU CALL THIS YEAR?
THE LESS THAN NOTHING CONGRESS? THE CONGRESS THAT IS COMPLETELY
UNWORKABLE? IS THERE ANY HOPE THAT WILL
CHANGE NEXT YEAR? ANNMARIE: NO. THERE IS NO HOPE THAT WILL
CHANGE. NEXT YEAR POTENTIALLY GETS
WORSE. THE NUMBERS GET TIGHTER FOR
REPUBLICANS ON THE HOUSE SIDE. THEY OUSTED THE REPRESENTATIVE
FROM NEW YORK'S THIRD CONGRESSIONAL DISTRICT.
WE KNOW KEVIN MCCARTHY IS RETIRING.
THEY HAVE A NUMBER OF DEAD LIGHTS. -- A NUMBER OF DEADLINES
LEADING UP TO A POTENTIAL GOVERNMENT SHUTDOWN.
THEY ARE TRYING TO GET THE SUPPLEMENTAL PACKAGE DONE.
NEXT WEEK THE HOUSES ALSO FOCUSED ON TRYING TO IMPEACH
PRESIDENT BIDEN OR STARTING UP THE FORMAL INQUIRY.
LOOK AT THE SENATE. THAT IS WHERE THE DEAL WILL GET
STRUCK. RIGHT NOW ALL OF THE TENSION IS
ABOUT QUARTER POLICY. REPUBLICANS WANT TO SEE MORE,
HARDER ASYLUM PROCESS, STRICTER PAROLE.
DEMOCRATS WANT TO MAKE SURE THEY ARE DOING THIS IN A
COMPASSIONATE WAY WHEN IT COMES TO INDIVIDUALS LOOKING FOR
ASYLUM AND REFUGE. THIS IS WHERE THE FIGHT IS. TOM:
HOW ALONE IS SENATOR MCCONNELL? ANNMARIE:
I DON'T KNOW IF HE IS ALONE. PEOPLE WANT TO ALSO SEE
STRICTER BORDER POLICY. -- KEEP WILL -- P -- HE WILL
WANT TO SEE STRICTER BORDER POLICY.
THE WHITE HOUSE PUT OUT A STATEMENT TALKING ABOUT THE
FACT THERE IS NOT A POT OF MONEY AT THE END OF THE YEAR,
IT ALL DRIES UP. IT'D THAT SINCE HIS COLLEAGUES
HAVE NOT HEEDED HIS ADVICE JUST YET.
-- IN THAT SENSE HIS COLLEAGUES ABOUT HEEDED HIS DEVICE JUST
YET. THIS BLEEDS INTO FEBRUARY. JONATHAN:
LET'S TALK ABOUT DECEMBER BEFORE WE GET TO FEBRUARY.
JANUARY AND FEBRUARY WILL BE UGLY IN WASHINGTON.
I WANT TO GO BACK TO THE WHISPER NUMBER. 175,000. CLIMBING THROUGH THE MONTH OF
DECEMBER. LISA: JUST TO SHOW THAT EARLY IN
DECEMBER THEY WERE TALKING ABOUT 150 AND THEY HAVE BEEN
EDGING AT HIGHER HIGHLIGHTS HOW MUCH PEOPLE HAVE BEEN SURPRISED
BY CONTINUING STRENGTH. WE TALK ABOUT BAD NEWS IS BAD
NEWS. SO FAR WE'VE GOTTEN GOOD DUES
AND IT IS TREATED AS GOOD NEWS. THAT IS WHAT WE HAVE HEARD FROM
SOME PEOPLE WHO SAY TREAT NEWS ON FACE VALUE. JONATHAN:
CAN I IMAGINE IF YOU TURNED INTO THE SHOW AFTER THIS? PRIYA MISRA ABOUT 15 MINUTES
AGO WAS TALKING ABOUT ANYTHING 100,000 OR BELOW WOULD BE
TREATED AS BAD NEWS FOR THIS MARKET AND I THINK SHE IS RIGHT.
LISA: 100%. IF YOU BACK OUT 40,000 AND THE
GOVERNMENT HIRES IS ALMOST NEGATIVE. JONATHAN:
PEOPLE DO NOT DO JOB GUESSES. TOM:
ONCE I GOT IT RIGHT AND I HAVE NEVER DONE IT SINCE. JONATHAN:
WHAT YEAR WAS THAT? TOM: A MILLION YEARS AGO. LISA: JONATHAN:
60 MINUTES AWAY FROM THE PAYROLLS REPORT.
ON THE S&P 500 PULLING DOWN JUST A TOUCH.
THE NASDAQ WITH THE DECENT BOUNCE YESTERDAY.
BEST DAY OF THE MONTH SO FAR. THIS MORNING WE ARE NEGATIVE A
QUARTER OF 1% ON THE NASDAQ. THE BOND MARKET A RIPROARING
RALLY. YIELDS MUCH LOWER. 4.1778 ON THE TWO YEAR.
LAST TIME WE PAID THIS GAME GOING INTO PAYROLLS YIELDS NEAR
5%. THIS MORNING FOR .62. LISA: THAT CONVERSATION USED TO BE
WHAT TO RAISE RATES AGAIN? HOW QUICKLY CAN THEY CUT RATES
QUICKLY? THE WAY THE NARRATIVE HAS
SHIFTED EVERYONE IS SAYING HOW MANY CUTS, NOT WILL THEY RAISE
AGAIN? JONATHAN: NOT JUST THE FEDERAL RESERVE
BUT THE ECB. THE EURO AT 1.0 784.
THE ECB, THEY WILL GO FIRST. TOM:
I DO NOT BUY IT BUT IT IS IN THE ZEITGEIST. JONATHAN:
MATT HORNBACH YESTERDAY AT MORGAN STANLEY LOOKING FOR A
STRONGER U.S. DOLLAR. LISA: YOU WANT ME TO GET IT ON THE
GAME? JONATHAN: THIS IS A BIG -- TOM:
THIS IS A BIG DEAL ON ECB. 150 BASIS POINTS LARGELY PRICED.
LISA: AT A CERTAIN POINT YOU HAVE TO
WONDER HOW MUCH PAIN THEY EXPERIENCED.
WILL THAT BE ENOUGH FOR THEM TO CUT AS MUCH AS THEY ARE?
JONATHAN: TOP STORIES TODAY. ONE HOUR AWAY FROM THE NOVEMBER
PAYROLLS REPORT. MEDIAN ESTIMATE CALLING FOR A
GAIN OF 183,000 JOBS. WALL STREET'S BIGGEST BANKS
WITH A WIDE RANGE OF FORECAST. GOLDMAN AT THE TOP LOOKING FOR
238,000. IAN SHEPHERDSON LOOKING FOR
275,000. LISA: THE QUESTION WILL BE HOW MUCH
IS WAGE GROWTH, HOW MUCH ARE WE SEEING THE UNEMPLOYMENT RATE
RISE OR STAY STABLE, AND I AM WATCHING HOURS WORKED BECAUSE
THAT WILL GIVE YOU A SENSE OF WHERE PEOPLE ARE STARTING TO
PAY HER AROUND MARKETS. JONATHAN:
YOU HAVE TO LOOK -- TOM: YOU HAVE TO LOOK AT CPI REPORTS.
LOOK AT IT WITH THE DATA NEXT WEEK, INCLUDING RETAIL SALES.
WILL HAVE A REAL SNAPSHOT OF WHERE WE ARE. JONATHAN: WE ARE TALKING ABOUT CUTS TO
THE FED, CUTS TO THE ECB AND THE BOJ EXPECTED TO END THE AIR
OF NEGATIVE RATES. MORE THAN TWO THIRDS OF
ECONOMISTS SAY THE BOJ RISING INTO POSITIVE TERRITORY,
BOOSTING BEDS AFTER A MEETING WITH THE GOVERNOR AND THE
JAPANESE PRIME MINISTER. THE YEN RALLYING THE MOST IN
NEARLY A YEAR. THE NEXT MEETING FOR THE BOJ IS
DECEMBER 19. TOM: HUGE DEAL. THE OTHER DEAL IS THE CULTURE
OF IT AND ROBERT FELDMAN OF MORGAN STANLEY IN TOKYO AND THE
MORGAN STANLEY TEAM IS WHO I READ FIRST. CREDIT SUISSE, HAD
A GREAT TEAM BEFORE THE BLOWUP WITH UBS.
TO ME IS ALSO ABOUT JAPAN, THE PEOPLE COME THE DEMOGRAPHICS,
THE FACT THEY ARE LIVING 3% INFLATION AND THAT IS UNDOABLE
PSYCHOLOGICALLY IN JAPAN. JONATHAN: 3% IS LIKE WHAT? TOM:
IT WILL BE A SOLID 5%. JONATHAN:
AMAZING TO SEE THE GUIDANCE WE WILL GET FROM THE BOJ WHEN THEY
SAY IT WILL BE DIFFICULT TO CONDUCT MONETARY POLICY. LISA:
THE ONE COMPLICATING FACTOR IS THE ECONOMY IS NOT DOING THAT
WELL AND THERE WAS DATA OVERNIGHT THAT THE JAPANESE
ECONOMY CONTRACTED IN THE THIRD ORDER THE FASTEST PACE BACK TO
THE DEPTHS OF THE PANDEMIC. ARE THEY GOING TO BE OVERCOME
BY EVENTS IN THE OPPOSITE DIRECTION WHEN THEY WILL NOT BE
ABLE TO MOVE AWAY BECAUSE MARKETING INFLATION IS NOT
BEING ACCOMPANIED WITH THE SAME GROWTH THEY'RE LOOKING FOR.
JONATHAN: THE U.S. AND THE PALESTINIAN AUTHORITY
WORKING TOGETHER ON A POSTWAR PLAN FOR GAZA.
THE PALESTINIAN PRIME MINISTER TELLING BLOOMBERG THE PREFERRED
OUTCOME WOULD BE FOR HAMAS TO BECOME A JUNIOR PARTNER UNDER
THE PALESTINIAN ORGANIZATION AND TO BUILD A NEW INDEPENDENT
STAKE THAT INCLUDES THE WEST BANK, GAZA, AND EAST JERUSALEM.
BENJAMIN NETANYAHU VOWING TO ELIMINATE HAMAS. TOM: I WILL GO TO GENERAL COMMIT WHO
HAS BEEN 8 -- GENERAL KIMMIT WHO TALKS ABOUT HAND-TO-HAND
COMBAT. I DO NOT CARE ABOUT ALL OF THE
PUNDITRY AND THE DIPLOMACY. WHERE ARE WE IN THIS WAR AND
BATTLE ON A MORNING? JONATHAN: ONGOING AND INCREASINGLY
DIFFICULT. TOM: AND EMAIL FROM ROBERT.
HE EMAILS IN. WHAT WE DO WITH THIS? BEARISH.
JOINING TEAM LISA. JONATHAN:
DIDN'T MOST PEOPLE JOIN TEAM LISA? IT IS A BIG TEAM. TOM: KNOW WHAT IS ON TEAM TOM.
IS THERE A TEAM JOHN? JONATHAN: WHAT IS TEAM JOHN?
IT IS A LONELY PLACE. LISA: WE ARE A PESSIMISTIC PLACE.
JONATHAN: -- TOM:
WE HAVE HAD SARAH WILL FEAR WITH US.
SHE JOINS US -- WE HAVE HAD SARAH WOLFE WITH US.
YOU PEOPLE DO HYPER ACCURATE CONSUMER ECONOMICS.
WHAT IS THE STATE OF 70% OF THE ECONOMY INTO THIS JOBS REPORT?
SARAH: CONSUMER SPENDING IS SLOWING
DOWN. WE ARE SEEING THE DOWN STEP IN
CONSUMER SPENDING. WE GOT AN EARLY READ ON HOLIDAY
SHOPPING. SLUGGISH BUT AS EXPECTED.
WE KNOW E-COMMERCE WAS STRONGER BUT YOU HAD LOOKING FOR
DISCOUNTING AND WE EXPECT MORE SLOW DOWN NEXT YEAR AS WE GET
MORE OF THAT PRESSURE FROM HIGHER INTEREST RATES, TIGHTER
LENDING STANDARDS, AND A SLOWER LABOR MARKET. JONATHAN:
BY NOW AND PAY LATER IS BOOMING. WHAT ARE YOU AND THE TEAM
SAYING? TOM: -- SARAH: BUY NOW PAY LATER HAS A LARGER
UPTICK ESPECIALLY FOR GEN Z. IT IS SHOWING THE DEMAND FOR
CREDIT IS SLOWING, THE AVAILABILITY FOR CREDIT IS
SLOWING. THIS IS MORE AVAILABLE TO LOWER
INCOME BORROWER. JONATHAN: DO WE HAVE SPACE TO LEVER UP IN
HOUSEHOLDS IN AMERICA? HOUSEHOLDS -- SARAH:
HOUSEHOLDS HAVE SPACE TO LEVER UP. 90% OF HOUSEHOLD DEBT IS
LOCKED-IN IN A FIXED RATE AND WE KNOW NO ONE IS BUYING AND
SELLING HOMES. WE ARE SEEING THAT HOUSEHOLDS
ARE NOT SUPER LEVERED. TOM: THIS IS THE HEART AND SOUL OF
ZENTNER ECONOMICS. EVERYONE IS HYSTERICAL ABOUT
CONSUMER DEBT, AND I THINK WE JUST HEARD WE SHOULD NOT BE
HYSTERICAL. SARAH: I WOULD AGREE WITH THAT.
WE ARE SEEING PRESSURE ON THE CONSUMER BUT INTEREST RATES ARE
5.5%. WE SHOULD BE SEEING PRESSURE ON
THE CONSUMER BUT I DO NOT THINK WE NEED TO SAY THE CONSUMER IS
FALLING OFF A CLIFF BECAUSE WE ARE SEEING A RISE IN
DELINQUENCIES AND PRESSURE ON THE CREDIT SPACE. LISA:
WE HEARD THINGS SIMILAR FROM PRIYA MISRA THAT THE LONGER
THINGS LOOK GOOD AND THERE ARE NOT THAT MANY WARNING SIGNS THE
MORE LIKELY A HARD LANDING IS. YOU AGREE WITH THAT? SARAH:
OF COURSE. THE LONGER RATES ARE HIGH, AND
MAKES THE FED'S JOB HARDER AND HARDER. THEY ARE IN A DIFFICULT
POSITION INTO NEXT YEAR AND MARKETS ARE PUSHING ON FOR A
MARCH CUT BUT THE INFLATION DATA WILL NOT FEEL COMFORTABLE
ENOUGH FOR THEM TO DO SO. EVEN AS ECONOMIC ACTIVITY IS
SLOWING WE THINK INFLATION DATA WILL PUT THEM TO STAY ON HOLD
UNTIL JUNE. JONATHAN: WHICH IS THE REASON -- LISA:
WHICH OF THE REASON TORSTEN SLOK SAID THE MARKET IS
UNDERESTIMATING THE FED COMMITMENT TO 2% INFLATION.
THIS IS WHAT WE ARE FEELING FROM GUEST AFTER GUEST. WHERE
IS THE MARKET MOST MISPRICED TO WHAT YOU AND SO MANY OTHERS SAY
IS THE REALITY, WHICH IS THE FED WILL NOT CUT RATES
AGGRESSIVELY. SARAH: WE THINK THEY ARE MISPRICED FOR
MARCH. CHAIR POWELL IS LOOKING AT THE
SIX-MONTH, THE 12 MONTH ANNUALIZED PACE.
HE SAID THE SIX-MONTH PACE IS 2.5%.
IF YOU LOOK AT THE PATH AHEAD, CORE PCE SIX MONTH ANNUALIZED
PACE WILL BE ACCELERATING AND IT IS NOT INTO THE SECOND
QUARTER IT STARTS TO FALL AGAIN. WE WILL GET THE DATA OF CORE
PCE PUSHING UP AND WE THINK THAT COULD PUSH MARCH PRICING
FURTHER OUT. TOM: PICKING UP A TENT THE 1% COME
IS IT A PICKUP THAT WILL UPSET OUR VIEWERS AND LISTENERS?
SARAH: YOU HAVE THIS NEGATIVE AIRFARE
PRINTS FROM EARLIER IN THE YEAR FALLING OUT OF THE MIX.
YOU HAVE UPWARD PRESSURE ON CAR INSURANCE.
WE WILL NEED TO GET INTO APRIL TO GET IT BACK DOWN TO 2.5%.
TOM: I WAS JUST READING DAVID ROSENBERG.
THERE ARE SINGLE ITEMS WITHIN THE INFLATION REPORT THAT WILL
PUSH UP THE MOTHER BALL JEROME POWELL INFLATION STATISTICS .5%
AIRFARE, CAR INSURANCE. SARAH: WE WILL HAVE TO LOOK THROUGH
THE NOISE BUT IT WILL ALL MATTER.
THERE'LL BE A LOT OF FOCUS ON CORE SERVICES X HOUSING AND
HOUSING ITSELF WHICH WILL CONTINUE TO MODERATE.
YOU HAVE TO PAY ATTENTION TO THE TOTALITY OF WHAT IS GOING
ON. JONATHAN: THREE-PART STORY WEDNESDAY.
CAN YOU GIVE US THE GUIDE? SARAH:
WE ARE EXPECTING A VERY LITTLE CHANGE IN THE STATEMENT BUT WE
ARE EXPECTING POWELL TO CONSTANTLY CHANGES
COMMUNICATION FROM HOW HIGH TO HOW LONG THE OF THE SUMMARY OF
ECONOMIC PROJECTIONS AND ALSO VIA THE PRESS CONFERENCE.
THEY WILL BE TAKING A. DOWN FOR THIS YEAR -- THEY WILL
BE TAKING A DOT DOWN FOR THIS YEAR.
THEY LEFT A MARK INFLATION DOWN TO 3.5% NEXT YEAR, 20 BASIS
POINTS LOWER. HE WILL HAVE TO KEEP PUSHING
BACK THEY ARE NOT YET TALKING ABOUT EASING POLICY. JONATHAN: DOES THE 2024 DOT OPERA KIES -- DOES THE TOY 24 D -- SARAH: IT
DOES MAKE HIS JOB VERY DIFFICULT WHERE WE HAVE SEEN
OVER 100 BASIS POINTS OF EASING IN FINANCIAL CONDITIONS.
MARKETS ARE GETTING AHEAD OF THEMSELVES SO HE WILL HAVE TO
BE MORE EXPLICIT IN HIS COMMUNICATION THAT IT IS TOO
SOON TO BE TALKING ABOUT CUTS. LISA: WHICH IS THE REASON I FIND
FASCINATING THE QUESTION HAS THE FED ALREADY LOST ITS
CREDIBILITY? SARAH: THE FED IS DOING THE BEST IT
CAN IN A COMPLICATED ENVIRONMENT. JONATHAN:
SO DIPLOMATIC. ALMOST REHEARSED. CHARIMAN POWELL IS DOING THE
BEST HE CAN. AT SOME POINT DOES OF THE
MARKET ALWAYS DOES THE FEDERAL RESERVE? SARAH: OF COURSE.
THE FED IS TRYING TO FIGURE IT OUT. THERE'S LOT OF TIME BETWEEN
MARCH AND JUNE. WE HAVE JOBS, WE'VE INFLATION,
WE'VE RETAIL SALES. A TREMENDOUS AMOUNT OF DATA.
JONATHAN: MOHAMED EL-ERIAN THINKS IT IS A
COMMUNICATION PROBLEM. WE WILL CATCH UP WITH HIM IN
THE NEXT COUPLE OF HOURS. IT IS WHAT IS NOT HAPPENING IN
MARKETS. LAST FRIDAY THE CHAIRMAN GOT
STEAMROLLED. IF THAT WAS PUSHBACK THIS
MARKET LAUGHED IN HIS FACE AND RALLIED HARD. LISA:
THAT IS EXACTLY IT. IT WAS ALMOST LIKE GABE OPERATE
BECAUSE HE WAS SAYING ONE THING -- IT WAS ALMOST LIKE A MOCKERY.
THE QUESTION IS DO THEY CARE? DO THEY CARE THAT MARKET
CONDITIONS HAVE EASED? IF THEY DO NOT CARE AND HE WILL
NOT BE THAT MUCH HARDER IN HIS COMMUNICATION, DOES THAT SEND A
MESSAGE ITSELF? TOM: THE BLOOMBERG FINANCIAL
CONDITIONS INDEX POSITIVE .56. THE ANSWER IS THEY DO CARE.
IT IS MOVING AWAY FROM THE ZERO NUMBER. JONATHAN:
SARAH, THANK YOU. SARAH WOLFE OF MORGAN STANLEY.
EQUITY FUTURES -.1%. A SIMILAR STORY IN THE FX
MARKET. IN THE BOND MARKET YIELDS
HIGHER THREE BASIS POINTS. THE MOST CONFUSING STORY OF THE
WEEK, CRUDE BACK IN THE 70'S. $70 AND $.74. LISA:
EVEN THOUGH THERE ARE INCREMENTAL MOVES, NOW THE
SPECULATION IS THAT SAUDI ARABIA, WHO MET WITH VLADIMIR
PUTIN, WHO IS APPARENTLY RUNNING FOR REELECTION AGAIN,
THERE'S A QUESTION OF WHETHER HE IS COOPERATING WITH SAUDI
ARABIA. JONATHAN: WHO WILL WIN? CAN YOU BET ON THAT? TOM: CAN YOU SEE THE DEBATE?
JONATHAN: ANY CHALLENGES? TOM: I DEFERRED TO ANNMARIE HORDERN.
JONATHAN: WE WANT TO TALK ABOUT AIRLINES.
EARLIER THIS WEEK LEVEL AIRLINES POISED TO GENERATE
RECORD REVENUE AND WILL EXTEND THE GAINS INTO 2024.
THE TURNAROUND FOR THIS INDUSTRY. TOM:
THE TURNAROUND IS THERE BUT I WONDER WHERE THE PROPHET IS. THEY ARE MAKING PROFIT BUT THE
STOCKS HAVE NOT RESPONDED. THEY ARE NOT ACADEMIC CLOSE,
BUT ARE THEY BOOMING? -- THEY ARE NOT AT PANDEMIC
LOWS BUT ARE THEY BOOMING, NO? JONATHAN:
COMING UP BLOOMBERG'S BROOKE >> I THINK THIS IS LAST TIME I
WILL TALK ABOUT RECOVERY BECAUSE WE ARE BACK WHERE WE
WERE IN 2019. ALWAYS CHALLENGING WITH THE
MACRO ECONOMIC ENVIRONMENT. WE REMAIN CAUTIOUSLY OPTIMISTIC
ABOUT 2024. SHOULD GIVE THE INDUSTRY REASON
FOR OPTIMISM. JONATHAN: THAT WAS THE IATSA DEPUTY
GENERAL. THE IMPROVED FORECAST AFTER
DELTAS PRESIDENT SIGNALED STRONG DEMAND INTO THE END OF
THE YEAR. JETBLUE PICKING UP A LITTLE BIT.
TOM: DO YOU THINK FUEL IS INTO IT?
WE HAVE A PANIC WHEN THE PRICE OF OIL GOES UP BUT NOW THE
PRICE IS DOWN. DOES IT PAY INTO THE FINANCIAL
PART OF AVIATION? JONATHAN:
THE PEAK FOR DISCRETIONARY STOCKS WAS JULY. TOM:
I HAVE HAD TROUBLE. I HAD TO BOOK A FLIGHT FOR ONE
OF THE OFFSPRING IN THE LAST 24 HOURS AND I WAS SHOCKED HOW
INEXPENSIVE IT WAS. THE ANSWER IS IT HAS GOTTEN
CHEAPER, EVEN THE SHORT LITTLE JUNKET FLIGHTS. IT IS AMAZING.
JONATHAN: THINGS HAVE TURNED AROUND.
I WOULD STILL SAY IT IS EXPENSIVE. TOM:
LET'S DO THE MAC ON THIS WITH BROOKE SUTHERLAND OF BLOOMBERG
OPINION, EXPERT ON AVIATION AND ALL THE MOVING PARTS.
I WENT TO GOOGLE FLIGHTS AND I LOOKED AT ONE OF THE
INTERNATIONAL FLIGHTS THAT JOHN AND I LOOK AT ALL THE TIME.
IT USED TO BE $7,000 AND I REMEMBER A PANDEMIC $9,000.
RIGHT NOW IT IS $2800, DOWN FROM 5300 MEDIA.
THIS IS NEW YORK TO PARIS. HOW DID WE GET HERE?
WHY IS THAT FLIGHT SO CHEAP? BROOKE:
THE AIRLINE CEOS ARE TRYING TO ARGUE THAT THE TRANSATLANTIC
TRAVEL SEASON WILL EXTEND DEEP INTO THE WINTER AND SO THAT
PRICE DATA POINT IS NOT IN LINE WITH THE PHILOSOPHY THEY HAVE
BEEN ESPOUSING. PART OF THE PROBLEM IS AIRLINES
DID NOT HAVE ENOUGH CAPACITY WHEN WE CAME OUT OF THE
PANDEMIC. THEY GOT STUMBLED BY THE SHEER
VOLUME OF DEMAND AND DID NOT HAVE ENOUGH PEOPLE AND PLANES
AND SO THEY OVERCOMPENSATED. THEY ADDED BACK A TON OF
CAPACITY AND IT IS NOT LIKE DEMAND HAS FALLEN OFF A CLIFF
FOR THE TRANSATLANTIC FLIGHTS OR DOMESTIC FLIGHTS.
THERE IS A LOT MORE AVAILABLE SEATS.
AIRLINES ARE HAVING TO OFFER DISCOUNTED TICKETS TO PHILIP
THOSE SEATS, WHICH CREATES A VERY DANGEROUS DYNAMIC FOR
THEIR PROFIT MARGINS AT A TIME WHEN COSTS ARE ALSO UP, NOT
JUST FOR FUEL BUT FOR LABOR. TOM: FORGET ABOUT THE PR FOR THE
AVIATION. LET'S DO THE BROOKE SUTHERLAND
GAS. WHAT DOES LATER 2024 LOOK LIKE?
ARE THEY TAKING CAPACITY UP? HOW DO THEY RESPOND TO THESE
REALITIES? BROOKE: I WOULD BE SURPRISED TO SEE
THEM CANCEL PLANE ORDERS BECAUSE THE WAIT TIMES ARE SO
LONG. IF YOU CANCEL IT YOU ARE SETTING YOURSELF BACK YEARS.
I THINK WE NEED TO SEE SUBSTANTIAL CAPACITY COTS.
WE HAVE SEEN A LITTLE BIT IN THE FIRST QUARTER BUT THIS IS A
TRIMMING AROUND THE EDGES. WE HAVE YET TO SEE THIS BIG
CAPACITY CAN'T I THINK THE INDUSTRY NEEDS TO LEVEL US UP.
I THINK THAT TIME WILL, BECAUSE THEY ARE BANKING ON A IN
CORPORATE TRAVEL THAT HAS NOT MATERIALIZED YET.
WE THOUGHT WE WOULD SEE IT IN THE FALL AS COMPANIES PUT
PEOPLE BACK INTO THEIR OFFICES. THAT DID NOT END UP LAYING OUT.
IF YOU DON'T HAVE THE CORPORATE TRAVELERS AIRLINES ARE
DEPENDENT ON LEISURE MARKETS. JONATHAN: -- LISA:
ON THE OTHER HAND HOW MUCH OF A BOOM IS IT THAT GAS PRICES HAVE
GONE DOWN AS MUCH AS THEY HAVE? BROOKE: IT DEFINITELY HELPS.
TO SEE THESE PRICES COMING DOWN IS A BOOST BUT YOU HAVE TO
WONDER IF YOU CAN BANK ON THAT. FUEL PRICES TEND TO BE A
VOLATILE METRIC. LISA:
WE'VE BEEN TALKING ABOUT HOW CAN YOU CALL FOR A RECESSION
WHEN YOU HAVE RECORD DEMAND BUT STILL INCREDIBLE AMOUNTS OF
TRAVEL. THANKSGIVING WAS BOOMING.
RECORDS INCLUDING PRE-PANDEMIC TIMES. IS IT JUST A MATTER OF EXPECTATIONS BEING HIGHER OR
ARE WE SEEING SOME SORT OF SOFTENING IN DEMAND? BROOKE:
IT IS INTERESTING BECAUSE THERE WAS WEAKNESS OVER THE SUMMER ON
THOSE DOMESTIC ROUTES. WHAT THE AIRLINE SAID IS PEOPLE
WERE PIVOTING AND TRAVELING INTERNATIONALLY BECAUSE THOSE
MARKETS WERE MUCH MORE OPEN AND THEY HAVE BEEN IN THE
POST-PANDEMIC PERIOD. THE PRESSURE WILL BE ON TO SEE
WHETHER PEOPLE TAKE THOSE INTERNATIONAL TRIPS.
I AM SKEPTICAL. IF YOU ARE A FAMILY WHO WENT TO
EUROPE IN 2022 OR 2023, DO YOU NEED TO GO BACK NEXT SUMMER?
I DO NOT THINK THE ANSWER IS YES.
I THINK WE WILL START TO SEE SOME PRESSURE ON THE CONSUMER.
WE ARE ALREADY SEEING IT ON BIG-TICKET ITEMS, THINGS LIKE
WASHING MACHINES. I THINK THAT EXTENDS TO
INTERNATIONAL TRAVEL. TOM: TO YOUR KANSAS HERITAGE, WHICH
IS WHERE AVIATION IS CENTERED, SORRY FOLKS, NOT THE CAROLINAS.
WHAT YOU SEE IN THE DIFFERENCE IN ENGINEERING BETWEEN BOEING
AND AIRBUS? BOEING IS WICKED TRADITIONAL,
AIRBUS IS MORE FANCY COMPUTERS, FLY BY WIRE.
WHERE ARE THEY IN FIVE YEARS? DO YOU FEEL LIKE ONE OF THEM
WILL RADICALLY CHANGE OR ARE THEY SAID IN THEIR WAYS? BROOKE:
I THINK FIVE YEARS IS A SHORT TIME HORIZON.
BOTH OF THEM ARE TRYING TO FIGURE OUT WHAT THE
NEXT-GENERATION TECHNOLOGY LOOKS LIKE IN TERMS OF REDUCING
CARBON EMISSIONS. AIRBUS IS EXPERIMENTING WITH
HYDROGEN TECHNOLOGIES AND THEY HAVE A COUPLE OF OTHER PROJECTS.
THEY ARE TAKING DIFFERENT PATHS BUT THE GOAL IS HOW WE MAKE
THESE PLATES MORE FUEL-EFFICIENT.
THAT WILL BE THE DRIVER FOR THE NEXT GENERATION OF AIRCRAFT.
IT COMMIT TO IMPROVE BEEN'S FROM ENGINE TECHNOLOGIES IS NOT
GOING TO GET YOU THERE OR BE A MOTIVATOR FOR THESE AIRLINES.
AS BOEING AND AIRBUS THINK ABOUT THEIR FUTURE PIPELINE
THAT IS THEIR PRIORITY. TOM: THEY WILL GO DOWN TO ONE
ENGINE. BROOKE: FOR MAYBE NO PILOTS. TOM: THE IDEA THAT WE ARE DOWN TO
ONE ENGINE, WHERE DOES THE EFFICIENCY COME FROM? BROOKE:
I WOULD ARGUE WE ARE PUSHING THE EFFICIENCY LIMITS OF THE
TECHNOLOGIES WE ALREADY HAVE. WHEN YOU LOOK AT THE ISSUES
THESE ENGINES HAVE HAD, WHETHER IT IS THE GTF FROM RTX WHICH
HAD ACUTE PROBLEMS. ROLLS-ROYCE HAS HAD ISSUES WITH ITS ENGINES.
WE ARE PUSHING THE BOUNDS OF THIS TECHNOLOGY IN TERMS OF
WHAT IT CAN DO. TO MAKE A QUANTUM LEAP FORWARD
IN TERMS OF FUEL-EFFICIENT SEAT WE WILL NEED DIFFERENT
TECHNOLOGY. WHAT THAT LOOKS LIKE I DO NOT
THEY THE INDUSTRY HAS SETTLED ON. THEY ARE PURSUING DIFFERENT
PATHS. JONATHAN: YOU ARE AWESOME.
LOVE HEARING FROM YOU. BROOKE SUTHERLAND OF BLOOMBERG.
PAYROLLS REPORT 36 MINUTES AWAY. NEIL DUTTA JUST PUBLISHING THIS
MORNING. "I CONTINUE TO SEE ANALYSTS
NOTING THE THRESHOLD TO CUT RATES IS HIGH BECAUSE THE FED
WANTS TO BE SURE INFLATION SLOWING DOWN BEFORE THE EASE
POLICY, I DON'T GET IT. THE THRESHOLD IS CONDITIONAL ON
THE INFLATION OUTLOOK AND THE THRESHOLD FOR PRICE MODERATION
IS NOT VERY HIGH." THE DISINFLATION IS IN THE
PIPELINE, ALREADY BAKED IN. YOU WILL SEE IT. TOM:
DAVID ROSENBERG SECONDS THE MOTION WITH NEIL DUTTA SAYING
THIS IS THE TREND, GET USED TO IT. JIM BIANCO WAS ARTICULATE ON
THIS IN THE LAST 24 HOURS. HE WAS OUT FRONT WITH THE IDEA
OF LEVELING INFLATION OR EVEN UP AS WE HEARD FROM MORGAN
STANLEY AND SARAH WOLFE. THE END OF THE WEEKEND IS WHERE
THE DEBATE IS ENGAGED. LISA: I LOVE THE NEIL DUTTA WATCHES
THE SHOW AND WATCHES THE CONSENSUS CALL AND THEN WRITES
IN HATE MAIL SAYING THEY ARE ALL WRONG.
I THINK THE THRESHOLD IS EVEN LOWER. IT CREATES REAL DIALOGUE.
JONATHAN: HE HAS BEEN RIGHT. TOM: A FEW MORE PEOPLE RIGHT IN.
JONATHAN: I AM SURE HE FEELS RIGHT ABOUT
2024. TOM: CAN I ASK YOU THE QUESTION
AFTER THE WONDERFUL CONVERSATION WITH BROOKE
SUTHERLAND. HAVE YOU FLOWN THE GIGANTIC
AIRBUS PLANE? YOU ARE A KEYSTROKE AND THERE
IS THIS THING -- YOU ARE AT HEATHRO W AND THERE IS A THING
TWICE AS LARGE AS A BOEING 737. JONATHAN: I HAVE NEVER FLOWN IT.
WOULD YOU LIKE TO? TOM: I DON'T KNOW.
I THINK IS GORGEOUS ENGINEERING. LISA:
TO LIKE IT WHEN THERE ARE FIVE SEATS TOGETHER IN THE MIDDLE?
JONATHAN: NO. YOU THINK HE SITS IN THE CABIN
WITH FIVE SEATS TOGETHER IN THE MIDDLE? LISA:
I HAVE EXPERIENCE THAT. JONATHAN:
HE DOESN'T EVEN KNOW WHAT THAT LOOKS LIKE. [LAUGHTER] JONATHAN:
PAYROLLS 33 MINUTES AWAY. TOM KEENE HAS NOT TURNED RIGHT
ON A PLANE IN YEARS. NADIA LEVEL IS COMING UP NEXT. WE STILL HAVE EVIDENCE POINTING
THAT THE FED IS WAFFLING. JOB GROWTH IS WRONG -- STRONG.
LABOR MARKETS ARE STRONG. A STRONG NUMBER IS LARGELY
PRICED IN. THIS IS BLOOMBERG SURVEILLANCE
WITH TOM KEENE, JONATHAN FERRO AND LISA ABRAMOWICZ. TOM: GOOD MORNING EVERYONE, IT IS
JOBS DAY ON RADIO AND TELEVISION AND WORLDWIDE. WHERE WILL WE BE AT 8:31 IN THE
MARKET REACTION. THE WHISPER NUMBER SAYS IT MAY
BE A LITTLE WEAKER THAN THE PUBLISHED NUMBER. JONATHAN: THE ESTIMATE IS 183,000 AND
WHAT YOU ARE BASICALLY ASKED KING IS IT BAD NEWS?
IS BAD NEWS BAD NEWS? WILL PEOPLE START TO SIT THERE
AND THINK OH, THAT'S BAD. THE RATE BECAUSE OFF OF
DISINFLATION, GREAT IF GROWTH IS ROBUST. BUT IF YOU HAVE AN
ECONOMIC DOWNTURN? TOM: IAN SHEPHERDSON, IT GOES THE
OTHER WAY. THAT WILL BE A SHOCK TO THE
MARKET AS WELL. JONATHAN: IS GOOD NEWS GOOD NEWS? LISA:
IT DEPENDS ON WHICH ASPECT? DOESN'T MATTER IF THEY WERE TO
GO DOWN SIGNIFICANTLY IF WHAT YOU ARE SEEING IN TERMS OF
QUITS ARE GOING DOWN AND JOB OPENINGS ARE GOING DOWN? CAN WE GET A READ THROUGH AT A
TIME WHERE THE DISTORTIONS FROM THE STRIKES, GOVERNMENT HIRING,
MEDICAL HIRING? TOM: THE DIFFERENCE IN THE TWO GDP
MEASUREMENTS, GDP, GDI DON'T MATCH.
WHAT WILL THE REVISIONS LOOK LIKE?
DO WE HAVE ANY VERACITY OF THE LAST TWO JOBS REPORTS? TOM: AND THEN WE HAVE CPI, FED,
RETAIL SALES. SO FOR MEAL DATA, THIS LABOR
MARKET IS NO LONGER A REASON TO BE HAWKISH. AT WHAT POINT DOES THAT TIP AND
NOT BE BEARISH? BASED ON JOBLESS CLAIMS, IT'S
TOO EARLY TO EXPECT GOD. LISA:
SERVICES INFLATION TENDS TO BE STICKIER AND THAT'S CONCERNING. PEOPLE ARE UNDERESTIMATING THE
FED'S COMMITMENT OF GETTING DOWN TO 2%. JONATHAN: A TOUGH MEETING FOR CHAIRMAN
POWELL, REALLY DIFFICULT. TOM: MORE DIFFICULT IN THIS LAST TWO
WEEKS. JONATHAN: THE MARKET IS PRICING IN A
HUNDRED BASIS POINTS AND THEY HAVE TO PUT IN DOTS IN 2024,
THAT'S DIFFICULT TO DO. TOM: WE WILL DO A LONGER DATA CHECK
AS WE GO INTO THE JOBS REPORT. THE VIX IT 13.1, I THINK THAT
SAYS BULL MARKET. JONATHAN:
AFTER THE MOVE YESTERDAY, THAT'S ABSOLUTELY RIDICULOUS
AND MORE RIDICULOUS WHEN YOU THINK ABOUT WHAT PEOPLE WERE
LOOKING AT THE START OF THE YEAR. TECH WAS HONEST NICE AND THEN
WE RIPPED OFF THE BACK OF THE AI STORY FROM NVIDIA, ALPHABET.
LISA: AND NOBODY IS WILLING TO PUSH
BACK. THERE IS A CHANGE IN RHETORIC,
NOT TECH WILL LOSE VALUE BUT MAY NOT OUTPERFORM. DON'T BET AGAINST ATTACK AND
EVERYONE IS TERRIFIED. JONATHAN: THE TWO-YEAR IS UP, 10 YEAR IS
UP AT 4.18. TOM: WHEN WE HAD OUR EARLY MORNING
MEETING IN THE ANSWER IS THE TWO YEAR YIELD AT 4.62.
JONATHAN: THAT'S A BIG TURNAROUND.
DOES THE DATA VALIDATED? TOM:
WE WILL DO THAT WITH MICHAEL MCKEE COMING UP HERE, NADIA
LEVEL BRIEFS US.
WE ARE ALMOST BEYOND THE IDEA OF IT BEING THE BULL MARKET. IS IT A BULL MARKET WITH BREATH
INTO 2024? NADIA:
WE THINK SO BUT SOME OF THE LEADERS FROM THIS YEAR WILL
CONTINUE NEXT YEAR BUT A LOT OF THIS WILL DEPEND ON THE DATA. IT DOES FEEL ON THE GROWTH FRONT WE ARE PROBABLY BACK IN
THE TWO MUCH GOOD NEWS IS BAD NEWS.
GIVEN HOW MUCH RATE CUTS ARE PRICED INTO THE MARKET BUT THIS
COULD CREATE SOME VOLATILITY IF THE MACRO DATA CONTINUES TO
SUPPORT A SOFT LANDING THAT THIS MARKET CAN MOVE HIGHER
FROM HERE. THIS PAST WEEK WE GOT SOME
INTERESTING COMMENTARY INCLUDING TECH FINANCIALS AND
COMPANIES ARE NOT SEEING ANY SLOW DOWN IN THE CONSUMER
REMAINS RESILIENT. THAT SHIFT CONTINUES TO SUPPORT
THE MARKET. JONATHAN: GOOD MORNING NADIA, WE HAVE
TECH AND ENERGY. THE WINNERS OF 2024, ARE THEY
THE WINTER OF 2023? NADIA: WE THINK IT WILL CONTINUE INTO
2024. AI ENTHUSIASM REMAINS AND WE CONTINUE TO SEE A MONETIZATION
INCREASE. WE ARE ALSO SEEING ALTERNATIVES
PRODUCE IN THAT FIELD. OUR VIEW ON TECH IS NOT SOLELY
AI. ON A RELATIVE BASIS, THIS IS
ABOUT IMPROVING FUNDAMENTALS AND THE REST OF TECH.
THEY ARE STARTING TO SEE A OPTIMIZATION COME TO AN END. PREVIOUSLY DEPRESSED MARKETS
IMPROVING BECAUSE OF A NEW GROWTH CYCLE WHEN YOU LOOK AT
SMARTPHONES AND PCS. THIS IS A SECTOR THEY COULD SEE
TWICE AS MUCH REVENUE AS THE BOND MARKET WITH MARKET
EXPANSION WHICH IS WHY WE THINK TECH COULD CONTINUE TO
OUTPERFORM. JONATHAN: LET'S DO ENERGY. WE DROPPED INTO THE 60'S, THEY
WERE LOOKING FOR 90'S AND BRENT. WHAT'S GOING ON IN THE
COMMODITIES MARKET? NADIA: YOU COULD SEE WHY MARKET WANTED
STABILIZATION CONSIDERING WHAT WENT AROUND LAST WEEK AND THE
CUTS INTO 2024. GIVEN WHERE OIL PRICES ARE THAT
WILL LIKELY INCREASE THE COMMITMENT FROM OPEC-PLUS AND
YOU COULD SEE A HIGH COMPLIANCE FOR THAT 200 MILLION BARRELS A
DAY CUT INTO NEXT YEAR. VOLATILITY WILL REMAIN BUT THE
DEMAND PICTURE REMAINS IN THE MAN. GROWTH IS IN DEMAND LED BY
EMERGING MARKETS. OIL REMAINED STRONG ESPECIALLY
WITH JET FUEL. PATIENCE IS REQUIRED BUT WE
THINK THIS MARKET WILL BE A DEFICIT IN THE FIRST HALF OF
THE YEAR. AND IT COULD GET BACK TO $90.
LISA: WHEN YOU LOOK AT THE EXXON
CHAIRS THAT ARE DOWN 17% SINCE SEPTEMBER? NADIA: WHAT WE SAY TO CLIENTS THAT
THIS IS AN OPPORTUNITY TO ADD EXPOSURE BECAUSE WE THINK THERE
IS A LIMITED DOWNSIDE FROM HERE WE THINK OPEC WILL STEP INTO
SUPPORT OIL PRICES. WHEN YOU LOOK AT THESE
COMPANIES THEY FUNDAMENTALLY ARE IN GREAT SHAPE.
AND RETURNING CASH TO SHAREHOLDERS WITH MASSIVE
BUYBACKS SO THERE IS AN OPPORTUNITY TO ADD TO ENERGY.
LISA: PRETTY MUCH EVERYTHING WILL BE
BAD NEWS EVEN IF IT'S GOOD NEWS BECAUSE IF IT'S NOT GOLDILOCKS
WITH RESPECT TO THE JOB REPORT WE GET.
HOW WILL YOU POSITION ON THE HEELS OF THIS?
DO YOU USE IT AS AN EXCUSE TO SELL OR BUY? NADIA: WE WOULD BE SURPRISED TO SEE
WEAKNESS IN THE LABOR MARKET IN TERMS OF THE OTHER DATA COMING
IN. IN THE PAST THREE LABOR MARKETS
HAVE BEEN PROMISING BUT EXPECTATIONS ARE HIGH GIVEN THE
RATE HIKES PRICED IN FOR NEXT YEAR. IF PAYROLLS REMAIN IN THE HIGH
100 THOUSANDS BUT IF YOU SEE SOMETHING BELOW THAT IT DOES
GIVE A REASON TO PAUSE AND QUESTION WHETHER THERE IS
CONSUMER RESILIENCY IN THE LABOR MARKET.
BUT WE THINK THE NUMBERS WILL BE FINE BUT THIS IS A MARKET ON
EDGE AND REMAIN ON EDGE AND IS VERY MUCH DATA DEPENDENT.
JONATHAN: NADIA, THANK YOU FOR CHECKING
IN ON PAYROLLS FRIDAY. THIS IS THE SECOND TIME WE HAVE
HEARD THIS, NADIA LOWELL FROM UBS.
100,000 AND BELOW WOULD SPOOK THIS NUMBER. TOM: 110, 120. ON TWITTER THERE IS A REALLY
SMART NOTE ON STOCK SELECTION AND NADIA TALKING ABOUT MIXED
INDEXES. I WOULD SUGGEST 2024 TYPICALLY
IN A BULL MARKET, IT'S LIKE BASEBALL. THE WINNERS OF AI, THE WINNERS
IN AEROSPACE IT WILL BE SELECTIVE. JONATHAN:
ARE YOU WENT TO BASEBALL AGAIN? TOM:
THE YANKEES JUST MADE THE TRADE OF THE YEAR. HE HAS THE MOST PATIENT BATTER
IN THE GAME IS TOTALLY DIFFERENT WHEN HE STEPS TO THE
PLATE. JONATHAN: WHAT IF THEY CONVINCED HIM TO
COME TO NEW YORK? TOM: THE FOOD SUCKS IN YANKEE
STADIUM. JONATHAN: THE FOOD DOES SUCK IN YANKEE
STADIUM WHY IS THAT? THEY PUT CHICKEN WINGS IN THE
SODA. TOM: WHAT'S AMAZING IS THAT
TOTTENHAM WITH THEIR MEAT STICKS? JONATHAN: UNBELIEVABLE, A KNIFE AND FORK
TO EAT APPLIED. DO YOU WANT TO DO OUR ACCIDENT
AGAIN TOM? TOM: NO. JONATHAN: THAT ALMOST SOUNDED THREATENING.
THANK YOU FOR JOINING US THIS MORNING.
FUTURES ARE LOWER DOWN 2.24%. TOM:
DID YOU SEE THE GOAL WHERE THE TOTTS LOST TO WEST HAM? THE DEFENSE OF GUYS SAYING I'LL
GIVE IT BACK TO THE GOALIE? JONATHAN:
YOU WATCH MORE FOOTBALL THAN I DO.
I DIDN'T EVEN WATCH THE GAME. LISA: DID YOU ACTUALLY WATCH THE
WHOLE GAME? TOM: NO, I WATCH THE HIGHLIGHTS. JONATHAN: JEFF ROSENBERG AT 8:30 A.M. >> WE WILL FOCUS ON A COUPLE OF
THINGS IN THIS REPORT. HOW STABLE IS MARKET GROWTH?
IN THE UNEMPLOYMENT RATE, IS DRIFTED UP THIS YEAR DESPITE
THE ECONOMY BEING SO STRONG. ONE MONTH DOESN'T MAKE A TREND
SO THE MARKET WILL REACT TO THE DATA WE GET BUT THE GENERAL
START IS THE ECONOMY SLOWING, INFLATION IS COMING DOWN.
JONATHAN: THAT WAS BILL DUDLEY LOOKING
AHEAD TO THE JOBS REPORT SAYING THE FED IS PRETTY HAPPY WITH
HOW THINGS ARE GOING. THERE'S A REBALANCING OF THE
LABOR FORCE, SUPPLY-SIDE DOING BETTER. TOM: WHERE ARE WE IN THE
POST-PANDEMIC? GOING BACK TO 1921, WE ARE NOT
IN THE ROARING 20'S. COMING OUT OF THE PANDEMIC IS
THE STUDY OF PRODUCTIVITY. JONATHAN:
I CAN TELL YOU WHERE WE ARE RIGHT NOW.
13 MINUTES AWAY FROM THAT JOBS REPORT AND WE LOOK LIKE THIS IN
THE MARKET OF .02% AND WE ARE LOOKING FOR 183,000. TOM: AFTER THE JOBS REPORT IS
MICHAEL MCKEE AND JEFF ROSENBERG IS SCHEDULED TO BE
WITH US AND WE ARE HAPPY TO BRING TO YOU THE CHIEF
STRATEGIST AT ROTH. THE DYNAMICS OF THE AMERICAN
ECONOMY IT COMES DOWN TO NOMINAL GDP. HOW QUICKLY THIS HOUR TOPLINE
ANIMAL SPIRIT EXPLODING? >> IF YOU LOOK AT THE TRACKING
NUMBERS FOR THE FOURTH QUARTER OF LOOKS LIKE THE EXPECTATIONS ARE RUNNING FOR 1% GDP GROWTH
AND WITH INFLATION RUNNING AT 2%, 3% THAT LOOKS LIKE THERE
HAS BEEN A DRAMATIC SLOWDOWN IN TYPE LINE GROWTH FROM Q3 TO Q4
WHICH LOOKS BELOW TREND. WE REALLY DON'T KNOW WHAT THE
UNDERLYING TREND IS BUT IT IS SAFE TO SAVE IT IS A SLOWING
TREND AND THIS IS WHAT THE FED WANTS AFTER ALL THE MONETARY
TIGHTENING THEY DID LAST YEAR. THE QUESTION IS DO WE STOP OUT
A DIME ON TREND GROWTH AND CONTINUE TO ENJOY THIS
IMMACULATE DISINFLATION? OR IS IT SOMETHING MORE
MALIGNANT THAT LOOKS LIKE A RECESSION? TOM:
WHAT KIND OF TREND SIGNIFIES A SLOWDOWN? LISA TALKS ABOUT NONFARM
PAYROLLS BUT IS IT SUB 100,000? MICHAEL: I THINK IS SUBJECTIVE. IF THE RELATIONSHIP BETWEEN THE ISM NONMANUFACTURING SURVEY
REVERTED TO THE PRE-PANDEMIC RELATIONSHIP WITH PAYROLLS WE
WOULD BE GETTING 70, 70 5000 WHICH IS WAY BELOW THE
EXPECTATION OF 185, 190. ANYTHING THAT IS OVER 200
INJURES THE BOND MARKET WHICH HAS BEEN IN THE THROES OF A BIG
RALLY. WE HAVE FIVE RATE CUTS PRESTON
FOR NEXT YEAR. I AM A BIT SKEPTICAL WE CAN
HAVE A SOFT LANDING, DOUBLE DIGIT EARNINGS GROWTH RATE FOR
THE S&P AND FIVE FED RATE CUTS. THIS IS A LITTLE TOO GOOD TO BE
TRUE IN TERMS OF THE STORY BEING COOKED UP BY WALL STREET
STRATEGIST. JONATHAN: WHAT DO YOU THINK HAS TO GIVE?
MICHAEL: THE BUSINESS CYCLE WILL GIVE
HERE. I WILL BE WATCHING THE UNEMPLOYMENT RATE WITH THE
EXPECTATION WE SET UP AT 3.9. WE ARE UP 5/10 FROM APRIL.
WHICH IS WHAT YOU WOULD SEE AT THE BEGINNING OF A RECESSION.
IT IS NOT A DECISIVE SIGNAL. ON A 12 MONTH BASIS YOU WANT TO
SEE AN INCREASE. IF WE DRIFT HIGHER ON THE
UNEMPLOYMENT RATE, THAT WAS SUGGEST WE ARE ENTERING A
RECESSIONARY. PERIOD. WE ARE MOVING IN A DECISIVE
UPWARD DIRECTION. JONATHAN: I JUST WANT TO GET HER AWAY
FROM THAT. WHAT ARE THE CHANCES WE WOULD
STOP THERE ARE NOT GO HIGHER? MICHAEL: ONLY ONCE IN THE 1950'S.
IT IS HAPPEN ZERO TIMES WITHOUT A RECESSION OVER A NINE-MONTH INTERVAL AND WE WERE 3/4 IN APRIL AND 5/10 IS UNTENABLE
WITHOUT A RECESSION. THESE PAYROLL FIGURES CAN STILL
BE POSITIVE FOR A WHILE INTO THE EARLY MONTHS OF A RECESSION
AND THEY CAN BE REVISED DRAMATICALLY OVER TIME. THE UNEMPLOYMENT RATE IN TERMS OF SLIGHTLY LACKING INDICATORS
WILL LET US KNOW IF WHERE IN THE GROWTH OR RECESSION PHASE.
LISA: WHEN YOU TALK ABOUT THE
POTENTIAL FOR A WEAKENING IN THE ECONOMIC CYCLE I HAVE TO
ASK, HAVE WE NOT CHRIST THAT IN? IF YOU LOOK AT THE
UNDERPERFORMANCE OF THE RUSSELL AND OUTSIDE OF THE MAGNIFICENT
SEVEN, ARE WE NOT PREPARED FOR THE WEAKNESS? MICHAEL: I THINK SO BECAUSE SMALL CAPS
HAVE DRAMATICALLY UNDERPERFORMED IN THE CYCLICALS
HAVE BEEN STRUGGLING, ENERGY, MATERIALS.
THE VALUATION WOULD SAY THERE'S NOT MUCH DOWNSIDE FROM HERE.
I'M WORRIED ABOUT THE VALUE TRAP WAS CYCLICALS OF WE FALL
INTO AN ACTUAL RECESSION. WHEN NOT AS OBVIOUS IN THE
CONSENSUS VIEW THAT WE ARE IN RECESSION, THUS THE TIME YOU
WILL WANT TO BUY CYCLICALS THAT HAVE ALREADY BEEN BEATEN UP
PRETTY BADLY. THAT'S AN IMPORTANT POINT FOR
INVESTORS. JONATHAN: STICK WITH US WE WILL GET BACK
TO YOU AFTER PAYROLLS. AND ALSO, HAPPY BIRTHDAY. HE IS SO CHISELED, SUAVE? LISA:
IT'S LIKE PARADISE CITY. I AM LOOKING AT THE GUNS AND
ROSES POSTER BEHIND HIM. SWEET CHILD OF MINE. JONATHAN:
185 IS THE NEW ESTIMATE. MICHAEL:
I WOULD LOVE TO BE 50 AGAIN. WE HAVE MOVED UP TO 185 IN THE
WHISPER NUMBER HAS FOLLOWED UP OUT WAS 77. NOT ONLY DO WE HAVE A HIGHER
NUMBER IN TERMS OF PAYROLL CHANGE THAN JUSTIFIED BUT WALL
STREET IS SUGGESTING. MICHAEL: WE DID SEE DOWNWARD REVISIONS
IN THE PAST AND YOU WANT TO WATCH FOR THAT.
MIKE WAS JUST SAYING THESE THINGS GET REVISED A LOT AND
SOMETIMES WHEN YOU THINK THERE IS A LOT OF STRENGTH, IT
DISAPPEARS. JONATHAN: HOW DIFFICULT THIS IS FURTHER
CHAIRMAN POWELL? MICHAEL: THE MEETING ITSELF IS NOT SO
HARD BECAUSE THEY CAN JUST SAY THEY'RE NOT DOING ANYTHING BUT HOW THEY FRAME THE DOT PLOT. AS MANY PEOPLE HAVE SHOWN, THE
MARKET TRADES DIFFERENTLY AT 2:00 WHEN WE GET THE STATEMENT
AND THEN AT 230 TIME WHEN THE CHAIRMAN SPEAKS. JONATHAN: MIKE WILL STICK WITH US BUT
COMING UP JEFFREY ROSENBERG, THE NUMBERS LOOK LIKE THIS. 185,000 IS THE PREVIOUS READ. GOING INTO FUTURES NEGATIVE AS
0.1% AND YIELDS DRIFTING HIGHER. JONATHAN:
20 SECONDS AWAY FROM THE PAYROLLS REPORT THE SCORES LOOK
LIKE THIS ON THE S&P EQUITY FUTURES SLIGHTLY NEGATIVE,
YIELDS ARE A LITTLE BIT HIGHER ON A 10 YEAR UP THREE
BASIS POINTS AND IN THE FX HIGHER NUMBER THE DOLLAR IS A
LITTLE STRONGER AGAINST THE EURO.
WITH YOUR JOBS REPORT HERE IS MIKE MCKEE. MICHAEL: WE ARE WAITING FOR THE NUMBERS
TO DROP AND WE COME IN A LITTLE BIT HIGHER. 190 NINE, JUST UNDER THE
200,000 LEVEL. 199 JOBS CREATED DURING
NOVEMBER AND 150 IN THE PRIVATE. A REBOUND IN MANUFACTURING
AFTER THE UAW STRIKE. IT IS STILL HIGHER THAN PEOPLE
ANTICIPATED AFTER THE MAP. THE UNEMPLOYMENT RATE IS 3.7%.
REMEMBER PEOPLE TELLING US WE WOULD GO OVER FOR? I WILL HAVE TO CHECK THE
NUMBERS IN TERMS OF WHY THAT HAS HAPPEN WHICH WILL DO IN A
SECOND BUT THAT'S A STUNNING NUMBER. AVERAGE HOURLY NUMBERS WERE
WAITING ON IN LABOR PARTICIPATION AT 62.8.
THERE SEEMS TO BE AN ISSUE WITH THE WEBSITE.
LET'S SEE IF EVERYBODY IS GOING THROUGH THAT.
WE ARE NOT GETTING THE DATA WE NORMALLY GET. JONATHAN: AN UPSIDE SURPRISE AT 199,
UNEMPLOYMENT AT 3.9. YIELDS HIGHER ARE UP 11 BASIS
POINTS. THE 10 YEAR IS 10, 11 BASIS
POINTS. WAGE GROWTH IN NUMBER HIGHER
MONTH OVER MONTH. MICHAEL: DOUBLE THAN WHAT WE SAW LAST
MONTH. IT MEANS NOTHING COMPARED TO
THE YEAR-OVER-YEAR. IT'S A 4% YEAR-OVER-YEAR BASIS
SO THAT TELLS US WE ARE STILL SEEING THE PROGRESS YOU WANT TO
SEE IN WAGES AND THAT EVEN WITH THE LARGE JOBS NUMBER. THE REVISIONISTS AND AND THAT'S
WITH THE DECLINE OF 37,000. WE DON'T KNOW WHICH MONTHS
THOSE ARE APPORTIONED TO BUT A SMALLER NUMBER FOR THE NET
REVISIONS THAN PEOPLE ANTICIPATED. JONATHAN:
A STRONGER DOLLAR AGAINST THE EURO. WE WERE TALKING ABOUT THE
PROSPECT OF A DOWNSIDE SURPRISE AND THIS IS GOOD NEWS WITH JOBS
BETTER-THAN-EXPECTED, PARTICIPATION IS HIGHER. THE SCRIPT IS NOT GOING TO
CHANGE ON WEDNESDAY. LISA: HE WILL HAVE TO HAVE A HAWKISH MESSAGE AFTER THIS SHOWS STRONG
NUMBERS. UNEMPLOYMENT DROPPED FROM THE
PRIOR MONTH IS SURPRISING. AND HOURS WORKED HAS ALSO
INCREASED WAGE GROWTH ALSO INCREASED. TOM: THE ELEPHANT IN THE ROOM IS A
SMALL REVISION HUNDRED 64,000 IS A MIDDLING
NUMBER BUT A SIGH OF RELIEF FROM THE GLOOM THAT IS BEEN
WHISPERED OUT THERE. JONATHAN: THREE MINUTES AFTER PAYROLLS
THE PRICE ACTION DOESN'T STICK. OF 10 BASIS POINTS AT THE
MOMENT, WHAT DO YOU SEE? MICHAEL: LET'S BREAK DOWN UNEMPLOYMENT
532,000 BUT WE ALSO GET 740 7000 OF PEOPLE EMPLOYED WHICH IS A HUGE NUMBER AND UNEMPLOYED
DROPS BY 215,000. THIS LOOKS LIKE A GOOD REASON
UNEMPLOYMENT IS FALLING. A SURPRISINGLY STRONG HOUSEHOLD
REPORT AND ESTABLISHMENT REPORT IS ALSO VERY STRONG. 40,000 JOBS IN LEISURE AND
HOSPITALITY WHICH IS HIGHER THAN IT HAS BEEN, THAT CATEGORY
STILL LOOKING FOR PEOPLE. I WONDER HOW MANY OF THOSE ARE
DEPARTMENT STORE SENSES? GOVERNMENT A LITTLE LOWER THAN
THE AVERAGE BUT STILL ADDING A LOT AND HEALTH CARE AT 77,000
JOBS. TOM: THAT'S MY SIDE GIG. JONATHAN:
YOU WOULD BE A GOOD SANTA. MICHAEL MCKEE THANK YOU FOR
THAT EQUITY FUTURES, BOND YIELDS ARE A LITTLE HIGHER AND
ON THE EURO AGAINST THE DOLLAR, A STRONGER DOLLAR 1.07 A
TREMENDOUS LINEUP WE HAVE MOHAMED EL-ERIAN, MIKE COLLINS OF FIXED INCOME AND A VERY
HAPPY LABOR SECRETARY WILL BE JOINING US FROM THE WHITE HOUSE
SOON. TOM: WE WILL CONTINUE OUR
CONVERSATION WITH MICHAEL DIVE. IS THIS THE PRODUCTIVITY
OVERLAY, TECHNOLOGY OVERLAY AND THE NON-TECHNOLOGICAL SECTORS
WHERE THINGS ARE BETTER THAN WE PERCEIVE? MICHAEL: IT'S HARD TO SAY THE
PRODUCTIVITY STATISTICS OF BEEN STRONG BUT THEY WERE INSANELY
WEEK BEFORE THAT. WE JUST FAULTED BACK TO THE
PRE-PANDEMIC TREND SO FAR WHICH WAS 1.6.
TO BE DETERMINED ON THAT. THIS IS A GOOD REPORT. WE WERE TALKING ABOUT THE
UNEMPLOYMENT RATE MOVING UP AS A RECESSION SIGNAL AND WE HAVE PULLED BACK AT 3.7 SO THIS IS A
REPORT THAT THE FED WILL FEEL LIKE THEY WON'T HAVE TO EMBRACE
THESE EARLY RATE CUTS. THIS COULD CHANGE WITH DECEMBER
DATA BUT AT FACE VALUE A STRONG REPORT. IT'S STILL THE FULLY EMPLOYED
MICAH. WE ARE SEEING A LITTLE BOUNCE
IN BOND YIELDS. LISA: DOES THIS MAKE YOU RETHINK YOUR
THESIS ABOUT THE CYCLE MOVING AVERAGE? MICHAEL: IT'S NOT A DECISIVE SIGNAL.
IF WE ARE UP ABOVE FOR FOR THIS REPORT THAT WOULD SUGGEST THAT
WE ARE FALLING INTO RECESSION. WE ARE NOT IN RECESSION RIGHT
NOW BUT NOT NECESSARILY AN ALL CLEAR SIGNAL FOR NEXT YEAR. TOM:
WHAT IS THE DARDA XP CALL. MICHAEL: FOR THE OVERALL S&P 500 WE
WILL HAVE A CHALLENGING PERIOD IN THESE LEADING SECTORS THEY
ARE TOO HIGH. INVESTORS WILL NEED TO LOOK AT
OTHER AREAS THAT HAVE BEEN UNDERPERFORMING. TOM: MICHAEL DARDA THANK YOU SO MUCH.
THE VIX UNDER 13 AT 12.90. 11 BASIS POINTS ON HIGHER YIELD
LOWER PRICE ON THE TWO-YEAR AND NOW DOWN EIGHT. LISA: IF ANYONE WAS DOUBTING
GOLDILOCKS, YOU COULD CONTINUE TO TRY TO DOUBT IT BUT EACH
DATA POINT PLACE WITH THAT IDEA WITH MORE PEOPLE ENTERING THE
WORKFORCE. TOM: A DIFFICULT WAY TO MANAGE MONEY
IN THIS ENVIRONMENT. JEFFREY ROSENBERG IS BLACKROCK.
WEST A STRATEGY THAT WORKS FORWARD GIVEN THE TREACHEROUS
ECONOMIC WATERS WE WAY? JEFFREY: THIS IS A GOOD REPORT AND WE
HAVE BEEN DISCUSSING ACROSS AND STRONGER-THAN-EXPECTED, MAYBE
NOT ON HEADLINE PAYROLLS BUT UNDERNEATH AND THAT WILL PUSH
BACK WHICH IS WHY YOU'VE SEEN THE MARKET REACTION WE JUST
DESCRIBED. JUAN MARKETS ARE REALLY
STARTING TO PRICE AND A LOT OF CUTS INTO NEXT YEAR.
THE UNEMPLOYMENT RATE IS HARD TO SEE WHERE THE RESTRICTION IS
COMING FOR THIS FED POLICY. YOU WILL HAVE PUSHBACK IN THE
NARRATIVE AND THAT YOU WON'T SEE THE SLOW DOWN.
MOST OF THE SUPPORT IS COMING FROM THE INFLATION SIDE.
ON THE GROSS SIDE YOU ARE NOT SEEING THE LEVEL OF HER STRICT
NOSE SHOW UP IN THE LABOR MARKET.
THAT WILL PUSH BACK ON HOW QUICKLY THE FED WILL BE ABLE TO
CUT RATES TO KEEP UP WITH THE FALL IN INFLATION AND AVOID THE
INCREASING REAL RATE. TOM: THE BLOOMBERG FINANCIAL
CONDITION INDEX EXPLODES TO 6.2. THIS IS WHAT POWELL DOES NOT
WANT TO SEE. LISA: HE DIDN'T PUSHBACK AS MUCH AS
PEOPLE THOUGHT. TO THAT POINT, WHEN YOU SAY
INFLATION IS IN THE FRONT MINDS OF PEOPLE ON .
HOW IS THEIR VIEW DAMAGED BY HOURLY EARNINGS RISING?
HOW DOES THAT SUGGEST A STICKINESS TO WAGE GROWTH THAT
FLIES AGAINST THIS NARRATIVE OF BED RATE BECAUSE? JEFFREY: WHAT YOU HAVE HAD ON THE
INFLATION SIDE IS THIS DICHOTOMY BETWEEN GOODS AND
SERVICES AND IT IS THE GOODS PART THAT IS BEEN THE
DISINFLATION FUELING THE ENTHUSIASM FOR THE CUTS INTO
NEXT YEAR. THE SERVICES SIDE HAS HELD UP
IN SERVICE S INFLATION IS THE MAP INTO
BROADER INFLATION. THAT REMAIN SUPPORTIVE. THIS REPORT SUPPORTS CONTINUED
SUPPORT FOR THE BROAD INFLATION PICTURE FROM THE SERVICES SIDE
IN THAT DEBATE WILL CONTINUE. WHAT YOU'VE SEEN IN THE MARKET
IS A LITTLE BIT OF PULLBACK IN TERMS OF THE ENTHUSIASM. THE FIRST REACTION IS NOT
NECESSARILY BE AND REACTION. THE TAKE AWAY IS THAT THERE IS
A VERY STRONG LABOR MARKET AND SUPPORT OF SERVICES INFLATION
DRIVEN BY THE GOOD SIDE. YOU ARE NOT SEEING THAT
SUPPORTED ON THE SERVICES SIDE. LISA:
DOESN'T MATTER HOW MUCH THE FED CUTS RATES NEXT YEAR
CONSIDERING THE FACT THAT IT DIDN'T SEEM TO MATTER HOW MUCH THEY SEEM TO RAISE RATES.
ARE THEY UNDERESTIMATING HOW MUCH AFFECT THE MARKET IF THEY
DON'T CUT RATES? WHEN YOU SEE AN ECONOMY
CHUGGING ALONG AT BUSINESSES THE HIRING? JEFFREY:
DOESN'T MATTER FOR THE REAL ECONOMY OR THE FINANCIAL
ECONOMY? IN TERMS OF THE SENSITIVITY TO
THE ECONOMY TO INTEREST RATES, IS A DIFFERENT QUESTION TO THE
SENSITIVITY OF THE FINANCIAL MARKETS.
FOR THE FINANCIAL MARKET IT MATTERS A LOT. THAT HAS EVERYTHING TO DO WITH
THE EXPECTATIONS OF THE SOFT LANDING AND ALLOWING THE FED TO
CUT INTEREST RATES IS HIGHLY SUPPORTIVE OF FINANCIAL MARKETS.
BUT WITH THE REAL ECONOMY IS LESS SIGNIFICANT BUT FOR
INVESTORS THAT WILL BE THE FINANCIAL MARKET. TOM: LET'S PRETEND YOUR CARNEGIE MELLON YOU HAVE A CHAT, DOES
THIS GOOD LABOR ECONOMY SUPPORT EBULLIENT ASSESSMENT OF OUR
REAL GDP? JEFFREY:
THAT'S KIND OF THE ISSUE HERE FOR MONETARY POLICY, THERE IS A
QUESTION OF WHAT IS NEUTRAL AND REAL INTEREST RATES OF WHAT IS
RESTRICT LIVE? WE THINK WE ARE THERE BUT WE
DON'T KNOW UNTIL IT SHOWS UP. WE HAVE HAD THE BENEFIT FROM
THE INFLATION SIDE BUT THE GROSS SIDE, LESS SO.
THAT'S BEEN THE MESSAGE FROM LABOR MARKETS.
IT'S BEEN A STEADY NORMALIZATION BUT WE ARE STILL SEEING A LARGE LABOR MARKET
PRESENCE, RATES ARE NOT REALLY CONSISTENT WITH RESTRICTIVENESS.
THAT IS GOOD FROM THE GROSS SIDE BUT IT MAY NOT BE GOOD TO
GET THE LAST SMILE OF 3.5 DOWN TO THE 2% TARGET. TOM:
JEFFREY ROSENBERG OFTEN HERE WITH US ON JOBS DAY FROM
BLACKROCK. WHAT IS BENEATH THE HEADLINE
DATA? MIKE:
HOURLY EARNINGS IS DOUBLE THAN EXPECTED BUT ON THE THREE MONTH
ANNUALIZED BASIS THEY ARE DOWN 3.4 FROM 3.7.
THE TREND IS MOVING IN THE RIGHT DIRECTION FOR WAGES.
3.5 IS THE STABLE LEVEL FOR WAGE INCREASES. IN TERMS OF JOBS, MANUFACTURING
OF 28,000. WE SAW A BIG STRENGTH IN THE
HEALTH CARE AREA WHICH IS ALWAYS THE CASE. 76,000 AND THE GOVERNMENT
49,000 , YOU CAN SEE POLITICAL ATTACKS BUT ALL OF IT WAS IN
THE STATE AND LOCAL GOVERNMENT WITH THE FEDERAL GOVERNMENT
WITH THE FEDERAL GOVERNMENT WAS ZERO ADDITIONAL WORKERS. THIS IS NOVEMBER, RETAIL LOST
38,000 JOBS. IT ISN'T EXACTLY CLEAR HOW THAT
HAPPENED. TOM: DO YOU KNOW WHAT AMAZON IS
DOING AND THOSE BIG BUILDINGS OUTSIDE OF FARGO, NORTH DAKOTA? MIKE:
PERFORMANCE OF TRANSPORTATION AND WAREHOUSING WAS DOWN 5000.
WE OFTEN SEE AN OFFSET TO RETAIL AS MORE PEOPLE MOVE TO
ONLINE SHOPPING AND WE DID NOT GET IT THIS TIME. IT'S NOT CLEAR TO ME WHETHER WE
ARE GOING TO SEE A BIG CHANGE IN DECEMBER OR THE SEASONALS OF
CHANGE. TOM: MIKE IS GOING TO DIVE INTO THE
DATA. IT'S TRULY DRIVING ALL OF OUR
ECONOMIC ANALYSIS. JIM ARNETT IS SCHEDULED TO BE
HERE. WHY DON'T YOU BRING IN IRAQ,
THE TWO YEAR YIELD WE HAD A 12 BASIS POINT MOVE. LISA: WHAT I FIND INTERESTING IS THE
HEADLINE NUMBER WAS SUGGEST YOU MIGHT AS WELL PARE BACK YOUR
BETS ON THE MARCH RATE CUT BUT THEY WERE NOT PARED BACK THAT
MUCH. 55 TO 47. A SIGNIFICANT CHANCE PRICING A
MARKET CUT. I READ, WHAT IS YOUR TAKE ON
THE FACT THAT MARKETS MOVED BUT THEY ARE RETRACING THAT EVEN
THOUGH THERE IS NOTHING IN THIS REPORT TO SUGGEST THAT THE FED
NEEDS TO CUT RATES IN THE FUTURE. IRA: THE MARKET US AND RISK
MANAGEMENT MODE BECAUSE IT THINKS THAT WE ARE SEEING A
SIGNIFICANT SLOWDOWN IN THIS IS A SPEED BUMP AND THAT NARRATIVE
THAT THE ECONOMY IS SLOWING QUICKLY.
LIKE MICHAEL MCKEE SAID PART OF THE ISSUE IS THE DISPERSION AND
DISTRIBUTION OF THE JOB GAINS OR LOSSES. ANNA WONG TALKED ABOUT THE SAG
STRIKE IN THE UAW STRIKE HAVING SOME EFFECT ON THIS. INFLATION IS STILL THE KEY TO
ALL OF THIS. NEXT WEEK'S CPI NUMBER WILL
PROBABLY DRIVE SOME OF THE NARRATIVE WE HAVE FROM THE FED
NEXT WEEK. THAT'S WHERE YOU CAN PROBABLY
SEE CHANGES IN MARKET PRICING. TOM: YOUR TEAM IS NOT ONLY THE
ECONOMICS OF THIS, BUT THE CONFIDENCE IN THE FIXED INCOME
MARKET. I HAVE SEEN A LOT OF GLOOM
ARTICLES AND A LOT OF PROS PUSHBACK. SHOULD WE WORRY ABOUT
LIQUIDITY? SHOULD WE WORRY ABOUT TRUST?
IRA: I DON'T THINK WE SHOULD BE
WORRIED ABOUT TRUST IN THE GOVERNMENT'S ABILITY TO PAY.
WE WILL HAVE A DEBT CEILING CRISIS JUST BECAUSE OF THE
PARTISANSHIP GOING ON IN WASHINGTON. IN TERMS OF THE SIZE OF THE
MARKET VERSUS THE PIPES THE MARKET RUNS THROUGH, THERE IS
CONCERN THERE. THEY ARE TRYING TO NIP AT THE
MARGIN BUT I'M NOT SURE THEY WANTED TAKE THE STEPS TO HELP
INCREASE LIQUIDITY IN A SUBSTANTIAL WAY.
I WOULDN'T WORRY ABOUT T-BILLS, THEY ARE STILL VERY LIQUID.
WHEN IT COMES TO FIVE-YEAR, 10 YEAR AND 30 YEAR BONDS, YOU
WILL SEE THESE MASSIVE MOVES ON NOT A LOT OF LIQUIDITY BUT
TODAY LIQUIDITY SEEMS TODAY. THERE ARE A LOT OF DAYS WHEN WE
GET NUMBERS LIKE THIS AND ALL OF THE BIDS AND OFFERS
DISAPPEAR AND WHEN THAT HAPPENS YOU SEE THESE OUTSIDE MOVES ON
DATA THAT YOU WOULD NECESSARILY EXPECT. LISA: WHICH IS WHY THEY'RE TRYING TO
IDENTIFY CONSENSUS. YOU SAVE THIS AXIS A A
SPEEDBUMP WITH RESPECT TO THE SLOWDOWN NARRATIVE, DOES THAT
MEAN THE NARRATIVE SEEMS TO BE THE CONSENSUS AND THEY WILL
CONTINUE TO PRICE OUT IN? IRA: I AGREE WITH THAT ASSESSMENT.
I THINK IF WE SEE THAT IN DECEMBER THE JOBS REPORT IS DUE
YOU SAID WE COULD PRICE OUT MARCH AND MAY INCOME CUT S. WHEN 10 YEAR AND TWO YEARS WERE
OUT 5% AND FIVE .25 WE WERE PRICING FOR ANY CUTS.
WE COULD EASILY GO BACK TO THE OTHER WAY.
THE BARDA CUT RATES IS MUCH HIGHER THAN THE MARKETS ARE
THINKING. TOM: THANK YOU SO MUCH I REALLY
APPRECIATE IT. ON THE OTHERS OF THE AISLE,
GINA MARTIN ADAMS. WE ARE LOOKING AT THE JOB YIELDS IN
THE FED. I AM SO FAR BEHIND IN THIS
MARKET, WHAT DO I DO GIVEN THIS JOBS REPORT? YEAR TO DATE STANDARD & POOR'S 500 UP 13% IN THE DOW UP 5% IN
THE GINA MARTIN OUT A NASDAQ IS OUT 400%?
HOW DO YOU TAKE THIS JOBS REPORT BETTER THAN GOOD FOLDED
INTO A BETTER THAN GOOD GDP WHICH IS CLEARLY A BETTER THAN
GOOD STOCK MARKET? GINA: THAT'S A GREAT QUESTION AND
ONE THEN EVERYONE'S CONTEMPLATING.
I WOULD POINT FIRST TO THE DIFFERENCE BETWEEN THE DOW AND
NASDAQ RETURN. THERE A SIMILAR DIFFERENCE
BETWEEN S&P AND SMALL CAPS. PORTIONS OF THIS EQUITY MARKET
ARE IN AN EXTRAORDINARY BEAR MARKET. AS EVERYTHING BUT THE JOB
MARKET INDICATORS HAVE BEEN PRETTY SOUR OVER THE COURSE OF
THE LAST TWO YEARS. THE EQUITY MARKET HAS BEEN
STUCK IN THIS RECESSION MALAISE. WITH THE EXCEPTIONS BEING TECH
RELATED STOCKS WHICH HAVE PERFORMED INCREDIBLY WELL.
THIS IS CLEARLY NOT ABOUT THE ECONOMY AND THE EQUITY MARKET. THEY ARE KEEPING MOST RETURN
SURPRISED, INTERNATIONAL RETURN SLOW. THAT SETS YOU UP WITH A GOOD
STRATEGY FOR 2024. TOM:
MY STRATEGY IS TO GET TO LISA ABRAMOWICZ.
I WANT TO NOTE THAT EQUITIES ARE BEGINNING TO LIFT WITH
FUTURES ONLY NEGATIVE FAR, DOW FUTURES AT -35.
IF WE HAVE A COME BACK INTO NEXT YEAR AFTER MONTH AFTER MONTH THIS RESILIENT JOB
ECONOMY DO WE UNDERESTIMATE WHERE THOSE TECH ESTIMATES WILL
BE IN JUNE? GINA: THERE'S A STRONG CHANCE THE
MARKET IS MISPRICED FOR 2024 AND MOST PEOPLE WOULD SAY IS
MISPRICED BECAUSE ANALYST EXPECTATIONS ARE TOO HIGH.
THE MARKET IS ANTICIPATING CLOSE TO 0% EARNINGS GROWTH AND
IF ANYTHING NEAR 11% GROWTH THAT WILL BE A SECOND YEAR OF
AN UPSIDE SURPRISE. WHILE WE BEEN CAPTIVATED BY
THIS DATA THE OTHER HALF IS WHAT IS GOING ON WITH THEIR
EARNINGS AND WE COULD BE SET UP FOR AN EARNINGS SURPRISE. LISA:
PART OF WHAT IS INTERESTING HERE IS PEOPLE ARE
UNDERESTIMATING THE CAPACITIES THESE COMPANIES HAVE FOR HIRING.
IF THEY SEE A DOWNSIDE TO BEING INSUFFICIENTLY STAFFED THAN THE
UPSIDE FROM CUTTING COSTS. WE ARE NOW 2 MILLION JOBS ABOVE
THE CBO PRE-PANDEMIC PROJECTION AND WEAR OUT A BETTER SPOT THAN
BEFORE THE PANDEMIC. WHERE DO YOU SEE THE BIGGEST
GAME TO BE HAD FROM THE FIGURES WE ARE SEEING WITH RESPECT TO
HIRING AND WHERE PEOPLE ARE REALLY HOPING TO BEEF UP? GINA: I THINK THE BIGGEST POTENTIAL
GAINS WILL COME FROM THE AREAS THAT ALREADY CUT.
IF YOU THINK ABOUT WHAT'S HAPPENING IN THE JOB MARKET WE
HAD JOB BECAUSE THROUGH THE PANDEMIC AND THE SECTORS THAT
DID NOT CUT THOSE JOBS THEY CUT THEM IN 2022 AND 23 AND SECTORS
LIKE TO KNOLOGY, COMMUNICATION AND FINANCIALS.
THOSE ARE THE GROUPS THAT ARE EXPERIENCING EARNINGS RECOVERY
INCLUDING THE TECH SECTOR WHICH IS PRODUCING STRONG GROWTH.
THOSE ARE THE SEGMENTS OF THE MARKET THAT ARE LEADING WHAT IS
GOING ON IN THE BROADER MARKET WITH THOSE OF THE SEGMENTS
WHERE THEY ARE ALREADY CUT TO THE BONE.
IF THEY CONTINUE TO PRODUCE HIGHER GROWTH WE WILL SEE A
HIRING GROW BACK. LISA: AT WHAT POINT DO FED RATE
BECAUSE FOR EQUITY VALUATIONS? GINA:
THEY DEFINITELY MATTER WHEN YOU LOOK AT THE SMALL CAPS
SECTOR. THEY HAVE BEEN TRADING AT MULTIYEAR DISCOUNT WHICH IS
CLEARLY DEPRESSED. IF YOU EXCLUDE THE TECH SECTOR
YOU HAVE A MULTIPLE CLOSER TO LONG-TERM AVERAGE.
THERE IS PENT-UP DEMAND THAT COULD BE SITTING ON THE
SIDELINE FOR EQUITIES BASED ON VALUATIONS ALONE. CUT COULD GO ALONG WAY FOR
VALUATION EXPANSION AND ALL THE GROUPS AND SECTORS THAT HAVE
BEEN LEFT BEHIND IN THIS TECH SPECIFIC MARKET. TOM:
ABSOLUTELY BRILLIANT. THANK YOU FOR THAT ANALYSIS.
A LOOK AHEAD INTO NEXT WEEK AND THAT INFLATION DATA. IN WHAT WE WILL DO WITH OUR 201
CASE. LISA: IT WAS A PRETTY GOOD REPORT BUT
NOT GOOD ENOUGH TO MAKE A GOOD NEWS, BAD NEWS OR CAUSE
HYSTERIA. IT'S SO GOOD THAT PEOPLE ARE
RETHINKING WHEN THE FED COULD REALLY START CUTTING RATES. TOM:
I THOUGHT IT WAS BRILLIANT BECAUSE SHE WALKED AWAY FROM
THE FED ANALYSIS TO WHAT CORPORATIONS ARE DOING IN THERE
IS A GROSS UNDERESTIMATE OF THE RESILIENCY AND ADAPTABILITY OF
CORPORATIONS A DIFFERENT SECTORS. WE KNOW MEDIA IS FLAT ON ITS
BACK BUT WE SEE FUTURES COME BACK.
FOR THOSE OF YOU ON RADIO, S&P FUTURES WE HAVE MADE A RUN TO
PLOT. LISA: PEOPLE AREN'T FULLY REPRICING
ANYTHING BECAUSE IT'S ONLY ONE DATA POINT. HOW MUCH OF PEOPLE
UNDERESTIMATED HOW MUCH STRENGTH THERE IS IN IF THAT IS
THE CASE PEOPLE OVERESTIMATING THE FED'S RESPONSE NEXT YEAR?
IT WILL BE IMPORTANT TO UNDERSTAND WHETHER THAT MATTERS.
TOM: ON DECEMBER 13 WE WILL DO A
SHOW IN THE FED DECIDES. LISA: ESPECIALLY NOW WHEN WE ARE IN
THIS UNCERTAIN TIME AND I'M CURIOUS WHETHER THEY CARE ABOUT
THE EASING OF FINANCIAL CONDITIONS OR THEY SAY IT
DOESN'T MATTER BECAUSE WE SEE A SLOWDOWN IN THE WORKS. TOM:
THANK YOU TO OUR TEAM IS ALWAYS A REALLY INTERESTING
CONVERSATION.
