11 Burst results for "Michael Gabin"
Bloomberg Radio New York
"michael gabin" Discussed on Bloomberg Radio New York
"And the fed is to try to speak to the American public and justify what actions they are taking and whatever he decides to do today because that's as we look back through history where all of their predecessors say that they fell short was they couldn't restore public confidence in banking in the fed in big economic institutions and the political fallout from that is something we continue to sit with today. Great conversation I do appreciate the insights as always jeanie chansey Bloomberg politics contributor and democratic analyst today joined by Republican strategist Doug high. The former communications director at the RNC as we set the table for everything that's about to happen. Special edition coming up here special coverage of Bloomberg surveillance, the fed decides and will have a lot more on the other side. I'll meet you back on balance of power on Bloomberg TV at 5 p.m.. The fed decides starts right now. From New York City. Are we doing this again? We are. The can't answer the fed starts right now. This is a special edition of Bloomberg surveillance with Tom king, Jonathan Ferrell, and Lisa ronalds. Bloomberg surveillance, the fed designs. From New York City from audience worldwide, good afternoon, good afternoon to you all. This is a Bloomberg surveillance special county attached to a fed decision about 28 minutes away. Your equity market is doing a whole lot of nothing. And this market lease was done a lot more than that over the last couple of months since they last met. And if you look at specific names, they also are doing a whole lot more than that. I'm looking at PAC west, for example. The banking concerns still are there regardless of some of the easing and pressures. Just to give you a state of the play right now, we are seeing 25 basis point rate hike about 80% priced into the market. And then we're still pricing in rate cuts through the end of the year. Rate cuts. Right. So the more I think that happens today. I think that they're very much alone in that. They're an outline. I think that's fair to say. So thinking about a pause today, the game changer in the last couple of weeks, the banking issues. Are we past the point of no return? Marco Richard JPMorgan says we are that ultimately we have gone past that point. Have we really seen the game changer where things start to break, you're sitting there on the committee and you say, we're done. That's it. Right now the market is giving the fed room to raise rates one more time by 25 basis points. So if they take that, it would make sense given the fact that they were just two weeks ago talking about the concern about some sort of acceleration. In inflation. So we shall see. We have really smart people who are going to be talking about this probably more intelligently than I will. Certainly coming up, we have a former fed vice chair rich clarita. He's going to be walking us through to the fed decision also TD's Priya misra will be joining us. That all is up to the 2 p.m. eastern decision that immediate reaction from KPMG's Diane swank Bank of America's Michael gabin and Morgan Stanley's mad hornbook. And then afterwards, as we understand what the market is doing, which usually is wrong, we're going to speak with former New York fed president Bill Dudley and BlackRock's Jeff Rosenberg. I have never before felt like the market's going to be wrong. We don't know how to read the decision. They're in a tough spot. What a mess after a mess of a past couple of years. This is super difficult to approach. Going into it, the market looks a little something like this on the S&P 500. Dana ran about a tenth of 1%, no real drama here. He would stand 6 or 7 basis points, three 54, 31, on a ten year Euro dollar one O 7, 94, positive two tenths of 1% off the back of a 50 basis point high from the ECB last week. There's a feeling that maybe that was the playbook for this week. So what do you think about that? So a lot of people are saying that. And if you look at the majority, they do think the fed is going to raise rates by 25 basis points. But that said, it does feel different because the banking issues seem a little bit more systemic in a different way in the U.S.. This is a difficult decision. It is. For this fed today, the hardest in the last 12 months by far. Joining us now to discuss it is Richard clarity, the global economic adviser at pimco and former vice chair of the Federal Reserve. Rich, let's start here. How on earth do you expect them to approach this decision today? Well, I think that they're juggling a lot of competing data and competing motives, but ultimately inflation too high. And I think they will come down. We'll know in a couple of minutes they'll come down on the side of doing a 25 basis point hike. I think if they do that, I think it'll be a dovish 25. I think they're going to want to preserve optionality and almost certainly either in the statement or the press conference discussion will acknowledge the uncertainty and probably the increased tightening of financial conditions. So I think that's where they'll land. Let's talk through it piece by piece. You've got the decision, but that's only a small part of it as you've indicated. You've got the statement the forecast, the news conference. Rich in the statement, there is this line here about ongoing increases. Do you expect that to disappear in about 25 minutes? Yeah, I lean in that direction. I think it will, I think, certainly, if they want to go in the dovish 25 direction, I think it'll disappear or be modified in some way. Rich, do you think that that's the likely outcome we were speaking earlier today with Betsy duke, a former fed governor who said that she thinks the big surprise is going to come with a statement of
Bloomberg Radio New York
"michael gabin" Discussed on Bloomberg Radio New York
"Be rather muted to return year, but I still think equities will do better than bonds. This is Bloomberg surveillance with Tom Keene, Jonathan farrow, and Lisa Abramovich. Treading water to turkey day, World Cup in the background. Welcome back. This is Bloomberg surveillance. Lisa abramo it's on this day with a holiday shortened week. It is a quiet week, except that it's not. And we've been talking about this all week. We get the 2023 outlooks. We also have some key data coming out tomorrow, including consumer sentiment. Well, it's a data dump. I mean, basically, am I right and that we're squeezing Wednesday, Thursday, and even Friday and the one day. Exactly. Tomorrow is going to be the day on a week. That's actually what I'm most interested in about, especially in light of what we were talking about with 20% inflation at the Thanksgiving table and people going out, how much is the conversation around the table, not going to be Bitcoin, not going to be how do you get rich? How do you just basically survive in an environment that's really the tightening of the screws? The future's advanced. So get to the data checking that, but let's rip up the script here. Michigan is something that's just sort of tossed out. People look at it. People don't. Lisa, the 5 to ten year inflation statistic. Nobody pays attention to this. 3%. That's not what Jerome Powell wants. Jerome Powell specifically has said, they pay really close attention to this and they care very much with the 5 to 10%. I have ten year inflation. Well, we're not there yet, right? We've seen it kind of fluctuate back and forth. But what if you start to see it go up, what then? How does the fed respond? What if you see sentiment plunge even more? Is that actually grandma? But does that actually give the fed a little bit of not comfort, but it says that they can pull back, right? This is the reason why on the margins this might matter quite a bit at a time when people are gathering around and kind of resetting. That's usually what happens. I'm going to have a reset. We were sent for leftovers on Thanksgiving. I'm going to reset to the new home sales statistics at 10 o'clock on the 23rd tomorrow, as well. But what we're really going to do is reset into that inflation report in the labor report all of a sudden important first week of December. How much can you actually start to see a labor market loosen up a little bit, right? They've wanted to see this and we really haven't seen this yet. You talked about this, Tom. And I think it's an important point. Tech jobs, is that the tip of the iceberg is that idiosyncratic story or is this something that is a teale for what's to come? Yeah, well, Ben laidler was brilliant on this this morning and he was absolutely heated to tech angst is way overdone. He says, look, Amazon is a little exiting 1%. Maybe a little bit more of their employees and their hiring and key areas while they lay off people. I have real trouble carrying a text angst over to the greater economy. And talking about Aang's we are seeing more shutdowns over in China. And it's not feeding through. Hold on a second, but it's not feeding through to markets, because you are seeing a bit of a lift. You're seeing the NASDAQ up nearly four tenths of a percent. The S&P, it's a little bit of a second. It's just a little bit of a lift. And how much is it despite the negativity that you heard out of China, despite the fact that there's a bit of cold weather in Europe? There's a sense that people are kind of pushing fast past these things. Yeah, I would mention 88 77 on Brent crude's Steven short moments go look for the shark interview in its entirety out on digital. Maybe it'll get out on YouTube $88 78 cents on Brent crude. I mean, I hung on every word that mister shark said that there was a clinic on oil up to her eyeballs. Could you get under $70 a barrel West Texas intermediate up to the legitimate angst? I believe he said Allentown Pennsylvania with a dearth of diesel fuel this morning. And we heard the OECD earlier this morning talking about the energy crisis really fueling a lot of what we've seen in terms of the inflation on the yield space you are seeing it come in just a touch. Although still very deeply inverted yield curve, we haven't talked about this, but the gap between twos and tens has still staying around the lowest going back. The most negative since 1981 to give you a sense. Well, we're going to recalibrate. Why don't you bring in mister quinlan? Miss pure. He's done this before. He's done this to a new year. Joe Clinton had a CIO market strategy at Merrill and Bank of America private bank joining us now. Joe, how do you recalibrate for next year given? The complete lack of clarity. Well, it's going to be tough heading into the new year, Lisa. We're looking at a recession here in the United States, shallow, first half of next year. Europe, I think is already in recession. And China's flatlining. That's around 65% of world GDP. So it's a choppy market into 23, but we do think on the other side, say, second quarter, third quarter of next year, we're going to be buyers of equities. We're going to reset here in the United States. We'll lead the way. But it's a chop and a churn as we go through the Central Bank tightening pandemic in China and recession energy related in Europe. So it's very choppy. How much is that really hinge that sort of bullish call in the second half of next year hinge on a quick deterioration in the economy and a quick response from central bankers? Well, I think we're seeing the downturn in the economy. And I think if the fed just pauses in January and February, not necessarily have to cut, that's kind of the green light for the equities that kind of rebuild, put that base in for the next bull market. So they don't have to start cutting. I don't think they're going to be cutting any time soon. But just a pause. Let the medicine work. See how quantitative tightening is working its way through the economy, how the consumer is hanging in there. You talk about the labor market, for sure. So I think we just need a pause to kind of build the bottom from full market. Joe, the pauses there and it hinges on inflation. OECD came out with an inflation call today, where global inflation next year again with all the angst in Europe is 6.8%. Let's be optimistic. It's lower in America. I think we can do that in Bank of America. No doubt would lead on that. Michael gabin and the rest Joe quinlan does inflation actually come down enough next year in America. I think it does, I really do because you're going to see the productivity gains come back. You're seeing the economy weaken commodity prices have rolled over. When you talk to the people in the energy patch materials, their material costs are coming down. So I think I'm not in the deflation camp as hard landing when it comes to having prices come down hard. But I do think we're headed in the right direction and you're, by the way, is going higher as you mentioned. And Japan could be an outlier as well. So I think inflation comes down significantly enough next year that it gives the fed pause and the markets lift to look forward into 20 deeper into 23 in the 24. Well, okay, we get a pause. And then we lift, is it a lift with quality? I mean, joke when you've been known for decades with a comfort in quality ownership. Define what that is. Is it a free cash flow analysis? Is it a persistency of revenue analysis
Bloomberg Radio New York
"michael gabin" Discussed on Bloomberg Radio New York
"Now Powell says it's got to go up. We don't know where it goes from there. So he's not telling anybody anything new here. They're likely to raise that rate to match. At least with the markets are saying, but that's the point they want people to focus on that. And that gives them maybe some flexibility to spread things out. They don't pause yet, he said that was clear. But they maybe come down so that they can get a little bit better read. The thing he said over and over again is that we've got a ways to go. And I think that's going to be the new watchword. I can make you and I know that every Central Bank and particularly major country central banks are haunted by how the Japanese got the rate call wrong a good 20 years ago, Justin wolfers wrote up on Twitter, the wonderful professor at Michigan about the asymmetry that was discussed today. Is this a J Powell who sang I'm not afraid to make the mistake the Japanese make? And if we overshoot and become too restrictive, we've got the confidence to turn around. Well, I think he's saying we're not going to make the mistake of ending too soon, which is more than just Japan. The ECB had that issue and of course United States Federal Reserve in the years before Paul Volcker under Arthur burns. So they've made that clear all along. They don't want to make that mistake. Now, the question is, as you and Michael gabin, we're talking about a few minutes ago when you get to a point where the unemployment rate starts to go up and you start to get the kind of political pressure that we've seen from democratic sub on Capitol Hill, do you feel maybe you need to back off a little bit and pulse try to thread the needle in saying
Bloomberg Radio New York
"michael gabin" Discussed on Bloomberg Radio New York
"We think that the fed will be holding at that terminal rate of 5 and a quarter throughout 2023 and then rate cuts could start in 2024, but don't look for the fed to be the white knight at historically has been riding to the rescue quickly and aggressively with rate cuts. I've got breaking news for you and it's not the ADP report. It's the fact that the market responded to it. Equity futures on the S&P negative about a tenth of 1%. Seriously though. With that ADP report, let's get across the Mike McKay morning Mike. Morning John, well, no help from ADP for Jay Powell and company, 239,000 jobs created in the month of October according to the payroll processor. Interestingly, they say it's a mix in the shift of hiring. We saw a big rise in service industry jobs, particularly in leisure and hospitality, but goods producers lost 8000 jobs, 20,000 jobs total loss for manufacturers. So a major change there. Mostly the hiring was at medium sized companies. And the other interesting aspect of this from the ADP, which will be somewhat complicating for the fed, is the rate of pay increases goes down. Now, people who are switching jobs still are getting double digit increases, 15.2%, but that is down from 15.7. And those who are staying in their jobs are getting raises of 7.7%, that is pretty much in line with recent months. So softening pay increases, good news for the fed still strong hiring. Not sure how they're going to take that. Michael McKee, it's a new ADP methodology. How many reports do we need to see before animals like you trust it? That's going to be a good question. We have to see and compare with the non farm payrolls numbers each month. This is only the third one for ADP. And we haven't got much of a track record, but I don't also know whether trusted is even something that ADP is looking for in this case because they're making it playing with this new survey that it is not a forecast of what we're going to get from non farm payrolls. It is simply another data point. So on that basis, 239,000 jobs is what ADP counts and I guess we stop there. And Mike, we're going to touch base with you in about ten minutes, I think. We'll catch a view at 8 30 Eastern Time. I don't even know if I'm going to do a market report off the back of this. Dan attempt of 1% on the S&P, not a major move off the back of this TK, the bond market essentially unchanged too. They're minor moves. Two 39. The estimate one 85, if you're looking for payrolls on Friday, the estimate right now in our survey, one 96 down from the previous month to 63. And to get to Friday's important because Friday still looks like a buoyant number. I mean, it's not a number zero in polls. I think when you've gone right then, it could be Mark. It was a flavor of how this market will respond to an upside surprise, which seems to be good news Tom is what? That's his favorite saying. Bad news. Love it. Good news. I was waiting for him to say that. Our good news is Michael gabin's with us. The chief U.S. economist of Bank of America thrilled he could be with us. He's from the university of James bullard, also known as Indiana University and a course of work at the International Monetary Fund as well. Thank you so much, doctor Gavin, for joining us today. I want to cut right to the chase. You and I give Chris Lowe and FT and a credit for this as well. There's a massive illusion to the American economy Jerome Powell faces today. And that is within the core equation net exports are holding us up. How poor are domestic final sales? So final sales to domestic purchasers, which would be GDP less trade and inventories grew at four tenths in the third quarter and it was two tenths I believe in the second quarter. Is that a recession? Indicator? No, it would essentially be the fed soft landing where growth is positive, but not still below trend. So the interest rate sensitive sectors of the economy housing, structures were really what weighed on activity in the third quarter. I think the inventory rebuilding cycle is also largely behind us. So yes, we got the boost from trade in the quarter, but it accounted for all of the growth in the quarter underneath that. The economy is cooling down. We've been talking about the lag time, right? The lag, the variable effects, lag time that the fed is watching right now. How long would you estimate it takes before the full effect, the dampening effect of the rate hikes that have been executed so far take effect? The cumulative effect probably as long as 12 to 18 months. You see the initial signs of it, maybe 6 to 9 months out, like we are now. The interest rate sensitive sectors tend to respond first. If financial conditions tightened in March and April, you'd expect by the third quarter of the year, it's going to show up, and it is. The cumulative effect, it's got a matriculate all the way through the rest of the economy, 12 to 18 months. How high does unemployment need to go to get inflation down? This is the number one question that these senators have right now. What kind of damage is this fed going to do to achieve its ultimate objective of getting back to 2%? So our forecast is that it'll be a little higher than the fed thinks. We're up to about 5 and a half percent is where we think the unemployment rate may go. The fed, as you know, is looking at about a percentage point rise to the mid fours. I'd say consensus is probably around 5. So somewhere between the four and a half to 5 and a half range seems to be what we're all thinking. The fed, your points exactly spot on the fed saying we need to remove imbalances in the labor market to bring inflation down. That's a bit of a euphemism for we think the unemployment rate has to rise to better balance supply and demand. That is the number one question right now. We say a little more than others. Your research was cited by senator Warren. I'm sure you're aware of that. She put it in her letter to chairman Powell, Bank of America expects that unemployment will peak at 5.6%, implying an early two percentage point jump in the unemployment rate over the next year and the loss of more than 3 million jobs. The question they're asking chairman Powell is this the price we need to pay. Is it worth paying this price to get inflation down? Now, I don't expect you to do chairman powers work for him. But there is this line. You can if you want. This line that he used in Jackson hole. And I'd love to get your thoughts on it. He said a failure to restore price stability would mean far greater pain. Can you elaborate on that a little bit for us, Mike? How people understand. What would happen if they didn't tackle this? So the feds believe I'm wired the same way is to think that the economy performs best over the very long term when we're not spending an hour talking about where is inflation and where is it going? You want to remove that variable off the table. So low and stable inflation gets you the best macro outcomes over the long term. I think we make a mistake right now when we think, oh, the fed's going to over tighten and make a policy error. I think the fed is saying, no, no, no. The policy error is not getting inflation down to 2%. Now, we don't know if we need a recession to get us there. But if we do, if that is ultimately what's needed, the fed would say we should pay that price now because to your point, waiting and paying it later, history says, well, we're going to have to pay a lot more. So we don't like to be in the position that we're in, but we need to remove and balances in the labor market. And we think we need to get to that sooner than later. So the true policy mistake is not getting inflation down to two. It's not the mistake is not creating some pain in the labor market to get there. If that makes sense. Do you know who's in their office right now, Tom? Chairman Powell making notes for the news conference when he gets asked the question. I read the senator Warren letter carefully. Senator Warren did not cite Mark Cabana. I don't know what that is about. I gave him, but not Cabana. Well, Cabana just the stuff on the balance sheet. The balance sheet
Bloomberg Radio New York - Recording Feed
"michael gabin" Discussed on Bloomberg Radio New York - Recording Feed
"All of that's been a big mover. I think it's so interesting we talk about inflation in the way that companies are responding to Michael gabin over at Barclays earlier. So how about the differences between inflation in the 80s, which was a multi decade, almost a demand for a supply shock demand story. And then, of course, Romain you get to today where a lot of this has been a supply shock. But demand is also filtered in through this and nowhere near anyone is expected to last as long as it did back in the 80s, but that's the conundrum for a Federal Reserve when they can't fix supply problems. Yeah, I wonder though about the repositioning though that we're seeing in the market. If it is repositioning, if it is a flight or not, I was an interesting story a little bit earlier about a cliff as this and the idea that value has sort of been outperforming growth and he's getting a little bit of time to crow but not necessarily taking that some concerns here. I guess about the persistence of where this rally can go next here. Here's your numbers right now. As we get the closing bells here in New York, the Dow Jones Industrial Average gonna finish the day higher by about a tenth of a percent. The S&P higher by about three tenths of a percent. The NASDAQ composite up about two tenths and we should point out, the Russell 2000 looks like it's going to end the day down by about 8 tenths of a percent here. We also saw a lot of the transport names which you point out Delta airline is going to be tomorrow to sit up here at least for right now seems to be folks are expecting not necessarily the greatest numbers. Yeah, we'll see what this does to have volatility in the markets as we go through those earnings reports. But the vix just down a hair Taylor in today's trade. We're looking at 17 and change on the vix. Yeah, you know what's interesting though Carol is on a sector level? Maybe this looks a little bit more green than it does rad when we're trying to digest the breadth and the volume of today's trading. Some of this looks pretty risky if you're thinking about some of the auto, the auto components material, semiconductor equipment, software services, capital goods. That feels like it's all up one half of 1% and 3.3%. There are some winners that are even on the loser side of the screen, but I'll take you down to the real losers and maybe it's still as some of the flattening of the old curve, which means it's the dividend financials that are some of the worst performers.
Bloomberg Radio New York
"michael gabin" Discussed on Bloomberg Radio New York
"Economist at Barclays and Mikey's pointed out let's go in March My question would be what would stop him between now and then Well really not much I mean you would need a major shift in terms of saying oh Macron effect on the economy a geopolitical event that would somehow disrupt the economy or risk-taking sentiment But in terms of where the fed is on their dual mandate inflation and the labor market they're basically there So coming out of the last employment report with the unemployment rate at 3.9 another month of solid employment gains 6 tenths rise in average hourly earnings That pretty much meets their bar So I think in January at the January meeting at the end of this month they could very well declare we're at full employment yesterday Powell said we are at or very close to full employment They've already told us they're there on the inflation side So I don't really think anything stops them from going in March except one of these kind of outlier events I think they're ready Michael gabin you and I are the only ones that will understand in 1982 I of the Tiger reigns supreme So inflation's rising up back on the street is this the same inflation is 1982 no So that was rocky three right So the 70s and 80s inflation was a multi decade period of demand exceeding supply creating wage price spirals higher inflation expectations It was very much a demand driven story although there were certainly supply shock components to it with the oil market at the time This is a very different outcome It's not necessarily from persistently easy policy over previous decades and expansionary fiscal policy Obviously we have some of that in the response to the pandemic We think it's still primarily a pandemic driven story that is likely to ease over time And as you mentioned in the last segment what can the fed do about that I think a lot of this risk management positioning is about being second ground effects right Preventing those the impulse today from showing up in a lot higher longer run inflation expectation So I do think it's a very different inflation so how the fed responds to it should be different And Michael what's so important here is just the president and his will to survive What does President Biden do with 7% inflation In part talk about that you get it You see it you get it you understand the problem It crimps real incomes households are very sensitive to changes in energy prices and food prices And then you also want to take some steps perhaps to help solve it Make sure that your Federal Reserve chairman that you're pointing understands the issue and the importance of getting inflation lower they unlock some of the strategic reserve in terms of oil supplies There's discussions around do you do you reverse tariffs on imports from China So what can you do to help bring inflation down and stabilize the situation But certainly he has to say we get it and we understand it and we're taking corrective measures How do you get the wrong kind of inflation down while keeping the inflation that they want to see as we've been hearing from John this morning the administration perhaps going to be looking much more at the wage increases and how this is possibly a good thing for the worker paint a picture of negative 2.4% real year over year hourly wages What does that mean in terms of the wage increases we can expect going forward And the trajectory of economic momentum Well certainly I think conditions in the labor market are tight We still have roughly 4 million people sitting sitting on the sideline demand for labor is strong I suspect labor market conditions will remain robust and average hourly earnings will continue to take higher And then you would hope that some of the inflation comes down on the other side But in the moment of course what it means is it bites in a crimps real real purchasing power So disposable income was kind of all the story last year about government transfer payments supporting income if you start to adjust for inflation now disposable income the last few months has been ticking lower So it might feed in to a little less demand And this is where the fed's messaging has shifted It used to be we need accommodative policy to keep labor market momentum going Now what we need to do is stabilize inflation to keep labor markets going and income and purchasing power elevated So it has shifted the narrative from the fed Mike part of that effort is not just rate hikes it's balance sheet reduction as well informing the analysis at the moment it's just a fed speed When earth is this going you have a balance sheet pushing 9 trillion We're all trying to work on them work out the month on month Reduction mic If you've got any idea what that looks like through the back half of this year if they start this summer what it looks like into next year Sure I think if most of us think the balance sheet run I was going to start in the second half of the year We're in July Policy seem to say later this year So if you look at the mature maturity schedule of defense balance sheet roughly over the year after that point you're looking at let's call it about a trillion in treasuries running off and prepay estimates on MBS portfolios will give you somewhere around another 300 billion So I think you could have at least half of that 750 billion maybe up to a trillion in terms of how much the fed wants to take out of the balance sheet over the first 12 months So let's call it 60 to 80 billion a month They may need to ratchet up to that level over time start with a cap that's lower and move higher But I do think that they want to get to the balance sheet sooner than later and with the trillion and a half sitting in the reverse repo facility I think they feel they can do a lot of draining of reserves without having a negative effect on front end financing conditions So I think they may try to get a fairly fast pace of runoff in the beginning And last point if I can make it there's about 325 billion in T bills on the fed's balance sheet this time We had almost zero in the last expansion when the fed was doing this So you may see different runoff rates for the T bills and the remainder of the coupon issuance or the coupon holdings that they have You could get a lot of run options quickly just by letting T bills go That's a very interesting point Mike Daven thank you Mike gave one of Barclays Your inflation number 7% widely expected the sticker shock It's gonna be a political issue You've got to go back to 1982 to see an inflation print in America this high From New York this is Bloomberg.
Bloomberg Radio New York
"michael gabin" Discussed on Bloomberg Radio New York
"Some Jonathan pharaoh Equity features into this one up two tenths of 1% on the S&P at the third on the NASDAQ yields on a ten year unchanged at one 73 on Euro dollar we go nowhere at one 13 with the data Here it is Mike McKee Winner today economists who predicted a 7% year over year CPI That's exactly what we got as the headline CPI rises half a percent on the month The core rate goes up 6 tenths which pushes that up to 5.5% That's a tick higher than we had anticipated And I want to stress a number that we haven't stressed in previous years or even months but it's getting to be more and more important And that's real average hourly earnings The bureau of labor statistics takes the average hourly earnings numbers we get from the employment report and subtract inflation from that real average hourly earnings down 2.4% So you are 2.4% behind inflation at this point and that's going to be the political issue for both Joe Biden and for Jay Powell Mike get us the compositional story as well beneath the headline number I've just went through the markers quickly Future's up two tenths on the S&P on the NASDAQ two upper band a third on the bond market story you'll tie by half a basis point no big moves here The front end hired by a couple of basis points but basically where we were early this morning at 90 Tom when you go through this data and to Mike McKee's point this market has been primed for this number for quite a while This morning this feels like a bigger political story than it is a market one Strongly agree with that You look at John as the so called integrand the space the area underneath the zero line and Michael McKee as you massage the data here I mean all this comes down to is a political reality of 2021 is a lot of negative wage integrand there Yeah that's going to be an issue going forward If the fed is right and inflation backs off the question is when will people start to feel that and really notice it And they'll be looking at things This comes up every month like food and energy And the slightly good news John and Tom and Lisa is that food prices on the month rose half a percent That's lower than it was in November And October And September A little bit of a back off It's still up 6.3% on the year So people are going to notice that 6 and a half percent in terms of food at home gasoline prices are down or by half a percent in December but as you've been reporting this morning oil prices rising again we'll see what happens with that in the month of January Gasoline prices of the year up 49.9% That will get people's attention Michael how much are we seeing that services sector inflation rebound that a lot of people have been expecting is the goods area starts to decelerate a little bit Yeah that's where the flattened out a little bit at least We saw a services less energy up three tenths of a percent It was four tenths in the month of October four tenths in the month of November And so it's down a little bit 3.7% of the year but you look at the headline number up 7% in services up 3.7% A big contribution from goods there And a lot of that is supply chains Service industries less of a supply chain problem because people aren't using them One final question here and in that case you're unawares OER residences non seasonally adjusted up 4% No one listening or watching believes that statistic How valid is OER tool We are living with Rhett and mortgages It's about as good as they can figure out how to do for that's the way the government calculates what it costs to buy at home And one of the big problems with buying a home is you only do it once every decade or so So it's not an ongoing thing that changes month to month for most people and that makes it really hard to come up with a number for it but we have seen rents been going up They've been repricing everybody got a deal during the pandemic in 2020 And now those leases are up and people are having to pay up Right And they use that imputed rent to try to get the household number out of it And so we know home prices are going up but going up slowly Michael mckeith thank you so much much more for mister McKee through the morning John we got to do the data one more time I've got Brent crude breaking out to new higher level here getting up to an 84 40 as well and John is see the vix coming in I'm sorry John after what we saw on Monday a vix is 17.94 is a big deal Not much price action in the bond market So I'm tens unchanged at one 74 30 up a single basis point to almost 2.1% two is just south of 90 now up a single basis point off the back of this But this is the political story here Tom it's been some 40 years You've got to go back to 1982 the last time we saw a 7 handle and for many people it's let's go let's go over on the FOMC Michael gabin joins us now The chief U.S..
Bloomberg Radio New York
"michael gabin" Discussed on Bloomberg Radio New York
"Can't convey enough the importance of that Especially at a time when fiscal policy is going to matter so much heading into year end Remember we were worried about the debt ceiling Are we going to have to worry about that again Or does this basically take that off the table and say there has to be some consensus There can't be any more unforced errors by the Democrats Does that mean a better fiscal backdrop that people could kind of factor into their equation And now an inconvenient truth folks You speak to Lisa bramo it's about all these auction mumbo jumbo that miki talked about What does it really mean Lisa at 8 30 this treasury thing Basically so what The so what is this the first time that the Treasury Department is reducing the total amount of coupon debt sales going back to 2016 That basically they are coming out and they are saying we can start to pair back how much debt we sell at the very same time that the Federal Reserve is saying we're going to curtail how many bonds we buy every month In other words it's a wash and it's coming out at the same time How does this then factor in to what the liquidity backdrop is when the fed is still highly accommodated That's the so what Can you be Henrietta trace cynical and say yellin's on the phone to Powell It's like you know a game of cheesy I'm happy to play partisi I'm not happy to spread rumors because I really am not going to make that connection Michael gabin you know ran away from that one and rightly So the issue here is how long can this dynamic persist When do we see the tightening that goes to potentially when you stop dancing question I just you know my head is spin can we talk something dumb like equities Sure let's talk about Avis You sell in Everyone else is today That's the belief Well you know when we should point out folks that all of us wisdom from miss abrahams comes to.
Bloomberg Radio New York
"michael gabin" Discussed on Bloomberg Radio New York
"Day And it's the price action Your equity market down 5 we're negative a tenth of 1% on ESP into the bond market where we have a little announcement for you Yields in a basis point One 53 48 on tens Let's get to that announcement How much supply we get from the treasury Mike McKee has more hey Mike John we have some news this morning territory is cutting the size of its auctions going forward First let's look at what they are going to do in the first month of this refunding quarter raising $44.1 billion by selling three year notes in the amount of $56 billion ten years 39 billion and the 30 year bond in the amount of 25 billion Now the cutbacks are these They are going to be cutting the size of three ten and 30 year refunding sales by $2 billion each They're going to cut the 7 year by $3 billion and they say the 7 year is being cut because that's the one that they increased the most so they're cutting it back the most They anticipate decreases of 2 billion a month in the new and reopen ten year auctions and in the new and reopened 30 year auction The treasury is significantly cutting back on the number of bonds and notes that it is going to sell because it says in its release that based on the latest fiscal outlook current auction sizes are projected to provide excess borrowing capacity over the medium term Now we know of course that the pandemic spending has leveled off and is starting to decline and so they don't need to finance as much And I know the Michael gaping coming up I know they will care that they are not going to do a sofa linked floating note but they are going to reduce the size of regular floating notes as well There are two warnings in here One is from the Treasury Department about the debt limit suggesting that Congress needs to make sure it gets it passed by December 3rd the treasury borrowing advisory committee calling it reckless to not do that And then in terms of the cash balance because of the debt limit they say treasury expects its bill issuance to decline between now and then because obviously they can't go over the debt limit And that could cause problems in the short term markets There's a little conversation that's taking place a big one in fact for people on the fixed income side as to whether everything you've just said cancels out the taper from the Federal Reserve through the next year Yeah it is a tale of two tapers and ironically they're both coming up today As the fed starts to cut back on bond buying the treasury is going to cut back on bond issuance And we haven't run all the numbers yet but Steven Stanley of Amherst Pierpont yesterday put out a note that suggested that when you look at the totality of the cutbacks in the in 2022 and the fed cut back in its buying that they roughly cancel each other out which should leave no real rate move based on these on these changes today And on the fed's the fed's taper We're seeing some as you can see on the screen on television We're seeing some reaction in the bond market to these announcements But it is probably going to fade out and be overcome by the fed this afternoon anyway Mike the expectation was for the Treasury Department to reduce the supply of T bills in the market short term debt and try to continue with some of the longer term securities that have very low yields Are we surprised that they didn't do that more aggressively that they didn't more heavily weight that cuts on the front end of the curve Well they are cutting on the front end of the curve when you get to the note level But the bills they're leaving pretty much in place except for basically for cash management purposes But except for the fact that they can't sell as many as they get closer to the debt ceiling on the December 3rd but they are going to supplement the benchmark Bill issuance with additional cash management bills of 17 weeks and hope that they get they can get through this period The only thing you got me I was a tele two tapers So Yellen saying this morning it's a far far better thing than I do than chairman Powell What's a distinction between treasury taper and fed taper Do we care Well we don't care as much as the people on the trading guest care because of the influence on interest rates but the fed is going to stop buying as many bonds of notes At the same time the treasury is selling fewer bonds and notes If the fed steps back then the private market has to absorb more In this case the more they have to absorb is a little bit less than it otherwise would be Price down yield up That could be except that if the fed is no longer buying as much And the treasury is not selling as much as Steve Stanley points out it could just cancel each other out Michael McKee thank you so much surveillance fact John farrow Lisa bramos and I all at gunpoint had to read Dickens tale to city He read it because he wanted to Michael gabin joins us on the tale of two tapers Now chief U.S. economist Barclays investment bank How is a treasury taper Michael gay been different from a fed taper I think it's mainly because the fed is a unique holder of treasury securities of course they have different incentives different holding periods There are different actors So I think it's more about yes on these two things are generally canceling themselves out but the fed is backing out of the market as a very unique buyer I think that's still the main message So I wouldn't make the net comparison too far I do think the big news is that the fed will be tapering The big news is I'll be tapering and they will be cautious and conservative is the August institution is In this November how measured will chairman Powell be I think it'll be fairly measured Typically when the fed is tightening policy in some form they like to offset it by giving you a little something on the other side And I don't think that's going to be a strong pushback against market pricing I just think it'll be an emphasis that the decision to taper in the decision to lift rates are two very different things They have different criterion the bar for lifting rates is higher and that's a long way off So I think that's going to be what he'll try to kind of soft pedal the taper message with Yes we're starting to taper Yes we're still concerned about risk to the outlook for inflation next year Yes there's a risk management component to this decision but really don't push this too far There are two separate decisions I think that's where his cautious will come in Michael do you expect him to say that we expect a lengthier transitory period going forward I think that's as though he were debating this in the last segment It kind of has become a dirty word It wasn't in his press conference statement last time around He didn't mention it in the press conference itself that word transitory It's in the statement So I think that flavor of that has to stay I still think in general there are forecasts are all consistent and ours are still very consistent with a transitory or temporary impulse The duration of it is just longer than we thought So I think they have to find a way to keep that flavor around but maybe back away from the pure usage of that word What's the potential market reaction if fed chair Jay Powell does not push back significantly against the idea.
Bloomberg Radio New York
"michael gabin" Discussed on Bloomberg Radio New York
"5 tenths of 1% traders were shrugging off concerns over a Federal Reserve pull back in stimulus contagion risks from distressed developer China evergreen group and Beijing's latest crackdown on cryptocurrencies Phil Orlando is chief equity strategist at Federated Hermes So could there be some instability that gives us another leg down over the next couple of weeks Absolutely And I think that's sort of what we're waiting to see How does Washington play out on the fiscal side I think we've got a pretty good feel for the monetary policy side And then we'll sort of see where you go from there Bill Orlando of Federated as for where stocks may go from here Patrick Armstrong is chief investment officer at pluri wealth management So I think we have a bumpier grind higher potentially but while we've got massive liquidity you saw 1.3 trillion in the fast reverse repo yesterday You've got negative real yields at negative .9% and you've got very significant earnings growth forecast for the next few years that the double digit earnings growth still is the consensus expectation While those three things are in place it's hard to see equities having a sustained sell off Patrick Armstrong of pluri But what about the interest rate environment Michael gabin is chief U.S. economist at Barclay's capital I think markets have been right in terms of absorbing the message that the normalization of policy has started The great exit if you will from these emergency policy settings has begun And maybe even accelerating Michael gaben of Barclays S&P up 6 points today up by one tenth of 1% the Dow also up one tenth NASDAQ fell by less than one tenth of 1% Globally used 24 hours a day on air and on Bloomberg quicktake powered by more than 2700 journalists and analysts in more than 120 countries I'm Charlie pellet this is Bloomberg This is masters in business with very renewals on Bloomberg radio This week my special guest is Hubert Jolie He is the former chairman and chief executive officer of Best Buy.
Bloomberg Radio New York
"michael gabin" Discussed on Bloomberg Radio New York
"Paying employees of the Tennessee store attacked by a third party vendor A Kroger spokesperson says the Collierville store will stay closed while police investigate yesterday's attack which left a customer identified as Olivia king dead Ten workers and four other customers were wounded A new report written by legal analysts says former president Trump could face a slew of criminal charges in Georgia related to the 2020 election The 107 page report filed by the brookings institution details Trump's questionable conduct in the days after the 2020 election The report largely focuses on the January 2nd phone call Trump had with Secretary of State Brad raffensperger where Trump asked him to find enough votes to reverse his defeat in Georgia The report finds that Trump could face charges including racketeering intentional interference with performance of election duties and conspiracy to commit election fraud among other charges Fulton county's district attorney's office is still working on the criminal investigation of Trump's conduct related to George's elections I'm rossia Rivera Wall Street is mostly higher to end a volatile week at the closing bell the Dow rose 33 points to 34 7 98 The S&P 500 gained 6 points to 44 55 while the NASDAQ lost four to 15 O 47 I'm Brian shook Kids in Ohio could win big if they get the COVID vaccine Governor Mike dewine introduced a new vaccine incentive that allows those between 12 and 15 years old to win up to $100,000 in scholarships similar to the state's vaccine lottery Kids can enter to win scholarships of varying amounts The wine says an increase in COVID cases along with low vaccination rates in young people is his reason for the program Texas is designating Ben and Jerry's as a company that boycotts Israel Sarah Bartlett has more State controller Glenn hegar says that Texas law forbids state contracts and investments with any firm that takes adverse action against Israel and American ally in July the left leaning company said it will no longer sell its ice cream in Palestinian territories under what it calls Israel's illegal occupation I'm Sarah Bart New York City mayor Bill de Blasio says he'll tour Rikers Island next week as the jail complex faces a staffing shortage and increase violence James flippin has more This follows the cause of numerous officials who urged de Blasio to see the chaotic conditions firsthand The mayor notes he's worked with the state to reduce the number of inmates housed at Rikers and he's directed NYPD to help out with courtroom duty freeing up more corrections officers for the gel complex on his weekly radio show de Blasio said he wants to see if these measures are making an impact While inmates have died at the complex this year there's been viral cell phone video of beatings and rampant drug use with guards seemingly nowhere to be found James flippin New York Hollywood actor Chris Pratt is getting slammed on social media for being the voice of Mario in a new Super Mario movie Nintendo announced Thursday that Pratt will star in a new animated feature film based on the Mario Brothers video game franchise The movie is already getting mixed reviews on social media where many are wondering why Chris Pratt was cast to play an Italian character I'm Bryan shook And I'm Charlie pellet Bloomberg world Hank waters turned out to be an off week and an up Friday for the S&P 500 Index now for the week the S&P gained 5 tenths of 1% traders were shrugging off concerns over a Federal Reserve pull back in stimulus contagion risks from distressed developer China evergreen group and Beijing's latest crackdown on cryptocurrencies Phil Orlando is chief equity strategist at Federated Hermes So could there be some instability that gives us another leg down over the next couple of weeks Absolutely And I think that's sort of what we're waiting to see How does Washington play out on the fiscal side I think we've got a pretty good feel for the monetary policy side And then we'll sort of see where you go from there Bill Orlando of Federated as for where stocks may go from here Patrick Armstrong is chief investment officer at pluri wealth management So I think we have a bumpier grind higher potentially but while we've got massive liquidity you saw 1.3 trillion in the fans reverse repo yesterday You've got negative real yields at negative .9% and you've got very significant earnings growth forecast for the next few years that the double digit earnings growth still is the consensus expectation While those three things are in place it's hard to see equities having a sustained sell off Patrick Armstrong of pluri But what about the interest rate environment Michael gabin is chief U.S. economist at Barclay's capital I think markets had been right in terms of absorbing the message that the normalization of policy has started The great exit if you will from these emergency policy settings has begun And maybe even accelerating Michael gaben of Barclays S&P up 6 points today up by one tenth of 1% the Dow also up one tenth NASDAQ fell by less than one tenth of 1% Globally used 24 hours a day on air and on Bloomberg quicktake powered by more than 2700 journalists and analysts in more than 120 countries I'm Charlie pellet This is Bloomberg This is Bloomberg Wall Street week Markets shrug off higher consumer prices the economy using the process of rebounding was a Federal Reserve have its own digital currency The financial stories that.