tv Bloomberg Surveillance Bloomberg December 29, 2021 8:00am-9:00am EST
>> the story ahead has got to be earnings. >> the early part of the cycle where we see rapid growth is behind us. >> what we haven't seen is how they react when that easy money gets pulled back. >> you want companies that aren't predicated on free money. >> what matters in interest rates and for bond investors is the pace and path of rate moves. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: what year for earnings
in america. good morning. "bloomberg surveillance this is -- this is "bloomberg surveillance," live on tv and radio. very close to all-time highs. the story of 2021, earnings in america, fantastic. the story of 2022 could be the challenge to multiples from a tighter federal reserve. kailey: the bold thesis, i doesn't matter if you are seeing policy normalization as a threat of emerging variance, as long as corporate profits can hang in there. i would note that as we have seen this more hawkish pivot from the fed, earnings expectations for the year ahead have actually picked up over the course of december, no looking at 8.7% growth for 2022. jonathan: what would you consider tightening to be at the federal reserve, given where nominal growth is, given where inflation is? how much work to they have to do? matt: they have to finish the paper. the sequencing is a question.
do they start to raise rates for they wind down the balance sheet? i wonder if they really do wind down the balance sheet. keep in mind we were still at $4 trillion when this started, so we had not wound it down very much from the last set of quantitative easing that we did. at some point, do we just assess the balance sheet like a high watermark whenever we finish the latest crisis? jonathan: the fed is behind the curve is an overused phrase. what we heard from john ryding yesterday on this program, that they don't just need to reduce the bounce sheet, i thought that was -- the balance sheet, i thought that was interesting. that they need to start selling assets. something you think they should do. that was the first time i have heard that in a while. matt: i think important to listen to him because he has lived through really serious inflation cycles. not just lived through them, but also advised central banks
during them. he was advising the bank of england for most of the 1980's. then he went on to advise the federal reserve bank of new york before going on to start his career in the private sector at bear stearns. that is a guy who has been there and done that, and knows what needs to happen to make things right. jonathan: that is fed policy. bit of news from the cdc earlier this week. we have cut the isolation period from five to 10 days. also getting some lines from rochelle walensky on vaccine boosters for kids. that conversation has moved quickly, hasn't it? kailey: you have seen pediatric hospitalizations picking up. i believe they have quintupled in new york in the last weeks. you're seeing it affect children more often. that is a bit of a heartstrings kind of issue, and they are getting a smaller vaccine dose for those under 12 then adults are. as you look at vaccine efficacy against this variant, do they
maybe need to have a bit more protection? jonathan: that news out in the last couple of minutes, speaking to cnn. your equity market down about 0.25 on the s&p. just fading from session highs. in the bond market, yields higher by almost two basis points to 1.4 960%. euro-dollar, 1.13 flat. with us now is jim paulsen, chief investment officer at the leuthold group. you've got a year end price target of 5000. i am trying to work out of that is this week or next year. which one is it? [laughter] jim: it is next year. i think we have a volatile year ahead of us. i would argue that it is probably going to the best in the first half of the year. i know people think we might give some of this back as we
enter the new year. that could happen. but i think we are going to maybe go above 5000 during the first half of the year on excitement that we finally may be moving from the pandemic to an epidemic, and the realization that inflation is moderating. but i think the last half, we are going to see bond yields come up, and the fed tapering and raising rates more aggressively. i think we could have a bit of a struggle in the latter half of the year. that is why i think we will end up around 5000 for the s&p. i think the broader market outside of the s&p 500 does better this coming year than the s&p 500 overall. kailey: let's talk about the bond yields going up. i know you see the 10 year at 2.25% next year. we are about 75 basis points south of that at the moment. does it matter how high the rates ultimately go or the speed at which they get there? do you think that is a move that
will happen quickly, and that is actually what will be upsetting to the equity market? jim: it is a great question. one of the things i have looked at recently, looked back to 1926 and look at all of the months we have been under 3% 10 year yield, and when you are under 3% 10 year, we have only been there about 25% of the time, it is a gift to equity investors because the stock market, what it does is almost 20% annualized monthly returns, and it has negative monthly returns 1/3 less compared to when you are above 3%. a return above 3%, it is 10%, 20% below. rates are going to go up, but until you get back above the 3% level, the history and the stock
market is awful encouraging. it does not mean that a rate rise of 75 or 100 basis points over a short period of time won't bring a correction. i think we will get that later next year. but i think it is important to realize not to totally run away from stocks, at least until we get back above 3% 10 year. matt: is there no alternative? is that part of the thesis? or do you see other places to go to hide from inflation? jim: i could be wrong, but i really think inflation is going to moderate. i think there's already some favorable signs. commodity prices have flattened out since may. breakeven rates have flattened out since may. what i am most encouraged by is that policy both monetary and fiscal have been tightening since march. annual growth was 27% you're on your margins, now 13%.
fed balance sheet was growing 80% in march, now under 20%. so there's a good degree of less stimulus, if you will. fiscal deficit is now under 12%, so there's also been fiscal tightening, and i think that policy leaves inflation historically anywhere from 12 to 18 months, and those moves come into play in moderation going forward. so commodity prices, which are the leading-edge of inflation pressure, already showing a rollover, and the policy behind it now moderating. i think it is going to be a good outcome for inflation. i don't think it is going to return to above 2% fed target. i thicket is going to stay elevated around 3% in the balance of this recovery, but i
do think it is going to moderate next year, and that is going to calm fears of runaway inflation. jonathan: you used the word tightening, but then said the equity market would not get hit until tenured -- until tenured yields got to around 3%. are you saying that we could get inflation down with the federal reserve doing what it is doing without seeing tighter financial conditions? jim: i expect bond yields will move up to .25% next year primarily because i think economic growth is going to continue to be strong. i also think a realization is going to hit us next year that we are not returning to the fed's 2% inflation target. i think the fed may even adopt the 3% is ok as an inflation target. they will move their inflation target up, and i think the bond market is going to respond to that is the year progresses. i also expect the fed to raise
the fed funds rate. i do think that will bring a correction, but a correction that is viable because i think the market will recover from it and move on to new highs, and i think the earnings and fundamentals of the economy are going to remain very strong, and that will continue to drive this equity market. jonathan: thank you for everything today and for the year so far. thank you, jim paulsen of the leuthold group. looking for 5000 next year on the s&p. 3% on tens is not part of the conversation. i'm looking at bank of america, 2%. emo, 2%. citi, 2%. eight bank, 2.2 percent. morgan stanley, 2.1%. natwest, 2.2%. it is not part of the conversation. matt: wow, 2.25%. that is an outlier.
jonathan: the idea that you have to get to 3% before you get any disruption in the equity market, what do you make of that? matt: keep in mind, we had a chart showing q4 2021 year-end targets, and they were much higher and had to come down. you have seen q4 2022 targets are supposed to come down as well. so 3% is a long way off. you've got to think someone like steve major is one of the smartest minds in the industry, and he is talking about 1.5%. scott minerd, who often gives outlier forecasts, is saying it could go negative, so 3% is going way far in the other direction. jonathan: i would love to see scott's book one day, matt. he is brilliant. scott minard of the guggenheim. coming up, a conversation on tesla and the autos of america. it is dan ives of wedbush.
from new york, this is bloomberg. ritika: there's no sign that the pandemic is slowing. for this second day in a row, the number of coronavirus cases around the world went over one million. overall, it seems to be triggering a lower rate of hospitalizations than the earlier out right. in the u.k., the government has no plans to follow the 80 of the u.s. -- to follow the lead of the u.s. authorities lowered the quarantine requirement in england from 10 days to seven days. the u.s. shortened its regulations from 10 to five. in hong kong, the last pro-democracy news outlet's. seven people linked to the publication were arrested on charges of conspiring and published judicious material. apple is paying some engineers unusual bonuses of up to wondering thousand dollars to keep them from leaving.
-- -- unusual bonuses of up to $120,000 to keep them from leaving. former senate majority leader harry reid has died. he helped pass obamacare and other key bills. he also engineered a sweeping change in senate procedures that cut off debate on most presidential nominees with a simple majority. later, republicans would use the same tactic to eliminate the super majority threshold for supreme court justices. harry reid was 82. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪
money. this is what the fed just did. they just told you that game is over. the winner take all tech platforms of the last decade, that was absolutely the place to be. i don't think that is the place to be going forward. i think you need a different playbook. jonathan: interesting to hear from the ceo and cio of winquist capital -- ofw win -- the ceo and cio of wincrest capital. back for 1.50% on tens. euro-dollar, 1.1 307. a stock to watch in the premarket, tesla. that stock is up by zero point 9%. dan ives of wedbush has a $1400 price target ,$ right now1098. great -- right now $1098.
great to catch up with you. why? dan: starting off with demand in china, last year it was rocky. 40% of deliveries for tesla going into next year, that is a linchpin to the bull thesis. the profitability for cars they sell in china are incrementally higher than those that they sell in the u.s. and europe, and that is why in our opinion, this is a stock that continues to move higher on the china story. jonathan: the likes of gm, ford, let's see what they can do in the next couple of years. gm is under your coverage now. walk us through how gm becomes a disrupter after being disrupted over the last several years. dan: we don't believe this is a zero-sum game. it is not tesla or, and there
is one winner. now you get the stalwarts with detroit, gm, i think there's a massive renaissance of growth. i think specifically gm is going to get rerate it -- get rerated. if you convert 10% of the base, this is a $100 stock. i never view tesla as an automotive company. i view it as a disruptive technology player. you are going to start to see those multiples, and i think you can put in the same bucket. matt: how much does the supply chain snafu we have seen over the last year push things back? because i am pumped to see the f-150 lightning. i can't wait to see mary barra's hummer. but i feel like it is going to take a few years before these things are actually rolling on the streets, looking at how long
it took them to get the bronco out there. dan: it is a great point. i do think we are starting to see from an engineering perspective, battery perspective, these companies, as opposed to the snafus, i don't think we see that over the coming years. everything mary and the team are doing, that is why i think gm will be re-rating on the models coming out over the next six or seven years. f-150 in terms of the electric side, that is going to revolutionize the category, along with rivian. we view the pickup truck market is a $1 trillion market over the next decade for ev's. matt: i am so excited for it. is the market big enough for all of the players? i know it is not a zero-sum game come up there are so many names out there. tesla, rivian, lucid.
you've got the stranger lordstown motors. nikola. you've got ballinger playing in the pickup truck space. plus, all of the old school, gm, ford, volkswagen. is this market going to be big enough for all of them by 2030? dan: like any market, you are going to have winners and losers. i think that is why you've got to have a basket way to play it. we continue to play tesla, but rivian is starting to pick up. you want to play europe, china, and some of those. i think like you said, it is about execution. and of these -- any of these startups throw in the white
towel, you have to separate who is going to be the winners, and there's going to be a lot of supply chain players. there's lifecycle charts and others in the exercise. kailey: is there a limit to demand growth given that the infrastructure isn't necessarily as robust as can support every single american having electric vehicle? dan: if you look globally, 3% of automotive is ev's. we think that goes to 10% by 2025. the infrastructure could support getting up to about 15% of autos being ev's. ultimately you would have to get charging stations up by the end of the decade. but if you look into growth, it is a $5 trillion green tidal wave in terms of the amount of spend over the next decade. i think you start to hit some
issues in terms of from an infrastructure perspective if we don't see any movement, especially in the u.s., and terms of charging stations, the grid, the upgrades or something like that. that won't happen till 20 fund -- until 2025 and 2026. europe, i think we are starting to see acceleration there, which is why that factor is so important. matt: but does any other manufacturer do it as big as tesla? their supercharger network is huge, but i have not seen any of the competitors go out and do it on their own. they are all waiting for the government to step in. matt: that is why the ev market is tesla's world, and everyone is paying rent as of now, because of the supercharger network and because of that capacity. you look at berlin, and china combined, they've passed about 2 million units.
so can they actually get the cars out? that is why tesla continues to own the market. but in the next one to two years, you will have other players, rivian, lucid, and others, the major beneficiaries bullish on what is going on out of europe. jonathan: denice, thank you, sir. got to think -- dan ives, thank you, sir. got to think that when gm get involves, things will change. matt: you see a ton of products rolling out from volkswagen, audi, and porsche, from mercedes. they've already got four or five ev's for sale here, and they will be moving over to the u.s. the question is, the supercharger network is so huge and successful, and germans typically wait for the
government to step in and spend money, whereas elon musk did it himself. that is my question. jonathan: waiting for the government to spend money on infrastructure, you might be waiting for a while. matt miller, kailey leinz, jonathan ferro. your equity market unchanged. from new york city, this is bloomberg. ♪
jonathan: the bond market just woke up. up four basis points to 1.5186. a lift across the curve, five basis points on 30's. the curve a bit steeper. the two year down half a basis point, on tens, 1.52. in the fx market, euro-dollar 1.1311. unchanged in the equity market as well. in the commodity market, $75.87 crude. great guests, the cofounder and cio of cumberland advisors. david, you are the perfect guest. the lessons of 2021 as we
approach 2022. before we get into 2022, what is the number one lesson for you? david: it is the ignoring of the history of pandemics. they are different. you are talking about the fed. i listened to the show this morning. the morning session you do in the 7:00 hour is the one reporting the status of this pandemic. when you hit the history of all pandemics, they are a lesson. this is not a business cycle that is typical. that is being missed. we are too much in the weeds. we have lots of historical evidence to guide us, especially with the federal reserve. i went back and looked at every pandemic i could find. there are indicators of impacts on wages, on labor forces, on prices, on interest rates, all
the way back to the time of athens and sparta. what is missing in the conversation is the impact? i read milton freedoms -- i read milton friedman's treatise, they talk about the fed and they do not mention a pandemic. that is a different characterization of global economics. the big takeaway for the year as far as i'm concerned is missing the big picture of a pandemic shock. kailey: when we look at it from a corporate perspective, profits have done quite well. they have continued to surprise to the upside. do not buy into the idea you can look through the pandemic, you can look through the normalization of monetary policy so long as earnings growth remains there? david: kailey, i agree with that. the earnings growth is spectacular and it will
continue. it is powerful. why do we have the earnings growth? we have a shock that is demographic. we have people dead, one million more in the united states than the traditional trajectory, we have people disabled, and we are not finished with this. what do you get, you get a substitution from labor to capital. when you do that, you get productivity gains, whether it is a robot or telemedicine, and you get a fall in the real interest rate. every pandemic in history has a fall in the real interest rate and a substitution of capital for labor. those are the macro pieces. jay powell understands this. i believe the composition of the board of governors will also
reflect it if it is the nominees we are seeing being proposed now in the public area. big picture, pandemic shock, not business cycle. the earnings will be good, the stock market will go higher, inflation will roll back 2% or 3%, and it will happen faster than people think as the shock adjustment rolls out. kailey: you mentioned the empty seats at the fed. depending on who sits them do you think we could be looking at a different trajectory of policy moving forward? david: if we look at the three names that have surfaced in the wall street journal yesterday, they leaned center but they are accepting of a changed fed structure that also looks beyond narrow monetary policy. we know what they've written and said.
they have some experience. they are all confirmable, they are young enough to hold these positions. obviously they have been able to deal with the financial restraint because the fed governor does not get paid very much. i think policy stays in the middle. that is great for markets, great for the investor class, great for the country. what people do not want is shocks. i am in the camp they should not reduce the balance sheet at the same time they raise the interest rates. it is hard enough or a central bank to do one thing at a time and a pandemic. doing two things and trying to get them both right is virtually impossible. one point at a time, do one thing at a time and get it right. matt: it is a good point and i appreciate your point that we
need eyes too narrowly focused. i think of your liberal education. i know you studied economics but also organizational dynamics and philosophy, how confident are you this fed is in touch with the human effects of the pandemic and their policy actions, especially when looking at something like covid and the effects of long covid? david: i think jay powell gets it. there is a community system and that that -- in the fed, it has 36 members. they published their results. they are looking at the entire population of 335 million americans and looking at the impacts of the various component parts. it seems to me the appointees being vetted publicly, cook, jefferson, and raskin have the
characteristic to look beyond the narrow. i hope the fed looks beyond the narrow. if it is strictly money and philosophy and not looking at full impacts and the agendas we face in united states and the rest of the world, we are in trouble. jay powell seems to get it. if the politicians would leave the fed alone, that would be much better. the independence of the fed is always threatened by politics. matt: i want to get the politics and rip up the script tom keene style. i look at your resume and i think about build back better and chances it will not pass as i think about my personal concerns the salt deduction cap
will not be lifted. i look at your resume, you are the commissioner of the delaware river port authority and served on the treasury transition teams. you are a board member of the new jersey economic develop an authority. i've been asking myself why do these states, especially new jersey and new york, have such high taxes compared to other states? it seems to only matter the salt cap to the tri-state area. if we do not get that, what else can be done to lower these tax burdens that are incredibly heavy on a lot of working families in those states? david: it takes a shop and it has not happened yet. i agree with you. our company used to be headquartered in new jersey. we are now in florida. we have to change. tax is not the only reason to
make the change. we are on airplanes flying to florida because of the migrations of wealth. during the pandemic florida is not such an easy place because we do not have mitigation. we have a governor that is playing this differently, and in my opinion there is a detriment to that. my office is extending its closing to february and doing a rolling month. we have had covid cases among our clients. we see a direct negative business impact when there is no mitigation. that is not an advocacy for a lockdown. it is an advocacy for thoughtful policy. jonathan: david, have to leave it there but we appreciate your friendship and your partnership with the program through the year and appreciate -- and look forward to the same through 2022. dave: talk of cumberland advised -- david kotok of cumberland
advisors. it looks like we are making changes that we might get some playoffs. kailey: we have seen a number of games getting moved because of covid-19 cases comment and in reflection of the cdc guidance they are saying they will do five days instead of 10. it opens up more players who test positive to be playing, less risk of disruption, that translates to add revenue for some of these tv players. this is the conversation. the flight attendants association raised this with the airlines. was this decision made on what benefits corporations and less people that work for them in the nfl is saying great, do it for five days. jonathan: that is the difficulty. the optics of that decision. was it a business decision or one backed by data? matt: this is what we were talking about earlier. we talk about the benefits of
reducing that window from 10 days to five days. looking at the economy from a 35,000 foot view. from a human perspective it probably looks a lot different. i do not know about an nfl player, these are exceptional people, but for somebody trying to deal with kids at home, trying to deal with parents worried about covid and the other stresses of everyday life, going straight back to work five days after you've come down with the disease that could be life-threatening seems quick. jonathan: closing out the year with matt miller and kailey leinz. i'm jonathan ferro. -.4% on the s&p. coming up, margo patel will join me in about 20 minutes time. from new york, this is bloomberg. ritika: there is more evidence the fast spreading omicron variant leads to milder symptoms
that other strains of the coronavirus. the u.s. as it seems to be triggering a lower possible as asians. the number -- a lower rate of hospitalizations. elon musk is closing in on his goal of reducing his stake in tesla by 10%. the world's richest person has sold another billion dollars worth of stock in the company. he is selling shares. bitcoin is that for its worst month since the cryptocurrency route in maine -- inmate. -- in may. it is down roughly 60% after hitting an all-time high just a month before. in new york, awarding from the judge in ghislaine maxwell's trial. the judge says the spike in cases could lead to a mistrial if jurors fall ill. she told lawyers she may have
jurors to liberate through the holiday weekend if they do not reach a verdict by new year's eve. john madden has died. he guided the oakland raiders to the pro football championship and walked away from coaching at age 42. he then became one of the best-known sports analysts of his time. he was also the brand name for the leading football videogame, matted nfl -- madden nfl. john madden was 85. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪
fed. the fed is trying to pull up this impossible scenario of tightening policy without tightening financial conditions. that is not possible. kailey: chief economic advisor at brean capital speaking with us yesterday about how the fed is going to go about rating in inflation without wreaking havoc at the same time. when we talk about normalization there is a question of what normal is in a post-pandemic era we are trying to get to. i do not know what the definition of normal is. normal may never be the same. matt: we had normal before you were around. [laughter] what i remember from my childhood is normal. that is what all old people think. you will do the same to people younger than you. it is a constantly changing situation. the future is difficult to predict and it is always
changing. you cannot compare what this fit needs to do -- what this fed needs to do with what the volcker fed did. they are both fighting inflation but in different circumstances and with different tools. kailey: let's bring in someone else older and wiser than me to talk about this. barry ritholtz joining us now. when we talk about what normal looks like post-pandemic, is there such a thing or have things permanently shifted for the longer term? barry: apparently i shifted into the older and wiser camp. kailey: relative to me. barry: that is the difference between absolute performance and relative performance. the interesting thing about the pandemic, there is been a terrible human cost and i do not want to make light of the fact that nearly a million americans
have died, but necessity becomes the mother of invention. what we have seen is the pandemic accelerating a lot of trends that had existed in a small fashion, and essentially bringing the future forward 10 years, whether it is how we purchase automobiles, the hybrid nature of work from home and office, retail sales. go down the list. telemedicine. the 2021 year looks more like 2031 would have looked without a pandemic accelerating all of these prior trends. matt: the acceleration is one of the more exciting things we have gotten from the pandemic. in terms of the supply chain, that is one of the worst things, aside from the human tragedy you brought up, that is one of the worst things for the economy. that is what caused the
inflation. the fed did not think it would last but it is clearly stickier than we previously thought. do you see any signs of that repairing itself? we got richmond fed data out, we been harping on it, kind of joking. it looks really good. the manufacturing survey shows shipments are up from a 12 to a zero. product inventory is up to negative seven from a -23. i do not know what the numbers represent but that is improvement, we are moving in the right direction. how do you see that panning out? barry: a very strong reminder we should all stick in our lanes, state what we know when we are talking about stuff. it turns out the fed knows nothing about supply chain logistics and the complexities of moving goods around the world , at least on a micro view. they could take a 30,000 foot view like any economist and make
a best guess. it is not surprising the fed got the ramp-up and distribution of things like semiconductors wrong. anyone who expected to get that right is giving them too much credit. if we listen to the ceos of various companies, the ceo ford, the ceo volkswagen, they all of said they see the chip crunch having already. while it is not going to be back to normal this week or next week or next month, they are looking at q1, maybe early q2 at the latest avenue -- as having supply of chips seminormal. the problem is we are year or two introduced automobile manufacturing, which means we will have reduced used-car availability for the next couple of years, which means elevated automobile prices might be sticking around, and they seem to have been one of the biggest components of inflation.
i am still in the transitory camp, but it will be a longer transitory as we wait for the supply chain to come online. matt: as chairman and cio at barry ritholtz wealth management you have to always be thinking about ways to make money. this acceleration you are talking about, not just in terms of cars and ev's and infrastructure but also working from home and telemedicine, that has to provide opportunity, if you can pick them? barry: could big waiters have been the biggest tech companies. people are talking about the big five as if it is some excess concentration, they are the only things working in the market. they are not. lots of things are working in the market. when we look at the five biggest companies in the s&p 500, when the final numbers are counted in 2021, they will have generated
about $1.5 trillion in revenue, the five of them together. that is unprecedented. we've never seen the top five be that powerful. it creeps up a little bit every year as the economy expands at 1% or 2% inflation driving that. we have never seen five companies so dominant. a lot of this is just the acceleration of technology. now everyone has a computer in their office and at home, whether it is windows or a mac, does not matter, we are all using ipads and various software, we are all using phones. we have full forward a lot of technology purchases from the future because we have two offices, and it does not look like work from home or some form of hybrid office is going away. that is a fundamental change in the way we live and work. those companies have been best
positioned to take advantage of it, those big five tech companies. kailey: barry ritholtz, thank you so much for joining us. matt, i think it is an important point. we think about this market we are talking about the heavyweights. they make up a quarter of the s&p 500. when you look at the mo b function you can see the contribution of each of the big five players. they are responsible for a lot of the thousand points of upside we have seen over 2021. matt: that is true in the s&p 500. i will point out the stoxx 600 is at an all-time record. if you go into any index you can use the members ranked return to see who has done the best and who has done the worst. in terms of the stoxx 600, their names you've never heard of at the top. you do not have that kind of outperformance.
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"the countdown to the open" starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. from new york city, we begin with the big issue. looking ahead to 2022. >> the timing question is the big open question. >> the fed is going to be more aggressive. >> does the market started to pull back is this tightening happens? >> as of friday four rate hikes have been priced in. >> or early next year we of inflation at peak levels -- >> the problem will be the story of 2021. >> if inflation overheats it will force the fed's hand. >> will it go down fast enough