tv Bloomberg Markets Americas Bloomberg October 6, 2022 10:00am-11:00am EDT
global infrastructure and energy security. plus, inc. labor market, jobless claims rise while fed officials still in the drama -- drama on rate hikes. yields are higher, equities mixed. from new york, i am alix steel with guy johnson in london. rate hike versus cut scenario. over the last hour, he said the bar to shifting our stance on policy is high. cannot get more than that guy: absolutely not, but you have to ask are we officially query the fed cannot signal a pivot until it is actually ready to deliver? if it signals too early, it undoes what it is trying to do now. this is a cat and mouse game. but if you say the said speakers are almost unanimous in what
they are saying, they are signaling there is no pivot. that is the message clear and simple. they are doubling down on their commitments that rates are going to go higher. >> i would like to reach a point where policy is moderately restricted. >> i see as raising to a level we believe is restricted enough. >> somewhere between 4% and 4.5% by the end of this year and holding at that level. >> holding at that level until we see inflation at 2%. >> do you have to understand the limitations of your data but you still need to use that to base your policy decisions on her -- on. guy: is the fed wrong? is that the signal we are getting from markets? take a look at the pricing here. give got a rate cut price, two in 2020 four.
is the fed wrong? joining us now to answer that question is two correspondence. is that what the market is signaling, that the fed is wrong? >> the market does not believe the fed can hike to 45% plus or -25 basis points and not texting. when you look at hiking cycles, you definitely suck six months after the last hike that the fed has generally started to cut. this time will be different, because the fed will be more reluctant to cut interest rates unless there is some significant slowdown in the economy. it is not a matter of the stock market going down or credits being relatively light compared to the past, they need to see
the economy slowing enough that they are convinced inflation will be relatively low. alix: traditionally, who has it right, the federally market? >> we have seen in the pastor they both get it wrong. markets are concerned with timing, the fed with outcomes it is hard to marry the two things. markets one to see a loose financial situation. they want additional liquidity in the markets. they have gotten used to that. he said once to see inflation going down. -- the fed wants to see inflation going down. the markets are telling you they will go down sooner, but the fact is saying we do not know that that is true so we will keep rates where they are until inflation starts to go lower. if that happens to be march, then the fed would pivot. if it does not, they will keep
rates where they are until they see that happening. jonathan: does a recession people a rate cut? mike: that depends on how you defined recession. some said the first two quarters of this year were a recession. they were not, what if you are looking for a contraction in economic activity, that would depend on why. if you're looking at unemployment going way up because there is a recession, the fed would have squashed demand. demand would mean prices are going down and inflation would be falling. the plate is going to be watching those indicators. the indicators are backward looking and meet ba the slower than the market would anticipate going forward. alix: i have been leading that it feels like everyone will be looking at the rate tomorrow. what is goldilocks in your world? ira: goldilocks means you would
wind up seeing 10 year yield's fall. if jeffrey goes out a bit, without the participation rate going up a lot, you would probably exceed rates rally a bit. people would be more concerned about the bed case scenario and that that would be a big thing. one of the things i have been asked over the last couple of weeks is is there a fed put? where is the strike price? i think what mike just said is important. at this point, there is a said put wt we've got news to good are used to the stock market going down and that is a signal to the fed that the economy is poor and they get more dovish, but in this environment, that is way far off. inflation is going to be the
driver of the fed's actions. and you get the pc index built 3%, the fed's put his way far off the money in terms of where the stock or credit market has to go. guy: that is a solid point, but it also needs to be nuanced. how does the market reacting as we start to approach some of those key points in the fed starts to slow down the rate of hikes? if we go to 25, this the market pivot? do financial conditions ease because the market overreacts? how does the fed manage that process? >> if the fed does hike, that is
what is christ in right now. -- that is what is christ in right now. you should get very little reaction one way or the other. should that be considered a pivot? no. this is what they have told you. this is modestly restrictive territory. we have done some work recently. assuming that the consensus forecast for ppe is correct, when will we reach the zero federal funds rate? the federal reserve has always hike interest rates until it gets the rate equal to the headline ppe. i can have been is are the is february or march of next year. that would be a great outcome for the fed. they can say we are neutral right now and the inflation rate continues to fall, so we are going to keep rates here until we get to our target.
that should not be considered a pivot. could risk assets to well after that? financial conditions might ease a bit, but not a crazy amount. alix: that is not a pivot, just policy that works. before you go, kashkari was saying the fed is not trying protect the dollar. mary daly was talking about this , too. they keep watching but do not seem scared. i am wondering when they get scared. >> with currencies, it is hard. the central bank does not have anything to do with the value of the dollar. the administration will decide whether it is gone too far one way or the other, but they have to live with the consequences. the consequences for the fed are good because we are exporting our inflation.
it does make oil prices higher around the world, which contribute to the opec-plus situation, but at this point, the fed is not going to be too worried. it is helping the u.s. economy more than hurting it. alix: good roundtable to set us up. thank you. coming up, a conversation with kim forrest. her thoughts on the question of the day. how do you invest in companies like in delhi? this is bloomberg.
>> markets are pricing in this goldilocks where some how we do not have a severe recession and inflation magically comes down. the reason markets are doing that is because it is what we got reeves to. we had many decades work central banks were able to get what they want, they were not very constrained. every time the economy veered in the loot, central banks could ease massively, that would not
raise inflation, but there are inflationary pressures coming into the environment. it is going to take some number of years for markets to adjust and realized just how constrained policymakers are and how they will not get the economy they want at the same time. alix: that brings us to the question of the day -- is the fed wrong? joining us is kim forrest. the market is pricing in another cut in november of next year. is the fed wrong? kim: yes. this weekend, we found out why. even though i have an equity analyst, i look at a whole bunch of stuff. i have been watching the dollar go higher and wondering when it is going to break.
it does not seem to be helping us tremendously as a consumer. over the last week or so we saw the u.k. panic over there pension fund end credit suisse has things going terribly wrong. we content about the individual company, but what is really -- 10 talk about the individual company, but what is really important is that credit suisse is not the only one that has derivatives that are not well managed. what i do not the fed really understands is they can only control a couple of things with the economy. the global economy is like a marionette where you pull one strength and something goes horribly wrong. guy: but we are talking about the financial economy. the fed is focused on the real
economy. this is the debate -- is financial stability going to knock the fed off course as it tries to get inflation down in the real economy? the fed is saying not so far. they are focused on the real economy, not the financial economy. kim: right, but they are breaking the financial economy. there is going to be a point like there was -- i am not saying that we are anywhere near 2008 -- but when banks start crumbling, they are going to want to pay attention to what the dollar is doing. the dollar is going up because our interest rates are so high comparatively with the rest of the world. alix: how do you approach earnings season? you have to deal with a stronger
dollar but potentially other numbers? kim: we still have a good economy here, although some of hikes are beginning to break down. i am a gross at a reasonable price investor. i am praying -- playing the time game. i give myself twelve-month for ideas to work out. i am going to get an eye roll from a letter people but i like intel and coca-cola. intel can become a boundary like it wants to. there is a lot of impetus for boundaries to be outside the island of taiwan for many reasons. both micron and intel have become -- began building over here again, but i do not believe guide is the only place. ireland might be good and other laces. -- places. guy: why do you not put
cyclicality into your portfolio? kim: i was a software engineer. i believe in the power of tech. i am not just swinging for when the global economy comes back. we will need more chips because we do not have the people around to do what we need them to do. we are going to replace people with technology and technology comes down to chips. alix: why intel specifically? why those sectors? kim: this is from my biases and software engineer. i try to look at companies that not only make technology but use it well. to be able to do more with what they have, that is what a good use of technology is.
coca-cola is a good loser of technology. you can see that on its earnings. it can grow faster earnings than its top line. that is what we are looking for. guy: how much cash you got now? some of these long-term opportunities are getting cheaper and cheaper. are you holding back to invest at better prices? kim: i am. i am dollar cost averaging. i will buy either a third or a half of a position right now. it is paying off well. on days like the last couple when things are up, i sit on my hands and do not do anything. i think we're going to be on this roller coaster ride of markets. an individual stock levels, we can pick up some good deals. alix: what do you hate right
now? kim: i always hate reads. i just do. alix: is that is specific yields are higher thing or camera does not like it? kim: real estate is what i really do not like. commercial real estate. with facebook cutting its presence in new york and more and more people are going to work from home is a push paper or electronic paper. guy: if you hate commercial real estate and people are working from home, what is the flipside of that trade? kim: technology. that is what makes working at homework. guy: we have bought an awful lot
of computers over the last few years. do we have enough? kim: never, apparently. what i am interested is the internet of things. that will drive exponentially the use of chips. that will make little devices out there measuring things they would like to measure. we cannot right now. guy: excellent. we are working from home, measuring things. kim forrest, thank you. this is bloomberg. ♪
bank alleges misconduct by managers at every level. goldman fought to conceal names in the suit. they are among the most promising -- prominent men. >> this is been going on since 2005. a couple of weeks ago, the filing showed egregious behavior going back almost two decades, but what is interesting is that it is not the most egregious stuff that caused the attention. the clash erupted over the last few months over complaints that were not nearly as ugly as the worst ones here. what raised the stakes was the individuals involved, because they were two prominent figures. one from the consumer and wealth division and the other is gary cohen who went to join the trump administration.
goldman adopted the stance that instead of judging the complaints, they will close ranks and put in an effort to make sure those names never became public. guy: talk about the context, what is happening more broadly. tell me what the original lawsuit was about. >> that is an important question. this lawsuit was started in 2000 and five. if she had waited to take goldman to court -- now almost 12 or 13 years later, the case goes to trial as one of the biggest class-action lawsuits that deals with the quality and gender bias in terms of how it treated women when it came to pay and promotion.
these lawsuits take a lot of time. some women have dropped out. one dropped out to be able to write a book. she wrote about her experience at goldman sachs. that became a rare tell-all from a high-ranking person from goldman sachs writing about wall street. alix: what is goldman's response? >> the phone that including the names of the two individuals was an unnecessary invasion into their privacy and not central to the case. they said these are unsworn complaints and people never should see who these complaints were logged against. guy: solid reporting. thank you. mark is beginning to roll off, equities down, s&p down by .7%. this is bloomberg.
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overall, especially in technology, banks are not benefiting. most sectors were lower. at this point, i think we will probably have a more sectors lower. let's take a look at the bloomberg imap. low sectors are lower. markets are moving so quickly recently. energy up one sector. the rest of the sector is down. the bulk of them down more than one and a half percent. that is not happening. this map has moved higher. the repricing of evaluation really weighing. if we take a look at what is going on in the week, the last two days coming today and yesterday, they fell a bit
bearish. if we put them in the context of monday and tuesday, which has been the best rally of 2020. we're looking at the best rally since june of this year. will they reemerge? they may. it is one of the better weeks that we have in quite some time for stocks. guy: yeah. there are a few that will headwind. thank you very much. let's get back to the question of the fed and its officials keep repeating the banter that they do not plan to cut interest rates next year. which of course leads to our
question of the day. is that the market right? joining us now, senior economist. let's get a answer on this one. is the market right? or is the fed right? >> i think the fed is right at this point. there are a number of reasons to believe that inflation is really a persistent problem that has not been tackled at all. i think next to her the week after when we get the upcoming cpi report, we will see surprising high rates on cpr. the leading indicators for inflation are still pointing up rather than down. when you look at the strength of the labor market, i know that there are a couple of data points that we have gotten that are starting to show the first signs that they will start to weaken a little bit. we are not nearly at a point of the labor market where we are getting persistent down pressure with inflation. it going to take several
months. the fed is not capable of stopping the rate hikes in time to anticipate that turnaround. i think that the market puts a lot of credit towards our credibility to do that. alix: to that point though, you mentioned the softening and loosening of the labor market. how quickly can the labor market read rates question mark is a possible one month is ok and the next month is and all of a sudda down in the labor market. thomas: anything is possible. i think what we saw in the job openings this week, that is in my eyes a sign that employers are looking towards in the outlook, based on what the fed has said about their forecast for the economy and also for their forecast for interest rates and anticipate a down turn
to come. it could manifest itself in significantly slower job growth. at this point, we see a number of other indicators that suggest as for as many employers, there are still plenty that are looking to scoop up anyone who has lost a job or looking to add to headcount. i do think it is not so much to to three months before we see the labor market turnaround. i think it is well into the next year before something like that happens. guy: before that happens qamar were going to see significant financial instability -- for that, are we going to see significant financial instability? how does that balance work? thomas: i think we just heard from the annapolis secretary
today. saying the financial conditions will worsen significantly from here before they will start to weigh in the fed accountability. i do not think we will see anything happening in the u.k. will happen in the u.s. that was a unique situation were not monetary and fiscal work at odds. congress are unpredictable. there may be more willing to do looser fiscal policy. we have so much uncertainty about monetary policy that causes all of that market volatility. alix: aside from market volatility, where we see liquidity issues? we read a lot about global foreign currency reserve are getting tight. we are looking at liquidity in the treasure market. i feel like every market i read
is that. thomas: there are signs of cracking. when we are looking at what happened last week, we are looking in the context of heading into -- liquidity always drives up towards the end of september. i think it is too early to tell what is going on in october. i am not saying it is getting dramatically better. there are bits and pieces where there are signs of things not functioning clearly. you also have to look at what is going on. -- still to trillion dollars in the overall reversal in cash liquidity. before that, we really need to see that sort of thing giant before we worry about more broaden things. guy:
thomas: i think that would be the easiest way for the common market. there is a lot of concerns about tt that has barely got going. there are pieces of evidence about liquidity issues are mounting. we have really only had -- it was september when they hit the full pace of qt. looking back on that, i think it is a psychological signal to the market. alix: thanks a lot. we really appreciate it. we have seen the bond market really take up some steam. 20 basis points along the dollar. what is the white house's plan on oil? how the white house is reacting to the opec.
>> this is bloomberg markets. coming up, chief u.s. equity. this is bloomberg. alix: president biden saying he is disappointed about the decision about opec oil production. he says the u.s. is looking to our turn it is and -- looking toward alternatives and ready to respond. i'm going to start here. i have seen a lot of plan b's floating around here. what are one and two on your list right now? >> thank you.
look, let me just stress where we are today. we are very disappointed in the decision by the opec and russia yesterday. we think it was a mistake. it is not substantiated by energy markets, global economy or by any other metric. it was unnecessary at this time. prices are already elevated. there was no real imminent threat of a collapse of prices that will resuscitate a cut. amos: i understand, i watched opec for a long time. it is a difference we see what they announced and what they do. opec's quota, they are under producing their quota by more than 2 billion that has been announced. it lets people this has any impact whatsoever in production number -- let's see if this has any impact whatsoever in our production numbers. we are meant to work with our
u.s. companies to make sure they increase production. we are down a couple of refineries due to accidents to maintenance. to make sure we have enough inventory along the east coast and part of the midwest. make sure that we have supplies. we will continue to focus on bringing down prices. we have still some work to do on the spr. alix: one of the reasons that opec talked about doing this was to incentivize their capacity. higher oil press -- price now to get more oil out of the ground. if there is some truth to that, why not take that view with u.s. producers, why go to your allies? why not hook up the phone with oil production companies? -- pick up the phone with oil production companies? amos: there is an assumption that we are not doing that. for the last four months we have
had discussions with almost all of the major oil producers in the united states. we told him, what can we do to -- what do we need to do to increase production? alix: we talked to the industry. the threat of regulation down the road is the issue. amos: i take issue to that. i do not think that is accurate. if you look at -- it has always been about where you put your money. capex has increased. they are increasing production. they have announced those increasing just several months ago. it takes time for that to materialize in production. we have seen them increase production. we know the production -- production for them is to increase production in 2023. they have what they need. i think they have what they need.
they are doing that. we have a good discussion with them. we do not always agree, that is true. we know that this administration believes in accelerating energy transition. in order to accelerate energy transition, we need to have a functioning u.s. economy and global economy. we still need oil production to rise in the united states. that is what we're talking about and where we are going. alix: can you basically play the forward curve? can you drain your spr now and promised to buying certain oil for oil producers in the u.s. six and nine months when the oil production comes online? i think that will give the market uncertainty. -- certainty. amos: let me be very clear. when prices come down, we will be replenishing the spr. we already said that in the beginning.
we hold that to your point. there will be repurchasing. what we really care about is, the economic security of the united states and the national security. to do that we have to have a will supply strategic petroleum reserve that we can deploy in times of emergency. we are going to be replenishing them. the president announced a 180 million barrel release over a period of six months. it has been six month where we have not released the full 180 million barrels. we will continue to do that. we will do 10 million the. we will see what we will need to do moving forward. we will take a multitude of steps with the private sector in the united states, allies, spr. we're going to talk to congress about what kind of tools we may need. we are meant have a conversation to make sure we have every tool available to us to make sure
that american consumers continue to seek the reduced prices of energy. i want to remind everyone before the hyperbole before yesterday's decision. gasoline prices are one dollar and 30 in their highs. alix: i want to get into how we got here. you are in saudi arabia. just less than two weeks ago you meant to at the crown prince, did you walk away from that meeting thinking we would be here today with opec cutting 2 million barrels off the market? amos: just about two weeks ago. i am not going to go into the details of our conversation. >> i know you did not think it would be this big of a cut? amos: now, i did not. >> 22 walk away thinking from the meeting, conversation from the -- what they do work with thinking from the conversation.
obviously, energy was one of the things you discussed. amos: i do not walkway without understanding. that was two weeks ago. a lots can happen in two weeks. the important piece is, is to understand what impact this has . in the united states we are a government energy company, whether it is oil, gas, solar, wind, clean technology. we are in very strong economy and a very strong country. there are a lot of poor countries, low income, developing countries who are reeling from high prices. this action from opec yesterday is turning their back on those developing countries in support of what is good for the russian agenda at the moment to finance their failing military aggression in ukraine. >> the since i get from you on
is that you walked away with a different picture at this opec meeting. people in your own party, they are not missing work. senator chris murphy. when a international crisis came, the gulf pitches america over russia and china. are you are there with the president in july. it is a controversial trip for the president to make politically. where does this relationship go from here? amos: i saw senator murphy's words. let me be clear, i was with the president of the -- on that trip. the president raised human rights and the difficult issues with the saudi leadership. he stood up to the american -- our american colliers.
that trip was in no shape or form to underline that. for the trip, during the trip, after the trip, it was not about oil. we had a lot of strategic issues in national security areas that we thought we could advance. the president is committed to advancing america's security interests. moving iraq away from the conference of iran -- influence of iran to implement them economically. there were a lot of reasons for that trip. when we announced that trip, oil prices were $117 per barrel. wdi is about 87 or $88 appeared that is a $30 decline. today, most americans are at three dollars and $.29.
we are doing significantly lower prices. >> the bti is trading just under 88 dollars a barrel. you made this historic trip. the president said memorial will be coming down the pipeline. the meeting right after the trip you have 100,000 barrels. that is it. it was embarrassingly low. not according to 2 million. yesterday a statement was put out. the department of justice could sue these countries. in may the white house have their concerns appeared at this a signal that this landed on the -- is there a signal that if if this lands on the presence desk, he will sign it? amos: i think we're going to work with congress to see what kind of tools we need to make sure that the united states economy is strong and has what it needs.
and essay from a handful of countries making decisions -- this essay from a handful of countries making decisions. the u.s. will make decisions for itself. i will let you read a few leaves. we will see what actions we take over the next several months. the immediate actions are going to make sure the prices continue to be stable and make sure they do not rise for american consumers. >> thanks. we really appreciated your time for us today. let's take a deeper dive here and speak to kevin book. kevin, you have heard that interview. your take away here on what the u.s. has to do? kevin: it does nothing like the u.s. -- it does not sound like the u.s. is happy or they have a lot of tools. -- that is a pretty big weapon. they're looking at congress to
tools, seems like a pretty clear reference to opec. kevin: we have an ally relationship when it comes to a lot of things. if you look at the last several months, it will we hard to conclude that -- the economic interests of the world to continue producing what the white house is asking. that is clearly not what the white house is asking. >> let's say we move onto to opec. whereas does the u.s. supposed to go? >> we have domestic production. thomas was busy talking to a lot of producers your he made the point that u.s. is still talking to the oil here at home. i think those signals are important. the dialogue may be did not start on the right foot.
working to increase domestic production. i do think the messaging is changing. guy: is it fast enough? kevin: this is a issue that needs resolving right now. the u.s. has the potential to up its production of oil relatively quickly. i appreciate their supply chain issues. nevertheless, this is something that the u.s. can do relatively quickly. why is it not happening if that is the message that we should be hearing from the white house? kevin: i think that is a question for producers themselves. they do run a profitable sustainable business. >> if the conversation is turning -- the conversation is turning a little. i am wondering if you're going
to see a fall with iran and venezuela. kevin: we are already seeing a fault with venezuela. -- fall with venezuela. there are resumption some talks in mexico city. that could be the trigger point for changing the sections that allow chevron and other countries get back in there. guy: thanks so much. tech a founder and managing director. let's take a look at what -- where european markets are. we are heading into the close right now. u.s. markets beginning to stabilize a little bit. the european close is coming up next. we are going to get a assessment of what comes next on policy point of view. we have the ecb and the bank of england. we have a very big move today,
18 basis points move. putting a bigger one on the 30 year. the bank of england is under pressure. we will talk about what the policies of formula is going to look like in europe and how different i would be compared to the fed. quebec quebec this is bloomberg. millions have made the switch from the big three
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