tv Bloomberg Surveillance Bloomberg October 21, 2021 6:00am-7:00am EDT
or two months, i think this is disingenuous. >> inflation will persist for longer. >> the consumer is resilient. >> we are counting on growth rate salary. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: a six-day winning streak. for our audience worldwide, good morning. this is bloomberg surveillance. i'm alongside tom keene and lisa abramowicz, i'm jonathan ferro. tom we are getting deeper into earnings season, 80 4% -- tom, we are getting deeper into earnings season. so far so good. jonathan: i read -- tom: i really want to emphasize that this is not a quiet day. there's a terrific slow on economics, finance investment, and off of it as well. jonathan: we do have two commissions with some research
written for you. is the dow jones stupid? what's that about? tom: laidler made an observation and i completely missed this. in the flaunted dow, everybody -- the flawed down. everybody looks in the investment world, it is growthier. he nailed that it's not copper anymore. jonathan: hardly anybody has allocated to the dow jones index. do you listen to what they say or watch what they do? tom: i watch what they watch. which according to google trends is four times the dow. jonathan: and then pay money to the other index. tom: we have to do both. lisa: i'm gonna let you guys decide the important developments of the dow jones but i do want to pick up on 84%
beating expectations. what's being priced already to the markets based on the fact that we got a shrug from stock traders and we were punished by bloomberg data going back to 2017. i thought it was fascinating. jonathan: are you trying to stop us from arguing? lisa: know, i just don't want to get in the middle of it. jonathan: let's go through the price action. the bond market is doing something, how sure are we from the highest of the year? 1.7 seven quarter and first quarter, not far off. the euro-dollar at 1.1642. and crude is down. lisa: today we get a rush fed speak. the key issue to me is how do they view the labor market, which is one of their dual mandates?
yesterday we heard from a number of different fed officials. they reiterate that this is not an overly tight labor market. we get a further view on it with u.s. initial jobless claims. this is not going down materially, adding to the question of where are all the workers at a time when there's a record number of openings. i'm curious to hear what gary gensler has to say. speaking at an event hosted by the institute of international economic law talking about crypto assets. or at least i hope so. especially as bitcoin surges to a record high. the etfs starting to trade, how much more will the chair edify this trend of crypto assets. we do have a look at home sales, the expectation is that it will remain elevated after declining. the prices are so high that the
barrier to entry isn't there and the supplies are so low. take a look at how much prices has increased. 20% year-over-year. i think this is getting fed official attention as it raises rent prices. jonathan: we can hardly wait. tom, you have been talking about this, the resilience of corporations. they hiked prices in the third quarter by 4.1%. the most since 2012. unilever is the stock i want to bring up. hiking prices since 2012. that's a change. jonathan: -- tom: unilever is that staple along with nestle. they are managing for a lower nominal gdp. a lower nominal growth. they have a tough decision to make but a history of making those tough decisions.
jonathan: what's fascinating is that there's a consumer price tolerance. i think that's what we are looking for. tom: it is. they will take the price increase. i don't see a can of tomatoes where you cut out a tomato. i have not seen that yet. the real focus is can we raise prices and will the consumer accept it. the answer seems to be i guess so. jonathan: this is up for 3%. tom: that's y mistake for 2021. jonathan: there will be more. we did have a conversation about the shape of this cycle. can you walk me through my this is different if you think it will be? >> we can see this is a totally different cycle. the recession lasted a couple of months rather than several years. everything is moving at a turbo
pace. really what so different about this cycle is not just the type of shock. this is different from a normal business cycle shop but it's also the policy response. -- business cycle shock. but it's also the policy response. not only is the fiscal impulse huge, there's also a stigma associated with using fiscal policy very aggressively. i means maybe we will get more. we are already discussing additional steps in the u.s. even though we've had such a big push. it's a different cycle. used to be only monetary policy was driving stimulus and now finally fiscal policy has stepped on the gas. that's enough to change inflation expectations. look around the world, it's not just the u.s. within ration on the move.
it's everywhere. we have a bunch of central banks feeling behind and catching up. we have the e.u. central bank with a hundred or more basis points in one go. we have the u.k. where we have not they would be stable for a long time and now they are gonna hike. things are moving fast. lisa: the consequences of this shift are disagreed upon pretty dramatically depending on who you speak to. some say it means a shorter and hotter cycle, some say it means flattened out cycles with no credit cycle whatsoever. what's your view? >> one point that's important to make, the market has this perception that as soon as the central bank height raised by 50 basis points, something very moderate, the economy can't take it. i think we have to be careful.
what happened over the last 10 to 15 years, the global economy was going to be weekend it was not that the sectors were damaged. but still, how far the central banking went is a totally open west. -- open question. the market is convinced the market is convinced u.k. kelly take a hundred basis and then they will have to cut. that's a big question. for a number of countries around the world the economy can take more. jonathan: -- tom: you do have industry-leading work on covid area and with your releases on twitter you have focused on cases i'm focusing on a really -- cases. i'm focusing on a really ugly by ugly country based flow. jonathan ferro is briefing me on the united kingdom. are we ready for another global set of lockdowns? jens: we look at cases,
hospitalizations, fatalities. we have to look at the whole picture. we are at a part of cycle where just the cases will give a different picture about how severe this is. this does not translate to hospitalizations in the same degree. if you look at what's going on now, you are right that there are spikes in eastern europe. i will give you an antidote. romania stalled their backs -- sold their vaccines to denmark a couple months ago because they did not want to use them themselves. in some countries where the vaccination rates are very low they will have issues in the winter. and a different group of countries where we have very high vaccination rates and hospital pressure will be very much lower than previous cycles. we will have pockets of winter waves where they are behind on
vaccinations. you will find that this wave that we are facing now is going to be having much less of an impact. jonathan: we hope so. thank you. take care. just a shift to the u.k., a shift in tone from the house secretary. saying we all have a role to play. the pandemic is not over. there is a fear, for some people, that we get deeper into winter and some restrictions have to return. this government doesn't want to go there. tom: to give credit you have hundred thousand people in the stands for the premier league and the champions league. do we go back to what we knew? it's going -- was again being currently localized? jonathan: there's a significant amount of tolerance in the u.k.. lisa: and you have policymakers
trying to get ahead of it with vaccine mandates. how much of what we heard from mayor de blasio was directly trying to tackle this ahead of the second, third, fourth wave, saying you have to get vaccinated. piercing that from increased companies. jonathan: who is he trying to reach out to, he goes on liberal left-wing news networks. who's he trying to reach? lisa: i think he's trying to speak to his base, which frankly speaks to his lack of support more broadly. that he seeks stephen unify his own party. jonathan: from new york city, this is bloomberg. ♪ >> with the first word news, i am leigh-ann gerrans. there has been improved business
travel arrangement agreements made. this is a political boost for the u.k. prime minister, with government analysis reaching such a deal with no long-term impact on the british economy. here in england, the government has been accused of being willfully negligent by not implementing its plan b to tackle rising coronavirus race. the medical associations as i measures are needed to avoid further pressures. the house sec. says the government wants to avoid bringing back tough measures and warns that new daily cases could rise to 100,000. he's urging people to get vaccinated. china has pulled -- and the financial newsgroup has afforded -- as china announced an approved list of domestic media
president biden: these bills are not about left versus right or moderate versus progressive or anything that pits one american against another. frankly, they are about more than giving working families a break, the positioning our country to compete in the long haul. by the well -- by the way, they will not increase at a penny of the deficit. they are fully paid for. jonathan: that's president biden. we are down 11 points on the s&p. equity futures are a little softer in the bond markets. the yields in a couple of basis points. this is a little lower, -6/10 of 1%. i can't help it tom. every president has a specific way of addressing an audience. this one [talking over each other. ] jonathan: [indiscernible] lisa: --
tom: [indiscernible] joining us now, jack, i am absolutely bedazzled by how we had to go to cornerstone media, the wonderful don snyder saying he's bipartisan. he's not a republican, saying 3.5 trillion is really for poindexter trillion. this is not a 15% haircut, it's more like a 60% haircut. do the math for us, do the math for the moderates and senator mcconnell of kentucky. do the math right now. jack: how big is the haircut? if you talk to senator sanders, it's a huge cut from what the progressives wanted. the frame of reference saying we are at about a 50% cut to compare what they are talking about now which is 1.7 trillion
or so to the 3.5 trillion we had heard about which did have some pushback from moderates and got sign off from mark warner of virginia. but he had always said that was his feeling and it could be lower. these are significant cuts if you listen to what progressives and the president were campaigning on and publicly touting. clearly that hit the wall. it will have to be much smaller. tom: in my reading of the tea leaves, this is all out the window except for british people seeing -- mimicking the president, their taxes will go. will anyone see higher taxes? jack: the question is how concrete are senator kyrsten sinema's demands. because she has set to oppose an increase in the corporate tax rate in the top income rate
which would leave some question as to whether the capital gains stuff could stay. the main question is, can the rest of the democratic party get her to change her mind. this is a significant portion of the revenue they are going to raise. they could look elsewhere to raise revenue but this is really the core of the democrat tax position that she is pushed back on. -- has pushed back on. it's a fundamental question as to how serious she is. and if that's a concrete demand or if she could be swayed to give smaller increases. lisa: i was looking at the details in terms of the newest proposal is. why is it that corporate taxes are less politically palatable for the democrats than individual taxes on the wealthiest? jack: a lot of the time if you look at general polling, those are two pre-popular positions
for democrats. increasing -- those are two pretty popular positions for democrats. what we are getting adding congress is less reading the polls, more trying to see if they could get to 50. it's a little hard to parse out. senator manchin says that he's open to increasing the corporate tax rate, but not as much as other democrats. senator cinema really has a different appeal. this is certainly different stance on corporate taxes and chamber of commerce issues. i'm not sure we can attribute this to popularity. because among many democrats, the mainstream position is that both of those are pretty popular with voters. lisa: we are deep into earnings seasons, we keep hearing about supply chain disruptions in this
is causing consumer prices to go up pretty dramatically. how much has the latest inclination of the infrastructure plan been tailored to address these supply chain disruptions which will take a long time to address in full? jack: they have not really redone anything with the infrastructure bill. one of the key issues with the supply chain challenges is that anything, especially for the near term that the government can do is more than informal capacity. the latest reporting from our colleagues on the white house side is that the president is encouraging some applications for federal grants to improve transportation. but there's not a lot they can do to appropriate new money or change things that would make any real difference in a matter of months then years. what we have seen in the near
term is the president is trying to encourage changes that companies can make on their own. the expansion of hours and that sort of thing. the infrastructure building such a long-term issue and it would take years rather than months to get that money out. that is standing on its own. it's relevant to the supply chain issues, but it can't be a response to what we are seeing. jonathan: thank you. he's on the latest in washington. and a conversation yesterday about senator manchin leaving the party. a report from mother jones, senator manchin responded to it with some choice words. [crosstalk] senator manchin leaving the party in that report then refusing to a knowledge that report. denying a report with choice language. tom: it's an american position.
democrats take the house -- if republicans take the house, republicans take the senate, how many democrats become republicans to have a voice in washington? jonathan: do you think that will happen? tom: i predicted always happens. the question is how much will it happen? one or two? a tidal wave? a lot of retirements right now. jonathan: we will catch up a little bit later this morning. going through the price action quickly. [crosstalk] is that what i did? tom: do i go after the queen? jonathan: you went after the prime minister. he went after his haircut. i was talking about his approach to delivering speeches. tom: you can put me in the timeout chair. jonathan: i will be going there shortly. down 1.5% on crude, the euro at
daily chance for productive conversation. jonathan: six days of gains coming into the equity market. log is daily winning streak on the s&p 500 going back to early july. no drama here. dad about one third of 1%. small caps dad about .5%. just a moment in time let's celebrate execution. fantastic execution last week from goldman sachs. unilever and tesla. for all the talk of a chip shortage and car companies not able to meet production targets, tesla is keeping up. the stock is only done by 1% in the premarket. it is not damaging demand.
consumer -- a bigger story for this quarter. a lot of companies under pressure with high costs. they have been able to pass it on, execute, adapt. the bond market just short of the highs of the year. 177. first quarter, at the end of the quarter. this morning, 167. deals coming in about a basis point. 2.11%. no drama. tomorrow we hear from chairman powell. tom: we have to talk about the success of david solomon. we sat with mr. solomon at davos. this guy was criticized up, down and sideways. keith horowitz says it's impressive execution, as you just mentioned.
they go on price target. 440 up to 480. jonathan: it is too easy to say the environment changed. they were beating estimates last week by one billion plus. yes, the rest of the street did well with equity trading revenue. fred goldman executed at a much higher level. lloyd blankfein waiting around for the business to turn. tom: i'm not going to criticize anybody. james dimon said two or three years ago, this is just hard work. solomon has been a piñata. he nailed it in this great environment. jonathan: you know what happens now? there are some people at that bank that want to get paid. tom: five basically think -- we will talk to sonali basak. i think goldman sachs will buy
the hamptons. jonathan: i'm not talking about the analyst class. i'm talking about further up. tom: joining us is adam parker. a very sharp of note here. i love how you say it's about identifying winners and losers. let's go type 2. how do you avoid the losers? adam: i think the number one issue in the market is going to be gross margin expansion. can you offset these rising input costs and pass it on to the end consumer? if you can, you will be a compounder and still a good stock. it's about growth profitability. tom: let's flip over to the winners. there seems to be two classes in tech. adam: give your high-margin
company in semiconductors or software, you are a winner. i'm getting experience here. 20 years ago, the title of my note was "pure gainers or market expanders." i'm revisiting these themes and it still works. if you can expand gross margins, he will be a winner. a key controversy for investors right now. software, for low-margin company is already a loser. the market does not like you. you are an inferior company. it will always be about profitability. we have done eight to 10 research notes in the last few months. no matter what angle, gross margin above consensus expectations is how you identify winners. lisa: winners when it comes to earnings. stock performance is different so we talked about what is been priced into a market that is
trading at record highs. 84% of companies reported third-quarter earnings so far have beat earnings, beat expectations. their stock has not been rewarded. those that miss get slammed. what is your interpretation? adam: one thing i struggle with earnings, and you probably laugh at this, there is a beat on revenue, margin, earnings. where did that verse the expectation? -- first the expectation -- burst the expectation? companies on margin get punished the most. that is the cocktail you want to avoid. the streetlights margin expansion. we -- perhaps they can pass on the revenue.
the guidance you what is gross margin expansion. you want to avoid revenue growth with margin contraction. lisa: procter & gamble versus unilever. is this an execution question or macroeconomic question about how the state of consumers balances are? adam: the consumers are pretty strong. the mix of the products and execution, that, nation -- that combination. pepsi, png another soft margin pressure. they can be currency and other stuff as well. generally, consumer companies have missed on margin, the restaurants, they had serious margin issues. tom: i want to distill it down for listeners and viewers. i'm using citigroup with airflow coming out this morning. tepid on ibm.
keith horowitz very excited about goldman sachs. what is the craft to avoid an ibm? adam: you have an issue of share losers and margin contractors underperforming. if expectations are starting to rise about a turnaround story and the disappoint, the stocks don't act well. i have this whiteboard behind me and i write down things people ask me. i say the phrase is i want to long compounder's and short melting ice cubes. 18 compounders, nine melting ice cubes people mentioned last week. i think ibm fits in the ice cube category for a lot of hedge fund managers. they don't see a path toward sustained revenue growth for margin expansion. tom: let's get you in trouble on
the ice cubes. i don't want you to fall into the ocean like a polar bear. where are the hedge funds now? what is the commitment you see right now? adam: there are different flavors and styles. i think generally people are still overweight with tech stocks. the risk is obviously if you get a backup and yield -- in yield. people will sell off sharply like it did in february. they have to focus on the gross margin capability. semiconductors, it's about materials, labors, appreciation, factory absorption. there are things you can track in that industry. that is the main focus for fundamental analysts. if you can't offset those pressures, the stocks will not act well. that is clear from last week.
lisa: yesterday, pemco came up with their five-year assessment. one feature of the report, lower returns going forward. what is your view when it comes to the equities sector? what should people expect when looking at a broad index level investment allocation to equities? adam: i don't want to disperse anyone from solving the problem. i have seen that no from the major firms every year for the last eight or nine years. those things better be really write really soon. i am pretty bullish on equities. the cocktail is easy to understand. you always sound dumber when you are bullish. you have got to remember that. earnings are going to grow next year versus this year. the fed will remain accommodative. the economy is reasonably strong. they will be a fiscal stimulus. those are pretty powerful variables.
you want to fight the fed, fight fiscal stimulus, fight corporate earnings being higher, fight the decent economy, go for it. i look at dividend around 1.7% and net buyback at 2% and a call option on earnings. which bond market looks better than that? i like equities. i will buy my dream to debt, sell it to a sucker with a bigger dream tomorrow. you can upgrade the bowtie portfolio. i don't see why you want to get to negative. the 10-year call, it looks high as his history -- versus history. interest rates rise a lot. wall street is littered with hockey rink's of people who tried to make that call every quarter for the last 10 years. jonathan: and tested to catch up
as always. tom: we will give you the highest honor. jon and i will whisper to you. adam: see you soon, guys. jonathan: what he said at the end is true. the loudest voice is always the bearish one. it's always the bullish one that sounds simplistic and dumb, but often write for the last 10 years. tom: it is so hard to short when things are moving up. jonathan: what to sound smart or make money? tom: i'm feeling good. jonathan: that's the tough one. from new york city, this is bloomberg. ♪ leeann: congressional democrats are at odds over the tax and spending size of the bill for
the bulk of president biden's economic agenda. the chances for agreement by the end of the week are now receiving as leaders intensify the search for alternatives to tax hikes for climate provisions. volvo says chip shortages and supply chain disruptions will continue to cap its stock making, forcing the manufacturer to turn away from customers. the company says the disruption in the production of trucks and other parts will continue. the company reported a third quarter adjusted operating profit of $1.1 billion, beating average analyst estimates. new south wales jumped 89 for the day before to hit 370 inspections. is the biggest daily increase since mid-september and comes 10
days after the state issued a widespread lockdown that lasted -- following a flare up in northwestern provinces. cases are spreading across the country to beijing. eight provinces have reported infections in the last week, fearing concerns china could see another widespread outbreak. 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 am leigh-ann gerrans. this is bloomberg. ♪
it is time to keep moving. for the vast majority of the workforce not yet vaccinated, the deadline is 5:00 p.m. on friday, october 29. my goal is to end the covid era once and for all. it can be done, but only if we keep pressing on. jonathan: officials tightening the screws. good morning. your equity market enter thursday, six days of gains. negative this morning. the bond market, yields lower. after a little look at 167. commodity market down .7% on crude. $82.84. allow me to read this after you. pfizer and beyond textedit booster shot of their vaccine has restored full protection and a large study. of booster was 95.6% effective against symptomatic covid in the
study, which followed 10,000 people aged 16 and older. when the trial took place delta was the dominant strain. a little bit of additional information for you. 10,000 people aged 16 and older, 95 point six effective against him to medic covid in the study -- 95.6% effective. tom: it is not funny for people out to get vaccinated, people with all sorts of immunology issues. is not funny for people who are scared. let's get some perspective. david doughty joins us from the bloomberg school of public health. the mandate tone from the mayor of the city of new york, the mandate tone amongst sports and universities in the rest, should that have occurred in october of 2020? are we doing now what we should have done 12 months ago? dr. doughty: we did not have
these vaccines 12 months ago. but i think maybe two or three month ago might not have been bad. tom: when you look at mandates, and people fight against it, how do you respond to them? >> it is everyone's individual right to choose but it's also every employers individual right to decide how to best protect their employees. if an employer says the best way for us to protect our employees is to mandate the vaccine, employees have a right to decide whether they want the vaccine or find another job. both are reasonable. we are not trying to shame people. we are trying to do what needs to be done to protect the workforce. lisa: a lot of people are
wondering where we are in terms of the pandemic. united kingdom is a cautionary tale. they have a high vaccination rate and the number of cases of hospitalizations has been climbing. how instrumental will be to get children vaccinated to end this cycle where we go in ebbs and flows but we see worsening trends in the covid pandemic? dr. dowdy: that's a good question. is easy to look at places like the u.k. where things are maybe not quite trending in the right direction, but worldwide there are more places trending down then trending up right now. i think there is reason to be optimistic. getting kids vaccinated what we have the right vaccines is a good thing to do. i also think they are trending down in the u.s. now and it is hard to tell. maybe things will swing back up but maybe they keep going down. we will wait and see. anyone with a crystal ball is lying to you. lisa: it goes to the sentiment
here, the idea of are we out of the woods. can we shed the pandemic habits anchor back to a new normal? is this something we can expect to do or are we always dealing with these ebbs and flows with the masking and the idea of retesting? a different normal that any of us want to see become what we are all accustomed to now? dr. dowdy: i think we do need to adjust our expectations. people who think this virus is going to be completely gone in a few months, i think that is not going to be the case. i do think we can get to a point where we are not having the same huge waves of sickness and death. i think we might be there but i don't want to say we are there. we still need to see where things go over the next few months. if we make it through the winter without another wave, we are
probably doing well. as we have seen in the u.k. and elsewhere, it's possible even with high vaccination rates thing start to get worse again. jonathan: if i live in america, why would it take the j&j vaccine? dr. dowdy: well, if you have a mandate a need to be fully vaccinated with a single dose, better to get vaccinated than not to. if i had to choose, i would probably choose what are the mrna vaccines myself. jonathan: they need to have a more open and honest conversation about these things. look at the science and not the social science and sate the vaccine has not worked out in the way people hoped it would. dr. dowdy: i agree. we need to look at the science. i think all of our science has social overtones. we need to think about how people react to that sort of approach. sometimes if you say here is the
science. what happens is people dig in more. we need to think about how to meet people where we are, where they are, work to get as many people vaccinated as possible. jonathan: is that the job of doctors or politicians? i being open and honest right now. it is the job of doctors to embrace social science, or politicians? dr. dowdy: i think it is the job of policymakers. that being said, i think doctors are part of who people are looking to. the doctors should lead with the science. we need to be cognizant of where people are coming from. if i come to a patient and say, here's what the sign says but i'm not thinking about where that patient is coming from and what they have been through that day, i'm not doing them a service. jonathan: i appreciate your
response. dr. david dowdy. the pfizer booster shot, 95.6% effective against symptomatic covid. that is not severe disease. that is symptomatic covid. that is back to where we were this time last year when we were talking about the efficacy of these vaccines. tom: i would emphasize in the conversations i've had -- have a massive amateur -- the pros say we can be more optimistic about taking fancy mrna vaccines abroad into emerging market and frontier economies. i don't know if that is true but that is what they are saying. we need to be more optimistic about what dr. doughty said -- dowdy said. jonathan: we have talked about this a a few times. lisa: we're talking about a world that is not supplied with vaccines.
♪ >> inflation transitory -- is inclusion transitory? our house view is it is going to mon -- it is going to moderate. >> the consumer is pretty resilient. the demand is pretty strong. >> we are counting on grocery accelerating a little bit. -- on growth re-accelerating a little bit. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: just pulling back from all-time highs. good morning. this is "bloomberg surveillance ," live on tv and radio. your equity markets after by 13, down 0.3%. this run has been pretty tidy. we've had a series of execution after execution in earnings season. does it validate where we are priced or inspire further gains? tom: against the gloom