>> we are going meeting by meeting, we are asking ourselves whether we have achieved policy that is restrictive. >> what the fed saw was a worrying for tightening conditions. >> if i were talking to jay powell i would recommend he leave the door open. >> our concern is around may and june. where is the fed going to be? >> i think it is either zero or multiple rate hikes. >> this is announcer: -- this is "bloomberg surveillance." tom: good morning, everyone.

jonathan ferro, lisa abramowicz, and tom keene. the morning before the jobs report. lots going on this week. luke, is going to -- luke kawa is going to start us off in a moment. brammo, finally a day off for the brammo. she is recovering from halloween. joining us now by special invitation. it has been weeks joining us this morning, scarlet fu. she has not been up this early in six years. scarlett: almost a decade. tom: how did that 4:00 a.m. feel? scarlett: ask me in two hours. tom: scarlet fu with us as we consider the earnings season. we have to consider what you witness yesterday, which is a melted in the market. it continues this morning. we will get to that in a moment. i looked at what came out

yesterday and it was nuance early in the powell love-fest, where he said it is not solid. he changed the language and said it is strong. the shift really belies the worry economists have about a slowdown in this present quarter. scarlett: that is something looming over the federal reserve. what i also learned is we have this new definition called lumpy. do you know progress in inflation will be lumpy? what does that look like? tom: we are going to dive into that. we will get to that in a moment. let me do the data check right now and dive into that. because it is really quite something. we continue to lift this morning. futures up a solid .5%. the dow up 100 points. but the nasdaq is a story. tech on. apple, a huge report from the people of cupertino.

catherine greifeld said, tom, you have to quote that dog -- bitdog moving that fast. we are in on the 10 year yield. i look at the screen and i can hardly understand the members -- the numbers. a little bit of disinversion. the real yield to me is the heart of the matter. it comes down to 2.30%. that is a demonstrative move in the inflation-adjusted yield. scarlett: i cannot keep track of the moves in the 10 year yield. we had this massive move yesterday. if the bond market is doing some of the fed's work for it what does it mean when we go up and down so quickly? can you rely on this market to do any work? tom: i don't think you can rely on the market. this is a fancy study, but this is not the first, second, third,

fourth, the fifth time we have had a, while, it is all over, it is done, which is the phrase the economists are using this morning. this is five times we have been through this exercise. to me that is the heart of the matter into the jobs report tomorrow. scarlett: into the jobs report, which will likely show the labor market is robust. we also get the bank of england in about two hours. have you heard of the term table mountain? tom: no, i don't know table mountain. ellen ruskin knows that. scarlett: it is another way of saying rates have peaked. i would say plateau. tom: we are going to dive into that. i saw governor bailey at the imf meetings. he was not declaring victory, but certainly a different calculus there and eight front calculus in europe, where you have economic slowdown. we have to talk about this. i have never seen a predictive deceleration in the american

economy like what is predicted right now. morgan stanley's seth carpenter stopped the show yesterday to go from boom economy down to ellen zentner, under 1% economic growth for this present q4. scarlett: it is grinding to a halt. tom: and there is some inventory numbers in there. but i wonder how many of our listeners really understand how they are modeling a slowdown right now. to me it is extraordinary. scarlett: if you ask the average consumer they did not feel like the economy grew that much in the third quarter. their sense of confidence and growth was definitely a lot more -- let's just call it restraint. going forward may be in the fourth quarter if we are looking at sub-1% people are not going to feel that bad. but the numbers show a dramatic deceleration. tom: luke kawa's hockey royalty from back a ways.

we have to get a sports update from fu. used to do this when we were together. the rangers start strong. scarlett: the new york rangers. they are first in their division. and they have a five-game winning streak. tom: how does lundquist look? scarlett: i follow him on instagram. tom: there is your hockey talk for this morning. futures up 21. with ubs management, luke kawa joins us now. do you have to asset-allocate off of what you witness yesterday from chairman powell? do you have to change the script? luke: for us we tend to take a more medium-term few in terms of tactical asset allocation decisions, but there are some things that stick out as warranting remembering as we move forward through the year. not to secure my next invite,

but powell's answer to mike mckee was telling. mike was asking, do we need below-trend growth? we just need slowing growth? the fed chair came up with an explanation that helps backfill the amazing moves we have seen this year, which is u.s. growth consistently surprising to the upside and inflation coming in right around where they are expecting. the way powell square that circle was to say may be potential growth is actually temporarily a lot higher than we thought. he could have answered that a very different way. he could have said some of the unwinding we have gotten on inflation is temporary, and because of the real growth outlook we are still concerned. when i took from this is that the fed's call on real gdp growth, strike price on that is a lot higher than i would have previously thought heading into this meeting. tom: what i saw yesterday was a lot of activity before the fed meeting. very unusual.

just on the terminal, lots of blinking, pulsing if you will. was yesterday one big short squeeze, whether it is bonds or equities? was it one big cover? luke: that is certainly a possibility. to set the stage, the context of where we were heading into this meeting, since the inception of the u.s. treasury bond index this is the first time since at least 1987 we have gone three-straight months with both of those falling. so, a very bad stretch for financial assets. you get the fed saying effectively that we might be done, real growth is a little higher than you otherwise would have thought, and we are acknowledging that there is going to be some bumping us on the path to getting inflation lower, and i think that is pretty much alluding to six-month annualized core inflation probably going to pick up a little as we head into year

end and six-month pce is going to flatten out a little. i think that provides a bit of good fodder for perhaps getting some relief in risk assets. it will certainly help that some of the non-economic factors that were propelling treasury yields higher, we got some news effectively saying that those might not be as bad as we thought. scarlett: i'm curious to get your take, given what we have seen in their earnings reports so far. anyone that doesn't live up to the highest estimates in terms of a forecast gets punished pretty quickly. by first half 20 23 standards the magnificent seven earnings seem to have disappointed. what would you say by regular standards? if we did not have this big run up at the start of the year? luke: we saw a big change in timbre in terms of how the market was expecting earnings this quarter. q2 you were seeing large

revisions coming into season, which makes it a lot easier to surprise to the upside. you did not see that as much in q3. results were solid, but were -- but what we are seeing better most concerning, and this comes in through the beige book and more quantitatively through the guidance we are getting from companies, right what is happening is q4 estimates for the point in time we are in on the year, have seen a negative revision. and i think that mirrors something tom was talking about. this is a very expected deceleration in growth. it has been highlighted by economists. it has now been highlighted by corporate america. our view is effectively that the real income growth you are getting is going to be sufficient to keep earnings growing, and that estimates, last i checked on the bloomberg terminal at about 8%, that is still low in how strong the handoff seems to be from september and october, and the

most persistent, dominant element of this year is the u.s. data surprises on the hard data side. just so consistently to the upside. scarlett: how does that set us up for the kind of forecast apple is likely to hint that monette announces results later today? people look at it as this proxy for china growth, for china demand. certainly for high-end items and also the shift of the global supply chain away from china. luke: certainly going to be a big event in terms of commenting on single names. not something we tend to do. even a name as big as apple. i will duck that one, if you don't mind. scarlett: when you look at overall conditions right now how oversold are we? with the nasdaq 100 and s&p 500 in correction mode last week -- certainly not yesterday because of the big rebound -- it is making stocks more prone to relief rallies. is this just another leg of the relief rally we are seeing? luke: we do expect heading into

year end, as you phrased the question, over the medium term we think both probably fairly good, considering the expected returns have improved a lot. more tactically we do think that the outlook is for equities to be rallying into year end. i would say based on some of the guidance we have received recently from corporate's, may tempering expectations for how much of a rally you get. but our view is that the earnings story, the calling in bond villain -- on volatility, and how oversold we got, are factors that are going to help looking under the hood. we did see a lot of components trading below 50 day moving averages, etc. we pretty much got to levels consistent with a lot of market bottoms before. tom: thanks for the brief. luke kawa with ubs asset management. yesterday there was a headline that stuck out like a sore thumb.

the chairman is talking in the statement about cumulative inflation. scarlett, i take real issue with this. the suits and ties talk about month over month, year-over-year. cumulative inflation -- radio, let me explain this to you. this is usda, how much do groceries cost? one year they are up 3.2%. the next year they are up 3.5%. in 2022 they ballooned 11%. that is compounded in aisle 14 at your store. groceries have gone up 19%. the two americas, the fancy america we are talking to every day is talking all of these fancy statistics, and what people are living is not from the beginning of pen -- of the pandemic, but somewhere in the middle of the pandemic groceries are up 19%. scarlett: you can't go to cosco

without accumulating a bill of about $500. and that is what gets people disgruntled. it doesn't matter that inflation is coming closer to that 2% target if you're cosco bill is about $500. tom: what is the number one thing a cosco that you go wild? to me it is beef. scarlett: just halloween candy. it was $20. tom: you stocked up at cox -- at cosco? scarlett: unfortunately, yes. tom: this cumulative phrase is perhaps the most important of the past 24 months. his cumulative inflation something we are all living? the vix, stunning. we will talk about the vix in a minute. scarlet fu. she is so large she is in for both jonathan ferro and lisa abramowicz. stay with us. bloomberg surveillance. ♪

pres. biden: we are continuing working to step up the flow of humanitarian assistance into gaza -- gaza. the number of trucks entering gaza continues to increase, but we still have a long way to go. israel has a right to defend its citizens from terror, and it needs to do so in a manner consistent with humanitarian law. that per year ties is the protection of citizens. -- step ties is the protection of citizens. tom: the president, as he images from israel, gaza, and the west

bank and northern border with lebanon. interesting to see. greg valliere to join us. jonathan ferro, lisa abramowicz, they are both off today. scarlet fu. we are thrilled that scarlet fu's people would release her to come and do this in the morning as well. we have a continued equity lift off of the joy we saw yesterday in the powell press conference. extraordinary move yesterday. the report in summary is the fed is done. at least that is the belief. futures up 20. the vix, the 21 level. yields continue to come in. the 30 year bond you will recall -- you will recall is at 5%. make it 4.91%. oil does not play today.

the dollar turns, fractionally weaker. i am on the japanese yen watch. really not much news in the last 48 hours, but something we are watching as well. right now we are going to go to tel aviv. oliver crook with us. oliver, how is the government of netanyahu, how are they managing the message in tel aviv in the last 24 hours? oliver: you heard from netanyahu this week, and again the message was clear, which is one against any kind of cease-fire and really on the defensive. netanyahu defending himself, as we have talked about, politically, internally, but also from accusations from the rest of the world. the further you get from october 7 the attention, the balance of attention is going more and more into what is happening today in gaza. as that time elapses, as we hear from authorities in gaza, the

united states and standing behind this government is going to have to address that. as blinken comes in, what has changed since he came last time? he will also be in jordan. jordan has called back its ambassador to israel. jordan one of the first countries to make peace with israel back in the 1990's. but again, taking issue with what is going on in gaza and new calls from the king and others that palestinian lives matter less than the israeli lives. scarlett: with antony blinken visiting the middle east again, what is his objective here? if things have not changed much what would count as a victory in this next trip? oliver: i think what will be interesting as i think from the israeli side of the trip you're going to expect some of the same things we have gone throughout, which is full throated support. maybe there is the sort of tacit suggestions about how they conduct themselves, how this

military operation is undertaken. but i think the more interesting part will be decided in jordan. where is the united states? how was jordan viewing their role? and will he go to other countries within the middle east? last time he was here who went to the uae, egypt, qatar. is he going to expand that? the saudi's, an interesting question there when you have more and more activity from yemen, with cruise missiles going over saudi airspace. that part of the trip is going to be important to watch, and any comments from those nations. tom: oliver crook, thank you so much. in tel aviv with our team as we continue to look at the war in israel, gaza, and other points. joining us now on the other points, the wars of washington, gregory valieva -- greg valliere he. it is november. that is 12 months away from an election. take the drama of our many wars

and folded into how things change 12 months before an election. how does your world change given the pending when you're out election? greg: good morning, tom. there are so many unknowns. one big one is benjamin netanyahu. if you saw the extraordinary story in the new york times on monday talking about how israel and netanyahu were blindsided, they got totally caught off guard, there is going to be recriminations. i think that has to be looked at very carefully. there is that, there is the fed, and there is this continuing fight in the house between fairly moderate republicans and right-wing. that fight is about to resume within days. scarlett: right, but you have a right wing speaker of the house now. shouldn't that restore some order in the house? greg: one would think, wouldn't one? but i'm not sure about that. even a handful, four or five house republicans, could block

this next spending bill. and there are republicans in the house that do not want to spend money on ukraine. and there are some lukewarm attitudes toward israel. but the big fight still is a budget. have a budget deadline in two weeks and they're not close to being done. scarlett: we are watching that november 17 deadline carefully. i want to get your take on what the economy means for the presidential election. try as it might the white house has been selling bidenomics, but it has not been doing well when consumers are feeling sour. what does the current fed policy mean for the economy in 2024? greg: i think there is may be some relief among consumers that the fed did not raise rates, but i thought you and tom a few minutes ago hit it perfectly, talking about food prices. food prices are up -- what did you guys say, 19%? tom: over three years. greg: that leaves an awful lot of people -- maybe not us, but

it leaves a lot of people discourage that this is not improving. tom: what is important there is the usda -- this is really good data from the department of agriculture. they say it is not third world, but 30% of their compensation is going to food. scarlett: which means compensation is not going to discretionary spending that supports the economy. greg, i want to bring it back to fed policy because jay powell's term expires in early 2026. whoever wins the 2024 election would get to pick the next fed chair. what does that mean to you? i bring this up because if donald trump wins the nomination committee yes, he nominated powell as fed chair, but he also nominated judy shelton as fed governor. greg: if biden wins he will obviously try to keep jerome powell. if trump wins he will get rid of

pal quickly as possible, and that well, i think, because anxiety for the markets. one other quick point i would make about what we could see in the next year or so that is outside of the box, i wrote a piece this morning on robert f. kennedy, jr.. there is a new poll out overnight from quinnipiac showing him a 22%. i was surprised. i think a lot of people were surprised to see that. i do think he will take away from joe biden. young people, independents, african-americans, environmentalists. robert f. kennedy, jr. is not going to be the next president, he may determine who will be. tom: greg valliere, thank you. look for that from agf investments of toronto. i want to look at the equity markets right now. the spx up. and we look at it through the vicks, the volatility index. a higher number is fear.

the joy, the nirvana, go not to angst, not to a 30-number, we go out to 21.71. and just like that, accelerated by what we saw yesterday afternoon and this morning. we are back to a vicks of 16.47. it is amazing. scarlett: the average over the last five years is 21.03. can we still rely on the vicks? tom: that is a loaded statement. mark cried more is excellent at this. scarlett: check him out on the bloomberg terminal. tom: it is a bull market, i think. scarlett: yeah, a week after a correction. sure. tom: apple this afternoon. ♪

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tom: "bloomberg surveillance." mr. farrow and mr. braun the whites are off today. well-deserved show germans -- sojourns as well. scarlet fu will be with catherine greifeld this afternoon for those important apple earnings. let's take a quick look at that right now. thank you so much for joining this morning, scarlett. apple matters to the american psyche. there is no other way to put it. scarlett: people are lining up to pay thousands of dollars for a phone.

when you add in the tax it is about $1300. the problem for apple is that chinese consumers are not necessarily doing that. tom: it is a mystery. mark gurman with real leadership coverage. this time around china is the mystery. scarlett: they are all excited about the huawei phone. tom: you'll have coverage of that this afternoon. on the market, futures up 20. vicks, solid. -- vix, solid. tom: shout out to -- scarlett: shout out to powell. tom: yields continue to come in. i'm going to go to brent crude. the global price, $85. we did not get to a $79 print on west texas. i don't have much of a story in currency today. bank of england, we will get to sarah hewin in a moment.

president biden urging israel and hamas to pause fighting in order to free hostages. the president stopping short of supporting a cease-fire. hamas says it 600 more foreigners and dual nationals may leave gaza today. all of's tone is literally evolving not even day by day, half day by half day. scarlett: there is increasing criticism of israel's operations in gaza. you have countries withdrawing their ambassadors. some latin american countries. feels like the u.s. standing unequivocally behind israel is feeling a little more lonely doing so. tom: whether abdullah in jordan is a hugely symbolic pull away. this is adjacent, on the eastern front to the west bank. this goes back to the 1990's. this is bill clinton. scarlett: we will see what antony blinken says when he does go to the middle east once

again. is go around trip again. tom: mike mckee late in the press conference yesterday noticed that the fed, leaving rates unchanged, chairman powell hitting that the central -- hinting that the central bank may be done hiking. we'll have to see. the focus this morning goes to the bank of england, governor bailey, and it's completely different story there. scarlett, their inflation is different than our inflation. scarlett: is it lumpy also? tom: i don't think so. i think that is exactly right. have a lumpy inflation affecting some of american society. fancy people maybe not all that much, but in england it is much more pervasive. i would go to our housing market with eight point -- 8.x different than their floating housing market. scarlett: like we do in the u.s. with a lot of the government

buying up those mortgages it is a completely different story. when it comes to the boe they are allowed to dissent. they don't have to vote unanimously. tom: i'm glad that they do. catherine mann over there with megan as well. this is important, and it is perfect to have scarlet fu over there. because she is a bloomberg surveillance celebrity lodestone. disney is going to buy the rest of hulu. negotiations are expected to last months, but disney is expected -- expects that the deal will be completed. why do i care that disney takes out hulu? scarlett: disney already owns two thirds of hulu. as part of the acquisition of the fox assets they had agreed that one of the other would make an offer for hulu. iger is looking to resolve hulu, but he also has to sort out other issues. espn partnership, maybe investment.

linear tv in the u.s., is he going to sell that? he has a full to do list. tom: the basic idea is with netflix dominant is the basic idea do you merge hulu with disney plus checkup you merge the kids channel and star wars -- scarlett: do you mean bundle it? tom: no, i mean merge it into one platform. scarlett: hulu doesn't have the brand recognition that disney plus does. do you watch hulu? tom: i don't watch any of it. what i notice that home is mostly what people are watching is youtube. we say good morning. bloomberg surveillance on youtube. that is what they are watching. we are shameless promoters. scarlett: you should watch "the bear" on hulu. there is a good taylor swift reference in season two. tom: right now we have a needed brief on the brink -- on the bank of england.

sarah hewin joins us, head of europe and americas research, standard chartered bank. do you expect a surprise or is it supposed to be a snooze fest like the fed was not yesterday? sarah: it is supposed to be a snooze fest. it would be a surprise if we get a rate hike. i mean, if that is the risk we could still see another split vote. perhaps hopefully not as close as it was last time around, but three policy committee members are still voting for a 25 basis point hike. last time around they were still concerned about inflation pressures. and we have still got inflation, you know, three, four times higher than the target. we know it is going to be coming down over the course of the next few months, particularly october's inflation will be a step lower because of the energy price impact, but there are still concerns about what is happening to wage growth. good that ultimately be inflationary?

tom: first -- you do what first-class economists like yourself do. when you go to the 13 month you forget the agony of the month 13 months ago. we get basic facts. the people watching this in england, in the united kingdom are not worried about base effect. they are just looking at a gigantic move in energy inflation, food inflation, and fat. what is the pain of inflation in the united kingdom right now? sarah: it is clearly very painful. there is a big cost-of-living crisis. and that is being exacerbated by higher mortgage rates. so, increasingly people are either on floating rates or people who have fixed-rate mortgages that are having to refinance, and those refinancings are coming up with each month that goes by. that is a big burden on many households. of course, you have a split.

for households that do not have mortgages, that have high savings are saying let the good times roll because they are getting high returns on their savings and they do not have the burden of mortgages. so, there is a split in the u.k. , but certainly we are seeing increasingly the impact of higher interest rates starting to weigh on growth. growth expected to be zero for the third quarter. and that is a big contrast with what we have seen in the u.s. scarlett: we talk about or joke about this boe meeting being a bit of a snooze fest. the last boe meeting the decision was anything but, because the decision to hold surprised a lot of people. also it indicates increased tolerance for upside data surprise. what is the extent of that tolerance? sarah: there is some tolerance.

the bank of england's forecasts are for very weak growth and for a big fall in inflation. so i think that there is a view that there are fundamental effects that will bring inflation lower. but as we had such a close vote last time around, then, you know, any persistent upside surprises on either activity, particularly on wage growth and inflation, will be a warning shot for another hike in rates. can i just say as well that the labor market data are very unsatisfactory. so the bank of england is hobbled by not really knowing what is going on with jobs, with wages. the official data are not really telling the true picture, so there is a bit of guesswork needed to be done on that. scarlett: so the guesswork extends to the terminal rate as well. the boe's chief economist has

described rates as a table mountain. tom had never heard of that term. you brought up that people had used the term matterhorn to describe where rates stand. give us some context on what table mountain means and where the boe is headed when it comes to terminal rate. sarah: this is huw pill describing that bank of england rates we need to stay at current levels or higher, but staying higher for longer. that is the mantra. having reached a peak, that peak stays, you know, level for quite some time. the matterhorn idea, that is what we have seen in other economies. for example in brazil, where you saw a huge and rapid increase in rates, and then look one -- and then an equally rapid decrease. the message is do not expect rate cuts anytime soon. tom: standard chartered, you

have the advantage of stephen and working with you. what you see on euro, sterling, or cable? sarah: good question. we see dollars staying strong against sterling and against euro as long as u.s. economy appears to be outperforming. there is such a big difference here between what we are seeing in europe and the u.k. on the activity front versus the data that are coming out of the u.s. we expect that to change. we are looking for u.s. to grow below trend over the course of the next 12 months. expectations of fed rate cuts starting to be factored in. we think they will start in the third quarter, and that as those expectations start to feature that will weigh on the dollar. tom: sarah hewin, standard chartered. we look for the bank of england this morning. help me here. is it 20 minutes we are going to

see bank of england or 7:15? i cannot keep score. all right, 8:00. scarlett: usually it is 7:00. tom: did i get that right? chris, problem -- part of the problem is ferro would never do this. we would talk about what happened in football yesterday. you can talk about that. scarlet fu, in a few days she will be at madison square garden for the reopening post-pandemic of the american concert. how about this? rockstar seats for fu for pink. $4500 per seat. scarlett: that is not where i'm sitting. tom: this is a follow on from taylor swift and beyonce. tell us about this. it's like entertainment is back. scarlett: and live nation is going to be reporting earnings today as well. we will see the extent to which people are shelling out for tickets. and if they are not they are

going to go see the taylor swift movie. tom: let's be clear, scarlet fu, misunderstood. i get that from two albums ago with pink. with whole swift thing and beyonce think is resounding across the whole industry is what i see. scarlett: it is a way for artists to make sure they monetize off of their music as opposed to having the streamers take all of it, spotify and everything else, and they get pennies or crumbs from that revenue. tom: so, my math here is two people, section a is $9,000? what does that make taylor swift tickets? scarlett: it is astronomical. tom: it is astronomical. scarlett: did anyone in your household ask for taylor swift tickets? tom: the last concert i went to was three dog night, so leave me alone. paul sweeney helping out with the entertainment world. you mentioned this earlier, scarlett. one of the great stories of 2023

is the absolute collapse of disney. i mean, that is a blue-chip stock. did you know that? you give it to your grandchildren. scarlett: bob iger came back and it is a very different disney than the one he left. he left at the top. he thought i have set up everything for my successor, and now he is cleaning up a lot of the issues that were there when he was ceo the first time. tom: look for apple coverage. the close this afternoon. scarlet fu, kathryn greifeld, they will go beneath the headline data from cupertino as well. much needed. the banks, beleaguered. gerard cassidy, rbc. maybe our interview of the day. this is "bloomberg surveillance." ♪ ♪ ♪

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they are bidding up on the liability side of the balance sheet. they are issuing cds to take in more money because they are seeing retail outflows, and they are holding cash. they are going to do that until they see signs the economy is turning. tom: the show stopped yesterday for mark cabana. it is about this linkage of what fixed-income annual pricing says about the state of commercial banking. good morning. jonathan ferro, lisa abramowicz off today. thrilled that scarlet fu could darken the door and help out. futures advance, even in the last 20 minutes. the vix, texting .45. i'm going to make a quick check here, because this interview is so important right now. we have 4.71% on the 10 year yield. i did a chart in the last 48 hours of the key bretton woods bank index.

there are other indices as well. it big banks, regionals, and little banks sprinkled in as well. i rarely use this word. not editorializing, just looking at the technical analysis it is a grim chart. i said to our wonderful team, can you get the gentleman from portland? joining us now, gerard cassidy of maine. a large cap bank analyst. with rbc capital markets. gerard, you have been doing this for years. i have not seen a chart like that since ages and ages ago. why is there no did to acquire banking shares? -- no bid to acquire banking shares? gerard: as you are showing, the chart is quite grim. there are experts in technical analysis, and you observed it right, it is really just awful.

tom: ok, we are breaking up there right now. we are going to try to reconnect with mr. cassidy. we will see if we can do it by phone. i'm going to turn to scarlet fu. i say never, and yes, i have seen where we go on strike with banks. as mark cabana pointed out yesterday. scarlett: gerard cassidy was telling us earlier that the scar tissue from the regional bank -- do we want to say crisis or tensions? tom: you can go with any of them. scarlett: however you characterize it it is pretty deep, the scar tissue. i wonder if it is more paralyzing for the banks themselves and how they operate or for investors? you mentioned the kbw bank index , you today is off 27%. there 24 members, do you know how many are higher this year? two. jp morgan and capital one. tom: mark cabana went to this tension here. if deposits go out to money

market funds, just as one part of a complex soup, you are forced -- there is no choice, there is nobody hiring mckenzie to consult. you are forced to get smaller. many banks are forced to bring it in and bring it in, and that is a major reason why people are on strike here. scarlett: remember when janet yellen said there will be consolidation in the banking industry? tom: where is it? scarlett: no one wants to mark down anything at the moment, and when talking to different people they said something has to happen for there to be forced consolidation. tom: i am very biased on this. i think a lot of bankers like their jobs and don't want to merge. scarlett: who doesn't like to go to lunch? tom: it is synergies and all of that, but you have to believe at some point here we see basically -- i'm not saying a complete roll up a la canada, but you get some form of mergers and acquisitions. with the decades of work of mr.

cassidy, it is a good place to pick up again with him. when do we see mergers? you have to be kidding me. there is 4000 banks. we are not going to five banks like canada, but when do we see a frenzy of consolidation? gerard: it's a really good question, because as you pointed out back when you and i were young men in their early 1980's, we had over 19,000 banks in this country. we are now down into that 4000 range. do your point, it will come back and it is not linear. it always comes in waves. the biggest obstacle to m&a today is when the buyer goes in and marks the target's book. there is a big gap. think about it for a moment. when you mark the assets to market the value of those assets are lower than historical cost today, she means there is a gap in the capital. and therefore the buyers cannot pay big premiums and there is no deals happening. you have the regulatory issues too. tom: jeffrey rosenberg of black

rock was heated yesterday that even a sort of bond recovery of price up, yield down is going to help the banks. then he basically amerco. do you ascribe to that, the idea that a good bond market is not going to get it done because the losses are so great? gerard: i would say would help in a big way, tom. i'm with him in this sense that i expect the 10 year bond yard -- 10 year bond yield to fall rapidly. the reason that is going to be positive is because the banks have large unrealized losses in those bond portfolios. if america is the one everyone points to. a lower 10 year yield would start putting in a bottom on the chart, and if we don't go into a hard landing, and credit is not a problem next year, these stocks are poised to have an incredible year. just like 1995. scarlett: you talk about the

bond portfolio, what about the real estate portfolio? commercial real estate was supposed to be the other shoe to drop. we know plenty of banks have exposure to that sector but what is really going on beneath the surface? gerard: it is a really good question, because you are right, there is still fear, and there should be. there are some properties in our major urban markets. san francisco is one of the more famous ones dropping in values, i think, 70%. this wipeout of not only equity, but the lenders. two things that happened in that. in the big properties when you go to the bankruptcy filings it is not the banks lending, it is the shadow banks. they have the exposure. second, the banks that do have exposure, they are working with their customers. this is not a situation where the property is undervalued they are up for refinancing and the bank forecloses. they work with their customers, and we heard that very clearly from the banks like pnc, who is

one of the best banks in the regional space, they are working with the customers and working to get through this period of challenges in commercial real estate. scarlett: if non-banks have this exposure once we start to see commercial real estate become a bigger factor what kind of a spillover effects with that have to the rest of the banking sector? gerard: there will certainly be spillover effects, but we have to remember the owners of the sea mbs -- cmbs market, jamie dimon pointed out that the banking industry has $12 trillion of loans outstanding but non-bank lenders have $20 trillion. that is where the risk is. the fed has de-risk the banking industry, so the spillover will come, but i think it will be manageable. tom: your outperform at citigroup, you have to be kidding me. verse stock split, i'm looking at $3.96. when does citigroup get their

act together and give us a gerard cassidy outperform? gerard: it is a great question and it has been a very frustrating stock. she has done a very admirable job turning around this large ocean liner. it is unfortunately going to take a while. but we have to think about for a moment, you and i know this company for years, and when you think about all of the ceos they have had, she is the one to make real progress in selling businesses that are not meeting their profitability hurdles. just think about mexico. that was kind of off limits, and she has now put that up for sale. they're going to take it in an ipo or spinoff in 2025. but that is real progress. it is a value trap so far, but as she makes progress, i think it is going to finally work. but it is going to take time. tom: gerard cassidy, thank you so much for the banking. he is with rbc.

this is a huge story to me. i go back to bernanke 101. the strength of the banking system is everything. right now the banking industry, strength is not there. scarlett: it is as strong as its weakest link, and citigroup is trading at .4 when it comes to ratio. jp morgan, its price-to-book ratio is about 1.39. it is a huge gap. tom: this is so much fun. it is always fun with brammo. ferro and i do not speak to each other when we are not on the show. but having the fu here brings back memories. scarlett: i like that. tom: you've got to be kidding me. look at that photo. she hasn't changed a bit. me, on the other hand. it is the first place new york rangers. it is extraordinary. on radio.

good morning. ♪

>> we are going meeting by meeting. >> what the market saw was a reference for the worry of tightening financial conditions. we could be done. >> if i were talking to jay powell, i recommend he leave the door open. >> our concern is around may and june, where is the fed going to be? >> it is either zero or multiple

rate hikes. >> this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. tom: good morning. day before jobs report. apple sandwiched in there somehow. thank you for joining us on radio and television. jonathan and lisa are off today. we are with scarlet fu. double barrel today. we have a lot to talk about, including the great opening montage from the vice chairman. bill dudley with his fiery op-ed. apple this afternoon. how are you and catherine greifeld preparing for that? scarlet: how many iphones did apple sell in north america? decent. in china? that is where the concern lies. tom: 25% per year for the last

10 years is the total return on apple. there is not a lot of dividend. that is just stock lift. scarlet: it is not really a safety stock. it is the all-purpose stock. tom: the fed was so important in the market moves we have seen so important. the equity advance we saw, the energy before the press conference. off on stocks. up 22 on standard & poor's 500. the long-duration magnificent seven. i have no idea what that means. up .8%. we mentioned the vix. 16.43. the fu with a statistic. 21 was the average vix? scarlet: today it is below 16.5. tom: yields coming in again 4.70 on the 10-year.

two under the 5% rate. david rosenberg saying it sounds like they are done. 4.94% as well. bill dudley in the opening, his essay yesterday was incendiary about this is not paul volcker. it is jerome powell and he has to wake up and worry about being an arthur burns where inflation gets out of control. adamant they need to be careful about the soft landing. scarlet: a pause might pave the way for some more challenges ahead, especially as inflation accelerates because of the stronger economy we are seeing that refuses to slow down. tom: i can do this on the bloomberg professional service. gip 2. west texas intermediate. we did not get down to $79 a barrel on american oil. the surprise of october given the horror we have seen in the eastern mediterranean is oil

really hasn't not played. -- has not played. there seems to be in optimism we will move on from this. scarlet: have you driven your guest -- check your gas tank lately? you drive a hummer? tom: it's been in the garage a lot. scarlet: when i fill up the car it is $60, $70 each time. tom: the oil change in the bentley is becoming painful. we have to talk before we get to dan morris. this is the challenges of japan. dollar-yen. euro-yen is what i'm watching. rounded up, 160. we all must "into the weekend" in tokyo where the quite of the weekend has some optionality about what to do about the failure of their monetary policy. scarlet: every time there is a

boj meeting there is a report the day before that hints what's going to happen. is this the new communication method of the bank of japan? tom: i have personally witnessed it in tokyo and it is bizarre. usually happens our time, sunday night, 7:00 p.m. you are trying to come out and get ready for rangers hockey on sunday night. the bank of japan has signs of a change. get your radar upon that. we will get a briefing on what's going on with what we witnessed yesterday from the fed with daniel morris, bnp paribas paris . i was thunderstruck yesterday by the market move, the energy of it. wasn't just a short cover were 70 people were gloomy and had a -- so many people were gloomy? daniel: i don't know if i would characterize the sentiment as gloomy. we are still trying to reassess

and absorb the shock of what is happened in interest rates -- what has happened in interest rates in the last three months. i think for a lot of people the narrative is still in place. i think at this point you could maybe find a bit more optimism than you had before looking at six month ahead, 12 month ahead. it paints a picture. tom: if i do not want to participate in the stock market, where is the most optimal place right now? daniel: two parts we are overweight is eurozone investment grade credit. in terms of absolute yield you will not get as much is in the u.s. it's always risk versus reward. we think the trade-off is best in the euro zone and investment grade credit. another area we added allocations is emerging-market local currency debt.

it should be reflected in local currency em. you get a bit more coupon. we are comfortable with the currency exposure. scarlet: how much of your portfolio should be geared towards the resilient u.s. consumer? starbucks sales topic estimates on more and bigger coffee orders. peloton giving a weak sales outlook. apple reporting this afternoon. by all indications people airline up to by $1200 plus iphones. what is the long bet on the u.s. consumer? daniel: the challenge is we have to maybe been swept up in the optimism, the surprising growth. it is being driven by excess savings. that has got to slow over the next year. in a very positive way, meaning we cannot sustain growth at this level or you will never get inflation back onto target.

it is tricky how the process is going to go. at the same time given where mortgage rates are in the u.s., the interest rate on a credit card clearly is quite high. it is more question of how quickly that demand wanes as opposed to betting on any kind of growth at the same level we've had over the last couple of quarters. scarlet: the easy money might have been made when it comes to the consumer. where is that -- where does that leave you for the rest of the year? it is a strong period even as october is proving to be a bit ugly. daniel: if you believe you have the valuation adjustment in the market in growth stocks already due to the increasing interest rates and you think the market has now priced in the impact on growth and on earnings from higher interest rates, you step back and say from here what trajectory do i expect to see in

the next six to 12 months. you come back to the u.s. looks relatively better compared to europe. within the u.s. you come back to the growth part of the market. i think there should be diversified exposure to growth. we are not just looking at one, two or seven stocks. tom: tell me about tech from paris. the bnp paribas view on american tech. i'm fascinated with the distance away from these juggernauts of america. how do you treat them out three years? daniel: it depends on your starting point in terms of valuation. expectations have moved up a lot over the last couple of months because of ai. it could be adjusted down and you will still have a positive earnings trajectory. what is crucial compared to where we were a year ago is the forward v on the nasdaq is in

the low 20s. at the peak it was 33 times. even with the great earnings trajectory, 33 times earnings, that will not work out so well and it did not last year. we are starting from neutral or average valuations, which i think is a great starting point. a positive earnings trajectory regardless of where you are standing. tom: dan morris, greatly appreciate it. he is with bnp paribas. i don't know how guys like dan write a year-end outlook. how do you do it? it is november 2. is it november 2? by the 15th you have to have 14 pages penciled out. they goes in a 60-page phone book that supposedly -- scarlet: and you don't know if the government is going to shut down. tom: greg touched upon that. i don't think i have seen a year

where i cannot make it up between the geopolitics -- scarlet: it does look like the u.s. economy is holding up better than other economies around the world. tom: way better. i don't have the numbers in front of me. i'm sorry. real gdp aggregate lift from the pandemic, i remember this number, the united states is up 8% inflation-adjusted growth from 2019. scarlet: bananas. tom: everything costs more, particularly organic. they are never green enough. scarlet: never green enough? tom: they always have rotten bananas at the store. i don't like that. everyone else is up 1%, 2%, 3%. with our stimulus we chose to be up 8%. i'm sorry. scarlet fu driving the markets higher this morning. we are up 22. half a percent. nasdaq 100 up .8%.

can we get a 15 fixed today? -- vix today? my eyes, when i look at the bloomberg screen and yields are not there. 4.71% on the 10-year yield. the dollar actually resilient. i hoped the dollar would pull back a little bit more. 106 on that blended major currency index. zero. -- euro a little stronger. lizzy burden in 15 minutes on the banking went. 191.93. standard & poor's 500 up half a percent this morning. we say good morning. scarlet fu for jonathan ferro and lisa abramowicz. you mentioned there is a headline. shake shack jumps 9% after

third-quarter revenue. keeping up with the starbucks. it is junk food thursday. scarlet: it is going to be interesting to hear what the company says about the concerns surrounding ozempic. a third-quarter revenue beat. 276.2 -- $276.2 million. up to .3%. that is -- up2.3%. tom: you look at shake shack. lunch, dinner, or how about the 9:00 p.m. seamless doordash rush? it is not what i do. it's what others do. we do the shake shack order that arrives at 9:52. starbucks. i'm glad you mentioned that. we are checking it out. the pumpkin cream cold brew.

$5.93. a pumpkin cream. i will have a pumpkin cream cold brew. , on. the -- come on. the margin on that puppy is like $.92. scarlet: people are addicted to their caffeine. tom: no. scarlet: i know. caffeine, cold brew, pumpkin. tom: i have to do birkenstocks and hummus. i'm talking shake shack and starbucks. this is a beautiful thing. scarlet: and we can talk arrangers on top of that. -- the rangers on top of that. tom: futures up 23. the stock market advances. good morning. ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf

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>> i think what speaker johnson needs to do and this is what he said is he needs to notch a win and the trust of his membership over there. by putting forward and israel-only package with an offset arguably an offset that has been debated, he has demonstrated he's interested in spending less money but also supporting israel. when it comes to the senate many of us are committed to having ukrainian -- continue to push back putin and get him weaker

and weaker. these are all intertwined. tom: from west virginia, put ago royalty. shelley moore capito. an important outlook on the backbone of the appellations and america's well -- appalachians and america as well. considering funding for israel and for ukraine. let me do a market check before we get to some important voices. it's been a nonstop lift from about 2:02 yesterday wall street time. vix comes in storming. 16.44 . can you imagine a 15 vix? -24 basis points for the pros keeping score. adjusted yield has cratered. that is the proper word.

from 2.50% to 2.30%. a ginormous drop. maybe not what chairman pal really wanted to see. i will leave it at that right now. this conversation is so important. jonathan and lisa are off. scarlet fu helping out today. double duty for bloomberg television and radio. this afternoon on apple earnings. we turn to the politics of what we are witnessing. the horror we are witnessing in gaza. whatever your political police. oliver crook on watch until levine. annmarie hordern in washington this morning. most politics across the aisle, politicians just want to get to monday. they have to try to get to the weekend given the news flow coming out of tel aviv and out of israel. how will they accomplish that? what do on a thursday? what do they do on a friday just

to get to some form of constructive resolution? annmarie: it is not just complicated by the news flow. it is complicated by new personnel. we have a new speaker of the house. he is bringing to the floor this is real stand-alone bill before the weekend -- israel stand-alone bill before the weekend. we heard the senator from west virginia. she had a lunch with him and with the other republican senators and wanted to hear what he had to say. she thinks he has a good path forward. he is trying to get some of that goodwill and the republican conference by saying there needs to be a pay for for this to offset the deficit. he wants $14 billion to israel. the congressional budget office this will add more than $12 billion to the deficit. when you resend money from the irs that is going after tax cheats, it will add money to the irs. this is the complication when it comes to congress on the house side to try to pass and israel

stand-alone bill. on the senate side, democrats and many republicans, especially mitch mcconnell went to see more than just a package for israel. they want to see the complete package for national security partners around the world. israel, ukraine, taiwan and money for the southern border. tom: oliver, how was this being treated in the halls of the government? a bipartisan, unified government in israel. how did they observe this world that annmarie hordern is living? oliver: until there is a real complication and the bill is an actual jeopardy i think they will be reassured by the fact at least united states apparently seems to be standing behind the government. they of all very slightly but the administration has been very clear in its support for israel. israel has been grateful for and knows how important it is. that is what they respected to hear from antony blinken as he arrives here tomorrow.

coming both israel and jordan. the backdrop and how he's being received more in the global audience, we have the jordanians pulling their ambassador to israel yesterday. this is a meaningful step with jordan is one of the first nations to make peace with israel. they are conscious of the global audience despite the fact that benjamin netanyahu says either alone or with others with us we will continue to push this fight to victory. scarlet: i want to focus on semantics. president biden used the word pause when it comes to civilians leaving gaza. was he suggesting a cease fire? who was he speaking to any use the word pause? oliver: it's actually not a euphemism for the same thing. there's a meaningful distinction between a humanitarian pause and a cease fire. the humanitarian pause could look something like what we had in the first week of fighting with the israelis said we will not bomb certain regions for a few hours. you are cleared to move.

that is where columns of a and people can move. a cease fire is where if it was temporary it would involve political negotiation at the upper level, a diplomatic relationship between the parties which are here -- hamas and the israelis. that is off the table for the israelis. the u.s. supports that view. it would be a humanitarian pause. the israelis will not dial back the military. can they dow for the aid? -- dail up the eight? -- aid? scarlet: talk about the crosscurrents president biden faces trying to speak of the horror taking place in the middle east while satisfying the different constituents he has to address. annmarie: he's in a rock and a hard place. he was in minnesota yesterday and greeted with protesters who are calling for a cease fire. at a fundraiser last night someone said i need you to call for a cease fire now.

he says i'm not going to do that but we should have a pause to get the prisoners out. there are still americans being held hostage by hamas. he's calling for this pause, but the president is under an immense amount of pressure because what he is hearing from air americans and muslim americans is they want to see this israeli bombardment on gaza civilians to stop. yes, israel is going after hamas. there are obviously civilians getting caught in harm's way. we saw that over the past two days. yes, hamas does use schools in refugee camps and hospitals as their bases. this is why the u.s. said how israel does this is so important. the president came back to the fact that he said i want israel to do this by following the humanitarian international rules of war. he said hamas is a terrorist organization, flat out. that is what they are.

he's getting a lot of flak from muslim americans. this potentially could have an impact on some of these swing states like michigan when you look to november of next year. tom: you had the senator from west virginia on. she is political royalty. she replaced jay rockefeller in the senate. it is not about the people of the beltway but it's out there. how is this all playing in the senator's west virginia? are people riveted by this or is this an inside the beltway elite story? annmarie: israel is certainly not inside the beltway elite story. you are seeing this conflict be debated all over the united states. we are seeing this happen every day at university campuses. every day in the news, on social media. some of which there is a ton of disinformation happening on social media. this is impacting constituents of individual districts.

what's important for politicians -- we spoke with markwayne mullin of oklahoma. how do you explain this to your constituents and why it is important. he's an individual that want to see more aid to ukraine. a lot of republicans say the administration has not explained well why we should still be in ukraine sending this aid. he said it's because of the budapest memoranda. how do you ask planet to the american people, tom? -- explain it to the american people, tom? tom: much more on balance of power tonight. futures up 23. dow futures up 123. the vix really extra neri. -- extraordinary. that started yesterday. scarlet fu and tom keene. "bloomberg surveillance." ♪

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tom: good morning. jonathan ferro, lisa abramowicz, tom keene. lisa is off. jonathan is off. he is on a cruise. scarlet fu is with us today. he was 16 floors up and got so seasick. scarlet: i want to hang out with him on vacation. tom: he had to recover.

scarlet: it is a long recovery too. tom: we have the fed meeting. we have apple today. jobs tomorrow. wonderful conversation on the bank of england in 20 minutes. yields coming in. 10-year yield 4.71%. a little dollar weakness but i am going to call it resiliency. jon saying that if i do not quote sterling, he will walk out in a huff. under surveillance today and on a serious note the president of the united states out in minnesota, asking for a pause to the fighting in gaza but stopping short of asking for a full cease fire. as many as 400 americans could

leave gaza after the rafa crossing opened for the first time since the october 7 attacks. apple, we are going to touch on this right now, set to report earnings after the closing bell. investors looking for scarlet fu's brand-new iphone 15 sales keeping revenues and cash flows going. there is a huge mystery to china. you are going to do this with katie greifeld. what is the thing you are looking for? scarlet: iphone sales in the u.s. versus china. the most important markets for apple. tom: i am going to look at the financials and i looked at the bloomberg professional service. back to 2019 apple sales, their revenues are up 47%. there are other companies that have done well but their free cash flow is up 71%.

scarlet: they have a lot of firing power. tom: there is -- this is not in the cfa agenda, curricular, rather. scarlet: katie greifeld wrote a great story about how these big tech companies with their massive cash flow and holdings are benefiting from higher rates because their interest income is rising. tom: i am so sorry that ferro is not here to talk about the rest of football. the texas rangers spent a lot of money. world series champions after defeating the arizona diamondbacks. 4-1 and that is a quick world series. they hold onto the one run lead before driving in four more in the ninth inning to clinch the series. the team's first ever world

series title. scarlet: baseball has had a renaissance. tom: the clock was really good but i tried three or four times to get into this world series and i went down in flames. i talked to the red sox and said, let's get this guy in boston. scarlet: everybody wants him. tom: give him something. we are going to start with football. john ryding joins us. his experience at the federal reserve. i am sorry. i have never seen the distress at manchester united of public traded security that i see now. they were dominant. what has happened to man u?

john: i am going to get a lot of hate mail if i give my opinion. tom: that is why i am asking you. [laughter] john: just a difference in philosophy. do you manage for the long-term and has someone who develops and grows -- which is what liverpool have done -- or are you throwing cash -- the amount of cash manchester united has spent over the years but not developed a team that is coherent and wants to play together. tom: the texas rangers won the world series and the pros in baseball say they opened the checkbook. new castle opened the checkbook. even the tots opened the checkbook. that has got to be the future of football. john: some wonder where that went after the var decision.

tom: you are correct. john: just to say i remember the devaluation in the pound. tom: let me talk about the wild spending of sports. i got a bank of england meeting in 25 minutes. a couple of years ago they chose austerity. we clearly chose stimulus in america. is the backdrop the united kingdom and europe that should have had stimulus like the united states? john: in the case of the eu, they remain constrained by the german philosophy towards fiscal spending and they have deficit

and debt limits that are frequently broken. the u.s. did the right thing in the midst of the pandemic. they did the wrong thing in not exiting or winding down the stimulus but piling up. i do not know how many -- what viewers and listeners may remember of the old diagram which was guns or butter, talking about the trade-off an economy could deal with in terms of allocating resources. but now we want to have guns and butter. as a result, the fiscal load on the economy is what has been pushing up yields. the fed is in a position where it is going to have to keep rates high. tom: bill dudley brought this up. he was heated that we were seeing what we saw in the 1960's

where we wanted guns and butter. scarlet: i cannot wait to read the next column with guns and butter mentioned. the bank of england expected to hold at 5.25%. although it will take the opportunity to warn it could tighten again his progress on inflation stalls or picks up. how will that warning sound different from what jay powell and the fed says? john: there is a difference. the fed moved very rapidly in 2022 once it realized its mistake. it has established positive real interest rates. it is less clear to me that you have restrictive policy in the u.k. maybe even in the eu. positive real interest rates have not been established. the fed is in a position where interest rates are above the --

they can just keep rates here. i said ahead of the september fomc meeting we are in a position where the fed is going to substitute time for higher rates. they are going to spend more time at a higher rate than keep having to raise rates. it is the third phase. the fourth phase is how it brings interest rates down. but in the case of the bank of england, the bank of england, and the ecb, are on hold in the hope that inflation will come down. scarlet: i see. john: i am not sure either have done enough. scarlet: the members have skepticism as well. we are looking for a vote split. why is that significant? i bring this up because we make a big deal if anyone in the fed vote the other way. john: it is not significant because the bank of england frequently can have decisions that go 4-5. if my memory serves, there was a

decision where the bank of england was on the losing side of the vote. so, the bank of england does not have to come to this group think outcome. the fed operates much more on consensus and a dissenting vote. unfortunately, has become a rare thing. if you were to have two dissenting votes going the same way, it would almost be like -- scarlet: rebellion. john: mutiny, as it work. i think that is unfortunate because we need more diversity of opinion. scarlet: diversity of opinion is good. what is the mandate? the fed has a dual mandate. the ecb is to tackle inflation. does the boe have an unofficial mandate? john: there are two parts. on the managing policy side, 2%

inflation target. if you breach that target, the governor of the bank of england has to write a letter to the chancellor of the exchequer to explain why the inflation target was breached. there is a lot of writing of letters going on given what is happening to the inflation rate. [laughter] but whether you are a dual mandate central-bank or single mandate central-bank you really are managing both. in the u.s., i have seen a development where jay powell says it all the time. you cannot have lasting prosperity at maximum employment if you do not get price stability first. that is a change from where the fed was back in 2020. they said we are not going to raise rates. tom: 40 seconds left. a lot of the questions were

weak. mike mckee was brilliant. lisa was brilliant. what is a question you would have asked jerome powell? john: i was hopeful on the follow-up question and he was asked about the neutral rate. why do you maintain this view that the long run real interest rate is only half a percent when it is nearly 2.5% in the market? he says there is uncertainty. why have that number at all? it is a very precise number that is very different from where the market is. there is no explanation as to why that is. tom: if you were in the press conference, michelle smith would never pick you. how did john ryding get into the press conference? thank you so much. rallying up 0.6%. scarlet fu, double duty.

we slide off to the bank of england. i think the stimulus issue is so important. my summer book was short effort on fiscal policy and how it folds into the monetary stew we have. he called the third stimulus the biden stimulus. scarlet: that is what you read for the summer? tom: i have no life. scarlet: ok. i am not telling you what i read. it has been a long time since we hosted together. i had to go into the photo archives to check when the last time we did this was. late 2014, early 2015. we took a photo to mark my last day. tom: did we? my word. scarlet: i think this was a hotel bar at 10:00 in the morning. tom: probably. we were celebrating. scarlet: that was in the day of zero interest rate policy. tom: john ryding was talking about moving the putting ring on

the golf course. where is the flag? john: actually, i think the fed is right on at 5.25% to 5.5%. tom: that's it. john: that is where we end up. scarlet: is that the peak or the table mountain? john: it is a plateau. tom: michael from jp morgan says thanks for trashing man u. it is in the agreement for the show. four minutes of english football every day or ferro has a tantrum. scarlet: did you watch the beckham documentary? tom: no. i cannot keep up. stay with us. bank of england. good morning. ♪

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boss is very strong. we are still expanding. we see a lot of opportunities in the american market, especially the u.s. and the south belt. in china we see more potential. we are growing our retail space, especially in the metropolitan cities like london, paris, tokyo, shanghai, new york. tom: yves miller, chief financial officer of hugo boss. i cannot say enough about this. the mystery of luxury given what we see across this world. speaking of, apple this afternoon. it is a luxury item. i don't care what you say. bramo was in the store a couple of days ago and had to unload on the cherubs. they had to mortgage the house or something. scarlet: they all got the ip hone 15 pro? tom: there is all this gloom

about apple but hugo boss or the others, the very tip top product, the 15 max or whatever, is going to be gangbusters. scarlet: it is in the u.s. the question is whether it goes gangbusters in china. people are going gangbusters for the huawei pro. tom: great team in london working on that. market check. every time i look it goes up. up 26 on spx. what do you think? scarlet: it is more resilience. did powell say anything new? maybe the fact he did not encouraged everyone. tom: we will have to see. it is a hard thing for me and, you know, they called me up and said we would like you to go on

"dancing on the stars." people are watching that on hulu? scarlet: they are watching all kinds of shows. you have to pay for it. you have to watch horrible commercials. tom: what is their theme versus netflix or disney plus? i asked ferro too. how do you identify hulu versus the others? scarlet: it is show by show they also have shows from the past. they have this library you can access. it is complicated. tom: we are going to get complicated and straighten this out. hulu being taken out by disney. brian roberts and comcast unloading the dog. geetha, is comcast happy today that they unloaded this stock? or is this the deal of a lifetime for mr. bob iger?

geetha: this is a complicated transaction. all we got yesterday was that disney is buying out comcast's 33% stake. we know that comcast is offloading and disney is buying. the biggest question is price. the value was set at $27 billion. disney said they expect to make the initial payment of $9 billion minus some capital calls which is why you get the $8.6 billion. the problem is how much greater the $27 billion is above valuation. tom: jon ferro is addicted to hulu. he binge watches "love island" and the rest. [laughter] doesn't matter who watches this stuff -- does it matter who

watches this stuff? geetha: hulu has 48 million subscribers. it is a successful streaming service. you are right. . it has a deep catalog of classics. tom: you are not going to sell surveillance's audience that love island is a classic. continue. [laughter] geetha: it has a lot of they must watch shows. only murders in the building is great. it has a lot of shows that come up from broadcast. it also has this live hulu+ live option. i think the biggest thing for disney is the ad. if there is anyone who has got advertising right, it is hulu. netflix is struggling with that. so is disney. amazon is looking to bring in advertising. hulu is the one brand already bringing in $3.5 billion in ad

revenue. that is a gold mine and super valuable to disney. scarlet: for that reason hulu is one of the few profitable streamers. netflix another profitable streamer but what is it about the ad packaging that hulu has figured out? as a consumer, it is frustrating to see the same tom brady commercial over and over again. geetha: you are right. but at the same time, this is a company -- they are the ones that have had ads for the longest time. they have built a very robust ad deck and they have relationships with advertisers. you have the larger disney brand at work but that is where they have been able to crack the code. the majority of the consumers is on the ad-supported option.

scarlet: disney says it has enough cash and credit to buy hulu where is comcast will use the proceeds to accelerate its stock repurchase program. when this transaction is completed does it move the needle for disney or comcast stock? geetha: it definitely moves the needle for disney. this removes a key overhang. there are so many strategic questions that are still pending for bob iger. whether it is the future of espn. whether it is the sale of the abc network. kind of closing this deal with hulu and integrating it with disney plus removes a key overhang. tom: five years out. do you see hulu combining with disney+ to take on netflix as a combined adult and kids entity? geetha: absolutely. i think that is what the plan is. at the end of the day, they are looking to get synergy across the board. they are still losing money.

they are going to lose about $3 billion this year. when you combine we are looking at sales of $1 billion to $1.5 billion. scarlet: synergy to me means re- bundling. you are going to have to pay a hefty price to get these different channels. tom: what i am fascinated by is when all is said and done there is hulu and disney+ and they are going to merge and take on netflix. geetha, do you see a true dual opoly? geetha: that is where it is headed. disney may get to 300 million subscribers but this is turning into netflix versus disney versus amazon. scarlet: what about hbo max? geetha: yeah, that is a tough

one. [laughter] tom: she is brutal. geetha: that is going to be a second-tier service. scarlet: wow. tom: this goes with discovery+ and max. where am i going to see 90 day fiance? scarlet: you are addicted. tom: geetha, thank you. i do not have hulu at home. i could not figure out how to give them my money. i gave up. scarlet: they make it easy for you to give money. they do not make it hard. tom: i don't know. have you ever added up all the streaming stuff? scarlet: i am scared to. the list goes on. i realized we have youtube premium as well so my kids can watch youtube without the commercials. tom: i am humbled by the collapse of disney. disney is what you bought your kids. you bought them shares of disney

so you get a certificate with mickey mouse. scarlet: bob iger is humbled as well. tom: what does he do with abc? that is a tv network. scarlet: he is looking to sell. i do not know who is buying. tom: who is buying? that is a key idea. it is like american housing. you have to find somebody to buy. scarlet: everything is frozen right now. tom: you know. scarlet: we have a lot of data coming up in over 30 minutes. tom: in four minutes we have lizzie from london. scarlet: probably no change to the rate. kind of like the fed. tom: she stands in front of the bank of england in front of the gorgeous building. she gets a more british accent. scarlet: i see. tom: i do not know where she is now. queen victoria street. it is like ferro. every fourth word i unlike, what did you say?

bank of england is coming up but it is not a routine matter. futures advancing up 24. good morning. ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪

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>> we are going meeting by meeting. we are asking whether we achieved policy that is restrictive. >> what the market saw was a

preference for the worry of tightening financial conditions. we can be done. >> if i were talking to jay powell, i would recommend he leave the door open. >> our concern is around may and june. where is the fed going to be? >> it is unlikely this is going to be sufficient. i think it is either zero or multiple rate hikes. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: we need ferro. he is lost in space. bramo is off today. we're going to go to lizzie in a moment. governor bailey much too early to be thinking about rate cuts. scarlet: similar to what jay powell said. we are not even thinking about that. tom: those are the headlines

this morning. market reaction. we see u.s. futures sustained but sterling goes to 1.22. the best hope is lizzy burden in london. this is a strident governor bailey this morning. lizzy: the bank of england has held rates at 5.25%. they were guiding that we were at the top of table mountain, this flat peak, and it looks like we are there. the vote was expected to be 6-3 and that is what it was. 5-4 last time. the market has been looking for any reason to take this as a dovish hold. you mentioned the pound. it is stronger against the dollar. stronger 0.4%. if you look at the market reaction, you got the two-year

at 5.74%. andrew bailey has made it clear it is far too early to think about rate cuts. echoing christine lagarde. it is premature to be talking about cutting. tom: what we saw in europe as well. the bank of england cuts their gdp forecast. for third quarter and fourth quarter this year, this is a more tepid economy. scarlet: the boe seas a 50% of u.k. recession. there is always accusations of groupthink at central banks. the vote was 6-3. clearly, you could make the argument there is not groupthink at the boe. how does that show up in policy? lizzy: there really isn't. you can expect the vote split masks more of the debate that is

happening. the internal members tend to vote together and flock toward the hold camp. but behind closed doors there are fierce arguments going on. we know at the hawkish end of the spectrum you have catherine mann. interesting that she is not voting for a cut yet. the market would have seized on that as a dovish signal. tom: let me ask you. is there a sense of stimulus by the united kingdom government? or are we drifting into an austerity we knew of a number of years ago? lizzy: you might say we are already there. we have the highest tax burden in the postwar period. pressure is on jeremy hunt to announce tax cuts this month from inside his own party. it is going to come from the press as well. we have an election on the horizon. what is interesting is you

mentioned potential recession on the horizon for the u.k. what is the chancellor going to hand out to the economy between now and then? is he going to give tax cuts, but at the same time cut public spending? net is the same. tom: i was stunned weeks ago to see the debate in the health service as well. lizzy burden at queen victoria street. strong sterling right now. what a joy to see her in london. sree kochugovindan joins us. i am absolutely fascinated by how the u.s. stands alone, by how jerome powell yesterday stood alone with massive stimulus leading into massive real gdp. does the united kingdom where governor bailey stands need

stimulus to keep it going? sree: i think stimulus would not be a good idea at this point. what we want to tackle is inflation. the bank of england have a challenging backdrop. growth outlook is weakening. but we have very elevated inflation pressures. inflation is past the peak. however, energy costs are still quite elevated. the headline inflation is high. and we have -- even though the base affects will unwind over time -- we have sticky core services and wage pressures. stimulus right now would not be a good idea for the u.k. it is not restrictive at the moment but further stimulus would not be helpful. scarlet: here is a fun fact from the bloomberg news story that lucy white wrote. ben bernanke attended the bank

of england's meeting as part of his review into the u.k. central bank's forecasting. this comes as bailey has faced criticism that they did not move quickly enough to respond to inflation. can you compare and contrast the efficacy of communication at the boe verses the fed? sree: there was a conversation about groupthink. there is a split within the bank of england and i think the communication has been clear from the various members. we have had the arguments for staying on hold. the arguments for another hike. all of those are quite consistent with the data we are seeing. but it seems on the whole we are witnessing a switch toward a focus on growth and weaker activity data, and some greater faith in inflation decelerating from here. we also have a signal from the

split in the vote and we have that signal very clear in terms of rates are going to be on hold. even f, as we expect, the economy enters recession. that is quite a burden for small companies who are much more sensitive to the rate cycle. they are not facing -- there is an issue in terms of future business investment. there are a number of challenges, particularly for the smaller firms. that is something the bank of england are going to have to be wary of. scarlet: credit availability always an issue whether it is stateside or across the pond. when it comes to the stimulus versus austerity debate tom was referencing, how does the bank of england's decision to keep rates on hold and warn about a possible recession, warn about the needs to possibly raise rates, restrain or limit the government's options when it

comes to supporting the economy? sree: i think the government is also aware and we have heard from rishi sunak. we have heard there is a focus on inflation even within the government. yes, they have an election coming up, but they are worried about stimulus too soon and too much. i think they are going to pare back on any measures that will fuel inflation further. very challenging decision given there is an election on the horizon. tom: are all the gains in the united kingdom focused on london? is it like, you know, the dominance of paris and france? are all the economic gains that have been tangible focused on the south of england? sree: there has been a big debate for a number of years with regards to the regional disparities. that was something that for a few years there has been focus on what are the policies that

can level up the economic outlook? however, it has been challenging in order to do that with the recovery from the pandemic. i think the leveling up policies may be in the future. right now, the focus is quite narrow. that region of disparity is still very much there. tom: thank you so much. sree kochugovindan with us with aberdeen. the bank of england lift sterling. they lift sterling because governor bailey, more stridently than what we heard from jerome powell, says we are here. we are happy we are here and we are going to stay here. scarlet: i cannot wait for him to say table mountain again. tom: isn't that like south africa? i think so. scarlet: table mountain? tom: yeah.

alan raskin would know. scarlet: we will ask him. tom: 2.16 on sterling. if you look at the 30-year, 10 days ago the elasticity, the movement of the u.k. 30-year bond was much more elastic than what we saw in the united states. the united kingdom yields. let's do the two-year comparison. 20 higher in the u.s. you can only do that on the bloomberg professional service. scarlet: i know. tom: she mentioned core services and that did not come up yesterday but that is the heart of the discussion. people are waiting to see what services do. mike mckee was focused on core

services. scarlet: he stomped jay powell with his -- stumped jay powell with his question. i think i saw his eyes rolled to the sky at one point. tom: i don't disagree. tomorrow,. the surprise last month -- tomorrow, payroll. the surprise last month of 38 6,000. scarlet: considering where we are in this economy. before we get to that we have jobless claims in about 15, 20 minutes. that is slated to come in at 210,000. we also have factory orders. tom: you only need the s&p 500 up 0.7%. we say good morning.

scarlet fu doing double duty. this has been fun. we have not been together since nixon was president. [laughter] scarlet: glad we are together on air. tom: what is amazing -- i have said this for years -- another headline, walt disney. espn bet to debutt with planned launch. it is a new online sports book. scarlet: it is partnership they made. i think it struck people as curious. pen gaming and disney -- tom: what is pen gaming? scarlet: i know him as the barstool guy. tom: ok. i miss bramo. scarlet: you could be talking about soccer with jon ferro instead. tom:tom: i have learned more

about hulu today than i have in 15 years. scarlet: "the bear." you have to watch. tom: i will check it out. we are up 31 points on spx. the nasdaq 100 up. triple leverage cash. i am enjoying at this morning. cash is king. should i buy apple today? scarlet: stay with your 5%, 6% yield in cash. tom: apple this afternoon. good morning. ♪ (adventurous music)

♪ ♪ ♪ be ready for any market with a liquid etf. get in and out with dia.

chair powell: we are asking whether we have achieved policy that is restrictive to bring inflation down to 2% over time. that is the question we are asking. we are looking at the full range of economic data, including financial conditions. we have not made any decisions about future meetings. we have not made a determination and we are not, i will say, we are not confident we have reached such a stance. tom: jerome powell yesterday. he has really gotten smoother at these press conferences. huge value adding clarity.

i thought yesterday he read the least off -- scarlet: he had a teleprompter. tom: he did? he is cheating. scarlet: are we cheating? tom: every morning. [laughter] but the answer is he had a teleprompter instead of looking at a piece of paper. scarlet: i think the last meeting he was using an ipad. there were people commenting on that. tom: like me. scarlet: this time he was using the teleprompter. i do not think there are things to help him when mike mckee asks questions. tom: bramo and ferro off today. i cannot say enough about not so much buy, hold, sell, but apple's statement. you mentioned this. the massive china mystery. scarlet: whether people are buying the huawei pro 6 beijing

has already made its preferences clear. the government is not going to welcome use of foreign smartphones, notably apple. tom: will have to see. we are going to touch on this in about 30 minutes. stay with us on apple. all i can say is fu shows up and the market goes up 31 points. we are getting near 4300, up 0.7%. nasdaq up a full stick. getting near 15,000 again. it is some form of melt up through the recent resistance of everybody's different moving averages. two-year under 5%. price up, yield down 4.9%. i go to the inflation-adjusted yield. wow. 2.27%. that is coming 13 huge basis

points on the 10-year. scarlet: it is huge moves. it has gotten so we are accustomed to looking at double-digit basis point and not thinking twice. tom: i will have to see on the melt up but more importantly, the why and what to do with it. brilliant research note from merrill and bank of america. chris hyzy, we are thrilled he could join us. buried in your note is the heart of the matter. larry mcdonald says there is a wall of money out there. you call it new money. what is the new money going to do? chris: the new money is going to go where the data wanted to go and that is still a big bookend. talked about before the short end of the curve 5.5%. two-year yield is over 5% now

and longer duration asset, people are looking for opportunity to come back into equity. they are sliding up a greased pole because we are starting to slow down. we are starting to see the financial conditions bite. yields cresting at the back end and everybody wants to know who is going to ring the bell when it says is it soft landing or recession? tom: you know the equity market gets out front about six months. what is the bank of america writing up for a year end review to get me to q3 of 2024? is this where you take new money and acquire with courage sectors for next year? chris: i think next year we are starting to call the chief investment office the foundational year. for those out of the equity markets lending themselves into next year and looking at fixed income and equities.

you should have three or four rebalancing opportunities between this past week and the weakness we saw the last 2.5 months. all the way into the middle of next year. why? you were going to see weakness in the earnings revisions because of a slowing economy. but the bond market should start to normalize in the second half of next year where you have, dare we say, upward sloping yield curve. the longer-term new profit cycle starts later in 2024, 2025, 2026. sometime between now and mid next year you will have three or four real opportunities to rebalance portfolios to get back up to your equity benchmark, and since fixed income has not performed well, fixed income as well. scarlet: i want to ask you about health care. we had novo nordisk report this morning. novo nordisk the maker of those weight loss drugs -- tom: they worked. scarlet: katie greifeld called

it the ai of health work. how are you thinking about health care and going in with these weight loss drugs changing up the scene? chris: well, you hit it on the head. disrupting. once every 10 years there is a giant disruption. it is like an umbrella. it does not just have to be in the technology sector. the health care sector has always been a disruptor but it has been narrow. it has not been across the board. industrials the same. communications and technology has been largely the disruptor of those sectors. what we have seen recently is that sectors are a mixed bag everywhere. energy has great free cash flow. health care has disruption but also defensive. when yields go up it starts to sell off. utilities the same. we have got to go down to the

industry group level and the stock level. kind of like the 1990's. tom: are you telling me to rebalance apple? are you telling me to rebalance microsoft? chris: i think on the technology side the ones that have been working is because they have big moats, they have cash, and they are earning more on cash than a lot of companies in the s&p have in total earnings. those are moats. those are viewed as high quality. i would not get overly exposed but being a benchmark, that makes sense. tom: thank you for the brief. chris hyzy with us. futures up 31. it has been a persistent ball of people getting in front of the market. we could get 15 for the close this afternoon with fu and grei

feld. they have dollar-yen and euro-dollars. one yen compared to euro. moments ago printing 1.60. out of the pandemic this is a strategy of reflation and japan. 10 years from now every graduate student will be thinking about this as they write a phd thesis. this is extra ordinary. it is broken and what do you do with euro-yen 1.60? scarlet: what you think they are more concerned about? 1.50 is the line japan watches for. tom: i think they are concerned about flows. not only the flows of currency and a fusion active japanese people moving money in and out of the country. there is the flows much more than interest rate dynamics. high interest rates here, low

interest rates there. but was mentioned yesterday by enda curren, it is also trade flows. weak yen they sell more toyotas. weak yen they have got to import funds -- not kidding -- tons of stuff into japan. that is an important note. one more reason to pay attention to what we are doing in hong kong with bloomberg's effort in japan and all of asia. futures, what can i say? they advance 31. jonathan pingle, ubs, before an american jobs report. this is "bloomberg surveillance" . ♪

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manus: bloomberg surveillance, after we have been looking back down memory mine. the dirty secret is michael mckee is the one who really runs the show. forget about fancy people and celebrities, michael mckee drives the ship.

from his question at the fed where chairman powell at the fed where chairman powell said, at d where chairman powell said, -- mike: this week it is at 217 thousand, but nothing that will tell jay powell that the labor market has gotten looser. the productivity numbers are interesting. of 4.7% following a 3.5 rise. this is with all of the hiring that we been doing. it does suggest that the economy is able to withstand high

interest rates. in the inflation rate where it is, this is the kind of thing we have not seen since the 1990's. that raises the question of where you go from here. unit labor costs are only -- actually it fell .8% after rising 3.2% in the prior quarter. business margin should be ok. they should be able to pay us more for the work we do. tom: futures advanced of 34, mastec up 1.2% and yields up six basis points at four point 8%. i brought this up with dr. dudley yesterday in julia coronado is onto something here. we have a gross misperception of

advancing productivity or efficiency in america. how does this change the dialogue in your world if we see good in better productivity? mike: it sets us up for a different kind of monetary policy and the fact that we can afford to have the wage gains that we have been seeing. it is less of an inflation danger than the fed would think. this is two quarters where we have seen strong growth. normally when you see a productivity jump you are coming out of a recession where there are fewer workers having to do more work. but we have been hiring like crazy and there are lots of workers out there and they are able to produce more. is this the beginning of the ai trend like the 1990's was computers? a lot of questions about how

long this can last a what this will mean going forward. >> how does this set us up for the job reports where nonfarm payrolls expect 180,000 jobs added after jobs being added the previous month. mike: we were all stunned by last month's numbers and i'm not sure we will get the same kind of surprise but you can't rule it out. 180,000 is quite strong. they think you need 100,000 to absorb entries into the labor market. right now, with jolts where they are in the numbers we've seen in many indicators including jobless claims. you have to think hiring remain strong. jay powell asked about this, the labor market is not reacting the way they expected it to.

they can't really take the same clues from it that they thought they could when they were originally raising rates and trying to figure out where they needed to go. >> how do you read the user because. this is an unexpected decline in the third quarter and these are preliminary numbers of unit labor costs. what is that mean when it comes to the real economy? mike: if it's really that unit labor cost are following its hard to believe in the sense that we have seen nothing but rising wage levels. the unit labor cost can be volatile because a lot goes into it besides just wages. the other cost of running a business. but if they are lower, companies margins can be higher than they can afford to raise wages which

is all very interesting in the context of the uaw settlement. tom: we really appreciate it. finishing tomorrow on the jobs report. futures up 33. fix comes up at 16.27. i will categorize it as a thursday melt up. we can rip up the script with jonathan pingel from ubs. macro trends are way out on this, are we miss guessing the efficiency, productivity and technological advancement. are we too pessimistic? >> it is hard to know what the expectations are. there are not as many in the

weeds on productivity and with immigration concerns. chairman powell touched on this yesterday, one is, we have been seeing a pretty impressive rebound in labor supply. that's a combination of significant improvement in international migration coming out of the pandemic. in addition to some groups like prime age women punching out all-time highs with participation rates. on the productivity stuff, we have to remember that productivity was incredibly weak as we went through the pandemic and coming out of it. we did have a fair amount of catch up to do. when we look at the longer run trends, after today's data you will be above the longer run trend.

but you are still not that far from what we were seeing pre-covid. but i think we are seeing nominal wage gains slow and that is the supply-side improvements in unit costs are dropping. that is result of the slowness we saw an average hourly earnings combined with gdp growth. it's a good supply-side story. tom: tell me about core services. are we seeing a service sector disinflation to give confidence to a goods deflation? jonathan: we have had positive news on core services over the past few months. but we are not out of the woods yet. that is one of the reasons chairman powell yesterday and michael mckee did a great job on trying to pin the chair down.

but we want to see slowing in the labor market to see slowing in those components of inflation. it does look like wage gains are still too brisk to be consistent with a sustainable 2% inflation. they do need to get the labor market to slow if they are going to achieve their mandate and restore price stability. >> this is clearly a big week for labor market data. we know that the uaw has come to agreements with automakers but if you are a union organizer. what is your take away from the flood of data that we have gotten on the labor market now? jonathan: the labor market is still tight. i don't think you need to look

beyond the unemployment rate of 3.8%. you have a point where there could be bargaining power for workers. the other interesting thing about the strikes as there are a lot of nonwage issues at stake. you're talking about the use of ai for the actors initiative to electric vehicles. that's been an interesting aspect, a lot of these labor negotiations are not just about wages. it's about these changing industry dynamics that they want to protect their workers from. >> how does that show up in the economy and what is measurable? jonathan: we should see the impact of the uaw strike in tomorrow's data. between the three strikes and a mack truck should be a 30,000

job reduction in motor vehicle and parts assembly. we should definitely see that way in motor vehicle and parts assembly. we should definitely see that way on the employer report tomorrow. but that will rebound in the subsequent report. with the ubs, left standing. and now it has absorbed credit suisse as well. tom: i am fascinated by productivity. there are three ratios, the

numerator, denominator in six things moving at the same time. that is where you hear dr. pingel saying we don't know. what is an apple i 15 going to do? you don't know for 10, 15 years. the market is talking right now and it is saying something. the market is interpreting at the way they want to but these are realities we won't confront for years to come. the 20 year bond is about 5%. tom: even lisa abramowicz doesn't even quote the 20 year bond. >> it gets my attention. tom: s&p 500 is up, .9%.

i don't pay attention to earnings and brammo is killing me about it. starbucks and shake shack, i am sorry. it stays the suppleness of adapting off the pandemic. it is up 10%. scarlett: that's pretty incredible. there are sales in china which was a worry for starbucks. tom: the worst starbucks i have ever been to in washington dc. annmarie hordern has a tantrum, for those of you on radio. this is the annmarie hordern

varese doug cart. this is for real. do we have this in new york? she had a tantrum and said i cannot get a decent cup of coffee and of course anything she does they react immediately. for those of you on radio, they have this high tech, with the syrups. do you do syrups? >> i don't drink coffee. tom: scarlett mentions apple. this is much watch and listen for apple. we will watch with caution this afternoon. ♪

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>> the power that apple has to convince people that now that they own everything from the

silica said the software and hardware it is reassuring customers that there is something under full control of apple rather than before with intel silica. tom: apple, apple, apple. this afternoon they will tear apart a press release from apple and they will look at this. could you tell us what the cash build is an apple? scarlet: it's going to be massive. tom: will you institute the share buyback? scarlet: they have to with the amount of cash or they buy something. tom: they have a challenging 90 days here. even with that said, this is an important interview for apple bulls, isaac wedbush.

the most articulate caution on apple is will always be from the black book on apple technology. he has a fancy title but the answer is he will always own the black books over at alliance. thank you so much for joining us. you have been cautious on apple. is now the time to buy shares after the lassitude we have seen over the past 12 months? >> i would like to say yes. but lassitude we have seen unfortunately, the reason i would like to say yes is because sentiment is low. 60% rating and 40% for neutral sale rating. it is as low as it can be.

we have had a slow year, three quarters in a row with the negative gross. that slow down, it's just stopped reacting to the nasdaq. there is not much action on the stock. the reason i would not jump on board now. you are still paying a hefty premium. part of its justified because the quality of a franchise. tom: the heart of the matter, single-digit revenue growth. sales are up 42% from up 42% frc

but the free cash flow is up 71%. and you are caution, are you suggesting that the formula that they have of operating leverage, of generating cash flow is now broken given the single-digit revenue growth? pierre: i think it's still works but 5% growth, the way i would like to think about it. between three, 5% revenue growth. apple can generate six, 7% dividends on a sustainable basis through systematic buybacks. there are huge amounts of quality there as you mentioned. when you get apple today, there

are 27 times forward earnings. there are other names that have grown five, 10%. you have a significant premium so you will not have a valuation surprise. when you own the stock today, you have to believe that this premium will rain which i think is fine. but you can't expect a sudden jump or increase in value unless you have a new growth story. that is where it's difficult to expect that. scarlet: the china part of the equation is not a gross story. it's getting a lot of attention and stealing the thunder and apple bears will point to china demand as a reason to not be optimistic. how does tim cook frame the

negative headlines coming out of china? whether it is beijing's ban of using foreign phones for government workers? pierre: i think it's a good question. it's a source of concern. i don't think it will materialize that quickly. the new huawei phone is in the early innings. they don't have a strong case to be that competitive against the iphone. a lot of that was what we were getting out of the picture in china and apple gaining 20,000 new units. that part of the business is safer the next food years.

the iphone remains an exceptional product. it's exceptional quality and integrated software. i would not say the chinese will be able to create a phone that will compete with the iphone. but there are 20 million phones being sold that while way in those markets have moved straight into apple's hands. that's a concern. scarlet: how about apple and ai? apple was left behind with chatgpt took over the zeitgeist. i know they are working on things. has this reached a point that investors can model it? pierre: no. on the business model of apple,

making all of its profits from selling hardware and selling mostly subscription services. the way i see it, it will be a defensive move. siri has never been impressive in terms of what it can achieve in terms of voice recognition end-user service. they will continue to do their best to achieve enhance the ovel experience with generative ai. but i don't see that it will be is as effective as it is for

microsoft. tom: is apple such a dynamo, we are all in the same game. are you suggesting that this is a stock that treads water for five years or are you looking for a diminished share price? pierre: from here, over the next five years. it can compound with its dividend power. it could be in the high single digits which is not too bad. i would look at buying it if there was a dislocation or a loss of confidence. if you see a weakness coming out of china and the stock is her by that, i would be keen to revisit and look at getting into the

name at a higher valuation. i really think you need to make apple a single digit compounding opportunity. an opportunity to increase prices on launch new products but is difficult to see that on the horizon. tom: pierre ferragou, talking about apple. scarlet fu, thank you so much. scarlet: i am staring at the 10 year yield plummeting. tom: neal dunn us says that it is welcome news. futures are up nearly 1%, up 41

points. the dow is up. this is bloomberg, good morning. ♪

matt: i am matt miller, and jonathan ferro. market teachers up -- market futures up. 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. matt: