>> stocks are going to grind higher. >> there is still move for the market to price further easing in. >> there is over the longer-term a big is going to do better theme. >> we are waiting for data that will confirm what -- one of these narratives. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: live from new york city, good morning. this is bloomberg surveillance

on tv and radio alongside tom keene and lisa abramowicz. your full impact just a touch, a five-day winning streak, and nasdaq 100 highest since january of 2022. microsoft record high, nvidia all-time high going into results later. tom: how stupid is this. we will inform you on tech today without all of the absolute insanity of the last three or four days. nvidia on the bloomberg, 117 they are growing so fast. near the estimated pe is 46. >> absolutely nuts. it is the number one performer on the s&p 500. q1 earnings from nvidia was probably the event that

catapulted ai into the stratosphere which is why for a lot of people this is the main event this week. lisa: it wasn't just about the returns in that quarter it was about profits. if they give us another forward look by 25 to 50% what does that mean about how much we are estimating or underestimating the potential for ai. tom: totally agree on the microsoft madness it will be nice to have a normal conference call with the guy who everybody worships who has an actual board that supports him unlike what we've seen. jonathan: can we avoid the openai obsession. a bunch of tech pros pretending this is the most important story they've ever covered. there is an actual war taking place. that's the news we need to cover. close to reaching a truce

agreement. this could happen as soon as today. tom: that's a story they will brief us on. other stories as well away from what's perceived by adults is the immaturity of the dialogue of so much of this openai thing. everybody read satya nadella's biography to find the adult in the room. huge family challenges with illness, he loves cricket, with all this he's devastated and then he's got to go deal with these kids. lisa: the fun of that is partially the reprieve people dealing with some of the other developments and the uncertainty about the broader parameters of what we are looking at next year. it's much more fun to focus on stories of promise and

dysfunction and craziness than it is to all of the other stuff that's very real for next year. >> let's get to some of the cross-section. negative by 0.1%. yields, the euro higher once again. what a night. >> leading statistic off the bloomberg launchpad is the 10 year real yield 2.11% down yesterday framing out euro 110, 111. we get to 1.99 10 year real yield. >> that speaks to the dollar weakness we've seen. four days of euro strength, the longest streak going back to july. that's how rocky things have been. lisa: considering the fact for a

number of months now. we are getting a whole host of retail earnings. coles, dick's sporting goods, abercrombie & fitch. all before the bell. shares lower by more than 5% after they came out of seeing the full year adjusting's per-share versus a higher range earlier also seeing this lower. we will parse through these earnings. we have october 31 and november 1 meeting. people are making this into something that maybe it won't be. people are expecting the fed to push back against the rate cuts increasingly getting priced into the market. we will see after the bell. to me, the story of the day is nvidia earnings. given they have colored the narrative over the promise for artificial intelligence, they have been the front of that game

because a lot of companies have been trying to hoard chips from nvidia. tom: an abrupt competitive response from the others. i can't say enough about the linkage is microsoft needs to build two chips to compete now with nvidia. tom: easier said than done. they are humble about it. jonathan: joining us to discuss, the senior portfolio manager, are you -- you are hold nvidia. do you see reason for that to continue next year? >> yes i do. it would be nice if we had broader range but i think we will be looking at modest growth next year and only those companies in sectors above average growth will continue to participate just like this year was dominated by handful of stocks i think that trend is continuing. tom: my theme for next year is

our cumulative 2024 stealing the concept from lael brainard. 24 months were 36 months out of these tech leaders. you are conservative, income equities dividend growth. >> many of them do have dividends and some have competitive dividends. also they have the ability to raise or start dividends which some started to do. stocks go up in price to increase the value so we do like tech and some of those companies even that pay a small dividend. lisa: how much is that bullish view predicated on rate cuts next year? margie: i think the fed is kind of irrelevant in what's going on in the economy. the economy moves slowly and

inflation has come down. the fed had very little to do with it so i think we will be trading treasuries 4.5 to 5% and the economy will do what it does. lisa: given the fact you think it's the economy, how important are things like nvidia earnings to give you a sense of how much more promise there is baked into some of the names? margie: it's a hugely symbolic name. there's some emotion and passion particularly around earnings tonight. it's hard to think of another company where we held our breath to see their earnings. the continuing strength we should see in artificial intelligence. i think even if it's disappointing for some reason the market will be stronger through the end of the year. jonathan: jumping in from the latest outlook.

narrow breath in equities likely to continue until a recession begins. out yesterday saying expecting some broad -- basically socgen is out with this saying they expect a mild recession. credit market selloff and ongoing qt is the call from socgen. tom: moments ago talking about the same slow and growth. for all of us those behind and ahead is the arch issue here with continued tech leadership. lisa: it goes to the point of everyone saying go with what works. at this point it works until it does not. so then how do you decide when to get out. jonathan: market in recession before we start to see a broader participation in this equity market. margie: possibly but that would

mean stocks would have to go lower. when you look at the market a lot of those other sectors really have problems. utilities, materials even health care in a downswing. so it's hard to see why they would be attractive compared to technology or some other tech related industries so i don't see a change really. tom: what do you speak to the people the bought bonds, maturities, single-digit returns , explained to them the bond people how they need to have some equity growth. margie: the absolute level of yields right now are very low. you can't say if you go back a decade or two and go back to high-yield bonds even junk bonds or 7% to 8%. reasonable value but not outstanding value.

compared to an above average stock. >> how do you avoid the dividend track -- trap. margie: i thought people would've learned their lesson from the financial crisis if buying the big dividend doesn't -- i think the best ways to look for companies that can grow their dividend over time and really look more for capital appreciation. the time when people seem to be focused on income. jonathan: great to catch up with you. want to go back to lows in the fourth-year outlook. missing estimates by a mile. now seeing -5%. the range previously was negative two to negative four. stocks down more than 5%. >> citing a decline in do-it-yourself spending for the decrease they are seeing with

the forward lookahead sprayed is this because people have already done all of the do-it-yourself projects? is it because they don't have the money, the will or all of the above? jonathan: how does it stack up against home depot? lisa: is it more or less tied to the housing cycle? margins came in significantly lower than they expected and will continue. tom: home depot has a 19 multiple, lows has a 15 multiple. the percentile track record is 84th percentile. she is one of the few standing. she is a rare dock within 80 fourth percentile five-year off the bloomberg. not being courageous, not to hold bonds. jonathan: typically would

associate a market with bonds in it. >> the last three or four years made a massive shift. jonathan: there are things that matter for the economy. mattering for the market as well. for this it's got to be nvidia after the closing bell. >> they basically knocked it out of the park again and again. they beat them and tell you they will be even more amazing and then beat those. it goes to this, how long can they continue to monetize in the way that they have over the past few. tom: only $.57 on the dollar. i've got to publish $.57 on the dollar. jonathan: the first quarter the numbers that came out in may blew this market away. there was this feeling it was too soon to monetize this effort and then it started to happen

rapidly. >> people thought this is something in the future we will figure out the applications and who the winners are. it's quite clear nvidia was monetizing on it now. businesses, a lot of countries saying we need to get in on this before the chips become obsolete. tom: 2019 pre-pandemic, revenues running right now. jonathan: nvidia year-to-date up 245%. software equity analyst at rbc capital markets. from new york city this morning, good morning. ♪

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committed to sam and the team. we will definitely want some governance changes. surprises abound and we just wanted to make sure that things are done in a way that will allow us to continue to handle well. jonathan: satya nadella surprised speaking to emily chang. talks unify the company after hundreds of staff threatened to leave following sam altman's firing. employees writing we are unable to work for or with people that lack competence, judgment and care for our mission and employees. microsoft hiring ultimate to lead a new ai group. saying we believe this ultimately benefits microsoft as its ai halo and further controls its destiny. they are in a stronger position now than before when it comes to ai. outperformance on the stock on

shares of microsoft. tom: this is the interview of the day on this. how do you get to nvidia does not cover over to the sophomore world of microsoft we know. at rbc capital markets. a boutique firm of incredible ability. they are going to walk in, two guys, a five guy's 500 engineers and they will make two chips or whatever to compete with nvidia. why does microsoft have to compete with nvidia? >> thank you for having me. one is we can all look at nvidia

with margins, the rally the stock has had in the revenue growth and microsoft knows they can save costs. the more important factor is there is a major shortage out there. you are in a situation where it is harder to make demand and because of all of this, costs are prohibitively expensive for generative ai. that's the piece of talk to his a lot of companies want to go down the route of adopting in a big way but the calls are what stop them. generative ai workload costs more. how do you bring those costs down. it starts with the hardware and you want to bring that down to make it more useful but ultimately you get generative ai to become a much more prevalent technology. tom: how nvidiaish is microsoft?

can it be out three to five years a germane part of microsoft? compare the potential size of what altman can do to the total of microsoft. rishi: this is going to be more like the cloud. that's the big thing is it is that seismic technological change. look at what happened to microsoft when they were a cloud company. not just their stock price, a look at their growth and profitability and look at their relevance in the world. ai can be an accelerator. the great thing about having sam and greg, if this is how it proceeds this is changing by the hour, microsoft not only continues to be a leader in ai, they are in control of their own

destiny. that was one of the few knocks people had against microsoft is they were off to openai. this can be a major accelerator for microsoft and could be a much bigger company as a result. lisa: i'm stuck on this idea cost five times based on the hardware for generative ai to get certain workloads done. the traditional means of just hiring people. does it mean nvidia's success is the reason why the microsoft of the world, of the software focused have not been able to monetize ai in as material a way. >> i don't think it's because of the gpu shortage. i would push back. i think microsoft is monetizing ai in a big way. in my estimates ai is a half billion dollar business with microsoft after two or three quarters which is kind of an unheard of trajectory.

for the rest of software i think there are a couple of reasons. microsoft has a huge head start when it comes to generative ai. a lot of other companies are playing catch-up. i think a lot of enterprises are also maybe having concerns around data privacy, security and that's also a limiting factor. maybe lastly his a lot of companies are figuring this out. generative ai is a little bit of a blank canvas you have to figure out the right way to use it. think about the way you and i use jet -- chatgpt compared to a year ago. part of it is we have had to figure out what's the right prompts to ask it, with apis maybe 10 times more complex and difficult. i think the monetization will come. i think the software is a 2025

event where it starts to materialize for the spots, but for microsoft i would say it's already material. lisa: one of the key components for some of these chips that are required for generative ai. do you think microsoft continually gets into the chip creation, the physical hardware game as it ramps up to the software monetary prowess? rishi: they are not going to directly be selling gpu's to customers in a big way, i think it's more you can rent our gpu capacity via azure and that gives a boost to the azure business. it becomes the preferred cloud vendor not only because the best ai technology is out there including these openai services, but now they will have more and

more capacity at a competitive rate versus how things have been. this is more of a unit economics of microsoft. >> we have to make some news. everybody's playing on microsoft now. you know we are on our way to $3 trillion. you are at 390, dan ives and the rest, will you be adjusting higher when you see this unfold? can we get to out over 420 on microsoft now? rishi: obviously i can't comment on price target changes. i would point you -- we talk about a bold case beyond that and you can draw your own conclusions. tom: we are among friends. give me a number. can you out ives dan ives? rishi: i think they think -- the

thing we have to say is i'm not modeling generative ai revenues in my model. if we start to think about office 365 for example that's breathing on top of this and i haven't even brought in 26 numbers. i would say you can draw conclusions based on those sort of things to get you significantly above where this is today. jonathan: compliance is still in bed. don't worry about it. they wake up at about 8:30. tom: stephen ross owns a small retail company. starting with next to nothing and owns a small football team called the dolphins and set up shop at michigan and they do acuity like nobody. that's what you heard. jonathan: a recruiters dream. marc benioff. salesforce will match.

tendered their resignation to join our salesforce ai research team. everyone was making an offer. lisa: then you've got one of the board members saying i'm sorry i did anything to make this a problem. he is the chief technology analyst. let's keep together, kumbaya. jonathan: what an absolute mass. tom: surveillance has been doing , talking to adults. jonathan: lindsay and steve joining us ahead. this is bloomberg. ♪

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jonathan: five-day winning streak on the s&p 500. just a touch, big earnings after the close. equity futures down by 0.1 percent on the s&p. on the nasdaq 100 going nowhere yesterday at the close, the highest level since january 2022. i believe just a few percentage points away from record highs on the nasdaq. lisa: we are not talking about new record highs, the by gives and seven have driven so much of the games.

jonathan: microsoft all-time high, nvidia all-time high. you can think the bond market. bad things did not happen. good news. >> better than people expected. it traded with yields going lower. this is one of the bigger movers. people wanted to know about the auction. >> the equity market seems more excited than the bond market did. this has become a market mover. tom: it's the debt and the deficit. the people you would expect talking about the death -- debt and the deficit saying how bad is this situation. jonathan: the euro, let's see if

it is still stronger. it is just about. you get another day of strength earlier. if you're joining the program. four days of euro strength bread longest since july. >> i only have one data point today and that is the inflation-adjusted yield on the 10 year moments ago, 2.0966. we have a plunging real yield. it's a huge deal. jonathan: that's what's weighing on the dollar. tom: it correlates with the bonds currencies and commodities . there's no other way to put it. jonathan: a potential breakthrough in the israel gaza war. the leader of hamas saying the group was close to reaching a truce agreement with israel suggesting progress is being made in talks to free some of the hostages held by hamas.

will we get some progress. >> will we have multi-day cease fire to get humanitarian aid in. i am struck by the amount of misinformation and the way this is being disseminated across a whole host of social media platforms. to me this will be one of the reckonings after the dust and blood. tom: we did not have social media at quad a canal. how do you run is -- run a war with social media? how do you prosecute a war with social media? jonathan: we are all hoping they make some progress today. the latest there on the israel hamas war. openai, intense discussions following the firing of the ceo. satya nadella telling emily chang he wouldn't be opposed to altman returning to openai. >> we are leading in this next

generation of ai technology. we continue to be committed to openai and sam and greg and the team irrespective of where they are. >> he can go back to openai. satya nadella still doesn't know why he got fired. i find that absolutely amazing. how does this guy with a massive steak in the company not know why the ceo was ousted on friday. >> the way he confirmed that. we are a little concerned about the composition considering we have little disability and surprises are good and we have no clue but either way we win. that was basically what i heard from some of his comments. >> i just sit there and shake my head. tom: the tech frenzy over the geography of it is just too much. i'm shaking my head a lot.

i'd like to talk about what it means for the future including for these wonderful bright american engineers. jonathan: palace intrigue and much more of that. let's get to nvidia. big story after the close. record high to start the week. after the bell later. nvidia has risen more than 240% this year pushing its market value above 1.2 trillion. investors betting on another demand for ai computing. going through the nasdaq and s&p. this name after this massive move this year. lisa: how much can they continue to give these forecasts. that will be the key component of the earnings. it all seems to be the way things go and probably a big margin. does that matter if they don't come out with some kind of outlook that is such a massive

significant increase over previous projections. tom: the other 30 stocks have gone up as well. you mentioned earlier the nasdaq is almost back to highs. that's a huge q4 catch up. jonathan: we've been raising the bar for this company every quarter and they've knocked it out of the park. tom: i've got an nvidia in the computer at home. it says nvidia on the side. lisa: buying up chips so they could be -- jonathan: stockpiling. just aggressively buying nvidia chips. i put them in little tiffany boxes to hand out to family and friends. tom: showing you economics which is what matters right now as we go to a december fed meeting.

i've got a real yield from the -1%, up we go and rolling over. what is the significance the inflation-adjusted real yield is down to 2.09%. what does that mean for jerome powell? >> it shows we are making progress in terms of bringing inflation off of those peak levels. i don't think they are light ready to celebrate yet. we have seen a lot of head fakes in inflation and a lot of volatility on the long end. there was a lot of argument this would be the final straw for the fed. doing maybe 25 basis points of the fed's work for it but that recent pullback we've seen on the longer end particularly in the 10 year suggests that run up may not be a reflection of structural factors such as

fiscal deficits but more a reflection of changed expectations for fed policy so this may mean there is ample pressure to take further action rather than enforcing as the market seems to be anticipating. tom: the labor economy and inflation interest rates if you will. two they have a mandate to look at real gdp and if it is slowing? is that jermaine to the conversation? lindsey: right now the labor market, the imbalance is wide but we are seeing progress. it is still extremely tight, the fed can check the box. the focus is on inflation. it doesn't matter if gdp is slowing from a 5% pace down to half of that by year end. that's an indication earlier fed policy is having the desired effect. the fed doesn't target gdp but the fed needs to see a low --

period of low trend growth to ensure we are having that effect. slowing investment, getting inflation under control. it's a step in the right direction if we do see that slow meaningfully from the third-quarter report. lisa: there is a 0% chance of any further rate hikes going forward. you basically implied he would push back against that. how much conviction do you have the fed might have to do more and we are seeing a head fake in the inflation statistics. lindsey: the market has been consistently preemptively calling for an end to rate hikes and pricing in rate cuts that have failed to come to fruition at this point. we have seen along the past two years the market consistently reminded of the old adage don't fight the fed. the rhetoric has been all over the place.

we've seen fed officials say we are at restrictive levels, some saying we need to remain patient and data dependent. we seen the chairman come out with a much more hawkish tone saying we are not there yet. and the fed remains committed to reinstating price stability meaning that if we don't see further improvement in the data, the fed is ready and willing to move forward with an additional rate hike. i think we are somewhat splitting hairs at this point. whether we see one additional rate hike or the fed is done, the notion of higher for longer is somewhat being lost on investors despite the fed's very clear line they will not be willing to cut rates until a meaningful sustainable disinflationary path. lisa: do you still think that is the underappreciated risk? lindsey: the biggest risk is the stagflation scenario. the fed has raised rates of the fastest pace in decades and we

expect that to slow meaningfully in 2024 perhaps a sub 1% on an annual basis but at this point if the fed does begin to lose its resolve we may see inflation still sticky and elevated above that 2% level giving us higher prices and slower growth and turning into that stagflation scenario. tom: we are at a tipping point of restrictive and accommodative . super restrictive was dominic 12 months ago saying the bloomberg financial conditions index is telling me we are becoming more accommodating. which is actually quite stunning. do we have a more accommodative policy right now? lindsey: whether or not monetary policy is is restrictive as the nominal numbers would suggest. but if in fact we have a higher target, we have other factors that are contributing to the

economy but are not being accounted for in the fed's basecase model, the fed may need to raise rates higher against market expectations to tame inflation. if we look at the fed's own financial volatility measure we see the impact from earlier fed tightening peaked in december of last year and as of december the impact began to wane. the idea there is further pressure down the pipeline given the current level of fed finds, that may not be the case. the fed may look at the need for further rate hikes if we don't see the improvement in the underlying inflation data. jonathan: that's what andrew has been talking about on this program. we have to leave it there. good to see you. happy thanksgiving as well. have a happy thanksgiving. the last dose of fed speak before thanksgiving today.

after that they are done for the rest of the week. and -- tom: the organic bird? like $300. jonathan: we don't go for the whole beast. don't like to have the whole beast. it goes too long. what is lisa cooking? lisa: i will try to make pumpkin pie again this year. in college i tried to bake a turkey and did not realize it took seven hours. [laughter] tom: they could see it in kalamazoo. lisa: a group of us were still staying in town and were supposed to have thanksgiving around 7:00. we had it around 11 or midnight. lisa: what happened -- jonathan: what happened to the public -- pumpkin pie? lisa: blackstrap molasses didn't

work. they had to smother it and whipped cream and then they just stopped. tom: jerome snyder, pimco. a smoked turkey from texas. jonathan: he sent me one of those ones. tom: he didn't send me one. jonathan: they gave it away to charity which is a nice thing to do. they tried to send me a smoked turkey. trying to bribe me tk to say nice things about bonds or something like that. lisa: do people like turkey? jonathan: if it is cooked well. if you talk about sides a little bit later, futures on the s&p slightly negative. ♪

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>> we recently upgraded the u.s. tech sector in part because

that's where we are finding quality and there certainly is over the longer term this big is going to do better theme that we want to play on. jonathan: expecting that theme to continue into next year. global wealth management cio, the nasdaq 100 closing at the highest level in some 22 months from an all-time high. record high, nvidia at the close , equity futures this morning pulling back just a touch. our 10 year, you'll get some fed speak in the fed minutes. after the close, earnings from nvidia. tom: leaderships going to continue under the theme of cumulative 2024. spx from late 19. we don't have the scale, of the

inflation is killing us. jonathan: it's just that cafe we go to. tom: seven dollar tip. jonathan: go to a diner. it's $60 easy. i'm with you. absolutely nuts. tom: i'm looking at the nasdaq and this is important going to alex webb he only comes on if we do the nasdaq. a moonshot going out to near record high off of the pandemic level. from the bottom here failure. jonathan: this is where people say easy money has been made. nothing about this in the last few years, nothing about it whatsoever. tom: as we talk to -- talked to

rishi earlier. let's focus on nvidia now. how do you identify what nvidia's business is. >> is a cliche. everyone has been looking what is the company that does this, the reseller raiders that fuel the data centers, aws, amazon are running all of the ai options and trying to sell to their customers in the cloud with a huge amount of benefit now. tom: he's got 26,000 employees, how does he keep it so satya nadella won't buy them like he did openai. is there something unique about the labor promise at nvidia? >> it's a very poor allocation of capital.

microsoft can develop and is developing chips in the house that seem to be comparable to some of the things nvidia is doing. let's not even think about the antitrust implications. nvidia was unable to buy arm. if there is any risk to that stock in the years ahead we are thinking more medium-term it is the fact microsoft, google and others are developing their own chips so that is where the microsoft competition comes into play. lisa: who is buying nvidia chips , who is hoarding? >> if anything there's more demand than there is supply. they are trying to build out the capacity. tom is loath to talk about

openai but when you think about these ai products the real money isn't necessarily going to be made in actually selling or likely seeing ai services, the real money is made in the processing power to make the ai stuff work and that processing power in the cloud, or google, microsoft and amazon will make their money. if you want to use these, you need to be using in microsoft case, azure. it's the way to get people onto their cloud systems and that's when they start really reaping the margin. lisa: every time this -- they steepen the hockey stick upward even more to people's expectations, how much will we reach a peak in which the cloud operators will by the chips they need and maybe have some replacements on the margins but

it won't be the moonshot it was. >> there's always going to be a piece of that. there is constant innovation in the space. it doesn't mean they will be leaving forever. where microsoft and google are in a years time you'll expect nvidia might've moved on from that. we are getting to the sub 3.5 meter process. it is something that's possible. the bigger question from an equity perspective, we saw the stock hit a record yesterday. when these are fully valued, the market expects the beat, a lot of the market, a beat is a meat. if there is any sort of disappointment on that front, the fact from a consensus perspective meet expectations then you might see a bit of profit-taking.

that's what you see with apple. tom: i want to drag apple into this. is apple part of this. you mentioned three nanometer chips. apple has a modem issue in their phone. how does apple in your view watching this openai soap opera? alex: microsoft has played a strong hand. the worst case scenario coming out of this is this will be a short-term issue. microsoft actually hiring a bunch of people from ai. therefore they need a few years. a year or so to replicate what openai is doing. they are not competing directly in this space. it's a little bit under the hood and the way facial recognition

happens on your phone. it is racing to catch up. that gives them a little bit of leeway. facebook, meta into the space. problems openai had microsoft is not necessarily a gift for apple. jonathan: someone writes in, just fry the beast. 45 to 55 minutes for juicy succulent perfection. tom: we will have to see. the restaurant we are going to. jonathan: up-and-coming chef. tom: you know what's best? they have a homemade custom vermouth from somewhere in

prevents -- provence i can afford. it's like a formula from the 17th century. jonathan: i'll be having a turkey from danielle. a local chef. tom: very good. we can go to lisa's for pumpkin pie. [laughter] lisa: good luck. jonathan: everyone should support their local shafts. lisa: i support my father. i really support his establishment. tom: basically they are giving away turkeys this year, there is a glut of turkey. the wonderful australian economist we saw in jackson hole this year turkey dinners reduced about 4%. lisa: cumulative, come on.

[laughter] i will say about frying the turkey, i have thoughts. you can do it in new york city because it's a fire hazard. it is succulent and good but we have to do it outside. tom: you don't do thanksgiving -- lisa: going down in flames literally. tom: is there an equivalent where you cook the eagles or whatever. jonathan: we do a harvest festival. tom: a pagan thing. [laughter] jonathan: you know your history tom. coming up, taught -- joanne feeney joining us shortly. yields not doing much, the 10 year 4.4140. tom: next at the 9:00 hour,

potatoes. ♪

(car engine revs) (engine accelerating) (texting clicks) (tires squeal) (glass shattering) (loose gravel clanking)

>> stocks are going to grind higher. >> there is still room for the market to put in easing. >> this kind of big is going to do better theme. >> it's not a time to be aggressively on offense. >> will -- we are waiting for data to confirm this kind of narrative. >> this is bloomberg

surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: from new york city this morning, good morning for our audience worldwide this is bloomberg surveillance. alongside tom keene and lisa abramowicz. we are down by 0.1%. we are up a five-day winning streak after the very -- nasdaq with a 21 high. nvidia reporting after the bell. we have nvidia at a record high. tom: mark half lee of ubs with us yesterday. he says stick with the leaders and quality big tech. a lot of other people are saying wait there are saying wait there other people not in the market, there's scared stiff. jonathan: year-to-date on the

s&p and the nasdaq. how many people participated in the big winners. stripping out the performance of a boost to stocks. lisa: a reason why you have to wonder if this will continue. is this a boom market? does this feel -- remove the chance particularly in housing in certain areas. how do you make sense with this. jonathan: what are we getting from the retailers. it's a big part of your wrap up this morning. negative six to -7.5. stock is down 4%. lisa: this has not been the same kind of gang buster review we have seen from some of the names we've seen in the service sector.

we talked about lows earlier. a discount retailer coming up below expectations. you see best buy coming in below expectations dropping compared to a low of 6% of the decline before. red across the board. does this give us a look into the consumer or is this just models being stressed in an otherwise stressful environment. jonathan: walmart offered some numbers and gave some negative commentary so the forecast is not too different but we've got some big confirms. words like deflation, a loss of pricing power in retail america. that got everyone's attention. tom: this is where the ceo of walmart used the dreaded d word almost in an aggregate sense and it still being talked about.

lisa: we start to wonder if this is a goods disinflation or consumers not being able to spend anymore. people aren't spending as much on do-it-yourself projects. tom: this is the polarity of america. these fancy tech people. the haves are rocking it and there is a whole part of america flat on their slowing gdp back. jonathan: the price of a hotel room in paris. tom: after the teacher conference i said to the french teacher what about hotel rooms in paris and she starts off on hotel rooms in paris. jonathan: dick's sporting goods up nicely. the numbers, of the outlook for full-year adjusted is the range. they had seen 11: -- 11.50 so a bit better than expected.

it speaks to the move. lisa: this is where we are in terms of expectations versus deliverance. the fact they came out and beat expectations was an incredible win. jonathan: just want to push forward to one more event that could take place later. we will be speaking to annmarie. a deal between israel and hamas to free dozens of hostages and declare a multi-day cease fire is imminent and could be announced by the qatari mediators as soon as today. two sources with direct knowledge of the issue speaking to that particular outcome. tom: i will lead with this in the first question because this is off the radar. how can this deal be off the radar if these are hostages in a war zone with visibility and we are talking about -- lisa: and the potential for a

cessation of violence at a time when we see people being killed and destroyed. this is a horrible situation and anything that can alleviate it is welcome news. let's talk about what we are looking at. we will be following the story of the middle east. we have meeting minutes from the october 31, november 1 meeting. pushing back with some of the rate cuts getting priced in. nvidia earnings again it's how much of a beat do they have to deliver for the shares to keep being a moonshot? jonathan: joanne feeney, lisa talking about nvidia after the close, our conversation do you believe that can continue beyond into 2024? joanne: i don't think we should expect in 20 anything like we've

seen in 2023. there's been a recovery off of a really tough 2022 when we saw earnings expectations start to come down. you have to put 2023 in the context of what happened before. we have built in the ai discovery subsets and that's a year ago and played into a lot of the stocks. tom: what do you do with portfolio construction here? do you d diversify on fewer things or do you spread it out? do you play for breadth? what do you do, what is the strategy for next year. joanne: this is an interesting time of year because clients are asking us what they should be doing in terms of their taxes. we get a lot of calls about the

realized gains, a lot of investors have experience gains this year because of the run-up in such a small number of stocks so that narrative creates problems because if you didn't want to become to overweight and concentrated because of those, you will have to trim those all year long. you create a lot of realized so you look at the losers and make lemonade out of those lemons. staying out for 31 days and then getting back in. you have to be careful how you do that. that differs to your question about diversification. lisa: are the losers going to lose even more and the winners can keep gaining? joanne: it's massively trying to

time the market. it has been the case in the past that some losers have continued to lose into the end of the year. we have seen that before. it is not terribly predictable but it does tend to happen. it is hard to pick a stock and say this will continue to go beyond that. you just want to be aware of any positive that might be on the rise. you have data on this suggesting , you don't want to be out of that stock. what you can do if you are harvesting something in industrials or health care. and put that cash into something that has similar exposure whether it's an etf or another stock. you just want to be aware of what you are getting out of and make sure you cover yourself for what you want to have. lisa: debating a real

consistency to the economic expansion we've seen or some sort of recession or a harder landing than it is expected. these are underwhelming, there a couple of exceptions but really projecting out greater weakness than people were expecting. how much of a signal in a broader sense versus noise around the specific retailers. joanne: we saw some of the other consumer stocks do well saying consumers are still spending, a retail sales not so bad. then you contrast with a best buy and recognize it depends on what you are selling. what we have found that this time is it is useful to take those winnings you have had in some of the big seven and use those to diversify. you look at 493 names and you

find a lot of value there so this is a good opportunity to take advantage and diversify. to the question whether we are seeing more consumer weakness we could be and we should expect to see some there along this strength with the high inflation. tom: you've got to understand on bloomberg radio, joanne feeney when you use the bloomberg what does it say about the banks if i'm going to sell microsoft to buy the banks, which banks? joanne: we like several different banks. we like both of these. but we also like some of the smaller financials outside of the big money center banks. they got beat up during the financial crisis and they are still beat up. you have to be willing to ride

out a recession because that risk is not off the table even though it is considered lower than it once was. >> pushing ahead to two key events later. we have nvidia earnings. a moonshot today. 240%. every time we raise the bar they appear to knock it out of the park every quarter. tom: they've got huge price consistency. there's not many competitors. the unit growth is just scary. you are buying nvidia chips in your blue boxes. jonathan: fed minutes feels like a snooze? it's just not being discussed with the same way. a lot of people are just parking this. lisa: the idea is they can massage the minutes. do they want to really send a

message? lisa: -- jonathan: safe when you put that turkey into the fryer. tom: a few will have dark meat. jonathan: if you are just joining us welcome to the program. the s&p 500 looks like this. -0.1%. yields are going nowhere. we gave you an update on the situation between israel and hamas from axios. cnn matching the report saying the deal on 50 hostages could be announced today. this is a two phased deal. hamas expected to release 50 israeli women and children held in gaza while israel is expected to release 150 palestinian prisoners, mostly women and minors. israel would allow 300 aids trucks per day to enter gaza from egypt.

this could be announced as soon as today. tom: we are hearing this -- lisa: hamas leadership has been much more vocal that close to a deal, moderated by qatar and the u.s. is involved with certain negotiating tools as well. does this mean we could be ending some sort of resolution or is this just a softening. either way we know if hostages can be returned that would be wonderful. >> it sounds like progress. it is a developing story. we will get the latest in just a moment. equity futures negative. from new york city, good morning. ♪ (sfx: stone wheel crafting) ♪

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make more of what's yours. >> if you are going to secure the release of hostages, you have to make sure they can get

from where they are to safety and do that as safely as possible which means you're going to have to have at least a temporary localized stop in the fighting. we can take for granted these people are easily mobile and don't have some sort of health issue that would slow them down or need assistance getting out. i don't want to negotiate in public but we believe we are getting closer braden >> that was john kirby, of the national security council coordinator delivering a briefing at the white house. the latest reporting that a deal between israel and hamas to free dozens of hostages and declare a multi-day cease fire is set to be imminent. we will pick up on that reporting in just a moment. the scores in financial markets look like this. equity futures pulling back on the s&p. yields going nowhere. two events on the schedule on the calendar later after the close you will hear from nvidia

and get earnings from them. minutes from the federal reserve. the front and center has to be the prospect of hostages being released out of gaza. >> this is a developing story and we are thrilled joining us, annmarie hordern. how many hostages are there? annmarie: about 240 that were taken. this deal would encompass 52 as high as 100. likely they will start at a lower number. i have reporting on this that matches axios. it will be over the course of a few days and there will be palestinian women and children in israel he jails that will beef -- israeli jails that will be freed and will allow aid trucks into gaza. it's difficult to talk about hostages when you are close to a deal because you do not want to

give their families false hope. but the fact the head of hamas in doha came out on telegram and said we are close to this truce says to me we are potentially at the end of this negotiation. jonathan: what are your sources telling you about phase i and phase ii? annmarie: for hamas, the leverage is the fact they have these individuals that people want to see free. the phase would be a pause in fighting, they would allow some of these hostages to be let go. the israel ease -- israelis need to let go of some of these palestinians in jail. then there is the aid trucks. it is a complex negotiation. no deal has happened, but we are very close. admiral kirby said this is the closest we have ever been. >> do we have a sense of what

the sticking points were? annmarie: one of the sticking points is israel has said there will be no pause until hamas is destroyed but israel has come under immense international pressure because of an incredibly rising death toll in gaza. one agency has it at one in every 10 palace billion children have now died of are living in gaza so israel has come under immense pressure. hamas wanted to see a pause. i think the pressure has come under benjamin netanyahu to strike this deal to get the hostages out. lisa: what does it mean in terms of progression of the war? is this beginning of ongoing negotiations or is this just what it sounds like? a pause to achieve the goals

laid out. annmarie: i think it is unknown at this moment. this would be a pause prayed i don't think you'll have israel come out and say they want a cease fire. everything has been about hostages. potentially it sets up the parameters to have a wider conversation about winding down and the end of this war. israel has gone into what they call the center of hamas and their infrastructure in gaza. we also know they are moving south which is where they told palestinians to flee for safety. jonathan: has anyone articulated an endgame here? annmarie: people have pontificated about what an endgame could look like. not everyone agrees. this is a very challenging moment. israel says they want to maintain security control of gaza after. you have many in the arab world

saying israel cannot reoccupy gaza, but who then controls gaza ? it is very challenging. the palestinian authority controls the west bank. any successor there has been he has really tamped down. it's a challenging moment, people talked about maybe a coalition of error -- of air rib states coming in and we are not there yet. jonathan: let's talk about what this could mean for the u.s. president going into next year. we've noticed in many poles he is not doing well. there's a specific democrat -- demographic he is not doing well but it seems like all roads are leading towards foreign policy. annmarie: more than 70% of the youth in this latest nbc news poll over the weekend are

unhappy. tom: taylor swift is 33 and the sky -- this guy can't figure out who brittany swift is? this is just basic stuff. you can do that. these two are earned icons. annmarie: one had a hit when i was 10 years old. tom: she's with the lads from sheffield. she came out and it was like who is this person. she was in norma's then and has gotten bigger and the president of the united states is conflating brittany and swift? annmarie: for some members of the youth this would be an egregious mistake. it is quite concerning for the president to says he calls his grandkids every single day.

he had a gaffe yesterday when he was pardoning the turkeys. it's the willard hotel, not the hay adams. he said britney spears is on tour somewhere hot, he clearly meant taylor, who is having an incredible tour. he is not doing very well with the youth vote. yesterday on balance they were arguing about this. rick does not think the youth vote. he says they always stay home but they came out in droves in 2020 and when you are dealing with small margins it's important for god and vote. jonathan: how many people over the age -- for them to go out and vote. jonathan: what this is about is every mistake this president makes will be attributed to his age.

it's a reason you brought it up. if anyone else made this mistake. tom: reagan got old, bush senior. why is this guy different? it's because he is running again. that's really what this is about. annmarie: he is running again and there are individuals within the democratic party, the washington post has a story saying donors and those part of the campaign are wetting the bed. that was one of the donors said. i'm breaking a lot of rules this week. they are concerned about his age and how it will look if he runs for reelection and is a one-time president and loses to trump. jonathan: based on certain events we've seen they are right to be concerned. annmarie: it's not so much how

bad he is doing but how obvious the american people wanted different choice. when you look at a generic republican against biden, the generic public and wins. when you look at a generic democrat against trump, the generic democrat wins. they are politically married. jonathan: great to have you with us in new york. bank of america with a year-end forecast on the s&p 500, 5000. we talk about the reason why in just a moment. equity futures -0.1% on the s&p. from new york city, this is bloomberg. ♪

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jonathan: the nasdaq 100 22- month high. equity futures pulling back on the nasdaq, down 0.1%. down 0.1% on the s&p 500. in the bond market, we are shaping up as follows. the two year, 10 year, and 30 year looks like this. we are down on all three.

the year end price target for next year 5000. we are bullish not because we expect the fed to cut but because of what the fed has accomplished. lisa: we are not necessarily going to get the recession many expected. disinflation will continue and it is not going to be whether rates go materially lower. it is that this economy can maintain the strength we have seen. tom: she does great analytical work. she takes an xl spreadsheet like no one else -- excel spreadsheet like no one else. but particularly with bank of america about those leadership stocks. jonathan: like nvidia. you could just own nvidia. tom: that is not the way it

works. [laughter] jonathan: if only. up 245% year to date on nvidia. tom: i am going to say this. sivita was pretty cautious and then she had the courage to adjust. now she steps up on yardenny. what does the bulls do? is deutsche bank pulling back and say i am going to calm it down? jonathan: phenomenal. under surveillance this morning openai saying the company is in intense discussions to unite staff after the ousting of sam altman.

the microsoft ceo telling emily chang he was unaware of any issues. >> i have not been told about anything. they published at openai the board has not talked about anything sam did other than break down into mitigation's and i was not directly told by anyone from their board about an issues. i remain confident in sam and his leadership and that is why we want to welcome him to microsoft. jonathan: and maybe send him back to openai. lisa: he was saying, heads we win, tails we win. they want to preserve their own ai unit without having to purchase openai. either way there is a clear breakdown in understanding. we still do not know what

happened. we do not know why the board made this move that might have caused this palace intrigue of insane proportions. jonathan: let's be blunt about it. lisa: please. jonathan: we are talking about one of the best leaders on the s&p 500. maybe even the best ceo. it is fair to say this is not how he does business. tom: yes, absolutely. you seize the moment and that is what microsoft has done. on a game three basis everyone has to respond. how does amazon respond? how does google? you wonder how benioff reacts to this. could you imagine the latte shops out there? [laughter] benioff is collecting the american mandolin.

i remembered jd crow and the south the other day. jonathan: what do you collect? tom: divorces. [laughter] jonathan: maybe we should leave that there. citi cutting 300 senior managers or 10% of staff. bloomberg reporting the cuts started yesterday with more expected in the coming year. it is expected to be the biggest in two decades and reduces the focus to five businesses. tom: the others were talking this up and names are starting to come up. 10-year track record at -1% per year. it is urgent. jane fraser is doing the work that should have been done 6,

7, 8 years ago. jonathan: the fed's latest meeting coming at 2:00 p.m. the next rate decision december 13. financial conditions have eased, yields are lower, and all we have heard from them is we will proceed carefully. lisa: they have no incentive to say anything. jonathan: zero. lisa: they can pack it in. they have no expectations for december. they can say, you are on your own. we are done. that seems to be the message. now people have to debate what is the trajectory of the economy and how much work they have done. tom: december 8 we have a survey statistic on how good it is. what he needs desperately is a more tepid jobs report, a late report for that jobs meeting. jonathan: jobless claims are the one to watch this week.

tom: it is the weekly data to look at. jonathan: we are coming off exceptionally low levels but the changes worth looking at. it starts to creep higher the last few weeks. tom: michael collins joins us from pgim. what is the adjusted 10-year yield coming in? what does it mean for our viewers, our listeners? michael: the world's discount rate, the u.s. real yield, is what is driving valuations on everything in the world. that real yield at 2.1% or so is probably still 100 basis points too high. i think it is supposed to be between zero and 2%. if you believe the real yield should be above 2% permanently -- it was at 2.5% just weeks ago

-- you are buying into the notion we are going to have this continuation of strong real growth in the u.s. and around the world, and it feels that is not in the cards. tom: that is a bold statement by you. to .50% down to -- 2.50% down to 2%. michael: just a few weeks ago the markets were pricing in a funds rate that ended at 4.5% and never got lower over the next 10 years. now that number is 4%. that probably is 100 or 200 basis points too high as well. when the fed is done, and the fed is done, that is why the minutes do not matter, the rates will rally.

as soon the message is clear that the heightened cycle is over. i think we just hit the overshoot at a 5% 10-year and 2.5% real yield. we are now on the way down. we have had disinflation and it has been driven almost solely by the supply-side. the huge rebound in the supply-side, both from the labor market and productivity boost. our a that 202 -- i worry that 2024 is going to be the demand-side. rates could be off sized by quite a bit. jonathan: let's talk about bigger picture and i will do this for you because you are far

too modest. 10 years ago you and the team were known for this call of low interest rates, low inflation. i remember the phrase. it was the lone ranger. that was 10 years ago. you won awards. a decade later, post-pandemic, can you talk about this regime and how different you think it will be? michael: certainly, you are in a world where you are seeing a generational high in capital investment in this country in technology related things. you have been talking about ai all morning. it is happening and it is real and it has increased our productivity in this country significantly over the last year. there is a chance that that is sustainable. that this ai and the robotics and all the technology investment does lead to more sustainably and higher real gdp. let's say, in the two's.

there is also a chance that inflation does not fall back to 1.5%. that he gets stuck at 2.5% or 3%. i think that climate-related risks and energy transition and shortages of labor around the world are all factors that could lead to stickier inflation. there is this high probability scenario that maybe rates are fair value. that the funds rate balances between three point -- bounces between 3% and 5%. that is a scenario we are really contemplating seriously as a pretty high probability. you do have to be humble in this business and that downside risk is always out there lurking. it is something we are certainly looking at. lisa: have you gotten more

conviction over the last four weeks of more aggressive rate cuts next year? michael: more conviction on rates? may be a little bit more. i think the inflation side is what has given us more encouragement. the disinflation story seems to be embedded and we are not as worried about a permanently higher inflation environment. that is a big delta we are seeing with goods prices and services inflation finally coming down. the labor market is seeing some cracks. all of those give us encouragement on inflation which give us encouragement that may be have seen the high end rates. may be the next move is 50 points lower. on the credit side the markets have run with this. low inflation, soft landing world and the equity market too. risk assets have rallied hard in the last few weeks.

i think you are supposed to be really careful and fade those rallies. jonathan: feels like a tougher call on the credit side. good to catch up with you. mike of pgim fixed income. equities look like this. futures negative by 0.14%. outside of nvidia we also have the fed minutes. this from andrew hollenhorst. officials have responded asymmetrically to tighter as opposed to looser conditions. lisa: the idea that they are preconditioned to wanting to see rates go lower because they are concerned about the weakness. the markets see greater weakness because of anecdotes they listen to, because of the fast-moving unemployment claims. they're not going to push back even though there has been a material loosening. tom: i feel strongly they are

data dependent and it seems like the debate of 10 days ago. they are going to wait for the november report and that will be a key determinant on what right now is a snooze fest. maybe it will not be. jonathan: what a change we are talking about the fed and snooze fest in the same sentence. tom: mission accomplished. jonathan: you want to go that far? tom: no. jonathan: they don't either. live from new york city, this is bloomberg. ♪ (sfx: stone wheel crafting) ♪

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? ♪

the chase ink business premier card is made for people like sam, who make- everyday products, designed smarter. like a smart coffee grinder, that orders fresh beans for you. oh, genius! for more breakthroughs like that- i need a breakthrough card. like ours! with 2.5% cash back on purchases of $5,000 or more. plus unlimited 2% cash back on all other purchases. and with greater spending potential, sam can keep making smart ideas- a brilliant reality! the ink business premier card from chase for business. make more of what's yours. >> the single biggest thing you can point to is what is different in goods inflation. that is what we are not looking

at enough right now. we have had a big disinflation in goods, so it is easy to say, well, we have returned to this prevent amick goods deflation, and that is what we had pre-pandemic. goods prices went down over time and anyone who has been out buying things over the last couple of years, certainly, the prices are not down. jonathan: andrew hollenhorst brilliant earlier this year. from new york city, welcome to the program. equity futures on the s&p 500 -0.15%. good morning from new york. it starts this afternoon with fed minutes and then picks up after the close with nvidia numbers. tom: it is the main event and the raging debate about leadership. let's say they stumble. we are not predicting it. but let's say in some way nvidia stumbles. what does that do to 40 multiple stocks priced in the last two

weeks? jonathan: i mentioned this earlier. you strip out the performance of the 20 ai stocks and you have an s&p 500 that would be flat. we spend a lot of time talking about the fed, economic data, payrolls. an ai frenzy behind these moves, and a legitimate one based on the numbers we have seen. tom: i was guilty of this as anyone. we do not talk about the laggards. i am going to suggest energy and banks are part of that flatness. lisa: which is the reason why i almost choke i think nvidia -- joke nvidia mrs.. isses. tom: alan greenspan would say the market was a clear indication of the goodwill on the american economy. are we going to get 4600 on spx?

these are huge moves and i am sorry. equity markets matter for jerome powell. jonathan: in what way? tom: trump would say a constructive tone. jonathan: 12 months ago they wanted tighter financial conditions and then we saw pushback. and then you start to see that move unravel and i don't get pushback the other way. they respond asymmetrically. lisa: this is why i struggle with data dependency. which data? how are they looking at the market? are they going to focus on the employment cost index? are they focusing on the sentiment survey? it is the one that stands out at that moment. it is difficult to form a cohesive opinion. tom: the wonderful interview we had with pgim. if you get there framework on

real rates, it turns this blah, blah, blah on its head. jonathan: if yields start going lower not because of disinflation because demand is collapsing, the credit core can go two ways. if you are getting lower yield, you are getting disinflation but also weaker demand. tom: secondary -- i agree -- but the housing market gets an act of god nationwide. jonathan: do you think it greases the wheels? tom: i don't know. we have never seen this. bramo is looking at six bedrooms. jonathan: should we ask someone who might know? tom: drew reading is with us right now. the man on home depot, lows, and the rest of the homebuilders. let's start with the basic idea home depot trades at a premium

to lowes. 19 versus 15. why is lowes second-best home depot? drew: the premium is the highest it has been in some time. some of that has to do with greater productivity in home depot stores. lowes has kind of lagged. home depot has traditionally outpaced lowe's and that has to do with exposure to the customer. lisa: there was a cohesive message from both companies that big ticket items are on the decline in terms of purchases. is this a representation of a housing market in

stasis? drew: i think there is a couple of things going on. i do think the consumer is under greater pressure than we have seen the last couple of quarters. it is the pullback in discretionary items. think of things like floor and cabinetry, appliances, and another big piece of this is think about how much lowe's group sales during the pandemic. they grew 30% during three years, 16% annualized, and that compares to the 5% in any given year. we think there is a lot of pull for demand during the pandemic and we are starting to see that give back. the last thing you have to mention is what is happening in the housing market. we have sales of existing homes below the $4 million annualized rates. that traditional relationship between home-improvement, spending, and sales is not as strong. you would be naive to think with

sales as low as they are that is not impacting the story. lisa: let's go there. how far lower would mortgage rates have to go to ignite actual action in the home sales market? what is your sense? how far do they have to go? drew: that is a tough question to answer. we have never been here before. but if we look at what the builders have been saying, it seems 5%, 5.5% has spurred additional activity. the homebuilders have been able to get there through buy bounds but total home sales are struggling. if we get to 5%, 5.5%, i think that spurs more activity. right now, we are coming off 8% in looking at 7.25%, 7.5%. tom: can they do what they did the last 10 years? even lowe's, which is a laggard to home depot, is on 17% for

per year total return. do you frame 10 years out as a redo? or is there a lower expectation? drew: we are typically look ing out over the next few years as a return to growth next year as optimistic. we think something in the low single digit decline is more likely. when we get on the others of the slow down in the broader housing market we think the market can return to growth in the low to mid single digit range. a lot of that has to do with the opportunities that are out there for lowe's in terms of their investments in the pro-market and their e-commerce platform and supply chain. we think there is a bit of pressure now headed into next year, but beyond that we think we will see more normalized growth. jonathan: drew reading, thank you. we have gone through a bunch of

surprises year to date given what we have seen happen with yields, interest rates, and the fed. to see the number four performing stock on the s&p 500 up 94%. tom: i missed this. jonathan: mortgage rates at 7% plus whatever and we have seen them up 94%. people think they would not be selling their homes and these homebuilders would be the guys selling the house us to places they were not. tom: i have no interest in nvidia but i framed out that big tech would do well. i did not frame out that housing would do well. lisa: it also highlights how rate insensitive the market is. a lot of these developers have been able to offer financing at a lower rate than the headline mortgage rates people are able to get elsewhere. it goes to this question how long and variable are the lags? have we felt the tightening if

the market has died? jonathan: those lags are 20 years long. lisa: exactly. 30 years. jonathan: it was something like 3.6%. we are quoting 7%. [laughter] you take the outstanding mortgages at the moment and the effective rate is 3.6%. lisa: how many people are taking out 7%? tom: in the last hour, what point if mortgage rates come down does the national frenzy begin? lisa: 5% to 5.5%. jonathan: the latest read, 3.74%. lisa: oof. jonathan: creeping in. tom: i think lowe's has a better display of artificial trees. the 7.5 foot pine. jonathan: how much? tom: $328. jonathan: pricey.

lisa: that is also pre-lit. jonathan: so was mine. $150. tom: lisa, you have no idea. [laughter] (sfx: stone wheel crafting) ♪ 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? ♪

>> the federal reserve is done in terms of raising interest rates. they are going to be on hold till the back half of next year.

>> even if it looks more like a soft landing eventually, there would not be a lot of urgency for the fed to cut rates. >> i think the market is moving the right direction and that by may or june they will be able to cut rates. >> the economy will slow down. >> the central bank sedated dependent and we do not get the forward guidance. announcer: this is "bloomberg surveillance" with jonathan fe rro, tom keene, and lisa abramowicz. tom: good morning. the nvidia earnings report that we will see tonight. we talked earlier about nvidia. what if they miss? what if they actually beat? what does that do to the magnificent seven? jonathan: 2012 is a great vintage. enjoy that bottle. nvidia gains of more than 240%. to see the nasdaq yesterday

close at 22-month highs. tom: record highs. jonathan: all-time highs. bank of america publishing their outlook moments ago for 2024 year end. 5000. this is what they have got to say. we are past maximum macro uncertainty. the market has absorbed geopolitical shocks already and the good news is we are talking about the bad news. we are bullish not because we expect the fed to cut but because of what the fed is accomplished. tom: the many walls of worry. apple is going to die because of china and apple is not at record highs. the worries seem to be drifting away. jonathan: it has been a punishing market. even if you called apple correctly, basically gone to know growth for the core of its business. china has been a struggle, yet the stock has gone the opposite direction, which is what the rest of big tech has done.

lisa: winner take all. at what point are we seeing the dominance of the big tech in the big names in general? at what point is that showing the divergence between these names and the rest of the economy? the rest of the economy is showing real signs of struggle. tom: we try to get out front and i saw someone predicting we would see a lot of credit issuance. even with rates not where they were two months ago is it opportunistic to unload billions? lisa: have people gotten over their skis with this idea that rate cuts are a good thing in terms of why they are happening? a good thing for risk assets and that is the question we have to ask. have we priced out the bad news to get rate cuts next year? tom: real yield emeritus over here. [laughter]

you were elbowing greifeld out of the way. i get what wilson was talking about. 2.11% real yield. what does it do to our belief? jonathan: i want to pick up on what lisa is talking about. it is not just about whether the fed is cutting interest rates were not. you have to think about the why. the why is far more important. not all rate cuts are created equally. if this is about keeping real rates consistent and not being overly tight and delivering those surgical cuts, great. you might be able to say that is constructive. but these rate cuts are coming because the economy is deteriorating. and this is what mike collins is talking about. if it is the latter enough the former, the call on credit is different and it is not as good. lisa: which is the reason we picked up so much of walmart's comments.

the outlook had deteriorated materially the previous 90 days which is why i am interested in the retailers reporting earnings with disappointing outlooks. how quickly are those changing as consumers pull back? tom: that is real gdp coming in. if you get disinflation, all of a sudden, you get nominal gdp well under 5% or lower. that is where this new worry comes up in a market -- futures are negative. when do we go green? jonathan: we are negative 0.2%. the fate of the market may be in the hands of fed speak and nvidia earnings. i would throw in jobless claims as well. claims tomorrow morning. tom: you can do this on the bloomberg professional service, the four-week jobless claims. i have a statistic of 220,000. that is still a boom economy. jonathan: we are coming up with exceptionally low levels.

are you going to look at the change? for many people you have to look at the change. it is moving in the other direction. tom: i look at a polarized america and sector by sector and i would love to learn more about energy and banks. we can do that as for tori fernandez is with us -- with victoria fernandez who is with us from crossmark. what is the strategy? victoria: throughout the last year when a lot of people were trying to make a decision of whether to be in or out of the market, for our clients, we were in the market but we were being cautious as to where we were putting our money to work. we had a lot of defensive names while still having cyclical names. our strategy has not changed tremendously. on days of the equity market is up -- because we do not think we are in this solid bull market --

we are trimming names and going into the names that pullback. you mentioned energy. that is one area we have been adding some exposure. we actually are adding into health care too. health care has been decimated but you look at the balance sheets and you have a lot of opportunity. adding a little bit of fixed income, having a little bit of cash, using alternatives in your portfolio like a cover calls. we think this is the time when you really need to have that diversification and be ready because we think there is quite a bit of volatility to go. jonathan: do you get uncorrelated fixed income versus equities? victoria: not as much as you probably used to. but what you're going to be using your fixed income for is for the cash flow. you can get a 5% yield on the short-term part of the yield curve. it is an opportunity to have something better than cash, a little better than government agencies.

you can lock that in and add a little bit on the longer end of the curve where you can have that steady cash flow over a longer period of time to buffer equity activity. lisa: there is a question about whether rate cuts next year are good or bad for risk. how do you think about that at a time when people are expecting a soft landing as a base case? victoria: i think there is a misconception that the fed is going to cut in the first half of next year. if you look over this hiking cycle we have already had six dovish head fakes, where the market got ahead of itself and priced that back out of the market. i think we are seeing a little bit of that now. i do not expect the fed to cut rates until the second half of next year and i think it will be more because we are seeing a deterioration in the economy then it is because of inflation expectations. we are back at pre-covid

delinquency levels in regards to autos and credit cards, especially in the 18-year-old to 29-year-old age group. as delinquencies go up at a time when low unemployment is, it means they are going to increase their loan loss reserves, loan growth goes down. these are things that are going to stymie the economy and the consumer and that is where we are going to see rate cuts. lisa: when you look at your risk appetite heading into next year do you think people are overly optimistic about both rates coming lower and equities continuing to do well, led by the names that have done best this year? victoria: i do think there is a little too much optimism right now and i would like to be optimistic. i like to say good things are going to happen but we said the last year you have got to be cautious. you look at leading economic indicators down again. even coincident economic indicators are flat. consumer is weakening. you have been talking about mr. mcmillan's statement about

disinflation and worries about the consumer. we have heard in the retail earnings. i think you are going to see some of these things that have been propping up the equity markets, like buybacks, start to come back. tom: but you are living in texas, the austin boom. the austin boom is service sector and technology. how do you underweight the magnificent seven? victoria: it is a tough decision to make on what you do with this magnificent seven. obviously, the ai tailwind has been tremendous and we assume nvidia is going to report good earnings and is going to continue to lead that narrative and help that magnificent seven. you have to have exposure to these names, you do, but you have to be cautious in putting all your eggs in that basket. if you have, you have done well, i cannot deny that, but we assume we are going to have a pullback in this economy and the consumer is going to come back

and capital expenditures and spending by corporations is going to slow down. we think you have to be concerned about what those earnings look like going forward. have your exposure but add that diversification in other areas as well. jonathan: thank you. happy thanksgiving. victoria: happy thanksgiving. jonathan: victoria fernandez of crossmark global investments. i have shared this with you a few times this morning but for those catching up, this from socgen. dominant leadership of a handful of stocks, the magnificent seven, the narrow equities will likely continue until recession begins, fed rate cuts become more prominent, and the yield curve is in positive territory. that is the call. the timing. most triggers back loaded into 2024. socgen is saying the dominance of this narrow tech story is going to be where it excels. lisa: is this the reverse of what we saw a couple of years ago? it was just gain and gain.

jonathan: it was different. dip and rip. lisa: and then rip and dip. [laughter] tom: good news, bad news, bad news, good news. lisa: i am losing focus. jonathan: stuart kaiser has said it is a rally build on a good economy and he things when the economy turns, laser focused on claims and continuing claims. he is basically saying you want to get out and get out fast. tom: that is one of the opinions and he still got this stunning 5000 bank of america. how many more of these are we going to see? jonathan: i don't know who we are waiting for. a lost track of it all. tom: does mr. wilson going to make an appearance? jonathan: we need to catch up with morgan stanley. he is out with his call. minimal upside. tom: he reaffirms the belief. eight months ago he was the king of the hill.

jonathan: one bad earnings report from nvidia -- tom: everybody gets injured. it is crushing. jonathan: to get everybody up with the scores -- not the football scores -- tom: i thought you were talking about the detroit lions. jonathan: are they doing all right? tom: the great michael barr will tell you 8-2, first time since 1962. jonathan: it has been that long? tom: that is how bad they have been. jonathan: why? tom: i will let michael barr answer that but the answer is politics. it is like the new york giants. it is a family owned team and it has been a challenge. lisa: i love listening to him talk about it. he starts screaming into the microphone. it is ridiculous! jonathan: we are talking about michael barr. [laughter] tom: michael barr walks down the

street and it is like -- jonathan: he is a superstar. it is just magical. tom: he is doing an entire show. jonathan: am i allowed to attend? tom: sure. lisa: you can sit in the audience. [laughter] jonathan: i will just watch and listen. greg valliere is coming up next. we will talk about the prospect of a truce in the middle east. tom: he goes out and shoots the damn turkey. jonathan: maybe we will have that conversation too. we have no idea what you are going to do. this is bloomberg. ♪

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are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today. >> i don't think there is any doubt in my mind that the opportunity arose for israel to

send their special operators in to get these ostriches that they would wait for negotiations -- these hostages, that they would wait for negotiations. this is being pushed by qatar, hamas, and the united states. jonathan: that was retired brigadier general speaking on balance of power. the latest on this conversation. the reported by axios this morning. two sources with direct knowledge telling axios that is part of the hostage deal, as well release three palestinian prisoners for each israeli hostage released by hamas. there are two phases to this but that would ultimately be a summary of events that could take place today. tom: as soon today is the key point. we are hanging on this by the minute. the bottom line is i think the entire press corps is waiting by the minute. jonathan: nathan hagerannmarie

cautioned -- nathan -- annmarie talked about this as well. tom: you can imagine the military operation going forward. jonathan: israel has been against any kind of cease-fire. the reports today are about multi-day cease-fire. it will be interesting to see if this comes together. tom: right now on politics and the moment of this election in new hampshire is greg valliere, chief u.s. policy strategist at agf. 8.3 million new voters will be eligible in 2024. they age into their ability to vote. what is the history of 18 to

22-year-olds showing up? greg: it has often been disappointing. at the same time, this is a big number. there was an issue that has really motivated young people and that is the war. the hamas-israeli war. polls show young people are opposed to the biden policy. biden's numbers are dropping fast. the young people coming into the system will put pressure, i think, on both parties to reach some kind of settlement. tom: do those young people want to vote for the former president? greg: donald trump? no, not necessarily. i think most young people would say none of the above. but i think on many fronts you have to say joe biden is not connecting with young people. whether it is taylor swift and the gaffe he made yesterday, or

farmer serious issues like what is going on on campuses, he cannot defend what is going on on the campuses, but i live in a city addicted to the polls. it shows you movement of young people. lisa: it has been a consistent trend of deterioration in joe biden's popularity. how serious are the discussions getting around getting a different nominee to take his place? greg: i think this reached a turning point over the weekend in which biden profaned lee criticized his critics. he has made it clear he is not dropping out. i would be very surprised. the filing deadlines have come and gone. i think he is in. i think it is trump versus biden and that is not a palatable choice. lisa: joe manchin has been

making the rounds and he is flirting with running for president as an independent, talking about how neither president is gaining traction with potential voters. former president and the current president. do you think there is a viable independent candidate who could actually win versus just take votes from one or the other? greg: going back to my home state of new hampshire there is a poll that showed robert f. kennedy junior at 22%. that was astonishing. one of the other things i do not understand, the new york times had a front-page story about the disconnect between how the economy is doing -- low unemployment, inflation falling -- and how people view it. people's view of the economy does not fit with the data. tom: it doesn't. why is that? to my great theme for this year -- and i am stealing this from lowell brainard -- the price of

thanksgiving dinner is down 4.5% but up 25% from 2019. that explains the electorate. greg: yeah, exactly. this disconnect, if it persists, will be another albatross for joe biden in his reelection effort. maybe next year if inflation is clearly falling things will change, but right now, an awful lot of americans are nervous about inflation coming back. tom: disinflation, i cannot say enough. three-month annualized, year-over-year thrown out the window,. i see every day from every person it is a reset from december 2019, maybe february 2020. lisa: let's connect this to where we started the conversation which was the war between hamas and israel. by next year is it going to all be about the economy or is there

going to be this hangover that we see currently that is eroding some of president biden's popularity? greg: i think by the end of the year the war will be over. there might be scattered resistance but i think that outcome is inevitable. sadly, that is not the case in ukraine. i would say the war is another source of anxiety that americans have and i think they feel washington is not listening to those concerns. lisa: do you have a sense of what people want to happen? of what would be considered a positive in humanitarian but also political outcome for this war? greg: i think people would like clarity. if this war does not end conclusively and it drags on, i think that would be extremely unfortunate. and i would say this. i think netanyahu and the israeli intelligence community has to answer for the fact they got totally blindsided. this cannot happen again.

jonathan: so many questions about that. thank you. greg valliere of agf investments. slightly distracted by the headlines crossing. netanyahu, we are making progress on the return of hostages. i hope there will be good news soon on hostages. those comments following this reporting from axios. a deal between israel and hamas to free dozens of hostages and declare a multi-day cease-fire is imminent and could be announced by the qatari mediators as soon as today. lisa: what i find interesting is where the pressure is coming from. we were talking with anne-marie and israel does not want a cease fire of any type until hamas is eradicated. in israel there is so much pressure to get the hostages home and growing pressure against netanyahu's leadership because of how unpopular he is and some of the mistakes and

hardline approaches. tom: annmarie hordern was great. it is not all the hostages. we are only talking about a small group. that is better than none but this is not like other hostage discussions where is all the hostages. jonathan: the number that axios went with was 50. tom: out of the 100 whatever. jonathan: not all. tom: that is the key thing. the other thing is the military effort as the move from north to south in gaza. horrific is the only word i can come up with. the images and the maps and the rest of it. jonathan: you have to agree. it has been tragic. tom: it is brutal. jonathan: conversation continues in the next hour. we turn to the markets. emily roland, brian levitt -- i remember this line from brian. i am a fomo guy. [laughter] i started laughing but he did

not miss out. tom: he is on because of michigan-ohio state. jonathan: is he? i can ask him about it. we will talk about credit and that maturity wall in 2025 an winner these come but is going to move lower to issue some debt? tom: i am an amateur on this. they have a wonderful joy in issuing debt. it is a no-brainer to take debt of 8% or 4%. these stupid percentage numbers. jonathan:jonathan: there is a window. tom: there is a window. well said. jonathan: thank you, buddy. tom: that's good. you working on the sides? jonathan: mac & cheese. [laughter] cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com

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tom: "bloomberg surveillance". good morning. mr. ferro, he is working on his side dishes. [laughter] lisa: he has mac & cheese tom: we were debating. you have got to go with mashed potatoes. it takes days of preparations. lisa: sweet potatoes with marshmallows on top. tom: that is on american -- unamerican. lisa: that is not unamerican. tom: it will be an interesting

week. huge economic data dump here tomorrow. we squeeze three days into a holiday wednesday. we are going to talk an important conversation with citigroup in a moment, but right now, michael mckee in charge of thursday football. thursday football is more interesting than the economics today. we wait for the data dump tomorrow. what do we need to look for tomorrow sides claims? mike: claims are what you are looking for. durable goods orders will be interesting to see if businesses are still spending. those get revised once we get the factory orders numbers. they will not be definitive. claims, people want to see if the 231,000 we got last week was holiday caused some oddball number or if we are starting to see a larger group of people getting laid off. a lot of interest in that tomorrow morning for people hit

the road to go home and watch football for thursday. today we get the fed minutes and it will be interesting to see how many people care if the fed minutes give us anything besides what we already know. tom: frame that out for us. three weeks old? how old are the minutes? mike: three weeks old. tom: is that ancient? mike: it is definitely ancient, especially now. since the meeting we have had the jobs report, the cpi report, we have seen a major reversal in the jump in interest rates along the yield curve -- which may have been a reason the fed cites why they might want to have held rates where they were at the last meeting. a lot has changed since then and there is more new data. what people will be looking for is any kind of criteria. criteria for whether they raise or lower rates or criteria where we can try and figure out what they mean by longer and higher

for longer. lisa: i have been interested in the economic data from retailers. they have been talking about the consumer and waning demand. best buy seeing what they call uneven consumer demand. this is part of the reason they cut their forecast. we heard similar messages from macy's, target, gap, walmart. how much is there this divergence going on with ongoing weakness in goods sectors even with resilience in the services? mike: it has been going on for a while and it is likely to continue. do people really intend to slow their spending or are they going to time it differently? there is some thought what people are waiting for is prices to drop. retailers have suggested -- walmart was the one that got headlines for this -- that we might see prices go down during the holiday season and that would mean people might hold off on buying. last year we saw a jump in october sales. this year we did not see that.

maybe people are waiting. or maybe a slowdown is underway and people are not going to spend as much. tom: thank you so much in washington. this is a joy and we rarely do this. you look back at the people who tanked, those who were successful, but we can say without question citigroup has had one hell of the year in forecasting the economy. andrew hollenhorst and others have hit the ball out of the park on higher rates. driving the ship is citi. their global economist is robert sockin and he joins us now. i want to go to the heritage which is you studied under martin at columbia and he is, in my opinion, the growth optimist of generation of economics. do you share his sheer optimism

on global growth? robert: i do. i think long run economic growth can be really benefited by growth in productivity, innovation. there is a lot of scope to do a lot of good. he always taught me it is not a zero-sum game. the buy can be divided or globally. for the next year something we have been highlighting is more pessimism we think global growth is going to be soft. that is more the cyclical factors that we face. we think we are in for harder times ahead but long-term, absolutely an optimist. tom: you would push against the imf's call of subdued global growth. somehow martin and others would say we do generate growth from other factors that surprise along the way. robert: we think we have seen a lot of resilience in the global

economy. if you went to the end of last year, we thought global growth this year would be running below 2%. we are tracking about 2.5% in market exchanges. pretty big upside surprise, most of that due to the u.s., but we have shifted that weakness into further quarters. we think that post-covid services momentum is starting to fade. those interest rate hikes are going to bite more into next year. and that manufacturing weakness we see globally is going to undercut activity more broadly. we are holding onto that slow down but we have been surprised to the upside throughout the year. lisa: let's talk about not the longer-term but the shorter-term and what you said. you think we are in for harder times. what does that look like at a time when people are expecting this gentle slope upward in the unemployment rate and a general decline in consumption? do you push back against that view? robert: we think eventually these interest rate hikes are going to have to bite more.

you are starting to see more evidence -- even in the u.s. where the data have significantly surprised as to the upside all year. that has been the source of most of the upside in our global growth forecast. but you are seeing some cracks. you are seeing credit conditions that have tightened significantly. we have done work that say that tends to play for the economy over a two year period. and you are seeing strains on the lower income consumer side where you are seeing rising delinquencies, rising credit card debt, they have drained most of their covid access savings. most of those will bite going forward. that said, the probability of a soft landing has gone up materially. we have seen a lot of these factors stay yellow warning signs and not read warning signs. lisa: which is why people are trying to understand whether this is like the other times where it becomes non-linear and you see unemployment pick up.

or if this time is different. given the discussion from retailers and how quickly things are moving does that make you feel like something is happening more quickly in terms of deterioration? robert: absolutely. if you look at the history of cycles, the labor market tends to turn for the end of a cycle. it moves rapidly after a period of relative stability. if you look at the lower income consumer segment, when they pulled back in spending, it tends to be sharp and quick. i think you could get this non-linearity. but the resilience we have seen is encouraging. stronger growth -- tom: everybody looked at the andrew hollenhorst call and said this kid is nuts. it is not going to happen and if it does, the world is going to

die. the core issue is we got the deadly, l area and -- dudley, el arian, hollenhorst call and we did not die. robert:: things early and calling things right. we really have not seen the effect of these higher rates yet. mortgage rates are above 7%. you had that excess savings story in the u.s. and we still think there is a fair amount of that left. rates have gone up a lot and growth accelerated in the third quarter. tom: the dean of economics at

columbia, he says there is something new. we going back to john williams' 2% or can we anchor at a new inflation? robert: that is a big debate. our view has been the post-covid world is going to look mostly like the pre-covid world. our star has not moved much. but maybe what you are seeing is exactly that. the economy has held up so well because it can sustain a higher level of interest rates. that is a key part of the debate. lisa: what data is most interesting for you in the next two months or month and a half? robert: i would say two factors. one is wage growth. can we still see wage growth continue to cool from very elevated levels? we think the fed's comfort zone is 3% to 3.5%. it is still running 4%, 4.5%.

that is down from 5.5%. there is still a long way to go. i want to see if that can continue to cool. and consumption. we have seen enormous upside surprises from the consumer throughout the cycle. can that continue? tom: robert sockin with us from citigroup. there is some form of breaking news. i want to read it verbatim. this is politico within the maze of speculation. the operative word is "has." the united states has brokered a deal between israel and hamas free dozens of hostages held in gaza in exchange for a four or five day pause in fighting, according to two current u.s. officials and a former u.s. official with knowledge of the talks.certainly, the wonderful g of having bob hormats with us in

a moment. lisa: we are seeing other headlines from other sources that the israeli cabinet is going to meet in the next few hours to review the progress on hostages. it feels like it is live and actually happening in a more material way than it has over the last couple of days. tom: widely rumored through the day but you wonder where this goes into the weekend. they do mentioned a four or five day pause. i am not sure what you do with that besides humanitarian aid. lisa: humanitarian aid and getting a hostages out. to be honest, all of us are looking for resolution for an end to the death, for an end to the destruction in gaza with resolution. tom: we are thrilled ambassador hormats will be joining us in about three minutes. the s&p 500 down 0.3%.

lisa: when we have this conversation with bob hormats but how the u.s. is influencing these talks at a really fraught time. and one of disagreement within even the democratic party of how to proceed. tom: and with the death of rosalynn carter and the fragility of the former president the images of jimmy carter with others. to harken back to 1967 and all that was done. you wonder how those images will look forward if we somehow extricate ourselves from this. lisa: we are going to talk more about politics in the next 12 months. it is going to become more and more of a focus. will markets care? tom: i think they have proven they don't. lisa: unless there is a bond auction and then they care a whole host more. there is this question here of how that is going to heat up. tom: west texas intermediate $77

a barrel. brent crude $82 a barrel. i am not going to say much about that. i want to point out the 10-year real yield with a shock this morning. 2.15%. i brought this up yesterday and nobody is listening. we visit 5% two-year yield and nobody is looking for that. lisa: creeping a little bit higher. you are right to raise that. tom: dollar weaker as well. ferro is looking at the euro. he is going for the big bird for thanksgiving. looking large with sterling. lisa: just of the breast. tom: you know. lisa: i like dark meat. it is better. tom: coming up, robert torments on israel and -- robert hormats on israel and hamas. ♪

what do you see on the horizon? uncertainty? or opportunity. whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today. lisa: we want to get the latest on the breaking news.

there has been some sort of resolution, some sort of agreed-upon truce or cease-fire, on the part of the israeli-hamas war. some return of hostages. annmarie hordern joining us and has been covering this for us. what do we know? annmarie: they are close to a deal. this would be for potentially as many as 50 to 100 hostages taken by hamas. only women and children. it would come with a number of days of a pause, potentially four days of pausing of what is going on in gaza. on top of that it would also mean palestinian women and children would also be released from israeli jails. we can see this as soon as today. my sources are saying it is close. i would read the tea leaves from officials. we heard from the political

leader of hamas based in doha. he came out on telegram saying they are close to a truce. the president yesterday say they were close. he did not want to lean much into it because when you are dealing with hostages these deals can break down. for many weeks i was close to being able to reporting something and at the last minute the deal broke down. but the president yesterday put his finger up, crossed, and admiral kirby said it is the closest we have ever been. tom: what happens after four or five days? annmarie: we don't know yet. tom: it is a prosecution of a military strategy, right? annmarie: many people want to see the bombardments slow down. there is a lot of pressure on israel. israel did not want to do any pause. they did not want to do anything until hostages were released, but they realize they were not coming out unless there was a pause. tom: stay with bloomberg all day.

sometimes you get lucky and we do that always with robert torments. -- robert hormats. ambassador hormats with the yale school of management. you and i could go for three hours. we have about seven minutes. there is james earl carter with sadat. we have nostalgia for that moment that you lived. what image are we going to see when we extricate ourselves from this war in gaza? bob: i think there was -- there were two interlocking moments carter was able to pull together and do that. now you have hamas. you have the israelis divided. hamas is a very inchoate

operation. there is not clear how much power the senator of hamas has. it is a very dispersed organization. with hostages, as you have correctly pointed out, you do not know until it is actually done. remember the movie "the bridge of spies." they did not know the transfer was going to take place until it did. i think these things are very sensitive. but what is important about this is that the united states and qatar have played this intermediary role which is constructive and gets the u.s. back into the game. tom: it is a primal wake-up call on american diplomacy is being efficacious. you have said this for decades. we cannot let down our diplomacy. what is our next diplomacy look like after what we have lived

the last eight or 12 years? bob: that is the interesting point. during the cold war diplomacy was washington and moscow. and now you have got lots of power centers. obviously, this summit with the chinese was, i thought, very constructive. i am going to china in a week to talk about what kind of progress can be made to support what was done in the california summit. opening up new opportunities for business and diplomacy, but talking to a number of people of how we move the very constructive process along. you also have a variety of new power centers that you have to have proactive diplomacy. india is playing a greater role in the global south. iran is a power in the region. saudi arabia is playing a greater role. you have to have a more agile and more diffused diplomacy.

there are a lot of power centers of different levels of power but a lot more influential countries then there were in the past. lisa: which is why there was focus on china's meeting with arab leaders and wondering how exactly they were navigating something that they have not taken a stance on. what you do glean from that? bob: that is a good example. the chinese for years played virtually no role in the middle east. they have a base in djibouti but that is north and out of the framework. it is on the tip of africa. but they were not engaged in the middle east. then we find they brokered a deal between saudi arabia and iran. it is clear they have a new positive, proactive -- and i would say quite constructive -- diplomatic approach. we should not underestimate the

quality of the chinese diplomatic order. they are very good. they are playing a greater role in the fact that we are now paris engaging in this diplomacy to help deal with the hostages shows we are coming back into the game and playing a constructive role. but we have to do this in a whole lot of countries because we are going have to play a role -- if we want to play a global role in a variety of regions. lisa: the more i read the less i know about where the power centers are, who was brokering what, whether saudi arabia is getting more aggressive with israel or not. do you have a sense of whether there is still this animosity between iran and saudi arabia? of whether there is this moved from qatar and egypt to move away from israel? do you have a sense of how this tied is shifting? bob: i would say that iran and saudi arabia probably have a lot

of questions about each other and a lot of suspicion. but at least they are engaging in conversation in a way they were not before. i would say it is probably true as well. i think the sunny arab countries in the region did want to have, and still want to have, a close relationship with israel. one of the reasons i think hamas did this horrible thing is that it did not like that was going on and thought this would interrupt that process. i still think the underlying goal is to have a greater degree of normalcy between israel and the arabs. tom: you celebrated your 80th birthday and between you and michael bloomberg, you are as well-preserved as anyone. what is the secret to looking this good at 80? bob: getting up early and coming on the show. [laughter] tom: great answer. i want you to talk about this crazy american geritol chrissy

we are living. the president is 81. the other guy is 78. half of congress is 92. how did we get here? bob: you asked a question with two powerful ingredients. we need to tap the younger political leaders and there are plenty of good people who are in the process of moving up in the political process. but the older leaders have taken the oxygen away from them. they do not get to participate in a lot of proactive debates that are going on because you have got two leaders who are older that take a lot of that oxygen. and money away. but the second point that is even bigger is we have to start thinking a lot more the implications of what we do today

for the next generation and the next generation and the next generation. that has to do with a budget because we are leaving our children and grandchildren -- tom:tom: this is your book from a couple of years ago. when is the next one out? bob: i did an article for fortune magazine explaining why this was a problem and what was going to mean for social security, the budget for contingent liabilities, and the numbers are up and up. who is going to pay the interest? our children and grandchildren. we are leaving them with a burden. climate is another. tom: breaking news is getting in the way. i have to cut you off. nikki for joining us. any breaking news into the 9:00 hour? annmarie: just that we remain close to getting this hostage deal done. we also did hear from the israeli prime minister and the israelis are tweeting they will have a war cabinet meeting this evening. tom: stay for this and annmarie hordern, balance of power this evening. we say thank you to robert hormats of the yield school.

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jonathan: life in new york city this morning. equity markets slightly better on the s&p. >> everything you need to get set for the start of trading. this is bloomberg markets with jonathan ferro. jonathan: coming up, sitting at 22 month highs.