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00:00> > THEY BREAK SOMETHING WHEN THEY RAISE RATES TOO MUCH. > > THERE IS ALWAYS THE QUESTION OF WHAT IS > > DIFFERENT THIS TIME? > > I THINK WE WILL THE REALIZATION THE ECONOMY IS IT NOT AS GOOD AS WE THOUGHT. > > SOME INDUSTRIES OUTPERFORMING. > > THIS IS "BLOOMBERG SURVEILLANCE." JONATHAN FROM NEW YORK CITY FOR OUR AUDIENCE WORLDWIDE, GOOD MORNING, GOOD MORNING. THIS IS "BLOOMBERG SURVEILLANCE." ALONGSIDE TOM KEENE AND LISA ABRAMOWITZ. YOUR EQUITY MARKETS UNCHANGED. THE S & P STILL NEGATIVE. TOM: GEOPOLITICS FRONT AND CENTER. STRONG SWISS FRANC. THERE ARE SOME KEY POINTS OF A NEWS WITH STRENGTH AND IT IS ONE OF THE ISSUES IN CONTINENTAL EUROPE. THE NEWS BURIED IS THAT THE U.S. AUTHORIZES THE DELIVERY OF STINGER ANTIAIRCRAFT MISSILES UKRAINE. THIS IS VERY MUCH A DEVELOPING STORY FOR ALL OF BLOOMBERG SURVEILLANCE. JONATHAN: WE HAD TO CLEANUP ACT FOLLOWING THE NEWS CONFERENCE. THE QUOTE, IT IS ONE THING IF IT IS A MINOR INCURSION AND WE HAVE TO FIND THE PATH OF WHAT TO DO AND WHAT NOT TO DO. IS THE TOOTHPASTE OUT OF THE TUBE? TOM: YOU HAVE BEEN TALKING ABOUT THE NORD STREAM 2 AND THINGS THAT MAKE MY EYES LAYS OVER, BUT THIS IS THE PHRASE OF A FULLY COORDINATED PLAN, WHERE IS THE FULLY COORDINATED PLAN AMONG WESTERN ALLIES AND NATO NATIONS. JONATHAN: THAT IS THE POLITICS. IN THE PREMARKET, ONLY ONE NAME, NETFLIX, DOWN, DOWN, DOWN IT GOES 20%. MARIA: DOWN 20% -- LISA: DOWN 20% AFTER THEY ANNOUNCE THEY EXPECT NEW USERS DOWN. THE KEY IS HOW MUCH WE BRING FORWARD DEMAND AND SEE A LAGGING REBOUND? WE ARE NOT SEEING A GO BACK TO PRE-PANDEMIC LEVELS IN TERMS OF THOSE GAINING TRACTION. HOW MUCH IS THE PRECURSOR ON WHAT TO EXPECT. JONATHAN: DOWN 20% ON THE NASDAQ . TOM: I LISTENED TO A CONFERENCE CALL AT NETFLIX AND THE CEO SAYING WE CAN TALK ALL NIGHT BUT THAT'S NOT GETTING US ANYWHERE. JONATHAN: I KNOW THAT IS A TRIBUTE TO YOU. TOM: MEATLOAF DEAD AT 74. 70 WHO HAD A LOT OF COURAGE. HE WAS REJECTED BY -- SOMEBODY WHO HAD A LOT OF COURAGE. HE WAS REJECTED BY EVERYONE. I HATE WHEN THE MEDIA BUNDLES THINGS TOGETHER. LET'S LOOK AT MICROSOFT OUT OF THE PIGGY BANK VERSUS NETFLIX. CASH FLOW, 2019 TO PRE-PANDEMIC OUT TO NOW. NETFLIX, -$3.1 BILLION. MICROSOFT, LOOK AT THE DIFFERENCE IN SIZE. MICROSOFT IS A GIANT ENORMOUS, 38 BILLION LARGE UP TO 65 BILLION. JONATHAN: I DON'T THINK YOU CAN COMPARE THOSE ANYMORE. THERE WAS PUSHBACK EVEN THEN. THAT IS JUSTIFIED THIS MORNING. I DON'T THINK YOU WILL GET MICROSOFT NUMBERS THE FOLLOWING DAY. TOM: I KNOW WE NEED TO GET TO GREG BOUTLE. I TOLD YOU EVERYTHING THAT I CAN. THERE IS NOTHING LEFT. JONATHAN: FUTURES NEGATIVE THREE ON THE S & P. DOWN 56 ON THE NASDAQ 100. DOWN PUT 4%. I WILL BRING YOU STATS ON THE NASDAQ 100 A LITTLE BIT FROM POSITIVE 1% TO -1%. IT WAS SAID THE FIRST TIME IN OVER 20 YEARS THE NAND AT -- NASDAQ WAS UP 1% AND FINISHED DOWN 1% ON BACK-TO-BACK DAYS. LISA: THIS IS WHAT IS GETTING A LOT OF PEOPLE CONCERNED. DOES IT PRETEND MORE WEAKNESS AHEAD? WE EXPECT ANTONY BLINKEN TO MEET WITH SERGEI LAVROV IN GENEVA. THE KEY ISSUE IS WHAT CAN THE U.S. DO TO EITHER PUT SANCTIONS ON RUSSIA OR EVEN PENALIZE THEM WHEN HER IS THIS OIL TIED TO EUROPE, THE NORD STREAM 2, THE ISSUE OF THE RELIANCE OF THE EUROPEAN AREA AND CRUDE RISING TO THE HIGHEST LEVELS GOING BACK TO 2014, HOW MUCH DOES THAT PRICE HINGE ON THE TALKS? THE LEADING INDEX FOR THE MONTH OF DECEMBER, LESS INTERESTED IN WHAT IT SAYS BUT THE TREND WE SEE IN THE ECONOMIC SURPRISES. WE HAVE SHEEN IT -- SEEN IT SHIFT DOWN. OVER THE PAST FEW WEEKS, INCREASINGLY THEY HAVE COME IN DISAPPOINTING. DOES THIS HINT TO THE OMICRON BUMP IN THE ROAD. AT 11:30 A.M. WE HEAR FROM JANET YELLEN SPEAKING AT THE VIRTUAL DEVIL'S MEETING. YESTERDAY SHE WAS TALKING ABOUT HER EXPECTATIONS FOR INFLATION REMAINING ABOVE 2%. IF WE ARE SUCCESSFUL IN CONTROLLING THE PANDEMIC SHE SAID I EXPECT INFLATION TO DIMINISH AND HOPEFULLY REVERT TO NORMAL LEVELS AROUND 2%. HOW MUCH DOES THIS BECOME THE MAINSTREAM? IT SEEMS THIS IS INCREASINGLY CONSENSUS, EVEN AS A NUMBER OF INVESTORS PUSHBACK AND SAY THEY ARE WRONG AND WE ARE IN A NEW INFLATIONARY ENVIRONMENT. JONATHAN: COPE IS THE KEY WORD IN EVERY -- HOPE IS THE KEY WORD AND EVERYTHING JANET YELLEN SAID. BANK OF AMERICA GETTING MY ATTENTION, JANUARY 2020, FIRST COVID-19 CASE, TWO YEARS LATER, 6% OF INVESTORS SEE COVID AS THE BIGGEST RISK IN THE 12 MONTHS. THE END OF THE PANDEMIC EQUALS THE END OF EXCESS RETURNS EQUALS THE END OF EXCESS ASSET RETURN TO THE END OF THE NEXT STIMULUS. BANK OF AMERICA JUST SAYING IT IS NOT ENDING. GREG, WE ARE TRYING TO FIGURE OUT THE DIRECTION YOU RUN AWAY FROM AND WHEN YOU BUY PAIRED WHAT IS THE DIFFERENCE? -- BY. BUY. WHAT IS THE DIFFERENCE? GREG: THE RATE OF THE PACE OF CHANGE IN REAL YIELDS. IF THEY CARRY ON THE WAY THEY ARE, IT IS PROBLEMATIC. TOM: COULD THAT SHIFT QUICKER? IT SEEMS LIKE WE ARE COMPRESSING PERFORMANCE OF ZEITGEIST INTO THREE WEEKS. I GET THE URINE CALL IN INFLATION. EQUITIES DO BETTER IN AUGUST, OCTOBER. COULD WE BE MISSING THE EQUITIES DO BETTER IN MARCH AND APRIL? GREG: I WOULD POINT TO THE PREVIOUS FED HIKING CYCLE. WE ARE ALL CONCERNED ABOUT WHAT THIS LIFT OFF FROM THE FED IS GOING TO MEAN. LOOK WHAT HAPPENED IN PREVIOUS CYCLES. IN 12 OF THE LAST 14 CYCLES, THE MARKET FINISHED HIGHER 12 MONTHS AFTER THE FIRST RATE HIKE. TYPICALLY, EQUITIES GO UP BECAUSE EARNINGS PICK UP THE SLACK. HOWEVER, IN FOUR OUT OF FOUR OF THE LAST HIKING CYCLES, WE HAVE SEEN EQUITIES LOWER IMMEDIATELY AFTER THE FIRST RATE HIKE. STEP HIGHER IN REAL YIELDS IS NOT THAT A TYPICAL FED LIFT OFF IN THE FIRST CYCLE. GOING INTO MARCH, REASON TO BE CONCERNED ABOUT TURBULENCE. LISA: HEADING OUT OF BANK EARNINGS THIS WEEK, HOW CONCERNED ARE YOU ABOUT MARGIN COMPRESSION AND WAGE INCREASES BEING BEYOND WHAT MANY PEOPLE EXPECTED? GREG: IF WE EXTRAPOLATE THE BANKS TO THE REST OF THE REPORTING SEASON, IT WOULD CHALLENGE MY MORE BULLISH THESIS FOR THE YEAR. THIS IS SOMETHING WE DID FLAG GOING INTO THIS EARNINGS SEASON. WHEN YOU LOOK AHEAD TO THE CONSENSUS EARNINGS FOR 2022, THE U.S. HAD THE WORST FORECAST EARNINGS. THE FINANCIALS HAD AN EXCEPTIONAL YEAR LAST YEAR. THERE WERE UNREPEATABLE GAINS IN TERMS OF INVESTMENT BANKING OR MARKET REVENUES. THE BANK IS A POTENTIALLY BAD BARRIER FOR THE REST OF THE YEAR. PEOPLE WILL BE FOCUSED ON LARGE CAP TECH BUT WE ARE GOING TO KEEP AN EYE ON THE INDUSTRIAL GO CYCLICALS WITH SOME HIGHEST GROWTH EARNINGS. JONATHAN: THANK YOU, SIR. REALLY INTERESTING PIECE ON THE FINANCIALS. IF YOU ARE HIRING THIS YEAR AND BOOSTING COMPENSATION AGGRESSIVELY, YOUR STOCK IS LOWER. IF YOU ARE FIRING AND REDUCING HEADCOUNT, YOUR STOCK IS HIGHER. SO THE BANKS IS A SECTOR, WITHIN THE BANKS, IT TELLS YOU SOMETHING VERY INTERESTING WHEN YOU LOOK AT THE HIRING AND THE HEADCOUNT GOING UP IN THE FIRING AND HEADCOUNT GOING DOWN. LISA: THE FOOTPRINT OF THOSE PROFILES ARE VERY DIFFERENT BECAUSE THE ONES THAT ARE FIRING TEND TO BE THE BIG MORE TRADITIONAL LENDING BANKS. I'M THINKING OF THE WELLS FARGO'S OF THE WORLD OR BANK OF AMERICA TRYING TO STREAMLINE SOME SERVICES, WHEREAS THE INVESTMENT BANKERS ARE THE ONES BEEFING UP THEIR TEAMS IN ORDER TO CAPTURE SOME OF THE MARKET ACTIVITY. IT POINTS TO THIS BIFURCATED NATURE AND THE BANKING WORLD, MUCH LIKE THE TECH WORLD. JONATHAN: AND THE SHOW IN MANY WAYS. J.P. MORGAN DOWN 7%, WELLS FARGO UP ALMOST 15% YEAR TO DATE SO FAR. SOMETHING TO THINK ABOUT. YOU KEEP TALKING ABOUT THE MOST IMPORTANT INFLATION PRINT OF THE YEAR, YOU KEEP PUTTING TO MARCH BUT MAY 11 IS THE INFLATION REPORT. IS GOING TO BE VERY INTERESTING. WE SEE THE PEAK IN INFLATION AND THEN A DIFFERENT WAY TO KICKING IN 12 MONTHS AGO. IF IT PHASE MATERIALLY, THAT COULD SET THE TONE FOR RATE HIKES. TOM: I THOUGHT THERE WAS A BLISTERING NOTE FROM DEUTSCHE BANK WHICH REALLY CAN HUMBLE THOSE LOOKING FOR FOUR TO SIX INCREASES. HE SAID THIS INFLATION IS CONTRACTIONARY. JONATHAN: HE ALSO SAID IF YOU WANTED TO KNOW WHERE IT NEUTRAL IS, THE EQUITIES WILL SETTLE BACK. BUT THE FINANCIAL CONDITIONS TELL YOU. TOM: WE ARE SUPPOSED TO BE IN DAVOS. JONATHAN: I AM THINK WE ARE NOT. TOM: I TALKED TO BARRY AND HE SAID NO VIRTUAL PIANO BAR. YOU SHOULD HEAR BARRY PLAY MEATLOAF. JONATHAN: THESE ARE HIGH-CLASS PROBLEMS. IF IT HAPPENS THIS SUMMER, I WILL BE LOBBYING HARD FOR IT TO SAY IN THE SOUTH. I DON'T WANT IN THE WINTER. COMING UP ON THE BOND MARKET, LOOKING FORWARD TO SUBADRA RAJAPPA.' LEIGH-ANN: I'M LEIGH-ANN GERRANS WITH BLOOMBERG'S "FIRST WORD NEWS." SECRETARY OF STATE ANTONY BLINKEN IS MEETING WITH HIS COUNTER PROBLEM -- SERGEI LAVROV. THERE ARE ROUGHLY 100,000 RUSSIAN TROOPS NEAR THE BORDER OF UKRAINE. ALSO THE PROSPECT THAT NETFLIX IS IN A PHASE OF SLOWER GROWTH, DOWN AS MUCH AS 20%. NETFLIX OF THE SLOWDOWN WILL CONTINUE FOR ANOTHER QUARTER. IN U.K. , DOWN TO PRE-PANDEMIC LEVELS. THE SUPERSTAR KNOWN AS MEATLOAF HAS DIED. HIS ALBUM HAD HIT SUCH AS PARADISE BY THE DASHBOARD LIGHTS AND TWO OUT OF THREE AIN'T BAD. IT BECAME ONE OF THE BEST-SELLING ALBUMS IN HISTORY WITH MORE THAN 14 MILLION COPIES SOLD. MEATLOAF WAS 74 YEARS OLD. GLOBAL NEWS 24 HOURS A DAY, ONLINE AND AT QUICKTAKE ON BLOOMBERG, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I'M LEIGH-ANN GERRANS. THIS IS BLOOMBERG. ♪ > > ADDING ANY ASSEMBLED RUSSIAN UNITS ACROSS THE BORDER IS AN INVASION. IT WILL BE MET WITH SEVERE AND COORDINATED RESPONSE. I HAVE DISCUSSED IN DETAIL WITH ALLIES AS WELL AS LAYOUT VERY CLEARLY. LET THERE BE NO DOUBT AT ALL THAT IF PUT IN MAKES THIS CHOICE, RUSSIA PAY I HAVE A PRICE. JONATHAN: THE PRESIDENT OF THE UNITED STATES STRAIGHTENING THINGS OUT. FROM NEW YORK CITY, GOOD MORNING. FUTURES DOWN, .3%. ON THE NASDAQ, DOWN .7%. YIELDS ARE LOWER. WE CAN DISCUSS THAT LOWER, DOWN A BASIS POINT. THE STOCK OF THE MORNING IN THE PREMARKET, NETFLIX, DOWN BY ALMOST 20%. AT $200 BILLION NAME SHOULD NOT MOVE THIS MUCH. -- A $200 BILLION NAME SHOULD NOT MOVE THIS MUCH. THERE SHOULD BE BETTER TRANSPARENCY. IT SHOULD COME IN AT SOMETHING LIKE TO. IT IS A $200 BILLION NAME FOR GOODNESS SAKE. I HAVE TO -- TOM: I HAVE TO BE CAREFUL BECAUSE I WILL GET MYSELF IN THE TIMEOUT CHAIR. THIS IS JUST ARROGANCE. THE TECH PEOPLE NEVER WANT TO ADMIT, THERE IS NEVER ANY GUIDANCE. JONATHAN: IT IS BIZARRE. YOU HAVE TO GO BACK TO 2020 TO SEE AND MOVE LIKE THIS -- 2012 TO SEE A MOVE LIKE THIS. DOWN JUST NORTH OF 400. TOM: PRESIDENT BIDEN RESETTING FOR YEAR TWO. ANNMARIE HORDERN IS THERE AND WE WILL TALK ABOUT THE RESET OF THE PRESIDENT. JOINING US FROM GENEVA FROM ST. PETER CATHEDRAL LOOKING ACROSS AT THE BEAUTIFUL CITY. MARIA TADEO JOINS US. TOUGH LIFE, MARIA. WHAT HAS BEEN THE SURPRISE FOR YOU? MARIA: TO ME, THE RUSSIANS HAVE A VERY DIFFERENT PERCEPTION OF WHAT IS HAPPENING, IN EUROPE, WE COULD POTENTIALLY GO TO WAR IN UKRAINE. THE RUSSIANS SEE IT VERY DIFFERENTLY. YOU PICK UP A LOT OF DETAILS AND ANECDOTES AND RUSSIAN OFFICIALS CONNECTED TO THE GOVERNMENT HAVE TOLD ME WE DON'T SEE A WAR HAPPENING. THIS IS THE WEST CREATING DRAMA. THE PERCEPTION IS VERY DIFFERENT TO THE TONE WE HEAR FROM BOTH THE U.S. AND EUROPEAN COUNTRIES. TOM: IS IT PERCEPTION DIFFERENT THAN CLINTON-BURBAGE OF. -- CLINTON-GORBACHEV. HOW IS PUTIN-BIDEN EFFORT? MARIA: WHEN IT COMES TO UKRAINE, THERE ARE MANY WAYS TO LOOK AT IT. PRESIDENT AYDEN SAID WE ARE GONNA GET SANCTIONS THAT WILL AFFECT THE RUSSIAN ECONOMY AND COUNTRY. LATIMER PUTIN IS THINKING THEY ARE NOT GOING TO DO IT IN THE EUROPEANS ARE NOT GOING TO DO ANYTHING, SO THIS IS A MOMENT HE COULD MAKE A BENEFIT ON. THE SECOND IS HE IS LOOKING AT THE ENERGY SITUATION. THE UNITED STATES IS A DIFFERENT STORY. IN EUROPE, THESE ARE THE FINAL YEARS HE CAN MILK THE EUROPEANS ON THE GAS. LISA: WHAT IS A HEAVY PRICE RUSSIA COULD FACE SHOULD THEY INVADE UKRAINE PER PRESIDENT BIDEN? MARIA: THIS WOULD BE A CONTINUATION OF HARSHER SANCTIONS. THERE ARE A NUMBER OF ISSUES BEING DISCUSSED WITH WESTERN PARTNERS AND THE UNITED STATES, EXPORT CONTROLS. SOME OF THAT IS KEY INFORMATION IN THE TECHNOLOGY INFORMATION SPACE, SANCTIONS ON INDIVIDUALS, BANKS, POTENTIALLY CUTTING OFF RUSSIA FROM TRADES AND A POTENTIAL NUCLEAR OPTION WOULD BE CUTTING THEM OFF FROM THE PAYMENT SYSTEM. THAT WOULD CREATE HAVOC FOR RUSSIAN BUSINESSES AND WESTERN BUSINESSES. ANNMARIE: WHAT COULD THE U.S. DO TO MAKE MORE AVAILABLE TO ALLIES AND TALKED ABOUT OTHER NATIONS AND GETTING RESERVES UNLEASHED. DO YOU KNOW ANY DETAILS ON THAT FRONT? HEATHER BEEN DISCUSSIONS YOU ARE AWARE OF ON THAT LEVEL? -- HAVE THERE BEEN ANY DISCUSSIONS YOU ARE AWARE OF ON THAT LEVEL. ANNMARIE: THERE WAS AN AVALANCHE OF SANCTIONS AND CUTS EUROPE OFF NOT SO MUCH FROM OIL BUT NATURAL GAS. EUROPE GETS 40% OF THEIR NATURAL GAS FROM RUSSIA. YOU HAVE THE NORTH SEA BEEN DEPLETED. THEY GET SOME FROM ALGERIA, NORWAY. POTENTIALLY THE UNITED STATES COULD SEND MORE LIQUEFIED NATURAL GAS. DO YOU REMEMBER WHEN THE U.S. ENERGY DEPARTMENT CAME UP AND SAID WE ARE GOING TO BE HAVING FREEDOM YES, -- FREEDOM GAS. THIS IS GETTING MUCH MORE EXPENSIVE FOR THE EUROPEANS. RUSSIA AVERSE QUICK AND EASY GAS. TOM: WHAT IS SO IMPORTANT TO ME IS THE ALLIES, THE FUTURE OF NATO AS WELL. THE ZEITGEIST IN WASHINGTON IS WRAPPED AROUND THE PHRASE "FULLY COORDINATED." HOW FULLY COORDINATED IS PRESIDENT BIDEN WITH THE NEW LEADERSHIP OF GERMANY AND MICRON RUNNING -- MCACRON RUNNING FOR HIS NEW OFFICE? LISA: -- MARIA: IT IS VERY TELLING AND WE UNDERSTAND THAT -- WAS SUPPOSED GO TO THE UNITED STATES. HOW UNITED THEY ARE WILL HAVE TO SEE AND WHEN THE BECOMING CLEAR IS THAT EUROPE IS A BIG POWER WHEN IT COMES TO COMMERCIAL INTEREST, BUT WHEN IT COMES TO SECURITY, IT IS THE BABY, EARLY DAYS. THERE ARE A LOT OF TEAMING PROBLEMS. JONATHAN: TO YOU BOTH, THANK YOU VERY MUCH. AN IMPORTING -- IMPORTANT MEETING LATER. TOM: BUT IT IS FOLDING INTO CONFIDENCE OUT THERE AND WE SEE IT IN THE TEA LEAVES AND LITMUS PAPER OF THE FINANCIAL MARKETS. A STRONG SWISS FRANC SHOWING TENSION IN THE MARKETS TO THE MIDAFTERNOON IN EUROPE. JONATHAN: I'M GOING TO AVOID COMING UP WITH NEAT NARRATIVES TO BACK THIS. I WAS THINKING BACK TO 2014 AND CRIMEA. IN NOVEMBER OF 2014, THE SAUDI'S STARTED A WAR OVER THE MARKET SHARE. IT WENT DOWN TO THE 40'S. THE SWISS NATIONAL BANK HAD TO DEAL WITH THE FALLING RUBLE. THINGS CAN PLAY OUT IN REALLY UNPREDICTABLE WAYS WHEN THINGS LIKE THIS HAPPEN. LISA: THAT IS WHERE MY MIND WENT, CLIENTS THINKING ABOUT REMOVING FUNDS FROM RUSSIA TO GET AHEAD OF POTENTIAL SANCTIONS. JONATHAN: SARAH HOUSE WILL BE JOINING US. JONATHAN: THE END OF THE PANDEMIC, THE END OF E EXCESS EARNINGS. WE ARE DOWN .8% AND THEN 10% FROM THE PREVIOUS HIGHS. SPEAKING OF UGLY AND THE END OF EXCESS RETURNS, THESE TWO NAMES. IT HAS BEEN BRUTAL FOR PELOTON, DOWN MORE THAN 20% IN PREMARKET. FOR NETFLIX, A $200 BILLION PLUS COMPANY, DOWN MORE THAN 20% IN THE PREMARKET. LOOKING AT A 6 MILLION PLUS PROJECTION, THE FORWARD LOOK FROM THE COMPANY ABOUT ONE THIRD OF THAT. NOT VERY GOOD. THIS HAS NOTHING TO DO WITH THE BOND MARKET BECAUSE YESTERDAY YIELDS WERE LOWER SIX BASIS POINTS AND THIS MORNING TO BASIS POINTS -- THIS MORNING DOES COBE BASIS POINTS. -- TWO BASIS POINTS. TOM: I AM WATCHING THE VANILLA SPREAD. IT COMES IN 78 BASIS POINTS AND THAT IS A FLATTER YIELD CURVE. MARIA: -- LISA: THAT I THINGS THAT I LOOK AT, I WILL DEFEND THEM TO MY DEATH. CAN WE MOVE ON? JONATHAN: 30 IS AT 2.1%. TOM: YOU ARE DONE, OK, THANK YOU . THERE IS A LOT GOING ON AS WE READ INTO THE WEEKEND. THERE IS A LOT GOING ON. STAY WITH US THROUGH THE MORNING. RIGHT NOW, WITH AN EXTREMELY SHARP NOTE, PUTTING THE TIMELINE I WANT TO GO TO MARCH. LET'S TAKE IT FROM JC'S ARE, BEWARE OF THE RATE HIKES. ARE WE GOING TO SEE IN THE WORK OF ECONOMISTS THE BEGINNING OF AN ADJUSTMENT OF WHAT WILL OCCUR IN MARCH? > > I THINK WE HAVE ALREADY SEEN IT MOVE THAT WAY. A LOT OF ECONOMISTS AND WHAT THEY CALLED WILL BE THE THEME AND WHAT THEY ARE DOING TO SIGNAL NOT JUST THE TIMING BUT INCREASINGLY WE WILL SEE MORE ATTENTION IN TERMS OF WHAT THE PACE LOOKS LIKE. IS IT GOING TO BE ROUGHLY THE 25 BASIS POINTS PER QUARTER LIKE WE SAW LAST CYCLE OR COULD WE SEE SOMETHING MORE AGGRESSIVE, WHETHER THAT IS POTENTIALLY A 50 BASIS POINT MOVE OUT OF THE GATE. TOM: WHY CAN'T THEY COME OUT AND SAY WE ARE IN A PANDEMIC, WE HAVE MASSIVE UNCERTAINTY, INCLUDING THE DIPLOMATIC EVENTS IN GENEVA, WE ARE GOING TO GO 25 AND THEN SIT? I CAN'T THEY SAY THAT? SARAH: WHEN YOU LOOK AT THE OVERALL STATE OF THE ECONOMY, EVEN AS WE ARE IN A PANDEMIC, WE ARE SEEING AN EXTRAORDINARY STRONG PICTURE. MARKETS ARE SOLID. MARKETS LOW FOR PERCENT. WHEN WE LOOK AT WHERE POLICY IS, IT IS STILL ACCOMMODATIVE AND IT IS HARD TO FIT WHEN YOU HAVE 7% NUMBERS AND IT'S HARD FOR THE FED TO STAND IDLY BY THE OPTICS DO NOT LOOK GOOD. MARIA: -- LISA: IT IS ACTUALLY VERY NUANCED. GEORGE SARAVELOS TALKED ABOUT IT SAYING THAT THE INFLATION WE ARE SEEING COULD BE CONTRACTIONARY AND IF THE FED DOESN'T ACT, THE ECONOMY WILL SLOW MUCH MORE THAN PEOPLE ARE EXPECTING. HOW MUCH ARE YOU SEEING PEOPLE NOT SPENT BECAUSE THEY ARE CONCERNED ABOUT HOW HIGH PRICES HAVE GONE? SARAH: I THINK WE HAVE CERTAINLY SEEN THAT IN SOME OF THE BUY-IN PLANS FOR BIG TICKET PURCHASES. IF YOU LOOK AT EIGHT MICHIGAN SURVEY, YOU SEE THE PLAN FOR HOMES AND DURABLES CRATERED. WHEN YOU DIG INTO THE REASONS, IT IS NOT SO MUCH HOUSEHOLDS BEING WORRIED ABOUT FINANCES BUT IT IS THE SHARE PRICE. WE ARE SEEING THIS INFLATION CANONIZE SOME OF THOSE AND IT IS ONE OF THE FACTORS LEADING US TO EXPECT MORE TREND LIKE PACE OF CONSUMER SPENDING WHICH WILL OFFER RELIEF ON THE INFLATION PICTURE BUT IT WILL BE MORE TOWARDS THE BACK HALF OF THE YEAR AND THEN LOOKING AT AN ENVIRONMENT OF INFLATION WELL ABOVE WHERE THE FED WANTS IT TO BE. THE NATURE OF THIS -- LISA: THE NATURE OF THIS IS BECOMING MORE PERILOUS. WORKERS ENJOYED THE BIGGEST WAGE GAINS AND NOW SEEING THEM FALL BEHIND ON A PERCENTAGE BASIS RELATIVE THE HIGHEST EARNERS. YOU ARE SEEING BANK EMPLOYEES WITH MASSIVE GAINS IN SALARIES. HOW MUCH DOES THIS CHANGE THE NARRATIVE IN A SIGNIFICANT WAY AND PUSHED THE FED TO MOVE FASTER, BECAUSE RIGHT NOW WE ARE BACK IN A SCENARIO WHERE TOP BRACKETS ARE BENEFITING THE MOST. SARAH: THIS IS AN IMPORTANT ELEMENT. WE FOCUSED A LOT ON THE LABOR MARKET BEING BROADER AND MORE INCLUSIVE OVER THE LAST CYCLE. WHEN WE LOOK AT THE CURRENT ENVIRONMENT AND STATE OF INFLATION, GROCERY STORE PRICES, ENERGY, HOUSING COSTS, WHEN YOU FACTOR IN UTILITIES, ALSO UP BY THE MOST WE HAVE SEEN SINCE THE EARLY 1990'S. THIS DISPROPORTIONATELY AFFECTS THE LOWER END HOUSE COMES -- HOUSEHOLD. THERE IS SOMETHING TO BE SAID FOR THE FED TACKLING THIS INFLATION TO MAKE SURE IT DOESN'T BECOME ENTRENCHED AND HAVE TO TIGHTEN FURTHER DOWN THE ROAD. IT HAS A DISPROPORTIONATE EFFECT ON THE LOWER INCOME HOUSEHOLDS FOR THEY DON'T HAVE THE SAVINGS TO DIP INTO THE SAME AS THE HIGHER INCOME HOUSEHOLDS. TOM: LET'S GO BACK TO JOHN SILVIA WHO DEVELOPED WELLS FARGO NTU SARAH HOUSE -- AND TO YOU, SARAH HOUSE. WHAT DOES THIS DUE TO TO THE INFLATION ADJUSTED PAYCHECK? SARAH: IN TERMS OF HOURLY WAGES, WE HAVE SEEN THEM NEGATIVE OVER THE PAST YEAR. WE WILL SEE SOME IMPROVEMENT IN THAT DYNAMIC AS THE YEAR MOVES FORWARD. WE EXPECT STRONGER IT WAGE GROWTH AS WE SEE THE LABOR MARKET CONTINUING TO TIGHTEN AND BUSINESSES COME AROUND TO THE FACT THAT IF THEY WANT TO ATTRACT AND RETAIN WORKERS, THEY HAVE TO PAY UP. THAT WAS A LESSON HARD TO LEARN. TOM: GO AWAY FROM HOURLY WAGES. SOME IT IS MAKING 140 AND THE OTHER IS MAKING 120 OR 90 OR 180, WHATEVER, ON THE OLD ALL IN THEY ARE DOING ATTACKS OF 150 PAIR THAT IS NOT AN AVERAGE HOURLY WAGE BUT GETTING CLOBBERED BY INFLATION. ARE THEY GOING TO BE ABLE TO KEEP UP THE UPPER-MIDDLE-CLASS HOUSEHOLD THAT EVERYONE ASPIRES TO? ARE THEY GOING TO KEEP UP IN THE NEXT 24 MONTHS? I DON'T SEE IT. SARAH: IT IS GOING TO BE LOOKING BETTER WHEN YOU TALK ABOUT THE STRONGER WAGES, NOT JUST IN LEISURE AND HOSPITALITY WHERE WE SEE HIGHER-PAYING BRACKETS. THE FACT THAT WE ARE EXPECTING INFLATION TO RECEDE OVER THE COURSE OF THE YEAR. THE BALANCE IS GOING TO GET BETTER. WE TALK ABOUT THE OVERALL HOUSEHOLD INCOME, WE HAVE TO CONSIDER THAT WE ARE ADDING JOBS AND THAT WILL HELP OFFSET THE INFLATIONARY PRESSURES THAT THE HOUSEHOLDS ARE SEEING AS WE SEE MORE PEOPLE STEP BACK INTO THE LABOR MARKET AND GO BACK TO TWO INCOME HOUSEHOLDS. LISA: THE FED IS INCREASINGLY MOVING TO A DATA DEPENDENCY AS THEY KEEP SAYING AND A LOT OF PEOPLE IN THE MARKET SEEM TO BELIEVE, THE QUESTION IS WHICH DATA? WHAT IS THE MOST IMPORTANT DATA YOU ARE WATCHING THE WEEKS AND MONTHS TO COME? SARAH: IT BOILS DOWN TO INFLATION. WE ARE UNDER THE ASSUMPTION THAT WITH THE DIFFICULTIES IN STAFFING AND BRINGING NEW WORKERS, IT COMES DOWN TO HOW QUICKLY OR WHETHER AT ALL WE SEE THE INFLATION PRESSURES BEGIN TO RECEDE. WE EXPECT INFLATION ON YEAR-OVER-YEAR TO TOP OUT IN THE FIRST QUARTER, BUT ON A MONTHLY WE ARE SEEING STRONG GAINS. IT IS A MATTER OF HOW MUCH THE MONTHLY GAINS COME DOWN. I THINK THAT WILL STILL KEEP THE PRESSURE VERY MUCH ON THE FED TO SIGNAL THAT THEY ARE CLOSELY TRACKING INFLATION AND TRYING TO REIN THAT IN YOU FOR IT COMES -- BECOMES TOO ENTRENCHED. JONATHAN: SARAH, THANK YOU. MAYBE PEAKING AT THE END OF Q1. I WAS CATCHING UP WITH LARRY MCDONALD, REMINDING ME OF THE SEQUENCING OF THE FEDERAL RESERVE AND THE TIMELINE. REMEMBER THE TAPER BACK IN 2013 AND THE HIKES DIDN'T START UNTIL 2015. QT DIDN'T START UNTIL 2017. THIS TIME AROUND, THEY ARE GOING TO DO IT ALL IN THE SPACE OF SEVERAL YEARS, A FEW MONTHS. TOM: THAT IS THE PLAN. WHO SAYS THAT IS ACTUALLY GOING TO BE WHAT HAPPENS. JONATHAN: CAN THE EXECUTED? TOM: OR WILL THEY BE OVERCOME BY EVENTS? JONATHAN: THE INTEREST RATE HIKE EVERYONE IS EXPECTING, IS IN MARCH. EQUITIES ALREADY DOWN 10% ON THE NASDAQ. LISA: THIS IS SUCH A DIFFERENT TIME BECAUSE OF INFLATION. YOU HAVE SOME PEOPLE SAYING, SHOULD THE FED NOT ONLY NOT BACK AWAY FROM A CORRECTION BUT AIM FOR ONE BECAUSE THAT IS THE TRANSMISSION MECHANISM OF THE POLICY. IF YOU ACTUALLY ARE DEALING WITH INFLATION, YOU ARE NOT TRYING TO NORMALIZE FOR MORE EMANATION, IT CHANGES THE GAME. JONATHAN: THAT'S WHY IT IS IMPOSSIBLE TO SAY WITH ANY CONFIDENCE OR CONVICTION THAT WE HAVE DISCOUNTED ALL OF THIS IN THIS MARKET BECAUSE SO MUCH OF IT IS UNPREDICTABLE. LISA: I WOULD AGREE WITH THAT. WHAT ARE WE DISCOUNTING? WHAT POLICY REGRESSION AND REACTION IN MARKETS? THERE ARE SO MANY NUANCES WHEN DATA IS MOVING QUICKLY. JONATHAN: HEIDI DISCOUNT $1.5 BILLION OF BALANCE REDUCTION INTO NEXT YEAR -- HOW DO YOU DISCOUNT ONE POINT $5 BILLION OF BALANCE REDUCTION INTO NEXT YEAR? TOM: IT IS A CLICHE THAT IS TRUE, THIS IS ORIGINAL TERRITORY. ARE WE QUOTING GOLD TODAY? I WOULD LIKE TO. YOU WILL NOT FIND YOUR GOLD ON A SANDY BEACH. JONATHAN: I THOUGHT YOU GO WITH THE BIG TECH STORY AND SAY THE SCREAMING AND HOWLING DOWN AND THE VALLEY TONIGHT. LISA: OH BOY, REALLY? JONATHAN: COME ON. FUTURES DOWN ON THE NASDAQ. FROM NEW YORK, THIS IS BLOOMBERG. ♪ LEIGH-ANN: I'M LEIGH-ANN GERRANS WITH BLOOMBERG'S "FIRST WORD NEWS." BITCOIN FELL TO THE LOWEST LEVEL IN FIVE POINTS. IT DROPPED BELOW $14,000 AND A HIGH OF ONLY $69,000 BACK IN NOVEMBER. COINS HAVE BECOME THE SYMBOL OF THEIR RETREAT. CHINA URGING BANKS TO INCREASE LENDING AFTER A SLOW START TO THE YEAR. THE PBOC HAS GIVEN GUIDANCE FOR REGIONAL BANKS AND URGING THEM TO EXTEND MORE CREDIT TO COMPANIES AND HOUSEHOLDS WITH LENDING IN THE FIRST TWO WEEKS OF THE YEAR. A MAGNET FOR -- FALLING. THEY CAN ONLY RECOUP BANKERS AND TRADERS LIVE THERE. FRUSTRATION WITH THE POLICIES. THE AMERICAN CHAMBER OF CONGRESS SAID 40% -- WHAT IS EXPECTED TO BE THE BIGGEST MANUFACTURING SITE, IT WILL BE NEAR COLUMBUS OHIO. THE COMPANY WILL RESEARCH, DEVELOP, AND MANUFACTURE CHIPS. GLOBAL NEWS 24 HOURS A DAY, ONLINE AND AT QUICKTAKE ON BLOOMBERG, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I'M LEIGH-ANN GERRANS. THIS IS BLOOMBERG. > > WE DO NOT HAVE HIGH ENOUGH RATES OF HIM IS ASIAN. THE LOSS ON THE JOBS MANDATE IN THE WORKPLACE SAFETY EMPLOYERS FOR OVER 100 EMPLOYEES IS A REAL LOSS BECAUSE IT WILL PROLONG. THAT IS STILL OUR BIGGEST VULNERABILITY. JONATHAN: WITH EQUITY FEATURES THIS MORNING DOWN 20 ON THE S & P, -.4% ON THE NASDAQ 100, .8%. UNLIKE IN PREVIOUS WEEKS WERE RISK ASSETS HAVE BEEN SHAPED THE BOND MARKET, THE BOND MARKET SEEMS TO BE SHAPED BY RISK ASSETS. WE ARE HEARING FROM REPORTS THAT THE TALKS BETWEEN SECRETARY BLINKEN AND HIS RUSSIAN COUNTERPART SERGEI LAVROV HAS WRAPPED UP. WE ARE TOLD SOMEONE ABOUT A.M. EASTERN TIME WE WILL -- ABOUT 7:00 A.M. EASTERN TIME WILL HAVE A SEPARATE CONFERENCE WITH SERGEI LAVROV. TOM: DISTANCE FROM THE TWO HOTELS IS THE DISTANCE THAT MARIA TADEO MADE THAT THE GOAL IS NOT HAVE AN AGREEMENT, IT IS JUST TO HEAR EACH OTHER OUT. JONATHAN: I WOULD SAY THE IDEAL SITUATION WOULD BE A JOINT NEWS CONFERENCE, NOT A SOVEREIGN 130 MINUTES APART. NOTHING ABOUT THIS IS IDEAL, IS IT? TOM: WE WILL BRING THAT TO YOU WORLDWIDE AND LOOKING AT HEADLINES. FOR AT LEAST EVERYONE IN AMERICA AND A TUMULTUOUS UNITED KINGDOM, THE CONVERSATION IS WE ALL GO TO OMICRON THIS WEEKEND. I HAVE TO CUT TO THE HEADLINE NEWS AND I SEE A 714 DAY AVERAGE -- SEVEN TO 14 DAY AVERAGE THAT IS 2000 DEATHS PER WHAT DOES THE SIGNAL TO YOU? > > THIS IS A MAJOR SHIFT ON HOW THE VARIANTS HAVE BEEN CAUSING DISEASE. WE HAVE SEEN OMICRON BE LESS SEVERE BUT BECAUSE IT IS SO TRANSMISSIBLE, IT IS INCREASING CASE NUMBERS AND THEREFORE SLIGHTLY LOWER SEVERITY RATES IS BEING TRUMPED BY THE FACT THAT CASE NUMBERS ARE EXPANDING SO HIGH. WE ARE SEEING CASE NUMBERS DROP BUT IT IS IMPORTANT TO REMEMBER THAT HOSPITALIZATIONS AND DEATHS OFTEN TIME LAG CASE NUMBERS BY TWO WEEKS BECAUSE IT TAKES LONGER TO DEVELOP SEVERE DISEASE. TOM: THIS FROM THE POST AND WE WANT TO GET YOUR PERSPECTIVE, UNVACCINATED, 65 OR OLDER ARE 49 TIMES MORE LIKELY TO BE HOSPITALIZED. HOW MANY OF THOSE 2000 DEATHS WERE UNVACCINATED PEOPLE VERSUS VACCINATED? > > THE VAST MAJORITY, AND IT RANGES ANYWHERE FROM 75% TO 90% BASED ON THE NUMBERS I AM SEEING. UNVACCINATED PEOPLE ARE STILL DRIVING THAT SEVERE DISEASE. TOM: DO WE NEED TO DO WHAT AUSTRIA DOES? OVERNIGHT THEY SAID GET VACCINATED. > > THIS IS THE ONGOING ISSUE AND IT IS ALSO GOING TO COME INTO PLAY WHEN WE START TO SEE CASE NUMBERS CONTINUE TO DROP AND WHERE WE ARE GOING TO PLATEAU. ARE WE GOING TO PLATEAU AT A LEVEL THAT IS LOW, PRE-DELTA, OR HIDE WHO ARE UNVACCINATED. ON TOP OF THAT, IT HAS SHOWN THAT THE BOOSTERS ARE HELPING PREVENT INFECTION. WE ARE NOT JUST TALKING ABOUT VACCINATED BUT PEOPLE HAVE TO BE VACCINATED AND BOOSTED TO REALLY GET THE MAXIMUM PROTECTION AGAINST OMICRON. LISA: OVER IN LONDON, SOME BIG BANKS SAYING, TIME TO GET BACK INTO THE OFFICE AND WE HAVE TO LIVE WITH THIS. WE SEE THAT FROM GOLDMAN SACHS AND BARCLAYS. DO YOU THINK THIS IS AN APPROPRIATE POLICY? DO THINK PEOPLE SHOULD GET BACK TO THE OFFICE AND USING PUBLIC TRANSPORTATION AND OPERATING LIKE THIS IS THE NORM? > > IT IS NOT ABOUT PAST THE PEOPLE CLOSE TO THE BOTTOM OF THE PEAK. THAT IS THE CRITICAL THING, BECAUSE HISTORICALLY IN OTHER PANDEMICS, A LOT OF INFORMATION SHOWING THAT IF YOU BRING PEOPLE BACK TO EARLY YOU SUFFER RISK OF HAVING A SECOND SURGE OF CASES OR PLATEAUING AT A HIGHER LEVEL THAN YOU WOULD IF YOU HAD WAITED A LITTLE LONGER. SIGNS ARE LOOKING GOOD BUT WE STILL HAVE TO REALIZE WE ARE AT HIGH NUMBERS OF CASES IN MOST PLACES AND WE STILL NEED TO HOLD ON AND MONITOR AND MINIMIZE THAT FOR AT LEAST ANOTHER WEEK OR TWO. LISA: WHAT ARE YOU LOOKING FOR TO RING THE ALL CLEAR AND GET BACK TO NORMALCY? > > IT IS THE SLOPE OF THE LINE THAT IS SHOWING US THE CASE NUMBERS AND WHEN THAT SLOPE TURNS TO A PLATEAU. IF IT TURNS TO A PLATEAU AT A HIGH LEVEL, THEN WE WILL STILL CONTINUE TO SEE ABSENCE FROM WORK AND IMPACTS ON THE ECONOMY THAT THE ILLNESSES ARE CAUSING RIGHT NOW. IT IS REALLY ABOUT WHERE THIS AUTUMN'S OUT IN TERMS -- WHERE THIS BOTTOMS OUT IN TERMS OF NORMAL SCHOOL AND WORK LIFE. JONATHAN: ANDY, THANK YOU. DEUTSCHE BANK LOOKING TO BRING BIG EFFORTS THIS WEEK. LISA: YOU HAVE SEEN THE BANKS SAYING WE COULD MOVE TO A HYBRID BUT WE ARE PAST THE PEAK AND WE HAVE TO START GETTING BACK TO NORMAL. THEY ARE GOING TO BE WEARING FACE MASKS AND HAVE CERTAIN MANDATES AND HAVE TESTING REQUIREMENTS. BUT WHEN DO WE SAY WE ARE BACK TO THE NEW NORMAL? WHEN QUEEN MAKE THAT DETERMINATION WHEN YOU HAVE A LOT OF CASES BUT NOT FOLLOWED BY QUITE AS MANY DEATHS. JONATHAN: I THINK SOME PEOPLE HAVE ALREADY DECIDED. THE U.K. IS ALREADY THERE. TOM: THERE IS SOME CONFUSION, DEUTSCHE BANK SAID THEY ARE GOING BACK TO WORK IN LONDON AND I BELIEVE LISA SAID WITH MASKS. TO THE PRIME MINISTER OF THE UNITED KINGDOM SAY 48 HOURS AGO FORGET ABOUT MASKS? JONATHAN: HE DID END THE MASK MANDATE BUT SAID IN SOME PLACES YOU WOULD HAVE TO WEAR THEM AND ULTIMATELY IT IS A CORPORATE -- PRIVATE CORPORATION THAT ESTIMATE THE DECIDE -- DECISION FOR THEIR EMPLOYEES. TOM: I GUESS SO. JONATHAN: YOU HAVE NOTICED THAT A LOT OF CORPORATIONS HAVE GONE THAT EXTRA STEP FURTHER IN TERMS OF TESTING AND VACCINE REQUIREMENTS BEFORE THE GOVERNMENT MADE THE BIG PUSH FOR A VACCINE MANDATE. TOM: CLEARLY IN THE UNITED STATES, THAT IS THE TRADITION. WE MENTIONED AUSTRIA AND THE ASIAN COUNTRIES WHERE THERE IS FAR MORE OF A GOVERNMENT STATEMENT. IN THE HISTORY OF MEDICINE BACK OVER 200 YEARS IS FOR PRIVATE RESPONSE. JONATHAN: THERE HAS BEEN A MEETING THIS MORNING WITH SECRETARY BLINKEN AND HIS RUSSIAN COUNTERPART, SURVEY LAVROV. -- SERGEI LAVROV. HE IS SPEAKING RIGHT NOW AND CALLING IT AN INTERIM MEETING HERE WE WILL HAVE SEPARATE NEWS CONFERENCES. WE WILL HEAR FROM SECRETARY BLINKEN BETWEEN NOW AND THE NEXT 35 MINUTES. TOM: THERE IS A TRIANGULATED MOSCOW, BERLIN, AND KIEV. JONATHAN: THE MOST IMPORTANT HEADLINE, SURVEY LAVROV SAYING -- SERGEI LAVROV SAYING THAT SECRETARY BLINKEN SAID HE WAS HAPPY WITH THE MEETING. IT IS A LOW BAR AT THE MOMENT. LISA: IT IS ALSO REALLY TELLING WENT SUMMIT HE SAYS THIS BEFORE THEIR COMPATRIOTS SPEAKS AT A DIFFERENT HOTEL LOCATION SEPARATELY HALF-HOUR LATER. JONATHAN: IT IS THE PROBLEM I HAVE WITH SEPARATE NEWS CONFERENCES. TOM: THE THREE BEST MET IN NEW JERSEY YESTERDAY AND I SAID I WAS SATISFIED WITH THE MEETING. JONATHAN: ARE YOU SAYING YOU WEREN'T SATISFIED WITH THE MEETING? ♪ > > FOR THEY BREAK SOMETHING WHEN THEY RAISE RATES TOO MUCH. > > THE QUESTION IS WHAT IS DIFFERENT THIS TIME. > > I THINK WE WILL GET THE REALIZATION THAT THE ECONOMY ISN'T QUITE AS GOOD AS WE THOUGHT. > > THIS IS A LOPSIDED MARKET. > > WE THINK REAL YIELDS START TO RISE THIS YEAR. > > THIS IS "BLOOMBERG SURVEILLANCE" WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOWICZ. JONATHAN: WAITING FOR SECRETARY BLINKEN. FROM NEW YORK CITY, FOR OUR AUDIENCE WORLDWIDE, GOOD MORNING. THIS IS "BLOOMBERG SURVEILLANCE ," LIVE ON TV AND RADIO. NASDAQ FUTURES DOWN 96, DOWN 0.6%. THE FOREIGN MINISTER OF RUSSIA RIGHT NOW, SERGEI LAVROV, CONTINUE TO SPEAK IN HIS NEWS CONFERENCE. TOM: YOU REALLY SEE IT IN SWISS FRANC AND EURO SWISSIE OF THE TENSION WITHIN EUROPE. THIS IS WHAT BLOOMBERG NEWS DOES BEST. LAVROV, "RUSSIA ISN'T PLANNING TO ATTACK UKRAINE." IT IS AT THE PRESIDENT WILSON HOTEL ON THE SHORES OF LAKE GENEVA. WE GO UPROOT TO THE INTERNET CONTINENTAL OPTO -- TO THE INTERCONTINENTAL HOTEL TO HEAR SECRETARY BLACKENING JUST A BIT. -- FROM SECONDARY BLINKEN IN JUST A BIT -- FROM SECRETARY BLINKEN IN JUST A BIT. WE WILL COVER THAT TODAY, AS WELL AS WHAT WE USUALLY COVER. AS YOU MENTIONED EARLIER AND I THINK LISA MENTIONED, THE COMPRESSION HERE OF NEWS AND THE EXHAUSTION OF THE MOMENT OF JANUARY 21 IS JUST STUNNING. JONATHAN: THREE WEEKS INTO IT, WE HAVEN'T EVEN CLOSED OUT THE THIRD WEEK. IT ALL STARTED NOT TO OUR NEWS CONFERENCE. AT SOME POINT, AND PRESIDENT -- AT SOME POINT, THE PRESIDENT, AND THE MINDS OF MANY, THE CLEANUP ACT HAS BEEN QUITE INTENSE. LISA: IT HAS BEEN INTENSE BECAUSE OF THE BACKDROP OF INFLATION AND OIL, AND RUSSIA BEING A MAJOR SUPPLIER OF OIL TO EUROPE. HOW'S THIS FACTORS INTO THE RAILS AND SHIP BETWEEN THE U.S. AND EUROPE AT SUCH A PERILOUS TIME WITH THE PRICE OF ALL CONSUMER GOODS COMING UP SO MUCH , HOW MUCH DOES THAT TIE THE HANDS ON A DIPLOMACY LEVEL WHEN YOU ARE TRYING TO BOTH PUSH FORWARD IN ECONOMY, OR AT LEAST LET THE AIR OUT SLOWLY, WHILE ALSO HAVING A HARD LINE WITH AN OPPONENT? JONATHAN: THAT IS GEOPOLITICS. WE ARE NOT EVEN THREE FULL WEEKS INTO THIS TRADING YEAR. IF YOU HAVE BEEN LONG THE NASDAQ OR NETFLIX, IT FEELS LIKE YOU HAVE BEEN TRADING FOR 10 YEARS THROUGH THE FIRST THREE WEEKS OF THIS YEAR. NETFLIX DOWN HARD IN THE PREMARKET FOLLOWING EARNINGS AFTER THE CLOSE YESTERDAY. LISA: HOW MUCH IS THIS AN IDIOSYNCRATIC STORY OF ONE OF THESE PANDEMIC PLAYS? EVERYONE WAS WILLING TO PAY TO WATCH ON THE SCREEN. NOW THEY ARE NOT. HOW MUCH IS THIS A NETFLIX STORY, AND HOW MUCH DOES THIS INDICATE WE HAVE BROUGHT FORWARD SO MUCH DEMAND FOR SOME OF THESE STAY-AT-HOME STOCKS, AND IT IS NOT GOING TO CONTINUE AT THE SAME LEVELS AS PREPENDED -- AS PRE-PANDEMIC FOR A LONG TIME? JONATHAN: THIS WAS A 200 WHEN HE BILLION-DOLLAR NAME -- A $220 BILLION NAME. 220 BILLION-DOLLAR NAMES SHOULD NOT BE MOVING TO ANY PERSON. -- MOVING 20%. YOUR EQUITY MARKET IS LOWER, -0.4% ON THE S & P COME ON THE NASDAQ, DOWN 0.7%. AS WE HAVE TALKED ABOUT ALREADY THIS MORNING, TYPICALLY AS THE YEAR GOES, THE BOND MARKET IS SHAKING UP THE EQUITY MARKET. THIS TIME, THE EQUITY MARKET IS SHAKING UP THE BOND MARKET THE OTHER WAY. LISA: AS YOU MENTIONED, WE ARE WEDDING TO HEAR FROM SECRETARY OF STATE ANTONY BLINKEN. THE EXPECTATION IS FOR A 7:30 A.M. EASTERN PRESS CONFERENCE FOLLOWING THE MEETING WITH RUSSIAN FOREIGN MINISTER SERGEI LAVROV IN GENEVA. WE ALREADY HEARD FROM LAVROV, BASICALLY SAYING EVERYTHING WAS GREAT. IT SEEMS LIKE WE HAVE HEARD A LOT FROM BLINKEN THAT HE WAS HAPPY FROM THE MEETING. NOW WE HEAR IN TERMS OF WHAT THE ROAD AHEAD LOOKS LIKE, WHAT THE POTENTIAL CONSEQUENT IS OFFER RUSSIA SHOULD THEY PERHAPS TIP THEIR TOLL MORE INTO UKRAINE IF THEY ARE NOT PLANNING TO INVADE IT. TONIGHT LIKE A.M., WE GET CONFERENCE BOARD U.S. LEADING INDEX FOR THE MONTH OF DECEMBER. LESS INTERESTED IN THE SPECIFIC COMPONENTS OF THIS DATASET, MORE IN THE OVERALL MOMENTUM OF THE DATA COMING OUT. THE AKAMAI TRAJECTORY HAS BEEN INDICATED LOWER AND HAS BEEN DISAPPOINTING. HOW MUCH IS THIS THE OMICRON BUMP? HOW MUCH WILL IT SUBSIDE? HOW MUCH IS IT DECELERATION IN AN ECONOMY WHERE CONSUMERS ARE WORRIED ABOUT HOW HIGH PRICES HAVE GONE? AT 11: 30, WE HEAR FROM U.S. TREASURY SECRETARY JANET YELLEN, SPEAKING AT A DAVOS CONFAB. SHE SAID YESTERDAY SHE EXPECTS INFLATION FOR MUCH OF THE YEAR TO REMAIN ABOVE 2%, BUT IF WE ARE SUCCESSFUL IN CONTROLLING THE PANDEMIC, "I EXPECT INFLATION TO REVERT TO NORMAL LEVELS BY THE END OF THE YEAR AROUND 2%." HOW MUCH DOES THAT AND THAT BEING THE STORY, THE PEOPLE LOOK TO THE NEW NORMAL OF 11 INFLATION KIND OF ENVIRONMENT? JONATHAN: LISA, THANK YOU. WE CAN TALK ABOUT THIS BOND MARKET WITH SUBADRA RAJAPPA, THE HEAD OF U.S. RATES STRATEGY AT SOCGEN. YOU PUBLISHED LAST NIGHT. "THE FED IS LIKELY TO PUSH BACK ON MARKET PRICING OF MORE THAN FOUR FED HIKES IN 2022 AS IT PREPARES FOR MASSIVE BALANCE RUNOFFS -- MASSIVE BALANCE SHEET RUNOFFS." HOW MUCH ARE YOU LOOKING FOR? SUBADRA: THEY ARE LOOKING AT $100 BILLION FOR MONTH AND A TOTAL OF $1 TRILLION WITHIN A YEAR OR SO, SO I THINK $1 TRILLION BY THE END OF 2023 IS DEFINITELY DOABLE. THAT IS A PRETTY RAPID PACE WITH A LOT OF MOVING PARTS THEY HAVE TO DEAL WITH. THEY OWN BILLS NOW. THEY DID NOT OWN BILLS BACK THEN. THERE'S A LOT OF DETAILS TO IRON. BUT I THINK THEY COULD BRING DOWN THE BALANCE SHEET QUITE MEANINGFULLY OVER THE NEXT YEAR. THE CONFLICTS, THE TREASURY IS GOING TO HAVE TO ASSURE A LOT MORE TO OFFSET THE FED'S PURCHASES. SO THERE'S A LOT OF MOVING PARTS FROM THE FED, AS WELL AS THE TREASURY, WHEN IT COMES TO BALANCE SHEET UNWIND. TOM: IF WE SHIFT OVER THE RESEARCH OF THE WEEKEND AND THE END OF THE MONTH, AND PEOPLE AT FOUR RATE INCREASES GO TO THREE RATE INCREASES, THE PEOPLE AT THREE RATE INCREASES TILT TOWARD TWO, ETC., WHAT DOES THE MARKET DO AT THE MARGIN WHEN WE SEE THE MARGINAL RATE INCREASE CHAT ADJUST? SUBADRA: I THINK RIGHT NOW, A LOT OF THE PRICING LOWER YOU HAVE SEEN IN RISKY ASSETS HAS COME FROM A VERY SHARP RISE IN REAL YIELDS, AS WELL AS THE MARKET TAKING A VERY AGGRESSIVE PATH OF RATE HIKES FOR THIS YEAR. MORE THAN FOUR FOR THIS YEAR AND BALANCE SHEET UNWIND ON TOP OF THAT SEEMS LIKE A LOT FOR THE MARKET TO DIGEST. SO I THINK THE FED IS GOING TO DICTATE VERY MEASURED APPROACH TO POLICY NORMALIZATION. REALLY, WHAT YOU'RE GOING TO SEE IS THE FED TALK BACK THE MARKET PRICING OF RATE HIKES A LITTLE BIT AT NEXT WEEK'S MEETING BECAUSE WHAT THEY WANT TO DO IS NOT RAISE RATES TOO SOON AND SLOW DOWN THE ECONOMY. SO THE KEY IS GOING TO BE A VERY MEASURED APPROACH. THEY DON'T REALLY HAVE A LOT OF CLARITY ON DATA FOR THIS YEAR. THE FIRST QUARTER MIGHT TURN OUT TO BE A VERY SLOW QUARTER, JUST LIKE WE SAW BACK IN Q3 AFTER THE DELTA VARIANT. YOU COULD SEE THE SAME THING IN Q1 BECAUSE OF THE OMICRON VARIANT. UNDER THE CIRCUMSTANCES, I THINK THEY WILL BE VERY CAUTIOUS WHEN TALKING ABOUT MONETARY POLICY AND HOW MANY HIKES THEY WILL BE ABLE TO DELIVER THIS YEAR. LISA: I AM GLAD YOU MENTIONED REAL YIELDS, THE INFLATION-ADJUSTED YIELD. EVEN THOUGH NOMINAL 10 YEAR YIELDS ARE DOWN TODAY, REAL YIELDS HAVE RISEN TO A LESS NEGATIVE FIGURE, THE LEAST NEGATIVE GOING BACK TO JUNE 2020. I AM WONDERING HOW FAR IT CAN GO. WHAT HAPPENS IF YOU CONTINUE TO SEE THE REAL YIELD CLIMB CLOSER TO ZERO? WHAT IS THE CONSEQUENT OF THAT? SUBADRA: TYPICALLY WHEN YOU TALK TO ASSET MANAGERS WHO MANAGE RISKY ASSETS, EITHER CREDIT OR EQUITIES, THAT INTO LOOK AT THAT ZERO BASIS POINT REAL YIELD AS THE POINT WHERE IT WILL START IMPACTING RISKY ASSETS, BROADLY SPEAKING. POLICY HAS BEEN EXTRAORDINARILY ACCOMMODATIVE FOR THE LAST COUPLE OF YEARS. WE HAVE HAD REAL YIELDS -1% FOR A GOOD TIME. THE RAPID RISE IN REAL YIELDS FROM -120 BASIS POINTS, -50 BASIS POINTS IN A VERY AMOUNTS TOP -- A VERY SHORT AMOUNT OF TIME HAS TO BE IN CONCERN. THAT IS THE NUMBER I AM LOOKING AT, WHEN REAL YIELDS START GETTING TO ZERO, AND WHAT THAT IS TO INFLATION EXPECT PATIENTS BECAUSE WE HAVE SEEN A PRETTY SHARP DECLINE IN INFLATION BREAKEVENS. THE FIVE-YEAR FORWARD FIVE-YEAR IS CLOSE TO 2%, NOT ANYWHERE NEAR 2.5%. SO UNDER THE CIRCUMSTANCES, THE FED IS NOT GOING TO BE CONCERNED ABOUT RAISING RATES TOO SOON BECAUSE THAT IS NOT BAKED INTO THE EXPECTATION. I THINK THE RISE IN REAL YIELD IS GOING TO BE VERY IMPORTANT FOR THE OUTSET. JONATHAN: HAVE A GOOD WEEKEND, SUBADRA RAJAPPA OF SOCGEN. IN GENEVA, THE FOCUS RIGHT NOW ON THE RUSSIAN FOREIGN MINISTER SERGEI LAVROV HOLDING A NEWS CONFERENCE. A LITTLE LATER THIS MORNING, WE WILL HEAR FROM HIS U.S. COUNTERPART, THE SECRETARY OF STATE ANTONY BLINKEN. AT THE MOMENT, THE HEADLINES AS FOLLOWS. RUSSIA ISN'T PLANNING TO ATTACK CRANE. UKRAINE ISSUE NEEDS ATTENTION. IT IS NOT A CORNERSTONE. THE U.S. HAS PROMISED A WRITTEN RESPONSE NEXT WEEK. PUTIN IS ALWAYS READY FOR CONTACT WITH PRESIDENT BIDEN. CAN'T SAY IF WE ARE ON THE RIGHT PATH OR NOT. JUST A FEW OF THE COMMENTS IN THE LAST 10 MINUTES. TOM: HIS FIRST POST I DON'T HAVE ANY EXPERTISE ON THIS OTHER THAN TO SAY HE'S NOT PART OF THE INNER SANCTUM OF STRIP PUTIN. THIS GUY IS A DIPLOMAT WITHIN THE FOREIGN SERVICE, AND THERE'S VERY MIXED REPORTS ON HIM FROM WESTERN COUNTRY DIPLOMAT. IT GOES EITHER WAY. THE GUYS CHALLENGING, TO SAY THE LEAST. I WILL LET OTHERS DECIDE. BUT THIS GUY IS A DIPLOMAT, AND DOING DIPLOMACY HERE WITH THE CIRCUITRY OF STATE. JONATHAN: -- THE SECRETARY OF STATE. LISA: I AM CLEARY US -- I'M CURIOUS TO SEE WHETHER HE GIVES A MORE CONCILIATORY TONE, WHETHER HE IS CONFIDENT THAT RUSSIA IS NOT, LEGALLY -- IS NOT IMMINENTLY GOING TO INVADE UKRAINE. JONATHAN: SERGEI LAVROV SAYS RUSSIA IS NOT PINING TO INVADE UKRAINE. WE WILL GET TOO SECURE VERY BLINKEN IN ABOUT 20 MINUTES. FUTURES DOWN ON THE NASDAQ 100. YIELDS COMING IN BY A SINGLE BASIS POINT ON TENDS TO 1.793 6%. WITH TOM KEENE AND LISA ABRAMOWICZ, I'M JONATHAN FERRO. ON RADIO, ON TV, THIS IS BLOOMBERG. ♪ LEIGH-ANN: WITH THE FIRST WORD NEWS, I'M LEIGH-ANN GERRANS. U.S. SECRETARY OF STATE ANTONY BLINKEN AND RUSSIAN COUNTERPART SERGEY LAVROV HELD SECURITY TALKS IN THE MIDST OF RISING TENSIONS OVER UKRAINE. BLINKEN TOLD LAVROV THE CRISIS IS AT A CRITICAL MOMENT. LAVROV SAID THE U.S. NEEDED TO COME UP WITH CONCRETE ANSWERS TO RUSSIAN PROPOSALS. PRESIDENT BIDEN HAS WARNED THAT MOSCOW COULD BE PLANNING IMMINENT INTERVENTION IN UKRAINE. RUSSIA DOES DENY THAT. INVESTORS ARE BRACING FOR THE PROSPECT THAT NETFLIX IS ENTERING A NEW PHASE OF SLOWER GROWTH. SHARES OF THE STREAM GIANT FELL AS MUCH AS 20% AFTER ITS FORECAST FOR NEW CUSTOMERS DISAPPOINTS. NETLIST SAYS THE SLOWDOWN WILL CONTINUE FOR AT LEAST ANOTHER QUARTER. CHINA IS TRYING TO ROOT OUT CORRUPTION AND WHAT THEY CALL THE DISORDERLY EXPANSION OF CAPITAL, A SIGN THAT BEIJING MAY EXPAND A REGULATORY CRACKDOWN THAT RAISED MORE THAN $1 TRILLION -- THAT ERASED MORE THAN $1 TRILLION OF MARKET VALUE LAST YEAR. THE ROCK SUPERSTAR KNOWN AS MEATLOAF HAS DIED. IS LATE 1970'S ALBUM "THAT OUT OF -- ALBUM "BAT OUT OF HELL" BECAME ONE OF THE BEST-SELLING ALBUMS IN HISTORY. MEATLOAF WAS 74 YEARS OLD. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M LEIGH-ANN GERRANS. THIS IS BLOOMBERG. ♪ ♪ > > ANY ASSEMBLED RUSSIAN UNITS MOVE ACROSS THE UKRAINIAN BORDER, THAT IS AN INVASION. IT WILL BE MET WITH SEVERE AND COORDINATED ECONOMIC RESPONSE THAT I HAVE DISCUSSED IN DETAIL WITH OUR ALLIES, AS WELL AS LAID OUT VERY CLEARLY FOR PRESIDENT PUTIN. BUT LET THERE BE NO DOUBT AT ALL THAT IF PUTIN MAKES THIS CHOICE, RUSSIA WILL PAY A HEAVY PRICE. JONATHAN: EXTERIOR MESSAGE FROM THE PRESIDENT OF THE UNITED STATES. -- A CLEAR MESSAGE FROM THE PRESIDENT OF THE UNITED STATES. YOUR EQUITY MARKET DOWN ON THE S & P 500, -0.7 PERCENT. WE ARE DOWN 0.5% AT THIS TIME. YIELDS A LOW BIT LOWER ON TENS . SERGEI LAVROV HAS BEEN DELIVERING A NEWS CONFERENCE IN THE LAST 30 MINUTES OR SO. WE STILL WAIT FOR THE SECRETARY OF STATE ANTONY BLINKEN IN ABOUT 10 MINUTES. TOM: LET'S DOVETAIL THIS IN AT THE PRESIDENT WILSON HOTEL ON THE SHORES OF LAKE GENEVA. ANNMARIE HORDERN, LAST TIME I SAW HER SHE WAS SKIING SOUTH OF GENEVA. SHE JOINS US NOW, OR BLOOMBERG WASHINGTON CORRESPONDENT. I WANT TO DOVETAIL THE DOMESTIC ITEM WITH THE FOREIGN POLICY THE MOMENT. THIS FROM THE TEAM AT "THE NEW YORK TIMES" THIS MORNING. I THOUGHT THE WAY THEY CAPTURED THIS QUOTE FROM THE PRESIDENT, "THE PUBLIC DOES NOT WANT ME TO BE THE PRESIDENT SENATOR. THEY WANT ME TO BE THE PRESIDENT AND LET THE SENATORS BE SENATORS." HOW IS HE TAKING THIS MOMENT TO BE MORE PRESIDENTIAL? ANNMARIE: HE'S TAKING HIS FOR US AN -- HIS FOREIGN POLICY MOM HAS PRESIDENT. YESTERDAY WAS A BIT OF A CLEANUP ACT -- CLEANUP ACT AFTER REALIZING THAT AS PRESIDENT, YOUR WORDS MATTER. PRESIDENT REALLY CLEANING UP SOME INSIGHT WHICH MANY RESONATED WITH, THE FACT THAT HE SAID THIS ISSUE ON MINOR INCURSIONS WHICH THAT WOULD MEAN FOR SANCTIONS, POTENTIALLY SOME FIGHTING BETWEEN THE UNITED STATES AND ITS PARTNERS ON WHAT THAT RESPONSE WOULD BE. THE PRESIDENT LOOKS DOWN AT A PIECE OF PAPER YESTERDAY AND HE CATEGORICALLY EXPLAINED TO THE AMERICAN PEOPLE, AND TO MOSCOW AND CAPITALS AROUND THE WORLD, ABOUT AN INVASION ON RUSSIA, WHAT THAT WOULD MEAN, AND THAT WOULD MEAN SANCTIONS ON THE KREMLIN. LISA: WHAT WAS TONY BLINKEN'S GOAL IN GENEVA TODAY? ANNMARIE: REALLY, THERE'S NO GOLD FOR THESE TALKS IN THE SENSE THAT GOING INTO THEM, YOU KNOW THEY ARE GOING TO FAIL. THE RUSSIANS HAVE SAID TWO THINGS THEY WANT, WHICH IS ONE, UKRAINE AND NEVER BE A PART OF NATO, AND THAT THEY WANT NATO TO REDRAW THE MAP, BASICALLY, FROM 1997, WHEN BORIS YELTSIN WAS MEETING WITH MR. BILL CLINTON. THAT IS WHAT RUSSIA WANTS, AND THAT IS A NONSTARTER FOR THE UNITED STATES AND NATO MEMBERS. SO GOING INTO THESE TALKS, THE FACT THAT THEY ARE TALKING IS REALLY THE KEY OBJECTIVE AND THE GOAL HERE, BUT IT IS TOUGH DELIBERATIONS. AS TOM WAS SAYING ABOUT SERGEI LAVROV, HE HAS BEEN THE RUSSIAN FOREIGN MINISTER FOR DECADES. HE'S KNOWN AS MR. NYET, WHICH MEANS NO AND RUSSIAN. IT IS SAID YOU CANNOT TANGOE WITH HIM BECAUSE DEMAND IS NOT DANCE. SO VERY COMPLICATED DISCUSSIONS, AND THERE BOTH COMING IN WITH HARDLINES, BUT THE FACT THAT THEY ARE TALKING IS OPTIMISTIC FOR MANY. THERE'S TWO THINGS WHEN YOU LOOK AT THE OIL MARKET. ONE IS THAT THE ENTIRE RUSSIAN ECONOMY IS ENSLAVED TO OIL AND GAS. FOR YEARS THEY HAVE TRIED TO DIVERSIFY, AND THEY HAVE NOT BEEN ABLE TO DO THAT. THE SECOND NATURE IS IT IS A DOUBLE-EDGED SWORD FOR THE WEST. YOU SEE OIL PRICES, BRENT APPROACHING $90 A BARREL. YOU HAVE INFLATIONARY ISSUES IN THE UNITED STATES THAT IS HURTING THE PRESIDENT DOMESTICALLY. IF YOU WERE TO SANCTION ENERGY COMPANIES OR EVEN BANKS IN RUSSIA, YOU ARE GOING TO SEE A RISE IN OIL PRICES, AND THAT IS GOING TO BE VERY DIFFICULT FOR THE UNITED STATES AND OTHER WESTERN COUNTRIES ALREADY DEALING WITH HIGHER ENERGY COSTS. JONATHAN: I WOULD LIKE TO GET BACK TO THE HEART OF THE ISSUE. YOU CAME OUT WITH TWO POINTS PRESIDENT PUTIN WOULD LIKE. HE WOULD LIKE FOR UKRAINE NEVER TO BE PART OF NATO. HE DOES NOT WANT STRATEGIC WEAPONS STATIONED IN UKRAINE. THE PRESIDENT SAID IN A NEWS CONFERENCE THEY COULD DO SOME THE ABOUT .2. THEY CAN'T DO ANYTHING ABOUT .1 -- ABOUT POINT TWO. THEY CAN DO A KNITTING ABOUT POINT -- DO ANYTHING ABOUT POINT ONE. OF COURSE, ANY MEMBER OF NATO IS GOING TO SAY CRANE CAN'T JOIN, BUT WILL THEY JOIN? HOW LIKELY IS THAT? ANNMARIE: YOU'RE NEVER GOING TO SEE A WESTERN LEADER SAY THAT UKRAINE CANNOT JOIN NATO, BUT THE FACT OF THE MATTER IS, AND YOU'RE GETTING TO THE HEART OF THE ISSUE HERE, THAT, AND PRESIDENT PUTIN KNOWS THIS, NATO DOES NOT WANT UKRAINE TO JOIN. THESE ARE CONVERSATIONS PEOPLE WILL NOT ADMIT IN THE OPEN, BUT IF UKRAINE JOINS NATO, THAT BASICALLY SETS NATO UP DIGITALLY FOR HAVING TO GO TO WAR WITH RUSSIA, AND THAT IS SOMETHING THEY DO NOT WANT TO TOUCH. JONATHAN: ANNMARIE, THANK YOU. THAT IS WHAT IS DIFFICULT ABOUT THIS MOMENT FILLED WITH SO MUCH TENSION. WHAT THEY WILL SAY PRIVATELY IS VERY DIFFERENT TO WHAT THEY SAY PUBLICLY, AND SERGEI LAVROV, THE RUSSIAN FOREIGN MINISTER, IS SPEAKING TO THAT OF THE MOMENT WHEN HE SAYS THE FOLLOWING. "WE ARE NOT SURE IF WE WILL PUBLISH THE U.S. RESPONSE. WE WILL ASK SECRETARY BLINKEN TO MAKE THE RESPONSE PUBLIC." SAYING NATO IS EWING UKRAINE AS ITS ZONE OF INFLUENCE. THERE WAS A PRIVATE CONVERSATION HERE. THERE'S A PUBLIC ONE. OF COURSE, ALL WE ARE GETTING IS THE PUBLIC SIDE OF THINGS. TOM: WE ARE SEEING THE IMAGERY AS WELL. I AM GETTING FROM THE FIRST IMAGES FROM THE DIPLOMATIC PART OF GENEVA, RIGHT NEAR THE UNITED NATIONS EFFORTS IN GENEVA, SO HISTORIC OFF OF WORLD WAR II, I THINK THE IMAGERY SPEAKS VOLUMES. YOU HAD MR. LAVROV AT A DESK IN BAD LIGHTING WRAPPED AROUND WITH PRESS, JUST THREE FLACKS BEHIND HIM. NOT MUCH GOING ON. THE BLINKEN PRESS CONFERENCE IS MUCH MORE CHOREOGRAPHED, WITH A SINGLE AMERICAN FLAG, VERY FANCY. THE IHT HOTEL. THE TWO WORLDS APART JUST UP THE SHORES FROM THE GENEVA MAY BE SPEAK TO THE TWO WORLDS APART OF THIS DEBATE ON KEY HAVE IN THE FUTURE ON KIEV IN THE FUTURE OF UKRAINE. LISA: YES, THE EUROPEAN UNION AND THE UNITED STATES HAVE BEEN ALLIED, BUT THERE IS A SENSE THAT PERHAPS THE UNITED STATES DOES NOT HAVE THE DICK BLACK LEADERSHIP -- THE NOMADIC LEADERSHIP THAT IT ONCE DID. -- THE DIPLOMATIC LEADERSHIP THAT IT ONCE DID. I WONDER IF THIS IS AN EFFORT TO REGAIN THE HELM. JONATHAN: SECRETARY BLINKEN MOMENTS AWAY. WE WILL CATCH UP WITH GEORGE SURVEY LOOKS -- WITH GEORGE SARAVELOS, HEAD OF FX RESEARCH AT DEUTSCHE BANK. NASDAQ 100 FUTURES DOWN 104, -0.7 -- NEGATIVE 0.7%. THIS TIME IT IS DIFFERENT. DURING THE FIRST TWO WEEKS OF THIS YEAR, IT HAS BEEN ABOUT HIGHER YIELDS AND AN EQUITY MARKET GETTING MESSY. THIS TIME IT IS ABOUT AN EQUITY MARKET GETTING MESSY AND SENDING YIELDS LOWER. ♪ JONATHAN: TWO HOURS AWAY FROM THE OPENING BELL IN NEW YORK CITY. ON THE NASDAQ, DOWN 0.8%. ON THE S & P 500, DOWN 0.5%. THE TAKE AWAY FROM BANK OF AMERICA OF RATE SHOCK IS JUST STARTING, NOT ENDING. THE FED IS HIKING INTO AN OVERVALUED REDDIT AND EQUITY MARKET. THEY CALL IT VERY 2007. THAT DOES NOT SOUND GOOD. SWITCH UP THE BOARD AND GET TO THIS. THIS IS THE STORY YEAR TO DATE. INFORMATION TECHNOLOGY ON THE S & P DOWN BY 9.6 PERCENT. ON THE NASDAQ 100, DOWN 9%. 10% OFF THE PREVIOUS HIGH. THEY CALL THAT A CORRECTION. THIS TIME AROUND, IT IS INTERESTING. IT HAS ALL BEEN ABOUT THE BOND MARKET SHAPING THE EQUITY MARKET. THIS MORNING AND YESTERDAY, THE EQUITY MARKET SHAPING THE BOND MARKET. YIELDS LOWER YESTERDAY, LOWER AGAIN TODAY. WHAT DO YOU MAKE OF THIS? WE ARE DOWN ON TENDS TO 1.7794%. TOM: WE ARE WAITING FOR THE SECRETARY OF STATE RIGHT NOW, AND YOU SEE IT WITH EURO SWISSIE AT 1.03446%, A STRONG SWISS FRANC. TOM: THIS IS WHY SOME PEOPLE CALL THIS -- JONATHAN: THIS IS WHY SOME PEOPLE CALL THIS A SELF-LIMITING SELLOFF. LISA: IT IS DRIVEN NOW BY DECLINING EXPECTATIONS, AS WELL AS RISING REAL YIELDS, SO IT COULD STILL BE POTENTIALLY DAMAGING FOR RISK ASSETS, EVEN AS THE NOMINAL YIELD GOES DOWN. JONATHAN: THAT IS THE PRICE ACTION. WE ARE WAITING FOR SEC. BLINKEN IN GENEVA. THAT'S GET YOU SOME SINGLE NAMES NOW WITH ROMAINE. ROMAINE: WE TALK ABOUT OFFICIAL CORRECTION TERRITORY FOR THE NASDAQ 100 AND THE NASDAQ COMPOSITE SENTIMENT. CERTAINLY NOT GOING TO IMPROVE TODAY, WITH NETFLIX DOWN 20% IN THE PREMARKET. SHOULD THIS CARRY OVER INTO THE CLOSE, THIS WILL BE ONE OF THE WORST DAYS FOR NETFLIX SINCE AT LEAST 2012, MAYBE WORSE THAN THAT. YOU DON'T SEE MOVES LIKE THIS FOR A STOCK THIS SIZE. ONLY SIX TIMES SINCE THEY WENT PUBLIC HAVE WE SEEN A 20% DECLINE. A LOT OF THAT HAS TO DO WITH THE SLOWDOWN IN SUBSCRIBER NUMBERS. I THINK A REAL ISSUE HERE, THE FACT THAT THE COMPANY REALLY GAVE NO EXPLANATION FOR IT. THERE WERE A COUPLE OF QUESTIONS ON THE CONFERENCE CALL, IT MUCH MORE STAGED CONFERENCE CALL THEN WE GET FROM OTHER COMPANIES, AND COULD NOT COME UP WITH A COHERENT EXPLANATION AS TO WHY THINGS SLOWED AS QUICKLY AS THEY DID. KEEP AN EYE ON DISNEY AND VIACOM . DOWN 3% FOR DISNEY, DO PERCENT FOR VIACOM. LOTS OF QUESTIONS NOW ABOUT THESE STREAMING SERVICES AND THE POTENTIAL FOR A SLOWDOWN IN GROWTH. THE BIG STOCK EVERYONE IS GOING TO BE TALKING ABOUT IS PELOTON. THEY WERE DOWN 24% YESTERDAY. THEY ARE HIGHER IN THE PREMARKET BY 6%. PELOTON CAME UP WITH A STATEMENT LAST NIGHT BASICALLY SAYING THE INITIAL REPORTS THAT THEY WERE SHUTTING DOWN PRODUCTION WAS FALSE, BUT THEY DID SAY THEY ARE CUTTING COSTS RELATED TO PRODUCTION, AND THAT THEY WERE CONSIDERING LAYOFFS. THEY ALSO CAME OUT WITH PRELIMINARY NUMBERS, SOME AB THAT IS WHY YOU ARE SEEING A MODEST BID, BUT YOU'RE TALKING ABOUT IT WHEN HE 4% DECLINE WE SAW YESTERDAY. TOM: THE TOP OF MARKET FOR PELOTON IS WHEN I BOUGHT IT AND WENT A MILE. JONATHAN: I DON'T BELIEVE YOU HAVE EVER GONE ON THAT BIKE, TOM. TOM: ROMAINE BOSTICK HAS. SOME IMPORTANT EARNINGS INTO NEXT WEEK AS WELL. AS FAR AS I'M CONCERNED, THIS IS THE DOMESTIC AND FINANCE INTERVIEW OF THE DAY. GEORGE SARAVELOS HAS BEEN BRILLIANT, FILLING IN ALL OF THE RESEARCH AT DEUTSCHE BANK INTO FOREIGN-EXCHANGE RESEARCH. THIS MORNING, AND ABSOLUTELY BRILLIANT TOUR DE FORCE -- BRILLIANT TOUR DE FORCE PARAGRAPH FROM SARAVELOS. LET'S GO TO IT NOW. "THIS IS VERY DIFFERENT FROM THE 1970'S WHEN REAL WAGES WERE GROWING SHARPLY. THIS IS LEADING TO A VERY DIFFERENT MESSAGE. THE CONSUMER IS DIFFERING AS OPPOSED TO ACCELERATING CONSUMPTION LIKE IN THE 1970'S." LET'S TRY THIS AS WE CAN. YOU TAKE A STARKLY DIFFERENT VIEW ON WHAT INFLATION WILL DO TO OUR ECONOMIES. WHERE WILL WE BE IN APRIL OR MAY? GEORGE: THANK YOU. IF YOU LOOK BACK THROUGH VARIOUS COMMENTARY, WE TRY TO FIND PARALLELS. IS THIS 2008, IS THIS 2018? I THINK THE REALITY IS THIS IS 2022, AND IT IS JUST VERY DIFFERENT TO ANYTHING WE HAVE SEEN BEFORE. PART OF THAT IS THE INFLATION PICTURE YOU ARE LOSING, AND WHAT YOU ARE SEEING IN THE U.S. NOW IS PRETTY REMARKABLE. U.S. REAL DISPOSABLE INCOME IS BELOW ITS PRE-COVID TRACK, SO EVERYONE IS FOCUSED ON THESE EXCESS SAVINGS, BUT IN TERMS OF FUTURE EXPECTATIONS FOR INCOME, THEY ARE GOING DOWN. YOU HAVE THE STORY OF SUPPLY THAT WAS FRIENDLY TERRIBLE. THE LABOR MARKET IS SHRINKING FOR THE FIRST TIME SINCE WORLD WAR II. I TAKE ISSUE WITH THIS IDEA THAT IT IS ALL ABOUT STRONG DEMAND, MOVING DEMAND. THE FED WILL HAVE TO HIKE, BUT THERE'S ALSO BAD THINGS HAPPENING IN THE BACKGROUND. I GUESS THE LAST POINT TO MAKE IS IF YOU LOOK AT THE STARTING POINT OF INFLATION, WE ARE TALKING ABOUT A TOTALLY DIFFERENT ENVIRONMENT TO THE LAST 30 YEARS. THE LAST FEW HIKING CYCLES HAVE ALWAYS STARTED WITH INFLATION AT OR BELOW TARGET. SO THIS IDEA THAT SOMEHOW THE FED CAN MAINTAIN EASY FINANCIAL CONDITIONS, KEEP THINGS NICE AND SMOOTH, THAT WAS THE OBJECTIVE IN THE LAST HIKING CYCLES BECAUSE INFLATION WAS NOT AS HIGH, AND AGAIN, THIS IS A VERY DIFFERENT ENVIRONMENT AND A VERY UNIQUE ONE, SO TO SPEAK. LISA: TO THAT POINT, THERE'S AN IDEA EMBEDDED IN YOUR WORDS WHERE THE FED HAS TO TIGHTEN POLICY IN ORDER TO KEEP THE ECONOMY FROM SLOWING DOWN MORE BECAUSE OF ITS RESTRICTIVE INFLATION THAT YOU TALK ABOUT FROM THE NEGATIVE REAL WAGES. CAN YOU TALK ABOUT HOW THEY MIGHT TRY TO ORCHESTRATE A SOFT LANDING, OR RATHER YOU THINK IT IS TOO LATE? GEORGE: THIS IS REALLY THE BIG QUESTION, CAN THE SOFT LANDING BE ORCHESTRATED. I THINK THAT IS PRECISELY THE WORRY OF 2022. IT IS GOING TO BE THIS STAGE OF THE CYCLE, WILL WOULD BE ABLE TO STAY MIDCYCLE, OR ARE WE GOING INTO A MORE LATE CYCLE ENVIRONMENT. I THINK THE JURY IS STILL OUT, BUT WHAT WE CAN SAY FOR SURE IS IT IS GOING TO BE MUCH MORE CHALLENGING THAN LAST YEAR, WHERE IF YOU LOOK AT REAL YIELDS , THEY MADE RECORD LOWS BACK IN OCTOBER, NOVEMBER, SO THIS IS A VERY FRESH STORY. I GUESS THE LAST POINT TO MAKE IS IF YOU LOOK AT THE FIXED INCOME MARKET, YES, WE HAVE TO REPRICE MORE FOR THE FED A NEAR-TERM TO BRING INFLATION DOWN, BUT MORE MEDIUM-TERM, THE RATE MARKET HAS BEEN GIVING YOU THIS MESSAGE THAT NEUTRAL RATES, TREND GROWTH HAS ISSUES, AND I THINK OF THIS CONTINUES, WHAT WE WILL SEE IS AN AGGRESSIVELY FLATTENING CURVE. POTENTIALLY THE CURVE CAN INVERT BECAUSE ESSENTIALLY, THE FED HAS TO HIKE RATES. THE PURPOSE OF HIKING THOSE RATES IS TO BRING INFLATION EXPECTATIONS DOWN, AND AT THE END OF THE DAY, THAT IS ACTUALLY POSITIVE FOR THE LONG END OF THE FIXED INCOME MARKET. LISA: GIVE US A SENSE OF WHAT YOU WOULD SAY TO PEOPLE WHO FIND THE LABOR MARKET INCREDIBLY TIGHT, AND MAY REAL WAGES ARE NEGATIVE, BUT THEY ARE GOING TO GO UP BECAUSE YOU ARE GOING TO SEE A ROLLING OVER IN THE INFLATION AND YOU ARE GOING TO SEE WAGES CONTINUE TO ACCELERATE AS WE HAVE SEEN IN SOME OF THE EARNINGS REPORTS THAT HAVE COME OUT SO FAR. WHAT WOULD YOU RESPOND TO THAT? GEORGE: I VERY MUCH AGREE THAT THE LABOR MARKET IS TIGHT. I VERY MUCH DISAGREE WITH THE PHRASE THAT THE LABOR MARKET IS STRONG. THE LABOR MARKET WOULD'VE BEEN STRONG IF U.S. EMPLOYMENT HAD RECOVERED BACK TO WHERE IT WAS AT PRE-COVID TREND. THE AUSTRALIAN LABOR MARKET IS STRONG. THE CANADIAN LABOR MARKET IS STRONG FORGET THE U.S. LABOR MARKET IS WEAK, AND THAT IS WHAT IS CREATING THIS WAGE PRESSURE. YOU DON'T HAVE ENOUGH WORKERS COMING BACK IN AND SHRINKING AT THE FASTEST PACE IN MANY DECADES , AND I THINK THAT IS PRECISELY WHAT IS GOING TO CREATE THE ISSUE FOR THE FED. WAGES MAY BE GOING UP, BUT ESSENTIALLY FOR BAD REASONS, AND IT ULTIMATELY MEANS THE SPEED LIMIT OF THE ECONOMY IS LOWER THAN WHAT WE ASSUME. TOM: GEORGE SARAVELOS WITH US WITH DEUTSCHE BANK, AN IMPORTANT CONVERSATION ON OUR ECONOMICS, FINANCE, AND INVESTMENT. WE AWAIT THE PRESS CONFERENCE OF THE SECRETARY OF STATE IN GENEVA , AFTER WE HEARD FROM MR. LAVROV EARLIER. I WANT TO GO ALL PETER HUBER ON YOU RIGHT NOW. MY CRITICISM IS THE STATIC ANALYSIS IS OUT THERE RIGHT NOW. YOU AND YOUR TEAM ARE WONDERFULLY DYNAMIC. WHICH PART OF THE DYNAMIC CONTINUUM MATTERS RIGHT NOW? GEORGE: I THINK FOR THE MARKET AT THE MOMENT, IT IS REALLY ALL ABOUT THE SPEED OF THIS EXPECTED INFLATION SLOW. IF YOU LOOK AT CURRENT INFLATION, CORE PCE AROUND 4%, IT IS EXPECTED TO GO DOWN ONTO THE 2% HANDLE. ANY DECELERATION THAT IS NOT ASSESSED IS THAT WILL CREATE PRESSURE ON THE FED. THE KEY QUESTION IS HOW THAT INTERACTS WITH A SLOWING ECONOMY. IT HAS THE POTENTIAL TO IMPACT ALL ASSET CLASSES. THE BIG QUESTION FOR THIS YEAR FOR ME IS REALLY ARE WE MIDCYCLE OR LATE CYCLE. I WORRY WE ARE IN THE LATE CYCLE SITUATION. JONATHAN: THE END IS NEAR. SOUNDS LIKE 'BRAMO. [LAUGHTER] LISA: I AM LOVING THIS. IT IS FASCINATING. IT GOES AGAINST THE NARRATIVE WE HAVE HEARD CONTINUALLY, SO THANK YOU. I APPRECIATE IT. JONATHAN: GEORGE SARAVELOS OF DEUTSCHE BANK MAKING LISA ABRAMOWICZ HAPPY. GEORGE, THANK YOU. THAT CONVERSATION I THINK IS SO IMPORTANT. UNLIKE THE 1970'S, THESE CONSUMERS ARE NOT CHASING THESE PRICES. THERE IS A RISK THEY RUN AWAY FROM THEM. IT IS THE POINT DEUTSCHE BANK ARE MAKING. LISA: AND GEORGE IS SAYING THE RETAIL SALES NUMBERS THAT EVERYBODY SHRUGGED OFF, THAT MAY BE OMICRON DEMAND WAS PULLED FORWARD, IS ACTUALLY A DEMONSTRATION OF EXACTLY THIS, EXACTLY THE FACT THAT PEOPLE ARE NOT SPENDING AS MUCH BECAUSE PRICES ARE SO HIGH IN THEIR WAGES ON A REAL BASIS ARE ACTUALLY FALLING. JONATHAN: THIS IS THE BIG RISK, THE RISK THE FED STARTS HIKING AND THEY HIKE INTO WEAKNESS. THAT IS THE PROBLEM FOR SO MANY PEOPLE, AND FOR OTHERS IT IS TOO LATE. IT DOESN'T MATTER WHAT THEY DO. EIGHT CYCLE, GAME OVER. LISA: AND FRANKLY, IF THEY HIKE RATES, IT IS NOT A POLICY ERROR BECAUSE IT IS LEADING TO A REAL PERNICIOUS CYCLE OR POTENTIALLY THE LOWEST INCOME EARNERS. THE IDEA THAT THEY ARE HAVING A MORE DIFFICULT TIME BEING ABLE TO AFFORD GROCERIES AND GAS AND OTHER BASIC MATERIALS. JONATHAN: WE ARE ABOUT TO HEAD OVER TO THE INTERCONTINENTAL HOTEL GENEVA TO HEAR FROM SECTOR TERRY BLINKEN. THAT COULD BE JUST MOMENT AWAY. TOM: I WANT TO SQUEEZE THIS IN. -- FROM SECRETARY BLINKEN. THIS COULD BE JUST MOMENTS AWAY. TOM: I WANT TO SQUEEZE THIS IN. THIS IS THE TENSION, THIS IS THE BACK STORY NO ONE IS TALKING ABOUT. I'M TRYING TO GET THAT UP ON BLOOMBERG TELEVISION RIGHT NOW. LET'S PASS ON AND STAY WITH THIS IMAGE. JONATHAN: WE'VE HEARD FROM THE RUSSIAN FOREIGN MINISTER SERGEI LAVROV AND GOT HIS VIEW OF EVENTS. HE IS SAYING THAT RUSSIA IS NOT PREPARING TO GO INTO UKRAINE AREA I THINK IT IS VERY IMPORTANT ON A MORNING LIKE THIS ONE TO HEAR FROM THE MAN HIMSELF, THE SECRETARY OF STATE, ANTONY BLINKEN. THAT COULD BE MINUTES AWAY. GIVEN WHAT SERGEI LAVROV SAID SO FAR, WHAT WOULD YOU LIKE TO HEAR, JUST BRIEFLY? TOM: I THINK WHAT WE WOULD LIKE TO HEAR IS A REAFFIRMATION OF WHAT WE HEARD FROM THE PRESIDENT AT THE PRESS CONFERENCE. PLEASE, THE SECRETARY. JONATHAN: THE SECRETARY OF STATE , ANTONY BLINKEN. LIST TAKE A LISTEN. SEC. BLINKEN: FOREIGN MINISTER LAVROV AND I FINISHED OUR MEETING, AND I WANT TO BEGIN BY THANKING SWITZERLAND FOR HOSTING US, FOR ITS TRADITIONAL HOSPITALITY, WHICH IS VERY MUCH APPRECIATED. I CAME TO GENEVA FOLLOWING UP ON LAST WEEK'S DISCUSSIONS AT THE NATO RUSSIAN COUNCIL AND THE OSCE ON THE CRISIS IN UKRAINE AND BROADER SECURITY ISSUES. OUR OBJECTIVE WAS TO DETERMINE WHETHER RUSSIA IS PREPARED TO TAKE DIPLOMATIC PATH AND OTHER NECESSARY STEPS TO DE-ESCALATE THE SITUATION IN UKRAINE AND ULTIMATELY TO RESOLVE OUR DIFFERENCES THROUGH DIPLOMACY AND DIALOGUE. THE DISCUSSION TODAY WITH MR. LAVROV WAS FRANK AND SUBSTANTIVE. THE POSITION OF THE UNITED STATES AND OUR EUROPEAN ALLIES AND PARTNERS, THAT WE STAND FIRMLY WITH UKRAINE IN SUPPORT OF ITS SOVEREIGNTY AND TERRITORIAL INTEGRITY. WE HAVE BEEN CLEAR, IF ANY RUSSIAN FORCES MOVE ACROSS UKRAINE'S BORDER, THAT IS A RENEWED INVASION. IT WILL BE MET WITH SWIFT, SEVERE, AND UNITED RESPONSE FROM THE UNITED STATES AND OUR PARTNERS AND ALLIES. WE ALSO KNOW FROM EXPERIENCE THAT RUSSIA HAS AN EXTENSIVE PLAYBOOK OF AGGRESSION SHORT OF MILITARY ACTION, INCLUDING CYBERATTACKS, PARAMILITARY TACTICS, AND OTHER MEANS, ADVANCING THEIR INTERESTS AGGRESSIVELY WITHOUT USING MILITARY ACTION. THOSE TYPES OF RUSSIAN AGGRESSION WILL ALSO BE MET WITH A DECISIVE, CALIBRATED, AND AGAIN, UNITED RESPONSE. THAT IS THE CLEAR MESSAGE COMING OUT OF MY MEETINGS ON WEDNESDAY WITH UKRAINE PRESIDENT ZELENSKY, AND WITH GERMAN CHANCELLOR SCHOLZ. WE COMMITTED EQUALLY IN OUR RESOLVE TO MASSIVE CONSEQUENCES SHOULD RUSSIA CHOOSE THE PATH OF CONFRONTATION AND CONFLICT. I STRESSED AGAIN TO MR. LAVROV THAT ON THE SECURITY CONCERNS RUSSIA HAS RAISED IN RECENT WEEKS, THE UNITED STATES AND EUROPEAN ALLIES AND PARTNERS ARE PREPARED TO PURSUE POSSIBLE MEANS OF ADDRESSING THEM IN THE SPIRIT OF RECIPROCITY, WHICH MEANS, SIMPLY PUT, THAT RUSSIA MUST ALSO ADDRESS OUR CONCERNS. THERE ARE SEVERAL STEPS WE CAN TAKE, RUSSIA INCLUDED, TO INCREASE TRANSPARENCY, TO REDUCE RISKS, TO ADVANCE ARMS-CONTROL, TO BUILD TRUST. I CONVEYED DIRECTLY TO MR. LAVROV ARE SPECIFIC CONCERNS FOR RUSSIA'S ACTIONS NOT ONLY IN UKRAINE, BUT THROUGHOUT EUROPE AND INDEED IN THE WORLD. ALSO LAID OUT SEVERAL IDEAS TO REDUCE TENSIONS AND INCREASE SECURITY WHICH WE HAVE DEVELOPED IN CONSULTATION WITH OUR PARTNERS AND ALLIES, AND WHERE WE BELIEVE WE CAN FIND COMMON GROUND AGAIN BASED ON THE PER AND SUPPORT OF RECIPROCITY. THIS WAS NOT A NEGOTIATION, BUT A CANDID EXCHANGE OF CONCERNS AND IDEAS. I MADE CLEAR TO MR. LAVROV THERE ARE CERTAIN ISSUES AND PRINTABLE'S THAT THE UNITED STATES AND OUR ALLIES ARE COMMITTED TO DEFEND. THAT INCLUDES THOSE THAT WOULD IMPEDE THE SOVEREIGN RIGHT OF THE UKRAINIAN PEOPLE TO WRITE THEIR OWN FUTURE. THERE IS NO SPACE THERE. NONE. FOREIGN MINISTER LAVROV AND I ALSO TALKED ABOUT THE WAY FORWARD. LET ME SAY AS WELL THAT HE HEARD FROM US AND FROM ME THAT WHAT IS FOR US AND UNVIABLE RULE, NOTHING ABOUT UKRAINE WITHOUT UKRAINE, NOTHING ABOUT NATO WITHOUT NATO, NOTHING ABOUT EUROPE WITHOUT EUROPE. BASED ON OUR DISCUSSION, I BELIEVE WE CAN CARRY FORWARD THIS WORK OF DEVELOPING UNDERSTANDING AGREEMENTS TOGETHER THAT ENSURE OUR MUTUAL SECURITY, BUT THAT IS CONTINGENT ON RUSSIA STOPPING ITS AGGRESSION TOWARDS UKRAINE. SO THAT IS THE CHOICE RUSSIA FACES NOW. IT CAN CHOOSE THE PASSIVE DIPLOMACY THAT CAN LEAD TO PEACE AND SECURITY, OR THE PAST THAT WILL LEAD ONLY TO CONFLICT, SEVERE CONSEQUENCES, AND INTERNATIONAL CONDEMNATION. THE UNITED STATES AND OUR ALLIES AND PARTNERS IN EUROPE STAND READY TO MEET RUSSIA ON EITHER PASS, AND WE WILL CONTINUE TO STAND WITH UKRAINE. I BELIEVE THAT FOREIGN MINISTER LAVROV NOW HAS A BETTER UNDERSTANDING OF OUR POSITION, AND VICE VERSA. TODAY'S DISCUSSION WAS USEFUL IN THAT SENSE, AND THAT IS PRECISELY WHY WE MET. I WILL RETURN TO WASHINGTON THIS AFTERNOON TO CONSULT WITH PRESIDENT BIDEN AND OUR AND TILE -- OUR ENTIRE NATIONAL SECURITY TEAM, MEMBERS OF CONGRESS, AND ALLIES AND PARTNERS IN THE DAYS AHEAD. BASED ON THE DISCUSSIONS TODAY, FOREIGN MINISTER LAVROV AND I AGREED THAT IT IS IMPORTANT FOR THE DIPLOMATIC PROCESS TO CONTINUE. I TOLD HIM THAT, FOLLOWING THE CONSULTATIONS WE WILL HAVE IN THE COMING DAYS WITH ALLIES AND PARTNERS, WE ANTICIPATE WE WILL BE ABLE TO SHARE WITH RUSSIA ARE CONCERNS AND IDEAS IN MORE DETAIL AND IN WRITING NEXT WEEK, AND WE AGREED TO FURTHER DISCUSSIONS AFTER THAT. WE AGREED AS WELL THAT FURTHER DIPLOMATIC DISCUSSIONS WOULD BE PREFERABLE WAY FORWARD, BUT AGAIN, IT IS REALLY UP TO RUSSIA TO DECIDE WHICH PATH IT WILL PURSUE. I SHOULD MISSION AS WELL THAT THE FOREIGN MINISTER AND I HAVE THE OPPORTUNITY TO DISCUSS IRAN, AND HOW THE UNITED STATES AND RUSSIA CAN WORK TOGETHER ON SECURITY ISSUES OF SHARED CONCERNS. THE TALKS WITH IRAN ABOUT A MUTUAL RETURN TO CLIENTS -- TO COMPLIANCE FOR THE JCPOA HAVE REACHED A DECISIVE MOMENT. IF A DEAL IS NOT REACHED IN THE NEXT FEW WEEKS, IT WILL MAKE IT IMPOSSIBLE TO RETURN TO THE JCPOA, BUT RIGHT NOW THERE IS STILL A WINDOW TO BRING THOSE TALKS TO A SUCCESSFUL CONCLUSION AND ADDRESS THE REMAINING CONCERNS OF ALL SIDES. WE DID NOT ASK ANY MAJOR BREAKTHROUGHS TO HAPPEN TODAY, BUT I BELIEVE WE ARE NOW IN A CLEAR PATH IN TERMS OF UNDERSTANDING EACH OTHER'S CONCERNS, EACH OTHER'S POSITIONS . LET'S SEE WHAT THE NEXT DAYS BRING READ WITH THAT, I AM HAPPY TO TAKE YOUR QUESTIONS. > > THANK YOU, MR. SECRETARY. MR. LAVROV HAS SPOKEN TODAY ABOUT WHAT HE CALLS HISTORICAL RHETORIC FROM THE WEST ABOUT AN INVASION, AND PRESIDENT BIDEN HAS SAID THAT PUTIN WILL MOVE IN -- [INDISCERNIBLE] DO YOU THINK AS OF TODAY YOU HAVE A BETTER UNDERSTANDING FROM MR. LAVROV OF WHAT PUTIN'S INTENTIONS ARE? DO YOU HAVE ANY COMMITMENT THAT THEY WILL STOP THE AGGRESSIONS STANDING IN THE WAY OF ANY AGREEMENT? HE SAYS THAT YOU ARE GOING TO PRESENT WHAT YOU JUST CONFIRMED WHICH YOU AND EVERYONE IN THE MINISTRY SHOULD HAVE SAID FROM THE BEGINNING OUR NONSTARTER'S, PROPOSALS TO LIMIT NATO EXPANSION. HAVE ANY DIFFERENT RESPONSES ABOUT NATO EXPANSION, WHAT YOU SAID IS NONNEGOTIABLE? WHERE YOU SEE ANY KIND OF ENGAGEMENT TO DIFFUSE THIS CRISIS? SINCE YOU BROUGHT OF IRAN, DO YOU THINK THERE IS THE POSSIBILITY AFTER TALKING TO MR. LAVROV THAT YOU AND RUSSIA, THE U.S. AND RUSSIA, AND THE OTHER ALLIES, CAN GET IRAN TO AGREE TO COME INTO COMPLIANCE, AND WILL THE U.S. THEN AGREE TO LIFT SANCTIONS, PERHAPS SIMULTANEOUSLY? SEC. BLINKEN: THANK YOU VERY MUCH. FIRST, WE ARE NOT PROCEEDING ON THE BASIS OF THE MOTION. -- OF EMOTION. WE ARE PROCEEDING ON THE BASIS OF FACT. THE FACTS ARE THAT RUSSIA HAS AMASSED VARIES IN IF IT ENFORCES ON UKRAINE'S BORDER AND CONTINUES TO DO SO. 100,000 TROOPS, MOST RECENTLY INCLUDING FORCES DEPLOYED TO BELARUS. THAT WOULD GIVE RUSSIA THE CAPACITY, IF PRESIDENT PUTIN SO CHOOSES, TO ATTACK UKRAINE FROM THE SOUTH, FROM THE EAST, FROM THE NORTH, AND WE HAVE SEEN PLANS TO UNDERTAKE A VARIETY OF DESTABILIZING ACTIONS, SOME OF THEM SHORT OF THE OVERUSE OF FORCE, TO DESTABILIZE UKRAINE, TO TOPPLE THE GOVERNMENT, A VARIETY OF THINGS. SO AS I SAID, THIS IS NOT ON THE BASIS OF EMOTION. IT IS ON THE BASIS OF FACT, AND ALSO HISTORY. RUSSIA INVADED UKRAINE IN 2014 IN CRIMEA, PROVOKING ONGOING CONFLICT IN EASTERN UKRAINE, CHANGING UKRAINE'S BORDERS BY FORCE. THAT IS WHAT WE ARE LOOKING AT. WE HAVE HEARD RUSSIAN OFFICIALS SAY THEY HAVE NO INTENTION OF INVADING UKRAINE. IN FACT, MINISTER LAVROV REPEATED THAT TO ME TODAY. BUT AGAIN, WE ARE LOOKING AT WHAT IS VISIBLE TO ALL, AND IT IS DEEDS AND ACTIONS, NOT WORDS, THAT MAKE THE DIFFERENCE. I SUGGESTED TO MINISTER LAVROV AS WE HAVE REPEATEDLY THAT IF RUSSIA WANTS TO BEGIN TO CONVINCE THE WORLD THAT IT HAS NO AGGRESSIVE INTENT TOWARDS UKRAINE, A VERY GOOD PLACE TO START WOULD BE BY DE-ESCALATING, BY REMOVING FORCES FROM UKRAINE'S BORDERS, AS WELL AS ENGAGING IN DIPLOMACY AND DIALOGUE WHICH IS WHAT WE DID TODAY, AND WHAT WE PLAN TO CONTINUE DOING IN THE DAYS AND WEEKS AHEAD. WE HAVE SAID ALL ALONG THAT WE INTENDED NOT ONLY TO RESPOND TO THE CONCERNS THAT RUSSIA HAS RAISED, BUT TO SHARE OUR OWN CONCERNS, WHICH ARE MANY, ABOUT THE ACTIONS RUSSIA TAKES THAT WE SEE AS A THREAT TO SECURITY IN EUROPE AND BEYOND. SO IT WAS IMPORTANT IN THE COURSE OF THE CONVERSATIONS THAT WE'VE HAD TO DATE, BOTH LAST WEEK BETWEEN THE UNITED STATES AND RUSSIA, AT THE NATO RUSSIAN COUNCIL, TO MAKE SURE THAT WE FULLY UNDERSTOOD EACH OTHER'S POSITIONS, EACH OTHER'S CONCERNS . AFTER THAT, AND AFTER CONSULTING VERY INTENSELY WITH ALLIES AND PARTNERS, PRESIDENT BIDEN WANTED ME TO HAVE THIS OPPORTUNITY, HAVING DIGESTED WHAT WE HAVE HEARD OVER THE LAST WEEK AND PRESUMABLY THE RUSSIANS HAVING HAD AN OPPORTUNITY TO DISCUSS WHAT THEY HEARD INITIALLY FROM US WITH PRESIDENT PUTIN, TO REALLY SEE WHERE WE ARE DIRECTLY WITH FOREIGN MINISTER LAVROV, TO DETERMINE WHETHER THERE IS A PATH FORWARD FOR DIALOGUE AND DIPLOMACY, AND THEN TO LOOK AT HOW WE WOULD PURSUE THAT, AND WHAT WAS AGREED TODAY, WHICH WAS THAT WE WILL SHARE WITH RUSSIA A RESPONSE TO THE CONCERNS AS RAISED. AND PUT SOME IDEAS ON THE TABLE FOR CONSIDERATION, AND THEN WE PLAN TO MEET AGAIN AFTER RUSSIA HAS HAD AN OPPORTUNITY TO LOOK AT THAT PAPER, AND WE WILL SEE WHERE WE GO FROM THERE. LET ME ALSO BE CLEAR ABOUT THIS. TO THE EXTENT THAT RUSSIA IS ENGAGED FOR NOW IN CLUMSY COME BUT AT THE SAME TIME CONTINUES TO TAKE ESCALATORY ACTIONS, CONTINUES TO PLAN FOR AGGRESSIVE ACTION AGAINST UKRAINE, WE END ALL OF OUR ALLIES AND PARTNERS ARE EQUALLY COMMITTED TO MAKE SURE WE ARE DOING EVERYTHING POSSIBLE TO MAKE CLEAR TO RUSSIA THAT WILL BE A SWIFT, SEVERE, AND UNITED RESPONSE TO ANY FORM OF AGGRESSION BY RUSSIA DIRECTED TOWARDS UKRAINE. JONATHAN: YOU HAVE BEEN LISTENING TO U.S. SECRETARY OF STATE ANTONY BLINKEN IN GENEVA FOLLOWING TALKS WITH HIS RUSSIAN COUNTERPART SERGEI LAVROV AMID TENSIONS OVER UKRAINE. NOT IN NEGOTIATION, A CANDID EXCHANGE OF CONCERNS AND IDEAS. TOM: THIS IS THE SECRETARY OF STATE WITHIN THE SPAN OF OUR HISTORY, WITH THE ONE EXCEPTION OF DR. KISSINGER, WHO TOTALLY UNDERSTANDS THE FABRIC OF THIS TERRITORY. HE HAS FAMILY MEMBERS WHO ARE AMBASSADORS TO HUNGARY AND BELGIUM. HUGELY STEEPED IN THE HISTORY OF THE REGION. HE SPEAKS WITH A CERTAIN AUTHORITY FROM GENEVA. JONATHAN: IN HIS OWN WORDS, "THEY CAN CHOOSE THE PATH OF DIPLOMACY OR THE PATH THAT LEADS TO CONSEQUENCES." NASDAQ FUTURES DOWN ABOUT 1%. GOOD MORNING TO YOU ALL. > > IS GOING TO BE A MARKET WHERE PEOPLE HAVE TO HAVE A SLIGHTLY LONGER TERM VIEW. > > THE MARKETS ARE NOT ASLEEP ON THIS. THE FED HAS BEEN VERY CLEAR THAT ONE WAY OR ANOTHER, THEY ARE GOING TO BRING INFLATION DOWN. > > MONETARY TIGHTENING MOST HURTS RISK MARKETS. > > THE ECONOMY THIS YEAR WILL BE WILL TO FLEE SOLID, BUT VALUATIONS NEED TO COME DOWN. > > THIS IS "BLOOMBERG SURVEILLANCE" WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOWICZ. TOM: GOOD MORNING, EVERYONE. IT IS A DOMESTIC, DIPLOMATIC, AND ECONOMICS AND FINANCE FRIDAY. THE SECRETARY OF STATE OF THE UNITED STATES REAFFIRMS A POLICY BACK TO WORLD WAR II. THERE WILL BE AN OPEN DOOR POLICY FOR NATO. THAT IS THE HEART OF THE MATTER, AS THE SECRETARY OF STATE SPEAKS IN GENEVA. JONATHAN: JUST ONE OF THE BIG ISSUES FOR RUSSIA AS A LOOK TOWARDS THE UKRAINE. THE RUSSIANS WOULD LIKE THAT DOOR TO BE CLOSED FOR UKRAINE. THE MEMBERS OF NATO CAN'T GUARANTEE THAT. THE SEPARATE ISSUE AROUND ALL OF THAT IS THE STRATEGIC WEAPONRY STATIONED IN UKRAINE. THE PRESIDENT SAID THAT MAYBE THEY CAN DO SOME THING ON THAT ISSUE. TODAY WAS NOT ABOUT NEGOTIATIONS. I THINK SECRETARY BLINKEN WAS CLEAR ABOUT THAT. HE CALLED IT AN EXCHANGE OF POSITIONS AND IDEAS. TOM: TO GO INTO THE HISTORY OF THIS AND A PATH FORWARD, I'VE GOT A WONDERFUL LOOK BACK TO 2014, BUT RIGHT NOW WE HAVE TO LOOK AT THESE MARKETS. THEY ARE SHOCKED BY NETFLIX. JONATHAN: I AM LOOKING AT A SINGLE NAME DOWN WHEN HE PERCENT. THAT SINGLE NAME HAD A MARKET CAP OF $200 BILLION. HEAVY EVERYTHING -- HAVE YOU EVER SEEN ANYTHING LIKE THIS, A $200 BILLION NAME MOVING TOWARD PERCENT? -- MOVING 20%? TOM: NO, NO. AS YOU MENTIONED EARLIER, THIS WAS FLAT OUT NOT SIGNALED TO THE SELL SIDE. JONATHAN: I IMAGINE THE SELL SIDE, THE ANALYST COMMUNITY ARE SLIGHTLY EMBARRASSED BY THIS. TO PROJECT OUT 6 MILLION SUBS AND THIS COMPANY SAYS WE MIGHT HAVE A TWO HANDLE, CLEARLY THERE'S A COMMUNICATION ERROR HERE. TOM: LISA ABRAMOWICZ, I THINK TO FOLD IT IN, YOU HAVE BEEN LEADING ON THIS, AT THE END OF THE DAY, IT IS JUST ABOUT INFLATION. LISA: NOT NECESSARILY FOR NETFLIX BECAUSE THEY ARE TRYING TO RAISE PRICES. THAT IS A SEPARATE STORY. BUT INFLATION VERY MUCH CONCERNING TO A MARKET THAT DOES NOT UNDERSTAND HOW IT IS HANDED -- HOW IT IS HAVING RAMIFICATIONS ON THE ECONOMY. I KEEP GOING BACK TO GEORGE SARAVELOS TALKING ABOUT THIS CYCLE, THAT PEOPLE DON'T WANT TO BUY AS MUCH STUFF, THAT PEOPLE IN LOWER TIERS ARE SUFFERING REAL WAGE LOSSES. HOW DOES THIS DOVE TEAL -- THIS DOVETAIL INTO A TIME AT WHICH THE FED IS FORCED TO HIKE? TOM: JON, LET US WALK THROUGH THE DATA CHECK TO GET TO OUR GOOD GUEST BEFORE WE GET TO TINA FORDHAM, AND WE ARE MONITORING THE HEADLINES OF THE SECRETARY OF STATE. I'M GOING TO GO CONTINENTAL EUROPE. I LITMUS PAPER IS ALWAYS EURO AGAINST SWISS FRANC, AS SECRETARY BLINKEN SPEAKS, AND IT IS GOING TO GO STRONG SWISS FRANC. JONATHAN: THE MEAL LOOKS THE SAME THIS MORNING. IT TASTES DIFFERENT. THE EQUITY MARKET IS LOWER, DOWN ABOUT 1%. THIS TIME, THE BOND MARKET IS NOT SHAKING UP THE EQUITY MARKET. THE EQUITY MARKET SEEMS TO BE SHAKING UP THE BOND MARKET. DOWN THREE BASIS POINTS AGAIN, DOWN SIX BASIS POINTS YESTERDAY. THAT IS WHY PEOPLE SPEAK OF THIS SELF-LIMITING SELLOFF IN THE TREASURY MARKET, BECAUSE AT SOME POINT IT STARTS TO BITE INTO THE EQUITY MARKET AND THE EQUITY MARKET MOVES START TO FLOW BACK TO THE BOND MARKET. ARE WE JUST TAKING A PAUSE FROM WHAT WE HAVE SEEN IN THE FIRST THREE WEEKS OF THIS YEAR? TOM: WE DIVE INTO EARNINGS SEASON NEXT WEEK WITH A LOT OF TECHNOLOGY NAMES. NADIA LOVELL JOINS US NOW OUT OF AN OPTIMISTIC UBS. TELL US WHAT YOU HAVE FRAMED IN THE FIRST FEW WEEKS OF JANUARY. HOW HAVE YOU AMENDED AND ADJUSTED THE UBS VIEW? NADIA: WE HAVE NOT CHANGED OUR VIEW MUCH. FAIRLY THE MARKET HAS HAD A CHOPPY START OF THE YEAR, BUT DOES FEEL AS IF MUCH OF THE SELLING MIGHT BE BEHIND US. WE ARE APPROACHING SUPPORT LEVELS ON THE S & P 500, AND THE MARKET WAS NEAR OVERSOLD TERRITORY, SO WE ARE LOOKING FOR SOME STABILITY IN THE MARKET GOING FORWARD. I THINK USUALLY YOU SEE A COUPLE OF THESE 5% PULLBACKS A WEEK. WE HAVE SEEN THE MARKET APPROACH THAT OVERSOLD TERRITORY AND THINK ABOUT BUYING THOSE DIPS. JONATHAN: YOU'VE HEARD THOSE PHRASES, CATCH A FALLING KNIFE. DON'T PUT YOUR HAND IN A FOOD BLENDER. WHEN IT FEELS UNCOMFORTABLE, THAT IS WHEN YOU SHOULD BUY. HOW UNCOMFORTABLE IS IT NOW? WOULD YOU BUY THE DIP ON THIS? NADIA: WE HAVE BEEN SOMEWHAT UNUSUAL ON TECH FOR SOME TIME. WE THINK TECH WILL CONTINUE TO FACE PRESSURE FROM RISING INTEREST RATES, AND YIELD VALUATION NEEDS TO COME IN A LITTLE MORE. THERE ARE AREAS OF TECH, THOUGH, THAT WE DO LIKE, AND WE WILL USE THE OPPORTUNITY OF INDISCRIMINATE SELLING TO BUILD SOME OPPORTUNITY FOR THE LONG-TERM TERM, SPECIFICALLY IN AREAS LIKE ARTIFICIAL INTELLIGENCE, BIG DATA, CYBERSECURITY. THERE'S AN OPPORTUNITY TO BUILD IN HIGH-QUALITY NAMES WITH SUSTAINABLE BUSINESS MODELS. LISA: DO YOU THINK THE MARKET HAS GOTTEN AHEAD OF ITSELF WITH EXPECTATIONS? NADIA: OUR BASE CASE IS THAT WE EXPECT THREE RATE HIKES THIS YEAR STARTING IN MARCH THIS YEAR, FOLLOWED BY JUNE AND SEPTEMBER. WE ARE LOOKING FOR BALANCE SHEET RUN OFF TO START LATER THIS YEAR. WHAT IS DRIVING OUR VIEW IS THAT WE CONTINUE TO BELIEVE THAT INFLATION WILL MODERATE AS THE YEAR PROGRESSES. WE THINK THAT WILL ALLEVIATE SOME OF THE PRESSURE ON THE FED TO BE MORE AGGRESSIVE AND BRING BACK MONETARY POLICY TO MUTUAL. LISA: YOUR FIRM CALLS FOR THREE RATE HIKES THIS YEAR VERSUS THE FOUR BAKED INTO MARKET EXPECTATIONS. I WONDER AT WHAT POINT DO YOU START TO SEE TECH BECOMING A BUY. WHAT IS THE TIPPING POINT TO SAY NOW IS REALLY THE TIME TO GO OVERWEIGHT AND GO ALL IN? NADIA: I THINK WHAT YOU NEED TO SEE, WE WILL BE WATCHING THE EARNINGS SEASON VERY CLOSELY, SO TECH COMPANIES CAN PUT UP GOOD NUMBERS, WHICH TRADITIONALLY THEY HAVE BEEN ABLE TO DO, SO I THINK YOU GOT ANOTHER 5% OR SO PULLBACK IN TECH, IT BECOMES A LITTLE BIT MORE ATTRACTIVE. NOW WE ARE REALLY FOCUSING ON VALUE. WE THINK VALUE INTO NEED TO BE WELL-POSITIONED, PARTICULARLY AS RATES MOVE HIGHER, FINANCIALS. WE ARE ALSO LOOKING AT ENERGY, GIVEN THE CONTINUING UPWARD PRESSURE WE HAVE SEEN ON OIL PRICES, AND WE THINK OIL PRICES WILL STABILIZE AT A HIGHER LEVEL, SO WISHING THAT ENERGY IS ALSO ONE OF THE BEST OPPORTUNITIES NOW ON THE MARKET. TOM: THIS IS MY OWN BIAS, FULL DISCLOSURE. I AM ABSOLUTELY FASCINATED AT THE COMPARISON OF MICROSOFT USING SPARE CHANGE TO GO AFTER ACTIVISION VERSUS THE TRAVAILS OF NETFLIX. I DON'T WANT YOU TO DO INDIVIDUAL STOCK HERE, BUT WHAT IS THE VALUE OF PROFIT RIGHT NOW? WHAT IS THE VALUE OF FREE CASH FLOW RIGHT NOW? NADIA: HAVING GOOD PROFIT GROWTH AND ALSO HAVING A STRONG BALANCE SHEET AND FREE CASH FLOW CAN BE A VERY POWERFUL CURRENCY IN THIS MARKET. AS YOU ARE SEEING VALUATION AND SOME OF THESE TECH COMPANIES, IT IS PROVIDING OPPORTUNITIES FOR M & A, WHICH IS ALREADY PLAYING OUT EARLY IN THE YEAR. SO WE DO THINK THAT IS VERY VALUABLE. A LOT OF THESE TECH COMPANIES ARE FLUSH WITH CASH, AND WE WOULD NOT BE SURPRISED TO SEE EVEN MORE M & A ACTIVITY THIS YEAR. JONATHAN: HOW DOES THE INTERNATIONAL STORY STACKED UP NOW AGAINST THE U.S.? I HAVE HEARD PEOPLE THROUGHOUT NAMES LIKE JAPAN, MAYBE TAKE A LOOK AT CHINA AS THEY START TO EASE. HOW DID THEY START TO STACK UP AT THE MOMENT? NADIA: WE DO HAVE A PREFERENCE TO THE U.S. IN TERMS OF LOOKING OVERSEAS, EUROZONE LOOKS INTERESTING. CHINA, WE ARE STILL NEUTRAL ON CHINA, BUT THE MARKET HAS RE-RATED DOWNWARDS OVER THE LAST YEAR, AND THERE MIGHT BE SOME OPPORTUNITIES THERE IN COMING WEEKS. BUT RIGHT NOW, WE ARE NEUTRAL ON CHINA. JONATHAN: NADIA, THANK YOU. THIS EQUITY MARKET DOWN 0.6% ON THE S & P. ON THE NASDAQ 100, DOWN 0.9%. WE OFTEN SAY BUY THE DIP, BUT IT SOUNDS SO EASY UNTIL YOU HAVE SEEN ONE, A 10% CORRECTION. THIS IS WHY PEOPLE ALWAYS MAKE THINGS SOUND VERY SIMPLE AND EASY IN FINANCIAL MARKETS, AND THEN WE ARE MET BY A 10% CORRECTION ON THE NASDAQ 100, IF YOU ARE IN CASH, NUDGE NUDGE, WINK WINK, TOM KEENE -- LISA: IF YOU TAKE A LOOK AT WHAT WE SAW FROM NETFLIX, THERE ARE REAL QUESTIONS ABOUT HOW QUICKLY IT CAN GET BACK TO PRE-PANDEMIC LEVELS OF SUBSCRIBER ADDITIONS, HOW IT CAN PASS ALONG COSTS TO CONSUMERS WHEN THEY ARE TRYING TO EXPAND TO AREAS MUCH MORE HIT BY THE PANDEMIC. I AM JUST LOOKING AT THIS, AND THE FUNDAMENTAL STORY WILL CONFIRM THE SELLOFF THAT, AS YOU SAID, BECOMES ONLY MORE PAINFUL TO BUY. JONATHAN: OVER IN GENEVA, SECRETARY BLINKEN STILL SPEAKING AT THE MOMENT. THIS HEADLINE JUMPED OUT FOR EVERYONE BECAUSE IT IS THE ESSENCE OF THE PROBLEM RIGHT NOW. THE UNITED STATES WILL NOT GO BACK ON A NATO OPEN-DOOR POLICY. I SAY THE ESSENCE OF THE PROBLEM. NOT FOR THE U.S., NOT FOR EUROPE, NOT FOR NATO MEMBERS. IT IS A PROBLEM FOR RUSSIA. TOM: LET US GO BACK TO THE FOUNDATION ESSAY ON THIS. THIS WAS HUGELY CONTROVERSIAL EIGHT YEARS AGO. UNIVERSITY OF CHICAGO. IT WAS BLISTERING, THE CRITICISM FROM A LIBERAL ELITE TO WHAT THE REALPOLITIK EXPERTS SAID, AND IT WAS JUST REAL SIMPLE, AS THE GENTLEMAN OF CHICAGO WROTE IN FOREIGN AFFAIRS MAGAZINE. I GUESS WE ARE UNABLE TO GET THAT QUOTE UP FOR A SECOND TIME. WHAT HE SAID IS SIMPLE. THE WEST SCREWED THIS UP. THEY OVER EXTENDED TOWARDS RUSSIA. HERE IT IS NOW. "THE TRIPLE PACKAGE OF POLICIES, NATO, EU EXPANSION, AND DEMOCRACY PROMOTION ADDED FUEL TO A FIRE WAITING TO IGNITE. A HUGE EXPANSE OF FLAT LAND THAT NAPOLEONIC FRANCE, IMPERIAL JOURNEY, AND NAZI GERMANY ALL CROSSED TO STRIKE AT RUSSIA ITSELF," THAT IS THE FEAR OF PUTIN. JONATHAN: RUSSIA WANTS TO CLOSE THE DOOR. THE U.S. WANTS TO KEEP IT OPEN. ONE OF THE MANY ISSUES DISCUSSED IN GENEVA. WE WILL CATCH UP WITH TINA FORDHAM, THE GLOBAL HEAD OF POLITICAL STRATEGY AT AVON HURST, VERY SHORTLY ON THE SPLIT WILL STORY. ON THE NASDAQ, NOUN 0.9%. A HAVEN BID FOR TREASURIES AT 1.772 3%. FROM NEW YORK, THIS IS BLOOMBERG. ♪ LEIGH-ANN: WITH THE FIRST WORD NEWS, I'M LEIGH-ANN GERRANS. AS TOM WAS DISCUSSING, AND GENEVA, RUSSIAN FOREIGN MINISTER SERGEI LAVROV SAYS THE U.S. SECRETARY OF STATE ANTONY BLINKEN PROMISED TO RESPOND NEXT WEEK TO MOSCOW'S DEMANDS FOR SECURITY GUARANTEES. HE ALSO REPEATED THAT RUSSIA HAS NO PLANS TO ATTACK UKRAINE. BLINKEN SAYS HE TOLD LAVROV THAT THE U.S. STANDS FIRMLY BEHIND THE UKRAINIANS. HE ALSO SAYS THAT THE KREMLIN NEEDS TO ADDRESS U.S. SECURITY CONCERNS. INVESTORS ARE BRACING FOR THE PROSPECT THAT NETFLIX IS ENTERING A NEW FILLETS OF -- A NEW PHASE OF SLOWER GROWTH. SHARE FELL AS 20% AFTER THE FORECAST FOR NEW CUSTOMERS DISAPPOINTED. NETFLIX ALSO SAYS THE SLOWDOWN WILL CONTINUE FOR AT LEAST ANOTHER QUARTER. CHINA IS VOWING TO CURB THE INFLUENCE OF TECHNOLOGY COMPANIES. AUTHORITIES SAY THEY WILL ALSO ROUTE OUT CORRUPTION TIED TO WHAT THEY CALL THE DISORDERLY EXPANSION OF CAPITAL. THIS IS SOMETHING THAT -- BANKS HERE IN ENGLAND ARE STARTING TO BRING STAFF BACK TO THE OFFICE NOW THAT THE GOVERNMENT HAS CHANGED GUIDANCE ON THE MATTER READ BARCLAYS IS REVERSING ITS HYBRID WORKING ARRANGEMENTS. HSBC HAS TOLD WORKERS THEY CAN RETURN AND THEY WILL NO LONGER BE REQUIRED TO WEAR FACE MASKS. DEUTSCHE BANK WILL ALSO START BRINGING WORKERS BACK TO ITS LONDON OFFICES, AND THE ROCK SUPERSTAR KNOWN AS MEATLOAF HAS DIED. HIS 1970'S ALBUM "BAT OUT OF HELL" BECAME ONE OF THE BEST-SELLING ALBUMS IN HISTORY, WITH MORE THAN 40 MILLION COPIES SOLD. MEATLOAF WAS 74 YEARS OLD. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I'M LEIGH-ANN GERRANS. THIS IS BLOOMBERG. ♪ SEC. BLINKEN:SEC. BLINKEN: DISCUSSION TODAY WAS MINISTER LAVROV WAS FRANK AND SUBSTANCE --SEC. BLINKEN: DISCUSSION TODAY WITH MINISTER LAVROV WAS FRANK AND SUBSTANTIVE. WE STAND FIRMLY WITH UKRAINE IN SUPPORT OF ITS SOVEREIGNTY AND TERRITORIAL INTEGRITY. JONATHAN: SEC. BLINKEN FROM GENEVA. FROM NEW YORK, THIS IS BLOOMBERG. ALONGSIDE TOM KEENE AND LISA ABRAMOWICZ, I'M JONATHAN FERRO. FUTURES ARE DOWN HARD ON THE NASDAQ BY ABOUT 1%. ON THE NASA 100, DOWN 146. ON THE S & P, DOWN ABOUT 28, 0 POINT 6%. YIELDS ARE LOWER THIS MORNING, DOWN THREE BASIS POINTS TO 1.77%. ON THE WEEK OF THE NASDAQ OFF BY ALMOST 5%. GOING INTO THE OPENING BELL, IT IS GOING TO BE MORE THAN THAT COMING OUT OF IT. TWO YEAR YIELDS UP BY ONLY FOUR BASIS POINTS ON THE WEEK. IT IS A DIFFERENT FLAVOR TO THE END OF THE WEEK NOW. IT IS A TREASURY MARKET BID. IT IS PURE RISK AVERSION. IT IS NOT THE FIRST TWO WEEKS OF THE YEAR YIELDS WERE BLASTING HIGHER, IT WAS SHAKING THINGS UP IN THE EQUITY MARKET. IT HAS FLIPPED. START OF THE YEAR, THE DOG WAS WAGGING THAT HILL. RIGHT NOW, THE TAIL -- WAGGING THE TAIL. RIGHT NOW, THE TAIL IS WAGGING THE DOG. TOM: IT IS ALSO, AS LISA MENTIONED, GETTING INTO NEXT WEEK. HOW MANY NETFLIXES ARE THERE TO COME NEXT WEEK? JONATHAN: YOU'VE GOT THE MULTIPLE ISSUE AS WELL, THE VALUATION STORY. WE STILL HAVE NOT WORKED OUT WHAT THAT BALANCE SHEET REDUCTION IS GOING TO MEAN FOR THIS MARKET, AND THE NUMBERS AT THE MOMENT, DEUTSCHE BANK, MET LOSE EDDIE AND PETER HUBER, THROWING UP BIG NUMBERS -- MATT LUZETTI AND PETER HOOPER THROWING OUT BIG NUMBERS. TOM: WE JUST GOT A 27 HANDLE ON THE VIX, WHICH SPEAKS VOLUMES. OUR GOAL IS TO BRING YOU EXPERTS, PEOPLE WITH ZERO BS ABOUT THE THINGS OF THE MOMENT, AND WE HAVE HIT A HOMERUN OUT OF THE PARK HERE OVER THE MASSACHUSETTS TURNPIKE WITH TINA FORDHAM, HEAD OF GLOBAL POLITICAL STRATEGY AT A LONGHURST -- AT AVONHURST. THRILLED TO HAVE YOU ON AT THIS HISTORIC MOMENT. SEC. BLINKEN'S FAMILY IS STEEPED IN EASTERN EUROPE, STEEPED IN THIS FRACTIOUS RELATIONSHIP BETWEEN RUSSIA AND THE WEST. I FEATURED THE REALPOLITIK MOMENTS AGO, THE IDEA THAT NATO IS OVERREACHED. HOW DOES THE PRESIDENT OF THE UNITED STATES REACT TO MR. PUTIN'S BELIEF THAT WE HAVE OVERREACHED? TINA: THE PRESIDENT NEEDS TO HOLD THE LINE, AND SECONDARY BLOOD CAN -- AND SEC. BLINKEN, JUST LIKE ANGELA MERKEL, KNOWS THAT YOU CANNOT SHOW WEAKNESS TO VLADIMIR PUTIN. DIVIDING THE WEST AND NATO IS PART OF WHAT IS HAPPENING HERE. JONATHAN: -- TOM: HOW DO WE SHOW STRENGTH AWAY FROM SANCTIONS? WHAT OTHER AVENUES DO WE HAVE EAST OF KIEV? TINA: WHILE WE HAVE ALL BEEN BUSY FIGHTING COVID, RUSSIA HAS BEEN ABLE TO MAKE SIGNIFICANT INROADS IN DESTABILIZING ITS FORMER SATELLITE STATES. LITHUANIA, FOR EXAMPLE, BELARUS, WITH THE SUPPORT THAT HAS COME FROM MOSCOW. ALSO SUPPORT FROM MOSCOW TO CURRENT EU MEMBER STATES. THAT IS WHY, TO THOSE WHO ASK WHY NOW, I WOULD SAY WE'VE GOT U.S. MIDTERMS IN NOVEMBER, AS ALL AMERICANS KNOW. WE'VE GOT A NEW GOVERNMENT IN GERMANY. WE HAVE THE U.K. FOCUSED ON ITS OWN TROUBLES. IF THERE WAS EVER A TIME TO TEST THE RESOLVE OF EUROPE AND THE UNITED STATES WHEN IT COMES TO ENFORCING BORDERS AND OTHER MEASURES, NOW IS THAT TIME. I THINK THE QUESTION, TO REFER BACK TO WHAT YOU WERE SAYING, IS WHETHER THE SANCTIONS THAT HAVE BEEN SUGGESTED, THESE MASSIVE SANCTIONS ARE GOING TO BE ENOUGH TO DETER PUTIN, WHO MIGHT BE THINKING THAT WE WON'T BE WILLING TO DO THE BIG STUFF LIKE SANCTION RUSSIA AGAINST SWISS, FOR EXAMPLE. LISA: THERE MAY BE LESSONS WE CAN TAKE FROM SOME OF THESE MEETINGS, IN PARTICULAR THE RELATIONSHIP BETWEEN THE UNITED STATES AND THE EUROPEAN UNION. IS IT SIGNIFICANT THAT ANTONY BLINKEN WENT FIRST TO MEET WITH OLAF SCHOLZ AND EMPHASIZED EVERYTHING HE SAID, WE WILL WORK WITH OUR ALLIES, WE HAVE DECIDED ON A PLAN, IS THAT NOTABLE, A NOTABLE DEPARTURE FROM THE PREVIOUS HIM THIS DURATION, ENOUGH TO CREATE -- THE PREVIOUS ADMINISTRATION, ENOUGH TO CREATE A COALITION? TINA: YOU ARE RIGHT THAT IT IS MORE OF AN EFFORT COMING FROM WASHINGTON THAN USUAL, BUT WHEN THE U.S.-RUSSIA BILATERAL MEETINGS WERE ANNOUNCED IN GENEVA, THE EUROPEANS WERE VERY CONCERNED ABOUT DECISIONS BEING TAKEN ABOUT EUROPE WITHOUT EUROPE IN THE ROOM. SINCE THEN, TONY BLINKEN HAS BEEN AT PAINS TO EMPHASIZE THE IMPORTANCE, BUT SPEAKING TO YOU FROM HERE IN LONDON, THERE IS PLENTY OF REASON TO BE CONCERNED THAT THE FAILURE OF THIS DIPLOMATIC INITIATIVE IS GOING TO LEAD TO A SERIOUS GAS PRICE CRUNCH IN EUROPE, OR A GAS SUPPLY CRUNCH, RATHER, AND A PRICE HIKE. OF COURSE, UKRAINE IS ALSO IMPORTANT AGRICULTURALLY, SO WE FEEL IT IS PERHAPS MORE REALPOLITIK FOR THE UNITED STATES. LISA: IF YOU WERE ADVISING MULTINATIONAL COMPANIES ABOUT HOW TO PREPARE FOR SOME SORT OF ESCALATION HERE, WHAT MINDSET SHOULD THEY GET IN AS THEY PREPARE FOR EITHER SANCTIONS OR EVEN MILITARY ALTERCATION? TINA: I DO ADVISE BIG MULTINATIONAL COMPANIES AND INSTITUTIONAL INVESTORS, AND ONE OF THE THINGS I HAVE EMPHASIZED IN MY METHODOLOGY IS THAT WE CANNOT TREAT THESE TYPES OF EVENTS AS TAIL RISKS. NOBODY NEEDS A GEOPOLITICAL ANALYST WHO CRIES WOLF ALL THE TIME, SO AS A LONG-STANDING RUSSIA WATCHER, I AM SAYING NOW THAT THIS CONFLICT IS ENTERING VERY SERIOUS TERRITORY. YOU NEED TO STRESS TEST AGAINST WICKING UP TO A HEADLINE THAT SAYS RUSSIA CROSSES THE BORDER INTO UKRAINE. THERE ARE SOME LESS DESTABILIZING, BUT STILL CONCERNING POSSIBILITIES. PERHAPS, AND ANNEXATION OF PART OF UKRAINIAN TERRITORY. REMEMBER, WE'VE GOT RUSSIAN TROOPS STATIONED IN BELARUS IN ADDITION TO THOSE ON THE BORDER WITH UKRAINE. TOM: MR. PUTIN IS CATCHING UP VERY QUICKLY. LET’'S LOOK AT PUTIN IN THE HEART OF THE MATTER, WHICH IS THE RUSSIAN PEOPLE HAVE ALWAYS PROJECTED SOUTH TO THE WATERS. THEY NEED A NAVY. IT HAS BEEN THAT WAY FOREVER. EXPLAIN TO US MR. PUTIN'S FEELINGS OF UKRAINE AS AN AVENUE TO CURB MY -- TWO CRIMEA, TO THE BLACK SEA, AND HOW THE U.S. NAVY AND NATO SHOULD RESPOND. TINA: I LOVE WHAT YOU ARE SAYING. I LIVED IN ST. PETERSBURG FOR A TIME A MILLION YEARS AGO IN MY STUDENT DAYS. IT WAS FROZEN HALF THE YEAR, SO IT DID NOT HAVE DIRECT ACCESS TO THE WATER. THE RUSSIAN EMPIRE, OF COURSE, CAME BEFORE THE SOVIET UNION, HAVING THE CHANNELS, AND IT HAS ALWAYS BEEN IMPORTANT. HE DOES SEE HIMSELF AS RUSSIA'S, ONE OF RUSSIA'S GREAT LEADERS COME ALONGSIDE THIS ARE -- ALONGSIDE THE CZARS. HE'S WRITTEN EXTENSIVELY ABOUT THIS. BECAUSE EXTEND, FOR EXAMPLE, IS IN CONTEXT. PUTIN DREAMS OF HAVING PRO-RUSSIAN BORDER STATES ALONG THE BORDER ARE STARTING TO TRACK. THE QUOTE YOU PUT UP INTERESTED ME VERY MUCH. IT IS ONE OF THE MOST IMPORTANT PROFESSORS OF INTERNATIONAL AFFAIRS AND LEADERS ON THIS. WHAT HE SAYS IT'S PERHAPS NATO HAS OVERREACHED, A GOODBYE A LOT OF THE INVESTORS I TALK TO. WHY ARE WE DOING THIS? WHY ARE WE POKING THE BEAR? HERE IS WHERE WE BRING IN U.S. DIPLOMATIC HISTORY THAT SAYS THE UNITED STATES CAN SO THAT -- YOU IS -- THE UNITED STATES CANCELS OUT ANY REGIONAL HEGEMONS. CHINA AND RUSSIA HAVE A BIG THING IN COMMON, AND THAT IS WANTING TO BE THE REGIONAL HEGEMONS. OF COURSE, THAT WORRIES ALL OF THE SMALLER COUNTRIES AROUND THEM. SO WILL THE U.S. BE ABLE TO MAINTAIN ITS GLOBAL POSITIONS? THAT IS WHAT IS AT STAKE IN UKRAINE, AND THAT IS WHAT SEC. BLINKEN IS GOING TO BE TRYING TO PROJECT. JONATHAN: THANK YOU. I THINK THAT FINAL POINT IS SO IMPORTANT. TINA FORDHAM OF AVONHURST. THOSE ISSUES ARE DIFFERENT, BUT THEY HAVE A LOT OF THINGS IN COMMON. TOM: THAT IS A REAL CLINIC, AND I WILL BE HONEST, THIS DISCUSSION FOLDS RIGHT INTO YOUR FRAMEWORK OF ECONOMICS, FINANCE, AND INVESTMENT. THIS IS NOT DISCRETE AND SEPARATE FROM THE REAL WORLD OF BLOOMBERG SURVEILLANCE. JONATHAN: FOR GEOPOLITICS, AND THE ISSUE OF THE MOMENT, WHICH IS INFLATION AND WHAT HAPPENS WITH ENERGY MARKETS, THIS SITUATION WITH RUSSIA IS VITAL. LISA: THEY RELY ON RUSSIA FOR SO MUCH OF THEIR NATURAL GAS, AT A TIME WHEN NATURAL GAS PRICES ARE REALLY LEADING THE INFLATION REPORTS THAT LED TO SOME 5% IN THE EURO REGION. INTERESTING TO SEE HOW THE UNITED STATES TRIES TO SHORE UP TRUST WITH THE EURO REGION AS A KIND OF GO IT ALONE IN THESE MEETINGS. I THOUGHT IT WAS FASCINATING, THE FACT THAT THEY STILL WENT TO THE MEETINGS TO REPRESENT EUROPE'S WITHOUT EUROPE IN THE ROOM, NOW TRYING TO REACH OUT WITH AN OLIVE BRANCH. JONATHAN: THE FEDERAL RESERVE IS NEXT WEEK TO GET THE WEEK AFTER THAT IS THE ECB. WE HAVE HEARD FROM ECB PRESIDENT CHRISTINE LAGARDE THIS MORNING. SHE SAID IN THE LAST HOUR THE ECB NOT SEEING INFLATION SPIRALING OUT OF CONTROL. THE ECB MUST BE DATA AND STATE-DEPENDENT. NO QUESTION THE ECB WILL ACT WHEN CONDITIONS ARE SATISFIED. NO DOUBT WHEN WE GET TO THE END OF THE YEAR, WE WILL BELIEVE THOSE CONDITIONS ARE SATISFIED. TOM: THERE IS SUCH A CULTURAL OVERLAY HERE. I AGREE, THE EU CALCULUS IS SO DIFFERENT FROM WHAT WE ARE SEEING. BUT WHAT IT COMES DOWN TO, IT IS AMAZING JUST IN THE LAST 48 HOURS WITH THE DATA THAT MADAME LAGARDE MENTIONS HOW THINGS HAVE CHANGED. JONATHAN: I THINK A LOT OF PEOPLE, YOU AND I TALKED ABOUT THIS GOING INTO THE END OF LAST YEAR, MANY PEOPLE ARE WAITING FOR THE END OF THIS FIRST QUARTER BECAUSE THE BAR JUST STARTS TO GET HIGHER, AND THERE IS THIS HOPE INFLATION FADES. SO CAN YOU FORECAST POLICY AFTER MARCH? PROBABLY. CAN YOU FORECAST THAT HELP SEEING THE INFLATION NUMBERS IN THE SUMMER? THAT IS A LITTLE MORE DIFFICULT. TOM: YOU SOUND LIKE A PROFESSOR. IT SOUNDS LIKE ECONOMIC MUMBO-JUMBO. OUR AUDIENCE IS GOING TO FEEL IT THAT WAY. ALREADY ON -- OUR AUDIENCE SAYS, DON'T GIVE ME THIS 12 MONTH OVERLAY. THEY ARE LIKE, WOW, PRICES ARE UP. JONATHAN: I AM PRETTY SURE IT IS AN INSULT, ALTHOUGH I KNOW TOM LOVES PROFESSORS. [LAUGHTER] MY DAD ALWAYS TOLD ME IF YOU CAN'T DO, YOU CAN'T TEACH. JONATHAN: AN HOUR AWAY FROM THE OPENING BELL. THIS EQUITY MARKET IS NOT LOOKING GOOD AGAIN. NASDAQ 100 FUTURES DOWN .8%. ON THE S & P WE ARE -.5%. THE FIRST TIME IN OVER 20 YEARS THE NASDAQ WAS UP 1% INTRADAY AND FINISHED DOWN OVER 1% ON BACK-TO-BACK DAYS. THAT HAS BEEN THE STORY. INTO THE BOND MARKET, YIELDS ARE LOWER AGAIN. DOWN THREE BASIS POINTS. NEXT WEEK, THE FEDERAL RESERVE DECISION. TOM: LET'S GET SMART. WE NEED TO GET SMART WITH SOMEONE WITH A CLAIM IN ACADEMICS BUT ALSO APPRISE YOU DO NOT KNOW ABOUT, APPRISE AT HARVARD UNIVERSITY. THEY FIND THE PEOPLE DOING WELL. BONNIE WONGTRAKOOL IS ONE OF THOSE PEOPLE. WE ARE THRILLED SHE CAN JOIN US IN THE WORLD OF PORTFOLIO MANAGEMENT AT THE WESTERN ASSET MANAGEMENT. THANK YOU SO MUCH FOR JOINING US. I AM LOVING YOUR ESSAY. YOU TALK ABOUT OUR PREDETERMINED PATH. AS MADAME LAGARDE MENTIONED, OUR DATA DEPENDENCY. TELL US ABOUT OUR DETERMENT DATA DEPENDENCY. WE ARE SLAVES TO IT. BONNIE: THE FED WILL BE VERY DATA DEPENDENT. THE FED HAS BEEN FOCUSED ON THE HAWKISH COMMUNICATION, BUT AT THE END OF THE DAY THE FED WILL BE LOOKING AT THE DATA. WE HAVE SEEN VOLATILITY IN THE RATES MARKET BECAUSE THE MARKET IS CALIBRATING WHAT THEY PERCEIVE AS THIS NEW FED. AS I SAID THE FED IS FOCUSED ON ONE THING, THE EVOLUTION OF THE DATA. WE ARE NOT SEEING THE CASE FOR WHAT IS BEING PRICED INTO THE RATES MARKET. WE ARE SEEING A SLOWING DOWN OF THE ECONOMY. WE ARE EXPECTING A MODERATION OF GROWTH BACK TO TRENT. WE HAVE SEEN RETAIL SALES DISAPPOINT SO I THINK WE ARE SEEING THE CASE FOR OUR VIEW. MICHAEL: YOU HAVE A LITTLE BIT -- TOM: YOU HAVE A LITTLE BIT OF EXPERIENCE. YOU KNOW WHERE THE BOND BEAR MARKET IS. ARE WE PRICE DOWN, YIELD UP, A BOND BEAR MARKET? BONNIE: WE ARE NOT CALLING FOR A BOND BEAR MARKET. OUR FUNDAMENTAL VIEW IS THE ECONOMY WILL SLOW DOWN. IT WILL NOT BE GROWING AT THE SAME SPACE WE SAW BEFORE. WE ARE SEEING DISPOSABLE INCOME ON A REAL BASIS DECLINE IN WHEEZING THAT REFLECTED IN NUMBERS LIKE THE RETAIL SALES. THAT WOULD NOT SUPPORT A BOND BEAR MARKET. WE ARE SEEING THAT REFLECTION IN THE WAY THE TREASURY CURVE IS BEHAVING. MORE VERIZON THE INTERMEDIATE PART OF THE CURVE WHERE THE LONG END IS REMAINING CONTAINED. THERE IS A VIEW BUT LONG-TERM GROWTH WILL BE CONSISTENT WITH THE TREND WE SAW BEFORE COVID. LISA: WHEN WE TALK ABOUT DISPOSABLE INCOME, I GO BACK TO THE IDEA THAT REAL WAGES ARE DEEPLY NEGATIVE GOING BACK TO 2008. DISPOSABLE INCOME IS COMING DOWN. HOW MUCH DOES THIS PUSH THE FED TO MOVE MORE QUICKLY TO HIKE RATES TO TRY TO CURTAIL SOME OF THE INFLATION THAT IS STRIPPING AWAY THEIR EARNINGS? BONNIE: IT IS A BIT OF A BALANCE. THE FED WANTS TO ADDRESS INFLATION. IT IS ON THE TOP OF CONSUMER'S MINDS. AT THE SAME TIME THEY WANT TO ENCOURAGE PARTICIPATION IN THE LABOR FORCE SO PEOPLE CAN REENTER. WE STILL HAVE WORKERS THAT ARE PRIME AGE. THERE HAS BEEN A LOT OF TALK ABOUT EARLY RETIREMENT. WE ARE TALKING ABOUT PRIMATES WORKERS NOT YET BACK IN THE LABOR FORCE. WE THINK THE FED WANTS THEM TO COME BACK. THE FED WILL HAVE TO BALANCE BETWEEN THOSE DISCO SIDES OF THIS MANDATE. -- BETWEEN THOSE TWO SIDES OF THIS MANDATE. SEEING WHETHER WE CAN GET WORKERS BACK IN THE LABOR FORCE AND HAVING THE LABOR FORCE PARTICIPATION GO BACK UP. LISA: IS THIS FORMULA CALLING TO BUY DURATION? ARE YOU BUYING THE SELLOFF WE SAW -- BONNIE: WE ARE CONSTRUCTIVE ON DURATION. WE THINK YOU HAVE TO HAVE SOME TREASURIES IN YOUR PORTFOLIO FOR DIVERSIFICATION PURPOSES. WE ALSO THINK THAT THESE CURRENT RATES THAT THEY DO PROVIDE VALUE. WE THINK THE FED IS OVERPRICED AND WE CAN SEE SOME RALLY IN THE MARKET BECAUSE THERE IS GOING TO BE A REALIZATION THAT IS OVERPRICED AND RATES COULD COME DOWN. TOM: THOSE ARE REALLY IMPORTANT COMMENTS. YOU ARE CONSTRUCTIVE ON DURATION , YOU WANT THE CURVE TO GO OUT OF MATURITY TO BUY THE PRICE FROM A PRICE TO MOVE UP AND A YIELD TO GO DOWN. TRANSLATE THAT TO THE FED PARLOR GAME. I DO NOT KNOW WHETHER WESTERN ASSET PAYS ATTENTION TO THE FED PARLOR GAME. ARE PEOPLE SCREAMING FOR FOUR RATE RISES? ARE THEY WRONG? BONNIE: IT IS POSSIBLE WE COULD SEE FOUR RATE HIKES. TOM: THAT IS MY FAULT. I MESSED YOU UP. CONTINUE. BONNIE: IT DEPENDS ON THE DATA. IT IS NOT OUR CALL. FOR THEM TO GET IN THE FULL FOUR RATE HIKES, YOU PROBABLY WANT TO SEE SOME ACCELERATION. YOU NOTICE THE FED CALL IS GOING TO MODERATE OVER THE YEAR. -- INFLATION IS GOING TO MODERATE OVER THE YEAR. THEY ARE EXPECTING THAT IN THE SECOND HALF OF THE YEAR. IF INFLATION CONTINUES TO BE ELEVATED THAT IS NOT CONSISTENT WITH OUR VIEW OR THE FED VIEW. IT HAS TO COME DOWN AND GO ON A DOWNWARD TREND GOING INTO THE END OF THE YEAR. TOM: WHAT DO WE DO? WITH WESTERN ASSETS IT IS A MORE LONG-TERM INVESTMENT. YOUR IDEA OF SHORT-TERM IS THREE YEARS AND FIVE YEARS. WHAT DO INVESTORS DO WHO WILL NOT BE IN NETFLIX, THEY WILL NOT BE IN THE EQUITY MARKET, NEED TO CLICK A COUPON OR FIND TOTAL RETURN. WHAT IS THE MIXED OF FIXED INCOME THAT LOOKS MOST APPROPRIATE? BONNIE: WE THINK THE SPREAD PRODUCT IS WELL VALUED AND IT CAN DO WELL, EVEN IF WE SEE SOME TIGHTENING IN FINANCIAL CONDITIONS. WE ARE GENERALLY OVERWEIGHT ACROSS THE DIFFERENT CLASSES, CORPORATE CREDIT, STRUCTURED PRODUCT, AND EM. WITHIN CORPORATE CREDIT WE BELIEVE IN ARE RISING STARS THAT ARE ANALYSTS HAVE SELECTED. WE THINK THOSE WILL CONTINUE TO BENEFIT AS THE ECONOMY CONTINUES TO MEND. WE THINK THERE ARE SELECT REOPENING TRADES WITHIN AIRLINES, CRUISE LINES, AUTOS THAT STILL LOOK GOOD. WE ALSO LIKE BANK LOANS. THE SPREADS ARE VERY ATTRACTIVE, DEFAULT RATES ARE COMING DOWN AND WE ARE SEEING RATINGS UPGRADES. I DO NOT SEE THE BIG -- THE BIGGEST REOPENING TRADE IS EMERGING-MARKET DEBT. IT IS PRICED EXTREMELY ATTRACTIVELY AND IF WE ARE APPROACHING THIS POINT WHERE THE P DIVERGENCE BETWEEN THE FED AND OTHER CENTRAL BANKS IS COMING CLOSE, THAT IS A GOOD CONDITION FOR EMERGING-MARKET PERFORMANCE. LISA: GIVEN THE FACT THERE IS SO MUCH TURMOIL EXPECTED THIS YEAR AND WE ARE COMING OFF LOW YIELDS , WHAT YOU SAY WHEN PEOPLE TALK ABOUT THE VOLATILITY AND HOW YOU HEDGE AGAINST IT AND THE POTENTIAL RETURNS THEY CAN EXPECT. BIG INSTITUTIONS, PENSIONS, ENDOWMENTS. WHAT IS AN APPROPRIATE -- BONNIE: IN TERMS OF HIKING VOLATILITIES WE THINK TREASURIES ARE THE BEST DIVERSIFIER. THIS IS A RELATIONSHIP THAT IS HELD OVER TIME. THE OTHER THING IS DIVERSIFICATION IN GENERAL. OUR PHILOSOPHY AT WESTERN ASSETS IS TO HAVE A BLOOP OF DIVERSIFIED TRADE -- A GROUP OF DIVERSIFIED TRADE WHERE WE HAVE HIGH CONVICTIONS AND THINK THE PORTFOLIO WILL DO OK EVEN IF OUR BASE CASE DOES NOT COME TO FRUITION. JONATHAN: THANK YOU AS ALWAYS. BONNIE WONGTRAKOOL. THIS NEXT HEADLINE COMES WITH A WARNING BECAUSE IT IS INCREDIBLY DIVISIVE. THIS IS COMING FROM REPORTING AND A SWISS GERMAN NEWSPAPER. THE WORLD ECONOMIC FORUM TO TAKE PLACE IN DAVOS MAY 22ND TO MAY 26. A PRESS RELEASE IS BEING PREPARED. TOM: WE GO TO THE SOURCES AS WELL. WE NEED TO NAIL THIS DOWN IN MAY. < SPEAKING GERMAN. JONATHAN: SOME PEOPLE WILL CARE, A LOT WILL NOT. LISA: MORE MEATLOAF LYRICS? I THINK PEOPLE WOULD RATHER THAT. TOM: BRING THE KIDS. LISA: PLEASE DO THAT AGAIN. JONATHAN: PLEASE DO NOT. LET'S PUSH AHEAD TO THIS WEEK. THE NASDAQ 100 HAS BEEN BRUTAL THIS WEEK. DONNA'S 5%. -- DOWN ALMOST 5%. IT HAS BEEN TOUGH. THIS WEEK IT IS NOT JUST ABOUT THE BOND MARKET, YIELDS LOWER TODAY AND LOWER YESTERDAY. LISA: HOW DID NETFLIX GUIDE SO POORLY? WHY DID THEY NOT GIVE SOME SENSE THEIR SUBSCRIBER NUMBERS WOULD COME IN SO MUCH LOWER THAN EXPECTATIONS AND WHAT DOES THIS BEING FOR OTHER COMPANIES? I UNDERSTAND IT IS AN IDIOSYNCRATIC STORY BUT THE BAR IS HIGH-END AND DISAPPOINTMENTS ARE SEVERELY PUNISHED. TOM: I AM CRYING ICICLES INSTEAD OF TEARS. LISA: I KNEW IT WOULD START. JONATHAN: CAN YOU SAY THAT IN GERMAN? TOM: [ATTEMPTING TO SPEAK GERMAN] JONATHAN: JUST TO BE CLEAR, THIS IS A REPORT COMING OUT OF SWITZERLAND. THE PRESS CONFERENCE -- THE PRESS OFFICE HAS NOT HAD A RESPONSE AND I'M SURE MANY OF YOU COULD NOT CARE LESS. [LAUGHTER] I WANT TO TALK ABOUT NETFLIX A LITTLE BIT MORE. LISA: PLEASE KEEP GOING. JONATHAN: NETFLIX DOWN 20%. THIS IS NOT A PENNY STOCK, NOT A PLAYGROUND. TOM: SERIOUSLY COME INTO THE WEEKEND, WHAT DOES IT MEAN FOR THE CONFIDENCE INTO THE EARNINGS TO LOOK FORWARDS NEXT WEEK? JONATHAN: THE CONFIDENCE AROUND THIS NAME HAS BEEN HAMMERED. WE HAVE SEEN MOVES LIKE THIS AFTER EARNINGS WITH NETFLIX. TO SEE A MOVE BIGGER THAN 20% YOU HAVE TO GO BACK TO 2012. IT WAS NOT A $200 BILLION NAME BACK THEN. ISN'T IT TIME TO GROW UP? TOM: THAT IS EXACTLY IT. I HATE THE BUNDLING OF THE FANGS. THEY HAVE $1 BILLION IN FREE CASH FLOW, MICROSOFT HAVE $65 BILLION, THEY ARE NOT COMPARATIVE AS INSTITUTIONS. LISA: WERE YOU TALKING ABOUT NETFLIX? IS IT TIME TO GROW UP A LITTLE BIT? JONATHAN: I WAS TALKING ABOUT NETFLIX. DAVID KELLY WILL JOIN US. AN ADULT CONVERSATION ON BLOOMBERG TV. THE CHIEF STRATEGIST AT J.P. MORGAN ASSET MANAGEMENT. LISA: [LAUGHTER] I DO NOT EVEN KNOW WHERE TO BEGIN. JONATHAN: WILL COVER THE BOND MARKET ON BLOOMBERG REAL YIELD TO RESTORE YOUR FAITH IN PROGRAMMING. FROM NEW YORK, THIS IS BLOOMBERG. LEIGH-ANN: BITCOIN FELL TO THE LOWEST LEVEL IN MORE THAN FIVE MONTHS AS THE WORLD'S LARGEST CRYPTOCURRENCY DROPS BELOW $40,000 AND HIT A HIGH OF ALMOST $69,000 IN NOVEMBER. VIRTUAL COINS HAVE BECOME A SYMBOL IN THE RETREAT IN SPECULATIVE INVESTMENT BY THE PROSPECT OF TIGHTER MONETARY POLICY. CHINA QUIETLY URGING BANKS TO INCREASE LENDING AFTER A SLOW START TO THE YEAR. BLOOMBERG HAS LEARNED THE PBOC HAS GIVEN WINDOW GUIDANCE TO LARGE STATE OWNED LENDERS AND REGIONAL BANKS AND IS URGING PEOPLE TO EXTEND MORE CREDIT TO COMPANIES AND HOUSEHOLDS. BANK LENDING WAS LOWER THAN A YEAR AGO. IBM HAS AGREED TO SELL ITS IBM WATSON BUSINESS TO PRIVATE EQUITY FIRM FRANCIS: PARTNERS. TERMS WERE NOT DISCLOSED BUT THE PRICE WAS SAID TO BE MORE THAN $1 BILLION. IBM WATSON HEALTH HELPS MEDICAL PROVIDERS MANAGE DATA. IBM'S NEW CEO HAS BEEN FOCUSED ON FASTER GROWTH. BLOOMBERG HAS LEARNED INTEL PLANS TO BUILD WHAT IS EXPECTED TO BE THE WORLD'S BIGGEST SILICON MANUFACTURING SITE. THE COMPANY WILL SPEND $20 BILLION ON THE CHIPMAKING HUB IN OHIO. PAT GENSLER TELLS TIME MAGAZINE THE COMPANY WILL USE THE NEW FACILITY TO RESEARCH AND DEVELOP ITS MOST ADVANCED CHIPS. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON QUICKTAKE BY BLOOMBERG, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I AM LEIGH-ANN GERRANS. THIS IS BLOOMBERG. > > WE HAVE SEEN THE ACCELERATING PHASE YOU NEED IN A BUBBLE. THAT HAD TAKEN PLACE LAST YEAR. THE NASDAQ UP OVER 100 FROM THE LOW BUT ALSO UP 58% FROM DECEMBER OF 2019. EVEN GRANTED THAT COVID DECLINE, IT WAS A HELL OF A YEAR. IT WAS YEAR OF ACCELERATION. THE NASDAQ HAS STARTED TO WEAKEN. TOM: THE WONDERFUL JEREMY GRAHAM FOAM. GMO AND CO-FOUNDER. HE IS TO BE KIND AND CAUTIOUS. WE HAVE 14 TOPICS. LISA ABRAMOWICZ AND TOM KEENE ON BLOOMBERG RADIO AND TELEVISION. BARRY RITHOLTZ JOINS US. SKEPTICAL READER OF THE SELL SIDE. WE WILL RIP UP THE SCRIPT AND TALK ABOUT SOMETHING JON FERRO BROUGHT UP THIS MORNING. I WAS TOO POLITE TO BRING IT UP. YOU AND I WILL NAIL THIS RIGHT NOW. NETFLIX STARTED IN A 36 MILE COMMUTE OF TWO BRIGHT PEOPLE FROM SANTA CRUZ ON THE WAY TO SAN JOSE AND SAN FRANCISCO. IT IS TRULY ONE OF OUR GREAT COMPANIES. NOT ONLY THAT BUT THEY REINVENTED THEMSELVES THREE TIMES. THEY HAVE THE GREATER SILICON VALLEY ARROGANCE ABOUT NOT INFORMING THE SELL SIDE OF THE STATE OF THE COMPANY BEFORE EARNINGS. IS THAT WHAT HAPPENED YESTERDAY? BARRY: YOU ARE MORE KIND THAN I AM. WHENEVER PEOPLE SAY EARNINGS MISSED ESTIMATES, THAT IS ALWAYS BACKWARDS. EARNINGS ARE GOING TO BE WHAT EARNINGS ARE. THE ESTIMATES GOT IT WRONG. IT IS NOT THE RESPONSIBILITY OF NETFLIX TO DO OF THE THING -- TO DO ANYTHING OTHER THAN SHARE THE OCCASIONAL UPDATE WITH THE ANALYST COMMUNITY. IT IS UP TO THE ANALYST COMMUNITY TO FIGURE OUT ARE THEY HITTING TARGETS, WILL WE DO WHAT THEY THINK THEY WILL DO? THIS IS BEEN RITUALLY PRICED FOR A LONG TIME. IT OBVIOUSLY HAD A WONDERFUL SURGE BENEFITING FROM WHEN EVERYONE WAS LOCKED DOWN, STUCK AT HOME, COULD NOT GO OUT TO THE THEATER, ATHLETIC EVENTS. A LOT OF WHAT IS GOING ON IS THE MARKET BETTING THAT THE LOCKDOWN CARA IS COMING TO AN END. I DO NOT THINK THE ANALYST FIGURED THAT OUT. WHETHER IT IS SUBSCRIPTION GROWTH OR TOTAL HOURS VIEWED. TOM: I WILL TAKE YOUR POINT IN THE INDUSTRIAL DOVER OF THE BORING MIDWEST HAS 18 ANALYSTS AND THEY ARE A CULTURAL WAY FROM THE BIG TECH ANALYSTS, AREN'T THEY? BARRY: YES. THE CHALLENGE WITH LOOKING AT NETFLIX, THEY ARE A CONTENT CREATOR. THEY ARE A SERVICE. THEY ARE A SUBSCRIPTION MODEL, AND THEY WERE A FILM STUDIO. WHEN YOU ADD THOSE THINGS TOGETHER, HOW ARE THEY SELLING THEIR PRODUCT, HOW MUCH OF A SPENDING, HOW MUCH THEY BORROWING? TO GIVE THE BENEFIT OF THE DOUBT TO THE ANALYST COMMUNITY, THIS IS A VERY DIFFICULT COMPANY TO GET A HANDLE ON. THERE'S A LOT OF MOVING PARTS. THAT SAID, I WAS NOT EXPECTING IT WHEN HE PERCENT DECREASE. LOOK AT HOW FAR -- I WAS NOT EXPECTING EIGHT 20% DECREASE. -- I WAS NOT EXPECTING A 20% DECREASE. WE LOOK AT HOW FAR NETFLIX RAN UP INTO THE PANDEMIC THIS IS NOT THE GREATEST SURPRISE. LISA: IT MIGHT NOT BE THE GREATEST SURPRISE TO YOU BUT OBVIOUSLY A LOT OF ANALYSTS GOT IT VERY WRONG. IT IS LEADING A LOT TO WONDER WHAT ELSE DID THEY GET WRONG? WHAT OTHER MISCALCULATIONS IN TERMS OF THE DYNAMISM OF THE CLIENTELE, IS THAT A FAIR CROSSOVER OR DO THINK THIS IS A UNIQUE STORY? BARRY: WHEN WE LOOK AT S & P 500 EARNINGS AND WE AVERAGE SOMEWHERE AROUND 65% OF COMPANIES ACTUALLY EXCEED EARNINGS CONSENSUS, MORE THAN HALF, THAT IS TELLING YOU THE ANALYST COMMUNITY ARE JUST SPIT BAWLING -- JUST SPITBALLING AND COMPANIES ARE MANIPULATING THEM TO PLAY THE GAME, INTO THE CASE OF COMPANIES LIKE MICROSOFT AND APPLE, WHERE THEY ARE LEADING BY HUNDREDS OF BILLIONS OF DOLLARS, THAT HAS BEEN THE GAME FOR A LONG TIME. WHEN WE LOOK AT THE PAST YEAR OR TWO, THE NUMBERS HAVE BEEN SUBSTANTIAL. IT IS MUCH GREATER. OFF THE TOP OF MY HEAD, AROUND 80% OF CUSTOMERS WERE BEATING ANALYST EXPECTATIONS, SIGNIFICANTLY ABOVE WHAT HAS BEEN TRADITIONAL, AND THAT SUGGEST THE ENTIRE MODEL OF GUESSING EARNINGS AND GUESSING REVENUES IS DEEPLY FLAWED. IT CERTAINLY NEVER HELPED ME MAKE MONEY IN THE MARKET. LISA: HELP OTHER PEOPLE MAKE MONEY. WHICH BE BUYING THE DIP WE HAVE SEEN, PARTICULARLY IN TECH STOCKS, IN THE NASDAQ IN PARTICULAR? BARRY: IT IS VERY EARLY IN WHATEVER SORT OF CORRECTION WE ARE HAVING. MY GUESS IS WHAT WE ARE REALLY GOING THROUGH IS THE MARKET WRAPPING ITS HEAD AROUND RISING RATES AND ADJUSTING TO THAT. WE KNEW IT WAS COMING EVENTUALLY. FOR A LONG TIME IT LOOKED LIKE TWO YEARS IN THE FUTURE. NOW IT IS TWO MONTHS IN THE FUTURE. THAT IS PART OF THIS. KEEP IN MIND WE HAVE HAD AN AMAZING RUN, NOT JUST SINCE THE PANDEMIC LOWS. THE PAST DECADE HAS SEEN SPECTACULAR DOUBLE DIGIT GROWTH OF THE S & P 500 BASED ON RECORD FUNDAMENTALS. EVERYBODY WANTS THE SPREAD OF THE FED. LOOK AT THE EARNINGS GROWTH OVER THE PAST 12 YEARS. IT HAS BEEN SPECTACULAR, NOT COUNTING THE PANDEMIC. THE MARKET HAS HAD A BRIEF RUN BASED ON FUNDAMENTALS AND IT LOOKS LIKE THIS WILL BE A PAUSE TO DIGEST THE GAINS. THIS DOES NOT SPELL AT THE END OF THE BULL MARKET. TOM: BREAKING NEWS. BARRY RITHOLTZ, THANK YOU FOR PERSPECTIVE ON NETFLIX. UNITED STATES OF AMERICA WEIGHS EVACUATING DIPLOMATS AND FAMILY MEMBERS FROM UKRAINE. LISA: UNDER THE PLAN NON-ESSENTIAL STAFF WILL LEAVE VOLUNTARILY WHILE FAMILY MEMBERS WOULD BE ORDERED TO RETURN HOME. AN ANNOUNCEMENT MAY BE WITHIN DAYS. THIS COMES AFRICAN CILIARY TONES FROM THE RUSSIAN FOREIGN MINISTER AND SECRETARY OF STATE -- THIS COMES FROM A AND AERATE TONES FROM THE RUSSIAN FOREIGN MINISTER -- A VERY DIFFERENT MESSAGE MOMENT AFTER THE MEETING ENDED. TOM: THE 10 YEAR GERMAN YIELD IS THE LITMUS PAPER OF THE EUROPEAN SYSTEM. GDBR 1 ZERO INDEX ON THE BLOOMBERG SOWS -- SHOWS THE EMOTION OF THE ANNOUNCEMENT. WE ARE SEEING A SIGNIFICANT MOVE. WE HAVE YET TO FIND SUPPORT TO THE PRICE OF THE GERMAN BENCHMARK YIELD. A QUIET DAY. LISA: YES, A QUIET DAY AHEAD OF NEXT WEEK SPENT MEETING. WE HAVE THE GEOPOLITICAL LANDSCAPE COME THE CENTRAL BANK LANDSCAPE, AND THE TECH EARNINGS NEXT WEEK. THE TAKE AWAY IS NERVOUSNESS. WE SEE THAT NERVOUSNESS INCREASING AND GROWING. YOU ARE STILL NOT GETTING A BID INTO STOCKS. THE GAME HAS MOVED A FAR AWAY FROM THE FED STORY. JONATHAN: I WILL LOOK AT IT -- TOM: I WILL LOOK AT IT FROM THE VIX, 26.90 IS NOT THE 21 WHERE WE BEGAN THE WEEK. WE CONTINUED THE TOMATO WAS NEWS OF THE DAY ON BLOOMBERG RADIO AND -- WE CONTINUE THE TUMULTUOUS NEWS OF THE DAY ON BLOOMBERG RADIO AND BLOOMBERG TELEVISION.

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