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Speaker 1: This is Bloomberg Surveillance. All this new communications technology means

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Speaker 1: we're spending a lot of time communicating and interacting, But

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Speaker 1: does that really make us more productive? I don't think

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Speaker 1: it necessarily does and place and it is probably the

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Speaker 1: slow moving economic variable we have out there in the market.

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Speaker 1: People are rarely objective, clinical and rational, and they go

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Speaker 1: to extremes and they went from optimistic to pessigs. Bloomberg

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Speaker 1: Surveillance your link to the world of economics, finance, and

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Speaker 1: investment on Bloomberg Radio. Good morning everyone, Michael McKee and

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Speaker 1: Tom Keene this Monday morning and thrilled you with us worldwide.

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Speaker 1: Don't forget Bloomberg Radio plus Bloomberg dot Com, Crystal Clear

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Speaker 1: in our signal areas Serious next tip Channel one nineteen.

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Speaker 1: Thrilled you're on Serious Next time with us and also

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Speaker 1: Bloomber twelve, Boston FM, Washington sixty, the Bay Area, in

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Speaker 1: San Francisco and the GORGIASA. Do you have a beautiful

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Speaker 1: New York day? Bloomberg eleventh three. Oh, good morning. We

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Speaker 1: need to look at for and exchange for X brief

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Speaker 1: brought you by Interactive Broker's winner of FX Weeks two

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Speaker 1: thousand fifteen award for the best Retail for X trading

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Speaker 1: platform visit ib at, I b k R dot Com

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Speaker 1: slash four X dollars stronger on d X y a

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Speaker 1: blend of major trading partners, Old Line Partners, not China

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Speaker 1: up a solid point nine five points nine seven point

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Speaker 1: five four gets my attention. Stronger dollar, weaker, Yen one seventeen,

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Speaker 1: weaker Euro big weaker Euro one ten ten, and sterling

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Speaker 1: is crushed and further crushed. Let me look at an

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Speaker 1: inter day here. I'll put this chart out on Bloomberg

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Speaker 1: Radio Plus, which we can do. I don't know if

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Speaker 1: Dave Wilson knew we could do that. Yeah, the sterling

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Speaker 1: is broken down even further. Not only did I know

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Speaker 1: we can do that, but I do that every day

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Speaker 1: with my Stock of the day at four pm East

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Speaker 1: during one pm Pacific, and with that shameless plug we're

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Speaker 1: pleased to bring in on equity markets one David Wilson, David, Well,

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Speaker 1: it's another one of those days where oils setting the

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Speaker 1: tone for stocks. I mean, energy shares higher and early

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Speaker 1: trading crude oil up about a dollar. Yeah, absolutely, and

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Speaker 1: people are paying attention to that. You've got that's Mobile

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Speaker 1: up one and a half percent, Chevron up two percent,

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Speaker 1: Conico Phillips up three percent in early trading. Yeah, Who's

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Speaker 1: up two and a half percent. The web portal will

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Speaker 1: begin approaching potential buyers for its main business as soon

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Speaker 1: as today. That's according to people familiar with the process.

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Speaker 1: They said Verizon, Comcast, and A T and T or

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Speaker 1: among the interested parties, although with private equity firms being

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Speaker 1: Capital KKR ANDTPG and Scott Galloway, I'm Bloomberg Surveillance and

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Speaker 1: Friday was adamant there will be multiple biries. It may

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Speaker 1: well be the case. In I should note there are

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Speaker 1: headlines out a few moments ago about the Verizon buying

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Speaker 1: XO communications fiber business for about one point eight billion dollars.

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Speaker 1: So Verison has been doing some deals, that's for sure.

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Speaker 1: We've got one earnings report out the Standforce five today.

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Speaker 1: It's a big one from our again. The shares are

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Speaker 1: up to percent. The drug makers FOURT quarter earnings and

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Speaker 1: revenue top to analysts average estimates in the Bloomberg survey,

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Speaker 1: companies top sellers of the wrinkled treatment Botox and the

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Speaker 1: dry eye drug Stasis and their sales beat projections. Fies

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Speaker 1: are seeking to buy Allagon for a hundred and sixty

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Speaker 1: billion dollars, so a plus for them. A couple of

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Speaker 1: railroad stocks higher in early training CSX up three percent

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Speaker 1: and Union Pacific up two and a half percent. They

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Speaker 1: were both raised to buy from Neutral. Bank of America,

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Speaker 1: Merrill Lynch other analysts calls of note Express Scripts down

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Speaker 1: two percent. The Drug Benefit Manager was cut to sell

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Speaker 1: from hold, the Dutsche Bank Trip Advisor down two percent,

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Speaker 1: the online travel agency lower to sell from Hold. It's

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Speaker 1: stifle and weld Care health Plans up five and a

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Speaker 1: half percent. The health insurer was raised equivalent to buy

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Speaker 1: from Neutral at JP more Dean Foods up three percent.

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Speaker 1: The Very Product Makers fourth quarter or he has been

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Speaker 1: estimates first quarter profit may also come out ahead based

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Speaker 1: on the company's forecast, and lumber Liquidators down seventy The

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Speaker 1: US Centers for Disease Control and Prevention found the retailer's

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Speaker 1: flooring poses three times the cancer risk disclosed earlier this month.

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Speaker 1: The CDC attributed the revision to incorrect ceiling heights. David Wilson,

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Speaker 1: thank you so much. He has wonderful degrees from Bowden College,

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Speaker 1: cal Tech, and Stern School. He's the only one I

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Speaker 1: know that actually understood the science of the Martian. Uh.

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Speaker 1: Jim Karen joins us from Morgan Stanley right now on

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Speaker 1: the fixed income mark? Did Jim, did you see the Martian?

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Speaker 1: I'm looking for Jim Karen. Okay, the Martian? Yeah? I

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Speaker 1: thought it was pretty good science. Are we dealing with

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Speaker 1: rational science now in our fixed income market? If our

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Speaker 1: central banker us have taken us through the zero bound

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Speaker 1: or to the zero bound? Are we doing science? Are

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Speaker 1: we doing alchemy? I think we're doing a grand experiment. Um.

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Speaker 1: I don't think there's a lot of science behind what's

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Speaker 1: going on right now, other than the fact that lower

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Speaker 1: rates tend to stimulate demand. So if you can push

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Speaker 1: for rates towards zero, should stimulate more demand, and hey,

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Speaker 1: if you push them negative, it should stimulate even more.

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Speaker 1: I think what we're finding though, is that negative rates

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Speaker 1: aren't what we all thought that they might be, That

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Speaker 1: there are some limitations as to how low these rates

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Speaker 1: can go before they create problems. We see in Japan

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Speaker 1: for example, UM, Japan pushed interest rates to negative levels,

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Speaker 1: and that's supposed to weaken the currency. Well, the Japanese

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Speaker 1: yend has been one of the strongest currencies out there

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Speaker 1: over the past couple of weeks. Ever since they've actually

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Speaker 1: moved to negative rates. So I think this is a

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Speaker 1: grand experiment, and we're really trying to get demand to

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Speaker 1: come back into the economy by manipulating interest rates, and

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Speaker 1: I don't think it's going to work the way that

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Speaker 1: they intend to. A lot of people are saying that

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Speaker 1: these days, do we get bond vigilantes telling central banks

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Speaker 1: it's not going to work. Well, it's it's interesting right now,

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Speaker 1: and I think the answer to that is ultimately yes.

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Speaker 1: But we also have to put this into context with

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Speaker 1: what's going on with the rest of assets around the world.

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Speaker 1: So equity prices have been coming down, credit spreads have

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Speaker 1: been widened. This has been creating a lot of pain.

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Speaker 1: Um so an oil clearly has been the number one

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Speaker 1: thing correlating all asset prices together. So when people look

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Speaker 1: for a hedge and they need a hedge to hedge

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Speaker 1: off these um hedge off losses from some of these assets,

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Speaker 1: what they end up doing is buying very very high

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Speaker 1: quality US treasuries, Euros. You know, guilt your government bonds,

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Speaker 1: I mean, and what that ends up doing is it

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Speaker 1: and the pushing rates lower. So the interest rate markets

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Speaker 1: look like they're well behaved and taking these negative rates

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Speaker 1: in stride, and it's doing what it's supposed to be doing.

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Speaker 1: But the reality is is that the other asset markets

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Speaker 1: are are really you know, the decline, and the other

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Speaker 1: asset markets is really with driving treasuries. So I don't

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Speaker 1: know that negative rates necessarily is the best solution. However,

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Speaker 1: there aren't a lot of other good solutions right now.

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Speaker 1: I think many central banks are running out of opportunities

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Speaker 1: to actually try to stimulate the markets, which is scary

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Speaker 1: in and of itself. If we do, we still need

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Speaker 1: somebody to stimulate the markets. Or would it be better,

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Speaker 1: as we were talking earlier in the show, for central

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Speaker 1: banks to sort of shut up and get out of

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Speaker 1: the way at this point, I think, you know, I mean, ultimately,

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Speaker 1: if if you come from the Austria Austrian economic camp,

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Speaker 1: then the answer is absolutely just get out of the

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Speaker 1: way and just let the markets behave like markets. And

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Speaker 1: and ultimately I think central banks do need to step

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Speaker 1: away a little bit too, to allow some of the

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Speaker 1: accesses to burn off, but there's also a lot of

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Speaker 1: collateral damage that ends up happening along the way. So

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Speaker 1: you could, for example, have you know, really good solid

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Speaker 1: companies um you know, move into higher probabilities of default

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Speaker 1: and have their bond prices go down because there's some

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Speaker 1: cleansing of the overall economic system, which could create you know,

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Speaker 1: high levels of unemployment. It could create a lot of

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Speaker 1: economic unrest. So I think central banks are have been

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Speaker 1: put on this planet to try to manage these things.

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Speaker 1: I think they've overdone it. Personally, I think they've overdone it,

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Speaker 1: and I do think that they need to step away

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Speaker 1: and allow the normal financial conditions in the marketplace to

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Speaker 1: revive itself. When I look Jim Karen at the derivative markets,

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Speaker 1: what's happened around the headlines on bonds? We've been here before.

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Speaker 1: Interesting markets, uh indetermine it was the word I use

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Speaker 1: last week. What have you observed in securitized markets? What

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Speaker 1: have you observed in shadow or derivative constructed bond markets.

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Speaker 1: So for many of these securities markets which typically hold

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Speaker 1: mortgages and you know, or buildings as a you know,

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Speaker 1: commercial mortgage backed securities, commercial mortgages as a as an

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Speaker 1: asset um. The residential space has actually been relatively strong.

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Speaker 1: Residential mortgages have done very very well, so the homeowner

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Speaker 1: of the individual paying their mortgage looking for homes, you know,

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Speaker 1: home price appreciation has gone up. Commercial mortgages, though, are

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Speaker 1: a different story. Commercial mortgages are a little bit more

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Speaker 1: of a technical story right now and often trades more

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Speaker 1: like a credit and since credit spreads has been widening,

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Speaker 1: commercial mortgages securitized assets have actually been getting hurt. Now

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Speaker 1: we're not seeing a lot of defaults, but what we

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Speaker 1: are seeing is a repricing of of the risk premium,

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Speaker 1: so higher risk premium, lower prices. And essentially what's also

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Speaker 1: happening is that there's a lot of technicals right now

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Speaker 1: where a lot of commercial mortgage backed securities were created

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Speaker 1: in oh six, oh seven, oh eight, which is in

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Speaker 1: have about ten year maturity. Those maturities are now coming

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Speaker 1: due and need to be rolled over, so there's a

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Speaker 1: lot more supplies, so I think it's weighing on those markets.

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Speaker 1: Jim Caring with us with mortgage Stanley, I'd really point

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Speaker 1: out a smart summary by zero has this weekend on

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Speaker 1: clos and invot is the collaterized loan obligation. Uh. Markets

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Speaker 1: and when I when I look at that, um he

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Speaker 1: cites more than Stanley researcher. And I wanted to bring

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Speaker 1: that up with Jim, Jim, Karen, thank you so much.

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Speaker 1: Wait too short of visit today. We'll do it again. Uh,

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Speaker 1: next time futures up twenty down, features up, will do

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Speaker 1: it longer. Next time, I should say, and again I

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Speaker 1: want to note dollar strength, Mike. We're really getting off

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Speaker 1: of Sterling's weakness. Uh. Not a huge move that would

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Speaker 1: be wrong, but a very nice lift in the X

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Speaker 1: y seven point five nights, not near a hundred, not

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Speaker 1: even ninety, but nevertheless, but also not just Sterling's weakness,

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Speaker 1: but the Euro at one ten oh six here threatening

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Speaker 1: one nine. It's a group efforts. Sterling one for seventy seven. Again,

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Speaker 1: I'm Boris Johnson and Brexit news. Let's check out what

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Speaker 1: John talker. I'll get the latest world in national headlines,

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Speaker 1: John and Michael and Tom. The suspect in that shooting

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Speaker 1: rampage in Calaba's in Michigan that left six people dead

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Speaker 1: expected to be ragined today on murder charges, please say

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Speaker 1: Jason Dalton seemed to choose his victims. At random. Authorities

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Speaker 1: say forty five year old uber driver and former insurance

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Speaker 1: adjuster has no criminal record. With Jeb Bush's departure from

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Speaker 1: the presidential race on Saturday of fundraising, army scattered had

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Speaker 1: the question the troops now facing pick another side or retreat.

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Speaker 1: Most Bush loyalist contacted Sunday say they're preparing to support

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Speaker 1: Marco Rubio. Authorities in Fiji still having trouble communicating with

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Speaker 1: some islands following a powerful and deadly cyclone that smashed

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Speaker 1: the Pacific Island chain. Officials. At least eighteen people die,

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Speaker 1: thousands remaining in shelters. Global News twenty four hours a day,

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Speaker 1: powered by a twenty four hundred journalists in more than

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Speaker 1: one hundred fifty news bureaus around the world. I'm John Tucker,

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Speaker 1: Michael and Tom. But John, thanks so much again, As

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Speaker 1: Mike McKey man. Should Sterling Waitness one forty eighty really

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Speaker 1: beginning to start thinking about a one handle on cable

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Speaker 1: that would be something. This is Bloomberg Surveillance Market drivers

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Speaker 1: brought you by your Mercedes Benz tri state dealer. When

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Speaker 1: Global Business News twenty four hours a day at Bloomberg

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Speaker 1: dot com, the Radio plus mobile lap and on your radio.

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Speaker 1: This is a Bloomberg Business Flash and I'm Karen Moscow.

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Speaker 1: This updates brought to you by Interactive Brokers and CME Group.

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Speaker 1: Oil is rising along with global equities amid speculation that

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Speaker 1: a production freezed by some OPEC members in Russia could

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Speaker 1: eventually help to evate the surplus. We checked the markets

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Speaker 1: every fifteen minutes throughout the trading day on Bloomberg nimex

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Speaker 1: Heurd oil is up five percent of a dollar seventy

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Speaker 1: two is a thirty one dollars thirty six cents of barrel.

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Speaker 1: Brent is up four point nine percent at thirty four

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Speaker 1: dollar sixty two cents. Futures are higher, with SNP eveny

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Speaker 1: futures of nineteen points now eveny futures of a hundred

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Speaker 1: seventy one NASA doc eumny futures of forty one decks

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Speaker 1: in Germany's up one point seven percent, ten your treasury

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Speaker 1: down to thirty seconds, the yeld one point seven five percent,

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Speaker 1: comex goal down one point seven percent, or twenty one

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Speaker 1: dollars to twelve oh nine eight announced, and the British

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Speaker 1: pound is at a dollar forty eight one, the Euro

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Speaker 1: a dollar ten oh nine. That's a Bloomberg business flash.

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Speaker 1: Tom and Mike Karen, thank you so much. Long ago

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Speaker 1: in far away or I would remember, and I'm sure

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Speaker 1: that Arthur Lovett, the former chairman of the SEC remember,

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Speaker 1: was a field goal. No, not Pete or Charlie Gogelak

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Speaker 1: kicking field goals. Three point field goals a long time ago.

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Speaker 1: But if you really wanted to get paid and damage

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Speaker 1: your client, you could make three big figures or of

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Speaker 1: field goal. I'm moving a piece of paper over to

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Speaker 1: one of your clients. Arthur Levitt considers the final death

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Speaker 1: of this where maybe Arthur, we would actually know the

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Speaker 1: markup at least some of the markup on some of

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Speaker 1: our bonds. Are we really actually too a visible market

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Speaker 1: on bonds? I think we're getting closer whether we'll get there.

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Speaker 1: We've thought this for the past twenty years. The game

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Speaker 1: of taking bonds into inventory and that afternoon marking them

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Speaker 1: up by one or two points as much as that

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Speaker 1: and handing them to innocent retail investors as a game

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Speaker 1: that was known throughout the street. But I think that

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Speaker 1: the Municipal Securities Rulemaking Board and FINRA are now going

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Speaker 1: to require brokers to disclose exactly how much they pocket

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Speaker 1: when they buy corporate or municipal bonds and then sell

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Speaker 1: those same securities later in the same day. And I

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Speaker 1: would point out, folks, as you know, the field goal

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Speaker 1: was a joke on the street, but I want to

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Speaker 1: point out, as Mr Levitt mentions one or two points,

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Speaker 1: many many people would mark up bonds constructively and ethically

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Speaker 1: to their customers for a quarter or three aids, half

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Speaker 1: a point whatever. So you know, it wasn't Mike. It

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Speaker 1: wasn't so reprehensible that everybody did it. It's just you

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Speaker 1: didn't even know who was doing it. It didn't because

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Speaker 1: those markets have not had the liquidity of our equity markets.

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Speaker 1: And when you get mom and pop buyers of odd lots,

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Speaker 1: they're gonna pay a lot of money for it. I

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Speaker 1: don't know that that's going to change totally. I think

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Speaker 1: it probably won't, but we're still in a better place

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Speaker 1: than we were ten years ago. We were talking earlier

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Speaker 1: today with Brad Hints about the outlook for banks and

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Speaker 1: how regulators has increased their costs significantly. Uh. One of

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Speaker 1: the items of regulatory requirement banks having to put up

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Speaker 1: with these days, and the living wills, which Jenny Ellens says,

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Speaker 1: I haven't worked out so well so far as they've

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Speaker 1: send them back to the banks to do them again.

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Speaker 1: Who should be the most worried the banks that they

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Speaker 1: have to keep doing this or regulators because we can't

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Speaker 1: get it right. Well, I think regulators should be nervous

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Speaker 1: because their credibility is online, and I think the American

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Speaker 1: public should be most nervous. It's their money on the

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Speaker 1: line of fan up bailing out the banks again. The

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Speaker 1: regulators should have required more of the living wills to

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Speaker 1: be made public so that outside experts could have evaluated them.

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Speaker 1: They should have also publicly disclosed how much funding they

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Speaker 1: think too it take for those institutions to be resolved

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Speaker 1: in bankruptcy and exactly where is the money coming from? Well,

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Speaker 1: I think there's a lot of worry to go around.

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Speaker 1: One of the points Neal cash Carry makes is that

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Speaker 1: the money doesn't have to come from anywhere. If one

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Speaker 1: bank is failing in isolation, they can let it go.

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Speaker 1: But the bank is unlikely to fail. A big bank

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Speaker 1: like that is unlikely to fail unless there's some sort

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Speaker 1: of overall crisis that means that the federal government has

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Speaker 1: to bail them out. So his view is it's by

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Speaker 1: default a bailout. Yes, I think that's absolutely right. And

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Speaker 1: look Arthur at the state of banking. I mean, and

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Speaker 1: to go away from the reading of the weekend, are

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Speaker 1: we at a point we were where we are utility banking?

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Speaker 1: Are we don't fight down the cycle? No? I don't

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Speaker 1: think so, not quite. I don't think banking has changed

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Speaker 1: all that much. I think our regulation has changed in

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Speaker 1: some ways. It's become more punitive. I think the public's

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Speaker 1: awareness of the consequences of too big to fail is

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Speaker 1: much keener than it's ever been before. So I think

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Speaker 1: the lessons of the market haven't gone unheeded. And I

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Speaker 1: think the political pressure on the banks is greater today

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Speaker 1: than ever before in recent history. So the banks are

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Speaker 1: not getting a free ride, but the regulators aren't doing

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Speaker 1: all they can, and the public obviously is bearing down

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Speaker 1: on the banks as the villain of this economic environment. Arthur,

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Speaker 1: thank you so much. Arthur love it quickly this morning.

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Speaker 1: He's a former chairman of the SEC board member with Bloomberg,

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Speaker 1: will be my The bond markup idea would be revolutionary

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Speaker 1: if it happened. I think so much of the reason

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Speaker 1: individual bond performance went away, in individual bond interest went away,

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Speaker 1: I should say, is because people have no clue what

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Speaker 1: they're buying. If I mean not that mistakes aren't made

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Speaker 1: every every day in the equity market, but there's even

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Speaker 1: there's a symbolance of actually doing where you are. People

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Speaker 1: have no clue what they're getting in the bondom market none.

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Speaker 1: That's why they're they gravitate towards things like ETFs. Yeah,

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Speaker 1: and well that that and and also the unit trust

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Speaker 1: and the mutual funds as well. But individual bonds, I

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Speaker 1: remember a million years ago it was a huge part

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Speaker 1: of the business, and that is just evaporated. Features very

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Speaker 1: stable up twenty As we get the markets open here

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Speaker 1: in five minutes, dat features up one seventy five. Yields

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Speaker 1: are higher by two and one basis points or so.

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Speaker 1: But early My headline today is curve flattening really significant.

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Speaker 1: Bears close watching as he goes through the week with

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Speaker 1: important economic data. Bloomberg Surveillance. We're kinding down to the

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Speaker 1: opening Bell, brought to you by the refined Jeep Grand

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Speaker 1: the Bloomberg Radio plus SAP and Boomberg dot Com. This

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Speaker 1: is Bloomberg Surveillance. Good morning. I'm Karen Moscow along with

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Speaker 1: Tom Keene and Michael McKee, and the opening Bell is

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Speaker 1: brought to you by SEI. Have evolving investor and regulatory

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Speaker 1: com slam imagine stocks higher at the open, the SNP

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Speaker 1: five seven ten percent or thirteen points in nineteen thirty

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Speaker 1: one Dow Jones Industrial average up six ten percent or

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Speaker 1: ninety five points to sixteen thousand, four eighty eight, and

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Speaker 1: then asked to acts up one percent or forty four

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Speaker 1: points to forty eight. Ten year Treasury down three thirty seconds,

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Speaker 1: the yield one point seven five percent yield on the

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Speaker 1: two year point seven six percent. Nim X screwed oil

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Speaker 1: up six percent or a dollar eighty four a barrel,

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Speaker 1: comic goal down one point eight percent or twenty two

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Speaker 1: dollars twenty says to twelve O eight sixty and ounce.

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Speaker 1: The euro a dollar ten seventeen, the yen one thirteen

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Speaker 1: point one six. Tom and Mike Karen, thanks so much.

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Speaker 1: Let's cut to the chase, Folks, Lisa Brandos with us

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Speaker 1: with Bloomberg gad flies. She's thought extraordinarily in the last

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Speaker 1: oh three or four five days getting through the weekend

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Speaker 1: on where we are in the bond market. I know

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Speaker 1: we're wonderful. Article on hedging or the lack of hedging

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Speaker 1: in European bonds in the extremely sophisticated zero hedge article

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Speaker 1: which has done off Morgan Stanley and I believe it

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Speaker 1: was Deutsche Bank research on the CLO the securities market

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Speaker 1: is well, let me cut to the general chase. What's

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Speaker 1: the sweat factor out there now in fixed income that

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Speaker 1: we don't know? What we don't know? And it's really bad?

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Speaker 1: How do you how do you? I love what you

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Speaker 1: just said. What do you mean by a general phrase

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Speaker 1: like really bad? Well, so there's the general concern that

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Speaker 1: central central bank policies that we really have not explored before,

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Speaker 1: which is really the negative, right pathic everybody agrees with

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Speaker 1: that are going to create unintended consequences, whether you call

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Speaker 1: it ascid bubbles, whether you call it just unintended consequences.

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Speaker 1: And we're seeing some of the effects of those in

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Speaker 1: the US already as the credit cycle starts to turn,

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Speaker 1: and arguably you're seeing the as you see the bust

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Speaker 1: of the energy boom and the royal price boom, you're

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Speaker 1: seeing the losses materialize in a meaningful way from all

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Speaker 1: of the investors who bought the corporate debt of these

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Speaker 1: market with all of your context, is the market operating

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Speaker 1: right now in a relatively comfortable and normal fashion, If

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Speaker 1: you have a piece and you need to go sell it.

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Speaker 1: Is there a bid there? It depends what it is.

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Speaker 1: But most people who I talked to, particularly and more

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Speaker 1: distressed debt, say absolutely not. And even though the Federal Reserve,

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Speaker 1: the New York Federal Reserve, has come out and said

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Speaker 1: Treasury liquidity in the bond market is not that impaired,

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Speaker 1: they said that again and again. TAB Group came out

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Speaker 1: with the report today where they said we're not using

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Speaker 1: the right tools to engage liquidity. And when I talk

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Speaker 1: to traders, they say, we cannot sell what we want.

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Speaker 1: It's like, I don't have an opinion on this other

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Speaker 1: than to say I am certain. In the last four

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Speaker 1: or five days, this has become a new talking point.

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Speaker 1: What Lisa just brilliantly conveyed, Well, it's been going on

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Speaker 1: for a while. They're concern about liquidity in the markets.

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Speaker 1: I guess um. The big issue is that in March

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Speaker 1: we get the resets from the banks and the energy

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Speaker 1: industry and nobody knows And I don't know why nobody

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Speaker 1: knows that people aren't counting up the loans or I mean,

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Speaker 1: why is there so much uncertainty about this? Do you

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Speaker 1: suppose when you say, the unknowns about whether banks will

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Speaker 1: re up the credit lines with the stress and energy

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Speaker 1: companies loans are likely to be in distress at that point,

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Speaker 1: and then you know, you can try to guess whether

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Speaker 1: or not they're going to be re uped or not.

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Speaker 1: But uh, you know, how bad is it? Well? I

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Speaker 1: think the US banks have disclosed some information. There's a

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Speaker 1: question about how complete that is or whether it's it's

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Speaker 1: a fair evaluation of the potential stresses in these companies.

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Speaker 1: I think underlying this is attention where banks do not

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Speaker 1: want to step away from companies in distress. This is

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Speaker 1: their job to stick with them. Jamie Diamond has been

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Speaker 1: very very vocal and I've spoken at saying we're not

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Speaker 1: going to abandon them. That is our job. We stayed

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Speaker 1: by them during the crisis. They don't want to basically

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Speaker 1: mess up themselves because they have a lot of money

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Speaker 1: tied up with these companies. But that is going to

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Speaker 1: prolong the pain if these companies aren't going to survive.

430
00:25:08,920 --> 00:25:13,399
Speaker 1: So that's another big question underlying via part of this

431
00:25:13,480 --> 00:25:16,040
Speaker 1: is a trunch analysis. I'm not asking you to come

432
00:25:16,119 --> 00:25:18,760
Speaker 1: up with wisdom here, but the last time we had

433
00:25:18,800 --> 00:25:23,560
Speaker 1: the fun Derby. The surprise was better quality trunches or

434
00:25:23,640 --> 00:25:28,280
Speaker 1: pieces of slices of derivatives or breakups of bonds. Better

435
00:25:28,359 --> 00:25:31,760
Speaker 1: quality tranches were affected that somewhat in the big short

436
00:25:32,560 --> 00:25:36,600
Speaker 1: as well, is the analysis now about the garbage out

437
00:25:36,640 --> 00:25:41,639
Speaker 1: there entrenches, or is it as well about better quality paper. Well,

438
00:25:41,720 --> 00:25:46,879
Speaker 1: the credit lines that the banks hold arguably are comparable

439
00:25:46,920 --> 00:25:51,880
Speaker 1: to those top tier tranches because their first lean loans.

440
00:25:51,920 --> 00:25:54,320
Speaker 1: This has to do with whether these companies are going

441
00:25:54,359 --> 00:25:56,520
Speaker 1: to get so wiped out that their assets will be

442
00:25:56,560 --> 00:26:00,600
Speaker 1: completely worthless. At that point, you'll see really big losses

443
00:26:00,640 --> 00:26:03,159
Speaker 1: for these banks. Now there's a question of whether that

444
00:26:03,160 --> 00:26:06,760
Speaker 1: could happen. But with the shale companies, should this low

445
00:26:06,880 --> 00:26:11,040
Speaker 1: oil price environment persists for long enough, there could be

446
00:26:11,119 --> 00:26:14,879
Speaker 1: pretty low recoveries, especially given some of the financing that

447
00:26:14,920 --> 00:26:18,080
Speaker 1: these companies have managed to sort of survive on. So

448
00:26:18,119 --> 00:26:20,000
Speaker 1: this is a big question. I think in Europe there's

449
00:26:20,040 --> 00:26:23,359
Speaker 1: a lot less certainty around how much exposure there is.

450
00:26:24,280 --> 00:26:29,439
Speaker 1: Let's go to your article. We have like, excuse me, ten, twelve,

451
00:26:29,480 --> 00:26:32,800
Speaker 1: fifteen these articles a day. Lisa is usually the weakest um.

452
00:26:33,240 --> 00:26:37,840
Speaker 1: But today good luck, good luck trying him, good luck

453
00:26:37,880 --> 00:26:41,240
Speaker 1: trying to hedge against a European bond risk. This is

454
00:26:41,240 --> 00:26:45,560
Speaker 1: a brilliant story led by by by yield, negative interest rates,

455
00:26:45,640 --> 00:26:48,800
Speaker 1: non correlations. Can anybody get any business done in Europe

456
00:26:48,840 --> 00:26:51,760
Speaker 1: right now? Well, here's the issue is that people are

457
00:26:51,800 --> 00:26:54,760
Speaker 1: being pushed into negative yielding debt and there's no way

458
00:26:55,080 --> 00:26:57,800
Speaker 1: for them to hedge those bets. You can't short sell

459
00:26:58,080 --> 00:27:00,680
Speaker 1: negative yielding government debt. You can can't. You know, they're

460
00:27:00,680 --> 00:27:03,080
Speaker 1: not there isn't like an active options or there's no

461
00:27:03,240 --> 00:27:08,360
Speaker 1: clear derivatives that actually are negative alternative. Well there, It's

462
00:27:08,359 --> 00:27:11,320
Speaker 1: just it's a very lopsided market, and it's a problem

463
00:27:11,320 --> 00:27:15,080
Speaker 1: when you have such a high concentration such a you know,

464
00:27:15,320 --> 00:27:19,040
Speaker 1: uh flood in one direction, you're going to get potentially

465
00:27:19,520 --> 00:27:23,000
Speaker 1: a very messy exit when everybody moves in the other direction.

466
00:27:23,000 --> 00:27:25,760
Speaker 1: And you know, there was some of that in the US,

467
00:27:25,960 --> 00:27:29,480
Speaker 1: given what the monetary policies over here were like, but

468
00:27:29,560 --> 00:27:34,520
Speaker 1: in Europe it's even more so. You buy it, you know,

469
00:27:36,320 --> 00:27:39,280
Speaker 1: why why do you play Russian roulette? Well, if central

470
00:27:39,280 --> 00:27:41,960
Speaker 1: bankers are going to continue to buy this stuff, first

471
00:27:42,000 --> 00:27:45,360
Speaker 1: of all, then you're going to potentially get a momentum

472
00:27:45,400 --> 00:27:48,280
Speaker 1: trade where you can profit from prices going up and

473
00:27:48,280 --> 00:27:52,160
Speaker 1: people buying that I don't buy as much. There also

474
00:27:52,240 --> 00:27:55,440
Speaker 1: are just mandates. We're certain fund managers have to buy

475
00:27:55,880 --> 00:27:59,440
Speaker 1: the developed market sovereign debt in Europe. One minute, what's

476
00:27:59,440 --> 00:28:02,320
Speaker 1: the number one thing you're trying to observe this week

477
00:28:02,359 --> 00:28:04,600
Speaker 1: when you do read your research, when you're right for

478
00:28:04,640 --> 00:28:06,800
Speaker 1: glad flight? What gad fly? What's the one thing you're

479
00:28:06,800 --> 00:28:09,320
Speaker 1: trying to figure out this week. I'm trying to figure

480
00:28:09,359 --> 00:28:11,159
Speaker 1: out some of the losses, and I'm also trying to

481
00:28:11,200 --> 00:28:14,880
Speaker 1: figure out how the big institutions are managing their allocations

482
00:28:14,960 --> 00:28:16,520
Speaker 1: right now. How do you know the losses if you

483
00:28:16,520 --> 00:28:19,520
Speaker 1: haven't taken the bond a bid? And know that's a

484
00:28:19,520 --> 00:28:21,560
Speaker 1: great question. When you start seeing the bankruptcies, you have

485
00:28:21,560 --> 00:28:26,119
Speaker 1: a better sense. As they say that the wind is

486
00:28:26,119 --> 00:28:28,840
Speaker 1: shifted in the last five or six I mean, it's

487
00:28:28,840 --> 00:28:31,719
Speaker 1: just amazes Well, it doesn't amaze me. Markets being markets,

488
00:28:31,760 --> 00:28:34,359
Speaker 1: there would be so much fear on total information. I

489
00:28:34,440 --> 00:28:37,040
Speaker 1: guess that's why there's so much fear um. You could

490
00:28:37,080 --> 00:28:38,880
Speaker 1: have done Tom a favor and you could have said

491
00:28:38,960 --> 00:28:40,959
Speaker 1: that your goal this week is to figure out how

492
00:28:40,960 --> 00:28:43,680
Speaker 1: the Red Sox are gonna play in two thousand sixteen.

493
00:28:44,160 --> 00:28:50,360
Speaker 1: I'm I'm with Mets. I'm a Mets affiliated so they're

494
00:28:50,400 --> 00:28:52,320
Speaker 1: gonna win everything this year. At least they told me

495
00:28:52,400 --> 00:28:58,280
Speaker 1: five times be fly out on Twitter. Pay attention to

496
00:28:58,280 --> 00:29:02,160
Speaker 1: Bloomberg gad Fly. There's always something where you go. I

497
00:29:02,200 --> 00:29:06,520
Speaker 1: didn't know that. It's very cool. It is. Seriously, ten twelve,

498
00:29:06,600 --> 00:29:09,360
Speaker 1: fifteen articles a day. You're not going to read them all.

499
00:29:09,400 --> 00:29:12,120
Speaker 1: We get that, but you're gonna find one or two les.

500
00:29:12,280 --> 00:29:17,240
Speaker 1: Change your dialogue through the day. Thursday's Lisa's day, so

501
00:29:17,440 --> 00:29:19,680
Speaker 1: just you don't think you're can ignore until Thursday. At

502
00:29:19,720 --> 00:29:23,040
Speaker 1: least the bram Wins is with Bloomberg gad Fly as well.

503
00:29:23,400 --> 00:29:26,680
Speaker 1: A nice move. Sixteen thousand, five seventies seven on the

504
00:29:26,760 --> 00:29:31,760
Speaker 1: d SMP, up twenty three points. The vix positively average

505
00:29:32,160 --> 00:29:37,840
Speaker 1: twenty point one zero. This Hour of Survance brought to you

506
00:29:37,800 --> 00:29:40,400
Speaker 1: you by Volvo Cars, White Planes. Visit Volvo Cars, White

507
00:29:40,400 --> 00:29:43,160
Speaker 1: Planes dot Com. Here's John Tucker with the latest news headlines,

508
00:29:43,160 --> 00:29:45,120
Speaker 1: Well Michael and Tom and the Afghan official says a

509
00:29:45,160 --> 00:29:48,120
Speaker 1: suicide bomber targeting a police commander killed at least thirteen

510
00:29:48,160 --> 00:29:50,960
Speaker 1: people today, including nine civilians, in the northern province. The

511
00:29:51,000 --> 00:29:55,640
Speaker 1: Taliban claiming responsibility Senator Bernie Sanders ahead of tomorrow South

512
00:29:55,640 --> 00:29:59,080
Speaker 1: Carolina primary. Campaigning in Greenville Sunday got a big response

513
00:29:59,160 --> 00:30:02,000
Speaker 1: from a crowd while talking about going after Wall Street.

514
00:30:02,480 --> 00:30:06,320
Speaker 1: Sanders has two more shots South Carolina and Super Tuesday

515
00:30:06,440 --> 00:30:08,320
Speaker 1: to level the playing field on the race for the

516
00:30:08,360 --> 00:30:12,240
Speaker 1: Democratic presidential nomination. After his lawns in Nevada Saturday, He's

517
00:30:12,280 --> 00:30:16,560
Speaker 1: tied with Hillary Clinton for pledged delegates, but Clinton establishment

518
00:30:16,600 --> 00:30:19,960
Speaker 1: party representatives are giving her hundreds of super delicates. On

519
00:30:20,120 --> 00:30:23,040
Speaker 1: tom A lawmaker is again considering a bill to raise

520
00:30:23,040 --> 00:30:25,400
Speaker 1: the smoking age from nineteen to twenty one in New

521
00:30:25,480 --> 00:30:28,160
Speaker 1: Jersey and Assembly committee there is scheduled the way in

522
00:30:28,200 --> 00:30:30,920
Speaker 1: on the legislation. The bill would find retailers up to

523
00:30:30,920 --> 00:30:33,720
Speaker 1: a thousand dollars if they sell to anybody twenty years

524
00:30:33,760 --> 00:30:37,200
Speaker 1: old or younger. And Bill Cosby's wife will finally have

525
00:30:37,280 --> 00:30:40,240
Speaker 1: to answer questions under oath today related to the sexual

526
00:30:40,240 --> 00:30:43,520
Speaker 1: assault lo sits against her husband. Camill Cosby has been

527
00:30:43,560 --> 00:30:47,360
Speaker 1: fighting the deposition for months, setting spousal privilege a judge's

528
00:30:47,360 --> 00:30:50,880
Speaker 1: world that as her husband's business manager, Mrs Cosby has

529
00:30:50,880 --> 00:30:54,280
Speaker 1: more to share than pillow talk. Yeah Global News twenty

530
00:30:54,280 --> 00:30:56,800
Speaker 1: four hours a day powered by twenty four hundred journalists

531
00:30:56,880 --> 00:30:59,000
Speaker 1: more than one d fifty news bureaus around the world.

532
00:30:59,360 --> 00:31:02,840
Speaker 1: I'm John, Michael and Tom Chan Thanks so much, gold

533
00:31:03,120 --> 00:31:08,480
Speaker 1: South Oil, gold Down Trouble and I make a twelve

534
00:31:08,600 --> 00:31:13,920
Speaker 1: ten the ounce a West Texas up almost two dollars

535
00:31:13,960 --> 00:31:21,680
Speaker 1: from New York and worldwide. Bloomberg Surveillance. Bloomberg Surveillance brought

536
00:31:21,680 --> 00:31:23,600
Speaker 1: you by Bank of America Mary Lynch is Global Cash

537
00:31:23,640 --> 00:31:26,760
Speaker 1: Management Solutions, helping you manage, protect and invest your global

538
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Speaker 1: cash wherever the road to growth leads. That's the power

539
00:31:29,240 --> 00:31:32,400
Speaker 1: of global connections. Bank of America North America Member f

540
00:31:32,560 --> 00:31:40,160
Speaker 1: d I C Global Business News twenty four hours a

541
00:31:40,280 --> 00:31:43,600
Speaker 1: day at Bloomberg dot Com, the Radio, plus mobile and

542
00:31:43,760 --> 00:31:47,760
Speaker 1: on your radio. This is a Bloomberg Business Flash and

543
00:31:47,840 --> 00:31:49,880
Speaker 1: I'm Caring Moss. Now this updates. We're all too. You

544
00:31:49,920 --> 00:31:53,440
Speaker 1: buys cbo E vix Options in Futures. Volatility can be

545
00:31:53,520 --> 00:31:57,160
Speaker 1: harnessed with cbo E Vicks Options in Futures. See disclosures

546
00:31:57,160 --> 00:32:00,600
Speaker 1: and learn more at cbo e dot com. Slash Powerful Outcomes.

547
00:32:00,720 --> 00:32:04,120
Speaker 1: Vix Us stocks are rising as bank and energy shares

548
00:32:04,240 --> 00:32:07,120
Speaker 1: let an early climb with higher oil prices adding to

549
00:32:07,280 --> 00:32:09,920
Speaker 1: gains after the SNP five hundred posted its best week

550
00:32:09,960 --> 00:32:13,200
Speaker 1: since November. We check the markets every fifteen minutes throughout

551
00:32:13,240 --> 00:32:16,120
Speaker 1: the trading day. On Bloomberg SNP five hundred up one

552
00:32:16,160 --> 00:32:19,120
Speaker 1: point three percent or twenty four points to nineteen forty two.

553
00:32:19,360 --> 00:32:21,840
Speaker 1: Dow Jones Industrial average of one point two percent or

554
00:32:21,880 --> 00:32:24,680
Speaker 1: one hundred ninety five points to sixteen thousand, five hundred

555
00:32:24,760 --> 00:32:27,160
Speaker 1: eighty eight. Then ASDAK up one point two percent or

556
00:32:27,160 --> 00:32:30,520
Speaker 1: fifty six points to forty five sixty Tenure Treasury down

557
00:32:30,560 --> 00:32:33,400
Speaker 1: five thirty seconds. The yelled one point seven six percent

558
00:32:33,560 --> 00:32:36,720
Speaker 1: yield on the two year point seven six percent. Nim

559
00:32:36,800 --> 00:32:39,440
Speaker 1: X screwed oil up six point eight percent or two

560
00:32:39,480 --> 00:32:42,000
Speaker 1: dollars two cents to thirty one dollar sixty six cents

561
00:32:42,000 --> 00:32:44,800
Speaker 1: of barrel Comex goal down one point seven percent or

562
00:32:44,840 --> 00:32:48,600
Speaker 1: twenty dollars thirty cents to twelve ten forty announced the

563
00:32:48,640 --> 00:32:51,520
Speaker 1: euro a dollar ten eighteen the yen one thirteen point

564
00:32:51,600 --> 00:32:55,600
Speaker 1: to zero. Lumber Liquidators is down about twenty two per

565
00:32:55,640 --> 00:33:00,280
Speaker 1: cent a day. It's flooring tested for formaldehyde was found

566
00:33:00,280 --> 00:33:03,040
Speaker 1: to have a three times higher risk of causing cancer

567
00:33:03,120 --> 00:33:06,720
Speaker 1: than previously stated. US regulators set in reversing their own

568
00:33:06,720 --> 00:33:09,920
Speaker 1: funding from earlier this month. That's a Bloomberg business flash.

569
00:33:09,960 --> 00:33:13,480
Speaker 1: Tom and Mike Karen, thank you very much. Scott Mather

570
00:33:13,680 --> 00:33:17,560
Speaker 1: is Chief Investment Officer for Course Strategies at PIMCO. He's

571
00:33:17,560 --> 00:33:21,440
Speaker 1: an old offenditive program. Everybody knows him and Scott, the

572
00:33:21,560 --> 00:33:23,960
Speaker 1: timing is perfect to have you on given the issues

573
00:33:24,000 --> 00:33:28,000
Speaker 1: that are out there right now. Following on we want

574
00:33:28,000 --> 00:33:30,400
Speaker 1: to talk to you about negative interest rates, and but

575
00:33:30,520 --> 00:33:33,720
Speaker 1: following on what Lisa Bramowitz was just saying in the

576
00:33:33,760 --> 00:33:37,280
Speaker 1: concerns in the markets about not just negative rates but

577
00:33:37,480 --> 00:33:43,120
Speaker 1: financials and liquidity. Uh, let me ask you how bad

578
00:33:43,160 --> 00:33:45,440
Speaker 1: are things. Her views seem to be that things are

579
00:33:45,440 --> 00:33:48,240
Speaker 1: pretty bad because nobody knows nothing. As the old saying goes,

580
00:33:49,480 --> 00:33:52,240
Speaker 1: wel good morning. Yes it's uh, you know, certainly I

581
00:33:52,240 --> 00:33:55,120
Speaker 1: think this this sort of environment. The uncertainties have increased

582
00:33:55,120 --> 00:33:58,200
Speaker 1: because of policies like negative interest rate policy. Some things

583
00:33:58,240 --> 00:34:01,040
Speaker 1: that people assumed could never happen and you know, are

584
00:34:01,080 --> 00:34:03,920
Speaker 1: happening in financial markets and so there is a greater

585
00:34:03,960 --> 00:34:08,120
Speaker 1: degree of uncertainty and combined with the regulatory backdrop that

586
00:34:08,160 --> 00:34:12,040
Speaker 1: has kind of reduced liquidity across the board. Uh, there

587
00:34:12,080 --> 00:34:14,960
Speaker 1: are sort of you know, choppy markets and choppy price action.

588
00:34:15,000 --> 00:34:17,840
Speaker 1: But for instance, in the bond market, we you know,

589
00:34:17,880 --> 00:34:21,560
Speaker 1: we still observe that there's a tremendous amount of transactional activity.

590
00:34:21,600 --> 00:34:23,799
Speaker 1: I mean we're still you know, humming along. Look at

591
00:34:23,880 --> 00:34:26,640
Speaker 1: investment grade corporate issue it's still humming along at near

592
00:34:27,080 --> 00:34:31,360
Speaker 1: record a record pace of activity, large amounts of bonds

593
00:34:31,400 --> 00:34:33,840
Speaker 1: coming to market every week. So you know, the nature

594
00:34:33,880 --> 00:34:38,560
Speaker 1: of the markets has changed. But in in people sort

595
00:34:38,560 --> 00:34:42,240
Speaker 1: of perceive that there's different ways that markets function versus

596
00:34:42,440 --> 00:34:44,839
Speaker 1: the way they functioned in the past. But we don't

597
00:34:44,840 --> 00:34:48,880
Speaker 1: think there's anything like sort of a systemic uh issue

598
00:34:48,920 --> 00:34:52,200
Speaker 1: with with wave volatility as uh, you know, impacting markets.

599
00:34:52,239 --> 00:34:55,120
Speaker 1: At this point, you feel like you can sell what

600
00:34:55,200 --> 00:34:58,800
Speaker 1: you may want to sell or need to sell these days,

601
00:34:59,040 --> 00:35:01,880
Speaker 1: and if things go south, you'll still be able to

602
00:35:01,880 --> 00:35:04,920
Speaker 1: do that. Yeah, we just we describe it as a

603
00:35:04,920 --> 00:35:06,759
Speaker 1: as a different sort of market. It's no longer the

604
00:35:06,800 --> 00:35:10,200
Speaker 1: market when where you can you pick up the phone

605
00:35:10,320 --> 00:35:13,279
Speaker 1: or or hit the buy or sell button uh in

606
00:35:13,360 --> 00:35:16,000
Speaker 1: many different sectors in the way that you used to,

607
00:35:16,560 --> 00:35:20,760
Speaker 1: because counterparties aren't providing the balance sheet to conduct business

608
00:35:20,800 --> 00:35:23,000
Speaker 1: that way. So it just means it takes more time

609
00:35:23,360 --> 00:35:25,200
Speaker 1: to connect a real buyer and a real seller, but

610
00:35:25,400 --> 00:35:27,359
Speaker 1: there's still plenty of that going on, and there's new

611
00:35:27,360 --> 00:35:30,240
Speaker 1: mechanisms for for putting buyers and sellers together that seemed

612
00:35:30,320 --> 00:35:34,200
Speaker 1: seemed to be functioning fine. I I look Scott, and

613
00:35:34,640 --> 00:35:37,320
Speaker 1: I think a lot of trading desk challenges and junk

614
00:35:37,400 --> 00:35:40,640
Speaker 1: maybe is not part of the Pimco world. Are you

615
00:35:40,719 --> 00:35:43,440
Speaker 1: working day to day now where we're just in a

616
00:35:43,440 --> 00:35:46,680
Speaker 1: low rate environment forever? I mean, one of the things

617
00:35:46,680 --> 00:35:48,360
Speaker 1: Mike and I have seen and we usually talk to

618
00:35:48,360 --> 00:35:50,480
Speaker 1: you in jobs day when we're on a leather about labor,

619
00:35:50,760 --> 00:35:52,920
Speaker 1: it's nice just to talk to you about the normal markets.

620
00:35:53,239 --> 00:35:56,840
Speaker 1: Do you just assume a terminal value means low yields

621
00:35:56,840 --> 00:36:01,160
Speaker 1: are here to stay. Well, we certainly think that that

622
00:36:01,239 --> 00:36:05,120
Speaker 1: low yields are here to stay for very many years.

623
00:36:05,200 --> 00:36:08,680
Speaker 1: But you know, still our forecast that that interest rates

624
00:36:08,680 --> 00:36:11,120
Speaker 1: in the US will be slowly normalized and out a

625
00:36:11,120 --> 00:36:13,520
Speaker 1: few years you should expect to see uh you know,

626
00:36:13,600 --> 00:36:16,640
Speaker 1: policy rates close to two percent, and you should expect

627
00:36:16,640 --> 00:36:20,880
Speaker 1: to see UH tenure rates probably close to three um.

628
00:36:20,880 --> 00:36:23,920
Speaker 1: So you know, we're we're just right now at the

629
00:36:23,960 --> 00:36:27,279
Speaker 1: point where because of what other central banks around the

630
00:36:27,280 --> 00:36:29,479
Speaker 1: world are doing, and the spillover effects on the US market,

631
00:36:29,520 --> 00:36:32,759
Speaker 1: it's prevented US yields from rising. But you know, if

632
00:36:32,760 --> 00:36:34,720
Speaker 1: we look at other major central banks in the world,

633
00:36:35,080 --> 00:36:36,800
Speaker 1: you know, project what the e c B will be

634
00:36:36,840 --> 00:36:38,520
Speaker 1: doing a year from now, with the Bank of Japan

635
00:36:38,520 --> 00:36:40,200
Speaker 1: will be doing a year from now, we think that

636
00:36:40,239 --> 00:36:44,960
Speaker 1: they'll they'll be done with with with easing, uh, and

637
00:36:45,120 --> 00:36:48,480
Speaker 1: we'll be looking to slowly normalize, uh, you know, at

638
00:36:48,520 --> 00:36:50,759
Speaker 1: that time, so some of those spillover effects on the

639
00:36:50,840 --> 00:36:55,640
Speaker 1: US market should begin to dissipate. So negative rates aren't

640
00:36:55,640 --> 00:36:59,400
Speaker 1: going to be something that is the new normal. No,

641
00:36:59,520 --> 00:37:01,640
Speaker 1: we don't think so. I mean, it's it certainly seemed

642
00:37:01,680 --> 00:37:04,480
Speaker 1: like over the past um, you know, three to six months,

643
00:37:04,520 --> 00:37:06,840
Speaker 1: there's been a herd of central bankers that have moved

644
00:37:06,840 --> 00:37:09,719
Speaker 1: in that direction and and uh, you know, as if

645
00:37:09,719 --> 00:37:11,680
Speaker 1: they've discovered a new tool. And in many ways they

646
00:37:11,719 --> 00:37:13,719
Speaker 1: have because it hasn't been used on the way that

647
00:37:14,040 --> 00:37:16,920
Speaker 1: it's it's being used at the moment um. But the

648
00:37:17,040 --> 00:37:20,520
Speaker 1: enthusiasm probably for those for those policies is beginning to

649
00:37:20,560 --> 00:37:23,000
Speaker 1: wane because if you look at what happened when the

650
00:37:23,000 --> 00:37:26,239
Speaker 1: ECB moved in that direction. What happened more recently when

651
00:37:26,280 --> 00:37:28,680
Speaker 1: the Bank of Japan moved in that direction of certainly

652
00:37:28,800 --> 00:37:31,920
Speaker 1: I don't think they achieved what they were looking to achieve.

653
00:37:31,960 --> 00:37:35,080
Speaker 1: In fact, you know, we now have tighter financial conditions, uh,

654
00:37:35,080 --> 00:37:37,879
Speaker 1: and the market was certainly disappointed. Uh. And on both

655
00:37:37,920 --> 00:37:40,239
Speaker 1: of those modes, either the ECB in December or Bank

656
00:37:40,280 --> 00:37:47,400
Speaker 1: of Japan anyway, those tighter conditions negated rate increases, including

657
00:37:47,400 --> 00:37:51,640
Speaker 1: the one occurred. We would say, so, um, you know,

658
00:37:51,719 --> 00:37:56,200
Speaker 1: most objective measures that people have different financial condition uh,

659
00:37:56,320 --> 00:37:58,560
Speaker 1: indicries that they put together. We have our own at Pimcoe,

660
00:37:58,640 --> 00:38:01,319
Speaker 1: but there's there's numerous ones of level. Uh. They're they're

661
00:38:01,320 --> 00:38:04,759
Speaker 1: all indicating that financial conditions globally and in almost every

662
00:38:04,760 --> 00:38:06,400
Speaker 1: reach of the world, they're tighter than they work just

663
00:38:06,440 --> 00:38:08,279
Speaker 1: a couple of months ago. Mike, I think this is

664
00:38:08,320 --> 00:38:13,960
Speaker 1: an incredibly important idea. Marching to March sixt is the

665
00:38:14,000 --> 00:38:16,640
Speaker 1: idea of that. Remember all the uproar about a rate increase.

666
00:38:17,600 --> 00:38:19,839
Speaker 1: I mean, you know, did you you age that day,

667
00:38:19,840 --> 00:38:23,000
Speaker 1: didn't you. Marty Felstine has a piece in the Wall

668
00:38:23,000 --> 00:38:26,200
Speaker 1: Street Journal today. I miss that that suggests the FED

669
00:38:26,239 --> 00:38:31,680
Speaker 1: would be mistaken to back off its forecast for rate

670
00:38:31,719 --> 00:38:35,120
Speaker 1: increases this year, and it would probably be a mistake,

671
00:38:35,239 --> 00:38:37,600
Speaker 1: given the economic data we're seeing now for the Fed

672
00:38:37,640 --> 00:38:39,760
Speaker 1: not to raise rate on the rates on the sixteenth,

673
00:38:39,800 --> 00:38:44,080
Speaker 1: because then it reinforces the market idea that there is

674
00:38:44,239 --> 00:38:51,000
Speaker 1: now and always will be a Fed put Well, it's

675
00:38:51,040 --> 00:38:54,920
Speaker 1: certainly uh. We would say marches is probably not very

676
00:38:55,000 --> 00:38:57,120
Speaker 1: likely at this point, because it's it's likely given this

677
00:38:57,200 --> 00:38:59,759
Speaker 1: tightening of financial conditions at the Federal Reserve. Will we'll

678
00:38:59,760 --> 00:39:01,399
Speaker 1: sit back and say, we need to see more data,

679
00:39:01,719 --> 00:39:04,319
Speaker 1: let's see what the influence of these tighter conditions is

680
00:39:04,320 --> 00:39:06,480
Speaker 1: on the real economy. So they may take a pass

681
00:39:06,480 --> 00:39:10,359
Speaker 1: in March um, but you know, we certainly expect that

682
00:39:11,120 --> 00:39:14,080
Speaker 1: UH interest rate hikes are back on the table for

683
00:39:14,840 --> 00:39:17,200
Speaker 1: the remainder of the year. Given given where we're at

684
00:39:17,200 --> 00:39:19,560
Speaker 1: in the cycle, and given where inflation and wages are headed.

685
00:39:19,920 --> 00:39:23,759
Speaker 1: What's your view on what the tightening we have seen

686
00:39:23,800 --> 00:39:28,959
Speaker 1: in markets is going to do to the economy given

687
00:39:29,000 --> 00:39:31,040
Speaker 1: the fact that when you look at say the Chicago

688
00:39:31,120 --> 00:39:38,200
Speaker 1: Fed UH index, you're not seeing tight conditions. I mean,

689
00:39:38,239 --> 00:39:41,640
Speaker 1: we're still very low, just tighter than they were, as

690
00:39:41,640 --> 00:39:44,120
Speaker 1: you say, a couple of months ago. Yeah, that's right.

691
00:39:44,200 --> 00:39:48,480
Speaker 1: They you know, the high frequency data continues to look okay,

692
00:39:48,560 --> 00:39:51,000
Speaker 1: and a lot of the survey based measures look okay.

693
00:39:51,080 --> 00:39:53,640
Speaker 1: So um, you know, if you just look at what

694
00:39:53,719 --> 00:39:56,440
Speaker 1: our model would say in terms of tightening of financial conditions,

695
00:39:56,440 --> 00:39:58,319
Speaker 1: how much that would lop off growth? You know, it's

696
00:39:58,360 --> 00:40:01,279
Speaker 1: about a quarter of a percent. So whereas you know

697
00:40:01,320 --> 00:40:03,040
Speaker 1: you might have had forecasts of two two and a

698
00:40:03,080 --> 00:40:06,080
Speaker 1: half percent growth for this year. If these tighter financial

699
00:40:06,120 --> 00:40:09,399
Speaker 1: conditions are sustained, uh, you have to reduce that by

700
00:40:09,560 --> 00:40:13,160
Speaker 1: perhaps up to a quarter point. Scott Manthers, thank you

701
00:40:13,200 --> 00:40:15,360
Speaker 1: so much. Greatly appreciated with pim code today as we

702
00:40:15,360 --> 00:40:17,920
Speaker 1: look at a broader strategy. Mike, I think what Scott

703
00:40:18,239 --> 00:40:22,120
Speaker 1: Mather said there is just profound about the trit and

704
00:40:22,160 --> 00:40:23,840
Speaker 1: you know, we've heard a lot of economists say it,

705
00:40:23,880 --> 00:40:27,640
Speaker 1: but to hear somebody and the trenches of the bond

706
00:40:27,760 --> 00:40:31,880
Speaker 1: market talking about just flat out tightenings occurred, and then

707
00:40:31,920 --> 00:40:36,080
Speaker 1: there's just presumption, almost discreet and separate from it, of

708
00:40:36,160 --> 00:40:41,120
Speaker 1: presumed rate increases is bizarre the right word. Well, I

709
00:40:41,120 --> 00:40:43,800
Speaker 1: don't think the markets presuming any rate increases at this point,

710
00:40:43,800 --> 00:40:48,000
Speaker 1: which is probably I mean, maybe Marty Feldston goes too far,

711
00:40:48,440 --> 00:40:52,920
Speaker 1: but at this point the markets may have gone too

712
00:40:52,920 --> 00:40:55,960
Speaker 1: far in believing nothing happening. When you look at the

713
00:40:56,000 --> 00:41:00,520
Speaker 1: Atlantic GDP now report. Um granted it, it can genuously

714
00:41:00,600 --> 00:41:02,520
Speaker 1: moves as the data come in, but the data is

715
00:41:02,560 --> 00:41:06,960
Speaker 1: so far are suggesting around two point seven growth in

716
00:41:07,000 --> 00:41:09,520
Speaker 1: the first quarter, which is going to get people's attention.

717
00:41:09,560 --> 00:41:14,040
Speaker 1: And as you've been noting, inflation is out there, Yeah

718
00:41:14,239 --> 00:41:17,759
Speaker 1: it is. I mean it's it's as I had the

719
00:41:17,800 --> 00:41:20,000
Speaker 1: Cleveland fed chart up today. I'm not sure we even

720
00:41:20,080 --> 00:41:21,719
Speaker 1: used it on TV. We'll bring that out to you

721
00:41:22,200 --> 00:41:25,040
Speaker 1: on social but it's it's edging up, Mike, There's no

722
00:41:25,040 --> 00:41:28,800
Speaker 1: other way to put it. Here's been a news Stanley

723
00:41:28,840 --> 00:41:32,560
Speaker 1: truck and Miller, um, I guess he runs his own

724
00:41:32,600 --> 00:41:34,319
Speaker 1: fund now, but of course he used to run du

725
00:41:34,440 --> 00:41:39,640
Speaker 1: Cane for years. Says he is going to endorse John Casey,

726
00:41:41,239 --> 00:41:45,319
Speaker 1: that Marco Rubio is not the most electable Republican and

727
00:41:45,400 --> 00:41:48,720
Speaker 1: that Casey can win. Casey had less than eight percent

728
00:41:48,760 --> 00:41:52,000
Speaker 1: of the vote in the South Carolina primary, but Drucca

729
00:41:52,040 --> 00:41:56,399
Speaker 1: Miller says the big industrial states in the Midwest can

730
00:41:56,480 --> 00:41:58,640
Speaker 1: help put him over the top. No, there's some political

731
00:41:58,719 --> 00:42:01,799
Speaker 1: discussion here, and we'll be doing that four years we

732
00:42:01,840 --> 00:42:05,319
Speaker 1: go to Super Tuesday. I might I lined up the

733
00:42:05,360 --> 00:42:09,640
Speaker 1: states of Super Tuesday from Vermont to Texas. It's just

734
00:42:09,800 --> 00:42:17,160
Speaker 1: wonderfully eclectic, but a real Southern bias. The five top states, Texas, Georgia, Tennessee, Virginia, Alabama.

735
00:42:17,239 --> 00:42:20,880
Speaker 1: They're calling it the SEC Primary Athletic Conference, and a

736
00:42:20,880 --> 00:42:22,680
Speaker 1: lot of other stuff going, but that will be really

737
00:42:22,719 --> 00:42:26,000
Speaker 1: fun to see how something that EBB and flow goes.

738
00:42:26,040 --> 00:42:29,400
Speaker 1: We'll try to bring you more of that within our Economics, Finance, Investment,

739
00:42:30,160 --> 00:42:34,400
Speaker 1: UH and international relations as we move forward to next Tuesday.

740
00:42:34,440 --> 00:42:37,040
Speaker 1: We are produced as always by Why You and our

741
00:42:37,400 --> 00:42:41,920
Speaker 1: global technical director Ken Filio. The market up a good

742
00:42:41,920 --> 00:42:46,920
Speaker 1: two point Stay with us all day on Bloomberg Radio