Speaker 1: This is Bloomberg surveillance. We don't feel that we're necessarily
Speaker 1: on the cusp of a recession. Business is okay and
Speaker 1: pretty good in some places. Because the FETs kept raps
Speaker 1: down here at Vera for so long. It's distorting how
Speaker 1: people finance themselves. What happens in the market is it
Speaker 1: only looks at the positives, and it interprets everything positively
Speaker 1: as long as it can, and then it gives up
Speaker 1: the ghost and it flips one eighty. Bloomberg Surveillance your
Speaker 1: link to the world of economics, finance, and investment on
Speaker 1: Bloomberg Radio. Good morning everyone, Michael McKee and Tom Keene
Speaker 1: Bloomberg Surveillance worldwide, indeed nationwide. I'm Bloomberg twolve in Boston,
Speaker 1: Bloomberg eleven three oh New York, home of the New
Speaker 1: York Mets, Bloomberg FM, Washington and Baltimore, Good morning, Baltimore.
Speaker 1: Orioles ascended that according to Minty vensuchi ace Orioles viewpoint
Speaker 1: here at Bloomberg and of course Bloomberg nine sixty the
Speaker 1: Bay Area as well, San Francis. I had no what
Speaker 1: the giants are doing. I've got to get sted. Giants
Speaker 1: have won the World Series the last three even years,
Speaker 1: so there is some thought that just that coincidence alone,
Speaker 1: aside from the fact that they have players, might might
Speaker 1: push them forward. We're gonna talk to the Clayton Kershaw
Speaker 1: of Equity Investments, Douglas Cast to join us here momentarily
Speaker 1: Bloomberg Surveillance. Much of my con a resuc accounting tax advisory.
Speaker 1: To minimize risk and capture value in private equity, you
Speaker 1: need cone residuct or forward thinking creates results. Find out
Speaker 1: how a cone residuc dot com O h N R
Speaker 1: E C N I c K. It's gorgeous February morning.
Speaker 1: The sun is up, it's staying up longer. It's a
Speaker 1: good time to speak to Douglas Cast of Seabers. Doug,
Speaker 1: good morning, Pictures and catches last week. I know it's
Speaker 1: like a good thing. And in America, UM, let's frame
Speaker 1: Doug right now within pictures and Catchers. Obviously l A
Speaker 1: is spending more money than anyone. That's the one way
Speaker 1: that in baseball. Where's the one way that you are
Speaker 1: a feared of Right now? In the equity markets, I
Speaker 1: would um, I think we're in a in a in
Speaker 1: a very difficult and confusing period. UM I mentioned to
Speaker 1: you in a memo to you and Lee the producer,
Speaker 1: that um I was at a James tell a concert
Speaker 1: of all places at Donald Trump's Morrow Lago House in
Speaker 1: Palm Beach on Saturday night, and he was He was
Speaker 1: singing Fire and Rain and invoked to me the obviously
Speaker 1: the Robert Frost poem Fire and Rain, which discusses the
Speaker 1: familiar question about the fate of the world whether it's
Speaker 1: more likely to be destroyed by fire ice. But I
Speaker 1: got back to a famous memo of that our mutual
Speaker 1: friend Barton, the late Barton Biggs Road of Coal Fire
Speaker 1: in I think it's time to fear the ice. Well,
Speaker 1: we are in a period of substandard economic and tempted
Speaker 1: profit growth, and that's our destiny. We have am and
Speaker 1: a broken market mechanism which is dominated by leverage ets
Speaker 1: and by these machines and algois who are agnostic to
Speaker 1: balance sheets, private market value and income statements. So we
Speaker 1: get this market with note what I call no memory
Speaker 1: from day to day. Um. These investment strategies of mass
Speaker 1: destruction tend to exaggerate short term market moves like we've
Speaker 1: experienced in Jabuary to the downside, upside, and now today
Speaker 1: to the upside. So I'm I'm basically fearful that we're
Speaker 1: in um um. You know, we have this upward reevaluation
Speaker 1: of multiples between O nine and to fifteen, and I
Speaker 1: think that the recent rerating of stocks lower themes to
Speaker 1: reflect the recognition that profits too will be lower for longer.
Speaker 1: The critics Doug will say, you go short, you go along,
Speaker 1: you move in and out. Tell us where you are
Speaker 1: right now and what it would suffice the Frankie that's
Speaker 1: the last line of the Robert Frost poem, and what
Speaker 1: would suffice to bring you forward to a new direction? Um.
Speaker 1: I would be more optimistic if I had a sense
Speaker 1: that the secular deterioration and growth prospects um um uh
Speaker 1: morphed into a more rapid period of economic growth at
Speaker 1: our dependency upon monetary policy makers are central bankers to
Speaker 1: stimulate um self sustaining growth and escape philosophy velocity. Uh,
Speaker 1: we're successful, and I just don't see it. So I
Speaker 1: am modestly bullish near term, but embarish into media term.
Speaker 1: I expect the SMP to decline to a low double
Speaker 1: digit percentage this year. I'm currently to answer your question,
Speaker 1: positioned only slightly net short, preferring to see a more
Speaker 1: rapid build up an optimistic investor sentiment before expanding my
Speaker 1: short exposure. It's interesting to note that a bunch of
Speaker 1: the investor surveys came out and market bain bowls remain
Speaker 1: at very low levels. The consensus and um of of
Speaker 1: bears actually rose last week, which is bulisha for the market.
Speaker 1: As a contrarian, would it be I think everybody can
Speaker 1: agree we're not going to see the fiscal policy action
Speaker 1: that the world is calling for. So would it be
Speaker 1: better if central banks just sort of shut up and
Speaker 1: got the heck out of the way, Because yeah, I
Speaker 1: think I think, Mike, it would have been much better
Speaker 1: if we did this a year ago. And first of all,
Speaker 1: if they stopped easing a year ago and um and
Speaker 1: basically let the let the market have have natural price
Speaker 1: discovery as opposed to this artificiality. And you know machines
Speaker 1: that are um um um and algorithms which are moved
Speaker 1: by the next announcement with regard to drag or the
Speaker 1: intention to stay lower for longer. It's just not a
Speaker 1: natural sequence of events. And I think that this whole
Speaker 1: thing has led up that I think the recent market
Speaker 1: weakness reflects the loss of confidence in all central bankers
Speaker 1: and concerns that monetary policy in the US has lost
Speaker 1: its effectiveness and or has pulled forward corporate sales and
Speaker 1: profits and economic activity. I call this the aha moment.
Speaker 1: It's it's not a market friendly moment for valuations. How
Speaker 1: do you filter out the noise? Then? Um As Richard Bernstein,
Speaker 1: you wrote a great book called Navigating the Noise, which
Speaker 1: which I really recommend. It's tough. I just think it's
Speaker 1: where it's really tough, Mike and Thomas for the buying
Speaker 1: whole crowd. It's easy for the traders if you approach
Speaker 1: the market in a kind of emotional less way, buying
Speaker 1: the stream dips, selling or shorting the extreme bouts of
Speaker 1: your four and we've seen four or five of those
Speaker 1: of consequence in the year. So I think the odds
Speaker 1: of a recession on mounting. But I want to add
Speaker 1: an important point I think that was made on Bloomberg
Speaker 1: on Surveillance last week. It's important to note that a
Speaker 1: precondition for a bear market is not necessarily a recession.
Speaker 1: Bear markets can occur even if the US fails to
Speaker 1: fall into recession. It happened in nineteen sixty two, sixty six,
Speaker 1: and eighty seven and nine and eight. I used to
Speaker 1: work with a guy when I was at Putnam. When
Speaker 1: I graduated, Warton called Wally Deemer, who was a fantastic,
Speaker 1: a legendary technical analyst, and he once said, you don't
Speaker 1: buy GDP futures, you buy S ANDP futures. Yeah, that's
Speaker 1: extremely well, said Doug. I I saw the Martian UH
Speaker 1: the other day and it really, really really I thought
Speaker 1: was an excellent effort and is. As Matt Damon says
Speaker 1: in the middle of the movie, let's science this. You
Speaker 1: are known for being an adult about sciencing your belief
Speaker 1: what's Doug casts science right now. But my thocts is
Speaker 1: to be is to be UM basically, to reduce gross
Speaker 1: exposure in an uncertain, volatile, and unpredictable period. There are
Speaker 1: times to play, and there's times, as Warren Buffett says
Speaker 1: to you know what to have your hands on. You know,
Speaker 1: UM wild so hard remiscent. It's hard because of the
Speaker 1: aforementioned discussion of these um UM weapons of financial market destruction,
Speaker 1: the leverage ETFs and UM, the quant strategies gamma hedging,
Speaker 1: risk parity trading, that that worship at the altar of
Speaker 1: price momentum. They they sent they tend to exaggerate your
Speaker 1: term markets, confused investors, they send false market messages, and importantly,
Speaker 1: they blemished the value of stock charts and technical analysis. Okay,
Speaker 1: I'll go with all that, and you've nailed it. But
Speaker 1: what I want to know for traders, and this is
Speaker 1: not what we do in surveillance. A lot we do
Speaker 1: more long term investment. But Mr Cass, what I want
Speaker 1: to know is in the middle of reminiscence of the
Speaker 1: stock operator, like you know, you're the only ones still
Speaker 1: alive and was there when the book is written. But
Speaker 1: there's a point where the guy just says, I'm going
Speaker 1: to Florida. Where I'm in Florida, I know, but pulling
Speaker 1: pulling away from the market actively. Yeah, but there's a
Speaker 1: point I'm trying to capture alpha by exploiting, as I said,
Speaker 1: in an unemotional way, the gyrations of the market, which
Speaker 1: are random and unpredictable. Are you clearly people aren't fastible
Speaker 1: enough and they should just sit on the hand. Are
Speaker 1: you at a point where it's so uncertain or convoluted
Speaker 1: to the upsilon so high that you just say I
Speaker 1: can't do this and you sit off to the sidelines
Speaker 1: for a while. I think that's the best strategy for
Speaker 1: the average investors. Boring, it's boring. You'll have a lot
Speaker 1: of you'll have a lot of silence that markt No, No,
Speaker 1: we don't want that. We don't want that. But I
Speaker 1: think it's important advice. We're gonna come back with Doug
Speaker 1: cass on all the rage right now financial engineering, which
Speaker 1: is out there, use of cash and you know, someone
Speaker 1: what the actives are doing here recently, but I really
Speaker 1: want to talk to him about financial engineering. America Belli says,
Speaker 1: give me back the money, thank you. A lot of
Speaker 1: other people say there should be this moral high ground
Speaker 1: of using it for other sources like convestment, maybe actually
Speaker 1: creates jobs as well. We'll return with Doug cass of
Speaker 1: Sea Breeze Investment Futures Up twenty two, jol futures up.
Speaker 1: All right, let's check in with John Tucker and get
Speaker 1: the latest world in national news. Michael and Tom. With
Speaker 1: Jeff Bush's departure from the presidential race, Saturday, fundraisers are
Speaker 1: facing the question pick another side or retreat. Most Bush
Speaker 1: loyalist content at Sunday said they were preparing to support
Speaker 1: Marco Rubio or no One in particular. Apple CEO Tim
Speaker 1: Cook has jumped back into the prey over FBI demands
Speaker 1: at the company help hack a locked iPhone used by
Speaker 1: the shooter in a San Bernardino attack. In an early
Speaker 1: morning email to employees, Cook says the government should withdraw
Speaker 1: its demanded. The emerging legal fight is sparked a debate
Speaker 1: on government power, privacy, digital rights, public safety and security.
Speaker 1: An epic chair draped in black is greeting Supreme Court
Speaker 1: justices meeting today for the first time since the death
Speaker 1: of Justice and Toon and Scalia. The remaining a justices
Speaker 1: resumed work today. Scalia's chair will remain as a tribute
Speaker 1: until next month. Global News twenty four hours a day,
Speaker 1: powered by a twenty jouralists more than one fifty news
Speaker 1: bureaus around the world. I'm John, Tucker, Michael and Tom John.
Speaker 1: Thanks so much coming up on use of cash, Doug
Speaker 1: Cass really looking forward to that next Bloomberg surveillance. Good morning.
Speaker 1: The news update was brought to you by Fairley Dickton's
Speaker 1: University Boost your career by getting CFP certified at FDU,
Speaker 1: named one of the great schools for financial planning. Classes
Speaker 1: begin February four. Visit FDU dot du slash FP Bloomboo
Speaker 1: Business News twenty four hours a day at Bloomberg dot com,
Speaker 1: the Radio plus Mobile Lab and on your radio, This
Speaker 1: is a Bloomberg Business Flash and I'm Karen Moscow. US
Speaker 1: stock index future is higher, so is oil. Let's go
Speaker 1: to the first Word breaking news desk for today's morning call,
Speaker 1: and here's Bill Maloney. Good morning Bill, Good morning Karen.
Speaker 1: Futures are maintaining their games since the last time we spoke.
Speaker 1: Dea Futures hired by a hundred and seventy six points,
Speaker 1: says it He's game twenty one, and Nazak futures rise
Speaker 1: by forty eight. The US ten yel at one point
Speaker 1: seven seven per sec main U pay markets are higher,
Speaker 1: led by two percent gains in Italy and Spain and
Speaker 1: on the US economic front at a thirty Chicago Fed
Speaker 1: and at market US manufactur P M. I Smith their
Speaker 1: fifty two point five. Another news CDC says lumber Liquidated
Speaker 1: is flooring has increased cancer risk. Shares a down sixteen
Speaker 1: percent pre market and in deal news, food distributor Cisco
Speaker 1: to buy break Stroop from Bain for three point one billion.
Speaker 1: Regarding airings this morning, Algan EPs beat and finally some
Speaker 1: of your key wallsheet upgrades and downgrades at Bank of America,
Speaker 1: Genesee and Wyoming raised to neutral. CSX and Union Pacific
Speaker 1: raids to buy Express Strips, cut to sell at Deutsche Bank,
Speaker 1: Parago cut sell Goldman Sachs and finally tripped by a
Speaker 1: Zon Expedia both cut to sell over at Stephle. Live
Speaker 1: from the First Breaking News desk, go on, Bill Maloney, Karen,
Speaker 1: all right, thanks to Baillan to hear live breaking news
Speaker 1: over your Bloomberg type squawk a goo on your terminal.
Speaker 1: That's s Q you a w K go and that's
Speaker 1: a Bloomberg business flash, Tom and Mike, Karen, I thanks.
Speaker 1: Someone's curve flattening. We've seen the two is tens spread
Speaker 1: come in nicely this morning. N nine point nine five
Speaker 1: A flatter yield curve. All in all, that's a distance
Speaker 1: between the ten year yield and the two year yield.
Speaker 1: You move the decimal point over two places. Doug Cass
Speaker 1: knows that Bloomberg Surveillance brought you by Investco. Factor based
Speaker 1: strategies can help investors focus on high quality, low volatility,
Speaker 1: and more. Learn more at investco dot com. Slash High Conviction.
Speaker 1: Douglas cast with us with Sea Breeze as we UH
Speaker 1: go through the emotions of being more active in the
Speaker 1: market away from activity, UH, the DOUG is a quarterly
Speaker 1: ballet of financial engineering. It has become cannon that you
Speaker 1: raise your dividend and you deploy cash, you know, you
Speaker 1: buy back shares, et cetera. Are you a critic of
Speaker 1: financial engineering or is it a good idea that they're
Speaker 1: moving money back to shareholders? Well, I I disagree with
Speaker 1: Mario because there ain't many Henry Singleton's from Televigne around anymore.
Speaker 1: There are a lot of people like Caterpillar. The as
Speaker 1: they stock at a hundred and five dollars a share,
Speaker 1: I think they bought even of the stock a year
Speaker 1: and a half ago. I've been short for that period.
Speaker 1: The chefs have gone from a hundred and six to
Speaker 1: sixty one. I think it is the broader question. The
Speaker 1: broader issue is that the risks and the unintended consequences
Speaker 1: of ever lower interest rates arising. The primary issue is
Speaker 1: that capital spending. Capital spending has been abandoned in favor
Speaker 1: of financial engineering. But there are other issues too. You know,
Speaker 1: the risk of savings ourselves into a recession is expanding.
Speaker 1: You know, they call that the paradox of thrift. And
Speaker 1: when you get low rates like this, people are hoarding
Speaker 1: cash and reducing the personal consumption expenditures. And finally, as
Speaker 1: Brad Hinton talked about earlier in an earlier segment, when
Speaker 1: you have rates so low with sixty of the world's
Speaker 1: sovereign yields in negative territory, banknet interest margins and profitability
Speaker 1: suffer may become challenged and lending his curd tailed. So
Speaker 1: you know, we're in a tough stew As James Taylor
Speaker 1: said in Steamroller or in a demolition derby, well, hefty
Speaker 1: hunk of steaming junk, Mike, what we like to do
Speaker 1: is have the hefty hunk of steaming junk. Doug Casson,
Speaker 1: because he used his history. Henry Singleton, who you just
Speaker 1: heard Mr cass speak of, is not only one of
Speaker 1: the heroes of American finance, but a giant of engineering.
Speaker 1: He was at Annapolis first in his class, had to leave,
Speaker 1: went to m I t reinvented himself and then did
Speaker 1: the oddest of things. Mike. He bought shares when the
Speaker 1: stock was cheap and issued them to the public when
Speaker 1: the shares were expensive. Is this This is a rare
Speaker 1: and beautiful thing. And then and then when rates interest
Speaker 1: rates declined, he issued an enormous amount of bonds in
Speaker 1: order to buy back stock in the future. Just a
Speaker 1: just a brilliant guy in a billionaire when a billion
Speaker 1: dollars really made meant something? What what you would be? No,
Speaker 1: but what you see today was invented by Mr Singleton.
Speaker 1: There was no other way to put it. A tele
Speaker 1: Omega's Lee Kooperman had done a great job. In fact,
Speaker 1: he's to courses at Columbia Business School talking about Singleton's
Speaker 1: allocation of capital strategy. Everyone should get a hands on
Speaker 1: their hands on it. By the way, Tom, I noticed
Speaker 1: you don't talk about the Red Sox anymore. You talking
Speaker 1: about the Dodgers. You're talking about the giant to come. Well,
Speaker 1: you remember last year, Doug He said in the beginning
Speaker 1: of April that the Red Sox were done for the year,
Speaker 1: and he actually turned out to be right. So he
Speaker 1: thinks he's a baseball prognosticator. Now, a lot of people,
Speaker 1: a lot of people would suggest maybe this year the
Speaker 1: Red Sox are going to play a little better. I
Speaker 1: didn't really know. Angel. Oh No, it's like Mike save
Speaker 1: me or play Bowden? Did you get my we wandered
Speaker 1: off the reservation. So let's just ask Doug as you
Speaker 1: keep an eye out on on the National League in particular. Um,
Speaker 1: your uncle had sort of a soft spot for the
Speaker 1: New York National League team, your cousin and and the
Speaker 1: UH and the Los Angeles team. UH, do you have
Speaker 1: a view on either one of their um performances coming
Speaker 1: up in two thousands sixteen? I think the God just
Speaker 1: could go on defeats. It's like the Warriors, you know,
Speaker 1: you know at this concert Saveny night, I know we're
Speaker 1: running out of time. James Taylor saying Angels of Fenway,
Speaker 1: and I love the opening line, which is a killer
Speaker 1: to you, Tom A six Summer's Gone by, Bambino put
Speaker 1: a hex on the bean. We were living on, a
Speaker 1: tear and a sigh in the shadow of the Bronx machine.
Speaker 1: That's hateful, hateful. Can our global technical director cut the
Speaker 1: line right now? Is that feasible? Did you see the
Speaker 1: Yankees have the by far the highest season ticket price
Speaker 1: in all of baseball, and the baseball they're playing does
Speaker 1: not justify Doug Cash. Thank you so much, greatly appreciated.
Speaker 1: Sea Breeze Partners and I do spring training and we
Speaker 1: can lead Cash. He can guess hosts with us for
Speaker 1: like the five or six days it will need for
Speaker 1: us to visit every park. Yeah, exactly. Um, I think
Speaker 1: anybody's listening, they could affect that trends act. Yeah. Yeah,
Speaker 1: our boss is saying, are you out of your mind
Speaker 1: at this point? Okay? Features up twenty, Features up seventy one.
Speaker 1: It's a very nice correlated screen with one screaming exception,
Speaker 1: and that is curve flattening. Two is ten spread nine
Speaker 1: point seven, the difference of deal between the tenure and
Speaker 1: the two year point points. That's a big deal. Curve
Speaker 1: flattening is something different this morning. Economic data next, Bloomberg
Speaker 1: Surveillance coming up there, with all due respect, highlight brought
Speaker 1: you by land Rover. If it's in your nature to
Speaker 1: cast off the every day and seek adventure, the Discovery
Speaker 1: Sport was built to help your search. Visit Landrover tri
Speaker 1: State dot com for special offers during the only Adventure
Speaker 1: Sales event. Landrover Above and Beyond broadcasting live to New York,
Speaker 1: Bloomberg eleventh Rio to Washington, d C, Bloomberg to Boston
Speaker 1: Bloomberg twelve hours to San Francisco, Bloomberg nine to the
Speaker 1: Country Series Exam Channel one ninety and around the globe
Speaker 1: the Bloomberg Radio plus Happen Bloomberg dot Com. This is
Speaker 1: Bloomberg Surveillance is a thirty Michael McKee along with Tom
Speaker 1: Keene and our economic indicators are brought to you by
Speaker 1: Commonwealth Financial Network. When it's time to change the conversation,
Speaker 1: talk with the broker dealer r I A that's ready
Speaker 1: to listen. Call eight six six four six to visit
Speaker 1: Commonwealth dot com to learn more. No major indicators today.
Speaker 1: The Chicago Fed National Activity Index is out at zero
Speaker 1: point to eight. That's up from a negative zero point
Speaker 1: three four in December and is much better than the
Speaker 1: survey of a negative zero point one zero. Not sure
Speaker 1: how much it tells us about what's actually going on
Speaker 1: the market. US Manufacturing p M I do out later
Speaker 1: this morning. Marks Andy is with us now and of
Speaker 1: course uh Mark is chief economist at Moody's Analytics, and
Speaker 1: he keeps track of all things going on around the world,
Speaker 1: which makes him the perfect person to follow Doudcasts who
Speaker 1: suggested that we may have about a thirty five pc
Speaker 1: chance of recession and is extremely worried about the stagnant
Speaker 1: economic growth prospects for the world and what central banks
Speaker 1: are or are not doing about it. Mark, would you
Speaker 1: share the pessimism, or at least the lack of optimism
Speaker 1: about where we are going over the next six months
Speaker 1: to a year, Well, I'd be I'd be a bit
Speaker 1: more optimistic, you know, subjectively. Put the odds of recession
Speaker 1: in the United States that's somewhere between fift no. Globally,
Speaker 1: there's more concern uh, And I would concur with some
Speaker 1: of the worries about what's going on overseas. But here
Speaker 1: in the US, I think we're fine, We're okay shape. Well,
Speaker 1: are we able to be an island and we continue
Speaker 1: to grow if the rest of the world is having trouble? Yeah,
Speaker 1: I think, and we're the engine of growth. We're driving
Speaker 1: the train now, and it's really the American consumer that's
Speaker 1: driving the train and the American consumers doing their part.
Speaker 1: Growth last year was very strong. Real consumer spending growth
Speaker 1: was over three and as we've been seeing in the
Speaker 1: recent data retail sales, vehicle sales, housing activity, I think
Speaker 1: the consumer is going to continue to do their part.
Speaker 1: You know, Tom, this reminds me of well is it
Speaker 1: about a decade ago? I remember a book came out
Speaker 1: called Flying on an Engine as an ancient home immediately
Speaker 1: went to the bargain visiones. Tom Keane put that together. Um,
Speaker 1: look at how the States was the only engine of growth.
Speaker 1: Well there's another engine. Europe is okay too, you know,
Speaker 1: it's you know, it's not gamebusters in Europe, but they
Speaker 1: are growing solidly and uh, you know, I think everything
Speaker 1: suggests that they'll continue to push forward. So it's not
Speaker 1: just the US. But but you know, your sentiment is correct.
Speaker 1: The global economy is is troubled. Mark. I want to
Speaker 1: go back a little bit within your optimism and and
Speaker 1: your immense chops in the books that you've done on
Speaker 1: the New American Century and such, what happened in the
Speaker 1: last two years. You were a great optimist, not an outlier,
Speaker 1: but but you were looking for three percent plus real
Speaker 1: GDP growth. You even voiced I don't want to put
Speaker 1: in your mouth, but you've voiced a four percent real
Speaker 1: maybe six percent nominal. It didn't happened. I'm fascinated. What's
Speaker 1: your why for what we've experienced? Hey, A good question. Well,
Speaker 1: you know it's interestingly not. The job market has done
Speaker 1: better than I would have thought. Yes, we produced more jobs.
Speaker 1: Unemployment fell faster, we've gotten back to full employment are
Speaker 1: close to pretty quickly. Wage growth is picking up. So
Speaker 1: do you look at the economy to the prison of
Speaker 1: the labor market, No problem. You know, we're doing very
Speaker 1: very well. So the you know, the the arithmetic suggests
Speaker 1: that the reason that uh that I'm I was wrong
Speaker 1: without GDP is productivity. Productivity growth has been very weak
Speaker 1: and it has not picked up. And you know that
Speaker 1: goes to you know, some pretty deep questions as to
Speaker 1: what's going on. My sense is that we will see
Speaker 1: productivity growth pick up, but that's still very much a forecast.
Speaker 1: I knew you would go there. And if you tear
Speaker 1: apart capital dynamics, labor dynamics in the strange thing total
Speaker 1: factor productivity, which is which did we miss? Son? Well,
Speaker 1: you know, I think it's all of the above. Uh,
Speaker 1: you know, my sense is here, I'll give you a statistic. Um.
Speaker 1: When we look at the productivity, it's the top line
Speaker 1: numbers non farm business productivity, and since the recovery began
Speaker 1: six and half years ago, that's grown just under one
Speaker 1: percent peranum over the periodes for context that we've non
Speaker 1: farm business product has grown two percent per enm on
Speaker 1: ever since World War Two. So that's you know, half
Speaker 1: the growth, less than half the growth. But if you
Speaker 1: look at non financial corporate productivity, so think about that
Speaker 1: for a second. Non financial so exclude the financial sector,
Speaker 1: and the non corporate sector productive growth has been one
Speaker 1: point seven percent prem during the recovery. That's that's what
Speaker 1: I would expect, one point seven percent. So what's going on?
Speaker 1: I think it boils down to There's lots of reasons,
Speaker 1: but I think the key reason is what the financial
Speaker 1: sector has been going through a post crisis. Because of
Speaker 1: the crisis and because of the change of the regulatory environment.
Speaker 1: I think that's the key weight on productivity. Can you tell, um,
Speaker 1: when we're talking about this with brand Hens about how
Speaker 1: the financial sector has been hurting, can you tell whether
Speaker 1: the troubles in the financial sector in the you know,
Speaker 1: Corporate Treasurer's office, Uh in the chief financial officers office,
Speaker 1: are affecting the economy. Yeah, I mean the financial system
Speaker 1: is like the circle story system of the real economy, right.
Speaker 1: I mean that's credit flows are a key to growth,
Speaker 1: to innovation, change, business formation, you know, all those key
Speaker 1: dynamics are vital to productivity growth. So yeah, I think
Speaker 1: that the financial sector is impaired or adjusting in essentially,
Speaker 1: you know, the banks are big banks have gone from
Speaker 1: have had to significantly increased amount of capital they hold.
Speaker 1: And I'm not arguing that's a bad thing. I mean,
Speaker 1: our banking system is now a fortress, but you know
Speaker 1: there is a cost to that, and I think it's
Speaker 1: been moored in prouctivity growth. We'd like to get shown more.
Speaker 1: Is we wandered through and into the summer. Marks Andy
Speaker 1: with this Moody's analytics, and uh really look forward to
Speaker 1: talking to him through the rest to the year. His
Speaker 1: title us macro look no recession, he minces no words
Speaker 1: about it with with optimism as well. Um, we're gonna
Speaker 1: come back. Let me do a daty check. Michael McKenna
Speaker 1: are sorting out the Monday morning here, Uh, futures up
Speaker 1: twenty down features up one seventy. Euro one ten six
Speaker 1: is a weaker euro with dollar strength. Um sterling is
Speaker 1: as sterling is really headline one forty five Sterling one
Speaker 1: forty is weaker. Uh this morning, Yeah, this hour of
Speaker 1: surveillance is brought to you by Volvo Cars, White Planes.
Speaker 1: Visit Volvo Cars, White Planes dot com. Here's John Tucker
Speaker 1: with headlines. All right, Michael and Tom. After predicting he
Speaker 1: could pull off a political upset Nevada had more than
Speaker 1: a week before potential wins on Super Tuesday, Bernie Sanders
Speaker 1: is assuring supporters he is working hard to close the
Speaker 1: gap on Saturday's primary in South Carolina. No polls in
Speaker 1: South Carolina have shown Sanders closer than eighteen points down
Speaker 1: from Hillary Clinton. Apple, resisting at court order requiring the
Speaker 1: company to help unlock the iPhone of a dead terrorists,
Speaker 1: says the US Congress should form a committee to discuss
Speaker 1: privacy and personal freedoms. Apple would gladly take part in
Speaker 1: such an effort, the company saying in a statement on
Speaker 1: its website. Today. The US Auto Safety Regulars says it's
Speaker 1: investigating all Too Kotter Corporation, the airbag inflators that use
Speaker 1: a chemical propellant ban from future models, and will compile
Speaker 1: data to determine whether to expand the industry's broadest recoil. Ever,
Speaker 1: Syria's main political opposition will meet today to discuss a
Speaker 1: proposed ceasefire whose potential for even limited success has been
Speaker 1: undercut by a spike in violence claimed by Islamic state,
Speaker 1: and the head of the UN Nuclear Agency says another
Speaker 1: eleven nations need to step up to make the world
Speaker 1: a safer place from the threat of nuclear material falling
Speaker 1: into the hands of terrorists. That's a number of countries
Speaker 1: needed to sign on to the Amendment to the Convention
Speaker 1: on the Physical a Protection of Nuclear Material. Global News
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Speaker 1: journalists and more than one hundred fifty bureaus around the world.
Speaker 1: I'm John Tucker, Michael and Tom. Thank you John. Time
Speaker 1: now for the Rakadina Outo Group. Bloomberg NBC Sports Update.
Speaker 1: Here's Rob Bush, Good morning, Mike, Tom. The Rangers thrilled
Speaker 1: the fans at Madison Square Garden as two of the
Speaker 1: marquee golten Er squared off the Red Wings. Jimmy Howard
Speaker 1: had twenty nine saves to Henrik Lundquist twenty two, but
Speaker 1: it was a defenseman of all people, Kevin Klein, who
Speaker 1: netted the game winner one nothing in overtime. It's it's
Speaker 1: a different game, obviously, and we don't practice it really,
Speaker 1: so it's it's it's tough and you just have to
Speaker 1: make sure when they've got the part defensively or on
Speaker 1: the right side of your guys, because you know, two
Speaker 1: on one like that can can turn to a two one,
Speaker 1: you know the other way. So it's difficult. You try
Speaker 1: and you know, just make the most of your opportunities
Speaker 1: when you get a chance. It was Klein's fifth goal
Speaker 1: of the year. As the Rangers are just one point
Speaker 1: behind Florida for the second seed in the East, they
Speaker 1: visit New Jersey on Tuesday. The Aisles also played Tuesday
Speaker 1: in Minnesota. The basketball, the Nets fell to eleven and
Speaker 1: twenty two at home of the one on four ninety
Speaker 1: six lost to Charlotte. Brook Lopez, who led the way
Speaker 1: with a double double, wanted this one bad as a
Speaker 1: team gears up for a nine game road trip. We
Speaker 1: had a great concentration in certain parts of the game tonight,
Speaker 1: and uh we we need to come with as much
Speaker 1: as possible. You know, we're definitely going to stick together
Speaker 1: obviously being on the road so long, and just take
Speaker 1: it a game at the time. The Nets won't return
Speaker 1: to Brooklyn until March thirteenth. Nicks entertained the Raptors of
Speaker 1: seven thirty. Jimmer Fred debt he'll join the team on
Speaker 1: a ten day contract. College Troops St. John wiped out
Speaker 1: a nineteen point deficit at home, but Isaiah Whitehead hit
Speaker 1: two game winning free throws as Seaton Hall beat the
Speaker 1: Red Storm sixty one, and NASCAR Denny Hamlin won the
Speaker 1: closest finish ever at the Dayton of five. And that
Speaker 1: is your NBC Bloomberg Sports Update. Mike tom rab Bush
Speaker 1: can thank you so much again. Shure to the market.
Speaker 1: I'm noticing Kurve flattening as well. Coming up, we're gonna
Speaker 1: continue our discussion with Marcus Zandy of Moody's on a
Speaker 1: most interesting American economy. If you go, ya will C
Speaker 1: plus I plus G plus ICs you can talk about
Speaker 1: any parts of that equation. I'm most interested in Mark
Speaker 1: Xandy on what it will take to get an investment
Speaker 1: Going from New York this Monday, Bloomberg Surveillance. The sports
Speaker 1: report was brought to by Katina Auto Group. Everyone deserves
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Speaker 1: This is a Bloomberg Business Flash and I'm Karin Moscow.
Speaker 1: This updates brought to you by Sector Spider e t
Speaker 1: f S. Why buy a single stock when you can
Speaker 1: invest in the entire sector of visits? Sector spd R
Speaker 1: said dot com are called one eight six sector one
Speaker 1: eight six six Sector et F. We are watching oil.
Speaker 1: Oil is rising with global equities and its speculation that
Speaker 1: a production freezes by some OPEC members in Russia could
Speaker 1: eventually help to abate the surplus. Nimax screwede oil is
Speaker 1: currently up six point three percent. It's been extending its
Speaker 1: gains throughout the morning. It's up a dollar eighty seven
Speaker 1: to thirty one dollars fifty one cents a barrel. Brent
Speaker 1: is up five point two percent or a dollar seventy
Speaker 1: four to thirty four seventy five of Barrel u S
Speaker 1: stock index futures higher as well. SNP E mini futures
Speaker 1: up twenty one points, DOWIE mini futures up a hundred
Speaker 1: eighty five, and NASA documni futures up about forty six
Speaker 1: dots in Germany's up one point nine percent ten. Your
Speaker 1: Treasury down five thirty seconds. That yelled one point seven
Speaker 1: six percent. Comax Gold is down one point six percent
Speaker 1: or nineteen dollars to twelve eleven eighty announced the euro
Speaker 1: a dollar ten twenty, the En one thirteen point one seven.
Speaker 1: Dean Foods, the largest US milk processor, posting fourth quarter
Speaker 1: profit that beat analysts Esta Mids after it paid less
Speaker 1: for dairy supplies. It shares up almost four percent this morning,
Speaker 1: and Allergan also beat. And that's a Bloomberg business flash.
Speaker 1: Tom and Mike Karn, thanks so much again. I'm looking
Speaker 1: at Kurve flattening today within a better risk and field again.
Speaker 1: West Texas up a dollar ninety one, gets your attention.
Speaker 1: Mark Sandy with us with moody and analyts us as
Speaker 1: we continue forward right now, though it is on Wall Street.
Speaker 1: The following is from Bloomberg View. Opinions and comment arry
Speaker 1: from Bloomberg columnists. I'm Clive Crook, columnist for Bloomberg View.
Speaker 1: How to account for the success of Donald Trump? Part
Speaker 1: of the answer is class. I'm a British immigrant and
Speaker 1: I grew up in a northern working class town, moving
Speaker 1: to Oxford and then London in the nineteen seventies. I
Speaker 1: learned something about snobbery, but I never witnessed the naked
Speaker 1: disdain for the working class that America's metropolitan elite finds
Speaker 1: permissible in two thousand and sixteen. The targets of this
Speaker 1: disdain understand they're seen as bigots, too stupid to know
Speaker 1: what's good for them. They don't like being looked down on,
Speaker 1: and many of them are supporting Trump. Trump is outrageous,
Speaker 1: and that's the point. This isn't about policies or promises.
Speaker 1: He delights in offending the people who look down on
Speaker 1: his fans. The more he offends those people, the better
Speaker 1: his supporters like it. Supporting Trump is an act of
Speaker 1: class protest, not just over hard time, the effect of
Speaker 1: immigration on wages, or the depredations of Wall Street. It's also,
Speaker 1: and perhaps most of all over lack of respect. That's
Speaker 1: something no American will stand for. I'm Clive Crook, a
Speaker 1: colonists for Bloomberg View. For more Bloomberg opinion and commentary,
Speaker 1: please go to Bloomberg View dot com or view go
Speaker 1: on the Bloomberg terminal. This has been Bloomberg View and
Speaker 1: Bloomberg View commentaries can be here in hour early weekdays.
Speaker 1: I'm Bloomberg Radio, Michael. Let's bring back Marks Eddie now
Speaker 1: chief economist at Movies Analytics. So we're talking about the
Speaker 1: global economy and how the US is sort of the
Speaker 1: engine of the growth. And I want to get at
Speaker 1: that a little bit, Mark and talk about why do
Speaker 1: you think that will continue? Knew we had a very
Speaker 1: rough fourth quarter. Are you in the camp that suggests
Speaker 1: that was maybe an inventory correction and that we are
Speaker 1: back to it's not a great level of growth, the
Speaker 1: plotting level that we've experienced the last couple of years. Yeah,
Speaker 1: And the fourth quarter was bad in terms of g
Speaker 1: d P. It wasn't bad in terms of jobs. In fact,
Speaker 1: it was fantastic in terms of job growth. And that's
Speaker 1: what's the most important because at this stace of job
Speaker 1: growth for fast approaching full employment, which were months away
Speaker 1: from and I mean stronger wage growth and stronger wage
Speaker 1: growth is the fodder for consumer spending and that's the
Speaker 1: engine for cool economic growth. So you know, as long
Speaker 1: as the American company continue to hire uh and pay
Speaker 1: wills continue to expand will be fine. And every indication
Speaker 1: is that they will uh. You know, we the u
Speaker 1: unemploying terms claims are very low. They remained very very low.
Speaker 1: And the most encouraging thing most recently is that the
Speaker 1: number of people quitting their jobs has skyrocketed, which you know,
Speaker 1: people don't do that unless it's so pretty comfortable they're
Speaker 1: going to find another one. So you know, as long
Speaker 1: as the labor marketings together, we'll be fine. Well, Mike
Speaker 1: jump in here on this year better on the Jolt
Speaker 1: survey and all that. But this was a source of
Speaker 1: conversation at least three times this weekend. Is people really
Speaker 1: have shifted Mike on the enthusiasm to exit the job. Well,
Speaker 1: the the quick rate certainly went up, and you know,
Speaker 1: hiring in theory will continue as long as demand is strong,
Speaker 1: and we saw reasonably good retail sales for the prior month.
Speaker 1: I just want to mark what you hear from companies,
Speaker 1: and uh, once you think the possibility is that with
Speaker 1: the volatility in markets and uncertainty out there, and certainly
Speaker 1: with the crazy turns the presidential campaign has taken, whether
Speaker 1: we will see ceo s just put things on hold
Speaker 1: as they did in previous years when we had these
Speaker 1: black swans come out Greece and other things. Well, I
Speaker 1: think clearly they're nervous. You know, in my business, I
Speaker 1: talked a lot of senior management ceo CFOs, and you
Speaker 1: know they're focused on their stock probably and with the
Speaker 1: decline in stock values, it makes them anxious. And it's
Speaker 1: more in stock prices volatility across all financial markets globally.
Speaker 1: So there's no doubt about that. Uh. But at least
Speaker 1: to this point, Uh, you know, there's no indication sign
Speaker 1: that they've actually called up their human resource head and said,
Speaker 1: you know, stop hiring or certainly no one's saying lying
Speaker 1: off people. That hasn't happened. Uh. Investment spending has been
Speaker 1: on the soft side. But but you know that's mostly energy.
Speaker 1: If exclude energy, why you know, it's it's fine, it's
Speaker 1: you know here, I'll give another statistic. Come you know,
Speaker 1: in this recovery, Uh, investment spending reel all in, you know,
Speaker 1: this whole shooting match. The business investment is four point
Speaker 1: eight percent peranum. That's that's pretty good. I mean in
Speaker 1: the last expansion in a decade ago, and that was
Speaker 1: a six year long expansion, peranum investment growth was four
Speaker 1: point one percent. And if you look at investment in
Speaker 1: R and D and intellectual property, which is you know,
Speaker 1: the most ski stuff with long payoff payoffs, and you
Speaker 1: think people, if their business are really scared to be
Speaker 1: pulling back on that, you don't say it. So, yeah,
Speaker 1: they're nervous, there's no doubt, but they're not nervous enough
Speaker 1: to say, you know, I'm going to pull back here,
Speaker 1: at least not yet. What about the the idea that
Speaker 1: the stock markets problems are going to have a wealth
Speaker 1: impact on spending and that could push us towards our session. Yeah,
Speaker 1: that's I worry about that. You know, we've done some
Speaker 1: recent research that indicates that the stock wealth effect is
Speaker 1: large by historical standards. Uh, you know, historically the stock
Speaker 1: wealth effect is about two three cents, So every dollar
Speaker 1: decline in stock prices would reduce consumers spending ultimately by
Speaker 1: two three cents. That doesn't sound like a lot, but
Speaker 1: you know, just to give a sense of it, a
Speaker 1: temper cent decline in stock values, which is roughly what
Speaker 1: we've experienced or peaked. The current is about two trillion
Speaker 1: dollars in wealth, so that adds up to real money.
Speaker 1: But if the wealth effect is by six cents, and
Speaker 1: my research suggests that it might have gotten that high,
Speaker 1: then the damage will will be greater. And you know that,
Speaker 1: and that goes right to the heart of my thesis.
Speaker 1: You know that the American consumer's gonna keep spending. So
Speaker 1: that's the key thing I worry about here, at least
Speaker 1: in the very near term. You know what the damage
Speaker 1: is going to be created by the financial turmoil. In
Speaker 1: the last minute that we've got with you, Mark Sandy
Speaker 1: helped me with the Fed. Mike, I think we've been
Speaker 1: It's important to understand with a meeting March sixteen, how
Speaker 1: fed free we've been in conversation in research this morning.
Speaker 1: What will you listen for from FED officials? Mark Sandy, Well,
Speaker 1: you know we're coming in a full employment check. Uh,
Speaker 1: actual inflation is actually picking up, Core inflation is picking up.
Speaker 1: Check We're not We're still below target. But we're moving
Speaker 1: towards target. I think the key thing really will be,
Speaker 1: you know, obviously, what damage will this financial terminal do.
Speaker 1: But and I think they'll be focused on unemployment, turance claims,
Speaker 1: and limber market data to focus on that. But the
Speaker 1: the real thing I think are now focused on is
Speaker 1: inflation expectations. That feels really soft, and that continues to
Speaker 1: be the case. I don't see they're just that, you know,
Speaker 1: they're not gonna be able to check that box, and
Speaker 1: they won't tighten monetary policy. What's your forecast for inflation?
Speaker 1: We have seen a we are definitely moving up of
Speaker 1: core rates. It's gonna pick up. I mean, if he did,
Speaker 1: my script roughly holds together because the labor markets tightening,
Speaker 1: we're going to get wage growth, and then you lay
Speaker 1: on top of that a very tight housing market. Vacancy
Speaker 1: rates are thirty year lows and we're getting very strong
Speaker 1: rent growth. And healthcare costs are going to pick up
Speaker 1: because it's very labor intensive, and his wage costs rise,
Speaker 1: healthcare costs will rise, and effects of Obamacare are going
Speaker 1: to start to fade a bit. So everything is adding
Speaker 1: up for inflation, getting core inflation, getting back to target
Speaker 1: over the next year eighteen months and then something beyond that.
Speaker 1: Mark Sandy, thank you so much. With movies, Mike the
Speaker 1: Speakers starting with Sebruary two, today Potter Fisher, Kaplan Bullard
Speaker 1: and in New York City Lockert Williams, Paul Brainerd and
Speaker 1: finally Stanley Fisher March seven. Before we descend into quiet,
Speaker 1: there will be a lot of opinions expressed what is
Speaker 1: going to happen, And we have a pretty good idea
Speaker 1: of where a lot of people sit at the moment,
Speaker 1: and uh, it was not unrealistic to expect the FED
Speaker 1: to do nothing. On the sixteen, he played twenty minutes
Speaker 1: seconds of hockey. That's a lot for anybody. The other
Speaker 1: night he is forty four in Florida, where you can
Speaker 1: I know what you're talking about. If you say so,
Speaker 1: I would not retire. Four fifty three second period yager
Speaker 1: from Kolakoff, who was born the year Yeami Yager started playing,
Speaker 1: and you see yokin In and then in a third
Speaker 1: period yager from yokin In. And for those of you
Speaker 1: who don't know hockey, it's much different when you score
Speaker 1: when everybody's on the ice, versus a power play when
Speaker 1: the other team as a man in the penalty box.
Speaker 1: Mr Yager's scored two goals to win the game five
Speaker 1: on five. Gotta give him credit, remark remarking that reminds
Speaker 1: one of Gordy Hunt playing into his fifties. You know,
Speaker 1: this is maybe the roughest, hardest sport, and yet the
Speaker 1: performed the longest to have been in hockey. If you
Speaker 1: had power play goals, they'd say, Okay, they set him up,
Speaker 1: the big gun in the slot. Blah blah blah. Two
Speaker 1: goals five on five at age forty four is I
Speaker 1: don't believe I've ever said that at any time or place.
Speaker 1: Futures up, two down, futures up yet one one weaker.
Speaker 1: Yet today with a little bit no nicely stronger dollar,
Speaker 1: I should say, another hour of Bloomberg surveillance. You need
Speaker 1: to be with us. Thank you,