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Speaker 1: on taking stock. Who would lend their money to the
Speaker 1: US government for ten years at a rate of one
Speaker 1: point five seven percent while some investors did. This morning,
Speaker 1: we're gonna be talking about negative bond yields and US
Speaker 1: tenure bond yields falling to a near record load. That's
Speaker 1: coming up. Larry McDonald, he covers the bond market very
Speaker 1: very closely. We're gonna find out if he's worried or
Speaker 1: happy about this gigantic bond rally. Well, I know what
Speaker 1: I am now, I'm happy. Going to Charlie pell news room,
Speaker 1: Boobermberg Business Flash, and I thank you very much, Kathleen
Speaker 1: Anky him, the DAL, the SMP nezdak all declining twenty
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Speaker 1: the dollar dragging down raw material and energy prices crewed,
Speaker 1: falling to the lowest in more than a week. West
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Speaker 1: seven tenths of one, down thirty two cents. Bloomberg's Heavier
Speaker 1: Blast in London says oil has room to fall further,
Speaker 1: and that is because of Brexit. Tell me we are
Speaker 1: not gonna go down to twenty six a borrower, but
Speaker 1: can we go another five dollars down in the worst
Speaker 1: case scenario of abrexit. Jest Probably supply and Demana is improving,
Speaker 1: The market is getting more balance, but obviously there's a
Speaker 1: big race off scenario. And I've seen that five dollars
Speaker 1: down if the United Kingdom decides to leave the Judoban Union,
Speaker 1: and today France's largest ensure a warrant that there is
Speaker 1: quote an extremely high probability that the UK will vote
Speaker 1: to leave the European Union. SMP five index down five
Speaker 1: to two thousand, seventy three, a drop of three tenths
Speaker 1: of one percent gold or right now up a dollar
Speaker 1: seventy up by point one percent. And now let's take
Speaker 1: a look at some of the other stories making news.
Speaker 1: Thank you Charlie from the Bloomberg Newsroom. I'm Oliver Rennick.
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Speaker 1: again recapping stocks or Laura SMP five hundred indecks now
Speaker 1: down by three points to two thousand seventy five, a
Speaker 1: drop of two tenths of one percent. I'm Charlie Pellett
Speaker 1: and that's a Bloomberg Business flash. This is taking Stock
Speaker 1: with Kathleen Hayes and Pimpbox on Bloomberg Radio. The yield
Speaker 1: on the benchmark US government note fell to a near
Speaker 1: record low today, as the yield on Germany's ten year
Speaker 1: debt fell low zero for the first time on record.
Speaker 1: Here to tell us more about the bond market is
Speaker 1: Larry McDonald. He is Managing Director ahead of Global macro
Speaker 1: Strategy at a CG Analytics, and he is also the
Speaker 1: author of the book A Colossal Failure of Common Sense,
Speaker 1: The inside story of the Collapse of Lehman Brothers. And
Speaker 1: he is also the editor of The Bear Trap. Larry McDonald,
Speaker 1: thank you very much for being with us, wondering if
Speaker 1: you could just tell us your thoughts about the record
Speaker 1: low yields. What are the implications for this near negative
Speaker 1: rate on many sovereign bonds? Well, thanks very much, FIM.
Speaker 1: I think we are within a few days of a
Speaker 1: classic blow off top in bonds. What's happening around the
Speaker 1: world is is pure evil. This is pure We're literally
Speaker 1: witnessing pure evil. Central bankers are putting forcing capital into
Speaker 1: places it just shouldn't be. We've gone from one trillion
Speaker 1: of of negative yielding bonds a year ago to probably
Speaker 1: over eleven trillion today. And the thirst for yield, the reach,
Speaker 1: the reach, reach, reach for yield is creating a so
Speaker 1: much systemic risk globally, uh that I think the near
Speaker 1: term run Uh, it will will end here sometime in
Speaker 1: the next hours. Why the next forty hours. It's been
Speaker 1: going on for months. Well, we saw this last thanks Kathleen.
Speaker 1: We saw this last We saw this on Sebruary eleventh,
Speaker 1: We saw this last April, and we also witnessed this
Speaker 1: on October four in two thousand fourteen. And Uh, when
Speaker 1: you have a rush into bonds like we've seen that's
Speaker 1: so far and so fast and so violent, uh, you
Speaker 1: it gets overdone and it's too many people are on
Speaker 1: one side of the boat, Kathleen. The bottom line is
Speaker 1: the central bankers have kept interest rates so low that
Speaker 1: there's hundreds and hundreds of hedge funds, acid managers thirsting
Speaker 1: for some type of alpha, thirsting for it, so that
Speaker 1: the student body goes left, the student body goes right,
Speaker 1: and and then what's happening is too many people are
Speaker 1: on one side of the boat chasing this yield, and
Speaker 1: they're gonna get whipside back out as they as we
Speaker 1: witnessed on October fourteenth, two thousand fourteen, as we witnessed
Speaker 1: on February and leventh of this year. It's just too
Speaker 1: many people on one side of the boat and it's
Speaker 1: not going to take much to get to to really
Speaker 1: capsize the vessel. Alright, what if you could comment on inflation?
Speaker 1: Do you believe that it is already with us? Well,
Speaker 1: we're I think I think we're in a we're obviously
Speaker 1: in a global deflation deflationary cycle that is starting to
Speaker 1: reverse itself here in the United States a little bit.
Speaker 1: But we globally were in disinflation. Uh. Evidence of real
Speaker 1: inflation in the United States is very suspect. And uh,
Speaker 1: there's just too many people because of these developed markets
Speaker 1: have aging populations, right number one? Uh they two number
Speaker 1: two democracies, Republican republic democracies have promised so many goodies
Speaker 1: to so many different people that the amount of people
Speaker 1: that are sitting at home not working in the developed
Speaker 1: markets is our proportions that we've never seen our lifetime.
Speaker 1: And so we have young people to fifty the most
Speaker 1: in thirty years in the United States that are not
Speaker 1: working that they're just sitting at home. God knows what
Speaker 1: they're doing, but they're not working. And that's that's not creating.
Speaker 1: That's not creating. I think that hilaria is that so
Speaker 1: many people are saying with the central banks have done
Speaker 1: wrong is take all the way to the world on
Speaker 1: their shoulders, and we need physical action and the government's
Speaker 1: giving both people money to stay home, and that's that
Speaker 1: is not working either, is what you're saying. Now. Are
Speaker 1: when you said that this will be over, this this
Speaker 1: super nova of a bondmark rally in four eight hours,
Speaker 1: do you just mean a little crack back up and
Speaker 1: we'll see the tenure German buon back above in positive
Speaker 1: territory for a while and maybe the tenure known in
Speaker 1: the US s to one seventy or so, and then
Speaker 1: the rally continues. Well, many people are saying, you know,
Speaker 1: one fifties easy, one point to five on the US
Speaker 1: ten years entirely possible. We'll keep in mind you're on
Speaker 1: the phone with one of the biggest bond bulls on
Speaker 1: Wall Street that's been around for the last I've been
Speaker 1: one of the biggest bond bulls. It's two years ago.
Speaker 1: People were laughing at me when we were calling for
Speaker 1: one forty on the tenure. So the entire street told
Speaker 1: us two years ago that we would be at three
Speaker 1: and a half on the tenure. The entire street of
Speaker 1: the street told us two years ago we would be
Speaker 1: at three to three and a half. We have to
Speaker 1: get we have to get ready for life after lift off.
Speaker 1: They lectured us hours and on end it was they
Speaker 1: were all the wrong. The entire street has been wrong.
Speaker 1: So I think to your point, yes, I think it's
Speaker 1: going to be a vicious sell off, but once again,
Speaker 1: it probably lasts a month or two. And I don't
Speaker 1: think it's the coupe data in the moment of the
Speaker 1: great reversal in the bond market. That's probably six to
Speaker 1: nine months away. But I don't think it's happening next month. Well,
Speaker 1: you know what also is about maybe six months away,
Speaker 1: is a new president in the United States. Do you
Speaker 1: think that politics is playing a role in this. Well,
Speaker 1: that's the thing exactly, tim is is that we talked.
Speaker 1: We talked about this on our Bear Traps report, on
Speaker 1: on Twitter, our handles at Convert Bond, and we we
Speaker 1: just did a report last week with our team in
Speaker 1: Washington and it was very well received by You're right,
Speaker 1: the deficit spending Reagan type programs are coming out of
Speaker 1: Trump in terms of stimulus, and that's going to increase
Speaker 1: the depth sit and that's when you're get to get
Speaker 1: a reversal in bond. Derry McDonald had a global macro
Speaker 1: strategy at a CG Analytics. He's editor of the Bear
Speaker 1: Transfer for report, and you may recall that he's the
Speaker 1: author of a colossal failure of common sense. This is
Speaker 1: Bloomberg Radio. Coming up on taking Stock. We're gonna be
Speaker 1: speaking with Larry Rosenthaal. He helps manage more than six
Speaker 1: hundred million dollars at Rosenthaw Wealth Management Group. What's he
Speaker 1: telling his clients to do with their money? That's next