WEBVTT - ACG's McDonald on Central Banks: Witnessing Pure Evil (Audio)

0:00:03.920 --> 0:00:08.240
<v Speaker 1>Broadcasting live to New York, Bloomberg eleventh, Ryo to Washington,

0:00:08.320 --> 0:00:12.440
<v Speaker 1>d C, Bloomberg to Boston, Bluemberg, Well under It to

0:00:12.520 --> 0:00:17.000
<v Speaker 1>San Francisco, Bloomberg to the countries. Joe is exam General

0:00:17.040 --> 0:00:20.600
<v Speaker 1>one nine and around the globe the Bloomberg Radio stap

0:00:20.760 --> 0:00:24.840
<v Speaker 1>and Bloomberg got gone. This is taking Stock coming up

0:00:24.880 --> 0:00:28.240
<v Speaker 1>on taking stock. Who would lend their money to the

0:00:28.400 --> 0:00:32.159
<v Speaker 1>US government for ten years at a rate of one

0:00:32.280 --> 0:00:36.640
<v Speaker 1>point five seven percent while some investors did. This morning,

0:00:36.680 --> 0:00:41.160
<v Speaker 1>we're gonna be talking about negative bond yields and US

0:00:41.280 --> 0:00:44.880
<v Speaker 1>tenure bond yields falling to a near record load. That's

0:00:44.920 --> 0:00:48.760
<v Speaker 1>coming up. Larry McDonald, he covers the bond market very

0:00:48.840 --> 0:00:51.960
<v Speaker 1>very closely. We're gonna find out if he's worried or

0:00:52.040 --> 0:00:54.640
<v Speaker 1>happy about this gigantic bond rally. Well, I know what

0:00:54.680 --> 0:00:56.960
<v Speaker 1>I am now, I'm happy. Going to Charlie pell news room,

0:00:56.960 --> 0:00:59.720
<v Speaker 1>Boobermberg Business Flash, and I thank you very much, Kathleen

0:01:00.000 --> 0:01:04.040
<v Speaker 1>Anky him, the DAL, the SMP nezdak all declining twenty

0:01:04.080 --> 0:01:06.920
<v Speaker 1>nine minutes to go ahead of the close on this Tuesday,

0:01:06.959 --> 0:01:09.240
<v Speaker 1>And we're brought to you by Sector Spider E. T F.

0:01:09.319 --> 0:01:12.000
<v Speaker 1>S why buy a single stock when you can invest

0:01:12.160 --> 0:01:15.920
<v Speaker 1>in the entire sector. Visits sector sp d r S

0:01:16.000 --> 0:01:19.600
<v Speaker 1>dot com or call one eight six six. Sector et

0:01:20.040 --> 0:01:23.360
<v Speaker 1>F stocks are on track for their longest losing streaks

0:01:23.360 --> 0:01:27.320
<v Speaker 1>in February, amid growing uncertainty about the UK's future in

0:01:27.360 --> 0:01:31.880
<v Speaker 1>the European Union. Also, investors are awaiting tomorrow's Federal Reserve announcements.

0:01:31.920 --> 0:01:36.560
<v Speaker 1>Special coverage here on Bloomberg Radio. Investors seeking safety boosting

0:01:36.560 --> 0:01:40.560
<v Speaker 1>the dollar dragging down raw material and energy prices crewed,

0:01:40.680 --> 0:01:43.600
<v Speaker 1>falling to the lowest in more than a week. West

0:01:43.600 --> 0:01:46.600
<v Speaker 1>Texas Intermediate crewed now at forty eight fifty six, down

0:01:46.760 --> 0:01:50.960
<v Speaker 1>seven tenths of one, down thirty two cents. Bloomberg's Heavier

0:01:51.040 --> 0:01:54.120
<v Speaker 1>Blast in London says oil has room to fall further,

0:01:54.480 --> 0:01:57.480
<v Speaker 1>and that is because of Brexit. Tell me we are

0:01:57.520 --> 0:02:00.720
<v Speaker 1>not gonna go down to twenty six a borrower, but

0:02:00.960 --> 0:02:03.559
<v Speaker 1>can we go another five dollars down in the worst

0:02:03.600 --> 0:02:08.760
<v Speaker 1>case scenario of abrexit. Jest Probably supply and Demana is improving,

0:02:09.639 --> 0:02:12.080
<v Speaker 1>The market is getting more balance, but obviously there's a

0:02:12.080 --> 0:02:16.040
<v Speaker 1>big race off scenario. And I've seen that five dollars

0:02:14.840 --> 0:02:18.680
<v Speaker 1>down if the United Kingdom decides to leave the Judoban Union,

0:02:18.680 --> 0:02:21.760
<v Speaker 1>and today France's largest ensure a warrant that there is

0:02:21.840 --> 0:02:26.480
<v Speaker 1>quote an extremely high probability that the UK will vote

0:02:26.520 --> 0:02:31.200
<v Speaker 1>to leave the European Union. SMP five index down five

0:02:31.280 --> 0:02:34.040
<v Speaker 1>to two thousand, seventy three, a drop of three tenths

0:02:34.080 --> 0:02:37.440
<v Speaker 1>of one percent gold or right now up a dollar

0:02:37.560 --> 0:02:41.320
<v Speaker 1>seventy up by point one percent. And now let's take

0:02:41.360 --> 0:02:43.840
<v Speaker 1>a look at some of the other stories making news.

0:02:45.160 --> 0:02:47.680
<v Speaker 1>Thank you Charlie from the Bloomberg Newsroom. I'm Oliver Rennick.

0:02:47.880 --> 0:02:49.720
<v Speaker 1>This news Upstate is brought to you by the Jeep

0:02:49.720 --> 0:02:53.040
<v Speaker 1>Grand Cherokee, the most awarded suv ever. The Grand Cherokee

0:02:53.120 --> 0:02:55.880
<v Speaker 1>continues to raise the bar with its luxurious interior in

0:02:56.000 --> 0:02:59.720
<v Speaker 1>legendary four by four capability driving at your local Jeep dealer. Today,

0:03:00.280 --> 0:03:03.440
<v Speaker 1>President Obama says anti Muslim rhetoric from Donald Trump does

0:03:03.480 --> 0:03:06.639
<v Speaker 1>not represent the America we want. Obama is arguing that

0:03:06.680 --> 0:03:10.120
<v Speaker 1>treating Muslim Americans differently won't make the US safer. He

0:03:10.160 --> 0:03:12.080
<v Speaker 1>says it will make the country less safe by fueling

0:03:12.120 --> 0:03:14.960
<v Speaker 1>the notion among followers of Islamic state that the West

0:03:15.000 --> 0:03:18.120
<v Speaker 1>hates Muslims. The President spoke after meeting with his national

0:03:18.160 --> 0:03:22.200
<v Speaker 1>security advisors on the threat posed by extremists. We currently

0:03:22.280 --> 0:03:25.200
<v Speaker 1>do not have any information to indicate that a foreign

0:03:25.280 --> 0:03:31.840
<v Speaker 1>terrorist group directed the attack in Orlando. It is increasingly clear, however,

0:03:31.919 --> 0:03:37.040
<v Speaker 1>that the killer took in extremist information and propaganda over

0:03:37.080 --> 0:03:42.440
<v Speaker 1>the Internet. He appears to have been an angry, disturbed,

0:03:42.880 --> 0:03:47.320
<v Speaker 1>unstable young man who became radicalized. Former President Clinton sat

0:03:47.360 --> 0:03:50.080
<v Speaker 1>down with Bloomberg's David Weston for an exclusive interview from

0:03:50.120 --> 0:03:53.760
<v Speaker 1>the Clinton Global Initiative America meeting in Atlanta. We need

0:03:55.040 --> 0:04:01.680
<v Speaker 1>it's more help the WODN tell this work with federal

0:04:01.720 --> 0:04:05.880
<v Speaker 1>and local law enforcement, with people who may be lone wolves.

0:04:06.120 --> 0:04:08.640
<v Speaker 1>A New York City police officers severely wounded in a

0:04:08.680 --> 0:04:12.920
<v Speaker 1>brazen daylight hatchet attack as receiving the NYPD's highest honor.

0:04:13.320 --> 0:04:16.159
<v Speaker 1>Officer Kenneth Healy and three other officers were patrolling a

0:04:16.160 --> 0:04:19.680
<v Speaker 1>bustling Queen's Commercial District last fall when a man charged

0:04:19.760 --> 0:04:22.640
<v Speaker 1>him with an eighteen inch hatchet. Global News twenty four

0:04:22.680 --> 0:04:25.280
<v Speaker 1>hours a day, powered by our journalists in more than

0:04:25.279 --> 0:04:27.560
<v Speaker 1>a hundred fifty news bureaus around the world. From the

0:04:27.600 --> 0:04:31.560
<v Speaker 1>Bloomberg Newsroom, I'm Ulverneck Charlie, and we thank you and

0:04:31.640 --> 0:04:35.520
<v Speaker 1>again recapping stocks or Laura SMP five hundred indecks now

0:04:35.560 --> 0:04:38.720
<v Speaker 1>down by three points to two thousand seventy five, a

0:04:38.839 --> 0:04:42.440
<v Speaker 1>drop of two tenths of one percent. I'm Charlie Pellett

0:04:42.440 --> 0:04:47.719
<v Speaker 1>and that's a Bloomberg Business flash. This is taking Stock

0:04:47.880 --> 0:04:52.400
<v Speaker 1>with Kathleen Hayes and Pimpbox on Bloomberg Radio. The yield

0:04:52.440 --> 0:04:55.560
<v Speaker 1>on the benchmark US government note fell to a near

0:04:55.640 --> 0:04:59.200
<v Speaker 1>record low today, as the yield on Germany's ten year

0:04:59.240 --> 0:05:02.839
<v Speaker 1>debt fell low zero for the first time on record.

0:05:03.279 --> 0:05:05.520
<v Speaker 1>Here to tell us more about the bond market is

0:05:05.600 --> 0:05:09.520
<v Speaker 1>Larry McDonald. He is Managing Director ahead of Global macro

0:05:09.800 --> 0:05:14.640
<v Speaker 1>Strategy at a CG Analytics, and he is also the

0:05:14.680 --> 0:05:18.400
<v Speaker 1>author of the book A Colossal Failure of Common Sense,

0:05:18.480 --> 0:05:22.000
<v Speaker 1>The inside story of the Collapse of Lehman Brothers. And

0:05:22.000 --> 0:05:26.159
<v Speaker 1>he is also the editor of The Bear Trap. Larry McDonald,

0:05:26.160 --> 0:05:28.480
<v Speaker 1>thank you very much for being with us, wondering if

0:05:28.480 --> 0:05:31.880
<v Speaker 1>you could just tell us your thoughts about the record

0:05:32.200 --> 0:05:36.440
<v Speaker 1>low yields. What are the implications for this near negative

0:05:36.520 --> 0:05:41.600
<v Speaker 1>rate on many sovereign bonds? Well, thanks very much, FIM.

0:05:42.240 --> 0:05:45.120
<v Speaker 1>I think we are within a few days of a

0:05:45.440 --> 0:05:52.600
<v Speaker 1>classic blow off top in bonds. What's happening around the

0:05:52.640 --> 0:05:56.200
<v Speaker 1>world is is pure evil. This is pure We're literally

0:05:56.240 --> 0:06:01.760
<v Speaker 1>witnessing pure evil. Central bankers are putting forcing capital into

0:06:01.800 --> 0:06:07.320
<v Speaker 1>places it just shouldn't be. We've gone from one trillion

0:06:07.400 --> 0:06:10.880
<v Speaker 1>of of negative yielding bonds a year ago to probably

0:06:10.920 --> 0:06:15.839
<v Speaker 1>over eleven trillion today. And the thirst for yield, the reach,

0:06:16.040 --> 0:06:20.039
<v Speaker 1>the reach, reach, reach for yield is creating a so

0:06:20.200 --> 0:06:24.480
<v Speaker 1>much systemic risk globally, uh that I think the near

0:06:24.600 --> 0:06:28.520
<v Speaker 1>term run Uh, it will will end here sometime in

0:06:28.600 --> 0:06:32.880
<v Speaker 1>the next hours. Why the next forty hours. It's been

0:06:32.920 --> 0:06:36.720
<v Speaker 1>going on for months. Well, we saw this last thanks Kathleen.

0:06:36.760 --> 0:06:40.280
<v Speaker 1>We saw this last We saw this on Sebruary eleventh,

0:06:40.680 --> 0:06:45.640
<v Speaker 1>We saw this last April, and we also witnessed this

0:06:45.760 --> 0:06:50.200
<v Speaker 1>on October four in two thousand fourteen. And Uh, when

0:06:50.240 --> 0:06:53.799
<v Speaker 1>you have a rush into bonds like we've seen that's

0:06:53.839 --> 0:06:57.839
<v Speaker 1>so far and so fast and so violent, uh, you

0:06:58.360 --> 0:07:02.360
<v Speaker 1>it gets overdone and it's too many people are on

0:07:02.360 --> 0:07:04.960
<v Speaker 1>one side of the boat, Kathleen. The bottom line is

0:07:05.560 --> 0:07:08.200
<v Speaker 1>the central bankers have kept interest rates so low that

0:07:08.240 --> 0:07:11.880
<v Speaker 1>there's hundreds and hundreds of hedge funds, acid managers thirsting

0:07:12.000 --> 0:07:14.560
<v Speaker 1>for some type of alpha, thirsting for it, so that

0:07:15.040 --> 0:07:17.960
<v Speaker 1>the student body goes left, the student body goes right,

0:07:18.000 --> 0:07:20.320
<v Speaker 1>and and then what's happening is too many people are

0:07:20.320 --> 0:07:22.520
<v Speaker 1>on one side of the boat chasing this yield, and

0:07:22.520 --> 0:07:25.440
<v Speaker 1>they're gonna get whipside back out as they as we

0:07:25.560 --> 0:07:29.080
<v Speaker 1>witnessed on October fourteenth, two thousand fourteen, as we witnessed

0:07:29.120 --> 0:07:31.160
<v Speaker 1>on February and leventh of this year. It's just too

0:07:31.160 --> 0:07:33.320
<v Speaker 1>many people on one side of the boat and it's

0:07:33.360 --> 0:07:35.480
<v Speaker 1>not going to take much to get to to really

0:07:35.520 --> 0:07:38.800
<v Speaker 1>capsize the vessel. Alright, what if you could comment on inflation?

0:07:38.880 --> 0:07:42.120
<v Speaker 1>Do you believe that it is already with us? Well,

0:07:42.120 --> 0:07:45.280
<v Speaker 1>we're I think I think we're in a we're obviously

0:07:45.320 --> 0:07:50.040
<v Speaker 1>in a global deflation deflationary cycle that is starting to

0:07:50.360 --> 0:07:52.640
<v Speaker 1>reverse itself here in the United States a little bit.

0:07:53.280 --> 0:07:59.360
<v Speaker 1>But we globally were in disinflation. Uh. Evidence of real

0:08:00.160 --> 0:08:05.520
<v Speaker 1>inflation in the United States is very suspect. And uh,

0:08:05.640 --> 0:08:08.880
<v Speaker 1>there's just too many people because of these developed markets

0:08:08.880 --> 0:08:12.480
<v Speaker 1>have aging populations, right number one? Uh they two number

0:08:12.480 --> 0:08:18.280
<v Speaker 1>two democracies, Republican republic democracies have promised so many goodies

0:08:18.280 --> 0:08:21.160
<v Speaker 1>to so many different people that the amount of people

0:08:21.560 --> 0:08:24.640
<v Speaker 1>that are sitting at home not working in the developed

0:08:24.640 --> 0:08:28.240
<v Speaker 1>markets is our proportions that we've never seen our lifetime.

0:08:28.720 --> 0:08:33.079
<v Speaker 1>And so we have young people to fifty the most

0:08:33.440 --> 0:08:35.720
<v Speaker 1>in thirty years in the United States that are not

0:08:35.840 --> 0:08:38.480
<v Speaker 1>working that they're just sitting at home. God knows what

0:08:38.520 --> 0:08:42.640
<v Speaker 1>they're doing, but they're not working. And that's that's not creating.

0:08:42.679 --> 0:08:45.040
<v Speaker 1>That's not creating. I think that hilaria is that so

0:08:45.040 --> 0:08:46.800
<v Speaker 1>many people are saying with the central banks have done

0:08:46.800 --> 0:08:48.199
<v Speaker 1>wrong is take all the way to the world on

0:08:48.240 --> 0:08:50.520
<v Speaker 1>their shoulders, and we need physical action and the government's

0:08:50.559 --> 0:08:52.440
<v Speaker 1>giving both people money to stay home, and that's that

0:08:52.600 --> 0:08:56.120
<v Speaker 1>is not working either, is what you're saying. Now. Are

0:08:56.120 --> 0:08:58.120
<v Speaker 1>when you said that this will be over, this this

0:08:58.400 --> 0:09:01.200
<v Speaker 1>super nova of a bondmark rally in four eight hours,

0:09:01.200 --> 0:09:02.840
<v Speaker 1>do you just mean a little crack back up and

0:09:02.880 --> 0:09:06.400
<v Speaker 1>we'll see the tenure German buon back above in positive

0:09:06.480 --> 0:09:08.520
<v Speaker 1>territory for a while and maybe the tenure known in

0:09:08.520 --> 0:09:11.880
<v Speaker 1>the US s to one seventy or so, and then

0:09:11.880 --> 0:09:15.600
<v Speaker 1>the rally continues. Well, many people are saying, you know,

0:09:15.720 --> 0:09:18.640
<v Speaker 1>one fifties easy, one point to five on the US

0:09:18.720 --> 0:09:21.840
<v Speaker 1>ten years entirely possible. We'll keep in mind you're on

0:09:21.880 --> 0:09:25.480
<v Speaker 1>the phone with one of the biggest bond bulls on

0:09:25.559 --> 0:09:28.080
<v Speaker 1>Wall Street that's been around for the last I've been

0:09:28.120 --> 0:09:30.360
<v Speaker 1>one of the biggest bond bulls. It's two years ago.

0:09:30.440 --> 0:09:32.640
<v Speaker 1>People were laughing at me when we were calling for

0:09:32.720 --> 0:09:35.960
<v Speaker 1>one forty on the tenure. So the entire street told

0:09:36.040 --> 0:09:37.600
<v Speaker 1>us two years ago that we would be at three

0:09:37.600 --> 0:09:40.400
<v Speaker 1>and a half on the tenure. The entire street of

0:09:40.440 --> 0:09:42.280
<v Speaker 1>the street told us two years ago we would be

0:09:42.280 --> 0:09:43.880
<v Speaker 1>at three to three and a half. We have to

0:09:43.920 --> 0:09:47.079
<v Speaker 1>get we have to get ready for life after lift off.

0:09:47.120 --> 0:09:49.840
<v Speaker 1>They lectured us hours and on end it was they

0:09:49.840 --> 0:09:51.800
<v Speaker 1>were all the wrong. The entire street has been wrong.

0:09:52.240 --> 0:09:55.120
<v Speaker 1>So I think to your point, yes, I think it's

0:09:55.160 --> 0:09:59.120
<v Speaker 1>going to be a vicious sell off, but once again,

0:09:59.679 --> 0:10:02.200
<v Speaker 1>it probably lasts a month or two. And I don't

0:10:02.200 --> 0:10:05.760
<v Speaker 1>think it's the coupe data in the moment of the

0:10:05.800 --> 0:10:09.160
<v Speaker 1>great reversal in the bond market. That's probably six to

0:10:09.280 --> 0:10:13.000
<v Speaker 1>nine months away. But I don't think it's happening next month. Well,

0:10:13.040 --> 0:10:15.840
<v Speaker 1>you know what also is about maybe six months away,

0:10:15.880 --> 0:10:18.240
<v Speaker 1>is a new president in the United States. Do you

0:10:18.280 --> 0:10:20.960
<v Speaker 1>think that politics is playing a role in this. Well,

0:10:20.960 --> 0:10:24.240
<v Speaker 1>that's the thing exactly, tim is is that we talked.

0:10:24.240 --> 0:10:26.480
<v Speaker 1>We talked about this on our Bear Traps report, on

0:10:26.480 --> 0:10:30.400
<v Speaker 1>on Twitter, our handles at Convert Bond, and we we

0:10:30.480 --> 0:10:32.560
<v Speaker 1>just did a report last week with our team in

0:10:32.640 --> 0:10:35.600
<v Speaker 1>Washington and it was very well received by You're right,

0:10:35.679 --> 0:10:39.720
<v Speaker 1>the deficit spending Reagan type programs are coming out of

0:10:39.760 --> 0:10:43.160
<v Speaker 1>Trump in terms of stimulus, and that's going to increase

0:10:43.200 --> 0:10:44.600
<v Speaker 1>the depth sit and that's when you're get to get

0:10:44.760 --> 0:10:48.040
<v Speaker 1>a reversal in bond. Derry McDonald had a global macro

0:10:48.120 --> 0:10:51.760
<v Speaker 1>strategy at a CG Analytics. He's editor of the Bear

0:10:51.840 --> 0:10:54.640
<v Speaker 1>Transfer for report, and you may recall that he's the

0:10:54.760 --> 0:10:57.839
<v Speaker 1>author of a colossal failure of common sense. This is

0:10:57.880 --> 0:11:02.959
<v Speaker 1>Bloomberg Radio. Coming up on taking Stock. We're gonna be

0:11:02.960 --> 0:11:05.960
<v Speaker 1>speaking with Larry Rosenthaal. He helps manage more than six

0:11:06.120 --> 0:11:10.839
<v Speaker 1>hundred million dollars at Rosenthaw Wealth Management Group. What's he

0:11:10.920 --> 0:11:13.600
<v Speaker 1>telling his clients to do with their money? That's next