1 00:00:03,320 --> 00:00:07,320 Speaker 1: This is Bloomberg surveillance. We have this massive disconnect between 2 00:00:07,320 --> 00:00:09,960 Speaker 1: central banks the way they see the economy and the 3 00:00:10,000 --> 00:00:12,480 Speaker 1: way the markets view central banks. But when we look 4 00:00:12,480 --> 00:00:15,360 Speaker 1: at that Bourmont average, we've seen this downward trend in 5 00:00:15,480 --> 00:00:18,440 Speaker 1: joblers claim for more than a year now. The US 6 00:00:18,520 --> 00:00:20,960 Speaker 1: FED is the global central bank of the world. And 7 00:00:21,000 --> 00:00:23,720 Speaker 1: when we move maybe that's basis points, feels like a 8 00:00:23,760 --> 00:00:28,200 Speaker 1: hundred basis points on the global scale. Bloomberg Surveillance your 9 00:00:28,240 --> 00:00:31,880 Speaker 1: link to the world of economics, finance and investment on 10 00:00:31,960 --> 00:00:36,520 Speaker 1: Bloomberg Radio the morning at seven am on Wall Street. 11 00:00:36,560 --> 00:00:39,640 Speaker 1: One pm in Brussels, I'm Michael McKee. We are watching 12 00:00:39,680 --> 00:00:43,200 Speaker 1: Brussels for a Brexit deal. Concessions by the EU two 13 00:00:43,479 --> 00:00:46,839 Speaker 1: entice the British to stay within the Common Market. We 14 00:00:46,880 --> 00:00:50,239 Speaker 1: shall see how those negotiations go. Today. The city is nervous. 15 00:00:50,640 --> 00:00:53,280 Speaker 1: The flip See is down sixteen points right now, three 16 00:00:53,320 --> 00:00:56,600 Speaker 1: tenths of eight percent, but the rest of the world 17 00:00:56,800 --> 00:01:00,520 Speaker 1: is risk on this morning. The technical analysts may tell 18 00:01:00,600 --> 00:01:02,800 Speaker 1: us this is a bounce, but for the moment, we're 19 00:01:02,840 --> 00:01:07,720 Speaker 1: seeing a de correlation among many asset classes in Europe. 20 00:01:07,800 --> 00:01:10,440 Speaker 1: Right now, the stock six hundred up by three points 21 00:01:10,520 --> 00:01:12,600 Speaker 1: nine tenths of eight percent. The docks a hundred and 22 00:01:12,640 --> 00:01:16,640 Speaker 1: forty five points higher. That's one point six percent. Here 23 00:01:16,680 --> 00:01:20,119 Speaker 1: in the United States, Futures are pointing to a higher open, 24 00:01:20,160 --> 00:01:22,960 Speaker 1: which would be the fourth straight day of stock gains 25 00:01:23,000 --> 00:01:26,440 Speaker 1: if that can be sustained. SNP futures up by eight 26 00:01:26,440 --> 00:01:28,720 Speaker 1: points now four tenths. It's a half percent gain. For 27 00:01:28,760 --> 00:01:32,399 Speaker 1: down futures eight tenths. NAZAKI means are up twenty four points, 28 00:01:32,400 --> 00:01:36,399 Speaker 1: six tenths of eight percent. Oil inventory has dropped a 29 00:01:36,400 --> 00:01:39,959 Speaker 1: bit yesterday, the government tells us SO oil prices are higher. 30 00:01:40,400 --> 00:01:43,559 Speaker 1: West Texas forty four is up two point five percent, 31 00:01:43,640 --> 00:01:48,240 Speaker 1: Brent crude thirty up two point two percent this morning, 32 00:01:48,880 --> 00:01:52,760 Speaker 1: and the Fed in the minutes yesterday suggests uh they 33 00:01:52,800 --> 00:01:55,760 Speaker 1: might wait longer. They're worried about what's been going on. 34 00:01:55,840 --> 00:01:58,840 Speaker 1: Jim Buller joining the chorus of Fed officials saying they're 35 00:01:58,840 --> 00:02:01,920 Speaker 1: probably gonna wait in mark. Yet, yields are higher this morning. 36 00:02:01,920 --> 00:02:05,400 Speaker 1: Ten year yield one point eight two, the five year 37 00:02:05,480 --> 00:02:09,040 Speaker 1: one point to seven, and seventy four basis points for 38 00:02:09,120 --> 00:02:12,520 Speaker 1: your two year note. Walmart earnings just out. Fourth quarter 39 00:02:12,560 --> 00:02:16,160 Speaker 1: earnings per share a dollar forty nine forecast consensus was 40 00:02:16,320 --> 00:02:19,440 Speaker 1: dollar forty six. Sales growth for the year they say 41 00:02:19,480 --> 00:02:22,239 Speaker 1: will be about flat. They had seen it up three 42 00:02:22,280 --> 00:02:24,919 Speaker 1: to four percent, which is a mark down for them. 43 00:02:24,919 --> 00:02:28,520 Speaker 1: But of course Walmart doesn't necessarily reflect what's going on 44 00:02:28,560 --> 00:02:30,320 Speaker 1: in the economy these days. We'll talk about that at 45 00:02:30,360 --> 00:02:35,440 Speaker 1: seven thirty with Bloomberg Shannon H. Petty piece. Um, you 46 00:02:35,520 --> 00:02:39,480 Speaker 1: know you're smart, Tom when you have two titles sitting 47 00:02:39,520 --> 00:02:43,240 Speaker 1: next to you now, Professor Dr Michael Porter of Harvard 48 00:02:43,280 --> 00:02:45,560 Speaker 1: as he is referred to on the Bloomberg and he's 49 00:02:45,639 --> 00:02:48,480 Speaker 1: also noted as Chief Executive Officer of All Worlds. So 50 00:02:48,560 --> 00:02:52,880 Speaker 1: he has three titles, which means he's really smart. Uh. 51 00:02:53,000 --> 00:02:54,440 Speaker 1: He is one of the best at the world in 52 00:02:54,760 --> 00:03:00,600 Speaker 1: linking economic theory and the real world. UM, so let 53 00:03:00,639 --> 00:03:02,960 Speaker 1: us ask you about what is going on in the 54 00:03:03,000 --> 00:03:06,000 Speaker 1: real world and in theory these days. I want to 55 00:03:06,040 --> 00:03:07,960 Speaker 1: start with something you and I were just talking about, 56 00:03:08,600 --> 00:03:11,480 Speaker 1: Uh in the break here. One big reason we see 57 00:03:11,480 --> 00:03:16,040 Speaker 1: low growth and slow wage growth, sustained drop in productivity. 58 00:03:16,400 --> 00:03:18,880 Speaker 1: There's a big debate in economics today about why some 59 00:03:19,000 --> 00:03:21,320 Speaker 1: say it's not coming back, at least not the levels 60 00:03:21,360 --> 00:03:24,200 Speaker 1: that we have seen. Uh. You study, you spend a 61 00:03:24,200 --> 00:03:26,440 Speaker 1: lot of time, and we should ask you about all world, 62 00:03:26,440 --> 00:03:29,080 Speaker 1: but we spend a lot of time studying up and 63 00:03:29,080 --> 00:03:32,360 Speaker 1: coming companies. Uh, do you think there's anybody out there 64 00:03:32,400 --> 00:03:35,480 Speaker 1: that can bring us back to the productivity rates that 65 00:03:35,520 --> 00:03:38,360 Speaker 1: we enjoyed saying in the in the into the early 66 00:03:38,360 --> 00:03:43,040 Speaker 1: two thousand's, Well, I think the the best thing that 67 00:03:43,080 --> 00:03:45,680 Speaker 1: I think is most likely to lead to that is 68 00:03:45,800 --> 00:03:50,280 Speaker 1: the changing nature of products. You know, we the some 69 00:03:50,360 --> 00:03:53,640 Speaker 1: of the last productivity growth spurts were driven by I 70 00:03:53,800 --> 00:03:57,560 Speaker 1: T and the embodying of information technology, and companies allow 71 00:03:57,640 --> 00:04:00,520 Speaker 1: them to automate things that they did and do those 72 00:04:00,560 --> 00:04:04,200 Speaker 1: things much better, you know, in terms of uh, computer 73 00:04:04,240 --> 00:04:07,640 Speaker 1: and design and supply chain management and all those systems. 74 00:04:07,640 --> 00:04:10,960 Speaker 1: But the previous generations of it were really about process. 75 00:04:11,040 --> 00:04:14,800 Speaker 1: That was really about how the company ran its business internally. 76 00:04:14,880 --> 00:04:17,920 Speaker 1: Now I T is starting to penetrate into companies, and 77 00:04:18,200 --> 00:04:21,320 Speaker 1: some people call this the Internet of things. We talk 78 00:04:21,400 --> 00:04:24,160 Speaker 1: about something we call it something different. We call it 79 00:04:24,240 --> 00:04:27,400 Speaker 1: smart connected products. So a car now is smart. It's 80 00:04:27,440 --> 00:04:31,240 Speaker 1: full of software, it's full of sensors, it's generating information, 81 00:04:31,279 --> 00:04:34,039 Speaker 1: it's connected to the internet. Every single machine and a 82 00:04:34,120 --> 00:04:37,799 Speaker 1: factory now is smart. It's connected, and then these changing 83 00:04:37,839 --> 00:04:40,880 Speaker 1: nature of products is now giving us a real new 84 00:04:41,040 --> 00:04:45,200 Speaker 1: uptick potentially in the productivity of just about everything. So 85 00:04:45,320 --> 00:04:48,520 Speaker 1: I think this would be the place where that that 86 00:04:48,520 --> 00:04:54,200 Speaker 1: that regeneration of productivity growth would I think originate from. Uh. 87 00:04:54,240 --> 00:04:57,479 Speaker 1: This is still early innings. This is still uh, you know, 88 00:04:57,880 --> 00:05:01,680 Speaker 1: not nearly uh penetrate throughout the economy. So I think 89 00:05:01,720 --> 00:05:04,680 Speaker 1: we might see some very interesting innovation and productivity there. 90 00:05:04,720 --> 00:05:07,320 Speaker 1: But you're absolutely right. The economic growth of the United 91 00:05:07,360 --> 00:05:10,719 Speaker 1: States is down decade after decade over the last three 92 00:05:10,839 --> 00:05:14,120 Speaker 1: or four years. Growth is just slowing. Productivity growth is slowing. 93 00:05:14,400 --> 00:05:18,480 Speaker 1: We need this next hopefully drive of change. We on 94 00:05:18,560 --> 00:05:20,640 Speaker 1: a continuous discussion because we get a ton of mail 95 00:05:20,680 --> 00:05:24,279 Speaker 1: on this. With Michael Porter of HBS Bloomberg Surveillance this morning, folks, 96 00:05:24,560 --> 00:05:27,560 Speaker 1: don't you buy investco. Don't settle for average in your 97 00:05:27,600 --> 00:05:31,640 Speaker 1: portfolio to invest go the right approach means investing with 98 00:05:31,800 --> 00:05:35,440 Speaker 1: high conviction. Find out more an investco dot com slash 99 00:05:35,920 --> 00:05:39,160 Speaker 1: high conviction Michael Porter, where it's an annual visit. Usually Mike, 100 00:05:39,240 --> 00:05:42,000 Speaker 1: we do this in Davos, stuck in a snow bank. 101 00:05:42,240 --> 00:05:46,360 Speaker 1: This is much nicer. Reporter with us in New York. Well, 102 00:05:46,400 --> 00:05:49,680 Speaker 1: what I hear from people is two basic themes. If 103 00:05:49,720 --> 00:05:53,520 Speaker 1: the new iPhone has a better camera, so what? And 104 00:05:53,880 --> 00:05:58,440 Speaker 1: they don't see the countable jobs formed by Michael Porter's 105 00:05:58,440 --> 00:06:02,279 Speaker 1: technological progress that we did in other times and places. 106 00:06:02,600 --> 00:06:07,640 Speaker 1: Do we need a manufacturing up policy in this nation, 107 00:06:07,839 --> 00:06:11,159 Speaker 1: Alice Switzer learning you picked the nation that that do 108 00:06:11,240 --> 00:06:15,640 Speaker 1: we need a goods producing policy within the nation? Well, 109 00:06:15,640 --> 00:06:18,919 Speaker 1: we we certainly need more goods producing in this country. 110 00:06:18,960 --> 00:06:22,560 Speaker 1: And again, the Apple example is so emblematic because Apple, 111 00:06:22,640 --> 00:06:27,359 Speaker 1: with all its genius, innovation and transformation, uh, didn't really 112 00:06:27,360 --> 00:06:30,360 Speaker 1: employ any American workers to make any of this stuff. 113 00:06:30,920 --> 00:06:33,720 Speaker 1: Um and Uh, I think that that shows us to 114 00:06:33,880 --> 00:06:37,920 Speaker 1: divide in the US economy. We're really good at innovating things, 115 00:06:37,920 --> 00:06:40,280 Speaker 1: we're really good at creating new things, were really good 116 00:06:40,279 --> 00:06:43,880 Speaker 1: at starting new company. But our economy now is so 117 00:06:44,040 --> 00:06:48,840 Speaker 1: high cost, and our skill levels are sufficiently lagging, and 118 00:06:49,000 --> 00:06:53,640 Speaker 1: our corporate taxes are sufficiently high that the actual making 119 00:06:53,800 --> 00:06:56,600 Speaker 1: of all the stuff that we create and innovate doesn't 120 00:06:56,640 --> 00:07:00,520 Speaker 1: happen here. Any European automakers over here. And there was 121 00:07:00,560 --> 00:07:03,720 Speaker 1: a whole transformation there that you covered, among other Steve 122 00:07:03,800 --> 00:07:07,440 Speaker 1: Rattner with his work in Detroit when Detroit blew up. 123 00:07:07,760 --> 00:07:10,320 Speaker 1: But do we need do you perceive day to day 124 00:07:10,320 --> 00:07:15,480 Speaker 1: at HBS that we need a national policy of manufacturing. 125 00:07:15,760 --> 00:07:19,119 Speaker 1: I think we need a national policy of driving competitiveness. 126 00:07:19,240 --> 00:07:23,480 Speaker 1: Tom uh Right now, our strategy in America for improving 127 00:07:23,480 --> 00:07:27,320 Speaker 1: our economy is monetary policy. It's stimulus. It's is interest 128 00:07:27,440 --> 00:07:30,000 Speaker 1: rates up or down? Do we pump do we pump down? 129 00:07:30,440 --> 00:07:32,560 Speaker 1: You know, we make more liquidity and the economy money 130 00:07:32,640 --> 00:07:37,560 Speaker 1: now is free. Uh. You know, capital is uh has 131 00:07:37,640 --> 00:07:40,440 Speaker 1: has low cost. And yet even though capital has such 132 00:07:40,560 --> 00:07:44,080 Speaker 1: low cost, now we're investing less and less in the 133 00:07:44,120 --> 00:07:48,000 Speaker 1: business sector in Why is that? I think because of 134 00:07:48,520 --> 00:07:54,680 Speaker 1: the perception of um The kind of immediate short term 135 00:07:54,680 --> 00:07:57,920 Speaker 1: pressure to to to deliver good earnings growth in an 136 00:07:57,920 --> 00:08:01,680 Speaker 1: economy that's fundamentally not growing is leading companies to do 137 00:08:01,760 --> 00:08:06,040 Speaker 1: everything they can to to kind of engineers. But I 138 00:08:06,080 --> 00:08:08,160 Speaker 1: think this is just a profound question. How do you 139 00:08:08,280 --> 00:08:13,440 Speaker 1: teach financial engineering in your courses? The pressure to give 140 00:08:13,480 --> 00:08:16,320 Speaker 1: cash back, the pressure to raise dividends. Yeah, well, I 141 00:08:16,680 --> 00:08:19,920 Speaker 1: in my courses, I don't teach financial engineering. I teach 142 00:08:20,120 --> 00:08:24,400 Speaker 1: strategy fundamentals. Uh, you know, drive the fundamental improvement of 143 00:08:24,440 --> 00:08:27,040 Speaker 1: your products and processes. But so much of what's going 144 00:08:27,080 --> 00:08:30,920 Speaker 1: on right now is financial engineering. It's it's it's issuing 145 00:08:31,320 --> 00:08:36,160 Speaker 1: really really low cost debt, it's buying back shares, it's 146 00:08:36,440 --> 00:08:41,280 Speaker 1: um it's it's it's all about sort of struggling with 147 00:08:41,640 --> 00:08:45,320 Speaker 1: a set of variables to raise EPs growth and and 148 00:08:45,400 --> 00:08:50,000 Speaker 1: meets your expectations. And companies now are absolutely not focusing 149 00:08:50,080 --> 00:08:55,920 Speaker 1: on really developing unique strategies and innovation in terms of 150 00:08:55,960 --> 00:08:58,840 Speaker 1: their fundamental business. Uh So we're at a We're at 151 00:08:58,840 --> 00:09:02,319 Speaker 1: a place now where I think the pressures that most 152 00:09:02,360 --> 00:09:06,760 Speaker 1: companies feel are not translating into the kind of investment 153 00:09:06,800 --> 00:09:08,920 Speaker 1: that I think we need to drive economic growth in 154 00:09:08,920 --> 00:09:11,200 Speaker 1: America or anywhere else. Right the kind of things we 155 00:09:11,280 --> 00:09:13,600 Speaker 1: make too, and the kind of things anybody makes these days. 156 00:09:13,960 --> 00:09:17,040 Speaker 1: All the companies that you advise, are any of them? 157 00:09:17,440 --> 00:09:19,200 Speaker 1: Do any of them not care how many people they 158 00:09:19,280 --> 00:09:21,480 Speaker 1: hire as long as they're profitable? Or is the goal 159 00:09:21,679 --> 00:09:26,520 Speaker 1: everywhere to push down on costs, which means engineer workers 160 00:09:26,559 --> 00:09:29,360 Speaker 1: and labor costs out. I think that is the over 161 00:09:29,600 --> 00:09:32,800 Speaker 1: has been the overwhelming dominant force for the last you know, 162 00:09:32,920 --> 00:09:37,600 Speaker 1: five to seven years. Uh is is engineer cost out. Uh, 163 00:09:37,640 --> 00:09:40,679 Speaker 1: you know, downsize employment and and and this is very 164 00:09:40,679 --> 00:09:45,560 Speaker 1: important for America and for employment in America that's relatively 165 00:09:45,640 --> 00:09:49,280 Speaker 1: high cost where you can do that employment elsewhere given 166 00:09:49,360 --> 00:09:54,079 Speaker 1: lower cost environments, equally good skills, lower tax rates. Uh, 167 00:09:54,120 --> 00:09:57,640 Speaker 1: that that sort of middle class employment has moved out, 168 00:09:58,480 --> 00:10:01,240 Speaker 1: you know, upper income, high skill, you know the people 169 00:10:01,240 --> 00:10:04,480 Speaker 1: that Apple hires. Employment is great for those kind of folks, 170 00:10:04,520 --> 00:10:08,240 Speaker 1: but for for the average worker, Uh, the job growth 171 00:10:08,320 --> 00:10:11,400 Speaker 1: is relatively low and the wage growth is very very low. 172 00:10:11,679 --> 00:10:15,800 Speaker 1: So so we have this divide, and the divide in 173 00:10:15,800 --> 00:10:21,040 Speaker 1: the economy has creating is creating political uh you know, 174 00:10:21,559 --> 00:10:26,640 Speaker 1: uh hurricane Uh. That is pitting you know, groups in 175 00:10:26,679 --> 00:10:29,920 Speaker 1: America against each other. We're not coming together to solve 176 00:10:29,960 --> 00:10:34,120 Speaker 1: the fundamental problems of skill education, uh, improving our tax code. 177 00:10:34,160 --> 00:10:36,760 Speaker 1: We're we're fighting each other. Let's come back. Michael Porter 178 00:10:36,880 --> 00:10:39,280 Speaker 1: was with Harvard Business School and annual visit. We will 179 00:10:39,320 --> 00:10:43,679 Speaker 1: continue this discussion. Futures up seven towl, futures up seventy, 180 00:10:43,720 --> 00:10:46,520 Speaker 1: the ten year yield one point eight one flat in 181 00:10:46,600 --> 00:10:52,480 Speaker 1: with a little bit of tendency there in a quiet market. 182 00:10:52,480 --> 00:10:54,520 Speaker 1: This hour of Surveillance brought to you by Volvo Cars, 183 00:10:54,520 --> 00:10:57,320 Speaker 1: White Planes. Visit Volvo Cars, White Planes dot com. Here's 184 00:10:57,360 --> 00:10:59,719 Speaker 1: Michael Barr with the latest news headlines. Mike Tom, thank 185 00:10:59,760 --> 00:11:02,520 Speaker 1: you very much. Turkey's Prime minister is blaming two Kurdish 186 00:11:02,600 --> 00:11:05,400 Speaker 1: groups for yesterday's car bombing and anchor that killed twenty 187 00:11:05,440 --> 00:11:08,160 Speaker 1: eight people. He says the attack was carried out by 188 00:11:08,200 --> 00:11:11,360 Speaker 1: the armed wing of the Democratic Union Party or the 189 00:11:11,360 --> 00:11:13,400 Speaker 1: p y D. However, the head of the p y 190 00:11:13,520 --> 00:11:16,440 Speaker 1: D says the group was not involved in the bombing. 191 00:11:16,800 --> 00:11:20,319 Speaker 1: Turkey has conducted air strikes against Reubles. President Obama will 192 00:11:20,320 --> 00:11:23,120 Speaker 1: release details of plans to travel to Cuba next month. 193 00:11:23,520 --> 00:11:26,400 Speaker 1: It would be the first time a sitting US president 194 00:11:26,720 --> 00:11:29,960 Speaker 1: visited Havanna in almost nine decades. I Made Your Hospital 195 00:11:30,040 --> 00:11:33,280 Speaker 1: in Los Angeles says it has paid ransom to hackers 196 00:11:33,280 --> 00:11:36,680 Speaker 1: who were holding its computer network hostage. The CEO of 197 00:11:36,720 --> 00:11:39,920 Speaker 1: Hollywood Presbyteria Medical Center says it was the most efficient 198 00:11:39,920 --> 00:11:42,440 Speaker 1: way to end the problem after the hospital's computers were 199 00:11:42,440 --> 00:11:46,320 Speaker 1: infected with ransomware. The hospital says it paid the hackers 200 00:11:46,440 --> 00:11:50,720 Speaker 1: forty bitcoins worth almost seventeen thousand dollars. Global News twenty 201 00:11:50,720 --> 00:11:54,600 Speaker 1: four hours a day, powered by our journalists I'm Michael Barr. 202 00:11:54,800 --> 00:11:57,520 Speaker 1: To Michael, thanks so much oil with a lift. This 203 00:11:57,600 --> 00:12:01,800 Speaker 1: warning us right now fifty barrel Michae McKee and Tom 204 00:12:01,880 --> 00:12:07,680 Speaker 1: Keane Bloomberg Surveillance Bloomberg surveillances. But you buy your try 205 00:12:07,760 --> 00:12:09,880 Speaker 1: State b MW Centers. This isn't the online. It try 206 00:12:09,880 --> 00:12:12,439 Speaker 1: State BMW dot com. At BMW, they only make one thing, 207 00:12:12,520 --> 00:12:24,559 Speaker 1: the ultimate driving machine. Global Business News twenty four hours 208 00:12:24,559 --> 00:12:27,840 Speaker 1: a day at Bloomberg dot com, the radio plus Mobila 209 00:12:28,040 --> 00:12:31,480 Speaker 1: and on your radio. This is a Bloomberg Business Flash 210 00:12:31,960 --> 00:12:34,360 Speaker 1: And I'm Karen Moscow. This updates brought to you by 211 00:12:34,400 --> 00:12:37,560 Speaker 1: Eisner Amper. Does your accountant do more than crunch numbers? 212 00:12:37,760 --> 00:12:40,920 Speaker 1: Eisner Amper understands the more than there, they're more their 213 00:12:40,960 --> 00:12:43,760 Speaker 1: clients know, the better the outcome. That's why they've created 214 00:12:43,760 --> 00:12:47,560 Speaker 1: a personal tax God free downloaded Oisner Emper dot Com 215 00:12:47,640 --> 00:12:51,360 Speaker 1: slash strategies. Walmart is down to four point four percent 216 00:12:51,440 --> 00:12:54,440 Speaker 1: this morning, the world's largest retailer, lowering its annual sales 217 00:12:54,480 --> 00:12:57,320 Speaker 1: forecast after the strong dollar pulled down the value of 218 00:12:57,360 --> 00:13:01,079 Speaker 1: overseas revenue futures are higher s and p Emuni futures 219 00:13:01,080 --> 00:13:04,480 Speaker 1: of seven points. Dowie Mini futures up seventy. Na's DOCUMENTI 220 00:13:04,520 --> 00:13:06,840 Speaker 1: Future is up twenty four. The acts in Germany's up 221 00:13:06,840 --> 00:13:10,120 Speaker 1: one point seven percent. Ten, Your treasury up to thirty seconds, 222 00:13:10,160 --> 00:13:13,240 Speaker 1: the yield one point one percent. Nix scret oil up 223 00:13:13,320 --> 00:13:15,800 Speaker 1: three percent or naughty two cents to thirty one dollars, 224 00:13:15,840 --> 00:13:18,680 Speaker 1: fifty eight cents of arrol comex goold on half percent 225 00:13:18,760 --> 00:13:21,480 Speaker 1: or five dollars eighty cents to twelve oh five seventy 226 00:13:21,480 --> 00:13:24,439 Speaker 1: announced and the euro a dollar ten nineties seven. That's 227 00:13:24,440 --> 00:13:27,520 Speaker 1: a Bloomberg business flash. Tom and Mike Karena, thanks so much. 228 00:13:27,520 --> 00:13:29,760 Speaker 1: Michael McKee and Tom Keane with us. Michael Porter of 229 00:13:29,800 --> 00:13:33,520 Speaker 1: Harvard Business School, great response to our comments. I love 230 00:13:33,520 --> 00:13:37,560 Speaker 1: what Bernie says out on Twitter, Professor Porter and the 231 00:13:37,640 --> 00:13:40,520 Speaker 1: divide is creating a welfare state. You just told us 232 00:13:40,520 --> 00:13:44,240 Speaker 1: off in the commercial um the iPhone is like the 233 00:13:44,240 --> 00:13:48,240 Speaker 1: controller of life. I love that idea. It goes back 234 00:13:48,280 --> 00:13:52,800 Speaker 1: to how we measure productivity. Del Jorgenson. I'm sure you've 235 00:13:52,880 --> 00:13:54,640 Speaker 1: lunched with him a couple of times a year. What 236 00:13:54,760 --> 00:13:57,760 Speaker 1: does what does Michael Porter? What does Professor Jorgenson? The 237 00:13:57,840 --> 00:14:03,319 Speaker 1: owner of productivity? Are we even approximating accountability? Of all 238 00:14:03,360 --> 00:14:06,880 Speaker 1: this technology. I I think it's very hard to measure 239 00:14:07,000 --> 00:14:12,559 Speaker 1: how it's affecting these numbers. But uh, I think, uh, 240 00:14:12,679 --> 00:14:15,920 Speaker 1: we're we were just talking about how, you know, all 241 00:14:16,000 --> 00:14:18,640 Speaker 1: this new communications technology means we're spending a lot of 242 00:14:18,640 --> 00:14:21,640 Speaker 1: time communicating and and and interacting. But does that really 243 00:14:21,720 --> 00:14:25,640 Speaker 1: make us more productive? That's the key question and all 244 00:14:25,680 --> 00:14:28,160 Speaker 1: the time, and I don't. I don't think it necessarily does. 245 00:14:28,440 --> 00:14:34,000 Speaker 1: And UH, I think the um, um, the the the 246 00:14:34,040 --> 00:14:38,960 Speaker 1: ability to kind of restart true productivity growth again is 247 00:14:39,360 --> 00:14:44,120 Speaker 1: uh is really a fundamental challenge facing the US, particularly 248 00:14:44,120 --> 00:14:48,880 Speaker 1: since so many citizens are uh, you know, not equipped 249 00:14:48,960 --> 00:14:52,280 Speaker 1: with with the skills and the capabilities uh to do 250 00:14:52,680 --> 00:14:56,680 Speaker 1: uh sort of modern productive work. UH. The factory job 251 00:14:56,800 --> 00:15:00,240 Speaker 1: is very different today than it was before. The the 252 00:15:01,120 --> 00:15:05,760 Speaker 1: nature of uh even even many service jobs is requiring 253 00:15:05,800 --> 00:15:10,040 Speaker 1: more than than it ever has. And I think, uh, 254 00:15:10,160 --> 00:15:13,600 Speaker 1: you know, how the uh, the middle uh is going 255 00:15:13,680 --> 00:15:17,760 Speaker 1: to access uh those opportunities is the great challenge of 256 00:15:17,800 --> 00:15:20,760 Speaker 1: our age. UH. I think the people with skill and 257 00:15:20,800 --> 00:15:26,160 Speaker 1: the people with education are doing just fine. Professor Dr Ceo, 258 00:15:26,520 --> 00:15:29,000 Speaker 1: let's add President of the United States, your title. Imagine 259 00:15:29,040 --> 00:15:32,120 Speaker 1: you're you're you could hold your nose long enough to run. 260 00:15:32,200 --> 00:15:34,240 Speaker 1: With this group of characters out there, what would you 261 00:15:34,280 --> 00:15:39,320 Speaker 1: do to turn this around? In a world whereas Larry 262 00:15:39,360 --> 00:15:42,720 Speaker 1: Summers points out in his marvelous Foreign affairs article, uh 263 00:15:42,960 --> 00:15:47,520 Speaker 1: Airbnb's impact on hotel construction, Uber's impact on car sales. 264 00:15:47,680 --> 00:15:50,000 Speaker 1: I mean, in that kind of world, how do you 265 00:15:50,080 --> 00:15:55,800 Speaker 1: incent companies to produce more? Well, um, that's a that's 266 00:15:55,800 --> 00:16:00,080 Speaker 1: a great question. Um, I think we need to you. 267 00:16:01,440 --> 00:16:05,240 Speaker 1: I think actually it's it sounds like a broke direct. 268 00:16:05,320 --> 00:16:07,920 Speaker 1: We need to modify the corporate tax system. Right now, 269 00:16:08,040 --> 00:16:11,040 Speaker 1: we have a we have the highest corporate tax system 270 00:16:11,080 --> 00:16:13,640 Speaker 1: in the world, and we've got to reduce We've got 271 00:16:13,640 --> 00:16:19,160 Speaker 1: to raise the return on fundamental investments in uh you know, 272 00:16:19,280 --> 00:16:22,880 Speaker 1: in in in plants and equipments and hiring people and 273 00:16:23,200 --> 00:16:26,840 Speaker 1: investing in in R and ded to find those next 274 00:16:26,920 --> 00:16:30,280 Speaker 1: better ways of doing things and uh you know, and 275 00:16:30,320 --> 00:16:34,359 Speaker 1: instead of of trying to create an environment that stimulates 276 00:16:34,400 --> 00:16:39,240 Speaker 1: innovation in the real economy. Um, instead where you know, 277 00:16:39,320 --> 00:16:43,000 Speaker 1: we're having silly fights over uh you know, tax and 278 00:16:43,120 --> 00:16:45,920 Speaker 1: versions where companies are leaving America and we want to 279 00:16:45,960 --> 00:16:49,560 Speaker 1: have an exite tax. So I don't know, I I 280 00:16:49,800 --> 00:16:54,120 Speaker 1: have this tremendous disconnect right now between what we're talking 281 00:16:54,160 --> 00:16:57,840 Speaker 1: about in the presidential election and in the policy arena 282 00:16:58,600 --> 00:17:02,480 Speaker 1: and the reality the real economy. Let's talk about somebody 283 00:17:02,520 --> 00:17:04,359 Speaker 1: that you know, arguably could be CEO of the Year 284 00:17:04,440 --> 00:17:06,679 Speaker 1: last year. There's many candidates for that, but Jeff Ymmelt 285 00:17:07,240 --> 00:17:10,359 Speaker 1: is transforming Generous Electric. I mean, it was a light 286 00:17:10,400 --> 00:17:13,879 Speaker 1: bulb company's connected. Jack Welch did his thing, and now 287 00:17:13,920 --> 00:17:18,240 Speaker 1: Jeff Emmelt's four or five years into a new example 288 00:17:18,400 --> 00:17:22,240 Speaker 1: of what corporations do. Comment on his business plan of 289 00:17:22,359 --> 00:17:27,760 Speaker 1: industrializing innovation, I think Jeff who I want to tell 290 00:17:27,840 --> 00:17:30,520 Speaker 1: you as a Harvard Business go grat and my former student, 291 00:17:30,960 --> 00:17:33,600 Speaker 1: I'm very proud of what Jeff has done. Jeff is 292 00:17:33,640 --> 00:17:38,639 Speaker 1: remaking General Electric. General Electric was the quintessential conglomerate. Jack 293 00:17:38,680 --> 00:17:43,040 Speaker 1: Welch's ge who of a fine company was in in everything, 294 00:17:43,280 --> 00:17:47,119 Speaker 1: and um it was. And what Jeff has done is 295 00:17:47,200 --> 00:17:49,639 Speaker 1: really trying to pair back that company to make it 296 00:17:49,680 --> 00:17:54,879 Speaker 1: truly an industrial company that makes things um uh and 297 00:17:54,880 --> 00:17:57,240 Speaker 1: and it's and it's well along the way. And Jeff 298 00:17:57,280 --> 00:18:02,040 Speaker 1: has also driven the adoption of this uh, this Internet 299 00:18:02,040 --> 00:18:05,320 Speaker 1: of things phenomena that that is that that there's no 300 00:18:05,400 --> 00:18:09,280 Speaker 1: company in America that will benefit more by the the 301 00:18:09,520 --> 00:18:14,320 Speaker 1: technological possibilities that are created by embedding sensors and UH 302 00:18:14,400 --> 00:18:19,160 Speaker 1: and and software and and UH. This this new information 303 00:18:19,200 --> 00:18:22,919 Speaker 1: technology into the products UH. So. I think GE is 304 00:18:22,960 --> 00:18:25,960 Speaker 1: a remarkable success story. We're very also happy they've moved 305 00:18:26,000 --> 00:18:29,119 Speaker 1: to Boston. Now, they're moving their headquarters to Boston up. 306 00:18:29,200 --> 00:18:32,440 Speaker 1: They want to be in the innovation center in these 307 00:18:32,600 --> 00:18:35,840 Speaker 1: this new product technolog Good morning, Bloomberg, Boston. Tell me 308 00:18:36,359 --> 00:18:39,920 Speaker 1: what Mayor Menino did to have the courage with others 309 00:18:40,200 --> 00:18:44,240 Speaker 1: to jump start that South Harbor section. GE will go 310 00:18:44,280 --> 00:18:47,480 Speaker 1: into well, I think a lot. I think Boston has 311 00:18:47,520 --> 00:18:50,800 Speaker 1: been a city that's actually had a strategy for for 312 00:18:50,880 --> 00:18:54,320 Speaker 1: a long time to try to you know, revitalize UH 313 00:18:54,480 --> 00:18:57,639 Speaker 1: kind of under under utilized parts of the city. We 314 00:18:57,720 --> 00:19:00,480 Speaker 1: have all this gorgeous waterfront and it was really not 315 00:19:01,160 --> 00:19:05,400 Speaker 1: taking taken advantage of UH. Boston has has worked very 316 00:19:05,480 --> 00:19:09,639 Speaker 1: very hard to improve its neighborhoods. UH. I work a 317 00:19:09,640 --> 00:19:11,840 Speaker 1: lot on inner cities in America. Boston has had a 318 00:19:12,040 --> 00:19:17,200 Speaker 1: very conscious strategy for revitalizing the urban core. UH tried 319 00:19:17,320 --> 00:19:19,200 Speaker 1: very very hard to improve its school so I got 320 00:19:19,240 --> 00:19:21,320 Speaker 1: ten seconds off maybe twelve seconds. What do you do 321 00:19:21,320 --> 00:19:23,560 Speaker 1: about the Red Sox this year? I think the Red 322 00:19:23,560 --> 00:19:27,399 Speaker 1: Sox are showing signs that they've they I think the 323 00:19:27,400 --> 00:19:31,159 Speaker 1: new leadership on the baseball side is brought in some 324 00:19:31,240 --> 00:19:34,600 Speaker 1: really great talent. I think the culture is changing. Uh, 325 00:19:34,640 --> 00:19:37,440 Speaker 1: and I think we're gonna have a good year. I'm 326 00:19:37,440 --> 00:19:42,399 Speaker 1: just trying to think of the four the barrier to entry, 327 00:19:42,480 --> 00:19:48,199 Speaker 1: not his middle relief. Michael, thank you so much, exactly. 328 00:19:48,320 --> 00:19:52,879 Speaker 1: Harvard Business School, Michael Porter. Always interesting and certainly it 329 00:19:52,920 --> 00:19:56,000 Speaker 1: links right into the political debate of this two thousand 330 00:19:56,160 --> 00:19:59,080 Speaker 1: sixteen futures of eight down, futures up seventy five. We 331 00:19:59,119 --> 00:20:04,280 Speaker 1: continue on econot, mixed finance, investment, indeed, international relations. Bloomberg Surveillance. 332 00:20:06,760 --> 00:20:09,000 Speaker 1: Bloomberg Surveillance is brought you by the refined Jeep Grand 333 00:20:09,080 --> 00:20:11,159 Speaker 1: Cherokee Overland. It continues to raise the bar with its 334 00:20:11,240 --> 00:20:14,600 Speaker 1: luxurious interior and legendary four by four capability. Drive one 335 00:20:14,600 --> 00:20:16,840 Speaker 1: at your local Jeep dealer today Jeep the official vehicle 336 00:20:17,040 --> 00:20:26,680 Speaker 1: Killington Resort, broadcasting live to New York, Gloomberg eleventh, Ryo 337 00:20:27,000 --> 00:20:31,479 Speaker 1: to Washington, d C. Bloomberg to Boston, Bloomberg twelve one 338 00:20:31,800 --> 00:20:36,480 Speaker 1: to San Francisco, Bloomberg nine to the Country six Channel 339 00:20:36,520 --> 00:20:39,920 Speaker 1: one ninety and around the globe the Bloomberg Radio Plus 340 00:20:40,200 --> 00:20:44,720 Speaker 1: and Bloomberg dot Com. This is Bloomberg Surveillance. Good morning, 341 00:20:44,720 --> 00:20:47,480 Speaker 1: seven thirty on All Street at Michaelmkey along with Tom Keene, 342 00:20:47,560 --> 00:20:49,840 Speaker 1: were two hours away from the start of trading. So 343 00:20:49,960 --> 00:20:52,960 Speaker 1: far futures hanging in there. It looks like an up 344 00:20:53,040 --> 00:20:55,560 Speaker 1: day at least to open the markets and be the 345 00:20:55,560 --> 00:20:58,200 Speaker 1: fourth day in a row. We shall see. Walmart chair 346 00:20:58,320 --> 00:21:01,720 Speaker 1: is not going to open higher. Walmart cutting its annual 347 00:21:01,760 --> 00:21:05,000 Speaker 1: sales forecast to relatively flat from a previous view of 348 00:21:05,359 --> 00:21:08,560 Speaker 1: up three percent to four percent. Earnings per share four 349 00:21:08,560 --> 00:21:11,000 Speaker 1: dollars to four dollars and thirty cents. The estimate is 350 00:21:11,040 --> 00:21:14,680 Speaker 1: four thirteen rather wide there UH. Their first quarter comp 351 00:21:14,760 --> 00:21:19,680 Speaker 1: sales disappointed UH and revenue was short. Walmart shares now 352 00:21:19,760 --> 00:21:23,240 Speaker 1: down four point four percent on the day, boweling we 353 00:21:23,280 --> 00:21:25,720 Speaker 1: can mention them won't face labor strife later this year 354 00:21:25,720 --> 00:21:29,639 Speaker 1: engineers and technical workers approving a six year contract extension. 355 00:21:29,720 --> 00:21:33,639 Speaker 1: Boeing shares flat in early trading. Now, let's check out 356 00:21:33,640 --> 00:21:36,680 Speaker 1: with Michael Barr and get the latest world and national headlines. Mike, 357 00:21:36,680 --> 00:21:39,520 Speaker 1: thank you very much. Vice President Joe Biden says President 358 00:21:39,560 --> 00:21:42,680 Speaker 1: Barack Obama is looking to dominate the Supreme Court candidate 359 00:21:43,080 --> 00:21:46,480 Speaker 1: who's been supported by Republicans in the past. Republicans have 360 00:21:46,600 --> 00:21:49,200 Speaker 1: threatened to block any action on the President's nominee to 361 00:21:49,240 --> 00:21:53,160 Speaker 1: replace late Justice Hanton and Scalia. Biden tells Minnesota Public 362 00:21:53,240 --> 00:21:56,639 Speaker 1: Radio Today that there are plenty of judges who seemingly 363 00:21:56,720 --> 00:22:00,280 Speaker 1: fit the criteria. President Obama will announce his play ends 364 00:22:00,320 --> 00:22:03,240 Speaker 1: later today for his historic trip to Cuba next month. 365 00:22:03,640 --> 00:22:06,440 Speaker 1: It would be the first time a sitting president has 366 00:22:06,520 --> 00:22:10,680 Speaker 1: visited Havanas since Calvin Coolidge in ninety eight. Not everyone 367 00:22:10,800 --> 00:22:14,240 Speaker 1: is on board with the president's trip. Florida Congresswoman Ailena 368 00:22:14,600 --> 00:22:17,600 Speaker 1: Ross lighten it, how does that benefit the United States 369 00:22:17,640 --> 00:22:20,439 Speaker 1: at all? Does it make us any safer to have 370 00:22:20,520 --> 00:22:23,600 Speaker 1: a Cuban embassy in Washington? No, it makes us less safe. 371 00:22:24,200 --> 00:22:26,320 Speaker 1: The U. S. And Cuba recently signed an agreement to 372 00:22:26,359 --> 00:22:30,320 Speaker 1: allow commercial flights between the two countries. Toyota is recalling 373 00:22:30,359 --> 00:22:33,760 Speaker 1: about two point nine million sport utility vehicles because of 374 00:22:33,880 --> 00:22:36,960 Speaker 1: seat belts that might fail in the crash. More than 375 00:22:37,000 --> 00:22:40,000 Speaker 1: one point one million of those SUVs are in the US. 376 00:22:40,280 --> 00:22:43,600 Speaker 1: The recall covers RAV four SUVs from two thousand five 377 00:22:43,720 --> 00:22:48,160 Speaker 1: through ten model years. Global News twenty four hours a day, 378 00:22:48,160 --> 00:22:50,960 Speaker 1: powered by our two hundred journalists and more than a 379 00:22:51,040 --> 00:22:53,960 Speaker 1: hundred fifty bureaus from around the world. I'm Michael Barr, Mike, 380 00:22:55,200 --> 00:22:57,560 Speaker 1: Thank you, Michael. Time now for the Ray Katina Auto 381 00:22:57,560 --> 00:23:01,439 Speaker 1: Group Bloomberg NBC Sports Update with John's all right, Mike. 382 00:23:01,560 --> 00:23:03,520 Speaker 1: Chicago black Hawks to be the white House today on 383 00:23:03,640 --> 00:23:05,640 Speaker 1: it for winning the Stanley Cup third time in six years. 384 00:23:05,680 --> 00:23:08,520 Speaker 1: They're a top to Western conference again this season showed 385 00:23:08,520 --> 00:23:10,600 Speaker 1: why at the Garden last night. They led the Rangers 386 00:23:10,600 --> 00:23:13,360 Speaker 1: to nothing. They fell behind three to two. A rookie 387 00:23:13,560 --> 00:23:16,440 Speaker 1: led the black Ops back stalled her first one year 388 00:23:19,200 --> 00:23:29,720 Speaker 1: LA change starts for r Chevy Panera. Black Hawks pick 389 00:23:29,840 --> 00:23:32,399 Speaker 1: up five three lead and that was the final. NBC 390 00:23:32,480 --> 00:23:34,680 Speaker 1: the call the fight getting the captain Ryan mcdunnab back 391 00:23:34,720 --> 00:23:37,720 Speaker 1: from his head injury. The first regulation time home loss 392 00:23:37,760 --> 00:23:41,320 Speaker 1: for the Rangers since December. College basketball in the sports 393 00:23:41,320 --> 00:23:43,960 Speaker 1: best rivalry, dukeally land in the second half twice, never 394 00:23:44,040 --> 00:23:46,199 Speaker 1: by more than a point, but the Blue Devils won 395 00:23:46,240 --> 00:23:50,160 Speaker 1: at North Carolina sev seventy three st John's sixteen game 396 00:23:50,240 --> 00:23:53,600 Speaker 1: losing streak finally over eighty to sixty five over DePaul, 397 00:23:53,880 --> 00:23:56,080 Speaker 1: a win for Seaton Hall that could help attendc double 398 00:23:56,119 --> 00:23:59,760 Speaker 1: a hope six four over Georgetown Form and beat U Mass. St. 399 00:23:59,800 --> 00:24:02,840 Speaker 1: Pete was tot Manhattan and Stony Brooks eight team game 400 00:24:02,880 --> 00:24:05,239 Speaker 1: winning streak, longest with the nation, came to an end 401 00:24:05,240 --> 00:24:07,960 Speaker 1: at all of the eighty two seventy with the Bloomberg 402 00:24:08,000 --> 00:24:12,800 Speaker 1: NBC Sports Update. I'm John Stash. Thank you John. As 403 00:24:12,800 --> 00:24:16,120 Speaker 1: we mentioned, SMP shares up by six points now three 404 00:24:16,119 --> 00:24:18,000 Speaker 1: tenths of eight percent. As we get ready to see 405 00:24:18,000 --> 00:24:20,680 Speaker 1: if we can do four days in a row. I 406 00:24:20,720 --> 00:24:22,879 Speaker 1: don't know if it qualifies as a turnaround or not. 407 00:24:22,960 --> 00:24:25,879 Speaker 1: Technical Land, let's tell you it's abounce. We shall see 408 00:24:26,200 --> 00:24:28,520 Speaker 1: ten your note gale though higher than it was yesterday, 409 00:24:28,640 --> 00:24:38,800 Speaker 1: one point eight one. This is Bloomberg Radio Worldwide. Then, 410 00:24:38,840 --> 00:24:41,840 Speaker 1: welcome back to Bloomberg Surveillance. I Michael McKey along with 411 00:24:42,000 --> 00:24:45,440 Speaker 1: Tom Keene. As we mentioned, a a risk on day 412 00:24:45,520 --> 00:24:48,600 Speaker 1: for everyone except the British. The foot seed down by 413 00:24:48,600 --> 00:24:50,480 Speaker 1: one points right now. They're kind of waiting to see 414 00:24:50,520 --> 00:24:53,440 Speaker 1: what happens with this whole Brexit talk. The negotiations underway 415 00:24:53,440 --> 00:24:56,080 Speaker 1: in Brussels, will see if Prime Minister Cameron comes up 416 00:24:56,080 --> 00:24:58,480 Speaker 1: with a deal that he can sell to the British people. 417 00:24:58,480 --> 00:25:01,560 Speaker 1: The rest of the world looking reasonably happy. US futures 418 00:25:01,600 --> 00:25:04,840 Speaker 1: up across the board by around three tenths of a percent. 419 00:25:04,920 --> 00:25:07,800 Speaker 1: The stock six hundred in Europe is up by three 420 00:25:07,800 --> 00:25:10,960 Speaker 1: points right now, That is eight tenths of a per cent. 421 00:25:11,640 --> 00:25:13,919 Speaker 1: Time now for the Bloomberg n j I T STEM Report, 422 00:25:13,920 --> 00:25:16,480 Speaker 1: brought to you by New Jersey Institute of Technology, partnering 423 00:25:16,520 --> 00:25:19,200 Speaker 1: with government and industry to apply the university's world class 424 00:25:19,240 --> 00:25:22,920 Speaker 1: research assets to innovate and spur economic growth. Learn more 425 00:25:22,920 --> 00:25:25,720 Speaker 1: at n j I T dot e d U. Here 426 00:25:25,800 --> 00:25:29,280 Speaker 1: is Michael Good Morning, seven thirty four on Wall Streets, 427 00:25:29,320 --> 00:25:32,840 Speaker 1: and here's what's making news in science, Technology, engineering and math. 428 00:25:33,240 --> 00:25:35,800 Speaker 1: Tim Cook has picked a fight with the US government, 429 00:25:36,040 --> 00:25:39,800 Speaker 1: and Silicon Valley is joining his side. From Google to Facebook, 430 00:25:40,040 --> 00:25:43,320 Speaker 1: the industry's biggest names have rallied around Apple's chief executive 431 00:25:43,359 --> 00:25:46,200 Speaker 1: officer after he valued to resist a court order demanding 432 00:25:46,359 --> 00:25:49,359 Speaker 1: it helped unlock the iPhone of a shooter in the 433 00:25:49,400 --> 00:25:53,919 Speaker 1: California terrorist attacks. Technologically speaking, Apple has the capability it 434 00:25:54,000 --> 00:25:56,359 Speaker 1: needs to comply with the government's request, but giving the 435 00:25:56,359 --> 00:26:00,080 Speaker 1: government a back door to its customers private communication, it contends, 436 00:26:00,280 --> 00:26:02,960 Speaker 1: would be a dangerous precedent, which could then lead to 437 00:26:03,119 --> 00:26:07,080 Speaker 1: a relatively simple technical work around to obtain call records, 438 00:26:07,080 --> 00:26:11,000 Speaker 1: text messages, text messages, and other data. The coalition representing 439 00:26:11,000 --> 00:26:14,800 Speaker 1: companies including Google, Facebook, Microsoft, and Twitter issued a statement 440 00:26:14,840 --> 00:26:18,120 Speaker 1: reiterating that while it's extremely important to deter crime and terrorism, 441 00:26:18,400 --> 00:26:21,000 Speaker 1: no company should be required to build backdoors to their 442 00:26:21,040 --> 00:26:25,600 Speaker 1: own technology. Separately, Google chief executives Sundar Pachai explained that 443 00:26:25,760 --> 00:26:29,240 Speaker 1: his company provides law enforcement access to data based on 444 00:26:29,600 --> 00:26:33,680 Speaker 1: valid legal orders, but added that's wholly different than requiring 445 00:26:33,720 --> 00:26:37,600 Speaker 1: companies to enable hacking of customer devices and data. And 446 00:26:37,680 --> 00:26:40,840 Speaker 1: that's this morning's Bloomberg and j I T Stem report. Michael, 447 00:26:41,160 --> 00:26:44,840 Speaker 1: thank you, Robert Walmart. As we mentioned, UH cutting their 448 00:26:44,880 --> 00:26:48,119 Speaker 1: forecast for the year to relatively flat. Previous view was 449 00:26:48,240 --> 00:26:51,720 Speaker 1: up three to four percent. They are, as so many 450 00:26:51,760 --> 00:26:54,600 Speaker 1: companies are these days, blaming the dollar. They also cite 451 00:26:54,640 --> 00:26:58,040 Speaker 1: recent store closings for the forecast and for the fact 452 00:26:58,119 --> 00:27:01,840 Speaker 1: that comps sales are not going to be significantly improving. 453 00:27:01,880 --> 00:27:06,320 Speaker 1: They were also short und estimates. Shannon Petty Piece covers 454 00:27:06,320 --> 00:27:10,840 Speaker 1: Walmart for Bloomberg News. Shannon, Walmart, we know is in 455 00:27:10,960 --> 00:27:15,200 Speaker 1: a quote unquote turnaround process. So do we look at 456 00:27:15,240 --> 00:27:19,600 Speaker 1: their results in the most recent quarter as a failure 457 00:27:19,640 --> 00:27:22,199 Speaker 1: of management and the stocks getting killed down down four 458 00:27:22,240 --> 00:27:24,840 Speaker 1: and a half percent in early trading, or as just 459 00:27:25,280 --> 00:27:28,879 Speaker 1: part of a bumpy step towards uh, the eventual achievement 460 00:27:28,920 --> 00:27:31,679 Speaker 1: of their goals. Um. Well, I mean, I guess you know, 461 00:27:31,760 --> 00:27:34,760 Speaker 1: it takes time to turn around the titanic. Um. You know, 462 00:27:34,800 --> 00:27:38,359 Speaker 1: they're a humongous company. They have almost five billion dollars 463 00:27:38,400 --> 00:27:41,720 Speaker 1: in revenue each year. Um. So you know it wasn't 464 00:27:41,720 --> 00:27:46,800 Speaker 1: going to be painless. But expectations have been really um, 465 00:27:46,840 --> 00:27:50,760 Speaker 1: you know low for among investors and analysts for Walmart. Um. 466 00:27:50,880 --> 00:27:54,120 Speaker 1: You know, for example, analysts, we're expecting um, same source 467 00:27:54,160 --> 00:27:57,440 Speaker 1: sales to increase about one percent. Walmart only increase them 468 00:27:57,440 --> 00:28:00,639 Speaker 1: about half a percent to zero point six percent, you know. 469 00:28:00,800 --> 00:28:03,480 Speaker 1: And for you know, the next year, they had given 470 00:28:03,520 --> 00:28:06,080 Speaker 1: this guidance in October saying that sales would grow about 471 00:28:06,080 --> 00:28:09,159 Speaker 1: three Uh. You know, investors weren't happy with that, but 472 00:28:09,200 --> 00:28:11,000 Speaker 1: they had sort of grown to live with it, and 473 00:28:11,040 --> 00:28:13,320 Speaker 1: then they said, oh, well wait, you know that really 474 00:28:13,320 --> 00:28:15,840 Speaker 1: didn't take into account how strong the dollar has been. 475 00:28:16,080 --> 00:28:18,320 Speaker 1: We know when you factor in currency, it's going to 476 00:28:18,359 --> 00:28:20,720 Speaker 1: be flat this year. And I think that's just sort 477 00:28:20,720 --> 00:28:24,119 Speaker 1: of um, you know, it's not pleasing to investors, or 478 00:28:24,240 --> 00:28:26,439 Speaker 1: they're at least saying, well, why do I stick around 479 00:28:26,480 --> 00:28:28,520 Speaker 1: with a company that's not going to have any growth 480 00:28:28,560 --> 00:28:31,240 Speaker 1: next year. There's plenty of companies that are still growing 481 00:28:31,680 --> 00:28:34,920 Speaker 1: despite everything that's going on in the global economy. These 482 00:28:34,920 --> 00:28:37,639 Speaker 1: guys just getting killed by Amazon. I mean, Walmart was 483 00:28:37,720 --> 00:28:43,160 Speaker 1: the world's biggest store, uh, destroying everybody through the nineties 484 00:28:43,440 --> 00:28:47,320 Speaker 1: or early two thousand's, and now they almost seem irrelevant 485 00:28:47,320 --> 00:28:50,920 Speaker 1: in this age of Amazon. Well, and I think, yeah, 486 00:28:50,920 --> 00:28:52,920 Speaker 1: Amazon's kind of elephant in the room. And when you 487 00:28:52,960 --> 00:28:56,080 Speaker 1: look at e commerce sales, they were up eight percent 488 00:28:56,280 --> 00:28:59,280 Speaker 1: in the quarter, um, and that might sound good, but 489 00:28:59,640 --> 00:29:02,640 Speaker 1: in context, they've been slowing. They were uh, they were 490 00:29:02,680 --> 00:29:05,680 Speaker 1: ten percent last quarter, they were um, you know, fifteen 491 00:29:05,720 --> 00:29:08,880 Speaker 1: percent a quarter before. A year ago, they were around 492 00:29:08,960 --> 00:29:12,720 Speaker 1: you know, so part of that's the law of large numbers, 493 00:29:12,760 --> 00:29:14,440 Speaker 1: but not a lot of that. I mean when you 494 00:29:14,440 --> 00:29:17,080 Speaker 1: look at Amazon, I mean they are double digit growth 495 00:29:17,240 --> 00:29:20,680 Speaker 1: just you know, chugging away no matter how big they get. Um, 496 00:29:20,720 --> 00:29:23,960 Speaker 1: you know, their growth is going faster and faster. So um, 497 00:29:24,520 --> 00:29:28,040 Speaker 1: I think, Yeah, the online side, despite all the investment 498 00:29:28,120 --> 00:29:31,240 Speaker 1: the company has been putting into that, it's at least 499 00:29:31,280 --> 00:29:34,160 Speaker 1: as far as the perception is what investors want, it's 500 00:29:34,200 --> 00:29:37,400 Speaker 1: not growing as fast as as they wanted to. So 501 00:29:37,400 --> 00:29:40,360 Speaker 1: what does the Amazon say to investors on their call today? 502 00:29:40,400 --> 00:29:43,640 Speaker 1: How do they keep them on board? So? How does Walmart? Yeah, 503 00:29:43,640 --> 00:29:46,120 Speaker 1: haws Walmart keeping them on board? Um, you know they 504 00:29:46,200 --> 00:29:50,160 Speaker 1: are blaming currency, They're blaming these store closures, even though 505 00:29:50,160 --> 00:29:53,120 Speaker 1: the store closures were tiny rounding error for the company. Um. 506 00:29:53,200 --> 00:29:55,440 Speaker 1: You know, they're blaming food deflation and milk and dairy. 507 00:29:55,480 --> 00:29:57,440 Speaker 1: But again, you know, this is a huge company. You 508 00:29:57,480 --> 00:30:00,200 Speaker 1: know how much milk and dairy do they sell? Um? 509 00:30:00,320 --> 00:30:03,080 Speaker 1: And uh you know that. I think the real message though, 510 00:30:03,120 --> 00:30:05,480 Speaker 1: is we've got a strategy in place. We're trying to 511 00:30:05,520 --> 00:30:08,440 Speaker 1: fix up our US stores. We're spending in our online operations, 512 00:30:08,440 --> 00:30:10,960 Speaker 1: We're trying to get more competitive there. We have the strategy, 513 00:30:11,000 --> 00:30:14,240 Speaker 1: we're sticking to it. We see some signs that it's improving. 514 00:30:14,400 --> 00:30:17,320 Speaker 1: We see the quality of our stores improving. We see 515 00:30:17,360 --> 00:30:20,800 Speaker 1: slight improvements in traffic. Hey, at least our same store 516 00:30:20,800 --> 00:30:23,600 Speaker 1: sales weren't down, which was the case a couple of 517 00:30:23,640 --> 00:30:26,400 Speaker 1: years ago. Um, you know, stick with our strategy. But 518 00:30:26,640 --> 00:30:29,600 Speaker 1: I do always kind of note to Walt on Walmart. Um, 519 00:30:29,920 --> 00:30:32,240 Speaker 1: you know, they're owned and controlled by the Walton family, 520 00:30:32,600 --> 00:30:34,400 Speaker 1: and so there's at the very end of the day, 521 00:30:34,400 --> 00:30:36,360 Speaker 1: there's only one shareholder that really matters, and that's the 522 00:30:36,360 --> 00:30:39,880 Speaker 1: Walton family. And UM, you know, obviously they have to 523 00:30:39,880 --> 00:30:42,440 Speaker 1: take into account the way Wall Street fills and and 524 00:30:42,520 --> 00:30:46,400 Speaker 1: respond to all of their shareholders, but that's who controls management, 525 00:30:46,400 --> 00:30:48,480 Speaker 1: that's who controls the strategy, and as long as they're 526 00:30:48,840 --> 00:30:51,240 Speaker 1: sticking by it, the family is, then you're probably not 527 00:30:51,280 --> 00:30:54,560 Speaker 1: going to see any big drastic changes set. Thank you 528 00:30:54,640 --> 00:30:57,920 Speaker 1: very much. Well, the Walton family has a stock price 529 00:30:57,960 --> 00:31:01,840 Speaker 1: of right now that is down four and a quarter 530 00:31:01,960 --> 00:31:06,200 Speaker 1: percent from from where it closed yesterday at sixty six 531 00:31:06,400 --> 00:31:10,360 Speaker 1: eleven after reporting those disappointing shares, and it may be 532 00:31:10,400 --> 00:31:13,120 Speaker 1: weighing a bit on Walmart. I mean on the market 533 00:31:13,160 --> 00:31:16,760 Speaker 1: SMP now only up four points to tens of eight percent. 534 00:31:17,160 --> 00:31:22,400 Speaker 1: This is Bloomberg Radio Bloomberg s Avalance brought to by 535 00:31:22,400 --> 00:31:25,080 Speaker 1: the all new BMW Springfield. Find amazing pricing on every 536 00:31:25,080 --> 00:31:28,360 Speaker 1: certified pre owned BMW is a BMW Springfield, New Jersey 537 00:31:28,400 --> 00:31:37,760 Speaker 1: dot Com. Financing and leasing available by BMW Financial Services. 538 00:31:37,760 --> 00:31:41,160 Speaker 1: Blombo Business News twenty four hours a day at Bloomberg 539 00:31:41,200 --> 00:31:44,280 Speaker 1: dot com, the Radio plus mobile app and on your radio. 540 00:31:44,560 --> 00:31:48,360 Speaker 1: This is a Bloomberg Business Flash and I'm camerin Moscow. 541 00:31:48,400 --> 00:31:51,000 Speaker 1: This update is brought to you by Sector spidery t F. 542 00:31:51,120 --> 00:31:53,120 Speaker 1: Why buy a single stock when you can invest in 543 00:31:53,160 --> 00:31:56,240 Speaker 1: the entire sector visits sector s P d r S 544 00:31:56,400 --> 00:32:00,120 Speaker 1: dot com or called on six sector e t have 545 00:32:00,920 --> 00:32:04,640 Speaker 1: and this morning Walmart Stores down four point four percent 546 00:32:04,760 --> 00:32:07,640 Speaker 1: shares of them, the world's largest retailer, lowering its annual 547 00:32:07,680 --> 00:32:10,240 Speaker 1: sales forecast after the strong dollar pulled down the value 548 00:32:10,280 --> 00:32:13,840 Speaker 1: of overseas revenue. Futures meanwhile, are moving higher, and we 549 00:32:13,960 --> 00:32:16,600 Speaker 1: checked the markets every fifteen minutes throughout the trading day 550 00:32:16,600 --> 00:32:20,120 Speaker 1: on Bloomberg SNP EVENI futures of four points, DOWI mini 551 00:32:20,120 --> 00:32:24,080 Speaker 1: futures of forty four and Aztec eveny futures of seventeen decks. 552 00:32:24,080 --> 00:32:27,040 Speaker 1: In Germany's up one point six percent, and your treasury 553 00:32:27,080 --> 00:32:29,160 Speaker 1: of one thirty second, the yield one point eight one 554 00:32:29,200 --> 00:32:32,160 Speaker 1: percent yield on the two year point seven three percent. 555 00:32:32,600 --> 00:32:35,120 Speaker 1: Nimex screwed oil up two point four percent or seventy 556 00:32:35,160 --> 00:32:38,160 Speaker 1: three cents to thirty one thirty nine A barrel Comex 557 00:32:38,280 --> 00:32:40,880 Speaker 1: gold is down half percent or six dollars thirty cents 558 00:32:40,920 --> 00:32:43,520 Speaker 1: to twelve oh five ten announced the euro at dollar 559 00:32:43,560 --> 00:32:46,440 Speaker 1: ten eighty six. The N one thirteen point eight three 560 00:32:46,640 --> 00:32:49,840 Speaker 1: Dish network posted profit that missed analysts estimates is more 561 00:32:49,840 --> 00:32:53,479 Speaker 1: TV customers canceled service, and in video is up eight percent. 562 00:32:53,560 --> 00:32:56,000 Speaker 1: This morning, the biggest maker of graphics chips used in 563 00:32:56,080 --> 00:32:59,920 Speaker 1: high end gaming computers predicted sales that may exceed analysts estimate, 564 00:33:00,120 --> 00:33:04,240 Speaker 1: demonstrating again how it's enthusiast customers are protecting it from 565 00:33:04,280 --> 00:33:06,960 Speaker 1: the worst of the PC slump. And that's a Bloomberg 566 00:33:07,000 --> 00:33:10,640 Speaker 1: business flash. Tom and Mike Karen, thank you very much. Well. 567 00:33:10,640 --> 00:33:13,959 Speaker 1: It is a truism in investing that the smart guys 568 00:33:14,440 --> 00:33:17,520 Speaker 1: buy companies before the rest of the world knows why 569 00:33:17,800 --> 00:33:21,400 Speaker 1: you would want to do so. The smarter guys identify 570 00:33:21,520 --> 00:33:24,280 Speaker 1: those companies for the smart guys. One of the smarter 571 00:33:24,360 --> 00:33:29,920 Speaker 1: guys is Quality. He's head of Equity derivatives, flow equity derivatives. 572 00:33:30,320 --> 00:33:32,600 Speaker 1: They officially call it for credit sweets. And he's here 573 00:33:32,640 --> 00:33:36,880 Speaker 1: with us now, Um, you look, let me ask it 574 00:33:36,960 --> 00:33:40,080 Speaker 1: this way. We have a sort of risk on field 575 00:33:40,080 --> 00:33:42,320 Speaker 1: to the markets the last three or four days. What 576 00:33:42,400 --> 00:33:45,760 Speaker 1: are people doing in the options market? And does that 577 00:33:45,840 --> 00:33:50,680 Speaker 1: tell us whether this is sustainable or not? Sure? Thanks? Um. 578 00:33:50,800 --> 00:33:53,600 Speaker 1: One of the things that we're more concerned with is that, 579 00:33:53,640 --> 00:33:55,320 Speaker 1: like you said, even though there is more of a 580 00:33:55,440 --> 00:33:58,840 Speaker 1: risk to risk on tone to the market, Um, the 581 00:33:58,840 --> 00:34:03,080 Speaker 1: bigger concern is this just a short squeeze or is 582 00:34:03,120 --> 00:34:08,319 Speaker 1: this more of a function of you know, basically the 583 00:34:08,320 --> 00:34:14,000 Speaker 1: world is okay again, taught me you're looking confused. I'm 584 00:34:14,560 --> 00:34:17,880 Speaker 1: I'm going back and forth with Okay, the rich Truman 585 00:34:17,960 --> 00:34:21,320 Speaker 1: is our is our crack producer here trying to float 586 00:34:21,360 --> 00:34:26,200 Speaker 1: Tom's balloon here? Um, so risk on for the moment, 587 00:34:26,640 --> 00:34:30,640 Speaker 1: but are people willing to bet on that? And so 588 00:34:30,719 --> 00:34:33,719 Speaker 1: that's the again, like you know, that's the million or 589 00:34:33,719 --> 00:34:36,919 Speaker 1: billion dollar questions. So speak is you know, is this over? 590 00:34:37,080 --> 00:34:39,840 Speaker 1: Is this period of fear over? Um? And one of 591 00:34:39,840 --> 00:34:42,319 Speaker 1: the things that stands out to us is, look, we're 592 00:34:42,320 --> 00:34:45,400 Speaker 1: in a period now, We've just gone through earnings and 593 00:34:45,760 --> 00:34:48,520 Speaker 1: you don't have really that much volume going through at 594 00:34:48,520 --> 00:34:51,319 Speaker 1: the moment um. That's something that should throw up some 595 00:34:51,360 --> 00:34:53,799 Speaker 1: alarm bells, so to speak. Right and even though you 596 00:34:53,800 --> 00:34:55,719 Speaker 1: don't have much volume, what you do have in the 597 00:34:55,760 --> 00:34:58,280 Speaker 1: market right now a lot of buy backs active again. 598 00:34:58,400 --> 00:35:01,560 Speaker 1: Buy backs start after the earning sperience ends because companies 599 00:35:01,719 --> 00:35:04,360 Speaker 1: start getting involved. We've heard it's incredibly slow. You do 600 00:35:04,400 --> 00:35:06,400 Speaker 1: a lot of quant and the derivatives. You do that 601 00:35:06,440 --> 00:35:09,240 Speaker 1: out of your chemistry degree at Harvard. We talked about 602 00:35:09,360 --> 00:35:11,440 Speaker 1: X ten at Harvard and did you take X ten? 603 00:35:11,680 --> 00:35:15,200 Speaker 1: And everyone everybody takes a ten. What they don't know 604 00:35:15,360 --> 00:35:18,239 Speaker 1: is keem forty, which is inorganic chemistry, which is a 605 00:35:18,320 --> 00:35:23,040 Speaker 1: rite of passage. Their models within science, within chemistry, are 606 00:35:23,040 --> 00:35:27,239 Speaker 1: the models in your world world right now, upside down 607 00:35:27,480 --> 00:35:31,799 Speaker 1: or askew? Do you have any confidence in derivative construction 608 00:35:32,200 --> 00:35:35,000 Speaker 1: given how slow it is and given the correlations that 609 00:35:35,040 --> 00:35:37,440 Speaker 1: we see out there on the bloomberg that's a great question. 610 00:35:37,480 --> 00:35:39,400 Speaker 1: So the great thing about chemistry is that when you 611 00:35:39,440 --> 00:35:42,359 Speaker 1: put X plus y together, if it's supposed to blow up, 612 00:35:42,520 --> 00:35:46,320 Speaker 1: if it blows up in the market, you put xplus 613 00:35:46,320 --> 00:35:48,360 Speaker 1: wy together. Everyone's wait for it to blow up. It 614 00:35:48,480 --> 00:35:50,480 Speaker 1: doesn't blow up. And the reason why is because it's 615 00:35:50,520 --> 00:35:54,120 Speaker 1: not just X and Y that actually matters. There's a B, C, D, E, 616 00:35:54,160 --> 00:35:57,120 Speaker 1: F G out there that all influence it. And it's, 617 00:35:57,200 --> 00:35:58,719 Speaker 1: you know, again one of those things in science that 618 00:35:58,719 --> 00:36:01,160 Speaker 1: you call a multidimensional problem, which is a complicated way 619 00:36:01,160 --> 00:36:02,839 Speaker 1: of saying, you know what, no one knows the answer 620 00:36:02,920 --> 00:36:04,759 Speaker 1: for sure. But what you can do is you can 621 00:36:04,760 --> 00:36:07,080 Speaker 1: create a model that says, hey, you know, most of 622 00:36:07,080 --> 00:36:10,279 Speaker 1: the time most things happen. This should happen. And like 623 00:36:10,320 --> 00:36:14,439 Speaker 1: you said, when correlations start breaking down, people start asking why, 624 00:36:14,680 --> 00:36:19,320 Speaker 1: what's the acceptable failure level? Though, then for a quant strategy, 625 00:36:19,640 --> 00:36:22,719 Speaker 1: when you say most of the time, how most do 626 00:36:22,760 --> 00:36:25,360 Speaker 1: you have to be in order to make it work? Again, 627 00:36:25,400 --> 00:36:29,200 Speaker 1: that's you know, another great question. If this was based questions, Yeah, 628 00:36:30,200 --> 00:36:31,799 Speaker 1: you know, if this is a baseball a third of 629 00:36:31,800 --> 00:36:34,240 Speaker 1: the time would be great. But it's not baseball. It's investing. 630 00:36:34,440 --> 00:36:37,239 Speaker 1: And and the interesting thing about investing is that even 631 00:36:37,320 --> 00:36:40,080 Speaker 1: something that says only works fifty one a time, right, 632 00:36:40,560 --> 00:36:43,319 Speaker 1: great traders can make money on that if their money 633 00:36:43,360 --> 00:36:45,400 Speaker 1: management is such that the one percent of time that 634 00:36:45,440 --> 00:36:47,560 Speaker 1: they get it right, they make ten to one right, 635 00:36:47,640 --> 00:36:49,799 Speaker 1: And so that's that's why I like, this is myth 636 00:36:49,880 --> 00:36:52,640 Speaker 1: about quants and that hey, these guys are right ninety 637 00:36:52,640 --> 00:36:55,240 Speaker 1: percent of time. They're not. Really, It's about just getting 638 00:36:55,280 --> 00:36:57,480 Speaker 1: something that's right most of the time or enough for 639 00:36:57,520 --> 00:36:59,279 Speaker 1: the time so that when you put it all, can 640 00:36:59,320 --> 00:37:02,520 Speaker 1: you do that with an equity desk, with the distortion 641 00:37:02,560 --> 00:37:06,000 Speaker 1: off a fixed income of negative interest rates, the zero 642 00:37:06,080 --> 00:37:09,320 Speaker 1: bound reality of every central bank out there in the 643 00:37:09,800 --> 00:37:13,839 Speaker 1: first and second order, derivatives of commodities right now? Can 644 00:37:13,880 --> 00:37:17,120 Speaker 1: you can you in two thousand sixteen create a model? 645 00:37:17,640 --> 00:37:20,400 Speaker 1: And that's the thing you can't if you're looking backwards, 646 00:37:20,520 --> 00:37:23,600 Speaker 1: because you don't have history to basically give you, Hey, 647 00:37:23,680 --> 00:37:26,600 Speaker 1: here's we don't even have a risk free rate exactly exactly. 648 00:37:26,640 --> 00:37:28,239 Speaker 1: I mean, so what do you do on the desk 649 00:37:28,280 --> 00:37:30,359 Speaker 1: a credit suites? What do you do if you don't 650 00:37:30,360 --> 00:37:32,280 Speaker 1: have a risk free rate and you can't look backwards, 651 00:37:32,520 --> 00:37:34,080 Speaker 1: what you do is you just sort of make a 652 00:37:34,160 --> 00:37:36,200 Speaker 1: best guess. But what you can do is you can 653 00:37:36,239 --> 00:37:39,160 Speaker 1: basically take say, hey, you know what, um, And the 654 00:37:39,200 --> 00:37:42,120 Speaker 1: analogy I'll give is, you know, sometimes when you're playing golf, 655 00:37:42,280 --> 00:37:44,759 Speaker 1: right and you hit a driver, UM, you know right 656 00:37:44,800 --> 00:37:48,040 Speaker 1: away whether that's gonna slice. Right, Um, But you know, 657 00:37:48,160 --> 00:37:51,560 Speaker 1: predicting like how far you go or whatever? Again, this 658 00:37:51,560 --> 00:37:54,319 Speaker 1: thing go two fifte yards, three hundred yards, It doesn't matter. 659 00:37:54,400 --> 00:37:55,960 Speaker 1: What you really are trying to get at is when 660 00:37:56,000 --> 00:37:58,240 Speaker 1: you hit it, is this thing gonna slice? And sometimes 661 00:37:58,280 --> 00:38:00,759 Speaker 1: again predicting what happens way on the future is tough. 662 00:38:01,080 --> 00:38:03,280 Speaker 1: But what you try to do, and especially an advantage 663 00:38:03,360 --> 00:38:04,960 Speaker 1: we have on a training desk is I don't have 664 00:38:05,000 --> 00:38:07,239 Speaker 1: to get what's right three months out, but what I'm 665 00:38:07,239 --> 00:38:09,560 Speaker 1: trying to get what's right one day. That one to 666 00:38:09,640 --> 00:38:12,760 Speaker 1: Mike's question, though, if we hear from interview after interview 667 00:38:12,800 --> 00:38:17,840 Speaker 1: that things are quiet, is what we hear in a 668 00:38:17,960 --> 00:38:23,080 Speaker 1: lack of volume, can you construct forward thinking models? And 669 00:38:23,600 --> 00:38:26,320 Speaker 1: that's a really tough question. It is a tough question 670 00:38:26,560 --> 00:38:29,520 Speaker 1: and unfortunately for a lot of people, right. And it's 671 00:38:29,560 --> 00:38:32,000 Speaker 1: not just something that comes on the investing side. It 672 00:38:32,080 --> 00:38:34,640 Speaker 1: comes even at the level of a bank CEO. Right. 673 00:38:34,640 --> 00:38:36,839 Speaker 1: You're trying to create a strategy that's supposed to give 674 00:38:36,840 --> 00:38:39,160 Speaker 1: you a profitble bank, or a strategy that's supposed to 675 00:38:39,239 --> 00:38:43,200 Speaker 1: give you a profitable trading investment, right, Um, But you're 676 00:38:43,200 --> 00:38:46,080 Speaker 1: really just going on best guests you're going on, maybe 677 00:38:46,120 --> 00:38:50,600 Speaker 1: some pass case studies, maybe some um you know, real 678 00:38:50,800 --> 00:38:52,880 Speaker 1: like numbers that Again, like you said, there's no right 679 00:38:52,960 --> 00:38:55,920 Speaker 1: hisory for it, We'll just while just working for I say, 680 00:38:55,960 --> 00:38:58,279 Speaker 1: in the St Regions Hotel in Beijing and I read 681 00:38:58,320 --> 00:39:01,560 Speaker 1: my first article on cee EEO squares and I had 682 00:39:01,600 --> 00:39:04,440 Speaker 1: the basic response of everybody, including the big short What's 683 00:39:04,480 --> 00:39:07,840 Speaker 1: that is my basic idea? What's the new cdo squared 684 00:39:08,040 --> 00:39:11,399 Speaker 1: away from flow equity at credit sueez? What's the derivative 685 00:39:11,880 --> 00:39:15,759 Speaker 1: item or guests or manipulation that you see now that 686 00:39:15,840 --> 00:39:19,040 Speaker 1: causes you professional concern? Well, the things that will cause 687 00:39:19,080 --> 00:39:22,040 Speaker 1: me the most professional concern are where do people have 688 00:39:22,160 --> 00:39:26,279 Speaker 1: their wealth? Because wealth destruction is ultimately what we're looking for, right, 689 00:39:26,320 --> 00:39:29,000 Speaker 1: It's the great Michael Lewis quote. You know, to airs equities, 690 00:39:29,040 --> 00:39:31,640 Speaker 1: but to really screw things up takes fixed income. And 691 00:39:31,760 --> 00:39:34,239 Speaker 1: what you really need to do is find out, all, right, 692 00:39:34,560 --> 00:39:37,520 Speaker 1: what is that you know area where people have concentrated 693 00:39:37,520 --> 00:39:40,000 Speaker 1: What what you would say about foreign exchange? You can't 694 00:39:40,000 --> 00:39:42,600 Speaker 1: buy it that air, right, they can't say that I'm 695 00:39:42,719 --> 00:39:47,200 Speaker 1: radio exactly. So again, where is a lot of wealth 696 00:39:47,239 --> 00:39:49,040 Speaker 1: in the world held? And a lot of it is 697 00:39:49,080 --> 00:39:53,239 Speaker 1: held in you know, basically government bonds, right, um, And 698 00:39:53,280 --> 00:39:55,719 Speaker 1: as you move towards a negative interstrate world, what are 699 00:39:55,719 --> 00:39:57,719 Speaker 1: you gonna do when the person who has their bank 700 00:39:57,760 --> 00:40:00,279 Speaker 1: account in you know, some country all of a is 701 00:40:00,320 --> 00:40:02,640 Speaker 1: losing money because you have negative rates. Like you said 702 00:40:02,680 --> 00:40:04,520 Speaker 1: at the beginning, this is something that we have a 703 00:40:04,600 --> 00:40:07,280 Speaker 1: model before. And while you can look in the equity 704 00:40:07,320 --> 00:40:10,160 Speaker 1: markets and equity strategies, use your quand models to say, hey, 705 00:40:10,160 --> 00:40:11,440 Speaker 1: you know what, this stock should go up and this 706 00:40:11,440 --> 00:40:13,880 Speaker 1: stock should go down. The question that you're asking me 707 00:40:13,920 --> 00:40:16,200 Speaker 1: about what causes me concern is that it's not the 708 00:40:16,320 --> 00:40:18,560 Speaker 1: day to day movements of the equity market that's gonna, 709 00:40:18,640 --> 00:40:21,200 Speaker 1: you know, cause your concern. It is when you get 710 00:40:21,239 --> 00:40:24,640 Speaker 1: actual wealth destruction. When someone who has a million, you know, Frank's, 711 00:40:24,680 --> 00:40:27,279 Speaker 1: all of a sudden wakes up and has nine thousand francs, 712 00:40:27,360 --> 00:40:30,520 Speaker 1: right then they start making decisions. Mike, I would point 713 00:40:30,560 --> 00:40:34,160 Speaker 1: out that the twenty year Swiss franc is breaking down, 714 00:40:34,200 --> 00:40:38,160 Speaker 1: not through record low, but at zero point one zero percent. 715 00:40:38,520 --> 00:40:41,719 Speaker 1: I've never said this on air. The twenty year the 716 00:40:41,840 --> 00:40:45,600 Speaker 1: two decade yield is a tenth of a percent. Well, 717 00:40:45,640 --> 00:40:48,480 Speaker 1: you don't want to be investing in Swiss funds at 718 00:40:48,480 --> 00:40:51,560 Speaker 1: the moment unless unless you have to I guess, or 719 00:40:51,640 --> 00:40:53,600 Speaker 1: if you think they're going to continue to decline. Now 720 00:40:53,640 --> 00:40:56,200 Speaker 1: that's part of the prediction effort for somebody who's going 721 00:40:56,239 --> 00:40:59,719 Speaker 1: to be investing in these things. Uh, what is what's 722 00:40:59,760 --> 00:41:04,279 Speaker 1: the impact of this idea that the neutral real rate 723 00:41:04,880 --> 00:41:07,759 Speaker 1: is much lower than we've ever seen it before? Uh 724 00:41:07,800 --> 00:41:11,360 Speaker 1: and and made stay there. You know, this is something 725 00:41:11,400 --> 00:41:14,680 Speaker 1: that is you know, and a phenomenon that's going to 726 00:41:14,719 --> 00:41:17,960 Speaker 1: propagate itself. And we're just gonna have to see um again. 727 00:41:18,000 --> 00:41:20,239 Speaker 1: If the neutral rate has to be lower, that means 728 00:41:20,280 --> 00:41:22,440 Speaker 1: that risk assets need to be higher because you know, 729 00:41:22,480 --> 00:41:24,720 Speaker 1: like I said before, people don't want to earn zero, 730 00:41:24,800 --> 00:41:27,800 Speaker 1: they want to earn something um. But there's a big 731 00:41:28,160 --> 00:41:31,640 Speaker 1: pull between you know, again the greed and fear um 732 00:41:31,800 --> 00:41:34,400 Speaker 1: aspects of it, and that people want to return. But 733 00:41:34,480 --> 00:41:37,080 Speaker 1: when they're nervous, when they're in a risk reduction mode, 734 00:41:37,480 --> 00:41:40,799 Speaker 1: they won't go get that return. And so again you 735 00:41:40,800 --> 00:41:43,279 Speaker 1: take everything down to zero. We don't know yet if 736 00:41:43,280 --> 00:41:45,520 Speaker 1: actually that money is going to go into buying stocks 737 00:41:45,640 --> 00:41:48,520 Speaker 1: or buying bonds. We'll find out, though. Thank you for 738 00:41:48,560 --> 00:41:51,280 Speaker 1: stopping buying and a Gaussian word. Quality is with credit 739 00:41:51,320 --> 00:41:54,480 Speaker 1: sueeze inequity flow us. We have much to talk to 740 00:41:54,520 --> 00:41:58,239 Speaker 1: what people have them back on? Continue this? Uh? Was that? 741 00:41:58,400 --> 00:42:00,120 Speaker 1: Was that? Okay? Mike, I don't think I don't. I 742 00:42:00,120 --> 00:42:02,839 Speaker 1: think we avoided a fair amount of jargon. Right. Well, 743 00:42:02,960 --> 00:42:05,279 Speaker 1: you kept me from getting lost, which is good. Yeah, 744 00:42:05,360 --> 00:42:08,719 Speaker 1: next week, crotosis. Look at that. Futures up six down, 745 00:42:08,719 --> 00:42:12,759 Speaker 1: features up fifty four. I'm watching oil. Might help me 746 00:42:12,800 --> 00:42:17,560 Speaker 1: watch oil because I gotta relaunch my launchpad screen right now. 747 00:42:17,560 --> 00:42:21,399 Speaker 1: It's for West Texas up two point eight percent, Brent 748 00:42:21,480 --> 00:42:26,160 Speaker 1: crude thirty five two. It's up two point one on 749 00:42:26,200 --> 00:42:30,040 Speaker 1: the day. And we get, of course, the holiday delayed 750 00:42:30,080 --> 00:42:32,600 Speaker 1: inventory numbers out at ten thirty this morning. We like 751 00:42:32,640 --> 00:42:37,440 Speaker 1: those holiday inventory numbers. Actually, inventory is quite important. We'll 752 00:42:37,440 --> 00:42:40,399 Speaker 1: give you, I hope, good perspective on that as well. 753 00:42:40,800 --> 00:42:45,200 Speaker 1: En one three stronger Japanese yen stay with us bonus 754 00:42:45,320 --> 00:42:47,640 Speaker 1: another hour of Bloomberg Savanllas