1 00:00:03,520 --> 00:00:06,800 Speaker 1: This is Bloomberg Surveillance. I don't want to be complainant. 2 00:00:06,840 --> 00:00:08,920 Speaker 1: They are things the world should be worrying about, but 3 00:00:09,080 --> 00:00:11,600 Speaker 1: it's just not as bad a world if some people 4 00:00:11,640 --> 00:00:14,840 Speaker 1: are saying for what most families care about, it's not 5 00:00:14,920 --> 00:00:17,439 Speaker 1: GDP worth of the size of the economy as a whole. 6 00:00:17,440 --> 00:00:22,120 Speaker 1: It's how they're doing. Real capital investment is gray below average? 7 00:00:22,280 --> 00:00:27,680 Speaker 1: Why because businesspeople are very uncertain in our computure. Bloomberg 8 00:00:27,760 --> 00:00:31,479 Speaker 1: Surveillance your link to the world of economics, finance, and 9 00:00:31,600 --> 00:00:35,040 Speaker 1: investment on Bloomberg Radio. Good morning everyone, Michael McKay and 10 00:00:35,120 --> 00:00:38,640 Speaker 1: Time keen worldwide for Global Wall Street in this hour, 11 00:00:39,000 --> 00:00:43,120 Speaker 1: must listen. Sef Masters joined us. Some Burnstey were thrilled 12 00:00:43,120 --> 00:00:46,159 Speaker 1: to drag him in here from his travels. Four Alliance 13 00:00:46,159 --> 00:00:49,760 Speaker 1: Bernstein self Masters will join us in a moment. Bloomberg 14 00:00:49,800 --> 00:00:53,520 Speaker 1: Surveillance brought you on this Monday Central Bank week, Bank 15 00:00:53,560 --> 00:00:56,960 Speaker 1: of Japan, the Feller Reserve and then the Bank of England. 16 00:00:56,960 --> 00:00:58,960 Speaker 1: There's nothing going on this week now. We're brought you 17 00:00:59,000 --> 00:01:02,560 Speaker 1: by Cone RESNEC Accounting Tax Advisory to keep your business 18 00:01:02,840 --> 00:01:05,800 Speaker 1: on top of issues in the evolving renewable energy market. 19 00:01:06,360 --> 00:01:10,600 Speaker 1: It takes dedicated industry experts like Cone Resnick find out 20 00:01:10,600 --> 00:01:13,640 Speaker 1: more at Cone Resnick dot com. Michael, this is gonna 21 00:01:13,720 --> 00:01:17,839 Speaker 1: be wonderful. Seth Masters is with Bernstein. You know them, 22 00:01:17,959 --> 00:01:20,960 Speaker 1: Michael is the keepers of the black books. Years ago, 23 00:01:21,080 --> 00:01:24,360 Speaker 1: before PDFs, you would you didn't even matter what was 24 00:01:24,480 --> 00:01:27,120 Speaker 1: in the black book. You just walked around with a 25 00:01:27,160 --> 00:01:30,880 Speaker 1: black like forty page or sixty page book just so 26 00:01:30,959 --> 00:01:35,560 Speaker 1: could you could look cool reading Bernstein research. He synthesizes 27 00:01:36,120 --> 00:01:39,520 Speaker 1: all of that for Bernstein out of Princeton and Oxford 28 00:01:39,560 --> 00:01:44,560 Speaker 1: and with a terrific eclectic international experience. Seth Master joins 29 00:01:44,680 --> 00:01:48,559 Speaker 1: us the runing are there's still black books at Bernstein? Yes, 30 00:01:48,600 --> 00:01:50,200 Speaker 1: there are, but as you said, most of them are 31 00:01:50,200 --> 00:01:52,760 Speaker 1: actually distributed electronically. Now do you remember that you call 32 00:01:52,840 --> 00:01:54,440 Speaker 1: up somebody, quick, get me a black book. I have 33 00:01:54,480 --> 00:01:58,240 Speaker 1: to look like I know what I'm talking about. You're 34 00:01:58,240 --> 00:02:00,840 Speaker 1: not gonna look cool anymore. Top will get a two girls? 35 00:02:00,920 --> 00:02:03,280 Speaker 1: You know, yeah, you could you get a black book 36 00:02:03,280 --> 00:02:06,960 Speaker 1: from bursting your your girl magnet. Tell me about single 37 00:02:07,000 --> 00:02:10,799 Speaker 1: digit world. This is something that's a huge focus. It 38 00:02:10,919 --> 00:02:14,720 Speaker 1: seems to me that all of our audiences are unprepared. 39 00:02:15,480 --> 00:02:18,600 Speaker 1: After oh nine in the bull Market, for a single 40 00:02:18,680 --> 00:02:20,760 Speaker 1: digit world. Is it going to be a low single 41 00:02:20,800 --> 00:02:24,560 Speaker 1: digit world? I think it is for some time and um, awkwardly, 42 00:02:24,639 --> 00:02:26,280 Speaker 1: in many parts of the world, if you're investing in 43 00:02:26,280 --> 00:02:29,480 Speaker 1: sovereign bonds, it's a negative single digit. So that that's 44 00:02:29,480 --> 00:02:33,959 Speaker 1: a very tip. That's a trying environment, especially because volatility 45 00:02:34,040 --> 00:02:36,480 Speaker 1: is apt to be elevated for some time as well, 46 00:02:36,520 --> 00:02:39,799 Speaker 1: and the combination of relatively lower turns with relatively high 47 00:02:39,840 --> 00:02:43,079 Speaker 1: volatility is going to be uncomfortable. There is an enormous 48 00:02:43,800 --> 00:02:47,440 Speaker 1: We have been through a couple of waves of enormous volatility, 49 00:02:47,440 --> 00:02:51,200 Speaker 1: and you're suggesting, Um, that's not over with. What's driving that? 50 00:02:51,360 --> 00:02:53,840 Speaker 1: If I want to look at what's going to you know, 51 00:02:53,960 --> 00:02:58,080 Speaker 1: to predict what's coming, what do I want to look at? Well? 52 00:02:58,120 --> 00:03:00,080 Speaker 1: I think that the fundamentals in the long run and 53 00:03:00,120 --> 00:03:02,040 Speaker 1: are always what matters, and in the short run it 54 00:03:02,080 --> 00:03:03,960 Speaker 1: tends to be sentiment. And the problem that we have 55 00:03:04,080 --> 00:03:08,080 Speaker 1: right now is that the fundamentals um are actually okay 56 00:03:08,080 --> 00:03:09,840 Speaker 1: and much of the world, actually in the United States 57 00:03:09,840 --> 00:03:12,359 Speaker 1: we have moderate growth, and much of the rest of 58 00:03:12,360 --> 00:03:15,919 Speaker 1: the world it's in unic but still it's growing. UM. 59 00:03:16,200 --> 00:03:19,120 Speaker 1: I think the problem is that people are so uncertain 60 00:03:19,160 --> 00:03:21,920 Speaker 1: about what lies ahead over the horizon, and over the 61 00:03:21,919 --> 00:03:25,560 Speaker 1: horizon matters more than ever because remember, markets discount the 62 00:03:25,560 --> 00:03:29,119 Speaker 1: future when interest rates are very very low. You're effectively 63 00:03:29,160 --> 00:03:31,760 Speaker 1: discounting further out into the future at a time when 64 00:03:31,800 --> 00:03:35,120 Speaker 1: it's harder to see what's out there. What issues are 65 00:03:35,200 --> 00:03:39,640 Speaker 1: driving sentiment right now? What's the major concern for investors 66 00:03:39,680 --> 00:03:42,000 Speaker 1: that they're watching. Well, one problem is there isn't one 67 00:03:42,040 --> 00:03:44,240 Speaker 1: major concern. People are really worried about what's happening in 68 00:03:44,360 --> 00:03:47,040 Speaker 1: energy markets. I think they've overestimated how much that feeds 69 00:03:47,040 --> 00:03:48,760 Speaker 1: directly through to the rest of the economy, but they 70 00:03:48,840 --> 00:03:51,119 Speaker 1: believe it and it becomes self fulfilling. They're very worried 71 00:03:51,160 --> 00:03:53,960 Speaker 1: about central banks are doing exactly as Tom said, there's 72 00:03:54,000 --> 00:03:57,240 Speaker 1: a lot of lack of clarity about exactly how these 73 00:03:57,280 --> 00:03:59,760 Speaker 1: policies will play out with this big divergence between the 74 00:03:59,840 --> 00:04:02,560 Speaker 1: u US, which is clearly trying to tighten, and the 75 00:04:02,600 --> 00:04:04,760 Speaker 1: rest of the world, which is trying to stimulate, and 76 00:04:04,800 --> 00:04:06,600 Speaker 1: nobody knows if either of those will work. But then 77 00:04:06,640 --> 00:04:11,080 Speaker 1: how do you synthesize single digit organic revenue growth at 78 00:04:11,080 --> 00:04:15,840 Speaker 1: the top line with somehow grossing it up to decent 79 00:04:16,040 --> 00:04:19,919 Speaker 1: margins down the income statement. To me, the only answers 80 00:04:20,000 --> 00:04:23,720 Speaker 1: is dreaded ugly word synergy, where it's all a star Woods. 81 00:04:23,920 --> 00:04:26,400 Speaker 1: It's almost a merger frenzy is the only way to 82 00:04:26,400 --> 00:04:28,920 Speaker 1: create alpha. I think it's very company specific. I think 83 00:04:28,960 --> 00:04:30,360 Speaker 1: that's gonna be one of the big themes in the 84 00:04:30,440 --> 00:04:34,560 Speaker 1: years ahead, which is the you know, the last five 85 00:04:34,640 --> 00:04:38,039 Speaker 1: or six years of this amazing stock market boom, it 86 00:04:38,120 --> 00:04:40,520 Speaker 1: was enough to just basically buy an index or any 87 00:04:40,520 --> 00:04:45,279 Speaker 1: tf and but I think the next five to seven 88 00:04:45,360 --> 00:04:47,800 Speaker 1: years are going to be really about being very selective 89 00:04:48,040 --> 00:04:51,960 Speaker 1: and choosing the companies. Well, you don't do companies. But 90 00:04:52,080 --> 00:04:53,960 Speaker 1: is Jeff m l on the right track with a 91 00:04:54,040 --> 00:04:58,760 Speaker 1: re industrialization of General Electric. I think it's really about 92 00:04:58,800 --> 00:05:01,599 Speaker 1: the company by company, any choice of what is your 93 00:05:01,720 --> 00:05:04,440 Speaker 1: competitive advantage and also do you have the right um 94 00:05:04,520 --> 00:05:07,680 Speaker 1: balance sheet strategy and the right people to make it happen. 95 00:05:07,720 --> 00:05:10,480 Speaker 1: It's you know, there's not there's not one ingredient that's 96 00:05:10,520 --> 00:05:12,960 Speaker 1: going to be correct for everybody. Um. There are also 97 00:05:13,040 --> 00:05:15,040 Speaker 1: some sectors that are going to be structurally much more 98 00:05:15,080 --> 00:05:17,960 Speaker 1: challenged than others. Obviously, energy right now is really in 99 00:05:18,000 --> 00:05:20,919 Speaker 1: this array that's gonna take some time to resolve UM. 100 00:05:21,000 --> 00:05:23,000 Speaker 1: You know you you want to look for companies that 101 00:05:23,040 --> 00:05:25,039 Speaker 1: are well positioned in industries that have a bit of 102 00:05:25,040 --> 00:05:27,040 Speaker 1: a tail and and uh, and we think that there 103 00:05:27,040 --> 00:05:30,680 Speaker 1: are lots of opportunities today because the massive flows out 104 00:05:30,680 --> 00:05:33,800 Speaker 1: of active and into passive have UM I think created 105 00:05:33,800 --> 00:05:36,440 Speaker 1: more irrational pricing at the stock level than we've seen 106 00:05:36,440 --> 00:05:38,480 Speaker 1: in sometimes. Well, I want to ask you that is 107 00:05:38,760 --> 00:05:42,800 Speaker 1: how far off are valuations from reality in this world? 108 00:05:43,120 --> 00:05:45,560 Speaker 1: If you look in aggregate, I think the market is 109 00:05:45,960 --> 00:05:48,840 Speaker 1: reasonably priced. It's a little bit above historic averages. But 110 00:05:48,920 --> 00:05:51,600 Speaker 1: then again inflation is low and the discount hit is low. 111 00:05:51,960 --> 00:05:54,520 Speaker 1: So those two things more or less offset. The problem, though, 112 00:05:54,600 --> 00:05:57,640 Speaker 1: is risk is high and you're not actually being paid 113 00:05:57,800 --> 00:06:01,240 Speaker 1: enough we think to take the additional risk that you 114 00:06:01,279 --> 00:06:04,000 Speaker 1: have today in stocks. So in our portfolios, which we 115 00:06:04,080 --> 00:06:07,240 Speaker 1: manage with a dynamic tilt, we actually are slightly underweighted 116 00:06:07,279 --> 00:06:10,920 Speaker 1: in stocks. And here's the reasoning. If you think about 117 00:06:11,000 --> 00:06:14,080 Speaker 1: what a person with a balanced portfolio about sixty stocks 118 00:06:14,080 --> 00:06:16,599 Speaker 1: forty sent in bonds is really trying to achieve, you 119 00:06:16,600 --> 00:06:18,200 Speaker 1: can think of it as a risk target. Because of 120 00:06:18,279 --> 00:06:22,120 Speaker 1: sixty forty portfolio like that historically has had a risk 121 00:06:22,160 --> 00:06:25,400 Speaker 1: that average is something like an eight to eleven of 122 00:06:25,480 --> 00:06:29,799 Speaker 1: volatility per year. But in today's environment, you're actually taking 123 00:06:30,240 --> 00:06:34,400 Speaker 1: more risk than that range if you sit at your 124 00:06:34,400 --> 00:06:38,640 Speaker 1: normal sixty allocation. So we adjust clients allocations to keep 125 00:06:38,680 --> 00:06:41,720 Speaker 1: them in that risk range that they originally signed up for, 126 00:06:42,120 --> 00:06:44,800 Speaker 1: and that means we'd be selling underweight stocks from that 127 00:06:44,920 --> 00:06:47,880 Speaker 1: risk perspective, but within that we'd be taking a fair 128 00:06:47,920 --> 00:06:51,960 Speaker 1: amount of concentration exposure in the stocks we think are 129 00:06:51,960 --> 00:06:54,200 Speaker 1: most attractive. Because we do think there are these mispirations. 130 00:06:54,600 --> 00:06:58,000 Speaker 1: It's really important you're gonna take a concentration exposure. You 131 00:06:58,040 --> 00:07:00,800 Speaker 1: and I remember Fidelity fifty just one idea of a 132 00:07:00,839 --> 00:07:03,720 Speaker 1: fun It was unheard of to be that non diversified. 133 00:07:03,960 --> 00:07:06,920 Speaker 1: But if you say you're gonna migrate sixty down to 134 00:07:07,000 --> 00:07:10,360 Speaker 1: a lesser stock, do you just assume more bonds? How 135 00:07:10,360 --> 00:07:12,360 Speaker 1: do you get there? Well, you have a number of choices. 136 00:07:12,480 --> 00:07:14,440 Speaker 1: Right now we would slightly overweight bonds, and also it 137 00:07:14,440 --> 00:07:17,320 Speaker 1: depends on which you know. We would be overweight in 138 00:07:17,320 --> 00:07:19,000 Speaker 1: certain parts of the world. Like example is how the 139 00:07:19,000 --> 00:07:21,240 Speaker 1: overweight Japanese stocks because we think they're cheaper and more 140 00:07:21,240 --> 00:07:24,400 Speaker 1: diversifying than other flavors of stocks. But we would be 141 00:07:24,440 --> 00:07:27,160 Speaker 1: slightly tilted into bonds, and and we do think it's 142 00:07:27,160 --> 00:07:29,520 Speaker 1: a time when it's worth having diversifying assets as well. 143 00:07:29,720 --> 00:07:32,400 Speaker 1: Is cash an asset? Um? Yeah, you can think of 144 00:07:32,440 --> 00:07:36,440 Speaker 1: cash as effectively a very very short duration asset. The 145 00:07:36,440 --> 00:07:40,160 Speaker 1: problem is right now, um, it's not very attractive. After all, 146 00:07:40,200 --> 00:07:43,320 Speaker 1: there is inflation which is running at somewhere between one 147 00:07:43,320 --> 00:07:46,160 Speaker 1: and a half and two percent, and so you're guaranteed 148 00:07:46,160 --> 00:07:48,320 Speaker 1: to lose purchasing power when you hold cash. Is cash 149 00:07:48,320 --> 00:07:52,120 Speaker 1: an asset in negative right countries? It's a really great question. 150 00:07:52,720 --> 00:07:56,280 Speaker 1: That's my existential question for the months. The problem is 151 00:07:56,320 --> 00:07:58,960 Speaker 1: how do you actually invest in it, apart from just 152 00:07:59,080 --> 00:08:01,360 Speaker 1: being like screwed McDuck and having a swinging pool full 153 00:08:01,400 --> 00:08:08,360 Speaker 1: of gold coins or yeah, so what do you do 154 00:08:08,400 --> 00:08:12,880 Speaker 1: with cash in in the meantime? I mean you don't 155 00:08:12,880 --> 00:08:14,920 Speaker 1: get paid for that either, right, So we actually don't 156 00:08:14,920 --> 00:08:16,440 Speaker 1: think it's a great idea to have a huge bound 157 00:08:16,480 --> 00:08:18,240 Speaker 1: of money sitting on the sidelines. We think what you 158 00:08:18,480 --> 00:08:22,400 Speaker 1: should do is have a long term plan that acknowledges 159 00:08:22,440 --> 00:08:25,360 Speaker 1: that returns will be lower, but they still will be positive. 160 00:08:25,400 --> 00:08:28,040 Speaker 1: We don't think that this is a terrible environment. It's 161 00:08:28,080 --> 00:08:32,160 Speaker 1: just anemic growth with many companies being challenged, so that 162 00:08:32,240 --> 00:08:34,480 Speaker 1: the issue is to have a long term plan that 163 00:08:35,160 --> 00:08:38,360 Speaker 1: takes that low industrate and and UH and rate of 164 00:08:38,360 --> 00:08:41,280 Speaker 1: return on stocks into account, but still gets you to 165 00:08:41,320 --> 00:08:43,240 Speaker 1: the long term objective you're looking for and then trying 166 00:08:43,240 --> 00:08:47,160 Speaker 1: to implement it really smart by not just being discriminated 167 00:08:47,160 --> 00:08:49,079 Speaker 1: about buying in deep I was just a herd right 168 00:08:49,120 --> 00:08:53,920 Speaker 1: now is US large multinationals large caps? Can you go 169 00:08:54,080 --> 00:08:58,120 Speaker 1: the other way and find value in emerging markets of 170 00:08:58,200 --> 00:09:01,440 Speaker 1: some flavor? Great quest, And yeah, I think there's actually 171 00:09:01,920 --> 00:09:04,200 Speaker 1: a very good argument now for trying to find some 172 00:09:04,280 --> 00:09:07,240 Speaker 1: of the areas that were most irrationally beat up during 173 00:09:07,280 --> 00:09:10,440 Speaker 1: the period of so you can go for true value. 174 00:09:11,120 --> 00:09:15,640 Speaker 1: But Brazilian commodities tax versus a bank in the Philippines, Well, 175 00:09:15,760 --> 00:09:18,880 Speaker 1: there's a real problem in some sectors because people aren't 176 00:09:18,920 --> 00:09:21,160 Speaker 1: always wrong when they think that things are bad. So 177 00:09:21,240 --> 00:09:24,080 Speaker 1: in Brazil there really are some very deep structural problems 178 00:09:24,600 --> 00:09:28,720 Speaker 1: UM and many of the Brazilian commodity companies UM actually 179 00:09:28,960 --> 00:09:32,280 Speaker 1: won't necessarily recover quickly. But to to our way of 180 00:09:32,280 --> 00:09:34,880 Speaker 1: looking at it, there are lots of specific opportunities in 181 00:09:35,080 --> 00:09:39,040 Speaker 1: UM in emerging markets, in small cap um. We would 182 00:09:39,120 --> 00:09:42,640 Speaker 1: therefore want to be fully exposed there um. It would 183 00:09:42,679 --> 00:09:45,240 Speaker 1: be as a little bit underweight in large cap us, 184 00:09:45,320 --> 00:09:46,840 Speaker 1: as you suggest, But we still think there are some 185 00:09:46,920 --> 00:09:49,960 Speaker 1: interesting stories there too. Well, this is wonderful. Seth Masters 186 00:09:49,960 --> 00:09:53,280 Speaker 1: where us with Bernstein Alliance Burnstein. We're thrilled to bring 187 00:09:53,320 --> 00:09:55,000 Speaker 1: him to you this morning. This is a great hour. 188 00:09:55,120 --> 00:09:59,800 Speaker 1: Pulse sank and Uh, Seth Masters is very very cool. 189 00:10:00,000 --> 00:10:02,959 Speaker 1: Coming up, We're gonna talk to Seth Masters about the 190 00:10:03,000 --> 00:10:08,640 Speaker 1: flat out failure of Arissa and defined contribution plans. He's 191 00:10:08,679 --> 00:10:11,520 Speaker 1: a true expert on this. I think it's gonna be 192 00:10:11,520 --> 00:10:15,920 Speaker 1: a timely conversation. Is John Tucker, among others, looks at 193 00:10:15,920 --> 00:10:20,760 Speaker 1: his two oh one K three thirty sixteen statement. Also, 194 00:10:20,800 --> 00:10:23,440 Speaker 1: we've got a real surprise with Seth Masters on your 195 00:10:23,520 --> 00:10:27,360 Speaker 1: children and while getting ready for next autumn back to school, 196 00:10:27,400 --> 00:10:30,200 Speaker 1: what should you do in a certain grievous part of 197 00:10:30,240 --> 00:10:33,840 Speaker 1: your children's education. So we'll do that with Seth Masters 198 00:10:33,840 --> 00:10:37,200 Speaker 1: of Bernstein. Futures of negative five, futures negative twenty four 199 00:10:37,559 --> 00:10:40,960 Speaker 1: yen weaker fractutionally dollars stronger a little bit. I would 200 00:10:40,960 --> 00:10:43,920 Speaker 1: go to oil two days in a row, south thirty 201 00:10:43,960 --> 00:10:47,319 Speaker 1: seven forty nine on West Texas Brent under forty thirty 202 00:10:47,400 --> 00:10:53,880 Speaker 1: nine apparel. They'll check it with Michael Barr. I get 203 00:10:53,880 --> 00:10:56,680 Speaker 1: the latest world to end national headlines. Michael, my Tom, 204 00:10:56,679 --> 00:10:59,440 Speaker 1: Thank you very much. The political fireworks might not be 205 00:10:59,559 --> 00:11:03,760 Speaker 1: limited of the presidential nominating campaigns. President Barack Obama will 206 00:11:03,760 --> 00:11:07,120 Speaker 1: likely announce his Supreme Court pick as early as this week. 207 00:11:07,640 --> 00:11:10,760 Speaker 1: The Republican Party is planning an intense campaign the target 208 00:11:10,840 --> 00:11:14,600 Speaker 1: vulnerable Democrats and try to stop whomever President Obama picks. 209 00:11:15,080 --> 00:11:18,720 Speaker 1: Amtrak says a train bound for Chicago from Los Angeles 210 00:11:18,720 --> 00:11:22,680 Speaker 1: derailed in Kansas, just west of Dodge City overnight, sending 211 00:11:22,679 --> 00:11:26,520 Speaker 1: about twenty people to a hospital. Forecasters saying any additional 212 00:11:26,559 --> 00:11:30,640 Speaker 1: reign will make flooding worse in Louisiana and Mississippi. Flooding 213 00:11:30,679 --> 00:11:33,960 Speaker 1: that began last week has damaged more than five thousand 214 00:11:33,960 --> 00:11:36,880 Speaker 1: homes and at least four people have died. In Louisiana, 215 00:11:37,240 --> 00:11:40,320 Speaker 1: the National Guard has rescued about three hundred people in 216 00:11:40,360 --> 00:11:43,400 Speaker 1: the state. Global News twenty four hours a day, powered 217 00:11:43,440 --> 00:11:46,559 Speaker 1: by our two hundred journalists and more than one hundred 218 00:11:46,600 --> 00:11:50,080 Speaker 1: fifty news bureaus from around the world. I'm Michael bar Michael, 219 00:11:50,120 --> 00:11:52,000 Speaker 1: thanks so much. You can set masters with us. This 220 00:11:52,080 --> 00:11:54,880 Speaker 1: is muscless in Global Wall Street. For those of you 221 00:11:55,000 --> 00:11:58,560 Speaker 1: looking at the what to do, I simply putting away 222 00:11:58,760 --> 00:12:06,520 Speaker 1: more money. This is Bloomberg's surveillance. Good morning. The news 223 00:12:06,559 --> 00:12:08,240 Speaker 1: update brought to you by with Smith and Brown c 224 00:12:08,360 --> 00:12:10,840 Speaker 1: P as audit, tax and advisory services. To help your 225 00:12:10,840 --> 00:12:12,959 Speaker 1: business be in a position of strength, experience the w 226 00:12:13,080 --> 00:12:15,400 Speaker 1: of way by visiting with him dot com, w I 227 00:12:15,520 --> 00:12:24,160 Speaker 1: T h U M dot com Global business news twenty 228 00:12:24,160 --> 00:12:27,160 Speaker 1: four hours a day. If Bloomberg dot com, the radio 229 00:12:27,200 --> 00:12:30,040 Speaker 1: plus mobile act and on your radio. This is a 230 00:12:30,080 --> 00:12:33,960 Speaker 1: Bloomberg business flash and I'm Karen Moscow. US dot index 231 00:12:34,000 --> 00:12:36,120 Speaker 1: future is moving lower this morning. Let's go to the 232 00:12:36,120 --> 00:12:39,200 Speaker 1: First Word Breaking news desk for today's morning call. Here's 233 00:12:39,240 --> 00:12:42,600 Speaker 1: Bill Maloney. Good morning, Bill, Good morning Karen. We are 234 00:12:42,600 --> 00:12:45,640 Speaker 1: seeing small losses in the equity futures as crude features 235 00:12:45,679 --> 00:12:48,600 Speaker 1: dropped two and a half percent down, futures currently lower 236 00:12:48,640 --> 00:12:51,319 Speaker 1: by twenty six points, SPS dropped five and as a 237 00:12:51,440 --> 00:12:54,120 Speaker 1: futures fall by eleven. The US ten yel at one 238 00:12:54,160 --> 00:12:57,640 Speaker 1: point nine seven percent and upm markets are rising, led 239 00:12:57,679 --> 00:13:00,560 Speaker 1: by one and a half percent gains in Germany while 240 00:13:00,600 --> 00:13:05,319 Speaker 1: you're Egyptian stocks jump six percent after currency devaluation. In 241 00:13:05,400 --> 00:13:07,600 Speaker 1: doing news, Fresh Market to be acquired by Apollo for 242 00:13:07,640 --> 00:13:11,240 Speaker 1: twenty fifty share and Starward Hotels gets offered for seventy 243 00:13:11,240 --> 00:13:14,120 Speaker 1: six dollars a share in cash. Finally, some of your 244 00:13:14,120 --> 00:13:17,440 Speaker 1: Wallshet upgrades and downgrades. Tesla raised out perform at bared 245 00:13:17,440 --> 00:13:20,760 Speaker 1: price target three hundred, mon Santio cut to neutral versus 246 00:13:20,760 --> 00:13:23,600 Speaker 1: by at City Group price target ninety five at Goldman, 247 00:13:23,640 --> 00:13:26,160 Speaker 1: Sachs and Fool and WR Grace cut to neutral. J 248 00:13:26,320 --> 00:13:29,199 Speaker 1: and J raised to neutral, and Echo Lab cut to sell. 249 00:13:29,880 --> 00:13:33,400 Speaker 1: HC Holdings raised over a JP, Morgan Consolation Brands raised 250 00:13:33,400 --> 00:13:36,080 Speaker 1: to buy its sun Trust and finally, for America cut 251 00:13:36,080 --> 00:13:39,280 Speaker 1: to neutral versus by over at ubs. Live from the 252 00:13:39,280 --> 00:13:41,920 Speaker 1: First Breaking news Desk, go on, Bill Maloney, Karen thanks 253 00:13:41,920 --> 00:13:44,360 Speaker 1: bail to hear live breaking news of your Bloomberg type 254 00:13:44,360 --> 00:13:47,160 Speaker 1: squaw could go on your terminal. That's squ a w 255 00:13:47,400 --> 00:13:50,400 Speaker 1: K go, that's a Bloomberg business flash. Tom and Mike Karen, 256 00:13:50,640 --> 00:13:53,199 Speaker 1: thanks so much. This morning Bloomberg Surveillance brought you by 257 00:13:53,200 --> 00:13:58,200 Speaker 1: Investco looking for investment views. Experienced experts are just to 258 00:13:58,200 --> 00:14:02,079 Speaker 1: click away. Go to investor dot com, slash us to 259 00:14:02,160 --> 00:14:06,600 Speaker 1: subscribe to the investco blog, and follow at investco us 260 00:14:06,640 --> 00:14:09,199 Speaker 1: on Twitter. We're thrilled to bring you seth Masters of 261 00:14:09,280 --> 00:14:17,120 Speaker 1: Bernstein with his exceptional expertise on defined contribution, Eisenhower X 262 00:14:17,280 --> 00:14:21,040 Speaker 1: number of other presidents. We get to ARISKA seventy four 263 00:14:21,920 --> 00:14:24,840 Speaker 1: and when I see Alicia munnelle up at Boston College, 264 00:14:24,880 --> 00:14:28,960 Speaker 1: tell me se of Americans aren't correctly funded. Can I 265 00:14:29,000 --> 00:14:32,320 Speaker 1: state that arissa was a failure? Well, I think the 266 00:14:32,400 --> 00:14:35,360 Speaker 1: question is what would have happened without it would have 267 00:14:35,400 --> 00:14:38,080 Speaker 1: been worse. Okay, it would have been worse, But come on, 268 00:14:39,120 --> 00:14:42,479 Speaker 1: percent of us, whatever the good will is, are actually 269 00:14:42,520 --> 00:14:44,680 Speaker 1: not even close to where we need to be. What 270 00:14:44,720 --> 00:14:47,040 Speaker 1: do we do right? Well, I think we, first of all, 271 00:14:47,080 --> 00:14:49,600 Speaker 1: don't have a lot of perfect choices. What we have 272 00:14:49,640 --> 00:14:52,600 Speaker 1: to do is be realistic. And one aspect of that 273 00:14:52,720 --> 00:14:55,080 Speaker 1: is that the defined benefit system that was one of 274 00:14:55,120 --> 00:14:58,440 Speaker 1: the major focuses of arissa UM really is in the 275 00:14:58,480 --> 00:15:03,000 Speaker 1: process of winding down. That's just going to happen organically 276 00:15:03,040 --> 00:15:05,320 Speaker 1: over time, So most people will not have a defined 277 00:15:05,360 --> 00:15:08,920 Speaker 1: benefit pension going forward. Our children are very very unlikely 278 00:15:09,320 --> 00:15:11,440 Speaker 1: to benefit at all from that kind of system, and 279 00:15:11,480 --> 00:15:13,280 Speaker 1: we have to make sure that that wind down happens 280 00:15:13,320 --> 00:15:16,600 Speaker 1: in an orderly fashion, which is tricky because returns are low. 281 00:15:16,840 --> 00:15:20,240 Speaker 1: The second thing is to find contribution plans will in 282 00:15:20,320 --> 00:15:24,200 Speaker 1: fact be the future, and exactly how that works um 283 00:15:24,400 --> 00:15:28,520 Speaker 1: will depend on how well organized they become. There they've been, 284 00:15:29,000 --> 00:15:32,160 Speaker 1: they've been subject to some problems. They're being tweaked, and 285 00:15:32,160 --> 00:15:34,840 Speaker 1: I think they can improve. When you say subject to 286 00:15:34,920 --> 00:15:36,720 Speaker 1: some problems, I mean one of the biggest problems is 287 00:15:37,120 --> 00:15:41,760 Speaker 1: people don't people don't trust markets, and people don't trust 288 00:15:41,800 --> 00:15:45,960 Speaker 1: themselves to be involved in markets. That's actually not true 289 00:15:46,040 --> 00:15:48,360 Speaker 1: inside to find contribution plans. So that's what's so interesting. 290 00:15:48,400 --> 00:15:51,880 Speaker 1: If you look at most individuals, they really do save 291 00:15:51,920 --> 00:15:55,000 Speaker 1: money in their DC plan if they are automatically enrolled, 292 00:15:55,040 --> 00:15:58,080 Speaker 1: and especially if they auto if if if they're not, 293 00:15:58,560 --> 00:16:01,760 Speaker 1: they're afraid of it, are they all? That's exactly However, 294 00:16:01,840 --> 00:16:04,360 Speaker 1: once people are in a defined contribution plan, if they're 295 00:16:04,480 --> 00:16:08,640 Speaker 1: especially enrolled automatically and their amount of contribution grows a 296 00:16:08,640 --> 00:16:11,360 Speaker 1: little bit every year as they are employed, if they 297 00:16:11,440 --> 00:16:14,320 Speaker 1: do have that, they tend to stay in that plan 298 00:16:14,400 --> 00:16:17,360 Speaker 1: and they actually don't fiddle very much with their allocations, 299 00:16:17,360 --> 00:16:19,040 Speaker 1: so it's the one place where people will have a 300 00:16:19,080 --> 00:16:22,480 Speaker 1: long terrizon. That's the following question is do people get 301 00:16:22,560 --> 00:16:26,200 Speaker 1: the allocations right in that because they don't fiddle with it, 302 00:16:26,280 --> 00:16:29,040 Speaker 1: because they may not feel like they know enough about it, 303 00:16:29,720 --> 00:16:33,480 Speaker 1: and generally they don't. So the key challenges having three 304 00:16:33,480 --> 00:16:36,840 Speaker 1: things be automated, the way you enroll, the way you 305 00:16:37,080 --> 00:16:39,960 Speaker 1: gradually increase your contribution over time, and finally, the default 306 00:16:40,000 --> 00:16:43,000 Speaker 1: option that you get into. And increasingly more and more 307 00:16:43,040 --> 00:16:46,160 Speaker 1: companies have moved to a default option, which is effectively 308 00:16:46,840 --> 00:16:51,520 Speaker 1: are carefully designed strategy to start out relatively aggressive when 309 00:16:51,560 --> 00:16:54,200 Speaker 1: you're just starting out your work, and then move to 310 00:16:54,360 --> 00:16:57,440 Speaker 1: a more conservad allocation, which probably is appropriate once you 311 00:16:57,440 --> 00:16:59,600 Speaker 1: start spending money. I want to rip up the script here. 312 00:17:00,320 --> 00:17:03,520 Speaker 1: With your immense abilities and skills working at Princeton and 313 00:17:03,640 --> 00:17:08,600 Speaker 1: Oxford and having an international childhood, you got languages at 314 00:17:08,600 --> 00:17:10,960 Speaker 1: a young age. I want you to speak to our 315 00:17:11,000 --> 00:17:16,119 Speaker 1: global audience about how you get kids to engage in languages. 316 00:17:16,240 --> 00:17:20,200 Speaker 1: You speak English, I believe it's good English, Mike Mandarin, 317 00:17:20,520 --> 00:17:22,920 Speaker 1: what else do you speak? French? French? Yes? And and 318 00:17:22,960 --> 00:17:25,720 Speaker 1: some German. Look. I think I was very fortunate because 319 00:17:25,720 --> 00:17:29,119 Speaker 1: I did grow up in France for part of my 320 00:17:29,200 --> 00:17:32,600 Speaker 1: childhood and just naturally glommed onto language. I think it 321 00:17:32,600 --> 00:17:34,880 Speaker 1: makes it a lot easier if you're in a foreign country. 322 00:17:35,520 --> 00:17:37,399 Speaker 1: Um and look, I think it's something we all wrestle 323 00:17:37,440 --> 00:17:39,359 Speaker 1: with because we live in a world with lots of distractions. 324 00:17:39,359 --> 00:17:41,000 Speaker 1: It's hard for kids. What do you think of? What 325 00:17:41,080 --> 00:17:43,399 Speaker 1: is it like? Two of the Upper West Side and 326 00:17:43,480 --> 00:17:47,080 Speaker 1: rules their kids in Mandarin by age four? Is Mandarin 327 00:17:47,119 --> 00:17:50,119 Speaker 1: a good place to start? I actually think it is 328 00:17:50,200 --> 00:17:53,400 Speaker 1: because speaking Mandarin is not as hard as you think. 329 00:17:53,520 --> 00:17:56,000 Speaker 1: It's very tricky to learn the tones, but there'sn't a 330 00:17:56,000 --> 00:17:58,080 Speaker 1: lot of grammar in Mandarin. It's really like English, a 331 00:17:58,200 --> 00:18:00,240 Speaker 1: very idiomatic language, and if you get to them in 332 00:18:00,240 --> 00:18:04,040 Speaker 1: the thought process, it's a fascinating at all. No, but 333 00:18:04,080 --> 00:18:06,000 Speaker 1: they haven't been older. They're not old enough to have 334 00:18:06,040 --> 00:18:08,520 Speaker 1: been automatically enrolled in the programs. One thing I read 335 00:18:08,600 --> 00:18:11,440 Speaker 1: is that if you don't continue to speak it though, 336 00:18:11,480 --> 00:18:13,800 Speaker 1: you lose it rapidly. And that's one of the problems 337 00:18:13,800 --> 00:18:15,919 Speaker 1: with the Upper West Side and rolling their kids is 338 00:18:16,160 --> 00:18:18,679 Speaker 1: they go through eighth grade learning Mandarin and then they 339 00:18:18,720 --> 00:18:20,720 Speaker 1: can't remember it. But that they get to college well 340 00:18:21,000 --> 00:18:24,040 Speaker 1: you certainly don't keep languages unless you use them some. 341 00:18:24,240 --> 00:18:26,760 Speaker 1: I wish I could use all my languages more. Um. 342 00:18:26,800 --> 00:18:28,960 Speaker 1: I think in Mandarin the thing that it is toughest 343 00:18:28,960 --> 00:18:35,440 Speaker 1: to keep is actually writing, because that that is very complicated. Yeah, 344 00:18:35,600 --> 00:18:37,480 Speaker 1: but I think, look, I think it's true you have 345 00:18:37,560 --> 00:18:40,200 Speaker 1: to find ways to stay kind. So what is your 346 00:18:40,240 --> 00:18:43,480 Speaker 1: track for seven days grade and through high school? For 347 00:18:43,520 --> 00:18:47,920 Speaker 1: our listeners, what's your advice and engaging kids the ugly 348 00:18:47,960 --> 00:18:51,040 Speaker 1: American like me and Mike? In languages, I think the 349 00:18:51,160 --> 00:18:54,600 Speaker 1: challenges really defined a way to have children start learning 350 00:18:54,600 --> 00:18:57,960 Speaker 1: a language early in life and then stick with it. Ideally, 351 00:18:58,400 --> 00:19:00,159 Speaker 1: that really means you have to love it, and not 352 00:19:00,240 --> 00:19:02,000 Speaker 1: every kid does. But the bottom line is they have 353 00:19:02,040 --> 00:19:03,399 Speaker 1: to love it. They left a lot and I think 354 00:19:03,480 --> 00:19:04,879 Speaker 1: a lot of that is down to the teachers. A 355 00:19:04,920 --> 00:19:08,080 Speaker 1: teacher who can really inspire is a wonderful thing. Seth Masters, 356 00:19:08,080 --> 00:19:10,360 Speaker 1: thank you so much. He is with Bernstein on your 357 00:19:10,400 --> 00:19:14,679 Speaker 1: single digit World And the challenges are defined contribution retirement 358 00:19:14,720 --> 00:19:17,800 Speaker 1: plan A little bit there, Mike help me here Rosetta 359 00:19:17,800 --> 00:19:22,400 Speaker 1: Stone three two lue la biblio tech. Can we got 360 00:19:22,400 --> 00:19:27,960 Speaker 1: a commercial here? It is my extended my extended uh French. 361 00:19:28,320 --> 00:19:33,000 Speaker 1: I believe that was French off. The radio is turning off. 362 00:19:33,040 --> 00:19:37,760 Speaker 1: Coast to coast oil don cents thirty seven fifty seven 363 00:19:38,080 --> 00:19:40,359 Speaker 1: After a huge week last week, Brent crude was above 364 00:19:40,400 --> 00:19:44,680 Speaker 1: forty now thirty down a full dollar eleven cents. Gold 365 00:19:44,720 --> 00:19:49,000 Speaker 1: fractionally lowered down four dollars twelve uh the ounce. It 366 00:19:49,160 --> 00:19:53,919 Speaker 1: is an exceptionally busy economic week. Allen Zetner at Morgan 367 00:19:54,000 --> 00:19:59,000 Speaker 1: Stanley dropping a bombshell in her analysis of Janet Yellin's 368 00:19:59,080 --> 00:20:06,960 Speaker 1: fed Next, this is Bloomberg Surveillance coming up the with 369 00:20:07,000 --> 00:20:08,959 Speaker 1: all due respect highlight brought to you by Landrover. If 370 00:20:08,960 --> 00:20:10,439 Speaker 1: it's in your nature to cast off the every day 371 00:20:10,440 --> 00:20:12,440 Speaker 1: and seek adventure, the Discovery Sport was built to help 372 00:20:12,480 --> 00:20:14,399 Speaker 1: your search. Visit land Over try state dot com for 373 00:20:14,520 --> 00:20:17,160 Speaker 1: special offers during the only Adventure Sales event level above 374 00:20:17,200 --> 00:20:27,880 Speaker 1: and beyond. Broadcasting live to New York Cloomberg eleventh, to Washington, 375 00:20:27,960 --> 00:20:33,600 Speaker 1: d C Bloomberg to Boston Bloomberg twelve Honors, to San Francisco, Bluemberg, 376 00:20:34,480 --> 00:20:38,040 Speaker 1: to the Country Series Exam Channel one ninety and around 377 00:20:38,119 --> 00:20:41,680 Speaker 1: the globe the Bloomberg Radio Plus Happen Bloomberg dot Com 378 00:20:41,760 --> 00:20:45,800 Speaker 1: this is Bloomberk Surveillance. Good morning and say thirty on 379 00:20:45,840 --> 00:20:48,840 Speaker 1: Wall Straight at Michael McKee along with Tom Keene are 380 00:20:48,920 --> 00:20:52,119 Speaker 1: economic indicators are brought to you by Commonwealth Financial Network. 381 00:20:52,119 --> 00:20:54,879 Speaker 1: When it's time to change the conversation, talk to a 382 00:20:54,920 --> 00:20:57,119 Speaker 1: broker dealer r I A that's ready to listen, call 383 00:20:57,600 --> 00:21:00,239 Speaker 1: six two three six three eight or visit Commonwealth dot 384 00:21:00,320 --> 00:21:04,159 Speaker 1: com to learn more. Actually, our economic indicators would be 385 00:21:04,240 --> 00:21:07,320 Speaker 1: brought to you by Commonwealth Financial Network if there were 386 00:21:07,560 --> 00:21:10,040 Speaker 1: any indicators today. But it's one of those quiet days 387 00:21:10,080 --> 00:21:12,800 Speaker 1: where there's nothing, but then it gets busy before Wednesday. 388 00:21:13,040 --> 00:21:17,520 Speaker 1: Do not touch that dial tomorrow morning. What Jim Vogel 389 00:21:17,560 --> 00:21:20,840 Speaker 1: at FTN says is the most important indicator of what's 390 00:21:20,840 --> 00:21:23,200 Speaker 1: going on in the economy until we get too later 391 00:21:23,280 --> 00:21:30,040 Speaker 1: in March, retail sales, the forecast is for a one 392 00:21:30,119 --> 00:21:32,760 Speaker 1: tenth drop in the headline. Nobody's gonna pay attention to 393 00:21:32,760 --> 00:21:35,720 Speaker 1: that because gas prices, but the Retail Sales Control Group 394 00:21:36,280 --> 00:21:40,080 Speaker 1: up zero point two. If that happens, he says, we 395 00:21:40,119 --> 00:21:43,880 Speaker 1: could go over on the ten year note the CPI 396 00:21:44,040 --> 00:21:46,520 Speaker 1: the day of the FED meeting. Do you suggest on 397 00:21:46,560 --> 00:21:49,920 Speaker 1: the Tuesday Wednesday meeting they know that data when they 398 00:21:49,920 --> 00:21:52,240 Speaker 1: walk in the door Tuesday morning at the Echos building. 399 00:21:52,520 --> 00:21:54,119 Speaker 1: All they'll know it at a thirty. They won't know 400 00:21:54,160 --> 00:21:57,040 Speaker 1: it in advance, but they won't know. The governor's presidents 401 00:21:57,080 --> 00:22:01,640 Speaker 1: won't know. But the morning that they will they will 402 00:22:01,640 --> 00:22:03,119 Speaker 1: know it, and so they'll know it before they make 403 00:22:03,119 --> 00:22:08,480 Speaker 1: a decision. Allan xanner uh with Morgan Stanley last year 404 00:22:08,680 --> 00:22:13,159 Speaker 1: shook Big House Economics to its foundation by delaying a 405 00:22:13,280 --> 00:22:15,560 Speaker 1: rate right. She then retracted on that, came back a 406 00:22:15,560 --> 00:22:18,960 Speaker 1: little bit, but without call, without question, it was the 407 00:22:19,000 --> 00:22:22,879 Speaker 1: big House call of the year. She redues it. This morning. 408 00:22:23,040 --> 00:22:26,080 Speaker 1: The report is out from Morgan Stanley. It is a 409 00:22:26,119 --> 00:22:29,280 Speaker 1: substantial report. We're gonna protect the copyright. Call up Ellen 410 00:22:29,359 --> 00:22:34,399 Speaker 1: to get it in the shallow end in miss Zentner. Basically, 411 00:22:34,440 --> 00:22:37,400 Speaker 1: Morgan Stanley is all alone among the big house when 412 00:22:37,400 --> 00:22:41,280 Speaker 1: you compare your one rate rate increased call to the 413 00:22:41,280 --> 00:22:44,560 Speaker 1: blue Chip consensus, I mean, you're awfull alone this morning, 414 00:22:44,560 --> 00:22:48,919 Speaker 1: aren't you. Yeah, But I think I've proven in the 415 00:22:48,960 --> 00:22:51,879 Speaker 1: past that I don't mind hanging out there by myself 416 00:22:52,600 --> 00:22:55,680 Speaker 1: if we have a very strong conviction around our call. 417 00:22:55,800 --> 00:22:57,639 Speaker 1: And I will note that if you look at Blue 418 00:22:57,680 --> 00:23:03,920 Speaker 1: Chip consensus therefore casts for growth, inflation, said rate hikes. 419 00:23:04,000 --> 00:23:06,639 Speaker 1: That's all been coming down over the past several months, 420 00:23:06,640 --> 00:23:10,240 Speaker 1: and we think that they will eventually come around to 421 00:23:10,320 --> 00:23:14,080 Speaker 1: our view that the Fed hikes once this year in December, 422 00:23:14,600 --> 00:23:18,280 Speaker 1: sort of in an eerily eerie replay of last year 423 00:23:18,320 --> 00:23:20,560 Speaker 1: where the said wants to do more and continues to 424 00:23:20,600 --> 00:23:23,480 Speaker 1: communicate they'd like to do more, but ultimately are only 425 00:23:23,520 --> 00:23:26,320 Speaker 1: able to deliver one more rate hike this year. Why 426 00:23:26,400 --> 00:23:30,880 Speaker 1: do they not go more than once? Well, I tell you, Mike, 427 00:23:30,920 --> 00:23:34,600 Speaker 1: they're gonna they're really encouraged by what they're seeing in 428 00:23:34,600 --> 00:23:37,760 Speaker 1: the domestic economy, as are we. I mean, there's a 429 00:23:37,760 --> 00:23:41,359 Speaker 1: lot of domestic strength out there coming from consumer muscle 430 00:23:41,920 --> 00:23:46,480 Speaker 1: and pretty steady contributions to growth from the housing market. Um, 431 00:23:46,480 --> 00:23:48,919 Speaker 1: but it's those external headwines. Net trade is going to 432 00:23:48,920 --> 00:23:51,639 Speaker 1: continue to be a big drag this year. We've had 433 00:23:51,680 --> 00:23:54,960 Speaker 1: another leg down in in drilling counts, which means energy 434 00:23:55,000 --> 00:23:58,439 Speaker 1: continues to weigh energy investment ways on the economy, and 435 00:23:58,440 --> 00:24:01,359 Speaker 1: we think the FEDS forecasts own forecaster too lofty and 436 00:24:01,400 --> 00:24:04,320 Speaker 1: their expectation that they want to high rates as of 437 00:24:04,440 --> 00:24:07,000 Speaker 1: right now four more times this year. That that's going 438 00:24:07,000 --> 00:24:10,600 Speaker 1: to change this week. UM is just is going to 439 00:24:10,680 --> 00:24:16,440 Speaker 1: follow those forecasts lower. UM Also underpinning that is Janet 440 00:24:16,440 --> 00:24:19,520 Speaker 1: Ellen has said that if inflation is moving in the 441 00:24:19,520 --> 00:24:22,639 Speaker 1: wrong direction, it would defer rate hikes. And if we 442 00:24:22,680 --> 00:24:25,320 Speaker 1: look at the path of core PC prices this year, 443 00:24:25,600 --> 00:24:28,159 Speaker 1: they have peaked for the year. And I think this 444 00:24:28,280 --> 00:24:31,600 Speaker 1: is the most important thing to underscore, and it's something 445 00:24:31,680 --> 00:24:35,240 Speaker 1: that buried deep in the footnotes of Lao Branderd's speech 446 00:24:35,320 --> 00:24:39,200 Speaker 1: last week was also that acknowledgement that core PC prices 447 00:24:39,760 --> 00:24:43,040 Speaker 1: that rose to one point seven percent in January, that's 448 00:24:43,080 --> 00:24:46,160 Speaker 1: the peak for the year, and they move lower from here. 449 00:24:46,160 --> 00:24:48,760 Speaker 1: And so it's gonna be awfully difficult to convince markets 450 00:24:49,320 --> 00:24:52,240 Speaker 1: that you should raise rates when inflation is moving in 451 00:24:52,280 --> 00:24:55,800 Speaker 1: the wrong direction. But if they don't come out with 452 00:24:55,880 --> 00:24:59,920 Speaker 1: a Zentner forecast and they continue to say their dated 453 00:25:00,000 --> 00:25:03,920 Speaker 1: depended and the data, as you even concede, match up 454 00:25:03,920 --> 00:25:08,880 Speaker 1: with their forecasts, don't they lose credibility. Well, so this 455 00:25:08,920 --> 00:25:11,080 Speaker 1: is how they get around the credibility issue that was 456 00:25:11,160 --> 00:25:14,240 Speaker 1: an issue last year where they kept telling markets we're 457 00:25:14,280 --> 00:25:16,560 Speaker 1: going to raise rates this year. It's going to happen 458 00:25:16,600 --> 00:25:18,879 Speaker 1: in June Okay, it's gonna happen this summer. Okay, it's 459 00:25:18,880 --> 00:25:21,040 Speaker 1: gonna happen in the fall. Okay, it's gonna happen before 460 00:25:21,080 --> 00:25:23,480 Speaker 1: the end of the year. Uh. And what they've done 461 00:25:23,840 --> 00:25:28,960 Speaker 1: is they've they've um uh called together the outliers, the 462 00:25:29,000 --> 00:25:32,560 Speaker 1: people that kept the policymakers that kept saying, oh, I 463 00:25:32,560 --> 00:25:34,840 Speaker 1: think four rate hikes are appropriate this year or three 464 00:25:34,880 --> 00:25:38,480 Speaker 1: are appropriate this year. Uh. And you notice that many 465 00:25:38,520 --> 00:25:41,399 Speaker 1: of them have stopped, uh specifically mentioning the number of 466 00:25:41,440 --> 00:25:46,120 Speaker 1: rate hikes they envision this year, because that that has 467 00:25:46,240 --> 00:25:48,400 Speaker 1: led to a lot of confusion for markets and led 468 00:25:48,440 --> 00:25:51,280 Speaker 1: to some of that credibility issue. The promise that they've 469 00:25:51,320 --> 00:25:54,439 Speaker 1: made is we will do more if and when we 470 00:25:54,560 --> 00:25:57,680 Speaker 1: can do more. And based on their forecasts, they're gonna 471 00:25:57,720 --> 00:26:00,399 Speaker 1: show us that they would like to do more. But 472 00:26:00,600 --> 00:26:04,720 Speaker 1: what we try to anticipate as economists is not what 473 00:26:04,760 --> 00:26:06,520 Speaker 1: we think they should do or what they would like 474 00:26:06,560 --> 00:26:08,720 Speaker 1: to do, but what ultimately we think they will be 475 00:26:08,840 --> 00:26:14,880 Speaker 1: able to do. Well. If that is the case, then 476 00:26:15,320 --> 00:26:18,600 Speaker 1: what's the You obviously must be saying there's no inflation 477 00:26:18,680 --> 00:26:23,119 Speaker 1: danger out there. No, there's not. I mean, the latest 478 00:26:23,160 --> 00:26:28,800 Speaker 1: employment data showed that wage growth has been on a 479 00:26:28,920 --> 00:26:33,440 Speaker 1: very slow lead upward, and there's no indication that it's 480 00:26:33,480 --> 00:26:36,840 Speaker 1: not going to continue along that path. We do have 481 00:26:36,920 --> 00:26:39,760 Speaker 1: tight labor markets in certain areas of the economy, but 482 00:26:39,760 --> 00:26:42,680 Speaker 1: they're in the very low wage paying sectors where when 483 00:26:42,720 --> 00:26:45,800 Speaker 1: you get tight labor markets there with wage pressures, it's 484 00:26:45,840 --> 00:26:48,560 Speaker 1: just the wage bill just is not enough to move 485 00:26:48,600 --> 00:26:51,640 Speaker 1: the needle in it in the aggregate in a bigger way. 486 00:26:51,720 --> 00:26:54,000 Speaker 1: So they're not to be pressured by the labor markets. 487 00:26:54,040 --> 00:26:58,400 Speaker 1: Stand Fisher just uh last a few weeks ago reminded 488 00:26:58,480 --> 00:27:01,359 Speaker 1: us or last week reminded us that the Phillips curve 489 00:27:01,640 --> 00:27:06,120 Speaker 1: is horizontal, so it's not the tighter low and content 490 00:27:06,200 --> 00:27:07,919 Speaker 1: right and not putting up for pressure on wages. And 491 00:27:07,960 --> 00:27:10,119 Speaker 1: if you look at core inflation this year, it's going 492 00:27:10,160 --> 00:27:12,680 Speaker 1: to be moving in the wrong direction. So there's really 493 00:27:13,000 --> 00:27:15,320 Speaker 1: compelling reason for them to do more. Let's come back 494 00:27:15,320 --> 00:27:17,920 Speaker 1: and dig into the American economy with Ellen Zentner. Morgan 495 00:27:18,000 --> 00:27:21,480 Speaker 1: Stanley again to remind for she moved some three to 496 00:27:21,600 --> 00:27:24,960 Speaker 1: two to one rate rise this year with some stunning 497 00:27:25,000 --> 00:27:28,919 Speaker 1: work within her larger research piece for Morgan Stanley Futures 498 00:27:28,960 --> 00:27:32,879 Speaker 1: negative five town futures negative thirty the yield one point 499 00:27:33,000 --> 00:27:38,639 Speaker 1: nine six. I've about to check out with like a 500 00:27:38,720 --> 00:27:41,760 Speaker 1: bar and get the latest world and national headlines. Monel night, Tom, 501 00:27:41,800 --> 00:27:45,040 Speaker 1: Thank you very much. Five states holding Republican primaries tomorrow 502 00:27:45,160 --> 00:27:48,000 Speaker 1: have enough delegates up for grabs to equal more than 503 00:27:48,040 --> 00:27:50,160 Speaker 1: a quarter of the one thousand, two hundred thirty seven 504 00:27:50,200 --> 00:27:54,040 Speaker 1: necessary for nomination. That's enough to have the potential to 505 00:27:54,040 --> 00:27:57,879 Speaker 1: give front runner Donald Trump almost an insurmountable lead. But 506 00:27:58,000 --> 00:28:01,359 Speaker 1: his rivals are fighting. Ohio Governor John Kasy is pushing 507 00:28:01,400 --> 00:28:04,200 Speaker 1: hard in his home state. Is the same for Florida 508 00:28:04,280 --> 00:28:07,560 Speaker 1: Senator Marco Rubio, who needs a home state win to 509 00:28:07,640 --> 00:28:10,320 Speaker 1: keep going. You have a leading contender for president telling 510 00:28:10,359 --> 00:28:12,800 Speaker 1: people in his audience, go ahead and punch someone in 511 00:28:12,840 --> 00:28:15,600 Speaker 1: the face. I'll pay your legal bills. That's not an 512 00:28:15,600 --> 00:28:18,120 Speaker 1: excuse of latitude, because let me tell you, that is wrong. 513 00:28:18,160 --> 00:28:21,240 Speaker 1: If our kids did it, that is disastrous of a president, 514 00:28:21,320 --> 00:28:24,119 Speaker 1: does it to. Journalists face up to eight years in 515 00:28:24,160 --> 00:28:27,399 Speaker 1: prison if convicted in the Vatican's controversial trial over leaks 516 00:28:27,400 --> 00:28:31,240 Speaker 1: of confidential documents. The journalists are accused of putting pressure 517 00:28:31,320 --> 00:28:34,480 Speaker 1: on a Vatican mont senior to obtain the document, which 518 00:28:34,480 --> 00:28:38,440 Speaker 1: revealed waste, mismanagement and greed in the church hierarchy. The 519 00:28:38,520 --> 00:28:41,320 Speaker 1: mon Senior and to other people affiliated with the Papal 520 00:28:41,360 --> 00:28:45,400 Speaker 1: Reform Commission are also on trial. Media rights groups have 521 00:28:45,480 --> 00:28:48,880 Speaker 1: announced the prosecution of the journalists. Turkey state run news 522 00:28:48,960 --> 00:28:51,640 Speaker 1: agency says the military has carried out air strikes against 523 00:28:51,680 --> 00:28:55,440 Speaker 1: Kurdish rebels in northern Iraq. It comes hours after yesterday's 524 00:28:55,480 --> 00:28:57,760 Speaker 1: deadly car bombing and Anchora. They have killed at least 525 00:28:57,800 --> 00:29:00,720 Speaker 1: thirty seven people. Global News twenty were hours a day, 526 00:29:00,760 --> 00:29:04,240 Speaker 1: powered by our two hundred journalists more than one hundred 527 00:29:04,280 --> 00:29:06,800 Speaker 1: fifty news bureaus from around the world. I'm MICHAELA Barre, 528 00:29:06,960 --> 00:29:09,760 Speaker 1: Mike Tom, Thank you, Michael. Time now for the Ready 529 00:29:09,800 --> 00:29:13,520 Speaker 1: Katina Auto Group Bloomberg NBC Sports Update with Rob Bushman. 530 00:29:14,440 --> 00:29:16,800 Speaker 1: Good morning, Mike and Tom. A half dozen local teams 531 00:29:16,800 --> 00:29:19,120 Speaker 1: are dancing as the n C two A unveiled their 532 00:29:19,160 --> 00:29:22,320 Speaker 1: annual tournament field of sixty eight on Sunday, Big East 533 00:29:22,320 --> 00:29:24,480 Speaker 1: Turney winners Seaton Hall will have their hands full of 534 00:29:24,560 --> 00:29:27,720 Speaker 1: Gonzega making their eighteenth consecutive trip to the Big Dance. 535 00:29:27,760 --> 00:29:31,520 Speaker 1: That's a six versus eleven matchup. Fairley Dickinson, Iona Stony 536 00:29:31,560 --> 00:29:34,240 Speaker 1: Brook Buffalo and Syracuse round out the New York and 537 00:29:34,320 --> 00:29:37,240 Speaker 1: New Jersey Field Brooklyn. They play host two first round 538 00:29:37,280 --> 00:29:40,720 Speaker 1: matchups this weekend. The Knicks road trip continues out West, 539 00:29:40,760 --> 00:29:44,480 Speaker 1: where they beat the Lakers seven Carmelo Anthony twenty six points. 540 00:29:44,480 --> 00:29:47,680 Speaker 1: He reflects on the final matchup versus Lakers star Kobe 541 00:29:47,680 --> 00:29:51,760 Speaker 1: Bryant Harry in motional situation, just as from the standpoint 542 00:29:51,760 --> 00:29:55,320 Speaker 1: of competing, you know, everybody one of the great uh 543 00:29:56,200 --> 00:29:59,400 Speaker 1: Brandon brother one last time, you know, and the way 544 00:29:59,440 --> 00:30:02,800 Speaker 1: that this game, you know, played itself out. Bryant is 545 00:30:02,840 --> 00:30:05,800 Speaker 1: of course retiring at the end of the season. Bucks 546 00:30:05,840 --> 00:30:08,440 Speaker 1: took down the Nets one on nine one. It's not 547 00:30:08,560 --> 00:30:11,120 Speaker 1: often the Rangers play back to back and lose both 548 00:30:11,160 --> 00:30:13,880 Speaker 1: at home. After an overtime loss on Saturday in New York, 549 00:30:13,880 --> 00:30:15,920 Speaker 1: fell five to three at the Garden to the Penguins, 550 00:30:16,200 --> 00:30:19,360 Speaker 1: Rangers Dan Gerardi felt that attrition didn't play a role 551 00:30:19,520 --> 00:30:21,760 Speaker 1: our first period of nineteen shots, you know, and you know, 552 00:30:21,800 --> 00:30:24,000 Speaker 1: if anything, that's gonna be the weakest period coming out 553 00:30:24,040 --> 00:30:26,320 Speaker 1: from back to back game, and it was our strongest tonight. 554 00:30:26,360 --> 00:30:28,080 Speaker 1: So yeah, I don't think that was a factor. I 555 00:30:28,120 --> 00:30:30,240 Speaker 1: just don't We have some good good minutes there Io 556 00:30:30,280 --> 00:30:32,800 Speaker 1: plays and it's just gonna get it done things. The Rangers, however, 557 00:30:32,840 --> 00:30:34,520 Speaker 1: are still in a three way tie in the East 558 00:30:34,560 --> 00:30:37,280 Speaker 1: with the Lightning and Panthers and Spring training news guys. 559 00:30:37,360 --> 00:30:40,080 Speaker 1: Yankees shut out by the Phillies while the Mets blanked 560 00:30:40,160 --> 00:30:43,200 Speaker 1: the Miami Marlins. And that is your NBC Bloomberg Sports Update, 561 00:30:43,240 --> 00:30:46,360 Speaker 1: Mike donb thanks so much. Ellen Setner with us, and 562 00:30:46,360 --> 00:30:50,400 Speaker 1: we will continue whither. She migrates her forecast to a 563 00:30:50,440 --> 00:30:53,880 Speaker 1: low inflation and a FED that will do little, not nothing, 564 00:30:53,920 --> 00:30:58,320 Speaker 1: but do little. Her colleague and crime Adam Parker, brings 565 00:30:58,360 --> 00:31:04,680 Speaker 1: down his equity growth view. He eliminates his positive tactical stance. 566 00:31:05,280 --> 00:31:08,320 Speaker 1: We had to cash U S treasuries and j g 567 00:31:08,520 --> 00:31:14,000 Speaker 1: b's Adam Parker missus no words about Zentner and Parker 568 00:31:14,440 --> 00:31:21,480 Speaker 1: adjust more with Allen Zentner. This is Bloomberg Surveillance. The 569 00:31:21,520 --> 00:31:23,600 Speaker 1: Sports Report was brought to by Rakotina Auto Group. Let 570 00:31:23,680 --> 00:31:26,280 Speaker 1: Rakatina show you the way to affordable luxury driving. Visit 571 00:31:26,320 --> 00:31:28,560 Speaker 1: any one of their sixteen beautiful showrooms in New York 572 00:31:28,560 --> 00:31:32,040 Speaker 1: Car New Jersey, call n E W A U T O, 573 00:31:32,280 --> 00:31:38,120 Speaker 1: or go to Rakatina dot com. For special offers. Global 574 00:31:38,160 --> 00:31:41,560 Speaker 1: business news twenty four hours a day at Bloomberg dot com, 575 00:31:41,800 --> 00:31:44,640 Speaker 1: the Radio plus mobile app, and on your radio. This 576 00:31:45,040 --> 00:31:48,440 Speaker 1: is a Bloomberg Business Flash and I'm Karen Moscow. There's 577 00:31:48,480 --> 00:31:51,880 Speaker 1: updates brought to you by National Realty Returns on cash 578 00:31:51,880 --> 00:31:54,160 Speaker 1: and rented real estate. Find them at n r I 579 00:31:54,440 --> 00:31:58,360 Speaker 1: a dot net US dot Index. Futures are lower this 580 00:31:58,480 --> 00:32:01,080 Speaker 1: morning after a rally. Centis and P five hundred two 581 00:32:01,120 --> 00:32:04,800 Speaker 1: its highest clothes this year, as investors wait further assurances 582 00:32:04,800 --> 00:32:07,600 Speaker 1: that central banks will continue to support growth. We check 583 00:32:07,680 --> 00:32:10,240 Speaker 1: the markets every fifteen minutes throughout the trading day on 584 00:32:10,360 --> 00:32:13,880 Speaker 1: Bloomberg SNP Emni futures down five points, Dow E mini 585 00:32:13,880 --> 00:32:17,320 Speaker 1: futures down twenty eight and nast documny futures down about eleven. 586 00:32:17,600 --> 00:32:20,240 Speaker 1: The decks in Germany's up one and a half percent ten, 587 00:32:20,280 --> 00:32:22,560 Speaker 1: Your treasury up eight thirty seconds. The yield one point 588 00:32:22,640 --> 00:32:25,000 Speaker 1: nine five percent, yield on the two year point nine 589 00:32:25,040 --> 00:32:28,040 Speaker 1: four percent nine make screwed oil down two point seven 590 00:32:28,080 --> 00:32:30,280 Speaker 1: per cent or a dollar three to thirty seven forty 591 00:32:30,400 --> 00:32:33,040 Speaker 1: seven a barrel. Comex's gold is down two tenths per 592 00:32:33,040 --> 00:32:35,480 Speaker 1: cent or two dollars forty cents to twelve fifty seven. 593 00:32:35,480 --> 00:32:38,360 Speaker 1: Announced the euro a dollar eleven twenty one. The en 594 00:32:38,440 --> 00:32:42,360 Speaker 1: one thirteam point five nine Starwood Hotels and Resorts, which 595 00:32:42,400 --> 00:32:46,120 Speaker 1: is being bought by Marriott International, receiving a separate unsolicited 596 00:32:46,120 --> 00:32:49,080 Speaker 1: takeover proposal from a group of companies led by n 597 00:32:49,160 --> 00:32:52,560 Speaker 1: Bang Insurance Groups. Starwood is up more than eight percent. 598 00:32:52,680 --> 00:32:55,880 Speaker 1: Apollo Global Management agreed to buy Grosser the fresh Market 599 00:32:55,920 --> 00:32:59,640 Speaker 1: for about one point four billion in cash. Fresh Market 600 00:32:59,760 --> 00:33:02,680 Speaker 1: is up almost twenty four percent, and as a Bloomberg 601 00:33:02,760 --> 00:33:05,800 Speaker 1: Business Flash, Tom and Mike Karen thanks so much again. 602 00:33:05,840 --> 00:33:08,360 Speaker 1: A little way to futures at negative five it is 603 00:33:09,800 --> 00:33:14,400 Speaker 1: on Law Street. The following is from Bloomberg View. Opinions 604 00:33:14,400 --> 00:33:18,560 Speaker 1: and commentary from Bloomberg columnists. I'm Francis Wilkinson, an editor 605 00:33:18,600 --> 00:33:22,360 Speaker 1: for Bloomberg View. Ted Cruz plotted the most promising path 606 00:33:22,480 --> 00:33:26,400 Speaker 1: to the Republican nomination until Donald Trump came along. In fact, 607 00:33:26,440 --> 00:33:30,600 Speaker 1: Trump's initial popularity only validated Cruise's strategy of making himself 608 00:33:30,680 --> 00:33:34,840 Speaker 1: a vessel for enraged voters. As trump staying power grew, however, 609 00:33:35,120 --> 00:33:38,680 Speaker 1: and his hold on racially resentful white voters tightened, Cruz 610 00:33:38,760 --> 00:33:42,160 Speaker 1: concluded that he had to confront Trump, attacking his personal 611 00:33:42,200 --> 00:33:44,880 Speaker 1: finances and saying a vote for Trump was a vote 612 00:33:44,880 --> 00:33:48,920 Speaker 1: for Obamacare. In the GIP debate Thursday Night, Crews opted 613 00:33:48,960 --> 00:33:52,680 Speaker 1: for a new tack. He used the word solution nine times, 614 00:33:52,680 --> 00:33:56,920 Speaker 1: suggesting Trump diagnoses problems but that his solutions don't work. 615 00:33:57,520 --> 00:34:01,160 Speaker 1: The debate only reinforced how thoroughly Trump has beaten Cruise 616 00:34:01,240 --> 00:34:04,440 Speaker 1: at his own game. Cruiz once went to extremes to 617 00:34:04,520 --> 00:34:07,000 Speaker 1: cast himself as a radical who, in the words of 618 00:34:07,040 --> 00:34:11,320 Speaker 1: one conservative commentator, wants to burn Washington to the ground. 619 00:34:11,880 --> 00:34:15,120 Speaker 1: Having been bested by a superior act, Cruz is now 620 00:34:15,200 --> 00:34:18,840 Speaker 1: forced to remake himself as a man with solutions for sale. 621 00:34:19,360 --> 00:34:22,879 Speaker 1: I'm Francis Wilkinson and editor for Bloomberg View. For more 622 00:34:22,880 --> 00:34:27,040 Speaker 1: Bloomberg opinion and commentary, please go to Bloomberg View dot com. 623 00:34:27,080 --> 00:34:30,640 Speaker 1: This has been Bloomberg View and Bloomberg View Commentary has 624 00:34:30,640 --> 00:34:35,359 Speaker 1: give your hourly weekdays on Bloomberg Radio. Michael, we're talking 625 00:34:35,400 --> 00:34:38,160 Speaker 1: with Alan Zitner, the chief US Kindas for Morgan Stanley, 626 00:34:38,200 --> 00:34:40,920 Speaker 1: who has, uh, it's not an outlier call because other 627 00:34:40,920 --> 00:34:43,400 Speaker 1: people agree with the same thing, but at least she 628 00:34:43,560 --> 00:34:46,680 Speaker 1: is on the low end of FED activity for the 629 00:34:46,760 --> 00:34:49,000 Speaker 1: coming year, or two just one move this year, two 630 00:34:49,000 --> 00:34:53,680 Speaker 1: moves in two thousand seventeen, which is much less than 631 00:34:54,320 --> 00:34:57,440 Speaker 1: the consensus forecast for what the Fed's gonna do. I 632 00:34:57,520 --> 00:34:59,840 Speaker 1: want to start by asking you to put that in context. 633 00:35:00,400 --> 00:35:03,440 Speaker 1: Are you suggesting the Fed is not going to move 634 00:35:03,640 --> 00:35:07,680 Speaker 1: because the economy is going to be bad, or because 635 00:35:08,160 --> 00:35:11,120 Speaker 1: inflation so low they don't have to and they might 636 00:35:11,120 --> 00:35:15,600 Speaker 1: as well get the extra stimulus. Well, I think, of course, Mike, 637 00:35:15,640 --> 00:35:20,000 Speaker 1: economists have many many hands, um and, so I could 638 00:35:20,000 --> 00:35:22,400 Speaker 1: say on the one hand, other hand, and a few others, 639 00:35:22,440 --> 00:35:25,600 Speaker 1: so it's always a little bit of everything. But they're 640 00:35:25,600 --> 00:35:28,600 Speaker 1: not pressured on the inflation front at all either on 641 00:35:28,680 --> 00:35:31,439 Speaker 1: the wage front, so labor markets just aren't tied enough, 642 00:35:32,200 --> 00:35:35,960 Speaker 1: uh and, and certainly not on the inflation front, particularly 643 00:35:36,160 --> 00:35:40,160 Speaker 1: when we look at our forecast for core inflation, where 644 00:35:40,440 --> 00:35:44,680 Speaker 1: the the lagged cumulative effects of the trade, the rising 645 00:35:44,680 --> 00:35:48,600 Speaker 1: trade weighted dollar will continue to depress inflation for some time. 646 00:35:48,719 --> 00:35:51,439 Speaker 1: So they're really not pressured on the inflation front this year, 647 00:35:51,760 --> 00:35:55,000 Speaker 1: but they are emboldened by what they're seeing in the 648 00:35:55,080 --> 00:35:58,960 Speaker 1: domestic economy. We're facing a lot of external headwinds that 649 00:35:59,080 --> 00:36:02,680 Speaker 1: have resulted in that trade dragging on growth, energy investment 650 00:36:02,760 --> 00:36:05,239 Speaker 1: dragging on growth. But if you take those out of 651 00:36:05,239 --> 00:36:08,560 Speaker 1: the picture and just look at final private domestic demand 652 00:36:08,560 --> 00:36:11,160 Speaker 1: and the economy, just what we're moving and shaken here 653 00:36:11,160 --> 00:36:14,440 Speaker 1: in the US UH and it looks pretty good. And 654 00:36:14,480 --> 00:36:17,239 Speaker 1: so they're going to continue to communicate that they'd like 655 00:36:17,360 --> 00:36:20,520 Speaker 1: to do more and they'll maintain that tightening bias, but 656 00:36:20,640 --> 00:36:23,520 Speaker 1: ultimately decisions are made meeting by meeting, and coming up 657 00:36:23,560 --> 00:36:25,719 Speaker 1: to each meeting, we think that they're going to be 658 00:36:25,719 --> 00:36:28,440 Speaker 1: looking at inflation dynamics that are going to lead them 659 00:36:28,480 --> 00:36:31,839 Speaker 1: to push on hikes, and a lot of that will 660 00:36:31,880 --> 00:36:33,880 Speaker 1: be determined by and this is going to be a 661 00:36:33,960 --> 00:36:36,920 Speaker 1: key phrase. I think that we'll here all year diverging 662 00:36:37,000 --> 00:36:42,160 Speaker 1: global central bank policies. Other global central banks are still easing. 663 00:36:42,239 --> 00:36:44,960 Speaker 1: We're not as near to the end of the global 664 00:36:44,960 --> 00:36:47,319 Speaker 1: central bank easing cycle as the said had thought we 665 00:36:47,320 --> 00:36:50,120 Speaker 1: were when they raised rates in December, and that's going 666 00:36:50,160 --> 00:36:52,960 Speaker 1: to continue to make it difficult for them to deliver 667 00:36:53,040 --> 00:36:57,000 Speaker 1: more hikes because, as OURFX strategists have have also released 668 00:36:57,000 --> 00:37:00,000 Speaker 1: a separate note this morning, they believe there's more upside 669 00:37:00,000 --> 00:37:05,600 Speaker 1: in the dollar to come because of divergence. Well, now 670 00:37:05,640 --> 00:37:10,480 Speaker 1: you ask the dollar, trade weighted dollars lower than it 671 00:37:10,560 --> 00:37:13,399 Speaker 1: was before the FED raised rates, Well, certainly, so we've 672 00:37:13,400 --> 00:37:16,160 Speaker 1: had a nice pullback in the trade weighted dollar, and 673 00:37:16,200 --> 00:37:19,920 Speaker 1: of course if that is sustained, then that would further 674 00:37:20,080 --> 00:37:22,239 Speaker 1: add to the Fed's argument to do more this year, 675 00:37:22,280 --> 00:37:24,560 Speaker 1: and we would probably end up being wrong on the 676 00:37:24,600 --> 00:37:28,400 Speaker 1: one rate hike assumption. Um. But our FX strategist and 677 00:37:28,480 --> 00:37:30,160 Speaker 1: Tom can tell you, if you listen to an f 678 00:37:30,280 --> 00:37:32,680 Speaker 1: X strategist, you could practically fall asleep on all the 679 00:37:32,760 --> 00:37:36,640 Speaker 1: nuances they give around what drives currencies. But one of 680 00:37:36,680 --> 00:37:45,719 Speaker 1: the one of the drivers is diverging global central bank policies. 681 00:37:45,840 --> 00:37:48,719 Speaker 1: And at the time of the December rate hike, the 682 00:37:48,760 --> 00:37:51,760 Speaker 1: FED was looking at the world and through a different lens. 683 00:37:51,840 --> 00:37:54,160 Speaker 1: They thought that we were nearer to the end of 684 00:37:54,200 --> 00:37:58,319 Speaker 1: global central bank easing cycle than we are. They were 685 00:37:58,360 --> 00:38:03,000 Speaker 1: blindsided by Japan going negative, ECB going negative, And it's 686 00:38:03,040 --> 00:38:05,400 Speaker 1: now apparent that we're not as close to the end 687 00:38:05,400 --> 00:38:07,759 Speaker 1: of the global central bank easing cycle. And that's that 688 00:38:07,920 --> 00:38:11,440 Speaker 1: policy divergence is just one of many reasons that we'll 689 00:38:11,480 --> 00:38:14,040 Speaker 1: put upward pressure on the trade weighted dollar. We think 690 00:38:14,280 --> 00:38:17,280 Speaker 1: you're just joining us, Ellen Zentner with Morgan Stanley tomorrow. 691 00:38:17,760 --> 00:38:20,600 Speaker 1: It's a fair and balance Bloomberg Surveillance. Hans Raddi, girl 692 00:38:20,600 --> 00:38:24,240 Speaker 1: will join us. He'll tear apart. Ellen. That was quite something. Ellen, 693 00:38:24,360 --> 00:38:26,680 Speaker 1: I don't tell us. Don't tell Hans that I said, 694 00:38:26,719 --> 00:38:30,160 Speaker 1: people will fall asleep when you listen. I will not. 695 00:38:30,480 --> 00:38:33,320 Speaker 1: I will not do that. But but seriously, this comes 696 00:38:33,320 --> 00:38:36,640 Speaker 1: down to a basic economics, which is a common ground 697 00:38:36,640 --> 00:38:39,320 Speaker 1: of everyone we speak to. There's a short term, a 698 00:38:39,440 --> 00:38:42,600 Speaker 1: long term, and the British have the conceit of the 699 00:38:42,640 --> 00:38:47,600 Speaker 1: medium term, which term is chair yelling in well, I 700 00:38:47,640 --> 00:38:50,879 Speaker 1: think right now much of their so when they make 701 00:38:50,920 --> 00:38:54,440 Speaker 1: decisions meeting by meeting, it's financial conditions that determine it. 702 00:38:54,480 --> 00:38:57,640 Speaker 1: What a financial conditions look like going into those meetings. 703 00:38:58,120 --> 00:39:01,560 Speaker 1: In terms of the medium term, the framework, the policy 704 00:39:01,600 --> 00:39:04,680 Speaker 1: framework is that tailor rule that we all love that 705 00:39:04,760 --> 00:39:07,279 Speaker 1: tells you how much of an unemployment gap do you have, 706 00:39:07,560 --> 00:39:10,080 Speaker 1: what kind of inflation pressures do you have, and what 707 00:39:10,200 --> 00:39:13,360 Speaker 1: is your output gap look like? And she believes that 708 00:39:13,480 --> 00:39:16,320 Speaker 1: the real equilibrium rate in the short run is currently 709 00:39:16,400 --> 00:39:21,840 Speaker 1: negative or about flat and will rise only gradually over time, 710 00:39:22,000 --> 00:39:25,399 Speaker 1: and so they look to align policy with that gradual rise. 711 00:39:25,480 --> 00:39:28,560 Speaker 1: So that dictates that they know they're pretty certain the 712 00:39:28,719 --> 00:39:31,879 Speaker 1: rise in rates is going to be very gradual. That's 713 00:39:31,880 --> 00:39:35,160 Speaker 1: the framework. But the decisions will be made meeting by meeting, 714 00:39:35,160 --> 00:39:37,960 Speaker 1: and so they'll look at financial conditions going into each 715 00:39:38,040 --> 00:39:41,919 Speaker 1: meeting um and how certain they are about their their 716 00:39:41,960 --> 00:39:44,880 Speaker 1: outlook that they will meet their outlook. That will dictate 717 00:39:45,080 --> 00:39:47,839 Speaker 1: what they're willing to do with rates today. I have 718 00:39:47,880 --> 00:39:51,000 Speaker 1: to ask you about a very short note in your 719 00:39:51,000 --> 00:39:55,960 Speaker 1: most recent note clients about recession remaining your bare case. 720 00:39:56,600 --> 00:39:59,680 Speaker 1: How much of a percentage do you put on recession 721 00:39:59,719 --> 00:40:02,719 Speaker 1: because what caught my eye is just this phrase, Uh, 722 00:40:02,760 --> 00:40:05,760 Speaker 1: it's deeper and longer to reflect increasing risk this scenario 723 00:40:05,920 --> 00:40:09,640 Speaker 1: plays out. Yeah, so it's a good question, Mike, and 724 00:40:09,760 --> 00:40:13,719 Speaker 1: the U S economy, basically, recession probabilities keep fluctuating. We 725 00:40:13,760 --> 00:40:17,359 Speaker 1: believe between twenty and thirty percent, depending on how much 726 00:40:17,560 --> 00:40:22,040 Speaker 1: angst there is in the markets. The reason why recession 727 00:40:22,040 --> 00:40:26,160 Speaker 1: probabilities aren't higher for the US even though we're in 728 00:40:26,200 --> 00:40:29,760 Speaker 1: this very low growth backdrop, is that you really need 729 00:40:29,800 --> 00:40:33,920 Speaker 1: to show more damage on the domestic side of the economy, 730 00:40:34,280 --> 00:40:37,359 Speaker 1: you know, the industrial side of the economy. We've we've 731 00:40:37,400 --> 00:40:40,320 Speaker 1: released a lot of analysis around this is in recession. 732 00:40:40,680 --> 00:40:42,719 Speaker 1: It takes off all the boxes that the n b 733 00:40:42,880 --> 00:40:46,359 Speaker 1: e R looks for when dating recessions. Industrial production has 734 00:40:46,400 --> 00:40:49,000 Speaker 1: fallen from peak. It's fallen by nearly two percent. It's 735 00:40:49,000 --> 00:40:51,759 Speaker 1: fallen over more than a six month period. But that's 736 00:40:51,840 --> 00:40:56,800 Speaker 1: ten of your economy. The other ninety percent is still 737 00:40:56,800 --> 00:41:00,359 Speaker 1: growing it around the two growth rate. And you've got 738 00:41:00,360 --> 00:41:02,800 Speaker 1: to see more damage done to the labor market, to 739 00:41:02,920 --> 00:41:07,360 Speaker 1: consumer confidence UH, to to spending UH than we've seen 740 00:41:07,480 --> 00:41:11,280 Speaker 1: in order to get those recession probabilities up much higher. 741 00:41:11,640 --> 00:41:14,319 Speaker 1: But it has to remain the base case, sorry, the 742 00:41:14,360 --> 00:41:18,200 Speaker 1: bear case, because we're growing at such a slow rate. 743 00:41:18,480 --> 00:41:21,160 Speaker 1: This is a mature phase of the cycle. I would say, 744 00:41:21,200 --> 00:41:23,279 Speaker 1: we don't know how long this business cycle will last. 745 00:41:23,320 --> 00:41:25,240 Speaker 1: We think it will be one of the longest on record. 746 00:41:26,080 --> 00:41:29,000 Speaker 1: But of course, when you're growing this slowly, any sort 747 00:41:29,040 --> 00:41:32,040 Speaker 1: of bobbling can push the economy into negative growth, and 748 00:41:32,120 --> 00:41:35,520 Speaker 1: so it has to remain your bear case. Ellen, thank 749 00:41:35,560 --> 00:41:39,400 Speaker 1: you so much, congratulations on your terrific two thousand fifteen. 750 00:41:39,440 --> 00:41:42,839 Speaker 1: And an important research note today from Morgan Seeley Adam 751 00:41:42,880 --> 00:41:48,160 Speaker 1: Parker migrates is equity call. Ellen Zentner migrates economical titled 752 00:41:48,200 --> 00:41:52,840 Speaker 1: in the Shallow on Mike um It's important anecdotal. Yahoo 753 00:41:52,880 --> 00:41:56,480 Speaker 1: down from the peak of late two thousand and fourteen, 754 00:41:57,080 --> 00:42:01,120 Speaker 1: and then there's securities analysis. You go to Twitter, thank 755 00:42:01,160 --> 00:42:06,160 Speaker 1: you Casey for the photograph itself by Southwest of the 756 00:42:06,239 --> 00:42:11,040 Speaker 1: tumbler party, and Casey, after careful research and notices it's 757 00:42:11,040 --> 00:42:15,680 Speaker 1: a cash bar this year. This is the change at Yahoo. 758 00:42:16,600 --> 00:42:20,200 Speaker 1: There's a cash bar at their tumbler party atself by 759 00:42:20,239 --> 00:42:24,800 Speaker 1: Southwest Important News. You can use security analysis there you 760 00:42:24,840 --> 00:42:29,239 Speaker 1: go no free cash, no no free cash, no free liquor, 761 00:42:29,719 --> 00:42:32,400 Speaker 1: versus on the warpath. I think we're having a cash 762 00:42:32,480 --> 00:42:35,920 Speaker 1: bar south by Southwest. It has changed. It is not nearly. 763 00:42:36,840 --> 00:42:40,319 Speaker 1: It is different collegiately. It is different than it was 764 00:42:40,400 --> 00:42:44,240 Speaker 1: ten or twenty years ago on economics, like ellen Zner, 765 00:42:44,320 --> 00:42:48,600 Speaker 1: on finance and investment. This is Bloomberg surveillance. Another hour 766 00:42:48,760 --> 00:42:49,200 Speaker 1: coming up.