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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: dot com, the Radio plus Mobile Lab and on your radio.

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Speaker 1: This is a Bloomberg Business Flash and I'm Karin Moscow.

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Speaker 1: There's updates. Brought to you by Marx Penneth l LP,

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Speaker 1: ranked among the top three forensic accounting firms in New

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Speaker 1: York by the New York Law Journal for the sixth

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Speaker 1: year in a row. Visit marks Penneth dot Com. Employers

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Speaker 1: added more workers in February than projected, while wages unexpectedly

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Speaker 1: defied The two hundred forty two thousand game followed a

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Speaker 1: one hundred seventy two thousand rise in January that was

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Speaker 1: larger than previously estimated. The java's rate held at four

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Speaker 1: point nine percent as people entered the labor force and

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Speaker 1: found work. Average hourly earnings dropped, the first monthly decline

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Speaker 1: in more than a year, and workers put in fewer hours. Stocks, meanwhile,

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Speaker 1: are moving lower, with the SMP five hundred down a

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Speaker 1: tenth of upper center two and a half points, to

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Speaker 1: ninete Dow Jones Industrial average down a tenth of upper

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Speaker 1: center twenty points. The sixteen thousand, nine hundred twenty three

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Speaker 1: NASDACK down two tenths per cent or eight points to

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Speaker 1: forty six nine ten. Your treasury is down four thirty seconds,

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Speaker 1: the yield one eight four percent. Nine X screwed oil

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Speaker 1: down a tenth of ever center four cents at thirty

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Speaker 1: four fifty four a barrel. COMEX gold is at one

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Speaker 1: point six per cent or twenty dollars ten cents to

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Speaker 1: twelve ounce. The Euro at dollar ten fourteen again one

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Speaker 1: thirteen point three nine, and you let. Packard Enterprises is

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Speaker 1: the best performer in the SNP five this morning. It's

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Speaker 1: up about fourteen per set to the company forecast profit

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Speaker 1: for the current quarter. That was better than some analysts

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Speaker 1: we're looking for. That's a Bloomberg business flash. Tom and

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Speaker 1: Mike Karen, thanks so much. I just put on a tweet.

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Speaker 1: It's extremely important tweet. With Scott Mather visiting us from

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Speaker 1: PIMCO and his heritage of University of Pennsylvania engineering, I

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Speaker 1: can't think of a better way to end the week

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Speaker 1: than a block on inertial force. I mean, come on,

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Speaker 1: we can do Newtonian mechanics to stagger to Saturday. You can. Yeah,

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Speaker 1: let's have to sit and listen. But you don't know, folks,

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Speaker 1: is when I walk out the door. Rachel, my executive producer,

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Speaker 1: gives me a bloody already to get me through the week, Scott,

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Speaker 1: let's cut to the chase negative interest rates. You go

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Speaker 1: below the zero bound, you get there if you go further.

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Speaker 1: It's not a linear function. The the impacts on the

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Speaker 1: I S curve, the real economy, the LM curve the

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Speaker 1: banking money system, and the impacts on the good politicians

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Speaker 1: and institution uh makers like your good advisor Ben Bernanke,

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Speaker 1: former Chairman of the FED. It's quadratic. It becomes ever

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Speaker 1: more inertial as you move lower in rates. We uh,

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Speaker 1: we definitely have sympathy for that view. I mean we

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Speaker 1: see these uh we see a lot of negative effects

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Speaker 1: that become amplified when you start moving further into negative territory.

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Speaker 1: So not only is do the positive impacts begin to diminish,

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Speaker 1: but probably it's the case, as you suggested, that the

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Speaker 1: negative impacts be and to be amplified in a nonlinear fashion.

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Speaker 1: And you think about the market's response to what the

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Speaker 1: ECB did in December and to all that commentary about

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Speaker 1: negative interest rate policy and then the bag of Japan,

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Speaker 1: it's quite clear the markets understand this as well. To

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Speaker 1: bring it back to the English language, nonlinear means you

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Speaker 1: are more susceptible to exogeren as shocks outside shocks when

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Speaker 1: you go into your Monday meeting, when you have your

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Speaker 1: quarterly meeting here soon, What will be the exogenous shock

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Speaker 1: you're most focused on. Well, we've been very focused on

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Speaker 1: how far negative interest rates will go. Now there is

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Speaker 1: some reason to believe, you know, that could be a

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Speaker 1: shock in and of itself. One of the UH features

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Speaker 1: of the last few weeks as you start to see

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Speaker 1: policy makers sort of back away from that. You've had

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Speaker 1: commentary from from the Fed, from the Bank of Japan

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Speaker 1: just overnight, and and from e CV officials sort of

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Speaker 1: indykating that they understand this effect perhaps and at least

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Speaker 1: have some sympathy for that for that view. So that

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Speaker 1: maybe is diminishing in terms of a risk, but the

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Speaker 1: risk that that that when you think about shocks that

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Speaker 1: could happen and change would change our relatively sanguine economic view. Uh,

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Speaker 1: most of them are political in nature. You know, we

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Speaker 1: just observe we still have fairly weak coalition governments in Europe.

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Speaker 1: We've got Brexit coming up, We've got growing nationalism all

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Speaker 1: over Europe, and we've got a migration crisis which could

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Speaker 1: threaten Merkel UH and her ability to to survive out

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Speaker 1: her full term. So you know, those would be major

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Speaker 1: UH market moving and real economy moving events that we

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Speaker 1: need to pay a lot of attention to. And then

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Speaker 1: of course after that we have US election politics. Well, yeah,

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Speaker 1: there's a lot there. You have a lot of UM

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Speaker 1: European center banks using negative rates now and they're all

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Speaker 1: suggesting they're going to continue with that, and the forecast

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Speaker 1: is for the ECB to do something additional next week.

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Speaker 1: How far can it go before it starts to damage

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Speaker 1: the banking system, the financial system and UH and and

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Speaker 1: have and be counterproductive. Well, we would say it's already

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Speaker 1: counter it's already there. It's already there. That's one of

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Speaker 1: the reasons we've seen financial stocks particularly damaged UH in Europe.

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Speaker 1: It's a tightening of credit conditions. So here's a policy

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Speaker 1: put in place meant to ease UH financial conditions, and

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Speaker 1: it's and it's and it's working in exactly the opposite way,

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Speaker 1: and it's pulling down inflation expectations perhaps rather than causing

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Speaker 1: them to go up. So UH, you know what we

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Speaker 1: think would be the right policy of response. What we

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Speaker 1: think the ECB will do UH is start to downplay

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Speaker 1: a move further into negative territory, although they feel they

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Speaker 1: might need to do a touch more and they'll focus

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Speaker 1: more on credit easing, which is probably more powerful. If

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Speaker 1: you're trying to design um a set of easier financial

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Speaker 1: conditions and get bank lending UH growing. UH, then you

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Speaker 1: need to stop damaging bank profitabilities. You need to find

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Speaker 1: ways to help them. That could be purchasing things like

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Speaker 1: bank loans directly off balance sheets. It could be purchasing

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Speaker 1: corporate credit. Tell us about what your experts say on

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Speaker 1: the dynamics down the income statement. We get different opinions

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Speaker 1: here about the strength of IBATA operating income gap earnings.

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Speaker 1: Everybody agrees finding revenue is going to be challenging. I

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Speaker 1: get that. What's the dynamic you frame for the American

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Speaker 1: corporate or world down the income Well, you know, one

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Speaker 1: of the big features of the next few years, we

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Speaker 1: think that will will be a further headwind to profit growth,

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Speaker 1: and it's sort of an unrecognized tail wind that's benefit

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Speaker 1: of corporate profits tremendously for the last of you know,

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Speaker 1: five years is uh is wages begin to go up again,

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Speaker 1: and we think that that will happen to get wage

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Speaker 1: growth for the American worker back up into the three

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Speaker 1: sort of territory. That's going to come at the expense

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Speaker 1: of corporate profits. But it's one of the reasons. Of course,

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Speaker 1: the reason why corporate profits were able to grow to

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Speaker 1: sort of a cycle high percentage of GDP is because

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Speaker 1: they've been taking more than their fair share of of

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Speaker 1: national income. Uh and that does mean revert over time.

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Speaker 1: We think we're going to enter the cycle as the

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Speaker 1: labor market tightens up where wages go up, it comes

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Speaker 1: at the expense of corporate profits. So add that to

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Speaker 1: the already challenging revenue growth and the challenging uh international environment,

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Speaker 1: and exactly you know, US multinationals have have a real

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Speaker 1: challenges does globalization. We're it's ahead again. And if if

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Speaker 1: we have wage increases in the U S, do they

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Speaker 1: just move investment abroad and job creation abroad. Well that's uh, yes,

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Speaker 1: definitely some of that will be happening. And that's uh,

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Speaker 1: you know, that's going to constrain US growth to some extent. Well,

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Speaker 1: not if certain people are elected president. UM at least

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Speaker 1: so they say, does it matter to you and your

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Speaker 1: investment outlook? Who is the president? Is the question I

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Speaker 1: put to uh to all our guests today, including Alan

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Speaker 1: Krueger and Robert Gordon. The United States government is a

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Speaker 1: massive operation, and you have Congress and the presidency often

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Speaker 1: in opposition, even if they're in the same party. So

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Speaker 1: do we have to fear some of the policy proposals

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Speaker 1: being brooted about as as much as uh we? Uh

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Speaker 1: we might on the face of it, are you would

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Speaker 1: you change your investment strategies based on who's elected? Well,

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Speaker 1: we might need to, but certainly you have to get

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Speaker 1: to the point where there's some you know, a clear

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Speaker 1: policy agenda or so far there is not. Uh So

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Speaker 1: that probably takes, you know, moving into the summer months,

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Speaker 1: and it will create some market volatility and and we'll

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Speaker 1: have to assess the situation. Then we would just point

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Speaker 1: out that there is some hope. Uh you know, there's

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Speaker 1: a lot of negativity and concern about what could go wrong,

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Speaker 1: but simply the fact of moving past the election and

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Speaker 1: sort of allowing there to be uh maybe a chance

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Speaker 1: of some sort of you know, constructive legislative agenda to

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Speaker 1: pick the low hanging fruit that are out there in

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Speaker 1: terms of things that can be done to to boost growth.

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Speaker 1: Makes us a bit more positive once we get past

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Speaker 1: the election, so we don't want to get carried away

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Speaker 1: with all the things that could go wrong in the

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Speaker 1: market volatility that will result before the election. There's a

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Speaker 1: lot of reason to think you're low hanging fruit in

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Speaker 1: terms of tax reform, of instance, I need some advice

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Speaker 1: before we let you go. I know you're gonna work

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Speaker 1: with Mike Worldwide on TV. We've got to wrap up

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Speaker 1: the weaker, Scott Mather. For an eight year old, we

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Speaker 1: could go with the regular ruler, or is it too

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Speaker 1: early for an engineering rule? One of those triangle three

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Speaker 1: sided rulers. Did you have one when you were five

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Speaker 1: or eight years old? I believe I did when I

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Speaker 1: was Yeah, when I was like eight years old or something.

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Speaker 1: It's very important and then your father can beat you

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Speaker 1: with it. That's right. You're trying to give a kid

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Speaker 1: one of those now, and they would just give you

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Speaker 1: this strange look to the m I T Slide Rule Museum.

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Speaker 1: To me, that's a fascinating place. Are you kidding me,

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Speaker 1: Mather or not? We used ko full An assert slide

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Speaker 1: rules he's too young to remember that. I did. I

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Speaker 1: remember the Hewlett Packard whatever it was or whatever freshman

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Speaker 1: years like fifth grad slide rule. Next week, Bloomers Surveillance quit.

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Speaker 1: Scott Mather, thank you so much. What a week of spend,

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Speaker 1: Michael make you really, you know, going from Washington and

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Speaker 1: the politics to what we've seen to that romney at

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Speaker 1: one after there's so many people so focused on politics,

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Speaker 1: and then you get back here and people are less

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Speaker 1: concerned and that's yeah, that's the interesting thing about it.

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Speaker 1: And we need to say thank you to our team,

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Speaker 1: everybody but Riley from St. Louis, who slacked it off

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Speaker 1: about Wednesday. She's been mailed in for two days. Rachel

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Speaker 1: worst Fan, thank you so much. Our executive producer Bowden

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Speaker 1: even this week was above average, which was shocking that

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Speaker 1: we were he was. We had a Bowden guest on

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Speaker 1: one of our reporters on Herbal Life. That's the only

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Speaker 1: reason he showed up today. But what we can say, folks, seriously,

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Speaker 1: it's been a magical week where we try to bring

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Speaker 1: you the best in conversation of economics, finance, investment, in

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Speaker 1: international relations, of special thanks to Bill Gross who has

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Speaker 1: given us a huge commitment to UH his job's day.

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Speaker 1: Thoughts from Janice at Capital. Importantly, Mark Helper in in

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Speaker 1: conversation with a former governor of the Commonwealth of Massachusetts,

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Speaker 1: Mitt Romney. After what we saw yesterday, Mitt Romney expanding

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Speaker 1: further with Mark Helper and look for that at one thirty.

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Speaker 1: That'll be worldwide Bloomberg Radio, Bloomberg Television. Look for that

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Speaker 1: just after the noon hour. UH this afternoon. The market

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Speaker 1: green in the screen now read negative thirty seven. The

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Speaker 1: vix se ventene points souciary. We are produced by Bowden

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Speaker 1: ken Fellow, our global technical director, from New York City,

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Speaker 1: Bloomberg Surveillance