1
00:00:02,200 --> 00:00:05,600
Speaker 1: Global business news twenty four hours a day. That's Bloomberg

2
00:00:05,640 --> 00:00:08,720
Speaker 1: dot Com, the Radio plus mobile app and on your radio.

3
00:00:08,960 --> 00:00:13,080
Speaker 1: This is a Bloomberg Business flag from Bloomberg World Handquarters.

4
00:00:13,240 --> 00:00:16,639
Speaker 1: I'm Charlie Powlett. Stocks are rallying new records for the

5
00:00:16,640 --> 00:00:20,000
Speaker 1: Dow Jones Industrial Average and the SMP five hundred index.

6
00:00:20,079 --> 00:00:23,960
Speaker 1: The SMP five hundred index up eleven to seventy five,

7
00:00:24,000 --> 00:00:27,320
Speaker 1: a gain of five tenths of one percent. Optimism about

8
00:00:27,360 --> 00:00:30,520
Speaker 1: earnings helping lift stocks today. We've got the Dow Industrials

9
00:00:30,560 --> 00:00:33,560
Speaker 1: up sixty two points to eighteen thousand, six hundred twenty,

10
00:00:33,560 --> 00:00:36,520
Speaker 1: a gain of three tenths of one percent. As stack

11
00:00:36,640 --> 00:00:39,600
Speaker 1: up sixty a gain there of one point two percent.

12
00:00:40,080 --> 00:00:42,960
Speaker 1: Ten Yere down eight thirty seconds, yield one point five

13
00:00:43,000 --> 00:00:47,639
Speaker 1: eight percent, Gold falling fourteen fifty the ounce the thirteen seventeen,

14
00:00:47,640 --> 00:00:50,200
Speaker 1: a drop there of one point one percent. Crude oil

15
00:00:50,240 --> 00:00:53,440
Speaker 1: back below forty five dollars of barrel ninety. Right now

16
00:00:53,440 --> 00:00:57,800
Speaker 1: on West Texas Intermediate it is up twenty six cents,

17
00:00:57,960 --> 00:01:01,040
Speaker 1: up by six cents of one percent. I'm Charlie Pellet,

18
00:01:01,840 --> 00:01:07,280
Speaker 1: a Bloomberg Business flash. Bloomberg Jakime Stock, the Fed in focus,

19
00:01:07,400 --> 00:01:10,360
Speaker 1: the interest rates start to row for where the economy

20
00:01:10,480 --> 00:01:12,840
Speaker 1: is going. The question is how much higher ship it be.

21
00:01:13,040 --> 00:01:16,720
Speaker 1: FED has increased to tass Yes, and in doing so

22
00:01:17,040 --> 00:01:21,240
Speaker 1: it has increased its liability. Keeping interest rates at zero

23
00:01:21,560 --> 00:01:24,560
Speaker 1: for a long time is not going to cause inflation

24
00:01:24,600 --> 00:01:27,560
Speaker 1: to go up. It's very controversial. I think what we

25
00:01:27,600 --> 00:01:29,199
Speaker 1: need to do is find a way for the FED

26
00:01:29,280 --> 00:01:32,160
Speaker 1: to integrate its policy and think more about its impact

27
00:01:32,160 --> 00:01:37,280
Speaker 1: on the world. The Fed in focus on Bloomberg Radio. Godzilla,

28
00:01:37,520 --> 00:01:43,760
Speaker 1: Godzilla versus Gegon, Godzilla versus Destroy Your Yah. Stephen Gilfoyle,

29
00:01:43,880 --> 00:01:47,520
Speaker 1: chief market economist of Stuart Frankel, joins us now. He

30
00:01:47,560 --> 00:01:51,600
Speaker 1: can be followed on Twitter at Sarge nine eight six.

31
00:01:52,000 --> 00:01:55,040
Speaker 1: Stephen gilfoil I started off with a little Godzilla courtesy

32
00:01:55,080 --> 00:01:57,200
Speaker 1: of your most recent note. I thought you were going

33
00:01:57,280 --> 00:01:59,440
Speaker 1: to tell me that the central banks around the world

34
00:01:59,520 --> 00:02:04,080
Speaker 1: where god Zilla and those other large characters fighting it out,

35
00:02:04,080 --> 00:02:06,040
Speaker 1: and that they would leave the world with a trail

36
00:02:06,080 --> 00:02:09,120
Speaker 1: of destruction. Tell us a little bit more, Oh, I

37
00:02:09,160 --> 00:02:11,400
Speaker 1: think that that's certainly the case. You're you're probably going

38
00:02:11,440 --> 00:02:13,560
Speaker 1: to see that my god Zilla reference this morning that

39
00:02:13,600 --> 00:02:16,720
Speaker 1: THO was having to do with this Pokemon in Japan.

40
00:02:16,840 --> 00:02:19,200
Speaker 1: But but yes, I think I think we'll stay with Japan,

41
00:02:19,639 --> 00:02:22,799
Speaker 1: the Bank of Japan with their with that program. We're

42
00:02:22,800 --> 00:02:25,680
Speaker 1: expecting them to go forward with next week, which really

43
00:02:25,720 --> 00:02:28,680
Speaker 1: amounts to either perpetual bonds or helicopter money however you

44
00:02:28,680 --> 00:02:32,200
Speaker 1: want to explain it is UH along with earnings. Part

45
00:02:32,200 --> 00:02:34,200
Speaker 1: of this goose move we're seeing in the markets here

46
00:02:34,200 --> 00:02:37,880
Speaker 1: with the record highs for the sp doubt for several

47
00:02:37,960 --> 00:02:42,280
Speaker 1: days running now as Japan continues at stimulus program, A

48
00:02:42,320 --> 00:02:46,280
Speaker 1: lot of that money is supposedly earmarked for infrastructure projects.

49
00:02:46,280 --> 00:02:49,200
Speaker 1: Those are projects that won't necessarily show up on any

50
00:02:49,400 --> 00:02:52,440
Speaker 1: balance sheet or in any budget item. What's that going

51
00:02:52,520 --> 00:02:56,799
Speaker 1: to do to the country's debt balance? Well, you see

52
00:02:56,800 --> 00:02:59,760
Speaker 1: when they spend fiscally, what they're gonna do. I mean,

53
00:02:59,800 --> 00:03:01,600
Speaker 1: even if they're spending it on infrastructure, it's going to

54
00:03:01,680 --> 00:03:04,160
Speaker 1: go towards things like like supplies is going to go

55
00:03:04,280 --> 00:03:06,720
Speaker 1: towards UH, towards salaries, things like that. The money will

56
00:03:06,760 --> 00:03:08,639
Speaker 1: be in the general economy, A lot of it will

57
00:03:08,680 --> 00:03:10,799
Speaker 1: be They're going to erase it from the balance sheet

58
00:03:10,800 --> 00:03:13,840
Speaker 1: of their central bank and from the liability side of

59
00:03:13,880 --> 00:03:16,280
Speaker 1: their treasury. So it's going to be a strictly an

60
00:03:16,280 --> 00:03:18,800
Speaker 1: increase in the monetary base with the money supply. So

61
00:03:18,840 --> 00:03:22,120
Speaker 1: the idea here is that they can maybe wash away

62
00:03:22,160 --> 00:03:24,400
Speaker 1: some of their debt by by getting some inflation. And

63
00:03:24,480 --> 00:03:26,040
Speaker 1: you know, I don't think it's really a good idea.

64
00:03:26,120 --> 00:03:28,920
Speaker 1: I don't. I'm not certainly on board with anything like this,

65
00:03:29,040 --> 00:03:31,080
Speaker 1: but it seems to be the way that ben Verniky

66
00:03:31,120 --> 00:03:33,440
Speaker 1: has led them. Is it a bad idea? Will it

67
00:03:33,639 --> 00:03:38,760
Speaker 1: create unintended consequences that may be worse than the original problem?

68
00:03:38,800 --> 00:03:40,440
Speaker 1: It may, I mean, we all know what happened in

69
00:03:40,520 --> 00:03:43,040
Speaker 1: Germany in the nineteen twenties. I'm not saying that's automatically

70
00:03:43,120 --> 00:03:45,000
Speaker 1: gonna happen. They've been trying to get inflation over there

71
00:03:45,000 --> 00:03:49,200
Speaker 1: for decades now and it hasn't worked. I myself come

72
00:03:49,240 --> 00:03:52,360
Speaker 1: from the Austrian school of economics, so I don't really

73
00:03:52,400 --> 00:03:56,560
Speaker 1: like these extra wild attempts at at goosing things. But

74
00:03:56,640 --> 00:04:00,200
Speaker 1: maybe you shouldn't. But they But in Japan's case, their

75
00:04:00,200 --> 00:04:02,440
Speaker 1: economy has been in a death spiral for some time

76
00:04:02,480 --> 00:04:05,360
Speaker 1: and they've tried almost everything else. So I do understand

77
00:04:05,400 --> 00:04:07,880
Speaker 1: the desperation, all right. So the death spiral that works

78
00:04:07,880 --> 00:04:11,400
Speaker 1: with a Godzilla character tell us about the European Central Bank.

79
00:04:11,680 --> 00:04:15,240
Speaker 1: What movie would they would they inhabit if indeed they

80
00:04:15,280 --> 00:04:18,039
Speaker 1: were making a film or a documentary about the Mario

81
00:04:18,160 --> 00:04:21,320
Speaker 1: Draggy and the European Central Bank. I don't know if

82
00:04:21,320 --> 00:04:23,880
Speaker 1: I can think of a movie for you, But they're

83
00:04:23,880 --> 00:04:26,320
Speaker 1: going to They're probably gonna hold still tomorrow. I mean,

84
00:04:26,320 --> 00:04:29,440
Speaker 1: they're trying pretty desperate measures themselves. We all know they've

85
00:04:29,480 --> 00:04:32,799
Speaker 1: kept interest rates very low. They're buying everything from corporate

86
00:04:32,800 --> 00:04:35,680
Speaker 1: bonds to government bonds to pretty much everything accept goods

87
00:04:35,680 --> 00:04:39,200
Speaker 1: and services, so they've been very aggressive themselves. I think

88
00:04:39,240 --> 00:04:40,720
Speaker 1: they have to give it a little more time. It's

89
00:04:40,720 --> 00:04:44,200
Speaker 1: their first meeting since the brexit. We I think it's

90
00:04:44,200 --> 00:04:46,200
Speaker 1: playing to see for orl right now that the brexits

91
00:04:46,279 --> 00:04:48,080
Speaker 1: hurting Europe more than it's going to hurt the UK

92
00:04:49,080 --> 00:04:51,120
Speaker 1: UH and I think they're probably gonna need another meeting

93
00:04:51,200 --> 00:04:52,720
Speaker 1: or two to see what they need to do. I

94
00:04:52,720 --> 00:04:54,640
Speaker 1: don't think they, I think will be imprudent of them

95
00:04:54,640 --> 00:04:57,080
Speaker 1: to get more aggressive with their monetary policy at this time.

96
00:04:57,440 --> 00:04:59,440
Speaker 1: I don't know whether you've been following the details of

97
00:04:59,480 --> 00:05:02,320
Speaker 1: what's been going going on by at the European Union's

98
00:05:02,360 --> 00:05:07,040
Speaker 1: top court, but they denied Italy's request that taxpayers, not bondholders,

99
00:05:07,400 --> 00:05:09,240
Speaker 1: be on the hook to a bail out to the

100
00:05:09,240 --> 00:05:12,840
Speaker 1: banking industry. What are your views on the Italian economy

101
00:05:12,920 --> 00:05:16,120
Speaker 1: and the banking industry there, Well, they're going to they're

102
00:05:16,160 --> 00:05:19,920
Speaker 1: going to have to allow Italy or maybe the the

103
00:05:19,960 --> 00:05:22,800
Speaker 1: Eurostone itself to bail out the Italian banks. If not.

104
00:05:23,640 --> 00:05:25,600
Speaker 1: A lot of our premise here for the move higher,

105
00:05:26,160 --> 00:05:28,120
Speaker 1: which I know I just blamed a few other things,

106
00:05:28,160 --> 00:05:29,920
Speaker 1: but also part of the part of the move here

107
00:05:29,960 --> 00:05:32,000
Speaker 1: high was because that the worry that we saw a

108
00:05:32,040 --> 00:05:34,920
Speaker 1: week or two ago over of a Deutsche banks exposure

109
00:05:35,000 --> 00:05:38,640
Speaker 1: and and the Italian banks themselves, really it seemed to

110
00:05:38,680 --> 00:05:40,400
Speaker 1: go away a little bit. It seemed to be we

111
00:05:40,440 --> 00:05:42,120
Speaker 1: seem to be a little bit at ease over it,

112
00:05:42,160 --> 00:05:44,920
Speaker 1: because we had believed that the Italians would be able

113
00:05:44,960 --> 00:05:47,799
Speaker 1: to monetize their banks, capitalize their banks if they needed

114
00:05:47,839 --> 00:05:50,839
Speaker 1: to once those banks fled dry. If they don't let

115
00:05:50,880 --> 00:05:53,320
Speaker 1: them do that, then it's going to be a different ballgame. Well,

116
00:05:53,520 --> 00:05:57,440
Speaker 1: Luftanza has just cut its forecast for earnings before interesting

117
00:05:57,520 --> 00:06:02,359
Speaker 1: taxes for twenties sixteen. A bit more on Europe. Is

118
00:06:02,400 --> 00:06:05,560
Speaker 1: there anything that you believe that the European Central Bank

119
00:06:05,640 --> 00:06:09,920
Speaker 1: can do without the support of the politicians to some

120
00:06:10,080 --> 00:06:13,839
Speaker 1: way figure out how to get the economies and the

121
00:06:13,920 --> 00:06:18,719
Speaker 1: banks in Europe to start growing again, you know right now.

122
00:06:18,720 --> 00:06:21,520
Speaker 1: But they're basically paying the banks to len right And

123
00:06:21,640 --> 00:06:23,640
Speaker 1: is it working? Not really. You saw the zoo numbers

124
00:06:23,640 --> 00:06:26,400
Speaker 1: out of Germany. You say, there's e W numbers. I mean, so,

125
00:06:26,480 --> 00:06:28,400
Speaker 1: so things seem to be going the wrong way there.

126
00:06:29,160 --> 00:06:32,279
Speaker 1: I'm I am concerned over Europe, but I my first

127
00:06:32,279 --> 00:06:35,479
Speaker 1: concern is here in the US, and I you know,

128
00:06:35,600 --> 00:06:38,359
Speaker 1: if we can it's going to hurt us in the

129
00:06:38,400 --> 00:06:40,680
Speaker 1: long run, if we're being the cleanest shirt and the

130
00:06:40,720 --> 00:06:44,840
Speaker 1: dirty hamper analogy. But I mean it's it's ready to

131
00:06:44,920 --> 00:06:46,480
Speaker 1: hurt us in trade because our dollar is going to

132
00:06:46,560 --> 00:06:48,640
Speaker 1: become too strong. It's all, what's the Dixie over ninety

133
00:06:48,680 --> 00:06:51,520
Speaker 1: seven right now? Our yields are are low enough already.

134
00:06:51,520 --> 00:06:54,040
Speaker 1: We don't need them going any lower. And I think

135
00:06:54,080 --> 00:06:56,960
Speaker 1: it's just it's going to hurt all of our multinationals

136
00:06:56,960 --> 00:06:59,720
Speaker 1: in the long run. Not that valuations can't stretch, because

137
00:06:59,720 --> 00:07:02,120
Speaker 1: we all know that fundamentals aren't what they used to be.

138
00:07:02,160 --> 00:07:05,000
Speaker 1: In stock valuations are not they are not what they

139
00:07:05,080 --> 00:07:07,080
Speaker 1: used to be either. I like them. Maybe we can

140
00:07:07,160 --> 00:07:09,559
Speaker 1: use that as your quote of the day. Fundamentals aren't

141
00:07:09,600 --> 00:07:11,800
Speaker 1: what they used to be. Well, maybe maybe they are

142
00:07:11,880 --> 00:07:13,920
Speaker 1: what they used to be. But how we how we

143
00:07:13,920 --> 00:07:17,080
Speaker 1: attach ourselves to them is the interpretation isn't what it

144
00:07:17,680 --> 00:07:21,680
Speaker 1: used to be? Well, thanks very much, Stephen. Sergeant gilfoil

145
00:07:21,760 --> 00:07:25,000
Speaker 1: He is the chief market economist for Stuart Franklin. He's

146
00:07:25,040 --> 00:07:27,440
Speaker 1: joining us from the floor of the New York Stock Exchange.

147
00:07:27,440 --> 00:07:32,400
Speaker 1: He can be followed on Twitter at serge nine eight six.

148
00:07:33,080 --> 00:07:36,480
Speaker 1: You're listening to taking Stock. I'm pim Fox and this

149
00:07:36,960 --> 00:07:48,480
Speaker 1: is Bloomberg coming up on taking Stock. What are the

150
00:07:48,480 --> 00:07:52,040
Speaker 1: expectations for the next f O m C meeting next week.

151
00:07:52,240 --> 00:07:54,800
Speaker 1: We'll find out more details when we speak to Marvin

152
00:07:54,880 --> 00:07:56,600
Speaker 1: Lowe of b n Y Melan