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Speaker 1: Broadcasting live to New York Gloomberg eleventh to Washington, d C,

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Speaker 1: Bloomberg nine one to Boston, Bloomberg well unders to San Francisco,

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Speaker 1: Bloomberg nine six to the country. Seeis XM Channel one

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Speaker 1: ninety and around the globe the Bloomberg Radio Plus appen

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Speaker 1: Bloomberg dot com. This is Bloomberg Surveillance and good morning.

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Speaker 1: I'm John Tucker, along with Mike McKee and Tom Keen.

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Speaker 1: The opening Bell Report this morning is being brought you

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Speaker 1: by Seiya. The future of the asset management business will

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Speaker 1: be profoundly different. Find out how seis Global operating platform

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Speaker 1: can help you navigate the new operational frontier at se

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Speaker 1: i C dot com slash imagine. We'll have that disappointing

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Speaker 1: jobs report. We have stocks opening lower right now. The

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Speaker 1: futures were lower going into the opening session, but they

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Speaker 1: regained some of their losses right now. They down Towns

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Speaker 1: and Dust were average down sixty four points. The S

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Speaker 1: and P five hundred downs seven that has a composite

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Speaker 1: index twenty two points lower. Among the most actively traded

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Speaker 1: stocks this morning, shares a General Electric down one point

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Speaker 1: four percent, a Southern company that's down two point seven

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Speaker 1: percent and square is down seventeen and a half percent.

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Speaker 1: And checked the markets for you every fifteen minutes during

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Speaker 1: the trading day right here on Bloomberg Radio, Tom A, Mike,

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Speaker 1: John Trucker, Thanks so much, Mike, A little bit of

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Speaker 1: effect to it here this morning. Ten point three is

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Speaker 1: the number of basis points that the tenure yield has moved.

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Speaker 1: Yield went lower and shock three point nine percent, three

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Speaker 1: point nine basis points, turned around and reverse six point

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Speaker 1: four ten point three basis points swing. I don't think

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Speaker 1: I've ever seen that. I can look. Well, let's check

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Speaker 1: with somebody who may have. Scott Mather's chief investment Officer

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Speaker 1: for Course Strategies at Pacific Investment Management Company pim coll

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Speaker 1: in Newport Beach, California. It's got interesting moves in the

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Speaker 1: market today, given that the knee jerk reaction to only

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Speaker 1: a hundred and sixty thousand jobs was the sky is falling,

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Speaker 1: the Fed is off the table, Quee's on its way,

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Speaker 1: and now the market seems to be saying, wait a minute,

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Speaker 1: we look a little bit closer and there's some inflation

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Speaker 1: in there. Yeah, I think that's right. You know, you

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Speaker 1: always see some overreaction to the employment report, and I

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Speaker 1: think you saw some signs of that today. You know,

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Speaker 1: it really wasn't that big of a miss. Putting it

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Speaker 1: in perspective. Three month moving average of employment games is

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Speaker 1: two hundred thousand. That's still well above the you know,

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Speaker 1: something less than a hundred thousand needed to keep the

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Speaker 1: unemployment rate stable. So um, not that disappointing, sort of

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Speaker 1: on trend and uh, probably enough to just still keep

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Speaker 1: the FED on track for one or two hikes this year.

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Speaker 1: So I think that's you know what the markets sort

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Speaker 1: of you know, waking up to. It still hasn't priced

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Speaker 1: in the probability of one or two hikes this year,

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Speaker 1: but but we think it will move in that direction June.

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Speaker 1: Do you think for the for the next move, Well,

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Speaker 1: gent's a possibility. You know, the market is currently priced

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Speaker 1: priced out the possibility of June. It's you know, we

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Speaker 1: think it's not likely, but it's certainly not zero either,

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Speaker 1: So you know, June July is still very much in

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Speaker 1: play with these types of employment numbers. So yeatt'll depend

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Speaker 1: on the you know, in the high frequency data, and

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Speaker 1: there'll be a lot between now and then. So we

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Speaker 1: think it's it's long to price it out completely. Jeremy Schwartz,

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Speaker 1: working in the coal mine with James Sweeney over credit

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Speaker 1: Sweez doesn't mince any words about this as he looks

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Speaker 1: forward to the retail report next week. He just calls

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Speaker 1: it robust income growth. I mean that's the phrase, and

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Speaker 1: you know we've identified that. I think, uh, this morning,

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Speaker 1: does that robust income growth translate into a stable or

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Speaker 1: better stock market? Is there a linkage there? Well, the

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Speaker 1: lake it is probably pretty loose there. Um. You know,

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Speaker 1: the the income growth sort of comes at the expense

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Speaker 1: of corporate profit growth, so that's in that phase of

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Speaker 1: the cycle. So you know, instead of being a tail

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Speaker 1: wind for corporate profits, it's going to be a headwind

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Speaker 1: going forward. So you know, it's it's never a very

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Speaker 1: tight correlation, but I think you have to anticipate that

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Speaker 1: as wage as we reach full employment, as wages go up,

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Speaker 1: it's going to come at the expensive of the corporate

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Speaker 1: profit share. Now that's perfectly that's exactly what the FED

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Speaker 1: expects to see, wants to see. Uh. So you know,

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Speaker 1: when they look at these types of numbers, they're gonna

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Speaker 1: be somewhat you know, satisfied with that. They they expect

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Speaker 1: we should all expect that we see wages going up

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Speaker 1: at the expense of of job increases. So you know,

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Speaker 1: by the end of the year, we should be looking

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Speaker 1: at hundred thousand types of numbers rather than two hundreds,

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Speaker 1: and we should be looking at wage growth that's in

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Speaker 1: you know, in the high twos or three percent area,

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Speaker 1: you know, rather than less than two and a half.

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Speaker 1: How do you respond? And I look at this Scott

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Speaker 1: almost as engineering and systems analysis, where you always want

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Speaker 1: to have the unexpected cover. Is this a FED that

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Speaker 1: will stop with the theory and just raise rates so

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Speaker 1: they have wiggle room if they have to lower them later,

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Speaker 1: they have greater degrees of freedom and ability to manipulate. Well,

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Speaker 1: I think that was the FED that that we were

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Speaker 1: dealing with maybe a year ago, but it doesn't seem

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Speaker 1: to be the FED we're dealing with now. So the

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Speaker 1: reaction function has clearly shifted over the course of the

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Speaker 1: last year, so you know, they're much more reluctant. I mean,

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Speaker 1: if you just if you just you know, observe the

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Speaker 1: data today, you know the FED should be moving on

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Speaker 1: a fairly deliberate path up to neutral um. But that's

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Speaker 1: clearly not what they're doing so, so their reaction function

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Speaker 1: has shifted. They're very sensitive to two asset price developments

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Speaker 1: and growth developments outside the US. So you know, whether

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Speaker 1: whether we like it or not, whether you think it's

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Speaker 1: right or not, that appears to be you know, how

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Speaker 1: they're going to react from here going forward. So how

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Speaker 1: do you trade that if that is your view of

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Speaker 1: their reaction function, Well, it means that you need to

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Speaker 1: pay a lot more attention to the data outside the US.

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Speaker 1: You need to pay a lot more attention to the

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Speaker 1: dollar and uh, how it does relative to other currencies,

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Speaker 1: because that's the primary a way that international developments affect

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Speaker 1: the US economy. So we think that's you need to

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Speaker 1: be overly sensitive to those developments and somewhat you know,

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Speaker 1: downplay the typical domestic developments. Michael McKay Stephen Stanley over

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Speaker 1: the Amber's pierpoint has just been brilliant on America's economic growth.

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Speaker 1: I do not think the Fed's decision calculus for June

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Speaker 1: change as much based on today's data. Well it seems

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Speaker 1: like um, I mean, they don't have to make a

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Speaker 1: decision for another month and a half exactly, so why

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Speaker 1: not wait, Uh, Scott let me ask you this, uh

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Speaker 1: on the sort of semi political sphere. Uh. You had

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Speaker 1: Donald Trump Yesterday's suggesting that, uh, if interest rates rise

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Speaker 1: in the United States, Treasury could just call you up

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Speaker 1: and say, um, we're gonna negotiate a deal on on

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Speaker 1: on the treasuries you hold. We won't pay you the

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Speaker 1: full face amount you could. You'll you'll be happy to

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Speaker 1: take a discount. Would you take that phone call? Uh? No,

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Speaker 1: I don't think anybody gonna be taking that phone call.

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Speaker 1: So uh, you know that I didn't catch those comments,

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Speaker 1: didn't didn't understand the context to them, but certainly, um,

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Speaker 1: you know there there's no need for discussions about the

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Speaker 1: credit worthiness of the US and uh, and I doubt

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Speaker 1: that comes into play anytime in the next decade or two. Well,

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Speaker 1: there is a suggestion out there that the Treasury Department,

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Speaker 1: leaving aside um full faith and credit questions, might want

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Speaker 1: to buy off the runs back uh and issue more

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Speaker 1: on the runs and make you happy because those are

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Speaker 1: more tradeable, and make them happy because they can retire

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Speaker 1: some of the higher interest rate bonds that are out there.

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Speaker 1: Would you be interested in something like that? Well, that

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Speaker 1: that's that's more realistic and certainly, you know, I think

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Speaker 1: another another idea that's you know, in the same vein

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Speaker 1: is the idea that you know, with low interest rates,

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Speaker 1: now the US and other uh developed world governments should

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Speaker 1: be extending the maturity of their debt. You know, why

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Speaker 1: not take advantage of these record low interest rates instead

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Speaker 1: of having an average maturity of death that's uh, you know,

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Speaker 1: six and seven years. You know, why shouldn't it be

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Speaker 1: fifteen years? So I think, you know, it's very possible

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Speaker 1: that we see a move over the next few years

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Speaker 1: where the U, S and other governments begin to begin

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Speaker 1: to do that. Scott Sconds can, of course strategy be

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Speaker 1: to own equities well, uh, you know, as part of

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Speaker 1: a well diversified portfolio. Makes sense. I mean we still think,

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Speaker 1: you know, equities, given their earnings, uh and given their

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Speaker 1: earnings yield should outperform bonds by a percent or two

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Speaker 1: over the next several years. So it makes sense that

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Speaker 1: people have them in a in a diversified portfolio. But

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Speaker 1: we shouldn't we shouldn't expect the type of equity returns

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Speaker 1: that we've seen in the past three or four five years,

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Speaker 1: nothing like that. We think low single digits is about

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Speaker 1: the best you can expect, Scott. I just wanted to

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Speaker 1: know if I should hold equities over the weekend. Yeah,

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Speaker 1: over the weekend. I'm sure you'll do fine as part

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Speaker 1: of my well diversified weekend, Scott. They love having Yeah

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Speaker 1: he is with PIMCO. I love doing that, folks. I

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Speaker 1: mean Mr Mather's under all sorts of pressures on what

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Speaker 1: to say. I just love the buses chops about holding

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Speaker 1: stocks over the weekend. The down negative twenty two right now,

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Speaker 1: time now to check in with Michael Arr and get

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Speaker 1: the latest world and national headlines. Michael, Mike, Tom, thank

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Speaker 1: you very much. Republican National Committee Chairman Ryan's previous says

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Speaker 1: that resumptive Republican presidential nominee Donald Trump and how Speaker

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Speaker 1: Paul Ryan are meeting next week to talk. Ryan told

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Speaker 1: CNN yesterday that he's not ready to support Trump. I

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Speaker 1: want to see is that we have a standard bear

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Speaker 1: that bears our standards. Trump responded, saying he's not ready

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Speaker 1: to support Ryan's agenda. Authorities in Alberta, Canada, are in

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Speaker 1: the process of moving thousands of people who already have

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Speaker 1: been evacuated from fire ravaged Fort McMurray. More than eighty

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Speaker 1: thousand people evacuated the town, and some twenty five thousand

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Speaker 1: were moved to work camps just north. Elberta Premier Rachel

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Speaker 1: Anne Notley says it will take longer than just a

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Speaker 1: matter of days before residents can return to their homes.

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Speaker 1: It is apparent that the damage to the community of

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Speaker 1: Fort McMurray is extensive and the city is not safe

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Speaker 1: for residents. At this time, more than two acres have

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Speaker 1: been scorched. The Obama administration is commuting the prison sentence

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Speaker 1: of fifty eight more federal convicts. It's part of a

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Speaker 1: push to revamp the criminal justice system and these punishments

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Speaker 1: for non violent drug offenders. The latest wave of releases

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Speaker 1: brings to three hundred six the total number of inmates

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Speaker 1: whose sentences President Obama has commuted Global New The twenty

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Speaker 1: four hours a day, powered by our hundred journalists and

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Speaker 1: more than a hundred fifty bureaus from around the world.

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Speaker 1: Michael Barr to Michael bar, thanks so much. Coming up

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Speaker 1: the Kentucky Derby Nyquist is favored. I can't decide who

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Speaker 1: to go with. Maybe I'll go Achievers, maybe I'll go

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Speaker 1: with Gilbert, Maybe I'll go with Mikita, I'm sophisticated about horses,

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Speaker 1: bloombird surveillance cutting down to UH. The Bondmaker Report brought

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