Speaker 1: Runt You by Bank of America Mary Lynch. With virtual reality,
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Speaker 1: Pierced Fenner and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
Speaker 1: insight from the best of economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com,
Speaker 1: and of course on the Bloomberg. We begin our job
Speaker 1: coverage in this hour with Alan Krueger of Princeton University,
Speaker 1: truly giant of modern economics, particularly his work on the
Speaker 1: hourly wage. We can talk about that in a bit.
Speaker 1: You're piling through one of my books of the summer
Speaker 1: a couple of years ago, Leonard Oiler Mathematical Genius in
Speaker 1: the Enlightenment, which is really heavy reading, a lot of
Speaker 1: math in it, a lot of formulas. Fortunately, Tom, it's
Speaker 1: the beginning of the summer. Yeah. But and it's it's
Speaker 1: it's a tough book to get through because it's got
Speaker 1: a lot of theory in it. It's a very significant book.
Speaker 1: I was more interested in his life, which very little
Speaker 1: about um. And it's tough going. I have to say,
Speaker 1: to get through the physics and the math, well that's
Speaker 1: where I wanted to do. It is the physics in
Speaker 1: the math and the era. Then the mystery why is
Speaker 1: our central banking now any different? I mean, do we
Speaker 1: have an understanding of the physics in the math of
Speaker 1: our central banking? Thinking you know what it's remarkable for
Speaker 1: me and thinking about the book is humans have been
Speaker 1: thinking about developing math for millennia and the progress was slow.
Speaker 1: Yet in the early eighteenth century they know far more
Speaker 1: than typical college student knows today. And when it comes
Speaker 1: to central banking, were you know much earlier in this period,
Speaker 1: so we're sort of pre Newton. I'd say, I want
Speaker 1: I'll put a question you. Tom often puts to two
Speaker 1: folks who are who are academics, that is, are how
Speaker 1: engaged with the mathematics or students in your department today
Speaker 1: students who are studying economics. Are they as engaged with
Speaker 1: mathematics as they used to be? Oh? Probably more so.
Speaker 1: I don't think, David, I'd be able to get into
Speaker 1: graduate school with the math that I had at Cornell today.
Speaker 1: But I would say this economics is more logic and
Speaker 1: more analysis than math, and I think the math is
Speaker 1: a proxy for someone who can think analytically. There used
Speaker 1: to be on the g R E exam an analysis part,
Speaker 1: and that was a stronger predictor of how well economists performed,
Speaker 1: how well they fared, than the math component. Yeah. But
Speaker 1: we had a great debate this week with Adam Posen,
Speaker 1: who defended the orthodoxy of Phillips curvics or etcetera, and
Speaker 1: John Riding who took him more Neil Viccellian view. It's
Speaker 1: the markets, it's we need to improve regulation, we need
Speaker 1: to change corporate texts, etcetera. More market based, more flow based.
Speaker 1: Which where's the tendency right now? Are we going to
Speaker 1: end up back to the orthodoxy of ten years ago?
Speaker 1: In ten years I don't know. Those are so inconsistent,
Speaker 1: to be perfectly honest, If you think about where the
Speaker 1: Phillips curve comes from, I think of it more is
Speaker 1: coming from my dynamic view of the economy. So I
Speaker 1: don't see a conflict. I can tell you I uh
Speaker 1: put some weight on historical estimates of the Phillips curve,
Speaker 1: and I also think making sure that we've got a
Speaker 1: proper regulatory regime for a financial system is important to
Speaker 1: make UH the economy work for everyone. Let's get to
Speaker 1: this job support. What are you gonna be looking for today?
Speaker 1: What's this report going to indicate to you about the
Speaker 1: health of the U s economy? Well, you know, the
Speaker 1: most important number in the jobs report is the top
Speaker 1: line UH peril growth number. But under the surface labor
Speaker 1: force participation, what's happening with wages? It seems pretty clear
Speaker 1: that job growth has been moderating the first six months
Speaker 1: of this year. That's not surprising given where we are
Speaker 1: in the business cycle, given that the unemployment rate is
Speaker 1: below four and a half percent. So I'll be looking
Speaker 1: closely to see if their further science of moderation, focusing
Speaker 1: on manufacturing, which has been pretty much moving sideways, although
Speaker 1: with the decline in auto sales, I'm concerned that could
Speaker 1: pull down all of manufacturing. UM. So those are the
Speaker 1: main aspects of the report. I'll look at from a
Speaker 1: policy perspective, what what could what could improve those manufacturing numbers?
Speaker 1: That do you think? Um, that's a good question. I
Speaker 1: think fundamentally we need to invest more in research and development, manufacturing,
Speaker 1: and what drove manufacturing is developing new products, products that
Speaker 1: can do new things. Uh. Also what drove manufacturing is
Speaker 1: productivity growth, and that's continuing. It's driving down employment. So
Speaker 1: I think we need to think more on the product
Speaker 1: side and how can we leverage our technology to create
Speaker 1: products that improve people's lives and put people to work.
Speaker 1: I think we need to rip up the script. We're
Speaker 1: coming back and talk to Alan Krueger about everybody wants
Speaker 1: to hear about. I'm gonna guess Professor Krueger, correct me,
Speaker 1: Card Krueger. Krueger Card a definitive paper on the labor
Speaker 1: economy of this nation. There is no other topic in
Speaker 1: labor economics now about the efficacy and result of twelve,
Speaker 1: thirteen and fifteen dollars per our minimum wage. Something everyone's
Speaker 1: been waiting for. Alan Krueger of Princeton on the minimum wage. Okay,
Speaker 1: here's the debate. The Washington Examine or conservative rag comes
Speaker 1: out and says liberals hate this report. And then the
Speaker 1: Washington Post comes out liberal rag and says, wait, the
Speaker 1: Washington Examiner's got a point. Essentially correct me if I'm wrong.
Speaker 1: Professor Seattle and others are finally getting the minimum wage
Speaker 1: back up to its inflation adjusted level from another time
Speaker 1: and place. In recent decades, a minimum wage has been
Speaker 1: set below that inflation adjusted glide path from before, and
Speaker 1: now at eleven fifteen dollars an hour, we're really beginning
Speaker 1: to test what's the best minimum wage. How's the test going? Well,
Speaker 1: I think it's very preliminary, so I will go with that.
Speaker 1: I would reserve judgment. I've looked at the studies from Seattle.
Speaker 1: There's more than one, and I think that the conventional
Speaker 1: wisdom which has become that modest increases in the minimum
Speaker 1: wage don't have a noticeable impact unemployment is still correct,
Speaker 1: and we don't know where the turning point is. UM.
Speaker 1: The UH evidence that we're going to start to get
Speaker 1: from Washington State, from Los Angeles, from a few other cities,
Speaker 1: I think might help us to determine where that turning
Speaker 1: point is. I've been concerned that fifteen dollars and hours
Speaker 1: beyond what we've experienced. UM. On the other hand, adjusted
Speaker 1: for inflation, that would put us throrom eleven twelve dollars
Speaker 1: an hour. Every business person listening to this right now
Speaker 1: is going Professor Greg go back to Princeton. We gotta
Speaker 1: live in the real world. We can't wait for more data,
Speaker 1: more time, more responsible economic studies. What do you say
Speaker 1: to the person going, wait, I gotta go from X
Speaker 1: to fifteen or thirteen eleven, and the only way I'm
Speaker 1: gonna do this is productivity, efficiency, robots and depreciate labor
Speaker 1: unit count. I mean, it's just fewer people employed, right, Well,
Speaker 1: I think it's more complicated than that. Um. I think
Speaker 1: what many individual businesses miss is that their competitors are
Speaker 1: also facing higher prices. So one of the things we've
Speaker 1: seen in the past is that minimum wage increases are
Speaker 1: often passed on in the form of higher prices. UM.
Speaker 1: And given how low inflation is at the moment, Uh,
Speaker 1: there might be some who actually think that it's not
Speaker 1: not the end of the world. But I think that
Speaker 1: the impact on an individual business is is not as
Speaker 1: great as often as perceived because it's affecting the entire market.
Speaker 1: Let me ask you a broader question about policy making
Speaker 1: in the year two thousand and seventeen. Tom brings up
Speaker 1: the minimum wage, but you see a lot of decisions
Speaker 1: being made at the state and local level that in
Speaker 1: the past have been made at the federal level. What
Speaker 1: does that city about the role of the federal government
Speaker 1: if you have UH cities and states tackling regulatory issues
Speaker 1: minimum wage issues. So what's changed. We've seen this before
Speaker 1: with the minimum wage in the nineteen eighties, when the
Speaker 1: federal government didn't raise the minimum wage, the states stepped up.
Speaker 1: That's what's been taking place since two and nine, the
Speaker 1: last time the federal minimum wage increased. Donald Trump proposed
Speaker 1: raising the minimum wage to ten dollars an hour when
Speaker 1: I ran for office. That struck me as a reasonable compromise,
Speaker 1: a reasonable level. I don't believe he's ever brought that
Speaker 1: up again, um and I think that's something which consensus
Speaker 1: could be formed behind and might lead to a national floor,
Speaker 1: which is UH leading to UH more people to be
Speaker 1: able to earn a living that they can survive. On
Speaker 1: one other thing, I wanted to point out time we're
Speaker 1: in a strange time now because job openings have been
Speaker 1: growing very quickly, much faster than hiring, and it raises
Speaker 1: the question why aren't we seeing more more wage growth?
Speaker 1: And historically in that kind of environment, I think we
Speaker 1: would have seen stronger wage growth. One of the reasons
Speaker 1: why this is taking place now, I think is because
Speaker 1: companies have imposed non compete clauses on their workers make
Speaker 1: it harder for them to switch. Even McDonald's has a
Speaker 1: requirement that franchisees can't hire away employees from other McDonald's
Speaker 1: unless they've been out of work for more than six months.
Speaker 1: So I think this is chilling the labor market and
Speaker 1: putting a lid on wages, and it's one of the
Speaker 1: reasons why we're not seeing wage growth, which the minimum wage.
Speaker 1: You know, historically when we were in this type of
Speaker 1: a labor market, we would see an increase in the
Speaker 1: federal minimum wage. Somebody's nine and they go to eleven
Speaker 1: dollars to any five cents in our minimum wage, whatever
Speaker 1: the geography is, whatever the state does. Everybody else go
Speaker 1: up a buck or two as well. There is often
Speaker 1: a big spell over. There's a debate in the profession
Speaker 1: now about how high that spellover goes. Um that's one
Speaker 1: of the issues they are looking for. It does tend
Speaker 1: to ratch it up the whole wage distribution, which makes sense.
Speaker 1: Workers care about their relative their relative pay. That's one
Speaker 1: of the reasons why employers resist pay increases because it's
Speaker 1: not just the individual employee. It's the whole pace will
Speaker 1: be effective. This is this is desperately important. You just
Speaker 1: stated there's a lot of job openings. Why don't they
Speaker 1: just raise the wage? Money talks. I can't get welders,
Speaker 1: I can't get economics professors like you know, I can't
Speaker 1: get why you yet you know, just raise the wage
Speaker 1: and why you en right? I think employers have gotten
Speaker 1: used to an environment which were no longer in, but
Speaker 1: an environment where we had a surplus of labor. And
Speaker 1: I think we're heading more towards a labor shortage economy,
Speaker 1: partly because of our demographics, partly because of our new
Speaker 1: immigration policy. UM and I think that employers need to
Speaker 1: adjust to this new environment. And I think the more
Speaker 1: enlightened ones will see it's in your interests to respond
Speaker 1: to these market conditions. What do we need to know
Speaker 1: about the skills gap are calling? Michael McKee was in Cambridge,
Speaker 1: Massachusetts yesterday. He spoke with a darn a smugglof of
Speaker 1: m I t about this very issue. It struck me
Speaker 1: talking to Mike Boston. Cambridge in a very privileged place.
Speaker 1: They're surrounded by great academic institutions and have their pick
Speaker 1: of a lot of those graduates becoming tougher and deffort
Speaker 1: to get those graduates to stick around the greater Boston area.
Speaker 1: What do we need to know about the skills gap
Speaker 1: and how to how to narrow that divine? Well, I
Speaker 1: think there is a skills gap, and I think we
Speaker 1: need to start early. I think it's a long term problem.
Speaker 1: I think it's been a problem for a long time
Speaker 1: for the US. But that can't explain the entire puzzle
Speaker 1: that we're facing because the fastest growth in job openings
Speaker 1: has been for restaurant workers, for hotel workers, retail um work,
Speaker 1: which has relatively low credentials uh generally lower education levels.
Speaker 1: So I don't think it's only a matter of skills.
Speaker 1: I think it's partly a matter of employer policy and
Speaker 1: reluctance to pay more for for both high and low skills.
Speaker 1: Are we exporting our skilled jobs? I mean you just
Speaker 1: mentioned three job categories or everybody's going I don't want
Speaker 1: my kid to do that. You know they can you know,
Speaker 1: minimum wage, fine, and go get a summer job. Great,
Speaker 1: But are we struggling with our skilled jobs because they're
Speaker 1: going abroad? Is that the new globalization? Well, that's a
Speaker 1: risk I think with our new immigration policy, because, uh,
Speaker 1: if you look at the mix of immigrants coming to
Speaker 1: the US, it's both a highly skilled and the low skilled.
Speaker 1: It's a barbell and also very ambitious people at all levels.
Speaker 1: Um And to the extent we're making the US less
Speaker 1: friendly for immigrants, that's gonna hurt employers. It's gonna hurt
Speaker 1: employees across the spectrum be cause, uh, the jobs that
Speaker 1: the skilled workers would help create for less skill workers
Speaker 1: won't be here, some of them. David mentions Michael Michael mckem.
Speaker 1: Meeting it up at m I M I T. You
Speaker 1: may not know the l A M I T is
Speaker 1: a school up on a river in Boston. I was
Speaker 1: very impressive. You can both pronounce as I have Smart.
Speaker 1: The one that I can pronounce smart. Crumpton helps you
Speaker 1: know what people don't know. The only reason I can
Speaker 1: pronounce these names is Crumpton is in my ear telling
Speaker 1: me how to pronounce it. He's the best. Okay, long
Speaker 1: term growth and his research up at m I T
Speaker 1: is institutions, institutions, institutions. Where are we on an institutional
Speaker 1: flexibility that gives us a better long term growth? I
Speaker 1: think their own their own smog is an excellent work
Speaker 1: in this area. UM. And historically, I think one of
Speaker 1: the great strengths of the U S has been our institutions,
Speaker 1: our institutions of free press or institutions of UH Central Banking,
Speaker 1: Congressional Budget Office, UH checks and balances. That we have
Speaker 1: a government and UH. Frankly, I'm worried that UH they're
Speaker 1: they're under stress now with the new administration. UM. I
Speaker 1: think we need to really praise our our institutions. By
Speaker 1: the way, I was listening to your show last week
Speaker 1: and I heard you both you listen to us. I
Speaker 1: was driving into work and I just broke and he
Speaker 1: heard you both mentioned the CBO executive summaries. I think
Speaker 1: probably on the healthcare bill. UH. CBO's an institution where
Speaker 1: you have to cherish even when I disagree with him.
Speaker 1: I think it's an institution that I have tremendous regard for.
Speaker 1: We're up to seven listeners in New Jersey. That's unbelievable.
Speaker 1: Why you unreal? Alan Krueger, thank you so much. We'll
Speaker 1: leave it there with the fact that you listen to us.
Speaker 1: I'm Bloomberger eleven three oh in serious XM Channel one nineteen.
Speaker 1: We said good morning one or six one FM Boston,
Speaker 1: Good morning to all of Sloane at Massachusetts Institute. What's
Speaker 1: the name of the schools up river? I can't I
Speaker 1: can't remember Leslie University. Watch yourself younger. That will get
Speaker 1: us into trouble as well. Really, really, thank Jim Glassman
Speaker 1: for joining us today from scenic Glendale, calif waking up
Speaker 1: early for yes, you really appreciate your early morning hours.
Speaker 1: How important is this job's report? Dr Glassman? You know,
Speaker 1: it's always important because it's yet another view of what's
Speaker 1: really going on in the economy. But I think we
Speaker 1: got to remember these things can be very volts a
Speaker 1: month to month, and May, June July have tend to
Speaker 1: be really volatile in the last couple of years. Remember
Speaker 1: last year we had a really weeked May, then we
Speaker 1: got this booming June number. Last month we've got a disappointment,
Speaker 1: And so you know, you have to sort of lick
Speaker 1: through the noise. And I think we got the idea
Speaker 1: the U s economy is back on its feet. Unapployments
Speaker 1: quite low. There may be still a few pockets of
Speaker 1: hidden unemployment. Inkly, Uh, this report is important because it
Speaker 1: backs up what we already know that the US economy
Speaker 1: isn't pretty good shape. It doesn't mean we're doesn't mean
Speaker 1: we solved all the problems, but we're pretty much there.
Speaker 1: I agree that months a month there seems to be
Speaker 1: a good metric, but also a new metric where is
Speaker 1: normal non farm payroll growth? You and I used to
Speaker 1: be one eight was terrible, two was okay, to twenty
Speaker 1: was great. You've got a whole new mathematics now, don't you.
Speaker 1: Exactly because of the demographics. And you know, the thing
Speaker 1: to remember is that the population has been growing about
Speaker 1: one percent a year since over the last ten years,
Speaker 1: but our labor force has been growing about a half
Speaker 1: percent past sixty a month. So this is why economists
Speaker 1: tell you we really as long as we're getting employment
Speaker 1: growing set you almill, say seventy five hundred thousand a month,
Speaker 1: that's considered to be pretty normal with this slow demographics
Speaker 1: that we have, the demographics I'm referring, who is the
Speaker 1: baby boom generation moving to retirement. So it's a real
Speaker 1: big deal. It's we've had to change our mind about
Speaker 1: what kind of growth you need to get the economy
Speaker 1: back on its feet. That's what we've been learning over
Speaker 1: the last decade or so, and I think that's what
Speaker 1: we're watching here, and that's why I think it's going
Speaker 1: to be a tough story to figure out what's good
Speaker 1: and what's not good. I think the key thing is
Speaker 1: as long as employment is holding steady at a low level,
Speaker 1: no matter what the job growth is, it means that
Speaker 1: we're kind of in steady state. Jim, I know you've
Speaker 1: been looking at layoffs. What do those numbers tell you
Speaker 1: about the state of the labor economy? Pretty darn good,
Speaker 1: you know. To me. To me, you're getting a lot
Speaker 1: of news, pockets of news that are kind of squishy
Speaker 1: and soft, and yet that's just the piece of the economy.
Speaker 1: The layoffs are telling you something about the entire economy,
Speaker 1: every corner of the economy that we don't see in
Speaker 1: the numbers. A lot of it, and those trends that
Speaker 1: that layoff pace jumping around week a week, But basically
Speaker 1: we're floating around two fifty thousand per week, which is
Speaker 1: a really steady. It just tells you we're holding high
Speaker 1: and there's nothing really bad happening. Uh. If there are
Speaker 1: pockets of weakness, there are other pockets that are offsetting it.
Speaker 1: So it looks pretty good to me, and we've got
Speaker 1: you know, at this time of the most summer months,
Speaker 1: the auto industry goes through a lot of adjustments and
Speaker 1: it could be really noisy, but frankly, these layoff trends
Speaker 1: are pretty steady and in a really good zone. What
Speaker 1: are you gonna learn about the confidence of employers from
Speaker 1: from this report about the momentum in this US economy?
Speaker 1: I'm not sure, because as the economy gets on his
Speaker 1: feet and we get close and closer to full employment,
Speaker 1: it's gonna be harder for people to hire folks, and
Speaker 1: so the job growth may slow down. The way you
Speaker 1: see the confidence is the wage trends start doing better.
Speaker 1: People have had to pay up. The interesting thing to me,
Speaker 1: this is music to economists ears employers everywhere complaining about
Speaker 1: not being able to find people, not being able to
Speaker 1: find people with the right skills. So that to me,
Speaker 1: the fact that that companies are actually hiring and they're
Speaker 1: having to and they had to pay up for it
Speaker 1: means to me the businesses are pretty confident of what
Speaker 1: lives ahead, and that's why they're doing this. That's why
Speaker 1: they're hiring aggressively, and you see more and more signs
Speaker 1: around of people needing help. Help on the signs the
Speaker 1: old fashioned way. Pretty interesting. Market is not a problem.
Speaker 1: We're just talking to Allen Krueger about this. Where's the
Speaker 1: wage growth? It's not there yet, but I think you know, uh,
Speaker 1: inflation is pretty low too, So you said, I had
Speaker 1: to look at things relative to inflation and productivity. But
Speaker 1: it's it's been a little disappointing right in the last
Speaker 1: particularly the last several months. But all of us economists
Speaker 1: sort of hold on to this idea that the closer
Speaker 1: we get, the tighter labor market gets, the lower unemployment follows.
Speaker 1: It's just a matter of time before workers start to
Speaker 1: see better pay increases because companies are having to work harder.
Speaker 1: So you're seeing a lot of you're seeing really good
Speaker 1: gains in areas that are strong that the technology sectors. Uh,
Speaker 1: we just hadn't seen a real convincing up trends. It
Speaker 1: looked like he was moving in the right direction, moving
Speaker 1: up from two and a half percent. Then it kind
Speaker 1: of stalled out. But I suspect I would be really
Speaker 1: shocked if this time next year we're not looking at
Speaker 1: faster gains and in errors in in wage rates. And
Speaker 1: you know, the other thing to keep in mind is
Speaker 1: average genially learnings aren't the only part of the labor
Speaker 1: pay story. Companies have to pay for all kinds of benefits,
Speaker 1: health care, insurance and things like that, and so if
Speaker 1: they have to pay more for that kind of stuff,
Speaker 1: they can't be as generous with average gerially learnings. And
Speaker 1: that's part of what may be going on with the
Speaker 1: health insurance premiums moving up. I'm not underemployment. How much
Speaker 1: attention should we pay to that figure when we get
Speaker 1: it this morning? You know, I think the trends, you know,
Speaker 1: it's always been worth paying attention to because there's a
Speaker 1: lot of unemployment that is not reflected in the uneployment rate.
Speaker 1: So we watch that trend pretty carefully. I look at
Speaker 1: the involuntary part time guys and the young adults, and
Speaker 1: the thing that's interesting is all those signs of undeployment
Speaker 1: really getting better. And that's that's not visible in the
Speaker 1: headline numbers when we you the payroll numbers, but it's
Speaker 1: really something that's been going on in the background which
Speaker 1: tells you. But you know, whether it's people who are
Speaker 1: unemployed for very long periods of time, or people who
Speaker 1: are working part time, or young adults. All of those
Speaker 1: trends are getting better. So you know, it doesn't in
Speaker 1: my book when you take it all into account, I
Speaker 1: think you could argue despite the fact that the undeployment
Speaker 1: rate is for I think you could argue that we're
Speaker 1: still in the top of the ninth inning. We still
Speaker 1: have a little bit more work to do because there
Speaker 1: are these pockets of hidden unemployment and underemployment. But I
Speaker 1: think we're doing a pretty good job getting there. Is it?
Speaker 1: Is it okay, Dr Glassman? If I steal your spectacular
Speaker 1: chart of non farm payrolls and claims inverted, which shows
Speaker 1: that we are we are. We are in a tenally
Speaker 1: unusual time. Yeah, we really are. And and I think
Speaker 1: to think to remember about this. I mean, I love
Speaker 1: Hayte nonfarm payrolls and job Day because you're getting a
Speaker 1: real good picture of the economy. But we don't know
Speaker 1: what's really going on with small businesses. It takes the BLS,
Speaker 1: you know, a little while to figure this out. The
Speaker 1: thing I like about jobless claims is it catches everybody,
Speaker 1: no matter where you are. No matter who you work for,
Speaker 1: you're in those numbers. So it's good to compare both
Speaker 1: and and and Uh. They're both impressive trends. What's the
Speaker 1: why the claims are as good as they've ever been, Well,
Speaker 1: there's I think there is a like everything else, we're
Speaker 1: surprised that the economy is doing as well as it
Speaker 1: is with slow growth. But I think the useful thing
Speaker 1: about claims is it doesn't care what our potential growth
Speaker 1: is. Is Is just telling you the economy doing well, and
Speaker 1: it's picking up pockets that we don't see in the
Speaker 1: in the numbers day to day. And I think what
Speaker 1: it tells you is companies are now focused on trying
Speaker 1: to get staffing levels up so no one wants to
Speaker 1: lay off. They may be having a harder time hiring people.
Speaker 1: That's what you would expect as we get closer and
Speaker 1: closer to full employment. But I think what I think
Speaker 1: what the claims number tells you is that people are
Speaker 1: pretty optimistic about the outlook and they're not willing to
Speaker 1: lay off. And even when their pockets of weaknesses, companies
Speaker 1: may be willing to ride through that because it's difficult
Speaker 1: to find people in a tight labor markets, so you
Speaker 1: don't want to lay off unless you really share your
Speaker 1: business is in trouble. I'm gonna get this chart on
Speaker 1: folks on Twitter. I'll probably feature it on television on Monday.
Speaker 1: It's extraordinary chart from Dr Glassman about how non firm
Speaker 1: payils are doing what they're doing, and they're hugely linked
Speaker 1: to claims up until exactly June of two thousand and fourteen,
Speaker 1: and then claims have a life of their own. And
Speaker 1: it's my pleasure this morning to present the Plummest Byline
Speaker 1: Award d Win Matthew Bosler fedwis Ri reporter here at
Speaker 1: Bloomberg News reporting from Vineyard Haven, Massachusetts. Stanley Fisher, the
Speaker 1: vice chairman, speaking there last night, talked a bit about uncertainty,
Speaker 1: and he said a cautious approach to investment by US
Speaker 1: companies may in part reflect the unser about the policy environment.
Speaker 1: The vice here saying mitigating the dampening effect of uncertainty
Speaker 1: by providing more clarity on the future direction of government
Speaker 1: policy is highly desirable. Jim Glassman, how much is uncertainty
Speaker 1: policy uncertainty weighing on employers right now? Well, you know,
Speaker 1: I mean uncertainty is always with us, right, I mean,
Speaker 1: I can't remember time when we were uncertain about things.
Speaker 1: And frankly, you have to ask yourself, we had a
Speaker 1: lot of uncertainty in the last ten years, and yet
Speaker 1: here we are. The economy has recovered from our pretty
Speaker 1: devastating downturn and the underwater problem is largely gone. And
Speaker 1: so you got to say, despite all of this uncertainty,
Speaker 1: I think businesses they run things by looking at the possibilities,
Speaker 1: and there's a lot of a lot of opportunity out there,
Speaker 1: and I think that's that really helps to dampen the
Speaker 1: worries that you have about uncertainty. So uncertainty is always
Speaker 1: a way of life, but frankly, I don't think it
Speaker 1: gets in the way. And uh, I think the economy
Speaker 1: has done a pretty good job despite all this. Let
Speaker 1: me ask you just how you think that the federals
Speaker 1: of policymakers like Mr Fisher are going to be viewing
Speaker 1: what they see to day, we have testimony from a
Speaker 1: yellow Capitol Hill, two days of testimony. Next week we're
Speaker 1: gonna get a monetary policy a report as well. How's
Speaker 1: the FED going to be processing these numbers? You know?
Speaker 1: I think I think they're pretty uh encouraged by what's
Speaker 1: been going on, and I think, uh, you know, even
Speaker 1: if the numbers are whether it's a little higher or
Speaker 1: a little low, I don't think it's going to change
Speaker 1: their mind about what they need to do because the
Speaker 1: basic idea is we've already got the economy close to
Speaker 1: full employment, and they've got policy very accommodative, and they'd
Speaker 1: like to normalize things gradually. And I think they're doing
Speaker 1: a good job with this, and the fact that inflation
Speaker 1: is quite low gives them lots of room to do it.
Speaker 1: So I don't think they're going to be disputed from
Speaker 1: the little surprises. I don't think they're gonna change their
Speaker 1: mind about what they need to do. We saw that
Speaker 1: last months too. They they they continue to talk about
Speaker 1: needing to normalize the balance sheet and interest rates, even
Speaker 1: though we had a weakish employment numbers. So, you know,
Speaker 1: I think, particularly when you put this report together with
Speaker 1: other things we're watching, jobless claims, trends various, Eddie, I
Speaker 1: think if you see surprises today, you tend to you
Speaker 1: tend to put in another box. It's not you know,
Speaker 1: you know, things are volatile. I don't think it's going
Speaker 1: to change their mind. Are we creating full time jobs?
Speaker 1: Are we deluding ourselves into a set of part time
Speaker 1: jobs to keep going. I think there's both. I mean
Speaker 1: the fact that overall unemployments down means I mean that
Speaker 1: there's a lot of people who like to work voluntarily
Speaker 1: part time jobs voluntarily, there's a there's a lot who
Speaker 1: have been forced to work part time that's disappearing pretty quickly.
Speaker 1: So I think the jobs are pretty good, pretty good
Speaker 1: jobs all around. And you see, uh, you see signs
Speaker 1: of that everywhere. And you know, we haven't. You haven't
Speaker 1: seen real confirmation yet in broad trend up in wages.
Speaker 1: But I think when we when we see that, we
Speaker 1: won't be shocked by it because we have a pretty
Speaker 1: good idea that the state of the job market is
Speaker 1: quite good. But if average all the earnings here every
Speaker 1: year at two point six percent today, are you just
Speaker 1: assuming with rates up, inflation goes up? How do how
Speaker 1: does wage growth stay ahead of rising inflation? You know,
Speaker 1: I don't. I don't think wages drive inflation. I think
Speaker 1: in the old days, when companies have a lot of protection,
Speaker 1: you would agree to certain deals. You figure you can
Speaker 1: just raise your prices to cover. I don't think people
Speaker 1: operate that way anymore. So if wages aren't doing well,
Speaker 1: it's because productivity is slow or because they can move
Speaker 1: operations elsewhere. So, but I think you know increasing when
Speaker 1: you hear when you hear people complain and and wring
Speaker 1: their hands about not finding workers, you just know what's coming.
Speaker 1: You know that. Well. The way you solve that problem
Speaker 1: is you offer better pay. I don't think companies are
Speaker 1: going to be offering pay that puts them out of business,
Speaker 1: but so when you if you so, if you see
Speaker 1: wage trends not doing as well as you just think
Speaker 1: you should, it might be because the underlying fundamentals aren't
Speaker 1: there yet companies. Companies can't do things that make them
Speaker 1: on rosket ball. But I think slowly, over time we're
Speaker 1: going to see better trends here. And the labor side
Speaker 1: is the job market is really the best part of
Speaker 1: the economy so far. Jimmy last one, stay with us.
Speaker 1: We'll have you with us as we break the numbers
Speaker 1: and then move on to Mr Grosser's well, David Garrow,
Speaker 1: we've gotta again pay homage to G twenty just amazing
Speaker 1: shots earlier of world leaders gathered in a bright lit,
Speaker 1: yellow and white room, very bright, cheerful room, a big, large,
Speaker 1: correctable Prime Minister May over to the left, sitting to
Speaker 1: the left, facing into the rectangle from Chancellor Miracle. President
Speaker 1: Trump two seats away from Chancellor Miracle. When do they meet?
Speaker 1: When does Fruiting and Trump? They've they've had their handshake.
Speaker 1: I spoke with the German ambassador of the US yesterday,
Speaker 1: asked him about that famous handshake between the German Chanceman
Speaker 1: the President the White House. He said that the two
Speaker 1: leaders have a good and productive relationship. We've made too
Speaker 1: much of the body language. We watch what we can.
Speaker 1: When Bill Gross visited our old headquarters here a couple
Speaker 1: of weeks ago, we did the Russian toast thing, locked
Speaker 1: elbows with a with a stole nia, you know, the
Speaker 1: Russian toasting. Maybe they'll maybe they'll do that today. Brunch
Speaker 1: you by Bank of America Mary Lynch. With virtual reality,
Speaker 1: virtually everything will change. Discover opportunities in a transforming world.
Speaker 1: Be of a mL dot Com, slash VR. Mary Lynch
Speaker 1: pierced Fenner and Smith Incorporated and now joining us on
Speaker 1: Bloomberg Radio and Bloomberg Television worldwide. We welcome William Gross
Speaker 1: of Janice Anderson as well. Bill, I want to go
Speaker 1: over the job market and then get right to the turmoil,
Speaker 1: the idea that we see higher rates and lower bill
Speaker 1: note and bond heields as well. This looks like a
Speaker 1: yelling friendly jobs report. It looks like a jobs report
Speaker 1: that let's have FED gives them them some room to
Speaker 1: raise interest rates. What will be the effect when the
Speaker 1: Fed raises interest rates? Well, they've been raising interest rates
Speaker 1: in the effect depends, I suppose, Tom, on how much
Speaker 1: they raise and when they raise. I still think despite
Speaker 1: this rather strong jobs report from the standpoint of jobs
Speaker 1: gain not necessarily from wages, which is what the Yellow launches.
Speaker 1: UH seriously as well, um that the Fed has one
Speaker 1: hike perhaps left in the year, and that's probably in December.
Speaker 1: I think to a significant accent. It depends, as I've
Speaker 1: mentioned in prior UH discussions with you, it depends significantly
Speaker 1: on what other central banks do, and if the ECB
Speaker 1: and the b o J and others, UH, you know,
Speaker 1: tend to change their policies and the FED must um
Speaker 1: not respond. But as a leader, as the central bank
Speaker 1: global leader, you know they've got to be cognizant of
Speaker 1: what it might do to currency levels, and so they're
Speaker 1: all in the pot at the same time. And I
Speaker 1: think your question about the FED is important, but it's
Speaker 1: also important about other central banks around the world with
Speaker 1: what we've observed in the last number of weeks, and
Speaker 1: of course we've got rising grades and we'll get the
Speaker 1: bonds and investment here in a moment, Mr Gross is
Speaker 1: the idea of a FED that is coordinated and yet
Speaker 1: at the same time constrained. How coordinated are the central banks?
Speaker 1: And how constrained is chair yelling because she's limited by
Speaker 1: other global activities. Yeah, I don't think they're coordinated at all.
Speaker 1: Yet you know, obviously in the last few weeks there
Speaker 1: have been hints from uh, the ECB and hence from
Speaker 1: the Bank of England that they're on the move or
Speaker 1: potentially on the move at some point six, twelve, eighteen
Speaker 1: months down the road. But they're still you know, a
Speaker 1: long way back from when we stopped qui in a
Speaker 1: long way back when when we started to raise our
Speaker 1: short term interest rates and so um, they were beginning
Speaker 1: to be coordinated from the standpoint of philosophy, perhaps in
Speaker 1: the direction, but certainly not in terms of timing and magnitude,
Speaker 1: and I think ultimately that does have a significant impact
Speaker 1: or will on currency levels, and central banks want to
Speaker 1: keep those currency levels relatively static. Admittedly, each wants to, uh,
Speaker 1: you know, to lower their currency a little bit so
Speaker 1: that it gives a push to their real economy, but
Speaker 1: they got to keep things steady. And so the future
Speaker 1: coordination is I think it's important. It hasn't been coordinated
Speaker 1: to this point. Bill, We're seeing a bit of a
Speaker 1: race here up to the top of the hill to
Speaker 1: declaring end of the bull market in bonds. I wonder
Speaker 1: if you're vying with Ray Dolly of Bridgewater to put
Speaker 1: a flag there at the top of the hill to
Speaker 1: say that we're entering a bear market. What say, well,
Speaker 1: my bear market level and now six months ago, so
Speaker 1: that isn't really applical one anymore was up at sixty five.
Speaker 1: You know, I've looked at the long term trend since
Speaker 1: the early nineteen eighties, and interest rates on the tenure
Speaker 1: have been falling by twenty basis points a year since then. Um,
Speaker 1: you know, is that a technical mumbo jumbo Really not,
Speaker 1: because it's an indication of what an economy needs in
Speaker 1: terms of lower interest rates in order to keep going.
Speaker 1: And so I think ultimately, although we're probably a two
Speaker 1: thirty five at the moment, you know that to six
Speaker 1: level is the critical level for interest rates going forward.
Speaker 1: Do we get there in the next few weeks? Uh?
Speaker 1: Probably not. You know, we've had a thirty basis point
Speaker 1: increase or twenty basis point increase over the last few
Speaker 1: weeks due to the bund taper so to speak. So um,
Speaker 1: but I think we're moving higher. Creeman wants you to
Speaker 1: come over here for Bloomberg Television. I'm gonna show this chart.
Speaker 1: We'll show it out on radio. Go to Twitter with
Speaker 1: that as well. Bill, for the first time in ages,
Speaker 1: I'm showing bond price. Here's part on the Germany tenure.
Speaker 1: Down we go, Bill, As you know, looking at your
Speaker 1: Monro trader, we're down about three percent on full faith
Speaker 1: and credit, higher yield. Did you know this bill? Higher yields,
Speaker 1: lower bond prices. When does it begin to hurt? Mr? Gross, Well,
Speaker 1: that's my old teen or todder Thomas. Obvious interest rates up,
Speaker 1: prices down, and that's what you've talked about. Boons up
Speaker 1: by thirty basis points with the direction of about nine. Yeah,
Speaker 1: it's about three points. When does it begin to hurt? Um,
Speaker 1: I think it begins to hurt at the margin here
Speaker 1: in the United States on mortgages. Ultimately it begins to hurt.
Speaker 1: And this is an unobserved fact. I guess by the
Speaker 1: by the street that that interest payments as a percentage
Speaker 1: of expenses, corporate expenses are significant, perhaps thirty and so
Speaker 1: it begins to hurt lower yielding corporations, junk bond corporations
Speaker 1: when they try to roll over their dead in two
Speaker 1: thousand and seventeen late and two thousand and eighteen early.
Speaker 1: And so as interest rates rise generally, and as interest
Speaker 1: rates and spreads widen, you know, the hurt begins to
Speaker 1: to affect those lower quality corporations as well as individuals.
Speaker 1: I want to buy a home bill gross, You're unconstrained.
Speaker 1: How do you adapt within your portfolio? Janis Anderson? How
Speaker 1: do you adapt to a higher rate environment? Do you
Speaker 1: get under the desk? Do you start rooting for the
Speaker 1: New York Patriots? What's what do you do New York? Well,
Speaker 1: of course, the way to adapt if you were sure
Speaker 1: of higher interest rates, and if you were sure that
Speaker 1: those rates would be higher than what we call the
Speaker 1: forward yield curve, which isn't much um than what you
Speaker 1: do is you go negative duration. The problem with negative duration,
Speaker 1: and it sounds very hedgy, Tom, but the problem with
Speaker 1: negative duration meaning's short bonds, basically is that you give
Speaker 1: up the valued carry, the carry of a positive interest rate,
Speaker 1: limited though it maybe, and so investors for the past
Speaker 1: thirty or thirty five years have been reluctant to give
Speaker 1: up carry. It's been a carry trade as interest rates
Speaker 1: have come down and stock prices have gone up. Carry
Speaker 1: is a function of not only interest rates, but spreads
Speaker 1: and risk taking, and so giving up carrying going into
Speaker 1: the negative column is a very difficult thing to do
Speaker 1: because you need higher interest rates in order to justify
Speaker 1: your position. But that's what you do. And the Jenison
Speaker 1: Constraint Fund has been you know, short carry and negative
Speaker 1: perhaps by half a year relative to its bogey. And
Speaker 1: and the bogey, by the way, is live or three
Speaker 1: months paper, so it's basically an effective duration of a
Speaker 1: minus half a year at the moment. Build very quickly here,
Speaker 1: what did you take away from the meeting in Central
Speaker 1: last week? All these central bankers, there are a lot
Speaker 1: of confusion surrounding what the ECB president Mario Drag had
Speaker 1: to say, the market interpreting what he had to say differently.
Speaker 1: What was your takeaway? Yeah, I think there's a lot
Speaker 1: of confusion, and that's typical. There's a lot of confusion
Speaker 1: now at the FED in terms of what they're going
Speaker 1: to do as well in terms of UH the lack
Speaker 1: of quantitative easy in or buying back selling treasure is
Speaker 1: basically into the market. I think Drag is focused on
Speaker 1: containing volatility. I think other central anchors within the e
Speaker 1: c B and members within the ECB are focused on
Speaker 1: the negative aspects of interest rates and what they're doing
Speaker 1: in terms of German insurance companies. So, um, it's pluses
Speaker 1: and minuses. It does our privilege to bring you William
Speaker 1: Gross of Janice Henderson right now. Is he always joins
Speaker 1: us on jobs today? We love that opportunity Bill Gross. Um. Yeah.
Speaker 1: I look at the whole mix here, the cocktail of
Speaker 1: you will of investment, and I guess it comes to
Speaker 1: when do we get a bear market in bonds? Let's
Speaker 1: begin with can you predict a bear market in bonds? Well,
Speaker 1: predicting bear markets bonds are are used to be a
Speaker 1: function tom of inflation and the potential for higher inflation
Speaker 1: followed by FED tightening these days with the extraordinary provisions
Speaker 1: on the part of central banks, quantitative e s and
Speaker 1: so on, you know, the ECB and the b o
Speaker 1: J and the Fed of purchase thirteen trillion dollars with
Speaker 1: the bonds and stocks via que over the last four
Speaker 1: or five years. And so it becomes a function of
Speaker 1: their persuasion as much as inflation, and um, what we
Speaker 1: know from their ideas in terms of future inflation are
Speaker 1: there that it hasn't gone up to their targets. All
Speaker 1: central banks are looking at a two percent target and
Speaker 1: most are dismayed that they haven't reached those targets. So
Speaker 1: a bear market and bonds is a function of what
Speaker 1: central bankers believe and at the moment, because they're pumping
Speaker 1: in so much money and because the inflationary targets haven't
Speaker 1: been hit, Yeah, we probably don't have a bear market
Speaker 1: and bonds until we see the whites of the central
Speaker 1: bankers eyes. That's a nice way of putting it in
Speaker 1: a military basis. In the attack and battle that we're in,
Speaker 1: when does the public catch up with the new normal
Speaker 1: of low yields. Psychologically, I haven't observed that yet. We're
Speaker 1: still trying to get back to a decent nominal in
Speaker 1: really yield return. And I respectfully say, Mr Gross, it
Speaker 1: ain't there. No when I've said that for a few years.
Speaker 1: To have that, I that I've that. I feel that
Speaker 1: real interest rates and nominal rates, uh, you know, themselves
Speaker 1: have to go up in order to afford the small
Speaker 1: saver and large savers, by the way, insurance companies, pension
Speaker 1: funds and so on, to earn satisfactory return. What is
Speaker 1: that return? Well, you know, based upon historical historical examples,
Speaker 1: individuals probably think that they're in a six to seven
Speaker 1: to eight percent return world in terms of a fifty
Speaker 1: fifty portfolio. I don't think so. Insurance companies and pension funds,
Speaker 1: as we know with the State of Illinois and others,
Speaker 1: you know, expect a seven to seven and a percent
Speaker 1: return from their diversified portfolio. I don't think that's going
Speaker 1: to happen, and that's why they're having problems. And so,
Speaker 1: you know, ultimately, despite the fact that tightening and higher
Speaker 1: interest rates has a negative impact historically unemployment and potentially
Speaker 1: could produce a recession, I think we have to get
Speaker 1: up there in order to avoid a future recession. You know,
Speaker 1: they're one last point. They've been studies by uh, you know,
Speaker 1: Princeton and others now in academia to point out that
Speaker 1: once you drop below two percent in terms of the
Speaker 1: short term rate, it really doesn't do much or hasn't
Speaker 1: done much in terms of stimulating the economy. And so
Speaker 1: I think ultimately we have to get back up to
Speaker 1: a level that stimulates savings investment in the real economy
Speaker 1: as opposed to simply channel funds into the financial economy.
Speaker 1: We've seen the German ten year an eighteen month high.
Speaker 1: We've seen the emerging market to sovereign dollar bonds posting
Speaker 1: their worst weeks since since November. What are the Bill
Speaker 1: Gross bell Weather bonds when you look around the world,
Speaker 1: what are the ones that you look to to tell
Speaker 1: you what's happening in the bond market overall? Well, I
Speaker 1: follow the Bund very seriously relative to tenure treasuries. I
Speaker 1: think there's a has been a rather dramatic correlation in
Speaker 1: the past few months, and indeed it makes sense that
Speaker 1: there should be a correlation period when the ten year
Speaker 1: German Bund exceeded fifty basis points yesterday or the day before.
Speaker 1: You know. To me, that was the say know that
Speaker 1: you know their yields are moving higher um, and that
Speaker 1: means that treasuries would be under pressure as well. The
Speaker 1: Bank of Japan has this ten basis point cap on
Speaker 1: their tenure rates, and we've gone up to the ten
Speaker 1: basis points, and I assume they're doing some easy policies
Speaker 1: in order to keep it there. But the ten basis
Speaker 1: points in Japan, the fifty basis points in Germany UH,
Speaker 1: and ultimately, as I mentioned, the two sixty level on
Speaker 1: ten years are critical in terms of determining whether or
Speaker 1: not bonds are in a bear market or not. It's
Speaker 1: going back to the minutes that we got this week
Speaker 1: from the Fed. Yes, but also from the the e
Speaker 1: c B. There was this by any means necessary line,
Speaker 1: or at least a version of that implicit in the
Speaker 1: in those in the policy of the e c B
Speaker 1: for so along. What do you make of its removal?
Speaker 1: Do do we see a change in tack here from
Speaker 1: the e c B? Well, I think ultimately, I know
Speaker 1: drug is very very devilsh and doesn't want to upset markets.
Speaker 1: It doesn't adhere to my particular philosophy that have just
Speaker 1: discussed in terms of their negative aspects of rates UM.
Speaker 1: I think ultimately we have to wait until two thousand
Speaker 1: and eighteen before they begin to taper um. You know,
Speaker 1: at what pace will that be? Probably limited? You know.
Speaker 1: I continue to see the e c B buying and
Speaker 1: increasing their balance sheet from perhaps four trillion to five
Speaker 1: trillion over the next eighteen months, and that's a stimulative
Speaker 1: type of monetary policy. So yes, taper is beginning probably
Speaker 1: next year, but it's going to be slow and gradual,
Speaker 1: and that's just the way Droggy does it. Within the
Speaker 1: movement in bonds. Bill Gross remember this idea. Bill youngera
Speaker 1: doesn't remember this. There was a point where yield actually
Speaker 1: competed with dividends. This happened long ago and far away.
Speaker 1: How close are we to where we return to the
Speaker 1: day to day battle of yield competing with equity dividends? Well,
Speaker 1: I think we have to get beyond the two particular
Speaker 1: factors that lie underneath that historical comparison. Tom One, we
Speaker 1: have to observe the amount of buybacks on the part
Speaker 1: of companies, and to date, although they've been coming down,
Speaker 1: they've been moving at a billion dollar a year pace,
Speaker 1: and and many investors consider, and I think there's logic
Speaker 1: to it that that five billion dollars a year is
Speaker 1: akin to the dividend, and so you can increase the
Speaker 1: dividend rate that we see by that amount, and that
Speaker 1: amounts to perhaps another one to one and a half percent. Uh. Secondly, though,
Speaker 1: I think that the corporations in terms of their dividends
Speaker 1: ultimately are a reflection of the potential for growth and
Speaker 1: the expectations for growth. And to the extent that growth
Speaker 1: is now moving down and investors are beginning to look
Speaker 1: at two as opposed to three and less fiscal stimulation
Speaker 1: on the part of Trump and tax policies and so on,
Speaker 1: that ultimately, uh, you know, stock yields as a reflection
Speaker 1: of growth. Um, you know have to have to start
Speaker 1: to increase in terms of immediate return as opposed to
Speaker 1: a future return. How will reached it, We'll be How
Speaker 1: worried are you about the contagion associated with this route
Speaker 1: that this could get into that we could see this
Speaker 1: move into other Uh, this is not a route that's
Speaker 1: being inflammatory. Gross Gross Bill Gross remembers the day where
Speaker 1: Alexander Hamilton wanted to coalesce all the state bonds into
Speaker 1: a federal bond bill. Gross Seriously, this is important, folks,
Speaker 1: for the hysteria we're all going to read about over
Speaker 1: the weekend bill. Gross. This is not a bound route,
Speaker 1: is it? No? Not yet? You know, thirty basis points
Speaker 1: in Germany is not a bound route. And uh, you know,
Speaker 1: we've come down from very low levels in terms of
Speaker 1: term premium and in terms of compressed volatility, and the
Speaker 1: volatility that we've seen in the last few days UM,
Speaker 1: even as expressed in the VIX, is certainly not a route. UM.
Speaker 1: You don't have to see volatil in double and triple
Speaker 1: UM and and and prices declined by two or three
Speaker 1: points a week in terms of a bond route. So no,
Speaker 1: not yet. But ultimately, inflationary expectations and central bank policies
Speaker 1: will try to contain volatility, will try to dampen interest rates. UM.
Speaker 1: Whether the market agrees with him forever, I think will
Speaker 1: be the ultimate question. Yields to my way of thinking,
Speaker 1: should move higher? David, get one more question here. I
Speaker 1: do want to point out Grosser's portfolio in the last
Speaker 1: thirty days is in the percentile. So he's being very
Speaker 1: rowdy because David's being very as I moved to the
Speaker 1: surveillance time out share from our mispeak. There, there you go, Phil,
Speaker 1: Let me just ask you lastly what you're going go ahead.
Speaker 1: I was gonna say that's that's a function of being
Speaker 1: negative on German interest rates and to the extent that
Speaker 1: they've gone up by thirty and prices down, and then
Speaker 1: Janice has done well, there you go. Bill. Let me
Speaker 1: ask you lastly, here's push ahead to next week, we
Speaker 1: get a monetary policy report, we hear from the FED chair.
Speaker 1: What are you gonna be listening for when she speaks
Speaker 1: on Capitol Hill two days next week? I believe on
Speaker 1: Wednesday and Thursday, Well, the doverishness, hawkishness, uh, you know,
Speaker 1: focus on inflation and financial conditions. I guess that's the
Speaker 1: debate that I see. I mean, yelling suggests that financial
Speaker 1: conditions aren't important. Others such as the you know, the
Speaker 1: president of New York Fed, um, you know, suggest that
Speaker 1: stock prices and financial conditions are important. So I'd like
Speaker 1: to see answers between that those two heavyweights, uh, in
Speaker 1: terms of whether stock prices are key or not key?
Speaker 1: Bill Gross, thank you, so much, greatly appreciate it. Mr
Speaker 1: Gross is with Jamie Anderson. It's been a remarkable day
Speaker 1: and we've now got a nice move in the bond
Speaker 1: market off the jobs report of better jobs report yields
Speaker 1: higher I guess h two point nine and the thirty
Speaker 1: year bond. A lot of the different American media maybe
Speaker 1: has moved away from Hamburg and the meetings, but to
Speaker 1: be honest, David Gura, across the Bloomberg, the headlines continue
Speaker 1: and they're really pretty important. The President meeting with the
Speaker 1: leadership of Mexico UH. Trump says Mexico should quote absolutely
Speaker 1: unquote pay for border uh wall. There's headlines on China
Speaker 1: China blast G twenty overtrade hands were shaken uh and
Speaker 1: Hamburg is calling in a little more security. So as
Speaker 1: we go to our next guest, David Gura, it's sort
Speaker 1: of a stew here in Germany on this Friday. Well done,
Speaker 1: A pleasure here to bring an ambassador, Max Bauchi's former
Speaker 1: US Ambassador to China, former US Senator of course, from
Speaker 1: the great state of Montana. He joins us on our
Speaker 1: phone lines. Since let me get your respective ambassadory if
Speaker 1: I could, from your time in Beijing. I imagine this issue,
Speaker 1: the North three issue, loomed large while you were there.
Speaker 1: What changed for you? Earlier this week July four, I
Speaker 1: went North three, attested this new missile. How did the
Speaker 1: political calculus change? Well? First, um, not much changed, because
Speaker 1: even though we Americans, including President Obama and Secretary of
Speaker 1: State Carry others, spoke very frequently as that I with
Speaker 1: the Chinese leadership about North Korea. Um, the birth Koreans
Speaker 1: with excuse me, the Chinese, but come back with platitudes,
Speaker 1: they wouldn't say anything. Meanwhile, Kim Jong un proceeds and
Speaker 1: develops his missiles. In a certain sense, nothing changed. What's
Speaker 1: more imminent now though, is that how far he's developed
Speaker 1: his missils capability and and how Also it's becoming more
Speaker 1: clear than China is not only not willing to help
Speaker 1: very much, but maybe even sat in with Brusha and
Speaker 1: opposition some degree to United States ways to try to
Speaker 1: solve this issue. So it's it's it's becoming more ominous
Speaker 1: in my judgments, help us with with urgency and diplomacy.
Speaker 1: We we heard from the President this week via Twitter
Speaker 1: we had to try with China. It sounded like he
Speaker 1: was given up on applying pressure to China on the
Speaker 1: issue of North Korea. You've lived this, how how difficult
Speaker 1: is it to get things to move faster diplomatically? Well,
Speaker 1: I think it's a mistake for him to conduct foreign
Speaker 1: policy Vida's twitter. Um, it's um, it's it one hand.
Speaker 1: His statements are inconsistent, sometimes it's bombastic, and sometimes it
Speaker 1: were reasonable. And foreign leaders therefore, including Kim Jong and
Speaker 1: President she really don't know what to expect. It's it's
Speaker 1: inconsistency rather, and a second is all public Rather, I
Speaker 1: think it's it's such the United States to buckle down,
Speaker 1: dig down really deep, work with other countries and figure
Speaker 1: out much more solid planned It puts a lot more
Speaker 1: pressure on all countries. In this case, it's not just
Speaker 1: North Korea, but it's on China and on other allies
Speaker 1: of ours who interned and put pressure on China and
Speaker 1: on Russia to get a solution. Near all countries now
Speaker 1: or involved, if can can shued an, I GBM that
Speaker 1: threatens the world, and it says stays it's be presidential
Speaker 1: beast dates but like and not do not conduct all
Speaker 1: these sweets. Let me ask a senator from Montana question,
Speaker 1: did you ever go home you know, I mean, I know,
Speaker 1: I know Max Bock has only took five or six
Speaker 1: days a year off. But when you did go home
Speaker 1: to Montana, did were you ever greeted with the emotion
Speaker 1: in anger that you see your colleagues greeted with. Now,
Speaker 1: is this a new thing or do this used to
Speaker 1: happen to you? Well? No, I got it um when
Speaker 1: I took my trips home to very frequently, remember two
Speaker 1: or three healthcare meetings, And I also found that it
Speaker 1: worked if I just stood there. I totally respected if
Speaker 1: people are asking the questions and respected that people are
Speaker 1: pretty angry, kind of ticked off, and listen. You gotta
Speaker 1: really listen. And after about an hour and an hour
Speaker 1: and a half of meetings, but maybe if it's a
Speaker 1: hundred people, two hundred people potend you to calm down
Speaker 1: a lot, and I think there's a lot more mutual
Speaker 1: self respect. Now. They may not really like the health
Speaker 1: care ability we passed that much, but at least there
Speaker 1: was a strong communication that we talked to a lot
Speaker 1: of with with American with with my constituents. Second in
Speaker 1: issue really came up a lot as a second amendment
Speaker 1: gun control Man oh Man that's that's hot, and in Montana,
Speaker 1: and so again I just listened to people and be
Speaker 1: very respectful. I started meeting by saying, Hey, Okay, I
Speaker 1: know you're upset. All I ask you give me five
Speaker 1: minutes and let me speak uninterrupted. Then we'll let let
Speaker 1: the roof blown off a letter riff and center backus.
Speaker 1: We treasure when you're on with us. I'm gonna ask
Speaker 1: you a deeply emotional question for a national audience, and
Speaker 1: particularly our audience in New York. Can we have gun
Speaker 1: legislation that meets the constituencies of your Montana and at
Speaker 1: the same times meets the constituencies of our urban areas,
Speaker 1: and particularly after this horrific I use this word folks
Speaker 1: with immense respect for NYPD for the assassination of a
Speaker 1: police officer in the last forty eight or seventy two hours.
Speaker 1: Can we have two gun policies? Max pocus, I frankly
Speaker 1: don't see it. I mean, um, if we had one
Speaker 1: gun policy in Montana, where people are hunters outdoors respect
Speaker 1: guns of our crime rates very low, and another gun
Speaker 1: policy in New York where handguns aversely banned, that might
Speaker 1: work in New York as well as uh the outline
Speaker 1: the approach I outlined from Montana. The trouble is guns
Speaker 1: go across the lines, and I answer your questions. I
Speaker 1: just don't see how they can combine these two. We
Speaker 1: have to leave it there. Too many as you always
Speaker 1: enjoy to speak to you Inbassador Bocas. Thank you, uh something, David.
Speaker 1: There's never enough time with Max. Bob always great to
Speaker 1: get on healthcare, on finance, indeed on China relations as well,
Speaker 1: China relations as well. Thanks for listening to the Bloomberg
Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
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Speaker 1: Tom Keene. David Gura is at David Gura. Before the podcast,
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