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Speaker 1: this is a Bloomberg Business flash and I'm Karen Moscow.
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Speaker 1: day on Bloomberg SNP EVENI futures up nineteen points, Dow
Speaker 1: E Mini futures of a hundred sixty five, naz Documuni
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Speaker 1: point seven percent tenure Treasury down six thirty seconds, the
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Speaker 1: three point six percent, or a dollar seven to thirty
Speaker 1: dollars seventy one cents a barrel, Comex goal down one
Speaker 1: point nine percent or twenty three dollars to twelve oh
Speaker 1: seven eighty announced, the Euro a dollar ten thirty, the
Speaker 1: En one thirteen point one seven, the British pound a
Speaker 1: dollar forty seventy seven, and all again reporting fourth quarter
Speaker 1: profit that beat analysts estimates. That's a Bloomberg business flash.
Speaker 1: Tom and Mike Karen, thank you very much. We're talking
Speaker 1: with Bob since you've Amherst Pierpont. Before the break, Bob,
Speaker 1: you mentioned negative interest rates. We got five countries in
Speaker 1: Europe right now with negative interest rates, and I read
Speaker 1: this morning the checks are thinking of going there next
Speaker 1: basically because they want a weaker karuna. Are we now,
Speaker 1: after after many years of talking about it, are we
Speaker 1: now getting into currency wars in which, like the nineteen thirties,
Speaker 1: there is no possible way to win if everybody's in
Speaker 1: a well. I think, uh, I don't know if i'd
Speaker 1: call them wars, but certainly some skirmishes going on, and
Speaker 1: I think that that many have have realized, and we've
Speaker 1: talked about this a number of times over the last
Speaker 1: couple of years, that one of the more important transmission
Speaker 1: mechanisms of monetary policy when rates get to very low
Speaker 1: levels is actually through the exchange rate. UM. That was
Speaker 1: certainly the case back in two thousand ten, two thousand
Speaker 1: and eleven when when the Fed initiated its third round
Speaker 1: of quantitative easing. I think we've seen that with the
Speaker 1: weaker euro down under one oh five UM at one
Speaker 1: point last year, with the ECB moving in the negative rate.
Speaker 1: So I think that that um, you know, it's it's um,
Speaker 1: it's a situation where monetary policy, really, I don't think
Speaker 1: negative rates themselves are doing very much and so really
Speaker 1: it's it's way of impacting the economy is through the
Speaker 1: through the exchange rates. So I think we are unfortunately
Speaker 1: inching towards the world where competitive devaluations is something that
Speaker 1: that countries are looking at because monetary policy has become
Speaker 1: ineffective and physical policy is still missing an action. Since
Speaker 1: good morning, tell me about the dollar. I need an
Speaker 1: update here in the Monday morning seven point five d X.
Speaker 1: Why can you go along the dollar here or is
Speaker 1: it just dollar malaise? No, I think we can go
Speaker 1: along the dollar here. There's Uh. Certainly we've seen some
Speaker 1: US interest rate back up here in the last couple
Speaker 1: of days. Uh. Some of the things we look at
Speaker 1: would suggest as the dollar has some upside from here. Um.
Speaker 1: I think if we're going to take long dollar positions,
Speaker 1: I think the euro is the way to go right now.
Speaker 1: Short the euro along the dollar. Because the ECB is
Speaker 1: facing a meeting. Uh. I think coming up March tense
Speaker 1: and give data. We need a message after the beat. Oh,
Speaker 1: there's some technical difficulties. Charlie Pellett joining us down, Michael
Speaker 1: McKee if you always go to yeah, there's let's continue
Speaker 1: on off since he's still there, I'm still here. Okay.
Speaker 1: We're putting some data that we get out of the
Speaker 1: the the your the EU this morning, your zone this morning,
Speaker 1: which is gest that both the manufacturing and service sectors
Speaker 1: weakening up a little bit. So the pressure is certainly
Speaker 1: on the ECB to do something in March. Um, it's
Speaker 1: not clear what they're going to do, but I think
Speaker 1: a week er euro as part of the max. I
Speaker 1: usually don't like to look back but I'm going to
Speaker 1: break a rule and do that here. Bob sinch to
Speaker 1: me last week, and the word I use mathematically was indeterminate.
Speaker 1: We were just sort of all over the place last week.
Speaker 1: What did you glean from last week? It frames strategy
Speaker 1: or more importantly, trade placement in the march, you know,
Speaker 1: I think some of them. So much of it still
Speaker 1: revolves around the oil market. And what we've seen is
Speaker 1: is oil um holding the lows around twenty six, but
Speaker 1: not really being able to break to the top side.
Speaker 1: So we've had um a lot of volatility in a
Speaker 1: very narrow range in the markets I think are overreacting
Speaker 1: to that UM. But I do think we're getting this
Speaker 1: sense that that the global economy is slowing further. UM.
Speaker 1: The risk is that oil prices are going to break
Speaker 1: to the downside. I think a lot of that has
Speaker 1: been discounted, and so when you don't get a break
Speaker 1: to the downside, you get these relief rallies. But I
Speaker 1: think the early data we're getting out for the month
Speaker 1: of February from some of these p m I indusseries
Speaker 1: around the world suggest that there is no bounce going
Speaker 1: on in the first quarter. After some relatively weak fourth
Speaker 1: quarter growth numbers around the world, and I think the
Speaker 1: growth environment is going to continue to be a heavy
Speaker 1: weight of uncertainty on markets as we go forward. It
Speaker 1: does seem though that the numbers are telling us things
Speaker 1: aren't getting significantly worse, that we're just sort of muddling along.
Speaker 1: And I'm wondering, given the money that has poured into
Speaker 1: negative yielding bonds, even into the United States, if we
Speaker 1: do see a floor put in under oil prices that
Speaker 1: people believe in there are a lot of people who
Speaker 1: I mean, we at risk of a huge blood bath
Speaker 1: from people who have gone the wrong way. Yeah. I
Speaker 1: think we've seen a little bit of that in the
Speaker 1: last couple of weeks with this enormous volatility in the
Speaker 1: oil markets and uh and so I think we are
Speaker 1: shaking out some of the some of the spectative positions. Um.
Speaker 1: But but the concern has to be inventories. I mean,
Speaker 1: we candicate large inventories. Um. The agreement last week was
Speaker 1: the cap production at already high levels. That's not going
Speaker 1: to do much to bring inventories down. So I think
Speaker 1: I think the markets continue to struggle with you know,
Speaker 1: have we found a durable bottom and oil prices, because
Speaker 1: if it goes down and breaks through that twenty six
Speaker 1: dollar level, I think we set off all sorts of
Speaker 1: concerns in the high yield bond markets, in the bank
Speaker 1: lending markets, et cetera. Let's rip up the script on
Speaker 1: a Monday morning. Mike, you bring up an incredibly important point,
Speaker 1: and Bob says answered by going to oil. Bob your
Speaker 1: magic because even though you do foreign exchange, you wonderfully
Speaker 1: go cross asset. I would suggest we have rationalized commodities
Speaker 1: using Brent as a proxy from a hundred, actually one,
Speaker 1: but from a hundred we rationalized at eight, we rationalized
Speaker 1: at sixty my memory, as we moved quickly from there,
Speaker 1: we rationalized at forty, and now we're doing the same
Speaker 1: thing at thirty. Why isn't this just one grand rationalization
Speaker 1: like the previous I see no indication of any catharsis
Speaker 1: in oil. I would agree, and I think that that
Speaker 1: the oil market is one that we have to be
Speaker 1: concerned about because so many of the players are not
Speaker 1: just motivated by the profit by profit margins. You know,
Speaker 1: you have a number of governments who are heavily involved
Speaker 1: in the market, who just need revenue and they'll they'll
Speaker 1: continue to pump oil just to generate revenue, whether it's
Speaker 1: at a profit or at a loss. And I think
Speaker 1: that makes for a market that doesn't really clear. You
Speaker 1: don't you don't find equilibrium as quickly as we should.
Speaker 1: And I think that's what we're seeing in the oil markets.
Speaker 1: And I think some of the uncertainty in the other
Speaker 1: asset markets is have we cleared this market? Are we
Speaker 1: going to clear this market? Or is this uncertainty going
Speaker 1: to stay with us? At the same time, is that
Speaker 1: certainly industrial production around the world. Maybe the services sector
Speaker 1: is doing okay, but industrial production continues to weekend. That
Speaker 1: certainly puts downward pressure on oil demand. And you put
Speaker 1: those two together and you keep grappling for this equilibrium
Speaker 1: price and I just don't think we found it yet
Speaker 1: and may take a while to find it. A while
Speaker 1: is how long in your view for Bob, Since the
Speaker 1: end of the month, I think, And you know, you
Speaker 1: would normally expect these markets to adjust in a matter
Speaker 1: of months. We haven't done that. It could take another
Speaker 1: three to six months before we really sort of sort out. Um,
Speaker 1: you know what rational levels are for oil prices going
Speaker 1: forward on a Monday Morning, Bob Stilter in the good
Speaker 1: work of one S. Stanley. He's been better than good,
Speaker 1: not about gloom but about malaise where it's not mourning
Speaker 1: in America. What does Steven Stanley say that you fold
Speaker 1: into your strategy. Well, I think there's a couple of things. One,
Speaker 1: I think Steve has been very early on the on
Speaker 1: the concerns about UM growth and investment, and he's been
Speaker 1: particularly pessimistic about a rebound and investment activity UM. Part
Speaker 1: of that in the US related to policy issues, but
Speaker 1: I think, you know, investment really is the global issue
Speaker 1: that we're we're facing a shortage of right now, and
Speaker 1: and that's really holding back the global economies Number one.
Speaker 1: Number two. Uh, Steve is also getting a bit more
Speaker 1: concerned about about the inflation outlook and the fact that
Speaker 1: the Fed may have to continue to normalize rates. Certainly,
Speaker 1: the core CPI numbers we saw last week or are
Speaker 1: a concern in that regard, and I think if the
Speaker 1: Fed does continue to normalize rates, then then we think
Speaker 1: we have another leg up in the dollar UM as
Speaker 1: we go through the year, and we've talked about euro
Speaker 1: dollar getting back towards parody by the end of this year,
Speaker 1: and I think that's still in play. Really. Uh, that
Speaker 1: had seemed to go away as an issue for a while.
Speaker 1: I gotta put that on on Twitter, that did you
Speaker 1: just say, Bob sins that the euro takes another dash
Speaker 1: to parody. I think we will test parody by the
Speaker 1: latter part of this year because I think things are
Speaker 1: not moving along very well in Europe. And you know,
Speaker 1: if we do get the FED needing to normalize rates,
Speaker 1: I think I do think parody comes back into view. Um.
Speaker 1: We were a little reluctant to go for the parody
Speaker 1: call a few months ago because it looked like US
Speaker 1: rates were coming off and there were too many people
Speaker 1: in that direction. Um, I think it's no longer the
Speaker 1: big consensus out there, and I do think there's downside
Speaker 1: in the euro from current levels. That's an important quote here.
Speaker 1: As we can futures up nineteen futures up one mind
Speaker 1: yields higher, but the curve flatter. That's an oddity of
Speaker 1: the morning. Here's another oddity Bonus round Bonus Monday, another
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