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Speaker 1: Broadcasting live to New York Coomberg eleventh, Ryo to Washington,

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Speaker 1: d C, Bloomberg to Boston, BLUEMBERG twelve hundreds to San Francisco,

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Speaker 1: Bloomberg to the Country, Series General one nine and around

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Speaker 1: the globe the Bloomberg Radio Plus Appen Bloomberg dot Com.

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Speaker 1: This is Bloomberg Surveillance. Good Morning at State thirty on

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Speaker 1: Wall Street Time, Michael McKee along with Tom keenar economic

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Speaker 1: indicators brought you by Commonwealth Financial Network. When it's time

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Speaker 1: to change the conversation, talk with the broker dealer r

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Speaker 1: I A that's ready to listen, call six two three

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Speaker 1: six three eight or visit Commonwealth dot com to learn more.

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Speaker 1: Time now for Vinnidale Judais with today's numbers, Michael and Tom.

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Speaker 1: Good Morning. Jobless claims last week down by nine thousand

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Speaker 1: and two hundred sixty seven thousand, a bit lower than

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Speaker 1: forecast claims, remaining close to a fourth decade low again.

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Speaker 1: Jobless claims last week week and in April sec and

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Speaker 1: falling by nine thousand to two hundred sixty seven thousand,

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Speaker 1: a bit less than Wall Street forecast at the bloemark

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Speaker 1: First Forecast Company tells Judice, Let's go back to network. Um, Mike,

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Speaker 1: I'm gonna be diressed. The the the the three moving

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Speaker 1: averages I use on any series, two of them are

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Speaker 1: convex lower on jobs claims. They are. It is an

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Speaker 1: outstanding series of optimism. It is just stunning optimism. Should

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Speaker 1: we discuss the Minnesota Twins? I don't you know? Uh, well,

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Speaker 1: you know, John and I were talking earlier while you

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Speaker 1: were out of the studio about how we were going

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Speaker 1: to deal with your depressed gloom today because the Red

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Speaker 1: Sox have lost their first game. It's truly on a

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Speaker 1: rule lately. Thank you the Brewing DeCamp upstairs. You know,

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Speaker 1: Jim Paulson joins us from Minnesota, where he is more

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Speaker 1: sane than we are and has a wonderful perspective on

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Speaker 1: our economics center equity. Jim, just simply, can you be

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Speaker 1: long of stocks right now? Yeah? I think in the

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Speaker 1: uh you know, in the next few months, tom My,

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Speaker 1: My feeling is we're probably gonna move higher to higher highs.

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Speaker 1: I there's a few things in the short run at least,

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Speaker 1: um that I really like. I like the fact that

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Speaker 1: we're kind of calming down the deflationary fears that have

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Speaker 1: ruled us over the last couple of years. Um, if

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Speaker 1: you remove that deflationary ABIs story, it brings more risk

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Speaker 1: on behavior. I like the fact that I think earnings

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Speaker 1: the expectations are now so low that even and I

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Speaker 1: actually think if you look at some economic surprising disease

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Speaker 1: about the globe, I'm starting to see a lot of

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Speaker 1: different regions, including the euro Zone, including the emerging market economies,

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Speaker 1: and the United States turned upward with the economic reports.

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Speaker 1: And then lastly, I think the biggest one is I

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Speaker 1: just continue to sense a pessimism. We've had exactly big

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Speaker 1: rally off the bottom in last August. When we did that,

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Speaker 1: it brought back optimism. This time it hasn't. So I

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Speaker 1: like the fact maybe we're going to have to break

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Speaker 1: up of two new all time highs head towards before

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Speaker 1: we bring back optimism, and at that point there might

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Speaker 1: be more risk. But I think now it looks pretty good. Mike,

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Speaker 1: I will I don't know appline on the markets. We

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Speaker 1: don't do that, but I will say it's uncommonly gloomy

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Speaker 1: inequity land right now. Well, is this a is this

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Speaker 1: a time then to buy? Because there's so much gloom?

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Speaker 1: Is it the old wall of worry thing. I think

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Speaker 1: that's one of the good reasons to be buying. Uh, Mike,

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Speaker 1: I really do you know, we've had almost three ten

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Speaker 1: percent corrections within about fifteen sixteen months. We fell almost

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Speaker 1: ten percent in late two thousand fourteen, we fell ten

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Speaker 1: percent in last August. We had another correction here even

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Speaker 1: you know, larger than the highs here in February. And

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Speaker 1: and what I noticed the last two times when we

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Speaker 1: had those corrections, you you were instantly the uh. The

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Speaker 1: attitude on Wall Street was, Oh, this is a good

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Speaker 1: buying opportunity, a refreshing pause and an ongoing bowl market,

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Speaker 1: a chance to get in before we go to new highs.

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Speaker 1: This this time in February, it's been entirely different. What

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Speaker 1: this collapse brought out was calls for a recession, calls

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Speaker 1: for a global financial contagion, bear trap rally. This has

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Speaker 1: been focused on. I like that we're back to what

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Speaker 1: really made this entire bullmarket great, which has been climbing

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Speaker 1: a perpetual wall of worrying. Yeah, but even at the

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Speaker 1: valuations we're seeing now. That was one of the concerns.

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Speaker 1: Paul Hicky and Bespoke head when't he was on with

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Speaker 1: us earlier that I mean, you're you're paying a those

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Speaker 1: nineteen times earnings for the S and T. I share that.

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Speaker 1: I share those concerns. I think the best of this

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Speaker 1: bull market from a buy and hole perspective, has passed.

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Speaker 1: But I don't think it's open. I don't see a

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Speaker 1: recession and on the horizons, so the I think the

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Speaker 1: odds of a sustained bear market are not good. On

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Speaker 1: the other hand, we've used up a lot of the

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Speaker 1: valuation that you you used to fuel the ball. We

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Speaker 1: were in a to a mature earning cycle right now,

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Speaker 1: which earnings are not gonna be as good going forward

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Speaker 1: as they have. We're gonna lose the support of the Fed.

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Speaker 1: We're gonna have to reset rate. There's a lot of challenges,

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Speaker 1: But to me, I think we persist, but the returns

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Speaker 1: are gonna be far less. But right now I think, Um,

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Speaker 1: I've had I've had a range of eighteen hundred ending

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Speaker 1: flat for the year, and we went down eighteen hundred

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Speaker 1: on excessive pessimism. Maybe we go up to excessive optimism

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Speaker 1: and uh, from where we are now, that's that's pretty

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Speaker 1: good upside. Jim Paulson with this, Jim, inflation is it?

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Speaker 1: Is it gonna overshoot? And uh give us something to

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Speaker 1: talk about in August and in December. Um, you don't.

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Speaker 1: I don't think we're en route tom to run away inflation. Um,

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Speaker 1: but I certainly think it's turned a corner. I think

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Speaker 1: it is heading higher a little bit here, you know,

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Speaker 1: lost in the colossal collapse of commodity prices, uh at

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Speaker 1: oil was over the last year, we've had a pretty

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Speaker 1: considerable rise in core economic cost in the United States.

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Speaker 1: We've had the biggest and most sustained rise in wage inflation,

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Speaker 1: in core consumer price inflation, in the core PC deflator,

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Speaker 1: in core services inflation. You also see core inflation that

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Speaker 1: it's picked up actually in the Eurozone, it's picked up

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Speaker 1: in Japan. Uh. So I think we've turned a corner.

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Speaker 1: We're at full employment into the four handles on unemployment probably,

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Speaker 1: and I think we're gonna continue to push that higher.

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Speaker 1: So I think we're gonna get back. And worried about that,

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Speaker 1: and worried about the FED being behind the curve, and

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Speaker 1: Jim Paulson, who has been a resilient optimist all the

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Speaker 1: way through this bull market and even the discussion are

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Speaker 1: we in a bear market now? Is enough to get

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Speaker 1: him fired up? Will continue with Mr Paulson. Maybe you

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Speaker 1: look at more of the economic foundations of his optics

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Speaker 1: of equities, UM futures negative tim doubt futures negative eight

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Speaker 1: one yield one point seven. All right, let's check out

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Speaker 1: with like a bar get the latest world at National Hills.

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Speaker 1: Mike Tom, thank you very much. Democratic presidential candidates Hillary

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Speaker 1: Clinton and Bernie Sanders are swapping pointed words at each other.

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Speaker 1: Sanders says Clinton isn't qualified to be president after taking

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Speaker 1: tens of millions of dollars in special interest funds. Meanwhile,

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Speaker 1: Clinton said Sanders hadn't done his homework on several subjects.

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Speaker 1: Republican presidential candidate Ted Cruz says fraud charges against Donald

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Speaker 1: Trump make him a liability to the party. Crews spoke

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Speaker 1: today to ABC News. We want to beat Hillary. The

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Speaker 1: last thing we want is to nominate someone like Donald Trump,

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Speaker 1: who over and over again has allegations of fraud against him.

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Speaker 1: Researchers trying to solve the puzzle of millions of BA

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Speaker 1: depths nationwide now turning their attention to pockets of survivors

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Speaker 1: in caves where a deadly fungal infection first began. Populations

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Speaker 1: of bats in some Upstate New York and from hibernation

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Speaker 1: sites appear to have stabilized. Researchers are studying everything from

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Speaker 1: behavior to cave conditions. It may not be pretty, but

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Speaker 1: bats serve an important role. They helped control the insect population.

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Speaker 1: Global News twenty four hours a day, empowered by our

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Speaker 1: twenty four hundred journalists and more than one hundred fifty

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Speaker 1: bureaus from around the world. Michael bar Tom Time now

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Speaker 1: for the Bloomberg NBC Sports Update. The Yankees get one

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Speaker 1: John's tesh Yeah, Mike Cold Night, Hot bats at the stadium.

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Speaker 1: Yankee scored six runs in the first innings, six more

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Speaker 1: over the next two, sixteen to six over Euston and

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Speaker 1: not to their first win. Would Joe Girardi like that

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Speaker 1: we continued to tack on. I think that's important. It

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Speaker 1: changes the way you can do things, you know, get

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Speaker 1: some guys off their feet for a little bit, you

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Speaker 1: use different guys in the bullpen. Nova does a tremendous

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Speaker 1: opt tonight, giving us four innings and not having to

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Speaker 1: use anyone else. He did a really good job. So

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Speaker 1: tacky on runs is really important during the course of

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Speaker 1: the season. Yanks with seventeen hits, three homers, one by

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Speaker 1: new second maation went Starlin Castro had four hits. He's

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Speaker 1: got seven rb i's in the first two games. The

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Speaker 1: Astros brilliant young shortstop Carlos Corea also had four hits,

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Speaker 1: two homers, one of them went four hundred sixty. They'll

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Speaker 1: finish the series this afternoon. Nixon Nets both lost. That's

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Speaker 1: happened to latch Charlotte one at the Garden one nineties

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Speaker 1: seven Brooklyn Phill at Washington to one oh three Rangers

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Speaker 1: and Islanders at the Garden Tonight. The Jets want tackle

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Speaker 1: the Ricker Shaw Ferguson to take a pay cut to

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Speaker 1: help resign quarterback Ryan Fitzpatrick. The Masters is underway to

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Speaker 1: Penny Champ, Jordan Spieth is looking to join Jack Nicholas

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Speaker 1: Nick Foulo, and Tiger Woods is the only back to

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Speaker 1: back winners. World number one Jason day teas off just

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Speaker 1: after one o'clock today, Roy McElroy down now after that.

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Speaker 1: They had the Part three yesterday, nine aces, including one

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Speaker 1: by eighty year old Gary Player. Live coverage the opening

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Speaker 1: round live from a got to starting at four fifteen

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Speaker 1: today on Bloomberg eleven three oh, the Bloomberg NBC Sports Update.

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Speaker 1: I'm john s John, thanks so much. Let's do a

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Speaker 1: data checker look at equities, bonds, currencies, commodities. One story

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Speaker 1: on the screen, Yeah, and a one oh eight point

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Speaker 1: three eight and the inter day low was stunning. Mike

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Speaker 1: McKee menching at earlier one oh eight point zero two,

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Speaker 1: which is really something. We took a sharp leg down.

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Speaker 1: Let me get that time for you about five thirty

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Speaker 1: five forty this morning. We've bounced up, but by no

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Speaker 1: means am I gonna call it a bottom. Technically it

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Speaker 1: doesn't look that way. It's just where we are one

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Speaker 1: oh eight uh point three five on Japanese and sharply stronger. Yeah,

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Speaker 1: And I spoke at length with Carl Rick Odonna earlier

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Speaker 1: this morning, back and forth about the presumption of intervention

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Speaker 1: by the Japanese government. Mr Rick Odonna may clear he

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Speaker 1: felt that was less than likely. Futures at negative eleven

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Speaker 1: worldwide in Japan Bloomberg surveillance. We'll get nerdy with Jim

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Speaker 1: Paulson coming up. The k L ratio has worsened. What

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Speaker 1: is happening to American companies and their profits and what

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Speaker 1: they spend it on. Coming up on surveillance. Global business

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Speaker 1: news twenty four hours a day at Bloomberg dot com,

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Speaker 1: the Radio plus Mobile Act and on your radio. This

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Speaker 1: is a Broomberg Business Flash and I'm Karin Moscow. There's

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Speaker 1: updates brought to you by Sector Spider e t F.

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Speaker 1: So I buy a single stock when you can invest

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Speaker 1: in the entire sector. Is its sector sp d r

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Speaker 1: s dot com are called sector et F. Fewer Americans

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Speaker 1: found for unemployment benefits. Last week, jobless claims dropped by

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Speaker 1: nine thousand, two hundred sixty seven thousand, and the week

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Speaker 1: that ended April two, u S stock index futures are lower,

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Speaker 1: with European shares and the yen strengthen into a seventeen

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Speaker 1: month high amid concern over the outlook for global economic growth.

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Speaker 1: We check the markets every fifteen minutes throughout the trading

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Speaker 1: day on Bloomberg. SNP E mini futures down ten points

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Speaker 1: DOWNIE mini futures down eighty three and NASDACK E mini

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Speaker 1: futures down nineteen. The decks in Germany's down two tenths

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Speaker 1: per cent, so is the cat in Paris and FT

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Speaker 1: one hundred tenure treasury of five thirty seconds, the yield

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Speaker 1: one point seven three percent yield on the two year

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Speaker 1: point seven one percent. Now, i'm x scrude oil down

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Speaker 1: seven tenths per cent or twenty seven cents to thirty

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Speaker 1: seven forty eight A barrel comes gold is up one

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Speaker 1: point four per cent or sixteen dollars sixty cents at

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Speaker 1: twelve forty forty announced the euro A dollar thirteen seventy

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Speaker 1: four the end one oh eight point four two, improving

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Speaker 1: gender equality, but at at least two point one trillion

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Speaker 1: dollars to US gross domestic product by twenty five. That

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Speaker 1: according to a McKinsey Global Institute's study. And Valion Pharmaceuticals

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Speaker 1: when the support of its lenders to wave a default

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Speaker 1: and ease some restrictions on its loan pact as the

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Speaker 1: drugmaker seeks to reign in it's thirty two billion dollar deadload.

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Speaker 1: That's a Bloomberg business flash, Tom and Mike Karena, thanks

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Speaker 1: so much again. Future negative ten. It is eight on

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Speaker 1: Wall Street. The following is from Bloomberg View opinions and

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Speaker 1: commentary from Bloomberg columnists. I'm Jonathan Bernstein, a columnist from

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Speaker 1: Bloomberg view, it's increasingly likely Donald Trump could win a

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Speaker 1: plurality of delegates but fall short of the required delegate

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Speaker 1: majority and lose the nomination. The convention could even select

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Speaker 1: a candidate who got drugged in the primaries, or one

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Speaker 1: who sat out the contests altogether. Trump may find that unfair,

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Speaker 1: but such an outcome would be democratic. Parties are private organizations.

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Speaker 1: It's up to them to decide how they want to

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Speaker 1: choose their nominees, at least as long as parties allow

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Speaker 1: new members to join and have an opportunity to exercise

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Speaker 1: influence within the party. I do have two concerns about

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Speaker 1: the selection of delegates, which on the Republican side is

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Speaker 1: partially separated from the allocation of delegates. It's not clear

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Speaker 1: to what extept the delegate selection process really is open

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Speaker 1: to new members. It also seems odd for a party

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Speaker 1: to hold primaries and advertise them as choosing the nominee

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Speaker 1: if in fact, separate delegate selection means primaries don't necessarily

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Speaker 1: determine the nomination. Overall, the system may look weird, but

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Speaker 1: it's probably sufficiently democratic. I'm Jonathan Bernstein for more view,

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Speaker 1: please go to Bloomberg View dot com or view go

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Speaker 1: on the Bloomberg terminal. This has been Bloomberg View and

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Speaker 1: Bloomberg View commentaries can be heard hourly weekdays. I'm Bloomberg Radio, Mike.

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Speaker 1: This is perfect, this is perfect surveillance. We have Jim

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Speaker 1: Paulson on and Albert Edwards, who even the optimists read

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Speaker 1: over at sock Chen because he's so David Gloomy Lukawa

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Speaker 1: out from Bloomberg Markets out with a tweet with a

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Speaker 1: killer Albert Ebsward's chart of business investment modestly rolling over

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Speaker 1: and earnings with a vengeance what he calls Edwards calls

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Speaker 1: whole economy profits rolling over. That's pretext, domestic non financial

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Speaker 1: profits rolling over. It's enough, Mike McKee to make Jim

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Speaker 1: Paulson squirm. Well, Jim is a little worried anyway about

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Speaker 1: what's been happening with the investments. I mean the capital

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Speaker 1: labor ratio. You're right about the recently um the k

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Speaker 1: L ratio were companies just aren't spending any money on

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Speaker 1: capital deepening at this point, and that's reflected in productivity numbers,

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Speaker 1: and maybe that's connected to why we're seeing such bad earnings.

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Speaker 1: Do you think I think it's possible. Uh, Like I

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Speaker 1: think the UH, the cap the capital, the amount of

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Speaker 1: capital the labors had to work with. That ratio has

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Speaker 1: been falling steadily in the last five years, really throughout

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Speaker 1: this recovery, from two thousand nine through the latest data

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Speaker 1: through two thousand fourteen. It's one of the steepest and

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Speaker 1: pro longest drops in the US capital ratio in post

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Speaker 1: war history. And certainly, you know, giving uh always giving

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Speaker 1: more and more capital to the to the labor supply

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Speaker 1: is one of the reasons that the US dominated the

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Speaker 1: globe economically. And UH, I don't think it's a coincidence

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Speaker 1: at all that the fall in the capital labor ratio,

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Speaker 1: the outsized fall in this recovery is has led to

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Speaker 1: the worst productivity performance of any recovery in the post

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Speaker 1: war period. UM. It's been an issue, it could become

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Speaker 1: a bigger issue UH going forward. UM. I am hopeful

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Speaker 1: that there's been some pickup in UH in private sector

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Speaker 1: investment in the last few years, not real strong, but

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Speaker 1: a little bit enough maybe to help raise productivity during

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Speaker 1: the balance of this recovery. But it's gonna be a

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Speaker 1: close call. We we we've got no help from the

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Speaker 1: public sector. Real public sector investment as a percentage GDP

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Speaker 1: has recently fallen to a sixty four year low in

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Speaker 1: this country, also contributing to lack of productivity. So it's

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Speaker 1: gonna come from the private sector. There's certainly tremendous capability here.

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Speaker 1: The amount of dry powder on corporate balance sheets relative

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Speaker 1: to the size of the economy remains almost record setting.

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Speaker 1: If we could get that off the balance sheet, uh,

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Speaker 1: into something other than buying back their own stock or

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Speaker 1: raising dividends or buying each other, if we could actually

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Speaker 1: create some animal spirit. Do you see any indication of that?

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Speaker 1: Not not right now. I don't, Tom, And that's the problem.

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Speaker 1: But but here's the one thing I think that's been

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Speaker 1: missing in this cycle. For that that we could get

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Speaker 1: we have. We think it's been tax policies, you know,

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Speaker 1: and not bringing cash over Europe and those kid things.

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Speaker 1: I don't. I think the main thing that hasn't been

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Speaker 1: there is when the CEO looks around the world, we

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Speaker 1: have never been able to see all the economic boats

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Speaker 1: rising at the same time in this recovery. You know,

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Speaker 1: we've we've lost Europe different times. We've lost Japan different times.

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Speaker 1: Now the emergent world slowing down. We've never had a

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Speaker 1: CEO that looks out of his markets and goes, oh,

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Speaker 1: look at they're all kind of going up the same time.

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Speaker 1: That is what would bring animal spirits, and in the

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Speaker 1: need to to add to capital investment, we might get that.

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Speaker 1: I think the tremendous synchronized policy stimulus that we've dumped

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Speaker 1: on the global economy in the last couple of years,

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Speaker 1: in the form of a tax cut, of of of

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Speaker 1: a fifty drop in commodity prices, in the form of

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Speaker 1: a major global wise drop in sovereign bond yields, and

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Speaker 1: in the form of currency weakness for everyone but the

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Speaker 1: United States, is likely to bring a bounce in economic

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Speaker 1: growth uh simultaneously, which could bring animal spirits. And within

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Speaker 1: your animal spirited optimism, you need this, Folcus on the

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Speaker 1: twins open oh and two Jim, when you when you

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Speaker 1: look at the enthusiasm you have, can you buy to

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Speaker 1: be safe x on and Chevron or can you load

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Speaker 1: the boat on energy? Even if you don't know it's

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Speaker 1: abottom in oil. I like energy time. I don't know

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Speaker 1: if i'd load the boat. I don't know if it's

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Speaker 1: a low, I said, I suspect it is. I think

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Speaker 1: the fact that there's a lot of things that haven't

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Speaker 1: happened at the preousiest times that crude rallied in the

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Speaker 1: last couple of years. You know, the look at the

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Speaker 1: performance of the transport stocks doing well, look at the

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Speaker 1: c RB raw, industrial commodity prices doing doing well, basically

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Speaker 1: material stocks doing well, gold doing well, the dollar coming

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Speaker 1: off significantly. Those are all things that give me more

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Speaker 1: support that this is a low, and I would rather

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Speaker 1: load the boat just an energy I would diversify it

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Speaker 1: not only to energy, but to basically materials as a

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Speaker 1: whole too, industrials, uh, overall, and even to parts of technology.

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Speaker 1: If we stabilize commodities and manufacturing, I think the more

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Speaker 1: capital goods industrial producer sectors of the world stock mark

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Speaker 1: are going to do better. Well. This is uh, you know,

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Speaker 1: a quarter in which all of those categories you just

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Speaker 1: talked about our forecast to basically be terrible in terms

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Speaker 1: of earnings. I mean, industrials are forecast to be down,

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Speaker 1: energy down there under. Um, so how long are we

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Speaker 1: gonna have to You're gonna have to wait to be

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Speaker 1: proven right? Well, you know, the stocks moved before the earnings,

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Speaker 1: so the stocks created uh last year and even to

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Speaker 1: the lows of January. But those most of those stocks

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Speaker 1: have turned the corner have been outperforming again. So the

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Speaker 1: earnings might well be bad and that might already have

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Speaker 1: been reflected in the the stock under performance in those sectors.

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Speaker 1: The fact that the stocks were already turning upward again

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Speaker 1: might tell you that as we get into the second

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Speaker 1: quarter and the last two courses year, earnings performance out

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Speaker 1: of these groups are gonna turn more positive. Uh. Certainly,

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Speaker 1: if commodity prices and crude oil hold at these higher

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Speaker 1: levels are still go higher, Uh, you're gonna have some

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Speaker 1: pretty big positive swings in earnings from those sectors. Ultimately,

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Speaker 1: is the percent changes from your goal levels start to

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Speaker 1: turn the other way. So you know, I kind of

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Speaker 1: think that by the time the earnings performance actually shows,

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Speaker 1: those stocks will already be doing uh quite well, Mike,

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Speaker 1: So I don't think he could wait for that turn.

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Speaker 1: Do you realize that when Jim Paulson says load the boat,

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Speaker 1: Michael McKee, he's talking about in nineteen sixty four criss

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Speaker 1: crafty two ft cavalier Dorry. That's the kind of boat

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Speaker 1: they have in Minnesota as light of it's it's not

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Speaker 1: like what we think of like load the boat. I mean, John,

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Speaker 1: you're thinking of what's the ferries that that run to

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Speaker 1: New Jersey every day where they watch Bloomberg TV while

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Speaker 1: they the C Streak Ferry where I almost got sick

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Speaker 1: ken through it into all my hands. Jim Paulson. His

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Speaker 1: idea of load the boat is in nineteen sixty four

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Speaker 1: Crisscraft two ft cavalier dorry. That's very cool, Jim Paulston,

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Speaker 1: thank you so much for Minnesota. Always appreciate it. With

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Speaker 1: Wells Capital Management, the gloom crew go nuts when Paulson's

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Speaker 1: on what's the Baltic dry index for the C Street

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Speaker 1: Ferry these days? As long as Tom's not on it,

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Speaker 1: it's fine. Well there's just no vermoose and then it's

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Speaker 1: the dry index, right, Okay? Before were moving on futures

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Speaker 1: of ten dat futures ing of eighty five. What are

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Speaker 1: Mike and I watching? Yeah? One O eight forty one

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Speaker 1: bonus time another hour of Bloomberg surveillance