1 00:00:03,400 --> 00:00:08,880 Speaker 1: This is Bloomberg Surveillance. If anybody needs capable management teams 2 00:00:08,920 --> 00:00:11,239 Speaker 1: for the future, it's the commercial banks, right, They're not 3 00:00:11,240 --> 00:00:13,600 Speaker 1: going to go away. The business isn't going to go away. 4 00:00:13,720 --> 00:00:17,720 Speaker 1: That's not as sign that the economy if not prospers. 5 00:00:17,960 --> 00:00:19,960 Speaker 1: The fact that in placement is only one percent, I 6 00:00:20,000 --> 00:00:21,599 Speaker 1: don't get it. The fourth core was bad in terms 7 00:00:21,600 --> 00:00:23,639 Speaker 1: of g d P. It wasn't bad in terms of jobs. 8 00:00:23,640 --> 00:00:25,920 Speaker 1: In fact, it was fantastic in terms of job growth, 9 00:00:26,000 --> 00:00:29,920 Speaker 1: and that's what's the most important. Bloomberg Surveillance your link 10 00:00:30,000 --> 00:00:34,440 Speaker 1: to the world of economics, finance, and investment. On Bloomberg Radio. 11 00:00:34,640 --> 00:00:38,199 Speaker 1: Good morning everyone, Michael McKeon, Tom Keane, Bloomberg Saveillans worldwide. 12 00:00:38,200 --> 00:00:41,280 Speaker 1: We welcome all of you this morning Bloomberg Saveillance a 13 00:00:41,280 --> 00:00:44,440 Speaker 1: batch of my Cone and Resnec Accounting, tax Advisory. It 14 00:00:44,440 --> 00:00:48,159 Speaker 1: can be hard to navigate your economic concertainty. Your business 15 00:00:48,200 --> 00:00:53,120 Speaker 1: needs industry insight and transformative advice to drive it forward. 16 00:00:53,200 --> 00:00:57,720 Speaker 1: Find out why at Cone Resnick dot com. Michael McKee 17 00:00:57,760 --> 00:01:03,160 Speaker 1: the yield one point. Watching a currency market on stronger 18 00:01:03,160 --> 00:01:09,920 Speaker 1: again this morning. Indeed we're looking at a one on 19 00:01:09,959 --> 00:01:12,200 Speaker 1: the end, but the euro is lower and the pound 20 00:01:12,440 --> 00:01:16,320 Speaker 1: is lower. The only thing a little bit stronger maybe 21 00:01:16,319 --> 00:01:19,520 Speaker 1: the Australian dollar today because the dollar index is down. 22 00:01:22,400 --> 00:01:24,800 Speaker 1: Very good, Michael mcketh, Thank you so much, and right now. 23 00:01:24,840 --> 00:01:27,800 Speaker 1: Stephanie Rule and John michel Thwaite, in conversation with Bill 24 00:01:28,200 --> 00:01:31,480 Speaker 1: and Melinda Gates at least their annual letter on philanthropy, 25 00:01:31,520 --> 00:01:35,080 Speaker 1: the question poise this year, if you could have a superpower, 26 00:01:35,160 --> 00:01:38,600 Speaker 1: what would it be? They write, Poverty is not just 27 00:01:38,720 --> 00:01:41,280 Speaker 1: about a lack of money, It is about the absence 28 00:01:41,360 --> 00:01:44,720 Speaker 1: of the resources the poor need to realize their potential. 29 00:01:44,959 --> 00:01:47,880 Speaker 1: Two critical ones are time and energy. I don't think 30 00:01:47,880 --> 00:01:50,280 Speaker 1: I have either one. Joining us now are the co 31 00:01:50,440 --> 00:01:53,800 Speaker 1: chairs Bill and Melinda Gates plus Bloomberg editor in chief 32 00:01:53,880 --> 00:01:57,960 Speaker 1: John michel Thwaite, No pressure on me right now. Welcome, 33 00:01:58,160 --> 00:02:01,240 Speaker 1: Thank you. Every year we read your letters and they're 34 00:02:01,320 --> 00:02:05,040 Speaker 1: very positive, very optimistic. This year is no different. But 35 00:02:05,120 --> 00:02:08,040 Speaker 1: it comes at a time when so many influential voices 36 00:02:08,240 --> 00:02:11,639 Speaker 1: are warning us of a global perfect storm. Why is 37 00:02:11,680 --> 00:02:14,040 Speaker 1: it that you continue to be optimistic? What do you 38 00:02:14,080 --> 00:02:16,920 Speaker 1: see that others don't well? I think we see the 39 00:02:16,919 --> 00:02:20,079 Speaker 1: decline in childhood death around the world. We see when 40 00:02:20,080 --> 00:02:22,239 Speaker 1: we travel to the developing world, which we've been doing 41 00:02:22,280 --> 00:02:25,200 Speaker 1: now for over fifteen years. Life getting better for people. 42 00:02:25,240 --> 00:02:27,920 Speaker 1: We see a rising middle class, we see so much 43 00:02:27,919 --> 00:02:30,800 Speaker 1: potential and ingenuity in the developing world. And yet the 44 00:02:30,840 --> 00:02:33,560 Speaker 1: headlines here are negative. But when you actually read what's 45 00:02:33,600 --> 00:02:36,400 Speaker 1: actually going on and look at the statistics, life is 46 00:02:36,440 --> 00:02:39,600 Speaker 1: getting better for most people around the world, not everywhere 47 00:02:39,639 --> 00:02:42,880 Speaker 1: all the time, but in general, it is absolutely getting better. 48 00:02:43,000 --> 00:02:44,680 Speaker 1: A lot of stuff though in the letter though, which 49 00:02:44,680 --> 00:02:47,760 Speaker 1: actually is rather depressing. You use the Thomas Edison example, 50 00:02:47,800 --> 00:02:50,040 Speaker 1: but it's a hundred and fifty years since he invented 51 00:02:50,040 --> 00:02:52,000 Speaker 1: the light bulb, when yet when you look at Africa 52 00:02:52,680 --> 00:02:55,040 Speaker 1: you see nothing at night other than darkness because there 53 00:02:55,080 --> 00:02:57,880 Speaker 1: aren't many electricity lights on there. And you talk about 54 00:02:57,919 --> 00:03:00,720 Speaker 1: the idea that this could actually be The message to 55 00:03:00,800 --> 00:03:02,600 Speaker 1: teenagers is that you have to come up with an 56 00:03:02,600 --> 00:03:05,520 Speaker 1: answer to solve the energy problem. And I just wondered 57 00:03:05,600 --> 00:03:08,399 Speaker 1: which of the which of the particular energies you put 58 00:03:08,400 --> 00:03:12,920 Speaker 1: the most amount of. Well, it's amazing that we've got 59 00:03:12,960 --> 00:03:16,280 Speaker 1: eighty percent of the world using electricity and almost taking 60 00:03:16,320 --> 00:03:19,000 Speaker 1: for granted the magic idea that you flip the switch 61 00:03:19,040 --> 00:03:20,880 Speaker 1: and the light comes on, or you just set the 62 00:03:20,919 --> 00:03:24,720 Speaker 1: temperature and that works. We want to get that to everyone, 63 00:03:25,080 --> 00:03:30,880 Speaker 1: and so getting the price down by better science, better innovation. 64 00:03:31,520 --> 00:03:34,960 Speaker 1: And now with this constraint that as we add to 65 00:03:34,960 --> 00:03:39,720 Speaker 1: the energy system, we cannot emit greenhouse gases. So the 66 00:03:39,840 --> 00:03:44,640 Speaker 1: old ways won't you talk about needing a miracle. You 67 00:03:44,760 --> 00:03:48,040 Speaker 1: need a scientific breakthrough. We need a miracle like the 68 00:03:48,040 --> 00:03:51,000 Speaker 1: personal computer or the internet or the mobile phone. So 69 00:03:51,040 --> 00:03:53,800 Speaker 1: we need young people to think, Okay, this is the 70 00:03:53,840 --> 00:03:56,520 Speaker 1: science that's going to make a big difference, and we 71 00:03:56,560 --> 00:03:59,920 Speaker 1: need R and D money that drives it forward. Amazing 72 00:04:00,080 --> 00:04:02,400 Speaker 1: lean for all the talk about clean energy, the money 73 00:04:02,400 --> 00:04:05,520 Speaker 1: spent on the demand side, the supply of innovation, that's 74 00:04:05,560 --> 00:04:08,480 Speaker 1: the R and D increase. People are just now beginning 75 00:04:08,480 --> 00:04:12,120 Speaker 1: to talk about that, and we want them to follow through. Well, 76 00:04:12,160 --> 00:04:15,640 Speaker 1: you want to sort of bring electricity to a billion people. 77 00:04:15,680 --> 00:04:18,880 Speaker 1: It's kind of like an electrical bringing power to the people. 78 00:04:19,160 --> 00:04:21,560 Speaker 1: But let's say the lights go on around the world. 79 00:04:21,920 --> 00:04:25,000 Speaker 1: What does the world look like in developing countries? Is 80 00:04:25,040 --> 00:04:28,719 Speaker 1: there an education system, a health system, jobs for these 81 00:04:28,720 --> 00:04:32,520 Speaker 1: people to have. Well, there's no doubt their labor has value. 82 00:04:32,640 --> 00:04:37,600 Speaker 1: The health is our biggest area of expertise. That's what 83 00:04:37,640 --> 00:04:40,200 Speaker 1: the Foundation puts the most money in, and there we 84 00:04:40,279 --> 00:04:45,279 Speaker 1: see improving nutrition, reduced childhood death rates, and they in 85 00:04:45,800 --> 00:04:52,159 Speaker 1: uplifting a country to be a middle income country. Education, health, infrastructure, 86 00:04:52,279 --> 00:04:56,200 Speaker 1: good governance. Those four really go together, and so we're 87 00:04:56,200 --> 00:04:59,440 Speaker 1: trying to make sure in Africa that the right things 88 00:04:59,600 --> 00:05:02,680 Speaker 1: happen and to help them get those four elements right. 89 00:05:02,800 --> 00:05:06,000 Speaker 1: In fact, Ethiopia, if you traveled there a decade ago 90 00:05:06,200 --> 00:05:09,599 Speaker 1: versus today, second largest country in Africa, you wouldn't recognize it. 91 00:05:09,720 --> 00:05:12,960 Speaker 1: I mean a really rising middle class people moving into 92 00:05:12,960 --> 00:05:16,320 Speaker 1: the city, starting to use more and more tools. And 93 00:05:16,360 --> 00:05:18,880 Speaker 1: then in places like Tanzani and Kenya, you have things 94 00:05:18,920 --> 00:05:22,320 Speaker 1: like digital money at scale. People are small, are saving 95 00:05:22,400 --> 00:05:25,520 Speaker 1: small amounts of money now on their phone and being 96 00:05:25,520 --> 00:05:27,920 Speaker 1: able to pay the school feeds. So in some ways 97 00:05:27,920 --> 00:05:30,840 Speaker 1: they're leap frogging because they didn't have hardline phones are 98 00:05:30,839 --> 00:05:33,560 Speaker 1: actually leap frogging into cell phones and that has huge 99 00:05:33,600 --> 00:05:36,039 Speaker 1: power in women if they can get digital money in 100 00:05:36,040 --> 00:05:38,920 Speaker 1: their hands. That basic kind of gospel of free trade 101 00:05:38,920 --> 00:05:41,640 Speaker 1: and capitalism, that that that that works as the way 102 00:05:41,680 --> 00:05:44,320 Speaker 1: that this is if you have good governance in these 103 00:05:44,320 --> 00:05:48,000 Speaker 1: countries and you have consistently good governance, then you start 104 00:05:48,040 --> 00:05:50,080 Speaker 1: to see that rising middle class because they make all 105 00:05:50,160 --> 00:05:53,760 Speaker 1: the right economic and infrastructure improvements in the country, and 106 00:05:53,760 --> 00:05:56,880 Speaker 1: then it just builds from there. Well, it's bad capitalism 107 00:05:56,920 --> 00:05:59,240 Speaker 1: and bad governance that has so many people here in 108 00:05:59,279 --> 00:06:02,080 Speaker 1: the United States frustrated. You were inspired to write this 109 00:06:02,160 --> 00:06:06,360 Speaker 1: letter by speaking to students, teenagers in Kentucky. To those students, 110 00:06:06,440 --> 00:06:09,120 Speaker 1: what's the message when they say, well, why not help us, 111 00:06:09,400 --> 00:06:12,320 Speaker 1: why not improve our education system? Why not help us 112 00:06:12,360 --> 00:06:15,600 Speaker 1: get jobs? We're faced with a student get crisis. Well, actually, 113 00:06:15,600 --> 00:06:18,839 Speaker 1: the school that we were interviewed in is a great 114 00:06:18,880 --> 00:06:23,000 Speaker 1: example of school that has reformed. It's in Appalachians called 115 00:06:23,040 --> 00:06:25,640 Speaker 1: Betsy Lane, and we couldn't have been more impressed with 116 00:06:25,760 --> 00:06:29,000 Speaker 1: the way that the teachers are using their new curriculum, 117 00:06:29,920 --> 00:06:32,360 Speaker 1: that the way the teachers are learning from each other. 118 00:06:32,800 --> 00:06:35,080 Speaker 1: That's a big focus on our foundation. In fact, our 119 00:06:35,080 --> 00:06:38,520 Speaker 1: money spent in the United States almost entirely goes to 120 00:06:38,560 --> 00:06:42,119 Speaker 1: improving the education system. And we're seeing some strong points 121 00:06:42,160 --> 00:06:46,440 Speaker 1: of light like Kentucky started four years ago with these 122 00:06:46,480 --> 00:06:49,200 Speaker 1: these reforms. Then does it not surprise you that in 123 00:06:49,240 --> 00:06:52,479 Speaker 1: the presidential kN race there are these outliers that have 124 00:06:52,560 --> 00:06:57,200 Speaker 1: gained so much popularity because we've got a disenfranchised country. Well, 125 00:06:57,200 --> 00:07:00,240 Speaker 1: I think they're disenfranchised with what's going on sometimes times 126 00:07:00,240 --> 00:07:02,440 Speaker 1: in politics and on Capitol Hill. But then when you're 127 00:07:02,480 --> 00:07:05,120 Speaker 1: out on the ground and you talk to teachers and 128 00:07:05,120 --> 00:07:07,520 Speaker 1: you talk to students about what's going on in your school, 129 00:07:07,560 --> 00:07:10,280 Speaker 1: and they see progress, they're feeling better about what's actually 130 00:07:10,360 --> 00:07:13,520 Speaker 1: happening locally, you're a little surprised to discover that. You'll 131 00:07:13,600 --> 00:07:16,400 Speaker 1: you'll know you're not actually the America's leading business person, 132 00:07:16,440 --> 00:07:21,520 Speaker 1: the most successful one as a man called Donald Trump. Well, 133 00:07:21,560 --> 00:07:24,880 Speaker 1: he's certainly in the news and uh, you know, he 134 00:07:25,520 --> 00:07:31,080 Speaker 1: generates a lot of talk and uh interest. You know, 135 00:07:31,120 --> 00:07:33,840 Speaker 1: he doesn't look as if he's going to get your age. Well, 136 00:07:34,400 --> 00:07:37,920 Speaker 1: our foundation has done a good job working with both 137 00:07:38,000 --> 00:07:42,000 Speaker 1: Republican presidents and Democratic presidents. George Bush did the huge 138 00:07:42,160 --> 00:07:47,400 Speaker 1: HIV program. Obama have been very good on foreign aide 139 00:07:47,440 --> 00:07:49,800 Speaker 1: and being supportive of that. Back in the two thousand 140 00:07:49,880 --> 00:07:54,120 Speaker 1: eight campaign, both candidates McCain and Obama committed to generous 141 00:07:54,160 --> 00:07:56,800 Speaker 1: foreign aide and making sure that things like Millary would 142 00:07:56,840 --> 00:07:59,240 Speaker 1: get lots of resources. So we haven't gotten into the 143 00:07:59,240 --> 00:08:03,280 Speaker 1: specifics and in this yet cost. One quick thing about 144 00:08:03,280 --> 00:08:06,160 Speaker 1: you're about the start of the area you focus on, 145 00:08:06,280 --> 00:08:09,160 Speaker 1: which is that area to do with the unpaid work 146 00:08:09,200 --> 00:08:12,240 Speaker 1: and the last amount that the girls and women do 147 00:08:12,360 --> 00:08:14,680 Speaker 1: and don't get paid for. The one very obvious thing 148 00:08:14,680 --> 00:08:16,880 Speaker 1: I found that shocking that the perhaps the biggest thing 149 00:08:16,880 --> 00:08:18,800 Speaker 1: of all out of that is what is the solution. 150 00:08:19,880 --> 00:08:21,920 Speaker 1: We do need to have a good policy. I think 151 00:08:22,000 --> 00:08:25,200 Speaker 1: nationwide we have it in three states of paid family 152 00:08:25,280 --> 00:08:28,360 Speaker 1: medical leave. California lead on this. You've got New Jersey 153 00:08:28,400 --> 00:08:30,440 Speaker 1: and Rhode Island. You've got the tech sector seeing it 154 00:08:30,480 --> 00:08:33,280 Speaker 1: as a competitive edge to have good paid family leave. 155 00:08:33,559 --> 00:08:35,680 Speaker 1: One thing I am encouraged about in this election is 156 00:08:35,679 --> 00:08:37,800 Speaker 1: both sides of the aisle are talking about it. I 157 00:08:37,800 --> 00:08:40,760 Speaker 1: think there's different ways of getting there, but we are behind. 158 00:08:40,800 --> 00:08:43,120 Speaker 1: I mean, let's look at Western Europe. You know they 159 00:08:43,160 --> 00:08:46,720 Speaker 1: have amazing paid family medical leave for both men and women, 160 00:08:46,760 --> 00:08:49,360 Speaker 1: and it says you can take time off to care 161 00:08:49,400 --> 00:08:51,520 Speaker 1: for the elderly or care for a child. That makes 162 00:08:51,520 --> 00:08:54,320 Speaker 1: a huge difference in terms of keeping women in the workforce. 163 00:08:54,320 --> 00:08:56,880 Speaker 1: And we want women to be able to balance time 164 00:08:56,920 --> 00:08:58,959 Speaker 1: at home and work. And one of the things I 165 00:08:59,000 --> 00:09:01,040 Speaker 1: talked about the Annual Letter is the fact that there's 166 00:09:01,120 --> 00:09:04,040 Speaker 1: all this unpaid work that happens at home that we 167 00:09:04,080 --> 00:09:06,480 Speaker 1: don't even call work around the world, but it is. 168 00:09:06,920 --> 00:09:09,439 Speaker 1: So that's one policy thing that would really help in 169 00:09:09,480 --> 00:09:12,360 Speaker 1: the United States. Are you afraid if we're really headed 170 00:09:12,440 --> 00:09:14,800 Speaker 1: at least you're in the US into a recession? The 171 00:09:15,000 --> 00:09:17,479 Speaker 1: R and D spend that you say is so necessary, 172 00:09:17,480 --> 00:09:20,719 Speaker 1: the policy changes could that fall by the wayside at 173 00:09:20,720 --> 00:09:24,160 Speaker 1: a time when companies just need to survive. Well, the 174 00:09:25,120 --> 00:09:27,880 Speaker 1: that's a more negative view of the US economy than 175 00:09:27,920 --> 00:09:35,640 Speaker 1: I have. Well, I see in the tech sector amazing innovation. 176 00:09:36,200 --> 00:09:40,959 Speaker 1: I see in the health sector, fantastic innovation. Uh, whether 177 00:09:41,000 --> 00:09:44,480 Speaker 1: it's stem cells or genetic editing. I see in the 178 00:09:44,640 --> 00:09:48,480 Speaker 1: energy and material sector, real opportunities for breakthroughs. We're able 179 00:09:48,520 --> 00:09:53,520 Speaker 1: to understand the basic physics of materials and catalysts. It's 180 00:09:53,559 --> 00:09:55,640 Speaker 1: interesting you say that you you and I have argued 181 00:09:55,640 --> 00:09:58,040 Speaker 1: about this for a long time. You look at energy 182 00:09:58,240 --> 00:10:00,640 Speaker 1: and we keep on hoping for this to come through. 183 00:10:00,679 --> 00:10:02,840 Speaker 1: And one reason why you cool for a miracle is 184 00:10:02,880 --> 00:10:05,360 Speaker 1: because actually all the things that we keep on opening 185 00:10:05,400 --> 00:10:07,800 Speaker 1: are really going to change, they haven't yet come through 186 00:10:07,800 --> 00:10:10,079 Speaker 1: an energy Energy seems to be an exception. Well, the 187 00:10:11,440 --> 00:10:17,880 Speaker 1: ironically for the climate challenge, actually the hydrocarbon area has 188 00:10:17,920 --> 00:10:21,000 Speaker 1: been the most innovated, and particularly now that you have 189 00:10:21,080 --> 00:10:26,960 Speaker 1: slackening demand, the cost reduction work they're doing about all 190 00:10:26,960 --> 00:10:31,720 Speaker 1: the inputs they have there makes the bar uh tougher 191 00:10:31,800 --> 00:10:35,760 Speaker 1: for the clean solution to come along. But energy is cheaper, 192 00:10:36,480 --> 00:10:40,839 Speaker 1: and because I see so many paths to get an 193 00:10:40,960 --> 00:10:44,000 Speaker 1: energy solution, I think the chance in the next fifteen 194 00:10:44,040 --> 00:10:46,480 Speaker 1: years that we do get the breakthrough is very high. 195 00:10:46,480 --> 00:10:51,160 Speaker 1: And uh that that's an optimistic view, but it's it's 196 00:10:51,160 --> 00:10:54,080 Speaker 1: based on my view of the science. You have long 197 00:10:54,200 --> 00:10:56,520 Speaker 1: term views and you take long term action. Are you 198 00:10:56,600 --> 00:10:58,920 Speaker 1: concerned that more and more of the rest of the 199 00:10:58,960 --> 00:11:03,840 Speaker 1: world has fallen into this short termism mindset and business practice. Well, 200 00:11:03,840 --> 00:11:05,400 Speaker 1: I think one of the things we one of the 201 00:11:05,400 --> 00:11:08,559 Speaker 1: reasons we keep trying to push to really promote the 202 00:11:08,600 --> 00:11:10,440 Speaker 1: idea that you have to go long term is if 203 00:11:10,520 --> 00:11:12,600 Speaker 1: you don't, then you're going to have these acute crises. 204 00:11:12,640 --> 00:11:15,240 Speaker 1: What you're seeing in Europe, particularly with the refugee crisis, 205 00:11:15,440 --> 00:11:18,400 Speaker 1: that's not just because of conflict, that's because people can't 206 00:11:18,440 --> 00:11:21,120 Speaker 1: find economic opportunity in their own area and so they 207 00:11:21,120 --> 00:11:23,560 Speaker 1: get up and move. So if we make the right 208 00:11:23,600 --> 00:11:26,520 Speaker 1: long term investments in these places, people want to stay 209 00:11:26,559 --> 00:11:28,360 Speaker 1: where they are if they can be healthy, get their 210 00:11:28,440 --> 00:11:31,120 Speaker 1: kids in a great education system, and get a job. 211 00:11:31,200 --> 00:11:33,800 Speaker 1: So we feel like you have to always focus on 212 00:11:33,840 --> 00:11:36,000 Speaker 1: the long term and we're always coming to that, back 213 00:11:36,000 --> 00:11:38,839 Speaker 1: to that message because it's important you to live your 214 00:11:38,880 --> 00:11:41,440 Speaker 1: lives that way. How do you make this a call 215 00:11:41,480 --> 00:11:45,440 Speaker 1: to action for others to CEOs today can't because they 216 00:11:45,480 --> 00:11:48,360 Speaker 1: have shareholders, an activist banging down their door, and regular 217 00:11:48,360 --> 00:11:51,280 Speaker 1: Americans don't necessarily have the money to make long term decisions, 218 00:11:51,280 --> 00:11:57,280 Speaker 1: and politicians certainly don't. Well, the best government is where 219 00:11:57,400 --> 00:12:00,600 Speaker 1: you look down the road ten or twine years and 220 00:12:00,720 --> 00:12:04,760 Speaker 1: you you build the institutions that will help you. The 221 00:12:04,840 --> 00:12:07,319 Speaker 1: United States is the envy of the world because our 222 00:12:07,520 --> 00:12:12,840 Speaker 1: universities are national laboratories in all the key areas that 223 00:12:12,880 --> 00:12:18,920 Speaker 1: are driving change. They are had robotic anxiety biology UH 224 00:12:19,720 --> 00:12:25,880 Speaker 1: any elements that UH the United States leads in set 225 00:12:25,880 --> 00:12:28,600 Speaker 1: in example, to human privacy is in the same stage 226 00:12:28,640 --> 00:12:31,920 Speaker 1: now as environmentalism was when you pass when you were younger. 227 00:12:31,960 --> 00:12:33,680 Speaker 1: That it's one of those issues that sort of people 228 00:12:33,679 --> 00:12:35,199 Speaker 1: who are going to come and work at Microsoft, the 229 00:12:35,240 --> 00:12:37,640 Speaker 1: sort of people are gonna work at Apple. It's it's 230 00:12:37,679 --> 00:12:40,920 Speaker 1: becoming as fundamental to them as greenery it was to 231 00:12:40,960 --> 00:12:47,800 Speaker 1: a previous generation. Well, everybody wants uh to feel like 232 00:12:47,840 --> 00:12:52,000 Speaker 1: their information is kept private, particularly because more and more 233 00:12:52,000 --> 00:12:54,880 Speaker 1: of your activity is in there in that digital log. 234 00:12:55,400 --> 00:13:00,920 Speaker 1: Then again, when people are empowered by technology g in 235 00:13:01,080 --> 00:13:04,520 Speaker 1: terrorist activities, they can't. It's not just that they can 236 00:13:04,600 --> 00:13:07,839 Speaker 1: kill a few people, it's through nuclear biological they could 237 00:13:07,920 --> 00:13:09,920 Speaker 1: kill a lot. So we do want the government to 238 00:13:09,960 --> 00:13:13,080 Speaker 1: be out there trying to stop those things from happening. 239 00:13:13,160 --> 00:13:17,439 Speaker 1: So it's not completely in one direction that that you 240 00:13:17,440 --> 00:13:19,640 Speaker 1: you have to if you look back at history of 241 00:13:19,679 --> 00:13:22,800 Speaker 1: the early liberals, they the ninety century liberals refused to 242 00:13:22,840 --> 00:13:26,640 Speaker 1: open people's letters of anarchists and modern terrorists because they 243 00:13:26,640 --> 00:13:29,719 Speaker 1: were frightened that that would be somehow illiberal. Do you 244 00:13:29,760 --> 00:13:31,839 Speaker 1: think the sort of definition of what liberalism is you've 245 00:13:31,880 --> 00:13:34,560 Speaker 1: generally seen yourself as a sort of liberal is changing. 246 00:13:36,200 --> 00:13:41,200 Speaker 1: I think that government has always been there to try 247 00:13:41,200 --> 00:13:45,800 Speaker 1: and maintain order and having some awareness of what's going on. 248 00:13:46,360 --> 00:13:49,440 Speaker 1: The UK strikes the balance different differently than the US 249 00:13:49,600 --> 00:13:54,040 Speaker 1: because there was some degree of terrorist activity. The idea 250 00:13:54,040 --> 00:13:56,840 Speaker 1: of having cameras in London, people are comfortable with that. 251 00:13:56,960 --> 00:13:58,960 Speaker 1: I don't think that's likely to happen in the US. 252 00:13:59,000 --> 00:14:03,079 Speaker 1: The US will always be probably uh wanting to make 253 00:14:03,080 --> 00:14:07,240 Speaker 1: sure the government doesn't overreach it. More than more than 254 00:14:07,280 --> 00:14:11,080 Speaker 1: most places. You've used technology to help empower and connect 255 00:14:11,160 --> 00:14:13,880 Speaker 1: the developing world. There are fears that that kind of 256 00:14:13,920 --> 00:14:17,600 Speaker 1: connection does lead to terrorist type of behavior. How do 257 00:14:17,679 --> 00:14:20,080 Speaker 1: we manage that? How do we control that in a 258 00:14:20,160 --> 00:14:24,120 Speaker 1: positive way and use technology for good? Bill, you yourself 259 00:14:24,160 --> 00:14:26,320 Speaker 1: have said at one point maybe your fourteen or sixteen 260 00:14:26,360 --> 00:14:29,480 Speaker 1: did a little hacking, But I think I think we're 261 00:14:29,560 --> 00:14:33,240 Speaker 1: so focused on one of the one little time. I mean, 262 00:14:33,400 --> 00:14:35,640 Speaker 1: it's it's a tragedy when these things happen, but it's 263 00:14:35,680 --> 00:14:38,680 Speaker 1: a it's a small number of people. Look the amazing 264 00:14:38,720 --> 00:14:42,120 Speaker 1: stuff technology does. When I see technology at use at 265 00:14:42,200 --> 00:14:44,920 Speaker 1: scale in Tanzani and Kenya and the Philippines, and you 266 00:14:45,000 --> 00:14:47,800 Speaker 1: see people saving a dollar a day, saving two dollars 267 00:14:47,800 --> 00:14:50,280 Speaker 1: a day, saying, oh my gosh, I actually during the 268 00:14:50,360 --> 00:14:52,920 Speaker 1: drought season still have the school fees now on my 269 00:14:52,960 --> 00:14:55,520 Speaker 1: phone to pay to keep my child in school. That 270 00:14:55,600 --> 00:14:59,240 Speaker 1: has a profoundly different effect on society. You have millions 271 00:14:59,240 --> 00:15:01,760 Speaker 1: of kids going a school, and you have women saying, 272 00:15:01,760 --> 00:15:03,720 Speaker 1: for the first time, I actually have access to a 273 00:15:03,720 --> 00:15:05,760 Speaker 1: bank account, I have my own money. I don't have 274 00:15:05,800 --> 00:15:09,600 Speaker 1: to renegotiate with my husband over the household finances. That 275 00:15:09,800 --> 00:15:13,840 Speaker 1: is hugely afford positive momentum. So I think instead of 276 00:15:13,920 --> 00:15:15,600 Speaker 1: us always focused on the negative, we ought to say, 277 00:15:15,600 --> 00:15:18,720 Speaker 1: where is technology enhancing the world? Not just in the 278 00:15:18,720 --> 00:15:21,520 Speaker 1: ways we're seeing in the United States but worldwide well 279 00:15:22,160 --> 00:15:25,480 Speaker 1: to counteract that, what do you say when the woman 280 00:15:25,560 --> 00:15:28,760 Speaker 1: from Flint, Michigan writes to a letter and says, you're 281 00:15:28,800 --> 00:15:32,520 Speaker 1: making extraordinary advancements in Tanzania for those women, But what 282 00:15:32,600 --> 00:15:35,320 Speaker 1: about me. I lost my job four years ago at 283 00:15:35,320 --> 00:15:37,840 Speaker 1: a Ford plant. I don't have the skills for the 284 00:15:37,960 --> 00:15:39,880 Speaker 1: job that they replaced it with, and my home is 285 00:15:39,920 --> 00:15:42,080 Speaker 1: now valued at zero. What do we say to that 286 00:15:42,160 --> 00:15:44,800 Speaker 1: woman who's going to help her? We say that both 287 00:15:44,840 --> 00:15:48,160 Speaker 1: are coming together of philanthropy and government and private sector, 288 00:15:48,200 --> 00:15:50,320 Speaker 1: that we do care about people in the United States 289 00:15:50,400 --> 00:15:52,960 Speaker 1: and we're trying to rebuild the country in those ways. 290 00:15:52,960 --> 00:15:55,440 Speaker 1: And so that's why we also put money into the 291 00:15:55,560 --> 00:15:57,760 Speaker 1: U S system, and we work with governments to really 292 00:15:57,920 --> 00:16:00,480 Speaker 1: help retrain people through community call just one of the 293 00:16:00,520 --> 00:16:03,280 Speaker 1: things we do making sure kids get a college education. 294 00:16:03,640 --> 00:16:05,480 Speaker 1: You've got to do both. And we feel like with 295 00:16:05,520 --> 00:16:07,680 Speaker 1: our own philanthropy we're focused on the part of the 296 00:16:07,680 --> 00:16:09,960 Speaker 1: world where most people don't focus, but we do focus 297 00:16:09,960 --> 00:16:12,560 Speaker 1: in the US too. Are you sure you don't want 298 00:16:12,560 --> 00:16:17,240 Speaker 1: to run for President's definitely not. Thank you so so much. 299 00:16:17,360 --> 00:16:19,680 Speaker 1: What an honor and a privilege. Phil and Linda Gates 300 00:16:19,960 --> 00:16:22,680 Speaker 1: of the Bill and Melinda Gates Foundation, thank you very good. 301 00:16:22,720 --> 00:16:26,760 Speaker 1: Stephanie Role and John Michaels wait there with Bill and 302 00:16:26,960 --> 00:16:31,080 Speaker 1: Melinda Gates in a conversation without question, the important discussion 303 00:16:31,120 --> 00:16:34,440 Speaker 1: there of the Apple I'm gonna call it apple and 304 00:16:34,600 --> 00:16:39,640 Speaker 1: government upward that is beginning now and certainly has galvanized 305 00:16:39,680 --> 00:16:43,200 Speaker 1: all of technology. And you heard Mr Gates step delicately 306 00:16:43,280 --> 00:16:46,800 Speaker 1: around those UH many issues. We uh have made a 307 00:16:46,880 --> 00:16:50,160 Speaker 1: history over the years of stepping delicately with David Kelly 308 00:16:50,560 --> 00:16:54,800 Speaker 1: of JP Morgan uh with with all that we see 309 00:16:55,200 --> 00:16:57,440 Speaker 1: of economics, and he joins us on, David, it's such 310 00:16:57,480 --> 00:17:00,000 Speaker 1: a good thing and it's what we do with surveillance. 311 00:17:00,200 --> 00:17:03,960 Speaker 1: Gary shilling on and then you want Gary has a 312 00:17:04,000 --> 00:17:08,960 Speaker 1: tone of disinflation and deflation he says, there's a greater probability, 313 00:17:09,040 --> 00:17:12,800 Speaker 1: not a certitude, that service sector inflation would roll over 314 00:17:13,320 --> 00:17:16,919 Speaker 1: and give us a new element of disinflation in this nation. 315 00:17:17,440 --> 00:17:22,440 Speaker 1: You aggressively pushed against that. Looking at the dragon not 316 00:17:22,600 --> 00:17:26,600 Speaker 1: seen in decades, which is outright inflation. Where is dr 317 00:17:26,680 --> 00:17:28,800 Speaker 1: shilling off the morning? Well, I think you just have 318 00:17:28,880 --> 00:17:30,840 Speaker 1: to look at the tightness of the labor market. I mean, 319 00:17:30,880 --> 00:17:34,040 Speaker 1: what we're seeing is the unemploye rates at four point 320 00:17:34,080 --> 00:17:36,800 Speaker 1: nine percent. There's a lot of nonsense spoken about how 321 00:17:36,840 --> 00:17:38,720 Speaker 1: this is not the real unemployment ration. If you look 322 00:17:38,760 --> 00:17:40,560 Speaker 1: at all the other slack in the labor market, there 323 00:17:40,600 --> 00:17:43,320 Speaker 1: isn't much good slack left. If you Home Depot didn't 324 00:17:43,359 --> 00:17:45,080 Speaker 1: show me slack this morning, I don't know if you're 325 00:17:45,080 --> 00:17:48,880 Speaker 1: aware of this. Home Yeah, thank you, Mike. Home Depot 326 00:17:48,960 --> 00:17:51,280 Speaker 1: was like a Bob Goodman, your mentor over Putnam a 327 00:17:51,280 --> 00:17:54,120 Speaker 1: million years ago. It was like a six percent nominal 328 00:17:54,160 --> 00:17:58,200 Speaker 1: GDP report. Well, yeah, and GDP is not growing that fast. 329 00:17:58,320 --> 00:17:59,840 Speaker 1: But but what we do know is that the k 330 00:18:00,040 --> 00:18:02,359 Speaker 1: ability of this economy from a supply side is probably 331 00:18:02,400 --> 00:18:04,639 Speaker 1: only to grow about one and a half percent. So 332 00:18:04,680 --> 00:18:06,480 Speaker 1: if we're growing more than one and a half percent, 333 00:18:06,920 --> 00:18:09,080 Speaker 1: The labor market is going to tighten, wage growth is 334 00:18:09,080 --> 00:18:12,639 Speaker 1: gonna pick up, and there is such complacency about this issue, 335 00:18:12,640 --> 00:18:14,760 Speaker 1: you know, as as I said in a note earlier 336 00:18:14,760 --> 00:18:17,560 Speaker 1: on this week, it's like this, this inflation dragon has 337 00:18:17,600 --> 00:18:19,480 Speaker 1: been sleeping and we're stomping on its tail and we're 338 00:18:19,480 --> 00:18:21,600 Speaker 1: pulling its whiskers, and we think it would be kind 339 00:18:21,600 --> 00:18:23,440 Speaker 1: of fun if it woke up. I mean, I think 340 00:18:23,480 --> 00:18:27,800 Speaker 1: inflation will actually come back a bit next year. And 341 00:18:28,040 --> 00:18:29,960 Speaker 1: even as a fair titans, I think inflation will come 342 00:18:30,000 --> 00:18:32,280 Speaker 1: back in the United States. So we shouldn't be too 343 00:18:32,320 --> 00:18:36,320 Speaker 1: complacent about it. How much inflation? In other words, uh, 344 00:18:36,400 --> 00:18:39,520 Speaker 1: do we have scope for as Bill Dudley and some 345 00:18:39,560 --> 00:18:43,520 Speaker 1: others have suggested running the economy hot for a little while. Well, 346 00:18:44,040 --> 00:18:46,840 Speaker 1: you know, I'm tempted to talk talk about inflation the 347 00:18:46,840 --> 00:18:49,600 Speaker 1: way Milton Friedman used to, which is that a little 348 00:18:49,640 --> 00:18:52,320 Speaker 1: bit of inflation is like a touch of pregnancy. Um. 349 00:18:53,200 --> 00:18:57,760 Speaker 1: So it's radio you can, yes, you can, It's it's 350 00:18:57,800 --> 00:19:02,520 Speaker 1: just nothing at all. Um. But uh, you know, I 351 00:19:02,560 --> 00:19:04,399 Speaker 1: don't I think we can. Yes, we can. Look, we 352 00:19:04,400 --> 00:19:06,480 Speaker 1: can run the economy has a little bit, but that's 353 00:19:06,480 --> 00:19:09,280 Speaker 1: not really going to deal with the basic structural problems 354 00:19:09,320 --> 00:19:12,440 Speaker 1: we have. We we don't have we don't have productivity growth, 355 00:19:12,480 --> 00:19:14,160 Speaker 1: and we don't have labor force growth, and we won't 356 00:19:14,200 --> 00:19:16,840 Speaker 1: do corporate tax reform, we won't do immigration reform. So 357 00:19:16,880 --> 00:19:19,520 Speaker 1: we're stuck with these problems. Running the economy Halls will 358 00:19:19,680 --> 00:19:21,560 Speaker 1: just in the end, I think calls the FED to 359 00:19:21,560 --> 00:19:24,359 Speaker 1: have to play catch up. UM, So I don't mind 360 00:19:24,400 --> 00:19:27,080 Speaker 1: them running the the the economy Holt, but it's not 361 00:19:27,119 --> 00:19:29,439 Speaker 1: gonna deal with the fundamental problem. David David Kelly with us, 362 00:19:29,440 --> 00:19:31,800 Speaker 1: this is wonderful. What we like best about surveillance is 363 00:19:31,800 --> 00:19:35,960 Speaker 1: that back and forth of uh informed in collegial debate. 364 00:19:36,040 --> 00:19:40,320 Speaker 1: This morning, Bloomberg Surveillance launch you by Investco. Factor based 365 00:19:40,320 --> 00:19:44,680 Speaker 1: strategies can help investors focus on high quality, low volatility 366 00:19:44,720 --> 00:19:50,080 Speaker 1: and more. Learn more in investco dot com Slash High Conviction. 367 00:19:50,240 --> 00:19:52,760 Speaker 1: Michael McKee and Tom Keane were thrilled to bring to 368 00:19:52,880 --> 00:19:56,080 Speaker 1: David Kelly is with Jake Pete Morgan Funds with an 369 00:19:56,080 --> 00:20:00,119 Speaker 1: optimistic view on the American economy futures negative five. This 370 00:20:00,160 --> 00:20:08,200 Speaker 1: is Bloomberg Surveillance coming up, with all due respect highlight 371 00:20:08,240 --> 00:20:09,919 Speaker 1: brought you by Landroper. If it's in your nature to 372 00:20:09,920 --> 00:20:11,880 Speaker 1: cast off the every day and seek adventure. The Discovery 373 00:20:11,920 --> 00:20:14,200 Speaker 1: Sport was built to help your search. Visit landroo Er 374 00:20:14,240 --> 00:20:16,200 Speaker 1: tri State dot com for special offers during the only 375 00:20:16,240 --> 00:20:24,480 Speaker 1: Adventure Sales event. Land Rover Above and Beyond broadcasting live 376 00:20:24,600 --> 00:20:27,920 Speaker 1: to New York, Gloomberg eleventh Yo to Washington, d C, 377 00:20:28,160 --> 00:20:33,400 Speaker 1: Bloomberg to Boston, Bluemberg dwelve Honors to San Francisco, Bloomberg 378 00:20:34,280 --> 00:20:38,679 Speaker 1: to the Country, Channel one and around the globe the 379 00:20:38,720 --> 00:20:42,600 Speaker 1: Bloomberg Radio Plus Happen Bloomberg dot Com. This is Bloomberg 380 00:20:42,680 --> 00:20:46,320 Speaker 1: Surveillance Warning A State thirty on Wall Street I Michael 381 00:20:46,400 --> 00:20:49,520 Speaker 1: McKee along with Tom Keane Economic indicators brought to you 382 00:20:49,560 --> 00:20:53,000 Speaker 1: by Commonwealth Financial Network. When it's time to change the conversation, 383 00:20:53,400 --> 00:20:55,520 Speaker 1: talk with the broker dealer r I A that's ready 384 00:20:55,560 --> 00:20:57,680 Speaker 1: to listen, call the six six four six two three 385 00:20:57,720 --> 00:21:00,639 Speaker 1: six three eight or visit Commonwealth dot com um to 386 00:21:01,000 --> 00:21:03,560 Speaker 1: learn more. No eight thirty numbers this morning, but we 387 00:21:03,600 --> 00:21:06,199 Speaker 1: do have a boatload of indicators coming out over the 388 00:21:06,200 --> 00:21:08,560 Speaker 1: course of the morning, starting at nine o'clock. The smp 389 00:21:08,680 --> 00:21:11,800 Speaker 1: K Shiller Home Price Index that is four December. So 390 00:21:11,880 --> 00:21:13,840 Speaker 1: again we have talked about that a lot. How that's 391 00:21:13,480 --> 00:21:18,880 Speaker 1: a delayed number consumer confidence. This is the conference board, 392 00:21:18,880 --> 00:21:22,359 Speaker 1: A lot of people are going to be interested in that, uh, 393 00:21:22,400 --> 00:21:25,800 Speaker 1: to the extent that it reflects what people may expect 394 00:21:25,880 --> 00:21:29,880 Speaker 1: about buying plans going forward. Richmond Fed is out this 395 00:21:29,920 --> 00:21:34,680 Speaker 1: morning at ten and existing home sales, which a lot 396 00:21:34,680 --> 00:21:37,679 Speaker 1: of people are watching to see for their knock on effects. 397 00:21:37,680 --> 00:21:40,160 Speaker 1: Tom has been talking about home Depot this morning, and 398 00:21:40,359 --> 00:21:43,879 Speaker 1: of course as home sales go up, home depot does better. 399 00:21:44,240 --> 00:21:47,840 Speaker 1: David Kelly is with us JP Morgan Funds chief global strategist, 400 00:21:47,840 --> 00:21:50,400 Speaker 1: and I want to weave these things together because while 401 00:21:50,440 --> 00:21:52,200 Speaker 1: we were in the break, you started to say something 402 00:21:52,200 --> 00:21:55,920 Speaker 1: about people looking at the wrong indicators, and I want 403 00:21:55,960 --> 00:21:58,960 Speaker 1: you to expand on that. Yeah. I think that in 404 00:21:59,200 --> 00:22:01,760 Speaker 1: financial mark there's always a shortcut of saying, oh, well, 405 00:22:01,760 --> 00:22:04,000 Speaker 1: look at the yield curve or look at how this 406 00:22:04,040 --> 00:22:07,000 Speaker 1: stock is performing, and that tells you about the whole economy. 407 00:22:07,400 --> 00:22:09,200 Speaker 1: And I believe that in order to see the big 408 00:22:09,240 --> 00:22:11,080 Speaker 1: picture you actually have to have a pretty wide lens. 409 00:22:11,760 --> 00:22:14,760 Speaker 1: You have to look at literally all the pieces of 410 00:22:14,600 --> 00:22:16,560 Speaker 1: a of a macroeconomic model. You've got to look at 411 00:22:16,600 --> 00:22:19,760 Speaker 1: all the piece of consumption and investment. Government spending in 412 00:22:19,800 --> 00:22:21,359 Speaker 1: the short run is all about demand. But it's a 413 00:22:21,440 --> 00:22:24,399 Speaker 1: very wide landscape. We have to look at all of it. 414 00:22:24,440 --> 00:22:26,360 Speaker 1: And I think a lot of people made a mistake 415 00:22:26,520 --> 00:22:28,600 Speaker 1: earlier this year when they saw that, you know, the 416 00:22:28,640 --> 00:22:31,879 Speaker 1: markets are down and there are some market related indicators 417 00:22:31,880 --> 00:22:35,000 Speaker 1: which in the past have indicated economic troubles, and they say, Okay, 418 00:22:35,040 --> 00:22:37,479 Speaker 1: the economy is in recession. The economy isn't in recession. 419 00:22:37,520 --> 00:22:39,600 Speaker 1: It's not even close to recession. But the way you 420 00:22:39,640 --> 00:22:41,760 Speaker 1: can see that is actually by adding up all the 421 00:22:41,800 --> 00:22:44,240 Speaker 1: pieces of demanding the economy, rather than trying to take 422 00:22:44,240 --> 00:22:48,560 Speaker 1: the shortcut of looking at financial market indicators. We're looking 423 00:22:48,600 --> 00:22:52,560 Speaker 1: at speaking of the event credit, you know, as part 424 00:22:52,600 --> 00:22:56,240 Speaker 1: of this whole exercise. And I hadn't quite realized until 425 00:22:56,280 --> 00:22:58,280 Speaker 1: it's been pointed out to be a last couple of 426 00:22:58,359 --> 00:23:01,080 Speaker 1: days for all the talk of a crisis out there. 427 00:23:01,880 --> 00:23:06,720 Speaker 1: Bank credit in terms of loans, in terms of commercial 428 00:23:06,840 --> 00:23:10,880 Speaker 1: real estate, and see an eye loans up more than 429 00:23:11,000 --> 00:23:13,440 Speaker 1: eight percent at a year over your basis in the 430 00:23:13,520 --> 00:23:17,560 Speaker 1: latest week. Yeah. Yes, And and in fact, in general 431 00:23:17,680 --> 00:23:20,640 Speaker 1: our banking system is extremely well capitalized. I think there 432 00:23:20,680 --> 00:23:23,119 Speaker 1: has been a lot of reluctance to lend money, partly 433 00:23:23,160 --> 00:23:25,840 Speaker 1: because of the need to build up a capital to 434 00:23:25,880 --> 00:23:29,639 Speaker 1: deal with um, you know, regulatory standards. But overall the 435 00:23:29,680 --> 00:23:32,400 Speaker 1: banks are trying to lend more money. We're seeing that 436 00:23:32,800 --> 00:23:34,639 Speaker 1: in We're also seeing it in credit cards, which I 437 00:23:34,640 --> 00:23:36,639 Speaker 1: think is very interesting. I think that that maybe what 438 00:23:36,680 --> 00:23:39,560 Speaker 1: are you seeing credit cards? JP You've got a conduct 439 00:23:39,560 --> 00:23:44,119 Speaker 1: to Mr Diamond on this well and not uh no, 440 00:23:44,200 --> 00:23:47,000 Speaker 1: I'm not going to talk about our understand Jase's business. 441 00:23:47,080 --> 00:23:49,200 Speaker 1: But but what if you look at the government's numbers 442 00:23:49,200 --> 00:23:51,520 Speaker 1: on credit card debt? They have turned around. What's happened 443 00:23:51,520 --> 00:23:53,879 Speaker 1: is for years the banks were just cutting back from 444 00:23:53,880 --> 00:23:56,160 Speaker 1: credit card debt because it wasn't worth doing, and now 445 00:23:56,200 --> 00:23:58,840 Speaker 1: they actually lending to lower income and middle income people 446 00:23:58,840 --> 00:24:01,640 Speaker 1: and that's helping the economy. David Kelly, help us then 447 00:24:02,240 --> 00:24:05,160 Speaker 1: with the general idea that things are pretty good. Home 448 00:24:05,160 --> 00:24:08,080 Speaker 1: depot is good, credit cards are good. The stock markets 449 00:24:08,160 --> 00:24:09,720 Speaker 1: actually had a hell of a running here the last 450 00:24:09,760 --> 00:24:14,080 Speaker 1: number of days, and the cacophony of fears wrapped around 451 00:24:14,280 --> 00:24:17,440 Speaker 1: Most Americans don't know how to spell brexit. We're learning 452 00:24:17,440 --> 00:24:21,480 Speaker 1: too quickly. How do you adapt to the noise that's 453 00:24:21,560 --> 00:24:26,919 Speaker 1: out there? Given the underlying good economy. Well, it's a 454 00:24:26,920 --> 00:24:30,800 Speaker 1: tough job because not only do we have have all 455 00:24:30,880 --> 00:24:35,120 Speaker 1: the foreign issues, we also have a very heated election campaign. 456 00:24:35,200 --> 00:24:37,000 Speaker 1: Of course, from all sides. The last thing you want 457 00:24:37,000 --> 00:24:39,600 Speaker 1: to say is that you're pro the establishment or that 458 00:24:39,640 --> 00:24:42,000 Speaker 1: you think things will muddle through and be okay. So 459 00:24:42,040 --> 00:24:44,240 Speaker 1: you have to talk about why everything is going in 460 00:24:44,240 --> 00:24:46,480 Speaker 1: a terribly wrong direction and needs to be fixed. I 461 00:24:46,520 --> 00:24:49,760 Speaker 1: think that is actually stoking fear. But there is there's 462 00:24:49,880 --> 00:24:52,679 Speaker 1: a lack of fundamental understanding of what's actually going on 463 00:24:52,720 --> 00:24:55,640 Speaker 1: in the economy. Um. I don't think good news never 464 00:24:55,680 --> 00:24:58,520 Speaker 1: gets much coverage, and I think people just hear all 465 00:24:58,560 --> 00:25:02,600 Speaker 1: the fear stories. There's a a commentary out from black 466 00:25:02,760 --> 00:25:08,400 Speaker 1: Rock this morning that says investors bond traders are underestimating 467 00:25:08,400 --> 00:25:10,840 Speaker 1: the feed. They're going to get hammered because the FED 468 00:25:11,000 --> 00:25:13,680 Speaker 1: is going to be forced by inflation and economic data 469 00:25:13,960 --> 00:25:16,480 Speaker 1: to raise interest rates more in two thousands sixteen than 470 00:25:16,520 --> 00:25:19,399 Speaker 1: the zero times the market is now expecting. Would you 471 00:25:19,520 --> 00:25:21,480 Speaker 1: agree with that? I would agree with that, But I 472 00:25:21,480 --> 00:25:24,159 Speaker 1: think it's very important to understand what the futurest market 473 00:25:24,280 --> 00:25:28,680 Speaker 1: is not telling us. UM futures markets are drivative markets. 474 00:25:28,760 --> 00:25:32,240 Speaker 1: Drivative markets are anchored by arbitrash to cash markets. If 475 00:25:32,240 --> 00:25:35,080 Speaker 1: you have a completely distorted fixed income market because the 476 00:25:35,119 --> 00:25:37,600 Speaker 1: actions of central banks all over the world buying long 477 00:25:37,680 --> 00:25:39,720 Speaker 1: term bonds, and you have a central bank wage of 478 00:25:39,720 --> 00:25:41,880 Speaker 1: course anchors the short end, then you've got a distorted 479 00:25:41,920 --> 00:25:45,199 Speaker 1: cash market. Distorted cash market is actually leading to a 480 00:25:45,320 --> 00:25:48,399 Speaker 1: distorted derivative market. So the Fed funds futures market is 481 00:25:48,440 --> 00:25:51,159 Speaker 1: not really what the average on Wall Street or even 482 00:25:51,160 --> 00:25:53,920 Speaker 1: the average bond trade. I thinks it's going to brilliantly explained, 483 00:25:54,080 --> 00:25:57,560 Speaker 1: and it goes back to within these distortions. No one 484 00:25:57,760 --> 00:26:02,480 Speaker 1: within economics, finance, or investment knows where the risk free rates. 485 00:26:03,280 --> 00:26:06,280 Speaker 1: It's been destroyed. When do we get it back, Well, 486 00:26:06,280 --> 00:26:08,919 Speaker 1: I'd certainly like to see come back. I think I 487 00:26:08,920 --> 00:26:13,080 Speaker 1: think there's this this nonsensical notion that the that somehow 488 00:26:13,119 --> 00:26:15,920 Speaker 1: the equilibrium of a neutral federal funds rate has fall 489 00:26:16,000 --> 00:26:19,000 Speaker 1: into some level. I don't think the Federals everybody understands 490 00:26:19,240 --> 00:26:22,800 Speaker 1: how the federal funds rate actually impacts the economy, or 491 00:26:22,800 --> 00:26:24,720 Speaker 1: how that short term interest rate impacts the economy. I 492 00:26:24,720 --> 00:26:27,280 Speaker 1: think the whole concept of a low neutral rate on 493 00:26:27,359 --> 00:26:30,000 Speaker 1: it um just you know if you actually examine it, it 494 00:26:29,920 --> 00:26:32,840 Speaker 1: it doesn't. It's kind of a complicated subject, but it's uh, 495 00:26:33,200 --> 00:26:35,520 Speaker 1: we we really don't know where it is. And I 496 00:26:35,560 --> 00:26:38,600 Speaker 1: think there's saying that it's that low is is probably wrong. 497 00:26:39,720 --> 00:26:41,680 Speaker 1: Let's come back. I think this is really important, Mike. 498 00:26:41,680 --> 00:26:43,320 Speaker 1: I think we need to update the markets here as 499 00:26:43,320 --> 00:26:46,240 Speaker 1: a churning to the markets, but some worlds subtly within it. 500 00:26:46,320 --> 00:26:49,240 Speaker 1: Look at oil, Mike, you just can't figure out what 501 00:26:49,280 --> 00:26:52,760 Speaker 1: to do. There was some legit green in oil today, 502 00:26:52,800 --> 00:26:56,720 Speaker 1: really buttressing up against all the weeks even months of resistance, 503 00:26:56,880 --> 00:27:01,480 Speaker 1: and it's just ebbed back. Brent is in Europe rounded 504 00:27:01,560 --> 00:27:04,920 Speaker 1: up to thirty five barrel, thirty four sixty one. I'm 505 00:27:04,960 --> 00:27:07,520 Speaker 1: stretching their folks. That's a joke, but there it is. 506 00:27:07,560 --> 00:27:10,879 Speaker 1: Brent down for actually West Texas down thirty six cents 507 00:27:10,920 --> 00:27:15,760 Speaker 1: oil rather gold rebounds fourteen thirteen dollars twelve twenty three. 508 00:27:15,800 --> 00:27:18,840 Speaker 1: The ounce uh this morning, Mike and I are watching 509 00:27:18,880 --> 00:27:24,840 Speaker 1: again stronger, much stronger earlier one twelve zero six on 510 00:27:24,880 --> 00:27:28,440 Speaker 1: a strong end. That's certainly anti obionomics. We're gonna come back. 511 00:27:28,520 --> 00:27:33,160 Speaker 1: David Kelly with JP Morgan Funds, with futures negative four 512 00:27:36,840 --> 00:27:39,560 Speaker 1: This hour of Savalance party by Masda White Plains. Visit 513 00:27:39,680 --> 00:27:42,600 Speaker 1: Muzda White Plains dot com. Here's John Tucker with the 514 00:27:42,640 --> 00:27:46,760 Speaker 1: latest news headlines and Michael and Tom. Republican presidential candidates 515 00:27:47,000 --> 00:27:49,560 Speaker 1: led by Donald Trump are drawing cheers a Devata by 516 00:27:49,600 --> 00:27:53,720 Speaker 1: bashing China's policies, even as that nation's tourism, trade in 517 00:27:53,720 --> 00:27:56,880 Speaker 1: investment helped lift the state for the worst economic decline 518 00:27:56,880 --> 00:28:00,000 Speaker 1: in the US. Chinese commerce has boosted about US tourist 519 00:28:00,000 --> 00:28:03,280 Speaker 1: of mining industries and money from China's backing a billion 520 00:28:03,320 --> 00:28:07,320 Speaker 1: dollar auto plant under construction in the state. China's Foreign 521 00:28:07,320 --> 00:28:10,119 Speaker 1: minister meets with Secretaries Hey John Kerry for talks this 522 00:28:10,160 --> 00:28:13,080 Speaker 1: week because each country accuses the other of escalating military 523 00:28:13,200 --> 00:28:17,120 Speaker 1: tensions in the Western Pacific, but lends the world uses 524 00:28:17,160 --> 00:28:19,320 Speaker 1: to watch where El Nino events has become a bit 525 00:28:19,320 --> 00:28:22,840 Speaker 1: fuzzier after Japan cut by about half the number of 526 00:28:22,880 --> 00:28:25,919 Speaker 1: buoys in the Western Pacific that monitor changes in the ocean. 527 00:28:26,320 --> 00:28:28,960 Speaker 1: It will take another four to five offline next year. 528 00:28:29,359 --> 00:28:33,120 Speaker 1: It's a money saving move. At Michigan and California, each 529 00:28:33,160 --> 00:28:37,520 Speaker 1: proposing crumbling World War two military sites as ideal locations 530 00:28:37,600 --> 00:28:42,720 Speaker 1: to test robot cars, Michigan secret Weapon better potholes. The 531 00:28:42,720 --> 00:28:45,320 Speaker 1: Great Lakes State plans to make a test track out 532 00:28:45,360 --> 00:28:49,720 Speaker 1: of a decrepit three acre industrial ghost town. It says 533 00:28:49,720 --> 00:28:57,480 Speaker 1: will mimic real world driving conditions. We call that street 534 00:28:57,520 --> 00:29:00,520 Speaker 1: in New York. Oh Easy now Global. It was twenty 535 00:29:00,520 --> 00:29:03,280 Speaker 1: four hours a day, powered by a twenty four hundred journalists. 536 00:29:03,400 --> 00:29:05,440 Speaker 1: He had more than one hundred fifty news bureaus are 537 00:29:05,480 --> 00:29:10,000 Speaker 1: around the world. I'm John Tucker, Michael and Thomas. Thank you, John. 538 00:29:10,160 --> 00:29:13,040 Speaker 1: Time now for the Ray Katina Otto Group, Bloomberg NBC 539 00:29:13,240 --> 00:29:17,320 Speaker 1: Sports Update with John stash Our. John Mirco was exactly 540 00:29:17,360 --> 00:29:20,200 Speaker 1: five years ago to the next acquired Carmelo Anthony from Denver. 541 00:29:20,320 --> 00:29:22,840 Speaker 1: Since then, he's played for four coaches, with three general 542 00:29:22,840 --> 00:29:26,680 Speaker 1: managers and countless teammates. Anthony, who decided to resign when 543 00:29:26,720 --> 00:29:28,520 Speaker 1: he was a free agent, said last night it is 544 00:29:28,640 --> 00:29:31,520 Speaker 1: challenging to stay positive. At twelve. Nick lost in the 545 00:29:31,600 --> 00:29:34,840 Speaker 1: last fourteen games, eighth and the last nine Toronto one, 546 00:29:34,960 --> 00:29:38,320 Speaker 1: going away at the Garden ninety five New to Night 547 00:29:38,360 --> 00:29:40,680 Speaker 1: for Kyle Lowry, that kind of point guard. The Knicks 548 00:29:40,720 --> 00:29:43,360 Speaker 1: desperately media twenty two points of a triple double mix 549 00:29:43,440 --> 00:29:46,680 Speaker 1: coach Kurt Rambis on his defense or let there up. 550 00:29:47,120 --> 00:29:49,560 Speaker 1: We couldn't find ways to stop him in in our 551 00:29:49,600 --> 00:29:51,480 Speaker 1: half court defense, and a lot of that just pick 552 00:29:51,520 --> 00:29:54,040 Speaker 1: and rolls. You know, we just can't stop the ball 553 00:29:54,280 --> 00:29:57,800 Speaker 1: high and there's a big part of our communication disappeared 554 00:29:57,800 --> 00:30:00,840 Speaker 1: in this ballgame. Are multiple efforts to disappeared in this 555 00:30:00,880 --> 00:30:02,840 Speaker 1: ball game. But we've got to do a much better 556 00:30:02,920 --> 00:30:05,440 Speaker 1: job of putting pressure on the ball so that these 557 00:30:05,440 --> 00:30:08,320 Speaker 1: guards just can't get these great heads of steam. Raptors 558 00:30:08,320 --> 00:30:10,840 Speaker 1: have won six of nineteen and with Cleveland losing at 559 00:30:10,880 --> 00:30:12,840 Speaker 1: home to Detroit, the Raptors are just three out of 560 00:30:12,880 --> 00:30:15,000 Speaker 1: the East. The Nets won't be back home to mid March. 561 00:30:15,040 --> 00:30:17,080 Speaker 1: They start a nine game trip tonight at Portland. The 562 00:30:17,160 --> 00:30:19,520 Speaker 1: Rangers are gonna be without captain Ryan mcduonnot Tonight they 563 00:30:19,640 --> 00:30:22,440 Speaker 1: visited the Devil's, who've lost their last three college hoops. 564 00:30:22,440 --> 00:30:24,479 Speaker 1: I only got thirty two points from a j English 565 00:30:24,480 --> 00:30:27,360 Speaker 1: and eight seven eight one win at Sienna. Gales are 566 00:30:27,400 --> 00:30:29,520 Speaker 1: just a game behind Monmouth and the mac The Jets 567 00:30:29,520 --> 00:30:32,600 Speaker 1: save eight million of their salary cap by releasing cornerback 568 00:30:32,640 --> 00:30:35,600 Speaker 1: Antonio Crimarti one year into a four year contract that 569 00:30:35,720 --> 00:30:39,160 Speaker 1: was not guaranteed. The Bloomberg NBC Sports Update. I'm John 570 00:30:39,200 --> 00:30:43,239 Speaker 1: Stash John, Thanks so much. Jimmy Diamond speaking in an 571 00:30:43,240 --> 00:30:47,480 Speaker 1: investor day conference. Um I this deve tails into our discussion. 572 00:30:47,480 --> 00:30:50,520 Speaker 1: Will continue this forward here uh in our next section. 573 00:30:51,000 --> 00:30:54,080 Speaker 1: Mr Diamonds as u S consumer is quote the big 574 00:30:54,200 --> 00:30:58,720 Speaker 1: winner from low oil prices. The counter factual of that's great, 575 00:30:58,720 --> 00:31:01,600 Speaker 1: which is of oil prices but higher. Where would we 576 00:31:01,680 --> 00:31:04,600 Speaker 1: be right now? But maybe we can see some actual 577 00:31:04,640 --> 00:31:08,240 Speaker 1: tangible evidence as we migrate through the summer. A new 578 00:31:08,800 --> 00:31:12,960 Speaker 1: low oil prices oil thirty three seventeen barrel done twenty 579 00:31:12,960 --> 00:31:16,160 Speaker 1: one since Brent fractionally green as well. We are with 580 00:31:16,280 --> 00:31:19,280 Speaker 1: David Kelly of JPM. We're gonna stay with the Sploomberg 581 00:31:19,280 --> 00:31:25,960 Speaker 1: savanas the sports report brought to you by Rakatina Autogroup. 582 00:31:26,000 --> 00:31:28,240 Speaker 1: Everyone deserves to drive a Mercedes ben from Katina. Make 583 00:31:28,280 --> 00:31:30,920 Speaker 1: it happen to Raycatina Motorcar and Edison Raycatina of Union 584 00:31:30,920 --> 00:31:33,920 Speaker 1: and the Red Raycatino Freehold, or go to Racotina dot 585 00:31:34,000 --> 00:31:40,400 Speaker 1: com Global Business News twenty four hours a day at 586 00:31:40,440 --> 00:31:43,480 Speaker 1: Bloomberg dot com, the Radio plus mobile app and on 587 00:31:43,520 --> 00:31:47,640 Speaker 1: your radio. This is a Bloomberg Business Flash and I'm 588 00:31:47,680 --> 00:31:49,960 Speaker 1: Karen Moscow. This dates brought to you by c b 589 00:31:50,120 --> 00:31:52,400 Speaker 1: o E r MC. Come to the cbo E Risk 590 00:31:52,520 --> 00:31:55,680 Speaker 1: Management Conference February twenty nine to March second at the 591 00:31:55,720 --> 00:31:59,200 Speaker 1: High D Regency Coconut Point, Florida. Register and learn more 592 00:31:59,240 --> 00:32:03,920 Speaker 1: at cbo E r MC US dot Com. Macy's is 593 00:32:04,000 --> 00:32:07,040 Speaker 1: up about six percent this morning, the largest US department 594 00:32:07,120 --> 00:32:10,240 Speaker 1: store chain, posting fourth quarter results that beat analysts estimates 595 00:32:10,280 --> 00:32:13,920 Speaker 1: after sales declined less than projected. Home Depot is up 596 00:32:13,960 --> 00:32:16,120 Speaker 1: more than three and a half percent after posting fourth 597 00:32:16,160 --> 00:32:19,680 Speaker 1: quarter profit that topped analysts estimates, showing consumers are still 598 00:32:19,680 --> 00:32:23,400 Speaker 1: willing to spend on their houses. European stocks, meanwhile, are 599 00:32:23,560 --> 00:32:26,440 Speaker 1: lower with emerging markets after the People's Bank of China 600 00:32:26,520 --> 00:32:29,400 Speaker 1: reduced the Yuwan's reference rate by the most in six weeks. 601 00:32:29,760 --> 00:32:32,920 Speaker 1: Futures they're little change. We checked the markets every fifteen 602 00:32:32,960 --> 00:32:35,920 Speaker 1: minutes throughout the trading day on Bloomberg. Snp E mini 603 00:32:35,960 --> 00:32:38,520 Speaker 1: futures down two points, a DOWI mini futures up six, 604 00:32:38,600 --> 00:32:41,880 Speaker 1: naz Daki many futures down twelve. The decks in Germany's 605 00:32:41,920 --> 00:32:44,920 Speaker 1: down seven tenths per cent. The tenure Treasury is down 606 00:32:44,960 --> 00:32:48,360 Speaker 1: eleven thirty seconds, the yield one point seven nine percent 607 00:32:48,520 --> 00:32:51,440 Speaker 1: yield on the two year point seven six percent nine 608 00:32:51,520 --> 00:32:53,680 Speaker 1: max Screwed oil down four tenths per cent or thirteen 609 00:32:53,720 --> 00:32:56,680 Speaker 1: cents to thirty three twenty six and Barrel COMCS gold 610 00:32:56,760 --> 00:32:59,360 Speaker 1: is up one point one percent or thirteen dollars thirty 611 00:32:59,360 --> 00:33:02,719 Speaker 1: cents at twelve twenty three forty and outs the euros 612 00:33:02,720 --> 00:33:05,200 Speaker 1: at a dollar ten twelve, the yen one twelve point 613 00:33:05,280 --> 00:33:08,280 Speaker 1: oh six. And we do see a headline crossing the 614 00:33:08,280 --> 00:33:12,000 Speaker 1: Bloomberg here the LSC and Deutsche Bors confirming detailed talks 615 00:33:12,000 --> 00:33:14,520 Speaker 1: on a potential merger. And we'll have more on that 616 00:33:14,600 --> 00:33:17,240 Speaker 1: story as it becomes available. That's a Bloomberg business flash. 617 00:33:17,280 --> 00:33:21,440 Speaker 1: Tom and Mike, thank you so much. On Wall Street. 618 00:33:22,440 --> 00:33:26,000 Speaker 1: The following is from Bloomberg View, opinions and commentary from 619 00:33:26,040 --> 00:33:30,600 Speaker 1: Bloomberg columnists. I'm Justin Fox, columnist for Bloomberg View. The 620 00:33:30,680 --> 00:33:35,200 Speaker 1: crisis was caused by oversaturated markets, currency devaluations, and a 621 00:33:35,240 --> 00:33:39,480 Speaker 1: lopsided balance of payments. China was producing more manufactured goods 622 00:33:39,600 --> 00:33:43,560 Speaker 1: than Westerners could pay for money. Supply complications made things worse. 623 00:33:43,920 --> 00:33:46,560 Speaker 1: The changing climate may have played a role to This 624 00:33:46,640 --> 00:33:49,760 Speaker 1: is a description not of our current economic troubles, but 625 00:33:49,840 --> 00:33:53,200 Speaker 1: of the financial crisis and economic depression that hit countries 626 00:33:53,240 --> 00:33:56,200 Speaker 1: from China to France in the fifteenth century. I've been 627 00:33:56,280 --> 00:33:59,280 Speaker 1: learning about it from Peter Franco Pan's just published book 628 00:33:59,560 --> 00:34:02,040 Speaker 1: The Silk Roads, A New History of the World. One 629 00:34:02,040 --> 00:34:04,600 Speaker 1: shouldn't make too much of the parallels with the present. 630 00:34:04,760 --> 00:34:07,240 Speaker 1: This is the fourteen hundreds we're talking about, after all. 631 00:34:07,400 --> 00:34:10,040 Speaker 1: But as we continue to struggle with the lingering aftermath 632 00:34:10,080 --> 00:34:13,000 Speaker 1: of the two thou eight financial crisis, it is fascinating 633 00:34:13,040 --> 00:34:15,880 Speaker 1: to learn that trade imbalances between China and the West 634 00:34:15,960 --> 00:34:19,160 Speaker 1: have brought trouble before, and to be reminded that monetary 635 00:34:19,200 --> 00:34:22,200 Speaker 1: policy problems are nothing new. We have been going through 636 00:34:22,239 --> 00:34:25,479 Speaker 1: these crises for centuries. They usually take a long time 637 00:34:25,480 --> 00:34:29,160 Speaker 1: to recover from, and sometimes they bring big economic shifts. 638 00:34:29,440 --> 00:34:31,960 Speaker 1: Wonder what they'll be writing about our trouble six hundred 639 00:34:32,040 --> 00:34:35,439 Speaker 1: years from now. I'm Justin Fox, a columnist for Bloomberg View. 640 00:34:35,760 --> 00:34:39,040 Speaker 1: For more Bloomberg opinion and commentary, please go to Bloomberg 641 00:34:39,080 --> 00:34:41,960 Speaker 1: View dot com or view go on the Bloomberg terminal. 642 00:34:42,280 --> 00:34:48,360 Speaker 1: This has been Bloomberg View Bloomberview commentary, give your hourly 643 00:34:48,560 --> 00:34:51,720 Speaker 1: week days. I'm Bloomberg Radio Mica. I had a delay 644 00:34:51,760 --> 00:34:54,120 Speaker 1: there because I was contemplating one day there will only 645 00:34:54,160 --> 00:34:59,719 Speaker 1: be one market, Yes, Keen Stock Exchange Incorporated. Right now, 646 00:35:00,200 --> 00:35:02,720 Speaker 1: two markets look like they are going to get together. 647 00:35:02,960 --> 00:35:06,239 Speaker 1: Serious Headlange with a headline a statement out just a 648 00:35:06,280 --> 00:35:09,000 Speaker 1: few moments ago saying they are in advanced talks with 649 00:35:09,080 --> 00:35:13,760 Speaker 1: deutschen Borce to merge what they call a merger of equals. However, 650 00:35:14,200 --> 00:35:17,719 Speaker 1: the way the deal is structured, deutal Bors holders would 651 00:35:17,760 --> 00:35:20,759 Speaker 1: have fifty four point four percent of the company and 652 00:35:21,040 --> 00:35:24,640 Speaker 1: the LSC stockholders would hold forty five point six percent, 653 00:35:24,800 --> 00:35:29,360 Speaker 1: So it would be a dutche Bors takeover essentially, although 654 00:35:29,400 --> 00:35:33,680 Speaker 1: the combined group would have a unitary board. UH doesn't 655 00:35:33,760 --> 00:35:36,160 Speaker 1: say exactly what that means in terms of well, it 656 00:35:36,160 --> 00:35:37,960 Speaker 1: says an equal number of directors. There's a headline just 657 00:35:38,000 --> 00:35:40,600 Speaker 1: coming out. Each side would get an equal number of directors. 658 00:35:40,600 --> 00:35:44,319 Speaker 1: No word on management yet when the headlines are just 659 00:35:44,440 --> 00:35:48,320 Speaker 1: coming out delicate. London Stock Exchange shares up sixteen and 660 00:35:48,320 --> 00:35:51,040 Speaker 1: a half percent over in London. Yeah, with some real 661 00:35:51,040 --> 00:35:53,840 Speaker 1: price move as well. David Kelly with US JP market funds. 662 00:35:54,040 --> 00:35:56,320 Speaker 1: What what is great about your David as you synthesize 663 00:35:56,360 --> 00:35:58,560 Speaker 1: in economics and what we should actually do with our money? 664 00:35:58,880 --> 00:36:02,120 Speaker 1: How do you scent the size Mica Ferole and Bruce 665 00:36:02,160 --> 00:36:06,239 Speaker 1: Chasms terminal rate coming down the great JP Morgan call 666 00:36:06,880 --> 00:36:10,759 Speaker 1: of a lower potential GDP, lower yield. How does that 667 00:36:10,920 --> 00:36:14,640 Speaker 1: fold over into what we actually do with our money? Well, 668 00:36:14,840 --> 00:36:16,680 Speaker 1: I think the first of all, I agree with that call. 669 00:36:16,800 --> 00:36:19,560 Speaker 1: Unless we see structural change in the United States in 670 00:36:19,920 --> 00:36:22,480 Speaker 1: terms of labor supply and in terms of productivity, that 671 00:36:22,600 --> 00:36:26,400 Speaker 1: terminal sower growth rate is inevitable. But the way I 672 00:36:26,400 --> 00:36:27,920 Speaker 1: think you look at it is if we are going 673 00:36:27,960 --> 00:36:30,520 Speaker 1: to have low inflation or lower inflation we've seen in historically, 674 00:36:30,480 --> 00:36:33,560 Speaker 1: we've got lower interest rates um, then we also should 675 00:36:33,640 --> 00:36:36,600 Speaker 1: have a lower earnings yield on stocks E over P, 676 00:36:37,120 --> 00:36:39,560 Speaker 1: and that means that PE ratios ought to be higher 677 00:36:39,560 --> 00:36:42,640 Speaker 1: than average. One of the oddities of the current situation 678 00:36:42,719 --> 00:36:45,960 Speaker 1: is people people look at price earnings ratis and say, well, 679 00:36:46,000 --> 00:36:48,759 Speaker 1: they need to be bounded, in fact upper bounded by 680 00:36:48,760 --> 00:36:50,960 Speaker 1: the by the average of the last twenty five years. 681 00:36:51,160 --> 00:36:52,719 Speaker 1: At the same time they say we're in a new 682 00:36:52,719 --> 00:36:54,919 Speaker 1: world in terms of low inflation and low interest rates. 683 00:36:55,040 --> 00:36:56,680 Speaker 1: If we are in a world of low inflation low 684 00:36:56,719 --> 00:36:59,160 Speaker 1: interest rates, you ought to have higher peats in the 685 00:36:59,200 --> 00:37:00,960 Speaker 1: long run. And if we have higher pe ratio is 686 00:37:00,960 --> 00:37:02,759 Speaker 1: in the long one that does mean that equities have 687 00:37:02,800 --> 00:37:04,440 Speaker 1: some room to move up. From here. You look like 688 00:37:04,520 --> 00:37:06,719 Speaker 1: Don Draper today from Madmen. Are we going back to 689 00:37:06,800 --> 00:37:09,920 Speaker 1: a nineteen fifties and fifty fifties in the sixties glory 690 00:37:09,960 --> 00:37:13,879 Speaker 1: of growth? Well, no, revaluation is a e over p. Well, 691 00:37:14,080 --> 00:37:17,640 Speaker 1: it comes a big p overy. I think we we 692 00:37:17,680 --> 00:37:19,640 Speaker 1: could see, we could see highest stock prices, and we 693 00:37:19,680 --> 00:37:22,360 Speaker 1: could see some reaction eventually from our political system to 694 00:37:22,480 --> 00:37:26,040 Speaker 1: the real problems that we face. But the one thing 695 00:37:26,200 --> 00:37:28,239 Speaker 1: similarity I think is that by the end of next 696 00:37:28,320 --> 00:37:30,880 Speaker 1: year we're going to be back to the lowest unemploint 697 00:37:30,960 --> 00:37:33,279 Speaker 1: rate since the late nineteen sixties. It looks to me 698 00:37:33,280 --> 00:37:35,239 Speaker 1: like the unepoint rate will come down to about three 699 00:37:35,280 --> 00:37:39,360 Speaker 1: point six percent by the end of seventeen because of 700 00:37:39,400 --> 00:37:42,400 Speaker 1: a lack of labor supply and continued modern economic growth. 701 00:37:42,680 --> 00:37:44,520 Speaker 1: That that takes you back to the age of Aquarius. 702 00:37:45,080 --> 00:37:47,080 Speaker 1: So I guess that is kind of Dondre. You don't 703 00:37:47,160 --> 00:37:50,680 Speaker 1: want Tom to look like you see pictures of time 704 00:37:51,120 --> 00:37:56,040 Speaker 1: back then at the age of UM. You and I 705 00:37:56,080 --> 00:37:59,520 Speaker 1: were just talking a moment ago in light of all this, Uh, 706 00:37:59,560 --> 00:38:03,520 Speaker 1: that the economy is better off if the FED is 707 00:38:03,719 --> 00:38:06,960 Speaker 1: raising rates. So the idea that they would have to 708 00:38:07,040 --> 00:38:10,040 Speaker 1: cut rates again, or use negative rates, or do something 709 00:38:10,080 --> 00:38:12,319 Speaker 1: to stimulate the economy would be a big mistake. Yeah. 710 00:38:12,480 --> 00:38:14,359 Speaker 1: The number one thing that I think central banks are 711 00:38:14,400 --> 00:38:18,360 Speaker 1: missing is that there is a nonlinear relationship between interest 712 00:38:18,480 --> 00:38:21,359 Speaker 1: rates and demand the economy. If you raise rates from 713 00:38:21,400 --> 00:38:24,480 Speaker 1: a very low level, you actually stimulate economic demand. When 714 00:38:24,520 --> 00:38:26,359 Speaker 1: you raise them from a higher level, you actually hurt 715 00:38:26,400 --> 00:38:29,160 Speaker 1: economic demand. It's a curve. I mean, curves occur all 716 00:38:29,160 --> 00:38:31,719 Speaker 1: over nature and science and so forth. But for some 717 00:38:31,760 --> 00:38:34,839 Speaker 1: reason central banks think it's a straight line. But the way, 718 00:38:34,920 --> 00:38:36,719 Speaker 1: the reason this is important is that if you raise 719 00:38:36,760 --> 00:38:38,680 Speaker 1: short from interest rates from low levels, you're gonna add 720 00:38:38,719 --> 00:38:40,800 Speaker 1: interest income, You're gonna add to confidence, You're going to 721 00:38:40,880 --> 00:38:43,600 Speaker 1: cause people to borrow ahead of higher rates. UM and 722 00:38:44,120 --> 00:38:46,480 Speaker 1: all of these things should help the economy grow a 723 00:38:46,560 --> 00:38:49,279 Speaker 1: little faster. Moreover, you do need to get back to 724 00:38:49,320 --> 00:38:51,359 Speaker 1: a more normal interest rates, so and so you can 725 00:38:51,360 --> 00:38:53,400 Speaker 1: get back to a more normal monetary policy in the 726 00:38:53,400 --> 00:38:56,040 Speaker 1: long run, So I would wish that the center. First 727 00:38:56,040 --> 00:38:58,200 Speaker 1: of all, I wanted the Federal Reserve to move more 728 00:38:58,239 --> 00:39:01,200 Speaker 1: steadily last year to get rates going back to normal. 729 00:39:01,280 --> 00:39:02,920 Speaker 1: But I still think they should move rights back to 730 00:39:03,000 --> 00:39:07,000 Speaker 1: normal at least, you know, remove a lot of the 731 00:39:07,040 --> 00:39:10,960 Speaker 1: distortions caused by this this um you know, ridiculously easy 732 00:39:11,000 --> 00:39:12,960 Speaker 1: monetary policy, which I think is you know, I think 733 00:39:13,000 --> 00:39:16,080 Speaker 1: it's actually hurting long term economic growth. Do the markets 734 00:39:16,640 --> 00:39:19,680 Speaker 1: can Can they withstand that? Or are we so hooked 735 00:39:19,719 --> 00:39:25,120 Speaker 1: on this that we see another taper tantrum kind of melted. 736 00:39:25,320 --> 00:39:27,480 Speaker 1: But you know, it's it's like raising children. I mean, 737 00:39:27,480 --> 00:39:29,360 Speaker 1: of course they're going to have a tantrum the initially 738 00:39:29,360 --> 00:39:31,279 Speaker 1: if you take away the candy, But in the long run, 739 00:39:31,320 --> 00:39:33,080 Speaker 1: if you give them a better dice, they would be 740 00:39:33,120 --> 00:39:36,120 Speaker 1: there'll be more well adjusted kids. I think. I think 741 00:39:36,120 --> 00:39:38,320 Speaker 1: the markets will survive it after a little tantrum and 742 00:39:38,320 --> 00:39:41,120 Speaker 1: they realize the economy is actually announced by this. If 743 00:39:41,160 --> 00:39:45,040 Speaker 1: we migrate within a linear function, we have from five 744 00:39:46,120 --> 00:39:49,359 Speaker 1: to three point eight three point seven, three point six 745 00:39:49,400 --> 00:39:53,240 Speaker 1: percent unemployment. To our listeners, they're all going, I don't 746 00:39:53,239 --> 00:39:57,080 Speaker 1: believe you. But the next question is will those be 747 00:39:57,280 --> 00:40:00,480 Speaker 1: good jobs. Uh well, first of all, I think they 748 00:40:00,480 --> 00:40:02,719 Speaker 1: should believe me because if you go back since two 749 00:40:02,680 --> 00:40:05,360 Speaker 1: thousand and ten, even though we've only averaged two point 750 00:40:05,400 --> 00:40:07,480 Speaker 1: one percent GDP growth, and that's very much in line 751 00:40:07,520 --> 00:40:10,320 Speaker 1: with everybody else's forecast, from now now on, the unemploye 752 00:40:10,400 --> 00:40:12,880 Speaker 1: rates come down about eight tens or percent per and 753 00:40:12,960 --> 00:40:14,600 Speaker 1: that would get me to my three point six by 754 00:40:14,640 --> 00:40:16,200 Speaker 1: the end of next year. All we need is a 755 00:40:16,200 --> 00:40:19,440 Speaker 1: continuation of current trends. As for being being good jobs, 756 00:40:19,600 --> 00:40:21,239 Speaker 1: you know, I think there will be good jobs. To me, 757 00:40:21,320 --> 00:40:24,080 Speaker 1: the problems are there going to be good workers? We 758 00:40:24,160 --> 00:40:27,120 Speaker 1: are We are scraping the bottom of the labor market barrel. 759 00:40:27,120 --> 00:40:29,320 Speaker 1: There are reasons why people have found it found it 760 00:40:29,480 --> 00:40:31,759 Speaker 1: hard to find jobs in this economy, but a lot 761 00:40:31,800 --> 00:40:33,640 Speaker 1: of those are microeconomic reasons, which I have to do 762 00:40:33,680 --> 00:40:36,160 Speaker 1: with um, you know, and I don't want to go 763 00:40:36,200 --> 00:40:37,600 Speaker 1: through the long list, but you can think of the 764 00:40:37,640 --> 00:40:40,480 Speaker 1: long list of problems that people are having being actually 765 00:40:41,120 --> 00:40:44,400 Speaker 1: well fit for the labor force problem. David, Thank you 766 00:40:44,400 --> 00:40:47,920 Speaker 1: so much, David Kelly with funds with a lot of 767 00:40:48,000 --> 00:40:51,320 Speaker 1: think and again, folks, this is what we love on 768 00:40:51,480 --> 00:40:56,040 Speaker 1: surveillance is the stark polarity between two smart people with 769 00:40:56,200 --> 00:41:00,399 Speaker 1: two really different certainly world views, but my guy would 770 00:41:00,400 --> 00:41:05,160 Speaker 1: also suggest two different American views as well. Well. I 771 00:41:05,200 --> 00:41:07,360 Speaker 1: love the fact that you had stepped out of this 772 00:41:07,680 --> 00:41:09,440 Speaker 1: for a second, Dary to break with. David said, you 773 00:41:09,520 --> 00:41:11,920 Speaker 1: know all this stuff about the you know, pet funds, 774 00:41:11,960 --> 00:41:14,879 Speaker 1: right and things like that is enormously complicated, And I said, 775 00:41:14,920 --> 00:41:17,479 Speaker 1: that's why you're on this program. This is the show 776 00:41:17,520 --> 00:41:19,520 Speaker 1: where you can talk about it and people can learn 777 00:41:19,560 --> 00:41:23,200 Speaker 1: something and you can get a measured view of the 778 00:41:23,360 --> 00:41:26,680 Speaker 1: overlays of Gary Shilling and David Kelly. And there are 779 00:41:26,680 --> 00:41:31,080 Speaker 1: many overlays and also some of the very stark differences, 780 00:41:31,719 --> 00:41:34,399 Speaker 1: just the idea of going to a three point six 781 00:41:34,440 --> 00:41:39,560 Speaker 1: percent unemployment rate, which basically nobody on the planet is um, 782 00:41:39,920 --> 00:41:44,480 Speaker 1: excuse me modeling right now. If you would like some enthusiasm, 783 00:41:44,600 --> 00:41:47,840 Speaker 1: we will deliver it. The tenure yield is up five 784 00:41:47,920 --> 00:41:53,920 Speaker 1: basis points to a one point eight zero. We even, finally, 785 00:41:54,080 --> 00:41:58,760 Speaker 1: on this Tuesday, have some curve steepening. If you recall 786 00:41:59,400 --> 00:42:02,400 Speaker 1: and our last edition of Nancy Drew, the basic idea 787 00:42:02,520 --> 00:42:05,480 Speaker 1: was curve flattening. Was out there even a man a 788 00:42:05,520 --> 00:42:09,640 Speaker 1: good equity market. Today we've got a legitimate risk on 789 00:42:10,239 --> 00:42:14,920 Speaker 1: move stronger dollar equities up. Well, they're fractionally stay in 790 00:42:14,960 --> 00:42:19,359 Speaker 1: corrected on that, but with a bond market acting almost normal. Michael, Well, 791 00:42:19,400 --> 00:42:24,440 Speaker 1: they were listening to David Kelly say that the curve 792 00:42:24,440 --> 00:42:27,799 Speaker 1: as a false indicator. Yeah, well it may be, but 793 00:42:27,880 --> 00:42:30,320 Speaker 1: at least today I've got higher yields going with a 794 00:42:30,360 --> 00:42:34,000 Speaker 1: steeper curve, which gets us much more back to, uh, 795 00:42:34,160 --> 00:42:37,880 Speaker 1: the normality of a five day working week. This is fun. 796 00:42:38,000 --> 00:42:41,320 Speaker 1: We've got a lot of good guests coming up on economics, finance, 797 00:42:41,440 --> 00:42:46,800 Speaker 1: investment in international relations. Another hour worldwide of Bloomberg surveillance