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

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Speaker 1: Bloomberg to Boston, Bloomberg twelve hunders to San Francisco, Bloomberg

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Speaker 1: to the Country, Channel one, and around the globe the

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Speaker 1: Bloomberg Radio plus a Bloomberg dot Com. This is Bloomberg Surveillance.

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Speaker 1: Good morning, a Turney on Wall Street. Our economic indicators

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Speaker 1: are brought to you by Commonwealth Financial Network. When it's

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

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Speaker 1: r I A that's ready to listen, Call six six

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Speaker 1: or six two or three six three orvisit Commonwealth dot

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Speaker 1: com to learn more. Here's Vinell Judas at the first

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Speaker 1: Word desk. We have a boatload of economic indicators, Michael.

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Speaker 1: Let's start with manufacturing. Durable goods orders up three point

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Speaker 1: four percent in April, topping forecasts. However, a gauge of

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Speaker 1: business investment down, jobless claims meantime down by ten thousand

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Speaker 1: last week to two hundred and sixty eight thousand. Again,

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Speaker 1: the Durable ghost report showing order is up three point

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Speaker 1: four percent in April, the prior month revised higher. However,

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Speaker 1: capital goods orders, a gauge of business investment non defense

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Speaker 1: x aircraft down point eight percent. That's weaker than forecasts,

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Speaker 1: and the job was claimed one more time, down by

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Speaker 1: ten thousand and two D sixty eight thousand. Can't forget

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Speaker 1: the labor market at the Bloomberg First World Desk, Vidic,

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Speaker 1: let's go back to New York. Well, we need the

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Speaker 1: labor market because the durable goods orders headline is great,

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Speaker 1: but the underlying number that the Fed wants to see

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Speaker 1: is not. Uh. It looks like durable goods a huge

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Speaker 1: increase over what was forecast, but that was largely because

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Speaker 1: of our good friends who split their time between Chicago

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Speaker 1: and Seattle mowing sixty five increase in non defense aircraft spending. Well,

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Speaker 1: the summaries markets move fields in the the the capital

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Speaker 1: goods non defense X aircraft, which is, as Vinnie said,

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Speaker 1: the proxy for business investment down eight tenths of a

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Speaker 1: PERCENTDA in a three month annually basis TOM negative eight

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Speaker 1: point consumers are spending business is not two year HEO.

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Speaker 1: It comes in point nine three uh, yesterday, the day before,

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Speaker 1: point eight nine, right now point eight nine in a

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Speaker 1: solid two basis points off that We'll see how that

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Speaker 1: migrates other markets. Are pretty much status quot but definitely

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Speaker 1: the Durable good report moving the bondod market as well,

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Speaker 1: which leads to one of the most interesting things, which

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Speaker 1: is the focus or narrowness of the hydro carbon tobacco

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Speaker 1: on our aggregate American economy. Jason Schenker has made a

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Speaker 1: cottage industry of this prestige economics of plane talk about

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Speaker 1: his Texas The Great Texan joins us now, Jason, good morning,

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Speaker 1: Good morning. How are you well? I think I'm very good.

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Speaker 1: How do you partition the oil and gas tobacco within

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Speaker 1: your macro economics like durable goods or for that matter

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Speaker 1: of FED policy? Is it discreet? Is it like the

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Speaker 1: early eighties middle and tobacco? What? What? How do you

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Speaker 1: split apart or keep in oil and gas challenges? Well,

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Speaker 1: I think that's stuff and that is something that the

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Speaker 1: set is dealing with. I mean, this is why the FED,

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Speaker 1: the fdi C, and the o c C issued very

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Speaker 1: strong language on this in their Shared National Credits reviewed

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Speaker 1: back in November. UM It's why at the Atlanta FED

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Speaker 1: Financial Markets Conference, Build Udley, the president of New York FED,

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Speaker 1: was talking about, uh, you know, increasing the liquid capital

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Speaker 1: that banks would have on hand, which also slows the

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Speaker 1: economy because you've got these bankruptcies that have been rolling

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Speaker 1: in and are going to continue to roll in. Even

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Speaker 1: if oil prices are around fifty dollars or a little

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Speaker 1: above that, there's uh a question of timing. How much

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Speaker 1: longer do we see the oil patch continued to subtract

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Speaker 1: from growth in the US. It's gonna be It's gonna

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Speaker 1: be a while. Tom So here here's the thing. You

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Speaker 1: know that the Shared National Credits Review back in November

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Speaker 1: highlighted the oil and gas bad dad had increased almost

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Speaker 1: four from November of four to November fifteen, And on

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Speaker 1: the day the warning was issued, the closing prices of

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Speaker 1: w t I was forty five and twenty cents, and

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Speaker 1: we spent six months below that. In the first quarter

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Speaker 1: we were below that, and natural gas prices were lower

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Speaker 1: than they were on the day of that issue in

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Speaker 1: the first quarter. But even now, okay, if we're around

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Speaker 1: fifty bucks, you know, we're actually pretty close to the

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Speaker 1: price levels when they did the analysis that led up

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Speaker 1: to this warning announcement. So we're still just now for

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Speaker 1: oil price is getting back to a giant red flag level.

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Speaker 1: So I mean even just yesterday. Every day you're seeing

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Speaker 1: wire stories of major oil companies announcing major layoffs, announcing

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Speaker 1: major cutbacks and cap backs, even now as prices arising,

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Speaker 1: because they're just now back to a level at which

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Speaker 1: a lot of independence really can't can't survive. I'm looking

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Speaker 1: through the list here of durable goods um spending and

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Speaker 1: it's interesting because you get a lot um in airplanes,

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Speaker 1: but the things like machinery down one. I mean, the

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Speaker 1: companies just start spending, Jason, you know, that's it. And

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Speaker 1: I talked to a lot of different companies, not just

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Speaker 1: oil and gas, and not just here in Texas, but

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Speaker 1: you know, manufacturing, very concerned transportation. You look at rail

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Speaker 1: car loads, you look at truck game, you look at

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Speaker 1: material handling. Any of those recent economic data points don't

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Speaker 1: look so good. And I think, right now, I think

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Speaker 1: the lynchpin for that that's holding the entire U S

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Speaker 1: economy together. If we look at you know, people talking

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Speaker 1: about how strong the consumer is, but if you look

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Speaker 1: at the year over year rates and retail sales, you know,

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Speaker 1: those have slowed quite significantly. And if we look at

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Speaker 1: retail sales excluding autos, those are near recessionary levels. And

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Speaker 1: so it's really autos that are holding up the whole picture.

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Speaker 1: And this is a really scary fact because auto subprime

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Speaker 1: loans right are now in greater abundance than subprime mortgages.

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Speaker 1: And if the FED and the FDIC and the o

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Speaker 1: CC have a mandate for banks to be a bit

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Speaker 1: more conservative in some of their leverage lending and lending

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Speaker 1: an oil like gas, and you see the banks just

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Speaker 1: become a little bit more diligent in how they're you know,

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Speaker 1: in terms of due diligence for it, for cosumer retail loans.

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Speaker 1: You see a drop in in issuance of new subprime

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Speaker 1: I'm not talking about subprime ato loans blowing up. I'm

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Speaker 1: just saying, what's and if you see this reduction, Okay,

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Speaker 1: let's let's come back. But Jason Schenker, Prestige Economics, this

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Speaker 1: is our savantance bot. You by monkis call Volvo visited

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Speaker 1: dot com. Here's Michael Barr with news headline mind Tom,

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Speaker 1: thank you very much. President Obama says foreign leaders have

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Speaker 1: good reason to be rattled by Donald Trump, the resumptive

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Speaker 1: Republican presidential nominee. A lot of the proposals that he's

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Speaker 1: named display either ignorance of world affairs or a cavalier attitude.

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Speaker 1: President Obama made the comment at a news conference in

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Speaker 1: Japan today following the first working session of the G

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Speaker 1: seven Summit. A large tornado and rural northern Kansas state

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Speaker 1: on the ground for more than an hour and a

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Speaker 1: half Candas Highway patrol spokes been uper Ben Gardner, we

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Speaker 1: came across multiple homes, some that are slightly damaged to

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Speaker 1: completely removed from the face of the earth, and they

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Speaker 1: are no longer in existence. The Kansas IWA Patrols has

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Speaker 1: emergency crews are going by homes and the hardest hit

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Speaker 1: part of Dickinson County making sure no one is trapped.

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Speaker 1: There no reports of injuries or fatalities and last night's twister.

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Speaker 1: Soldiers are placing nearly a quarter of a million US

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Speaker 1: flags at Earlington National Cemetery is part of a Memorial

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Speaker 1: Day tradition. Today's flags in marks the beginning of Memorial

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Speaker 1: Day weekend observances at the cemetery. Global News twenty four

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Speaker 1: Hours a day, Michael Bark, Mike Tom thank you, Michael.

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Speaker 1: Time now for the land Roper Participani Bloomberg NBC Sports

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Speaker 1: Update with John stessha alright Mike. Toronto Blue Jays off

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Speaker 1: to a slow start after winning the A at least

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Speaker 1: last year, but their bats woke up of it last

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Speaker 1: night at the stadium, especially Russell Martin, who hit his

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Speaker 1: first home under the season. That hit another Jay's end

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Speaker 1: of the Yankees six game win streak eight to four

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Speaker 1: of the series ends four o'clock today. Alex Rodriguez comes

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Speaker 1: off of the sable this They were a homard last

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Speaker 1: night for double A Trent and the struggling marked to

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Speaker 1: share expected to miss a few more games with the

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Speaker 1: stiff neck Mets made it five to the last six.

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Speaker 1: They won two nothing to Washington. David writes first Stanning

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Speaker 1: Homer all that Stephen Max would name brilliant again and

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Speaker 1: winning his seventh straight match, retired sixteen in a row

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Speaker 1: at one point, met Sat. Matt Harvey, despite his struggles,

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Speaker 1: will make his next start on Monday. Not much of

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Speaker 1: an NBA game. Cleveland led by eighteen in the first

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Speaker 1: quarter by thirty three at a half, won sixteen to

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Speaker 1: seventy eight over Toronto. Kevin Love, after two subpar games

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Speaker 1: on the road, came home scored twenty five points. Lebron

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Speaker 1: James at twenty three one more winning lebron Is in

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Speaker 1: the NBA Finals for the sixth year in a row.

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Speaker 1: Three times. San Jose had lost in the NHLs West

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Speaker 1: Finals A couple of years ago. They blew a three

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Speaker 1: nothing series lead Sharks Pete St. Louis five to two,

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Speaker 1: won the series four two, and they'll in the final phase.

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Speaker 1: Whoever wins Tonight's game seven Sampa Bay at Pittsburgh. Raphael

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Speaker 1: and the dal up two sets at the French Open.

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Speaker 1: She's one nine times. The two Jet white outs, Brandon

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Speaker 1: Marshall and Eric Decker no shows at offseason workouts. Reportably,

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Speaker 1: protesting of the Jets have not reslying quarterback line. Fitzpatrick

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Speaker 1: sports something I'm John stating, John, thanks so much. Mike.

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Speaker 1: I went back and forth with Dr Larrian. He is

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Speaker 1: not the antipodes what do you call the bottom of

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Speaker 1: South America had Agonia. He's sounding with like eight penguins

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Speaker 1: and they're not in game seven times. Good morning, Dr Larry,

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Speaker 1: and and I love this I thought of Dr Larion.

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Speaker 1: Mike is out on Twitter saying he loves when I

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Speaker 1: say stochastic. Dr Larry is the only one that understands

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Speaker 1: what I'm talking about. To Stocastic is a very Game

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Speaker 1: of Thrones kind of thing. Pointy. It's like the point

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Speaker 1: the end of the sword from Game of the Pointing.

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Speaker 1: It's when a chart gets pointy. Is sometimes you get

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Speaker 1: with strong dollar and you get a stochastic response and

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Speaker 1: abrupt move. Maybe we'll get that out of Brexit. This

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Speaker 1: is Bloomberg's surveillance. We're stochastic. The portion part was brought

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Speaker 1: to you by Landrover Parcipity. The spring sales event is

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Speaker 1: happening now. Visit Landrover Parcipiti dot com, Landrover above and

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Speaker 1: beyond Global business news twenty four hours a day at

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Speaker 1: Bloomberg dot com, the Radio plus mobile app and on

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Speaker 1: your radio. This is a Roomberg Business Flash and I'm

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Speaker 1: Karen Moscow. This update is brought to you by Van

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Speaker 1: Eck Vector's e t f s. Expect more from your

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Speaker 1: muni's target tax exempt income by maturity and credit quality

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Speaker 1: oh at low cost e t f s. Visit van

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Speaker 1: eck dot com slash Muni, van Eck Access the opportunities.

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Speaker 1: Orders for business equipment unexpectedly declined in April for a

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Speaker 1: third straight month. Bookings for nonmilitary capital goods excluding aircraft

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Speaker 1: dropped eight ten percent after a revised one tent March decrease.

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Speaker 1: Jobless claims foul for a second week, initial applications for

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Speaker 1: unemployment benefits dropped by ten thousand into two hundred sixty

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Speaker 1: eight thousand, and the week that ended May twenty one,

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Speaker 1: u S Dock Index futures are made higher following these reports,

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Speaker 1: with SNP eveny futures up two and a half points

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Speaker 1: nowI many futures up thirty three, NAS document A futures

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Speaker 1: up six The acts in Germany's up seven tenths per cent.

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Speaker 1: Tend your treasury of three thirty seconds, the YELD one

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Speaker 1: point eight five percent, nim excrude oil up one point

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Speaker 1: one per cent of fifty four cents at fifty dollars

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Speaker 1: eleven cents of barrel. Comic school is up three tents

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Speaker 1: per cent or three dollars ninety cents to twelve thirty

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Speaker 1: fifty in ounce, the Euro at dollar eleven seventy five,

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Speaker 1: the N one ten point oh four and Sears Holdings

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Speaker 1: plans to consider options for its Ken Moore Craftsmen and

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Speaker 1: die Hard brands, as well as it's Sears Home Services

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Speaker 1: repair business singling, not the unprofitable retailer. May it get

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Speaker 1: returning to asset sales to generate cash amid continued losses.

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Speaker 1: And that's a Bloomberg business flash, Tom and Mike Karen,

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Speaker 1: thank you so much, Michael McKee and Tom Keane. It

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Speaker 1: is eight on Wall Street. There following you. Bloomberg View

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

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Speaker 1: Bloomberg View. Is Donald Trump the Republican Party's fault? After all?

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Speaker 1: Most Republican Party actors resisted the Trump takeover until and

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Speaker 1: in some cases, even after his nomination opponents dropped out.

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Speaker 1: But the party nevertheless bears plenty of responsibility for the

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Speaker 1: rise of the reality show star. Republicans had encouraged, or

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Speaker 1: at least tolerated boolyard taunts and far fetched conspiracy talk

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Speaker 1: long before Trump's campaign. Republicans had also already lowered the

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Speaker 1: standards for their politicians. Several well qualified Republican candidates ran

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Speaker 1: in sixteen. The Republican voters have been taught by their

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Speaker 1: party to ignore normal qualifications, and they did so. And yes,

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Speaker 1: Republicans have tolerated bigotry ever since. Richard Nixon's Southern strategy,

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Speaker 1: even if they avoided Trump's explicit version. Voters have all

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Speaker 1: sorts of ideas. Only when politicians highlight those ideas did

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Speaker 1: they escape from people's heads and become political issues. Neither

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Speaker 1: Trump nor earlier Republican dog whistlers created the audience they

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Speaker 1: played to, but there are many potential audiences the electorate.

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Speaker 1: Politicians and political parties choose which ones to nurture and

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Speaker 1: are fairly held responsible for their choices. I'm Jonathan Bernstein.

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Speaker 1: For more of you, please go to Bloomberg View dot

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Speaker 1: com or view go on the Bloomberg terminal. This has

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Speaker 1: been Bloomberg View and Bloomberview commentaries can be here hourly weekdays.

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Speaker 1: I'm Bloomberg Radio, West Texas. Fifty dollars seven cents, Crisis

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Speaker 1: over Brand fifty dollars thirty three cents, Gold Up four

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Speaker 1: dollars twelve thirty one ounce, which means it's a good

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Speaker 1: time to speak with Jason Sanker, author of Commodity Prices

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Speaker 1: one oh one. Jason, you're teaching the graduate course five

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Speaker 1: oh two. It's an open book exam. What's the price

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Speaker 1: of oil gonna do? Well? I think you know we're

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Speaker 1: gonna see, you know, and I've said the prices would

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Speaker 1: rise higher because of the um, you know the impact

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Speaker 1: of bankruptcies and cuts and capacs. We've seen prices go higher.

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Speaker 1: Now because of disruptions, I think that we could see uh,

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Speaker 1: you know, prices go a little bit higher. But there

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Speaker 1: are a number of factors that threatened to push prices lower.

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Speaker 1: And you know, one of those realities is we've had

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Speaker 1: a disruption out of the Canadian oil sands. Uh that

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Speaker 1: that's uh, that's gonna come off the book soon. That's

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Speaker 1: six hundred thousand barrels a day have interrupted supply. You've

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Speaker 1: got more supply coming out of Iran. You've got more

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Speaker 1: supply coming out of Libya. So you've got a lot

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Speaker 1: more supply coming out of the picture. And even though

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Speaker 1: we've see strong demand this year, um, you know, I

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Speaker 1: think there's a chance we're going to be kind of

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Speaker 1: in this range. Were actually below it has average prices

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Speaker 1: through the parts of the year. Well, this morning, the

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Speaker 1: Japanese Prime Minister Sanzo Aby presented a case to his

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Speaker 1: fellow Group of Seven leaders meeting that said, look, commodity

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Speaker 1: prices have fallen by between two thousand and fourteen and

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Speaker 1: two thousand sixteen, that's similar to the margin by which

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Speaker 1: they fell in two thousand and eight two thousand nine,

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Speaker 1: And therefore he concluded the world economy risks falling into

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Speaker 1: a crisis on the scale of the two thousand and

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Speaker 1: eight Lehman shock, and that was his word. Um, would

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Speaker 1: you agree or is he maybe just conflating and dropping

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Speaker 1: oil prices with the drop that Lehman took. You know,

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Speaker 1: I think that the drop in oil prices is a

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Speaker 1: real risk for the global economy, and there's risk for financials,

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Speaker 1: which is why when Christine Lagarde, the head of the IMF,

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Speaker 1: had an interview with Bloomberg's Friencian Laqua last month, the

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Speaker 1: week before the IMF released their new forecast at the

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Speaker 1: beginning of April, she explicitly avoided answering the question if

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Speaker 1: she was concerned about a recession twice in a three

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Speaker 1: and a half minute interview, and then instead deflected and said, well,

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Speaker 1: you know, there are three things, uh that we're looking

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Speaker 1: about that that are very disconcerting, and the first is

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Speaker 1: the Chinese economy transition from manufacturing. The second thing is

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Speaker 1: low commodity prices and oil, and the third thing, um,

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Speaker 1: you know our financials and and sort of the risk

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Speaker 1: to those. So these are the same, These are very

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Speaker 1: similar things that have been on the Fed's mind. Uh,

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Speaker 1: you know if the i m F when they release

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Speaker 1: their growth forecas. A week after that interview, in the

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Speaker 1: press conference, one of the heads of research was asked,

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Speaker 1: is the global economy and a crisis? And the very

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Speaker 1: uninspiring response was, we are not technically in a crisis.

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Speaker 1: We are on alert for a crisis. So you know,

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Speaker 1: these these kinds of statements highlight that the I m

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Speaker 1: F is clearly concerned and that you know, the Fed,

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Speaker 1: we know is concerned because of the share also credits

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Speaker 1: of human things they've said recently. You know this is

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Speaker 1: this is a potential, real risk even at these prices.

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Speaker 1: Have you've been surprised, Jason. It's how the commodity implosion

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Speaker 1: has fallen through to the overall economy and the central

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Speaker 1: bank policy. I would suggest the I m F has

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Speaker 1: actually paid a fair amount of attention to the global

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Speaker 1: commodity implosion. You see that certainly in their financial stability book,

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Speaker 1: the Green Book. You have central banks paid enough attention

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Speaker 1: to the structural shock and all of lower commodity prices. Well,

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Speaker 1: I think yes, and I think that you know, there

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Speaker 1: have been times they've paid a lot of attention when

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Speaker 1: they were rising. I mean I've seen Bernankey speak a

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Speaker 1: number of times when you know, when he was to

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Speaker 1: be chair at the Atlantic FI Financial Markets Conference and

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Speaker 1: oil prices, you know, in two thousand eleven and twelve

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Speaker 1: and thirteen, those those were things that were you know,

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Speaker 1: front and center on the mind. And now you know,

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Speaker 1: it looks like one of the bubbles of the two

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Speaker 1: thousand tens has been shale, right and if we look

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Speaker 1: at say the job market in Texas, you know, the

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Speaker 1: jobs went from uh, you know, roughly around two hundred

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Speaker 1: and thirty thousand jobs in the space up to a

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Speaker 1: close to three hundred twenty thousand and an hour backed

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Speaker 1: down to two hundred thirty thousand since two thousand eleven

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Speaker 1: in oil and gas jomps, and so you've pretty much

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Speaker 1: erased all of those job games. So this, you know,

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Speaker 1: this is something that I think they are paying attention to.

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Speaker 1: I think it is important. There's been a lot of

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Speaker 1: money that's been going in here. And on the metal side,

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Speaker 1: something we haven't talked about because copper is still not good.

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Speaker 1: And there have been some weird things going on with

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Speaker 1: Farash scrap prices, which has been one of which was

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Speaker 1: Alan Greenspan's one of his favorite leading economy what do

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Speaker 1: you see? Well, you know, I think it's a problem

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Speaker 1: that it's a it's a throughput proxy for the global economy,

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Speaker 1: what's going on in China, right, and so these prices

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Speaker 1: and the transition of what's going on in manufacturing China

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Speaker 1: is a big deal. Uh. You know, Farris scrap prices

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Speaker 1: rose at the end of March from about two hundred

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Speaker 1: and fifty dollars a short ton up to three dollars

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Speaker 1: a short ton, and now they're back down to two

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Speaker 1: hundred and sixty dollars a short time. So you've had

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Speaker 1: this surge and a drop and it looks like they're

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Speaker 1: there's money, uh, cycling into the commodity space and metals

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Speaker 1: prices which have risen uh in you know, in recent

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Speaker 1: months in the spring, in the earlier part of the spring,

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Speaker 1: they've now come back down quite a bit. And this

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Speaker 1: happened in two thousand, fourteen and fifteen, where metals prices

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Speaker 1: came under a lot of pressure, but oil prices were

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Speaker 1: supported by the driving season and then you know it

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Speaker 1: might take now a couple of months. Uh. There's also

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Speaker 1: obviously the supply stuff going on. But there's downside risk

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Speaker 1: uh to whatever happens to the oil prices once we

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Speaker 1: get past the driving season, because you have these other

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Speaker 1: dynamics going on. Unless you see significant improvements in Chinese manufacturing, uh,

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Speaker 1: you know you've got some downside risk. And those p

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Speaker 1: m I s, the Chinese p m I that comes

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Speaker 1: out next week one of the most important indicators for

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Speaker 1: not only industrial medals, but also for equity markets. If

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Speaker 1: you look at the NAZEC and the down when you

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Speaker 1: had really weak Chinese p m I s, you had

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Speaker 1: one in August, you had one of the January. If

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Speaker 1: you see weakness there, that sent equity market flower, that

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Speaker 1: also sent metals prices lower. That that's the cadence for

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Speaker 1: a lot of markets. And I think that's a number.

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Speaker 1: I believe the FED is watching. I think they're watching.

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Speaker 1: Jason love having you on every time you're on and

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Speaker 1: learned something. Mike. I've never looked at Farris scrap Wasn't

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Speaker 1: that a movie? Yeah, Farris Scraps, Scraps to day out.

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Speaker 1: I've actually was on the Alan Greenspan list. No, I

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Speaker 1: know that major indicators that he used to watch because

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Speaker 1: if people if scrap metal is rising, then people are

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Speaker 1: junking cars and getting rid of old refrigerators and things

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Speaker 1: like that, and that means they're buying new stuff. Ferris scrap,

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Speaker 1: I'm gonna have to look at I'm gonna I'm gonna

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Speaker 1: email Alec Tanzy. We do have we do have I

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Speaker 1: think um something on that. Just about that. You think

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Speaker 1: that it's just me and Mike making it up, folks,

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Speaker 1: We have a whole team of people who help us

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Speaker 1: every day. I mean down to obvious coffee and tea

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Speaker 1: and tantrums all the coffee is not hot enough. Two

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Speaker 1: serious questions like help me with Faris scrap one. Alexander

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Speaker 1: Tanzi in Washington is the keeper of Faris scrap knowledge.

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Speaker 1: We'll go to him and see what he can do. Uh.

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Speaker 1: Good morning everyone, Michael McKee and Tom Keane. Uh, Bloomberg's

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Speaker 1: surveillance with an interesting screen. I do want to mention

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Speaker 1: the president's press conference in Japan was really something uh

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Speaker 1: this morning thanks to our team in Japan had made

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Speaker 1: that possible. Another hour now of Bloomberg surveillance,