Speaker 1: Who you put your trust in matters. Investors have put
Speaker 1: their trust in independent registered investment advisors to the tune
Speaker 1: of four trillion dollars. Why learn more and find your
Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
Speaker 1: insight from the best in economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and
Speaker 1: of course on the Bloomberg. Right now, let's bring in Robertson.
Speaker 1: She's with Amber's Pure Pont Bob. We've been talking through
Speaker 1: the morning about where we are. Is it a good
Speaker 1: time to take advantage of the volatility that's coming or
Speaker 1: is that a risky business? Pros love movement in the market,
Speaker 1: that's where you make money. Things have been quiet supposedly.
Speaker 1: Is it going to be more volatile into the end
Speaker 1: of the year. I think we are going to see
Speaker 1: significant increases in volatility as we go forward. I think
Speaker 1: a couple of things are driving at One is obviously
Speaker 1: the potential that the FED will finally high rates, and
Speaker 1: that always tends to create some volatility. Uh. Second is
Speaker 1: we have not only the election here. We have discussions
Speaker 1: about Greek fiscal policy coming up later this year with
Speaker 1: the EU potential there. We have a big referendum in
Speaker 1: Italy coming up about the future governance there and what
Speaker 1: that implies for for reforms going forward. We have ongoing
Speaker 1: reform processes in a number of places Brazil, around the world.
Speaker 1: So I think there are some catalyst as we go
Speaker 1: into the latter part of the year. And of course
Speaker 1: the central banks, I think is another big one. I
Speaker 1: think central banks really are beginning to push back against
Speaker 1: this notion that they can continue to solve all the
Speaker 1: world's problem. David wants to go big and wide. Let
Speaker 1: me go you right now. Is there a Monday trade
Speaker 1: from Robert Sinch? I mean, is there something that just
Speaker 1: screams because you know, you do some great obscure stuff. Yen, luony,
Speaker 1: luoni yen, and that is there something that sticks out
Speaker 1: right now? You know? We we we talked to a
Speaker 1: couple of weeks ago about UM the movement down in
Speaker 1: the pace SO and we thought that that to take
Speaker 1: out the oil play. UM. You know, we could be
Speaker 1: um short Canada long pace SO or short Russian Ruble
Speaker 1: short pace so. Um, you know, I think we've had
Speaker 1: a pretty good rebound now in the Mexican pace, so
Speaker 1: from around twenty down to under nineteen. I think that
Speaker 1: trade is is played out for now. I still think
Speaker 1: we're going higher in the dollar, um. And I think
Speaker 1: we could see you know, dollar yen higher, we could
Speaker 1: see euro dollar lower. So I do think this is
Speaker 1: an environment where the dollar is going to you better,
Speaker 1: and we should look at the dollar versus a basket
Speaker 1: of foreign currencies. Right, Tom mentioned this is a Monday,
Speaker 1: a chance to regroup after what happened last week. Let's
Speaker 1: talk about the flash crash, what we saw in Sterling
Speaker 1: a few days hence. Now, what's your reaction to what
Speaker 1: happened there? What? What? What conclusion should we draw from
Speaker 1: what happened there? You know, in the foreign exchange world,
Speaker 1: there is this because it's an over the counter market. Uh.
Speaker 1: And there is this strange time between the clothes in
Speaker 1: New York and the real opening time in Asia. Um. Now,
Speaker 1: this was twenty years ago when I used to manage money,
Speaker 1: but we used to leave overnight orders to go into
Speaker 1: the Asian session. We would specifically limit no transactions between
Speaker 1: five pm and seven pm New York time, because we
Speaker 1: knew there was tremendous illiquidity going into this New Zealand
Speaker 1: Australian marketplace. That's when we had this volatility again the
Speaker 1: other night. And uh, you know, I would have thought
Speaker 1: the markets had grown up from that, but there is
Speaker 1: still that awkward period between the New York close and
Speaker 1: the Singapore Hong Kong open when you can off and
Speaker 1: get these very volatile moves in markets. And I think
Speaker 1: that's what we saw the other Now, your sense there
Speaker 1: is it was a liquidity issue, nothing nothing more. I
Speaker 1: think it was a liquidity issue. We may find out
Speaker 1: in some earnings reports that there was some errors made
Speaker 1: somewhere along the way, um, but clearly it was. It
Speaker 1: was such a disorderly move that you have to chalk
Speaker 1: this up to illiquidity and probably an error that somebody
Speaker 1: will will fess up to at some point in the future.
Speaker 1: I'm embarrassed, Bob that I didn't bring this up earlier
Speaker 1: this morning. Let's cover it right now. I noticed obviously
Speaker 1: weak sterling, but just in the last week week euro
Speaker 1: as well. It's almost like a little wind shifting here.
Speaker 1: Sterling dollar is cable, euro, Sterling is across the channel fuel,
Speaker 1: which do you look at? Which matters here? Well, I
Speaker 1: think again this becomes is this a just a move
Speaker 1: down for sterling or is this a move up for
Speaker 1: the dollar? You know, we've seen dollar yen back up
Speaker 1: above one oh three, it held that one hundred level
Speaker 1: back at one oh three. We've seen euro dollar come
Speaker 1: below one twelve. We've seen sterling obviously move lower. At
Speaker 1: what point do we start talking about a stronger dollar
Speaker 1: rather than just a weak cable. And I think we're
Speaker 1: at that point round right now. You know, if you
Speaker 1: look at at five year interest rate differentials around the world,
Speaker 1: you know, five year swap rate in the US relative
Speaker 1: to five year swap rates in in other major countries,
Speaker 1: and you wait that by the waitings of the Dollar
Speaker 1: index at d x Y, this is the widest differential
Speaker 1: in favor of the dollar this year. So quietly, over
Speaker 1: the last couple of weeks, interest rate differentials really have
Speaker 1: shifted back in favor of the dollar. And suddenly it's
Speaker 1: the dollar moving higher rather than sterling moving lower. But
Speaker 1: then the euro goes with ster What I'm in, what
Speaker 1: I'm seeing as an amateur, is euros becoming attached to sterling.
Speaker 1: Is that a wrong assessment. I think it's more than
Speaker 1: the dollar is moving higher and the euro actually I
Speaker 1: think is is holding up better um than I would
Speaker 1: have expected it. And David, this is really important, and
Speaker 1: this is the compensating factors of different currency pairs. One
Speaker 1: of the biggest mistakes I see in for an exchange
Speaker 1: analysis is we don't look at them as pair traits.
Speaker 1: And there's a set of pair trades. Of course, David,
Speaker 1: you had memorized permutations and combinations. I mean, I mean,
Speaker 1: do you know that David's from Brooklyn and Bob he
Speaker 1: learned permutations and combinations growing kale on his roof because
Speaker 1: he knows there's like a hybrid lens, hybrid lens of kale.
Speaker 1: It's the same way in foreign exchange. David, I have
Speaker 1: a modern day Mendel. Let me ask you more about
Speaker 1: the pace. So, as I mentioned, you had this great
Speaker 1: note Mexico and oil not connected here. You know, we
Speaker 1: had the debate last night, we've been tracking the pay
Speaker 1: so with Donald Trump's pull rings, with Hillary Clinton's pullings,
Speaker 1: you have sort of a novel look at what we're
Speaker 1: seeing there. Yeah, I mean I think that you know
Speaker 1: there are there are two different time frames to look at, right,
Speaker 1: And I think that UM, the rebound and oil had
Speaker 1: not been showing up in the pay so UM primarily
Speaker 1: because of this uncertainty about the election outcome. UM. And
Speaker 1: as we pull that away, you sort of get back
Speaker 1: to fundamentals and and uh, you know, in the short run,
Speaker 1: there is so little going on in these markets these days,
Speaker 1: and so few drivers in the foreign exchange markets that
Speaker 1: traders are willing to to basically jump on anything that's moving.
Speaker 1: And so I think the notion of this um, you know,
Speaker 1: Trump victory probability and movements in the pace so really
Speaker 1: caught on in the markets, and it becomes a self
Speaker 1: fulfilling prophecy, right if people think that other people are
Speaker 1: going to trade dollar pace so based on the election movements,
Speaker 1: and they'll start doing it, and it feeds on itself,
Speaker 1: and that works until it doesn't. And I have a
Speaker 1: feeling that you know, obviously over the next three weeks
Speaker 1: we're gonna find out that there are four weeks that
Speaker 1: it doesn't work anymore because we've we passed the election.
Speaker 1: But I think we're starting to do that. And I
Speaker 1: think that part of what the movement and the big
Speaker 1: movement up in the Peso in the last a week
Speaker 1: or so has been a realization that, hey, you know,
Speaker 1: energy prices have gone up, oil prices have gone up.
Speaker 1: We've completely forgot about this relationship with oil and now
Speaker 1: I think there's a bit of a catch up move
Speaker 1: going on. Robert Sinch with this amorous Pierpunt updateus on
Speaker 1: the institution that is this Federal Reserve system. Mr Trump
Speaker 1: wants to go after this institution and that would President
Speaker 1: Trump change the FED? You know, I think one of
Speaker 1: the concerns, you know, I have a couple of concerns
Speaker 1: about central banks. One that I think they've played their
Speaker 1: hands as far as they can and they really are
Speaker 1: running out of options and anything that's really going to
Speaker 1: affect the economies and inflation going forward. The second is
Speaker 1: this little bubbling up of intrusion on central bank independence.
Speaker 1: We've seen a little bit of it in Japan where
Speaker 1: people around Prime Minister Abbe have been making comments about
Speaker 1: how the ee O J needs to continue to take
Speaker 1: more action. Um, I'm not sure what's really left for
Speaker 1: them to do. That's a big demographic problem they're facing
Speaker 1: in Japan. Uh. We've seen Prime Minister May in the
Speaker 1: UK make a couple of pretty shocking statements. One of
Speaker 1: them was about the side effects of central bank actions.
Speaker 1: I'm not exactly sure what the implication of that was.
Speaker 1: And now I think, you know, we we certainly saw
Speaker 1: last night that that Mr Trump said he would instruct
Speaker 1: you know, a attorney general, an attorney general to look
Speaker 1: into Hillary Clinton's I mean, this is kind of unprecedented stuff.
Speaker 1: You wonder what he would instruct the Treasury secretary to
Speaker 1: do about monetary policy. So I think there is this
Speaker 1: concern that after holding up monetary policy is the real
Speaker 1: savior for the global economies, that now that they're running
Speaker 1: on empty uh and fiscal policy is nowhere to be seen,
Speaker 1: that they start encroaching more on monetary policy. Um, and
Speaker 1: I think it's a concern about central bank independence going forward.
Speaker 1: Had stand Fisher, the vice chairs speak yesterday, Janet Yellen
Speaker 1: speaking at the Boston FED later this week, do you
Speaker 1: think that the Yelling Fed could be doing more to
Speaker 1: emphasize this point that it is not subject to political winds.
Speaker 1: You you hear it from the outside, you here economists
Speaker 1: defending it, but um, we haven't heard explicitly from a
Speaker 1: chair Janet Yellen, at least not not explicitly and not
Speaker 1: in quantity. A lot here about the independence of the Fed.
Speaker 1: You know. Knowing some people who have been with the FED,
Speaker 1: my guess is they're pretty baffled by this. I think
Speaker 1: they're sitting there going, wait a second, we're the only
Speaker 1: ones who have been acting here. Um, we are. We
Speaker 1: are not political in our decision process, although they've been
Speaker 1: accused of that, UM. And I think that that they
Speaker 1: get a little surprised at these things even bubble up
Speaker 1: like this. Um, we'll probably get a bit defensive about it,
Speaker 1: circle the wagons as they normally do. UM. But I
Speaker 1: think part of this is they they brought it on
Speaker 1: themselves by their rhetoric of talking about about normalizing policy
Speaker 1: and then not doing it. A whole seg inn of
Speaker 1: the American population that is wondering why they saved and
Speaker 1: why they're not getting any return on those savings for retirement.
Speaker 1: So I think a lot of of of tensions are
Speaker 1: bubbling up and again because fiscal policy around the world
Speaker 1: has been so non participatory in this process, what do
Speaker 1: people do. They keep focusing back on the monetary authorities
Speaker 1: around the world. UM as as miracle workers, and I
Speaker 1: think they need to keep pushing back and saying they've
Speaker 1: done what they can do. I I wonder as you
Speaker 1: look ahead, there's so much scuttle but here that Leo
Speaker 1: Brander might be a Hillary Clinton Treasury search differences this
Speaker 1: can preclude that from happening. Do you think if if
Speaker 1: Hillary Clinton would be elected? No, I don't think so.
Speaker 1: I think that that, um, you know, there there may
Speaker 1: be some concern about you used to worry about movements
Speaker 1: between the Fed and Wall Street, now that they have
Speaker 1: movements between the Fed and the Treasury. But I think
Speaker 1: that that once somebody leaves the Fed, um, you know,
Speaker 1: their I D doesn't work at the doors anymore. Uh,
Speaker 1: they can't get ready access. So I don't think that's
Speaker 1: a tremendous issue. I think you know, clearly there was.
Speaker 1: It was a very political appointment, uh to the to
Speaker 1: to have her participating in the in the federal reserve system.
Speaker 1: So you know, I think that that, you know, that
Speaker 1: might actually be a little bit healthier in terms of
Speaker 1: re establishing the the the political nature of the fat
Speaker 1: Bob same, Thank you so much with the MS pure Pint,
Speaker 1: greatly appreciate your attendant's unclosed. Good, you have your good
Speaker 1: to be here here, David. My favorite tweet last night
Speaker 1: was from a woman. Well there was the one for
Speaker 1: Jason over at the Journal who said, my television just
Speaker 1: threw itself out the window. Let's just go with that
Speaker 1: thing now as we bringing Greg Greg Horizon Investments. Your
Speaker 1: your notes have been absolutely fabulous. And to keep the
Speaker 1: base ball thing going, Mr Vlier, Mr Trump needed a
Speaker 1: home run and he hit a double. Was it a
Speaker 1: legit double off the wall or was it a ground
Speaker 1: rule double in Yankee Stadium? Hi? Tim, good morning. Now.
Speaker 1: I think it was a legit double. I think he
Speaker 1: really energized his bass, which she had to do. They're
Speaker 1: going to turn out if it's windy and raining in Ohio.
Speaker 1: They're turning out, and I think you know he spoke
Speaker 1: to them. Did he add any new support? Well, that's
Speaker 1: the issue. I'm not sure he did. Let me bring
Speaker 1: it over to Secretary Clinton. The f T had a
Speaker 1: great chart the other day of a certain blue collar
Speaker 1: county in Ohio. She's got to get marginal voters with
Speaker 1: the weekend she had. Can she do that? Yeah? I
Speaker 1: think she can. I think that, uh, I would say
Speaker 1: the weekend Trump had. You know, I'm not sure he's
Speaker 1: going to bring a lot of those voters either. You
Speaker 1: know that if you step back just for a second
Speaker 1: and look at the forest rather than the trees, I mean,
Speaker 1: the forest is there's been massive defections among Republicans who
Speaker 1: were really worried. Now they not only would lose the Senate,
Speaker 1: but they might even lose the House as well. So
Speaker 1: you've got a really anxious party. I'm not sure one
Speaker 1: pretty good debate performance by Trump is going to change that. Greg,
Speaker 1: what do you make of the degree to which that tape,
Speaker 1: which was released on on Friday afternoon published by The
Speaker 1: Washington Post, played a role in this debate. I look
Speaker 1: back on what happened last night, you can almost cut
Speaker 1: the debate into There was the first thirty minutes, which
Speaker 1: I would say ex very contentious, and it played a
Speaker 1: major role there. This isn't something that Secretary Clint came
Speaker 1: back to though at the end of the debate, a
Speaker 1: sigh of relief from the Trump campaign that this is
Speaker 1: now at least in part behind him. What do you
Speaker 1: make of how it played out in the debate? It's
Speaker 1: in part behind him, assuming there are no additional disclosures,
Speaker 1: and I am not willing to make that prediction. I
Speaker 1: think that there could be more bombshells for both of them,
Speaker 1: with her from wiki leaks, with him with taxes. I'm
Speaker 1: not sure The New York Times has released all that
Speaker 1: they have, and of course with him and other women.
Speaker 1: So we've got another month of this cringe inducing campaign
Speaker 1: to go, and I think there's going to be more disclosures.
Speaker 1: You mentioned the defections on the Republican side. What was
Speaker 1: it about this tape, about these comments in particular that
Speaker 1: were so distasteful? Yes, the vulgarity, for sure. But but
Speaker 1: there will be those who say this is nothing new.
Speaker 1: We we we knew at least what Donald Trump was like,
Speaker 1: if not what he is like. Why why did this
Speaker 1: happen now? Well, I say two things. Number one, what
Speaker 1: do you describe doing as a felony? Last time I checked?
Speaker 1: Number Two, I think that a lot of Republicans you said,
Speaker 1: oh my god, he's talked about growing women. I think
Speaker 1: they're real concern, as I said earlier, is that they
Speaker 1: could lose Congress. I mean they're looking at potentially a
Speaker 1: really ugly election. I think that motivated a lot of
Speaker 1: the defections. Help me here, Greg, with with all that
Speaker 1: we've observed in the in the final twenty days of
Speaker 1: the election. There was a whisper of a moment last
Speaker 1: night where Secretary Clinton shifted from the dance over to
Speaker 1: I will represent all Americans. And I turned to someone
Speaker 1: who was watching the debate with and said, that's the
Speaker 1: first moment where she's speaking to all the voters and
Speaker 1: not just the usual constituencies. Did you sense that or
Speaker 1: does that wit? October nine? Yeah, yeah, I think Tom
Speaker 1: that in the last week or two, when you make
Speaker 1: your closing pitch, the candidates usually get a lot more
Speaker 1: bipartisan tiid and cue the music. Better Angels, We're not
Speaker 1: We're not there yet. I think we got a waste
Speaker 1: to go before we hear that kind of talk. David
Speaker 1: to put it in the tweet I love last night
Speaker 1: as Mr Velier speaks to the Better Angels. Was the
Speaker 1: woman who said, look, it's like Game of Thrones. You
Speaker 1: tell the kids go do something, you close the door,
Speaker 1: you turn a volume down, and you have your thumb
Speaker 1: the revote control if the kids come in the room.
Speaker 1: That's what the beginning of the debate was like last night. Wondering,
Speaker 1: wondering what was going to happen. Greg talk about the
Speaker 1: undecided nous in the room, I mean, it's it's it
Speaker 1: seems this campaign has gone on for so long, many
Speaker 1: many months. Now you have a room of undecided voters.
Speaker 1: I'd say that the voters who were on stage with
Speaker 1: the two candidates didn't actually ask many questions. I think
Speaker 1: that the two candidates took a lot of care of
Speaker 1: a lot of the back and forth themselves here. But
Speaker 1: how real is the undecided factor right now? I don't
Speaker 1: think it's that big anymore. Maybe there's still five of
Speaker 1: the electorate that could be swayed, but it's dwindling and
Speaker 1: I'm not sure. You know, one of the big takeaways
Speaker 1: from last night is that I'm not sure they moved
Speaker 1: the needle that much. You know, Trump again really rallied
Speaker 1: his base. They're motivated to vote for him. But I
Speaker 1: think among these undecided there's one issue, if I might,
Speaker 1: there's one issue that still has to be addressed, and
Speaker 1: that's pro growth. I've been harping on this for a
Speaker 1: long time. I think that her agenda more regulations and
Speaker 1: you know, more higher taxes, is not pro growth. I
Speaker 1: think if Trump realized that he could make some inroads there.
Speaker 1: Does he have a campaign staff? I say this, folks,
Speaker 1: I mean you know, full disclosure. I was outside the
Speaker 1: Trump Tower yesterday and Greg, it was such a zoo
Speaker 1: with a naked cowboy and the rest of it. We
Speaker 1: we went across the street and around it because we
Speaker 1: didn't want aerrabs to see it and and help me here.
Speaker 1: Does he have a cane pick campaign staff? Well, you
Speaker 1: look at some of the key states and you have
Speaker 1: to talk about the ground game. It's kind of our cane.
Speaker 1: But those of us who are really into this wouldn't
Speaker 1: tell you that in a lot of key states like Florida,
Speaker 1: he had a bunch of amateurs working for him, poorly funded,
Speaker 1: have never really worked on campaigns. Her ground game is
Speaker 1: really good and in a close election that could be
Speaker 1: worth half a point half half a half point, yeah,
Speaker 1: half a points important in a close state. There was
Speaker 1: a moment during the debate when my jaw dropped Martha
Speaker 1: rat It's asking about Syria, and what emerged was a
Speaker 1: real disconnect between one Donald Trump and one Mike Pence.
Speaker 1: She pointed out that they've said two different things about
Speaker 1: what the course of action should be in that country
Speaker 1: with regard to to Russia's participation. Uh. And Donald Trump
Speaker 1: allowed that it was something that he and Mike Pence
Speaker 1: had had not discussed this, I said, last hour, five
Speaker 1: days in here, these two have been running mates and
Speaker 1: and is it how surprising is it to you here
Speaker 1: that this isn't something that's come up. I think it's
Speaker 1: a big deal, David. I mean, first of all, I
Speaker 1: think over the weekend Pence was a gassed over that
Speaker 1: tape and the sexual stuff. He's a conservative Christian and
Speaker 1: I think that Trump threw him under the bus last
Speaker 1: night on Syria very dismissively. And currently so there's not
Speaker 1: a lot a lot of love between the two. There's
Speaker 1: been rumoring and Pence might leave the ticket. I don't
Speaker 1: think he's going anywhere because if he endures this for
Speaker 1: another month, he becomes one of the front runners. Well
Speaker 1: that's right where I wanted to go. In the final question,
Speaker 1: we have Mr Villiers, is Mr Pence and Mr Ryan
Speaker 1: and the others. Are they just positioning themselves for Greg
Speaker 1: Villiers New Hampshire primary to come. I think if you
Speaker 1: gave most of them truth sir, and they would tell
Speaker 1: you that They're all already thinking past the selection. They're
Speaker 1: thinking about the next one. Pence is going to be
Speaker 1: a player, Ryan Rubio, maybe Cruise. A big cast of
Speaker 1: characters I think are secretly rooting for Trump to lose.
Speaker 1: Great briefing, and I'm sure we'll have much more. Greg Villier,
Speaker 1: your notes are more than valuable. Folks. Again, we got
Speaker 1: many emails, Mr. Vliers, paperwork we do. We protect the
Speaker 1: copyright of all of our guests. Please contact Arizing Investments
Speaker 1: for the uh, the the chiseled granite slabs that Mr
Speaker 1: puts out every moment. Who you put your trust in matters.
Speaker 1: Investors have put their trust in independent registered investment advisors
Speaker 1: to the tune of four trillion dollars. Why they see
Speaker 1: their role is to serve, not sell. That's why all
Speaker 1: schwab is committed to the success of over seven thousand
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Speaker 1: achieve their financial goals. Learn more and find your independent
Speaker 1: advisor dot com. It is wonderful to pause now after
Speaker 1: the dropeth in gold of a week or so ago.
Speaker 1: James Steele writes brilliant notes for HSBC on the bigger
Speaker 1: picture on gold nut, the minutia of companies and all that,
Speaker 1: but just the bigger view, James, it's Golden Week in
Speaker 1: China and then China comes back. You notice a pulse
Speaker 1: of demand in India with all the ballet of China.
Speaker 1: Is there a pulse to acquire gold in China? I
Speaker 1: think yes, There's been a considerable decline between when they
Speaker 1: went on Golden Week and now. So merchants and traders
Speaker 1: as they have come back to their desks, uh, and
Speaker 1: back to their businesses this morning, will have been greeted
Speaker 1: with a substantially lower gold price. And definitely those reacting
Speaker 1: to the consumer demand will, I suspect, seek to purchase
Speaker 1: bullion around these prices. That's not to say that the
Speaker 1: washout is over, but I definitely think that the physical
Speaker 1: demand in the Far East will will react to this. James,
Speaker 1: what's the biggest driver of gold right now? Is it?
Speaker 1: Is it speculation about Fed policy? Is it the election?
Speaker 1: Where where are you seeing drivers of growth? Yes? I
Speaker 1: would say it's the Fed policy angle, um, and that
Speaker 1: feeds through into the currencies. A secondary but important one
Speaker 1: is uh, the election, and I think as we run
Speaker 1: up closer to the election that will be increasingly important. Uh.
Speaker 1: It's interesting to note that gold has been relatively a
Speaker 1: new or two changes in the polls between Trump closing
Speaker 1: on Hillary or Hillary opening up against Mr Trump. Gold
Speaker 1: doesn't seem to have reacted much to that. It's been
Speaker 1: much more sensitive, however, to UH comments from officials at
Speaker 1: the Federal Reserve. I was looking at when Hillary Clinton
Speaker 1: gains in the polls. It seems like one month gold
Speaker 1: volatility has fallen a little bit. What why do you
Speaker 1: think that is? When when when you see the lack
Speaker 1: of volatility, when you see the lack of movement with
Speaker 1: regards is that surprising to you? I think any gain
Speaker 1: in the polls um for for for the leader would
Speaker 1: probably tend to reduce the volatility because that would be
Speaker 1: one less thing the market would would would be uncertain about.
Speaker 1: So UM, I don't think. I think if it were
Speaker 1: much closer, the vault would probably would probably be higher.
Speaker 1: James Steele, when I look at the chart, I know
Speaker 1: you're not a technical analyst, but UM, do you have
Speaker 1: the sense that gold has broken through support or is
Speaker 1: the rally still intact which nicely started the end of
Speaker 1: two thousand fifteen. That's a good question. Um, it's taken
Speaker 1: a real dent. There's absolutely no doubt about that. We
Speaker 1: had quite significant technical selling when we got down to
Speaker 1: and then again down around twelve fifty nine, the more
Speaker 1: recent low. If you look at a rough retracement from
Speaker 1: the beginning of the move around, say if you put
Speaker 1: it at ten in December, as you highlighted up to,
Speaker 1: say twelve thirteen seventy five, then that would be around
Speaker 1: twelve ten. And I think the market will hold well
Speaker 1: well above that because yep, I don't mean I don't
Speaker 1: mean it erupt, but I mean we go through to
Speaker 1: twelve fifty or twelve sixty in support is ten sixty?
Speaker 1: Do you look at this as a pullback and a
Speaker 1: break of the James Steele rally, is it's known worldwide?
Speaker 1: Or do you look at this as we may we
Speaker 1: may test that ten sixty level and as a gloom
Speaker 1: and doom crusee we migrate back to eight nine ounce.
Speaker 1: Uh No, I don't think we will break down to
Speaker 1: those levels, uh at all. I think monetary policy still
Speaker 1: remains to loose. We have negative interest rates outside of
Speaker 1: the US and no real sign that that's going to
Speaker 1: that's going to reverse. UM and Also, you know, the
Speaker 1: fan rate rises are clearly well telegraphed, and uh, we're
Speaker 1: only looking for very modest ones. So I think that
Speaker 1: might be already somewhat digested into the absorb absorbed into
Speaker 1: the price. So no, I don't see a major um
Speaker 1: decline of that of that magnitude. I see it's staying
Speaker 1: well north of James. I look at the growth of
Speaker 1: gold backed e t f s inflows, I think north
Speaker 1: of twenty seven billion dollars, and I wonder what effect
Speaker 1: that's having on the on the marketplace, how much that's
Speaker 1: changed the the the contours of the gold marketplace right now.
Speaker 1: It's been one of the most bullish. It's probably the
Speaker 1: most bullish development on market wise that we've seen, um
Speaker 1: in years. Uh. It's absorbed a great deal of gold. Uh,
Speaker 1: you know, without going into the merits of of of
Speaker 1: an e t F necessarily, but it gives you a
Speaker 1: good way to hold in store gold. But before people
Speaker 1: would tend to go to coins and small bars or
Speaker 1: or equities, and this gives them, you know, an an
Speaker 1: alternative this day if they choose to do so. And
Speaker 1: it's built up considerably. UM. One of the things that's
Speaker 1: interesting I'm glad you mentioned the e T s because
Speaker 1: although the net comics positions then net long COMICX positions
Speaker 1: have come down considerably with this, with this drop since
Speaker 1: the high of twelve, the ETFs have been very firm.
Speaker 1: James Steele with us and we've been getting tons of mail.
Speaker 1: Is always on his gold call. James, you have to
Speaker 1: live within the milieu of a major shop HSBC. And
Speaker 1: it's not that you love to make outlier calls. It
Speaker 1: just happens to be where you guys are in Sterling now.
Speaker 1: And on the duration of low yields, How does Steve
Speaker 1: Major's bond call low yields out to two thousand and
Speaker 1: twenty one as far as I can see, how does
Speaker 1: it fold into your work on gold? Are you and
Speaker 1: Mr Major not in speaking terms? Oh? No, we certainly are.
Speaker 1: Now Now we try to be aware, well we are,
Speaker 1: we are, we are aware of of of everybody's views. UM.
Speaker 1: We discuss things and his view about low rates going
Speaker 1: further out, which have been you're gracious enough to say,
Speaker 1: have been UH correct of for for many, many many quarters.
Speaker 1: Now UM is supportive of of the gold price, UH
Speaker 1: without without doubt it lowers opportunity cost of owning gold.
Speaker 1: It makes it easier to UH to own gold as
Speaker 1: a comparatively safe safe haven. UM. There's many positives that
Speaker 1: low interest rate environment have for gold going forward, so
Speaker 1: it helps secure and gives us an economic and good
Speaker 1: rationale for for our views on bullion. There's a looking
Speaker 1: at at at the dollar, the strength of the dollar,
Speaker 1: and I wanted the degree to which that's a that's
Speaker 1: effecting gold will continue to affect goal. What's your forecast
Speaker 1: there in terms of how the dollar relates to go on? Well, UM,
Speaker 1: we do have the dollar weakening slightly to the euro
Speaker 1: UH by year end. Recently it's it's it's been stronger.
Speaker 1: So our currency view is usual to slightly supportive of
Speaker 1: of gold. UM. The big issue, of course has been
Speaker 1: the reaction of the pound, which has been down sharply.
Speaker 1: And and I think there's two ways to look at
Speaker 1: that for gold. Actually, because when you when we first
Speaker 1: got the vote on Brexit, UM, the gold market jumped
Speaker 1: a jumped, not necessarily because of currency moves, but more
Speaker 1: because of the geopolitical risk associated with the the the
Speaker 1: UK leaving the U. So in this case, although generally
Speaker 1: speaking a weaker pound would be a big negative for gold,
Speaker 1: it might not be so much the case this time.
Speaker 1: That's that's the interesting thing about the gold market is
Speaker 1: you have to balance many other things out, and although
Speaker 1: currencies generally have the dominant impact on gold, you have
Speaker 1: to look at why the currency is moving as well.
Speaker 1: When you look at Brexit, when you look at the
Speaker 1: uncertainty over when that might take place, how how much
Speaker 1: of a complicating factor is that? Well? I think as
Speaker 1: far as gold has concerned, a lot of it has
Speaker 1: already been priced in. It was priced in very quickly
Speaker 1: with the rally. When when the vote, when the vote
Speaker 1: came through, We'll have to see how how things progress.
Speaker 1: But right now I think it's mostly in the gold market,
Speaker 1: and the gold market will tend now to look towards
Speaker 1: fed E c B Bank of Japan policy frameforce elasticity
Speaker 1: or responsiveness of jewelry. Two, the price of gold, I
Speaker 1: mean an ounce of gold. How how tight is that?
Speaker 1: That's where again this is very interesting because it is
Speaker 1: split pretty much in two halves. UM. Jewelry demand in
Speaker 1: the West does not appear to be incredibly price responsive UM,
Speaker 1: mostly because it's a function of income. Higher incomes mean
Speaker 1: more spending on luxury goods, and you don't tend to
Speaker 1: see a big movement in jewelry demand either way. Because
Speaker 1: of price movements, it tends to be more related to
Speaker 1: income and also to employment levels. Now in the Far East,
Speaker 1: where a margin on jewelry is much much lower UM
Speaker 1: and there's less discretionary income, it's much more sensitive. And
Speaker 1: I think that's why, alluding back to earlier conversation, why
Speaker 1: we're probably going to see a nice physical response from
Speaker 1: the Chinese merchants when they as they as they get
Speaker 1: going again after after Golden Weeks, they'll they'll be greeted
Speaker 1: with a substantially lower lower price. And the lower price
Speaker 1: now is finally beginning to kick in and encourage Indian demand,
Speaker 1: which has been off the radar for many months, but
Speaker 1: it's going to come back, you suggesting, I do think
Speaker 1: so moderately, um more more. I think the more of
Speaker 1: the growth will be in China, um the but the
Speaker 1: Indian demand I think will be up as well. The
Speaker 1: month soon was good this uh this year, which might
Speaker 1: sound an odd thing to say, but a lot of
Speaker 1: gold is bought in the northern tribal belt and is
Speaker 1: dependent upon rural incomes and rule incomes in turn or
Speaker 1: depend upon the harvest and the months soon go to harvest.
Speaker 1: How maybe is this a naive question, James, when you
Speaker 1: talk about gold sales in China, how open a marketplace
Speaker 1: is that? How much government intervention is there in the
Speaker 1: gold market in China? It's quite open. There have been
Speaker 1: reforms that have taken the government out of that stemming
Speaker 1: back years now. So it's a relatively open as far
Speaker 1: as as far as that's concerned, James, to congratulations again
Speaker 1: and killing the gold call here in the number of months,
Speaker 1: and certainly the shift there is very important, as she
Speaker 1: steals with HSBC is surveillance. I'm David Gurrow with Tom Keene.
Speaker 1: Bank of Japan Governor Rohiko Kuroda sat down for an
Speaker 1: interview with Bloomberg over the weekend and gave the clearest
Speaker 1: signal yet that it may take longer than initially forecast
Speaker 1: for the BOJ to hit its two percent inflation target.
Speaker 1: We don't I intend to exit from extremely accommodative expansion
Speaker 1: already at this stage. We will continue or even strengthen
Speaker 1: our monitor easing in coming months and years to achieve
Speaker 1: the presentive phrase one and the four the time being,
Speaker 1: as I said eighteen US this podcast would would continue.
Speaker 1: Croda also made it clear he'll continue to support a
Speaker 1: strong stimulus program, responding to the idea of curbing monetary
Speaker 1: easing with a laugh. We're joined now by Takatoshio, Professor
Speaker 1: of International Public Ferries at Columbia University. Professor, you know,
Speaker 1: let me ask you, first of all, just about what
Speaker 1: we heard from Governor Coroda over the weekend, both the
Speaker 1: Brookings and in this speech. You've read a note about
Speaker 1: the the inflation overshooting commitment, calling it epic making. Why
Speaker 1: is that the case? Yes, this, obviously in commitment is
Speaker 1: amount to the what we call the price level anything
Speaker 1: in the little journ, which means that the Banqua commits
Speaker 1: to offset any dested in the price levels not achieving
Speaker 1: two percent in the years after they tugged hit the
Speaker 1: two percent targets. The two percent is now not the goal,
Speaker 1: but the average of the two percent over the medium
Speaker 1: term is two is the target. So this is very
Speaker 1: strong commitment that the easing will continue. So by delaying
Speaker 1: the forecast of achieving two percent target dates, they supplemented it.
Speaker 1: It was a very strong commitment on the afterwards, after
Speaker 1: hitting two percent, it's going to breaks to u to
Speaker 1: upwards maybe three percent, maybe four percent. Professor, you know,
Speaker 1: we have another delay, seemingly from the governor saying that
Speaker 1: this would not take effect until two wasn't eighteen. This
Speaker 1: is the fifth delay that we've seen. What do you
Speaker 1: what do you make of the near constancy of these delays. Well,
Speaker 1: it's um a combinations factors. Some of them are beyond
Speaker 1: that US control. Mainly oil prices continue to be low
Speaker 1: and the domestic labor they're not demanding the wage increase,
Speaker 1: so consumption is so those are the miscalculations on miss podcast.
Speaker 1: But now we are seeing that oil prices are going
Speaker 1: up and uh finally that I think a labor market
Speaker 1: in depend is almost full employment. So they they have
Speaker 1: been a good post. Professor Rito. I'm sorry to remind
Speaker 1: you that it's been twenty six years since you crafted
Speaker 1: your must read book The Japanese Economy that at the
Speaker 1: time all of us read cover to cover. You then
Speaker 1: went on with Barry Ike Green and Charles White plots
Speaker 1: to look at international econom mix. Please explain to our
Speaker 1: global audience as you were shortlisted for Mr Kuroda's job
Speaker 1: please explain the independence of the Bank of Japan in
Speaker 1: modern deflationary Japan. How independent is uh, mr Kuroda, It
Speaker 1: is very independent. I think um boj is as independent
Speaker 1: as whether reserve or easy bo of boe UM. I
Speaker 1: think all those four major central banks are now under pressure,
Speaker 1: and uh the kewe and your interest rate or native
Speaker 1: interest rate, all of them seemed to have failed at
Speaker 1: even to present very quickly. So now people are talking
Speaker 1: about the coordination between multiples and fiscal policy, which to
Speaker 1: some people sounds like loosing independence. But I do not
Speaker 1: think that losing independence. I think it is uh, you know,
Speaker 1: coordination all the equal to You took your doctorate at
Speaker 1: Harvard with Professor Blanchard Olivier Blanchard. He has been critical
Speaker 1: of modern macro economics and how we're going to do
Speaker 1: economics forward. What would you like to see from the
Speaker 1: Bank of Japan in terms of a new strategy given
Speaker 1: the assault on so called dynamics stochastic general equilibrium theory,
Speaker 1: what would what would you like to see out of
Speaker 1: your Japan economics? Is your professor is critical of modern
Speaker 1: macro Well, I'm sorry, I just got quotes from Yemen,
Speaker 1: not Olivia. About jobs. But data side, UM, I think
Speaker 1: the dynamics stochastic generic libum macro UH had not proved
Speaker 1: that they are relevant in analyzing the current situation, especially
Speaker 1: for the analyzing global financial crisis of or eight or nine.
Speaker 1: I think the DSc model that central banks do have
Speaker 1: but as one of three or four macro models so
Speaker 1: UM UH DSD is very useful in amazing how the
Speaker 1: individual sectors like helphold and corporations who the act to
Speaker 1: a policy changes UM that's more deep paramid long term
Speaker 1: effect and they failed to analyze um, you know, very
Speaker 1: short terms domino like h implement or under utilization of
Speaker 1: the resources and professortail. Thank you so much, taka Ito,
Speaker 1: Columbia University from more Sina Heights of this morning here
Speaker 1: of course visited in the studio before a real honor
Speaker 1: to have him in after Friends and Laquas interview with
Speaker 1: Mr Coroda. Thanks for listening to the Bloomberg Surveillance podcast.
Speaker 1: Subscribe and listen to interviews on iTunes, SoundCloud, or whichever
Speaker 1: podcast platform you prefer. I'm out on Twitter at Tom Keene,
Speaker 1: David Gura is at David Gura. Before the podcast, you
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