1 00:00:00,760 --> 00:00:05,840 Speaker 1: Global business news twenty four hours a day at Bloomberg 2 00:00:05,880 --> 00:00:08,920 Speaker 1: dot com, the Radio plus Mobile Act and on your radio, 3 00:00:09,680 --> 00:00:13,240 Speaker 1: He's a Bloomberg Business Flash and I'm Karen Moscow. The 4 00:00:13,280 --> 00:00:16,520 Speaker 1: US economy unexpectedly expanded at a faster pace in the 5 00:00:16,560 --> 00:00:20,400 Speaker 1: fourth quarter than initially estimated, reflecting a higher value of 6 00:00:20,440 --> 00:00:23,880 Speaker 1: business inventories, Gross domestic product the value of all goods 7 00:00:23,880 --> 00:00:26,680 Speaker 1: and services produced to grow at a one percent annualized 8 00:00:26,760 --> 00:00:29,840 Speaker 1: rate compared with an initial estimate of seven tenths percent, 9 00:00:30,120 --> 00:00:33,520 Speaker 1: and consumer spending was revised lower. US Dock Index future 10 00:00:33,520 --> 00:00:36,760 Speaker 1: has remained higher following that report, with SMP eveny futures 11 00:00:36,760 --> 00:00:39,959 Speaker 1: of fourteen points, Dowie Mini futures of a hundred twenty two, 12 00:00:40,000 --> 00:00:42,760 Speaker 1: and as DOCI many futures of thirty seven. We checked 13 00:00:42,760 --> 00:00:45,159 Speaker 1: the markets every fifteen minutes throughout the trading day on 14 00:00:45,200 --> 00:00:48,680 Speaker 1: Bloomberg Dacks in Germany's up two percent ten, your treasury 15 00:00:48,680 --> 00:00:51,680 Speaker 1: down eleven thirty seconds, the yield one point seven five percent, 16 00:00:52,120 --> 00:00:54,360 Speaker 1: Nimax crude oil of three point four per cent or 17 00:00:54,360 --> 00:00:57,520 Speaker 1: a dollar eleven to thirty four seventeen a barrel Comax 18 00:00:57,600 --> 00:01:00,280 Speaker 1: gold down six tenths percent or seven dollars ninety sense 19 00:01:00,320 --> 00:01:03,240 Speaker 1: to twelve one announced, the euro a dollar O nine 20 00:01:03,360 --> 00:01:06,800 Speaker 1: nine three the yen one thirteen point to five Euro 21 00:01:06,959 --> 00:01:09,720 Speaker 1: area inflation looks to be cooling more than expected, but 22 00:01:09,760 --> 00:01:12,319 Speaker 1: the prices in three other regions for the largest economies 23 00:01:12,319 --> 00:01:15,560 Speaker 1: and missing estimates and strengthening the case for an expansion 24 00:01:15,600 --> 00:01:19,560 Speaker 1: of the European Central Banks monetary stimulus in March. Consumer 25 00:01:19,600 --> 00:01:21,960 Speaker 1: prices slit in Germany, France and Spain in the year 26 00:01:21,959 --> 00:01:25,760 Speaker 1: to February figures show today and as a Bloomberg Business Flash, 27 00:01:25,800 --> 00:01:30,880 Speaker 1: Thomas Scarlett Karen thank you so much. It is on 28 00:01:31,000 --> 00:01:35,360 Speaker 1: Wall Street. The following is from Bloomberg View, opinions and 29 00:01:35,440 --> 00:01:40,360 Speaker 1: commentary from Bloomberg columnists. A columnist for Bloomberg View. As 30 00:01:40,400 --> 00:01:43,400 Speaker 1: Britain prepares to vote on leaving the European Union, President 31 00:01:43,400 --> 00:01:46,679 Speaker 1: Obama is reportedly considering repeating as advice that it's stay 32 00:01:47,000 --> 00:01:50,040 Speaker 1: silence is a better idea. Britain is our closest ally 33 00:01:50,120 --> 00:01:52,680 Speaker 1: among the European powers, so it does often argue that 34 00:01:52,720 --> 00:01:55,400 Speaker 1: its influence on the EU helps us, but it's up 35 00:01:55,400 --> 00:01:58,559 Speaker 1: to the British to determine what relationship with Europe maximizes 36 00:01:58,600 --> 00:02:01,280 Speaker 1: their influence in the world. Have an interest in that question, 37 00:02:01,360 --> 00:02:03,720 Speaker 1: but it's not as great as theirs. If they think 38 00:02:03,760 --> 00:02:06,640 Speaker 1: the EU sets back their interests, we can't reasonably ask 39 00:02:06,680 --> 00:02:09,639 Speaker 1: them to stay because it suits us. The all administration 40 00:02:09,720 --> 00:02:12,120 Speaker 1: is hinted that we might not have friendly trade relations 41 00:02:12,120 --> 00:02:15,320 Speaker 1: with a post EU Britain. Carrying through that threat would 42 00:02:15,320 --> 00:02:17,839 Speaker 1: be harmful to us and serve no purpose, which means 43 00:02:17,880 --> 00:02:19,880 Speaker 1: it's not a credible threat. What we should tell the 44 00:02:19,919 --> 00:02:22,000 Speaker 1: British is that we trust them to make their own 45 00:02:22,000 --> 00:02:24,920 Speaker 1: decision and will have a strong relationship with them either way. 46 00:02:25,040 --> 00:02:27,320 Speaker 1: I'm a entrepreneurio. For more of you, please go to 47 00:02:27,320 --> 00:02:30,480 Speaker 1: Bloomberg View dot com or view go on the Bloomberg terminal. 48 00:02:30,840 --> 00:02:34,639 Speaker 1: This has been Bloomberg View and bloom Review commentary is 49 00:02:34,639 --> 00:02:37,399 Speaker 1: can be here in hourly weekdays on Bloomberg Radio. Tom 50 00:02:37,480 --> 00:02:42,320 Speaker 1: keenan Scarlet Foo with us today Michael McKee on assignment. 51 00:02:42,639 --> 00:02:45,680 Speaker 1: Scarlett has decided to step in. Scarlett earlier in the 52 00:02:45,720 --> 00:02:48,760 Speaker 1: week we saw the drop in the British pound. We 53 00:02:48,880 --> 00:02:52,400 Speaker 1: come back to one. But on a Monday ago, five 54 00:02:52,480 --> 00:02:55,560 Speaker 1: days ago, if we said it was a one, that 55 00:02:55,560 --> 00:02:59,120 Speaker 1: would have been handline um making, and I guess we 56 00:02:59,200 --> 00:03:02,200 Speaker 1: stagger arounded you and Brexit and all that. But it 57 00:03:02,240 --> 00:03:05,440 Speaker 1: really folds into the G twenty meeting where the presumption 58 00:03:05,520 --> 00:03:09,000 Speaker 1: interview after interviews, nothing's gonna happen. I don't buy it. Well, 59 00:03:09,160 --> 00:03:12,040 Speaker 1: here's where I'm a little confused, because people came into 60 00:03:12,080 --> 00:03:14,320 Speaker 1: this meeting thinking that there would be some kind of 61 00:03:14,360 --> 00:03:18,280 Speaker 1: grand proclamation or there would be some uh work done 62 00:03:18,320 --> 00:03:21,919 Speaker 1: where they might agree to come together and say de 63 00:03:22,000 --> 00:03:24,400 Speaker 1: value the UN once and for all and get rid 64 00:03:24,400 --> 00:03:28,320 Speaker 1: of this drip drab policy or not even policy approach 65 00:03:28,639 --> 00:03:31,959 Speaker 1: to weakening the UN. Then the fact that Jack Luke 66 00:03:32,000 --> 00:03:35,480 Speaker 1: came out on Bloomberg Television and told our David Weston that, uh, 67 00:03:35,640 --> 00:03:38,360 Speaker 1: that kind of thing is not in the offing. Had 68 00:03:38,400 --> 00:03:43,360 Speaker 1: everyone worried. Why Why would everyone think that the G twenty, 69 00:03:43,920 --> 00:03:47,440 Speaker 1: separate members, everyone has their own interest, would be able 70 00:03:47,440 --> 00:03:49,920 Speaker 1: to come together and come and come with any agreement. 71 00:03:50,000 --> 00:03:52,440 Speaker 1: And Virginia Mason, who nailed this this morning with her 72 00:03:52,480 --> 00:03:56,880 Speaker 1: experience of trotism PIMCO. She was on a surveillance on television. 73 00:03:57,240 --> 00:04:00,400 Speaker 1: She's a portfolio manager with a bigger, broader, sixty thousand 74 00:04:00,440 --> 00:04:04,320 Speaker 1: foot view and Ms Masin have made clear what is 75 00:04:04,440 --> 00:04:07,720 Speaker 1: needed if you're going to get drama is level of 76 00:04:07,800 --> 00:04:11,760 Speaker 1: crisis and we're just not there. Villain bowder It's City 77 00:04:11,760 --> 00:04:17,960 Speaker 1: group is adamant that without financial instability, institutions are not 78 00:04:18,040 --> 00:04:19,960 Speaker 1: going to come to the rescue and they're not going 79 00:04:20,000 --> 00:04:23,320 Speaker 1: to save the day. And in fact, that's where we 80 00:04:23,360 --> 00:04:26,039 Speaker 1: are right now. And in fact, his shop only estimates 81 00:04:26,040 --> 00:04:29,560 Speaker 1: fifty chance of a recession, So you're saying fifty fifty 82 00:04:29,640 --> 00:04:33,039 Speaker 1: anything could happen at this point. Yeah, I mean, I 83 00:04:32,360 --> 00:04:35,680 Speaker 1: I just find it into the weekend, and of course 84 00:04:35,680 --> 00:04:39,159 Speaker 1: we'll all do our reading over the weekend, uh and 85 00:04:39,200 --> 00:04:42,240 Speaker 1: of course as we go to Super Tuesday as well. 86 00:04:42,320 --> 00:04:47,000 Speaker 1: But the basic idea of what didn't happen this week 87 00:04:47,120 --> 00:04:48,720 Speaker 1: is just as important as the news that we saw. 88 00:04:49,279 --> 00:04:52,680 Speaker 1: What didn't happen this week, we're institutions writing to the rescue. 89 00:04:52,720 --> 00:04:55,120 Speaker 1: Where the Jack lou interview, there's a distinct lack of 90 00:04:55,200 --> 00:04:58,360 Speaker 1: urgency heading into this G twenty and I would say 91 00:04:58,360 --> 00:05:01,919 Speaker 1: a distinct lack of urgency the barge and to the 92 00:05:01,960 --> 00:05:04,400 Speaker 1: gloom cruise point. You know, you see this out on 93 00:05:04,839 --> 00:05:07,839 Speaker 1: the different articles of people very cautious and very upset 94 00:05:07,920 --> 00:05:11,680 Speaker 1: feel they're sort of waiting for something in March and 95 00:05:11,760 --> 00:05:16,279 Speaker 1: that waiting has to come from action from crisis, and 96 00:05:16,320 --> 00:05:18,839 Speaker 1: the jump moves for now aren't there. I'll give you 97 00:05:18,920 --> 00:05:21,920 Speaker 1: one exception, though, I'm looking at the Bloomberg folks. It's 98 00:05:21,920 --> 00:05:24,039 Speaker 1: the red Knight put the photo out before. In social 99 00:05:24,600 --> 00:05:28,960 Speaker 1: the basic idea of the entire screen is complacent oil 100 00:05:29,000 --> 00:05:32,120 Speaker 1: oil up a dollar twenty two, except the German two 101 00:05:32,240 --> 00:05:36,000 Speaker 1: year negative point five one shows that angst For American 102 00:05:36,080 --> 00:05:41,240 Speaker 1: GDP analysis John Herman with Mitsubishi, John, what was the 103 00:05:41,320 --> 00:05:44,359 Speaker 1: thing you gleaned? How did this update? Okay, so the 104 00:05:44,440 --> 00:05:46,760 Speaker 1: update what it call those couple of you know, a 105 00:05:46,839 --> 00:05:49,720 Speaker 1: couple of important things. One is we didn't we were 106 00:05:49,880 --> 00:05:51,800 Speaker 1: thinking that we were going to go through more of 107 00:05:51,839 --> 00:05:55,960 Speaker 1: an inventory correction in the second half of last year, 108 00:05:56,000 --> 00:05:58,240 Speaker 1: and we really didn't get it. So we still kind 109 00:05:58,240 --> 00:06:00,840 Speaker 1: of have that oranging a little bit first quarter or so. 110 00:06:01,240 --> 00:06:04,600 Speaker 1: But when we move that's all very very temporary, transitory 111 00:06:04,640 --> 00:06:07,440 Speaker 1: and stuff like that. When we moved past that, uh, 112 00:06:07,480 --> 00:06:10,320 Speaker 1: you know, what we're seeing is basically seeing a pretty 113 00:06:10,400 --> 00:06:15,359 Speaker 1: decent residential construction sector, personal consumer. I mean, we're not 114 00:06:15,400 --> 00:06:17,600 Speaker 1: we're not back in the nineties or last seconde or 115 00:06:17,600 --> 00:06:19,400 Speaker 1: the eighties, but you know, we're running at that two 116 00:06:19,480 --> 00:06:23,360 Speaker 1: percent clip. And the consumer which is you know, relatively good. 117 00:06:24,000 --> 00:06:27,560 Speaker 1: We keep maintaining that business, spending a touch software on 118 00:06:27,600 --> 00:06:31,520 Speaker 1: the revisions, but you know, nothing outlandish. So we're all 119 00:06:31,560 --> 00:06:35,760 Speaker 1: trans we're all transforms. Is too people had gotten too pessimistic. 120 00:06:35,880 --> 00:06:39,200 Speaker 1: You know. What they did was market participants. They say said, gee, 121 00:06:39,240 --> 00:06:41,640 Speaker 1: you know, the economy is really going to underperform this year. 122 00:06:41,839 --> 00:06:45,240 Speaker 1: Inflation is really an underperformance on what's happening is the data. 123 00:06:45,320 --> 00:06:49,000 Speaker 1: The actual data rolling in is not quite as bad sentiment, 124 00:06:49,080 --> 00:06:50,760 Speaker 1: so they might set that out. And that was like, 125 00:06:50,880 --> 00:06:53,320 Speaker 1: you know, kind of crazy just because of time. I 126 00:06:53,360 --> 00:06:55,440 Speaker 1: want to get to the thing you've been dead on on, 127 00:06:55,640 --> 00:06:59,600 Speaker 1: and that's curve flattening. Vanilla two tends spread in a 128 00:06:59,760 --> 00:07:02,799 Speaker 1: very John Herman way. Is it a hundred basis points? 129 00:07:03,000 --> 00:07:06,359 Speaker 1: Spending the week beneath that? Give us an update on 130 00:07:06,520 --> 00:07:10,960 Speaker 1: what curve flattening tells you? What it What it tells 131 00:07:10,960 --> 00:07:13,320 Speaker 1: you is this, Uh, it's like you said, it's it's 132 00:07:13,360 --> 00:07:16,600 Speaker 1: plain vanilla, but you know we're we're an environment that 133 00:07:16,600 --> 00:07:18,560 Speaker 1: that kind of fits it. What it tells you is 134 00:07:18,640 --> 00:07:21,120 Speaker 1: is it tells you the economy is going to continue 135 00:07:21,120 --> 00:07:24,200 Speaker 1: to run at sort of this two percent clip. The 136 00:07:24,400 --> 00:07:26,320 Speaker 1: first thing. The second thing is inflation is going to 137 00:07:26,440 --> 00:07:29,520 Speaker 1: gradually grind its way up to about you know, one 138 00:07:29,560 --> 00:07:32,240 Speaker 1: point six, one point seven percent this year, one point 139 00:07:32,320 --> 00:07:35,920 Speaker 1: eight percent this year. That keeps the FED in the game. 140 00:07:36,000 --> 00:07:38,040 Speaker 1: Although people have priced to fed out, they're gonna have 141 00:07:38,040 --> 00:07:40,360 Speaker 1: to start pricing the fedback in. Uh. And what it 142 00:07:40,400 --> 00:07:43,600 Speaker 1: just tells you is that the economy doesn't have um 143 00:07:43,680 --> 00:07:46,600 Speaker 1: sort of the acceleration to move and break out of 144 00:07:46,640 --> 00:07:50,320 Speaker 1: this this sort of um stasis. It doesn't have the 145 00:07:50,360 --> 00:07:53,040 Speaker 1: ability to accelerate past it. But on the other hand, 146 00:07:53,760 --> 00:07:57,400 Speaker 1: we're grinding up enough that you know, the FED you 147 00:07:57,480 --> 00:08:00,040 Speaker 1: cannot really tries to fed out of the game. You 148 00:08:00,160 --> 00:08:02,760 Speaker 1: just can't do it. Okay, that was the mistake people. Man. 149 00:08:03,000 --> 00:08:06,280 Speaker 1: When we look at the curve flattening, are we do 150 00:08:06,360 --> 00:08:09,000 Speaker 1: we presume that it will lead to an inversion? And 151 00:08:09,120 --> 00:08:11,000 Speaker 1: what would that tell us about the prospect of recession? 152 00:08:11,360 --> 00:08:13,720 Speaker 1: I think, I think where you get you're getting this 153 00:08:14,080 --> 00:08:15,880 Speaker 1: on the back end of the curve. You do have 154 00:08:16,040 --> 00:08:18,960 Speaker 1: kind of you know, you have the inflation that's up 155 00:08:18,960 --> 00:08:21,760 Speaker 1: but not accelerat, but you have a negative rates everywhere 156 00:08:21,760 --> 00:08:24,440 Speaker 1: else in the world, and those investors need to get 157 00:08:24,520 --> 00:08:26,280 Speaker 1: some kind of yield, and they're coming here to get 158 00:08:26,280 --> 00:08:29,960 Speaker 1: their yields. So Europeans, Japanese, Asian accounts. I'm on the 159 00:08:29,960 --> 00:08:32,320 Speaker 1: phone with the Central Bank of Brazilian five minutes. You know, 160 00:08:32,440 --> 00:08:37,400 Speaker 1: they're looking to buy treasuries so that the overseas markets, 161 00:08:37,520 --> 00:08:39,720 Speaker 1: the investors are buying, so that keeps the back end 162 00:08:39,760 --> 00:08:42,360 Speaker 1: yeels low. So that's what part of our thesis. The 163 00:08:42,520 --> 00:08:45,360 Speaker 1: second part is that you cannot the economy is going 164 00:08:45,440 --> 00:08:47,959 Speaker 1: decent enough that you cannot price to fed out to zero, 165 00:08:48,280 --> 00:08:49,839 Speaker 1: which is you know people were talking about just a 166 00:08:49,840 --> 00:08:51,360 Speaker 1: couple of weeks ago, Oh, the father is gonna go 167 00:08:51,400 --> 00:08:53,920 Speaker 1: negative rates. I mean, you just can't. You know, you 168 00:08:53,960 --> 00:08:55,640 Speaker 1: may go negative rates, but it may not be until 169 00:08:55,640 --> 00:09:00,160 Speaker 1: like but you know, in but like in the foreseeable future, 170 00:09:00,400 --> 00:09:02,959 Speaker 1: you know, most likely you may see a couple of 171 00:09:03,040 --> 00:09:05,680 Speaker 1: rate hikes and there's your two cents later. You don't 172 00:09:05,679 --> 00:09:08,960 Speaker 1: get the escape velocity that pushes the back right meaningfully 173 00:09:08,960 --> 00:09:11,880 Speaker 1: above you, and you kind of keep yourself in this game, 174 00:09:12,080 --> 00:09:13,959 Speaker 1: right John, And when the minute we've got left with 175 00:09:14,040 --> 00:09:16,160 Speaker 1: you at the bottom of your latest research note, and 176 00:09:16,160 --> 00:09:19,360 Speaker 1: you are the king of Granular, you have an unemployment 177 00:09:19,480 --> 00:09:22,839 Speaker 1: rate fractionally below four percent out a couple of years, 178 00:09:23,480 --> 00:09:28,400 Speaker 1: and the labor participation rate goes nowhere. Why is fortunately? 179 00:09:28,760 --> 00:09:32,480 Speaker 1: Why is that we we unfortunately when you compare the US, 180 00:09:32,760 --> 00:09:34,800 Speaker 1: this is very unfortunate, and I wish we would get 181 00:09:34,800 --> 00:09:37,520 Speaker 1: more attention to this. When you compare the US to 182 00:09:37,559 --> 00:09:40,080 Speaker 1: the other G seven economies, we have the for the 183 00:09:40,120 --> 00:09:42,360 Speaker 1: prime age mails and primate females. We have one of 184 00:09:42,400 --> 00:09:46,280 Speaker 1: the lowest prime age participation rates for men and women 185 00:09:46,320 --> 00:09:48,920 Speaker 1: in the United States versus reside G seven economies. Only 186 00:09:48,960 --> 00:09:51,120 Speaker 1: Italy is worse than US. So that's first thing, So 187 00:09:51,160 --> 00:09:54,040 Speaker 1: that gives you should give you a reality check. The 188 00:09:54,080 --> 00:09:56,400 Speaker 1: other problem is we have you know, when you pass 189 00:09:56,480 --> 00:09:59,000 Speaker 1: the prime age is we've got baby boomers retiring and 190 00:09:59,040 --> 00:10:02,319 Speaker 1: exiting the labor for at a pace that's much faster 191 00:10:02,800 --> 00:10:07,000 Speaker 1: than what their natural offspring we are able to replace 192 00:10:07,040 --> 00:10:09,320 Speaker 1: them at because it's just it's just it's just too 193 00:10:09,360 --> 00:10:13,240 Speaker 1: slow and replacement. So you get the participation rate for 194 00:10:13,280 --> 00:10:16,439 Speaker 1: both reasons the prime age structure, and but we're also 195 00:10:16,480 --> 00:10:21,320 Speaker 1: seeing young kids not participating enough. Parents have to encourage it. 196 00:10:21,520 --> 00:10:25,600 Speaker 1: I mean, you're blaming me, You're blaming me. I'll say this, 197 00:10:25,760 --> 00:10:27,600 Speaker 1: I'll say this song. When you look back, you know 198 00:10:27,640 --> 00:10:29,800 Speaker 1: we had we had something similar in the early nineteen 199 00:10:29,960 --> 00:10:32,400 Speaker 1: sixties when you know when they did that wrote that 200 00:10:32,440 --> 00:10:35,160 Speaker 1: book to Graduate, you know with Dustin Hoffins, that that 201 00:10:35,200 --> 00:10:37,640 Speaker 1: was early seen. It wasn't in the end of the sixties. Earlier. 202 00:10:37,920 --> 00:10:39,280 Speaker 1: And what they were saying, they were saying, they were 203 00:10:39,320 --> 00:10:41,839 Speaker 1: saying that America was so wealthy at that time that 204 00:10:41,840 --> 00:10:46,160 Speaker 1: that kids were, you know, foregoing work because they are 205 00:10:46,200 --> 00:10:49,680 Speaker 1: parents like this. This is the talk you get. This 206 00:10:49,760 --> 00:10:53,880 Speaker 1: is people have, John Herman. This is the kind of 207 00:10:53,960 --> 00:10:57,600 Speaker 1: talk you get from newly made fathers who have brand 208 00:10:57,600 --> 00:11:01,400 Speaker 1: new babies and rail about teenagers and lazy college students. 209 00:11:03,480 --> 00:11:06,480 Speaker 1: Chad Herman, thank you so much, and congratulations again on 210 00:11:06,720 --> 00:11:10,240 Speaker 1: a newly born Hermit Scarlet Foom and Tom came another 211 00:11:10,280 --> 00:11:12,360 Speaker 1: hour of Bloombridge surveillance.