Speaker 1: Global business news twenty four hours a day at Bloomberg
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Speaker 1: He's a Bloomberg Business Flash and I'm Karen Moscow. The
Speaker 1: US economy unexpectedly expanded at a faster pace in the
Speaker 1: fourth quarter than initially estimated, reflecting a higher value of
Speaker 1: business inventories, Gross domestic product the value of all goods
Speaker 1: and services produced to grow at a one percent annualized
Speaker 1: rate compared with an initial estimate of seven tenths percent,
Speaker 1: and consumer spending was revised lower. US Dock Index future
Speaker 1: has remained higher following that report, with SMP eveny futures
Speaker 1: of fourteen points, Dowie Mini futures of a hundred twenty two,
Speaker 1: and as DOCI many futures of thirty seven. We checked
Speaker 1: the markets every fifteen minutes throughout the trading day on
Speaker 1: Bloomberg Dacks in Germany's up two percent ten, your treasury
Speaker 1: down eleven thirty seconds, the yield one point seven five percent,
Speaker 1: Nimax crude oil of three point four per cent or
Speaker 1: a dollar eleven to thirty four seventeen a barrel Comax
Speaker 1: gold down six tenths percent or seven dollars ninety sense
Speaker 1: to twelve one announced, the euro a dollar O nine
Speaker 1: nine three the yen one thirteen point to five Euro
Speaker 1: area inflation looks to be cooling more than expected, but
Speaker 1: the prices in three other regions for the largest economies
Speaker 1: and missing estimates and strengthening the case for an expansion
Speaker 1: of the European Central Banks monetary stimulus in March. Consumer
Speaker 1: prices slit in Germany, France and Spain in the year
Speaker 1: to February figures show today and as a Bloomberg Business Flash,
Speaker 1: Thomas Scarlett Karen thank you so much. It is on
Speaker 1: Wall Street. The following is from Bloomberg View, opinions and
Speaker 1: commentary from Bloomberg columnists. A columnist for Bloomberg View. As
Speaker 1: Britain prepares to vote on leaving the European Union, President
Speaker 1: Obama is reportedly considering repeating as advice that it's stay
Speaker 1: silence is a better idea. Britain is our closest ally
Speaker 1: among the European powers, so it does often argue that
Speaker 1: its influence on the EU helps us, but it's up
Speaker 1: to the British to determine what relationship with Europe maximizes
Speaker 1: their influence in the world. Have an interest in that question,
Speaker 1: but it's not as great as theirs. If they think
Speaker 1: the EU sets back their interests, we can't reasonably ask
Speaker 1: them to stay because it suits us. The all administration
Speaker 1: is hinted that we might not have friendly trade relations
Speaker 1: with a post EU Britain. Carrying through that threat would
Speaker 1: be harmful to us and serve no purpose, which means
Speaker 1: it's not a credible threat. What we should tell the
Speaker 1: British is that we trust them to make their own
Speaker 1: decision and will have a strong relationship with them either way.
Speaker 1: I'm a entrepreneurio. For more of you, please go to
Speaker 1: Bloomberg View dot com or view go on the Bloomberg terminal.
Speaker 1: This has been Bloomberg View and bloom Review commentary is
Speaker 1: can be here in hourly weekdays on Bloomberg Radio. Tom
Speaker 1: keenan Scarlet Foo with us today Michael McKee on assignment.
Speaker 1: Scarlett has decided to step in. Scarlett earlier in the
Speaker 1: week we saw the drop in the British pound. We
Speaker 1: come back to one. But on a Monday ago, five
Speaker 1: days ago, if we said it was a one, that
Speaker 1: would have been handline um making, and I guess we
Speaker 1: stagger arounded you and Brexit and all that. But it
Speaker 1: really folds into the G twenty meeting where the presumption
Speaker 1: interview after interviews, nothing's gonna happen. I don't buy it. Well,
Speaker 1: here's where I'm a little confused, because people came into
Speaker 1: this meeting thinking that there would be some kind of
Speaker 1: grand proclamation or there would be some uh work done
Speaker 1: where they might agree to come together and say de
Speaker 1: value the UN once and for all and get rid
Speaker 1: of this drip drab policy or not even policy approach
Speaker 1: to weakening the UN. Then the fact that Jack Luke
Speaker 1: came out on Bloomberg Television and told our David Weston that, uh,
Speaker 1: that kind of thing is not in the offing. Had
Speaker 1: everyone worried. Why Why would everyone think that the G twenty,
Speaker 1: separate members, everyone has their own interest, would be able
Speaker 1: to come together and come and come with any agreement.
Speaker 1: And Virginia Mason, who nailed this this morning with her
Speaker 1: experience of trotism PIMCO. She was on a surveillance on television.
Speaker 1: She's a portfolio manager with a bigger, broader, sixty thousand
Speaker 1: foot view and Ms Masin have made clear what is
Speaker 1: needed if you're going to get drama is level of
Speaker 1: crisis and we're just not there. Villain bowder It's City
Speaker 1: group is adamant that without financial instability, institutions are not
Speaker 1: going to come to the rescue and they're not going
Speaker 1: to save the day. And in fact, that's where we
Speaker 1: are right now. And in fact, his shop only estimates
Speaker 1: fifty chance of a recession, So you're saying fifty fifty
Speaker 1: anything could happen at this point. Yeah, I mean, I
Speaker 1: I just find it into the weekend, and of course
Speaker 1: we'll all do our reading over the weekend, uh and
Speaker 1: of course as we go to Super Tuesday as well.
Speaker 1: But the basic idea of what didn't happen this week
Speaker 1: is just as important as the news that we saw.
Speaker 1: What didn't happen this week, we're institutions writing to the rescue.
Speaker 1: Where the Jack lou interview, there's a distinct lack of
Speaker 1: urgency heading into this G twenty and I would say
Speaker 1: a distinct lack of urgency the barge and to the
Speaker 1: gloom cruise point. You know, you see this out on
Speaker 1: the different articles of people very cautious and very upset
Speaker 1: feel they're sort of waiting for something in March and
Speaker 1: that waiting has to come from action from crisis, and
Speaker 1: the jump moves for now aren't there. I'll give you
Speaker 1: one exception, though, I'm looking at the Bloomberg folks. It's
Speaker 1: the red Knight put the photo out before. In social
Speaker 1: the basic idea of the entire screen is complacent oil
Speaker 1: oil up a dollar twenty two, except the German two
Speaker 1: year negative point five one shows that angst For American
Speaker 1: GDP analysis John Herman with Mitsubishi, John, what was the
Speaker 1: thing you gleaned? How did this update? Okay, so the
Speaker 1: update what it call those couple of you know, a
Speaker 1: couple of important things. One is we didn't we were
Speaker 1: thinking that we were going to go through more of
Speaker 1: an inventory correction in the second half of last year,
Speaker 1: and we really didn't get it. So we still kind
Speaker 1: of have that oranging a little bit first quarter or so.
Speaker 1: But when we move that's all very very temporary, transitory
Speaker 1: and stuff like that. When we moved past that, uh,
Speaker 1: you know, what we're seeing is basically seeing a pretty
Speaker 1: decent residential construction sector, personal consumer. I mean, we're not
Speaker 1: we're not back in the nineties or last seconde or
Speaker 1: the eighties, but you know, we're running at that two
Speaker 1: percent clip. And the consumer which is you know, relatively good.
Speaker 1: We keep maintaining that business, spending a touch software on
Speaker 1: the revisions, but you know, nothing outlandish. So we're all
Speaker 1: trans we're all transforms. Is too people had gotten too pessimistic.
Speaker 1: You know. What they did was market participants. They say said, gee,
Speaker 1: you know, the economy is really going to underperform this year.
Speaker 1: Inflation is really an underperformance on what's happening is the data.
Speaker 1: The actual data rolling in is not quite as bad sentiment,
Speaker 1: so they might set that out. And that was like,
Speaker 1: you know, kind of crazy just because of time. I
Speaker 1: want to get to the thing you've been dead on on,
Speaker 1: and that's curve flattening. Vanilla two tends spread in a
Speaker 1: very John Herman way. Is it a hundred basis points?
Speaker 1: Spending the week beneath that? Give us an update on
Speaker 1: what curve flattening tells you? What it What it tells
Speaker 1: you is this, Uh, it's like you said, it's it's
Speaker 1: plain vanilla, but you know we're we're an environment that
Speaker 1: that kind of fits it. What it tells you is
Speaker 1: is it tells you the economy is going to continue
Speaker 1: to run at sort of this two percent clip. The
Speaker 1: first thing. The second thing is inflation is going to
Speaker 1: gradually grind its way up to about you know, one
Speaker 1: point six, one point seven percent this year, one point
Speaker 1: eight percent this year. That keeps the FED in the game.
Speaker 1: Although people have priced to fed out, they're gonna have
Speaker 1: to start pricing the fedback in. Uh. And what it
Speaker 1: just tells you is that the economy doesn't have um
Speaker 1: sort of the acceleration to move and break out of
Speaker 1: this this sort of um stasis. It doesn't have the
Speaker 1: ability to accelerate past it. But on the other hand,
Speaker 1: we're grinding up enough that you know, the FED you
Speaker 1: cannot really tries to fed out of the game. You
Speaker 1: just can't do it. Okay, that was the mistake people. Man.
Speaker 1: When we look at the curve flattening, are we do
Speaker 1: we presume that it will lead to an inversion? And
Speaker 1: what would that tell us about the prospect of recession?
Speaker 1: I think, I think where you get you're getting this
Speaker 1: on the back end of the curve. You do have
Speaker 1: kind of you know, you have the inflation that's up
Speaker 1: but not accelerat, but you have a negative rates everywhere
Speaker 1: else in the world, and those investors need to get
Speaker 1: some kind of yield, and they're coming here to get
Speaker 1: their yields. So Europeans, Japanese, Asian accounts. I'm on the
Speaker 1: phone with the Central Bank of Brazilian five minutes. You know,
Speaker 1: they're looking to buy treasuries so that the overseas markets,
Speaker 1: the investors are buying, so that keeps the back end
Speaker 1: yeels low. So that's what part of our thesis. The
Speaker 1: second part is that you cannot the economy is going
Speaker 1: decent enough that you cannot price to fed out to zero,
Speaker 1: which is you know people were talking about just a
Speaker 1: couple of weeks ago, Oh, the father is gonna go
Speaker 1: negative rates. I mean, you just can't. You know, you
Speaker 1: may go negative rates, but it may not be until
Speaker 1: like but you know, in but like in the foreseeable future,
Speaker 1: you know, most likely you may see a couple of
Speaker 1: rate hikes and there's your two cents later. You don't
Speaker 1: get the escape velocity that pushes the back right meaningfully
Speaker 1: above you, and you kind of keep yourself in this game,
Speaker 1: right John, And when the minute we've got left with
Speaker 1: you at the bottom of your latest research note, and
Speaker 1: you are the king of Granular, you have an unemployment
Speaker 1: rate fractionally below four percent out a couple of years,
Speaker 1: and the labor participation rate goes nowhere. Why is fortunately?
Speaker 1: Why is that we we unfortunately when you compare the US,
Speaker 1: this is very unfortunate, and I wish we would get
Speaker 1: more attention to this. When you compare the US to
Speaker 1: the other G seven economies, we have the for the
Speaker 1: prime age mails and primate females. We have one of
Speaker 1: the lowest prime age participation rates for men and women
Speaker 1: in the United States versus reside G seven economies. Only
Speaker 1: Italy is worse than US. So that's first thing, So
Speaker 1: that gives you should give you a reality check. The
Speaker 1: other problem is we have you know, when you pass
Speaker 1: the prime age is we've got baby boomers retiring and
Speaker 1: exiting the labor for at a pace that's much faster
Speaker 1: than what their natural offspring we are able to replace
Speaker 1: them at because it's just it's just it's just too
Speaker 1: slow and replacement. So you get the participation rate for
Speaker 1: both reasons the prime age structure, and but we're also
Speaker 1: seeing young kids not participating enough. Parents have to encourage it.
Speaker 1: I mean, you're blaming me, You're blaming me. I'll say this,
Speaker 1: I'll say this song. When you look back, you know
Speaker 1: we had we had something similar in the early nineteen
Speaker 1: sixties when you know when they did that wrote that
Speaker 1: book to Graduate, you know with Dustin Hoffins, that that
Speaker 1: was early seen. It wasn't in the end of the sixties. Earlier.
Speaker 1: And what they were saying, they were saying, they were
Speaker 1: saying that America was so wealthy at that time that
Speaker 1: that kids were, you know, foregoing work because they are
Speaker 1: parents like this. This is the talk you get. This
Speaker 1: is people have, John Herman. This is the kind of
Speaker 1: talk you get from newly made fathers who have brand
Speaker 1: new babies and rail about teenagers and lazy college students.
Speaker 1: Chad Herman, thank you so much, and congratulations again on
Speaker 1: a newly born Hermit Scarlet Foom and Tom came another
Speaker 1: hour of Bloombridge surveillance.