Speaker 1: Brought you by Bank of America, Mary Lynch. Investing in
Speaker 1: local communities, economies and a sustainable future. That's the power
Speaker 1: of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated
Speaker 1: Member s I p CEA. 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 Francie Lequai in London. David
Speaker 1: Gura off David sentence Francine a photo of his seats
Speaker 1: at the Super Bowl. It's unreally, he's like literally a kid,
Speaker 1: you not at the forty seven yard line. It's just
Speaker 1: I don't know which side he's on, like Patriots or
Speaker 1: falcons um. This is beyond well timed. We take it
Speaker 1: as a great privilege of Alan Krueger with us in
Speaker 1: Jobs Day. But Professor Krueger, I think there can never
Speaker 1: be a better time to speak to you now about
Speaker 1: the raging academic debate that we've seen within Trump presidential
Speaker 1: politics and that has led by Brad de Longa, Berkeley,
Speaker 1: Danny Roderick of Harvard. Jared Bernstein weighing in as well
Speaker 1: on the effects of NEFTA on jobs in America. And
Speaker 1: it comes down to what you and card did years ago,
Speaker 1: which is a distribution on low wage people. Let's start
Speaker 1: with uh, the obvious first question, has neft been good
Speaker 1: or bad for the American worker? Has been very positive
Speaker 1: for the US, including for the vast majority of American workers.
Speaker 1: You could give longer answers than that. Yeah, Um, I
Speaker 1: think first of all, having a stable, prosperous Mexico on
Speaker 1: our border is very much to our interest. Uh. Secondly,
Speaker 1: there are synergies between US in Mexico. UM. I believe
Speaker 1: that globalization and trade have had distributional effects. I think
Speaker 1: China has A much has had a much more profound
Speaker 1: effect on the wages of less skilled American workers than
Speaker 1: trade with Mexico has um so Uh, I think the
Speaker 1: research suggests that NAFTA has had a beneficial effect in
Speaker 1: terms of lowering prices for consumers, which have been particularly
Speaker 1: beneficial for low income Americans. So, professor, are we confusing
Speaker 1: globalization inequality, innovation and actually just wealth distribution. Well, we've
Speaker 1: had profound changes over the last thirty years and inequality
Speaker 1: and wealth distribution in the US and in many countries
Speaker 1: around the world. I think the driving force has been technology. Uh.
Speaker 1: Manufacturing has been losing jobs around the world because of
Speaker 1: increased productivity UM. At the same time, I think that
Speaker 1: trade does create winners and losers, and we haven't done
Speaker 1: enough to help those who were dislocated by trade. The
Speaker 1: what this were distributional to labor economists like yourself is
Speaker 1: a big deal. Defined distributional Professor Roderick Cuppett as a
Speaker 1: school in Cambridge called Harvard. Distributional for Danny Roderick is
Speaker 1: really front and center. Where Brad DeLong at Berkeley diminishes
Speaker 1: that what is distributional effects little. Distribution is very simple
Speaker 1: to define. It's who gets what, how we split up
Speaker 1: the pie, and growth has to do with the size
Speaker 1: of the pie. And I think one of the things
Speaker 1: we've seen over the last thirty years is that growth
Speaker 1: is necessary but not sufficient. You now, if you look
Speaker 1: at this fascinating new study by Rods Chatting and his
Speaker 1: co authors on the chances that children have higher income
Speaker 1: than their parents, we've seen a massive shift over the
Speaker 1: last forty years in the US, where we've gone from
Speaker 1: over nine children earning more than their parents at age
Speaker 1: thirty when you compare their comparable ages to about half
Speaker 1: for the most recent cohort. That's driven by distributional changes,
Speaker 1: not by slimmer growth in fantsy, this could jump into
Speaker 1: your frenzy. With one more question, we'll have Professor kruckerback.
Speaker 1: But Fretsy, that's the heart of the Mackenzie analysis of
Speaker 1: this year is our children and the effect on them. Right,
Speaker 1: But I mean, I guess that the question is even
Speaker 1: if you know, could you not suppose that you want
Speaker 1: to create a smaller pie? Right, But if you have
Speaker 1: protectionist measures, then you actually directly, uh, we distribute wealth
Speaker 1: as you make it. I think it's a very blunt instrument.
Speaker 1: If we want to redistribute wealth, I think there are
Speaker 1: far more efficient tools, more direct tools, particularly targeted to
Speaker 1: those who struggled the most, which are those at the
Speaker 1: very bottom of the wage distribution um, earned income, tax credit,
Speaker 1: minimum wage. I think are much more targeted tools to
Speaker 1: help that group, as opposed to trade, which is a
Speaker 1: very blunt instrument. Professor Krueger, he's a former chairman of
Speaker 1: the President's Council of Economic Advisers for President Obama, of
Speaker 1: course at Princeton University, and it's done particularly recent work
Speaker 1: among his many interests on the gig economy as well.
Speaker 1: Francie la Quad London and Tom Keane in your Francine
Speaker 1: Healthy here, you've done a lot of analysis falcons or
Speaker 1: patriots falcons. I go with whatever Alarion says, there you go.
Speaker 1: I'm sorry, Tom Okay, are you sure she gets one
Speaker 1: question in the next one hour? Robert dahlw us here
Speaker 1: and Bob, this is fabulous to have you here within
Speaker 1: American corporations and your optimism on the bull market. Are
Speaker 1: they the kind of jobs being formed that corporate agents
Speaker 1: used to do for us? Or is this a different
Speaker 1: job economy than what we think from Monsanto or DuPont
Speaker 1: or Eastman Kodak of another time they improved as the
Speaker 1: because of the cycle has going on early on remembers
Speaker 1: all that criticism all low paying jobs. That's not the
Speaker 1: case anymore. It's a wide swath across sectors and types
Speaker 1: of jobs and quality of jobs. So I think we're
Speaker 1: in a much better jobs picture than we were early
Speaker 1: in the cycle, and we couldn't get the jobs thing going?
Speaker 1: Is it part time America? No, it's not. Um. Yeah,
Speaker 1: are there a lot of part time jobs? Sure, I
Speaker 1: won't deny that, But a lot of these jobs are
Speaker 1: full time jobs. Companies are struggling to find good skilled workers,
Speaker 1: and so that's why the amount of time it's taken
Speaker 1: to fill an open position has doubled since the end
Speaker 1: of the Great Recession. That's why we're seeing wages slowly
Speaker 1: move higher. Uh. There the companies are hand up to
Speaker 1: get good skilled workers. It's a it's a much healthier place, Bob,
Speaker 1: who's hiring. If you look at the industry groups and
Speaker 1: we're talking a little bit about small businesses compared to
Speaker 1: bigger businesses earlier on on TV, it feels like a
Speaker 1: million years ago. But is there a wave in the
Speaker 1: business cycle that means they're hiring a lot more than
Speaker 1: everyone else? I know, I don't. I don't think so. Um. Look,
Speaker 1: we all know that over the long term, all the
Speaker 1: net job growth takes place in small companies, big businesses
Speaker 1: or net net approximately zero. So small companies are coming
Speaker 1: back around. They're still slow because they still have the
Speaker 1: healthcare concerns. They haven't had the tax relief that they're
Speaker 1: hoping to get. So uh, it's it's it's healthcare, it's technology, um,
Speaker 1: selected consumer areas, it's it's broadening out. In my view,
Speaker 1: I look at how it's broadening out, and it just
Speaker 1: assumes wage increase. Do you observe that? What do you
Speaker 1: hear from corporations and the analysts at moving about actual
Speaker 1: wage pressure companies? I don't see it yet. It's moderate,
Speaker 1: but it's improving. I think we boughtened out at about
Speaker 1: one and a half percent annual year over year wage growth.
Speaker 1: Now we're running two point nine, and my guess is
Speaker 1: that is heading into the threes. It's it's a slow
Speaker 1: creep um you know, four, sort of a flash point.
Speaker 1: I hope we don't get there anytime soon because that
Speaker 1: begins to pressure corporate profit margins. So more and more
Speaker 1: people are getting wage right gains, and that's a healthy
Speaker 1: thing for the consumer and therefore for the economy. So, Bob,
Speaker 1: you follow equities, and so you follow CEOs companies. Talk
Speaker 1: to me about about the behavior of a CEO. When
Speaker 1: does a cr a company decide to increase wages? Is
Speaker 1: it because they're in a shortage of supply? Because it's
Speaker 1: you know, extra skilled workers. Talk me through it. Yeah,
Speaker 1: they look at lots of things. They look at how
Speaker 1: hard is it to find the new incremental worker. They
Speaker 1: look intensively at people who leave. When nobody's leaving, they
Speaker 1: don't raise wages. But when the leavers increase, uh, wage
Speaker 1: rates have to move up. They look around them to
Speaker 1: see what other companies are doing. You know, the things
Speaker 1: you and I would do to pay attention to the environment.
Speaker 1: That's what they're doing, and that's leading to a slow
Speaker 1: but steady increase in wage rates. Do you see investment?
Speaker 1: I believe. I learned in school that investment creates jobs,
Speaker 1: which creates consumption. It's something like that. Is that rule
Speaker 1: still affect It's America. It's a good rule. We have
Speaker 1: not seen the pick up an investment. It's been absent
Speaker 1: um a significant degree this cycle for a whole bunch
Speaker 1: of reasons. Corporations just don't have a lot of confidence
Speaker 1: uh and conviction about the long term. Maybe the fiscal
Speaker 1: policy and tax reform that is on the agenda will
Speaker 1: cause them to begin to do more investment, more cash
Speaker 1: back home if we get repatriation, But so far we're
Speaker 1: not there. No, I mean, Bob, this is important, and
Speaker 1: one of the high points for Bloomberg this week was
Speaker 1: our conversation John Nichols Waite's UH a conversation with Mr
Speaker 1: mL of General Electric Take GE is an industrial proxy.
Speaker 1: I guess I could take U t X or you
Speaker 1: name the company. But the answer is, can Bob Doll
Speaker 1: be long GE like stocks? Yeah? You know GE in
Speaker 1: particular if they just can't get out their own way
Speaker 1: and the restructurings been late and the earnings games have
Speaker 1: been so so and the revenue growth, so yeah, we're
Speaker 1: pretty lukewarm one GE. But let's take an inger soul rand.
Speaker 1: You know related businesses that companies growing, uh, it has
Speaker 1: need for for for more workers and they're hiring some people. UM,
Speaker 1: So you've got to still be selective in these industrial areas.
Speaker 1: Our technology companies Bob hiring American yes, yes, and and
Speaker 1: also hiring foreigners. They're hiring both. UM. I think that um,
Speaker 1: when you look at the graduates from the big technology schools,
Speaker 1: their the ability of those folks to get jobs has
Speaker 1: moved up in in the last couple of years, but
Speaker 1: they're still hiring workers outside the U s Indian for
Speaker 1: the usual UM businesses that you see happening there. So
Speaker 1: it's it is more geography than just the US. For sure.
Speaker 1: Mr Trump may stop that, but for now, right, I
Speaker 1: was going to know, but I was going through That's
Speaker 1: exactly where I was going about. But if you have
Speaker 1: immigration bands and if this goes into like working visas,
Speaker 1: and if we see a lot of this UM you know,
Speaker 1: going in and being expanded, does it mean that it
Speaker 1: will actually create jobs in America or not necessarily because
Speaker 1: it could hurt profit at the same time. Yeah, I
Speaker 1: I think that once the more restrictions you put on,
Speaker 1: the less efficient the economy is going to be. And
Speaker 1: so uh, I'd love Mr Trump to make it it's
Speaker 1: so attractive for UM businesses to hire workers here through
Speaker 1: tax reform and economic growth that they do it naturally
Speaker 1: rather than putting up barriers that you can't. Yeah. But
Speaker 1: one more question. I want to go to Francine on
Speaker 1: the greater picture on this job stay getting folks about
Speaker 1: twenty minutes away from that report, Bob Doll with us
Speaker 1: with Uvin and then Bill Gross will be with this
Speaker 1: Neuvine as a bond house, that's your heritage out of Chicago.
Speaker 1: You do the coupon at what point, did the bonds
Speaker 1: become a competition for your equity world? To me, we're
Speaker 1: nowhere near that. I agree, um so, so we've seen
Speaker 1: the tenure treasury move from one thirties seven up to
Speaker 1: two fifty. Um, you know, without a three handle, I
Speaker 1: don't get worried, and even a three handle is not
Speaker 1: a big deal part of its pace. Tom If we
Speaker 1: get the three tomorrow morning, bonds will be competitive, but
Speaker 1: if it's a gradual thing, stocks will be fine. Bob,
Speaker 1: we're talking earlier about the equity market and when the
Speaker 1: bond coupon begins to compete. Let's combine in your work
Speaker 1: with the work of Bill gross over at Janis and
Speaker 1: this idea of equities and bonds. From where you sit,
Speaker 1: do you need to own both? Well, you know, diversification
Speaker 1: says the answer that question is yes. So I think
Speaker 1: it's a matter of proportion. And my view is whatever
Speaker 1: for normal is for you, risk reward, time, horizon, income, neis, etcetera.
Speaker 1: Just be you know, ten fifteen higher than normal in
Speaker 1: stocks than the fifteen lower in bonds because interest rates
Speaker 1: are probably gonna creep higher, which means we have a
Speaker 1: better economy, which we had better earnings. Therefore, I like
Speaker 1: stock sober bonds. We have a joke that we do here,
Speaker 1: which is with John Tucker the opening of the four
Speaker 1: oh one k envelope, which is we sedate him and
Speaker 1: he opens his four oh. Okay, they don't do that
Speaker 1: with me, folks, because I'm in the double leverage all
Speaker 1: cash fund. But but that's a new being product. But
Speaker 1: but Bob, how do I catch up if I'm behind.
Speaker 1: I've got a guy listening right now in New York.
Speaker 1: He's in his fancy maserati. He's a hedge fund guy
Speaker 1: who did four percent last year and he's scared, you
Speaker 1: know what. Or I got a retiree out in Iowa
Speaker 1: listening right now. Talk to them both about how you
Speaker 1: catch up. So, if you have three hundred dollars on
Speaker 1: the sidelines earmark for the stock market, and you don't
Speaker 1: know when to get in, put a hundred in now,
Speaker 1: take a hundred and dollar cost average over the next
Speaker 1: six months, and if we get a dip like we
Speaker 1: always do, take the last hundred and put in. Have
Speaker 1: the guts of your conviction at the hardest time when
Speaker 1: your stomach doesn't feel so good. Last year, that was
Speaker 1: January February is different, and should we worry about dollar strength? Bob?
Speaker 1: Every year is different. Obviously, dollar strength to the extent
Speaker 1: it continues, will provide a head win for a multinational
Speaker 1: companies here in the US. And so my view is
Speaker 1: overweight domestic companies, underweight the multinationals. Why fight the strength
Speaker 1: of the dollar plus weaker economic growth elsewhere? I want
Speaker 1: those domestic companies right, But what is the one thing?
Speaker 1: Is there a level on the dollar that which at
Speaker 1: which you start worrying. I think it's more about pace
Speaker 1: than it is level. If it's slow and steady increase,
Speaker 1: we can live with it. But it's these big gaps
Speaker 1: that we see from time to time that that that
Speaker 1: create problems. Um, look, we've already we've already been through
Speaker 1: and earnings recession over the last couple of years, and
Speaker 1: half the reason with the strengthen the dollar, that could
Speaker 1: come again, Let's hope not. Bob. I want to talk
Speaker 1: about a mystery stock, Bob doll us. When I do this,
Speaker 1: Bob can't talk about individual securities. That's part of the game, folks.
Speaker 1: How about a mystery stock trading at three time sales
Speaker 1: twenty seven times cash flow with a total enterprise value
Speaker 1: to eat but uh A forty four point seven three.
Speaker 1: All you need to know about that goofy ratio, folks,
Speaker 1: is this is a richly prized beast. I'll give you
Speaker 1: a hint. They're out in Seattle. How do you own
Speaker 1: an Amazon, Bob when you're when you're read Graham, Dodd
Speaker 1: and Coddle. Yeah, I'm with you. I you know, great
Speaker 1: business model. They've been doing great things. But my goodness
Speaker 1: is a price per per perfection. My view is it
Speaker 1: is every time I look there, you know, I buy
Speaker 1: something else where I can touch um the earnings and
Speaker 1: the cash flow and and and sleep at night over
Speaker 1: the valuation. It's an expensive stock and you know all
Speaker 1: they have to do is, you know, not quite come
Speaker 1: ruin revenues like they did last night, and they take
Speaker 1: the stock down some Bob, I need to push back
Speaker 1: a little bit on the the optimism that we see,
Speaker 1: for especially from equity folk like yourself. What's good out
Speaker 1: there in the world? Is there? There seems to be
Speaker 1: much more upside risk than there was only six months ago. Yeah, So,
Speaker 1: making no mistake about it, I'm I'm only looking for
Speaker 1: five for the stock market to from dividends that gives
Speaker 1: me a seven percent year. Stock selection is going to
Speaker 1: be necessary to get me to ten if I'm going
Speaker 1: to get there. So the long term return on stocks
Speaker 1: is tanna. I'm looking for half that, so it count
Speaker 1: me in the cautiously optimistic view. The tailwind is earnings.
Speaker 1: Earnings growth is pacing at eight percent for the fourth quarter.
Speaker 1: That's great news. That's great news. I mean, that's but
Speaker 1: that's what we expect, right, It's like three d beats
Speaker 1: above nominal GDP. But we haven't had eight percent for
Speaker 1: many quarters. That's that's that's the issue. And now we
Speaker 1: have that bit of a tailwind. Look if interest rates
Speaker 1: and inflation creep a bit higher at some point, we'll
Speaker 1: have a head wind called pressure on multiples, pressure on
Speaker 1: valuations to a company, the tailwind and that's why i'm
Speaker 1: five ish rather than ten or fifteen is ish, right.
Speaker 1: I'm writing down to your folks off the terminal where
Speaker 1: we are as we go to the job's report, Bob
Speaker 1: doll very quickly here, just in a matter of seconds,
Speaker 1: you can stay long equities given a two thousand statistics.
Speaker 1: I agree, better than expected job growth and uh, the
Speaker 1: fact is we're getting jobs and not having to pay
Speaker 1: workers more, at least in this report. Remember last month
Speaker 1: the number was wages up zero point four. You take
Speaker 1: the two uh and you get three year every year number,
Speaker 1: and that's kind of where we are. Bob Doland, Nuvine,
Speaker 1: thank you so much. Brought you by Bank of America,
Speaker 1: Mary Lynch. Dedicated to bringing our clients insights and solutions
Speaker 1: to meet the challenges of a transforming world. That's the
Speaker 1: power of global connections. Merrily Pierce Federan Smith Incorporated Member
Speaker 1: s I p C. Bill Gross joins us now with
Speaker 1: Jane's Capital Bill. This is the final jobs report for
Speaker 1: President Obama. I would suggest you want to step forward
Speaker 1: that this is a constructive jobs report for President Trump
Speaker 1: as well. Yes, and I think a little schizophrenic, as
Speaker 1: you just pointed out in the last minute or so.
Speaker 1: You know, jobs grow grow strong, but wages revised down
Speaker 1: by point two percent and instead of two point seven
Speaker 1: percent annual, now two point five. I suppose that's good
Speaker 1: for corporate profits to keep wages down, but ultimately we
Speaker 1: know that it's consumers and consumption that drives the economy,
Speaker 1: and if they don't earn enough money or if their
Speaker 1: money is only growing at two point five and that's
Speaker 1: a slow growth economy. So so scopheric report. And I
Speaker 1: can say how markets might interpret it one way or
Speaker 1: the other. I want to bring this right over building
Speaker 1: the bigger picture. This morning again futures advanced down, futures
Speaker 1: up near the twenty tho level. But I like what
Speaker 1: Bill said there about a schizophrenic tape bill. If we
Speaker 1: get a reflation from where you sit, is it a
Speaker 1: reflation that gives us an inflation boost or can we
Speaker 1: actually hope that the real economy will boost with the
Speaker 1: Trump stimulus? Well, sure, and that's the hope that real
Speaker 1: GDP which is now around two percent and actually for
Speaker 1: the quarter with Atlanta fed above three percent, but the
Speaker 1: hope is that they we're in a three to four
Speaker 1: percent real GDP economy. That was the promise from the
Speaker 1: Trump administration. That's the hope in terms of fiscal policy
Speaker 1: and stimulation, deregulation and so on that we look forward to.
Speaker 1: I remain skeptacle. I guess I remain You know the
Speaker 1: of the camp that the productivity is the key to
Speaker 1: real GDP growth. We know labor force growth is less
Speaker 1: than one percent, so it's all productivity and what produces
Speaker 1: productivity investment and investment hasn't been there, as you've discussed
Speaker 1: for the past thirty minutes. And to the extent that
Speaker 1: it remains an amic, then productivity will remain an emic.
Speaker 1: And I think we're stuck in a two percent real
Speaker 1: GDP world, no matter what the fiscal stimulation and no
Speaker 1: matter what the deregulation. One of the exogity shocks and folks,
Speaker 1: we have to remind ourselves that Mr Gross for decades
Speaker 1: has had an international perspective where dollar dynamics really are there.
Speaker 1: A key conversation bill this week was with Barry iken
Speaker 1: Green of the Universe University California at Berkeley, and Professor
Speaker 1: iken Green was adamant that Mr Trump will lead us
Speaker 1: towards dollar strength. Do you show up at every day
Speaker 1: at Janice just assuming dollar strength? No. I mean the
Speaker 1: dollar has had a good rally, and certainly against some
Speaker 1: emerging countries like the Mexican pays a significant one. So
Speaker 1: I don't assume continuing continuing dollar strength unless you know
Speaker 1: the FED stays ahead of the e c B or
Speaker 1: the FED stays ahead of the b O J, and
Speaker 1: you know at the moment that's not the case. Both
Speaker 1: those central banks are still uh, you know, stuck on
Speaker 1: quantitatives in significant proportions, and that's led to the dollar rally,
Speaker 1: and that's led to stronger growth in the United States.
Speaker 1: But you know, I think there's some ketchup coming into
Speaker 1: the equation from Japan and from Eural Land. Their growth
Speaker 1: rates are close to two percent as well. And so yeah,
Speaker 1: a dollar growth and dollar appreciation is certainly not assumed.
Speaker 1: I don't think we have a new Plaza Court ahead
Speaker 1: of us in which the dollar, the strong dollar, threatens
Speaker 1: the global economy and we have to take some significant measures.
Speaker 1: I don't see that. Bill Gross. Let me frame what
Speaker 1: keeps surveillance going, which is two perspectives. We've got your
Speaker 1: caution with a two percent GDP. Peter Hooper, the esteemed
Speaker 1: economist at Deutsche Bank Securities, will suggest a more optimistic attack.
Speaker 1: What is missing from the optimists? What are they missing
Speaker 1: about their belief that we do get good, if not great,
Speaker 1: economic growth and by definition a higher interest rate regime.
Speaker 1: How will that not happen? Well, I think they have
Speaker 1: a point. You know, if if you have a strong
Speaker 1: fiscal program, we don't know what it is but if
Speaker 1: it's a trillion to two trillion over ten years, you
Speaker 1: know that that's a plus a half a percent over
Speaker 1: the next several years. There's there's no doubt about that.
Speaker 1: And with the corporate taxes being cut, there's the potential
Speaker 1: for a near term stimulus. I'm I'm talking about real
Speaker 1: GDP over a relatively longer prevent time three to five
Speaker 1: to ten years. And I think we're stuck in this
Speaker 1: two zone. But yeah, the short term optimists, uh, you know,
Speaker 1: I'll grant them three perhaps over the next year or two.
Speaker 1: And that's a that's a positive for equity markets. But
Speaker 1: and and that's a positive as well for higher inflation
Speaker 1: and a positive for higher bond yields. And I can
Speaker 1: talk about that in a second. Well we'll talk about that,
Speaker 1: but you know, the inflation, the idea of of a
Speaker 1: higher bond yields. But critically here, I know, Bill, in
Speaker 1: your office at Janie, you've got a Bloomberg terminal. It's
Speaker 1: a vanity terminal. You barely look at it. You're still
Speaker 1: wedded to your Monroe trader. The fact is you're still
Speaker 1: back looking at the most basic calculator out there. Does
Speaker 1: your Monroe trader tell you you can buy bonds right now,
Speaker 1: whether full faith and credit or foreign or corporate. Yeah,
Speaker 1: I think to a certain extent. And the and the
Speaker 1: reason is tom is that other central banks are buying bonds.
Speaker 1: You know, the the U S went off the habit,
Speaker 1: so to speak to qui habit about two years ago.
Speaker 1: But the E C B, the b O J, the
Speaker 1: you know, the Bank of England are still in their
Speaker 1: plug into a hundred and fifty billion a month. That's
Speaker 1: a that's a lot of money. That's basically uh, you know,
Speaker 1: one to two trillion dollars a year going into the
Speaker 1: bond market. And that provides tremendous support. For instance, in
Speaker 1: terms of arbitrage, you can move into the treasuries at
Speaker 1: two forty five, you know, from buns at forty five
Speaker 1: basis points and pick up two hundred currency adjusted. You
Speaker 1: can even pick up you know, fifty to sixty basis
Speaker 1: points for buns to treasury. Same thing with j G
Speaker 1: B is at the basically tend the fifteen basis points.
Speaker 1: Huge arbitrage there are even currency adjusted so to the
Speaker 1: accentag you've got a hundred and fifty billion coming in
Speaker 1: a month from these central banks. Basically, it means that
Speaker 1: central banks are still supporting a low interest rate in
Speaker 1: our environment. I don't like that, but you have to
Speaker 1: recognize it as an investor. And this is very important, folks.
Speaker 1: What you just heard for Mr Gross there is a
Speaker 1: classic long short of what you do nation and nation
Speaker 1: given divergence? Are you picking up dimes in front of
Speaker 1: a bulldozer? Are you going to get run over by
Speaker 1: the Trump administration doing you're cute arbitrage? Well, I think
Speaker 1: you have to be careful, and that's why janison constraint.
Speaker 1: We've we've got a zero duration, but we've got the
Speaker 1: arbitrage between buns and treasuries. I'm of the persuasion, and
Speaker 1: I think I've talked about this last month that you
Speaker 1: know US treasury is at two point six or two
Speaker 1: point six five is a critical area and that's a
Speaker 1: technical type of interpretation, but it's a long term trend line, tom,
Speaker 1: you know, going down from four and it's been hit
Speaker 1: on the upside by seven, eight, nine times. Two point
Speaker 1: six is very critical. And if we get higher inflation
Speaker 1: and higher yields relative to two point six, then we've
Speaker 1: got a bear market. It is Job's day and we
Speaker 1: say good morning everyone. Bill Gross with us with Janice
Speaker 1: Capital Francine. Uh, let me talk to Mr Gross here
Speaker 1: about what we're observing in Europe. Bill, there are telltale
Speaker 1: signs of inflation in Europe in massive divergence. Is it
Speaker 1: an opportunity for you to see the difference in yield
Speaker 1: between Italy and Spain, or the difference and yield between
Speaker 1: Germany and Italy. Is that an opportunity when you're unconstrained
Speaker 1: like Bill Gross, Well, sure it's an opportunity. Uh. You know,
Speaker 1: the difference between Italy and Germany is really a risk
Speaker 1: spread and dependent to some extent on developments, and in Italy,
Speaker 1: same thing I suppose in France, although the the spreads
Speaker 1: are are very tight, but moving out and widening to
Speaker 1: some extent based upon fears of elections later in the year.
Speaker 1: So you know, it's a political type of situation in
Speaker 1: terms of those particular countries. But they're all, as you know,
Speaker 1: joined by the the ECB policy rate and the bigger
Speaker 1: arbitrage to my way of thinking is between buns and
Speaker 1: U S treasuries. Buns are so overvalued and under yielded
Speaker 1: at the point four or five percent one of these days.
Speaker 1: When quantitative easing disappears or at least as reduced, uh,
Speaker 1: you know what the ECB, then then buns will lose
Speaker 1: a bid and start to move higher in terms of yields.
Speaker 1: So I like that spread the best in terms of
Speaker 1: a short and along bill. Are you expecting if you
Speaker 1: look at the European recovery, is it for real? And
Speaker 1: if it is for real, when will the ECB start
Speaker 1: scaling back some of this QUEUEI I think it's for real.
Speaker 1: I mean the euro has gone down and and appreciated,
Speaker 1: which provides a push. And in terms of their partcular
Speaker 1: economy relative to the rest of the world, I think
Speaker 1: all global are many global economies are stronger simply because
Speaker 1: the Chinese over twelve eighteen month period of time have
Speaker 1: been so strong in terms of fiscal spending and debt
Speaker 1: accumulation and debt growth. You know, ultimately it's a potential disaster.
Speaker 1: Right for the moment, the Chinese are leading the way.
Speaker 1: They're the locomotive in terms of fiscal stimulation. Uh. The
Speaker 1: e c B is the locomotive in terms of monetary stimulation.
Speaker 1: So I think it's real temporarily um and and the
Speaker 1: Eurland can support a two percent growth rate, and therefore,
Speaker 1: you know, there's a huge arbitrage between as I mentioned,
Speaker 1: German boons and US treasury. Same thing with j GPS.
Speaker 1: It's an enormous spread and provides an opportunity. How are
Speaker 1: you expecting this ten in seventeen you have very possibly
Speaker 1: explosive political elections in France and German and Netherlands at
Speaker 1: a time where also Peter Navarro is accusing Germany of
Speaker 1: cheating America by having a surplus. Well, I think they
Speaker 1: have for a long time, you know, ever since uh,
Speaker 1: you know, the the the EU was was put together
Speaker 1: in terms of exchange rates, I think Germany came in
Speaker 1: at a very favored level and for a long long
Speaker 1: time now relative to their own neighbors, relative to Italy,
Speaker 1: relative to Spain, France, uh. And I think there's a
Speaker 1: common agreement there for for most observers that Germany is, yes,
Speaker 1: picking their own neighbors and picking the United States. Uh,
Speaker 1: you know, in terms of the euro uh, in terms
Speaker 1: of a significant surplus, what they have a nine percent
Speaker 1: trade balanced surplus against their own neighbors, and Germany says, well,
Speaker 1: that's just because we're doing well. I think it's because
Speaker 1: of how they came into the system itself. I want
Speaker 1: to remind everyone that Bill Gross was known as a
Speaker 1: bond exploiter for years. Uh well, Bill, help me here
Speaker 1: with something you made worldwide headlines on and surveillance years ago,
Speaker 1: which is where one day you said, yes, a Procter
Speaker 1: and Gamble growth of dividend can be a yield proxy.
Speaker 1: Are we still in the vicinity of a stock dividend
Speaker 1: and dividend growth being a yield equivalency or is that
Speaker 1: going to shift with a venge at some point? Well,
Speaker 1: I think you can. You can talk about an equivalency
Speaker 1: as long as the fear of deflation is off the board,
Speaker 1: and we're beginning to see that time right with the
Speaker 1: pots central for reflation as opposed to deflation. You know,
Speaker 1: a yield proxy Procter and Gamble two or two an
Speaker 1: af percent yield, you know, the high quality company than
Speaker 1: it is in a period of deflation. You know, provides
Speaker 1: or allows for risk to that dividend. And so, you know,
Speaker 1: yield proxies for stocks become more and more certain and
Speaker 1: more and more stable as we moved from d fflation
Speaker 1: to reflation. And so I think that is a consideration
Speaker 1: that stock investors relative to bonds should should Vader seems
Speaker 1: ages ago, Bill, and again, thanks for your generosity of
Speaker 1: joining us here on our fed coverage and our job
Speaker 1: stay coverage as well. We greatly appreciate it. But Bill Gross,
Speaker 1: you've had two weeks to observe Trump politics in the
Speaker 1: Trump presidency. Do you get a sense of an industrial
Speaker 1: policy from Mr Trump? Is there a vision yet of
Speaker 1: what we're going to see for the coming four years? Well,
Speaker 1: but perhaps in terms of at least proposals for lower
Speaker 1: corporate tax rates and proposals for less regulation. You know
Speaker 1: that to a certain extent as as a corporate policy.
Speaker 1: But uh, you know, Trump ran basically on a policy
Speaker 1: for middle class America for providing jobs, you know, presumably
Speaker 1: through industrialization, and perhaps those are tied together there. Um.
Speaker 1: You know, I'm yet to see proposals in terms of
Speaker 1: middle class America Wisconsin, Ohio, Michigan, the states that put
Speaker 1: him over the top. Um, So we'll have to wait
Speaker 1: and see. I'm fearful that when they lower corporate tax
Speaker 1: rates that there won't be a quid pro quo in
Speaker 1: terms of higher revenue um or or balanced type of revenue.
Speaker 1: I think those types of things always work out to
Speaker 1: the favor of corporations, and good for corporations in terms
Speaker 1: of the stock market, but bad for people in terms
Speaker 1: of you know, their percentage of of GDP. What does
Speaker 1: the Donald Trump presidency mean for the rest of the world?
Speaker 1: Bill This is one thing. You know, all the leaders
Speaker 1: are gathering today in Malta and the meeting, they're not
Speaker 1: talking about bregsit. It's all overshadowed about what Trump means
Speaker 1: for them and for this block. Sure and more uncertainty,
Speaker 1: not only in terms of fiscal policy and and um
Speaker 1: you know, government policies relative to taxation and export import
Speaker 1: you know, those are all important considerations uncertainty in terms
Speaker 1: of geopolitical as well. And so you know, I think
Speaker 1: in the last few weeks you've seen that in terms
Speaker 1: of markets, a recognition that you know, it's not all
Speaker 1: hunky dory in terms of the proposals, that the uncertainty
Speaker 1: that he brings to the presidency almost on a daily
Speaker 1: basis is uh, you know, has a potential real consequence.
Speaker 1: And so you know that builds in a risk factor
Speaker 1: and equity risk premium that's higher, and therefore you know,
Speaker 1: puts a damper on stock prices going forward. I think
Speaker 1: and I guess, and I'm asking you the biggest implication
Speaker 1: is what for emerging markets or if there is a
Speaker 1: trade war that actually materializes, what does it mean for
Speaker 1: these emerging markets involved and therefore for their bonds. Yeah,
Speaker 1: and certainly for the ones that there are specifically pointed out.
Speaker 1: I mean, a strong dollar is a negative concert wins
Speaker 1: for almost all emerging markets because almost all of them
Speaker 1: have high debt dollar debt relative to GDP, but from
Speaker 1: Mexico for others that you know, become targets for Trump,
Speaker 1: And obviously it's a negative in the short term, at
Speaker 1: least in terms of investor optimism. Bill. One final question
Speaker 1: that I've got to get to the important business of
Speaker 1: the day. The most mail I get on William Gross
Speaker 1: is about financial repression. Do you see any end of
Speaker 1: the financial repression, particularly for conservative savers, in the coming two,
Speaker 1: three or four years. Yeah, I I don't tell. And
Speaker 1: the end of the history of financial repression suggests that
Speaker 1: it could be thirty forty years. It's basically an attempt
Speaker 1: on the part of the government to uh to pay
Speaker 1: its bills and a and a cheaper fashion to reduce
Speaker 1: that policy rate below neutral for a long long time,
Speaker 1: and that that favors borrowers but at disadvantages those with
Speaker 1: long term liabilities and savers like insurance companies, banks, pension
Speaker 1: funds and the like. And so we see this in balance.
Speaker 1: As long as repression continues, we see the potential for
Speaker 1: imbalance is tipping economies and tipping markets over the long.
Speaker 1: Bill one final question, if I could I know Tom
Speaker 1: Brady's gonna end the game and go I'm going to Disneyland.
Speaker 1: I get all that, But what I want to know
Speaker 1: from Bill Gross is Kyle Shanahan, the offensive coach for
Speaker 1: the Atlanta Falcons. Is he gonna walk off the field
Speaker 1: and say I'm going to San Francisco. Is Shannon An't
Speaker 1: gonna coach the gross forty Niners? Well, I thank you. Will,
Speaker 1: I mean, that's that's the probability, and will he helped
Speaker 1: the forty Niners. The forty Niners need a quarterback very badly,
Speaker 1: and uh an offensive coordinator becoming head coach? What can
Speaker 1: they do without a quarterback? So we'll see. We'll see
Speaker 1: about that on draft day. Okay, Bill Gross, thank you
Speaker 1: so much. Moving forward to see how Gross does that
Speaker 1: John Tucker. He just migrates right past the Super Bowl
Speaker 1: to Draft Day. He's such a vision. He doesn't even
Speaker 1: do you know? He does not care about the Atlanta
Speaker 1: Falcons and the New England Patriots. Okay, thank you, Francy
Speaker 1: no Vomer help me here? Do you care about the
Speaker 1: Super Bowl? I spent all morning reading the seventeen page
Speaker 1: Super Bowl preview of the New York Post. Thank you
Speaker 1: New York Post, Thank you Bill Gross. This is Bloomberg.
Speaker 1: This is a joy, folks, to go from Alan Krueger
Speaker 1: to Robert dal to William Gross to one James Grant
Speaker 1: and his Grants Interest Rate Observer, and and Jim, I
Speaker 1: love what you wrote here. What card carrying contrarian can
Speaker 1: resist the invitation to fade the mass consensus of the
Speaker 1: New York Times, of Financial Times of New York, of
Speaker 1: The Guardian, the Washington Post, in the Brooklyn Heights Press
Speaker 1: and Cobble Hill News. The market's got a one way
Speaker 1: bet going right, It would seem to um. We propose
Speaker 1: that if there were a common stock and the ticker
Speaker 1: would say d j T in that stock, perhaps represented
Speaker 1: to certain someone in the White House, what you would
Speaker 1: observe is it seemed to continue to make new highs,
Speaker 1: or at least two apparently want to go up in
Speaker 1: the face of almost unanimous negative sentiment from the analytical community,
Speaker 1: mainly the press. It's a little bit glib, but then again,
Speaker 1: this is the mass media, right, I mean, yeah, Bill
Speaker 1: Francine laquoans to jump in here very quickly. Is this
Speaker 1: a gilded age? Can we just finally say, as you've
Speaker 1: written about for years, that it is a plutocracy and
Speaker 1: that everybody has gold knobs in their bathroom, you know,
Speaker 1: cotton cold knobs. Well, um, uh, there's not enough goal
Speaker 1: that seems to me. For one thing, in view of
Speaker 1: the evident tail risk, you know, Donald Trump, it seems
Speaker 1: to me is the is the avatar or the personification
Speaker 1: of what they call in the trade tail risk, meaning
Speaker 1: me um, the possibility of extreme outcomes, both good and bad. Um.
Speaker 1: Trump is uh will seemingly say anything. I don't think
Speaker 1: you'll actually do anything. But he is a most unpredictable entity.
Speaker 1: You know. The characteristic of this age with respect to
Speaker 1: money is that it is lighter than air. Indeed, it
Speaker 1: is the lacks any substance at all. It's you know,
Speaker 1: it's just a digital thing, it's an X or an OH,
Speaker 1: it's a piece of paper, and it's most tangible. And
Speaker 1: in the central banks, we have institutions that that manipulate
Speaker 1: interest rates the most critical prices in capitalism. So it's
Speaker 1: it's we have a unique presence, it seems to me
Speaker 1: in the White House, and we have an unusual, if
Speaker 1: not unique set of monetary institutions, all of which I
Speaker 1: think points to the again the likely hood of really
Speaker 1: really surprising outcomes. And I think it's really good for
Speaker 1: the journalism trades. I know we're in the journalism business
Speaker 1: with the scum of the earth. I think I read
Speaker 1: that some authority, but I think it's I think it's
Speaker 1: going to be wonderful. What twelve years he has or
Speaker 1: sixteen years? Jump in here, James, I guess the you know,
Speaker 1: my confusion in some points is that people say he's
Speaker 1: really unpredictable, But so far he's just implemented what his
Speaker 1: campaign was, right, It's just people didn't want to see
Speaker 1: it or believe it. Perhaps, although you'll know that he
Speaker 1: wants the dollar to go up and to go down.
Speaker 1: He thinks that the CIA is akin to the um,
Speaker 1: the old Nazi Party, and then it's the most beautiful
Speaker 1: thing in Washington. Um So, I think there is a
Speaker 1: great deal of tension between what he professes to believe
Speaker 1: in what he says. Um. I think that there that
Speaker 1: his better angel, for example, a better angels would be
Speaker 1: pointing to something in the way of a freer trade, um,
Speaker 1: that is to say, less bureaucratized trade. But then you
Speaker 1: wonder when he does such things as threatened to cut
Speaker 1: off whole countries because they seem to pique him. Um
Speaker 1: So I root for him, I've I've voted for I
Speaker 1: will actually voted for Mike Pence. Donald Trump happened to
Speaker 1: be on that same ticket, you know. But even for
Speaker 1: people who voted for him, I think every other day
Speaker 1: as a freak out on Tuesday, Thursday and Saturday or
Speaker 1: frind but Monday, Wednesday and Friday or just you know,
Speaker 1: you wonder, all right, what do you wonder about foreign policy?
Speaker 1: And when will the market starts take notice? Because for
Speaker 1: the moment it's largely discounted. Right. Uh, I'm not sure
Speaker 1: it's discounting because I'm not sure what people know what
Speaker 1: they ought to discount. Um, there's something um, as a
Speaker 1: friend of mine remarket is something charming about a a
Speaker 1: secretary of state Texas oil man named Rex. This promises
Speaker 1: something fresh and wholesome in America with regard to foreign policy.
Speaker 1: But that that's the secretary of state. Above him is
Speaker 1: his boss, the president, who seemingly Uh, I think the
Speaker 1: problem with respect to foreign policies, I don't know what
Speaker 1: the what the theory is. I know what the tweets are,
Speaker 1: but I'm not sure the overarching theory is. Jim Grant
Speaker 1: very quickly here. Uh, it's a huge event, folks, March fifteenth.
Speaker 1: It's a closed event, Grants Spring two thousand and seventeen
Speaker 1: conference with Chuck Royce, Robert Not and Peter Fisher. You're
Speaker 1: gonna have it at the Plaza in Manhattan? Are you
Speaker 1: timing that perfectly for another plaza accord? Are we going
Speaker 1: to see dollars strength, Jim Grant to perfectly coincide with
Speaker 1: your March fifteenth conference. I think if we see dollar strength,
Speaker 1: it will be against the will of the sitting president.
Speaker 1: I think Donald Trump is a low interest rate guy,
Speaker 1: and he's a he's a he's a weak dollar person,
Speaker 1: and what he wants is a profusion of bank credit
Speaker 1: at at easily accessible rates of interest. So I think
Speaker 1: that the surprise would regard to monetary policy, and the
Speaker 1: trouble administration will be um not a rigorous or an
Speaker 1: orthodox monetary policy of some of us hoped. I think
Speaker 1: it will be a reversion of something much more akin
Speaker 1: to what we had in the seventies, a central bank
Speaker 1: doing the president's bidding and doing it at low interest
Speaker 1: rates and with lots and lots of dollar bills. Interesting,
Speaker 1: Jim Grant, not enough time, We'll do this again, Mr
Speaker 1: Grant's Grant's interest rate Observer is truly I must read
Speaker 1: on Wall Street. Jim Grant, of course, looking for higher
Speaker 1: rates within the cacophony of where we are right now,
Speaker 1: joining yourself, this has become a real joy. Scott Mather
Speaker 1: is with PIMCO, and it's wonderful to talk to Mr
Speaker 1: Mather here an hour on from the Job's report that
Speaker 1: Dala up hundred and fourteen. We're about ready to print
Speaker 1: twenty again. It's a new Pimco rule. We can only
Speaker 1: talk to Scott when we print twenty. Scott, you are
Speaker 1: the torture of writing a joint memo with one Libby
Speaker 1: Cantroll about the new administration and investment, And the buried
Speaker 1: sentence is Scott Mather is more defensive. Why are you
Speaker 1: more defensive given President Trump? Well, that's uh, it's really
Speaker 1: because of the uncertainty that that we think is out there.
Speaker 1: I mean, the market right now is is really romancing
Speaker 1: all the all the sugar that can come from increased
Speaker 1: economic activity. But with respect to uncertainty, both on the
Speaker 1: political front, with respect of trade policy, with respect to
Speaker 1: some of the adjustment problems that that may that may
Speaker 1: occur in the next several quarters, we think the market's
Speaker 1: a little bit complacent. So when we look at pricing today,
Speaker 1: we're you know, in the corporate market where we're at
Speaker 1: multi year tights and spreads. When we look at implied
Speaker 1: volatility and the equity market and other measures of of
Speaker 1: sort of market complacency, it appears that people are just
Speaker 1: far too complacent about a sanguine, smooth path to a
Speaker 1: to a better destination, and we don't think that's likely.
Speaker 1: And then when we look at uh, say core interest rates,
Speaker 1: you look at tenure rates, we've obviously backed up and
Speaker 1: yield over a hundred basis points, So there's there's there's
Speaker 1: a lot more value in high quality fixed income uh
Speaker 1: than there was a couple of quarters ago. So that, yes,
Speaker 1: what's unlikely the the better destination or the smooth path.
Speaker 1: Smooth path is very very unlikely in our opinion, And
Speaker 1: when we just observe investor behavior so far, it seems
Speaker 1: like people have been sort of pricing in a very
Speaker 1: smooth path. And one of the things that we noted, uh,
Speaker 1: that Libby and I have been talking about, is that,
Speaker 1: you know, the markets focused on that destination, but really
Speaker 1: the easiest things to get done that are on trade policy,
Speaker 1: and those are some of the things that can cause
Speaker 1: the most investor consternation and and confusion and an an
Speaker 1: upset because clearly, you know, industry by industry, company by company,
Speaker 1: it creates big differences in winners and losers. And so
Speaker 1: when you look at the whole agenda, what's likely to
Speaker 1: get done, it's all those things that cause uh, sort
Speaker 1: of maximum adjustment problems, maximum pain that are more likely
Speaker 1: to happen first. And the things that happened from lower taxes,
Speaker 1: increased fiscal spending, infrastructure spending, and maybe even regulatory reform.
Speaker 1: You know, those those are things that probably take take
Speaker 1: hold later. What's priced in at the moment. Well, if
Speaker 1: you look at in terms of in terms of interest rates, right,
Speaker 1: we're looking at the market pricing in just about two
Speaker 1: hikes this year, two hikes next year. Um. If you
Speaker 1: look at what's priced in and other parts of the market.
Speaker 1: Once again, we would say the markets pricing in a
Speaker 1: return to a higher trajectory of growth, and that that's
Speaker 1: the only thing that can sort of explain uh, low
Speaker 1: high equity prices, low implied volatility, and very tight credit
Speaker 1: spreads at this point. And that's that's really what we're
Speaker 1: taking issue with. We're saying that the pricing for that
Speaker 1: is is probably incorrect. Help me here with a dividend proxy.
Speaker 1: I did a study Scott Mather of Proctor. I just
Speaker 1: picked on Procter and Gamble and they're divoting growth over
Speaker 1: twenty years and basically you've got a coupon this year
Speaker 1: off your investment of twenty years ago of about because
Speaker 1: of that dividend growth is dividend growth within the Pimco shop.
Speaker 1: Is it a proxy for yield or has there been
Speaker 1: a shift? Well, Candy a proxy uh for for yield
Speaker 1: of bed and there and there we would just not
Speaker 1: you know, it's good to look at the last twenty years,
Speaker 1: but you know that dividend growth has to be highly
Speaker 1: associated with nominal GDP growth. And for a big international company,
Speaker 1: it's not just the U S, it's the rest of
Speaker 1: the world. So we would just note that now that
Speaker 1: dominal GDP growth has been slowing substantially for years, at
Speaker 1: the same point in time that people have have been
Speaker 1: looking for fixed income proxies going into equities, counting on
Speaker 1: as an amount of dividend growth going forward. And and
Speaker 1: there's probably an intersection of of of of reality that's
Speaker 1: likely to hit when people see the dividends can't grow
Speaker 1: at the same rate they've grown in the last twenty years,
Speaker 1: and unless there's a big uptick in UH in that
Speaker 1: global GDP growth. What is the one thing that people
Speaker 1: are miss pricing when when you look at and Scott
Speaker 1: you talked a little bit about, you know, readjusting what's
Speaker 1: priced in. But is there something fundamentally that the markets
Speaker 1: are ignoring because they're either too afraid of looking at
Speaker 1: it or because we measure things wrong. Well, a couple
Speaker 1: of big things that come to mind. I mean, we
Speaker 1: we've been talking about this one for a while but
Speaker 1: we've pretty pretty persistently. We think investors have under priced
Speaker 1: the possibility of of central banks UH, and not just
Speaker 1: the FED, but global central banks engineering and return to
Speaker 1: inflation target and perhaps even an overshoot of inflation. So
Speaker 1: that's something we think investors are miss pricing, and that
Speaker 1: has implications of course, across all asset classes. And the
Speaker 1: other the other really big miss pricing is even despite
Speaker 1: recent historical experience where we've seen markets UH jump to
Speaker 1: very different valuations and volatility increased substantial and we've seen
Speaker 1: multiple examples of that in the past couple of years,
Speaker 1: even though real economic activities not jumping around, that's what
Speaker 1: happens in the financial markets for a host of reasons,
Speaker 1: and yet markets still UH continue to price volatility going
Speaker 1: forward very low, as if they know with certainty what
Speaker 1: the economic or policy trajectory looks like. And so those
Speaker 1: are the two big miss pricings were really focused on,
Speaker 1: Scott One final question, if we could get you onto
Speaker 1: your busy UH a day. When we look at the
Speaker 1: equity market, I think a lot of investors want to
Speaker 1: know the tilt of allocation of a four oh one
Speaker 1: K right now, is the tilt domestic is the tilt
Speaker 1: foreign investment, Well, that's a it's a good question. And
Speaker 1: our multi asset products where we focused on well, when
Speaker 1: we're not so far away from what we consider sort
Speaker 1: of a neutral allocation between fixed income and equities, we
Speaker 1: think that's the right way to be positioned right now.
Speaker 1: We do think when you look at valuations around the world,
Speaker 1: you know, you already had a huge bee pricing and
Speaker 1: domestically oriented US stocks, so yes, is there more value
Speaker 1: in other developed world stocks? Yes, when you look in
Speaker 1: Europe for instance, is an example. So we have slide
Speaker 1: overweights there. But it's uh, you know, it's not a
Speaker 1: time to be all in on for are all in
Speaker 1: on emerging markets or or any one sector. We're taking
Speaker 1: much more balanced approach. Scott Mather, thank you so much
Speaker 1: with PIMCO. Greatly appreciated this morning. Thanks for listening to
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm out on Twitter
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