WEBVTT - Bill Gross Says We're Stuck in a 2% Real GDP Environment 0:00:00.120 --> 0:00:02.920 Brought you by Bank of America, Mary Lynch. Investing in 0:00:03.000 --> 0:00:07.840 local communities, economies and a sustainable future. That's the power 0:00:08.080 --> 0:00:12.360 of global connections, Mary Lynch, Pierce Fenner and Smith Incorporated 0:00:12.760 --> 0:00:27.400 Member s I p CEA. Welcome to the Bloomberg Surveillance Podcast. 0:00:27.840 --> 0:00:31.520 I'm Tom Keene with David Gura. Daily we bring you 0:00:31.560 --> 0:00:36.600 insight from the best in economics, finance, investment, and international relations. 0:00:37.000 --> 0:00:41.600 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and 0:00:41.680 --> 0:00:49.760 of course on the Bloomberg Francie Lequai in London. David 0:00:49.800 --> 0:00:53.240 Gura off David sentence Francine a photo of his seats 0:00:53.240 --> 0:00:56.280 at the Super Bowl. It's unreally, he's like literally a kid, 0:00:56.320 --> 0:00:58.520 you not at the forty seven yard line. It's just 0:00:58.600 --> 0:01:00.920 I don't know which side he's on, like Patriots or 0:01:01.160 --> 0:01:05.160 falcons um. This is beyond well timed. We take it 0:01:05.760 --> 0:01:08.160 as a great privilege of Alan Krueger with us in 0:01:08.280 --> 0:01:11.640 Jobs Day. But Professor Krueger, I think there can never 0:01:11.720 --> 0:01:15.120 be a better time to speak to you now about 0:01:15.200 --> 0:01:19.760 the raging academic debate that we've seen within Trump presidential 0:01:19.760 --> 0:01:22.400 politics and that has led by Brad de Longa, Berkeley, 0:01:22.920 --> 0:01:26.679 Danny Roderick of Harvard. Jared Bernstein weighing in as well 0:01:27.160 --> 0:01:31.760 on the effects of NEFTA on jobs in America. And 0:01:31.800 --> 0:01:34.319 it comes down to what you and card did years ago, 0:01:34.920 --> 0:01:39.480 which is a distribution on low wage people. Let's start 0:01:39.520 --> 0:01:43.840 with uh, the obvious first question, has neft been good 0:01:43.920 --> 0:01:48.000 or bad for the American worker? Has been very positive 0:01:48.040 --> 0:01:52.480 for the US, including for the vast majority of American workers. 0:01:53.840 --> 0:02:00.520 You could give longer answers than that. Yeah, Um, I 0:02:00.600 --> 0:02:04.600 think first of all, having a stable, prosperous Mexico on 0:02:04.600 --> 0:02:08.400 our border is very much to our interest. Uh. Secondly, 0:02:09.160 --> 0:02:13.120 there are synergies between US in Mexico. UM. I believe 0:02:13.200 --> 0:02:17.600 that globalization and trade have had distributional effects. I think 0:02:17.720 --> 0:02:20.480 China has A much has had a much more profound 0:02:20.560 --> 0:02:25.240 effect on the wages of less skilled American workers than 0:02:25.880 --> 0:02:31.079 trade with Mexico has um so Uh, I think the 0:02:31.120 --> 0:02:35.200 research suggests that NAFTA has had a beneficial effect in 0:02:35.320 --> 0:02:38.720 terms of lowering prices for consumers, which have been particularly 0:02:38.720 --> 0:02:43.040 beneficial for low income Americans. So, professor, are we confusing 0:02:43.080 --> 0:02:50.119 globalization inequality, innovation and actually just wealth distribution. Well, we've 0:02:50.120 --> 0:02:53.120 had profound changes over the last thirty years and inequality 0:02:53.120 --> 0:02:55.680 and wealth distribution in the US and in many countries 0:02:55.720 --> 0:03:00.280 around the world. I think the driving force has been technology. Uh. 0:03:00.520 --> 0:03:04.360 Manufacturing has been losing jobs around the world because of 0:03:04.480 --> 0:03:08.600 increased productivity UM. At the same time, I think that 0:03:08.639 --> 0:03:10.880 trade does create winners and losers, and we haven't done 0:03:10.960 --> 0:03:13.680 enough to help those who were dislocated by trade. The 0:03:14.440 --> 0:03:18.320 what this were distributional to labor economists like yourself is 0:03:18.360 --> 0:03:22.480 a big deal. Defined distributional Professor Roderick Cuppett as a 0:03:22.520 --> 0:03:26.760 school in Cambridge called Harvard. Distributional for Danny Roderick is 0:03:26.840 --> 0:03:30.040 really front and center. Where Brad DeLong at Berkeley diminishes 0:03:30.040 --> 0:03:34.080 that what is distributional effects little. Distribution is very simple 0:03:34.120 --> 0:03:36.320 to define. It's who gets what, how we split up 0:03:36.320 --> 0:03:38.640 the pie, and growth has to do with the size 0:03:38.640 --> 0:03:40.680 of the pie. And I think one of the things 0:03:40.680 --> 0:03:43.200 we've seen over the last thirty years is that growth 0:03:43.280 --> 0:03:46.320 is necessary but not sufficient. You now, if you look 0:03:46.360 --> 0:03:49.120 at this fascinating new study by Rods Chatting and his 0:03:49.200 --> 0:03:53.360 co authors on the chances that children have higher income 0:03:53.400 --> 0:03:56.720 than their parents, we've seen a massive shift over the 0:03:56.760 --> 0:03:59.000 last forty years in the US, where we've gone from 0:03:59.000 --> 0:04:03.000 over nine children earning more than their parents at age 0:04:03.000 --> 0:04:06.800 thirty when you compare their comparable ages to about half 0:04:06.800 --> 0:04:10.160 for the most recent cohort. That's driven by distributional changes, 0:04:10.240 --> 0:04:12.640 not by slimmer growth in fantsy, this could jump into 0:04:12.680 --> 0:04:15.119 your frenzy. With one more question, we'll have Professor kruckerback. 0:04:15.320 --> 0:04:18.839 But Fretsy, that's the heart of the Mackenzie analysis of 0:04:18.880 --> 0:04:22.760 this year is our children and the effect on them. Right, 0:04:22.800 --> 0:04:24.640 But I mean, I guess that the question is even 0:04:24.640 --> 0:04:26.920 if you know, could you not suppose that you want 0:04:26.960 --> 0:04:30.480 to create a smaller pie? Right, But if you have 0:04:30.560 --> 0:04:35.560 protectionist measures, then you actually directly, uh, we distribute wealth 0:04:35.800 --> 0:04:38.440 as you make it. I think it's a very blunt instrument. 0:04:38.800 --> 0:04:41.120 If we want to redistribute wealth, I think there are 0:04:41.120 --> 0:04:44.880 far more efficient tools, more direct tools, particularly targeted to 0:04:44.880 --> 0:04:47.560 those who struggled the most, which are those at the 0:04:47.640 --> 0:04:51.279 very bottom of the wage distribution um, earned income, tax credit, 0:04:51.320 --> 0:04:55.320 minimum wage. I think are much more targeted tools to 0:04:55.440 --> 0:04:58.080 help that group, as opposed to trade, which is a 0:04:58.200 --> 0:05:02.800 very blunt instrument. Professor Krueger, he's a former chairman of 0:05:02.800 --> 0:05:07.320 the President's Council of Economic Advisers for President Obama, of 0:05:07.320 --> 0:05:12.640 course at Princeton University, and it's done particularly recent work 0:05:13.520 --> 0:05:17.440 among his many interests on the gig economy as well. 0:05:29.000 --> 0:05:32.240 Francie la Quad London and Tom Keane in your Francine 0:05:32.320 --> 0:05:35.320 Healthy here, you've done a lot of analysis falcons or 0:05:35.360 --> 0:05:41.000 patriots falcons. I go with whatever Alarion says, there you go. 0:05:41.200 --> 0:05:43.880 I'm sorry, Tom Okay, are you sure she gets one 0:05:43.960 --> 0:05:47.719 question in the next one hour? Robert dahlw us here 0:05:48.360 --> 0:05:51.679 and Bob, this is fabulous to have you here within 0:05:51.839 --> 0:05:56.880 American corporations and your optimism on the bull market. Are 0:05:57.040 --> 0:06:00.320 they the kind of jobs being formed that corporate agents 0:06:00.400 --> 0:06:03.120 used to do for us? Or is this a different 0:06:03.200 --> 0:06:07.800 job economy than what we think from Monsanto or DuPont 0:06:07.920 --> 0:06:15.240 or Eastman Kodak of another time they improved as the 0:06:15.279 --> 0:06:17.400 because of the cycle has going on early on remembers 0:06:17.480 --> 0:06:20.479 all that criticism all low paying jobs. That's not the 0:06:20.520 --> 0:06:24.799 case anymore. It's a wide swath across sectors and types 0:06:24.839 --> 0:06:29.640 of jobs and quality of jobs. So I think we're 0:06:29.160 --> 0:06:32.560 in a much better jobs picture than we were early 0:06:32.600 --> 0:06:34.760 in the cycle, and we couldn't get the jobs thing going? 0:06:35.160 --> 0:06:38.719 Is it part time America? No, it's not. Um. Yeah, 0:06:38.800 --> 0:06:40.359 are there a lot of part time jobs? Sure, I 0:06:40.360 --> 0:06:42.960 won't deny that, But a lot of these jobs are 0:06:43.279 --> 0:06:48.440 full time jobs. Companies are struggling to find good skilled workers, 0:06:48.480 --> 0:06:50.799 and so that's why the amount of time it's taken 0:06:50.839 --> 0:06:53.600 to fill an open position has doubled since the end 0:06:53.640 --> 0:06:57.400 of the Great Recession. That's why we're seeing wages slowly 0:06:57.440 --> 0:07:00.599 move higher. Uh. There the companies are hand up to 0:07:00.680 --> 0:07:04.360 get good skilled workers. It's a it's a much healthier place, Bob, 0:07:04.360 --> 0:07:07.040 who's hiring. If you look at the industry groups and 0:07:07.080 --> 0:07:09.279 we're talking a little bit about small businesses compared to 0:07:09.680 --> 0:07:12.200 bigger businesses earlier on on TV, it feels like a 0:07:12.240 --> 0:07:15.640 million years ago. But is there a wave in the 0:07:15.680 --> 0:07:17.960 business cycle that means they're hiring a lot more than 0:07:18.000 --> 0:07:22.240 everyone else? I know, I don't. I don't think so. Um. Look, 0:07:22.280 --> 0:07:25.120 we all know that over the long term, all the 0:07:25.160 --> 0:07:28.520 net job growth takes place in small companies, big businesses 0:07:28.600 --> 0:07:32.480 or net net approximately zero. So small companies are coming 0:07:32.520 --> 0:07:34.840 back around. They're still slow because they still have the 0:07:34.920 --> 0:07:38.760 healthcare concerns. They haven't had the tax relief that they're 0:07:38.800 --> 0:07:44.920 hoping to get. So uh, it's it's it's healthcare, it's technology, um, 0:07:45.080 --> 0:07:49.360 selected consumer areas, it's it's broadening out. In my view, 0:07:50.120 --> 0:07:53.680 I look at how it's broadening out, and it just 0:07:53.800 --> 0:07:58.880 assumes wage increase. Do you observe that? What do you 0:07:58.880 --> 0:08:03.120 hear from corporations and the analysts at moving about actual 0:08:03.200 --> 0:08:06.840 wage pressure companies? I don't see it yet. It's moderate, 0:08:06.880 --> 0:08:09.720 but it's improving. I think we boughtened out at about 0:08:09.960 --> 0:08:13.000 one and a half percent annual year over year wage growth. 0:08:13.040 --> 0:08:16.480 Now we're running two point nine, and my guess is 0:08:16.520 --> 0:08:19.200 that is heading into the threes. It's it's a slow 0:08:19.280 --> 0:08:22.480 creep um you know, four, sort of a flash point. 0:08:22.520 --> 0:08:24.440 I hope we don't get there anytime soon because that 0:08:24.520 --> 0:08:29.080 begins to pressure corporate profit margins. So more and more 0:08:29.080 --> 0:08:31.760 people are getting wage right gains, and that's a healthy 0:08:31.800 --> 0:08:34.520 thing for the consumer and therefore for the economy. So, Bob, 0:08:34.559 --> 0:08:37.439 you follow equities, and so you follow CEOs companies. Talk 0:08:37.480 --> 0:08:39.520 to me about about the behavior of a CEO. When 0:08:39.559 --> 0:08:42.840 does a cr a company decide to increase wages? Is 0:08:42.880 --> 0:08:47.720 it because they're in a shortage of supply? Because it's 0:08:48.000 --> 0:08:50.959 you know, extra skilled workers. Talk me through it. Yeah, 0:08:51.040 --> 0:08:52.719 they look at lots of things. They look at how 0:08:52.720 --> 0:08:56.400 hard is it to find the new incremental worker. They 0:08:56.480 --> 0:09:01.559 look intensively at people who leave. When nobody's leaving, they 0:09:01.559 --> 0:09:06.120 don't raise wages. But when the leavers increase, uh, wage 0:09:06.200 --> 0:09:08.679 rates have to move up. They look around them to 0:09:08.720 --> 0:09:11.040 see what other companies are doing. You know, the things 0:09:11.080 --> 0:09:13.600 you and I would do to pay attention to the environment. 0:09:13.640 --> 0:09:16.800 That's what they're doing, and that's leading to a slow 0:09:16.880 --> 0:09:19.800 but steady increase in wage rates. Do you see investment? 0:09:19.840 --> 0:09:23.480 I believe. I learned in school that investment creates jobs, 0:09:23.520 --> 0:09:26.560 which creates consumption. It's something like that. Is that rule 0:09:26.640 --> 0:09:29.760 still affect It's America. It's a good rule. We have 0:09:30.000 --> 0:09:32.920 not seen the pick up an investment. It's been absent 0:09:33.120 --> 0:09:36.720 um a significant degree this cycle for a whole bunch 0:09:36.760 --> 0:09:39.920 of reasons. Corporations just don't have a lot of confidence 0:09:40.320 --> 0:09:44.200 uh and conviction about the long term. Maybe the fiscal 0:09:44.280 --> 0:09:47.400 policy and tax reform that is on the agenda will 0:09:47.440 --> 0:09:50.319 cause them to begin to do more investment, more cash 0:09:50.360 --> 0:09:53.480 back home if we get repatriation, But so far we're 0:09:53.520 --> 0:09:55.599 not there. No, I mean, Bob, this is important, and 0:09:56.280 --> 0:09:58.160 one of the high points for Bloomberg this week was 0:09:58.200 --> 0:10:01.679 our conversation John Nichols Waite's UH a conversation with Mr 0:10:01.880 --> 0:10:05.680 mL of General Electric Take GE is an industrial proxy. 0:10:05.960 --> 0:10:07.520 I guess I could take U t X or you 0:10:07.600 --> 0:10:10.000 name the company. But the answer is, can Bob Doll 0:10:10.080 --> 0:10:15.840 be long GE like stocks? Yeah? You know GE in 0:10:15.880 --> 0:10:18.240 particular if they just can't get out their own way 0:10:18.280 --> 0:10:21.640 and the restructurings been late and the earnings games have 0:10:21.720 --> 0:10:24.079 been so so and the revenue growth, so yeah, we're 0:10:24.080 --> 0:10:27.640 pretty lukewarm one GE. But let's take an inger soul rand. 0:10:27.720 --> 0:10:32.320 You know related businesses that companies growing, uh, it has 0:10:32.480 --> 0:10:36.920 need for for for more workers and they're hiring some people. UM, 0:10:37.040 --> 0:10:40.360 So you've got to still be selective in these industrial areas. 0:10:40.800 --> 0:10:45.800 Our technology companies Bob hiring American yes, yes, and and 0:10:45.840 --> 0:10:50.600 also hiring foreigners. They're hiring both. UM. I think that um, 0:10:51.040 --> 0:10:55.920 when you look at the graduates from the big technology schools, 0:10:55.960 --> 0:10:59.199 their the ability of those folks to get jobs has 0:10:59.280 --> 0:11:01.600 moved up in in the last couple of years, but 0:11:01.720 --> 0:11:06.080 they're still hiring workers outside the U s Indian for 0:11:06.120 --> 0:11:09.880 the usual UM businesses that you see happening there. So 0:11:09.920 --> 0:11:13.480 it's it is more geography than just the US. For sure. 0:11:13.880 --> 0:11:16.280 Mr Trump may stop that, but for now, right, I 0:11:16.320 --> 0:11:17.839 was going to know, but I was going through That's 0:11:17.880 --> 0:11:19.520 exactly where I was going about. But if you have 0:11:19.600 --> 0:11:22.600 immigration bands and if this goes into like working visas, 0:11:22.679 --> 0:11:26.000 and if we see a lot of this UM you know, 0:11:26.080 --> 0:11:29.040 going in and being expanded, does it mean that it 0:11:29.080 --> 0:11:31.959 will actually create jobs in America or not necessarily because 0:11:32.000 --> 0:11:34.640 it could hurt profit at the same time. Yeah, I 0:11:34.640 --> 0:11:37.360 I think that once the more restrictions you put on, 0:11:37.760 --> 0:11:40.480 the less efficient the economy is going to be. And 0:11:40.520 --> 0:11:43.880 so uh, I'd love Mr Trump to make it it's 0:11:43.920 --> 0:11:48.080 so attractive for UM businesses to hire workers here through 0:11:48.200 --> 0:11:52.120 tax reform and economic growth that they do it naturally 0:11:52.200 --> 0:11:55.000 rather than putting up barriers that you can't. Yeah. But 0:11:55.280 --> 0:11:57.040 one more question. I want to go to Francine on 0:11:57.360 --> 0:12:00.680 the greater picture on this job stay getting folks about 0:12:00.679 --> 0:12:02.880 twenty minutes away from that report, Bob Doll with us 0:12:02.880 --> 0:12:05.679 with Uvin and then Bill Gross will be with this 0:12:05.800 --> 0:12:08.640 Neuvine as a bond house, that's your heritage out of Chicago. 0:12:09.000 --> 0:12:12.319 You do the coupon at what point, did the bonds 0:12:12.400 --> 0:12:15.760 become a competition for your equity world? To me, we're 0:12:15.760 --> 0:12:19.280 nowhere near that. I agree, um so, so we've seen 0:12:19.320 --> 0:12:21.920 the tenure treasury move from one thirties seven up to 0:12:21.960 --> 0:12:25.480 two fifty. Um, you know, without a three handle, I 0:12:25.480 --> 0:12:28.080 don't get worried, and even a three handle is not 0:12:28.160 --> 0:12:30.240 a big deal part of its pace. Tom If we 0:12:30.320 --> 0:12:33.120 get the three tomorrow morning, bonds will be competitive, but 0:12:33.160 --> 0:12:35.520 if it's a gradual thing, stocks will be fine. Bob, 0:12:35.559 --> 0:12:38.520 we're talking earlier about the equity market and when the 0:12:38.559 --> 0:12:43.240 bond coupon begins to compete. Let's combine in your work 0:12:43.400 --> 0:12:46.480 with the work of Bill gross over at Janis and 0:12:46.559 --> 0:12:50.520 this idea of equities and bonds. From where you sit, 0:12:50.880 --> 0:12:54.760 do you need to own both? Well, you know, diversification 0:12:54.880 --> 0:12:57.240 says the answer that question is yes. So I think 0:12:57.240 --> 0:13:00.000 it's a matter of proportion. And my view is whatever 0:13:00.040 --> 0:13:04.120 for normal is for you, risk reward, time, horizon, income, neis, etcetera. 0:13:04.400 --> 0:13:06.559 Just be you know, ten fifteen higher than normal in 0:13:06.640 --> 0:13:09.400 stocks than the fifteen lower in bonds because interest rates 0:13:09.400 --> 0:13:11.400 are probably gonna creep higher, which means we have a 0:13:11.400 --> 0:13:13.600 better economy, which we had better earnings. Therefore, I like 0:13:13.679 --> 0:13:16.400 stock sober bonds. We have a joke that we do here, 0:13:16.520 --> 0:13:18.960 which is with John Tucker the opening of the four 0:13:18.960 --> 0:13:21.840 oh one k envelope, which is we sedate him and 0:13:21.880 --> 0:13:23.640 he opens his four oh. Okay, they don't do that 0:13:23.679 --> 0:13:26.120 with me, folks, because I'm in the double leverage all 0:13:26.200 --> 0:13:29.920 cash fund. But but that's a new being product. But 0:13:29.920 --> 0:13:33.600 but Bob, how do I catch up if I'm behind. 0:13:34.040 --> 0:13:36.120 I've got a guy listening right now in New York. 0:13:36.400 --> 0:13:39.200 He's in his fancy maserati. He's a hedge fund guy 0:13:39.280 --> 0:13:42.400 who did four percent last year and he's scared, you 0:13:42.440 --> 0:13:45.560 know what. Or I got a retiree out in Iowa 0:13:45.640 --> 0:13:49.240 listening right now. Talk to them both about how you 0:13:49.320 --> 0:13:51.520 catch up. So, if you have three hundred dollars on 0:13:51.559 --> 0:13:54.400 the sidelines earmark for the stock market, and you don't 0:13:54.400 --> 0:13:56.440 know when to get in, put a hundred in now, 0:13:57.440 --> 0:13:59.880 take a hundred and dollar cost average over the next 0:14:00.320 --> 0:14:03.559 six months, and if we get a dip like we 0:14:03.679 --> 0:14:06.480 always do, take the last hundred and put in. Have 0:14:06.679 --> 0:14:09.880 the guts of your conviction at the hardest time when 0:14:09.880 --> 0:14:11.959 your stomach doesn't feel so good. Last year, that was 0:14:12.040 --> 0:14:16.959 January February is different, and should we worry about dollar strength? Bob? 0:14:17.600 --> 0:14:20.640 Every year is different. Obviously, dollar strength to the extent 0:14:20.760 --> 0:14:24.600 it continues, will provide a head win for a multinational 0:14:24.640 --> 0:14:27.320 companies here in the US. And so my view is 0:14:27.480 --> 0:14:33.080 overweight domestic companies, underweight the multinationals. Why fight the strength 0:14:33.120 --> 0:14:36.200 of the dollar plus weaker economic growth elsewhere? I want 0:14:36.240 --> 0:14:38.960 those domestic companies right, But what is the one thing? 0:14:39.280 --> 0:14:41.480 Is there a level on the dollar that which at 0:14:41.560 --> 0:14:45.200 which you start worrying. I think it's more about pace 0:14:45.280 --> 0:14:48.960 than it is level. If it's slow and steady increase, 0:14:49.080 --> 0:14:51.320 we can live with it. But it's these big gaps 0:14:51.800 --> 0:14:53.600 that we see from time to time that that that 0:14:53.800 --> 0:14:57.200 create problems. Um, look, we've already we've already been through 0:14:57.200 --> 0:14:59.760 and earnings recession over the last couple of years, and 0:15:00.120 --> 0:15:02.320 half the reason with the strengthen the dollar, that could 0:15:02.320 --> 0:15:05.280 come again, Let's hope not. Bob. I want to talk 0:15:05.320 --> 0:15:08.520 about a mystery stock, Bob doll us. When I do this, 0:15:08.560 --> 0:15:11.760 Bob can't talk about individual securities. That's part of the game, folks. 0:15:12.280 --> 0:15:15.120 How about a mystery stock trading at three time sales 0:15:15.640 --> 0:15:19.640 twenty seven times cash flow with a total enterprise value 0:15:19.680 --> 0:15:22.880 to eat but uh A forty four point seven three. 0:15:23.200 --> 0:15:25.600 All you need to know about that goofy ratio, folks, 0:15:25.960 --> 0:15:28.760 is this is a richly prized beast. I'll give you 0:15:28.800 --> 0:15:31.760 a hint. They're out in Seattle. How do you own 0:15:31.800 --> 0:15:35.440 an Amazon, Bob when you're when you're read Graham, Dodd 0:15:35.480 --> 0:15:39.080 and Coddle. Yeah, I'm with you. I you know, great 0:15:39.080 --> 0:15:42.000 business model. They've been doing great things. But my goodness 0:15:42.200 --> 0:15:45.240 is a price per per perfection. My view is it 0:15:45.560 --> 0:15:48.040 is every time I look there, you know, I buy 0:15:48.120 --> 0:15:52.360 something else where I can touch um the earnings and 0:15:52.400 --> 0:15:54.800 the cash flow and and and sleep at night over 0:15:54.840 --> 0:15:57.560 the valuation. It's an expensive stock and you know all 0:15:57.600 --> 0:15:59.800 they have to do is, you know, not quite come 0:16:00.080 --> 0:16:02.640 ruin revenues like they did last night, and they take 0:16:02.680 --> 0:16:05.040 the stock down some Bob, I need to push back 0:16:05.040 --> 0:16:07.200 a little bit on the the optimism that we see, 0:16:07.240 --> 0:16:11.200 for especially from equity folk like yourself. What's good out 0:16:11.200 --> 0:16:13.280 there in the world? Is there? There seems to be 0:16:13.360 --> 0:16:16.680 much more upside risk than there was only six months ago. Yeah, So, 0:16:16.800 --> 0:16:19.160 making no mistake about it, I'm I'm only looking for 0:16:19.320 --> 0:16:22.160 five for the stock market to from dividends that gives 0:16:22.240 --> 0:16:24.880 me a seven percent year. Stock selection is going to 0:16:25.000 --> 0:16:26.880 be necessary to get me to ten if I'm going 0:16:26.920 --> 0:16:29.400 to get there. So the long term return on stocks 0:16:29.400 --> 0:16:31.800 is tanna. I'm looking for half that, so it count 0:16:31.840 --> 0:16:35.640 me in the cautiously optimistic view. The tailwind is earnings. 0:16:36.280 --> 0:16:40.200 Earnings growth is pacing at eight percent for the fourth quarter. 0:16:40.320 --> 0:16:42.720 That's great news. That's great news. I mean, that's but 0:16:42.800 --> 0:16:45.200 that's what we expect, right, It's like three d beats 0:16:45.240 --> 0:16:48.600 above nominal GDP. But we haven't had eight percent for 0:16:48.800 --> 0:16:51.640 many quarters. That's that's that's the issue. And now we 0:16:51.720 --> 0:16:54.760 have that bit of a tailwind. Look if interest rates 0:16:54.800 --> 0:16:57.760 and inflation creep a bit higher at some point, we'll 0:16:57.800 --> 0:17:01.600 have a head wind called pressure on multiples, pressure on 0:17:01.720 --> 0:17:04.800 valuations to a company, the tailwind and that's why i'm 0:17:04.840 --> 0:17:07.320 five ish rather than ten or fifteen is ish, right. 0:17:07.359 --> 0:17:09.800 I'm writing down to your folks off the terminal where 0:17:09.800 --> 0:17:12.560 we are as we go to the job's report, Bob 0:17:12.600 --> 0:17:15.360 doll very quickly here, just in a matter of seconds, 0:17:15.480 --> 0:17:21.199 you can stay long equities given a two thousand statistics. 0:17:21.600 --> 0:17:25.040 I agree, better than expected job growth and uh, the 0:17:25.080 --> 0:17:27.359 fact is we're getting jobs and not having to pay 0:17:27.640 --> 0:17:30.760 workers more, at least in this report. Remember last month 0:17:31.000 --> 0:17:33.880 the number was wages up zero point four. You take 0:17:33.880 --> 0:17:37.000 the two uh and you get three year every year number, 0:17:37.000 --> 0:17:38.840 and that's kind of where we are. Bob Doland, Nuvine, 0:17:38.920 --> 0:17:49.680 thank you so much. Brought you by Bank of America, 0:17:49.760 --> 0:17:53.960 Mary Lynch. Dedicated to bringing our clients insights and solutions 0:17:54.280 --> 0:17:57.600 to meet the challenges of a transforming world. That's the 0:17:57.640 --> 0:18:03.280 power of global connections. Merrily Pierce Federan Smith Incorporated Member 0:18:03.920 --> 0:18:10.080 s I p C. Bill Gross joins us now with 0:18:10.760 --> 0:18:13.919 Jane's Capital Bill. This is the final jobs report for 0:18:13.960 --> 0:18:17.400 President Obama. I would suggest you want to step forward 0:18:17.440 --> 0:18:20.959 that this is a constructive jobs report for President Trump 0:18:21.040 --> 0:18:24.920 as well. Yes, and I think a little schizophrenic, as 0:18:24.920 --> 0:18:27.040 you just pointed out in the last minute or so. 0:18:27.600 --> 0:18:31.600 You know, jobs grow grow strong, but wages revised down 0:18:31.640 --> 0:18:34.640 by point two percent and instead of two point seven 0:18:34.640 --> 0:18:38.160 percent annual, now two point five. I suppose that's good 0:18:38.200 --> 0:18:41.040 for corporate profits to keep wages down, but ultimately we 0:18:41.080 --> 0:18:44.840 know that it's consumers and consumption that drives the economy, 0:18:44.880 --> 0:18:47.520 and if they don't earn enough money or if their 0:18:48.000 --> 0:18:50.400 money is only growing at two point five and that's 0:18:50.440 --> 0:18:53.560 a slow growth economy. So so scopheric report. And I 0:18:53.560 --> 0:18:55.639 can say how markets might interpret it one way or 0:18:55.680 --> 0:18:57.600 the other. I want to bring this right over building 0:18:57.640 --> 0:19:00.600 the bigger picture. This morning again futures advanced down, futures 0:19:00.680 --> 0:19:04.239 up near the twenty tho level. But I like what 0:19:04.280 --> 0:19:07.280 Bill said there about a schizophrenic tape bill. If we 0:19:07.440 --> 0:19:11.520 get a reflation from where you sit, is it a 0:19:11.560 --> 0:19:15.040 reflation that gives us an inflation boost or can we 0:19:15.119 --> 0:19:19.240 actually hope that the real economy will boost with the 0:19:19.280 --> 0:19:23.560 Trump stimulus? Well, sure, and that's the hope that real 0:19:23.640 --> 0:19:27.480 GDP which is now around two percent and actually for 0:19:27.560 --> 0:19:31.040 the quarter with Atlanta fed above three percent, but the 0:19:31.119 --> 0:19:32.840 hope is that they we're in a three to four 0:19:32.920 --> 0:19:36.159 percent real GDP economy. That was the promise from the 0:19:36.160 --> 0:19:39.440 Trump administration. That's the hope in terms of fiscal policy 0:19:39.480 --> 0:19:43.720 and stimulation, deregulation and so on that we look forward to. 0:19:44.160 --> 0:19:47.639 I remain skeptacle. I guess I remain You know the 0:19:47.720 --> 0:19:51.439 of the camp that the productivity is the key to 0:19:52.000 --> 0:19:54.640 real GDP growth. We know labor force growth is less 0:19:54.640 --> 0:19:57.800 than one percent, so it's all productivity and what produces 0:19:57.800 --> 0:20:01.960 productivity investment and investment hasn't been there, as you've discussed 0:20:02.040 --> 0:20:04.159 for the past thirty minutes. And to the extent that 0:20:04.240 --> 0:20:07.720 it remains an amic, then productivity will remain an emic. 0:20:07.840 --> 0:20:10.000 And I think we're stuck in a two percent real 0:20:10.080 --> 0:20:14.159 GDP world, no matter what the fiscal stimulation and no 0:20:14.200 --> 0:20:17.840 matter what the deregulation. One of the exogity shocks and folks, 0:20:17.920 --> 0:20:20.760 we have to remind ourselves that Mr Gross for decades 0:20:21.119 --> 0:20:26.400 has had an international perspective where dollar dynamics really are there. 0:20:26.440 --> 0:20:29.080 A key conversation bill this week was with Barry iken 0:20:29.160 --> 0:20:33.440 Green of the Universe University California at Berkeley, and Professor 0:20:33.480 --> 0:20:36.040 iken Green was adamant that Mr Trump will lead us 0:20:36.040 --> 0:20:39.560 towards dollar strength. Do you show up at every day 0:20:39.560 --> 0:20:45.639 at Janice just assuming dollar strength? No. I mean the 0:20:45.760 --> 0:20:48.439 dollar has had a good rally, and certainly against some 0:20:48.600 --> 0:20:52.639 emerging countries like the Mexican pays a significant one. So 0:20:52.680 --> 0:20:56.879 I don't assume continuing continuing dollar strength unless you know 0:20:56.920 --> 0:20:59.280 the FED stays ahead of the e c B or 0:20:59.320 --> 0:21:01.480 the FED stays ahead of the b O J, and 0:21:01.840 --> 0:21:04.000 you know at the moment that's not the case. Both 0:21:04.000 --> 0:21:07.479 those central banks are still uh, you know, stuck on 0:21:07.840 --> 0:21:13.159 quantitatives in significant proportions, and that's led to the dollar rally, 0:21:13.240 --> 0:21:15.960 and that's led to stronger growth in the United States. 0:21:16.000 --> 0:21:20.040 But you know, I think there's some ketchup coming into 0:21:20.119 --> 0:21:23.959 the equation from Japan and from Eural Land. Their growth 0:21:24.040 --> 0:21:26.800 rates are close to two percent as well. And so yeah, 0:21:26.960 --> 0:21:31.120 a dollar growth and dollar appreciation is certainly not assumed. 0:21:31.240 --> 0:21:33.920 I don't think we have a new Plaza Court ahead 0:21:33.920 --> 0:21:36.720 of us in which the dollar, the strong dollar, threatens 0:21:36.760 --> 0:21:40.119 the global economy and we have to take some significant measures. 0:21:40.160 --> 0:21:42.560 I don't see that. Bill Gross. Let me frame what 0:21:42.760 --> 0:21:45.560 keeps surveillance going, which is two perspectives. We've got your 0:21:45.600 --> 0:21:48.840 caution with a two percent GDP. Peter Hooper, the esteemed 0:21:48.840 --> 0:21:53.040 economist at Deutsche Bank Securities, will suggest a more optimistic attack. 0:21:53.600 --> 0:21:57.440 What is missing from the optimists? What are they missing 0:21:57.880 --> 0:22:01.439 about their belief that we do get good, if not great, 0:22:01.600 --> 0:22:05.760 economic growth and by definition a higher interest rate regime. 0:22:06.119 --> 0:22:09.600 How will that not happen? Well, I think they have 0:22:09.600 --> 0:22:11.919 a point. You know, if if you have a strong 0:22:12.359 --> 0:22:14.800 fiscal program, we don't know what it is but if 0:22:14.800 --> 0:22:17.840 it's a trillion to two trillion over ten years, you 0:22:17.840 --> 0:22:20.240 know that that's a plus a half a percent over 0:22:20.280 --> 0:22:23.200 the next several years. There's there's no doubt about that. 0:22:23.280 --> 0:22:26.040 And with the corporate taxes being cut, there's the potential 0:22:26.119 --> 0:22:29.480 for a near term stimulus. I'm I'm talking about real 0:22:29.560 --> 0:22:33.080 GDP over a relatively longer prevent time three to five 0:22:33.160 --> 0:22:35.399 to ten years. And I think we're stuck in this 0:22:35.480 --> 0:22:39.520 two zone. But yeah, the short term optimists, uh, you know, 0:22:39.840 --> 0:22:43.200 I'll grant them three perhaps over the next year or two. 0:22:43.240 --> 0:22:46.080 And that's a that's a positive for equity markets. But 0:22:46.160 --> 0:22:50.200 and and that's a positive as well for higher inflation 0:22:50.240 --> 0:22:52.800 and a positive for higher bond yields. And I can 0:22:52.800 --> 0:22:54.919 talk about that in a second. Well we'll talk about that, 0:22:54.960 --> 0:22:56.960 but you know, the inflation, the idea of of a 0:22:57.000 --> 0:23:00.119 higher bond yields. But critically here, I know, Bill, in 0:23:00.200 --> 0:23:02.680 your office at Janie, you've got a Bloomberg terminal. It's 0:23:02.680 --> 0:23:05.560 a vanity terminal. You barely look at it. You're still 0:23:05.560 --> 0:23:08.440 wedded to your Monroe trader. The fact is you're still 0:23:08.480 --> 0:23:12.000 back looking at the most basic calculator out there. Does 0:23:12.040 --> 0:23:16.000 your Monroe trader tell you you can buy bonds right now, 0:23:16.280 --> 0:23:20.840