WEBVTT - Hilltop's Grant: 'Huge' Mistake for Fed to Raise Rates (Audio)

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<v Speaker 1>Broadcasting live to New York, Bloomberg eleven, Rio to Washington,

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<v Speaker 1>d C, Bloomber to Boston, Bloomberg twelve to San Francisco,

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<v Speaker 1>Bloomberg to the Country, sees at General one, nine and

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<v Speaker 1>around the globe the Bloomberg Radio Plus athen Bloomberg dot com.

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<v Speaker 1>This is taking Stock. I'm Kathleen Hayes, my co host

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<v Speaker 1>of pim Fox is on a well deserved vacation. This week.

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<v Speaker 1>We're going to continue FED a reserve in focus now

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<v Speaker 1>taking a look at what we have heard from FED

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<v Speaker 1>officials the last few days, including FED Vice Chair Stanley

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<v Speaker 1>Fisher right here on Bloomberg Radio and television. What does

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<v Speaker 1>it all mean for the bond market? The Fed is

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<v Speaker 1>seriously considering an interest rate increase in September. Our next guest,

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<v Speaker 1>Mark Ran from Hillside. Excuse me how Top Security says

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<v Speaker 1>not so good? Well, he's always so good, and that's

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<v Speaker 1>Charlie Pellett. He is in the newsroom with a Bloomberg

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<v Speaker 1>business class. Thank you very much, Athlete Hayes are way

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<v Speaker 1>too kind to dial the SMP nez Dak not so

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<v Speaker 1>kind today, stocks declining a sell off in oil, sending

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<v Speaker 1>stocks slumping and We are brought to you by national

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<v Speaker 1>Realty providers of one hundred percent satisfaction guaranteed New York

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<v Speaker 1>dot net. The SMP five hundred index has erased its

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<v Speaker 1>monthly gain. Traders are awaiting Friday's jobs data to assess

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<v Speaker 1>the outlook for interest rates in the US economy. Energy

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<v Speaker 1>producers dragging down equities as crude oil trades below forty

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<v Speaker 1>five dollars a barrel after a report showed American stockpiles

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<v Speaker 1>climbed by more than projected. Chris Gersh is director of

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<v Speaker 1>strategy at Bell Curve Capital, and on Bloomberg Television this morning,

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<v Speaker 1>he talked about the bigger picture for oil and oil prices,

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<v Speaker 1>which I ran in Saudi Arabia ramping up production um

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<v Speaker 1>there and also the strong dollar really causing what a

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<v Speaker 1>lot of people perceived to be a slow down in

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<v Speaker 1>the fourth quarter. Uh. We believe that the w t

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<v Speaker 1>I contract and it will you know, correlate to Brent

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<v Speaker 1>and pull that down, will be setting a new range

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<v Speaker 1>here below forty six handle. And right now we do

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<v Speaker 1>have West Texas intermediated at seventy two, down three and

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<v Speaker 1>a half percent. Brent crude is down two point eight percent,

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<v Speaker 1>the tenure the yield there one point five six percent,

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<v Speaker 1>the SMP down eight to sixty seven, a drop of

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<v Speaker 1>four tenths of one percent. Then Stack Composite Index down

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<v Speaker 1>fourteen points, a drop of three tenths of one percent.

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<v Speaker 1>Down Industrials down seventy two, a drop of four tenths

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<v Speaker 1>of one percent, to thirty two on Wall Street. Now,

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<v Speaker 1>let's look at other stories making news from around the world.

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<v Speaker 1>Thank you, Charlie from the Blueberg newsroom. I'm Matt Miller.

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<v Speaker 1>This news update is brought to you by Willoughbyes since eight,

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<v Speaker 1>and thirty first Street. Brazil's Senate has overwhelmingly voted to

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<v Speaker 1>Brazilia with more than unsurprised twist. The chamber decided against

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<v Speaker 1>the harshest possible punishment that would have banned her from

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<v Speaker 1>running for public office for eight years after her Vice president,

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<v Speaker 1>has been running the country since May when the patent

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<v Speaker 1>process began the Senate. We'll record a pronouncer with broadcast

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<v Speaker 1>on State TV later tonight, Anna Edgerson, Bloomberg Radio. Brazilia.

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<v Speaker 1>Republican presidential nominee Donald Trump is in Mexico today for

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<v Speaker 1>private meeting with Mexico's president. Campaign manager Kelly Ann Conway

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<v Speaker 1>spoke about that during an appearance on With all due

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<v Speaker 1>respect on Bloomberg Television. There are many tenants to his plan.

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<v Speaker 1>I think they are incredibly important for everyone to remember.

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<v Speaker 1>Build a wall, which has been the signature of his

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<v Speaker 1>campaign since practically day one. That's that's their amnesty, no legalization,

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<v Speaker 1>No sanctuary cities. UM. Sanctuary cities have become a very

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<v Speaker 1>um inflection, very important inflection point in this campaign. Investigators

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<v Speaker 1>are considering sun glare as a possible factor in an

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<v Speaker 1>twenty four hours a day, powered by over journalists and

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<v Speaker 1>This is Bloomberg, and we thank you and again recapping

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<v Speaker 1>the DAL, the SMP and NESTAK all declining today, the

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<v Speaker 1>SMP five hundred index and now lower by eight points

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<v Speaker 1>to sixty seven, a drop there of four tenths of

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<v Speaker 1>one percent. I'm Charlie Peltz. That's a Bloomberg business flash.

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<v Speaker 1>This is taking stock the FED in focus on Bloombird Radio.

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<v Speaker 1>I'm Kathleen Hayes. My co host Kim Fox is on

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<v Speaker 1>vacation this week, so he's gonna miss a very prific

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<v Speaker 1>conversation now with Mark Grant, chief fixed income strategist Hilltop Securities.

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<v Speaker 1>We know him as the Wizard for all his incifle

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<v Speaker 1>comments on the U S Government bond market and more.

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<v Speaker 1>He has been UH one of the biggest bulls UH

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<v Speaker 1>so far over the last couple of years and continues

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<v Speaker 1>to look for further games and bonds, particularly the FED missteps. Mark,

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<v Speaker 1>welcome back to the show. Thanks and always a pleasure

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<v Speaker 1>to be with you, well, let's start with there's so

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<v Speaker 1>many places, but you know post, Jackson Hole Post and

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<v Speaker 1>Fisher saying negative rates he thinks are working, ETCETERA very

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<v Speaker 1>interesting I think, and maybe a little more nuanced. Charlie Evans,

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<v Speaker 1>President Chicago FED, and Eric rosen Grin, President of Boston FED,

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<v Speaker 1>speaking on a panel. I don't think they're exactly opposed

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<v Speaker 1>to each other. But Charlie Evans focusing on UH rates

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<v Speaker 1>could stay low for a longer time than people thought.

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<v Speaker 1>According to his business contacts, the FED could move slowly.

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<v Speaker 1>Eric rosen gran a little bit worried about accesses that

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<v Speaker 1>could be building up in places like commercial real estate

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<v Speaker 1>as a risk of the FED moving too slow. What

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<v Speaker 1>do you see? Well, I think if the Fed does

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<v Speaker 1>raise rates, it will be a huge mistake on two fronts.

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<v Speaker 1>One Politically, it will be a mistake because whoever might

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<v Speaker 1>win the election is not going to be happy with

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<v Speaker 1>the Fed. If the Fed causes a disruption of the

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<v Speaker 1>American economy too in terms of the um economics of it,

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<v Speaker 1>if you look at what happens when the Fed raises rates,

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<v Speaker 1>it means that commercial real estate, residential real estate, commercial loans,

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<v Speaker 1>personal loans, everything becomes more expensive that are tied to

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<v Speaker 1>the short end and may throw the economy into some

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<v Speaker 1>kind of recession. And that means that you're going to

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<v Speaker 1>get a flatter yield curve than we have now, or

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<v Speaker 1>maybe even go into an inverted yield curve, and I

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<v Speaker 1>think it would just be very negative for the country

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<v Speaker 1>on both counts. Well, Mark, I guess your argument if

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<v Speaker 1>you want to race rates pretty soon as you say, hey,

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<v Speaker 1>wait a minute, you know you kind of look at

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<v Speaker 1>the jobs market. The labor market is growing just fine.

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<v Speaker 1>We might get a strong jobs report on Friday. In

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<v Speaker 1>a situation like that, we can afford to pay a

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<v Speaker 1>little bit more for the money they borrow because they're

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<v Speaker 1>making more money and they'd rather have more demand and

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<v Speaker 1>more business and making more money than than they would

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<v Speaker 1>care about keeping the rate little. See what I mean? Well,

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<v Speaker 1>there are two parts of that argument. One is you

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<v Speaker 1>have to look at the quality of jobs until you

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<v Speaker 1>have to look at the product productivity in the job markets,

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<v Speaker 1>and both are not very good. We've had some more

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<v Speaker 1>jobs added, there's no question about that. But when you

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<v Speaker 1>look at what kind of jobs they are, and then

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<v Speaker 1>you look at the productivity in the labor force, it

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<v Speaker 1>certainly looks less optimistic. And then again also I think

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<v Speaker 1>you have to look at the inflation rate, and with

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<v Speaker 1>oil now plunging down again, which has a big impact

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<v Speaker 1>on inflation, means the freads are going to be nowhere

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<v Speaker 1>near their desired goal two percent. So I think those

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<v Speaker 1>are the offsetting parts and the and the third big

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<v Speaker 1>part of it is what the other central banks in

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<v Speaker 1>the world are doing. So we now, according to Fitch,

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<v Speaker 1>have thirteen points in trillion and negative yielding bonds across

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<v Speaker 1>the world. Bonds in Europe and Japan are substantially less

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<v Speaker 1>yield than we have in the United States. So all

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<v Speaker 1>you're gonna do is drag in more foreign money into

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<v Speaker 1>the US market, which is what one of the major

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<v Speaker 1>reasons I think yields even here going down because we're

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<v Speaker 1>the last man standing with the positive yield. Hey, but

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<v Speaker 1>the Japanese banking Japan might say thank you very much

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<v Speaker 1>for to reserve. We've been trying like crazy the week

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<v Speaker 1>in our end. If we have divergence, if the Fed hikes,

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<v Speaker 1>the dollar rises, and the bo J goes the other way,

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<v Speaker 1>it's more stimulus than the end weekends. They'd be very happy.

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<v Speaker 1>This is their big bugaboo. Well, I think the FED

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<v Speaker 1>is you may recall, is I'm not only recalls I

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<v Speaker 1>know you know, is the central Bank of the United States.

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<v Speaker 1>It's not the central Bank of Japan. And consequently, the

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<v Speaker 1>FEED should be doing what it can for our country.

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<v Speaker 1>Plus whoever is elected president, they're both are talking about

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<v Speaker 1>very uh uh. You know, a huge growth in infrastructure

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<v Speaker 1>coming at it from different patterns, but it's going to

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<v Speaker 1>be even more debt for the Treasury, and the should

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<v Speaker 1>be trying to hold rates down to accommodate that. In

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<v Speaker 1>my opinion. Now, let's s the FED races rates and

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<v Speaker 1>you're right, and it's the wrong thing to do, and

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<v Speaker 1>the economy really slows down. That would just would that

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<v Speaker 1>just opened the door to another big leg of a

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<v Speaker 1>bond rally that pushes yields even lower, in prices even higher. Absolutely, Kathleen,

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<v Speaker 1>You've got to add exactly right. So we're bond going work. Well,

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<v Speaker 1>I think we're going to one at a quarter on

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<v Speaker 1>the tenure by year end. I've said that since around

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<v Speaker 1>February when the tenure was at a one seventy seven.

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<v Speaker 1>Were the one fifty six today, But I think we're

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<v Speaker 1>going to go back lower just because we have the

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<v Speaker 1>only place in the world, as I said, with positive yields.

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<v Speaker 1>I mean, it's like we're the last man standing. And

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<v Speaker 1>then whoever is elected president wants to do more and

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<v Speaker 1>terms of government infrastructure and growth, and the only way

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<v Speaker 1>to really pay for that without causing even more massive

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<v Speaker 1>problems is the lower interest rate. So the Fed may

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<v Speaker 1>in fact at some point reverse course and add more

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<v Speaker 1>to their balance sheets than the four chilion they already

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<v Speaker 1>have about ten seconds. You're still a fan of closed

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<v Speaker 1>end bond funds. I think closed in bond funds where

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<v Speaker 1>if you pick the right ones, you can get about

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<v Speaker 1>ten or the best option, especially for any person right now. Well,

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<v Speaker 1>Mark ran, Mr Wizard the Wizard, we thank you so

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<v Speaker 1>much for joining us. He's cheap fixed income strategists at

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<v Speaker 1>Hilltop Securities based in Fort Lauderdale. What a lovely place

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<v Speaker 1>to be, he said. It would be a huge mistake

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<v Speaker 1>for the FED to raise rates. Now it's election year.

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<v Speaker 1>You're gonna stir up a hornet's nest, and you're gonna

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<v Speaker 1>make money cost more, and that's gonna hurt commercial real

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<v Speaker 1>estate and residential real estate and more. I'm Kathleen Hayes.

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<v Speaker 1>This is Bloomberg. Ben in Focus is brought to you

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