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Speaker 1: Global business news twenty four hours a day. If Bloomberg

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Speaker 1: dot Com the radio, plus Globo lapps and on your radio,

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Speaker 1: this is a Broomberg Business Flash. Strom Bloomberg World Headquarters.

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Speaker 1: I'm Charlie Pellett. Move higher for US equities on this Monday.

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Speaker 1: SMP five hundred index on track for eight ten month high.

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Speaker 1: FED Chair Janet Yellen signaling the economy is still strengthening

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Speaker 1: enough to withstand gradual increases in borrowing costs despite recent

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Speaker 1: signs of slower job growth. SMP five hundred indecks up

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Speaker 1: twelve to twenty one eleven, a gain of six tenths

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Speaker 1: of one percent, and has stack up thirty two, a

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Speaker 1: gain of seven tenths of one percent. Town industrials up

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Speaker 1: one d thirty four points up eight tenths of one percent,

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Speaker 1: tenure down nine thirty seconds that yield one point seven

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Speaker 1: three percent. Gold up five seventy ounce to twelve forty eight,

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Speaker 1: a gain of five tenths of one percent. And crude

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Speaker 1: oil of a dollar ten a barrel forty nine seventy two.

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Speaker 1: That's a gain of two point three I'm Charlie Pellett,

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Speaker 1: and that's a Bloomberg Business Flash. Charlie Pellet, thank you

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Speaker 1: so very much. Time now for the e t F report,

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Speaker 1: a t F report. We bring in Catherine Calorie. There's

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Speaker 1: a new class of e t s. It's taking the

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Speaker 1: industry by storm. What we're seeing now with low volatility

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Speaker 1: products is what we saw two years ago with currency hedging.

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Speaker 1: It is the flavor of the month. Bloomberg Intelligence analyst

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Speaker 1: Eric Caltuna says, an example is U s m V

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Speaker 1: or the I Shares Edge m SCI Minimum Volatility USA

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Speaker 1: e t F. It's attracted five point four billion dollars

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Speaker 1: so far. They sere putting it in the top five

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Speaker 1: in terms of inflows. The reason Valtuna says, there's fear

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Speaker 1: in the market and this product basically is a minimum

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Speaker 1: altility products, so basically gives you SMP exposure, right, so

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Speaker 1: large cap stocks, but it is designed in a way

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Speaker 1: to give you less volatility. So it's about less the

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Speaker 1: ups and downs. It's basically like taking the edge off

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Speaker 1: of the marketer. It's like a diet coke version of

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Speaker 1: the market um in that you get to participate in

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Speaker 1: some of the upside, not all of it, but you

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Speaker 1: get less downside about and says, low volatility ets are

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Speaker 1: now big business, with about twenty five billion dollars invested

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Speaker 1: in about thirty five low volatility products. That's your Bloomberg

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Speaker 1: ETF report. I'm Catherine Cowdery. You're listening to Taking Stock

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Speaker 1: with pin Box and Kathleen Hayes on Bloomberg Radio. Volato

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Speaker 1: financial markets, unprecedented central banks over the past few years

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Speaker 1: that have taken us to places that no one could

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Speaker 1: have imagined, places like negative interest rates, the relation between

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Speaker 1: US and China, so many things hanging over the markets now.

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Speaker 1: Who better to ask where are we and where are

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Speaker 1: we going next? Than Leo Malomed. Of course, he is

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Speaker 1: the founder of finance futures, the man who went from

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Speaker 1: chairman of the Chicago Mercantile Exchange to create the International

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Speaker 1: Monetary market, leading the CME then in creating a number

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Speaker 1: of important financial instruments. Instruments from foreign currency futures to

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Speaker 1: T bills, Euro dollar stock index futures, he spearheaded the

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Speaker 1: world's first electronic trading system, Globex, and so much more,

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Speaker 1: and he joins me now on taking stock. Welcome to

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Speaker 1: the show. Welcome, I'm very happy to be here. It's

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Speaker 1: a real treat. So let's start with where we are

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Speaker 1: in the US when it comes to the Federal Reserve.

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Speaker 1: At this point, Leo, what should people be doing? Just

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Speaker 1: kind of putting you know, shutting out the Fed noise

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Speaker 1: or saying wow, Janet Yellen is still worried about the

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Speaker 1: labor market, doesn't sound very aggressive on rates. What what

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Speaker 1: is your take there? Well, you know, she she's between

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Speaker 1: a hard and a hard place, because it is it

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Speaker 1: is true that we are a part of international system.

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Speaker 1: It's not just to see it's not just the United

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Speaker 1: States by itself. It's a it's an ocean of problems

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Speaker 1: around us that that she has to deal with. And

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Speaker 1: our progress has been um really very very slow in

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Speaker 1: terms of recovery from the two thousand eight uh A crash.

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Speaker 1: And so yes we are and we're certainly on a

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Speaker 1: better trajectory than the rest of the world, but we

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Speaker 1: can't live alone. We are all our trading partners are

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Speaker 1: in trouble. Europe is in trouble, Japan is in trouble,

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Speaker 1: China is in trouble. Who who are we going to

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Speaker 1: sell our goods to and how are we going to

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Speaker 1: recover if if no one else around US does? That's

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Speaker 1: her problem, and I understand it well. Speaking of China,

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Speaker 1: the President is in China, the US China Economic Dialogue underway,

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Speaker 1: Jack Lou criticizing that, well, maybe urging the Chinese to

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Speaker 1: take some steps to signal more trade policy better those uh,

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Speaker 1: the islands that are disputed that they are becoming more

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Speaker 1: and more contentious all the time. What does what does?

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Speaker 1: Where is China now? And what you just mentioned the

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Speaker 1: fact that that they're not growing what that means for

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Speaker 1: the US and the rest of the world. That's right,

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Speaker 1: and I think in there they're trend of um lush

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Speaker 1: growth is going to continue for a while. You know,

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Speaker 1: we look, we look to be able to have a

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Speaker 1: two percent GDP. They're talking about a six percent. I

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Speaker 1: don't even think that they can reach six percent. So

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Speaker 1: it sounds like, you know, they're much better off than

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Speaker 1: we are, but they're not because they've they've got a

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Speaker 1: real bad issue in nonperforming loans which occurred as a

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Speaker 1: result of coming out of the two thousand mate um

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Speaker 1: debacle that the world had, and they sort of recovered

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Speaker 1: from that because they just threw money into the system. Now,

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Speaker 1: that was okay for a little while, but it's continue

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Speaker 1: to a point where the nonperforming loans throughout their uh

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Speaker 1: private sector is such that I don't know what they're

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Speaker 1: gonna do with that. So yeah, you know, one of

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Speaker 1: the things that they do is that, you know, you

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Speaker 1: may if you can't do something domestically, maybe you do

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Speaker 1: something internationally. And that's where the islands come in. So

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Speaker 1: they're gonna they're gonna be, you know, difficult to deal

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Speaker 1: with on that because they've got internal problems right now.

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Speaker 1: You know, just the opposite of what some people are

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Speaker 1: saying about China doing manipulations or eating our launchers things

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Speaker 1: like that. That's that's just simply not true. At the moment.

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Speaker 1: China is having a tough time just staying study. In fact,

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Speaker 1: they have to support their currency because it would fall

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Speaker 1: um much more if they didn't. So it's not I

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Speaker 1: wouldn't say it's in good shape at all. Well, you know,

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Speaker 1: quite apart from the economic fundamentals and and the political leadership.

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Speaker 1: There's a question of the markets in China and there's

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Speaker 1: structure as somebody who who revolutionized financial markets in the

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Speaker 1: US and around the world. What what is what is

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Speaker 1: China's big challenge now? What where are they and where

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Speaker 1: do they need to go next to really have mature, open,

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Speaker 1: you know, internationally powerful markets. That's a hard it's a

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Speaker 1: hard answer, the hard question to answer. You know, you've

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Speaker 1: got to understand that what they want to do is

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Speaker 1: to become a consuming society because they grew out of

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Speaker 1: exports and right now their exports, of course have diminished

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Speaker 1: considerably because the rest of the world UH situation, and

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Speaker 1: so what they've been trying to do is change from

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Speaker 1: an exports society to a consumption society. That's not easy

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Speaker 1: to do at any time because we're talking about a

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Speaker 1: you know, a huge, huge population. So um, it's hard

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Speaker 1: at any time, but harder yet during the time when

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Speaker 1: the conditions in the world are not that good. Now overall,

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Speaker 1: China has done miraculously well. We all understand that in

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Speaker 1: the past thirty years that their their ability to bring

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Speaker 1: out um their nation from poverty and from UH really

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Speaker 1: truly difficult UH economic world, to a competitor in the world,

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Speaker 1: to someone to a nation that is second to the

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Speaker 1: United States. So you can't deny that they are capable people,

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Speaker 1: and they are capable and they have capable leadership. But

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Speaker 1: you know when when a totalitarian type government uh that

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Speaker 1: can how how distance the rest of the world with

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Speaker 1: quick decisions and so forth, is a good thing at times,

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Speaker 1: but when it continues to do that and doesn't know

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Speaker 1: when to stop, it hasn't got the the kind of

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Speaker 1: um maysayers only disputing their their plan um. They don't

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Speaker 1: know how to stop, and that's their problem that they're

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Speaker 1: still continuing to throw money into um operations and buildings

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Speaker 1: that cities that are goose cities and so forth, major problems.

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Speaker 1: Do you see potential for another financial crisis? Japan can't okay?

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Speaker 1: Where how what do what do you see? Well? I

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Speaker 1: just see that that nation. You know, you're dealing with

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Speaker 1: negative interest rates. It's it's unheard of, it's not it's

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Speaker 1: not the kind of thing that's going to work, and

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Speaker 1: it isn't working. You've got Japan, um what they've been

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Speaker 1: in a depression now for twenty five years, and they

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Speaker 1: can't seem to get out of it. It's getting worse.

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Speaker 1: Europe maybe it's in a little better shape than Japan,

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Speaker 1: but it isn't that much better. And they've got internal problems.

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Speaker 1: You've got Greece, and you've got Italy, and now you

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Speaker 1: have even the the Brexit situation and the British people, Um,

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Speaker 1: you know, one can't even blame them if they say

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Speaker 1: we don't want to be part of that. So all

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Speaker 1: of this is a condition that does not call for

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Speaker 1: a great rebound. I think I don't know that we'll

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Speaker 1: go back into a recession, but we're certainly not going

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Speaker 1: to be in a growth mode either. Final question before

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Speaker 1: I let you go, what indicator is there one thing

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Speaker 1: people should be watching closely as as that sign media

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Speaker 1: that that's where we're heading. I really, I really think

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Speaker 1: the corporate spending has to pick up and and if

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Speaker 1: you saw that happen, but to do that, you need

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Speaker 1: a tech tax structure that is much more um, much

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Speaker 1: more invitive of of corporate spending. So um, I really,

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Speaker 1: I really think that we have to have some fiscal changes.

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Speaker 1: Leo Malama, thank you so very much for joining us.

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Speaker 1: He is concerned about financial excesses in China. He's concerned

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Speaker 1: about negative interest rate into and not working. Says there

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Speaker 1: is potential for a financial crisis and he's hoping that

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Speaker 1: maybe some fiscal steps could be taken to get corporate

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Speaker 1: spending going again. This is taking Stock. I'm Kathleen Hayes,

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Speaker 1: and this is Bloomberg Radio. H