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Speaker 1: Broadcasting live to New York Cloomberg Even to Washington, d

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Speaker 1: C Bloomberg one, to Boston Bloomberg Well one to San

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Speaker 1: Francisco Bloomberg nine six, to the Country series Exam Channel

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Speaker 1: one ninety and around the globe the Bloomberg Radio plus

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Speaker 1: Apen Bloomberg dot Com. This is Bloomberg Surveillance and good morning.

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Speaker 1: I'm Karen Moscow along with Tom Keenan Barry Ritholtz and

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Speaker 1: the opening gal is brought to you by se I

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Speaker 1: Imagine whenasset management servicing is unconstrained by infrastructure. See how

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Speaker 1: SIS Global Operating Platform could be your cantalyst for a

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Speaker 1: business expansion and se i C dot Com slash Imagine

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Speaker 1: and stocks opening lower this morning. The sn P five

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Speaker 1: hundred down four tenths per center seven points at two down.

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Speaker 1: Jones Industrial average is down three tenths per center sixty

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Speaker 1: points to seventeen thousand, six hundred twenty one, and the

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Speaker 1: NASDAGS down six tenths per center twenty nine points to

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Speaker 1: forty forty ten. Your treasury that'll change yell one point

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Speaker 1: seven six percent that yielding a two year point seven

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Speaker 1: five percent nive ex screw Oil down three point six

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Speaker 1: percent at a dollar thirty nine at thirty six barrel,

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Speaker 1: and Comex gold is down one and a half percent

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Speaker 1: or nineteen dollars to twelve sixteen sixty Again ounce the

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Speaker 1: euro a dollar thirteen seventy eight and again one twelve

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Speaker 1: point oh six. Tom and Berry, thanks so much. Boy,

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Speaker 1: have I been looking for to the Scott Mather is

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Speaker 1: with PIMCO, their chief investment officer, and they have been

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Speaker 1: very very vocal about group thinking, about fervor and about

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Speaker 1: monetary policy. People off their models into unorthodox territory. Scott,

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Speaker 1: you've got the engineering thing going and as you know,

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Speaker 1: a lot of what we do is plug in chug

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Speaker 1: where you plug in certitude into models. Do we have

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Speaker 1: any clue what we should plug into our models right now,

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Speaker 1: whether it's a terminal value for oil or a terminal

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Speaker 1: value for economic growth. Well, that's uh, that's the big question.

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Speaker 1: We would seem that they're there's too much confidence in

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Speaker 1: the models that have worked well for the past few decades.

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Speaker 1: And that's really what we're what we're talking about. What

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Speaker 1: I put on our our blog site the other day, Uh,

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Speaker 1: you know, clearly the models. I guess you want to

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Speaker 1: call them, the the Neo Kaynesian models, including the models

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Speaker 1: for how monetary policy work that you know, they haven't

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Speaker 1: been working with respect to creating the growth and raising inflation,

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Speaker 1: uh in the way that they have worked maybe in

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Speaker 1: the past. So you know, what we're raising is the

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Speaker 1: real possibility that there's sort of a nonlinear response uh

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Speaker 1: that happens. You know, it's not the case necessarily that

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Speaker 1: that ever lower in terms of rates forever longer, uh,

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Speaker 1: necessarily has to boost inflation and our growth. I want

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Speaker 1: to bring very riddles but to that nonlinear response idea,

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Speaker 1: Then as we move forward, do you perceive stability to

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Speaker 1: dampened reaction functions and sinoidal functions or is there a

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Speaker 1: real risk here of instabilities as we move away from

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Speaker 1: non move away from linear. Well, we think there's definitely

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Speaker 1: that possibility of instabilities. And uh, I mean we you know,

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Speaker 1: we're in sort of uncharted territory here with respect to

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Speaker 1: h monetary policy, and that really does raise some concern

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Speaker 1: that it's establishing you know, new new equal new equal

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Speaker 1: came to say equilibrium levels of of of growth and

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Speaker 1: of inflation that they don't interact in the same way

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Speaker 1: that they used to and so you know, our concern

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Speaker 1: there would be that you know, if we get with

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Speaker 1: hit with any sort of shock, you know, be at

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Speaker 1: commodity prices or or be at some other sort of

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Speaker 1: global shock, that that we won't have the tools necessarily

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Speaker 1: to uh, to use monetary policy in the same way

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Speaker 1: that we did in the past, and that therefore, you know,

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Speaker 1: there are risks out there, their tail risks that are

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Speaker 1: still probably growing in terms of their risk to to

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Speaker 1: the outlook. So are we at the ends of what

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Speaker 1: we can reasonably expect from monetary policy this cycle? Is

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Speaker 1: there anything else at least here in the US that

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Speaker 1: central bankers can do or is it now up to

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Speaker 1: the private sector and fiscal stimulus. Well, there's an increasingly

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Speaker 1: less that monetary policy can do. And perhaps, you know,

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Speaker 1: perhaps this overreliance on monetary policy is is part of

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Speaker 1: the problem. I mean, we should we should always remember that,

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Speaker 1: you know, monetary policy wasn't meant to be economic policy.

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Speaker 1: And slowly, over the past uh, you know, several years, uh,

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Speaker 1: it's increasingly thought of as economic policy. That's probably pretty

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Speaker 1: a pretty dangerous idea. What is great about this is

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Speaker 1: when one of the greatest labor economists in the world

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Speaker 1: is listening to Bloomberg's surveillance, was Scott Mather, Pimco. David

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Speaker 1: blanche Flower of Dartmouth is listening, and he is totally

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Speaker 1: in agreement with you on nonlinear responses. And of course

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Speaker 1: his iconic look is the wage curve. To help David

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Speaker 1: blanche Flow of Dartmouth, Mather of Penn help out the

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Speaker 1: good professor, when do wages go up? Well, we're seeing

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Speaker 1: wages go up. I mean we shouldn't, uh, you know,

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Speaker 1: we shouldn't throw out all the models. I mean there

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Speaker 1: is still this uh, this Phillips curve effect that we see.

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Speaker 1: We were looking at it the other day, just you know,

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Speaker 1: state by state, uh, looking at you know, state level

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Speaker 1: Phillips curves, and you do observe that, you know, lower

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Speaker 1: unemployment leads to higher wages in those states. So there's

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Speaker 1: still that effect. And if you look at things like

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Speaker 1: the Atlanta wage tracker, which is sort of the best

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Speaker 1: uh you know, same store sales apples to apples comparison

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Speaker 1: of wages, it is up over you know, over three percent.

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Speaker 1: So we are seeing the wages begin to head up.

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Speaker 1: You saw a little bit of that in today's UH

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Speaker 1: employment report. So you know, our forecast would be that

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Speaker 1: they do drift up throughout the course of this year.

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Speaker 1: And that's a pretty a pretty good thing, and ultimately

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Speaker 1: that's probably what causes the Fed to UH to begin

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Speaker 1: moving again. So we just had this this tirade by

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Speaker 1: the markets in December and January about the possibility of

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Speaker 1: of rates going higher. We're a Fed funds rates now

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Speaker 1: about thirty seven basis points UH in real time. If

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Speaker 1: the Fed takes rates from BIPs to fifty bibs, is

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Speaker 1: this really such a tragic thing? Is the global economy

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Speaker 1: that fragile then it can absorb a still below one

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Speaker 1: percent Fed funds rate? Well, we don't. We don't think so. Uh.

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Speaker 1: And that's you know, and and there are there are

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Speaker 1: probably some pretty good arguments to be made that you know,

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Speaker 1: actually at this point, a return to more normal monetary policy,

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Speaker 1: more normal levels of rates UH might be getting more

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Speaker 1: normal economy. And now he's probably the time, you know,

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Speaker 1: perhaps we're even a year or two past the time

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Speaker 1: when rates should have been should have been normalized. Yeah,

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Speaker 1: we just don't know what happens, uh, you know, and

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Speaker 1: there is no empirical evidence, you know, about what happens

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Speaker 1: here at the at the zero bound for a protracted

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Speaker 1: period of time. I mean, that's the only example we

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Speaker 1: have is Japan, and of course, you know that's not

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Speaker 1: particularly inspiring when you look at the results of that,

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Speaker 1: So you know, one should really question whether that is advisable.

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Speaker 1: And I wrote about this the other day. The other

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Speaker 1: interesting thing is, and there is more talk about this

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Speaker 1: that the Neo Fisherian arguments that you know, if if

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Speaker 1: it's your desire to return inflation to target, perhaps higher

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Speaker 1: interest rates can be part of the answer. And of

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Speaker 1: course that's exactly the opposite answer of of you know,

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Speaker 1: the traditional UH view of the policymakers at the moment

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Speaker 1: based on new Keynesian sorts of ideas, right, And James

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Speaker 1: Bullard UH focusing on that at St. Louis Kathleen asan

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Speaker 1: pim Fox an interview with the president of St. Louis

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Speaker 1: FED coming up, Barry Jason Furman at the White House

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Speaker 1: just puts out a spectacular three bar chart. Much what

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Speaker 1: Mr Mather's talking about, which is the makeup of recent

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Speaker 1: wages is higher employment and very much so rising real

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Speaker 1: hourly earnings. Maybe it's not good enough, but it is

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Speaker 1: a change complexion from where we were, oh nine eleven,

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Speaker 1: there's all Barry jumping here to get Scott Mather with

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Speaker 1: a last thought. So the really the final question I

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Speaker 1: have is in the last thirty seconds, if you can

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Speaker 1: do that, how significant is our negative interest rates around

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Speaker 1: the globe to to us in the US. Well, they're

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Speaker 1: they're very important. The spillover effects are keeping US yields

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Speaker 1: very low. So all things equal, that's easing financial conditions

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Speaker 1: around the globe, even here in the U S So UH,

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Speaker 1: that should make it even easier for the Fed to

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Speaker 1: begin normalizing interest rates rather than harder. Tom Well, very good, look, Leo.

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Speaker 1: Let's come back here Scott Mather with us with PIMCO

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Speaker 1: of a few more minutes with him, and then move

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Speaker 1: on the end of the weekend UH and negative nineties

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Speaker 1: six on the dala icks up a stick and twelve

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Speaker 1: one point one two big fixed points fifteen point zero

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Speaker 1: seven with yields fractually higher. They're much higher off the report.

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Speaker 1: Actually the thirty year bond comes in significant curve flattening

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Speaker 1: in the ten thirty spread two point five on the

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Speaker 1: ear year oil really headlines today some of that move

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Speaker 1: off John Michelswaite riad Hamad interview with the Deputy Crown

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Speaker 1: Prince of Saudi Arabia. Thirty six is oil breaks down

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Speaker 1: a full dollar forty two and this is Bloomberg surveillance today.

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Speaker 1: This job's day, Bloomberg surveillance. Butchet by Volvo Cars, White

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Speaker 1: Plains visit Volvo Cars White Plains dot Com with our

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Speaker 1: news Michael Barr, Tom Berry, thank you very much. A

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Speaker 1: Marquette University Law School. Pole shows Ted Cruz surging past

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Speaker 1: Donald Trump by ten points at Wisconsin ahead of next

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Speaker 1: week's Republican primary. If Cruise sweeps all the delegates in Wisconsin,

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Speaker 1: Trump will need to win fifty of the remaining delegates

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Speaker 1: in other states to collect the one thousand, two hundred

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Speaker 1: thirty seven he needs to clinch the nomination. Meanwhile, Democrat

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Speaker 1: Hillary Clinton is reminding voters of her time as Senator

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Speaker 1: from New York ahead of the states April nineteenth primary.

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Speaker 1: Clinton is promoting a ten billion dollar plan and at

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Speaker 1: revitalizing manufacturing. Rival Bernie Sanders grew up in Brooklyn. Government

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Speaker 1: officials in Brussels are meeting to discuss when to reopen

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Speaker 1: the Brussels airport after it was hit by suicide bomber's

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Speaker 1: last week. Meanwhile, Belgian police unions are demanding tighter screening.

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Speaker 1: South Korea says North has fired a surface to air

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Speaker 1: missile into waters off its east coast. Today. It comes

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Speaker 1: as President Obama and world leaders are in Washington for

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Speaker 1: the Nuclear Security Summit. The New York Senate has begun

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Speaker 1: debating the portion of the budget containing a measure they

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Speaker 1: would raise the state's minimum wage to fifteen dollars an hour.

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Speaker 1: New York would join California Global News twenty four hours

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Speaker 1: a day, powered by our hundred journalists and more than

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Speaker 1: a hundred fifty news bureaus from around the world. No

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Speaker 1: Michael Barr, Tom Berry, Mica Thanks called down seventeen dollars

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Speaker 1: twelve nineteen. Thence West, Texas, Berry Reynolds, and Tom King

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Speaker 1: was Scott Mather of Pimco Bloomberg Surveillance. Surveillance brought to

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Speaker 1: you by on Tucket. I think your shirt is too

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Speaker 1: long to wear untucked? Probably is. On Tucket has solved this,

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Speaker 1: making shirts designed to be worn't untuckeds it untucket dot

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Speaker 1: com use the code w bb R for fifteen percent

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Speaker 1: off to improve your work. Global Business News twenty four

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Speaker 1: hours a day at Bloomberg dot com, the Radio plus

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Speaker 1: mobile app, and on your radio. This is a Bloomberg

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Speaker 1: Business Flash, and I'm Karen Moscow. This updates brought to

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Speaker 1: you by National Realty Returns on cash and rented real

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Speaker 1: estate find them at n r i A dot net.

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Speaker 1: U s stocks are lower, tracking declines in crude oil,

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Speaker 1: limit data showing job gains and higher wages that support

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Speaker 1: of the case for raising interest rates. And we check

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Speaker 1: the markets every fifteen minutes throughout the trading day. On

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Speaker 1: Bloomberg sn P five hundred down six tenths per center

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Speaker 1: thirteen points at six down. Jones Industrial Average down six

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Speaker 1: tenths per center ninety seven points of seventeen thousand, five eight.

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Speaker 1: The NASDACS down six tenths per center to wenty six

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Speaker 1: points to forty three ten. Your treasury up one thirty

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Speaker 1: second to yield one point seven six percent, the yield

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Speaker 1: on the two year point seven five percent. NIMEX Scrude

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Speaker 1: oil is down four percent on a dollar fifty to

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Speaker 1: thirty six eighty four A barrel Comex gold is down

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Speaker 1: one point three percent, or sixteen dollars forty cents to

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Speaker 1: twelve nineteen ten, announced the euro A dollar thirteen eighty seven,

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Speaker 1: the yen one twelve point oh three. US automakers reporting

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Speaker 1: sales increases in March that failed to keep up with

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Speaker 1: what analysts were looking for, while Nissan Motors beat analysts

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Speaker 1: estimates forwards Like vehicles sales including its heavy trucks rose

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Speaker 1: seven point eight percent in the US and March General

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Speaker 1: Motors March US sales game nine ten percent in Via

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Speaker 1: Chrysler's added eight point one percent. Saudi Arabia getting ready

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Speaker 1: for the twilight of the oil age by creating the

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Speaker 1: world's largest sovereign wealth fund for the kingdom's most prized assets.

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Speaker 1: And that's a Bloomberg business flash. Tom and Barry Karen,

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Speaker 1: thank you so much. Very riddle Tom King with Scott

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Speaker 1: Mother of PIMCO, will talk oil here in London in

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Speaker 1: a moment. Scott, um, I see oil down. I'm not

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Speaker 1: going to go into the technical mumbo jumbo, but it

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Speaker 1: seems indeterminate. Can you go long big oil companies right now?

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Speaker 1: At PIMCO? Can you add to your holdings of what

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Speaker 1: I'm gonna call too big to fail oil or do

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Speaker 1: you still have to wait for an oil bottom? Well?

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Speaker 1: You you you probably can. I mean, like you said,

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Speaker 1: I mean the you know, the too big to fail,

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Speaker 1: the companies that have you know, the big integrated companies.

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Speaker 1: They have lots of financial flexibility, and you know probably

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Speaker 1: when you look at oil prices, you know, today hard

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Speaker 1: to know whether they've bottomed, but you can be pretty

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Speaker 1: sure I think out one or two years from now

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Speaker 1: that they will be substantially higher than whether they are today.

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Speaker 1: So no companies with the financial flexibility to easily make

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Speaker 1: it through the next couple of years are probably pretty safe.

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Speaker 1: Within that is a terminal value of oil. You and

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Speaker 1: I know, it's so hard to predict whether that is.

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Speaker 1: We've heard two ranges today from ubs in fifties sixty

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Speaker 1: from a few others. Where are you well short term

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Speaker 1: and say out a year or so, we're thinking that

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Speaker 1: fifty to sixty level probably makes the most sense. Now.

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Speaker 1: Beyond that it probably needs to be quite a bit higher.

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Speaker 1: You just look at the biggest oil producers in the

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Speaker 1: world unless there's a major shift, a major transformational shift,

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Speaker 1: and how they manage their economies. Even countries like Saudi

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Speaker 1: Arabia with massive reserves you know out two or three years,

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Speaker 1: have depleted those reserves and so you know, running budget

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Speaker 1: deficits at today's oil price is not going to work

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Speaker 1: for them, So the price will need to change for

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Speaker 1: them one way or the other. So let's talk about

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Speaker 1: transformational shifts in the economy. We saw the Tesla Model three,

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Speaker 1: which is there, for lack of a better word, every

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Speaker 1: man's car, thirty dollars and a two hundred plus mile

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Speaker 1: on a single charge. The Chevy Vault Chevy Bolt is

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Speaker 1: their new thirty dollar electrical car. Are we seeing a

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Speaker 1: dramatic shift in how transportation consumes oil and what does

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Speaker 1: this mean for the long term prospects for oil prices? Yeah,

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Speaker 1: we are. I don't think you should necessarily over overplay it.

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Speaker 1: I mean on a global level, uh, you know, hyprid

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Speaker 1: cars and electric cars you know, even out five years

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Speaker 1: from now, are not going to be a significant portion

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Speaker 1: of the stock. I mean, you still have a tremendous

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Speaker 1: growth in just traditional gas consuming cars throughout the emerging

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Speaker 1: market the world, and that's a that's a much more

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Speaker 1: important global dynamic. So I wouldn't read too much into

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Speaker 1: it in terms of a major drop off in the

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Speaker 1: demand for oil anytime soon. Scott, we got ten seconds left.

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Speaker 1: Do you drive a Homer h Age two or a Tesla?

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Speaker 1: Which way do you go? I have an electric car

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Speaker 1: and a gas guzzler, so I covering both bases. Scott mother,

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Speaker 1: thank you so much. He is with Pimco John Tucker

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Speaker 1: the h two Do you have it? You have the

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Speaker 1: chains off the wheels yet? Yeah, the chains are off

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Speaker 1: the wheel I've had a turbo charge so I can

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Speaker 1: consume more gas. Well, what do you talk about the

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Speaker 1: stick on the back that says global warmer? What's what's

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Speaker 1: the new jersey of price? Right now? It's getting higher?

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Speaker 1: It's up? Uh, I want to say one seven yourself.

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Speaker 1: There you go. That gets a set up for Xavier Lassier.

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Speaker 1: He is in London, of course, after his important interview

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Speaker 1: assisting John Michaels Wait, the editor in chief with the

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Speaker 1: Deputy Crown Prince in Saudi Arabia. Have you congratulations and

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Speaker 1: what I thought was very important market moving work. But

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Speaker 1: some of it goes to the range bound nature of oil.

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Speaker 1: Within all of your research, are the pros calling boden

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Speaker 1: in oil or is there still that nervousness that we've

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Speaker 1: earned over eighteen months. I think that the nervousness is

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Speaker 1: going to be continuing, and particularly because after the interview

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Speaker 1: that we published today at Bloomberg, it's becoming more clear

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Speaker 1: to me that Saudi Arabia is not really interesting on

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Speaker 1: letting prices to go significantly beyond the current prices. I

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Speaker 1: think that a very important comment that the Deputy Crown

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Speaker 1: Prince of Southi Rabbia made in the interview beyond the

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Speaker 1: short time about they're not joining the freeze in production

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Speaker 1: unless also Ran joined, is this comment about high oil

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Speaker 1: prices maybe against the interests of Saudi Arabia. He said

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Speaker 1: that that high prices reduced a lifespan of oil. It

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Speaker 1: means that if you have high prices, you're gonna have

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Speaker 1: more more people UH in an electrical car. And I

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Speaker 1: think that that is a fundamental message from Saudi Arabia

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Speaker 1: should really prone many investors. So we think what the

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Speaker 1: kind of equilibrium price of oil is going to be

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Speaker 1: going forward. VI. When we look at some of the

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Speaker 1: political let's call them enemies of Saudi Arabia, whether it's

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Speaker 1: Iran or Syria or Russia, it seems like a lot

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Speaker 1: of people who aren't especially friendly to the sounds UH

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Speaker 1: and would benefit from higher oil prices cannot be too

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Speaker 1: happy with the Saudias is helping to keep pressure pressure

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Speaker 1: on prices. What are your thoughts on political situation. I

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Speaker 1: think that you are absolutely right. I don't think that

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Speaker 1: the Sudi is that using oil precisely as a political

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Speaker 1: weapon or low oil prices as a political weapon. But

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Speaker 1: I think that it's a it's a it's an outcome

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Speaker 1: that Um, it's it's helpful for Saudi Arabia. Saludis want

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Speaker 1: to keep low oil prices because that's gonna increasing month

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Speaker 1: for oil, and it also means that it's gonna be

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Speaker 1: less competition from Tesla and others are trying to get

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Speaker 1: the work out of the addiction of Saudio oil. It

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Speaker 1: that also means that it creates trouble for we run

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Speaker 1: Syria or Russia or or Venezuela. I think that that's

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Speaker 1: something that Saudi Arabia will welcome. At the same time,

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Speaker 1: Having quickly, one final question before you go, what are

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Speaker 1: you gonna read about in hydrocarbons this weekend? What is

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Speaker 1: on your mind to get smarter on oil? Um? What

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Speaker 1: I'm gonna be reading on the weekend, I to be honest,

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Speaker 1: one of the things, because I have been so busy

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Speaker 1: with the interview. This week I have been meeting is

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Speaker 1: is the Testla announcement that test last three And this

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Speaker 1: is one thing that I really want to read. I

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Speaker 1: want to see more about the buzz about this new

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Speaker 1: car coming because I think that the soundies are really

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Speaker 1: putting a lot of attention on them of alternative energy.

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Speaker 1: So it's not gonna be a book, but I really

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Speaker 1: want to read all the ros rules from from Tesla

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Speaker 1: about the new car. And that's brilliant because at the

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Speaker 1: thirty five dollar price point, people lined up eighteen feet

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Speaker 1: deep for what Mr Musk is doing right now. How

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Speaker 1: you thank you so much? Get some sleep? How a

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Speaker 1: blast helping with the oil coverage and assisting order in

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Speaker 1: chief John Nichols Waite in that important If you're very

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Speaker 1: you have fun this week? This was fantastic. The week

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Speaker 1: blew by. I just don't know where three hours a

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Speaker 1: day for five days ago is it just flies? First

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Speaker 1: a vacation for me, Yeah, I know, you know you

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Speaker 1: can use my vacation. Genter McKee uh gets working with

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Speaker 1: every days of vacation outside the well. Most important phrases

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Speaker 1: I heard was villain powder, the dire straits of China,

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Speaker 1: and that he wasn't the only one talking about the

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Speaker 1: amount of debt that China had. I was surprised to

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Speaker 1: learn that it's in the trillions and brillions of dollars.

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Speaker 1: That was quite fascinating. The response to the Tesla three

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Speaker 1: is really amazing. I'm looking forward to either Hannah Elliott

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Speaker 1: or Matt Miller's review of that. That'll be fascinating. And look,

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Speaker 1: you know, the economic data continues to come out fairly robust.

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Speaker 1: Everybody is concerned about an imminent recession. It's just not

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Speaker 1: there in the data. It's almost like a perfect storm.

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Speaker 1: Except it's not all bad or it's not all good.

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Speaker 1: It's just a it's a perfect jumble of information. But

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Speaker 1: but when is it ever perfectly clear? It's always ambiguous.

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Speaker 1: The only time there certainty is at the very top

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Speaker 1: and the very bottom, when people are positive, markets are

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Speaker 1: going to zero, or when it's a perfect perfect situation.

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Speaker 1: What is this the set in the first straight month

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Speaker 1: of job creation, fourteen million new jobs since the Great

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Speaker 1: Recession ended. That's not a terrible accounty. Well, it's perfect

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Speaker 1: having you here, I mean I I look at this

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Speaker 1: and the yelling speech. Clearly the moment of the week

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Speaker 1: along with Kathleen Hays and Charles Evans and and all

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Speaker 1: that is, well, what was a single takeaway that perfect

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Speaker 1: takeaway you got from yelling speech that it's going to

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Speaker 1: be a slow and steady move away from the emergency

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Speaker 1: footing of zero. Whether we get one or two increases

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Speaker 1: this year is the most relevant. Uh. And that they're

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Speaker 1: apparently dual mandate is a tripart mandate. They're looking at

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Speaker 1: overseas volatility. As much as any trader. Is there perfect

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Speaker 1: value in the stock market right now? There's never listen.

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Speaker 1: Fair value is a moment that exists as you swing

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Speaker 1: wildly below and above it. If you want cheap stocks,

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Speaker 1: as we heard from Red Faber, go to Europe and

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Speaker 1: hold your nose and by it. You have been a

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Speaker 1: perfect guest host, Verry d Holts. If you like to

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Speaker 1: do the things you do, do we shon do the baby.

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Speaker 1: I'm perfect, baby, You're perfect for you. Eave if you

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Speaker 1: like not, try the windows down, if you like places

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Speaker 1: they can't even pronounce. If you like I have dream it,

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Speaker 1: come say up baby. Un Perfect