Speaker 1: This is Bloomberg Surveillance. I've been thinking the ten years
Speaker 1: in a one and a half two and a half
Speaker 1: trade dam and that's where we've been, and I think
Speaker 1: that's where we're going to stay. I think there's a
Speaker 1: growing sentiment that maybe negative rates aren't all that they
Speaker 1: were supposed to be in terms of stimulating growth and inflation.
Speaker 1: Of precondition for a bear market is not necessarily a recession.
Speaker 1: Bear markets can occur even at the US fails to
Speaker 1: fall to recession. Bloomberg Surveillance your link to the world
Speaker 1: of economics, finance, and investment on Bloomberg Radio. Good morning,
Speaker 1: Michael McKee. It is seven am on Wall Street. Where
Speaker 1: risk is that kind of off today? The screen read,
Speaker 1: though not overwhelmingly so. Today on surveillance the debate of
Speaker 1: sort Gary Shilling in a moment, who sees the red
Speaker 1: as a harbinger, David Kelly of JP Morgan Funds, who
Speaker 1: is an optimist, And this is must listen. Bill Emlyndi
Speaker 1: Gates at eight am in their annual letter for the
Speaker 1: Gates Foundation, a stern, stark warning Tom about the risks
Speaker 1: of climate change. That is going to be must listen.
Speaker 1: They have actually done it. They're one of the few
Speaker 1: that has put money where mouth is an action, and
Speaker 1: it's a beautiful thing. I mean, we don't understand what
Speaker 1: he has done about the virology and microbiology of the world.
Speaker 1: He has of them major credit for that interesting letter
Speaker 1: this time aimed at young people. Uh. It seems to
Speaker 1: be the market these days, from Bertie Sanders to Bill Gates. Anyway,
Speaker 1: Bill Gates at eight am on surveillance. Markets on this Tuesday,
Speaker 1: as I mentioned, are lower. These stockis under by a point,
Speaker 1: that's four tenths of u percent on that index. The
Speaker 1: docks is off by seventy eight that's your worst performer
Speaker 1: of the day, eight tents of eight percent. The iPhone
Speaker 1: Institute's Business Climate Index dropping to one oh five point
Speaker 1: seven in February from one oh seven point three. Lead
Speaker 1: lower by expectations. US futures are lower s and P
Speaker 1: features by two points a tenth of a percent of
Speaker 1: tenth drop for Dow futures there down by ten points.
Speaker 1: NASDAG features off by ten points, that's two tents on
Speaker 1: that index. Bonds a touch weaker actually, with the tenure
Speaker 1: yield up to one point seven eight percent to five
Speaker 1: year at one point to five seventy six basis points
Speaker 1: for year two year. And of course we are watching oil.
Speaker 1: It was lower overnight, now it is mixed. West Texas
Speaker 1: is still off by four tents at thirty three twenty seven,
Speaker 1: but Brent's higher by four tents at thirty four eight.
Speaker 1: One big oil conference underway in Houston. We'll see what
Speaker 1: news develops out of that later today. Currencies where the
Speaker 1: action is to the extent there is action today, with
Speaker 1: the yen lower, the euro lower, the pound lower, Dollar
Speaker 1: Index barely higher on the day, the Australian dollar, Canada's
Speaker 1: looney stronger against the green bag. Those are commodity currencies.
Speaker 1: Gary Shilling says that won't last. President of a Gary
Speaker 1: Shilling and Company back with a long list of things
Speaker 1: wrong with global outlook, currency pairs among them. Your February newsletter, Um,
Speaker 1: quite the list of issues that we have to face
Speaker 1: going forward. Well, well we do. I mean, I think
Speaker 1: if you if you look around the world, we've got
Speaker 1: we've got slow growth. Um, we have virtually every country
Speaker 1: devaluing or trying to devalue against the dollar. They want
Speaker 1: to have stronger economic growth, they don't have it domestically,
Speaker 1: so they say we'll turn to exports. How do you
Speaker 1: get more exports You make your currency cheaper, make them
Speaker 1: more attractive to foreigners. UM. So that's going on. Commodity
Speaker 1: prices are are declined too much supply and we're seeing
Speaker 1: with VHP buillet In cutting our dividends today a clear
Speaker 1: indication of that, and Glenn Core all all these other
Speaker 1: commodity producers in trouble, um and uh all this does
Speaker 1: feed into a considerable throat of deflation, which scares the
Speaker 1: daylightes of central banks. Commodity prices have not im down
Speaker 1: in a month and a half. As a matter of fact,
Speaker 1: they're higher over the last month and a half UM
Speaker 1: and oil prices have stabilized, and inflation, according to the
Speaker 1: CPI last week is higher. So interesting thing about inflation,
Speaker 1: a matter of fact, we've we've just taken a look
Speaker 1: at that. And and one of the interesting things in
Speaker 1: the c p I is u of that is what's
Speaker 1: called owner imputed rent. The assumption is that you and
Speaker 1: I run our houses from ourselves, assuming you own your house.
Speaker 1: That's the way it is in there. And because rests
Speaker 1: of going up, a lot of younger people cannot afford
Speaker 1: their own houses, uh, and so running has been where
Speaker 1: the action is that index is up three point two
Speaker 1: percent versus a year ago. If you take that out,
Speaker 1: and what matter does it mean? If you own your house,
Speaker 1: you you look around and say, this is what I
Speaker 1: can run it from my from myself. For if you
Speaker 1: take that out, it knox the it knox the core
Speaker 1: if you if you took that out, that inflation wouldn't
Speaker 1: have fallen. Is when home prices were going down. So
Speaker 1: that's sort of a where would the core rate be
Speaker 1: right now? If you take a imputer, the core rate
Speaker 1: would be one of y're over here one point two
Speaker 1: versus one versus one point Bloomers surveillance. This morning, folks,
Speaker 1: This Tuesday, a morning brought you by Investco. Investco believes
Speaker 1: it's time to bench the benchmarks and to consider active
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Speaker 1: dot com Slash high Conviction. Gary, We started the morning
Speaker 1: looking at the five year five year forward, which is
Speaker 1: a chart very shilling friendly and just disinflation and deflation.
Speaker 1: To be clear, can the US be in deflation or
Speaker 1: is that something that happens abroad? Well, I think it's
Speaker 1: it's a universe. It's a universal situation. And of course
Speaker 1: what has happened so far as it's been largely in
Speaker 1: commands and spreading from there. The real question, though, Tom,
Speaker 1: is will it spread to services? If you look at
Speaker 1: if you're looking at in the consumer US consumer, uh,
Speaker 1: goods prices are are declining at about a three percent
Speaker 1: annual rate, but services are still increasing about two. They
Speaker 1: are starting to roll over, and there is an effect
Speaker 1: from good to services. For example, people are laid off
Speaker 1: in the energy industry, they're not going to as many
Speaker 1: bars they're they're not they're not going to as many
Speaker 1: movies they're not they're not getting as many haircuts. If
Speaker 1: they have hair I don't have come to the services.
Speaker 1: But that's the real question. Uh, what's your probability on that? Well,
Speaker 1: I think I think, I think it probably is over
Speaker 1: fifty fifty that it will because you simply have so
Speaker 1: much access supply in the world, and it's only a
Speaker 1: matter of time until people, when the goods industry simply
Speaker 1: simply uh, curtailer, they're spending on services. Services. Inflation in
Speaker 1: the most recent CPI report was up three tenths after
Speaker 1: being up one tenth. Yeah, and I explained that that
Speaker 1: was that was because of this, that was because of
Speaker 1: extraordinary increase in this homeowner rent on a on a
Speaker 1: year over year basis, it's unchanged two and a half percent.
Speaker 1: I mean, I'm not sure where the rolling over is. Well,
Speaker 1: if you if you look at if you look at
Speaker 1: I'm looking at the I'm looking at the components of
Speaker 1: the of not the c p I, but the the
Speaker 1: consumer consumer spending indexes. What the FED looks at. It's
Speaker 1: not the CPI, it's it's a variation on that. But
Speaker 1: that's one that I concentrate. We should We showed the
Speaker 1: Mike's point. We did show the Cleveland FED measurement of inflation,
Speaker 1: which unambiguously is concaveable. Well, you know, he and I
Speaker 1: met with any of these things. You can prove anything
Speaker 1: you want if you throw out enough stuff. I do
Speaker 1: that every day. How do you know? That's our formula
Speaker 1: and surveillance. But that's what you know. But that's what
Speaker 1: the Cleveland Fed and and there's nothing wrong with it.
Speaker 1: It's just a question what do you what do you
Speaker 1: want to believe? Uh, As they say in this case,
Speaker 1: I don't think you ought to include his owner imputed
Speaker 1: rent because nobody really thinks about it. But if it didn't,
Speaker 1: their behavior. But they look at the they look at
Speaker 1: the things that people buy every day. Uh. And and
Speaker 1: you know, but you can come to almost any conclusion
Speaker 1: you want depending on where you start on this oil prices,
Speaker 1: ten dollar oil your call win. Uh. Well, you know,
Speaker 1: one of the great forecasters historically said you should forecast
Speaker 1: what will happen or what will happen, but not both.
Speaker 1: I don't have a time raising on that. But you know,
Speaker 1: my rationale, Mike and I've talked about it many times,
Speaker 1: starting literally over a year ago on on this show. Uh.
Speaker 1: The rationale is that when you're when you're in a
Speaker 1: price war, and that's what's going on, and OPEC is
Speaker 1: you know, Bullpeck has ceased to exist as an effective cartel.
Speaker 1: The action has shifted to American frackers. But when you're
Speaker 1: in a situation whereas every man for himself and everybody's
Speaker 1: trying to produce more oil. You know, it's it's like
Speaker 1: if you have a if you have an intersection with
Speaker 1: four gas stations, one in each corner, somebody starts up
Speaker 1: cut prices the other the other stations have to cut
Speaker 1: their prices in response, and it keeps going around the
Speaker 1: around the circle that the intersection. Where does it stop.
Speaker 1: It stops not at the price of running the station,
Speaker 1: not the not the full cost. It stops at the
Speaker 1: price the marginal cost, the cost of getting the gas
Speaker 1: off a tanker, the tank truck plus plush taxes. Well.
Speaker 1: In the case of oil, the marginal cost is somewhere
Speaker 1: to tend to twenty bucks of barrel and the Permian
Speaker 1: basion in Texas and even lower in the Persian Gulf.
Speaker 1: In other words, once the holes are drilled, once the
Speaker 1: oil is flowing, where where what is the cost of
Speaker 1: getting com Where does free class flow does very quickly
Speaker 1: within that Newtonian analysis, Does the US drive the oil
Speaker 1: price boat? Or is it Opeque or is it not Opec?
Speaker 1: Now it's it's it's the U s I think it's
Speaker 1: the U s Now it's it's not Opec. Opec is
Speaker 1: producing flat out. Opec has some low cost oil, they
Speaker 1: have some high price oil. But in a second cartel
Speaker 1: and I Sho had a report on that the conditions
Speaker 1: for a cartel were wonderful. Earlier with olpack there were
Speaker 1: only a few members. They've got a product. Well, there's
Speaker 1: not many substances. Everybody wants it now they don't have it,
Speaker 1: their lots of substitutes, and they no longer have control.
Speaker 1: It's the American front. Well, come back, Gary's shilling with
Speaker 1: us UH as we look at price change amid an
Speaker 1: interesting mix of economics, finance and investment. Michael mckeeon Tom Keane.
Speaker 1: We do data checks. We do them cross asset sterling
Speaker 1: one forty nine two. It is weaker sterling today with
Speaker 1: a one forty hand and we have not gotten to
Speaker 1: one nine yet, which would be headline making dollar elevated
Speaker 1: slightly looking at strong yen one twelve twelve, we had
Speaker 1: one eleven dollar again earlier this morning, our Surreilan's brought
Speaker 1: to you by Vulvo Cars White Planes. Visit Volvo Cars
Speaker 1: White Planes dot com. Here is John Tucker with the
Speaker 1: latest news headlines. Michael and Thomber with Publican presidential candidates
Speaker 1: took last minute appeals for support across Nevada on the
Speaker 1: eve of today's caucuses. Marco Rubio, meantime, has been gathering
Speaker 1: support from Republican establishment figures since Friday. He's added twelve
Speaker 1: new congressional or globlatorial endorsements. Will Donald Trump and ts
Speaker 1: TED crews have added none. The Syrian government says it
Speaker 1: accepts the proposed truce in that country. The official announcement
Speaker 1: comes a day after the US and Russia agreed on
Speaker 1: a new cease fire for Syria that will take effect
Speaker 1: on Saturday. In the Eastern Netherlands, and commuter train derailed
Speaker 1: after slamming into a crane which was crossing the tracks.
Speaker 1: One person reported dead, six others injured. More than one
Speaker 1: hundred sixty passengers and crew slid down, emergency shoots and
Speaker 1: swirling snow after an engine fire forced the japan Airlines
Speaker 1: domestic flight to aboard takeoff. Today, Global News twenty four
Speaker 1: hours a day, powered by twenty four hundred journalists, had
Speaker 1: more than one hundred fifty news pres around the world.
Speaker 1: I'm John Tucker, Tom Jim, Thanks so much, Gary showing
Speaker 1: with US an economics finance investment. Your destination Bloomberg surveillance.
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