WEBVTT - Shilling: countries devaluing against dollar to boost growth

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<v Speaker 1>This is Bloomberg Surveillance. I've been thinking the ten years

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<v Speaker 1>in a one and a half two and a half

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<v Speaker 1>trade dam and that's where we've been, and I think

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<v Speaker 1>that's where we're going to stay. I think there's a

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<v Speaker 1>growing sentiment that maybe negative rates aren't all that they

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<v Speaker 1>were supposed to be in terms of stimulating growth and inflation.

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<v Speaker 1>Of precondition for a bear market is not necessarily a recession.

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<v Speaker 1>Bear markets can occur even at the US fails to

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<v Speaker 1>fall to recession. Bloomberg Surveillance your link to the world

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<v Speaker 1>of economics, finance, and investment on Bloomberg Radio. Good morning,

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<v Speaker 1>Michael McKee. It is seven am on Wall Street. Where

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<v Speaker 1>risk is that kind of off today? The screen read,

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<v Speaker 1>though not overwhelmingly so. Today on surveillance the debate of

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<v Speaker 1>sort Gary Shilling in a moment, who sees the red

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<v Speaker 1>as a harbinger, David Kelly of JP Morgan Funds, who

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<v Speaker 1>is an optimist, And this is must listen. Bill Emlyndi

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<v Speaker 1>Gates at eight am in their annual letter for the

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<v Speaker 1>Gates Foundation, a stern, stark warning Tom about the risks

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<v Speaker 1>of climate change. That is going to be must listen.

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<v Speaker 1>They have actually done it. They're one of the few

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<v Speaker 1>that has put money where mouth is an action, and

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<v Speaker 1>it's a beautiful thing. I mean, we don't understand what

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<v Speaker 1>he has done about the virology and microbiology of the world.

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<v Speaker 1>He has of them major credit for that interesting letter

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<v Speaker 1>this time aimed at young people. Uh. It seems to

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<v Speaker 1>be the market these days, from Bertie Sanders to Bill Gates. Anyway,

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<v Speaker 1>Bill Gates at eight am on surveillance. Markets on this Tuesday,

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<v Speaker 1>as I mentioned, are lower. These stockis under by a point,

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<v Speaker 1>that's four tenths of u percent on that index. The

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<v Speaker 1>docks is off by seventy eight that's your worst performer

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<v Speaker 1>of the day, eight tents of eight percent. The iPhone

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<v Speaker 1>Institute's Business Climate Index dropping to one oh five point

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<v Speaker 1>seven in February from one oh seven point three. Lead

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<v Speaker 1>lower by expectations. US futures are lower s and P

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<v Speaker 1>features by two points a tenth of a percent of

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<v Speaker 1>tenth drop for Dow futures there down by ten points.

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<v Speaker 1>NASDAG features off by ten points, that's two tents on

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<v Speaker 1>that index. Bonds a touch weaker actually, with the tenure

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<v Speaker 1>yield up to one point seven eight percent to five

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<v Speaker 1>year at one point to five seventy six basis points

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<v Speaker 1>for year two year. And of course we are watching oil.

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<v Speaker 1>It was lower overnight, now it is mixed. West Texas

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<v Speaker 1>is still off by four tents at thirty three twenty seven,

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<v Speaker 1>but Brent's higher by four tents at thirty four eight.

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<v Speaker 1>One big oil conference underway in Houston. We'll see what

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<v Speaker 1>news develops out of that later today. Currencies where the

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<v Speaker 1>action is to the extent there is action today, with

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<v Speaker 1>the yen lower, the euro lower, the pound lower, Dollar

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<v Speaker 1>Index barely higher on the day, the Australian dollar, Canada's

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<v Speaker 1>looney stronger against the green bag. Those are commodity currencies.

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<v Speaker 1>Gary Shilling says that won't last. President of a Gary

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<v Speaker 1>Shilling and Company back with a long list of things

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<v Speaker 1>wrong with global outlook, currency pairs among them. Your February newsletter, Um,

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<v Speaker 1>quite the list of issues that we have to face

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<v Speaker 1>going forward. Well, well we do. I mean, I think

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<v Speaker 1>if you if you look around the world, we've got

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<v Speaker 1>we've got slow growth. Um, we have virtually every country

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<v Speaker 1>devaluing or trying to devalue against the dollar. They want

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<v Speaker 1>to have stronger economic growth, they don't have it domestically,

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<v Speaker 1>so they say we'll turn to exports. How do you

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<v Speaker 1>get more exports You make your currency cheaper, make them

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<v Speaker 1>more attractive to foreigners. UM. So that's going on. Commodity

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<v Speaker 1>prices are are declined too much supply and we're seeing

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<v Speaker 1>with VHP buillet In cutting our dividends today a clear

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<v Speaker 1>indication of that, and Glenn Core all all these other

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<v Speaker 1>commodity producers in trouble, um and uh all this does

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<v Speaker 1>feed into a considerable throat of deflation, which scares the

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<v Speaker 1>daylightes of central banks. Commodity prices have not im down

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<v Speaker 1>in a month and a half. As a matter of fact,

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<v Speaker 1>they're higher over the last month and a half UM

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<v Speaker 1>and oil prices have stabilized, and inflation, according to the

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<v Speaker 1>CPI last week is higher. So interesting thing about inflation,

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<v Speaker 1>a matter of fact, we've we've just taken a look

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<v Speaker 1>at that. And and one of the interesting things in

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<v Speaker 1>the c p I is u of that is what's

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<v Speaker 1>called owner imputed rent. The assumption is that you and

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<v Speaker 1>I run our houses from ourselves, assuming you own your house.

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<v Speaker 1>That's the way it is in there. And because rests

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<v Speaker 1>of going up, a lot of younger people cannot afford

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<v Speaker 1>their own houses, uh, and so running has been where

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<v Speaker 1>the action is that index is up three point two

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<v Speaker 1>percent versus a year ago. If you take that out,

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<v Speaker 1>and what matter does it mean? If you own your house,

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<v Speaker 1>you you look around and say, this is what I

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<v Speaker 1>can run it from my from myself. For if you

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<v Speaker 1>take that out, it knox the it knox the core

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<v Speaker 1>if you if you took that out, that inflation wouldn't

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<v Speaker 1>have fallen. Is when home prices were going down. So

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<v Speaker 1>that's sort of a where would the core rate be

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<v Speaker 1>right now? If you take a imputer, the core rate

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<v Speaker 1>would be one of y're over here one point two

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<v Speaker 1>versus one versus one point Bloomers surveillance. This morning, folks,

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<v Speaker 1>This Tuesday, a morning brought you by Investco. Investco believes

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<v Speaker 1>it's time to bench the benchmarks and to consider active

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<v Speaker 1>management in factor based strategies. Find out more in investco

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<v Speaker 1>dot com Slash high Conviction. Gary, We started the morning

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<v Speaker 1>looking at the five year five year forward, which is

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<v Speaker 1>a chart very shilling friendly and just disinflation and deflation.

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<v Speaker 1>To be clear, can the US be in deflation or

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<v Speaker 1>is that something that happens abroad? Well, I think it's

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<v Speaker 1>it's a universe. It's a universal situation. And of course

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<v Speaker 1>what has happened so far as it's been largely in

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<v Speaker 1>commands and spreading from there. The real question, though, Tom,

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<v Speaker 1>is will it spread to services? If you look at

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<v Speaker 1>if you're looking at in the consumer US consumer, uh,

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<v Speaker 1>goods prices are are declining at about a three percent

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<v Speaker 1>annual rate, but services are still increasing about two. They

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<v Speaker 1>are starting to roll over, and there is an effect

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<v Speaker 1>from good to services. For example, people are laid off

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<v Speaker 1>in the energy industry, they're not going to as many

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<v Speaker 1>bars they're they're not they're not going to as many

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<v Speaker 1>movies they're not they're not getting as many haircuts. If

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<v Speaker 1>they have hair I don't have come to the services.

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<v Speaker 1>But that's the real question. Uh, what's your probability on that? Well,

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<v Speaker 1>I think I think, I think it probably is over

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<v Speaker 1>fifty fifty that it will because you simply have so

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<v Speaker 1>much access supply in the world, and it's only a

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<v Speaker 1>matter of time until people, when the goods industry simply

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<v Speaker 1>simply uh, curtailer, they're spending on services. Services. Inflation in

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<v Speaker 1>the most recent CPI report was up three tenths after

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<v Speaker 1>being up one tenth. Yeah, and I explained that that

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<v Speaker 1>was that was because of this, that was because of

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<v Speaker 1>extraordinary increase in this homeowner rent on a on a

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<v Speaker 1>year over year basis, it's unchanged two and a half percent.

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<v Speaker 1>I mean, I'm not sure where the rolling over is. Well,

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<v Speaker 1>if you if you look at if you look at

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<v Speaker 1>I'm looking at the I'm looking at the components of

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<v Speaker 1>the of not the c p I, but the the

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<v Speaker 1>consumer consumer spending indexes. What the FED looks at. It's

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<v Speaker 1>not the CPI, it's it's a variation on that. But

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<v Speaker 1>that's one that I concentrate. We should We showed the

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<v Speaker 1>Mike's point. We did show the Cleveland FED measurement of inflation,

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<v Speaker 1>which unambiguously is concaveable. Well, you know, he and I

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<v Speaker 1>met with any of these things. You can prove anything

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<v Speaker 1>you want if you throw out enough stuff. I do

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<v Speaker 1>that every day. How do you know? That's our formula

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<v Speaker 1>and surveillance. But that's what you know. But that's what

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<v Speaker 1>the Cleveland Fed and and there's nothing wrong with it.

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<v Speaker 1>It's just a question what do you what do you

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<v Speaker 1>want to believe? Uh, As they say in this case,

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<v Speaker 1>I don't think you ought to include his owner imputed

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<v Speaker 1>rent because nobody really thinks about it. But if it didn't,

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<v Speaker 1>their behavior. But they look at the they look at

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<v Speaker 1>the things that people buy every day. Uh. And and

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<v Speaker 1>you know, but you can come to almost any conclusion

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<v Speaker 1>you want depending on where you start on this oil prices,

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<v Speaker 1>ten dollar oil your call win. Uh. Well, you know,

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<v Speaker 1>one of the great forecasters historically said you should forecast

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<v Speaker 1>what will happen or what will happen, but not both.

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<v Speaker 1>I don't have a time raising on that. But you know,

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<v Speaker 1>my rationale, Mike and I've talked about it many times,

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<v Speaker 1>starting literally over a year ago on on this show. Uh.

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<v Speaker 1>The rationale is that when you're when you're in a

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<v Speaker 1>price war, and that's what's going on, and OPEC is

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<v Speaker 1>you know, Bullpeck has ceased to exist as an effective cartel.

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<v Speaker 1>The action has shifted to American frackers. But when you're

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<v Speaker 1>in a situation whereas every man for himself and everybody's

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<v Speaker 1>trying to produce more oil. You know, it's it's like

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<v Speaker 1>if you have a if you have an intersection with

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<v Speaker 1>four gas stations, one in each corner, somebody starts up

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<v Speaker 1>cut prices the other the other stations have to cut

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<v Speaker 1>their prices in response, and it keeps going around the

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<v Speaker 1>around the circle that the intersection. Where does it stop.

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<v Speaker 1>It stops not at the price of running the station,

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<v Speaker 1>not the not the full cost. It stops at the

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<v Speaker 1>price the marginal cost, the cost of getting the gas

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<v Speaker 1>off a tanker, the tank truck plus plush taxes. Well.

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<v Speaker 1>In the case of oil, the marginal cost is somewhere

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<v Speaker 1>to tend to twenty bucks of barrel and the Permian

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<v Speaker 1>basion in Texas and even lower in the Persian Gulf.

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<v Speaker 1>In other words, once the holes are drilled, once the

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<v Speaker 1>oil is flowing, where where what is the cost of

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<v Speaker 1>getting com Where does free class flow does very quickly

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<v Speaker 1>within that Newtonian analysis, Does the US drive the oil

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<v Speaker 1>price boat? Or is it Opeque or is it not Opec?

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<v Speaker 1>Now it's it's it's the U s I think it's

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<v Speaker 1>the U s Now it's it's not Opec. Opec is

0:09:54.400 --> 0:09:57.679
<v Speaker 1>producing flat out. Opec has some low cost oil, they

0:09:57.720 --> 0:10:01.160
<v Speaker 1>have some high price oil. But in a second cartel

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<v Speaker 1>and I Sho had a report on that the conditions

0:10:03.600 --> 0:10:06.679
<v Speaker 1>for a cartel were wonderful. Earlier with olpack there were

0:10:06.679 --> 0:10:09.000
<v Speaker 1>only a few members. They've got a product. Well, there's

0:10:09.000 --> 0:10:12.000
<v Speaker 1>not many substances. Everybody wants it now they don't have it,

0:10:12.000 --> 0:10:15.120
<v Speaker 1>their lots of substitutes, and they no longer have control.

0:10:15.200 --> 0:10:17.680
<v Speaker 1>It's the American front. Well, come back, Gary's shilling with

0:10:17.760 --> 0:10:20.959
<v Speaker 1>us UH as we look at price change amid an

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<v Speaker 1>interesting mix of economics, finance and investment. Michael mckeeon Tom Keane.

0:10:26.280 --> 0:10:29.559
<v Speaker 1>We do data checks. We do them cross asset sterling

0:10:29.760 --> 0:10:33.199
<v Speaker 1>one forty nine two. It is weaker sterling today with

0:10:33.280 --> 0:10:35.160
<v Speaker 1>a one forty hand and we have not gotten to

0:10:35.280 --> 0:10:39.679
<v Speaker 1>one nine yet, which would be headline making dollar elevated

0:10:39.920 --> 0:10:44.640
<v Speaker 1>slightly looking at strong yen one twelve twelve, we had

0:10:44.760 --> 0:10:53.160
<v Speaker 1>one eleven dollar again earlier this morning, our Surreilan's brought

0:10:53.160 --> 0:10:55.400
<v Speaker 1>to you by Vulvo Cars White Planes. Visit Volvo Cars

0:10:55.400 --> 0:10:57.760
<v Speaker 1>White Planes dot com. Here is John Tucker with the

0:10:57.800 --> 0:11:01.480
<v Speaker 1>latest news headlines. Michael and Thomber with Publican presidential candidates

0:11:01.640 --> 0:11:04.640
<v Speaker 1>took last minute appeals for support across Nevada on the

0:11:04.679 --> 0:11:08.400
<v Speaker 1>eve of today's caucuses. Marco Rubio, meantime, has been gathering

0:11:08.440 --> 0:11:13.000
<v Speaker 1>support from Republican establishment figures since Friday. He's added twelve

0:11:13.080 --> 0:11:16.839
<v Speaker 1>new congressional or globlatorial endorsements. Will Donald Trump and ts

0:11:17.080 --> 0:11:20.240
<v Speaker 1>TED crews have added none. The Syrian government says it

0:11:20.280 --> 0:11:23.400
<v Speaker 1>accepts the proposed truce in that country. The official announcement

0:11:23.440 --> 0:11:25.800
<v Speaker 1>comes a day after the US and Russia agreed on

0:11:25.840 --> 0:11:28.439
<v Speaker 1>a new cease fire for Syria that will take effect

0:11:28.679 --> 0:11:32.199
<v Speaker 1>on Saturday. In the Eastern Netherlands, and commuter train derailed

0:11:32.240 --> 0:11:34.920
<v Speaker 1>after slamming into a crane which was crossing the tracks.

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<v Speaker 1>One person reported dead, six others injured. More than one

0:11:38.720 --> 0:11:41.840
<v Speaker 1>hundred sixty passengers and crew slid down, emergency shoots and

0:11:41.920 --> 0:11:45.520
<v Speaker 1>swirling snow after an engine fire forced the japan Airlines

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<v Speaker 1>domestic flight to aboard takeoff. Today, Global News twenty four

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<v Speaker 1>hours a day, powered by twenty four hundred journalists, had

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<v Speaker 1>more than one hundred fifty news pres around the world.

0:11:54.760 --> 0:11:57.880
<v Speaker 1>I'm John Tucker, Tom Jim, Thanks so much, Gary showing

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<v Speaker 1>with US an economics finance investment. Your destination Bloomberg surveillance.

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<v Speaker 1>Bloomberg Surveillance has brought you by your try State BMW

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