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Speaker 1: Broadcasting live to New York, Gloomberg to Washington, d C,

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Speaker 1: Bloomberg to Boston, Bloomberg twelve hundreds, to San Francisco, Bloomberg

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Speaker 1: nine six to the country. When he said Sam channel

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Speaker 1: one ninety and around the globe, the Bloomberg Radio BLUs happened.

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Speaker 1: Bloomberg dot Com. This is Bloomberg Surveillance. Good morning, eight

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Speaker 1: thirty on Wall Street and Michael McKee along with Tom

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Speaker 1: Keene Economic Indicators brought to you by Commonwealth Financial Network.

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Speaker 1: When it's time to change the conversation, talk with the

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Speaker 1: broker dealer r I A that's ready to listen Call

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Speaker 1: eight six two three six three eight or is it

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Speaker 1: Commonwealth dot Com to learn more? No economic indicators in

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Speaker 1: the United States at eight thirty. But Canada has just

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Speaker 1: reported it added forty thousand, six hundred jobs in March.

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Speaker 1: The jobless rate their falls. NHL players, all NHL players

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Speaker 1: who weren't going to the Stanley thank you. Yeah, they've

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Speaker 1: all gotten their their part time jobs. There. Bill Dudley

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Speaker 1: just about to speak up in Bridgeport, Connecticut, and uh,

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Speaker 1: we're we're watching to say, well here you here are

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Speaker 1: the headlines. Um, he's still concerned about low inflation expectations. Uh,

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Speaker 1: there is significant uncertainty about growth prospects abroad, and he's

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Speaker 1: calling for a cautious, gradual approach to rate hikes. No

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Speaker 1: UH fundamental change, I would say Tom in the in

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Speaker 1: no deviation from the FED line there Um, he does

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Speaker 1: see the jobless rate falling to around four or three

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Speaker 1: quarters present for in two s. This is the money

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Speaker 1: headline that none of our audience, including me, is mentally

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Speaker 1: set for. And I'll you bring in our esteem guests,

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Speaker 1: who's expert on this. The president of the New York

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Speaker 1: Fed sees United States growth of about two percent this

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Speaker 1: year above potential. Above potential is nobody's framing that to

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Speaker 1: or two point to ur two point x well is

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Speaker 1: quote unquote above potential. Let's bringing bringing a man who

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Speaker 1: went to uh Duke University and got a degree also

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Speaker 1: from the University of Michigan uh to to wield his

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Speaker 1: framing hammer and tell us what this all means. Obviously,

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Speaker 1: UH potential growth is how fast you can grow without

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Speaker 1: touching off inflation. But two percent Eric Westman is very

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Speaker 1: different from what we have seen in the past. He

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Speaker 1: has UH fixed income portfolio managered MFS well, I mean,

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Speaker 1: you're looking at different dynamics out there, especially in the

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Speaker 1: labor market, and in terms of how we measure productivity,

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Speaker 1: we think productivity is less than one percent, and we

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Speaker 1: know that labor force UH increases are pretty minimal here

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Speaker 1: and are likely to be low for the next five

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Speaker 1: to ten years. Were we know that. So potential growth

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Speaker 1: at two percent doesn't sound that off base to me.

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Speaker 1: And certainly it is a sea change relative to the

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Speaker 1: Reagan and Clinton expansions, where we would have considered potential

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Speaker 1: growth to be above three. So is this a permanent condition,

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Speaker 1: the permanent new normal? Are we just still trying to

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Speaker 1: figure out a way to raise it a little higher.

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Speaker 1: I don't think we can say it's permanent. I mean,

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Speaker 1: it may be semi permanent for a while. It sort

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Speaker 1: of depends on whether you believe in Robert Gordon's view

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Speaker 1: of the world from Northwestern is new book out there

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Speaker 1: talking about how we've seen a four hundred year one

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Speaker 1: off in productivity growth and all of the low hanging

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Speaker 1: fruit has been picked and that's the end of that,

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Speaker 1: or whether you believe that this next technological advancement only

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Speaker 1: takes time to run itself through the economy as have

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Speaker 1: previous advancements, and we will see it over the course

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Speaker 1: of time. I'm more in the ladder camp. I think

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Speaker 1: we will see higher productivity. Whether it we'll see two

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Speaker 1: percent productivity, I don't know, but I think we'll see

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Speaker 1: something significantly higher than one. Do we see it into

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Speaker 1: into President Dudley's shocking headline of where a potential is?

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Speaker 1: Is it a potential of a bimodal to America economy

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Speaker 1: or frankly, a nice part of America's doing a lot

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Speaker 1: lot better than potential and there's another part of America

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Speaker 1: flattener back or has that always been our economic condition?

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Speaker 1: I think that's always been the case to some degree,

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Speaker 1: but it seems to be more the case today. And

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Speaker 1: that happens during these paradigm shifts. Right. So, we have

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Speaker 1: this new artificial intelligence and digitalization that's really disrupting an

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Speaker 1: awful lot of the economy. And there is a school

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Speaker 1: of thought out there that as many companies transition to

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Speaker 1: this more technologically advanced methodology, that they're sort of doing

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Speaker 1: two things at once. They're using the prior dynamics of

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Speaker 1: managing their business while they're trying to bring online this

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Speaker 1: new digitalization, and that's sort of doubling efforts and that

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Speaker 1: will be the case for a while. That's productivity detracting

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Speaker 1: in Greenspan made the case last night that the productivity

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Speaker 1: is the real issue here, that if you were going

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Speaker 1: to do anything to try to fix the economy to

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Speaker 1: get potential up, it would be fiscal policy aimed at

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Speaker 1: raising investment to raise productivity. Hard to disagree with that, certainly.

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Speaker 1: If you look at small business, which tends to be

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Speaker 1: a driver of productivity, if you look at startups, we're

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Speaker 1: not seeing that. We're not seeing credit go into that

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Speaker 1: part of the economy. Some of that could be demographics,

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Speaker 1: some of that could be regulatory, some of that could

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Speaker 1: be just the aftermath of the global financial crisis. But

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Speaker 1: we need to get money back into the system, and

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Speaker 1: especially sort of new money with new businesses. To come

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Speaker 1: back and talk about the fixed income business, Are you

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Speaker 1: managing the various extincome efforts at MFS For any sense

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Speaker 1: of rising inflation, I think that you're probably likely to

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Speaker 1: see inflation creep a little bit higher than where it

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Speaker 1: has been. Oil prices fell by and then they fell

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Speaker 1: by another. There's only so many times that can happen

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Speaker 1: unless they're going to start to actually give away the stuff.

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Speaker 1: So at some point those base effects will kick in,

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Speaker 1: and I think you'll see headline inflation rates a little

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Speaker 1: bit higher. But core rates are already somewhat high. If

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Speaker 1: you look at core CPI, that's running above two. So

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Speaker 1: I think we'll see the headline converge to the core

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Speaker 1: over the course of the next couple of years. But

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Speaker 1: it's going to be a long slog. Let's come back

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Speaker 1: here quite soon with us with the MFS as we

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Speaker 1: consider Really they're the synthesis of what we do every

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Speaker 1: day economics, finance, invest Mike, what else do you see

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Speaker 1: in the Dudley comments. I'm fixated. I'm Bill Dudley saying

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Speaker 1: about two is above potential. I can almost look at

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Speaker 1: the don't think this is a type of Well, if

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Speaker 1: you're a FED watcher and you're parsing his comments, he says,

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Speaker 1: the balance of risks tilted slightly to the downside. Our

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Speaker 1: balance of risk is tilted to a data check futures

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Speaker 1: up seventeen. Michael bar is here. Now let's get the

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Speaker 1: latest world in national headlines. Mike, Tom, thank you very much.

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Speaker 1: Secretary of State John Kerry made an unannounced stop and

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Speaker 1: bagged at today to meet with the Racks Prime Minister

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Speaker 1: and other top officials. It comes at a time of

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Speaker 1: increased military momentum against the Islamic State group and deep

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Speaker 1: political uncertainty in the unstable country. It is a major

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Speaker 1: document called The Joy of Love. The document, which is

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Speaker 1: two hundred fifty six pages, was released today by Pope

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Speaker 1: Frances about the complexities of sex, marriage and family. The

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Speaker 1: Pope has insisted that individual conscious should be the guiding

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Speaker 1: principle for Catholics and rejects the emphasis on black and

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Speaker 1: white rules for the faithful. Frances makes no change in

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Speaker 1: the church doctrine, but says the Church must no longer

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Speaker 1: sit in judgment and throw stones against those who failed

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Speaker 1: to live up to the Church's ideals of marriage and

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Speaker 1: family life. It looks like any snow the New York

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Speaker 1: City area we'll get over the weekend we has turned

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Speaker 1: out to be a Yeah, it would be much less

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Speaker 1: than first expected. According to the National Weather Service, the

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Speaker 1: New area knew it will get only about an inch

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Speaker 1: of snow or less. That's down from about one to

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Speaker 1: three inches of snow. That's good news. Did you see

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Speaker 1: three inches? We're going to get but now it's Track

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Speaker 1: South and now it's a something Global News twenty four

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Speaker 1: hours a day. Michael Blarm, All right, thank you, Michael.

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Speaker 1: Time now for the Bloomberg NBC Sports Update, which traces

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Speaker 1: the question John Stash, how is the Master's gonna get

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Speaker 1: affected by the cold weather. Yeah, they had a lot

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Speaker 1: of wind yesterday, but they're not getting any snow down

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Speaker 1: in Augusta. But a lot of struggles yesterday. Mickey Fowler

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Speaker 1: had an eighty two time winner, Bubba Watson a back

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Speaker 1: forty one. Jason Dave ranked first in the world, triple

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Speaker 1: bogey the sixteen foal. How about Ernie Else a nine

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Speaker 1: on the opening hole. He six putted from three feet,

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Speaker 1: but Jordan Speed trying to join Jack Nicholas tagger Woods

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Speaker 1: and Nick Foul That was the only back to back winners.

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Speaker 1: The Green Jacket fired a bogie free six under sixty six.

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Speaker 1: He will bring it two shot leader today second round,

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Speaker 1: which can be heard on Bloomberg eleven free today starting

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Speaker 1: at four fifteen. If Guarden Islanders completed an unprecedented seasons

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Speaker 1: sweep with the Rangers four one, they won the second

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Speaker 1: period three nothing, This might be an outshot sixteen to nine.

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Speaker 1: Two teams are tied. The one that finishes ahead places

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Speaker 1: Pittsburgh in the playoffs. The team that doesn't plays Florida

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Speaker 1: Penguins just one the eighth in a row four three

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Speaker 1: at Washington and a Sidney Crosby golding overtime Tamma Baby

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Speaker 1: at the Devil's four to two, seventieth win for Golden

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Speaker 1: State one twelve, one on one over San Antonio. If

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Speaker 1: the Warriors win their last three games, they break the

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Speaker 1: record for most wins ever at the stadium. In last

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Speaker 1: than twenty four hours, Yankee scored twenty four runs twenty nine.

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Speaker 1: They had six homers eight five over Houston. Mark to

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Speaker 1: Shara Broke Tar with a three run opposite field homer

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Speaker 1: in the seventh inning. He says, everyone's hitting on Tarl

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Speaker 1: top to bottom has been um producing these first few games,

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Speaker 1: so especially last night and today, you know, we had

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Speaker 1: contributions from one three nine again like Darland Castro, believed

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Speaker 1: to be the best start to a Yankee career ever,

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Speaker 1: three games in three homers, eight r b I s

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Speaker 1: A five eight three average Yanks in Detroit today and

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Speaker 1: the Mets have their home opener coming up against the

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Speaker 1: Billings with the Bloomberg NBC Sports Update. I'm John Stapsha John,

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Speaker 1: thanks so much. Mike McKee minim suits, just walking around

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Speaker 1: taller the last few days. The Orioles are undefeated. The

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Speaker 1: cold weather must be the cold We're gonna we're gonna

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Speaker 1: get a report on that fairly soon. I think in

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Speaker 1: the next few days we're gonna be talking with John Angelos. Oh,

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Speaker 1: I did not know that. Wonderful in contact with him yesterday.

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Speaker 1: We're excited by that. We're excited that they've had a

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Speaker 1: good start, and we're always excited since she's our boss,

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Speaker 1: that Mindy is happy. David Price will start the Red

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Speaker 1: Sox home opener. That's wonderful. Coast to coast Bloomberg Surveillance.

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Speaker 1: Sector e t F Global stocks rebounding with oil, while

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Speaker 1: bonds of Europe's most intended countries rose on the final

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Speaker 1: day of a week that saw markets whips on currency

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Speaker 1: volatility approach the high since twenty eleven. Futures this morning

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Speaker 1: are higher SNP mini futures of fifteen points, DOWNI miny

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Speaker 1: futures of one eleven, and NAZ DOCU mini futures have

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Speaker 1: thirty two The tenure Treasury down nine thirty seconds, the

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Speaker 1: yield one point seven two percent nom X screwde oil

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Speaker 1: of five percent of a dollar eighty six atteen of

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Speaker 1: barrel comics gold is down to tens percent or two

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Speaker 1: dollars fifty cents to twelve thirty five an ounce. The

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Speaker 1: euro at dollar thirteen fifty nine. The n one oh

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Speaker 1: eight point six five uncertainty over the outlook for the

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Speaker 1: U S economy is higher than usual, which calls for

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Speaker 1: a conscious and gradual approach to interest rate increases. Not

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Speaker 1: from Federal Reserve Bank of New York President William Dundley,

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Speaker 1: who's speaking in a speech in Connecticut City Grooves head

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Speaker 1: of equity trading, Derek Van Deen will leave after almost

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Speaker 1: eight years at the firm. And that's a Bloomberg business flash.

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Speaker 1: Tom and Mike Karen, thanks so much. Fisture a risk

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Speaker 1: field to the screen. It is on Wall Street. The

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Speaker 1: following is from Bloomberg View opinions in commentary from Bloomberg columnists.

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Speaker 1: I'm Frank Berry, an editor with Bloomberg View, waiting on

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Speaker 1: line to board a bus for the Donald Trump rally.

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Speaker 1: Mustache showed older man with a big board of Trump

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Speaker 1: buttons sauntered by five dollars each. She said, two for

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Speaker 1: six dollars, said at twenty something man. The peddler didn't

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Speaker 1: budge the prospective buyer. Let's call him buttons. Raised his

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Speaker 1: offer two for seven dollars. The peddler kept walking. This

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Speaker 1: guy said, buttons, you believe him? Two expletives deleted. Buttons

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Speaker 1: eventually left and came back with the goods. You get

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Speaker 1: two for seven dollars, asked his friend. No, said buttons

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Speaker 1: two for eight. Gotta say, smart businessman. One expletive deleted.

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Speaker 1: A man in a knit cap turned around the art

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Speaker 1: of the deal, he said buttons and his friend eventually

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Speaker 1: made a run for the venue and one of their

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Speaker 1: buttons fell to the street. I picked it up, thinking

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Speaker 1: I might see them inside, but I never made it

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Speaker 1: into the rally. The crowd was too big. But at

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Speaker 1: least I got a good expletive deleted souvenir. I'm Frank

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Speaker 1: Barry edited with Bloomberg View. For more Bloomberg opinion and commentary,

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Speaker 1: please go to Bloomberg View dot com or Bloomberg Go

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Speaker 1: on the Bloomberg terminal. This has been Bloomberg View and

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Speaker 1: Bloomberg View Commentary can be heard hourly weekdays. I'm Bloomberg Radio.

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Speaker 1: This morning Bloomberg Surveillance. We bought you by Columbia University's

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Speaker 1: Executive Technology Management Graduate program. It prepares technology professionals to

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Speaker 1: drive business performance information and SPS dot Columbia dot E

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Speaker 1: d U slash tech One more time, SPS dot Columbia

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Speaker 1: dot E d U slash tech. Eric Wison with us

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Speaker 1: with MFS. As we consider the bond market, Eric frame,

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Speaker 1: how you manage a bond portfolio? Right now? Is it

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Speaker 1: for coupon? Since things are priced to perfection. Is total

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Speaker 1: return out well, still all got to be about total return,

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Speaker 1: But you have to know you're not getting a whole

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Speaker 1: lot of income from your coupons, so you're looking for

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Speaker 1: countries that can offer you a little bit of extra spread.

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Speaker 1: So you look at a country like in New Zealand Australia.

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Speaker 1: Things are relatively weak. Their inflation is popish and declining

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Speaker 1: growth is middle ish, so you might be able to

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Speaker 1: get some spread compression there. And in Europe maybe you

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Speaker 1: look at a Norway where it's still beholden to oil.

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Speaker 1: Inflation has room to come down and the central bank

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Speaker 1: still has a little bit of room to cut rates.

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Speaker 1: But there's not a lot out there that's offering you, uh,

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Speaker 1: compelling spread. Well, you gotta put money somewhere where, do

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Speaker 1: you right? You see how Mike said, so subtly until

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Speaker 1: you get your mattress etf up and go yes indeed,

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Speaker 1: so you know, I mean, I'll sound a little bit

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Speaker 1: like a broken record from last time, but high yield

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Speaker 1: not quite as compelling as the last time we spoke,

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Speaker 1: where it might have been around eight hundred over, but

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Speaker 1: it's still six fifty over. It's still a hundred hundred

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Speaker 1: and twenty cheap two sort of where it averages um.

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Speaker 1: You know, we like that. E M still offers some spread.

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Speaker 1: It's a little dicey. You gotta pick your points. It's

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Speaker 1: cheap to high grade, and high grade offers you a

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Speaker 1: little bit of a pickup over sort of. It's it's

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Speaker 1: mean over the course of this business cycle. So there

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Speaker 1: is some spread out there, and you have to take

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Speaker 1: a look at what your risk tolerance is. Away from

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Speaker 1: the bond world, there's the idea of equity dividend is

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Speaker 1: yield equivalent. All the radar goes up when that kind

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Speaker 1: of idea is said. Now we have dividend paying dividend

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Speaker 1: growing consumer stocks price to nineteen sixties perfection. Folks. We

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Speaker 1: say this to the Massachusetts Financial Service, which basically invented

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Speaker 1: the diversified equity portfolio. Eric, you were there, what was

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Speaker 1: that eight? Sometimes was the last time the red sox won?

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Speaker 1: Um A. But but Eric, the basic the basic idea

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Speaker 1: of a dividend is a yield proxy. Discussed that. That's

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Speaker 1: a difficult thing, isn't it. I think that's in a

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Speaker 1: moment in time. It's a nice narrative, but I don't

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Speaker 1: think that that's particularly compelling over the course of time.

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Speaker 1: You know, if you look at dividends and you look

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Speaker 1: at yield, you look at dividends and you look at spreads,

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Speaker 1: my sense would be the correlations over lengths of time

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Speaker 1: are are not going to match that narrative. So I

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Speaker 1: would be suspect of comparing the two like that. The

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Speaker 1: noted bond investor and we have some music playing in

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Speaker 1: the background here. Um. The noted bond investor Jamie Diamond

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Speaker 1: suggested earlier this week that the bond market is not

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Speaker 1: ready for the FED. Uh, you're in charge of keeping

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Speaker 1: track of the bond market. Is MFS ready for the FED?

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Speaker 1: Or do you think he's too pessimistic. I'm not sure

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Speaker 1: how anybody can be ready for the FED right now.

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Speaker 1: I mean, it seems as though we're lost in terms

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Speaker 1: of trying to figure out what the Fed's reaction function is.

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Speaker 1: They used to not care about the rest of the world.

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Speaker 1: They used to not talk about the dollar, and now

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Speaker 1: that's all they talk about. So in September they surprised

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Speaker 1: us saying the rest of the world is too tighty

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Speaker 1: and we don't want to raise rates. And March they've

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Speaker 1: done the same thing yelling speech last week. Uh, and

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Speaker 1: it now seems very whimsical. And I think that's not

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Speaker 1: a term that any central banker would want attached to them,

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Speaker 1: especially in a world where ever, growing transparency tends to

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Speaker 1: be a goal. You probably don't want to be transparent

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Speaker 1: about your capriciousness. But that's where the central banks are

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Speaker 1: right now in terms of raising rates. Uh. You know,

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Speaker 1: I think the feed is damned if they do, and

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Speaker 1: damned if they don't. If they raise rates and the

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Speaker 1: dollar increases in values, you wind up getting into that

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Speaker 1: kind of vicious cycle all over again. And if the

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Speaker 1: FEED says they're on ROLD, then it forces the e

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Speaker 1: c B in the Bank of Japan to go yet

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Speaker 1: further into negative yielding territory, and that has its own problems.

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Speaker 1: One final question, if we we could, Eric, and I

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Speaker 1: say this with great respect for the heritage of Bob

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Speaker 1: Dennis and John Jamison NFS explained to me leverage is

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Speaker 1: a suitable yield and answer for retirees, is there any

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Speaker 1: proof it works? Well, that's a heck of a good question.

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Speaker 1: I think that in an environment like this, Uh, that's

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Speaker 1: a kind of a scary thought to some degree, we're

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Speaker 1: already highly leveraged. Uh you know where Yeah, I mean,

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Speaker 1: we're We're in a world here where leverage makes a

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Speaker 1: good deal of sense if you have visibility out into

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Speaker 1: the future and you feel good about domestic demand, international demand,

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Speaker 1: a little bit of inflation. Levering up in an environment

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Speaker 1: where you can't see that demand, where the demographics are

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Speaker 1: less favorable where they've been, where there's more regulation, where

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Speaker 1: tax policy is uncertain, that may not be the best

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Speaker 1: prescription going forward. And I want to make clear, folks,

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Speaker 1: there's two kinds of leverage there. There's a leverage within

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Speaker 1: the system, the macro leverage and the leverage on the

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Speaker 1: accounting statements, and then the actual use of leverage within

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Speaker 1: a diversified portfolio. To any answer, yield. It's a little

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Speaker 1: complex there, but I thought Eric's question was great. Dr Weisman,

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Speaker 1: thank so much. He is with the Massachusetts Financial Services

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Speaker 1: MF asked, Mike, I want to bring it back right here,

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Speaker 1: just to get a window into our next hour about

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Speaker 1: what we learned this week. What I learned this week

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Speaker 1: is a real global real economic effects are having profound

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Speaker 1: influence on markets, and markets having a profound in influence

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Speaker 1: on global economies as well. You know, hour long discussion

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Speaker 1: last night among the four FED former chairs, and I

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Speaker 1: think Alan Greenspan probably had the most trench and comment

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Speaker 1: of all when he talked about productivity being the key

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Speaker 1: to why we're seeing such slow growth and that he said,

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Speaker 1: is uh, slow because there is no investment out there?

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Speaker 1: And why is there no investment out there? Well, companies

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Speaker 1: are are uncertain. And just to paint the picture, folk,

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Speaker 1: Mike and I are with Sherman Greenspan and he comes

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Speaker 1: into the room and he's walking a little, you know,

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Speaker 1: a little fragile for you know, ninety sits down, sharp

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Speaker 1: as attack, and he leans over his says, Tom, can

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Speaker 1: we please talk about productivity? Yeah, I mean that's front

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Speaker 1: center for him. Yeah, I mean he and he made

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Speaker 1: a very cogent point last night about that. Interesting to

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Speaker 1: hear from Paul Volker again. You know, the audience was

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Speaker 1: students most weren't even born when he was with Care

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Speaker 1: of the Ft exactly. But reminding us that all this

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Speaker 1: handwringing over the political criticism of the FEED is nothing new. Uh.

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Speaker 1: He reminded us that you know, builders sent him two

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Speaker 1: by four's into mail and he raised interest rates and

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Speaker 1: farmers demonstrated outside the Fed and hung him in effigy.

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Speaker 1: So uh, it goes with the territory. I hope you

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Speaker 1: guys like how we do economic history here. We really

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Speaker 1: believe you have to have a look back to look forward,

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Speaker 1: and sometimes there's not enough of that in our rushed

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Speaker 1: modern world. We're gonna continue our dialogue on this Friday

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Speaker 1: after yesterday. It's a decidedly better feel with le Yen

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Speaker 1: is the global proxy A one oh seven and change

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Speaker 1: yesterday A and then really in the low one o eight,

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Speaker 1: one o eight ten, one oh eight two, one oh

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Speaker 1: eight fifteen, and we have a weaker end one oh

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Speaker 1: eight point six nine, but still that's massively strong compared

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Speaker 1: to where we were a week or two ago. We're

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Speaker 1: gonna continue that discussion Robbie Feldman of Morgan Stanley with

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Speaker 1: us earlier this morning. We're going to continue that smart

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Speaker 1: discussion with John Vale. He will join us. So Nico

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Speaker 1: Asset Management can't do better than that. This is Bloomberg

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Speaker 1: surveillance