Speaker 1: Broadcasting live to New York, Gloomberg to Washington, d C,
Speaker 1: Bloomberg to Boston, Bloomberg twelve hundreds, to San Francisco, Bloomberg
Speaker 1: nine six to the country. When he said Sam channel
Speaker 1: one ninety and around the globe, the Bloomberg Radio BLUs happened.
Speaker 1: Bloomberg dot Com. This is Bloomberg Surveillance. Good morning, eight
Speaker 1: thirty on Wall Street and Michael McKee along with Tom
Speaker 1: Keene Economic Indicators brought to you by Commonwealth Financial Network.
Speaker 1: When it's time to change the conversation, talk with the
Speaker 1: broker dealer r I A that's ready to listen Call
Speaker 1: eight six two three six three eight or is it
Speaker 1: Commonwealth dot Com to learn more? No economic indicators in
Speaker 1: the United States at eight thirty. But Canada has just
Speaker 1: reported it added forty thousand, six hundred jobs in March.
Speaker 1: The jobless rate their falls. NHL players, all NHL players
Speaker 1: who weren't going to the Stanley thank you. Yeah, they've
Speaker 1: all gotten their their part time jobs. There. Bill Dudley
Speaker 1: just about to speak up in Bridgeport, Connecticut, and uh,
Speaker 1: we're we're watching to say, well here you here are
Speaker 1: the headlines. Um, he's still concerned about low inflation expectations. Uh,
Speaker 1: there is significant uncertainty about growth prospects abroad, and he's
Speaker 1: calling for a cautious, gradual approach to rate hikes. No
Speaker 1: UH fundamental change, I would say Tom in the in
Speaker 1: no deviation from the FED line there Um, he does
Speaker 1: see the jobless rate falling to around four or three
Speaker 1: quarters present for in two s. This is the money
Speaker 1: headline that none of our audience, including me, is mentally
Speaker 1: set for. And I'll you bring in our esteem guests,
Speaker 1: who's expert on this. The president of the New York
Speaker 1: Fed sees United States growth of about two percent this
Speaker 1: year above potential. Above potential is nobody's framing that to
Speaker 1: or two point to ur two point x well is
Speaker 1: quote unquote above potential. Let's bringing bringing a man who
Speaker 1: went to uh Duke University and got a degree also
Speaker 1: from the University of Michigan uh to to wield his
Speaker 1: framing hammer and tell us what this all means. Obviously,
Speaker 1: UH potential growth is how fast you can grow without
Speaker 1: touching off inflation. But two percent Eric Westman is very
Speaker 1: different from what we have seen in the past. He
Speaker 1: has UH fixed income portfolio managered MFS well, I mean,
Speaker 1: you're looking at different dynamics out there, especially in the
Speaker 1: labor market, and in terms of how we measure productivity,
Speaker 1: we think productivity is less than one percent, and we
Speaker 1: know that labor force UH increases are pretty minimal here
Speaker 1: and are likely to be low for the next five
Speaker 1: to ten years. Were we know that. So potential growth
Speaker 1: at two percent doesn't sound that off base to me.
Speaker 1: And certainly it is a sea change relative to the
Speaker 1: Reagan and Clinton expansions, where we would have considered potential
Speaker 1: growth to be above three. So is this a permanent condition,
Speaker 1: the permanent new normal? Are we just still trying to
Speaker 1: figure out a way to raise it a little higher.
Speaker 1: I don't think we can say it's permanent. I mean,
Speaker 1: it may be semi permanent for a while. It sort
Speaker 1: of depends on whether you believe in Robert Gordon's view
Speaker 1: of the world from Northwestern is new book out there
Speaker 1: talking about how we've seen a four hundred year one
Speaker 1: off in productivity growth and all of the low hanging
Speaker 1: fruit has been picked and that's the end of that,
Speaker 1: or whether you believe that this next technological advancement only
Speaker 1: takes time to run itself through the economy as have
Speaker 1: previous advancements, and we will see it over the course
Speaker 1: of time. I'm more in the ladder camp. I think
Speaker 1: we will see higher productivity. Whether it we'll see two
Speaker 1: percent productivity, I don't know, but I think we'll see
Speaker 1: something significantly higher than one. Do we see it into
Speaker 1: into President Dudley's shocking headline of where a potential is?
Speaker 1: Is it a potential of a bimodal to America economy
Speaker 1: or frankly, a nice part of America's doing a lot
Speaker 1: lot better than potential and there's another part of America
Speaker 1: flattener back or has that always been our economic condition?
Speaker 1: I think that's always been the case to some degree,
Speaker 1: but it seems to be more the case today. And
Speaker 1: that happens during these paradigm shifts. Right. So, we have
Speaker 1: this new artificial intelligence and digitalization that's really disrupting an
Speaker 1: awful lot of the economy. And there is a school
Speaker 1: of thought out there that as many companies transition to
Speaker 1: this more technologically advanced methodology, that they're sort of doing
Speaker 1: two things at once. They're using the prior dynamics of
Speaker 1: managing their business while they're trying to bring online this
Speaker 1: new digitalization, and that's sort of doubling efforts and that
Speaker 1: will be the case for a while. That's productivity detracting
Speaker 1: in Greenspan made the case last night that the productivity
Speaker 1: is the real issue here, that if you were going
Speaker 1: to do anything to try to fix the economy to
Speaker 1: get potential up, it would be fiscal policy aimed at
Speaker 1: raising investment to raise productivity. Hard to disagree with that, certainly.
Speaker 1: If you look at small business, which tends to be
Speaker 1: a driver of productivity, if you look at startups, we're
Speaker 1: not seeing that. We're not seeing credit go into that
Speaker 1: part of the economy. Some of that could be demographics,
Speaker 1: some of that could be regulatory, some of that could
Speaker 1: be just the aftermath of the global financial crisis. But
Speaker 1: we need to get money back into the system, and
Speaker 1: especially sort of new money with new businesses. To come
Speaker 1: back and talk about the fixed income business, Are you
Speaker 1: managing the various extincome efforts at MFS For any sense
Speaker 1: of rising inflation, I think that you're probably likely to
Speaker 1: see inflation creep a little bit higher than where it
Speaker 1: has been. Oil prices fell by and then they fell
Speaker 1: by another. There's only so many times that can happen
Speaker 1: unless they're going to start to actually give away the stuff.
Speaker 1: So at some point those base effects will kick in,
Speaker 1: and I think you'll see headline inflation rates a little
Speaker 1: bit higher. But core rates are already somewhat high. If
Speaker 1: you look at core CPI, that's running above two. So
Speaker 1: I think we'll see the headline converge to the core
Speaker 1: over the course of the next couple of years. But
Speaker 1: it's going to be a long slog. Let's come back
Speaker 1: here quite soon with us with the MFS as we
Speaker 1: consider Really they're the synthesis of what we do every
Speaker 1: day economics, finance, invest Mike, what else do you see
Speaker 1: in the Dudley comments. I'm fixated. I'm Bill Dudley saying
Speaker 1: about two is above potential. I can almost look at
Speaker 1: the don't think this is a type of Well, if
Speaker 1: you're a FED watcher and you're parsing his comments, he says,
Speaker 1: the balance of risks tilted slightly to the downside. Our
Speaker 1: balance of risk is tilted to a data check futures
Speaker 1: up seventeen. Michael bar is here. Now let's get the
Speaker 1: latest world in national headlines. Mike, Tom, thank you very much.
Speaker 1: Secretary of State John Kerry made an unannounced stop and
Speaker 1: bagged at today to meet with the Racks Prime Minister
Speaker 1: and other top officials. It comes at a time of
Speaker 1: increased military momentum against the Islamic State group and deep
Speaker 1: political uncertainty in the unstable country. It is a major
Speaker 1: document called The Joy of Love. The document, which is
Speaker 1: two hundred fifty six pages, was released today by Pope
Speaker 1: Frances about the complexities of sex, marriage and family. The
Speaker 1: Pope has insisted that individual conscious should be the guiding
Speaker 1: principle for Catholics and rejects the emphasis on black and
Speaker 1: white rules for the faithful. Frances makes no change in
Speaker 1: the church doctrine, but says the Church must no longer
Speaker 1: sit in judgment and throw stones against those who failed
Speaker 1: to live up to the Church's ideals of marriage and
Speaker 1: family life. It looks like any snow the New York
Speaker 1: City area we'll get over the weekend we has turned
Speaker 1: out to be a Yeah, it would be much less
Speaker 1: than first expected. According to the National Weather Service, the
Speaker 1: New area knew it will get only about an inch
Speaker 1: of snow or less. That's down from about one to
Speaker 1: three inches of snow. That's good news. Did you see
Speaker 1: three inches? We're going to get but now it's Track
Speaker 1: South and now it's a something Global News twenty four
Speaker 1: hours a day. Michael Blarm, All right, thank you, Michael.
Speaker 1: Time now for the Bloomberg NBC Sports Update, which traces
Speaker 1: the question John Stash, how is the Master's gonna get
Speaker 1: affected by the cold weather. Yeah, they had a lot
Speaker 1: of wind yesterday, but they're not getting any snow down
Speaker 1: in Augusta. But a lot of struggles yesterday. Mickey Fowler
Speaker 1: had an eighty two time winner, Bubba Watson a back
Speaker 1: forty one. Jason Dave ranked first in the world, triple
Speaker 1: bogey the sixteen foal. How about Ernie Else a nine
Speaker 1: on the opening hole. He six putted from three feet,
Speaker 1: but Jordan Speed trying to join Jack Nicholas tagger Woods
Speaker 1: and Nick Foul That was the only back to back winners.
Speaker 1: The Green Jacket fired a bogie free six under sixty six.
Speaker 1: He will bring it two shot leader today second round,
Speaker 1: which can be heard on Bloomberg eleven free today starting
Speaker 1: at four fifteen. If Guarden Islanders completed an unprecedented seasons
Speaker 1: sweep with the Rangers four one, they won the second
Speaker 1: period three nothing, This might be an outshot sixteen to nine.
Speaker 1: Two teams are tied. The one that finishes ahead places
Speaker 1: Pittsburgh in the playoffs. The team that doesn't plays Florida
Speaker 1: Penguins just one the eighth in a row four three
Speaker 1: at Washington and a Sidney Crosby golding overtime Tamma Baby
Speaker 1: at the Devil's four to two, seventieth win for Golden
Speaker 1: State one twelve, one on one over San Antonio. If
Speaker 1: the Warriors win their last three games, they break the
Speaker 1: record for most wins ever at the stadium. In last
Speaker 1: than twenty four hours, Yankee scored twenty four runs twenty nine.
Speaker 1: They had six homers eight five over Houston. Mark to
Speaker 1: Shara Broke Tar with a three run opposite field homer
Speaker 1: in the seventh inning. He says, everyone's hitting on Tarl
Speaker 1: top to bottom has been um producing these first few games,
Speaker 1: so especially last night and today, you know, we had
Speaker 1: contributions from one three nine again like Darland Castro, believed
Speaker 1: to be the best start to a Yankee career ever,
Speaker 1: three games in three homers, eight r b I s
Speaker 1: A five eight three average Yanks in Detroit today and
Speaker 1: the Mets have their home opener coming up against the
Speaker 1: Billings with the Bloomberg NBC Sports Update. I'm John Stapsha John,
Speaker 1: thanks so much. Mike McKee minim suits, just walking around
Speaker 1: taller the last few days. The Orioles are undefeated. The
Speaker 1: cold weather must be the cold We're gonna we're gonna
Speaker 1: get a report on that fairly soon. I think in
Speaker 1: the next few days we're gonna be talking with John Angelos. Oh,
Speaker 1: I did not know that. Wonderful in contact with him yesterday.
Speaker 1: We're excited by that. We're excited that they've had a
Speaker 1: good start, and we're always excited since she's our boss,
Speaker 1: that Mindy is happy. David Price will start the Red
Speaker 1: Sox home opener. That's wonderful. Coast to coast Bloomberg Surveillance.
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Speaker 1: Flash and I'm Karen Moscow. This updates brought to you
Speaker 1: by Sector Spider e t F S. Why buy a
Speaker 1: single stock when you can invest in the entire sector?
Speaker 1: Visits sector spd r S dot com or call six
Speaker 1: Sector e t F Global stocks rebounding with oil, while
Speaker 1: bonds of Europe's most intended countries rose on the final
Speaker 1: day of a week that saw markets whips on currency
Speaker 1: volatility approach the high since twenty eleven. Futures this morning
Speaker 1: are higher SNP mini futures of fifteen points, DOWNI miny
Speaker 1: futures of one eleven, and NAZ DOCU mini futures have
Speaker 1: thirty two The tenure Treasury down nine thirty seconds, the
Speaker 1: yield one point seven two percent nom X screwde oil
Speaker 1: of five percent of a dollar eighty six atteen of
Speaker 1: barrel comics gold is down to tens percent or two
Speaker 1: dollars fifty cents to twelve thirty five an ounce. The
Speaker 1: euro at dollar thirteen fifty nine. The n one oh
Speaker 1: eight point six five uncertainty over the outlook for the
Speaker 1: U S economy is higher than usual, which calls for
Speaker 1: a conscious and gradual approach to interest rate increases. Not
Speaker 1: from Federal Reserve Bank of New York President William Dundley,
Speaker 1: who's speaking in a speech in Connecticut City Grooves head
Speaker 1: of equity trading, Derek Van Deen will leave after almost
Speaker 1: eight years at the firm. And that's a Bloomberg business flash.
Speaker 1: Tom and Mike Karen, thanks so much. Fisture a risk
Speaker 1: field to the screen. It is on Wall Street. The
Speaker 1: following is from Bloomberg View opinions in commentary from Bloomberg columnists.
Speaker 1: I'm Frank Berry, an editor with Bloomberg View, waiting on
Speaker 1: line to board a bus for the Donald Trump rally.
Speaker 1: Mustache showed older man with a big board of Trump
Speaker 1: buttons sauntered by five dollars each. She said, two for
Speaker 1: six dollars, said at twenty something man. The peddler didn't
Speaker 1: budge the prospective buyer. Let's call him buttons. Raised his
Speaker 1: offer two for seven dollars. The peddler kept walking. This
Speaker 1: guy said, buttons, you believe him? Two expletives deleted. Buttons
Speaker 1: eventually left and came back with the goods. You get
Speaker 1: two for seven dollars, asked his friend. No, said buttons
Speaker 1: two for eight. Gotta say, smart businessman. One expletive deleted.
Speaker 1: A man in a knit cap turned around the art
Speaker 1: of the deal, he said buttons and his friend eventually
Speaker 1: made a run for the venue and one of their
Speaker 1: buttons fell to the street. I picked it up, thinking
Speaker 1: I might see them inside, but I never made it
Speaker 1: into the rally. The crowd was too big. But at
Speaker 1: least I got a good expletive deleted souvenir. I'm Frank
Speaker 1: Barry edited with Bloomberg View. For more Bloomberg opinion and commentary,
Speaker 1: please go to Bloomberg View dot com or Bloomberg Go
Speaker 1: on the Bloomberg terminal. This has been Bloomberg View and
Speaker 1: Bloomberg View Commentary can be heard hourly weekdays. I'm Bloomberg Radio.
Speaker 1: This morning Bloomberg Surveillance. We bought you by Columbia University's
Speaker 1: Executive Technology Management Graduate program. It prepares technology professionals to
Speaker 1: drive business performance information and SPS dot Columbia dot E
Speaker 1: d U slash tech One more time, SPS dot Columbia
Speaker 1: dot E d U slash tech. Eric Wison with us
Speaker 1: with MFS. As we consider the bond market, Eric frame,
Speaker 1: how you manage a bond portfolio? Right now? Is it
Speaker 1: for coupon? Since things are priced to perfection. Is total
Speaker 1: return out well, still all got to be about total return,
Speaker 1: But you have to know you're not getting a whole
Speaker 1: lot of income from your coupons, so you're looking for
Speaker 1: countries that can offer you a little bit of extra spread.
Speaker 1: So you look at a country like in New Zealand Australia.
Speaker 1: Things are relatively weak. Their inflation is popish and declining
Speaker 1: growth is middle ish, so you might be able to
Speaker 1: get some spread compression there. And in Europe maybe you
Speaker 1: look at a Norway where it's still beholden to oil.
Speaker 1: Inflation has room to come down and the central bank
Speaker 1: still has a little bit of room to cut rates.
Speaker 1: But there's not a lot out there that's offering you, uh,
Speaker 1: compelling spread. Well, you gotta put money somewhere where, do
Speaker 1: you right? You see how Mike said, so subtly until
Speaker 1: you get your mattress etf up and go yes indeed,
Speaker 1: so you know, I mean, I'll sound a little bit
Speaker 1: like a broken record from last time, but high yield
Speaker 1: not quite as compelling as the last time we spoke,
Speaker 1: where it might have been around eight hundred over, but
Speaker 1: it's still six fifty over. It's still a hundred hundred
Speaker 1: and twenty cheap two sort of where it averages um.
Speaker 1: You know, we like that. E M still offers some spread.
Speaker 1: It's a little dicey. You gotta pick your points. It's
Speaker 1: cheap to high grade, and high grade offers you a
Speaker 1: little bit of a pickup over sort of. It's it's
Speaker 1: mean over the course of this business cycle. So there
Speaker 1: is some spread out there, and you have to take
Speaker 1: a look at what your risk tolerance is. Away from
Speaker 1: the bond world, there's the idea of equity dividend is
Speaker 1: yield equivalent. All the radar goes up when that kind
Speaker 1: of idea is said. Now we have dividend paying dividend
Speaker 1: growing consumer stocks price to nineteen sixties perfection. Folks. We
Speaker 1: say this to the Massachusetts Financial Service, which basically invented
Speaker 1: the diversified equity portfolio. Eric, you were there, what was
Speaker 1: that eight? Sometimes was the last time the red sox won?
Speaker 1: Um A. But but Eric, the basic the basic idea
Speaker 1: of a dividend is a yield proxy. Discussed that. That's
Speaker 1: a difficult thing, isn't it. I think that's in a
Speaker 1: moment in time. It's a nice narrative, but I don't
Speaker 1: think that that's particularly compelling over the course of time.
Speaker 1: You know, if you look at dividends and you look
Speaker 1: at yield, you look at dividends and you look at spreads,
Speaker 1: my sense would be the correlations over lengths of time
Speaker 1: are are not going to match that narrative. So I
Speaker 1: would be suspect of comparing the two like that. The
Speaker 1: noted bond investor and we have some music playing in
Speaker 1: the background here. Um. The noted bond investor Jamie Diamond
Speaker 1: suggested earlier this week that the bond market is not
Speaker 1: ready for the FED. Uh, you're in charge of keeping
Speaker 1: track of the bond market. Is MFS ready for the FED?
Speaker 1: Or do you think he's too pessimistic. I'm not sure
Speaker 1: how anybody can be ready for the FED right now.
Speaker 1: I mean, it seems as though we're lost in terms
Speaker 1: of trying to figure out what the Fed's reaction function is.
Speaker 1: They used to not care about the rest of the world.
Speaker 1: They used to not talk about the dollar, and now
Speaker 1: that's all they talk about. So in September they surprised
Speaker 1: us saying the rest of the world is too tighty
Speaker 1: and we don't want to raise rates. And March they've
Speaker 1: done the same thing yelling speech last week. Uh, and
Speaker 1: it now seems very whimsical. And I think that's not
Speaker 1: a term that any central banker would want attached to them,
Speaker 1: especially in a world where ever, growing transparency tends to
Speaker 1: be a goal. You probably don't want to be transparent
Speaker 1: about your capriciousness. But that's where the central banks are
Speaker 1: right now in terms of raising rates. Uh. You know,
Speaker 1: I think the feed is damned if they do, and
Speaker 1: damned if they don't. If they raise rates and the
Speaker 1: dollar increases in values, you wind up getting into that
Speaker 1: kind of vicious cycle all over again. And if the
Speaker 1: FEED says they're on ROLD, then it forces the e
Speaker 1: c B in the Bank of Japan to go yet
Speaker 1: further into negative yielding territory, and that has its own problems.
Speaker 1: One final question, if we we could, Eric, and I
Speaker 1: say this with great respect for the heritage of Bob
Speaker 1: Dennis and John Jamison NFS explained to me leverage is
Speaker 1: a suitable yield and answer for retirees, is there any
Speaker 1: proof it works? Well, that's a heck of a good question.
Speaker 1: I think that in an environment like this, Uh, that's
Speaker 1: a kind of a scary thought to some degree, we're
Speaker 1: already highly leveraged. Uh you know where Yeah, I mean,
Speaker 1: we're We're in a world here where leverage makes a
Speaker 1: good deal of sense if you have visibility out into
Speaker 1: the future and you feel good about domestic demand, international demand,
Speaker 1: a little bit of inflation. Levering up in an environment
Speaker 1: where you can't see that demand, where the demographics are
Speaker 1: less favorable where they've been, where there's more regulation, where
Speaker 1: tax policy is uncertain, that may not be the best
Speaker 1: prescription going forward. And I want to make clear, folks,
Speaker 1: there's two kinds of leverage there. There's a leverage within
Speaker 1: the system, the macro leverage and the leverage on the
Speaker 1: accounting statements, and then the actual use of leverage within
Speaker 1: a diversified portfolio. To any answer, yield. It's a little
Speaker 1: complex there, but I thought Eric's question was great. Dr Weisman,
Speaker 1: thank so much. He is with the Massachusetts Financial Services
Speaker 1: MF asked, Mike, I want to bring it back right here,
Speaker 1: just to get a window into our next hour about
Speaker 1: what we learned this week. What I learned this week
Speaker 1: is a real global real economic effects are having profound
Speaker 1: influence on markets, and markets having a profound in influence
Speaker 1: on global economies as well. You know, hour long discussion
Speaker 1: last night among the four FED former chairs, and I
Speaker 1: think Alan Greenspan probably had the most trench and comment
Speaker 1: of all when he talked about productivity being the key
Speaker 1: to why we're seeing such slow growth and that he said,
Speaker 1: is uh, slow because there is no investment out there?
Speaker 1: And why is there no investment out there? Well, companies
Speaker 1: are are uncertain. And just to paint the picture, folk,
Speaker 1: Mike and I are with Sherman Greenspan and he comes
Speaker 1: into the room and he's walking a little, you know,
Speaker 1: a little fragile for you know, ninety sits down, sharp
Speaker 1: as attack, and he leans over his says, Tom, can
Speaker 1: we please talk about productivity? Yeah, I mean that's front
Speaker 1: center for him. Yeah, I mean he and he made
Speaker 1: a very cogent point last night about that. Interesting to
Speaker 1: hear from Paul Volker again. You know, the audience was
Speaker 1: students most weren't even born when he was with Care
Speaker 1: of the Ft exactly. But reminding us that all this
Speaker 1: handwringing over the political criticism of the FEED is nothing new. Uh.
Speaker 1: He reminded us that you know, builders sent him two
Speaker 1: by four's into mail and he raised interest rates and
Speaker 1: farmers demonstrated outside the Fed and hung him in effigy.
Speaker 1: So uh, it goes with the territory. I hope you
Speaker 1: guys like how we do economic history here. We really
Speaker 1: believe you have to have a look back to look forward,
Speaker 1: and sometimes there's not enough of that in our rushed
Speaker 1: modern world. We're gonna continue our dialogue on this Friday
Speaker 1: after yesterday. It's a decidedly better feel with le Yen
Speaker 1: is the global proxy A one oh seven and change
Speaker 1: yesterday A and then really in the low one o eight,
Speaker 1: one o eight ten, one oh eight two, one oh
Speaker 1: eight fifteen, and we have a weaker end one oh
Speaker 1: eight point six nine, but still that's massively strong compared
Speaker 1: to where we were a week or two ago. We're
Speaker 1: gonna continue that discussion Robbie Feldman of Morgan Stanley with
Speaker 1: us earlier this morning. We're going to continue that smart
Speaker 1: discussion with John Vale. He will join us. So Nico
Speaker 1: Asset Management can't do better than that. This is Bloomberg
Speaker 1: surveillance