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Speaker 1: But because of these actions, all of our nations are

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Speaker 1: more peaceful, and more secure and more prosperous UH, and

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Speaker 1: it underscores the enduring friendship and partnership between the United

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Speaker 1: States UH and the countries that are represented around this table.

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Speaker 1: Thank you for your hospital. The President of the United

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Speaker 1: States speaking in Riad and again he will move to

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Speaker 1: London today in celebration on the Queen's birthday, as well

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Speaker 1: well of continuing coverage by our government and our global

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Speaker 1: government team on the President's trip throughout all of our

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Speaker 1: Bloomberg platforms. Droggy is speaking, Michael. The euro moves decidedly stronger.

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Speaker 1: We didn't get to it one fourteen. But what I

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Speaker 1: really noted, Mike was the adjustment in German yields a

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Speaker 1: two year yield from nineteen pips and the ten year

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Speaker 1: to point to three one. Not a big move, but

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Speaker 1: on a volatility basis, that was quite a move. Quite

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Speaker 1: a shift. Yeah, for a bank that didn't do anything

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Speaker 1: significant market impact. It looks like people are disappointed in

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Speaker 1: what the ECB is doing and or saying that they're

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Speaker 1: not trying to move the currency more, and so the

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Speaker 1: reaction goes the other way. That's having an impact the

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Speaker 1: German buttons also interesting because of course Germany has been

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Speaker 1: very critical of Joggy and his policies, and he was

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Speaker 1: asked about that today and gave a strong defense of

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Speaker 1: the independence of ECB. The present headlines were on the

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Speaker 1: Italian bank and right now he's just back to helicopter money.

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Speaker 1: Dragg He refuses to be drawn out on the legality

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Speaker 1: of the helicopter money. We thank George Severellis of Deutsche

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Speaker 1: Bank for wonderful perspective. Look for that out on all

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Speaker 1: of our audio platforms. David Wilson has to skill still.

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Speaker 1: Helicopter money. I guess the money helicoptered into Detroit five, eight,

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Speaker 1: ten years ago, and now it's not a helicopter money's

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Speaker 1: pickup money. It is money you certainly gotta pick up.

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Speaker 1: Going on at General Motors, no question there. I mean

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Speaker 1: the stocks up about three percent in early trading. The

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Speaker 1: automaker's first quarter earnings and revenue exceeded analysts average estimates

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Speaker 1: in the Bloomberg survey. GM had a record profit in

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Speaker 1: North America and improved results in the rest of the world,

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Speaker 1: which in some cases meant smaller losses. Verizons down two

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Speaker 1: and a half percent. The phone company's first quarter profit

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Speaker 1: match the average estimates. Sales were lower than projections. The

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Speaker 1: results were hurt by verizons dependence on tablet computer promotions

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Speaker 1: to keep its places. The number one US wireless carrier,

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Speaker 1: qual Calm, down two percent. The mobile phone chip makers

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Speaker 1: second quarter earnings and revenue forecasts were only in line

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Speaker 1: with estimates. The first quarter results came out ahead. Qual

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Speaker 1: Calm executives sound a conference call that they expect to

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Speaker 1: lose some parts orders for Apple's iPhone. Verizon should point

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Speaker 1: out one of three companies that need Dow Jones Industrial

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Speaker 1: Average reported since late yesterday, another one of mayor can

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Speaker 1: Express up two and a half percent. The biggest US

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Speaker 1: credit card issuer by purchases posted first quarter profit and

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Speaker 1: revenue the beat estimates as customers increased spending. The other

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Speaker 1: one is Travelers and that stocks down three percent. The

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Speaker 1: insurers operating profit for the first quarter failed to meet

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Speaker 1: estimates as catastrophe costs rows, including a hail storm in

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Speaker 1: Texas that they had to pay off claims on. Investment

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Speaker 1: income fell on lower returns from hedge funds elsewhere. Biogens

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Speaker 1: up one percent. The drug makers first quarter ownings beat estimates.

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Speaker 1: Cost cuts offset falling sales of Biogen's biggest seller, the

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Speaker 1: multiple Scrosses drug Tech Federa Union Pacific. Turning to transportation

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Speaker 1: up two percent first quarter earnings beat estimates as a

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Speaker 1: price increases and cost cutting outweighed and drop in demand.

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Speaker 1: Southwest Airlines up two and a half percent to carry

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Speaker 1: report at first quarter profit to beat estimates thanks for

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Speaker 1: lower fuel costs and sustained demand. Unit cont now, on

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Speaker 1: the other hand, is down three and a half percent.

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Speaker 1: First quarter revenue for each mile and seat flow own

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Speaker 1: fell about seven and a half percent from a year earlier.

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Speaker 1: The United expects a comparable decline the second quarter. That's okay.

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Speaker 1: Las Vegas, yes, I give you that one, Ernest, the

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Speaker 1: world's largest operative casinos, fell more than I was expected

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Speaker 1: in the first quarter. They suffered from a slump in

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Speaker 1: their biggest market, Macau, the Chinese city uh in A.

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Speaker 1: Las Vegas Sands down a percent. Other casino stocks down

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Speaker 1: as well. MGM resorts of two and a half or

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Speaker 1: down to an a half percent. Win Resorts down two percent.

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Speaker 1: David Wilson, thank you so much. The President continued to

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Speaker 1: speak in Riod and a little monitor of that for

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Speaker 1: important headlines. Mario dragging continues to speak, which means it's

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Speaker 1: a good time to speak with William Lee a City

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Speaker 1: Group bill. Give me an update on the global field

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Speaker 1: from you and Fortress bowder Um. What is our probability

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Speaker 1: of global recession or is that diminishing? Well? The economy

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Speaker 1: seems to be looking a little bit better because the

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Speaker 1: market seems to have calmed down, and the markets themselves

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Speaker 1: have been a source of tremendous headwind both here and abroad.

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Speaker 1: So so I think our household is still one of

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Speaker 1: it's better than even money that we're gonna see. We're

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Speaker 1: gonna be in a global recession this year, which means

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Speaker 1: look to percent growth a lower, but the speed at

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Speaker 1: which we would be heading down that path has seen

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Speaker 1: to us slowed a bit, so so I think it's

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Speaker 1: it's it's uh. It's impressive that, for example, Mario drug

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Speaker 1: has been talking so extensively about give the policy some

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Speaker 1: time to work, and I think my reaction to that is, well,

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Speaker 1: it's beginning to sound like a hope in a prayer. Well. Uh.

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Speaker 1: It certainly seems from the market reaction that that's the case,

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Speaker 1: because the euro gained almost a full figure and look

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Speaker 1: at oil prices have completely reversed, uh and they're down now.

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Speaker 1: People seem disappointed in what the ECV didn't do, and

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Speaker 1: Mario dragging didn't say, well, what are we expecting? Honestly,

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Speaker 1: like from Mario and from Janet and from the Corona,

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Speaker 1: we're expecting miracles. And I think we can all agree

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Speaker 1: on one thing. Monetary policy cannot make growth. They cannot

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Speaker 1: create growth out of nothing. All Montro policy can do

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Speaker 1: is as Drug said, um I can get time. Please

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Speaker 1: put in some structure reforms, because that's the source of growth.

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Speaker 1: All Montro policy is doing is moving growth around. If

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Speaker 1: I appreciate the currency, I'm taking it away from whoever's appreciating.

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Speaker 1: If I lower interest rates, I'm trying to take take

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Speaker 1: growth from the future, I bring it into today. So

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Speaker 1: all I can do is moving around until we get

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Speaker 1: structural policies to really give us sustainable, real productivity and

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Speaker 1: real growth. Tom I'm imagining as Bill says that Billy

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Speaker 1: Crystal is a miracle, Max and the Princess, it's a

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Speaker 1: excuse me, it's a most unusual time, and you see

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Speaker 1: it with an unusual headlines drug exchange rate, no policy target.

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Speaker 1: But an important factor, Billy, where does chair Yelling want

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Speaker 1: the dollar? Where does chair Draggy want the euro? And

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Speaker 1: that's the way you see the attention, right. I mean,

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Speaker 1: if if, if we're relying on montro policy, get growth,

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Speaker 1: that means Cherry Yelling is saying, well, you're not going

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Speaker 1: to take it from me. So I want the dollars

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Speaker 1: state exactly where it is. You've already pushed it up.

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Speaker 1: You've already cost me the US about a percentage point

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Speaker 1: of growth, which will take about another year or two participate.

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Speaker 1: And and and so with the growth that you've taken

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Speaker 1: from us, what have you done with it? And I

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Speaker 1: think that and with drawing is saying we need a

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Speaker 1: little more, We need a little more time because clearly

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Speaker 1: the political impacts here in Europe is so severe it's

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Speaker 1: unlikely what we're going to get those structure reforms soon.

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Speaker 1: Interesting headline from Dragging answers one of the questions you

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Speaker 1: put Tom to George Saravellis. He says, there doesn't seem

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Speaker 1: to be any indication that negative rates have hurt banks

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Speaker 1: net interest income. Uh So why not just continue with

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Speaker 1: the policy they're they're doing, or even go more negative,

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Speaker 1: Bill Well, I think that's that's sort of the fallacy

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Speaker 1: that I think they're living under, which is that the

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Speaker 1: financial system can somehow survive all of this margin compressions.

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Speaker 1: I was just at a major insurance company yesterday and

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Speaker 1: their main concern was we have acid liability mismatches and

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Speaker 1: others where where we have all these annuities and all

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Speaker 1: these problems to pay returns and we don't have the

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Speaker 1: assets that have the earning power to support that. We

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Speaker 1: see corporates raising uh money like crazy, issuing a lot

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Speaker 1: of debt, and what are they doing with the sixty

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Speaker 1: cents that of every dollars give the back to the

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Speaker 1: shareholder in the form of dividend and stop buybacks. We've

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Speaker 1: got a distorted financial market now, so distorted by these

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Speaker 1: zo rate policies and native rate policies that the big,

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Speaker 1: the big danger that's ahead of us is that the

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Speaker 1: capital markets are no longer allocating capitloids that it's almost

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Speaker 1: impossible to find way to put capital so that he

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Speaker 1: earned a positive and the real rate of return. We

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Speaker 1: continue with William Lee of City Michaels. Think about the

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Speaker 1: next angle you want to take? With so much going

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Speaker 1: on Mario Dragi continues to speak. The President's remarks just ended,

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Speaker 1: but he will move to another press conference. We can

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Speaker 1: see it from our studios in New York with a

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Speaker 1: wide set of Arab nation flags behind UH the electron

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Speaker 1: Michael with the American flag obviously from center with the

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Speaker 1: president's visit, so we look forward to his comments there.

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Speaker 1: Why don't you continue, Michael a little bit more with Billy. Yeah, well,

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Speaker 1: you continuing going with what you were just saying, building

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Speaker 1: are the central banks then having sort of the effect

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Speaker 1: they want because you can't get a return anywhere, so

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Speaker 1: you are taking chances, you are taking on more risk

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Speaker 1: and would that be good for markets in the economy? Well, myke,

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Speaker 1: you know, if if you're taking a bet and saying

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Speaker 1: that we're going to try to stimulate growth and and

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Speaker 1: and and regardless of what happens the banking system, when

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Speaker 1: when you look at places like Europe and Japan that

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Speaker 1: are so bank dependent, that's really playing UH an awfully

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Speaker 1: risky game because that's the main channel for monte policy transmission.

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Speaker 1: At least here in the US. We've got the capital

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Speaker 1: markets that are able to supplement the bank lending and

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Speaker 1: aren't able to somehow maybe move capital around. But even there,

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Speaker 1: with spreads as as compressed as they are, it's very

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Speaker 1: hard to find an efficient allocation. One of the things

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Speaker 1: that I did um last week was I downgraded the

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Speaker 1: U S outlook even further. And and the reason behind

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Speaker 1: that is because cherry yelling has given us a sense

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Speaker 1: that we are looking at financial markets looking at us.

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Speaker 1: In other words, the feedback loop from Montreal policy to

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Speaker 1: the markets back to the Montrey policy again has gotten

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Speaker 1: so severe that Montre policy is no longer anchored to

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Speaker 1: macro funmentals. And in that sort of situation, the level

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Speaker 1: of uncertainty rises. And and as you guys know, I've

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Speaker 1: done a lot of research using this economic policy uncertainty

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Speaker 1: index that the research as Stanford has done, and and

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Speaker 1: and I reestimated consumption function, is reestimated investment equations. And

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Speaker 1: it's amazing how much head let's come back build with

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Speaker 1: us will continue this discussion on important economic metrics. Draggy

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Speaker 1: speaks and the President will speak in a bit. All right,

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Speaker 1: let's check out with Michael Byron now and get the

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Speaker 1: latest world of national headlines my time. Thank you very much.

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Speaker 1: President Obama is pressing arabellies to increase their support for

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Speaker 1: the besieged Iraqi government as it battles the Islamic State Group.

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Speaker 1: President Obama who is in Saudi Arabia at this morning

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Speaker 1: with top officials from six Arab nations to address the

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Speaker 1: conflicts in Iraq, Syria and Yemen, and the President will

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Speaker 1: address a news conference shortly. Iraqi officials having been identifying

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Speaker 1: bodies recently found in two mass graves in the western

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Speaker 1: city of Ramadi five with the victims are a policeman,

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Speaker 1: his wife and son, and to security personnel. Thirty two

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Speaker 1: bodies have been exhumed so far. Earlier this week, Islamic

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Speaker 1: State militants under arrest led authorities to the mass graves

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Speaker 1: inside the city's soccer stadium. Celebrations are going on for

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Speaker 1: Britain's Queen Elizabeth, who is celebrating your ninety birthday today.

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Speaker 1: Global News twenty four hours a day, powered by our

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Speaker 1: twenty four hundred journalists and more than a hundred fifty

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Speaker 1: news bureaus from around the world on Michael bar Nighttime

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Speaker 1: and Michael both thanks so much. The five stronger euro

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Speaker 1: weaker dollar off the early drag. Comments from New York

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Speaker 1: This is a Bloomberg Business flash and I'm Karen Moscow.

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Speaker 1: This updates brought to you by Interactive Brokers and CME Group.

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Speaker 1: dot indix. Futures are little changed in a mix of

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Speaker 1: corporate earnings that fail to provide a clearer picture on

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Speaker 1: the health of the economy. To check the markets every

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Speaker 1: fifteen minutes throughout the trading day on Bloomberg Again, Futures

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Speaker 1: little change. The decks in Germany's down four tenths percent,

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Speaker 1: CACK in Paris down six tens percent, FT one hundred

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Speaker 1: down seven tenths per cent, ten year Treasury down eight

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Speaker 1: thirty seconds. The yield one point eight seven percent yield

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Speaker 1: on the two year point eight zero percent. Non max

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Speaker 1: Scrude oil down nine tenths per cent or thirty nine

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Speaker 1: cents to forty three seventy eight A barrel comas gold

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Speaker 1: is up six tens percent or seven dollars twenty cents

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Speaker 1: to twelve sixty one sixty ounce. The euro a dollar

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Speaker 1: thirteen seventy eight b n one oh nine point six four.

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

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Speaker 1: thank you. Nine eighteen. This morning, the headlines finally get

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Speaker 1: most interesting. First of all, the President speaking in Readies

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Speaker 1: press conference. We will monitor those headlines. Presidents's friendship with

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Speaker 1: golf countries consistent, He says, the new government in Libya

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Speaker 1: has a chance to organize itself. Michael, the draggy headlines,

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Speaker 1: they're both speaking at the same time. We choose to

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Speaker 1: focus on uh the e C b uh. There it

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Speaker 1: is on Germany and finally, Michael, as we go to

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Speaker 1: Billy of City Group on negative rates, folding it right

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Speaker 1: into the German pension issues. Yeah, the Germans have been

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Speaker 1: critical of extremely low rates and lately have been talking

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Speaker 1: about the penalty. It puts on savers dragging, suggesting that

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Speaker 1: they understand that, but it is better for everybody if

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Speaker 1: they have uh low and negative rates. He also knows

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Speaker 1: that real rates, if you look at real rates, the

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Speaker 1: difference is much less dramatic. Now there it is Billy

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Speaker 1: as a city group with a wonderful tenure at the

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Speaker 1: International monety Monetary Fund, Actor Lee. It's in our e

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Speaker 1: context books, it's chapter twenty three. And that is the

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Speaker 1: linkage of economics over to banking and then over to

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Speaker 1: the people that actually walk in the bank doors. How

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Speaker 1: critical as the German led criticism that negative rates ruined savers,

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Speaker 1: I think they're spot on. In fact, you know, one

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Speaker 1: of the correct pod one of the signs that every

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Speaker 1: young economists gets at the FED is the answer correct

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Speaker 1: pod letters. And one of the croc pod letters they

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Speaker 1: used to get was, you know, if the chairman would

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Speaker 1: only raise rates, I would able to spend more because

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Speaker 1: my interest earning assets would earn more and I'd be

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Speaker 1: able to spend more. And why doesn't help? Why does

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Speaker 1: it help the economy to raise rates? And it used

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Speaker 1: to be that, well, you know the job destruction, but

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Speaker 1: the higher rates is more than what you would be

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Speaker 1: spending from your higher assets. Well, you know, Tom, the

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Speaker 1: answer is now different. I I did semestimates to showing

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Speaker 1: that the amount of financial assets people now hold and

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Speaker 1: the fact that we have older people, much more older

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Speaker 1: people with these financial answers, if you raise rates, you

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Speaker 1: actually recoot GDP. And I think that's one of the

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Speaker 1: things that I think is being ignored that the textbooks

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Speaker 1: answer is no longer holding, and in the case of Germany,

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Speaker 1: is even more so because if you keep rates negative,

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Speaker 1: you put the pension funds in legal risks because they

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Speaker 1: no longer are able to fulfill the obligations of paying

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Speaker 1: out the annuities that they promised their people. Did you

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Speaker 1: ever answer a letter from Dr Paul or his son

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Speaker 1: Centator from Kentucky. I never saw the signatures when I

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Speaker 1: asked the letters. They were sort of generic form letters

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Speaker 1: that we we then put out to the pr people.

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Speaker 1: But but I must say, I go back to those

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Speaker 1: to those days, and I think to myself, if I

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Speaker 1: only were there now, I would qualify those. Uh. Sort

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Speaker 1: of follow on to this is you know, what where

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Speaker 1: does the FED go from here? Brio draggy the latest headlines.

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Speaker 1: He's suggesting that the ECB is doing the same thing

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Speaker 1: by and large as everyone else, and that you know,

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Speaker 1: Jean Claude Trichet a couple of days ago said he'd

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Speaker 1: do the same as as drag has done. Uh. What

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Speaker 1: does this mean in terms of global central banks and

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Speaker 1: interest rate differentials? Is is everybody on the same page

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Speaker 1: or is the Fed we're gonna start going back to

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Speaker 1: raising rates. I think one of the things that all

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Speaker 1: centrifis are realizing is that even though the intention is

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Speaker 1: to raise domestic demand, they really are conducting bigger than

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Speaker 1: naghbor policies, whether they call it that or not. And

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Speaker 1: that's become the new PC way of saying, I'm going

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Speaker 1: to steal your growth, um and and it's from my country.

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Speaker 1: I'm I'm gonna be conducting monstro policy from my country's needs.

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Speaker 1: The FED, i hope, was start to recognize that we

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Speaker 1: need to fix financial markets. We need to allow financial

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Speaker 1: marks to do their job and I would say capital

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Speaker 1: and the only way to do that is to have

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Speaker 1: rates go up so that people can price risks properly. Now,

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Speaker 1: I don't think the Fed has the courage to do that.

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Speaker 1: I think they have gotten to chicken and they've gotten

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Speaker 1: to obsessed with trying to compla What would happen if

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Speaker 1: they began a hyper measured modest rate increase to give

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Speaker 1: the financial system some form of normality. What would happen

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Speaker 1: the next day? You just saw what happened they did

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Speaker 1: that in December, and what happened January February? Right the

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Speaker 1: markets front berserk. Okay, they call it global concerns. They

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Speaker 1: called it a market reaction to global events. But you know,

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Speaker 1: I think if the Fed UH did not put out

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Speaker 1: that that the not charge showing four rate increases in December,

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Speaker 1: we would not have had those huge market reactions. And

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Speaker 1: as a result of that, the uncertainty run when ran

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Speaker 1: up so high, the fact that whoops, forget about anything

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Speaker 1: in March and then UH and in fact, if there's anything,

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Speaker 1: we're going to lower it. And the markets are saying, Okay,

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Speaker 1: we got you, and we now know that we can

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Speaker 1: force you to lower the number of plans increases if

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Speaker 1: we start acting acting up. Well, has the Fed has

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Speaker 1: the e CB lost credibility? Well you can see how

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Speaker 1: how the how the markets are reacting to draw these statements.

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Speaker 1: I think I think the markets are also recognizing Montrey

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Speaker 1: policy limits have been reached. And what we need now,

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Speaker 1: of course our structural policies and fiscal policy and and

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Speaker 1: and unfortunately our political impass is preventing us from doing that.

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Speaker 1: So so there's all the central banks are caught between

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Speaker 1: a rocket and hart place. They of course want to

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Speaker 1: buy us more time, but unfortunately whatever little bits upon

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Speaker 1: they buy us are being dissipated by the political impass

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Speaker 1: and political nonsense that's growing up. Billy, thank you so much.

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Speaker 1: Wrapped around the comments of the President and Mr Dragon

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Speaker 1: thrilled to have William Lee of City Group with us

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Speaker 1: this morning, Mike, let me get out of the way.

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Speaker 1: The presidents have lines, uh, he says. A ceasefire in

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Speaker 1: Syria very fragile, he is told. The president says, he

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Speaker 1: told Mr Putin he must hold Syria to account. There's

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Speaker 1: some mentionings of a run as well. Mike, take it

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Speaker 1: over to drag What do you see from the dragging

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Speaker 1: headlines right now? Well, it's interesting, Uh, maybe defensiveness from

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Speaker 1: Mario drag In defending what the ECB has done. And

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Speaker 1: here's what he says, in relation to the whole criticism

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Speaker 1: from the Germans that a polite, lively debate can allow

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Speaker 1: the e c D to explain issues. I'm not sure

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Speaker 1: what I have every morning when I would consider himselves

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Speaker 1: so polite, Yes, exactly, Um, we're explaining surveillance policy here.

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Speaker 1: It is right here. Here's the headline following on Tucker

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Speaker 1: full Cole and a polite, lively debate was had by

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Speaker 1: McKee and Key over the last guests. Not likely likely.

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Speaker 1: We will continue our coverage of the Draggy press conference

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Speaker 1: in Frankford with our entire your European economic team from

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Speaker 1: New York Bloomberg Surveillance. We're cutting down to the opening bell,

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