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Speaker 1: This is Bloomberg Surveillance. One of the things we have

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Speaker 1: to do is reinvigorate the Atlantic relationship, which is strength

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Speaker 1: in relations with the European community. A consequence of set

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Speaker 1: tightening over the next year could be a US procession

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Speaker 1: in seventeen. I think that's going to add to the

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Speaker 1: upside for the young. When you value a basket of

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Speaker 1: stocks in Germany now and you're up against a zero

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Speaker 1: interest rate for years, they look very attractive. Here Bloomberg Surveillance,

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Speaker 1: you're linked to the world of economics, finance and investment.

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Speaker 1: On Bloomberg Radio. Good morning everyone, Michael McKee and Tom King.

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Speaker 1: Mr McKee off this week. What fun has been a

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Speaker 1: very with a smart conversation on economics, finance and investment.

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Speaker 1: Very don't forget Masters in or of business, Master's in business.

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Speaker 1: It depends if you're in school or listening to the radio.

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Speaker 1: If you're listening to the radio, it's master's in business school.

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Speaker 1: It's a master's of business, master's business with Barry also

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Speaker 1: looking for that's a once a week smart drop into

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Speaker 1: the world of a certain guests, and of course out

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Speaker 1: on iTunes podcast, as is Bloomberg Surveillance as well. We're

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Speaker 1: looking at the end of the quarter in the next year.

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Speaker 1: April's Full's joke job State. Tomorrow, Jim Glassman Bill gross

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Speaker 1: will join us a Bloomberg surveillance brought you by cone

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Speaker 1: Resnick Accounting Tax Advisory. During times of growth, crisis and

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Speaker 1: our economic uncertainty, your business needs the Cone Residec Advisory

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Speaker 1: Group for the strategies to move forward. Find out more

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Speaker 1: at cone Resnick dot com, c O h n R

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Speaker 1: e z n I c K cone Resnick dot com

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Speaker 1: jad ZU with us down from Hong Kong with hs

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Speaker 1: B Z and the backdrop John of where we are

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Speaker 1: and what we're doing is the correct HSBC call on

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Speaker 1: low rates and tepdenomenal g d P. Is that a

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Speaker 1: structural move or do you see an end the low

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Speaker 1: rates and tepid economic growth? I think this is something

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Speaker 1: that the world economy is going to find difficult to

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Speaker 1: move out of. There simply a lot of structural issues

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Speaker 1: that's holding back global demand as well as cilic code demands.

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Speaker 1: And what you're seeing now is still not enough demand

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Speaker 1: to go around, and signs of deflation becoming more entrenched

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Speaker 1: in certain areas. So I think the lower for longer

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Speaker 1: view is already going to be with us for a while. John.

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Speaker 1: The absolute shift in the final week of this quarter

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Speaker 1: has been every pro is focused on your China. Help

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Speaker 1: us here with the new Silk Road, with a new

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Speaker 1: development of China. What's the thing we need to distill

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Speaker 1: down to about China. I think it's important to separate

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Speaker 1: the near term data, which is still fairly weak, and

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Speaker 1: what we think is probably slightly more positive longer term picture.

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Speaker 1: So China's economy is certainly faking a lot of um,

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Speaker 1: you know, downward pressure from certain industries that are simply

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Speaker 1: for being terminal, decline or have peached a long time ago. However,

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Speaker 1: that doesn't mean that the potential for China to grow,

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Speaker 1: assuming that it does the kind of reforms that it

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Speaker 1: says it's going to do, has necessarily fallen. So we

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Speaker 1: just think that China, although it has grown very rapidly

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Speaker 1: for the past pretty five forty years, it was growing

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Speaker 1: from such a low base that you still have I

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Speaker 1: think several years, maybe even a decade of reasonably rapid

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Speaker 1: catch up growth. So, John, we were just speaking with

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Speaker 1: a j Raja Daks of Barclays, and one of the

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Speaker 1: things that had come up was the enormous credit overhang

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Speaker 1: that China is dealing with. No one doubts the potential

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Speaker 1: growth over the next decade or two, but how are

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Speaker 1: they going to manage to deal with this debt? Are

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Speaker 1: are we being too nervous about their debt? Is it?

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Speaker 1: Is it manageable? Or is this a potential problem? I

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Speaker 1: think it is a problem um and we worry about

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Speaker 1: it as well, especially given the kind of quite clear

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Speaker 1: defolationary pressures that you're seeing in China. That's clearly not

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Speaker 1: a good thing if you are heavily indebted. So I

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Speaker 1: think actually, in my view, the right way to go

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Speaker 1: about it, to go about de leveraging, really is to

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Speaker 1: try and bring growth up. So I would probably argue

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Speaker 1: against a kind of liquidationalist argument that a deflationary fire

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Speaker 1: will suddenly clean out all the inefficiencies. I think that's

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Speaker 1: actually quite dangerous and will be very painful. I would

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Speaker 1: rather try and do you know what you can, And

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Speaker 1: policy still had a lot of room from maneuver to

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Speaker 1: bring up nominal growth so that that debt becomes much

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Speaker 1: more sustainable when you don't have deflation. And and what

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Speaker 1: about the fast growing middle class and the possibility of

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Speaker 1: seeing an actual consumer market. It seems to be kind

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Speaker 1: of bifurcated these days. The very wealthy are buying ferraris

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Speaker 1: and vintage wines and artwork, but the masses don't seem

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Speaker 1: to have access to the same sort of retail spending.

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Speaker 1: Are we going to see a robust middle class develop

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Speaker 1: in China anytime soon? I think you are seeing signs

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Speaker 1: of a medio class rising, but it's obviously the most

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Speaker 1: more complicated story. In fact, if you look at the

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Speaker 1: wage data, you see that wages at perhaps at lower

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Speaker 1: end are still growing pretty rapidly, almost partly because the

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Speaker 1: nominal sort of minimum wage in the local provinces still arising.

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Speaker 1: So although the probably you know, the more conspicuous consumption

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Speaker 1: at the top end probably gets the most headlined, we

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Speaker 1: shouldn't forget that people in China are still uh, you know,

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Speaker 1: having meeting incomes that are growing reasonably rapidly even at

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Speaker 1: the low wind, especially as they are going from again

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Speaker 1: a sandy low base. John, I've got to be honest

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Speaker 1: with you. When a clown like me says he goes

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Speaker 1: to China, it's the Hong Kong Airport. A fancy car

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Speaker 1: that lovely driving Hong Kong from the airport into the

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Speaker 1: city in one of the fancy hotels. And then we

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Speaker 1: reverse the process and come back to New York and

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Speaker 1: say we went to China, which is bologny is everybody

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Speaker 1: can know what's going on away from Shanghai, away from

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Speaker 1: Hong Kong, away from Beijing. What is the major distinction

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Speaker 1: between what we know about China and what's really going

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Speaker 1: on in mid size cities. I think you're quite right.

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Speaker 1: The gross in China is very clustic, and it is

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Speaker 1: obviously doing very well around Shinjin and the Guangdong region,

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Speaker 1: and then also in Shanghai, which is focused on services

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Speaker 1: and trade, and Beijing, which is becoming a R and

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Speaker 1: D science and research and media as well help. But

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Speaker 1: there are places in the inland that I think are

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Speaker 1: still actually growing reasonably strongly, and part of it is

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Speaker 1: because China can afford and can do a lot of

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Speaker 1: fiscal transfers. Really the government can help support growth in

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Speaker 1: the regions that are suffering from say the over capacity,

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Speaker 1: especially in heavy industry in the north. So sort of

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Speaker 1: denied that some regions, especially those in the north and northeast,

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Speaker 1: that have been too specialized in say agriculture or industry

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Speaker 1: arguing to have a difficult couple of years. But the

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Speaker 1: you know, the good thing is that China as a country,

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Speaker 1: although a very diverse country, still has the fiscal room

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Speaker 1: to I think custom Some of the drag that will

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Speaker 1: have in certain industries and certain provinces dovetail your China

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Speaker 1: view with your colleagues. Steve Major's call for shockingly low

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Speaker 1: interest rates is that a bood to China to see

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Speaker 1: yield price up rather price up and yields down if

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Speaker 1: you have you know, very low interest rates and that

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Speaker 1: manages to spur investments and consumption and global demand, and

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Speaker 1: that would be I think good to China. But there

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Speaker 1: is perhaps only so much that low interest rates can

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Speaker 1: really do right now, especially as many you know in

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Speaker 1: the private sector, whether it's households or corporates, are still

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Speaker 1: not feeling particularly confidence. So I guess I um, you know,

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Speaker 1: becoming rather cantian in this, which is that if there

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Speaker 1: are very few sources of demand from private sector or

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Speaker 1: from exports, then really government and Cisco policy has to

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Speaker 1: take up some of the slack. John, you thank you

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Speaker 1: so much, greatly appreciate, appreciated, Joan Zu with HSBC in

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Speaker 1: Hong Kong is nothing like perspective from Hong Kong at

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Speaker 1: any given moment. I've been very I look at the

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Speaker 1: soup out there, which is equity markets moving higher, yields

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Speaker 1: studying low and still low. Once again, the the yield

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Speaker 1: higher crew is chastened, and it's just another sobering quarter

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Speaker 1: about what we don't know. You know, if I were

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Speaker 1: to say to you in the beginning of January, hey,

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Speaker 1: don't worry about this market. We'll be back to break

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Speaker 1: even on the SMP and the down and practically flat

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Speaker 1: as that at the end of the quarter, again, you

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Speaker 1: would look at me and say, what are you smoking?

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Speaker 1: You know, you obviously were uh in Portland recently. You're

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Speaker 1: out of your mind. The ability for the market to

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Speaker 1: to withstand these down drafts to be very very, uh

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Speaker 1: just robust, is really quite amazing. And I think people

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Speaker 1: continue to underestimate the US markets. Yeah, I strong degree

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Speaker 1: of the idea any whether it's January December, but people

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Speaker 1: really cautious. And here we are at seventeen thousand, seven

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Speaker 1: hundred sixteen and the VIX and thank thank you to

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Speaker 1: Dean Current yesterday, who I thought was particularly good for

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Speaker 1: MECO risk advisors on Thus the complacency within day to

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Speaker 1: day agitations out there. The VIX thirteen point five six,

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Speaker 1: What am I watching? Real simple? The two year yield

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Speaker 1: to four digits, Janet yelling with a vengeance moves the

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Speaker 1: two year point seven four four seven, and there's a

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Speaker 1: lot of difference of opinion about where that ought to be.

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Speaker 1: Gary Shilling will be with us yes tomorrow rather day

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Speaker 1: with an update tomorrow. Job today. Bill Gross and Jim

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Speaker 1: Glassman with us as we dive into the labor market

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Speaker 1: data and now of the news in New York, Here's

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Speaker 1: Michael barr Tom Barry, thank you very much. Nuclear Security

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Speaker 1: Summit opens today in Washington. Nuclear terror as a man,

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Speaker 1: the Islamic State Group are major topics on the agenda.

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Speaker 1: Another issue involves concerns about North Korea's nuclear weapons program.

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Speaker 1: President Obama plans this morning to have a joint meeting

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Speaker 1: with the presidents of Japan and South Korea on pyong Yang.

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Speaker 1: Rescuers in eastern India have confirmed that at least fourteen

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Speaker 1: people were killed when an overpass collapsed while under construction today.

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Speaker 1: It fell on people traveling underneath the other presidential candidates

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Speaker 1: are criticizing Republican front runner Donald Trump for his saying

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Speaker 1: that if abortion becomes illegal, women who get one should

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Speaker 1: face some sort of punishment. Trump later reversed himself. Global

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

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Speaker 1: four hundred journalists more than one fifty news bureaus from

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Speaker 1: around the world, not Michael Barr, Tom Ferry mcabar. Thanks

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Speaker 1: so much again, Charles Evans, always important, way out front

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Speaker 1: on a lesser g DP, A dampen GDP our Kathleen

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Speaker 1: as Charles Evans in the nine o'clock our worldwide Bloomberg Surveillance.

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Speaker 1: Surveillance brought you by Flushing Bank. I'll put a complete

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Speaker 1: business checking account with fifteen thousand dollars and more. Get

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Speaker 1: a pre sixteen gig WiFi tablet. Visit Flushing Bank dot

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Speaker 1: Global Business News twenty four hours a day at Bloomberg

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Speaker 1: This is a Bloomberg Business Flash and I'm Cameron Moscow

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Speaker 1: us Dock Index futures. They are a little changed this morning.

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Speaker 1: Let's go to the first word breaking news desk for

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Speaker 1: today's morning call, and here's Bill Maloney. Good morning Bill,

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Speaker 1: Good morning Karen. That's right. Futures are quiet right now.

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Speaker 1: Doubt futures currently highed by two points says to the

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Speaker 1: futures are unchanged and as the futures are lower by

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Speaker 1: two The U s ten uel at one point eight

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Speaker 1: two percent and Europa markets are lower, led by losses

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Speaker 1: in Italy and Spain. On the US second frontday thirty

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Speaker 1: initial job is claims at nine o'clock I s M

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Speaker 1: Milwaukee and Chicago p M I and a ten thirty

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Speaker 1: natural gas storage change. After the bellas night Mike run

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Speaker 1: Q three forecast missed estimates and a deal news Metivation

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00:13:13,960 --> 00:13:17,520
Speaker 1: set to work with advisors to defend against takeover. Pacific

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Speaker 1: crests says Skyworks should acquire or merge with Maxim, Piper

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Speaker 1: says possible of paper acquisition remains low, and c LSA

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Speaker 1: says rack Space unlikely to find a buyer. Finally, some

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Speaker 1: of your wallsteet upgrades and downgrades. Mike Round cut to

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Speaker 1: market reform at Bernstein Ball Corporates, to overweight at JP,

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Speaker 1: Morgan Square cut the neutral at bt I G, and

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Speaker 1: Target cut to Underweight over at Barkley's Live from the

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Speaker 1: first Breaking news desk on Belle Maloney Karen, all right,

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Speaker 1: thanks Bill and to hear live breaking news over your

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Speaker 1: Bloomberg type squawk A go on your terminal. Let's ask

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Speaker 1: you a w K go. That's a Bloomberg business flash.

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Speaker 1: Tom and Barry Karen, thank you so much. Bloomberg surveillance

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Speaker 1: this morning, budget by Investco to the day's headlines. Have

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Speaker 1: you searching for more investment views? Invest Goose experts. They

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Speaker 1: can help find the latest thought leadership at the investo block.

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Speaker 1: Visit investco dot com slash us to subscribe. Tom keep

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Speaker 1: with Barry reholds and what we like to do is Bury.

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Speaker 1: There's anything, any number of things to talk about. I

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Speaker 1: want to talk Barry about should we invest in a

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Speaker 1: class A class B structure? It is happening more and

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Speaker 1: more and more and more and more and more. I

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Speaker 1: can think of a handful with fingers left over, of

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Speaker 1: times where it's worked out, and it usually doesn't work.

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Speaker 1: I am not a fan. You know, any time you

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Speaker 1: create two classes of stock, you're effectively creating two classes

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Speaker 1: of shareholders. And why do I want to be a

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Speaker 1: second class shareholder. When that's done, typically there's a founder

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Speaker 1: or a family involved, and they're protecting their interests, which

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Speaker 1: my eight diverge from those interests of the shareholders. This

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Speaker 1: is really very basic stuff. I'm gonna give one shout

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Speaker 1: out this to Boston Bloomberg in Boston to the exception

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Speaker 1: of the rule, which is Richard Smith, the Smith family,

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Speaker 1: the General Cinema. They hadn't even Marcus for a cup

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Speaker 1: of coffee. But you know that's the But that's the exception.

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Speaker 1: It's the exception that proves the rule. When you can say, hey,

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Speaker 1: look at these guys doing it right, you are implicitly

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Speaker 1: stating everybody else is doing it wrong to the detriment

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Speaker 1: of investors. And that always makes me crazy. I've already

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Speaker 1: sort of like Walt Disney for that, and I didn't

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Speaker 1: proceed Disney's Class A class I mean when through the

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Speaker 1: whole thing with Roy Disney and and all that. But

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Speaker 1: there's another example of how you don't have a class

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Speaker 1: B class A issue. That's right, And we were just

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Speaker 1: speaking to John Zoo in Hong Kong. I've never been

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Speaker 1: a fan of the way, uh you have to invest

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Speaker 1: in China with similar class A and Class B shares.

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Speaker 1: Either you're are a mainland investor where you get all

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Speaker 1: the advantages of of the shares, or you're a B

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Speaker 1: investor in Hong Kong, which very much lack and I

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Speaker 1: knew where red Holtz was going because we never talked before.

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Speaker 1: Hit Berry and I frankly earned on speaking terms. But

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Speaker 1: that's a separate issue. But we never talked about this.

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Speaker 1: So let's go right from Class A Class B in

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Speaker 1: the Mystery of Asia to on Buying. I I first

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Speaker 1: of all, Michael Force. I started on The New York Times.

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Speaker 1: I thought was brilliant the back end of its typical foresight.

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Speaker 1: He's a pitbull terrier. Blah blah blah blah blah, I'm buying,

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Speaker 1: had no comment, blah blah blah blah blah, I'm buying,

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Speaker 1: no comment. We have no clue who's trying to buy.

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Speaker 1: Start with doing that's right. You don't know what's gonna

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Speaker 1: happen with that. We yesterday the conversation we had about

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Speaker 1: Ron Perlman and and what's happening with revalon. Any time

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Speaker 1: you have a substantial owner or even a minority owner,

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Speaker 1: who is treated differently than the rest of shareholders. It's

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Speaker 1: a red flag. And let me remind people there are

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Speaker 1: five thousand loss Us stocks out there and then the

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Speaker 1: rest of the world. If there's a red flag on something,

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Speaker 1: if you're not gonna be treated well, move on, find

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Speaker 1: a different stock. You go to the Bloomberg r e

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Speaker 1: V as a symbol and says Revlon and in class A.

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Speaker 1: You know, it's not that runs indeedious about you know,

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Speaker 1: and that's a maybe Revalon is not the greatest example.

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Speaker 1: What did he own almost eight percent? It's a private

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Speaker 1: company with a public studia. The media is the place

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Speaker 1: you see it the most guy, especially in in Look

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Speaker 1: at the New York Times, look at and then you

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Speaker 1: end up with the exceptions like the Guardian, where the

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Speaker 1: underlying ownership was put into a trust with a few

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Speaker 1: billion dollars. That's that's turned into that's the exception. For

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Speaker 1: the most part, we saw it. We saw it with

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Speaker 1: the family with the Bancrofts, with the Wall Street Journal,

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Speaker 1: we see it with the Sulzburgers with the Times. It's

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Speaker 1: a perennial issue with media property. Not to be the Guardian,

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Speaker 1: but like like every other good trust, they turned billy.

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Speaker 1: You know, you start with a small fortune. You you start,

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Speaker 1: you take a large fortune, and you lose most of it.

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Speaker 1: That's how you create a small fortune under the quarter Barry,

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Speaker 1: are we optimistic? Is Bery up to his eyeballs triple leverage? No,

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Speaker 1: we don't do any leverage. We're not fans of of

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Speaker 1: juicing um portfolios that way. But I will tell you that.

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Speaker 1: We keep reading headlines recessions are imminent. Here comes a

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Speaker 1: US recession, here comes a global recession. Let me let

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Speaker 1: me remind listeners exactly how economic expansions ends. You. You

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Speaker 1: end up with a shortage of workers which were starting

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Speaker 1: to see signs of We see substantial ways increases, increased

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Speaker 1: velocity of money, people spending, spending, spending. The Fed notices

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Speaker 1: a big up ticket inflation, an overheating economy, and the

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Speaker 1: hike hike, hike, and eventually cut off credit make it

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Speaker 1: more limited and more expensive. And that's how the expansion ends.

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Speaker 1: Now we're seeing shortage of people won't work get ten

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Speaker 1: dollars an hour. But all the rest of that scenario

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Speaker 1: has yet to play out. There is a recession coming

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Speaker 1: somewhere off in the future. I just don't see it

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Speaker 1: as imminent as so many pundits seemed to believe it

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Speaker 1: is a year today the one s five up rounded

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Speaker 1: up to point you mentioned the VIX before. In the

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Speaker 1: last twenty seconds we have Maybe what the VIX is

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Speaker 1: telling us is that the presidential elections in the United

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Speaker 1: States aren't a disaster, that the FED hasn't lost control.

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Speaker 1: Maybe it's not complacent. Maybe the VIX says, hey, there's

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Speaker 1: a little runway here. Well, we'll have to see. I

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Speaker 1: think what I can say for certain is Barre and

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Speaker 1: I are humbled, folks, as is Mike McKee by the

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Speaker 1: sweat of January and now it's turned into seventeen thousand,

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Speaker 1: seven sixteen. And we hope you enjoyed being where us.

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Speaker 1: We are thrilled you're with us on economics, finance, investment,

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Speaker 1: and indeed international relations, economic data. There is a PLU

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Speaker 1: throughout this morning. We'll do that next Bloomberg surveyance. All

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