1
00:00:03,400 --> 00:00:06,800
Speaker 1: This is Bloomberg Surveillance. I think the key thing for

2
00:00:06,920 --> 00:00:09,840
Speaker 1: Drugg is to basically make it clear that he understands

3
00:00:09,840 --> 00:00:11,960
Speaker 1: all the issues that people have. The job market is

4
00:00:11,960 --> 00:00:14,440
Speaker 1: not as competitive as we like to think. There are

5
00:00:14,480 --> 00:00:17,960
Speaker 1: frictions in the job market, bargaining power matters. Economic data

6
00:00:18,079 --> 00:00:21,720
Speaker 1: is improving. It will not only back away from recession years,

7
00:00:21,920 --> 00:00:24,000
Speaker 1: will maybe get to the point of where we embrace

8
00:00:24,079 --> 00:00:28,040
Speaker 1: an idea of a synchronized bounce globally. Bloomberg Surveillance your

9
00:00:28,120 --> 00:00:31,760
Speaker 1: link to the world of economics, finance, and investment on

10
00:00:31,840 --> 00:00:38,280
Speaker 1: Bloomberg Radio. Good Morning. It is seven am on Wall Street,

11
00:00:38,320 --> 00:00:42,320
Speaker 1: two am in Honolulu. Late breaking news. Donald Trump wins

12
00:00:42,320 --> 00:00:46,520
Speaker 1: the Hawaii Republican caucus. He also won in Michigan, as

13
00:00:46,560 --> 00:00:51,800
Speaker 1: did Bernie Sanders. We'll talk about why today on Bloomberg Surveillance.

14
00:00:51,800 --> 00:00:54,360
Speaker 1: I'm Michael McKee along with Tom Keane. If the prospect

15
00:00:54,360 --> 00:00:56,760
Speaker 1: of a Trump nomination is scaring investors, they are not

16
00:00:56,880 --> 00:01:00,320
Speaker 1: showing it yet. A down day in Asia Tokyo off

17
00:01:00,320 --> 00:01:03,520
Speaker 1: by eight tenths, has been followed by an up day

18
00:01:03,800 --> 00:01:06,520
Speaker 1: in Europe. We are just a day away from the

19
00:01:06,560 --> 00:01:10,520
Speaker 1: European Central Bank, meaning expectations really high. That's another topic

20
00:01:10,560 --> 00:01:14,240
Speaker 1: for US here on surveillance. UH Later in the show,

21
00:01:14,760 --> 00:01:17,840
Speaker 1: the stock six hundred four points higher now one point

22
00:01:17,840 --> 00:01:20,200
Speaker 1: one percent. The docks is up a hundred twenty eight

23
00:01:20,240 --> 00:01:24,160
Speaker 1: that's one point three percent. The foot see not going

24
00:01:24,200 --> 00:01:27,720
Speaker 1: to be affected by the ECB thirty six points higher,

25
00:01:27,760 --> 00:01:31,280
Speaker 1: six tenths of eight percent. Here in the US, futures

26
00:01:31,280 --> 00:01:34,440
Speaker 1: are significantly higher after yesterday's lower close. The S and

27
00:01:34,520 --> 00:01:37,440
Speaker 1: P five hundred futures are up by ten points right

28
00:01:37,480 --> 00:01:39,479
Speaker 1: now half a percent a half percent gain for Dow

29
00:01:39,560 --> 00:01:41,880
Speaker 1: E meaning futures they're up eighty six and the stock

30
00:01:41,959 --> 00:01:46,399
Speaker 1: six hundred is for UH to the NASDAC. I'm sorry,

31
00:01:46,840 --> 00:01:49,640
Speaker 1: as I mentioned, twenty three points higher, about six tenths

32
00:01:49,640 --> 00:01:53,440
Speaker 1: of eight percent. Bonds are lower, yields higher this morning,

33
00:01:53,440 --> 00:01:55,760
Speaker 1: the ten year one point eight eight percent, the five

34
00:01:55,840 --> 00:01:58,800
Speaker 1: year one point three eight percent, eighty nine basis points

35
00:01:58,800 --> 00:02:01,760
Speaker 1: for the two year. That's a little move higher in

36
00:02:01,880 --> 00:02:06,800
Speaker 1: yields over the last hour or so. Um oils higher

37
00:02:06,880 --> 00:02:11,880
Speaker 1: this morning, Brent crude up seventy seven cents one one

38
00:02:11,880 --> 00:02:16,040
Speaker 1: point six percent, Game for West Texas up sixty cents

39
00:02:16,160 --> 00:02:19,920
Speaker 1: on the morning, and the Sun tabloid in London says

40
00:02:20,000 --> 00:02:25,560
Speaker 1: the Queen favors Brexit. No confirmation from her majesty, but

41
00:02:25,639 --> 00:02:30,800
Speaker 1: the pound is higher this morning on the euros higher. Well,

42
00:02:30,840 --> 00:02:33,880
Speaker 1: the euro has turned around. My mistake. It was highest morning,

43
00:02:33,880 --> 00:02:38,480
Speaker 1: it's now lower. One head of the ECB meeting getting

44
00:02:38,480 --> 00:02:44,919
Speaker 1: people are expecting some sort of additional stimulus. And happy anniversary,

45
00:02:45,120 --> 00:02:49,400
Speaker 1: tom uh Today is the seventh anniversary of the bull

46
00:02:49,480 --> 00:02:53,440
Speaker 1: market began March ninth, two thousand nine. The SMP is

47
00:02:53,520 --> 00:02:56,639
Speaker 1: up almost two hundred percent from its low that day.

48
00:02:56,639 --> 00:03:03,120
Speaker 1: Can you remember six seventy six fifty three now just

49
00:03:03,360 --> 00:03:09,240
Speaker 1: under two thousand. Think of the people that we're in cash? Yeah,

50
00:03:09,320 --> 00:03:14,160
Speaker 1: stayed in cash. If you were under a desk. I mean,

51
00:03:14,320 --> 00:03:18,040
Speaker 1: even if you made every mistake before that, how do

52
00:03:18,080 --> 00:03:22,280
Speaker 1: you catch up if you missed that bull market? We

53
00:03:22,320 --> 00:03:25,040
Speaker 1: can ask our our next guest, Dan Suzuki, isn't sure.

54
00:03:25,200 --> 00:03:27,080
Speaker 1: I guess how much higher it can go. He's the

55
00:03:27,080 --> 00:03:30,200
Speaker 1: senior equity strategist at Bank of America Maryland Global Research.

56
00:03:30,680 --> 00:03:33,840
Speaker 1: And you recently lowered your SMP forecast. Yeah, that's right.

57
00:03:33,880 --> 00:03:36,080
Speaker 1: I think we want to reflect that there was greater

58
00:03:36,320 --> 00:03:38,200
Speaker 1: risk just a couple of months ago in the market.

59
00:03:38,240 --> 00:03:40,240
Speaker 1: I think some of that risk has abated a bit

60
00:03:40,280 --> 00:03:42,240
Speaker 1: with the turn of the economic data. You know, with

61
00:03:42,560 --> 00:03:44,880
Speaker 1: talking about the anniversary, you know you're gonna see pretty

62
00:03:44,920 --> 00:03:48,400
Speaker 1: much every every media outlet talk and write articles about

63
00:03:48,400 --> 00:03:50,440
Speaker 1: how we're, you know, at the seven year anniversary of

64
00:03:50,480 --> 00:03:53,720
Speaker 1: this bull market. I think what's more important for investors

65
00:03:53,720 --> 00:03:56,280
Speaker 1: to take away is how much the markets up since

66
00:03:56,280 --> 00:03:58,680
Speaker 1: the prior peak. You know, if you think about where

67
00:03:58,680 --> 00:04:01,520
Speaker 1: we were in two thousand seven, in October two thousand seven,

68
00:04:01,680 --> 00:04:03,680
Speaker 1: if you were an investor and you bought the market,

69
00:04:03,720 --> 00:04:06,360
Speaker 1: then you know you would have if you would have seen,

70
00:04:06,680 --> 00:04:09,040
Speaker 1: you know, the biggest bear market in our lifetimes, the

71
00:04:09,040 --> 00:04:12,800
Speaker 1: biggest recession in our lifetimes, our financial system brought to

72
00:04:12,840 --> 00:04:17,159
Speaker 1: its knees. Yet the market today is up over on

73
00:04:17,200 --> 00:04:19,599
Speaker 1: a total return basis since then. And I think that

74
00:04:19,680 --> 00:04:24,200
Speaker 1: speaks to you know, long term investing and divides is

75
00:04:24,200 --> 00:04:28,000
Speaker 1: your model, whether you're cautious now an optimism later, which

76
00:04:28,040 --> 00:04:31,799
Speaker 1: I believe is the general call. It's centered on return

77
00:04:31,800 --> 00:04:34,720
Speaker 1: in cash to shareholders. Yeah, and there's no different now

78
00:04:34,720 --> 00:04:37,279
Speaker 1: than it was if it's four decades ago. You know,

79
00:04:37,360 --> 00:04:39,400
Speaker 1: it's it's shifted a little bit. I mean, if you

80
00:04:39,440 --> 00:04:43,000
Speaker 1: look historically going back to the early part of the century,

81
00:04:43,080 --> 00:04:45,600
Speaker 1: our last century, you know, companies were paying fifty six

82
00:04:46,080 --> 00:04:48,600
Speaker 1: of their their earnings out as dividends. That's come down,

83
00:04:48,640 --> 00:04:50,200
Speaker 1: but you're starting to see it go up, and I

84
00:04:50,240 --> 00:04:52,960
Speaker 1: think it's it's an underlooked area of market. Again, going

85
00:04:53,000 --> 00:04:55,640
Speaker 1: back to the returns you've seen since the prior peak,

86
00:04:55,800 --> 00:04:58,279
Speaker 1: half of those came from dividends. So I think dividends

87
00:04:58,279 --> 00:05:01,360
Speaker 1: are are way to underlooked in this market. That may

88
00:05:01,360 --> 00:05:03,880
Speaker 1: be the case, but that to me sort of falls

89
00:05:03,920 --> 00:05:07,000
Speaker 1: under the old check prince, you've gotta dance um while

90
00:05:07,040 --> 00:05:09,320
Speaker 1: the music is playing. If they're giving out dividends, take

91
00:05:09,320 --> 00:05:12,240
Speaker 1: the dividends, but doesn't it suggest that companies are not

92
00:05:12,440 --> 00:05:17,200
Speaker 1: investing their cash to grow the top line, and so

93
00:05:17,839 --> 00:05:21,320
Speaker 1: longer term the outlook isn't as good. Well, the fact

94
00:05:21,360 --> 00:05:23,960
Speaker 1: that dividends are important important is sort of separate from

95
00:05:23,960 --> 00:05:27,200
Speaker 1: whether or not they're investing in in capital investments. So

96
00:05:27,440 --> 00:05:30,520
Speaker 1: if you look historically, whether they've invested or not, dividends

97
00:05:30,520 --> 00:05:34,120
Speaker 1: have always been the concept. Yes, I'm just talking about

98
00:05:34,160 --> 00:05:36,440
Speaker 1: the fact that they have increased and more companies paying

99
00:05:36,760 --> 00:05:40,839
Speaker 1: a higher dividend also buying backstock to prop up their stuff.

100
00:05:40,880 --> 00:05:43,560
Speaker 1: I think the fact that you've seen a massive increase

101
00:05:43,680 --> 00:05:46,599
Speaker 1: over the last few years and returning cast shareholder is

102
00:05:46,600 --> 00:05:49,800
Speaker 1: a reflection of the fact there's less investment opportunities out there.

103
00:05:50,360 --> 00:05:52,200
Speaker 1: I mean, there are options. If they are less growth

104
00:05:52,200 --> 00:05:55,160
Speaker 1: opportunities out there, your option as a shareholder is that

105
00:05:55,400 --> 00:05:58,200
Speaker 1: is to want them to invest in the company, which

106
00:05:58,440 --> 00:06:00,680
Speaker 1: you know is there's not many growth up teams out there,

107
00:06:00,800 --> 00:06:02,920
Speaker 1: or return that to shareholders, which I think makes sense,

108
00:06:03,000 --> 00:06:06,240
Speaker 1: or sit on cash. So I think that that makes sense. Um,

109
00:06:06,480 --> 00:06:09,159
Speaker 1: the fact that you know dividends increasing, I think that's

110
00:06:09,160 --> 00:06:12,400
Speaker 1: actually more reflection of the fact that there's uh the

111
00:06:12,440 --> 00:06:14,240
Speaker 1: market to start for yield. I mean you were talking

112
00:06:14,279 --> 00:06:16,960
Speaker 1: about interest rates, how low they were a little bit earlier.

113
00:06:17,120 --> 00:06:21,160
Speaker 1: I think that is driving this drive, this demand for dividends,

114
00:06:21,200 --> 00:06:24,280
Speaker 1: and and companies are responding to that. Den Suzuki with

115
00:06:24,360 --> 00:06:27,960
Speaker 1: this Bank of America, Meryl Lynch Bloomberg Savannahs. This morning

116
00:06:28,000 --> 00:06:33,360
Speaker 1: brought you by Investco. Looking for investment views experienced experts.

117
00:06:33,440 --> 00:06:36,400
Speaker 1: They're just to click away. Go to investco dot com,

118
00:06:36,480 --> 00:06:40,560
Speaker 1: slash us to subscribe to the investco blog and follow

119
00:06:41,120 --> 00:06:44,600
Speaker 1: and invest goo us on Twitter. Give me the three

120
00:06:44,600 --> 00:06:47,080
Speaker 1: groups I need to be in if I want to

121
00:06:47,120 --> 00:06:51,799
Speaker 1: get ready for further highs in the market. You're hesitant

122
00:06:51,839 --> 00:06:55,000
Speaker 1: about now, But if I've got to research three groups,

123
00:06:55,080 --> 00:06:57,719
Speaker 1: what are they? Uh? If you if you if you

124
00:06:57,760 --> 00:07:00,600
Speaker 1: believe that the market is going to higher, you obviously

125
00:07:00,680 --> 00:07:03,839
Speaker 1: want to get into the more cyclical areas, especially the

126
00:07:03,880 --> 00:07:06,440
Speaker 1: particularly the ones that are beaten down. Now. Part of that,

127
00:07:07,120 --> 00:07:08,760
Speaker 1: part of part of that is based on what your

128
00:07:08,800 --> 00:07:11,080
Speaker 1: commanding view is. If you think that commandities are going higher,

129
00:07:11,080 --> 00:07:13,040
Speaker 1: those got those stocks have a lot of room to

130
00:07:13,120 --> 00:07:15,680
Speaker 1: rally further. But I think from a risk war perspective,

131
00:07:15,880 --> 00:07:19,120
Speaker 1: you know, technology companies have great balance sheets and they

132
00:07:19,160 --> 00:07:22,400
Speaker 1: have good growth prospects. Industrial companies, if you do believe

133
00:07:22,440 --> 00:07:25,120
Speaker 1: that the data the data has shown an inflection, I

134
00:07:25,120 --> 00:07:27,760
Speaker 1: think you could see you know, those companies, particularly given

135
00:07:27,800 --> 00:07:30,440
Speaker 1: how high quality they become relative to a decade ago.

136
00:07:30,760 --> 00:07:34,240
Speaker 1: His Historically, you know, they had you know, hugely volatile

137
00:07:34,280 --> 00:07:37,640
Speaker 1: earnings growth and you know, low quality balance sheets. Now

138
00:07:37,800 --> 00:07:40,080
Speaker 1: they have they've delivered their balance sheets and their earning

139
00:07:40,120 --> 00:07:42,720
Speaker 1: stabilities a lot better. So I think, you know, industrials

140
00:07:42,720 --> 00:07:45,440
Speaker 1: and tech are are well positioned if you think the

141
00:07:45,480 --> 00:07:48,680
Speaker 1: market's going higher. I think our theme is really more

142
00:07:48,720 --> 00:07:51,840
Speaker 1: about moving away from your sector view and more about

143
00:07:51,920 --> 00:07:56,280
Speaker 1: playing themes like companies with stronger balance sheets, larger companies,

144
00:07:56,320 --> 00:07:58,920
Speaker 1: company with more stable earnings. I think those types of

145
00:07:58,960 --> 00:08:01,200
Speaker 1: companies are going to con TM to do well, especially

146
00:08:01,280 --> 00:08:03,600
Speaker 1: if you think that we're probably in the early stages

147
00:08:03,640 --> 00:08:07,040
Speaker 1: of a credit tightening. I think, you know, we're just now.

148
00:08:07,080 --> 00:08:09,040
Speaker 1: If you look at the FED Loan Officers survey, we've

149
00:08:09,080 --> 00:08:11,720
Speaker 1: only seen the first two quarters of net tightening by

150
00:08:11,760 --> 00:08:15,080
Speaker 1: loan officers. That's probably going to continue going forward. So

151
00:08:15,120 --> 00:08:17,840
Speaker 1: I don't think you want to be writing the junk

152
00:08:17,920 --> 00:08:21,120
Speaker 1: rally that you've seen in the recent weeks. The Uh,

153
00:08:22,000 --> 00:08:26,040
Speaker 1: the target um for the SMP five hundered, you recently lowered. Uh.

154
00:08:26,680 --> 00:08:30,160
Speaker 1: Why are you coming down at this point? Well, I

155
00:08:30,160 --> 00:08:31,840
Speaker 1: think it's a reflection of a few things. If you

156
00:08:31,880 --> 00:08:35,040
Speaker 1: look at you know, the earnings front, uh, you know,

157
00:08:35,040 --> 00:08:37,920
Speaker 1: the earnings outlooks definitely gotten worse, The commandity outlook has

158
00:08:37,960 --> 00:08:40,840
Speaker 1: gotten worse, and so I think and then on top

159
00:08:40,880 --> 00:08:43,079
Speaker 1: of that, the data that was coming in. You know,

160
00:08:43,160 --> 00:08:46,439
Speaker 1: I mentioned on the last segment that the I s

161
00:08:46,600 --> 00:08:50,760
Speaker 1: M had seen six consecutive months of deterioration and that wasn't.

162
00:08:50,800 --> 00:08:53,680
Speaker 1: It was basically every indicator you look at was basically

163
00:08:53,800 --> 00:08:56,920
Speaker 1: at you know, cycle lows or it's seen significant deterioration.

164
00:08:57,040 --> 00:08:59,520
Speaker 1: So what do you get. I don't mean to interrupt,

165
00:08:59,760 --> 00:09:01,920
Speaker 1: think this is critical. I'll go with a gloom of

166
00:09:02,000 --> 00:09:06,560
Speaker 1: January you climb on. Now for rebound, how does a

167
00:09:06,679 --> 00:09:11,240
Speaker 1: pro extend the easy rebound and do a bull call?

168
00:09:11,720 --> 00:09:16,160
Speaker 1: How do you do that? Yeah, I think it depends

169
00:09:16,200 --> 00:09:19,280
Speaker 1: on whether right now you're seeing the bull rebound based

170
00:09:19,360 --> 00:09:21,840
Speaker 1: on a lot of high frequency in the care very

171
00:09:21,920 --> 00:09:25,559
Speaker 1: fault totally. I think to get to extend the bull rebound,

172
00:09:25,600 --> 00:09:29,040
Speaker 1: you have to have some belief that these are sustainable.

173
00:09:29,440 --> 00:09:32,600
Speaker 1: The pickup in growth you have is sustainable. I think

174
00:09:32,679 --> 00:09:34,560
Speaker 1: in the near term, the market's probably got a little

175
00:09:34,559 --> 00:09:36,800
Speaker 1: bit ahead of itself. I mean, I mentioned the last

176
00:09:36,920 --> 00:09:39,719
Speaker 1: the last show, estimate revisions are still the cyclo. I

177
00:09:39,760 --> 00:09:42,920
Speaker 1: mean that analysts are taking are taking down their estimates.

178
00:09:43,360 --> 00:09:46,280
Speaker 1: Uh two to one for every analyst that's taking up

179
00:09:46,280 --> 00:09:48,560
Speaker 1: their estimates. That's a pretty bad sign for the markets

180
00:09:48,559 --> 00:09:50,480
Speaker 1: in the near term. But I think as you get

181
00:09:50,600 --> 00:09:52,640
Speaker 1: more later in the year, you are going to see

182
00:09:52,960 --> 00:09:55,560
Speaker 1: growth pick up, and I think that's gonna be you know,

183
00:09:55,600 --> 00:09:57,520
Speaker 1: the sustainably gonna get out front of that. What I

184
00:09:57,559 --> 00:10:00,440
Speaker 1: just heard you say, as you want to research industrials, Uh,

185
00:10:00,520 --> 00:10:03,000
Speaker 1: industrials and tech, I think are where you want to

186
00:10:03,000 --> 00:10:07,200
Speaker 1: look to ride the Dan Suzuki with us with Bank

187
00:10:07,240 --> 00:10:11,080
Speaker 1: of America Maryland. Shall continue with us here through the

188
00:10:11,200 --> 00:10:14,360
Speaker 1: our lot of interesting guests coming up today and into

189
00:10:14,360 --> 00:10:17,920
Speaker 1: tomorrow as well. Um, Mike, very quickly here at eight

190
00:10:18,040 --> 00:10:22,880
Speaker 1: thirty tomorrow, the world stops. Is that true? Um? The

191
00:10:22,920 --> 00:10:28,280
Speaker 1: world stops? Mr? Well, yes, in that sense I the world.

192
00:10:28,480 --> 00:10:31,760
Speaker 1: The markets keep going, but everybody stops to listen. We'll

193
00:10:31,800 --> 00:10:34,200
Speaker 1: do that. Yes, it's like the old sheer snada. Where

194
00:10:34,200 --> 00:10:37,600
Speaker 1: else do you want to be? Michael McKee sifty the

195
00:10:37,679 --> 00:10:41,080
Speaker 1: ECB headlines tomorrow, we'll be all over it. That is

196
00:10:41,080 --> 00:10:44,280
Speaker 1: a good and beautiful thing. Like futures up eleven, Dan

197
00:10:44,360 --> 00:10:48,200
Speaker 1: Suzuki driving the market higher, futures up twelve, doubt futures

198
00:10:48,280 --> 00:10:54,040
Speaker 1: up ninety four. Now let's check it with Michael bar

199
00:10:54,120 --> 00:10:56,840
Speaker 1: and got the latest world and national headlines, Mike time,

200
00:10:56,880 --> 00:11:00,719
Speaker 1: Thank you very much. The Democratic presidential candidates split primaries

201
00:11:00,760 --> 00:11:04,800
Speaker 1: in Michigan and Mississippi yesterday. Bernie Sanders surprised Hillary Clinton

202
00:11:04,880 --> 00:11:08,040
Speaker 1: with an upset win in Michigan. Clinton soundly won in

203
00:11:08,080 --> 00:11:11,240
Speaker 1: Mississippi and helped put her more than halfway to winning

204
00:11:11,240 --> 00:11:15,319
Speaker 1: the delegates she needs to secure the nomination for the Republicans.

205
00:11:15,360 --> 00:11:19,320
Speaker 1: Donald Trump had the strongest showing, winning in Michigan, Mississippi,

206
00:11:19,360 --> 00:11:23,520
Speaker 1: and Hawaii. Ted Cruz took Idahome. Vice President Joe Biden

207
00:11:23,559 --> 00:11:26,400
Speaker 1: says if iron breaks the terms of the nuclear deal

208
00:11:26,520 --> 00:11:31,360
Speaker 1: it's signed, the US will act. Biden spoke alongside Israeli

209
00:11:31,360 --> 00:11:34,880
Speaker 1: Prime Minister Benjamin nettan Yahoo today in Jerusalem, shortly after

210
00:11:34,960 --> 00:11:38,080
Speaker 1: I Run announced it had test fired two ballistic missiles.

211
00:11:38,480 --> 00:11:41,800
Speaker 1: Two days of a public viewing begins today as the

212
00:11:41,840 --> 00:11:45,040
Speaker 1: body of former First Lady Nancy Reagan will lie in

213
00:11:45,160 --> 00:11:49,040
Speaker 1: repose at the Reagan Presidential Library. Global News twenty four

214
00:11:49,080 --> 00:11:52,120
Speaker 1: hours a day, powered by our two hundred journalists. They

215
00:11:52,200 --> 00:11:54,360
Speaker 1: more than a hundred fifty news bureaus from around the world.

216
00:11:54,400 --> 00:11:57,679
Speaker 1: Now Michael Barr and Michael thanks so much again. Pretty

217
00:11:57,720 --> 00:12:01,360
Speaker 1: Markets Rise features up eleven Michael McKee and Tom Keene.

218
00:12:01,360 --> 00:12:08,560
Speaker 1: Bloomberg Surveillance. Bloomberg Surveillance brought to by Mercedes Bands this month.

219
00:12:08,559 --> 00:12:11,040
Speaker 1: Here Mercedes Benz tri State healers welcome Spring with limited

220
00:12:11,080 --> 00:12:13,199
Speaker 1: time offers on select models like the Sporty c l

221
00:12:13,240 --> 00:12:15,840
Speaker 1: A and Versatile g l A, each engineered and price

222
00:12:15,960 --> 00:12:23,000
Speaker 1: to move. Visit m b USA dot com today Global

223
00:12:23,040 --> 00:12:26,440
Speaker 1: business news twenty four hours a day at Bloomberg dot com,

224
00:12:26,679 --> 00:12:29,440
Speaker 1: the Radio plus Mobile Lab and on your radio. This

225
00:12:29,920 --> 00:12:33,480
Speaker 1: is a Bloomberg Business Flash and I'm Karen Moscow. US

226
00:12:33,559 --> 00:12:36,559
Speaker 1: Dock index futures are higher, signaling more gains for equities

227
00:12:36,559 --> 00:12:38,560
Speaker 1: heading into the eight year of a bull run as

228
00:12:38,600 --> 00:12:41,760
Speaker 1: investors away queues from central banks. We checked the markets

229
00:12:41,800 --> 00:12:45,000
Speaker 1: every fifteen minutes throughout the trading day on Bloomberg. SNP

230
00:12:45,160 --> 00:12:47,840
Speaker 1: EMNI futures up twelve points, Dow EMUNI futures of a

231
00:12:47,880 --> 00:12:51,400
Speaker 1: hundred one and NAS documedy futures of twenty seven docks

232
00:12:51,400 --> 00:12:54,040
Speaker 1: in Germany's of one and a half percent. Ten year

233
00:12:54,080 --> 00:12:56,840
Speaker 1: treasury down fourteen thirty seconds, the yield one point eight

234
00:12:56,880 --> 00:12:59,920
Speaker 1: seven percent yield on the two year point eight nine percent.

235
00:13:00,520 --> 00:13:02,679
Speaker 1: Nimax screwed oil up two point one per cent or

236
00:13:02,720 --> 00:13:05,040
Speaker 1: seventy eight cents, to thirty seven twenty eight a barrel

237
00:13:05,280 --> 00:13:07,720
Speaker 1: Comx goal down seven tenths per cent or eight dollars

238
00:13:07,760 --> 00:13:11,120
Speaker 1: thirty cents to twelve fifty four seventy announced the euro

239
00:13:11,240 --> 00:13:13,040
Speaker 1: and dollar oh no on seven seven and the N

240
00:13:13,120 --> 00:13:16,480
Speaker 1: one twelve point four nine. And that's a Bloomberg Business Flash.

241
00:13:16,520 --> 00:13:20,479
Speaker 1: Tom and Mike Karen, thanks so much. Bloomberg Business flash

242
00:13:21,000 --> 00:13:25,160
Speaker 1: brought you by Interactive Brokers. They offered direct market access

243
00:13:25,200 --> 00:13:28,800
Speaker 1: to stocks, options, futures, four X bonds, and e t

244
00:13:29,080 --> 00:13:31,760
Speaker 1: f s in over one of their market centers in

245
00:13:31,880 --> 00:13:35,320
Speaker 1: twenty four countries, all of that from a single account.

246
00:13:35,840 --> 00:13:40,680
Speaker 1: Visit i b k R dot com slash trade worldwide.

247
00:13:40,760 --> 00:13:44,680
Speaker 1: I b k r dot com slash Trade Worldwide. We

248
00:13:44,760 --> 00:13:49,079
Speaker 1: think Interactive Brokers for their support. Michael dan Suzuki is

249
00:13:49,120 --> 00:13:52,319
Speaker 1: senior equity strategist at Bank of American Mary Lynch Global Research.

250
00:13:52,559 --> 00:13:57,040
Speaker 1: We're talking about the outlook for the markets. Uh. Jeff

251
00:13:57,120 --> 00:14:00,840
Speaker 1: good Luck, who's a very well known bonding ester, offering

252
00:14:00,880 --> 00:14:04,600
Speaker 1: opinions on stocks yesterday. He says the SMP has just

253
00:14:04,720 --> 00:14:09,560
Speaker 1: a two percent upside a downside, which he says is

254
00:14:09,600 --> 00:14:14,280
Speaker 1: a big losing proposition. He's calling this a bear market rally.

255
00:14:14,600 --> 00:14:18,080
Speaker 1: We should note that this week they closed their six

256
00:14:18,120 --> 00:14:22,040
Speaker 1: million dollar equities growth funded the Felt Toll percent this year.

257
00:14:22,080 --> 00:14:27,000
Speaker 1: So maybe he's speaking from anger or frustration. But what

258
00:14:27,080 --> 00:14:29,880
Speaker 1: do you make of, uh, the idea of a bear

259
00:14:30,000 --> 00:14:34,120
Speaker 1: market rally here, I think the fact that so many

260
00:14:34,160 --> 00:14:37,240
Speaker 1: people are are bearish on stocks and are getting frustrated

261
00:14:37,280 --> 00:14:40,400
Speaker 1: by by this market is actually is actually a good thing.

262
00:14:40,560 --> 00:14:43,080
Speaker 1: You know, you look at pretty much every sentiment indicator

263
00:14:43,120 --> 00:14:46,600
Speaker 1: out there, they're pretty much at either cycle lows or

264
00:14:47,040 --> 00:14:49,440
Speaker 1: decade long lows, whether you look at. One of the

265
00:14:49,640 --> 00:14:52,160
Speaker 1: interesting things that comes out of the fund Managers surveyor

266
00:14:52,200 --> 00:14:54,840
Speaker 1: from our colleagues is that cash levels at at fund

267
00:14:54,880 --> 00:14:57,480
Speaker 1: managers of people that are actually paid to put money

268
00:14:57,520 --> 00:15:00,120
Speaker 1: into work are are at the highest levels it is

269
00:15:00,160 --> 00:15:02,680
Speaker 1: two thousand one. It gives you a sense of how

270
00:15:03,240 --> 00:15:06,400
Speaker 1: much confusion and how much fears out there in the markets.

271
00:15:06,440 --> 00:15:08,400
Speaker 1: And you know, on top of that, you know, look

272
00:15:08,400 --> 00:15:11,560
Speaker 1: at all the other sentiment indicators. People are not enjoying

273
00:15:11,560 --> 00:15:13,720
Speaker 1: this rally and people are not participating, and I think

274
00:15:13,720 --> 00:15:16,360
Speaker 1: that that is one of the upsides. Well, this goes

275
00:15:16,400 --> 00:15:18,760
Speaker 1: to your research and what you do so well, which

276
00:15:18,760 --> 00:15:22,359
Speaker 1: is the basic idea that given what you just described,

277
00:15:23,080 --> 00:15:28,680
Speaker 1: people expense their way to good and good operating income.

278
00:15:29,120 --> 00:15:33,640
Speaker 1: The bottom line is we always in every case underestimate

279
00:15:33,720 --> 00:15:38,440
Speaker 1: the ability to cut costs. Where are we within that belief? Yeah,

280
00:15:38,480 --> 00:15:41,440
Speaker 1: I think that the the ability to cut costs here

281
00:15:41,920 --> 00:15:44,720
Speaker 1: uh is pre select I mean one of the ways

282
00:15:44,720 --> 00:15:47,520
Speaker 1: that we were talking about earliers, you know they can

283
00:15:47,760 --> 00:15:50,080
Speaker 1: the companies. One of the ways that they may start

284
00:15:50,080 --> 00:15:52,440
Speaker 1: to you may start to see come up more frequently

285
00:15:52,800 --> 00:15:54,400
Speaker 1: is cutting costs through M and A. I think if

286
00:15:54,400 --> 00:15:56,440
Speaker 1: you look at the shift in the M and A

287
00:15:56,520 --> 00:15:58,760
Speaker 1: cycle that you've seen over the past couple of years,

288
00:15:59,080 --> 00:16:01,760
Speaker 1: is before it was a matter of buying you know,

289
00:16:01,800 --> 00:16:05,240
Speaker 1: the high growth names. There's been a decisive shift in

290
00:16:05,280 --> 00:16:07,400
Speaker 1: the past six to twelve months and where the M

291
00:16:07,440 --> 00:16:10,880
Speaker 1: and A has really been derived from defensive mergers. And

292
00:16:10,920 --> 00:16:12,920
Speaker 1: part of that comes to this, you know, speaks to

293
00:16:13,000 --> 00:16:15,720
Speaker 1: that cost cutting desire that you're talking about, you know,

294
00:16:15,760 --> 00:16:18,160
Speaker 1: cutting out the synergies. I think there there is some

295
00:16:18,240 --> 00:16:21,920
Speaker 1: room uh for that. Um. What's interesting is everybody's talking

296
00:16:21,960 --> 00:16:24,200
Speaker 1: about how, you know, margins have peaked and they need

297
00:16:24,280 --> 00:16:26,840
Speaker 1: to meet and revert what I think that that's that

298
00:16:26,960 --> 00:16:29,120
Speaker 1: story is a little bit overdone. I think if you

299
00:16:29,200 --> 00:16:32,480
Speaker 1: look at the sector level, there's only two sectors that

300
00:16:32,520 --> 00:16:36,200
Speaker 1: really have stretched margins relative to history. It's only consumer discretionary,

301
00:16:36,240 --> 00:16:38,360
Speaker 1: which is a record margins, and technology, which is that

302
00:16:38,480 --> 00:16:40,920
Speaker 1: record margins. And I think outside of that, you know,

303
00:16:41,000 --> 00:16:43,520
Speaker 1: it's pretty mixed. A lot about happiness. Sectors have below

304
00:16:43,560 --> 00:16:46,040
Speaker 1: average margins throughout the district. And the fall off and

305
00:16:46,080 --> 00:16:49,320
Speaker 1: margins that we've seen last year was entirely due to energy.

306
00:16:49,360 --> 00:16:53,000
Speaker 1: If you take out take out energy margins. Okay, But

307
00:16:53,040 --> 00:16:56,640
Speaker 1: where's what you're saying is, if you take out energy,

308
00:16:56,680 --> 00:17:00,200
Speaker 1: we've already cut a lot of expenses. We have cut

309
00:17:00,240 --> 00:17:02,320
Speaker 1: a lot of expenses. I mean that's been you know,

310
00:17:02,400 --> 00:17:05,320
Speaker 1: one of the drivers for growth. So I think at

311
00:17:05,320 --> 00:17:08,120
Speaker 1: an individual company level of the ability to cut costs further,

312
00:17:08,440 --> 00:17:10,159
Speaker 1: I mean, you can do it, but you're starting to

313
00:17:10,160 --> 00:17:13,000
Speaker 1: cut your your cutting into your livelihood. You know, seeing

314
00:17:13,000 --> 00:17:15,800
Speaker 1: it in the financial services business where you know you're

315
00:17:15,840 --> 00:17:18,120
Speaker 1: cutting you know work, so then you merge. I mean,

316
00:17:18,119 --> 00:17:21,960
Speaker 1: this goes securitiously right back. So what we're talking about

317
00:17:22,320 --> 00:17:24,000
Speaker 1: this morning, and you're seeing more of that in the

318
00:17:24,040 --> 00:17:26,760
Speaker 1: past six months. We talked about them to side about

319
00:17:26,760 --> 00:17:30,600
Speaker 1: this from the LC is the answers the thirties, everybody

320
00:17:30,640 --> 00:17:34,840
Speaker 1: combines combinations. Yeah, it's gonna be interesting to see because

321
00:17:34,840 --> 00:17:39,040
Speaker 1: companies have gotten really big already. Uh, and so you know,

322
00:17:39,080 --> 00:17:41,119
Speaker 1: we'll see what the political environment is to allow some

323
00:17:41,200 --> 00:17:44,920
Speaker 1: of these mergers to continue. There is that dollar. You

324
00:17:45,359 --> 00:17:47,800
Speaker 1: have written that there's a lot of concern about what

325
00:17:47,880 --> 00:17:52,200
Speaker 1: the strong dollar will mean. Uh. Right now, it's losing

326
00:17:52,480 --> 00:17:56,919
Speaker 1: ground significantly. The Federal Reserves trade weighted Dollar index is

327
00:17:57,000 --> 00:18:01,159
Speaker 1: down more than three percent since it's genuine right high. Uh.

328
00:18:01,400 --> 00:18:04,640
Speaker 1: Is that going to fade as an issue? I think

329
00:18:04,880 --> 00:18:08,439
Speaker 1: from here it's probably gonna return as an issue. But

330
00:18:08,960 --> 00:18:10,399
Speaker 1: you know, I think that's part of the reason that

331
00:18:10,440 --> 00:18:12,480
Speaker 1: the markets rallied. I mean, you look at the dollar,

332
00:18:12,800 --> 00:18:14,719
Speaker 1: you know, hitting new highs, and I think that that

333
00:18:14,840 --> 00:18:16,880
Speaker 1: was one of the concerns for the market. Now that

334
00:18:16,880 --> 00:18:18,679
Speaker 1: that's come off, I think that's given a little bit

335
00:18:18,720 --> 00:18:21,440
Speaker 1: of confidence, maybe maybe overdone. And then one of the

336
00:18:21,480 --> 00:18:23,280
Speaker 1: reasons that we're still concerned here is that we think

337
00:18:23,320 --> 00:18:26,120
Speaker 1: the dollar is going to regain momentum later this year.

338
00:18:26,320 --> 00:18:28,680
Speaker 1: But I think the bottom line is that the head

339
00:18:28,720 --> 00:18:30,639
Speaker 1: wind from the dollar is gonna be way less. So

340
00:18:30,640 --> 00:18:32,560
Speaker 1: if you think about the head wind from the dollar

341
00:18:32,760 --> 00:18:34,960
Speaker 1: that you saw last year, I think it's roughly four

342
00:18:35,040 --> 00:18:38,040
Speaker 1: or five percentage points of headwind that you saw last year.

343
00:18:38,040 --> 00:18:39,640
Speaker 1: I think this year is gonna be more like half

344
00:18:39,640 --> 00:18:41,879
Speaker 1: of that. And so when you get that type of

345
00:18:42,000 --> 00:18:45,440
Speaker 1: change along with you know, an improvement or stabilization and

346
00:18:45,440 --> 00:18:47,800
Speaker 1: commodity prices, I think in the back half of the year,

347
00:18:47,880 --> 00:18:50,560
Speaker 1: you you can't see growth pick up this. Suzuki, thank

348
00:18:50,600 --> 00:18:52,520
Speaker 1: you so much. He is with Bank of American Mary

349
00:18:52,600 --> 00:18:56,760
Speaker 1: Lynch with inequity strategy. Is well, Mike, what did you

350
00:18:56,800 --> 00:18:59,520
Speaker 1: take of the politics last night? You know, I got

351
00:18:59,600 --> 00:19:01,840
Speaker 1: up early, you know, I looked at the headline and said, really,

352
00:19:03,000 --> 00:19:05,480
Speaker 1: uh something, Well, the polls were clearly wrong on the

353
00:19:05,480 --> 00:19:09,600
Speaker 1: Democratic side. I'm much more interested in the exit polls. Uh.

354
00:19:09,880 --> 00:19:14,800
Speaker 1: Friend Gary Langer, who does the does the Bloomberg Consumer

355
00:19:14,800 --> 00:19:18,560
Speaker 1: Comforting next, does the exit polling for ABC News, and

356
00:19:18,760 --> 00:19:22,920
Speaker 1: in both Michigan and Mississippi in the Republican primary, and

357
00:19:23,040 --> 00:19:28,560
Speaker 1: extraordinary number of people told the exit pollers they were

358
00:19:28,640 --> 00:19:32,160
Speaker 1: voting for Donald Trump because they think the economy is lousy.

359
00:19:32,280 --> 00:19:35,760
Speaker 1: And I find that really interesting. I want to ask

360
00:19:35,840 --> 00:19:37,680
Speaker 1: Megan Murphy about that. We'll to her at A thirty

361
00:19:37,720 --> 00:19:40,480
Speaker 1: this morning, because you know, we talked to people like

362
00:19:40,560 --> 00:19:43,119
Speaker 1: Dan Suzuki and Okay, it's not great, but we're not

363
00:19:43,160 --> 00:19:45,320
Speaker 1: going into recession. But that's not how the American people

364
00:19:45,320 --> 00:19:48,480
Speaker 1: seem it sound. Well, that's the exit polls rhyme. With

365
00:19:48,560 --> 00:19:51,080
Speaker 1: the mail I get. I will tell you that we

366
00:19:51,160 --> 00:19:54,080
Speaker 1: get a lot of mail when people tell us things

367
00:19:54,240 --> 00:19:57,159
Speaker 1: are good, for whatever reason that may be. Michael McKee

368
00:19:57,160 --> 00:20:00,400
Speaker 1: and Tom Keane, we're here in New York opening our mail.

369
00:20:00,520 --> 00:20:07,320
Speaker 1: Thanks for sending it. Bloomberg Surveillance. Bloomberg Surveillance is brought

370
00:20:07,320 --> 00:20:09,480
Speaker 1: you by the New York Community Trust, where donors like

371
00:20:09,560 --> 00:20:24,600
Speaker 1: you help them make New York better. Broadcasting live to

372
00:20:24,800 --> 00:20:28,679
Speaker 1: New York, Bloomberg eleventh Riyo to Washington, d C, Bloomberg

373
00:20:29,560 --> 00:20:34,280
Speaker 1: to Boston, Bloomberg twelve hundreds to San Francisco, Bloomberg to

374
00:20:34,400 --> 00:20:37,840
Speaker 1: the country. See He's exam Channel one ninety and around

375
00:20:37,880 --> 00:20:41,480
Speaker 1: the globe the Bloomberg Radio plus Appen Bloomberg dot Com.

376
00:20:41,480 --> 00:20:45,359
Speaker 1: This is Bloomberg Surveillance. Good morning at seventh Arty on

377
00:20:45,480 --> 00:20:48,639
Speaker 1: Wall Street Time, Michael McKee along with Tom Keene, or

378
00:20:48,720 --> 00:20:52,240
Speaker 1: two hours away from what looks like a higher open

379
00:20:52,560 --> 00:20:57,080
Speaker 1: on the day, with futures up relatively strongly SMP futures

380
00:20:57,119 --> 00:21:00,280
Speaker 1: eleven points higher right now about half a percent. Here's

381
00:21:00,280 --> 00:21:02,520
Speaker 1: some of the corporate news we are watching this morning.

382
00:21:02,560 --> 00:21:06,320
Speaker 1: Warren Buffetts, Berkshire Hathaway marketing bonds and euros to help

383
00:21:06,359 --> 00:21:09,359
Speaker 1: repay a bank loan, offering bonds maturing in four, eight

384
00:21:09,400 --> 00:21:11,760
Speaker 1: and twelve years to pay offf loans used in the

385
00:21:11,800 --> 00:21:14,880
Speaker 1: acquisition of Precision cast parts. That's according to a person

386
00:21:15,200 --> 00:21:19,000
Speaker 1: familiar with the matter. Burberry shares up this morning speculation

387
00:21:19,040 --> 00:21:23,560
Speaker 1: The Intercontinental Exchange also is financing a bid for the

388
00:21:23,640 --> 00:21:27,639
Speaker 1: London Stock Exchange Group. According to people familiar with the matter,

389
00:21:27,960 --> 00:21:30,760
Speaker 1: it will go to head to head with Deutsche Bors

390
00:21:30,800 --> 00:21:34,359
Speaker 1: to win control of the UK company. Prudential, the UK's

391
00:21:34,440 --> 00:21:37,399
Speaker 1: largest insurer, reporting a nineteen point three percent increase in

392
00:21:37,440 --> 00:21:41,320
Speaker 1: pre tax profit, and Norway's Sovereign Wealth Fund, the world's biggest,

393
00:21:41,320 --> 00:21:44,240
Speaker 1: had its worst year since two thousand eleven. The government

394
00:21:44,240 --> 00:21:47,040
Speaker 1: pension fund global return two point seven percent in two

395
00:21:47,040 --> 00:21:52,600
Speaker 1: thousand fifteen, after rising seven point six percent the previous year. Now,

396
00:21:52,680 --> 00:21:55,040
Speaker 1: let's check in with Michael Barrow in the latest world

397
00:21:55,240 --> 00:21:58,600
Speaker 1: national headlines. Mike, thank you very much. Democrat Bernie Sanders

398
00:21:58,640 --> 00:22:01,240
Speaker 1: scored an upset when in the mission in presidential primary

399
00:22:01,359 --> 00:22:06,080
Speaker 1: last night, Sanders rival Hillary Clinton easily won Mississippi. Clinton

400
00:22:06,200 --> 00:22:09,919
Speaker 1: spoke to supporters in Cleveland ahead of next week's primaries

401
00:22:09,920 --> 00:22:14,400
Speaker 1: in Ohio and other states. You're here tonight and you're

402
00:22:14,440 --> 00:22:18,920
Speaker 1: going to do everything you can in this next week,

403
00:22:19,400 --> 00:22:24,520
Speaker 1: along with people in Florida, Illinois, Missouri, North Carolina who

404
00:22:24,600 --> 00:22:28,360
Speaker 1: are going to the polls. Clinton is more than halfway

405
00:22:28,400 --> 00:22:31,480
Speaker 1: to the delegate account needed to win the nomination. Meanwhile,

406
00:22:31,560 --> 00:22:34,959
Speaker 1: Clinton and Sanders will hold their eighth debate tonight. For

407
00:22:35,000 --> 00:22:38,240
Speaker 1: the Republicans, Donald Trump stretched his lead and the delegate

408
00:22:38,240 --> 00:22:41,760
Speaker 1: account with wins in Michigan, Mississippi, and Hawaii. Ted Cruz

409
00:22:41,800 --> 00:22:45,960
Speaker 1: one Idaho. Pendagon officials say US air strikes targeted and

410
00:22:46,040 --> 00:22:48,480
Speaker 1: may have killed a top commander of the Islamic State

411
00:22:48,600 --> 00:22:51,919
Speaker 1: terrorist group. The commander, who goes by the alias Omar

412
00:22:52,040 --> 00:22:55,280
Speaker 1: the Chechen, is said to have operated in both Syria

413
00:22:55,400 --> 00:22:59,359
Speaker 1: and Iraq. North Korea is publicizing what it claims as

414
00:22:59,400 --> 00:23:01,720
Speaker 1: a mock up of a key part of a nuclear

415
00:23:01,760 --> 00:23:04,479
Speaker 1: warhead lead to Kim. John Unen says this country has

416
00:23:04,520 --> 00:23:08,800
Speaker 1: developed miniaturized atomic bombs that can be placed on missiles.

417
00:23:08,960 --> 00:23:12,960
Speaker 1: Global News twenty four hours a day, powered by our journalists.

418
00:23:13,200 --> 00:23:16,600
Speaker 1: I'm Michael Barr. Mike, Thank you, Michael. Time now for

419
00:23:16,680 --> 00:23:19,239
Speaker 1: the Bloomberg NBC Sports update, and for that we'll bring

420
00:23:19,320 --> 00:23:21,879
Speaker 1: in John stash Our. Thanks Mike. Busy night for the

421
00:23:21,920 --> 00:23:24,119
Speaker 1: locals and hockey and hoops. Rangers were coming off a

422
00:23:24,240 --> 00:23:26,440
Speaker 1: loss to the Islanders where they have not lost back

423
00:23:26,480 --> 00:23:29,520
Speaker 1: to back games since mid December, and that Street continues

424
00:23:29,560 --> 00:23:31,800
Speaker 1: with a four two win at Buffalo to stay three

425
00:23:31,800 --> 00:23:34,320
Speaker 1: points ahead of the Red Hot Islanders were back home

426
00:23:34,359 --> 00:23:36,280
Speaker 1: from a six and one road trip and who got

427
00:23:36,280 --> 00:23:39,280
Speaker 1: by Pittsburgh two to one on Lander's legal in the

428
00:23:39,400 --> 00:23:41,679
Speaker 1: third period. Nix have not had back to back winds

429
00:23:41,760 --> 00:23:45,080
Speaker 1: since mid January. That Street continues, outscored in each quarter

430
00:23:45,359 --> 00:23:48,879
Speaker 1: in a one ninety four loss at Denverse seventeen loss

431
00:23:49,160 --> 00:23:51,920
Speaker 1: in the last twenty one games. Carmelo Anthony scored thirty

432
00:23:52,040 --> 00:23:55,800
Speaker 1: versus his former team in Toronto. Brook Lopez had thirty five,

433
00:23:55,880 --> 00:23:58,880
Speaker 1: but the Nets blew us sixteen point halftime lead fell

434
00:23:58,960 --> 00:24:01,639
Speaker 1: to the Raptors one of for nine nine either fairly,

435
00:24:01,720 --> 00:24:03,680
Speaker 1: Dickinson or Wagner had been to the n C Double

436
00:24:03,680 --> 00:24:06,359
Speaker 1: A tournament in the last decade. It's fter you who's

437
00:24:06,400 --> 00:24:08,600
Speaker 1: going having going to Staten Island and in the northeast

438
00:24:08,600 --> 00:24:11,119
Speaker 1: final on the road. He's seven seventy nine. Were at

439
00:24:11,119 --> 00:24:15,240
Speaker 1: the Bloomberg NBC Sports Up. I'm John Stashland. Thanks John.

440
00:24:15,240 --> 00:24:18,359
Speaker 1: As we mentioned, we're seeing strength in the markets uh

441
00:24:18,520 --> 00:24:21,520
Speaker 1: in Europe no exception. These stock six undered now up

442
00:24:21,520 --> 00:24:25,879
Speaker 1: by four points one point two percent. The ECB is

443
00:24:25,920 --> 00:24:28,720
Speaker 1: meeting tomorrow. We will have Mario Joggs press converts for you.

444
00:24:28,880 --> 00:24:33,160
Speaker 1: Live here on Bloomberg Surveillance eight thirty Wall Street Time.

445
00:24:33,520 --> 00:24:41,640
Speaker 1: This is Bloomberg Radio and this is Bloomberg Surveillance. I'm

446
00:24:41,640 --> 00:24:47,080
Speaker 1: Michael McKee along with Tom Keane. The markets change in

447
00:24:47,160 --> 00:24:50,119
Speaker 1: psychology from yesterday, shall we say where maybe there was

448
00:24:50,160 --> 00:24:53,520
Speaker 1: some consolidation going on. Right now we're looking at people

449
00:24:53,600 --> 00:24:56,840
Speaker 1: buying in SMP futures up by eleven points half a

450
00:24:56,880 --> 00:25:00,399
Speaker 1: percent down futures ninety points higher. That's also half a

451
00:25:00,480 --> 00:25:05,240
Speaker 1: percent on the day. Gold concominate LYE is down nine

452
00:25:05,280 --> 00:25:09,440
Speaker 1: dollars twelve fifty three. Time now for the Bloomberg n

453
00:25:09,560 --> 00:25:11,960
Speaker 1: j I t STEM Report, brought to you by New

454
00:25:12,040 --> 00:25:15,320
Speaker 1: Jersey Institute of Technology, partnering with government and industry to

455
00:25:15,359 --> 00:25:18,520
Speaker 1: apply the university's world class research assets to innovate and

456
00:25:18,560 --> 00:25:21,359
Speaker 1: spur economic growth. Learn more at n J I, T

457
00:25:22,000 --> 00:25:25,240
Speaker 1: dot E d U. Here's Bob, Thanks and good morning, Michael.

458
00:25:25,359 --> 00:25:27,480
Speaker 1: Coming up on seven thirty five on Wall Street, and

459
00:25:27,480 --> 00:25:31,000
Speaker 1: here's what's making news in science, Technology, engineering, and math.

460
00:25:31,400 --> 00:25:35,000
Speaker 1: Time to stretch STEM studies. The New York Times reports

461
00:25:35,040 --> 00:25:37,439
Speaker 1: the federal government is preparing to publish a rule on

462
00:25:37,520 --> 00:25:41,480
Speaker 1: Friday that will make international students earning degrees in science, technology,

463
00:25:41,560 --> 00:25:45,159
Speaker 1: engineering and math eligible to stay for three years of

464
00:25:45,280 --> 00:25:48,200
Speaker 1: on the job training. This is seven months longer than

465
00:25:48,280 --> 00:25:50,920
Speaker 1: under the two thousand eight rule it replaces for the

466
00:25:50,960 --> 00:25:53,800
Speaker 1: STEM Optional Practical Training program known as O p T.

467
00:25:54,400 --> 00:25:56,960
Speaker 1: It's set to take effect on May t This is

468
00:25:56,960 --> 00:25:59,959
Speaker 1: fueling the debate between industry leaders who say they're dead

469
00:26:00,000 --> 00:26:02,800
Speaker 1: split for skilled talent, and tech workers complaining it's end

470
00:26:02,880 --> 00:26:06,680
Speaker 1: run around stalled immigration reform and an assault on American workers.

471
00:26:07,119 --> 00:26:10,840
Speaker 1: And artificial intelligence system developed by Google beat a top

472
00:26:10,920 --> 00:26:14,200
Speaker 1: ranked player of the ancient brain challenging board game Go

473
00:26:14,920 --> 00:26:18,560
Speaker 1: in a televised match in South Korea. Google's self learning

474
00:26:18,640 --> 00:26:21,679
Speaker 1: deep mind technology seems to have bastard one of the

475
00:26:21,680 --> 00:26:25,520
Speaker 1: most creative and complex games ever devised, and Tyson the

476
00:26:25,520 --> 00:26:29,159
Speaker 1: big US chicken producer, is facing special challenges in China,

477
00:26:29,400 --> 00:26:32,399
Speaker 1: where consumers have been chasened by years of food safety scares.

478
00:26:32,640 --> 00:26:35,040
Speaker 1: The company has added to some of its chicken products

479
00:26:35,080 --> 00:26:37,800
Speaker 1: a quick response code that can be scanned with a

480
00:26:37,840 --> 00:26:41,159
Speaker 1: smartphone to see exactly where the bird was slaughtered and

481
00:26:41,240 --> 00:26:44,159
Speaker 1: when the meat arrived in the store cooler. That's this

482
00:26:44,240 --> 00:26:47,359
Speaker 1: morning this Bloomberg n j I T STEM report. Michael,

483
00:26:48,040 --> 00:26:51,280
Speaker 1: thank you, Bob Well. A lot of focus on China

484
00:26:51,359 --> 00:26:55,200
Speaker 1: over the past week as the Party Congress figures out

485
00:26:55,240 --> 00:26:58,000
Speaker 1: what the Chinese economy is going to be like, command driven,

486
00:26:58,080 --> 00:27:02,879
Speaker 1: top down. So their plans are to bring in growth

487
00:27:02,920 --> 00:27:06,359
Speaker 1: this year six and a half to seven percent on

488
00:27:06,440 --> 00:27:09,000
Speaker 1: the year, and to do that they are going to

489
00:27:09,400 --> 00:27:13,680
Speaker 1: add short term stimulus. We've already seen reserve ratio cut

490
00:27:13,800 --> 00:27:17,480
Speaker 1: and they are going to they say, start cutting over

491
00:27:17,520 --> 00:27:21,920
Speaker 1: capacity in some industries like steel production. Asia Times colinist

492
00:27:22,000 --> 00:27:25,439
Speaker 1: David Goldman follows what's going on in China very closely.

493
00:27:25,480 --> 00:27:29,320
Speaker 1: He joins us, Now, David, let's start with the growth number,

494
00:27:29,400 --> 00:27:32,239
Speaker 1: six and a half to seven percent, certainly lower than

495
00:27:32,280 --> 00:27:37,160
Speaker 1: we have seen in years, but still people say relatively ambitious. Well,

496
00:27:37,320 --> 00:27:40,800
Speaker 1: that's a blend of very strong growth in the consumer

497
00:27:40,840 --> 00:27:44,040
Speaker 1: and tech sectors and very bad growth, negative growth in

498
00:27:44,119 --> 00:27:50,400
Speaker 1: fact in traditional cement, steel and other smoke snack industries,

499
00:27:50,440 --> 00:27:53,800
Speaker 1: which are in many respects past they're used by date.

500
00:27:54,240 --> 00:27:56,760
Speaker 1: So what the GDP network comes out is is much

501
00:27:56,880 --> 00:27:59,959
Speaker 1: less important to me than the kind of qualitative improved

502
00:28:00,640 --> 00:28:02,679
Speaker 1: we want to see from a number of industries. And

503
00:28:02,720 --> 00:28:06,880
Speaker 1: I think if you follow what Chinese private tycoons are

504
00:28:06,960 --> 00:28:09,879
Speaker 1: talking about, will have a number of benchmarks. Who want

505
00:28:09,920 --> 00:28:14,440
Speaker 1: to see uh a quantum leap and efficiency of solar power.

506
00:28:14,480 --> 00:28:17,800
Speaker 1: We want to see improvement in the quality of local

507
00:28:17,840 --> 00:28:21,680
Speaker 1: production of consumer goods. Who want to see continued expansion

508
00:28:21,840 --> 00:28:25,320
Speaker 1: of e commerce and e finance, which is China's great

509
00:28:25,320 --> 00:28:29,479
Speaker 1: success story. So I think it's the qualitative supply side,

510
00:28:29,920 --> 00:28:33,600
Speaker 1: bottom up aspect of the Chinese economy that will make

511
00:28:33,600 --> 00:28:37,360
Speaker 1: the difference as opposed to aggregate demand management. And that's

512
00:28:37,400 --> 00:28:41,200
Speaker 1: really what the government has been saying well, in terms

513
00:28:41,320 --> 00:28:44,040
Speaker 1: of that supply side, they are going to try to

514
00:28:44,080 --> 00:28:48,680
Speaker 1: address over capacity, cuts and steel and cold production and

515
00:28:48,960 --> 00:28:52,960
Speaker 1: more promises to deal with the zombie companies, particularly those

516
00:28:53,000 --> 00:28:57,920
Speaker 1: on bank balance sheets. What progress will they make, well,

517
00:28:58,000 --> 00:29:02,440
Speaker 1: it will be uneven because governments in China is a

518
00:29:02,520 --> 00:29:06,040
Speaker 1: work in progress, to put it charitably, but it's much

519
00:29:06,160 --> 00:29:10,280
Speaker 1: easier to shut old companies down that it is, for example,

520
00:29:10,320 --> 00:29:14,080
Speaker 1: to get to Chinese to buy locally made rice cookers.

521
00:29:14,080 --> 00:29:17,720
Speaker 1: One of the proverbial issues that keeps coming up is

522
00:29:17,760 --> 00:29:21,719
Speaker 1: that Chinese like to buy Japanese rice cookers because basic

523
00:29:21,760 --> 00:29:27,000
Speaker 1: consumer products are simply better overseas. So the German of

524
00:29:27,080 --> 00:29:31,000
Speaker 1: shall Me, the extremely successful low caused Chinese smartphone producer,

525
00:29:31,120 --> 00:29:35,840
Speaker 1: is talking about moving into basic consumer items, producing a

526
00:29:35,960 --> 00:29:39,480
Speaker 1: higher quality product at a lower cost. One of the

527
00:29:39,560 --> 00:29:45,680
Speaker 1: proofstones of Chinese productivity is going to be their semiconductor investment.

528
00:29:46,240 --> 00:29:49,720
Speaker 1: As Bloomberg has been reporting and many others, China's plans

529
00:29:49,760 --> 00:29:54,880
Speaker 1: suspend about a hundred sixty billion dollars two um reduce

530
00:29:54,960 --> 00:29:59,640
Speaker 1: its fore independency on semiconductor imports. Now the import about half.

531
00:29:59,680 --> 00:30:01,960
Speaker 1: That's going to be a critical test of how good

532
00:30:02,000 --> 00:30:05,160
Speaker 1: they are. The solar industry, which is now getting to

533
00:30:05,440 --> 00:30:09,880
Speaker 1: grid parity uh in China in terms of cost, is

534
00:30:09,880 --> 00:30:11,720
Speaker 1: going to be a critical issue because they've got to

535
00:30:11,720 --> 00:30:15,400
Speaker 1: be shifting away from coal, which is a terrible pollutant

536
00:30:15,720 --> 00:30:19,040
Speaker 1: to renewables as well. As nuclear and other cleaner sources

537
00:30:19,840 --> 00:30:22,560
Speaker 1: of energy. So I think it's going to be those

538
00:30:22,640 --> 00:30:25,360
Speaker 1: industries which we have to watch and where the real

539
00:30:25,400 --> 00:30:29,160
Speaker 1: opportunities are. I know some of the smartest tech venture

540
00:30:29,240 --> 00:30:32,760
Speaker 1: capitalists in the world are massively involved in China right now.

541
00:30:32,800 --> 00:30:36,520
Speaker 1: I think it's the world's biggest opportunity. They're really concentrating

542
00:30:36,720 --> 00:30:41,320
Speaker 1: on Internet, E commerce, E finance, social media, UH and

543
00:30:41,400 --> 00:30:49,080
Speaker 1: other things which exploit the prospective efficiencies of distribution. Well,

544
00:30:49,200 --> 00:30:53,840
Speaker 1: let's continue. David Goldman from Asia Times on China and

545
00:30:54,000 --> 00:30:58,840
Speaker 1: what lies ahead for the Chinese economy. The Chinese stock

546
00:30:58,880 --> 00:31:02,560
Speaker 1: market finished on the day by one point three percent.

547
00:31:02,720 --> 00:31:05,840
Speaker 1: That's a thirty nine point dropped there. In Hong Kong

548
00:31:05,880 --> 00:31:09,520
Speaker 1: it was a fifteen point drop a tenth of a percent.

549
00:31:09,720 --> 00:31:12,320
Speaker 1: But stocks around the rest of the world are higher.

550
00:31:12,480 --> 00:31:16,320
Speaker 1: Stock six center in Europe up by one right now,

551
00:31:17,000 --> 00:31:23,920
Speaker 1: this is Bloomberg Surveillance. Bloomberg Surveillance is brought to you

552
00:31:23,920 --> 00:31:26,200
Speaker 1: by n y CB asked about their my community interest

553
00:31:26,280 --> 00:31:28,959
Speaker 1: checking with free n y CB online and mobile banking.

554
00:31:29,000 --> 00:31:37,719
Speaker 1: Earn more. Get more, visit NYCB family dot com for details.

555
00:31:37,720 --> 00:31:41,360
Speaker 1: Global business news twenty four hours a day. Bloomberg dot

556
00:31:41,360 --> 00:31:44,240
Speaker 1: com the Radio Plus Mobile Act and on your radio.

557
00:31:44,520 --> 00:31:48,400
Speaker 1: This is a Bloomberg business flash and I'm carrying Moscow.

558
00:31:48,480 --> 00:31:50,760
Speaker 1: This update is brought to you by Sector Spider E

559
00:31:50,880 --> 00:31:52,840
Speaker 1: t F so I buy a single stock when you

560
00:31:52,840 --> 00:31:56,480
Speaker 1: can invest in the entire sector. Visits sector sp d

561
00:31:56,640 --> 00:32:00,520
Speaker 1: r s dot com are called sector e t B

562
00:32:00,760 --> 00:32:03,920
Speaker 1: MW reporting of five point two percent gain and profit

563
00:32:04,040 --> 00:32:07,280
Speaker 1: last year on higher vehicle deliveries. As the world's largest

564
00:32:07,280 --> 00:32:10,479
Speaker 1: maker of luxury cars pushes to stay ahead of Mercedes Benz,

565
00:32:10,840 --> 00:32:13,280
Speaker 1: stock traders are putting the clins in Asia behind them.

566
00:32:13,280 --> 00:32:16,760
Speaker 1: As European markets rise with US stock index futures and commodities,

567
00:32:17,000 --> 00:32:20,120
Speaker 1: government bonds are falling, gold sliding the euro weakening. We

568
00:32:20,280 --> 00:32:22,880
Speaker 1: checked the markets every fifteen minutes throughout the trading day

569
00:32:22,920 --> 00:32:26,360
Speaker 1: on Bloomberg SNP E Mini futures up ten points, DOWIE

570
00:32:26,400 --> 00:32:29,240
Speaker 1: Mini futures of seventy nine and NASDAC EMNI futures of

571
00:32:29,360 --> 00:32:32,960
Speaker 1: twenty one des in Germany's of one point two percent ten,

572
00:32:33,040 --> 00:32:35,840
Speaker 1: your treasury down thirteen thirty seconds, the yield one point

573
00:32:35,840 --> 00:32:38,560
Speaker 1: eight seven percent yield on the two year point eight

574
00:32:38,640 --> 00:32:41,360
Speaker 1: nine percent nim X screwed oil up one point nine

575
00:32:41,360 --> 00:32:44,000
Speaker 1: percent or sixty eight cents to thirty seven eighteen. A

576
00:32:44,080 --> 00:32:47,000
Speaker 1: barrel comes gold is down four ten percent or five

577
00:32:47,040 --> 00:32:49,840
Speaker 1: dollars fifty cents at twelve fifty seven fifty and ounce

578
00:32:50,240 --> 00:32:52,520
Speaker 1: the euro a dollar oh nine seven seven, the N

579
00:32:52,600 --> 00:32:56,040
Speaker 1: one twelve point four eight. And that's a Bloomberg business flash.

580
00:32:56,080 --> 00:32:59,480
Speaker 1: Tom and Mike okay, Moscow, thank you very much. We're

581
00:32:59,520 --> 00:33:03,840
Speaker 1: talking with David Goldwan from Agia Times about China. It's

582
00:33:03,880 --> 00:33:07,760
Speaker 1: a new policy conference and whether the Chinese economy they

583
00:33:07,800 --> 00:33:11,520
Speaker 1: are announcing additional monetary stimulus. They're going to raise the

584
00:33:11,560 --> 00:33:16,120
Speaker 1: amount of cash in circulation, David, they've cut the reserve ratio.

585
00:33:16,240 --> 00:33:20,840
Speaker 1: Are you expecting more fiscal or monetary stimulus or is

586
00:33:20,960 --> 00:33:23,520
Speaker 1: what they've done enough at this point. Now, China has

587
00:33:23,560 --> 00:33:27,280
Speaker 1: the highest real interest rates of any major economy in

588
00:33:27,320 --> 00:33:30,560
Speaker 1: the world, and as a result of Chinese currency has

589
00:33:30,600 --> 00:33:34,200
Speaker 1: appreciated in real terms according to the b I asked

590
00:33:34,200 --> 00:33:38,200
Speaker 1: by about twenty in the past two years. That's one

591
00:33:38,240 --> 00:33:40,880
Speaker 1: of the things killing Chinese exports. If you look at

592
00:33:40,960 --> 00:33:44,520
Speaker 1: the composition of growth around the world, Europe is doing

593
00:33:44,520 --> 00:33:47,640
Speaker 1: a good deal better after the massive devaluation of the euro.

594
00:33:47,800 --> 00:33:50,960
Speaker 1: Japan is doing a bit better. Chinese exports are doing

595
00:33:51,560 --> 00:33:56,520
Speaker 1: very poorly, and that's largely the redistribution of a fixed

596
00:33:56,600 --> 00:34:00,920
Speaker 1: or shrinking pie of world trade. According to ICE, currencies

597
00:34:01,440 --> 00:34:05,200
Speaker 1: that rise get less exports. So yes, they do have

598
00:34:05,320 --> 00:34:08,879
Speaker 1: more to do, and uh, they're very cautious about doing

599
00:34:08,920 --> 00:34:13,240
Speaker 1: it in a disruptive fashion. There's been a perception, uh

600
00:34:13,560 --> 00:34:17,520
Speaker 1: that this can lead to an exhausting reserves or financial crisis,

601
00:34:17,800 --> 00:34:20,000
Speaker 1: as you know, I've disagreed with that, but they have

602
00:34:20,080 --> 00:34:23,800
Speaker 1: to proceed cautiously. So that's a one witted way of saying, yes,

603
00:34:24,239 --> 00:34:26,799
Speaker 1: they've got more to do in terms monetary stimulus. What

604
00:34:26,920 --> 00:34:29,040
Speaker 1: does it give us an update? David Goldman and the

605
00:34:29,160 --> 00:34:33,320
Speaker 1: power of Beijing versus the regional powers in China. Is

606
00:34:33,360 --> 00:34:37,040
Speaker 1: this a stronger Beijing over the last twelve months. Well,

607
00:34:37,080 --> 00:34:39,759
Speaker 1: the regional powers in China have the problem that they've

608
00:34:39,800 --> 00:34:44,080
Speaker 1: been financing all this massive infrastructure growth on the basis

609
00:34:44,080 --> 00:34:47,800
Speaker 1: of local government financing vehicles. It's like a local business

610
00:34:47,840 --> 00:34:53,960
Speaker 1: development corporation sponsored by municipality. That's a fabulous amount of

611
00:34:54,080 --> 00:34:58,200
Speaker 1: debt and the government is consolidating that that into provincial

612
00:34:58,480 --> 00:35:01,120
Speaker 1: debt backed by tax or have used as opposed to

613
00:35:01,880 --> 00:35:04,719
Speaker 1: local entities backed by assets that will occur at much

614
00:35:04,760 --> 00:35:08,600
Speaker 1: lower interest rates should happen over five years UH, and

615
00:35:08,680 --> 00:35:12,960
Speaker 1: that will shift about the debt equal to about GDP

616
00:35:13,960 --> 00:35:18,359
Speaker 1: away from municipalities to the government. So I think there's

617
00:35:18,360 --> 00:35:24,360
Speaker 1: a massive consolidation of centralized power based on the substitution

618
00:35:24,600 --> 00:35:28,439
Speaker 1: of tax revenues as the basis for government debt from

619
00:35:28,480 --> 00:35:34,200
Speaker 1: these local government financing vehicles backed by real estate. Where

620
00:35:34,200 --> 00:35:38,719
Speaker 1: does the where does the government come into it? In

621
00:35:38,840 --> 00:35:42,399
Speaker 1: terms of dealing with the banks, now, banks are a

622
00:35:42,440 --> 00:35:45,719
Speaker 1: major concern for for people. Even they may not have

623
00:35:45,760 --> 00:35:48,319
Speaker 1: a systemic impact on the rest of the world, but

624
00:35:48,680 --> 00:35:53,200
Speaker 1: people are watching the banks and their extended loan portfolios

625
00:35:53,280 --> 00:35:56,920
Speaker 1: for um whether or not they can continue to sustain

626
00:35:56,960 --> 00:36:00,360
Speaker 1: growth in China. Oh no, the banks that they basically

627
00:36:00,440 --> 00:36:05,480
Speaker 1: been attached to the sase they're very inefficient. We estimate

628
00:36:05,760 --> 00:36:10,520
Speaker 1: the bad loan ratio to NPL ratio for banks at

629
00:36:10,560 --> 00:36:13,839
Speaker 1: somewhere around seven eight percent, which is manageable. There are

630
00:36:13,840 --> 00:36:16,400
Speaker 1: basically two things that government has to do. Want us

631
00:36:16,480 --> 00:36:20,160
Speaker 1: to permit securitization of up coming loans, which has standard

632
00:36:20,640 --> 00:36:28,400
Speaker 1: much more important. Let the e finance UH entrepreneurs substitute

633
00:36:28,600 --> 00:36:32,480
Speaker 1: for the banks and make capital available for small and

634
00:36:32,640 --> 00:36:36,239
Speaker 1: medium enterprises. The banks have been hopeless at that a

635
00:36:36,360 --> 00:36:40,680
Speaker 1: just trouble money into big, in inefficient entities. But the

636
00:36:40,760 --> 00:36:45,240
Speaker 1: new entrepreneurs doing e finance like a financial Jack Mos

637
00:36:45,320 --> 00:36:50,640
Speaker 1: company are much better at evaluating credit for smaller enterprises.

638
00:36:50,680 --> 00:36:54,359
Speaker 1: And that's for China's futures lives. So given the regulatory

639
00:36:54,480 --> 00:36:59,560
Speaker 1: go ahead to allow the new financial technologies to lead

640
00:36:59,600 --> 00:37:02,080
Speaker 1: prod over the old ones is going to be the

641
00:37:02,080 --> 00:37:05,919
Speaker 1: most I'll go, that's brilliant. But can you do that

642
00:37:06,000 --> 00:37:09,239
Speaker 1: within the government regime that they have, if they have

643
00:37:09,360 --> 00:37:14,840
Speaker 1: true command and control psychology? Can you hope for Silicon

644
00:37:14,960 --> 00:37:22,320
Speaker 1: Valley entrepreneur attributes, Well, you can hope, uh, tom Uh.

645
00:37:22,480 --> 00:37:27,080
Speaker 1: Obviously it's certainly possible. Within the political framework. There will

646
00:37:27,120 --> 00:37:29,560
Speaker 1: be a lot of people who don't like it. Nobody

647
00:37:29,680 --> 00:37:33,680
Speaker 1: likes being leap frogged. Uh. You know, Jack Mau expresses

648
00:37:33,719 --> 00:37:37,319
Speaker 1: great optimism. The other entrepreneurs expressed great optimism, and they've

649
00:37:37,360 --> 00:37:41,320
Speaker 1: really been a driver of the Chinese economy. It's the

650
00:37:41,680 --> 00:37:45,359
Speaker 1: double digit growth in consumption which is holding China up

651
00:37:45,360 --> 00:37:48,840
Speaker 1: while some of the older sectors languish. My view is

652
00:37:49,600 --> 00:37:53,279
Speaker 1: the Chinese government can't afford not to work with the

653
00:37:53,400 --> 00:37:56,200
Speaker 1: entrepreneurs because if they don't, they won't get the growth

654
00:37:56,320 --> 00:38:00,759
Speaker 1: and the lose the mandat of heaven. What's the most

655
00:38:00,760 --> 00:38:03,839
Speaker 1: important thing for China in this next year to try

656
00:38:03,880 --> 00:38:06,719
Speaker 1: to live up to their promises. The most important thing

657
00:38:07,000 --> 00:38:12,040
Speaker 1: is to turn loose the creative juices of entrepreneurs, small

658
00:38:12,040 --> 00:38:15,080
Speaker 1: and medium sized enterprises. You have a lot of extremely

659
00:38:15,200 --> 00:38:18,959
Speaker 1: smart people in China. You've got a new generation which

660
00:38:19,000 --> 00:38:22,880
Speaker 1: has PhD s from the better Chinese universities, foreign universities,

661
00:38:23,000 --> 00:38:26,719
Speaker 1: very smart engineers and scientists, people who can innovate. You

662
00:38:26,880 --> 00:38:31,680
Speaker 1: have to turn that innovation into GDP growth. That's the

663
00:38:31,760 --> 00:38:35,000
Speaker 1: key thing. Yeah, but but again, how do you do

664
00:38:35,040 --> 00:38:40,719
Speaker 1: that within this government? Uh? Well, I think the financing

665
00:38:40,800 --> 00:38:43,799
Speaker 1: e commerce are a great example. One of the hut

666
00:38:43,920 --> 00:38:47,080
Speaker 1: huge things about doing this over the internet for the

667
00:38:47,200 --> 00:38:50,200
Speaker 1: Chinese is that the more of the economy that goes

668
00:38:50,239 --> 00:38:54,000
Speaker 1: over the Internet, the more of a look see that

669
00:38:54,120 --> 00:38:57,399
Speaker 1: the government has as to what people are doing. From

670
00:38:57,440 --> 00:39:00,960
Speaker 1: the standpoint of a centralized government, you get a lot

671
00:39:01,000 --> 00:39:03,520
Speaker 1: of information about what people are doing over the internet.

672
00:39:04,400 --> 00:39:06,520
Speaker 1: At the same time, you give entrepreneurs a lot of

673
00:39:06,560 --> 00:39:09,520
Speaker 1: room to swing, so that may end up being a

674
00:39:09,560 --> 00:39:15,279
Speaker 1: marriage of interests. David, help me here with productivity. You've

675
00:39:15,320 --> 00:39:17,680
Speaker 1: been a great synthesis, and of course we focused on

676
00:39:17,800 --> 00:39:21,879
Speaker 1: Asia with you so much. But help me with your

677
00:39:22,000 --> 00:39:27,640
Speaker 1: thoughts on whether our productivity challenge now is demand based

678
00:39:27,840 --> 00:39:31,480
Speaker 1: or supply Basedis has been a great distinction. Well, I

679
00:39:31,560 --> 00:39:35,120
Speaker 1: think there are two things going on. There's been an

680
00:39:35,200 --> 00:39:39,640
Speaker 1: enormous shift in employment away from high productivity to low

681
00:39:39,680 --> 00:39:44,040
Speaker 1: productivity sectors. We lose manufacturing jobs, we gained fast food

682
00:39:44,040 --> 00:39:48,479
Speaker 1: and healthcare jobs, which are low paid, low productivity service jobs.

683
00:39:48,480 --> 00:39:51,200
Speaker 1: So a great deal of the productivity decline we've seen

684
00:39:51,680 --> 00:39:54,960
Speaker 1: in the past dozen years a growth rate decline, is

685
00:39:55,160 --> 00:39:57,080
Speaker 1: simply good to the fact that we have a shift

686
00:39:57,120 --> 00:40:00,799
Speaker 1: in composition of the workforce. The secon an important thing

687
00:40:00,960 --> 00:40:05,520
Speaker 1: is that we have a client in capital investment. UH.

688
00:40:05,960 --> 00:40:09,839
Speaker 1: Capital investment uh measured, but you know they're not by

689
00:40:09,840 --> 00:40:13,440
Speaker 1: a number of measures, hasn't even reached the two thousand

690
00:40:13,560 --> 00:40:18,680
Speaker 1: seven peak, much less peak at the height of the

691
00:40:19,480 --> 00:40:22,960
Speaker 1: telecom and and inter that bubble. So if we have

692
00:40:23,040 --> 00:40:26,440
Speaker 1: less capital investment and we have a shift in composition

693
00:40:26,480 --> 00:40:30,960
Speaker 1: to the labor force towards lower productivity activities, tom of

694
00:40:31,000 --> 00:40:33,839
Speaker 1: course we're going to have declining productivity. I don't think

695
00:40:33,840 --> 00:40:38,000
Speaker 1: there's a mystery here. We certainly heard that yesterday Michael

696
00:40:38,040 --> 00:40:44,120
Speaker 1: McKey from Dominic Constant as well. Lack of mystery involved. Well,

697
00:40:44,440 --> 00:40:49,480
Speaker 1: you know, the question is what will drive additional productivity

698
00:40:49,480 --> 00:40:54,280
Speaker 1: because businesses aren't um seeing a way, seeing a reason

699
00:40:54,360 --> 00:40:59,040
Speaker 1: to invest that will significantly change things. Well, I think

700
00:40:59,800 --> 00:41:05,719
Speaker 1: you have. You've had a business unfriendly environment coming from Washington,

701
00:41:05,880 --> 00:41:11,160
Speaker 1: and you have dropped the most monopolized, carnalized economy that

702
00:41:11,200 --> 00:41:13,640
Speaker 1: the United States has had since the post World War

703
00:41:13,680 --> 00:41:18,000
Speaker 1: two period. Virtually all the employment growth under the Obama

704
00:41:18,000 --> 00:41:22,160
Speaker 1: administration has occurred with the S and P. There's been

705
00:41:22,640 --> 00:41:26,080
Speaker 1: very little job growth from small businesses and startups, and

706
00:41:26,200 --> 00:41:31,719
Speaker 1: that's a gigantic reversal from any previous economic recovery. It's

707
00:41:31,719 --> 00:41:34,120
Speaker 1: always been the startups that create the productivity, that do

708
00:41:34,239 --> 00:41:38,640
Speaker 1: the innovating, and startups are the major force in the

709
00:41:38,680 --> 00:41:42,920
Speaker 1: economy that's been absent in this recovery. David Goldbin, thank

710
00:41:42,960 --> 00:41:46,920
Speaker 1: you so much. The Asian Times greatly appreciated, always thoughtful

711
00:41:46,920 --> 00:41:51,880
Speaker 1: and asia. The linkage of markets into economics is Michael,

712
00:41:51,920 --> 00:41:56,520
Speaker 1: I'm fascinated by this idea of an innovation transfer to China.

713
00:41:57,280 --> 00:42:00,120
Speaker 1: I'm not qualified even a Pineapper for a se it,

714
00:42:00,239 --> 00:42:03,640
Speaker 1: but I just don't understand how you do entrepreneurial spirit

715
00:42:04,360 --> 00:42:07,359
Speaker 1: within their government system. Well, that's a question a lot

716
00:42:07,400 --> 00:42:10,239
Speaker 1: of people have asked, because it requires a level of

717
00:42:10,280 --> 00:42:12,480
Speaker 1: freedom that's so far they haven't granted. And I go

718
00:42:12,520 --> 00:42:14,799
Speaker 1: back to Bob Hormatson when he's said years ago in

719
00:42:14,880 --> 00:42:19,359
Speaker 1: a book, expect the unexpected about China. Maybe that's what

720
00:42:19,400 --> 00:42:22,040
Speaker 1: we'll see as well. Right now we expect the data

721
00:42:22,120 --> 00:42:25,160
Speaker 1: check which you need. Futures up nine down, futures up

722
00:42:25,200 --> 00:42:27,799
Speaker 1: seventy nine. It has been a four day churn in

723
00:42:27,880 --> 00:42:31,759
Speaker 1: the markets. Brent crude forty point three six. What a

724
00:42:31,800 --> 00:42:34,839
Speaker 1: debate on whether oil we've had over the last two

725
00:42:34,960 --> 00:42:39,040
Speaker 1: or three days on the show. Stephen Short to join

726
00:42:39,160 --> 00:42:42,120
Speaker 1: us here at some point, looking forward to that. Yeah,

727
00:42:43,239 --> 00:42:48,000
Speaker 1: seven stronger, Yet another hour with you. Bloomberg Surveillance