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Speaker 1: This is Bloomberg Surveillance. I think one of the challenges

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Speaker 1: has been that the Fed and other central banks want inflation,

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Speaker 1: that they don't want too much inflation. What's holding us

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Speaker 1: back at home is not what we're spending on national security.

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Speaker 1: It's what we're not doing domestically. The lack of a creative,

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Speaker 1: fistical response two years on acceptably low growth is the

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Speaker 1: real story here. Bloomberg Surveillance your link to the world

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Speaker 1: of economics, finance, and investment on Bloomberg Radio Morning Everyone,

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Speaker 1: Bloomberg Surveillance, Tom keene and Michael mckeeth thrilled youer with

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Speaker 1: us this morning worldwide. Of course, the President in Japan

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Speaker 1: his press conference earlier was really quite something. A wide

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Speaker 1: ranging press conference. Are to lose an Aripa talking to

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Speaker 1: the President about the Clinton emails. There were questions on

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Speaker 1: his visit to Roschama tomorrow as well worldwide. In coast

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Speaker 1: to coast, Bloomberg Surveillance brought you by Investco. Investco believes

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Speaker 1: it is time to say goodbye to the traditional stock

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Speaker 1: by allocations say hello to alternatives as a court part

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Speaker 1: the modern portfolios. Learning more at invesco dot com, slash

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Speaker 1: Alts James Bullard of St. Louis usually speaking with our

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Speaker 1: Michael McKee. He's in Singapore and he's making some really

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Speaker 1: interesting and tangible headlines. He talks about the dot plot.

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Speaker 1: He says the FED could have avoided the mess by

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Speaker 1: not guiding with the dot plot. Jim Buller says the

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Speaker 1: f O m C got a little burned with the

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Speaker 1: dot plot in December. In January for the summer, Diane

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Speaker 1: Swans getting a dot plot in her left arm. She

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Speaker 1: joins the ds economic Chicago, Liven and Color here in

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Speaker 1: New York. How silly is the dot plots? Dump the

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Speaker 1: dots the dots. There was an intent behind him, and

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Speaker 1: you know my friend Charlie Ovans, he was part of that.

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Speaker 1: He believed in the dots. The problem is they got

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Speaker 1: used to hate to use the word. People confuse what

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Speaker 1: politics and the FED are versus politics outside of the

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Speaker 1: head in Washington, but it was used for people to

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Speaker 1: put extreme views. Remember in December, Cocola Coota was leaving

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Speaker 1: UM from the Minneapolis FED, and you know here they

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Speaker 1: went ahead and UM raised rates for the first time

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Speaker 1: in December. Yet there was a negative interest rate on

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Speaker 1: that dot plot. It was kind of confusing who put

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Speaker 1: a negative interest rate all of a sudden on the

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Speaker 1: dot plot. It got to be so that people who

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Speaker 1: had extreme views could express their extreme views rather than

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Speaker 1: really say where the consensus of the FED was. What

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Speaker 1: is great about swank economics is you're ecumenical. I never

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Speaker 1: get the sense that you've got an angle or a

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Speaker 1: political angle. How philosophically divided is this Fed? But when

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Speaker 1: the traditional bounds freshwater, salt water, Great Lakes economics Georgia

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Speaker 1: School of timber Lake and Robert mcterial, what's what's the

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Speaker 1: politics of the Federal Actually, you know, I think they're more.

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Speaker 1: There wasn't some very deep division is I think now

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Speaker 1: they're more in Unison, and I think it's wrong to

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Speaker 1: talk about hawks and doves. I do think it was

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Speaker 1: interesting that hearkened Um said said he was an eagle

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Speaker 1: out of the Philly FED. The bottom line is they're

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Speaker 1: now flocking together, singing in Unison after all this dissonance.

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Speaker 1: And what we're seeing is everyone is concerned within the

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Speaker 1: Federal Reserve that the markets got it wrong. Now, let's

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Speaker 1: face that the markets have been more right than the

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Speaker 1: fet is on their own dot plots. Um, But What

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Speaker 1: they're worried about is the markets. As Jim Bullard said,

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Speaker 1: no normal um, no normalization. The markets are not pricing

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Speaker 1: in enough of great hikes over the next up. We

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Speaker 1: have a we have a thing that we do in

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Speaker 1: America where we look at the dynamics of say, income

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Speaker 1: statement economics, and we avoid the old world of balance

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Speaker 1: sheet economics. Is this a FED ignorant of the need

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Speaker 1: to clear markets. I don't think they're ignorant. I think

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Speaker 1: the fet is what we've seen is the transparency that

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Speaker 1: we've seen out there has really been as I've talked

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Speaker 1: about before, We've seen the sausage being made, and we

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Speaker 1: don't like the blood. We don't like seeing all we

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Speaker 1: don't want to be. We don't need in the back

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Speaker 1: of the kitchen of a great restaurant. That's what we're

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Speaker 1: seeing today, and now I think the FED is trying

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Speaker 1: to rein it in a little bit. What's interesting is

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Speaker 1: it really is not easy to corral these cats, and

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Speaker 1: the fact that they're all starting to sing in unison

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Speaker 1: means there actually is a consensus building and it's not

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Speaker 1: as divided as it once was. Now, what does that

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Speaker 1: mean for the next grade hike? They can divide real

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Speaker 1: quickly again because there is a difference on how much

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Speaker 1: within the Fed, how much overshooting and inflation do we

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Speaker 1: allow um Stan Fisher vice cho the FED really wouldn't

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Speaker 1: like to see any overshooting where Cherry Yelling and hers

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Speaker 1: is the largest vote. Once over, another Jim Bullard headline,

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Speaker 1: he wades into the Brexit debate. This is important again,

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Speaker 1: Brexit isn't global financial event. It's seen as being. Jim

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Speaker 1: Bullard was some some real pushback to the consensus and

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Speaker 1: the belief right now whether it's global headwinds or not.

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Speaker 1: Give us some measurement right now of Cherry Yelling's attention

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Speaker 1: on international econ well, she revealed her hand when she

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Speaker 1: talked about China um and you saw this sort of

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Speaker 1: debbish um speech by yellin she's speaking again on June six.

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Speaker 1: That's going to be a pivotal point because that's after

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Speaker 1: the jobs report, after the Job's report, but really right

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Speaker 1: before the blackout period. So this is her chance to

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Speaker 1: put in we've heard this unison, the shift towards rate

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Speaker 1: hikes in June or July. UM At the end of

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Speaker 1: the day, it's Cherry Allen's vote that matters the most,

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Speaker 1: and that will be the deciding factor. But it is

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Speaker 1: interesting as Leo Brainard, who's Photo Reserve governor, she's really

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Speaker 1: brought into the equation much more of the international and

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Speaker 1: it really is something that has been a criticism of

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Speaker 1: the FED, and I think they're trying to grapple with

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Speaker 1: it now. Is how do you have a mandate on

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Speaker 1: the domestic economy and then say, you know, the international

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Speaker 1: world matters, but it doesn't. It does, okay, But to

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Speaker 1: the domestic economy, we have inflation and we all know

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Speaker 1: those vectors, but we're nowhere overshooting them. We're still undershooting.

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Speaker 1: And that's the point. And so you know, I think

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Speaker 1: the important part for the FED too is that you know,

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Speaker 1: they're starting to get to the point where they really lies.

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Speaker 1: You know, there is no Las Vegas in the world.

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Speaker 1: What happens abroad comes back to us. There is no

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Speaker 1: place where it just stays there. Um. I don't know

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Speaker 1: the Las Vegas days there either, But that's that's the

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Speaker 1: important point, is what happens abroad matters, and we have

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Speaker 1: to think about how those waves show up on our

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Speaker 1: own shore and how high those waves are. So far,

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Speaker 1: we've been able The good news is if our domestic

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Speaker 1: economy can weather it, that's good. Um, there's some things

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Speaker 1: that you just have to punt on. It mean, if

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Speaker 1: China melts down, and I think they're seeing a financial

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Speaker 1: crisis in China down the road, I think that would

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Speaker 1: be one of the greatest challenges. Well. The other great

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Speaker 1: thing about swank economics with your bank one days and

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Speaker 1: working with James Diamond in another lifetime and the idea

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Speaker 1: of what you did at Mezzo now at DS Economics

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Speaker 1: is this real understanding of two America's. There's a huge

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Speaker 1: body of America. I mean, is is cher Yelling managing

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Speaker 1: the FED for a gilded age in a plutocracy. She

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Speaker 1: would say no, no, I would argue, you know, And

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Speaker 1: this is where she's really gotten a bad rap. I mean,

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Speaker 1: you know, I think she felt really sideswiped, and we

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Speaker 1: saw the shellack and she took in Congress when she

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Speaker 1: did the Humphrey Hawke what was used to the Humphrey Hawkins.

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Speaker 1: She is someone who has really lived the nineteen The

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Speaker 1: difference between her and stand Fishers Yelling saw the nineteen nineties.

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Speaker 1: She sees an opportunity to overshoot on unemployment and re

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Speaker 1: engage workers, which is beginning to happen that have been sidelined,

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Speaker 1: that people thought there's skills at after feed, they'll never

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Speaker 1: work again. She sees an opportunity to overshoot, and she

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Speaker 1: remembers when all you needed to get a job with

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Speaker 1: a false and she wants to get to some of

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Speaker 1: that with some wage acceleration. And she's been disappointed that

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Speaker 1: we've not seen more of it, but she has been proven. Right. Then,

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Speaker 1: where are you on the unemployment right, Dean Mackie At

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Speaker 1: point seven two x Barclays takes the vector all the

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Speaker 1: way down to four point two, four point one, even

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Speaker 1: four point zero unemployment. It is it is beyond thinking

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Speaker 1: that we could get Jim Bullard's no normalization or slow

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Speaker 1: normalization with a vector moving to four percent unemployment. Well,

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Speaker 1: not necessarily, I mean, depends on how fast the Fed moves.

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Speaker 1: I think, you know, the issue is how much labor

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Speaker 1: force participation do we get. I don't think I don't

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Speaker 1: think we're at the full employment tipping point that some

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Speaker 1: people think we are. We are having age acceleration, we're

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Speaker 1: having some traction, but a lot of us coming from

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Speaker 1: minimum wages at the state and local level being raised,

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Speaker 1: and that's starting to finally hit a tipping point. It's

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Speaker 1: coming from We are seeing entry level new college grads

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Speaker 1: finally seeing it. But what we're not seeing it is

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Speaker 1: jen X, which is this smaller population that was These

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Speaker 1: are people in their thirties and forties. They are the

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Speaker 1: ones who we saw the reduction participation rate, We saw

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Speaker 1: a reduction homeownership. That's where the sweet spot of people's

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Speaker 1: earning potential is. And if they're not seeing acceleration, you

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Speaker 1: don't get as much attraction. But this is a social question.

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Speaker 1: Now can those kids to us their kids? Can those

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Speaker 1: kids that's revealing our age, I'm revealing my age. Can

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Speaker 1: those kids get back to normal with the new terminal

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Speaker 1: rate of g d P? I would suggest they can't.

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Speaker 1: UM Well, Interestingly, I you know, Larry Somers has an

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Speaker 1: interesting chart that he tweeted and I had to retweet

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Speaker 1: it out. He shows that, UM, the Great Depression had

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Speaker 1: this big V shape. But if you if you index

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Speaker 1: both the Great Depression and the Great Recession with the

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Speaker 1: growth rates we have projected, you end up at the

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Speaker 1: same end point in that you do, right, So it's

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Speaker 1: still not this subpar growth has eroded things, and it

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Speaker 1: mass growth and its aggregate has massed the great inequalities,

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Speaker 1: and that's why we're seeing this anger. I mean, you

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Speaker 1: can look at I mean the frustration that the poles is,

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Speaker 1: you know, the sense of stagnation or a little growth.

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Speaker 1: It's not enough. You know, we need to see more

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Speaker 1: wage games and people who have there are a lot

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Speaker 1: of people have really lost a lot of income. What

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Speaker 1: you run right on GDP twelve months, I'm still you know,

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Speaker 1: unfortunately two percent. Yeah, you know, I'd like to have

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Speaker 1: stronger It's not good enough. We're gonna have a big

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Speaker 1: bounce back in the second quarter and part of that,

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Speaker 1: you know, um seasonal, and we are regaining traction. But

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Speaker 1: the bottom line is, you know, I'd love to be wrong.

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Speaker 1: I want to be wrong. I want to have a

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Speaker 1: stronger economy and I want the BED to have to normalize.

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Speaker 1: Rates pretty good in you a Diane Swank of DS Economics,

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Speaker 1: futures flat, They're up a little more. Earlier yields have

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Speaker 1: come in over the last two days. We got up

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Speaker 1: near point nine three on the two year point nine one.

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Speaker 1: Now it's a movement around nudges without question. The headline

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Speaker 1: this morning is fifty dollar oil West Texas Brent crude

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Speaker 1: fifty dollars eleven cents h barrel I'm watching and the

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Speaker 1: currency markets um euro dollar one eleven seventy nine again

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Speaker 1: pretty much churned there as well. We're gonna come back

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Speaker 1: with Diane Swank and then much more on economics. We're

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Speaker 1: gonna get a really interesting look at Brexit from a

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Speaker 1: gentleman from Scotland that will be uh better than good

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Speaker 1: here in this hour as well. Gold twelve thirty one

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Speaker 1: announce gets a nice bounce off the level that we

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Speaker 1: saw yesterday. This hour surveillance brought to by west Chester

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Speaker 1: suber Up. Visit west Chester subar dot com. Here's Michael

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Speaker 1: Barr with news headline, Tom, thank you very much. President

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Speaker 1: Barack Obama says world leaders are rattled by Donald Trump.

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Speaker 1: President Obama mentioned Trump at the news conference today in

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Speaker 1: Japan after attending the first working session of the G

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Speaker 1: seven summit. The president says many of Trump's proposals display

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Speaker 1: ignorance about world affairs, cavalier attitude, or an interest in

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Speaker 1: getting tweets and headlines. Meanwhile, Donald Trump will give an

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Speaker 1: energy policy speech today in North Dakota. No reports of

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Speaker 1: injuries or fatalities after a large tornado tour through northern

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Speaker 1: Kansas last night. The twister was on the ground for

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Speaker 1: about ninety minutes. Global News twenty four hours a day,

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Speaker 1: powered by our twenty four hundred journalists more than a

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Speaker 1: hundred fifty news bureaus around the world. I'm Michael Barr,

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Speaker 1: Mike Tom, Thank you, Michael Well. Measures of financial stress

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Speaker 1: that was Jim Bullard's focus this morning. They have eased

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Speaker 1: and it looks that way in the markets, with the

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Speaker 1: dollar index lower and bonds flat. This morning, the tenure

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Speaker 1: no deal one point eight seven percent. This is Bloomberg

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Speaker 1: Radio Worldwide. Bloomberg s Avalance is brought to by New

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Speaker 1: if Bloomberg dot Com, the radio plus mobile app and

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Speaker 1: on your radio. This is a Broomberg business flash and

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Speaker 1: I'm Para in Moscow. Sears Holdings, the unprofitable department store

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Speaker 1: company controlled by hedge fund manager Edward Lamport. Edward Lampard

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Speaker 1: plans to consider options for it's Ken, Moore, Craftsman and

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Speaker 1: die Hard brands, as well as it's Sears home service

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Speaker 1: repair business. Frank Crude, rising above fifty dollars a barrel

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Speaker 1: for the first time in more than six months, is

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Speaker 1: at decline in US stockpiles accelerated a rebound from a

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Speaker 1: twelve year low. Brent is up eight ten per cent

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Speaker 1: or forty one cents at fifty dollars fifteen cents a barrel,

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Speaker 1: while nine X crude oil is up seven tenths per

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Speaker 1: cent or thirty one cents to eight seven U stock

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Speaker 1: indise future is also higher. SNP EMNY futures up two

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Speaker 1: points now, e Many futures up twenty nine, NASA documny

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Speaker 1: futures up six That acts in Germany's up four tenths

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Speaker 1: per cent ten. Your treasury little change yield one point

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Speaker 1: eight six percent. Call my school is up half per

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Speaker 1: cent or five dollars eighty cents to twelve thirty two

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Speaker 1: forty announced the euro a dollar eleven eighty three again

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Speaker 1: one oh nine point nine nine. That's a bloomberg business flash.

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Speaker 1: Tom and Mike Karen, thanks so much, greatly appreciated. Fixed

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Speaker 1: trading thirteen point eight nine in the equity market, A

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Speaker 1: good feel to the market. One are the great advantages

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Speaker 1: of slogging my way through Bloomberg surveillance every morning? Is

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Speaker 1: Michael McKee has talked to every FED president fourteen times.

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Speaker 1: I mean, maybe, excuse me, mix. San Francisco is a

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Speaker 1: long ways away. It's only twelve times. They're Jim Bullard speaking.

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Speaker 1: But Mike put it in only the context you can

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Speaker 1: put it in. Is it a redux the previous moments

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Speaker 1: or is there something original to his comments in Singapore?

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Speaker 1: Nothing particularly original. He rearranged some of the paragraphs the

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Speaker 1: same speech that he gave in Beijing on Monday, uncharacteristically

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Speaker 1: neutral for him, perhaps because he's speaking to an overseas audience.

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Speaker 1: But if you read between the lines, he's outlining the

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Speaker 1: reasons why the Fed feels that it can go ahead

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Speaker 1: and raise rates. The labor markets are strong, inflation is rising,

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Speaker 1: and particularly international headwinds have died down. You're all right

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Speaker 1: over there replaying the Sharks. Rachel, Sharks did well. Rachel

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Speaker 1: Worstpan told me that the only reason Diane Swak agree

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Speaker 1: to appear today is because the White Sox and the

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Speaker 1: Cubs are in the first place, then that makes them all.

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Speaker 1: It makes Chicagoans even more crazy, you know, because then

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Speaker 1: it's like civil war. Have you ever gone, like in

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Speaker 1: a weekend to both parks? That is so cool. I

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Speaker 1: have gone to both parks, not on the same weekend.

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Speaker 1: I've done to day that is yeah, Cobbe doubleheader and

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Speaker 1: you know they played a lot of day games in

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Speaker 1: White Sox Nightcap. Get the name bringing her steam goest

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Speaker 1: Michael Well, of course. Dann Swawka is a long time

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Speaker 1: member of the Extended Surveillance family. She now learns her

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Speaker 1: own firm dancewalking associates in what town is it? Chica?

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Speaker 1: And I note you and Tom we're talking about the

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Speaker 1: fact that you are from multiple zip codes away from here. Uh,

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Speaker 1: the markets and um, the folks on Wall Street tend

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Speaker 1: to have a fairly pessimistic outlook about how things are going.

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Speaker 1: And people in Washington, to hear them tell it, Hell

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Speaker 1: in a handbasket is probably an optimistic view. But they're

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Speaker 1: running for office, so they have to say things are terrible.

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Speaker 1: But what does it look like in the real America?

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Speaker 1: You know? Um, it depends on who you are, right

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Speaker 1: and where you live. It isn't. Um. Chicago is now

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Speaker 1: one of the most segregated cities in the country. We

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Speaker 1: have UM neighborhoods that are on par with Sam Paulo

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Speaker 1: in terms of violence and poverty, which is really sad

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Speaker 1: and UM a troubling issue. So we're seeing things where

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Speaker 1: at the cutting edge in Illinois of much of what

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Speaker 1: the country has to deal with going forward, and that

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Speaker 1: is everything from income inequalities, the race issues, to the

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Speaker 1: budget issues. I mean, Illinois is you want a munch

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Speaker 1: on your Greek yogurt while you're there? Um, it really

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Speaker 1: has some severe financial problems as well. That said, there

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Speaker 1: are some really interesting things happening where we're getting a

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Speaker 1: lot of headquarters in the city. Some of the headquarters

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Speaker 1: I split them into two categories. We've got headquarters that

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Speaker 1: are moving from the suburbs and downsizing and moving into

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Speaker 1: the city and UM trading baby boomers are retiring out

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Speaker 1: for younger talented millennials and so you're getting some affluence there. UM,

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Speaker 1: but they're downsizing. Well that's the question. Yeah, you can

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Speaker 1: have headquarters and that's ceo s and they make seven

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Speaker 1: figure paychecks, but what about for the average guy O

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Speaker 1: our jobs being created, didn't and are those jobs starting

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Speaker 1: to pay more in the Midwest. Well, you know, it

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Speaker 1: depends on where you are. Now, we have also a

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Speaker 1: tech sector. We've got Google, We've got a lot of

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Speaker 1: startups that are that are on the tech side of it,

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Speaker 1: that are growing rapidly and paying well. So we do

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Speaker 1: have that side of it. There's sort of that Silicon

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Speaker 1: Prairie thing um going and we're cheaper than clearly you

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Speaker 1: know in San Francisco, um. But and we do have

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Speaker 1: a lot of universities and institutions to tap into. So

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Speaker 1: there is that positive side of it. But there's a

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Speaker 1: real divide in terms of the corporate headquarters in Chicago.

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Speaker 1: Ones that reflect restructuring and are just bringing just the

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Speaker 1: affluent in a very small group of people into Chicago,

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Speaker 1: although it's good for Chicago because they need that. And

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Speaker 1: then there's the ones that are more the growing and

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Speaker 1: the vibrant pie side of the economy. And you know,

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Speaker 1: at the same time, Chicago's had the overshadowing of the

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Speaker 1: steel industry has gone bus We now have steel tariffs

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Speaker 1: coming in. The steel industry was linked very closely to

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Speaker 1: the shale boom. Also, the rail industry very closely linked

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Speaker 1: to the shale boom. Trucking very closely linked to the

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Speaker 1: shie boom. So we've had some of the residual effects

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Speaker 1: on the downside of oil, even though it used to

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Speaker 1: be that lower oil prices were huge positive for US.

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Speaker 1: I know Tom has has probably asked you this, but

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Speaker 1: I gotta follow up it. Say, is then Illinois fertile

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Speaker 1: ground and Wisconsin because you're only a few miles from there. Uh,

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Speaker 1: fertile ground for a populist challenger for the presidency who

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Speaker 1: may not have any economic plans but has the message

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Speaker 1: of anger. Um. I think Michigan is more fertile ground

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Speaker 1: since I'm from Michigan. I mean remember the Michigan Militia.

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Speaker 1: They trained Timothy McVeigh and UM, I watched the whole

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Speaker 1: Um what happened, Um as union workers joined the military

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Speaker 1: and then we're taken out the military and they started

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Speaker 1: doing war games and in the woods. Um, Michigan I

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Speaker 1: think is more at risk. UM, talking to my friends

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Speaker 1: that are political handicappers in Midwest is where this battle

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Speaker 1: is going to be fought out. And you know Illinois

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Speaker 1: has a lot of anger as well. But um, it's

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Speaker 1: a there is a difference that you've got the minority

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Speaker 1: anger because there's neighborhoods that have been very isolated, and

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Speaker 1: the blue collar anger is a little different equation. Um,

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Speaker 1: the unions are still pretty strong in Illinois, Tom I

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Speaker 1: I would suggest that perhaps the turning point for the

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Speaker 1: election may be found in who plays in the World

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Speaker 1: Series come October. If you get the Cubs and the

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Speaker 1: White Sox, that would be in such a good mood. Yes,

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Speaker 1: but I've been listening to you guys go on about this,

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Speaker 1: and I think Diana, it's a huge value to have

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Speaker 1: you on about this. What how do you speak to

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Speaker 1: the independence in the Rust belt States? What what is

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Speaker 1: your prescription for finding residents with those We're gonna have

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Speaker 1: to We're gonna have to leave her, We're gonna have

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Speaker 1: to continue this conversation with Diane Swak would just simply

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Speaker 1: run out of the can sit and conversation. Well there

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Speaker 1: it is, UM a lot going on. Let me get

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Speaker 1: over to my data screen. Here futures up to down

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Speaker 1: features of twenty nine from New York Bloomberg's surveillance. Bloomberg

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Speaker 1: Surveillance brought to by Bank of America Merrilynch seeing what

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Speaker 1: others have seen, but uncovering what others may not. Global

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Speaker 1: research that helps you harness disruption. Go to top global

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Speaker 1: research firm five years running, Marylynch, Pierce, Fentner and Smith

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Speaker 1: can incorporate