WEBVTT - Gross Says Weak Jobs Data Won't Stay Fed on Rates 0:00:00.240 --> 0:00:04.040 Runt You by Bank of America Mary Lynch with virtual reality, 0:00:04.320 --> 0:00:09.719 virtually everything will change. Discover opportunities in a transforming world. 0:00:10.119 --> 0:00:14.440 Be of a mL dot Com, slash VR, Mary Lynch, 0:00:14.520 --> 0:00:28.120 Pierced Fenner and Smith Incorporated. Ye. Welcome to the Bloomberg 0:00:28.160 --> 0:00:32.360 Surveillance Podcast. I'm Tom Keene with David Gura. Daily we 0:00:32.440 --> 0:00:36.080 bring you insight from the best of economics, finance, investment, 0:00:36.120 --> 0:00:42.200 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:42.280 --> 0:00:50.640 Bloomberg dot Com, and of course on the Bloomberg David Gurral, 0:00:50.640 --> 0:00:52.320 why don't you bring it into a steam guest? Yeah, 0:00:52.360 --> 0:00:55.040 Jeffrey Sax with this university Professor at Columbia University, author 0:00:55.080 --> 0:00:57.680 of building the New American Economy, Smart, fair, and Sustainable. 0:00:57.760 --> 0:00:59.960 Julia Cornado joining us as well in our Bloomberg and 0:01:00.040 --> 0:01:03.400 v in three studios, Founder and president of Macro Policy Perspective. 0:01:03.760 --> 0:01:06.480 Let me start with with you as we await the 0:01:06.520 --> 0:01:09.840 job support here at thirty Uh, will the Fed ever 0:01:09.920 --> 0:01:11.800 declare that we've reached full employment? Is that something that 0:01:11.880 --> 0:01:14.200 just a specter looming in the in the background? What 0:01:14.000 --> 0:01:16.600 what is the Fed waiting for? Well, they're not waiting. 0:01:16.600 --> 0:01:19.319 I mean they're they're raising rates. They have basically said 0:01:19.360 --> 0:01:21.680 on the on the employment side of the mandate there 0:01:21.720 --> 0:01:24.319 there there may be a little bit more slack is 0:01:24.360 --> 0:01:28.000 their assessment. But um, they have kind of declared victory 0:01:28.120 --> 0:01:30.880 on the employment mandate. Now it's the inflation side of 0:01:30.920 --> 0:01:34.800 their mandate that's still falling short. But they are raising rates, 0:01:34.800 --> 0:01:36.800 and they are going to put in a balance sheet 0:01:36.800 --> 0:01:40.959 reduction plan it seems later this year. So they are 0:01:41.040 --> 0:01:45.520 moving forward with policy tightening ever so slowly, but surely 0:01:45.720 --> 0:01:48.120 how tenuous the position are they in right now? Look 0:01:48.160 --> 0:01:50.440 looking at the jobs market where it is, and as 0:01:50.480 --> 0:01:53.480 you say, worried about the other other half of the mandate, Well, 0:01:53.520 --> 0:01:56.440 I think the job situation is probably the least of 0:01:56.480 --> 0:01:59.240 their worries, uh, in a lot of senses. I mean, 0:01:59.280 --> 0:02:02.800 assessing the outlook with so much uncertainty and the risks 0:02:02.840 --> 0:02:05.440 to it is is a very difficult job. And again 0:02:05.480 --> 0:02:08.880 the the inflation side, things have been going in the 0:02:08.919 --> 0:02:15.000 wrong direction lately, both headline inflation, commodity prices falling, core 0:02:15.080 --> 0:02:18.920 inflation giving up a good quarter point of progress, wage 0:02:18.919 --> 0:02:25.560 growth lagging behind inflation expectations really sort of getting anchored 0:02:25.560 --> 0:02:28.880 at a lower level so, uh, it really looks like 0:02:28.919 --> 0:02:33.520 they'll struggle. They've emphasized the symmetry of their inflation target lately, 0:02:34.080 --> 0:02:37.520 but uh, they can't even really get to two. So 0:02:37.720 --> 0:02:39.960 I think that's where the worries lie for them. Jeffrey 0:02:39.960 --> 0:02:43.680 Sacks will dive past the headline into the greater detail 0:02:43.720 --> 0:02:45.720 of this job support this when we look at manufacturing 0:02:46.240 --> 0:02:49.560 this administration. Others have talked about manufacturing in the US. 0:02:49.600 --> 0:02:52.560 We were talking about innovation and manufacturing a few moments ago. 0:02:52.760 --> 0:02:54.320 Where is that going to come from? Where is the 0:02:54.480 --> 0:02:58.160 the impulse for innovation, the the the training to do 0:02:58.240 --> 0:03:00.200 new manufacturing going to come from. Is that to be 0:03:00.240 --> 0:03:03.160 something pioneered by companies going forward, or is that something 0:03:03.200 --> 0:03:07.639 that is in the providence of the government. First of all, 0:03:07.760 --> 0:03:13.680 innovation comes from a combination of academia, government and business. 0:03:14.200 --> 0:03:17.960 And that's the rich model. We call it the innovation system. 0:03:18.080 --> 0:03:22.079 And that was the vision vanever Bush right after World 0:03:22.080 --> 0:03:24.680 War Two, that we would build a science and tech 0:03:24.720 --> 0:03:30.040 based economy through the interactions of the government, academia, and 0:03:30.040 --> 0:03:33.440 and business. And it works great, and our manufacturing sector 0:03:33.560 --> 0:03:39.640 is incredibly dynamic technologically, but the technologies of today in 0:03:39.720 --> 0:03:44.920 the future are eliminating jobs, not creating jobs on the whole. 0:03:45.080 --> 0:03:49.480 And this is quite real phenomenon. There's nothing special about 0:03:49.520 --> 0:03:53.640 it or paradoxical about it. We are in a job 0:03:54.080 --> 0:03:58.640 saving technology mode because the machines are getting smarter and 0:03:58.640 --> 0:04:02.320 smarter and able to replace what people do, so manufacturing 0:04:02.440 --> 0:04:05.840 is healthy. Jobs is another matter. That's why the wages 0:04:05.880 --> 0:04:09.520 are going down for more and more of the labor force. 0:04:09.640 --> 0:04:13.080 And the winners of this are the equity owners because 0:04:13.520 --> 0:04:17.080 the whole national income has shifted towards capital. Should we 0:04:17.120 --> 0:04:20.800 wax historical here, Julia? I mean I think you should 0:04:20.800 --> 0:04:27.159 wax historical. Let's talk about young sacks thirty five years ago. Comment. 0:04:27.480 --> 0:04:32.200 Try to remember the employment real wage relationship. You were 0:04:32.279 --> 0:04:35.279 thinking about this when you started out. This is after 0:04:35.360 --> 0:04:38.480 Kotlikoff and Lemur, and that this is the employment real 0:04:38.560 --> 0:04:43.039 wage relationship. Are we a guilded age now like we 0:04:43.040 --> 0:04:46.240 were a guilded age back then. It's interesting. I have 0:04:46.320 --> 0:04:50.599 been thinking about how technological change or oil price shocks 0:04:50.880 --> 0:04:54.120 affects the demand for labor and writing about that for 0:04:54.360 --> 0:04:58.520 oh my word, almost four decades. But the fact is 0:04:58.600 --> 0:05:03.080 that the whole uh machine age, which is not just 0:05:03.320 --> 0:05:07.120 now but goes back to the nineteenth century, has been 0:05:07.160 --> 0:05:11.000 replacing lower skilled work. And that's why to keep ahead, 0:05:11.560 --> 0:05:14.920 we have what Larry Katz and Claudia Golden of Harvard 0:05:14.960 --> 0:05:18.720 is famously called the race between technology and education. Now 0:05:18.760 --> 0:05:22.200 technology is winning that race, meaning that more and more 0:05:22.240 --> 0:05:26.280 of our population is not able to keep up with 0:05:26.320 --> 0:05:30.200 the machines. This doesn't mean that as a whole we're 0:05:30.240 --> 0:05:34.520 losing from technological innovation. The winners are Larry Page and 0:05:34.600 --> 0:05:38.839 Sergey Brinn and Tim Cook and UH and Bill Gates, 0:05:39.240 --> 0:05:41.839 and we have and Jeff Bezos. We have more money 0:05:41.880 --> 0:05:45.440 at the top than ever. We have a larger economy 0:05:45.480 --> 0:05:49.240 than ever. We have a dollar economy, but the labor 0:05:49.279 --> 0:05:51.880 share of national income has been falling. You've got to 0:05:51.880 --> 0:05:56.160 get off an airplane, polluting, destroying hydrocarbon airplane. Get off 0:05:56.200 --> 0:05:58.920 the airplane and comeback. Jeff says, thank you so much, 0:05:59.560 --> 0:06:02.440 really really helpful. They thank you, folks for your many comments. 0:06:02.880 --> 0:06:17.800 Mr Sachs's appearance, We welcome on Bloomberg Radio and Bloomberg 0:06:17.880 --> 0:06:22.159 Television worldwide from Janice Anderson. William Gross joins us as 0:06:22.160 --> 0:06:26.159 he always does after the good analysis of Uh. Jim Glassman. 0:06:26.160 --> 0:06:29.200 It's good to speak to Bill Gross. Bill, I haven't 0:06:29.240 --> 0:06:32.560 done the three months moving average of jobs, but we're 0:06:32.600 --> 0:06:35.400 not getting the job's growth we got ten years ago. 0:06:35.839 --> 0:06:40.000 Is that a surprise? No, I don't think so, certainly, 0:06:40.040 --> 0:06:42.880 not at the levels of unemployment that we're at now, 0:06:43.680 --> 0:06:46.719 not only in terms of you three, but U six. 0:06:46.720 --> 0:06:50.800 I think as an economy matures, and this recovery is 0:06:50.920 --> 0:06:54.160 eight nine, close to ten years in the making. Uh. 0:06:54.200 --> 0:06:56.560 You know, job growth comes down, so I think it's 0:06:56.600 --> 0:06:58.839 to be expected. It's a weaker number than the market 0:06:58.880 --> 0:07:01.360 expected today, but not the less, you know. I think 0:07:01.360 --> 0:07:05.880 it reflects via the work week, via wages, that we're 0:07:05.920 --> 0:07:09.960 on on steam for a two point two percent type 0:07:09.960 --> 0:07:12.920 of real economy going forward, which I mean, not see 0:07:12.920 --> 0:07:14.880 what the market's expecting, but what I think is going 0:07:14.920 --> 0:07:18.200 to happen. Does the tepidness of this the vectors the 0:07:18.320 --> 0:07:21.239 three months to the six month or twelve month job 0:07:22.200 --> 0:07:26.040 formation and also wage growth, does it adjust what chair 0:07:26.160 --> 0:07:32.560 Yelling will confront June. I don't think it changes much. 0:07:32.600 --> 0:07:37.680 I do agree that the chair you know, believes in 0:07:37.920 --> 0:07:40.480 job growth more than anything else, in the the extent 0:07:40.560 --> 0:07:44.440 that it's lower than the market expected, perhaps, but she's 0:07:44.480 --> 0:07:48.200 going in June. I think the Fed tom is for 0:07:48.360 --> 0:07:52.600 clemped to site an old Saturday Night Live skipped phrase. 0:07:52.880 --> 0:07:56.560 You know, it wants inflation higher in the real economy, 0:07:56.600 --> 0:08:00.440 but not necessarily in the financial markets. And so we have, um, 0:08:00.600 --> 0:08:04.280 you know, not dreaded fear, but you know, concern about 0:08:04.600 --> 0:08:08.160 financial bubbles in some areas commercial real estate and and 0:08:08.200 --> 0:08:11.080 so on. And and to be fair, other central banks 0:08:11.080 --> 0:08:14.000 are really pouring on the coal in terms of the 0:08:14.040 --> 0:08:16.480 global economy. The ECB and the b o J by 0:08:16.480 --> 0:08:19.760 the way, tom UH now have balance sheets larger than 0:08:19.800 --> 0:08:22.560 the Fed at four and a half trillion plus each 0:08:22.600 --> 0:08:24.800 of them. And so there's a lot of money coming 0:08:24.840 --> 0:08:27.600 into this global economy. And for the Fed to uh 0:08:27.640 --> 0:08:31.640 you know, join in and stop raising the FED funds 0:08:31.720 --> 0:08:34.480 level or even you know, not address what we have 0:08:34.559 --> 0:08:36.320 in terms of their balance sheet later in the year, 0:08:36.360 --> 0:08:38.760 I think would be a mistake. A little coffee talk 0:08:38.840 --> 0:08:42.120 here with Bill Gross if Jana Centerson here on Jobs Day, Bill, 0:08:42.200 --> 0:08:44.679 let me ask you what happens when the FED begins 0:08:44.760 --> 0:08:46.840 unwinding this balance sheet. What's that going to mean for 0:08:46.840 --> 0:08:51.560 for term premium? Well, it depends on how fast, right 0:08:51.640 --> 0:08:54.199 David um and we're talking about not only treasuries but 0:08:54.320 --> 0:08:57.319 mortgages because they're in that pot too. You know, at 0:08:57.320 --> 0:09:01.440 the moment the forecasts are the private forecasts are for 0:09:01.559 --> 0:09:04.760 like ten to fifteen billion dollars a month, which makes 0:09:04.800 --> 0:09:07.920 an end road in terms of uh, you know, reducing 0:09:07.920 --> 0:09:10.320 the balance sheet, but certainly at a very slow pace. 0:09:10.640 --> 0:09:12.880 I think ultimately a though, to answer your question that 0:09:13.000 --> 0:09:17.280 the term premium for five to ten thirty year treasuries, 0:09:17.320 --> 0:09:20.120 which are a significant part of that balance sheet, you know, 0:09:20.280 --> 0:09:24.800 basically have to has to increase. The term premium is 0:09:25.400 --> 0:09:29.160 uh you know, not only forecast but put into evidence 0:09:29.240 --> 0:09:35.080 by several district fed uh FED reserve banks has suggested 0:09:35.120 --> 0:09:38.360 that seventy five basis points lower, you know, was the 0:09:38.360 --> 0:09:42.400 net net of the four trillion dollar edition that we've seen, 0:09:42.840 --> 0:09:45.360 you know, prior to the past few years. And so 0:09:45.400 --> 0:09:47.360 you would have to expect the term premium to go up. 0:09:47.440 --> 0:09:49.959 Does go back up by seventy five basis points, I 0:09:50.000 --> 0:09:53.080 don't think so, but certainly higher over the short term. 0:09:53.240 --> 0:09:54.880 David Gary pick up the question here. But we got 0:09:54.960 --> 0:09:57.120 to do a data check for radio and television right now, 0:09:57.120 --> 0:10:00.560 because this is really remarkable. Two on the ten ure 0:10:00.640 --> 0:10:03.880 yield the thirty year BONDUS seventeen basis points in from 0:10:03.920 --> 0:10:06.319 three percent. That is a huge deal. And over on 0:10:06.400 --> 0:10:09.439 the cream. Get over here right now in Bloomberg Television 0:10:09.600 --> 0:10:12.280 for those of you in radio, this is a wow statistic. 0:10:12.480 --> 0:10:15.560 Bill Gross is minting money this morning. The two tens 0:10:15.559 --> 0:10:19.280 spread is broken under ninety basis points. Gross may have 0:10:19.320 --> 0:10:23.000 to cancel ther David jumping with Bill Well, I continue 0:10:23.040 --> 0:10:25.160 to look at the spread market. Bill. Let me ask you, 0:10:25.160 --> 0:10:28.880 your global investor. We have seen changes to geopolitics here 0:10:28.880 --> 0:10:30.520 over the last twenty four hours and certainly over the 0:10:30.600 --> 0:10:33.800 last week plus. How does a different role for the 0:10:33.920 --> 0:10:38.800 US in the world to change your outlook and your positioning? See, 0:10:38.840 --> 0:10:41.080 I think it's significant. I don't think the market thinks 0:10:41.080 --> 0:10:46.160 it's significant, because the stocks blew by that news yesterday. 0:10:46.240 --> 0:10:47.760 But you know, let's look at it this way in 0:10:47.840 --> 0:10:50.320 terms of the Paris accord, and uh, you know, our 0:10:50.200 --> 0:10:55.240 our absence, at least in terms of philosophical absence. You know, 0:10:55.880 --> 0:10:59.319 it's destructive from my point of view for equities because 0:10:59.400 --> 0:11:04.040 equitists are long term cash flow dependent. And what we're 0:11:04.120 --> 0:11:07.560 talking about here in terms of global warming going higher 0:11:07.600 --> 0:11:11.160 as the increase in long term liabilities, and so ultimately 0:11:11.280 --> 0:11:15.439 stocks have to be affected by the potential for the 0:11:15.520 --> 0:11:20.360 expense the liability you know, to contain global warming goes 0:11:20.480 --> 0:11:22.880 much higher. Okay, here's the heart amount of cream. Come 0:11:22.880 --> 0:11:25.079 over here again, cream, Come on, I make the rules. 0:11:25.120 --> 0:11:27.960 This chart was to Capitlan of Dallas. This is the 0:11:28.040 --> 0:11:31.480 vector of inflation, and Bill Gross has been dead on that. 0:11:31.559 --> 0:11:35.000 We're not right that the court pc inflation is rolling 0:11:35.120 --> 0:11:38.040 over Bill With this job's report and with the two 0:11:38.040 --> 0:11:41.800 stents spread under ninety beeps, with yields coming in weaker dollar, 0:11:42.160 --> 0:11:46.080 would you say even more so now that inflation is 0:11:46.280 --> 0:11:49.880 just not part of the debate, and that gives Janet 0:11:49.960 --> 0:11:55.000 Yellen cover to lengthen out her path to a normal 0:11:55.200 --> 0:12:02.520 yield policy. Well, I I'm not sure I understood the 0:12:03.640 --> 0:12:05.760 two parts of that question, but I think what it 0:12:05.800 --> 0:12:09.880 does for Janet Yellen is allow her to m you know, 0:12:09.960 --> 0:12:14.040 to to keep the Fed funds level, the neutral, the 0:12:14.080 --> 0:12:16.600 long term neutral Fed funds rate, at a lower level 0:12:16.640 --> 0:12:18.839 than she would have previously. You know, there is a 0:12:19.480 --> 0:12:22.800 contentious debate among the Fed officials as to what our star, 0:12:22.960 --> 0:12:26.400 which is really the real long term uh you know, 0:12:26.480 --> 0:12:29.040 Fed funds right what it is, and at the moment 0:12:29.080 --> 0:12:31.880 it appears that it's less than zero. And I think 0:12:32.000 --> 0:12:35.200 Janet Yellen will keep on keeping on and as long 0:12:35.240 --> 0:12:37.880 as financial markets in some areas of the economy did 0:12:37.880 --> 0:12:42.400 not show bubblish types of characteristics. How are you adjusting 0:12:42.440 --> 0:12:45.320 your portfolio, Janie Henderson, I mean, we have seen a 0:12:45.440 --> 0:12:48.800 bill gross economy over the last two months, I would 0:12:48.800 --> 0:12:52.520 suggest where it's been a little bit disappointing from the enthusiasm. 0:12:52.720 --> 0:12:56.960 How have you ingested your portfolio? Well, let's look at 0:12:57.000 --> 0:12:59.560 it this way. From all asset classes, tom, So we 0:12:59.600 --> 0:13:01.400 know of all futility is low. We know about the 0:13:01.480 --> 0:13:06.120 vix it's less than ten, which is historically low. We're 0:13:06.160 --> 0:13:11.040 not so uh, you know, necessarily informed on bond volatility, 0:13:11.040 --> 0:13:13.760 but it's historically low as well. And so when you 0:13:13.800 --> 0:13:16.440 have volatility and the two major markets at low levels, 0:13:16.679 --> 0:13:19.800 you know you certainly don't want to sell that volatility. 0:13:19.800 --> 0:13:23.520 And the way investors basically assume risk and sell volatility 0:13:23.600 --> 0:13:27.280 is to buy stocks, to buy duration, to buy hild 0:13:27.320 --> 0:13:30.960 bonds that relatively low spreads. In other words, they move 0:13:31.040 --> 0:13:33.880 into markets that have low risk premiums when they should 0:13:33.920 --> 0:13:36.520 move into markets that have high risk premium. So this 0:13:36.600 --> 0:13:39.040 is definitely a market not just with stocks, but with 0:13:39.120 --> 0:13:42.240 bonds and other essays classes where an investor has to 0:13:42.240 --> 0:13:46.080 be careful because of the low volatility that's into the market. 0:13:46.160 --> 0:13:49.280 David Gern, Tim Keenan New York joining us from Janis Anderson, 0:13:49.720 --> 0:13:52.480 uh William Gross. Bill Gross, wonderful to have you with us. 0:13:52.840 --> 0:13:55.520 As always, what I noticed today build it is so 0:13:55.640 --> 0:13:58.880 different as you get a reaction from the report, and 0:13:58.880 --> 0:14:03.600 we've had now one into impulses twenty minutes down the line, 0:14:03.640 --> 0:14:09.000 twenty four minutes down the line of lower yields, weaker dollar. 0:14:09.360 --> 0:14:13.280 When does the twos ten spread begin to get Bill 0:14:13.320 --> 0:14:17.960 Gross's attention? If we had a Trump surge, a Trump fade, 0:14:18.360 --> 0:14:21.840 we went through the curve flatness of November eight to 0:14:22.040 --> 0:14:25.720 an ever flatter yield curve in with a vengeance, we 0:14:25.800 --> 0:14:28.960 see more of this morning. When does Bill Gross look 0:14:28.960 --> 0:14:33.920 at the twos tenants say this has my attention? Well, 0:14:33.960 --> 0:14:36.920 tell me, it's had my attention actually for a long time. 0:14:38.000 --> 0:14:41.480 You know, I think most portfolio managers and economists have 0:14:41.520 --> 0:14:45.360 it wrong. They talk about the flatness and the move 0:14:45.440 --> 0:14:48.040 of the two ten to a you know, basically a 0:14:48.040 --> 0:14:51.480 flat level which creates a recession, and it always has 0:14:51.520 --> 0:14:53.800 historically in the past. But to me, you know, the 0:14:53.840 --> 0:14:56.440 two ten has been flattening for at least two to 0:14:56.520 --> 0:14:59.760 three years. It started close to two oter basis points 0:14:59.800 --> 0:15:02.280 and now where it is as you cite, and so 0:15:02.320 --> 0:15:05.560 that's an indication of tightening. Now why do we not 0:15:05.800 --> 0:15:09.160 need to go back to zero to create recessionary types 0:15:09.240 --> 0:15:12.680 of environments? I think because the US economy and the 0:15:12.680 --> 0:15:14.960 global economy is much more highly levered and to the 0:15:15.000 --> 0:15:17.760 extent that the US dollar is the global currency. To 0:15:17.800 --> 0:15:20.160 the extent that you flat flat flat, you know, it 0:15:20.480 --> 0:15:23.280 creates more and more risk in terms of a global 0:15:23.360 --> 0:15:28.040 economic slowdown, not necessarily a recession. So it's got my attention, 0:15:28.120 --> 0:15:30.360 has had my attention, and I think an actor should 0:15:30.400 --> 0:15:32.800 continue to watch it and not just look for zero 0:15:33.240 --> 0:15:35.960 as opposed to where we are now at eight to 0:15:36.040 --> 0:15:38.040 nine basis point. Bill, you and I should have a 0:15:38.080 --> 0:15:40.640 moment of silence for all those taking the CFA exam 0:15:41.080 --> 0:15:44.640 this Saturday. I guess we can do that. And is 0:15:44.920 --> 0:15:48.400 you know, Bill gross level one convexity is about acceleration. 0:15:48.760 --> 0:15:52.960 How worried are you of tantrums of convexity? Of acceleration 0:15:53.440 --> 0:15:56.840 in the glide pass. For Janet Yellen, can she believe 0:15:56.880 --> 0:15:59.960 in stability or does she have to worry about real upset. 0:16:02.240 --> 0:16:04.840 I don't think we have to worry about convexity and 0:16:04.920 --> 0:16:09.520 acceleration from the yelling economy and the yelling FED. I 0:16:09.560 --> 0:16:11.520 think we have to worry about it from the standpoint 0:16:11.520 --> 0:16:13.960 of the e c BE, not necessarily the b O J. 0:16:14.440 --> 0:16:17.240 At some point the e c B, and they've suggested 0:16:17.280 --> 0:16:19.760 already that they're going to cut back in terms of 0:16:19.760 --> 0:16:23.400 their purchases. But ultimately, remember the Fed, uh, you know, 0:16:23.480 --> 0:16:27.200 eliminated quantitative easy and about two years ago, and you 0:16:27.280 --> 0:16:30.160 know the taper tantrum was before that, but an anticipation 0:16:30.240 --> 0:16:33.280 of it. And so I think, simply because buns and 0:16:33.840 --> 0:16:37.600 because um you know, um J g B s are 0:16:37.720 --> 0:16:40.080 calling the tune for the global market, that we should 0:16:40.080 --> 0:16:42.920 look to the e c B as the potential leader 0:16:43.000 --> 0:16:45.760 for any type of tantrum going forward. At the moment, 0:16:45.840 --> 0:16:49.280 Droggy is basically calm markets and said, hey, inflation is 0:16:49.320 --> 0:16:51.640 not high enough. But when we come to that point 0:16:51.640 --> 0:16:55.400 where the ECB starts to cut back, then uh, you know, 0:16:55.480 --> 0:16:58.400 bond markets globally maybe at risk. But I want to 0:16:58.400 --> 0:17:00.640 get you react to what James Gorman said to Bloomberg 0:17:00.640 --> 0:17:02.280 a couple of days ago. We had an exclusive with 0:17:02.360 --> 0:17:05.159 him in Beijing. The CEO of Morgan Stanley said, the 0:17:05.160 --> 0:17:07.320 dirty little secret is the U s economy is doing 0:17:07.960 --> 0:17:13.639 just fine. Secrets out. Do you agree with him? Well, no, 0:17:13.760 --> 0:17:16.040 I don't think so. You know, I think it comes 0:17:16.040 --> 0:17:19.080 down to productivity. And as we know over the past 0:17:19.119 --> 0:17:22.560 few years, actually over the past five years, productivity basically 0:17:22.640 --> 0:17:26.760 is close to flatlined. And so that's the ultimate indicator 0:17:26.840 --> 0:17:29.760 of how the US economy is doing. We know that 0:17:29.840 --> 0:17:34.040 labor force growths. Today's report included you know, it is 0:17:34.080 --> 0:17:37.240 moving at a point to five percent to point five 0:17:37.280 --> 0:17:40.160 percent rate going forward. And so the balance, if we're 0:17:40.200 --> 0:17:42.760 going to go to a two percent the economic growth 0:17:42.880 --> 0:17:45.639 or higher has to come from productivity. Now, what are 0:17:45.640 --> 0:17:48.399 the reasons why productivity is flatlined and why might it 0:17:48.480 --> 0:17:51.040 go higher? You know, perhaps it could go higher simply 0:17:51.080 --> 0:17:55.080 because there's a lag between technology and the ultimate real economy. 0:17:55.119 --> 0:17:58.080 But you know, there are negatives to Robert Gordon from 0:17:58.119 --> 0:18:01.439 Northwestern sites, low hanging fruit and all of it being picked. 0:18:01.640 --> 0:18:05.720 You know, there's demographics, there's high debt, levels, there's de globalization, 0:18:05.800 --> 0:18:09.040 all of which suggests, you know, lower productivity going forward. 0:18:09.080 --> 0:18:12.080 And one last point on you know, the productivity of finance, 0:18:12.480 --> 0:18:14.720 which has been inherent in the economy for the past 0:18:14.760 --> 0:18:17.879 twenty or thirty years with lower refi rates and mortgages 0:18:17.920 --> 0:18:20.320 and so on, you know, basically has gone. And so 0:18:20.760 --> 0:18:22.919 productivity is the key, and we're not seeing it, and 0:18:22.960 --> 0:18:25.280 so I don't think the U. S. Economy is doing fine. 0:18:25.400 --> 0:18:27.840 We saw we saw manufacturing tickdown for the first time 0:18:27.840 --> 0:18:29.480 in a while in this report today, and I'm just 0:18:29.520 --> 0:18:32.040 looking through the layers of it. Here is the is 0:18:32.080 --> 0:18:34.480 the morning. Whereas what does that say to you again 0:18:34.520 --> 0:18:36.800 putting into that sort of global context we're talking about 0:18:36.800 --> 0:18:41.119 globalization and the last in the last block, well, I 0:18:41.160 --> 0:18:43.680 think I'm not sure what's influenced that we know about 0:18:43.720 --> 0:18:45.679 Ford and we know about the auto companies and the 0:18:45.680 --> 0:18:48.040 cutbacks in terms of their labor. I don't know whether 0:18:48.040 --> 0:18:52.440 that's influenced this recent report. But you know, manufacturing depends 0:18:53.359 --> 0:18:56.200 and we'll give Trump a little bit of credit here, 0:18:56.440 --> 0:19:00.560 Manufacturing depends on a lower dollar, and to the extent 0:19:00.680 --> 0:19:02.640 that we've had that for the last three or four months, 0:19:02.840 --> 0:19:06.040 maybe you know, there's hope for manufacturing going forward, but 0:19:06.359 --> 0:19:09.000 at the level that Paller was four or five six 0:19:09.080 --> 0:19:12.000 months ago, you know, the US manufacturing was not at 0:19:12.000 --> 0:19:15.080 a competitive level. I mean, Bill within this in in 0:19:15.720 --> 0:19:17.960 the number of minutes that we've got left to do, 0:19:18.119 --> 0:19:20.760 I want to talk about the to do list for investors. 0:19:21.200 --> 0:19:25.000 I assume in the battle of yields moving around and 0:19:25.119 --> 0:19:27.320 prices right now, we got price up, yield down. So 0:19:27.359 --> 0:19:30.480 I guess you're making money today. But at Janice Henderson, 0:19:30.640 --> 0:19:34.959 what is the methodology of Bill Gross to be safe 0:19:35.119 --> 0:19:41.440 and capture yield? What are you actually doing day to day? Okay, 0:19:41.680 --> 0:19:43.480 first of all, time you have to accept the fact 0:19:43.520 --> 0:19:46.560 that returns and yields are lower and that you know 0:19:46.600 --> 0:19:49.560 your investors are going to be slightly disappointed almost no 0:19:49.600 --> 0:19:52.320 matter what. But secondly, what am I doing? Um and 0:19:52.400 --> 0:19:57.680 you know, basically avoiding high risk premium markets and to 0:19:57.840 --> 0:20:01.280 be frank, those are equi These those are long term 0:20:01.600 --> 0:20:05.120 high yield bonds. You know, those are anything with long 0:20:05.240 --> 0:20:08.000 term cash flows that may be affected by you know, 0:20:08.119 --> 0:20:11.600 ultimately slower growth point forward, What is the substitute in 0:20:11.600 --> 0:20:14.080 the meantime? You know, we heard about Chuck Prince and 0:20:14.359 --> 0:20:18.480 dancing on the floor until the music stops. Well, to 0:20:18.520 --> 0:20:20.840 a certain extent, investors are in the same thing. They say, 0:20:20.840 --> 0:20:22.359 what do I do with my money? Well, what do 0:20:22.400 --> 0:20:23.800 they do with their money? I think if you're going 0:20:23.800 --> 0:20:25.920 to invest in high yield bonds, you invest, you know, 0:20:26.080 --> 0:20:28.760 very short term. There's some E t F S H, Y, 0:20:28.840 --> 0:20:32.560 G J and K some other alternatives which you know 0:20:32.600 --> 0:20:34.960 provide four to five percent returns with a three to 0:20:35.080 --> 0:20:37.680 four year maturity level. I think those are okay. We're 0:20:37.680 --> 0:20:40.159 buying some of those. There's a preferred E t F 0:20:40.280 --> 0:20:44.480 called PFF, the biggest preferred PFF, the biggest E t F, 0:20:44.800 --> 0:20:47.360 and it yields about five and a half percent. Are 0:20:47.359 --> 0:20:51.320 these low risk types of investments. They're lower risk than 0:20:51.800 --> 0:20:57.280 UH than long term bonds are box and technology high flyers, 0:20:57.280 --> 0:20:59.439 and so you know, that's what we're doing to produce 0:20:59.480 --> 0:21:01.560 a three to four or five percent retire And you 0:21:01.640 --> 0:21:04.080 sound like a good collo league. Christopher Whalen, who we 0:21:04.119 --> 0:21:06.720 speak to, like those preferreds from time to time. I 0:21:06.760 --> 0:21:09.400 believe that's called capturing a coupon. Bill Gross. I want 0:21:09.400 --> 0:21:11.600 to know the levels where you begin to pay attention. 0:21:11.840 --> 0:21:14.439 The yen is on a tear this morning, stronger yen 0:21:14.720 --> 0:21:17.879 one ten seventy three. We mentioned the two ten steps 0:21:17.880 --> 0:21:20.879 spread flattening out oil down to forty seven. We had 0:21:20.920 --> 0:21:24.239 a forty six handle in West Texas intermediate. Do you 0:21:24.320 --> 0:21:28.040 sense a tip point here in the correlation of markets 0:21:28.040 --> 0:21:31.760 that signal disinflation or can you really say it's a 0:21:31.840 --> 0:21:38.280 steady American economy and Janet Yelling will act as predicted. Yeah, 0:21:38.280 --> 0:21:40.960 I think it's a steady American economy and that the 0:21:41.359 --> 0:21:45.199 market is expecting and we'll see, you know, hike in 0:21:45.280 --> 0:21:47.600 June and perhaps one later in the year, but the 0:21:47.600 --> 0:21:50.080 feed is going to stay very, very low, and so 0:21:50.160 --> 0:21:53.240 that the supports markets to some extent. I would say, 0:21:53.520 --> 0:21:56.639 you didn't mention gold, but gold is up today. You know, 0:21:56.720 --> 0:21:59.440 golds a reflection of a weeker dollar and it's a 0:21:59.520 --> 0:22:02.680 reflection of lower real interest rates, and we see both 0:22:02.680 --> 0:22:05.720 of those today and so you know, some markets will 0:22:05.760 --> 0:22:08.639 be affected by the lower yields and by the weaker 0:22:08.760 --> 0:22:11.720 dollar to to the extent that we continue to see 0:22:11.720 --> 0:22:14.440 that trend, and those would be markets where you'd want 0:22:14.440 --> 0:22:17.000 to invest. Bill Gross, thank you was always for your time. 0:22:17.000 --> 0:22:20.040 He's with Janie Henderson as well. Of course, with Janie 0:22:20.040 --> 0:22:23.720 Henderson unconstrained. Uh fun, just great to get his perspective. 0:22:23.840 --> 0:22:26.840 Mr Gross, He's not taking the cf A this weekend, 0:22:26.920 --> 0:22:29.719 just so you know, you're just for fun. 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