Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim
Speaker 1: Fox along with my co host Lisa Abramowitz. Each day
Speaker 1: we bring you the most important, noteworthy, and useful interviews
Speaker 1: for you and your money, whether at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg P L Podcast
Speaker 1: on iTunes, SoundCloud and at Bloomberg dot com. All right,
Speaker 1: let's just bring in Stephen Dennis, who is our Bloomberg
Speaker 1: Senate reporter, and he has been following the confirmation hearings
Speaker 1: that are being held in Washington today. We know that
Speaker 1: Rex Tillerson, former chief executive of Exxon Mobile attampt to
Speaker 1: be the next Secretary of State. Stephen Dennis, So anything
Speaker 1: stand out to you in the in the questioning or
Speaker 1: is it pretty much standard Democrats going after Rex Tillerson
Speaker 1: and his ties and his business experience in Russia and
Speaker 1: the Republicans UH supporting Rex Chillensen. Actually, I think it's
Speaker 1: pretty bipartisan. The tough questioning senators like Marco Rubio are
Speaker 1: going after Tillerson very hard on his ties to Putin
Speaker 1: and also on Putin's record of having uh of his
Speaker 1: dissidents disappearing and getting murdered on the death of civilians
Speaker 1: and Aleppo, which Rubio charges the Russian the Russians with
Speaker 1: perpetrating crimes against Aleppo civilians. And uh So, it's been
Speaker 1: very tough on Tillerson, I think, except for Tillerson has
Speaker 1: sort of said, sort of deflected everything and basically said
Speaker 1: that he needs to know more information and needs no
Speaker 1: classified information, which he won't have until he's confirmed, and
Speaker 1: then he'll give advice. Um So, I think Tillerson is
Speaker 1: basically hopes that he can get through on that sort
Speaker 1: of basis of just sort of trying to deflect as
Speaker 1: much as he can. And uh and it's gonna be
Speaker 1: a real question now for people like Rubio, McCain and
Speaker 1: Lindsey Graham whether they're gonna ultimately vote for Tillerson if
Speaker 1: he loses though that that trio, he will not be
Speaker 1: there's a big chance he will not be confirmed. He
Speaker 1: needs to get some Democratic support. Um So, this might
Speaker 1: be the most interesting nominee as far as whether this
Speaker 1: nominee can get confirmed ultimately. Everybody expects that he will,
Speaker 1: but you know, he's got to. He's got to make
Speaker 1: these Republicans hawks on Russia happy and there's certainly been
Speaker 1: more and more about Russia, and we're certainly going to
Speaker 1: hear a lot of from Trump about whether he has
Speaker 1: ties to Russia. He keeps denying that on Twitter. You know,
Speaker 1: I expect he'll probably deny it, and with questions when
Speaker 1: questions are asked about the leaked report that came out yesterday,
Speaker 1: and also about his own personal finances, he still hasn't
Speaker 1: really detailed everything that he owns, and also how all
Speaker 1: of his loan I wonder if they'll ask about whether
Speaker 1: he will release his tax returns. I would I would
Speaker 1: expect something along those lines, and also how he had
Speaker 1: will extricate himself from his business. And you know, he
Speaker 1: promised a press conference in December on this very topic
Speaker 1: until hasn't happened talking about that. Why is he holding
Speaker 1: a press conference now at the same time as a
Speaker 1: hearing for one of his cabinet nominees. Well, you know,
Speaker 1: I think now it's probably as good a time as
Speaker 1: any you know, I mean when he was going to
Speaker 1: have it, Uh, you know, you want to do it
Speaker 1: in the middle of the week, get maximum attention. And
Speaker 1: you know to the extent that Tillerson is the one
Speaker 1: pick who may be in the most danger, along with
Speaker 1: possibly the Treasury Secretary pick Stephen manutian Um and maybe
Speaker 1: a few others. Uh, you might you might as well
Speaker 1: have your press conference, have the the big bully pulpit
Speaker 1: um to try and bluster things away. Is there any
Speaker 1: evidence that any of the nominees feel that they are
Speaker 1: going to be unfairly treated as part of the hearings
Speaker 1: because this is not something that is brand new to
Speaker 1: Washington and many of the people, at least as far
Speaker 1: as the Senators are concerned. But for many of the nominees,
Speaker 1: this is really their first interaction with the way Washington works. Yeah.
Speaker 1: I mean, there are a couple of things that are
Speaker 1: different about this cabinet. You know that it's the richest
Speaker 1: cabinet by far. You have billionaires in this cabinet. Just
Speaker 1: dealing with a paperwork when you're a billionaire is an
Speaker 1: order of magnitude different than if you're just you know,
Speaker 1: Joe Q citizen. So people like Wilbur Ross and Betty
Speaker 1: de Voss, who who are very wealthy and are in
Speaker 1: this cabinet, you know, their paperwork is taking a while. Um.
Speaker 1: But also these are people by and large who have
Speaker 1: never been in government before, so being in a hearing
Speaker 1: is is a new experience. Now Rex Stillerson's testified before
Speaker 1: Congress before is ex ce Jeff Sessions, who was at
Speaker 1: his first very marathon hearing yesterday, is certainly experienced as
Speaker 1: a before the Judiciary Committee for Attorney General, right and
Speaker 1: and and so Sessions sort of kind of anticipated where
Speaker 1: the questions were going and kind of knew how to
Speaker 1: dance around most of the questions. Uh, this will be
Speaker 1: an interesting thing to see whether Stephen Manuchian, the Treasury
Speaker 1: Secretary pick, when he has his hearing in the future, um,
Speaker 1: and some of these other picks who have not really
Speaker 1: been before Congress, that they're really going to be under
Speaker 1: the gun and the Democrats are really going to go
Speaker 1: after them because they want to show that the populist
Speaker 1: Trump is not how Trump is governing. He's picking plutocrats
Speaker 1: in their eyes who don't really have the interests of
Speaker 1: working people at heart. And you know you're going to
Speaker 1: see them go. They're already going very hard after Mr
Speaker 1: Poster the well Elaine, I just want to mention Elaine.
Speaker 1: Elaine Chow, who's the nominee for Secretary Transportation, is the
Speaker 1: only Trump appointee who has previously worked at the cabinet level.
Speaker 1: If you know, I wanted just to break in, I
Speaker 1: mean about the press conference that we're going to be watching.
Speaker 1: I wanted to understand kind of the process of how
Speaker 1: it usually goes down. I mean, how long should president
Speaker 1: elector or does a president elect usually speak for? And
Speaker 1: then how much time is usually allotted to questions. You know,
Speaker 1: I wouldn't be surprised to see this go on a
Speaker 1: little bit longer since there hasn't been a press conference
Speaker 1: in an unprecedented period of time since the election, and
Speaker 1: there are frankly, so many questions out there. But it
Speaker 1: really depends on Trump, you know. He he can bluster
Speaker 1: at the beginning for a few minutes and then open
Speaker 1: it up to questions. Uh. Typically you get six eight
Speaker 1: ten questions at a at a scheduled press conference like
Speaker 1: this with the President Obama. Uh. Trump could go longer
Speaker 1: than that or not. And the other thing is that
Speaker 1: the reporters, you know, keep in mind, these reporters have
Speaker 1: have not had access to Trump and large they might
Speaker 1: try to ask three and four part questions because there
Speaker 1: are so many unanswered questions. You know, he tweets uh,
Speaker 1: little details and and never really interacts with the press
Speaker 1: in a meaningful three or four part way. This is
Speaker 1: the first real opportunity beyond the few interviews that he's
Speaker 1: done with UH, with sort of adversarial press course. So
Speaker 1: this is going to be very interesting to watch how
Speaker 1: he interacts, whether he tries to be marker garious or combative.
Speaker 1: And after yesterday UH and the tweets were seeing in
Speaker 1: all caps this morning decrying fake news and dismissing this
Speaker 1: report as total fiction, I expect he'll probably be very
Speaker 1: compative and very critical of the press for not treating
Speaker 1: him fairly. Stephen Dennis is our Bloomberg Senate reporter and
Speaker 1: he's with us. You know, I was just looking at
Speaker 1: the schedule of hearing is You're gonna be kind of
Speaker 1: busy nine thirty tomorrow morning when Washington James maddis the
Speaker 1: nominee for Secretary of Defense. He'll be testifying before the
Speaker 1: were inveted. He'll be questioned by the Senate Armed Services Committee.
Speaker 1: Then you have Ben Carson. I believe he'll be before
Speaker 1: the Senate Committee on Banking, Housing and Urban Affairs. That's
Speaker 1: a ten am. Yeah. I think Mattis is probably a
Speaker 1: slam dunk. He's a favorite of John McCain, who's no
Speaker 1: friend of Trump most days. Um. But you know, that
Speaker 1: could be interesting if Maddis Rebuke has a different position
Speaker 1: than Trump on Isis on torture, on a number of things.
Speaker 1: So that's something to watch for. You know, Ben Carson,
Speaker 1: that could be a very entertaining hearing. He's a guy
Speaker 1: who previously said he doesn't have much experience in government
Speaker 1: and had there was a real question whether he wanted
Speaker 1: to even be an administration and so I think the
Speaker 1: Democrats are going to try and test whether he really
Speaker 1: has the knowledge to handle that that department. And uh,
Speaker 1: Wilbur Ross also he's up at ten am tomorrow as
Speaker 1: well in Washington's before the Commerce, Science, and Transportation uh committee. Yeah,
Speaker 1: now Ross is sort of interesting, obviously well known on
Speaker 1: Wall Street billionaire. UM. I think the real question with
Speaker 1: him is how he's going to handle conflicts of interest
Speaker 1: um and that sort of thing. But you know that
Speaker 1: there's no real expectation that his his nominee is nomination
Speaker 1: is going to be in trouble. And you know, part
Speaker 1: of the thinking I think is, you know, you don't
Speaker 1: really want to get a billionaire mad Yeah, well so,
Speaker 1: uh so that that'll be uh someone interesting for you know,
Speaker 1: people who watch Wall Street to see how he handles
Speaker 1: handles himself. But I think that will probably be pretty standard.
Speaker 1: Fair Stephen, have you heard about Republican and frankly or
Speaker 1: Democratic senators getting together before these hearings and trying to
Speaker 1: come up with a game plan, because it does feel
Speaker 1: like there has been some I don't know conflict if
Speaker 1: in turn to seeing conflicts certainly between some Republicans. Now absolutely,
Speaker 1: I think the Republicans and Democrats sort of treat these
Speaker 1: things by and large as teams, and they sort of
Speaker 1: dole out who's gonna ask which line of questioning, who's
Speaker 1: gonna you know, with the Jeff Sessions, who was going
Speaker 1: to defend him on X and who was going to
Speaker 1: defend him on why? There there wasn't a whole lot
Speaker 1: of Republicans who really wanting to go after Jeff Sessions,
Speaker 1: and the Democrats you know, went after him a little bit,
Speaker 1: but they didn't go after him as hard as they
Speaker 1: potentially could have. You know, he's a he's a colleague,
Speaker 1: he's going to win confirmation. You've got to deal with
Speaker 1: him as Attorney General. So uh, he didn't really go
Speaker 1: that hard at the allegations of racism as they could
Speaker 1: have um in his past. And uh so that we're
Speaker 1: going to see more of that today. I mean the
Speaker 1: unprecedented spectacle of Corey Booker going after UM Jeff Sessions,
Speaker 1: a fellow senator that's basically on heard of, and it
Speaker 1: could be something that sets up Corey Booker to potentially
Speaker 1: run help him run for president four years from now. Um.
Speaker 1: You know, he's one of the rising stars in the
Speaker 1: on the Democratic side, and they're looking at the party
Speaker 1: spaces looking for fighters right now, and they see him
Speaker 1: as one. I just want to mention that I mentioned
Speaker 1: Wilbur Ross. He's not going to be uh at the
Speaker 1: hearing tomorrow. It'll be January. Stephen Dennis, thank you so
Speaker 1: much for joining us. Steven Dennis Blueberg, SENEC reporter. It
Speaker 1: is the big debate. It is the debate that is
Speaker 1: keeping up people at night and is keeping bond. King's
Speaker 1: going at each other with the numbers. I want to
Speaker 1: get a number from Mike materas So, Senior Vice president
Speaker 1: and co chair of Franklin Templeton's Fixed Income Policy Committee.
Speaker 1: Mike thank you so much for joining us. Do you
Speaker 1: think that there is a certain threshold, a certain number
Speaker 1: for US ten year yields to climb above at which
Speaker 1: we can say goodbye to the thirty five year bond
Speaker 1: bull market? Um? Well, is there a number? I don't
Speaker 1: know if there's specifically a number, but uh, we're of
Speaker 1: the opinion that we we could see yields move as
Speaker 1: high as three percent this year, probably more towards the
Speaker 1: end of the year, but that wouldn't necessarily mean that
Speaker 1: that the bull the bull bond market has has ended.
Speaker 1: I think that there are a lot of demographic trends
Speaker 1: globally that are in place that will keep UH global
Speaker 1: growth as well as inflation under control over the intermediate
Speaker 1: to possibly even longer than that. That's a that's an
Speaker 1: important point. In other words, even if the if the
Speaker 1: yields on ten year treasuries to does climb, do climb
Speaker 1: above three percent, there still could be potentially a plateauing
Speaker 1: from there, in your view, I think, I think so.
Speaker 1: I think that uh there that higher interest rates at
Speaker 1: some point will will choke off economic growth and slow
Speaker 1: slow US the U S economy down as well as
Speaker 1: other economies, and with that UH not see inflation rise
Speaker 1: and UM and UH interest rates rise as well. Mike,
Speaker 1: could you comment on municipal bonds because I was reading
Speaker 1: a story today about how corporate tax cuts could actually
Speaker 1: reduce demand for municipal bonds from banks and insurance companies
Speaker 1: because lower rates make municipals less attractive compared with taxable investments.
Speaker 1: How does that work out? Well, I think it's more
Speaker 1: a matter of depending upon how the tax code ends up,
Speaker 1: but it will make UH corporate bonds and even treasuries
Speaker 1: more attractive, especially if you go with the Republican UH proposal,
Speaker 1: which I think is a sixteen and a half percent
Speaker 1: tax UH paid by individuals UM so, so I don't
Speaker 1: think it has an impact per se on municipal rates,
Speaker 1: but it gives provides more competition for municipal bonds. Having
Speaker 1: said that, I think it's important to realize that a
Speaker 1: ten year double A municipal bond right now has a
Speaker 1: yield of about a hundred and fifteent higher than the
Speaker 1: ten year treasury, so it has a spread over treasuries
Speaker 1: to begin with. So I think that it will provide
Speaker 1: more competition, but not necessarily be apparel for the municipal
Speaker 1: bond market. Mike, you know one question that I have
Speaker 1: given your prediction that ten year treasure yields will climb
Speaker 1: above three percent this year, I have to wonder what,
Speaker 1: I'm sorry, approach three not approach okay, approach three percent
Speaker 1: this year? What does that mean for corporate bonds. I
Speaker 1: know that we've seen the fastest pace of issuance of
Speaker 1: investment grade bonds to start the year. UH and meanwhile,
Speaker 1: yields on junk bonds have climbed to the lowest in
Speaker 1: two thousand and fourteen, leaving a pretty all cushion of
Speaker 1: extra spread to sort of absorb that kind of increase. Yeah,
Speaker 1: that's sort of the quandary that fixed income investors are
Speaker 1: in right now. I think that with a lot of
Speaker 1: the proposals UH that of the Republicans and Trump administration,
Speaker 1: if if they're passed, I think it extends the business cycle,
Speaker 1: which is good for for corporations. At the same time, though,
Speaker 1: a lot of the a lot of that positive news,
Speaker 1: and potentially I think it's important. Not necessarily it's not
Speaker 1: necessarily going to be passed, but a lot of it
Speaker 1: is already reflected in UH in yields on corporate investment
Speaker 1: grade corporate bonds as as well as high yield. So
Speaker 1: we are we're positive on credit, less positive on relative value.
Speaker 1: Right now we would in other words, what does that
Speaker 1: mean in terms of a trade? Oh? Sure, So what
Speaker 1: it means is that, uh, given womans and most would
Speaker 1: say that we are in the latter stages of the
Speaker 1: business cycle. Fiscal policy that will be passed to the
Speaker 1: extent that it's past, it's passed later on this year
Speaker 1: will probably extend the business cycle. That's positive for corporate credit.
Speaker 1: That when that the prospects of a recession are further off.
Speaker 1: At the same time, though, spreads have come in on
Speaker 1: investment ary corporate bonds probably about thirty thirty basis points
Speaker 1: over the last few months, and even more so on
Speaker 1: high yield, so they're spread to treasuries. The risk premium
Speaker 1: has shrunk. Should there be any disappointments where risk premiums
Speaker 1: rise on these on these sectors of the markets, we
Speaker 1: would look at look at that as an opportunity to
Speaker 1: buy because we feel the business cycle will be longer.
Speaker 1: But current levels were just moderately we find corporate bonds
Speaker 1: and high you'll just moderately attractive, just moderately attractive for
Speaker 1: high you because I note that the inflows into et
Speaker 1: f s exchange traded funds, particularly for a high yield debt,
Speaker 1: added about a billion and a quarter. I was gonna say,
Speaker 1: a tremendous, tremendous influence a very and it's a very
Speaker 1: efficient way of getting exposure to the high yield market.
Speaker 1: I shares seven to ten year treasury bonding TF had
Speaker 1: the biggest outflows. Is this an indication of what we
Speaker 1: can expect if indeed we get some kind of fiscal
Speaker 1: spending bill passed by the Congress. Well, typically it's interest
Speaker 1: rates are rising because business prospects are getting better, and
Speaker 1: that's good for corporate credit. And that's the reason why
Speaker 1: individuals are buying corporate bonds is there they feel comfortable
Speaker 1: with the credit quality. And in that type of environment
Speaker 1: of rising treasury rates, corporate bond yields are going to rise,
Speaker 1: but not as much as treasury yields will rise, So
Speaker 1: it gives you some some protection to the downside. Mike,
Speaker 1: what's your greatest conviction call on the markets? Uh? This year?
Speaker 1: I mean, do you have any sort of contrarian bets
Speaker 1: that you're making on either a recovery or a big loss. Yeah,
Speaker 1: I would say probably the more. In the In the
Speaker 1: near term first half of the year, I think that
Speaker 1: we could see a bit of a disappointment and growth
Speaker 1: given that interest rates have risen, that oil prices have risen, UH,
Speaker 1: the dollar has risen, and I think all of these
Speaker 1: are our headwinds to the US economy and the global
Speaker 1: econ We've had a global manufacturing rebound in the second
Speaker 1: half of this year and that probably will taper off
Speaker 1: in the first half of the neck of the of
Speaker 1: of this year last year's rebound UH, and I think
Speaker 1: that we may see see a little bit of disappointment
Speaker 1: instead of I think in the near term treasury yields
Speaker 1: can can rise, probably from maybe upport around the two
Speaker 1: and three quarter area. But I think that we could
Speaker 1: see a declining yields in the first half of the
Speaker 1: year based on growth disappointment, only then to see in
Speaker 1: the second half of the year are rebound as more
Speaker 1: as more of the fiscal policy UH is discussed and
Speaker 1: hopefully passed, which will have a positive effect on two
Speaker 1: thousand and eighteen growth. So look possibly lower yields in
Speaker 1: the first half of the year rather than higher yields.
Speaker 1: I think that's a contrary of you. I want to
Speaker 1: thank you very much for spending time with us. Mike
Speaker 1: Matta Rosso is the senior vice president and co chair
Speaker 1: of Franklin Templeton's Fixed Income Policy Committee. Now let's turn
Speaker 1: our attention to an ongoing story which has to do
Speaker 1: with an unsubstantiated intelligence reports involving Russia and the President elect.
Speaker 1: And here to tell us more as Chris Strom, he
Speaker 1: is Justice Department reporter for Bloomberg News. Chris, what can
Speaker 1: you tell us about this report and is there any
Speaker 1: veracity in it? Is it truthful at all? Well, this
Speaker 1: is a thirty five page report that is just full
Speaker 1: of multiple allegations that are unsubstantiated. However, some of them
Speaker 1: appear to be rooted in reality to a degree. For example,
Speaker 1: there's there's indications in the report that the that there
Speaker 1: have been UH questions about business dealings by UH by
Speaker 1: Trump associates. Now we know from our reporting that the
Speaker 1: FBI has already been looking into UH possible corruption UH
Speaker 1: tied to Donald Trump's X campaign chief Paul Manafort over
Speaker 1: in Ukraine. Now, there are multiple, multiple allegations in these
Speaker 1: thirty five pages. They're also I just so, I just
Speaker 1: want to mention and having looked at the documents that
Speaker 1: you're talking about, there are multiple grammatical mistakes, there are
Speaker 1: multiple repetition, there's multiple repetition. Uh, it doesn't seem like
Speaker 1: a coherent document. It just seems grammatical and substantive mistakes. Yeah,
Speaker 1: and it just seems it doesn't seem like a document
Speaker 1: that was prepared by any um, I guess, substantiated organization.
Speaker 1: Where does this come from? Well, the the belief at
Speaker 1: this point is that it came from a former m
Speaker 1: I six intelligent agents over in Great Britain and his
Speaker 1: intelligence team put it together. UM. We are still trying
Speaker 1: to verify exactly where the report came from and what
Speaker 1: in it might actually have any sense of credibility. What
Speaker 1: we do know is that there was a a two
Speaker 1: or three page summary that was attached to the briefing
Speaker 1: that the intelligence agencies gave Donald Trump in President Obama
Speaker 1: last week, and we have not seen what is in that.
Speaker 1: It's that very slim down version, and questions remain whether
Speaker 1: the intelligence agencies in that, in that very condensed version
Speaker 1: only presented information that seems to have uh, you know,
Speaker 1: some sense of credibility or some additional independent sources verifying
Speaker 1: what was in it. But certainly the document as a
Speaker 1: whole contains all kinds of unsubsidiated allegations. Aside from this document,
Speaker 1: that we've heard that the Russia is suspected of hacking
Speaker 1: the Republican National Committee as well as the d n C,
Speaker 1: and that they're holding material that could potentially be damning
Speaker 1: for President elect Trump and that they could you know,
Speaker 1: use is basically a bargaining chip that they have some
Speaker 1: leverage when it comes to negotiations. Is there anything in
Speaker 1: this memo that was attached to Adassier given to us,
Speaker 1: allegedly given to President elected Trump. Is there anything that
Speaker 1: sort of seems like the most possible thought er for
Speaker 1: UH leverage or or that the Russians could use to
Speaker 1: just sort of get President elect Trump to do something
Speaker 1: that perhaps uh might not be And there's nothing, there's
Speaker 1: nothing that I can say right now that that we
Speaker 1: have any indication that it is going to be something, uh,
Speaker 1: something that is verified incredible that could be used to
Speaker 1: blackmail Donald Trump. UM. I think that there's concern now
Speaker 1: uh between among lawmakers in Congress that this needs to
Speaker 1: be looked at in in in detail to find out
Speaker 1: if there is anything. But it's also important to remember
Speaker 1: that that, you know, Trump has sent out tweets saying
Speaker 1: that this is fake news and that there's nothing. He
Speaker 1: saying that the Russians and the Russians have also But
Speaker 1: it's important to remember the Russians also denied hacking, as
Speaker 1: you know, they denied hacking as well. And I think,
Speaker 1: you know, the intelligence agencies have pretty fortunately come out
Speaker 1: with you know, the uh, you know, back backing up
Speaker 1: the idea that that the Russian government was hacking the
Speaker 1: DNC and other political groups. Well, we're just going to
Speaker 1: mention that. In one of Donald Trump's tweets earlier, he
Speaker 1: asked if these leaks, the leaks of this dossier or
Speaker 1: this document of he described dirt, meant that we are
Speaker 1: quote living in Nazi Germany, says he prepares to hold
Speaker 1: his first I mean this this memo, you know, it's
Speaker 1: I mean, it's it's it's a bomb that just went
Speaker 1: off last night, and we're all trying to's we're all
Speaker 1: kind of scrambling now to try and figure out what
Speaker 1: it means, what might be in it that has any
Speaker 1: you know any any substance so far. Is there anything
Speaker 1: that sort of stood out to you? One thing? I
Speaker 1: can't say if there's anything that jumped out to me, Um,
Speaker 1: I I don't want to. I don't want to identify
Speaker 1: anything in particular that that you know that we don't have,
Speaker 1: that we don't have. You know that we haven't been
Speaker 1: able to independently verify your back up yet. That's fair enough.
Speaker 1: I respect that. Thank you so much for joining us.
Speaker 1: Chris Strom, Justice Department reporter for Blueburg New speaking to
Speaker 1: us from Washington, d C. Talking about how markets are
Speaker 1: trying to find direction ahead of the Ahead of the
Speaker 1: press conference by President elected Trump, James Crombie, an editor
Speaker 1: of Boomer Briefs, has been talking with economists about their
Speaker 1: predictions regardless of what President elect Trump may say or
Speaker 1: tweet today. James, must be a particularly difficult time to
Speaker 1: sort of nail down the top forecasters given the political uncertainty.
Speaker 1: What struck out, what was stood out to you as
Speaker 1: sort of the most notable uh IDEA Well, we ranked
Speaker 1: the best forecast is in the fourth quarter for a
Speaker 1: variety of US indicators, and we talked to a lot
Speaker 1: of the top ranked forecasts, and what really stood out
Speaker 1: for us in terms of surprises were that one headline
Speaker 1: growth could be higher potentially, although not as high anywhere
Speaker 1: near as what what Trump suggested four percent when he
Speaker 1: was campaigning. UM. But a lot of people were also
Speaker 1: saying that the you know, the Trump effect, that what
Speaker 1: one described as Trump flation may not be anywhere near
Speaker 1: as much as as what some people were expecting, and
Speaker 1: also not happen in the short term, so it could
Speaker 1: deliver at the end of next year. For example. UM.
Speaker 1: The other big thing unemployment, as you mentioned earlier, will four.
Speaker 1: We had one of our top forecast is suggesting that
Speaker 1: it could get to four point one percent by the
Speaker 1: end of next year, which is very low. UM. And UM,
Speaker 1: you know that really implies that the Fed has to
Speaker 1: move more quickly than probably is priced into the market
Speaker 1: right now. The other thing inflation, UM two percent at
Speaker 1: some point this year. PC could hit two percent by
Speaker 1: mid year. UM. That's the Fed's key indicator. Again, that
Speaker 1: means the FED may have to move. When we asked
Speaker 1: one of the forecast is what that means in terms
Speaker 1: of hikes next year, he said, if you held the
Speaker 1: gun to his head, he'd say more more four than two,
Speaker 1: which is surprising and it's certainly not priced in um.
Speaker 1: And the other thing that stood out fed transition. You know,
Speaker 1: will Trump replace the current line up with a lot
Speaker 1: of hawks. Um, certainly policy will change in some way
Speaker 1: that can you imagine somebody actually holding a gun to
Speaker 1: somebody's head and saying, you know, come on, how many
Speaker 1: FED hikes next year? Anyway? Um? No, I hope not. James.
Speaker 1: Just want to get your thoughts on accelerated inflation because
Speaker 1: I was looking today and JM. Smucker talking about raising
Speaker 1: coffee prices six percent and another note, looking at the
Speaker 1: grains market specifically soybeans and wheat, and those prices are
Speaker 1: trending higher. What is the outlook for inflation? Well, I
Speaker 1: think you know we're seeing it all over and not
Speaker 1: just in commodities. But um, you know, if there is
Speaker 1: this big fiscal push, then that will obviously have some
Speaker 1: inflationary impact. If there is a bad for bonds, good
Speaker 1: for stocks possibly. But markets are moving in strange ways
Speaker 1: as you as you as you probably watched the moment. Well,
Speaker 1: I was just looking at the ten ure. For example,
Speaker 1: in the yield there is two point three eight percent
Speaker 1: a little bit of a sell off and in the
Speaker 1: third year two point nine seven and that's kind of
Speaker 1: hovering around that three percent level, which I believe. Jeffrey
Speaker 1: good Lack at the double line and Bill Gross at
Speaker 1: Jonas Uh they mentioned very specific levels I think to
Speaker 1: six and three saying the bond bull market is over. Yeah.
Speaker 1: I mean, I'm curious, James, when you talked with some
Speaker 1: of these forecasters, was there more hemming and hiring more.
Speaker 1: I don't know what's going to happen. Then you've heard
Speaker 1: in the past. Um, I think all of them, you know,
Speaker 1: they've been doing this a long time. They see Trump
Speaker 1: as a lot of noise. In lots of cases, they've
Speaker 1: some of them have said that they've become a bit
Speaker 1: more nimble. They've made their models smaller and easier to
Speaker 1: adjust because of the new political situation. Um. But they're
Speaker 1: you know, they're still forecasting, and they're still you know,
Speaker 1: they need to make calls. They need to see through
Speaker 1: that noise. And Dave, you know, just sort of to
Speaker 1: that point at people still need to make calls, but
Speaker 1: not necessarily right ahead of a Trump press conference. It
Speaker 1: seems like, you know, you spoke about how there isn't
Speaker 1: a lot of direction that people are kind of waiting.
Speaker 1: I mean, do you have a sense from volumes or
Speaker 1: just sort of a certain activity of just how sort
Speaker 1: of how much traders are with bated breath right now
Speaker 1: waiting to get a sense of what direction we're going
Speaker 1: to head in. Well, just taking a quick look at
Speaker 1: the first half hour or so trading, I mean, it
Speaker 1: was pretty much in line with what we saw yesterday
Speaker 1: when you look at NYC and NAZAC listed stocks. So
Speaker 1: I mean there's a big mo just looking at a
Speaker 1: big board. Volume is down right now, I touch, you know,
Speaker 1: not much and as much as anything, you know, it
Speaker 1: becomes a matter of where we go from here. And
Speaker 1: I would just note since you're talking about inflation that
Speaker 1: you know, we got numbers out of Super Value grocery
Speaker 1: chain and their earnings came up well short of estimates
Speaker 1: and the stocks down eight percent, So you know, and
Speaker 1: that's an area, particularly when you talk about food, that
Speaker 1: you know there's a concern that you know that the
Speaker 1: grocery chains and everyone sort of alongal line may suffer
Speaker 1: because prices are falling rather than rising. Within that piece
Speaker 1: of the inflation puzzle, one it doesn't necessarily get a
Speaker 1: lot of attention because if you think about cord inflation,
Speaker 1: it excludes food as well as energy drives or takes
Speaker 1: any kind of vehicle or really eats foods about volatility,
Speaker 1: PIM clearly, thanks very much. Dave Wilson, Bloomberg stocks Commas
Speaker 1: appreciate it. Just send Dave an email at d Wilson
Speaker 1: at Bloomberg dot net and sign up for his daily
Speaker 1: free email newsletter. Our thanks alson James Crumbie. He is
Speaker 1: the editor of Bloomberg Briefs. Thanks for listening to the
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Speaker 1: I'm Pim Fox. I'm out there on Twitter at pim Fox.
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