Speaker 1: Broadcasting live to New York Bloomberg eleventh, Riyo to Washington,
Speaker 1: d C, Bloomberg one to Boston, Bloomberg well Moneys to
Speaker 1: San Francisco, Bloomberg nine sixteen to the Country Series Exam
Speaker 1: Channel one nineteen and around the globe the Bloomberg Radio
Speaker 1: plus Apen Bloomberg dot Com. This is Hoomwork, Surveillance and Governing.
Speaker 1: I'm Karen Moscow along with Tom Keene and Michael McKee
Speaker 1: on the opening val Brasso. You buy s c I
Speaker 1: Imaginement Asset management. Servicing is unconstrained by infrastructure. CISCUS Global
Speaker 1: Operating Platform can be your cantalyst for a business expansion
Speaker 1: at se i C dot com. Slash Imagine stalks are
Speaker 1: higher at the open. The SNP five hundred up a
Speaker 1: tenth of upper cent or two points to ninete six
Speaker 1: down Jones Industrial Average up a tenth of upper cent
Speaker 1: or seventeen points to sixteen thousand, nine hundred sixty six.
Speaker 1: The NASDAC up almost two tenths per cent or seven
Speaker 1: points to forty seven fourteen ten. Your treasury down nine
Speaker 1: thirty seconds. The yield one point at six percent yield
Speaker 1: on the two year point eight six percent. Non Mex
Speaker 1: screwed oil is up about eight ten percent or nine
Speaker 1: dollars thirty cents to twelve sixty seven. Actually that was
Speaker 1: Comic gold. Comex gold is up seven tens per cent
Speaker 1: or nine dollars forty cents to twelve sixty seven. Seventy
Speaker 1: ounce Nimex screwed oil is up eight ten percent or
Speaker 1: twenty six cents to thirty four eighty five of barrel.
Speaker 1: The Euro is at a dollar oh nine seven one.
Speaker 1: The yen is at one thirteen point seven six. Tom
Speaker 1: and Mike came Mosco. Thank you very much. Well, this
Speaker 1: is really exciting because every job's day we have our
Speaker 1: usual gang of analysts and they're all here today. Um
Speaker 1: Muhammad has come to the mountain for for a change.
Speaker 1: Scott Mather's chief investment officer at PIMCO, made his way
Speaker 1: all away from Newport Beach into the snowstorm. Uh here
Speaker 1: in New York not that's knowing that hard, but it's
Speaker 1: still not Newport Beach weather and has joined us here
Speaker 1: in studio. Thank you for coming in making that effort.
Speaker 1: I know, did you tweeted it you'd be on at
Speaker 1: six thirty am. You're thinking Pacific time, but it is
Speaker 1: nine thirty here the jobs numbers today, we're seeing a
Speaker 1: reaction in the market's tenure. Note yield is down about
Speaker 1: a quarter of a point at this point, to yield
Speaker 1: is up to one point eight seven percent. How high
Speaker 1: do we go? How much do we read into the
Speaker 1: strength of the economy right now? Yeah, it is sort
Speaker 1: of a strange market reaction from my perspective. And the
Speaker 1: markets sort of yawned at this number. I guess they
Speaker 1: don't know what to make of the fact that there's
Speaker 1: a lot of jobs being created, but wages appear to
Speaker 1: be down, the work weeks down, um, so that's why
Speaker 1: we're unchanged. But I think it's the type of employment
Speaker 1: number that definitely puts the FED back in play. It
Speaker 1: certainly didn't this month or well, I doubt March, but
Speaker 1: certainly June. And I think that we'll hear more about
Speaker 1: that at this upcoming meeting, So you know, I think
Speaker 1: markets are a little bit unprepared for that and a
Speaker 1: little bit uh too sanguent about the possibility of the
Speaker 1: FED being on the move in the summertime. Again, certainly
Speaker 1: not the type of employment number though that indicates there's
Speaker 1: a recession you know, on the horizon, and of course
Speaker 1: that was the concern, uh, you know, just to myth ago.
Speaker 1: So we think it's much more reasonable that the Fed
Speaker 1: manages to to move two or three times this year. Uh.
Speaker 1: And the market's not even priced for the full high
Speaker 1: until you know, basically first quarter and the first quarter
Speaker 1: of next year. So there's quite a disconnect between where
Speaker 1: the market is, where we think the Fed will be,
Speaker 1: and then further where the Fed things they'll be. What
Speaker 1: where should we be then were if you were if
Speaker 1: you were the market, where would you set the yield? Well,
Speaker 1: I think that it's reasonable to expect the Fed still
Speaker 1: wants to move about once a quarter until they get
Speaker 1: to a level of of rates they believe is neutral,
Speaker 1: which we think is is somewhere around two percent. The
Speaker 1: Fed sort of things that that's the number two. They
Speaker 1: talk about zero percent real being the right number. So
Speaker 1: as we progress through the year and as inflation goes
Speaker 1: back up, headline inflation goes back up uh to to
Speaker 1: the Fed's target around two Um. You know, by that
Speaker 1: time in theory they should be at neutral. That would
Speaker 1: be the end of the year. That's the question is
Speaker 1: how fast does it get there? Because the whole debate
Speaker 1: is over whether the FED moves earlier to head it
Speaker 1: off or whether they wait and have to move faster. Well, right,
Speaker 1: And the longer they wait there, they're going to be
Speaker 1: facing some you know, some impossible uh, some impossible situations. Right.
Speaker 1: Imagine if we do begin to see inflation move up
Speaker 1: to target, in fact exceed target. Uh, and yet they're
Speaker 1: only at seventy basis points and telling the market that
Speaker 1: neutral is that, you know, long term neutures and three
Speaker 1: and a half and there and in short term might
Speaker 1: be at two percent. I think that you know what
Speaker 1: you could see happening sort of? What how do we
Speaker 1: think this plays out? Is that the market will will
Speaker 1: move from being overly obsessed about deflationary risks to putting
Speaker 1: a decent probability on the Fed allowing or maybe engineering
Speaker 1: and overshoot of inflation for a few years. And that
Speaker 1: seems quite likely that shift will probably happen over the
Speaker 1: course of this year. Scott. Your your background at PEN
Speaker 1: is in material science, engineering and the Absolute Textbook, which
Speaker 1: which I waited through a zillion years ago, it seems,
Speaker 1: and statics and dynamics and forces in friction and all
Speaker 1: that was Goldstein. What what I don't get is the
Speaker 1: inertial forces were in right now things are so messed up.
Speaker 1: We've got a great distortion, we've got financial repression. Now
Speaker 1: we have negative interest rates overlaid upon that. How can you,
Speaker 1: as a pro work within the Newtonian mechanics, physics, and
Speaker 1: engineering of all the theory you and I learned where
Speaker 1: we are right now? Tell us how you do that
Speaker 1: day to day at PINCO if you don't know where
Speaker 1: the risk free rate is, just as one example, Well,
Speaker 1: that's a good question. I mean, there is no textbook theory,
Speaker 1: there's nothing to go off of it your Monday morning
Speaker 1: meeting and pimcoff I guess it's one of the reasons
Speaker 1: we see the dangers of zero and negative interest rate
Speaker 1: policy um growing over time. It's a function of time
Speaker 1: in our opinion, So we think it's right for the
Speaker 1: Fed to be moving further off of zero. We think
Speaker 1: it doesn't have to be a bad thing for the economy.
Speaker 1: It's going to create some volatility and financial markets, no
Speaker 1: question about it, but we think that's probably the right
Speaker 1: thing to do to stabilize growth, to return some normalcy
Speaker 1: to the Because we get normalcy. You want that. Vice
Speaker 1: Chairman Fisher wants that. Chairman Greenspan wants that, and on
Speaker 1: and on. As we move that vector to normalcy, what
Speaker 1: will be the ramifications to portfolio volatility? Even if the
Speaker 1: portfolio is diversified, so portfolio volatility will be going up.
Speaker 1: And that has to be sort of one of the
Speaker 1: you know, the key tenants of of your outlook yield up,
Speaker 1: price down. They'll they'll be two way actions, just like
Speaker 1: we've seen this year. You'll have choppiness in the markets.
Speaker 1: You'll certainly have uh used the VIX as a proxy.
Speaker 1: We think the VIX will spend most of his time
Speaker 1: around twenty rather than the low teens for the next
Speaker 1: few years. That's the statement of the week for all
Speaker 1: of you. You know, we do all this mumbo jumbo
Speaker 1: on economics, and that what Scott Mather just told you
Speaker 1: is extremely important. The complacency and lassitude that we've seen,
Speaker 1: it's not a to be there. That's that's right. So
Speaker 1: it's gonna you know, this adjustment process is going to
Speaker 1: result in a lot of financial market of altity, probably
Speaker 1: not as much real economic volatility as people are concerned about, though,
Speaker 1: and that's what we've seen so far. Look at the
Speaker 1: look at the draw down of aultility we had in
Speaker 1: August and September, you had no appreciable effect on underlying
Speaker 1: economic momentum. Probably the same thing is true of of
Speaker 1: what happened in January and February. Well, that's interesting because, um,
Speaker 1: even some FED people have started looking at those numbers
Speaker 1: and what happened and saying it may have an impact.
Speaker 1: And you have people saying, well, inflation expectations appear to
Speaker 1: have become unmoored by looking at the markets. You seem
Speaker 1: to be taking issue with that. Well, I'm taking issue
Speaker 1: with that of it. I think one of the one
Speaker 1: of the features of zero rate policy, low rate policy,
Speaker 1: and certainly negative interest rate policies. It pulls down nominally yields.
Speaker 1: We would say that also pulls down inflation expectations embedded
Speaker 1: in the bond market. You know, nobody really talks about
Speaker 1: that too much, but mechanically, if you pull down the
Speaker 1: you know, tenure in amo yield, you decompose it into
Speaker 1: inflation and real components. You know, it's it's it's illogical
Speaker 1: to assume that all the reduction and interest rates can
Speaker 1: be attributed to the real component. You sort of will
Speaker 1: have to also pull down the expected inflation component. I'm
Speaker 1: gonna want to chase Ford to equity. We saw Honeywell
Speaker 1: ut X that fell apart, or we can see a
Speaker 1: lot of M and A this year. I mean within
Speaker 1: the dynamics of growth the global macro system to CFOs
Speaker 1: have a feeding frenzy even bigger than last year. We
Speaker 1: we would think. So that's a trend that probably continues.
Speaker 1: You know, when there's low, when there's little top line growth,
Speaker 1: everyone you gotta go find it. Yeah, PIMCO can emerge
Speaker 1: with Franklin. I think that's quite unlikely. But okay, thank
Speaker 1: you what surveyless exclusive there we will make clearer than
Speaker 1: mr Mr Mather is not responsible for opining on that
Speaker 1: for the Pacific Investment Management Company. We're gonna come back
Speaker 1: with Scott Mather and important discussions. Thrilled he's in our
Speaker 1: studios in New York to We're also thrilled to tell
Speaker 1: you oil with it better than good week, West Texas
Speaker 1: eight Brent thirty seven. Oil crisis over. That's all it means.
Speaker 1: Futures the market rather up nine points alright. Time now
Speaker 1: to check in with Michael var and get the latest
Speaker 1: world in national headlines, Michael, Mike, Tom, thank you very much.
Speaker 1: Donald Trump's Republican presidential rivals say they will support him
Speaker 1: if he wins the nomination. At last night's debate on
Speaker 1: Fox News and Detroit, Ted Crew said he would prefer
Speaker 1: Trump to either of the Democratic presidential contenders. He also
Speaker 1: says that he is calling for getting rid of the
Speaker 1: Internal Revenue Service. When we get rid of all the
Speaker 1: corporate welfare, all the subsidies, all the car about in
Speaker 1: the i r S code, it dramatically simplifies it. And
Speaker 1: under Obama, the i r S has become so corrupt
Speaker 1: and so politicized. We need to abolish it all together.
Speaker 1: We will bring you more on the Republican presidential race
Speaker 1: from former nomineem ad Rom Needle will speak with Bloomberg
Speaker 1: All It Takes, Managing editor Mark Halperin at one thirty
Speaker 1: pm Wall Street Time on Bloomberg Television and Radio. Federal
Speaker 1: and state authorities are looking for the source of a
Speaker 1: mysterious blood infection blamed for eighteen deaths in Wisconsin. French
Speaker 1: aviation investigators are looking into a report that a drone
Speaker 1: narrowly missed a passenger plane during its approach to Paris's
Speaker 1: Charles de Gaulle Airport. The cold pilot spotted the drone
Speaker 1: within about sixteen feet of the wing of the airbus
Speaker 1: A three twenty as it came in for landing. The
Speaker 1: incident happened on February nineteenth. Global News twenty four hours
Speaker 1: a day, powered by our journalists and more than a
Speaker 1: hundred fifty news bureaus from around the world. Now Michael
Speaker 1: bar night time. Michael, thanks so much, immensely appreciated. See
Speaker 1: you on Monday. We will continue Scott Mather with us
Speaker 1: with Pimco as we look for the week forward. What
Speaker 1: to think of an economics finance investment don't forget Mit
Speaker 1: Romney one thirty with Mark Helper in worldwide Blueberg Surveillance
Speaker 1: brought you by a Bank of America Merrill Lynch committed
Speaker 1: to bringing higher finance to lower carbon gave the most
Speaker 1: innovative investment bank for climate change and sustainability by the banker.
Speaker 1: That's power of Global Connections. Bank of America n A
Speaker 1: fd I C