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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: dot com, the Radio plus Mobile, last and on your radio.

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Speaker 1: This is a Bloomberg Business Flash and I'm Karen Moscow.

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Speaker 1: This updates brought to you by c b O E

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Speaker 1: r m C. Come to the cbo E Risk Management

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Speaker 1: Conference February twenty nine to March second at the high

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Speaker 1: end Regency Coconut Point, Florida. Register and learn more at

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Speaker 1: cbo E r m C US dot com. Macy's is

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Speaker 1: up about six percent this morning, the largest US department

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Speaker 1: store chain, posting fourth quarter results that beat analysts estimates

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Speaker 1: after sales declined less than projected. Home Depot is up

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Speaker 1: more than three and a half percent after posting fourth

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Speaker 1: quarter profit that topped analysts estimates, showing consumers are still

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Speaker 1: willing to spend on their houses. European stocks, meanwhile, are

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Speaker 1: lower with emerging markets after the People's Bank of China

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Speaker 1: reduced the yuan's reference rate by the most in six weeks.

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Speaker 1: Futures they're little changed. We checked the markets every fifteen

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Speaker 1: minutes throughout the trading day on Bloomberg as and p

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Speaker 1: EVENI futures down two points. A Dowie Mini futures up six,

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Speaker 1: naz Daki Many futures down twelve. The acts in Germany's

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Speaker 1: down seven tenths per set. The tenure treasury is down

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Speaker 1: eleven thirty seconds. The yield one point seven nine percent

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Speaker 1: yield on the two year point seven six per set.

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Speaker 1: Nine night Screwed oil down four ten percent or thirteen

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Speaker 1: cents to thirty three twenties. Six of barrel Komac's gold

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Speaker 1: is up one point one per cent or thirteen dollars

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Speaker 1: thirty cents at twelve twenty three forty an ounce, the

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Speaker 1: euros at a dollar ten twelve, the yen one twelve

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Speaker 1: point oh six. And we do see a headline crossing

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Speaker 1: the Bloomberg here the LSC and Deutsche Bors confirming detailed

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Speaker 1: talks on a potential merger. And we'll have more on

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Speaker 1: that story as it becomes available. That's a Bloomberg business flash.

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Speaker 1: Tom and Mike char thank you so much. On Wall Street.

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Speaker 1: The following is from Bloomberg View opinions in commentary from

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Speaker 1: Bloomberg columnists. I'm Justin Fox, columnist for Bloomberg View. The

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Speaker 1: crisis was caused by oversaturated markets, currency devaluations and all

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Speaker 1: upsided balance of payments. China was producing more manufactured goods

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Speaker 1: than Westerners could pay for money. Supply complications made things worse.

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Speaker 1: The changing climate may have played a role to This

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Speaker 1: is a description not of our current economic troubles, but

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Speaker 1: of the financial crisis and economic depression that hit countries

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Speaker 1: from China to France in the fifteenth century. Have been

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Speaker 1: learning about it from Peter Franco Pan's just published book

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Speaker 1: The Silk Roads, A New History of the World. One

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Speaker 1: shouldn't make too much of the parallels with the present.

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Speaker 1: This is the fourteen hundreds we're talking about, after all.

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Speaker 1: But as we continue to struggle with the lingering aftermath

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Speaker 1: of the two thousand eight financial crisis, it is fascinating

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Speaker 1: to learn that trade imbalances between China and the West

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Speaker 1: have brought trouble before, and be reminded that monetary policy

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Speaker 1: problems are nothing new. We have been going through these

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Speaker 1: crises for centuries. They usually take a long time to

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Speaker 1: recover from, and sometimes they bring big economic shifts. Wonder

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Speaker 1: what they'll be writing about our troubles six hundred years

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Speaker 1: from now. I'm Justin Fox, a columnist for Bloomberg View.

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Speaker 1: For more Bloomberg Opinion and commentary. Please got a Bloomberg

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Speaker 1: View dot com or view, go on the Bloomberg terminal.

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Speaker 1: This has been Bloomberg View. Bloom Review commentary can be

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Speaker 1: here in hourly weekdays. I'm Bloomberg Radio Mike. I had

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Speaker 1: a delay there because as contemplating one day there will

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Speaker 1: only be one market. Yes, Keen Stock Exchange Incorporated right

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Speaker 1: now to markets look like they're going to get together.

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Speaker 1: SIS change with a headline a statement out just a

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Speaker 1: few moments ago saying they are in advanced talks with

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Speaker 1: Deutsche Bors to merge what they call a merger of equals. However,

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Speaker 1: the way the deal is structured, dout Bors holders would

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Speaker 1: have fifty four point four percent of the company and

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Speaker 1: the LSC stockholders would hold forty five point six percent,

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Speaker 1: so it would be a Doutge Bors takeover essentially, although

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Speaker 1: the combined group would have a unitary board. UH doesn't

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Speaker 1: say exactly what that means in terms of well, it

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Speaker 1: says equal number of directors. There's a headline just coming out.

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Speaker 1: Each side would get an equal number of directors. No

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Speaker 1: word on management yet. When the headlines are just coming

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Speaker 1: out delicate. London Stock Exchange shares up sixteen and a

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Speaker 1: half percent over in London. Yeah, with some real price

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Speaker 1: move as well. David Kelley, whether JP market funds? What

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Speaker 1: what is great about you? David? As you synthesize in

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Speaker 1: economics and what we should actually do with our money?

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Speaker 1: How do you synthesize Michael Ferrole and Bruce Chasms terminal

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Speaker 1: rate coming down the great JP Morgan call of a

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Speaker 1: lower potential GDP, lower yield. How does that fold over

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Speaker 1: into what we actually do with our money? Well, I think,

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Speaker 1: the first of all, I agree with that call. Unless

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Speaker 1: we see structural change in the United States in terms

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Speaker 1: of labor supply and in terms of productivity, that terminal

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Speaker 1: sower growth rate is inevitable. But the way I think

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Speaker 1: you look at it is if we are going to

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Speaker 1: have low inflation or lower inflation that we've seen in historically,

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Speaker 1: we've got lower interest rates um, then we also should

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Speaker 1: have a lower earnings yield on stocks E over P,

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Speaker 1: and that means that PE ratios ought to be higher

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Speaker 1: than average. One of the oddities of the current situation

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Speaker 1: is people people look at price earnings ratios and say, well,

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Speaker 1: they need to be bounded, in fact upper bounded by

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Speaker 1: the by the average of the last twenty five years.

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Speaker 1: At the same time, they say we're in a new

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Speaker 1: world in terms of low inflation and low interest rates.

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Speaker 1: If we are in a world of low inflation low

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Speaker 1: interest rates have higher pe pratus in the long run,

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Speaker 1: and if we have higher pe ratios in the long run,

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Speaker 1: that does mean that equities have some room to move up.

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Speaker 1: From here. You look like Dan Draper today from Madmen.

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Speaker 1: Are we going back to a fifties and fifty fifties

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Speaker 1: in the sixties glory of growth? Well, no, revaluation is

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Speaker 1: the e over p well terms a big povery. I

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Speaker 1: think we could see, we could see highest stock prices,

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Speaker 1: and we could see some reaction eventually from our political

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Speaker 1: system to the real problems that we face. But the

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Speaker 1: one thing similarity I think is that by the end

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Speaker 1: of next year we're going to be back to the

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Speaker 1: lowest one point rate since late nineteen sixties. It looks

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Speaker 1: to me like the unpoint rate will come down to

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Speaker 1: about three point six percent by the end of seventeen

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Speaker 1: because of a lack of labor supply and continued modern

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Speaker 1: economic growth. That that takes you back to the age

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Speaker 1: of Aquarius. So I guess that is kind of a Dondre.

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Speaker 1: You don't want to look like you see pictures of

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Speaker 1: time back then at the age of the age of

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Speaker 1: key Um. You and I were just talking a moment

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Speaker 1: ago in light of all this, Uh that the economy

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Speaker 1: is better off if the Fed is raising rates. So

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Speaker 1: the idea that they would have to cut rates again,

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Speaker 1: or use negative rates, or do something to stimulate the

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Speaker 1: economy would be a big mistake. Yeah. The number one

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Speaker 1: thing that I think central banks are missing is that

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Speaker 1: there is a nonlinear relationship between interest rates and demand

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Speaker 1: the economy. If you raise rates from a very low level,

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Speaker 1: you actually stimulate economic demand. When you raise them from

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Speaker 1: a higher level, you actually hurt economic demand. It's a curve.

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Speaker 1: I mean, curves occur all over nature and science and

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Speaker 1: so forth. For for some reason, the central banks thinks

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Speaker 1: it's a straight line. But the way, the reason this

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Speaker 1: is important is that if you raise short term interest

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Speaker 1: rates from low levels, you're gonna add interest income, You're

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Speaker 1: going to add to confidence, You're going to cause people

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Speaker 1: to borrow ahead of higher rates um, and all of

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Speaker 1: these things should help the economy grow a little faster. Moreover,

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Speaker 1: you do need to get back to a more normal

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Speaker 1: interest rates, so and so you can get back to

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Speaker 1: a more normal monetary policy in the long run. So

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Speaker 1: I would wish that the center. I first of all,

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Speaker 1: I wanted the Federal Reserve to move more steadily last

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Speaker 1: year and to get rates going back to normal. But

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Speaker 1: I still think they should move rates back to normal

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Speaker 1: that at least, you know, remove a lot of the

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Speaker 1: distortions caused by this this um you know, ridiculously easy

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Speaker 1: monetary policy, which I think is you know, I think

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Speaker 1: it's actually hurting long term economic growth. Do the market

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Speaker 1: can Can they withstand that? Or are we so hooked

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Speaker 1: on this that we see another taper tantrum kind of

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Speaker 1: melt that? But you know, it's it's like raising children.

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Speaker 1: I mean, of course they're going to have a tantrum

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Speaker 1: that initially if you take away the candy, But in

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Speaker 1: the long run, if you give them a better dice,

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Speaker 1: they would be better. There will be more well adjusted kids.

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Speaker 1: I think I think the markets will survive it after

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Speaker 1: a little tantrum and they realize the economy is actually

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Speaker 1: announced by this. If we migrate within a linear function,

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Speaker 1: we have from five to three point eight three point seven,

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Speaker 1: three point six percent unemployment. To our listeners, they're all going,

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Speaker 1: I don't believe you. But the next question is will

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Speaker 1: those be good jobs? Uh? Well, first of all, I

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Speaker 1: think they should believe me, because if you go back

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Speaker 1: since two thousand and ten, even though we've only averaged

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Speaker 1: two point one percent GDP growth, and that's very much

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Speaker 1: in line with everybody else's forecast, from now now on,

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Speaker 1: the unemploye rates come down about eight ten percent, and

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Speaker 1: that would get me to my three point six by

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Speaker 1: the end of next year. All we need is a

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Speaker 1: continuation of current trends as for being being good jobs.

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Speaker 1: You know, I think there will be good jobs. To me,

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Speaker 1: that we problem is are there going to be good workers?

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Speaker 1: We are? We are scraping the bottom of the labor

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Speaker 1: market barrel. There are reasons why people have found it

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Speaker 1: found it hard to find jobs in this economy, but

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Speaker 1: a lot of those are microeconomic reasons which have to

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Speaker 1: do with um, you know. And I don't want to

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Speaker 1: go through the long list, but you can think of

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Speaker 1: the long list of problems that people are having being

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Speaker 1: actually well fit for the labor force. David, Thank you

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Speaker 1: so much. David Kelly with JPAN Funds, and again folks.

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Speaker 1: This is what we love on surveillance is the stark

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Speaker 1: polarity between two smart people with two really different certainly

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Speaker 1: world views, but Mike, I would also suggest two different

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Speaker 1: American views as well. Well. I love the fact that

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Speaker 1: you had stepped out the studio for a second during

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Speaker 1: the break with David said, you know all this stuff

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Speaker 1: about the you know, plat funds right and things like

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Speaker 1: that is enormously complicated. And I said, that's why you're

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Speaker 1: on this program. This is the show where you can

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Speaker 1: talk about it and people can learn something and you

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Speaker 1: can get a measured view of the overlays of Gary

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Speaker 1: Shilling and David Kelly. And there are many overlays and

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Speaker 1: also some of the very stark differences. Just the idea

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Speaker 1: of going to a three point six percent unemployed it right,

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Speaker 1: which basically nobody on the planet is um excuse me

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Speaker 1: modeling right now. If you would like some enthusiasm, we

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Speaker 1: will deliver it. The tenure yield is up five basis

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Speaker 1: points to a one point eight zero. We even, finally

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Speaker 1: on this Tuesday, have some curve steepening. If you'll recall

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Speaker 1: and our last edition of Nancy Drew, the basic idea

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Speaker 1: was curve flattening was out there, even a man. A

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Speaker 1: good equity market. Today we've got a legitimate risk on

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Speaker 1: move stronger dollar equities up. Well, they're fraction when I

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Speaker 1: stay in corrected on that, but with a bond market

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Speaker 1: acting almost normal. Michael, Well, they were listening to David

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Speaker 1: Kelly say that the curve is a false indicator. Yeah,

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Speaker 1: well it may be, but at least today I've got

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Speaker 1: higher yields going with a steeper curve, which gets us

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Speaker 1: much more back to the normality of a five day

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Speaker 1: working week. This is fun. We've got a lot of

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Speaker 1: good guests coming up on economics, finance, investment in international relations.

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Speaker 1: Another hour worldwide of Bloomberg's surveillance