1 00:00:06,320 --> 00:00:12,960 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:33,960 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg So 5 00:00:33,960 --> 00:00:36,360 Speaker 1: when it's play rolls Friday, your median estimate in our 6 00:00:36,400 --> 00:00:40,440 Speaker 1: Bloomberg survey one hundred and ninety thousand added to the 7 00:00:40,560 --> 00:00:43,120 Speaker 1: month of May, the unemployment rate expected to stay at 8 00:00:43,159 --> 00:00:47,320 Speaker 1: three point nine percent, and the closely watched wage growth figure. 9 00:00:47,600 --> 00:00:50,880 Speaker 1: The estimate their two point six percent year on year, 10 00:00:51,040 --> 00:00:54,000 Speaker 1: in line with the previous read. I'm really pleased to 11 00:00:54,040 --> 00:00:56,120 Speaker 1: say to give us his personal read. It's Tom Porselli 12 00:00:56,280 --> 00:00:59,280 Speaker 1: OBBC Capital Markets chief US economist who joins us in 13 00:00:59,320 --> 00:01:01,720 Speaker 1: the studio morning. So, good morning, good to see. What 14 00:01:01,760 --> 00:01:03,360 Speaker 1: are you looking for this morning? So we're looking for 15 00:01:03,400 --> 00:01:06,360 Speaker 1: two fifteen headline and private, and we're looking for a 16 00:01:06,360 --> 00:01:09,160 Speaker 1: three nine on the unemploymer No change there. Look, I 17 00:01:09,440 --> 00:01:11,680 Speaker 1: think you know, let's be let me be the only 18 00:01:11,680 --> 00:01:14,560 Speaker 1: honest economist on this point. Whether it comes in at 19 00:01:14,600 --> 00:01:16,680 Speaker 1: consensus one nine d I think you said, are my 20 00:01:16,760 --> 00:01:19,119 Speaker 1: two fifteen or even it comes a little lighter than that. 21 00:01:19,319 --> 00:01:22,840 Speaker 1: To be honest, it's still very consistent with a totally 22 00:01:23,000 --> 00:01:25,920 Speaker 1: rock solid labor backdrop. Tom and I were talking about 23 00:01:25,920 --> 00:01:28,479 Speaker 1: this on on TV or earlier. I mean, I think, 24 00:01:28,520 --> 00:01:32,040 Speaker 1: just look at sentiment with regard to the labor backdrop, 25 00:01:32,319 --> 00:01:36,479 Speaker 1: um the conference boards, Uhum, sentiment measures as as good 26 00:01:36,520 --> 00:01:39,160 Speaker 1: as any and what you see is that people continue 27 00:01:39,200 --> 00:01:41,560 Speaker 1: to say that they have they're holding a really positive 28 00:01:41,600 --> 00:01:44,240 Speaker 1: view on labor. So um, I think from not just 29 00:01:44,280 --> 00:01:47,039 Speaker 1: from a numbers perspective, do I think things look good, 30 00:01:47,080 --> 00:01:50,520 Speaker 1: but from a sentiment perspective, Um, people continue to feel 31 00:01:50,560 --> 00:01:52,560 Speaker 1: good about the backdrop? What does it say about where 32 00:01:52,600 --> 00:01:55,640 Speaker 1: we are that we can still get prints of? So 33 00:01:55,720 --> 00:01:57,520 Speaker 1: I love this question because I really think it gets 34 00:01:57,520 --> 00:01:59,160 Speaker 1: to drive home this one point. I think that there's 35 00:01:59,200 --> 00:02:02,880 Speaker 1: a heck of a lot of people us but but 36 00:02:03,000 --> 00:02:05,360 Speaker 1: time I love you though, and it doesn't love me, 37 00:02:08,680 --> 00:02:10,120 Speaker 1: which is why I like being on with both of you. 38 00:02:10,120 --> 00:02:13,320 Speaker 1: I get the best of both worlds. Uh. So I 39 00:02:13,360 --> 00:02:16,240 Speaker 1: would say that what it what it really drives home is, 40 00:02:16,800 --> 00:02:18,919 Speaker 1: you know, we're we're probably not quite at full employment 41 00:02:18,960 --> 00:02:20,720 Speaker 1: yet in the United States, right. I mean, I think 42 00:02:20,720 --> 00:02:22,440 Speaker 1: a lot of people think of full employment as somewhere 43 00:02:22,440 --> 00:02:24,160 Speaker 1: between four and four and a half percent. I think 44 00:02:24,200 --> 00:02:27,000 Speaker 1: it's reasonable to actually wonder allowed or really between three 45 00:02:27,040 --> 00:02:29,240 Speaker 1: and a half and four percent from a full employment perspective. 46 00:02:29,360 --> 00:02:31,919 Speaker 1: And if that's true, if that thesis is true, then 47 00:02:31,960 --> 00:02:34,399 Speaker 1: what that means is that there's still pipeline wage pressure. Again, 48 00:02:34,440 --> 00:02:36,040 Speaker 1: something else Tom and I talked about on on air 49 00:02:36,080 --> 00:02:38,720 Speaker 1: a little earlier. But I would say that if you 50 00:02:38,800 --> 00:02:42,720 Speaker 1: consider that, UM, the tighter labor markets get, or as 51 00:02:42,840 --> 00:02:45,560 Speaker 1: labor markets get the most tight, I e. Once you 52 00:02:45,600 --> 00:02:48,359 Speaker 1: get down toward full employment, that's when wage pressures really 53 00:02:48,360 --> 00:02:49,720 Speaker 1: start to take off. So I would tell you that 54 00:02:49,720 --> 00:02:53,639 Speaker 1: I think there's pipeline pressure, not just actual pressure. Today, Tom, 55 00:02:53,680 --> 00:02:55,359 Speaker 1: you're thinking out loud, do you get the impression that 56 00:02:55,400 --> 00:02:57,680 Speaker 1: the Federal Reserve is doing the same thing I do? 57 00:02:58,040 --> 00:03:00,080 Speaker 1: In fact, you know, look at the beige book. I 58 00:03:00,080 --> 00:03:02,040 Speaker 1: mean you know that that the Fed's homegrown piece, right, 59 00:03:02,120 --> 00:03:04,120 Speaker 1: it's within the bage book. We have this great we 60 00:03:04,120 --> 00:03:06,520 Speaker 1: have a couple of great indicators within the bage book. UM. 61 00:03:06,760 --> 00:03:09,120 Speaker 1: We've we've sort of scraped the bage book over the decades, 62 00:03:09,280 --> 00:03:11,320 Speaker 1: and we have something called the bage Book Labor Shortage 63 00:03:11,320 --> 00:03:14,360 Speaker 1: Index UM. And if you overlay that with the unemployment rate, 64 00:03:14,400 --> 00:03:17,400 Speaker 1: it actually has a fantastic relationship. UM. And guess what 65 00:03:17,440 --> 00:03:19,640 Speaker 1: you continue to hear from the Page book, UM that 66 00:03:19,720 --> 00:03:22,079 Speaker 1: their companies are really having a heck of a hard 67 00:03:22,080 --> 00:03:24,799 Speaker 1: time finding qualified workers and they're paying up for it. 68 00:03:25,120 --> 00:03:27,560 Speaker 1: And we should say this with great, great love and 69 00:03:27,680 --> 00:03:30,959 Speaker 1: honor to the late Richard Yamarona Bloomberg, who was really 70 00:03:30,960 --> 00:03:35,480 Speaker 1: out front and re re affirming the value of the 71 00:03:35,480 --> 00:03:38,080 Speaker 1: Beige Book. And what you see there and what this 72 00:03:38,160 --> 00:03:42,000 Speaker 1: comes down to, Tom Porcelli, Everyone listening coast to coast 73 00:03:42,160 --> 00:03:47,960 Speaker 1: is saying, Okay, raise wages. So when you'll find the people. Yeah, 74 00:03:48,040 --> 00:03:51,160 Speaker 1: so it's happening. So I I would tell you that 75 00:03:51,160 --> 00:03:53,920 Speaker 1: it's happening already. So look at so the Atlanta Fed. 76 00:03:54,000 --> 00:03:56,560 Speaker 1: Right again just picking on sort of the Fed data. Um, 77 00:03:56,640 --> 00:04:00,280 Speaker 1: look at the Atlanta Fed. They have the wage accord 78 00:04:00,360 --> 00:04:02,400 Speaker 1: and when the breakdown of the tracker is pretty interesting, right, 79 00:04:02,560 --> 00:04:06,360 Speaker 1: they have um wage wage tracker for job leavers, So 80 00:04:06,400 --> 00:04:08,520 Speaker 1: someone who left a job to go take another and 81 00:04:08,560 --> 00:04:11,119 Speaker 1: for jobs stay or someone who's just staying at a job, um, 82 00:04:11,120 --> 00:04:14,040 Speaker 1: And the spread is about a full percentage point higher 83 00:04:14,640 --> 00:04:17,320 Speaker 1: for people that are leaving to take a job, So 84 00:04:17,440 --> 00:04:20,160 Speaker 1: you're being rewarded for taking a job right now. Um, 85 00:04:20,200 --> 00:04:22,840 Speaker 1: So yeah, I think it's already happening. And again it's 86 00:04:22,880 --> 00:04:25,760 Speaker 1: a speed question, right, like is it happening to the 87 00:04:25,800 --> 00:04:28,800 Speaker 1: speed to which people want it to happening? That is 88 00:04:28,800 --> 00:04:31,880 Speaker 1: a philosophical view, you know, Like I I can't get 89 00:04:31,880 --> 00:04:34,080 Speaker 1: into that philosophical view on that. Tell me what your 90 00:04:34,080 --> 00:04:35,520 Speaker 1: expectations were, and I'll tell you if you were going 91 00:04:35,560 --> 00:04:38,760 Speaker 1: to be wrong, you know. Um, But the reality is 92 00:04:38,800 --> 00:04:41,960 Speaker 1: wage pressures have already materializing, will continue to materialize given 93 00:04:42,000 --> 00:04:43,640 Speaker 1: some of the things we just talked about. Sumple Sully 94 00:04:43,760 --> 00:04:45,679 Speaker 1: right to catch up with this morning on scary thoughts 95 00:04:45,680 --> 00:04:48,000 Speaker 1: on the on the labor market and payrolls coming out 96 00:04:47,880 --> 00:04:50,560 Speaker 1: of eight thirty East and sample Sully jointing us from 97 00:04:50,600 --> 00:04:53,240 Speaker 1: rb C. The capital market is chief US economists tell 98 00:04:53,480 --> 00:04:56,320 Speaker 1: we would usually talk to Mr Purcelli for two to 99 00:04:56,400 --> 00:04:59,400 Speaker 1: three hours here, but we can't today because we have 100 00:04:59,520 --> 00:05:02,479 Speaker 1: national lose not a trade war. I'm not willing to 101 00:05:02,520 --> 00:05:05,800 Speaker 1: say that yet, but boy was yesterday and eventful. As 102 00:05:05,800 --> 00:05:07,680 Speaker 1: we try to do on surveillance, we try to bring 103 00:05:07,760 --> 00:05:11,960 Speaker 1: you the nation's experts, people really thinking about this, and 104 00:05:12,000 --> 00:05:14,000 Speaker 1: that would be Edward Old and Ted Alden of the 105 00:05:14,040 --> 00:05:17,000 Speaker 1: Consul on Foreign Relations. I can't say enough about his 106 00:05:17,040 --> 00:05:20,960 Speaker 1: book Failure to Adjust. Ted Alden, what is the failure 107 00:05:21,000 --> 00:05:25,120 Speaker 1: to adjust that President Trump is doing right now? Well, 108 00:05:25,160 --> 00:05:29,680 Speaker 1: he's you know, his basic approach is that there are 109 00:05:30,040 --> 00:05:32,320 Speaker 1: you know a number of Americans have not done well 110 00:05:32,680 --> 00:05:34,920 Speaker 1: in uh in recent years. You know. I talk about 111 00:05:34,960 --> 00:05:37,560 Speaker 1: them as being those left behind in my book. And 112 00:05:37,760 --> 00:05:39,839 Speaker 1: President Trump's approach to this is to say, well, the 113 00:05:39,880 --> 00:05:42,680 Speaker 1: foreigners are to blame for what's gone wrong in your lives. 114 00:05:43,200 --> 00:05:46,320 Speaker 1: And he's you know, going after our allies on trade. 115 00:05:46,320 --> 00:05:48,720 Speaker 1: He's obviously doing the same thing on immigration in different ways. 116 00:05:48,760 --> 00:05:52,800 Speaker 1: So so he's really trying to externalize this problem. And 117 00:05:52,800 --> 00:05:55,080 Speaker 1: and I fear, unfortunately he's going to make the problem 118 00:05:55,200 --> 00:05:57,640 Speaker 1: much bigger. You know, I know the economic news is 119 00:05:57,640 --> 00:06:00,320 Speaker 1: pretty good, but there's a huge layer of uncertainty here 120 00:06:00,600 --> 00:06:02,440 Speaker 1: as a result of these trade acts. In the in 121 00:06:02,480 --> 00:06:06,679 Speaker 1: the micro theory, the microeconomics of terroiffs, and this applied 122 00:06:06,680 --> 00:06:09,880 Speaker 1: to me on the typical martialian cross. There's all of 123 00:06:09,920 --> 00:06:12,440 Speaker 1: this stuff, and part of it is the deadweight loss. 124 00:06:12,600 --> 00:06:15,800 Speaker 1: Is the deadweight loss of this trade war different than 125 00:06:15,839 --> 00:06:19,080 Speaker 1: the eight deadweight losses of the eight last trade wars 126 00:06:19,400 --> 00:06:22,880 Speaker 1: going back to the seventeenth century. And we don't know 127 00:06:22,920 --> 00:06:24,920 Speaker 1: the answer to that question yet. I mean, yeah, there's 128 00:06:24,960 --> 00:06:27,200 Speaker 1: always you know, there's always huge deadweight loss in the 129 00:06:27,200 --> 00:06:29,520 Speaker 1: trade war, and there will be in this one too. 130 00:06:29,560 --> 00:06:31,719 Speaker 1: We just we just don't know how big it's gonna get. 131 00:06:31,839 --> 00:06:33,920 Speaker 1: I mean, we this may be as far as it goes. 132 00:06:33,960 --> 00:06:36,560 Speaker 1: If I had to predict, I would argue that there's 133 00:06:36,600 --> 00:06:38,760 Speaker 1: several more shoes to drop. But but we just don't 134 00:06:38,760 --> 00:06:42,600 Speaker 1: know yet. This president is obviously very unpredictable and uh 135 00:06:42,960 --> 00:06:44,680 Speaker 1: and and so he keeps us all guessing about what 136 00:06:44,720 --> 00:06:46,320 Speaker 1: the next move is gonna be. And is there something 137 00:06:46,360 --> 00:06:49,039 Speaker 1: we could characterize at this point as a trite war 138 00:06:49,080 --> 00:06:51,720 Speaker 1: if this is as far as it goes, um, I 139 00:06:52,200 --> 00:06:55,760 Speaker 1: would actually, you know, and I'm among those, I'm among 140 00:06:55,760 --> 00:06:57,880 Speaker 1: those who's been very reluctant to use that term. But 141 00:06:57,920 --> 00:07:00,520 Speaker 1: to me, a trade war is tipped for had terror 142 00:07:00,600 --> 00:07:04,240 Speaker 1: retaliation outside the rules of the trading system, and the 143 00:07:04,360 --> 00:07:06,800 Speaker 1: US action here. This claim that this is based on 144 00:07:06,920 --> 00:07:10,040 Speaker 1: national securities a bogus claim. It's a pretty clear violation 145 00:07:10,080 --> 00:07:11,840 Speaker 1: of the w t O rules. And in fact, the 146 00:07:11,960 --> 00:07:16,360 Speaker 1: retaliation by our trading partners also falls outside w t 147 00:07:16,400 --> 00:07:19,800 Speaker 1: O rules. They they are making up this story that 148 00:07:19,880 --> 00:07:23,200 Speaker 1: this is in a national security move. It's a conventional safeguard, 149 00:07:23,560 --> 00:07:26,360 Speaker 1: and therefore they are justified in you know, in the 150 00:07:26,440 --> 00:07:31,120 Speaker 1: language of trading grom suspending equivalent concessions. So it's bogus 151 00:07:31,160 --> 00:07:32,920 Speaker 1: on both sides. So to me, that really is trade 152 00:07:32,920 --> 00:07:38,640 Speaker 1: war territory. How is aluminum a national security concern? Well, 153 00:07:38,680 --> 00:07:40,520 Speaker 1: I mean it can be right, and so can still 154 00:07:40,560 --> 00:07:44,040 Speaker 1: be there important for for a lot of defense applications, 155 00:07:44,120 --> 00:07:46,880 Speaker 1: for you know, for airplanes, for tanks, for other things. 156 00:07:47,120 --> 00:07:49,559 Speaker 1: You can at times make an argument that these things 157 00:07:49,920 --> 00:07:52,560 Speaker 1: are very important for national security. What what was very 158 00:07:52,640 --> 00:07:55,400 Speaker 1: strange about the way this administration approached it is every 159 00:07:55,440 --> 00:07:59,000 Speaker 1: time these analyzes have been done in the past, allies 160 00:07:59,040 --> 00:08:01,560 Speaker 1: were included as part of the defense industrial base. You know. 161 00:08:01,600 --> 00:08:04,880 Speaker 1: The notion that Canada somehow would not be a reliable 162 00:08:04,960 --> 00:08:08,120 Speaker 1: supplier of stealing illumined to the United States in time 163 00:08:08,160 --> 00:08:12,360 Speaker 1: of war is ludicrous. And yet that is the interpretation 164 00:08:12,440 --> 00:08:15,920 Speaker 1: that the Trump administration made in order to justify these actions. 165 00:08:15,960 --> 00:08:17,520 Speaker 1: So I tend what we have here really is a 166 00:08:17,560 --> 00:08:20,680 Speaker 1: disagreement over the approach the administration is taking because I 167 00:08:20,680 --> 00:08:22,920 Speaker 1: find it very hard to disagree with the problems the 168 00:08:22,920 --> 00:08:27,000 Speaker 1: administration identifies. There are quite clearly substantial barriers to entry 169 00:08:27,000 --> 00:08:30,480 Speaker 1: in foreign markets and heavily subsidized industries elsewhere. We do 170 00:08:30,600 --> 00:08:33,200 Speaker 1: not have a level playing field. So Ted, let's talk 171 00:08:33,200 --> 00:08:36,320 Speaker 1: more about the approach. You've taken issue with the approach. 172 00:08:36,920 --> 00:08:38,959 Speaker 1: What should they be doing to get these barriers to 173 00:08:39,080 --> 00:08:41,079 Speaker 1: entry to below with two level the playing field and 174 00:08:41,120 --> 00:08:43,600 Speaker 1: the way they desire. Well, if you look at where 175 00:08:43,600 --> 00:08:46,600 Speaker 1: the biggest barriers to entry are there in China, and 176 00:08:46,800 --> 00:08:49,800 Speaker 1: you know, this administration has picked trade fights with its 177 00:08:49,840 --> 00:08:53,320 Speaker 1: closest allies instead of building some kind of coalition to 178 00:08:53,440 --> 00:08:56,520 Speaker 1: go after the underlying problems in China. To the extent 179 00:08:56,559 --> 00:08:58,679 Speaker 1: that there are barriers in other countries, ensure they are 180 00:08:58,760 --> 00:09:01,280 Speaker 1: you know, there are issues with you know, dairy access 181 00:09:01,320 --> 00:09:03,920 Speaker 1: in Canada. The Europeans have a higher auto tariff than 182 00:09:04,000 --> 00:09:07,480 Speaker 1: than we do. There are negotiating procedures to try to 183 00:09:07,520 --> 00:09:09,800 Speaker 1: deal with those things under NAFTA into the w t O. 184 00:09:10,160 --> 00:09:13,040 Speaker 1: The Europeans are willing to do a bilateral deal. They 185 00:09:13,080 --> 00:09:15,080 Speaker 1: have been for a long time. So there are other 186 00:09:15,080 --> 00:09:18,920 Speaker 1: ways to go after these problems. This administration's theory is 187 00:09:18,960 --> 00:09:22,440 Speaker 1: that if they threaten and punish enough, other countries will 188 00:09:22,440 --> 00:09:25,440 Speaker 1: make bigger concessions than they would have otherwise. So far, 189 00:09:25,559 --> 00:09:28,040 Speaker 1: with the exception of South Korea, which agreed to a 190 00:09:28,120 --> 00:09:31,080 Speaker 1: significant cut in its steel exports the United States, that 191 00:09:31,240 --> 00:09:33,760 Speaker 1: theory has proven to be a failure. Instead, other countries 192 00:09:33,760 --> 00:09:35,920 Speaker 1: are hitting back. They're they're not knuckling under to this 193 00:09:36,000 --> 00:09:37,920 Speaker 1: kind of pressure. Ted, thank you so much for this 194 00:09:38,040 --> 00:09:41,000 Speaker 1: timely interview. I'll put out, folks and feature on Tom 195 00:09:41,080 --> 00:09:44,880 Speaker 1: king books Failure to Adjust How Americans got left behind 196 00:09:45,240 --> 00:10:03,439 Speaker 1: in the global economy. And now, folks for your briefing 197 00:10:03,559 --> 00:10:08,040 Speaker 1: and Deutsche Bank we are advantaged by Eliza Martin newsy 198 00:10:08,240 --> 00:10:11,240 Speaker 1: Deutsche Bank stock is down a hundred and forty since 199 00:10:11,280 --> 00:10:14,520 Speaker 1: Alisa started writing about Deutsche Bank more than a few 200 00:10:14,600 --> 00:10:18,880 Speaker 1: years ago at Lisa Good Morning. What is different now 201 00:10:20,000 --> 00:10:24,000 Speaker 1: versus the rationalizations of a year ago, or frankly, the 202 00:10:24,080 --> 00:10:28,320 Speaker 1: rationalizations of Ackerman any number of years ago. What's different 203 00:10:28,480 --> 00:10:31,080 Speaker 1: right now? I think if we want to take this 204 00:10:31,120 --> 00:10:34,480 Speaker 1: particular moment, in this particular marriage of bad news and 205 00:10:34,559 --> 00:10:36,959 Speaker 1: compare it to the last time they were in a 206 00:10:37,000 --> 00:10:40,360 Speaker 1: similar situation. You want to look at two numbers. One 207 00:10:40,480 --> 00:10:44,160 Speaker 1: is the liquidity buffer, and that shows how much liquidity 208 00:10:44,200 --> 00:10:45,920 Speaker 1: the bank is sitting on at the moment, and that 209 00:10:46,080 --> 00:10:49,600 Speaker 1: is higher than it was in when it was a 210 00:10:49,600 --> 00:10:51,880 Speaker 1: bigger bank. So that points to the bank being in 211 00:10:51,880 --> 00:10:55,520 Speaker 1: a much more comfortable position right now. Um. And the 212 00:10:55,559 --> 00:10:59,080 Speaker 1: other metrics that investors might look at is the measure 213 00:10:59,080 --> 00:11:01,800 Speaker 1: of financial strength, the common equity tier one way shot, 214 00:11:01,840 --> 00:11:04,599 Speaker 1: and again that that number is significantly higher than it 215 00:11:04,640 --> 00:11:07,640 Speaker 1: was in twenty sixteen when the bank was the midst 216 00:11:07,640 --> 00:11:10,480 Speaker 1: of discussions about a large fine. You and I have 217 00:11:10,559 --> 00:11:15,520 Speaker 1: read the articles of liquidity versus solvency, and this is 218 00:11:15,559 --> 00:11:18,400 Speaker 1: really what happens when trust is at risk. Are we 219 00:11:18,559 --> 00:11:22,880 Speaker 1: at that point where with Deutsche Bank, their customers are saying, 220 00:11:23,480 --> 00:11:28,440 Speaker 1: let's measure the liquidity, let's measure the solvency. We're not 221 00:11:28,480 --> 00:11:31,200 Speaker 1: getting that sense at all at the moment. Clearly they 222 00:11:31,360 --> 00:11:33,360 Speaker 1: You know, the bank has communicated that it has been 223 00:11:33,400 --> 00:11:36,560 Speaker 1: a difficult quarter, um, and we've seen that for for 224 00:11:36,600 --> 00:11:40,840 Speaker 1: the last couple of years. The erosion of business that 225 00:11:40,920 --> 00:11:43,440 Speaker 1: the bank has suffered, and not just in business's words 226 00:11:43,440 --> 00:11:46,480 Speaker 1: for trenching, but beyond those just because you know, clients 227 00:11:46,480 --> 00:11:48,400 Speaker 1: are not are not sure whether the bank is going 228 00:11:48,440 --> 00:11:50,840 Speaker 1: to be around with the same remit in a in 229 00:11:50,880 --> 00:11:53,240 Speaker 1: a couple of years, and that's led to them losing 230 00:11:53,240 --> 00:11:55,480 Speaker 1: some businesses they didn't want to lose. And I think 231 00:11:55,520 --> 00:11:58,319 Speaker 1: what they will investors will be looking for quickly from 232 00:11:58,400 --> 00:12:01,120 Speaker 1: Christians Saving the new CEO is that he's able to 233 00:12:01,200 --> 00:12:03,120 Speaker 1: draw a line under that and then you know, put 234 00:12:03,120 --> 00:12:05,920 Speaker 1: a stop to that erosion and and and see the 235 00:12:05,960 --> 00:12:07,959 Speaker 1: bank growing in the businesses and wants to keep and 236 00:12:08,040 --> 00:12:10,200 Speaker 1: the Liza, we should highlight what you've basically touched on 237 00:12:10,320 --> 00:12:12,839 Speaker 1: is that the downgrade from standard and pause in the 238 00:12:12,920 --> 00:12:15,480 Speaker 1: last twenty four hours was not about liquidity. In fact, 239 00:12:15,480 --> 00:12:19,000 Speaker 1: they highlighted that being okay, It was about execution risk 240 00:12:19,040 --> 00:12:22,760 Speaker 1: of the overall strategy and significant execution risk. What can 241 00:12:22,840 --> 00:12:26,720 Speaker 1: Christian Saving actually do to push away these concerns around 242 00:12:26,760 --> 00:12:29,960 Speaker 1: the execution of his strategy. But one thing they'll be 243 00:12:30,000 --> 00:12:32,440 Speaker 1: looking at is, you know how much you know the 244 00:12:32,480 --> 00:12:35,480 Speaker 1: costs he can keep costs under control um and that 245 00:12:35,679 --> 00:12:38,840 Speaker 1: was one error that the previous management failed in. And 246 00:12:38,880 --> 00:12:41,520 Speaker 1: they also want to see that you know, he's pushing 247 00:12:41,600 --> 00:12:45,200 Speaker 1: through the job cuts that he's announced um, and that 248 00:12:45,280 --> 00:12:47,559 Speaker 1: he's retrenching where he said he would. So it's really 249 00:12:47,559 --> 00:12:50,640 Speaker 1: the execution and delivering on that execution, and that is 250 00:12:50,679 --> 00:12:54,120 Speaker 1: other banks have shown when they've undertaken on similar structuring. 251 00:12:54,400 --> 00:12:56,640 Speaker 1: Take for example, the u B S is something they 252 00:12:56,679 --> 00:13:00,160 Speaker 1: have to prove every quarter to maintain investor support. So 253 00:13:00,200 --> 00:13:03,440 Speaker 1: we learned yesterday in several reports too. I believe that 254 00:13:03,520 --> 00:13:06,920 Speaker 1: the bank, the US subsidiary of the bank, is on 255 00:13:06,960 --> 00:13:09,760 Speaker 1: the f d i C Problem Bank List. How much 256 00:13:09,760 --> 00:13:13,560 Speaker 1: of an issue is that if that is indeed true, Well, 257 00:13:13,600 --> 00:13:15,360 Speaker 1: I think you know, you'd probably be looking at a 258 00:13:15,360 --> 00:13:20,680 Speaker 1: couple of concerns. One is obviously the mark that leaves 259 00:13:20,679 --> 00:13:23,360 Speaker 1: on the bank, so the pr associated with being on 260 00:13:23,360 --> 00:13:26,520 Speaker 1: that list, which obviously isn't god. And you've also got 261 00:13:26,520 --> 00:13:30,200 Speaker 1: to think about potential restrictions on on on some of 262 00:13:30,240 --> 00:13:33,240 Speaker 1: the decision making process that we understand might have been 263 00:13:33,240 --> 00:13:36,480 Speaker 1: imposed on the bank. Um. But you know, having said 264 00:13:36,520 --> 00:13:39,400 Speaker 1: that there's no there's no measuring offense yet that it's 265 00:13:39,480 --> 00:13:43,520 Speaker 1: led to a particular reaction from clients as a result 266 00:13:43,559 --> 00:13:45,960 Speaker 1: of being on that list. And at the moment you'd 267 00:13:45,960 --> 00:13:49,400 Speaker 1: have to say that morale Eliza must absolutely stink at 268 00:13:49,400 --> 00:13:51,280 Speaker 1: the Bank, and I think Christian's Eving, the CEO of 269 00:13:51,280 --> 00:13:54,360 Speaker 1: Dorge Bank, acknowledging that fact, how difficult is it working 270 00:13:54,360 --> 00:13:57,480 Speaker 1: inside Dorge Bank at the moment. It's actually quite quite 271 00:13:57,480 --> 00:14:01,320 Speaker 1: interesting because unlike his predecessor to and Servings message hitherto 272 00:14:01,400 --> 00:14:04,200 Speaker 1: had been morather positive, today's message was you know, it 273 00:14:04,200 --> 00:14:07,680 Speaker 1: seems seemingly much more realistic in that his acknowledging that 274 00:14:07,800 --> 00:14:10,360 Speaker 1: you know, staff is fed up with all the bad 275 00:14:10,400 --> 00:14:13,760 Speaker 1: news um, and it was much more intelle like crime 276 00:14:13,920 --> 00:14:17,640 Speaker 1: used to be in underscoring just how tough that situation is. 277 00:14:17,720 --> 00:14:20,320 Speaker 1: Right now, you're the board members Mark plat or Clee, 278 00:14:20,320 --> 00:14:25,280 Speaker 1: Garrett Cox, Brittisy Hyder Rose, you're Game Matting's board, Douche 279 00:14:25,560 --> 00:14:29,520 Speaker 1: Simon Eschelbach Schultz and a few others. What in God's 280 00:14:29,600 --> 00:14:33,320 Speaker 1: name are they doing well. I think what we've seen 281 00:14:33,400 --> 00:14:37,400 Speaker 1: on the recent management reshuffle, which was, you know, rather tumultuous, 282 00:14:37,600 --> 00:14:40,840 Speaker 1: is that, you know, the governance UM and then the 283 00:14:40,840 --> 00:14:43,920 Speaker 1: government's under Paul last night and the chairman's leadership has 284 00:14:43,960 --> 00:14:47,720 Speaker 1: been questioned by investors because so much management change of 285 00:14:47,760 --> 00:14:49,840 Speaker 1: the course of the last three or four years, so 286 00:14:49,920 --> 00:14:52,400 Speaker 1: many strategy revamps. I mean, we're talking about three and 287 00:14:52,480 --> 00:14:55,280 Speaker 1: three years have raised questions about you know exactly what 288 00:14:55,320 --> 00:14:57,640 Speaker 1: you're asking, what you know, what has the board been doing? 289 00:14:58,600 --> 00:15:00,320 Speaker 1: This has been brilliant at least a thing. You so 290 00:15:00,400 --> 00:15:03,120 Speaker 1: much and thank you for your years of work on Italian, 291 00:15:03,200 --> 00:15:06,280 Speaker 1: German and European banking as well. These are Martin Newsy 292 00:15:06,600 --> 00:15:26,280 Speaker 1: with Bloomberg News this morning and now joining us William 293 00:15:26,320 --> 00:15:29,280 Speaker 1: Gross of Janice Henderson. Bill Gross, Let's let's get to 294 00:15:29,320 --> 00:15:31,560 Speaker 1: the jobs report before we go on to other issues, 295 00:15:31,600 --> 00:15:36,000 Speaker 1: including our trade policy of the nation. But this is 296 00:15:36,120 --> 00:15:41,480 Speaker 1: Bill Gross, a make America Great Again jobs report? Does 297 00:15:41,520 --> 00:15:46,440 Speaker 1: that just solidify rate increases? And can those rate increases 298 00:15:46,520 --> 00:15:53,720 Speaker 1: be uniformly beneficial for America? Well? I think it solidifies certainly, 299 00:15:53,840 --> 00:15:56,280 Speaker 1: June tom and that's not saying much because I was 300 00:15:57,440 --> 00:16:01,120 Speaker 1: percent going in. But you know, but perhaps another one 301 00:16:01,160 --> 00:16:03,960 Speaker 1: if these types of numbers continue. I think the most 302 00:16:03,960 --> 00:16:07,280 Speaker 1: important number to me was the average hourly earnings at 303 00:16:07,320 --> 00:16:10,960 Speaker 1: point three and now annualized at the two point seven percent. 304 00:16:11,040 --> 00:16:14,520 Speaker 1: And so, you know, are we making America great again? 305 00:16:15,200 --> 00:16:17,160 Speaker 1: I guess from the standpoint of jobs and g d 306 00:16:17,280 --> 00:16:21,200 Speaker 1: p M inflation moving higher in terms of wages and 307 00:16:21,240 --> 00:16:24,280 Speaker 1: so you know, it's pretty much of a scenario where 308 00:16:24,280 --> 00:16:28,200 Speaker 1: the Fed, the FED hawks basically think that they can 309 00:16:28,400 --> 00:16:32,160 Speaker 1: move forward once twice, some say three times. I say 310 00:16:32,880 --> 00:16:35,400 Speaker 1: June is the last. Oh, that's an important and that's 311 00:16:35,400 --> 00:16:37,520 Speaker 1: a distinctive feature. We'll get to that in a moment. 312 00:16:37,560 --> 00:16:39,880 Speaker 1: But Bill Gross, what's so important here? This goes to 313 00:16:39,960 --> 00:16:43,880 Speaker 1: your work on financial repression out years. We get a 314 00:16:43,960 --> 00:16:48,520 Speaker 1: higher rate regime, fine, but with that higher inflation, can 315 00:16:48,560 --> 00:16:52,000 Speaker 1: you see a higher real rate? Can you see higher 316 00:16:52,280 --> 00:16:57,760 Speaker 1: real wages? Well, we have seen higher real rates actually, Tom, 317 00:16:57,800 --> 00:17:01,200 Speaker 1: Although yields have come down in the last several weeks, 318 00:17:01,560 --> 00:17:04,520 Speaker 1: you know, most of the increase has has been on 319 00:17:04,600 --> 00:17:06,800 Speaker 1: the real side. On the tips side, in terms of 320 00:17:06,800 --> 00:17:09,600 Speaker 1: their yields, we have a ten year reel yield around 321 00:17:09,640 --> 00:17:13,960 Speaker 1: seventy basis points um, a five year a little bit less, 322 00:17:13,960 --> 00:17:17,440 Speaker 1: and so you know, real reels are not what they were, 323 00:17:17,640 --> 00:17:21,239 Speaker 1: but they're better than zero. And it's not exactly the 324 00:17:21,240 --> 00:17:24,920 Speaker 1: financial repression that we knew three or four years ago 325 00:17:25,000 --> 00:17:28,840 Speaker 1: with interest rates closed to zero. But it's getting better still. 326 00:17:28,920 --> 00:17:31,479 Speaker 1: I would say that we're in for a long period 327 00:17:31,480 --> 00:17:36,080 Speaker 1: of financial repression. As real yields that should be around 328 00:17:36,119 --> 00:17:39,919 Speaker 1: two percent real or at seventy basis points, so that 329 00:17:40,160 --> 00:17:43,520 Speaker 1: the average saver has been robbed by a percent or 330 00:17:43,680 --> 00:17:45,440 Speaker 1: two a year. But I didn't want to take the 331 00:17:45,480 --> 00:17:48,680 Speaker 1: opportunity to talk about your performance. It's been a week 332 00:17:48,720 --> 00:17:51,359 Speaker 1: which many people have reported on your funds performance, and 333 00:17:51,520 --> 00:17:53,080 Speaker 1: I think it's only right and only fair that we 334 00:17:53,080 --> 00:17:55,600 Speaker 1: give you the opportunity and the right to respond to 335 00:17:55,880 --> 00:17:59,120 Speaker 1: some of what has been criticism um of your strategy. 336 00:17:59,160 --> 00:18:01,200 Speaker 1: Can you just walk us through what did happen this 337 00:18:01,280 --> 00:18:03,560 Speaker 1: week build and how you set up coming out of 338 00:18:03,640 --> 00:18:07,920 Speaker 1: a side Well, you give me some time on this 339 00:18:08,000 --> 00:18:10,920 Speaker 1: and and the strategy basically, which was the basis of 340 00:18:11,000 --> 00:18:15,399 Speaker 1: your question, has been a strategy that has been short 341 00:18:15,480 --> 00:18:19,960 Speaker 1: the German Bund and long U S treasuries. You know, 342 00:18:20,200 --> 00:18:25,760 Speaker 1: the spread between the two is historically high. For instance, 343 00:18:25,840 --> 00:18:29,920 Speaker 1: on on the tenure U S Treasury versus the tenure Bund, 344 00:18:30,000 --> 00:18:33,520 Speaker 1: it's a two fifty basis points. It's never been at 345 00:18:33,560 --> 00:18:37,120 Speaker 1: that level. And for those that would cite the inflation differences, 346 00:18:37,160 --> 00:18:39,240 Speaker 1: I would say, you know, in terms of the linker 347 00:18:39,320 --> 00:18:42,919 Speaker 1: market for buns and the tips market for us on 348 00:18:43,000 --> 00:18:47,560 Speaker 1: the five year basis, real yields on five year tips 349 00:18:47,840 --> 00:18:50,719 Speaker 1: are two in twenty basis points difference two point two 350 00:18:50,760 --> 00:18:54,199 Speaker 1: percent higher in the US and in Germany. And I 351 00:18:54,200 --> 00:18:57,199 Speaker 1: would suggest it at some point, um, you know, this 352 00:18:57,280 --> 00:19:00,560 Speaker 1: has got to reverse because that the two Germany and 353 00:19:00,560 --> 00:19:04,160 Speaker 1: the United States are equal credits. And what's the difference 354 00:19:04,240 --> 00:19:07,879 Speaker 1: is simply the function between the ECB in terms of 355 00:19:07,920 --> 00:19:10,720 Speaker 1: their monetary policy and the FED in terms of their 356 00:19:10,760 --> 00:19:13,879 Speaker 1: monetary policy. And so um. You know, that was the 357 00:19:13,920 --> 00:19:17,439 Speaker 1: basis for the uh, you know, the bad day and 358 00:19:17,480 --> 00:19:20,560 Speaker 1: the bad trade, but certainly not the basis for some 359 00:19:20,640 --> 00:19:24,040 Speaker 1: of the negative publicity from the New York Times that 360 00:19:24,280 --> 00:19:29,480 Speaker 1: intertwined my financial trade with my divorce of six to 361 00:19:29,560 --> 00:19:32,199 Speaker 1: twelve months ago. I think it was outrageous and I 362 00:19:32,240 --> 00:19:35,199 Speaker 1: can talk about that, but you probably talk about some 363 00:19:35,320 --> 00:19:37,160 Speaker 1: other things. Well, I don't know, we can talk about 364 00:19:37,160 --> 00:19:39,000 Speaker 1: that bill. We've got a lot of time here as well. 365 00:19:39,080 --> 00:19:41,440 Speaker 1: I don't know. I'd rather talk about your stamp collection 366 00:19:41,520 --> 00:19:44,640 Speaker 1: or the forty nine years. But this is so important, folks. 367 00:19:44,680 --> 00:19:46,680 Speaker 1: I want to bring us in because you know, we 368 00:19:46,680 --> 00:19:49,159 Speaker 1: we showed the articles the other day on Mr Gross 369 00:19:49,200 --> 00:19:52,919 Speaker 1: and on Janice Henderson unconstrained took a hit here off Italy. 370 00:19:53,280 --> 00:19:55,240 Speaker 1: I want to go to the chart and John Farroll, 371 00:19:55,240 --> 00:19:57,159 Speaker 1: I'm going to go to you, to go to Mr Gross. 372 00:19:57,200 --> 00:19:59,360 Speaker 1: This is what Bill Gross is talking about. Folks, We're 373 00:19:59,359 --> 00:20:02,199 Speaker 1: gonna use the Lumberg ramy come in here. This is 374 00:20:02,240 --> 00:20:05,879 Speaker 1: the linkage of the US and Germany. And Mr Gross 375 00:20:05,960 --> 00:20:09,600 Speaker 1: is looking at sustained higher US yields and at the 376 00:20:09,640 --> 00:20:14,119 Speaker 1: same time this reduced German tenure yield And there's been 377 00:20:14,160 --> 00:20:16,560 Speaker 1: a little bit of upset here, John. So that that 378 00:20:16,760 --> 00:20:21,440 Speaker 1: gap John, between Germany US ten years is massive, is 379 00:20:21,480 --> 00:20:23,399 Speaker 1: the only way to describe it. A Bill Gross, we 380 00:20:23,440 --> 00:20:25,200 Speaker 1: are not going to make you talk about a divorce 381 00:20:25,640 --> 00:20:28,080 Speaker 1: live on Blombag TV and live on block Back Radio. 382 00:20:28,160 --> 00:20:30,960 Speaker 1: So let's keep on the market. Excuse me, No, we 383 00:20:31,000 --> 00:20:33,959 Speaker 1: have a few other divorces we could talk about, Mr. 384 00:20:34,240 --> 00:20:35,920 Speaker 1: We could talk about a few of Tom's and that's 385 00:20:35,920 --> 00:20:37,880 Speaker 1: for sure, we can watch yourself. But we could talk 386 00:20:37,920 --> 00:20:41,479 Speaker 1: about the bund market. Let's talk about buns. The j 387 00:20:41,560 --> 00:20:44,280 Speaker 1: g B market for such a long time was called 388 00:20:44,280 --> 00:20:46,720 Speaker 1: the widow maker, and I just wonder whether the bund 389 00:20:46,760 --> 00:20:49,080 Speaker 1: market could become the same thing. What are your thoughts 390 00:20:49,119 --> 00:20:53,679 Speaker 1: on that? Bill, Well, let's uh, let's let's talk about buns. 391 00:20:53,680 --> 00:20:56,480 Speaker 1: Why are they so low and yield and why basically 392 00:20:56,560 --> 00:21:00,119 Speaker 1: our half of the the buns in terms of the 393 00:21:00,280 --> 00:21:02,840 Speaker 1: maturities all the way out to two thousand and twenty four, 394 00:21:02,920 --> 00:21:06,280 Speaker 1: so we're going out six years, where are they still negative? Well, 395 00:21:06,840 --> 00:21:10,320 Speaker 1: obviously for one reason, the e C b still is 396 00:21:10,359 --> 00:21:13,560 Speaker 1: succeedingly low in terms of their short rate. But secondly, 397 00:21:13,600 --> 00:21:16,359 Speaker 1: and you bring up Italy, you know, I haven't really 398 00:21:16,400 --> 00:21:19,560 Speaker 1: dealt in Italy or been short Italy or along Italy. 399 00:21:20,240 --> 00:21:23,080 Speaker 1: That hasn't been the problem with the trade. But Italy 400 00:21:23,119 --> 00:21:28,080 Speaker 1: affects German buons because ultimately, if Italy, from the standpoint 401 00:21:28,080 --> 00:21:32,720 Speaker 1: of a political direction, you know it decides to leave 402 00:21:32,880 --> 00:21:37,760 Speaker 1: the EU, then the consequences are severe and and Germany 403 00:21:38,440 --> 00:21:40,919 Speaker 1: if the EU breaks up. You know, back in the 404 00:21:41,000 --> 00:21:44,560 Speaker 1: day when when Greece was a significant problem, there was 405 00:21:44,640 --> 00:21:48,200 Speaker 1: talk about Germany leaving the EU because they didn't want 406 00:21:48,200 --> 00:21:50,800 Speaker 1: to share the burden. And so if if Germany leaves 407 00:21:50,800 --> 00:21:53,560 Speaker 1: the EU, then all of a sudden, their bonds, their 408 00:21:53,600 --> 00:21:58,600 Speaker 1: buons become denominated in German marks and that makes them 409 00:21:58,600 --> 00:22:04,480 Speaker 1: appreciate significantly. So Italy affects the German bund market basically 410 00:22:04,640 --> 00:22:09,199 Speaker 1: because of the potential for Italy leaving the EU, and 411 00:22:09,280 --> 00:22:12,440 Speaker 1: that's what's happened in the past week or two. Bill 412 00:22:12,440 --> 00:22:14,880 Speaker 1: Gross with us, said Jennie Henderson. We will return. We've 413 00:22:14,880 --> 00:22:18,280 Speaker 1: got lots to talk about, as John correctly mentions, really 414 00:22:18,400 --> 00:22:21,320 Speaker 1: interesting dynamics within the bond market that Mr Gross and 415 00:22:21,359 --> 00:22:24,040 Speaker 1: off other bond managers have had to deal with. And 416 00:22:24,119 --> 00:22:28,760 Speaker 1: of course the backdrop here is a really strong jobs 417 00:22:28,800 --> 00:22:32,240 Speaker 1: report which good again reaffirms stronger dollar, d X y 418 00:22:32,680 --> 00:22:38,439 Speaker 1: higher as well with yen one euro eight three, lifting 419 00:22:38,520 --> 00:22:40,880 Speaker 1: yields in the bond market using the thirty year bond 420 00:22:40,880 --> 00:22:43,639 Speaker 1: as a proxy three point out six percent. We had 421 00:22:43,640 --> 00:22:47,480 Speaker 1: a lot higher yields here not too long ago Bloomberg 422 00:22:47,560 --> 00:23:04,160 Speaker 1: surveillance with William Gross of Janice Anderson. We continue John 423 00:23:04,200 --> 00:23:07,280 Speaker 1: Brian Allen, Professor Kruger back with us. Alan, I know 424 00:23:07,320 --> 00:23:08,960 Speaker 1: we had some problem with the connection. You are joining 425 00:23:09,040 --> 00:23:10,800 Speaker 1: us from Europe, so we appreciate your time ahead of 426 00:23:10,840 --> 00:23:13,000 Speaker 1: that payroll to release. Let's just talk about the president's 427 00:23:13,000 --> 00:23:16,680 Speaker 1: tweet looking forward to seeing the employment numbers at eight 428 00:23:16,800 --> 00:23:20,720 Speaker 1: thirty this morning. It seems like a very innocent tweet. 429 00:23:20,760 --> 00:23:24,119 Speaker 1: The problem is for market participants fully aware that the 430 00:23:24,160 --> 00:23:27,840 Speaker 1: president has access to those numbers before their release. How 431 00:23:27,920 --> 00:23:30,200 Speaker 1: unprecedented is it for the president to be talking about 432 00:23:30,240 --> 00:23:33,119 Speaker 1: the payrolls and number the morning golf ahead of time. 433 00:23:35,240 --> 00:23:40,160 Speaker 1: I can't remember another example, certainly president tweeting or even 434 00:23:40,240 --> 00:23:44,280 Speaker 1: commenting on the job numbers. They're treated like state secrets. 435 00:23:44,760 --> 00:23:50,679 Speaker 1: So surprising within the Professor Krueger is how this is 436 00:23:50,800 --> 00:23:54,600 Speaker 1: actually done? What do you do hand an envelope to 437 00:23:54,640 --> 00:23:58,960 Speaker 1: the president and say here's one statistic? Does he get 438 00:23:59,000 --> 00:24:02,400 Speaker 1: a full briefing? I mean, is there a procedure to this? 439 00:24:02,560 --> 00:24:06,480 Speaker 1: Like the military guy that carries the bomb codes behind 440 00:24:06,520 --> 00:24:10,040 Speaker 1: the president? How do you actually tell a president what 441 00:24:10,160 --> 00:24:15,760 Speaker 1: the jobs report will be? Excellent question? Uh. First of all, Tom, 442 00:24:15,840 --> 00:24:19,520 Speaker 1: going back to the Nixon administration, the Office of Management 443 00:24:19,640 --> 00:24:24,520 Speaker 1: the Budgets has procedures for how sensitive economic indicators are 444 00:24:24,560 --> 00:24:30,120 Speaker 1: to be treated and UH they require that government administration 445 00:24:30,160 --> 00:24:33,640 Speaker 1: officials did not comment on sensitive numbers until after one 446 00:24:33,680 --> 00:24:37,760 Speaker 1: hour after they released. UH. Is dictates who can receive 447 00:24:37,840 --> 00:24:40,800 Speaker 1: the numbers ahead of time and how they should be 448 00:24:41,560 --> 00:24:46,400 Speaker 1: UH transmitted. Um. Different presidents do things differently. I could 449 00:24:46,400 --> 00:24:50,760 Speaker 1: tell you with President Obama on most Thursdays before the 450 00:24:50,840 --> 00:24:52,919 Speaker 1: job release, I would head over to the Oval office 451 00:24:53,240 --> 00:24:56,200 Speaker 1: and greets among the numbers. In person, I would also 452 00:24:56,280 --> 00:24:59,000 Speaker 1: bring a one page memo with me which talked about 453 00:24:59,840 --> 00:25:02,840 Speaker 1: h top line numbers and on job roots and the 454 00:25:02,840 --> 00:25:08,240 Speaker 1: table survey, plummer rate before participation, wage growth, the key 455 00:25:08,400 --> 00:25:11,640 Speaker 1: UH component of the report. And of course if something 456 00:25:11,640 --> 00:25:13,280 Speaker 1: else stood out and there was an issue with the 457 00:25:13,280 --> 00:25:15,479 Speaker 1: weather or something like that, the metal would cover it. 458 00:25:15,520 --> 00:25:18,439 Speaker 1: But normally I would spend tent to teen minutes reefing 459 00:25:18,480 --> 00:25:22,119 Speaker 1: the President on the report, and if he was not 460 00:25:22,320 --> 00:25:24,720 Speaker 1: in the White House, sometimes I would reach him by 461 00:25:24,760 --> 00:25:27,320 Speaker 1: secure phone. I remember I called him once on Air 462 00:25:27,359 --> 00:25:30,520 Speaker 1: Force one on a secure phone. I called him the 463 00:25:30,600 --> 00:25:33,240 Speaker 1: night before the Democratic Convention before his speech at the 464 00:25:33,240 --> 00:25:37,080 Speaker 1: convention on the secure phone. UM and a member of 465 00:25:37,119 --> 00:25:40,160 Speaker 1: Time where I just sent in a memo, didn't actually 466 00:25:40,359 --> 00:25:43,680 Speaker 1: talk to him by phone or in person. I am seeing. 467 00:25:43,720 --> 00:25:46,200 Speaker 1: Are we gotta be very careful, folks. We welcome all 468 00:25:46,240 --> 00:25:49,640 Speaker 1: of you worldwide with Alan Krueger of Princeton University. These 469 00:25:49,680 --> 00:25:52,320 Speaker 1: are delicate matters, and John and I and our team, 470 00:25:52,359 --> 00:25:55,080 Speaker 1: Collin Tipton and others, we're really trying to keep this 471 00:25:55,160 --> 00:25:59,400 Speaker 1: in order. Futures were up twelve, they're now fractually up thirteen, 472 00:26:00,200 --> 00:26:03,200 Speaker 1: And you know, Alan, if I look, it'll log interday 473 00:26:03,280 --> 00:26:07,200 Speaker 1: chart of the two year yield. The fact is I 474 00:26:07,280 --> 00:26:10,920 Speaker 1: have a move of a hundred and thirteen pips from 475 00:26:10,920 --> 00:26:14,400 Speaker 1: two point four four ish up to two point four 476 00:26:14,560 --> 00:26:19,000 Speaker 1: five one three, which I would suggest, Professor correlates with 477 00:26:19,240 --> 00:26:25,240 Speaker 1: that word good, doesn't it. Well, you know, the reason 478 00:26:25,359 --> 00:26:28,720 Speaker 1: why the O and B has its procedures is to 479 00:26:28,840 --> 00:26:34,679 Speaker 1: prevent unnecessary politization of the numbers, which the nixt administration did, uh, 480 00:26:34,760 --> 00:26:40,359 Speaker 1: and to reduce unnecessary volatility. I think at this point, 481 00:26:40,359 --> 00:26:42,520 Speaker 1: see how he said, like next to new it's very 482 00:26:43,359 --> 00:26:45,600 Speaker 1: he doesn't because I would always I would also take 483 00:26:45,640 --> 00:26:47,679 Speaker 1: the view this morning, Tom that it's very hard to 484 00:26:47,760 --> 00:26:51,359 Speaker 1: infer price action off the back of this tweet. What 485 00:26:51,440 --> 00:26:53,600 Speaker 1: I do think, this tweet writes, though, is a question 486 00:26:53,640 --> 00:26:57,800 Speaker 1: as to whether that privileged access should ultimately exist. What 487 00:26:57,840 --> 00:27:01,000 Speaker 1: are the benefits of having that privilege access. Why should 488 00:27:01,000 --> 00:27:04,840 Speaker 1: the president of any color, Republican, Democrat, whatever that political 489 00:27:04,880 --> 00:27:08,720 Speaker 1: stripes might be, Alan, why should they have access to 490 00:27:08,840 --> 00:27:13,200 Speaker 1: that data? Well, you know, that's an interesting question, John, 491 00:27:13,280 --> 00:27:17,640 Speaker 1: and Um. We want the statical agencies to be independent, 492 00:27:17,760 --> 00:27:20,119 Speaker 1: we want them to have credibility. I think it's very 493 00:27:20,200 --> 00:27:25,880 Speaker 1: unfortunate that people have criticized UH, good regis statistics, made 494 00:27:25,920 --> 00:27:29,520 Speaker 1: unfounded allegations about them making up the numbers. Well, we've 495 00:27:29,520 --> 00:27:31,800 Speaker 1: got another problem there. That's right where I was gonna 496 00:27:31,840 --> 00:27:34,199 Speaker 1: go with my next question. Let's leave it there. With 497 00:27:34,240 --> 00:27:51,400 Speaker 1: Alan Krueger, we thank him from Trent to Italy. Has 498 00:27:51,440 --> 00:27:55,080 Speaker 1: been an extraordinary moment one morning in the history of 499 00:27:55,160 --> 00:28:01,320 Speaker 1: economic analysis, economic statistics, in the communication of said statistics. 500 00:28:01,359 --> 00:28:04,760 Speaker 1: We were honored with Alan Krueger with us earlier today, 501 00:28:04,880 --> 00:28:09,160 Speaker 1: who was cordially scathing in his critique of the president 502 00:28:09,280 --> 00:28:15,320 Speaker 1: releasing UH an early tweet. UM Lawrence Summers, uh is 503 00:28:15,400 --> 00:28:20,440 Speaker 1: well put out a tweet, UH said, uh quite simpler. 504 00:28:20,520 --> 00:28:23,120 Speaker 1: Lawrence Summers put out a tweet the Washington Post as 505 00:28:23,920 --> 00:28:26,720 Speaker 1: if during the clintoner Obama administrations there had been a 506 00:28:26,760 --> 00:28:30,080 Speaker 1: statement from the President or anyone senior official in the 507 00:28:30,119 --> 00:28:32,040 Speaker 1: morning before the employment report, it would have been a 508 00:28:32,040 --> 00:28:36,359 Speaker 1: major scandal, with all sorts of investigations following on the 509 00:28:36,480 --> 00:28:38,920 Speaker 1: moments ago. Yeah, let me share this with you. Does 510 00:28:38,960 --> 00:28:43,320 Speaker 1: a counterpoint to that White House Economic advisor Larry Cudlow 511 00:28:43,960 --> 00:28:49,280 Speaker 1: says that President Trump, that's about the jobs report last night? Yeah, 512 00:28:49,280 --> 00:28:51,320 Speaker 1: I get it, and he says it wasn't meant to 513 00:28:51,320 --> 00:28:54,200 Speaker 1: send a signal. Here's the reality, folks, we deal with 514 00:28:54,240 --> 00:28:57,880 Speaker 1: before we bring in Jason Furman. Here's the reality. You 515 00:28:58,000 --> 00:29:00,840 Speaker 1: and I pim can't move markets. And I've been honor 516 00:29:00,920 --> 00:29:04,240 Speaker 1: it's a very flattering I moved the Japanese yen ones. Great, 517 00:29:04,280 --> 00:29:08,400 Speaker 1: blah blah blah. We're not here to move the two 518 00:29:08,480 --> 00:29:12,000 Speaker 1: year yield. The fact is I observed the two year 519 00:29:12,080 --> 00:29:16,160 Speaker 1: yield with log convexity off of the tweet go up 520 00:29:16,200 --> 00:29:19,920 Speaker 1: ever so slightly. That's our precursor to bringing in dr firm. 521 00:29:19,920 --> 00:29:22,360 Speaker 1: And he's a former chairman of the President's Council of 522 00:29:22,360 --> 00:29:26,800 Speaker 1: Economic Advisors. Jason, you were out first and you were 523 00:29:26,880 --> 00:29:33,280 Speaker 1: scathing discuss the president's tweet. Here, Tom, I got these 524 00:29:33,360 --> 00:29:38,240 Speaker 1: numbers every month in advance. I was authorized to share 525 00:29:38,240 --> 00:29:43,080 Speaker 1: them with the Chair of the Federal Reserve, the Treasury Secretary, 526 00:29:43,280 --> 00:29:46,640 Speaker 1: the NBC director, and the President of the United States. 527 00:29:47,560 --> 00:29:52,200 Speaker 1: I took that really, really seriously and worked hard to 528 00:29:52,280 --> 00:29:55,680 Speaker 1: protect the integrity of the data. Um I can tell 529 00:29:55,720 --> 00:29:58,120 Speaker 1: you that if President Obama had done this tweet, I 530 00:29:58,120 --> 00:30:01,360 Speaker 1: would have had exactly the same action and conveyed it 531 00:30:01,920 --> 00:30:04,360 Speaker 1: directly to him and everyone else in the White House 532 00:30:04,400 --> 00:30:06,920 Speaker 1: that it was a major, major problem that he had 533 00:30:06,920 --> 00:30:10,320 Speaker 1: done it. UM, and I would hope that that's what's 534 00:30:10,320 --> 00:30:12,320 Speaker 1: happening right now in the White House. I mean, I'm 535 00:30:12,320 --> 00:30:16,280 Speaker 1: seeing Mr Cutler and CNBC as we speak, rationalizing this. 536 00:30:16,400 --> 00:30:19,520 Speaker 1: And I'm sure that you know you've always been collegial 537 00:30:19,680 --> 00:30:23,280 Speaker 1: with Dr hess at the present chairman of the president 538 00:30:23,320 --> 00:30:27,360 Speaker 1: Council of Economic Advisors. What do they suggest to General 539 00:30:27,440 --> 00:30:31,000 Speaker 1: Kelly or to the President so this doesn't happen again, 540 00:30:33,080 --> 00:30:37,960 Speaker 1: I don't know, you know. In one would be reminding 541 00:30:38,040 --> 00:30:40,840 Speaker 1: him of the seriousness and importance of this and telling 542 00:30:40,880 --> 00:30:44,280 Speaker 1: him to make sure it doesn't happen again. A second 543 00:30:44,320 --> 00:30:47,600 Speaker 1: option would be not giving him the number. A third 544 00:30:47,600 --> 00:30:49,840 Speaker 1: option to the DLS not giving the number to the 545 00:30:49,840 --> 00:30:53,320 Speaker 1: White House. And the fourth that b LS might want 546 00:30:53,360 --> 00:30:58,680 Speaker 1: to consider is doing what is done by government statistical 547 00:30:58,680 --> 00:31:01,600 Speaker 1: agencies for other data, which is, when part of the 548 00:31:01,720 --> 00:31:04,960 Speaker 1: data comes out in advance, they provide the full release 549 00:31:05,040 --> 00:31:08,560 Speaker 1: immediately before the release time UM. And it's something that 550 00:31:08,640 --> 00:31:11,400 Speaker 1: they might need to be prepared to do UM in 551 00:31:11,440 --> 00:31:13,440 Speaker 1: the event that that ever happens in the future. I 552 00:31:13,440 --> 00:31:16,280 Speaker 1: think these are you know, these are all terrible options. 553 00:31:17,080 --> 00:31:20,040 Speaker 1: I I don't think we should do any of them. 554 00:31:20,720 --> 00:31:22,720 Speaker 1: I don't think we should be happy about doing any 555 00:31:22,760 --> 00:31:24,960 Speaker 1: of them. But I think we have to, um, we 556 00:31:25,040 --> 00:31:28,360 Speaker 1: have to be seriously considering it. Uh. Well, you know, 557 00:31:28,600 --> 00:31:32,040 Speaker 1: Mr Ferman, I'm wondering, just to play devil's advocate here, 558 00:31:33,280 --> 00:31:36,959 Speaker 1: is it possible that you know in previous years, uh, 559 00:31:37,640 --> 00:31:41,640 Speaker 1: that you know there were news conferences that were called 560 00:31:41,680 --> 00:31:46,160 Speaker 1: suddenly for the non farm payroll report on Friday, and 561 00:31:46,560 --> 00:31:48,600 Speaker 1: you have a news conference if that was good, but 562 00:31:48,720 --> 00:31:50,600 Speaker 1: not a news conference if it was bad. I mean, 563 00:31:51,080 --> 00:31:53,440 Speaker 1: hasn't this kind of already been telegraphed in one way 564 00:31:53,520 --> 00:31:55,360 Speaker 1: or another? Is it all that different now in a 565 00:31:55,400 --> 00:31:58,600 Speaker 1: world of instant communications? Should we just expect this to happen? 566 00:31:58,720 --> 00:32:05,000 Speaker 1: Nothing's gonna stay confidential. Oh, we actually took pains to 567 00:32:05,120 --> 00:32:08,640 Speaker 1: avoid that. So if you know, if we would have 568 00:32:08,680 --> 00:32:11,719 Speaker 1: gotten President Obama the number at five pm, but he 569 00:32:11,760 --> 00:32:14,360 Speaker 1: was going to be out at five thirty and taking 570 00:32:14,360 --> 00:32:18,040 Speaker 1: a question, we'd wait until after that to make sure 571 00:32:18,080 --> 00:32:22,400 Speaker 1: it was I understand all that, but but I guess 572 00:32:22,440 --> 00:32:24,120 Speaker 1: what I'm trying to get it, and this is not 573 00:32:24,160 --> 00:32:26,000 Speaker 1: to come down one way or the other. It's to 574 00:32:26,120 --> 00:32:29,760 Speaker 1: recognize that the world is a very different place when 575 00:32:30,040 --> 00:32:35,560 Speaker 1: no communication that is electronic is any longer confidential, and 576 00:32:35,600 --> 00:32:40,360 Speaker 1: that we live in a world where instantaneous communication exists. 577 00:32:40,400 --> 00:32:42,680 Speaker 1: But just the fact that I would suggesting this is 578 00:32:42,720 --> 00:32:47,000 Speaker 1: away from Dr Furman's expertise. We've got a president who's 579 00:32:47,160 --> 00:32:52,920 Speaker 1: alone and by himself in the ramifications are here. The question, 580 00:32:53,440 --> 00:32:57,320 Speaker 1: Jason Furman is if we've seen this, and yes, we 581 00:32:57,400 --> 00:32:59,840 Speaker 1: saw the market move, I'm willing to say that now, folks, 582 00:33:00,160 --> 00:33:03,120 Speaker 1: even though I wasn't saying it in real time. What 583 00:33:03,160 --> 00:33:06,040 Speaker 1: do we do next month? Do we need to have 584 00:33:06,640 --> 00:33:09,480 Speaker 1: a White House debate on this, Jason Furman? Or do 585 00:33:09,600 --> 00:33:11,840 Speaker 1: we just say, oh, it's a president, that's the way 586 00:33:11,880 --> 00:33:16,240 Speaker 1: it is. I just think, you know, if we are 587 00:33:16,240 --> 00:33:18,920 Speaker 1: in a world of instantaneous communication, that maybe the president 588 00:33:19,800 --> 00:33:25,080 Speaker 1: shouldn't get this anymore because, um, you know, it makes 589 00:33:25,120 --> 00:33:28,040 Speaker 1: me worried. I'm also worried by the way Tom sour 590 00:33:28,080 --> 00:33:30,080 Speaker 1: President talks a lot of people late at night on 591 00:33:30,160 --> 00:33:34,800 Speaker 1: his phone. President who likes to brag about things, I 592 00:33:34,840 --> 00:33:39,040 Speaker 1: think without even being malicious, without intending to be conveying 593 00:33:39,040 --> 00:33:42,760 Speaker 1: insider information. Is he talking to his friends at night 594 00:33:42,880 --> 00:33:47,120 Speaker 1: and telling them, hey, you know, great jobs number coming tomorrow. 595 00:33:47,760 --> 00:33:50,320 Speaker 1: I don't have confidence that that's not happening. I really 596 00:33:50,320 --> 00:33:52,400 Speaker 1: wish I could say I did, but I you know, 597 00:33:52,440 --> 00:33:55,400 Speaker 1: I'm not sure. The question comes up and let us 598 00:33:55,440 --> 00:33:58,280 Speaker 1: move on now. Is this will be a topic certainly 599 00:33:58,320 --> 00:34:01,080 Speaker 1: within economics and Dame and Poletta has it on the 600 00:34:01,120 --> 00:34:03,560 Speaker 1: cover of the Washington Post, So it's not just like 601 00:34:03,600 --> 00:34:07,160 Speaker 1: an inside Bloomberg story, folks. This has really reached the 602 00:34:07,800 --> 00:34:10,680 Speaker 1: so of the zeitgeist of the nation right now as well. 603 00:34:10,920 --> 00:34:13,520 Speaker 1: Dr Ferman, three point eight percent is a victory lap 604 00:34:13,560 --> 00:34:17,080 Speaker 1: for anybody. Is our three percent unemployment the same as 605 00:34:17,080 --> 00:34:21,960 Speaker 1: it was in the nineteen fifties? You know, we have 606 00:34:22,920 --> 00:34:25,520 Speaker 1: dysfunctions in our labor market we didn't have in the 607 00:34:25,560 --> 00:34:29,200 Speaker 1: nineteen fifties. We have a much lower participation rate for 608 00:34:29,280 --> 00:34:32,920 Speaker 1: men than we had UM in the nineteen fifties. UM, 609 00:34:32,920 --> 00:34:35,040 Speaker 1: we also have a hired one for women UM than 610 00:34:35,120 --> 00:34:38,320 Speaker 1: we had in the nineteen fifties. I think from a 611 00:34:38,360 --> 00:34:42,879 Speaker 1: cyclical perspective though, assessing what the FED is doing, how 612 00:34:42,920 --> 00:34:45,680 Speaker 1: we're doing in the recovery from the recession, UM, the 613 00:34:45,719 --> 00:34:49,080 Speaker 1: unemployment rate is the right number to focus on, and 614 00:34:49,239 --> 00:34:52,960 Speaker 1: that number tells a very positive story about our recovery. 615 00:34:53,400 --> 00:34:57,000 Speaker 1: Tom Percelly earlier today noticed the vector of real wage 616 00:34:57,000 --> 00:35:00,840 Speaker 1: growth actually rising. Do you agree read with that? And 617 00:35:00,920 --> 00:35:05,200 Speaker 1: can we get to a positive and constructive real wage growth? 618 00:35:05,320 --> 00:35:11,280 Speaker 1: We're not there yet, but can we get there? It's 619 00:35:11,280 --> 00:35:14,920 Speaker 1: going to be hard. UM. The biggest constraints on our 620 00:35:14,920 --> 00:35:17,400 Speaker 1: real wage growth is our lack of productivity growth. You know, 621 00:35:17,440 --> 00:35:20,319 Speaker 1: if you look at the difference between what we've seen 622 00:35:20,320 --> 00:35:22,400 Speaker 1: in real wage growth of the last couple of years 623 00:35:22,400 --> 00:35:25,440 Speaker 1: and what we saw in real wage growth in es UM, 624 00:35:25,440 --> 00:35:28,680 Speaker 1: that difference almost entirely explained by we had much faster 625 00:35:28,760 --> 00:35:32,560 Speaker 1: productivity than than now. So I think a tight labor 626 00:35:32,640 --> 00:35:36,919 Speaker 1: market will help. I'm in favor of a tight labor market. UM, 627 00:35:36,960 --> 00:35:40,360 Speaker 1: it's one of the dials that we have. But until 628 00:35:40,520 --> 00:35:45,160 Speaker 1: we get more innovation, productivity, capital investment in our economy, UM, 629 00:35:45,239 --> 00:35:48,640 Speaker 1: we can't have more sustainable wage growth. Do you believe 630 00:35:48,680 --> 00:35:53,160 Speaker 1: that there's going to be an acceleration and inflation. We're 631 00:35:53,160 --> 00:35:58,440 Speaker 1: already seeing some firming up of inflation, and UM, I 632 00:35:58,480 --> 00:36:02,560 Speaker 1: would expect to see more firming up of inflation. Could 633 00:36:02,600 --> 00:36:05,600 Speaker 1: we have a two and a half percent rate? UM? 634 00:36:05,640 --> 00:36:10,040 Speaker 1: At some point over the next year. Absolutely, because that 635 00:36:10,239 --> 00:36:13,920 Speaker 1: I'm worried very very much. UM, not at all. The 636 00:36:13,960 --> 00:36:19,120 Speaker 1: feed has said their target is symmetric. I no, I 637 00:36:19,239 --> 00:36:22,480 Speaker 1: agree it should be symmetric, and so you know, after 638 00:36:22,480 --> 00:36:24,879 Speaker 1: a lot of years below two, you know, some years 639 00:36:24,880 --> 00:36:26,919 Speaker 1: of a bit about two. UM, I think that would 640 00:36:26,920 --> 00:36:29,279 Speaker 1: be just fine. Jason Firman, thank you so much. He's 641 00:36:29,280 --> 00:36:31,919 Speaker 1: a former chairman of the President's Council. Are you can 642 00:36:31,920 --> 00:36:35,440 Speaker 1: have advisors? Greatly appreciate his attendance on short notice this morning. 643 00:36:42,920 --> 00:36:47,120 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 644 00:36:47,160 --> 00:36:52,480 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 645 00:36:52,520 --> 00:36:56,800 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 646 00:36:56,800 --> 00:37:01,040 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg Radio.