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

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

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Speaker 1: dot com, slash c M E Group US Dock Index

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Speaker 1: futures are higher, signaling the SNP five hundred will recover

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Speaker 1: from a decline as rising commodity prices offset a tepid

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Speaker 1: start to the first quarter earning season. We checked the

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Speaker 1: markets every fifteen minutes throughout the trading day on Bloomberg.

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Speaker 1: SNP E mini futures are higher, up two points. They

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Speaker 1: have trimmed their gains. Dowie Mini futures of eleven, nastacimuni

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Speaker 1: futures up one, and the decks in Germany's up about

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Speaker 1: two tens per cent ten Your treasury down seven thirday seconds,

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Speaker 1: the yield one point seven five percent, nim X screwed

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Speaker 1: oil up half per cent or twenty cents to forty

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Speaker 1: dollars fifty seven cents of arrol comc Scholdre's up three

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Speaker 1: tens per cent or three dollars ninety cents a twelve

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Speaker 1: sixty nine announced the euro a dollar the end one

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Speaker 1: oh eight point three six, and that's a Bloomberg business flash.

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Speaker 1: Tom and Mike Karen, thanks so much. We're with Anthony Kriscenzi,

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Speaker 1: which is important because Mike, it's not about quoting the

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Speaker 1: ten year yield one point seven five. It's when a

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Speaker 1: long term piece is two years, and there's lots of

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Speaker 1: other short term stuff as well. Uh, Tony, you know,

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Speaker 1: looking at two years, that's definitely the long bottle these days. Uh.

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Speaker 1: When you see uh headlines about oil, when you see

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Speaker 1: headlines about the economy. We're getting a lot of reaction

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Speaker 1: in the currency markets. We're getting a lot of reaction

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Speaker 1: in the equity markets, but we're not getting a lot

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Speaker 1: of reaction in the bond markets. We've been be calmed

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Speaker 1: and arranged for quite some time. What's it gonna take

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Speaker 1: to push us rates out of range? Yellen's main contention

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Speaker 1: for holding off on interest rate hikes, and the markets

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Speaker 1: seem to buy in. She says that there's a lot

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Speaker 1: of slack remaining in the labor market, and that were

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Speaker 1: the proof of this is in the low pace of

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Speaker 1: wage gains and slow rates of inflation that we see,

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Speaker 1: and her arguments bolstered significantly recently by substantial increase in

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Speaker 1: the US labor force. She said for a long time

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Speaker 1: that there's some cyclical component to the decrease in the

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Speaker 1: labor force. Many people after the financial crisis seemed to

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Speaker 1: leave it. But lately a two million, near two million

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Speaker 1: persons surge in four months in the labor force. Now,

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Speaker 1: for perspective, the average monthly gained the last three years

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Speaker 1: preprior to that was seventy thousand, seventy thousand per month,

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Speaker 1: and here was two million people roughly entering the labor force,

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Speaker 1: which is to say, there are a lot of people

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Speaker 1: perhaps on the sidelines, that could come back in and

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Speaker 1: compete for jobs and compete for wages and keep inflation down.

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Speaker 1: And so when we see headlines on oil and such,

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Speaker 1: we think of Janet Yellen, her and her contention about

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Speaker 1: there being significant slacks still perhaps in the labor market.

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Speaker 1: And until so therefore, until the labor data change, let's

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Speaker 1: say that job was right, fulls more or wage figures

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Speaker 1: pick up or inflation data today they were priced figures

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Speaker 1: on imported prices. It was for the first time Sin's March.

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Speaker 1: That's the sort of thing. Well that night change things.

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Speaker 1: I I just put out on Bloomberg Radio Plus and

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Speaker 1: I will use this chart on television tomorrow. Mike the

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Speaker 1: e C I all in benefits wages statistic and it

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Speaker 1: is absolutely smack dab on the seven year moving average

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Speaker 1: seventies arbitrary. But the point is, Tony and Mike, Mike,

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Speaker 1: to pick this up, please, we had a wage growth

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Speaker 1: we used to believe in until oh eight. Is this

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Speaker 1: entire debate, including yellings, debate on slack about a hope

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Speaker 1: and a prayer Mike McKee, of getting back to a

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Speaker 1: wage growth from another time and place We may not.

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Speaker 1: We may not UH, And that I guess it's kind

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Speaker 1: of the question out there, Tony, is what's it going

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Speaker 1: to take. Is there an automatic connection between slack and

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Speaker 1: UH wages or is it based more on the type

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Speaker 1: of jobs these days? Well, in reading the minutes to

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Speaker 1: the fed's March sixteenth meeting, you see that FRMC participants

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Speaker 1: are losing confidence in their own Phillips curve analysis, which

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Speaker 1: is to say that this relationship between growth and inflation

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Speaker 1: because they've seen such a long period of time, As

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Speaker 1: Tom you mentioned, if the e c I is at

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Speaker 1: its seven year moving average, and if today the job

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Speaker 1: situation is far better than it was on average during

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Speaker 1: the seven years, one would think the e c I

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Speaker 1: would be a little higher. Yet it's not, and so

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Speaker 1: there is some weakening and competence of FED officials. What

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Speaker 1: really shows it demonstrates it most is the fed's own

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Speaker 1: projection of its neutral rate, the rate where it's neither

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Speaker 1: pressing on the gas or the brakes for the economy.

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Speaker 1: Four years ago the FED projected at that rate, and

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Speaker 1: historically it's been four in a quarter, and in the

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Speaker 1: latest summary of economic projections from March six teams available

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Speaker 1: on the fed's website, it shows the figure at three

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Speaker 1: and a quarter. So the FED is itself believes that

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Speaker 1: the relationship has broken down a bit. And this is

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Speaker 1: importantly even as the Fed's projecting that and its staffers

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Speaker 1: that the US growth will stay above potential for the

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Speaker 1: next two and a half years at least, which is

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Speaker 1: to say, grow faster than its ability to grow and

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Speaker 1: continue to drive the job straight down, probably into the

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Speaker 1: mid to low force at some point. Uh. And so

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Speaker 1: it has changed. What could change it though? Who knows?

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Speaker 1: After the election. Let's think Warren Buffett like, don't bet

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Speaker 1: against America. They're certainly interesting. Uh political camp aner right now?

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Speaker 1: Is this a cyclical flailing about trying to find footing

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Speaker 1: or is the idea that some have advanced of stagflation

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Speaker 1: or secular stagnation set in well? Given how the U.

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Speaker 1: S economy has reshaped itself in the less seven years

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Speaker 1: eight years, uh and uh reinvented itself, you could say.

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Speaker 1: And there's still a lot of innovation occurring in the

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Speaker 1: technology sector. For example, one probably shouldn't bet against American.

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Speaker 1: Here we are on the cusp of an election that

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Speaker 1: could be important to changing things. Both sides of the

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Speaker 1: aisle seem to want. For example, it cut or change

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Speaker 1: in the corporate tax code carton tax rates or change

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Speaker 1: in the code, and who knows, maybe that'll give companies

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Speaker 1: incentives to invest more and raise productivity and when And

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Speaker 1: that's the big missing ingredient in the productivity data. It's

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Speaker 1: it shows it. It's because what drives productivities people, things, stuff, plants, equipment, cetera.

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Speaker 1: And how it all gets used. And the data show

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Speaker 1: it's a lack of investment and stuff that's righting productivity low.

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Speaker 1: And if if it were to increase as a result

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Speaker 1: of increased confidence next year, that leaves little more income

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Speaker 1: for people and maybe we do get better WAG figures

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Speaker 1: next year. Tony always thought provoking too greatly appreciate. I

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Speaker 1: just put that chart on on Twitter. I'll feature that tomorrow.

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Speaker 1: That is the ultimate Sanders Trump Trump Sanders chart, where

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Speaker 1: we were and where we are now on wage growth

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Speaker 1: taken on a logarithmic y axis, which is what med

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Speaker 1: Faber does, among others. It's Bloomberg's surveillance. We're kind of

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Speaker 1: gat out of the opening well brought you by the

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Speaker 1: Jeep Grand Cherokee, the most awarded suv ever. The Grand

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Speaker 1: and legendary four by four capability. Drive on at your

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Speaker 1: local Jeep dealer today. This is Bloomberg surveillance. I think

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Speaker 1: the currency is beginning to shift its focus from nominal

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Speaker 1: short term intil s right greferentials to real short term

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Speaker 1: intrist rate greferentials. The yen is an example of something

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Speaker 1: that's been universally hated for the past four or five years.

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Speaker 1: Any improvement in the outlook would give rise to a

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Speaker 1: stronger funds right path. Any firming of confidence and inflation

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Speaker 1: getting to two percent would do the same. Bloomberg Surveillance

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Speaker 1: your link to the world of economics, finance, and investment

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Speaker 1: on Bloomberg Radio. Good morning everyone, Michael McKeon time Kee.

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Speaker 1: We welcome all you worldwide, Bloomberg Surveillance, Bloomberg twelve, Boston,

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Speaker 1: Bloomberger Levins Rio, New York FM in Washington, N sixty

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Speaker 1: the Bay area of San Francisco, and a good good

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Speaker 1: morning to all of you. Serious next M Channel one

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Speaker 1: nineteen worldwide nationwide, I should say in across Canada as well.

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Speaker 1: We need to look at foreign exchange, a big shift

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Speaker 1: there from yen to euro specific. The for X Brief

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Speaker 1: slash slash I say good Guitar players, slash four x

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Speaker 1: as well. Let's look at for in exchange. Hero I

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Speaker 1: said on one fourteen and elevator, we've pulled back one

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Speaker 1: again one four Mike, you're raising your hand over there. Yes,

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Speaker 1: we have the I m F we oh out the

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Speaker 1: wheel old economic outlook, and the outlook ain't so great. Uh.

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Speaker 1: They're cutting their forecast for two thousand and sixteen global

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Speaker 1: growth to three point two percent from three point four percent.

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Speaker 1: They're they're lowering numbers for UM many countries around the world,

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Speaker 1: Brazil shrinking. That's a contraction number of three point eight percent,

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Speaker 1: more than the contraction of three point five percent that

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Speaker 1: they had forecast. I m F. You were talking about

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Speaker 1: the the essays that come along with it. They're writing

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Speaker 1: about Brexit could create severe regional and global damage, and

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Speaker 1: they also say a fragile world economy needs monetary stimulus,

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Speaker 1: so keep going. Central banks is guards the Japan headline

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Speaker 1: as well, again talking about specific national policy. Japan to

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Speaker 1: slide into contraction next year on consumption tax. So the

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Speaker 1: I m f O pining UM text policy as well.

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Speaker 1: One thing that's percolating. I saw Barclays report with great caution.

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Speaker 1: Michael McKeon Greece. That reminded me of our huts interview

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Speaker 1: increase the other day, coming back into the news as

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Speaker 1: we get closer to the summer. By the way, the

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Speaker 1: I m f US forecast two point four percent growth,

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Speaker 1: two tenths lower than they had seen in January. He

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Speaker 1: has a list I M f level. It's our world

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Speaker 1: stock report right now from the blue book of David Wilson.

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Speaker 1: What do you got? Well, you gotta start without COHA

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Speaker 1: I mean first, first one out, first one out and

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Speaker 1: not well received. Aw CoA shares down about three and

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Speaker 1: a half percent. The iluminum makers first quarter revenue trail

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Speaker 1: the average anial assessment to Bloomberg Survey adjusted Ernie's beat projections. Now.

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Speaker 1: CoA cut this year's sales estimate for its auto and

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Speaker 1: aircraft parts business, which will become a standalone company called Arconic.

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Speaker 1: So that's I MFI Arconic, Arconic. That sounds like two.

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Speaker 1: NBA's made that up. Well announced the name last month.

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Speaker 1: You can go find out where they came up with that. Alright, yeah, right,

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Speaker 1: uh some Annalis. Cause of note, Starbucks is down two

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Speaker 1: and a half percent. The largest coffee shop chain was

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Speaker 1: cut to whole from BIA Deutsche Bank. The firm sided

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Speaker 1: Starbucks valuation and challenging sales comparisons. Al Brand's down two

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Speaker 1: and a half percent. The retailer was re duced to

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Speaker 1: neutral from buy at Golden Sacks and taking off a

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Speaker 1: list of the firm's top picks. Goldman also, on the

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Speaker 1: other hand, raised its rating on the glass product maker

200
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Speaker 1: Corning to buy from neutral and Coining shares are up

201
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Speaker 1: two percent back to earnings. Juniper Networks down six and

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Speaker 1: a half percent. Preliminary first quarter results showed the networking

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Speaker 1: equipment makers earnings and sales failed to meet estimates. And

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Speaker 1: it isn't just Juniper that's lower. You're seeing Cisco Systems,

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Speaker 1: one of their rivals, down about one and a half percent,

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Speaker 1: Horizon farm A down nineteen percent. The drug maker sales

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Speaker 1: estimate for the first quarter indicated that revenue will be

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Speaker 1: lower than projections, and Fastenal's down three and a half percent.

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Speaker 1: The industrial distributors first quarter earnings and revenue came up

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Speaker 1: shot of estimates. Festivals daily sales were unchanged in March

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Speaker 1: after rising two point six percent in February. You're that

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Speaker 1: excited time, that's a best like FedEx to meet Festinal

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Speaker 1: is a bell Weather, A bell Weather I see for

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Speaker 1: a big piece of true, no question, he jokes about it,

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Speaker 1: but it is right. And they're the only company in

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Speaker 1: the S and P five hundred that has reported earning

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Speaker 1: so far today. So we'll have another set of results

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Speaker 1: later on Fast. I want to go long Fast right CSX.

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Speaker 1: By the way, I would be out after the closing training.

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Speaker 1: A couple more for you, Tiffany two percent. The luxury

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Speaker 1: jewelry retailer agreed to expand its online business by selling

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Speaker 1: Somebody Smooth the website Netta Porte and Marathon It. Well

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Speaker 1: it's French after all, Preda Porte, Netta Porte, you get

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Speaker 1: it anyway. Marathon Oil two and a half percent. Enrong

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Speaker 1: Producers selling assets mostly in Wyoming for a total of

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Speaker 1: nine fifty million dollars. They're raising cash and response to

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Speaker 1: lower oil and gas prices. Fast Winona, Minnesota. You just

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Speaker 1: got me, you know, obviously, when you say you want

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Speaker 1: to go long fast, it just triggered in my mind.

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Speaker 1: I just looked up who has the ticker symbol long?

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Speaker 1: You want to go long Long? You're buying a travel

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Speaker 1: service company in the People's Republic of China's in the US.

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Speaker 1: You wonder how often that Winona County, Minnesota, in the

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Speaker 1: southeasternly corner on the bluffs above the Mississippi we get

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Speaker 1: I must confess I haven't been to Minnesota. I have

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Speaker 1: to get there one of these known as you know.

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Speaker 1: That's a different part of it. Very good. It's like

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Speaker 1: Havin Costello, which means we need to bring an Anthony

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Speaker 1: Cousenzi a PIMCO for a series conversation on liquidity and

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Speaker 1: where we are right now, Tony, just start things off.

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Speaker 1: If we get the terminal value that so many are

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Speaker 1: talking about, your Scott Mather and uh Michael Faroli at

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Speaker 1: JP Morgan. Then if we get a terminal value sub

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Speaker 1: two percent, what's a two year yield supposed to be?

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Speaker 1: When do you expect that to percent to be reached? Tom?

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Speaker 1: I don't know that. I agree. And it also depends

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Speaker 1: on whether market participants when it gets to two thinking

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Speaker 1: it might get to three. So it really depends on

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Speaker 1: speed at which we moved towards to and whether markets

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Speaker 1: think there's more. Uh, if the markets think the Feds

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Speaker 1: done and there's a rate cut coming, when that time comes,

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Speaker 1: the rate could be lower than two, so it really depends,

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Speaker 1: but it will move up. It probably. Historically you could

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Speaker 1: would say in a rate high cycle, the two you

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Speaker 1: would trade about a hundred basis points over the funds

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Speaker 1: rate and anticipation of more and even as high as

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Speaker 1: two hundred over. But those days are gone, so it

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Speaker 1: probably would stay as it is now above the funds

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Speaker 1: rate as it's moving up. UH. And just how much

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Speaker 1: depends on how much the markets expect they'll be from

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Speaker 1: that point. Well, what do markets expect at this point?

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Speaker 1: And how how much credibility I don't know credibility, How

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Speaker 1: much weight should we put on what markets expect now

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Speaker 1: because they seem to change their view every time a

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Speaker 1: FED official over their mouth or an inflation report comes up.

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Speaker 1: The markets aren't expecting very much UH. One quarter point

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Speaker 1: rate hike per year the rest of this decades. That's

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Speaker 1: very little insure markets have changed their minds. But hasn't

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Speaker 1: the Fed? I think last year it guided market participants

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Speaker 1: into thinking that there could be as many as four

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Speaker 1: rate hikes. Remember, in this quartally summery of economic projections

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Speaker 1: that the FED produces UH, the median of projections of

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Speaker 1: of f O MC participants. The seventeen that attended the

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Speaker 1: FEDS FMC meetings had said that would be four and

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Speaker 1: then and then Janet Yelling in her presser last year,

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Speaker 1: seemed to suggest that perhaps that would be possible now

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Speaker 1: now that FEDS guiding towards two and so markets. While

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Speaker 1: uh seeming fickle, uh, it's in part because the communications

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Speaker 1: from the FED have been changed a bit. Tony, the

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Speaker 1: seventeen people in Washington have read the twelve pages of

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Speaker 1: Stigiums Money Market, which you did a lot to bring forward.

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Speaker 1: Mercer stigum In. Anthony Kris sends, this is the bible

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Speaker 1: folks on money market, so you're qualified for this question.

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Speaker 1: The doorstopper. What's it is the doorstopper? What's the risk

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Speaker 1: free rate? What does the risk free rate? Depends on

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Speaker 1: the entity and his a horror. It's a desire to

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Speaker 1: protect money, to guard money, to preserve do you know

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Speaker 1: what that rate is? If Scott Mother walks in right

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Speaker 1: now and says, hey, wise guy, what's the rate? I

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Speaker 1: can't get this great answer what he called Tony from

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Speaker 1: Staten Island, New York, A wise guy. I feel that

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Speaker 1: that would be true. But but but Honestly, nobody has

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Speaker 1: a clue what the risk free rate is, right, it's

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Speaker 1: become difficult to judge. But thank thank in part this way,

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Speaker 1: think of a normal, everyday, ordinary human beings. The aging

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Speaker 1: populations of the developed world. We know the United States

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Speaker 1: baby boomers, those born between ninety six and sixty four,

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Speaker 1: began turning sixty five and two thousand and eleven. They'll

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Speaker 1: continue until and the throng of sixty plus year olds

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Speaker 1: will grow from forty five million today to about seventy

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Speaker 1: two million. Think of those individuals and what's risk free

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Speaker 1: to them. As we get older, we have a desire

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Speaker 1: to be higher in the capital structure. Is a fancy

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Speaker 1: wave of saying it, which is another way of saying

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Speaker 1: we want less and less risk. We don't want to

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Speaker 1: take risk in the equities markets perhaps, and high risk

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Speaker 1: credit or commodities markets, or even in real estate. We

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Speaker 1: move higher and we move into bonds. And so that's

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Speaker 1: the risk free to just depends on the the objective.

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Speaker 1: Let's come back, I mean to coends you with us.

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Speaker 1: Lots to talk about in the two year old futures

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Speaker 1: pull back up to right now down, futures up for

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Speaker 1: quiet ten points. This morning, time to check in out

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Speaker 1: with Michael Barr and get the latest world in national headlines. Michael, Mike, Tom,

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Speaker 1: thank you very much, President of Barack Obama, House, Democratic

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Speaker 1: Leader Nancy Pelosi and the Democrats are speaking at a

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Speaker 1: women's equality event today in Washington. It comes on Equal

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Speaker 1: Payday this year, April twelve is considered the day it

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Speaker 1: takes most women to earn what the average man in

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Speaker 1: the same job did. Last year. Seven out of ten

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Speaker 1: married women of view Donald Trump at a negative light.

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Speaker 1: That's according to a Bloomberg pole It shows about fifty

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Speaker 1: percent of married women have an unfavorable view of Hillary Clinton.

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Speaker 1: Brazil's president is another step closer to impeachment. The Congressional

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Speaker 1: Committee voted to approve the impeachment process against dil marussof

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Speaker 1: The full Lowerhouse could vote on an impeachment as early

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Speaker 1: as Sunday. Global News twenty four hours a day, powered

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Speaker 1: by our twenty four hundred journalists more than a hundred

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Speaker 1: fifty news bureaus from around the world. Michael Barr, Michael,

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Speaker 1: thanks so much, Ginny I m f out with their

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Speaker 1: UH Spring meeting. Look for Maurice Absfeld in their team.

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Speaker 1: Global stagnation is the phrase of the moment world. Tony

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Speaker 1: Coresenzi of Pimcoe Bloomberg's surveillance stay with US market. Driver

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