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

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Speaker 1: dot com, the radio, plus mobile, and on your radio.

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Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters.

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Speaker 1: I'm Charlie Pallet's stocks are falling for the first time

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Speaker 1: in four days as disappointing numbers from Macy's to Walt

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Speaker 1: Disney heightened concern that American consumers remain hesitant to booth spending.

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Speaker 1: Macy's down fourteen percent now, Disney is down four point

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Speaker 1: four percent. Down Industrials dropping one hundred ninety six points

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Speaker 1: and decline there of one point one percent, SMP five

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Speaker 1: hundred index down sixteen the drop of eight tenths of

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Speaker 1: one percent, and as stack is down seven tenths of

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Speaker 1: one percent. Gold up thirteen thirty ounce to twelve seventy

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Speaker 1: eight again there of one point one percent. Crude oil

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Speaker 1: up a dollar forty seven and barrel forty six twelve.

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Speaker 1: Right now again they're a three point three percent. I'm

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Speaker 1: Charlie Paloton. That's a Bloomberg Business Flash. Bloom or jaking stock.

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Speaker 1: The FED in focus infest rates start too low for

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Speaker 1: where the economy is going. The question is how much

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Speaker 1: higher should they be? The FED has increased the fast yes,

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Speaker 1: and in doing so, it has increased its liability. Keeping

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Speaker 1: interest rates at zero for a long time is not

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Speaker 1: going to cause inflation to go up. It's very controversial.

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Speaker 1: I think what we need to do is find a

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Speaker 1: way for the FED to integrate its policy and think

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Speaker 1: more about its impact on the world. The Fed, in

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Speaker 1: focus on Bloomberg Radio, Better Reserve, are they going to

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Speaker 1: raise interest rates in June? Or will market bets be

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Speaker 1: right again? It will the Fed perhaps not raise rates

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Speaker 1: until the end of the year. If then, this is

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Speaker 1: the question on the market's mind and so many investors

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Speaker 1: minds as well. To grapple with it, to look at

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Speaker 1: the ECO data, to look at some recent comments from

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Speaker 1: feder Reserve officials, including on this program. We're very happy

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Speaker 1: to welcome back to the show Diane Swank. She's founder

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Speaker 1: of Diane Swank Economics based in Chicago. However, joining us

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Speaker 1: today from our bureau in Washington, d C. Home of

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Speaker 1: Bloomberg Point One. Welcome Diane. Good to be here so Washington,

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Speaker 1: d c. Uh. Certainly the debate continues there as well.

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Speaker 1: But in your mind, when you look at the probability

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Speaker 1: of a FED rate hike, as reflected in the FED

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Speaker 1: Funds futures contract, almost no chance the Fed moves in June.

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Speaker 1: And yet we have spoken recently to a couple of

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Speaker 1: FED officials who certainly kept the door open to that possibility,

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Speaker 1: including John Williams, President of San Francisco FED, just last week.

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Speaker 1: This is the issues that we're still seeing, this break between,

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Speaker 1: you know, within the FED about what they want to do. Clearly,

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Speaker 1: carry Yelln has to corral the cats. She was able

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Speaker 1: to do that to some extent at the last meeting,

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Speaker 1: but there really is no clear direction on signaling from

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Speaker 1: the Fed. And I think that's why you're seeing the

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Speaker 1: financial markets because of this dissonance, financial markets not pricing

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Speaker 1: it in. And as much as I think it would

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Speaker 1: be advantageous for the Fed to move in June, I

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Speaker 1: also think that um the financial markets have been more

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Speaker 1: right than the Fed at forecasting their own rate hikes.

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Speaker 1: Diane Swanks will continue along on that thought. And if

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Speaker 1: an investor is not necessarily concerned about the push and

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Speaker 1: pull at the Federal Reserve but wants to concentrate on

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Speaker 1: making money in stocks, where would you suggest they look? Well,

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Speaker 1: you know, I'm not an advisor on stocks, But you know,

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Speaker 1: winners and losers in the US economy. I think what

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Speaker 1: we're looking at is, even though we've seen some bad

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Speaker 1: news from retailers, we also are seeing retailers that are

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Speaker 1: going bankrupt. There's a restructuring in the retail sector. That

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Speaker 1: doesn't mean the consumer is anywhere near dead. In fact,

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Speaker 1: we know that some of the consumer data from the

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Speaker 1: first quarter was underestimated because of the way we account

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Speaker 1: for the retail sales data. We look at retail sales

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Speaker 1: by type of retailer, not by what they sell. And

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Speaker 1: in fact, in January and February, when gas prices were

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Speaker 1: plummeting at the pump, places like Walmart, Sam's Club, Cost Club,

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Speaker 1: which sell gasoline, also saw softening and retail sales. But

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Speaker 1: it isn't actual softening. It was the prices of gas

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Speaker 1: going down while people were spending more money inside the stores.

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Speaker 1: So there really is a lot of noise out there

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Speaker 1: in the data as well, which makes it really hard

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Speaker 1: to get through this period in terms of finding winners

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Speaker 1: and losers. I do think a key issue going forward,

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Speaker 1: particularly from manufacturing beyond the retail sector. I think the

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Speaker 1: consumer is going to still continue to spend. The question

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Speaker 1: is where and beyond the retail sector is a strong

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Speaker 1: dollar and how will that affect manufacturing? Manufacturing looks like

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Speaker 1: it's bottoming out there, but we still got a long

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Speaker 1: way to go. When you're at the bottom of a

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Speaker 1: barrel of oil, you've still got to climb your way out.

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Speaker 1: Is it possible that some have said that the the

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Speaker 1: markets are underestimating the FEDER reserves resolved. And if you take,

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Speaker 1: for example, the fact the Fed in December raise its

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Speaker 1: key rate the first time since two thousand and six,

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Speaker 1: when in one of its key metrics inflation was far

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Speaker 1: from target. Does that is that perhaps a sign that,

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Speaker 1: you know, guess what they could move in June because

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Speaker 1: they're nervous about keeping the key rates so low and

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Speaker 1: as they keep say is John william said in San

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Speaker 1: Francisco last week, this is normalizing rates. Isn't necessarily tightening exactly,

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Speaker 1: And I think that's one of the issues that's still

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Speaker 1: very hard. Our markets operate in black and white. As

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Speaker 1: the rates going up, by the rates going down, that's

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Speaker 1: not necessarily tightening or easin. It's less easy money. And

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Speaker 1: stan Fisher has gone to great lengths to try to

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Speaker 1: explain this saying, listen, we're trying to um ease up

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Speaker 1: on the accelerator. We're not hitting the brake. And I

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Speaker 1: think that's a subtlety that's getting lost in translation. Although

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Speaker 1: the Feds of one doing the translation, so let's let's

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Speaker 1: face it, they're not giving the right message. I think

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Speaker 1: it's also important though, that you know the break within

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Speaker 1: the FED between the sort of more hawkish, say Vice

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Speaker 1: Chairman Stan Fisher and Janet Yellen, who's not necessarily not hawkish,

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Speaker 1: but she really does see She's a veteran in the

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Speaker 1: nineties and she sees this opportunity to sort of overshoot unemployment.

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Speaker 1: She's seen the participation rate coming up, and she sees

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Speaker 1: that ability that if you overshoot in a low inflation

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Speaker 1: environment and over stimulate perhaps a bit, you might actually

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Speaker 1: re engage all of these workers that we sort of

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Speaker 1: thought could never even re enter the labor force back

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Speaker 1: in the nineties. All he needed was a pulse to

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Speaker 1: get a job. That's something we're far from right now,

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Speaker 1: but to think that you could even get a little

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Speaker 1: bit closer to that is something that I think is

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Speaker 1: enticing to her. Diana wonder if you have any thoughts

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Speaker 1: about the automobile industry in the United States, and maybe

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Speaker 1: then we'll talk about housing. But automobiles have been important

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Speaker 1: for the economic recovery. Yeah, you know automobile. I'm from Detroit.

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Speaker 1: I used to be an auto analyst. I grew up

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Speaker 1: in the auto industry. It's like, you know, on only

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Speaker 1: my blood. So you can take the girl out of Detroit,

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Speaker 1: you can't take the Detroit out of the girl. I know. Um,

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Speaker 1: Tom King's always getting me on the auto industry as well,

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Speaker 1: but you know, I mean, the issue is on autos

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Speaker 1: is what's feeling the sales, And what worries me is

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Speaker 1: the run up in two things right now, not only

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Speaker 1: sub prime lending, which um, the auto industry got a

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Speaker 1: way run when they got restructured, they were the ones

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Speaker 1: to continue so prime lending, which helped to support vehicle sales.

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Speaker 1: And we did have really strong vehicle sales snap back

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Speaker 1: in the month of April. But also we're seeing least

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Speaker 1: sales pick up. And these are many of the problems

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Speaker 1: that got the auto industry into it's um sort of

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Speaker 1: racist in the first place. Beyond what was tied to

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Speaker 1: the subprime mortgage crisis up until about two thousand and five.

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Speaker 1: Many people who were up through two thousand and five

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Speaker 1: a lot of home equity lines of credit. We're not

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Speaker 1: just going to pay for homes and refinance homes and

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Speaker 1: pay for mortgages. They're also going to pay for cars.

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Speaker 1: And then of course car sales collapsed as the equity

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Speaker 1: market in housing collapse. I think I think the auto

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Speaker 1: industry is being a little precarious with how they're juicing

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Speaker 1: sales at the moment. We're going to continue the conversation

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Speaker 1: with Diane Swank, the founder of Diane Swank Economics, more

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Speaker 1: on the Federal Reserve and more on what the U

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Speaker 1: s economy means for the direction of stock prices and

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Speaker 1: bond fields. That's next on taking stock? Is the dollar

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Speaker 1: slump over Goldman Sachs says it is. Does the Federal

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Speaker 1: Reserve play a role on? How about that Bank of

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Speaker 1: England needing tomorrow? We're gonna look at all these questions

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Speaker 1: coming up on Bloomberg Radio Broadcasting Live to New York,

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Speaker 1: Bloomberg eleventh, Brio to Washington, d C. Bloomberg to Boston,

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Speaker 1: Bloomberg twelve hundred to San Francisco, Bloomberg nine to the

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Speaker 1: Country Series Exam General one nineteen and around the globe

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Speaker 1: the Bloomberg Radio plus NAP and Bloomberg Got Gone Zeus

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Speaker 1: is taking stock. I'm Kathleen Hayes, along with Pim Fox,

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Speaker 1: the Federal Reserve in focus, along with the Bank of

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Speaker 1: England and the European Central Bank of Central Banks run

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Speaker 1: out of bullets at the economy? Does falter in the

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Speaker 1: U S? And globally We'll be asking Diane Swamp answer

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Speaker 1: that question and more yes. And also coming up, we'll

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Speaker 1: take a look at the impeachment of the President of Brazil,

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Speaker 1: Tilma Russef. We've got Raymond Collett, Bloomberg Bureau Chief in Brazilia.

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Speaker 1: He'll be joining us later on in the program, but

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Speaker 1: right now, let's go to Charlie Pellett in the Bloomberg

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Speaker 1: news room for a Bloomberg Business Flat and I thank you,

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Speaker 1: Pim Fox, Thank you, Kathleen Hayes. The dial the SMP

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Speaker 1: nez dak all declining. We are brought to you by

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Speaker 1: Van Eck Vector's e t fs. Expect more from your

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Speaker 1: muni's target tax exempt income by maturity and credit quality,

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Speaker 1: all with low cost e t f s. Visit Van

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Speaker 1: eck dot com slash Muni van Eck access the opportunities

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Speaker 1: stocks are slipping after the biggest gain in two months,

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Speaker 1: as disappointing results from Disney and Macy's raised outs about

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Speaker 1: the strength of the U. S. Consumer oil rose after

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Speaker 1: an unexpected drop in inventories. The dollar fell, crewed up

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Speaker 1: a dollar fifty one of barrel seventeen. Now again there

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Speaker 1: of three point four percent, Gold up twelve seventy the

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Speaker 1: ounce advancing one percent to twelve seventy seven. Fifty Billionaire

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Speaker 1: hedge fund manager Paul Singer says Gold's best quarter in

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Speaker 1: thirty years probably just the beginning of a rebound. Bob

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Speaker 1: Iachino is with Path Trading Partners in Chicago, when you

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Speaker 1: look at the fundamental picture of the FED losing credibility,

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Speaker 1: global central banks continuing to have that pressure. We saw

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Speaker 1: industrial production in Germany and France disappoint last week, and

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Speaker 1: we're seeing now that in the same period of time

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Speaker 1: from about December third of last year, the dollar index

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Speaker 1: fell about six and a half percent. Gold is almost

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Speaker 1: twenty two percent. So if you expect a couple more

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Speaker 1: percentage points lower, if you expect the FEDS path to

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Speaker 1: be a little more dovish, you can expect another large

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Speaker 1: rising gold. Fossil Group shares plummeting to the lowest price

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Speaker 1: in more than six years after the watchmakers slashed its

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Speaker 1: full year earnings forecast. Shares now down by twenty eight

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Speaker 1: point nine percent, the SMP down fifteen, a drop of

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Speaker 1: seven tenths of one percent to thirty two on Wall Street.

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Speaker 1: Now we'll look at other news from around the world.

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Speaker 1: On Bloomberg Radio, Charlie, Thank you from the Bloomberg news

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Speaker 1: Room by Mark Crumpton. House Speaker Paul Ryan says the

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Speaker 1: Republican Party needs to come together to defeat likely Democratic

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Speaker 1: presidential nominee Hillary Clinton in November. To pretend where unified

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Speaker 1: as a party after coming through a very bruising primary

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Speaker 1: which just ended like a week ago. Um to pretend

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Speaker 1: reunified without actually unifying, then we go into the fall

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Speaker 1: at half strength. Speaker Ryan meets with presumptive GOP presidential

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Speaker 1: nominee Donald Trump in Washington tomorrow. At BI director James

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Speaker 1: Comey is speaking out on the investigation into the private

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Speaker 1: email server account that Hillary Clinton used when she was

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Speaker 1: Secretary of State. Director Comey told reporters quote, I remained

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Speaker 1: close to that investigation to ensure that it's done well

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Speaker 1: and has the resources it needs. End quote. ABC News

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Speaker 1: reported last week the FBI was seeking to interview Secretary

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Speaker 1: Clinton soon, but a Clinton spokesman says she hasn't received

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Speaker 1: an invitation from the FBI to answer questions. In Italy,

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Speaker 1: the Lower Chamber of Deputies has voted to grant legal

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Speaker 1: recognition to civil unions. The bill pass three sixty to one.

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Speaker 1: The legislation stopped short of authorizing gay marriage, but it's

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Speaker 1: significant because Italy was the last holdout in Western Europe

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Speaker 1: to extend some rights to gay couples. A new right

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Speaker 1: to Die bill has been introduced to New York's legislature.

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Speaker 1: It would allow terminally ill patients to request life ending

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Speaker 1: drugs from a physician. The proposal would require two doctors

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Speaker 1: to certify that the patient's illness is in fact terminal.

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Speaker 1: Global News twenty four hours a day, powered by our

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Speaker 1: bureaus around the world. From the Bloomberg News Room, I'm

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Speaker 1: Mark Crumpton, Charlie, and we thank you and again recapping

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Speaker 1: a move law for US equities. Right now the SMP

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Speaker 1: down fifteen points to two thousand sixty nine to drop

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Speaker 1: seven tenths of one percent, ten year up nine thirty seconds.

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Speaker 1: The yield there one point seven to I'm Charlie Palatine.

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Speaker 1: Stock the FED in Focus on bloom Bird Radio joining

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Speaker 1: us now as Dianne Swank, founder of Dianne Swank Economics. Diane,

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Speaker 1: just to continue the conversation, I know that we were

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Speaker 1: talking about the automobile industry. Tell us your thoughts about

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Speaker 1: the housing industry in the United States. You know, this

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Speaker 1: is really an interesting area where we've got prices going

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Speaker 1: up very rapidly because demand is outstripping supply and what's

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Speaker 1: still a tepid overall market. Some of the supply problems

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Speaker 1: we're finding our very structural in nature. Um, what we've

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Speaker 1: seen is at the local level, in particular in more

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Speaker 1: urban areas and in close by suburbs. Many cash stat

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Speaker 1: strapped municipalities have raised fees and all the costs of

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Speaker 1: the land for builders to build in order to make

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Speaker 1: up for the shortfall they felt in real estate revenues

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Speaker 1: during the height of the crisis. The result has made

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Speaker 1: it really hard for builders to move downstream and build

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Speaker 1: more product for entry level for a time buyers, and

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Speaker 1: as a result, they've stayed higher in the market which

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Speaker 1: is really constrained supply. We also have seen the South

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Speaker 1: not really come back at which is the driver of

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Speaker 1: housing starts and the real activity out there, and that's

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Speaker 1: really Florida has been sort of a laggered. It was

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Speaker 1: the epicenter of the subprime crisis. Some of those markets

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Speaker 1: are starting to finally firm, and I do think that

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Speaker 1: will help. But you really got an issue where housing

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Speaker 1: is actually very constrained and the result is showing up

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Speaker 1: in price, and the prices are going up much more

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Speaker 1: rapidly than incomes and eroding some affordability even at a

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Speaker 1: time when housing and interest rates are still relatively affordable.

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Speaker 1: I think these are real issues we need to sort

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Speaker 1: of look at because that housing price appreciation is also

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Speaker 1: going to show up in some of the measurements of

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Speaker 1: inflation as well. Diane, Why are bond yields staying soul below?

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Speaker 1: Is it because investors around the world. Number one, they're saying, oh,

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Speaker 1: we can get some yield in the US, which we

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Speaker 1: can't get almost any place else. Our investors saying, oh

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Speaker 1: the economy is weak. Are they saying, well, the FED

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Speaker 1: is going to move but so slowly. I might as

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Speaker 1: well keep my money and bonds because that's the main

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Speaker 1: reason you've got these terrific mortgage rates, and a lot

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Speaker 1: of people are refining now. It's it's really stunning, isn't that.

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Speaker 1: I mean one seven on a on a tenure. And

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Speaker 1: I laugh because you know, we we've all been I've

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Speaker 1: been humbled more than once by my own forecast that

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Speaker 1: bonnield should rise at some point in time, and it's

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Speaker 1: like waiting for the good Oh um. I think all

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Speaker 1: of the above is really important. You know, the seek

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Speaker 1: for yield. The US is a safe return. And if

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Speaker 1: you don't think inflation is high, and think about you know,

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Speaker 1: in other countries where you've got inflation much lower than

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Speaker 1: the US and the risk of deflation still there, it

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Speaker 1: looks pretty good to get one seven on the tenure.

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Speaker 1: So I think all of these factors are coming into play.

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Speaker 1: I also think they're really you know, there is a

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Speaker 1: sort of reluctance to believe the FED will raise rates,

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Speaker 1: and that's because the FED has not been consistent in

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Speaker 1: their message. There really is a credibility issue here. There's

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Speaker 1: a communication issue here, and you know that's sort of

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Speaker 1: a residual of the transparency that we saw come under

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Speaker 1: Ben Berniky. He really felt that everyone should see the

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Speaker 1: spectrum of debate and instead, you know, we see the

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Speaker 1: sausage getting made and we don't really like the blood

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Speaker 1: and everything that goes with it. Dian, who is going

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Speaker 1: to take the loss on bonds? You mentioned the tenure

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Speaker 1: right now at one point seven two. If you were

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Speaker 1: to buy that, or if you're in an institution and

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Speaker 1: you're gonna buy it to trade it, someone's going to

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Speaker 1: have to be on the other side of the trade

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Speaker 1: when you finally sell it. Is everyone going to rush

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Speaker 1: to the exit at the same time and we're gonna

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Speaker 1: have a bond collapse? Um? Well, you know who knows.

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Speaker 1: I mean that we do tend to have big movements

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Speaker 1: and bonds. My biggest concerned about the bond market is

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Speaker 1: actually depending on what happens in November, we are really

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Speaker 1: under pricing political risk out there, and that could be

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Speaker 1: a turning point um as we finally we're not pricing

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Speaker 1: in political risk or policy risk because there's still many,

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Speaker 1: so many uncertainties out there, and the marketing bond prices

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Speaker 1: could rally. I actually think they could go. They could

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Speaker 1: go the other direction. But if you have political risk,

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Speaker 1: woulden people buy US treasuries? Political risk in the US?

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Speaker 1: I see, and I think there's we uh, there's other

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Speaker 1: those over saying that if you look at the global forces,

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Speaker 1: they are still more disinflationary and even deflationary, and that

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Speaker 1: in fact p M. You may recall just a couple

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Speaker 1: of weeks ago, we had David kotok On from Cumblent

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Speaker 1: Advisors and we were looking at Europe. He's predicting that

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Speaker 1: you're going to have very low inflation and very low

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Speaker 1: and even some negag rates in Europe till the end

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Speaker 1: of the decade. And he said that is going to

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Speaker 1: support these yields and prices on US treasuries and we

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Speaker 1: could see a further rally. What do you think, Well,

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Speaker 1: you know. I mean, um, there certainly is a possibility

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Speaker 1: for a further rail and we can't roll it out. Um.

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Speaker 1: One of the things that I think we're gonna have

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Speaker 1: to see is whether or not we get a snap

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Speaker 1: back and growth. I do think the GDP numbers, we've

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Speaker 1: got to deal with the disconnectre syne unemployment data versus

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Speaker 1: the overall GDP data. Is productivity growth? Really that week,

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Speaker 1: if it is, any acceleration in wages would be dry

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Speaker 1: tinder for some inflation. I don't think that's necessarily the case,

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Speaker 1: but I do think that reality is somewhere in between

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Speaker 1: the GDP figures, which were you know, a point five

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Speaker 1: percent in the first quarter, and the employment data, which

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Speaker 1: was much stronger. So I think my own sense is

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Speaker 1: that we will see a bit of a snap back

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Speaker 1: in growth. The question is what happens when we get

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Speaker 1: to the elections. Because it used to just be noise.

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Speaker 1: And here I am sitting in Washington and it used

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Speaker 1: to just be noise to us as an economist. But

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Speaker 1: the policy risks of trade protective protectionism, of tariffs, increasing,

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Speaker 1: of immigration, you know, being even further cut back, all

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Speaker 1: of those things undermine growth. There's sort of a misconnect,

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Speaker 1: a disconnect between correlation and causality. The globalization of the U. S.

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Speaker 1: Economy was gonna kernel matter what the problem is, many

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Speaker 1: people were sidelined by that globalization. We just didn't prepare

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Speaker 1: them for the operating in a global economy, that the

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Speaker 1: skills they needed to earn what they needed to earn cancel.

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Speaker 1: I love that new word you just made, misconnect a misconnect.

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Speaker 1: I'm gonna tweet that out. Diane Swonk is founder of

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Speaker 1: Diane Swonk Economics, joining us from Washington, d C. Today

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Speaker 1: to put the feeder Reserve in focus on Kathleen has Long.

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Speaker 1: Pin Flock were taken stock on Blueberg Radio. Coming upon

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Speaker 1: taking stock, Brazil's president Dilma Rousseff could be hours away

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Speaker 1: from being forced out of office, at least temporarily. We've

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Speaker 1: got an update next