1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:31,360 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well, 7 00:00:31,400 --> 00:00:34,440 Speaker 1: at a time like this, when markets are full of uncertainty, 8 00:00:34,479 --> 00:00:36,760 Speaker 1: it works to UH talk with someone who's gotten a 9 00:00:36,760 --> 00:00:39,479 Speaker 1: lot of very big predictions right. And I want to 10 00:00:39,520 --> 00:00:44,000 Speaker 1: bring in, uh that person, Mark Grant, chief strategistic Hilltop Securities, 11 00:00:44,040 --> 00:00:47,120 Speaker 1: who nailed the fact that President Trump was going to 12 00:00:47,320 --> 00:00:50,040 Speaker 1: win the election in November and also has gotten bond 13 00:00:50,080 --> 00:00:52,320 Speaker 1: calls right as well as oil calls. Mark, thank you 14 00:00:52,360 --> 00:00:55,639 Speaker 1: so much for joining us now. Uh. In your latest note, 15 00:00:55,640 --> 00:00:59,000 Speaker 1: you were talking about oil, and as we see right now, 16 00:00:59,040 --> 00:01:01,920 Speaker 1: oil is pois for its biggest weekly drop in at 17 00:01:02,000 --> 00:01:06,399 Speaker 1: least four weeks. Um are we heading lower here? I 18 00:01:06,440 --> 00:01:09,280 Speaker 1: think so, Lea's I think, first of all, thank you 19 00:01:09,360 --> 00:01:11,479 Speaker 1: for your kind comments. I feel like if I could 20 00:01:11,480 --> 00:01:17,080 Speaker 1: bow on the radio, I would do it. Yes, I 21 00:01:17,120 --> 00:01:21,240 Speaker 1: think oils had probably fifty where we are exactly at 22 00:01:21,240 --> 00:01:24,280 Speaker 1: this moment is the technical support level. I think we're 23 00:01:24,280 --> 00:01:31,000 Speaker 1: gonna break it and head down towards I think the 24 00:01:31,040 --> 00:01:34,679 Speaker 1: American shale oil producers are in a fabulous position, the 25 00:01:34,720 --> 00:01:38,839 Speaker 1: best position we've been in fifty years, to begin exporting 26 00:01:38,840 --> 00:01:44,200 Speaker 1: oil and bringing in revenues, increasing our tax base, and 27 00:01:44,280 --> 00:01:46,560 Speaker 1: in fact the numbers are so bigly said that it 28 00:01:46,600 --> 00:01:49,880 Speaker 1: can literally balance the budget if we start moving in 29 00:01:49,880 --> 00:01:53,120 Speaker 1: that direction. Mark Grant, I want you to talk about 30 00:01:53,360 --> 00:01:57,280 Speaker 1: risk and several of the items that you've recently written 31 00:01:57,320 --> 00:01:59,960 Speaker 1: about having to do with risk and how people see 32 00:02:00,080 --> 00:02:02,480 Speaker 1: not to be able to perceive it, and you use 33 00:02:02,560 --> 00:02:05,440 Speaker 1: the quote from Warren Buffett. Risk comes from not knowing 34 00:02:05,560 --> 00:02:09,280 Speaker 1: what you're doing. Yes, but I think that's the correct statement. 35 00:02:09,320 --> 00:02:12,359 Speaker 1: I think Mr Buffett nailed at the There are a 36 00:02:12,440 --> 00:02:15,000 Speaker 1: number of ruth areas right now that I will not 37 00:02:15,480 --> 00:02:18,799 Speaker 1: be involved in, uh, just because that's personally the way 38 00:02:18,840 --> 00:02:22,080 Speaker 1: I do business. With the big institutional accounts I talked to, 39 00:02:22,480 --> 00:02:25,000 Speaker 1: Fannie Mae and Freddie Mack are both a lot of risk. 40 00:02:25,160 --> 00:02:27,360 Speaker 1: I don't want anything to do with their bonds because 41 00:02:27,360 --> 00:02:29,040 Speaker 1: we don't know what they're gonna do with those two 42 00:02:29,440 --> 00:02:36,320 Speaker 1: agencies Um, you could look at the European Bank deet right, 43 00:02:36,360 --> 00:02:39,280 Speaker 1: the European Bank debt, the Tier one bonds I think 44 00:02:39,320 --> 00:02:42,880 Speaker 1: have a tremendous amount of risk. Banco Popular Air is 45 00:02:43,000 --> 00:02:47,279 Speaker 1: likely to go over the edge of the cliff and 46 00:02:47,320 --> 00:02:49,280 Speaker 1: then we're gonna have to see how Europe deals with 47 00:02:49,320 --> 00:02:53,400 Speaker 1: that situation. Uh. There have been big pain trades in 48 00:02:53,520 --> 00:02:57,040 Speaker 1: both bonds. I said yields were going lower. I think 49 00:02:57,040 --> 00:02:59,480 Speaker 1: I may have been one of the three people in 50 00:02:59,520 --> 00:03:03,520 Speaker 1: the world at set it and everybody talked that everybody 51 00:03:03,639 --> 00:03:06,000 Speaker 1: we're gonna have three percent yields right now in the 52 00:03:06,080 --> 00:03:10,600 Speaker 1: tenure were to sixteen this morning. And as Lisa mentioned, 53 00:03:10,600 --> 00:03:15,960 Speaker 1: oils the other big pain trade. OPEC keeps saying, you know, 54 00:03:16,040 --> 00:03:18,240 Speaker 1: they're going to cut back and cut back. The problem 55 00:03:18,280 --> 00:03:21,200 Speaker 1: they have is we can produce more than they can. 56 00:03:21,480 --> 00:03:25,520 Speaker 1: So just to continue that thread, cheap loans to buy 57 00:03:25,560 --> 00:03:30,079 Speaker 1: things such as automobiles, commercial mortgage backed securities. Right, those 58 00:03:30,080 --> 00:03:32,280 Speaker 1: are two other areas PIM, and I'm glad you mentioned 59 00:03:32,440 --> 00:03:35,720 Speaker 1: one would be subprime auto loans. I think the automobile 60 00:03:35,800 --> 00:03:39,440 Speaker 1: market has been saturated in a way almost like the 61 00:03:39,640 --> 00:03:43,440 Speaker 1: sub prime real estate market was. Was very cheap credit 62 00:03:43,960 --> 00:03:46,200 Speaker 1: and I think we're about to end get to the 63 00:03:46,280 --> 00:03:48,240 Speaker 1: end of that cycle, so I want nothing to do 64 00:03:48,280 --> 00:03:52,240 Speaker 1: with those securities. And then c mbs, a commercial mortgage 65 00:03:52,400 --> 00:03:57,200 Speaker 1: asset back bonds of real estate, especially anything connected with 66 00:03:57,320 --> 00:04:02,120 Speaker 1: retail stores. Amazon On and the Internet companies are just 67 00:04:02,200 --> 00:04:06,720 Speaker 1: eating the lunch of the traditional retail stores, and I 68 00:04:06,800 --> 00:04:10,120 Speaker 1: see a huge problem in that area of credit as well. Well, 69 00:04:10,200 --> 00:04:12,680 Speaker 1: let's talk about what you do. Like I'm wondering now 70 00:04:12,720 --> 00:04:14,680 Speaker 1: that we see a ten year yield on the treasury 71 00:04:14,720 --> 00:04:18,159 Speaker 1: of two point one six percent, do you think that 72 00:04:18,240 --> 00:04:21,440 Speaker 1: yields go lower from here? Are you advising clients to buy. 73 00:04:22,520 --> 00:04:28,800 Speaker 1: I'm advising clients to um go into a mixed picture, 74 00:04:28,800 --> 00:04:31,479 Speaker 1: which I call cash flow investing, which is to buy 75 00:04:31,520 --> 00:04:35,040 Speaker 1: corporate bonds five to ten years space to get a 76 00:04:35,120 --> 00:04:38,320 Speaker 1: yield of around four percent. By the way, corporate bonds 77 00:04:38,400 --> 00:04:42,520 Speaker 1: right now, even after taxes, have better yields, and municipal bonds, 78 00:04:43,040 --> 00:04:45,360 Speaker 1: and then take half of their money and go into 79 00:04:46,240 --> 00:04:48,839 Speaker 1: what I call closed in bond funds. They are about 80 00:04:49,040 --> 00:04:52,040 Speaker 1: hundred or seven or so I like, and they're all 81 00:04:52,120 --> 00:04:55,320 Speaker 1: yielding around at ten percent and higher, and they have 82 00:04:55,360 --> 00:04:59,240 Speaker 1: a monthly check, which I think is critical. So a 83 00:04:59,279 --> 00:05:02,520 Speaker 1: ten percent yield. Actually, because of the compound, interest is 84 00:05:02,520 --> 00:05:05,320 Speaker 1: worth about eleven point one percent. So you put the 85 00:05:05,360 --> 00:05:08,800 Speaker 1: two together, you're getting around seven and a quarter seven 86 00:05:08,839 --> 00:05:11,600 Speaker 1: and a half percent on your money. And I think 87 00:05:11,680 --> 00:05:15,320 Speaker 1: most of the run inequities is done, and I think 88 00:05:15,360 --> 00:05:17,240 Speaker 1: that's a very good place to put money, both for 89 00:05:17,320 --> 00:05:20,880 Speaker 1: institutions as well as for individuals. You know, Mark, I 90 00:05:20,960 --> 00:05:22,839 Speaker 1: just want to push back a little bit because you 91 00:05:22,839 --> 00:05:27,080 Speaker 1: said corporate bonds, in particular, leverage ratios have reached their 92 00:05:27,120 --> 00:05:31,000 Speaker 1: all time highs with some of these particularly investment grade companies. 93 00:05:31,000 --> 00:05:33,760 Speaker 1: They've been packing on debt at a faster pace than 94 00:05:33,760 --> 00:05:37,039 Speaker 1: they've been increasing their revenues, and it's been heavily weighted 95 00:05:37,120 --> 00:05:41,320 Speaker 1: towards telecommunication companies that face somewhat uncertain future. Does that 96 00:05:41,360 --> 00:05:44,800 Speaker 1: concern you at least one? I think that's a fabulous 97 00:05:44,839 --> 00:05:47,480 Speaker 1: point you're making. It. Does it concern me when interest 98 00:05:47,600 --> 00:05:50,919 Speaker 1: rates are this low? No, that would be my short answer. 99 00:05:51,240 --> 00:05:53,400 Speaker 1: You know, I pay attention to it, I look at it. 100 00:05:53,960 --> 00:05:57,600 Speaker 1: But you have to bear in mind the additional debt 101 00:05:57,839 --> 00:06:00,520 Speaker 1: is going in at such low interest rate. It's given 102 00:06:01,400 --> 00:06:04,680 Speaker 1: profit margins that they're just increasing the size of their 103 00:06:04,720 --> 00:06:07,880 Speaker 1: business we're doing stock buy backs in some cases, but 104 00:06:08,000 --> 00:06:10,960 Speaker 1: I don't have a big concern about it now. So Mark, 105 00:06:11,160 --> 00:06:13,480 Speaker 1: this looks like a very low yield picture that you're 106 00:06:13,520 --> 00:06:18,279 Speaker 1: advising your clients to expect. How much have estimated forecasts 107 00:06:18,320 --> 00:06:21,880 Speaker 1: for turns that you're talking with your clients about, how 108 00:06:21,960 --> 00:06:24,919 Speaker 1: much have they come down? That've come down substantially. The 109 00:06:24,960 --> 00:06:28,440 Speaker 1: reason we're in this very low interest rate environment, my opinion, 110 00:06:29,240 --> 00:06:33,400 Speaker 1: is the ECB and the Japanese Central Bank now have 111 00:06:33,520 --> 00:06:36,479 Speaker 1: bigger balance sheets and the FED. The yields in Europe 112 00:06:36,480 --> 00:06:40,640 Speaker 1: and and Asia are much lower, some of them negative. 113 00:06:40,680 --> 00:06:43,560 Speaker 1: At one point we had over eleven trillion dollars in 114 00:06:43,640 --> 00:06:47,800 Speaker 1: negative yielding securities that we're now down to probably around 115 00:06:47,839 --> 00:06:53,080 Speaker 1: eight trillion. But the the monetization of debt by the 116 00:06:53,120 --> 00:06:56,360 Speaker 1: central banks all over the world has been huge, and 117 00:06:56,440 --> 00:07:00,680 Speaker 1: that just is pushing yields down. And and then I think, 118 00:07:00,720 --> 00:07:03,680 Speaker 1: of course with the FED, that Mr Trump has the 119 00:07:03,720 --> 00:07:06,240 Speaker 1: ability at any point in time here to appoint four 120 00:07:06,279 --> 00:07:08,280 Speaker 1: members of the FED, if not more, but we know 121 00:07:08,400 --> 00:07:10,560 Speaker 1: for for sure. I think they are going to be 122 00:07:10,600 --> 00:07:12,880 Speaker 1: business people. I think the FED is going to become 123 00:07:12,960 --> 00:07:15,800 Speaker 1: much more pragmatic, and I think that a call for 124 00:07:15,960 --> 00:07:20,520 Speaker 1: this return to normalcy, which is an economic theory I 125 00:07:20,560 --> 00:07:23,640 Speaker 1: think is going to get too overturned. And as as 126 00:07:23,720 --> 00:07:26,800 Speaker 1: the new members of the FED are appointed, Mark speak 127 00:07:26,800 --> 00:07:29,800 Speaker 1: if you can just briefly about pension liabilities that exist 128 00:07:29,880 --> 00:07:33,200 Speaker 1: in the United States when it comes to municipalities, their 129 00:07:33,280 --> 00:07:37,720 Speaker 1: bond issuance and also UH, the risks that may be 130 00:07:38,160 --> 00:07:41,920 Speaker 1: attended to those that people don't really understand. Certainly been 131 00:07:42,120 --> 00:07:47,720 Speaker 1: the amount of pension liabilities is the biggest that's ever 132 00:07:47,760 --> 00:07:52,280 Speaker 1: been unfunded pension liabilities. I've advised that the institutions I 133 00:07:52,320 --> 00:07:55,800 Speaker 1: speak with, insurance companies, money managers to stay away and 134 00:07:56,000 --> 00:08:00,000 Speaker 1: or take more assertive action in terms of I municipal 135 00:08:00,160 --> 00:08:04,120 Speaker 1: pension funds. Uh, they're in a lot of them are 136 00:08:04,120 --> 00:08:08,200 Speaker 1: in big trouble. We've seen, you know, some announcements in 137 00:08:08,200 --> 00:08:11,200 Speaker 1: the press about some but it was recently estimated by 138 00:08:11,240 --> 00:08:16,600 Speaker 1: the Houver Institute that Connecticut, for example, and their municipalities 139 00:08:16,640 --> 00:08:21,160 Speaker 1: had about sixty five billion dollars and unfunded pension liabilities. 140 00:08:21,960 --> 00:08:24,400 Speaker 1: We can look at Dallas, we can look at a 141 00:08:24,520 --> 00:08:26,880 Speaker 1: number of other cities that have been mentioned in the 142 00:08:26,880 --> 00:08:32,680 Speaker 1: press for worth, and they're just huge problems out there 143 00:08:32,720 --> 00:08:35,880 Speaker 1: having to do with these pension funds. Thanks for sharing 144 00:08:35,880 --> 00:08:38,559 Speaker 1: your thoughts with us. Smart Grant is the chief strategist 145 00:08:38,600 --> 00:08:42,440 Speaker 1: at Hilltop Securities, giving us his view of risks that 146 00:08:42,480 --> 00:08:45,200 Speaker 1: currently exist in the market that people may not be 147 00:08:45,280 --> 00:09:00,439 Speaker 1: paying attention to. We were talking earlier about the report 148 00:09:00,480 --> 00:09:03,960 Speaker 1: that came out today disappointing headline number also showing that 149 00:09:04,000 --> 00:09:07,840 Speaker 1: wages are not going anywhere. But perhaps uh there is 150 00:09:08,040 --> 00:09:10,600 Speaker 1: more optimism here uh than meets the eye. I want 151 00:09:10,600 --> 00:09:12,760 Speaker 1: to bring in Neil Data, who's head of US economics 152 00:09:12,800 --> 00:09:16,840 Speaker 1: for Renaissance Renaissance Macro Research, who joins us by phone. Neil, 153 00:09:17,080 --> 00:09:19,000 Speaker 1: thank you so much for joining us. I want to 154 00:09:19,040 --> 00:09:23,640 Speaker 1: start with the idea that perhaps this job's report shows 155 00:09:23,920 --> 00:09:27,280 Speaker 1: that the FEDS policy of holding rates low is actually 156 00:09:27,320 --> 00:09:30,640 Speaker 1: still helping get people off the sidelines. That was a 157 00:09:30,679 --> 00:09:33,160 Speaker 1: sentiment that you seem to express in a Bloomberg News 158 00:09:33,280 --> 00:09:37,640 Speaker 1: article yesterday. Uh is that how you read this? Well? 159 00:09:37,679 --> 00:09:40,680 Speaker 1: I don't read this report that way, because the labor 160 00:09:40,720 --> 00:09:45,400 Speaker 1: force participation rate uh fell and um you know, it 161 00:09:45,520 --> 00:09:49,120 Speaker 1: fell for prime age workers as well, so to fifty 162 00:09:49,120 --> 00:09:51,560 Speaker 1: four year old Um you know. But I think the 163 00:09:51,600 --> 00:09:55,240 Speaker 1: general trend for for prime aged participation has been up 164 00:09:55,679 --> 00:10:00,360 Speaker 1: broadly speaking since early UM. You know, if you look 165 00:10:00,400 --> 00:10:02,840 Speaker 1: at UM, I think what you're trying to get at 166 00:10:02,960 --> 00:10:06,400 Speaker 1: is UM. It is definitely true that UM. I think 167 00:10:06,440 --> 00:10:10,920 Speaker 1: easy monetary policy generally is UM. You know, pulling people 168 00:10:11,480 --> 00:10:15,079 Speaker 1: back into the workforce. UM. You know at the margins, right, 169 00:10:15,200 --> 00:10:19,240 Speaker 1: so you know, for example, UM, part time for economic reasons, 170 00:10:19,280 --> 00:10:22,160 Speaker 1: that's down, right, the U six unemployment rate, that's down. 171 00:10:22,200 --> 00:10:23,840 Speaker 1: If you look at those not in the labor force 172 00:10:23,920 --> 00:10:27,520 Speaker 1: that want a job right now, that's down. So UM. 173 00:10:27,559 --> 00:10:29,439 Speaker 1: You know that's the sign of a healthy labor market, 174 00:10:29,480 --> 00:10:31,600 Speaker 1: is that's your you know, long term unemployment is down. 175 00:10:31,720 --> 00:10:33,960 Speaker 1: So I mean that that tells you that if the 176 00:10:34,000 --> 00:10:36,959 Speaker 1: labor market is strong enough to pull down the unemployed, 177 00:10:37,040 --> 00:10:39,800 Speaker 1: for the people that are the most difficult to bring 178 00:10:40,400 --> 00:10:43,840 Speaker 1: into employment. UM, that's saying something. I mean. So if 179 00:10:43,880 --> 00:10:46,840 Speaker 1: you take a look at, for example, within the Peril Report, 180 00:10:46,880 --> 00:10:51,720 Speaker 1: I mean leisure and hospitality earnings, UM, that number relative 181 00:10:51,760 --> 00:10:54,600 Speaker 1: to total private sector earnings hourly earnings is over six. 182 00:10:55,360 --> 00:10:57,880 Speaker 1: So you know, when you have a sector like leisure 183 00:10:57,920 --> 00:11:01,160 Speaker 1: and hospitality, which is you I think most would agree 184 00:11:01,480 --> 00:11:07,080 Speaker 1: a low wage sector UM rising relative to other industries 185 00:11:07,120 --> 00:11:11,199 Speaker 1: in terms of wage growth. Um, So that's that income 186 00:11:11,200 --> 00:11:15,040 Speaker 1: inequality in some respects of declining. Right. So, UM, I 187 00:11:15,040 --> 00:11:17,960 Speaker 1: mean I think the labor markets are tightening. Um, I 188 00:11:18,000 --> 00:11:21,040 Speaker 1: think the FED is going in June. Um. I think 189 00:11:21,040 --> 00:11:23,400 Speaker 1: there was enough in this report, and I mean it's 190 00:11:23,440 --> 00:11:26,160 Speaker 1: about taking a holistic approach. I mean, I think there's 191 00:11:26,160 --> 00:11:28,760 Speaker 1: been enough to date to suggest that, you know, the 192 00:11:28,760 --> 00:11:32,199 Speaker 1: headline payroll number today is probably not quite as weak 193 00:11:32,320 --> 00:11:35,640 Speaker 1: as as this was reported, and I think the underlying 194 00:11:35,640 --> 00:11:38,360 Speaker 1: trend rather is is probably so much stronger than the 195 00:11:38,440 --> 00:11:42,040 Speaker 1: number we got today. UM. So you know, and I'm 196 00:11:42,040 --> 00:11:44,560 Speaker 1: and I'm I think there's enough in there to, um, 197 00:11:44,600 --> 00:11:47,240 Speaker 1: you know, to kind of draw some encouraging signs about 198 00:11:47,240 --> 00:11:49,760 Speaker 1: the outlook, Neil, Is there enough in there to draw 199 00:11:49,800 --> 00:11:52,720 Speaker 1: any conclusion about what's going on with the yield curve 200 00:11:52,800 --> 00:11:56,640 Speaker 1: and why it is flattening so much? Oh? Well, I 201 00:11:56,679 --> 00:11:58,679 Speaker 1: mean I think that. I mean, I think that's um, 202 00:11:59,200 --> 00:12:01,080 Speaker 1: that's me. That's all vious. I mean, the wage number 203 00:12:01,120 --> 00:12:04,800 Speaker 1: was sluggish and labor force participation rate fell, which implies 204 00:12:04,840 --> 00:12:08,640 Speaker 1: lower potential GDP. At the same time, I think, you know, 205 00:12:08,679 --> 00:12:11,319 Speaker 1: the odds of a June hiker fairly much set in 206 00:12:11,320 --> 00:12:13,360 Speaker 1: the stone at this point. Um. You know, while this 207 00:12:13,440 --> 00:12:15,760 Speaker 1: number was weak, it's not quite as week to shift 208 00:12:15,800 --> 00:12:18,760 Speaker 1: the odds of June. So you know, the FED hiking 209 00:12:19,120 --> 00:12:21,880 Speaker 1: and potential growth is slowing someone at the margin based 210 00:12:21,880 --> 00:12:23,560 Speaker 1: on this data point at least, and so you get 211 00:12:23,720 --> 00:12:26,960 Speaker 1: you get a flatter yeel curve. UM. Now I do 212 00:12:27,080 --> 00:12:29,719 Speaker 1: think that, you know, you have to weigh this, as 213 00:12:29,760 --> 00:12:32,360 Speaker 1: I say, against the data that's come in, and GDP 214 00:12:32,559 --> 00:12:36,160 Speaker 1: tracking is in the vicinity of around three to four 215 00:12:36,200 --> 00:12:39,320 Speaker 1: percent in the current quarter. That was the Atlanta FED report, right, 216 00:12:39,840 --> 00:12:41,800 Speaker 1: Well that was yesterday. I mean, we'll see what what 217 00:12:41,800 --> 00:12:43,440 Speaker 1: what number they come up with today. I mean the 218 00:12:43,480 --> 00:12:46,480 Speaker 1: trade numbers, for example, probably pushed that number a little 219 00:12:46,520 --> 00:12:49,240 Speaker 1: bit lower. Um, you know, but at the end of 220 00:12:49,240 --> 00:12:51,720 Speaker 1: the day, I mean GDP growth in the second quarter 221 00:12:51,760 --> 00:12:53,800 Speaker 1: is going to show a meaningful rebound relative to the 222 00:12:53,840 --> 00:12:56,480 Speaker 1: first UM. And you know, I think the odds are 223 00:12:56,600 --> 00:12:58,360 Speaker 1: that when you average out the first two quarters of 224 00:12:58,360 --> 00:13:00,280 Speaker 1: the year, you're growing at about two and alf for sense, 225 00:13:00,280 --> 00:13:04,120 Speaker 1: So you have to weigh that against against this job's number. 226 00:13:04,160 --> 00:13:07,400 Speaker 1: So if you have stronger GDP growth but somewhat slower 227 00:13:07,440 --> 00:13:09,880 Speaker 1: employment growth, what does that mean? That means productivity is 228 00:13:09,920 --> 00:13:12,760 Speaker 1: going up right, and that's yeah, sorry, good, No real 229 00:13:12,840 --> 00:13:16,319 Speaker 1: quick question. If this report does signal some kind of 230 00:13:16,760 --> 00:13:21,400 Speaker 1: slowing down of the the employment picture, do you think 231 00:13:21,480 --> 00:13:24,840 Speaker 1: this takes the third hike for off the table for 232 00:13:24,840 --> 00:13:28,439 Speaker 1: the Fed. It's possible. It's certainly possible. I mean, it's 233 00:13:28,440 --> 00:13:32,480 Speaker 1: also possible that the GDP numbers are relatively healthy and 234 00:13:32,559 --> 00:13:35,920 Speaker 1: that core inflation firms and the FED can still go 235 00:13:36,000 --> 00:13:39,240 Speaker 1: in in um in September. I mean, I think the 236 00:13:39,240 --> 00:13:42,720 Speaker 1: big story is, you know, in sten the FED needed 237 00:13:43,920 --> 00:13:47,480 Speaker 1: overwhelming evidence to hike. Now they need overwhelming evidence not 238 00:13:47,559 --> 00:13:49,719 Speaker 1: to and we're not there yet. I want to thank 239 00:13:49,720 --> 00:13:51,760 Speaker 1: you very much for joining us. Neil Data is the 240 00:13:51,800 --> 00:13:56,080 Speaker 1: head of US economics for Renaissance Macro Research, giving us 241 00:13:56,120 --> 00:13:59,720 Speaker 1: his thoughts about today's jobs report and also about the 242 00:13:59,720 --> 00:14:11,800 Speaker 1: future of US GDP performance. We want to take a 243 00:14:11,840 --> 00:14:14,239 Speaker 1: moment to let you know about something new from Bloomberg. 244 00:14:14,480 --> 00:14:16,719 Speaker 1: Starting right now, you can use our I O s 245 00:14:16,760 --> 00:14:19,920 Speaker 1: app or our new Google Chrome extension to scan any 246 00:14:19,920 --> 00:14:23,360 Speaker 1: news story on any website, instantly revealing relevant news and 247 00:14:23,400 --> 00:14:26,040 Speaker 1: market data from Bloomberg and other sources related to the 248 00:14:26,040 --> 00:14:28,760 Speaker 1: companies and people you're reading about. So no matter where 249 00:14:28,800 --> 00:14:30,720 Speaker 1: you're reading the news. You can bring the power of 250 00:14:30,760 --> 00:14:34,280 Speaker 1: Bloomberg's news and data with you. It's pretty amazing. Download 251 00:14:34,320 --> 00:14:36,840 Speaker 1: our io s app or search for the Bloomberg extension 252 00:14:36,880 --> 00:14:39,040 Speaker 1: on the Chrome Store to try it out. Learn more 253 00:14:39,080 --> 00:14:51,600 Speaker 1: at bloomberg dot com slash lens. Yesterday we got the 254 00:14:51,640 --> 00:14:54,600 Speaker 1: announcement from President Trump that he plans to withdraw the 255 00:14:54,680 --> 00:14:58,600 Speaker 1: US from the Paris Climate Accord, making the US one 256 00:14:58,600 --> 00:15:01,760 Speaker 1: of three nations g tobally that are not part of 257 00:15:01,800 --> 00:15:04,400 Speaker 1: this pact. To get a better sense of what the 258 00:15:04,400 --> 00:15:07,200 Speaker 1: implications really are, I want to bring in Rob Barnett. 259 00:15:07,320 --> 00:15:10,280 Speaker 1: He is based in London, our senior energy policy analysts 260 00:15:10,280 --> 00:15:14,680 Speaker 1: for Bloomberg Intelligence. Rob, you know, after some closer examination, 261 00:15:14,720 --> 00:15:17,360 Speaker 1: we're getting a lot of reports that perhaps this will 262 00:15:17,360 --> 00:15:20,360 Speaker 1: make no difference whatsoever with respect to the US is 263 00:15:20,480 --> 00:15:26,680 Speaker 1: adoption of UH environmentally friendly sources of energy. What's your 264 00:15:26,680 --> 00:15:29,480 Speaker 1: take on this, Well, depends on whether you have a 265 00:15:29,560 --> 00:15:33,280 Speaker 1: medium term or long term view. In the medium term, 266 00:15:33,320 --> 00:15:36,440 Speaker 1: it really doesn't make a difference. Trump had already signaled 267 00:15:36,440 --> 00:15:38,960 Speaker 1: that we weren't going to do the Clean Power Plan 268 00:15:39,640 --> 00:15:43,920 Speaker 1: and other types of policies in the US, so frankly, 269 00:15:43,960 --> 00:15:46,960 Speaker 1: being in the Paris agreement or not didn't really change 270 00:15:47,680 --> 00:15:51,200 Speaker 1: the landscape for policy in the US. But to your 271 00:15:51,200 --> 00:15:55,840 Speaker 1: earlier point, the the industry has already been shifting to 272 00:15:55,960 --> 00:16:00,240 Speaker 1: lower emissions without having the Paris Agreement or without having 273 00:16:00,640 --> 00:16:04,120 Speaker 1: many of the policies that President Barack Obama was pushing for. 274 00:16:04,600 --> 00:16:07,680 Speaker 1: Emissions were declining by an average of about one point 275 00:16:07,720 --> 00:16:11,040 Speaker 1: three percent a year in the US for the last decade. 276 00:16:11,160 --> 00:16:15,400 Speaker 1: So we've seen market declines without really having the policy. 277 00:16:15,680 --> 00:16:18,920 Speaker 1: None of those fundamental underlying factors have changed that have 278 00:16:19,000 --> 00:16:22,280 Speaker 1: been allowing for that decline to occur, Rob, Can you 279 00:16:22,320 --> 00:16:25,000 Speaker 1: tell us a little bit about cap and trade programs, 280 00:16:25,040 --> 00:16:29,600 Speaker 1: how they currently work, and whether they are successful. Sure? So, 281 00:16:29,920 --> 00:16:33,960 Speaker 1: capin trade, one thing is that often gets used in 282 00:16:34,120 --> 00:16:39,840 Speaker 1: almost synonymous terms with Paris, the Paris Agreement, or any 283 00:16:39,920 --> 00:16:42,760 Speaker 1: of the policies being discussed in the United States. But 284 00:16:42,800 --> 00:16:45,600 Speaker 1: the thing is cap and trade is far from the norm. 285 00:16:45,720 --> 00:16:48,800 Speaker 1: Less than ten percent of emissions around the world are 286 00:16:48,880 --> 00:16:51,640 Speaker 1: subject to cap and trade programs, and that's where you 287 00:16:51,680 --> 00:16:55,200 Speaker 1: have a tradeable credit for where emitters trade for the 288 00:16:55,400 --> 00:16:59,640 Speaker 1: right to emit carbon oxide into the atmosphere. Now there 289 00:16:59,640 --> 00:17:02,320 Speaker 1: are use such programs in the US, for instance, out 290 00:17:02,360 --> 00:17:05,080 Speaker 1: in California if you want to admit CEO too, it 291 00:17:05,240 --> 00:17:09,680 Speaker 1: costs about a little over fourteen dollars per ton right now. 292 00:17:09,760 --> 00:17:13,160 Speaker 1: But the interesting thing about that is for the jurisdictions 293 00:17:13,200 --> 00:17:17,600 Speaker 1: that do have captain trade California, Europe, parts of Asia, 294 00:17:17,840 --> 00:17:20,480 Speaker 1: they don't care whether Trump's in the Climate Paris Climate 295 00:17:20,520 --> 00:17:24,280 Speaker 1: Agreement or not. So right now, the withdrawal of the 296 00:17:24,400 --> 00:17:29,360 Speaker 1: US has very little impact on the resolve of lawmakers 297 00:17:29,400 --> 00:17:32,159 Speaker 1: and those jurisdictions to continue with those kind of programs. 298 00:17:32,200 --> 00:17:34,359 Speaker 1: You know, Robbie started out talking about how in the 299 00:17:34,480 --> 00:17:36,240 Speaker 1: short term it's hard to see that there's going to 300 00:17:36,240 --> 00:17:39,520 Speaker 1: be a significant difference. What about the long term, Well, 301 00:17:39,520 --> 00:17:43,840 Speaker 1: over the long term, it is quite likely that policy 302 00:17:43,920 --> 00:17:47,320 Speaker 1: is going to be needed to continue to drive emission's lower. 303 00:17:47,920 --> 00:17:50,119 Speaker 1: Uh if we're going to hit this uh you know, 304 00:17:50,280 --> 00:17:54,520 Speaker 1: two degree warming threshold, so having temperatures go no more 305 00:17:54,520 --> 00:17:59,240 Speaker 1: in two degrees. So interesting to note that Paris itself 306 00:17:59,320 --> 00:18:02,320 Speaker 1: didn't get us to that to degree threshold. So even 307 00:18:02,320 --> 00:18:05,199 Speaker 1: if you if all countries complied with Paris, you wouldn't 308 00:18:05,240 --> 00:18:09,760 Speaker 1: get there. So an incremental policy, new policy is needed 309 00:18:09,760 --> 00:18:13,240 Speaker 1: to drive emissions lower over the long term, at least 310 00:18:13,280 --> 00:18:17,240 Speaker 1: with the current technology mix. So if you had a 311 00:18:17,480 --> 00:18:21,280 Speaker 1: future president who thought like President Donald Trump does on 312 00:18:21,320 --> 00:18:24,560 Speaker 1: this issue, you might not see those kinds of policies 313 00:18:24,800 --> 00:18:28,600 Speaker 1: coming in and driving those new technologies into the marketplace. 314 00:18:28,640 --> 00:18:31,520 Speaker 1: But at least in the short run, it's not that meaningful. 315 00:18:31,840 --> 00:18:33,919 Speaker 1: Long term though, if you look out over kind of 316 00:18:33,960 --> 00:18:37,959 Speaker 1: twenty thirty, forty years, UH, it would be meaningful. So 317 00:18:38,080 --> 00:18:41,439 Speaker 1: it just depends on how long we continue with the 318 00:18:41,480 --> 00:18:44,760 Speaker 1: president who doesn't really want to tackle the issue. Well. 319 00:18:44,800 --> 00:18:47,840 Speaker 1: The President yesterday and speaking in the Rose Garden about 320 00:18:47,840 --> 00:18:51,080 Speaker 1: the US withdraw from the Paris Climate Accord, mentioned the 321 00:18:51,160 --> 00:18:54,680 Speaker 1: coal industry. What are your thoughts about the coal industry 322 00:18:54,720 --> 00:18:58,439 Speaker 1: and is there a revival likely to happen? Certainly not 323 00:18:58,680 --> 00:19:03,159 Speaker 1: in the US, and we're seeing the UH use of 324 00:19:03,240 --> 00:19:07,680 Speaker 1: coal slow globally, so uh the plants that have already 325 00:19:07,720 --> 00:19:10,880 Speaker 1: closed in the United States, they're not coming back. It's 326 00:19:11,000 --> 00:19:14,640 Speaker 1: interesting the note, even with President Trump and his pro 327 00:19:14,880 --> 00:19:20,040 Speaker 1: coal rhetorical stance, we're continuing to see coal plants UH 328 00:19:20,240 --> 00:19:23,879 Speaker 1: closures being announced from companies like A E. S and 329 00:19:24,040 --> 00:19:26,280 Speaker 1: others that have said even since he's been elected that 330 00:19:26,280 --> 00:19:28,560 Speaker 1: they're going to close their coal plants. And over in 331 00:19:28,640 --> 00:19:31,320 Speaker 1: Europe and elsewhere, you're seeing a lot of resolve to 332 00:19:31,640 --> 00:19:35,600 Speaker 1: tackle coal. So France, Emmanuel mccrolan has said he wants 333 00:19:35,600 --> 00:19:38,920 Speaker 1: to close all of the coal plants in France. Bye. 334 00:19:39,200 --> 00:19:42,200 Speaker 1: Here in the UK they're aiming to have all coal 335 00:19:42,240 --> 00:19:46,600 Speaker 1: plants closed by so none of them is changing in 336 00:19:46,680 --> 00:19:50,879 Speaker 1: spite of the rhetorics that's coming out of President Donald Trump. 337 00:19:51,040 --> 00:19:53,000 Speaker 1: So in our view at least, it's going to be 338 00:19:53,160 --> 00:19:58,159 Speaker 1: very difficult to uh drive incremental new coal demand from 339 00:19:58,400 --> 00:20:01,120 Speaker 1: loosening some of this policy. In the U S. It's 340 00:20:01,160 --> 00:20:04,400 Speaker 1: just not gonna work. Just gonna mention that just yesterday 341 00:20:04,520 --> 00:20:07,560 Speaker 1: Brighton Point power Station in Somerset in Massachusetts, that's the 342 00:20:07,640 --> 00:20:11,359 Speaker 1: largest qualifier plants in New England UM went dark on Wednesday. 343 00:20:11,600 --> 00:20:14,480 Speaker 1: It's part of the shutdown. It's been underway for several years. 344 00:20:15,440 --> 00:20:17,760 Speaker 1: That's right. You've got to keep in mind that New 345 00:20:17,760 --> 00:20:20,560 Speaker 1: England is one of the parts of the US that 346 00:20:20,840 --> 00:20:23,639 Speaker 1: is pushing very hard on the issue of climate whether 347 00:20:23,680 --> 00:20:26,280 Speaker 1: you have a president like Donald Trump in place or not. 348 00:20:26,840 --> 00:20:29,840 Speaker 1: In the Northeast, just like in California, they've got cap 349 00:20:29,880 --> 00:20:32,840 Speaker 1: and trade in place, so Brighton Point would have been 350 00:20:32,880 --> 00:20:36,400 Speaker 1: subject to that trading program and it and it increases 351 00:20:36,440 --> 00:20:39,600 Speaker 1: the cost of using cold if you if you have 352 00:20:39,720 --> 00:20:43,320 Speaker 1: to pay for those emissions. So uh certainly uh in 353 00:20:43,359 --> 00:20:46,600 Speaker 1: any state where you have that kind of program in place, 354 00:20:46,960 --> 00:20:51,600 Speaker 1: you're gonna see less uh less emphasis on using cole, 355 00:20:51,800 --> 00:20:55,400 Speaker 1: more emphasis on natural gas and renewables. Thank you very much. 356 00:20:55,480 --> 00:20:59,280 Speaker 1: Rob Barnett as our senior Energy policy analyst for Bloomberg Intelligence, 357 00:20:59,480 --> 00:21:01,960 Speaker 1: joining us from London. Just go to b I go 358 00:21:02,119 --> 00:21:08,600 Speaker 1: on the Bloomberg for more information. Thanks for listening to 359 00:21:08,600 --> 00:21:11,520 Speaker 1: the Bloomberg P and L podcast. You can subscribe and 360 00:21:11,560 --> 00:21:15,560 Speaker 1: listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast 361 00:21:15,560 --> 00:21:19,040 Speaker 1: platform you prefer. I'm pim Fox. I'm on Twitter at 362 00:21:19,200 --> 00:21:23,119 Speaker 1: pim Fox. I'm on Twitter at Lisa abramowits one before 363 00:21:23,160 --> 00:21:26,399 Speaker 1: the podcast. You can always catch us worldwide on Bloomberg Radio.