WEBVTT - Ryding: Fed has messed up communications policy 0:00:03.320 --> 0:00:06.600 This is Bloomberg Surveillance way text of view that as 0:00:06.640 --> 0:00:09.400 the FED rises rights, that removes the US dollar liquidity 0:00:09.440 --> 0:00:11.320 from the rest of the world. Sixty percent of global 0:00:11.360 --> 0:00:15.200 j DP relies on US toll liquidity to bottom have 0:00:15.480 --> 0:00:19.480 basically seen their income stagnate over a third of a century. 0:00:19.560 --> 0:00:21.720 The Asian economies there are the fastest growing ones in 0:00:21.760 --> 0:00:24.080 the world, China's Both may be slowing down, but we're 0:00:24.079 --> 0:00:26.239 still talking about China growing at six and a half 0:00:26.280 --> 0:00:30.560 seven percent. Bloomberg Surveillance your link to the world of economics, 0:00:30.760 --> 0:00:35.400 finance and investment on Bloomberg Radio. Good morning, It is 0:00:35.560 --> 0:00:38.040 seven am on Wall Street. It is five am in 0:00:38.120 --> 0:00:41.879 Fort McMurray, Canada, where we wish the firefighters battling that 0:00:42.000 --> 0:00:44.360 huge blaze up there. The best oil higher this morning, 0:00:44.360 --> 0:00:48.839 in part on concerns of interruptions to the supply from Canada. 0:00:48.880 --> 0:00:52.080 West Texas sixty two is up two point two percent, 0:00:52.520 --> 0:00:57.120 Brent nine up one point six percent this morning, but 0:00:57.200 --> 0:01:01.480 actually pretty much everything is higher this morning. By the way, 0:01:01.520 --> 0:01:04.640 I'm Michael McGee along with Tom Keen Unsurveillance today and 0:01:04.640 --> 0:01:07.679 we're watching a global rally overnight. Asia up and now 0:01:07.680 --> 0:01:10.800 Europe the stock six hundred four points higher one point 0:01:10.800 --> 0:01:14.000 two percent, the docks in Germany up one eighty points. 0:01:14.000 --> 0:01:17.039 That's one point eight percent in London, a thirty point 0:01:17.040 --> 0:01:19.640 game for the Footsie half a percent of the day 0:01:19.680 --> 0:01:25.000 bonds little changed to higher, the curve stepens. The two 0:01:25.080 --> 0:01:27.920 year no yield is at seventy three basis points, five 0:01:27.959 --> 0:01:30.600 year one point to two, and the ten year one 0:01:30.640 --> 0:01:34.840 point seven seven. On the day, the dollars stronger. Here's 0:01:34.840 --> 0:01:39.240 the real debate point. The dollar following comments and the 0:01:39.640 --> 0:01:42.720 jobs report following comments from the Fed moving higher today 0:01:43.160 --> 0:01:46.040 ninety three point nine for the d X y index, 0:01:46.160 --> 0:01:49.320 The yen weekends to one oh oh four, the year 0:01:49.360 --> 0:01:54.280 O one thirteen eight, and the pound one four fifty one. 0:01:54.400 --> 0:01:57.480 So that's uh the question whether interest rates in the 0:01:57.560 --> 0:02:01.320 United States and whether the dollar and bond market. We 0:02:01.400 --> 0:02:05.559 have seen Fed officials the latest Bill Dudley this morning 0:02:05.600 --> 0:02:08.560 time in the New York Times saying we're still on 0:02:08.639 --> 0:02:11.240 track for June if the numbers continue the way they are, 0:02:11.280 --> 0:02:14.200 But that's not the way the bond market season. John 0:02:14.280 --> 0:02:17.040 Riding is the chief economist and founder of r t 0:02:17.160 --> 0:02:20.560 Q Economics. John, there's an old saying, don't fight the FED. 0:02:21.000 --> 0:02:24.280 And it seems that people on bond trading desks have 0:02:24.400 --> 0:02:27.080 decided they want to get into a scrap with the 0:02:27.200 --> 0:02:30.040 U S. Central Bank. Well, the problem is the FED 0:02:30.240 --> 0:02:35.200 is completely messed up its communications policy and UH. It 0:02:35.600 --> 0:02:40.400 told us it had objectives for unemployment inflation. UH, and 0:02:40.480 --> 0:02:42.560 then as we go close to those, it lowered the 0:02:42.639 --> 0:02:45.639 unemployment rate, so that the market simply doesn't believe the FED. 0:02:45.720 --> 0:02:48.200 And I think that to believe the Fed, John at 0:02:48.280 --> 0:02:51.239 YELLTT has to come out and deliver a similar message. 0:02:51.440 --> 0:02:54.680 And as I said to Tom on TV a few minutes, 0:02:54.720 --> 0:02:57.920 you say to me right now to um, what we 0:02:58.000 --> 0:03:02.480 have here is typically the central Uh. The chairman of 0:03:02.480 --> 0:03:05.360 the FET goes in May and gives a testimony, so 0:03:05.400 --> 0:03:07.880 she can be perfectly tied up to say not that 0:03:07.919 --> 0:03:11.560 we're going in June, but that we are still committed 0:03:11.600 --> 0:03:15.280 to renormalizing monetary policy, and the data points are close 0:03:15.320 --> 0:03:17.680 and if we continue in that direction, we will go. 0:03:17.760 --> 0:03:20.600 Because the FED in the past halt about cumulative improvement, 0:03:20.760 --> 0:03:24.880 and cumulative improvement as the actual progress won't quote upon exactly, 0:03:25.160 --> 0:03:28.200 not just the latest day to point cumulative improvement from 0:03:28.200 --> 0:03:30.720 a temper cent an employment rate to a five percent 0:03:30.800 --> 0:03:33.799 unemployment rate. John Writing with the rd Q Economics. We 0:03:33.840 --> 0:03:36.960 say good morning to all of your worldwide Bloomberg Radio 0:03:37.000 --> 0:03:41.280 Plus and of course across Bloomberg dot com Bloomberg Surveillance. 0:03:41.320 --> 0:03:45.920 This morning brought you by Investco. Factor based strategies can 0:03:45.960 --> 0:03:50.800 help investors focus on high quality, low volatility and more. 0:03:51.800 --> 0:03:56.200 Learn more at investco dot com Slash High Conviction Genre 0:03:56.200 --> 0:03:58.600 writing giving as great perspective this morning, John, As I 0:03:58.640 --> 0:04:03.800 mentioned earlier, your note had a certain heat on Friday. 0:04:03.960 --> 0:04:08.360 Let's frame the two avenues out of the jobs report. 0:04:08.480 --> 0:04:10.760 One is it was a molding number. We all agree 0:04:10.760 --> 0:04:14.120 on this with the molding revision. And then there's the yeah, 0:04:14.240 --> 0:04:18.039 but the underlying data was actually pretty good. Explained to 0:04:18.160 --> 0:04:22.840 us why hours worked in wages can trump? That was 0:04:22.960 --> 0:04:25.560 upon their thinking. Did you like that? That was a 0:04:25.640 --> 0:04:27.440 very Did you see how we did that? Can trump? 0:04:27.839 --> 0:04:31.240 Get it? Can trump the countables of non farm payrolls? 0:04:31.960 --> 0:04:33.760 Can we start off with the non fund payroll number? 0:04:33.760 --> 0:04:36.359 Because our number for private perils was a hundred and 0:04:36.360 --> 0:04:39.279 seventy five thousand, We got a hundred and seventy one thousand. 0:04:40.360 --> 0:04:44.240 Why because we had such a mild winter that the 0:04:44.360 --> 0:04:47.039 pick up in jobs that normally take place because people 0:04:47.040 --> 0:04:50.280 couldn't work because the weather is so bad in February 0:04:50.320 --> 0:04:54.000 and March, the seasonal sniff, they were already working, and 0:04:54.080 --> 0:04:56.960 so we had a hundred and sixty thousand three month 0:04:57.000 --> 0:05:00.680 averages around two hundred thousand. I think that the the 0:05:01.360 --> 0:05:04.200 FED four cash revision calls by economists on Friday at 0:05:04.240 --> 0:05:06.880 some major banks, we're like looking for an excuse to 0:05:06.920 --> 0:05:09.080 come to the market, and I think it ridiculously over 0:05:09.160 --> 0:05:12.280 emphasizes the latest data point. But the FED in the 0:05:12.360 --> 0:05:15.440 last statement talked about consumer fundamentals as well. So you've 0:05:15.440 --> 0:05:18.359 got an increase in hours worked because we had a 0:05:18.400 --> 0:05:20.920 longer work week of four tenths of a percent. We 0:05:20.960 --> 0:05:24.280 had a three tenths of p percent increase in wages. 0:05:24.480 --> 0:05:27.280 That's a seven tenths of p percent increases running somewhere 0:05:27.279 --> 0:05:30.920 between eight or around eight percent at an annualized rate 0:05:31.200 --> 0:05:34.720 if we were to continue that in wage income, which 0:05:34.720 --> 0:05:36.479 is the bulk of what people have to spend. So 0:05:36.480 --> 0:05:39.320 if you're a Kanzian and you're worried about demanding, you're 0:05:39.360 --> 0:05:42.479 worried about the consumer, you have this big income increase. 0:05:43.440 --> 0:05:45.880 John Wrinning with this with his work at the Bank 0:05:45.880 --> 0:05:48.279 of England, at the Federal Reserve System, of course, with 0:05:48.320 --> 0:05:51.800 Bear Stearns for years, and now at rd Q Economics. John, 0:05:52.040 --> 0:05:54.839 I'm gonna massively rip up the script here. Greg Villier 0:05:54.960 --> 0:05:59.919 has given us great perspective on our economic politics. Villiers 0:06:00.040 --> 0:06:05.240 and writing stunning political notes about Secretary Clinton and particularly 0:06:05.680 --> 0:06:10.039 Mr Trump. Here's Valier this morning on debt restructuring and 0:06:10.160 --> 0:06:13.960 Donald Trump. Quote he's playing with matches in a very 0:06:14.080 --> 0:06:17.080 arid forest. The US and much of the world is 0:06:17.120 --> 0:06:21.400 crushed by individual and government debt. So here comes someone 0:06:21.480 --> 0:06:25.800 with catnip. Let's restructure the debt. Is it even feasible 0:06:26.360 --> 0:06:29.880 within the economics and the chapters in our economic textbook 0:06:29.920 --> 0:06:34.719 on debt restructuring that you can restructure quote unquote full 0:06:34.760 --> 0:06:38.120 faith and credit debt like you'd restructure a hotel in 0:06:38.160 --> 0:06:41.320 Atlantic City. No, you can't. But what you can do 0:06:41.520 --> 0:06:45.159 is lengthen the maturity of the debt at these very 0:06:45.200 --> 0:06:48.359 low interest rates, and that has been a policy at 0:06:48.360 --> 0:06:51.680 the Tragedy Department has been doing and could, in my opinion, 0:06:52.000 --> 0:06:55.640 pursue fall more aggressively. The treasure debts not callable. It's 0:06:55.640 --> 0:06:58.640 full faith in credit. You can't tear up someone's old 0:06:58.680 --> 0:07:00.720 note and replace it with a new low interest rate. 0:07:00.760 --> 0:07:02.800 Now that that's just simply not feasible. It doesn't matter 0:07:02.880 --> 0:07:06.600 what he thinks. It's not legally feasible. But you can 0:07:06.800 --> 0:07:10.080 lengthen the maturity of the debt. Now, one of the 0:07:10.080 --> 0:07:14.720 interest things is if you look talked to an academic 0:07:14.800 --> 0:07:22.440 on the FED, good friend from Pittsburgh, Carnegie Mellon, and 0:07:22.440 --> 0:07:26.480 and he will say he will put together, um mon, 0:07:26.600 --> 0:07:28.760 good friends have put together the Central Bank and the 0:07:28.800 --> 0:07:32.440 Treasury Marvin good friend here, yes, and then you can 0:07:32.520 --> 0:07:35.800 then you can look at monetary policy in fiscal policy 0:07:35.840 --> 0:07:37.760 and combine it. And so what was the Fed doing 0:07:38.120 --> 0:07:40.520 It was short in the duration of the debt by 0:07:40.600 --> 0:07:43.800 operation twist, as the treasure was trying to lengthen the 0:07:43.840 --> 0:07:47.880 maturity of debt, and those two policies cancel each other out. 0:07:48.000 --> 0:07:50.520 So yes, I would lengthen the maturity of the debt 0:07:50.520 --> 0:07:53.400 because I certainly as an investor, would not want to 0:07:53.440 --> 0:07:56.400 invest for ten years at one point. Peter Fisher Blackstone 0:07:56.480 --> 0:07:58.840 is really good at this, and of course I call 0:07:58.960 --> 0:08:02.720 him the tripod guy. He's served government, he served Wall Street, 0:08:02.960 --> 0:08:06.360 and he's got terrific academic bearing as well. He's a 0:08:06.360 --> 0:08:12.440 bit cautious about Europe. Europe, if you will, the europeanization 0:08:13.040 --> 0:08:15.560 of our death structure France, as I believe a fifty 0:08:15.640 --> 0:08:18.600 year piece. We don't do that in America because we're better. 0:08:18.800 --> 0:08:21.720 What's the price of going from a blended debt to 0:08:21.760 --> 0:08:24.480 pick a number seven years out to a blended debt 0:08:24.480 --> 0:08:27.160 of ten years or fifteen years. Well, I think at 0:08:27.200 --> 0:08:30.440 these low interest rates for the government, there's there's very 0:08:30.560 --> 0:08:34.400 little price except ten years down the road when you 0:08:34.640 --> 0:08:37.280 if you had a huge amount of debt to be 0:08:37.559 --> 0:08:40.120 refunded at that particular point in time, and we're in 0:08:40.200 --> 0:08:43.760 a very different interest rates environment, and and that's the 0:08:43.760 --> 0:08:46.280 the price will come at a future point where we 0:08:46.320 --> 0:08:48.319 won't know where, we won't know what it is. And 0:08:48.400 --> 0:08:51.280 the whole idea about issuing along the curve is not 0:08:51.400 --> 0:08:54.800 so much about minimizing interest rate costs, but is not 0:08:54.880 --> 0:08:57.680 having any great big refunding coming up. And then let's 0:08:57.679 --> 0:08:59.719 takes us back to the full faith and credit ten 0:08:59.800 --> 0:09:03.800 year yield. Do you perceive institutions that could give us 0:09:03.840 --> 0:09:07.640 a glide path to higher yields or by definition, do 0:09:07.720 --> 0:09:10.319 we have to have a jump condition when the shotgun 0:09:10.360 --> 0:09:14.960 aw comes that we're actually gonna have normal interest rates. UM. 0:09:15.040 --> 0:09:19.440 I think we could have a glide path, but markets 0:09:19.480 --> 0:09:21.880 never tend to wear it that way. But what would 0:09:21.880 --> 0:09:25.679 help is if the FED began to unwind its portfolio, 0:09:25.800 --> 0:09:29.480 at least stop reinvesting and start allowing it to shift 0:09:29.559 --> 0:09:35.200 the assets back into the private sector in a gradual manner. 0:09:36.360 --> 0:09:40.280 But the FEDS seems intent to hold onto its UH 0:09:40.280 --> 0:09:45.320 portfolio until maturity, and maybe that helps with the glide path, 0:09:45.440 --> 0:09:50.760 but it keeps the market from adjusting. John writing with 0:09:50.840 --> 0:09:53.240 this with our d Q economics, and we will continue this. 0:09:53.360 --> 0:09:57.719 There are headlines out of Lending Club. They have been 0:09:57.760 --> 0:10:01.240 in the news and it's been challenging news, to say 0:10:01.280 --> 0:10:05.440 the least. The Lending Club chairman and chief executive Officer, 0:10:05.559 --> 0:10:11.080 Renold Laplanche resigns. Hans Morris is named chairman, but very 0:10:11.120 --> 0:10:17.040 importantly Scott Sandborn will serve as acting CEO. They will 0:10:17.080 --> 0:10:20.719 not provide guidance at this time. That's probably the key headline. 0:10:21.120 --> 0:10:23.280 Things are so messed up. They got to sort out 0:10:23.320 --> 0:10:26.840 what's going on in their lending club. The violation of 0:10:26.880 --> 0:10:32.040 practices and a lack of disclosure is unacceptable. Lending Club 0:10:32.080 --> 0:10:35.280 of previous seven dollars ten cents is giving me an 0:10:35.280 --> 0:10:38.400 indication self will try to firm up that bid. An 0:10:38.400 --> 0:10:41.880 ask on lending Club as well. Again, the present chairman 0:10:41.880 --> 0:10:45.400 and CEO of Lending Club resigns. Shootures of five down, 0:10:45.480 --> 0:10:49.080 futures of forty one the yield one point seven seven percent. 0:10:52.800 --> 0:10:54.640 Check in with Michael Byer and get the latest World 0:10:54.640 --> 0:10:57.199 and Nashelle headlines. Michael Mike time, thank you very much. 0:10:57.240 --> 0:11:00.480 British Prime Minister David Cameron called on Britain's not to 0:11:00.600 --> 0:11:04.079 vote to leave the European Union next month. Cameron, in 0:11:04.120 --> 0:11:07.440 a speech at the British Museum in Central London today, 0:11:07.720 --> 0:11:11.400 says leaving the EU is genuinely a leap in the dark. 0:11:12.080 --> 0:11:15.520 Mexican government officials say the new Mexican prison holding convicted 0:11:15.600 --> 0:11:19.240 drug lord La Kina l Chapo Guzman is rated as 0:11:19.280 --> 0:11:24.240 the worst in the country's federal penitentiary system for inmate conditions. However, 0:11:24.600 --> 0:11:28.040 the former head of the International operations for the US 0:11:28.160 --> 0:11:32.160 Drug Enforcement Agency questions sending Guzman to a less secure 0:11:32.200 --> 0:11:35.640 prison that is in the territory firmly controlled by his empire. 0:11:36.080 --> 0:11:39.400 Officials in Alberta, Canada say a forecast for cooler temperatures 0:11:39.400 --> 0:11:42.400 and light rain will help them corral and enormous wildfire. 0:11:42.760 --> 0:11:47.119 Global News twenty four hours a day, powered by our journalists. 0:11:47.160 --> 0:11:49.480 I'm Michael barn Time and Mecha, thanks so much. In 0:11:49.480 --> 0:11:52.600 a currency front, yend weaker and dramatically weaker over two 0:11:52.640 --> 0:11:56.960 three days one oh eight point zero nine point of 0:11:57.000 --> 0:12:00.800 note as a dollar shows modest strength x Y with 0:12:01.040 --> 0:12:08.079 John riding Bloomberg Surveillance Bloomberg surveillance by by sector spider 0:12:08.160 --> 0:12:10.000 et s y by a single stock when you can 0:12:10.000 --> 0:12:13.280 invest in the entire sector, Visit sector spdrs dot com 0:12:13.400 --> 0:12:16.000 or call one eight six six Sector e t F. 0:12:23.440 --> 0:12:26.719 This is Bloomberg surveillance way tech. The view that as 0:12:26.720 --> 0:12:29.520 the FED raises rights, that removes the US dollar liquidity 0:12:29.559 --> 0:12:31.400 from the rest of the world. Sixty percent of global 0:12:31.480 --> 0:12:33.560 j DP relies on U s TOL liquidity. At the 0:12:33.600 --> 0:12:39.000 bottom have basically seen their income stagnate over a third 0:12:39.000 --> 0:12:41.280 of a century. The Asian economies there are the fastest 0:12:41.320 --> 0:12:43.839 growing ones in the world. China's Both may be slowing down, 0:12:43.920 --> 0:12:46.080 but we're still talking about China growing at six and 0:12:46.080 --> 0:12:49.480 a half seven percent Bloomberg Surveillance your link to the 0:12:49.520 --> 0:12:55.240 world of economics, finance, and investment on Bloomberg Radio. Good morning, 0:12:55.240 --> 0:12:57.679 It is seven am on Wall Street. It is five 0:12:57.720 --> 0:13:01.520 am in Fort McMurray, Canada, where we wish the firefighters 0:13:01.559 --> 0:13:03.959 battling that huge blaze up there. The best oil higher 0:13:04.000 --> 0:13:07.640 this morning, in part on concerns of interruptions to the 0:13:07.679 --> 0:13:11.839 supply from Canada. West Texas two is up two point two. 0:13:12.640 --> 0:13:17.240 Brent nine up one point six percent this morning. But 0:13:17.320 --> 0:13:21.600 actually pretty much everything is higher this morning. By the way, 0:13:21.640 --> 0:13:24.760 I'm Michael McGee along with Tom Keene Unsurveillance today and 0:13:24.760 --> 0:13:27.760 we're watching a global rally overnight. Asia up and now 0:13:27.800 --> 0:13:30.600 you're up. The stock six d four points higher one 0:13:30.640 --> 0:13:34.120 point two percent, the docks in Germany up one eight points. 0:13:34.120 --> 0:13:37.160 That's one point eight percent in London, a thirty point 0:13:37.160 --> 0:13:39.760 game for the footsie half a percent of the day. 0:13:39.800 --> 0:13:45.120 Bonds little changed to hire. The curve steepens. The two 0:13:45.200 --> 0:13:48.040 year note yield is at seventy three basis points, five 0:13:48.120 --> 0:13:50.720 year one point to two, and the ten year one 0:13:50.760 --> 0:13:54.959 point seven seven. On the day, the dollars stronger. Here's 0:13:54.960 --> 0:13:59.360 the real debate point the dollar following comments, and the 0:13:59.760 --> 0:14:03.559 job report falling comments from the Fed moving higher today 0:14:03.280 --> 0:14:07.480 nine for the d X y index, the yen weekends 0:14:07.520 --> 0:14:11.400 to one oh oh four, the year one eight, and 0:14:11.480 --> 0:14:16.080 the pound one four fifty one. So that's the question 0:14:16.280 --> 0:14:19.240 whether interest rates in the United States and whether the 0:14:19.360 --> 0:14:24.280 dollar and bond market. We have seen FED officials the latest, 0:14:24.560 --> 0:14:26.800 Bill Dudley this morning time in the New York Times 0:14:27.040 --> 0:14:30.320 saying we're still on track for June if the numbers 0:14:30.360 --> 0:14:32.160 continue the way they are. But that's not the way 0:14:32.200 --> 0:14:35.720 the bond market sees it. John Riding is the chief 0:14:35.720 --> 0:14:39.120 economist and founder of r t Q Economics. John, there's 0:14:39.160 --> 0:14:41.840 an old saying, don't fight the Fed, and it seems 0:14:41.880 --> 0:14:45.520 that people on bond trading desks have decided they want 0:14:45.560 --> 0:14:49.120 to get into a scrap with the U s. Central Bank. Well, 0:14:49.120 --> 0:14:52.840 the problem is the fattest completely messed up its communications 0:14:52.880 --> 0:14:57.640 policy and uh. It told us it had objectives for 0:14:57.680 --> 0:15:01.720 our unemployment inflation uh, and then as we got close 0:15:01.760 --> 0:15:04.200 to those, it lowered the unemployment rate. So that the 0:15:04.240 --> 0:15:06.600 market simply doesn't believe the Fed. And I think that 0:15:06.680 --> 0:15:09.360 to believe the Fed, Janet Yellen has to come out 0:15:09.400 --> 0:15:13.080 and deliver a similar message, And as I said to 0:15:13.080 --> 0:15:15.440 Tom on TV a few minutes, you say to me 0:15:15.560 --> 0:15:19.880 right now to um what we have here is typically 0:15:20.040 --> 0:15:23.880 that the central uh, the Chairman of the FED, goes 0:15:23.920 --> 0:15:26.000 in May and gives a testimony. So she can be 0:15:26.080 --> 0:15:29.080 perfectly tied up to say not that we're going in June, 0:15:29.440 --> 0:15:33.480 but that we are still committed to renormalizing monetary policy, 0:15:33.880 --> 0:15:36.280 and the data points are close, and if we continue 0:15:36.280 --> 0:15:38.520 in that direction, we will go. Because the Fed in 0:15:38.560 --> 0:15:42.160 the past talked about cumulative improvement, and cumulative improvement has 0:15:42.360 --> 0:15:45.800 actual progress. One quote, if I'm exactly not just the 0:15:45.920 --> 0:15:48.600 latest data point, CU want of improvement from a ten 0:15:48.640 --> 0:15:52.280 percent unemployment rate to a five percent unemployment rate. John 0:15:52.320 --> 0:15:54.560 writing with the rd Q Economics, we say good morning 0:15:54.560 --> 0:15:57.640 to all of your worldwide Bloomberg Radio Plus and of 0:15:57.680 --> 0:16:02.720 course across Bloomberg dot com Bloomberg Surveillance. This morning brought 0:16:02.720 --> 0:16:07.240 you by Investco. Factor based strategies can help investors focus 0:16:07.320 --> 0:16:12.600 on high quality, low volatility and more. Learn more at 0:16:13.080 --> 0:16:17.240 investco dot com slash High Conviction Generating. Giving his great 0:16:17.280 --> 0:16:21.400 perspective this morning, John, as I mentioned earlier, your note 0:16:21.520 --> 0:16:26.280 had a certain heat on Friday. Let's frame the two 0:16:26.440 --> 0:16:29.200 avenues out of the jobs report. One is it was 0:16:29.240 --> 0:16:31.400 a molding number. We all agree on this with a 0:16:31.480 --> 0:16:35.400 molding revision. And then there's the yeah, but the underlying 0:16:35.480 --> 0:16:39.760 data was actually pretty good. Explained to us why hours 0:16:40.000 --> 0:16:43.920 worked in wages can trump? That was a pun there, thanking? 0:16:44.000 --> 0:16:46.240 Did you like that? That was a very Did you 0:16:46.280 --> 0:16:48.760 see how we did that? Can trump get it? Can 0:16:48.800 --> 0:16:52.560 trump the accountables of non farm payrolls. Can we start 0:16:52.640 --> 0:16:55.000 for the non fund payroll number? Because our number for 0:16:55.080 --> 0:16:57.560 private paerallels was a hundred and seventy five thousand, we 0:16:57.600 --> 0:17:01.840 got a hundred and seventy one thousand. Why because we 0:17:01.960 --> 0:17:05.560 had such a mild winter that the pickup in jobs 0:17:05.600 --> 0:17:08.080 that normally take place because people couldn't work because the 0:17:08.160 --> 0:17:11.399 weather is so bad in February and March the season, 0:17:12.160 --> 0:17:15.159 they were already working, and so we had a hundred 0:17:15.160 --> 0:17:18.800 and sixty thousand three month averages around two hundred thousand. 0:17:19.760 --> 0:17:23.159 I think that the the FED forecast revision calls by 0:17:23.160 --> 0:17:26.280 economists on Friday at some major banks were like looking 0:17:26.280 --> 0:17:28.000 for an excuse to come to the market, and I 0:17:28.000 --> 0:17:31.520 think it ridiculously over emphasizes the latest data point. But 0:17:31.880 --> 0:17:34.600 the threat in the last statement talks about consumer fundamentals 0:17:34.600 --> 0:17:37.400 as well. So you've got an increase in hours worked 0:17:37.880 --> 0:17:40.320 because we had a longer work weed of four tenths 0:17:40.400 --> 0:17:42.159 of per percent, we had a three tenths of per 0:17:42.160 --> 0:17:45.879 percent increase in wages. That's the seven tenths of per 0:17:45.920 --> 0:17:49.520 percent increases running somewhere between eight or around eight percent 0:17:49.680 --> 0:17:52.439 at an annualized rate if we were to continue that 0:17:52.640 --> 0:17:55.920 in wage income, which is the bulk of what people 0:17:55.960 --> 0:17:58.280 have to spend. So if you're a Kanzian and you're 0:17:58.320 --> 0:18:00.879 worried about demand and you're worried about the consumer, you 0:18:00.960 --> 0:18:05.080 have this big income incre John writing with this with 0:18:05.200 --> 0:18:07.200 his work at the Bank of England, at the Federal 0:18:07.200 --> 0:18:09.719 Reserve System, of course with Bear Stearns for years, and 0:18:10.200 --> 0:18:13.400 now at our DQ economics, John, I'm gonna massively rip 0:18:13.480 --> 0:18:16.080 up the script here. Greg Valier has given us great 0:18:16.760 --> 0:18:21.520 perspective on our economic politics. Valier has been writing stunning 0:18:21.600 --> 0:18:26.800 political notes about Secretary Clinton and particularly Mr Trump. Here's 0:18:26.880 --> 0:18:31.479 Valier this morning on debt restructuring and Donald Trump quote. 0:18:31.920 --> 0:18:35.600 He's playing with matches in a very arid forest. The 0:18:35.720 --> 0:18:38.880 US and much of the world is crushed by individual 0:18:39.000 --> 0:18:42.640 and government debt. So here comes someone with catnip. Let's 0:18:42.680 --> 0:18:47.840 restructure the debt? Is it even feasible? Within the economics 0:18:47.840 --> 0:18:51.280 and the chapters in our economic textbook on debt restructuring 0:18:51.720 --> 0:18:55.760 that you can restructure quote unquote full faith and credit 0:18:55.840 --> 0:18:59.600 debt like you'd restructure a hotel in Atlantic City. No, 0:18:59.680 --> 0:19:02.240 you are. But what you can do is lengthen the 0:19:02.280 --> 0:19:06.960 maturity of the debt at these very low interest rates. 0:19:07.040 --> 0:19:09.520 And that has been a policy that the Treasury Department 0:19:09.600 --> 0:19:12.920 has been doing and could, in my opinion, pursue far 0:19:12.960 --> 0:19:16.280 more aggressively. The treasure debts not callable. It's full faith 0:19:16.280 --> 0:19:19.080 in credit. You can't tear up someone's old note and 0:19:19.160 --> 0:19:21.240 replace it with a new low interest rate. Now that 0:19:21.240 --> 0:19:23.760 that's just simply not feasible. It doesn't matter what he thinks. 0:19:24.160 --> 0:19:27.960 It's not legally feasible. But you can lengthen the maturity 0:19:28.000 --> 0:19:30.919 of the debt. Now, one of the interesting things is 0:19:32.359 --> 0:19:35.360 if you look talk to an academic on the FED 0:19:36.280 --> 0:19:43.720 good Friend from Pittsburgh Carnegie Mellon and and he will 0:19:43.760 --> 0:19:47.480 say he'll put together um more good friends have put 0:19:47.520 --> 0:19:51.040 together the Central Bank and the Treasury about Marvin good Friend, Yes, 0:19:52.080 --> 0:19:53.920 and then you can then you can look at monetary 0:19:53.920 --> 0:19:57.119 policy in fiscal policy and combine it. And so what 0:19:57.200 --> 0:20:00.159 was the Fed doing It was shortening the duration the 0:20:00.200 --> 0:20:03.359 debt by operation twist, as the treasure was trying to 0:20:03.480 --> 0:20:07.600 lengthen the maturity debt, and those two policies cancel each 0:20:07.600 --> 0:20:10.280 other out. So yes, I would lengthen the maturity of 0:20:10.320 --> 0:20:13.240 the debt because I certainly as an investor, would not 0:20:13.280 --> 0:20:15.440 want to invest for ten years at one point. Peter 0:20:15.560 --> 0:20:18.480 Fisher Blackstone is is really good at this, and of 0:20:18.480 --> 0:20:21.280 course I call him the tripod guy. He's served government, 0:20:21.600 --> 0:20:25.040 he served Wall Street, and he's got terrific academic bearing 0:20:25.400 --> 0:20:30.560 as well. He's a bit cautious about Europe. Europe, if 0:20:30.600 --> 0:20:34.840 you will, the europeanization of our debt structure France, as 0:20:34.880 --> 0:20:37.040 I believe a fifty year piece. We don't do that 0:20:37.080 --> 0:20:40.640 in America because we're better. What's the price of going 0:20:40.720 --> 0:20:43.520 from a blended debt to pick a number seven years 0:20:43.520 --> 0:20:46.760 out to a blended debt of ten years or fifteen years. Well, 0:20:46.800 --> 0:20:48.959 I think at these low interest rates for the government, 0:20:49.000 --> 0:20:53.439 there's there's very little price except ten years down the 0:20:53.520 --> 0:20:56.560 road when you if you had a huge amount of 0:20:56.600 --> 0:20:59.920 debt to be refunded at that particular point in time. 0:21:00.080 --> 0:21:03.080 We're in a very different interest rate environment and and 0:21:03.119 --> 0:21:05.480 that's the problem. But the price will come at a 0:21:05.520 --> 0:21:07.960 future point where we won't know where, we won't know 0:21:08.000 --> 0:21:10.399 what it is. And the whole idea about issuing along 0:21:10.400 --> 0:21:13.760 the curve is not so much about minimizing interest rate costs, 0:21:13.800 --> 0:21:17.239 but is not having any great, big refunding coming up. 0:21:17.320 --> 0:21:19.120 And then let's take this back to the full faith 0:21:19.200 --> 0:21:23.520 and credit tenure yield. Do you perceive institutions that could 0:21:23.520 --> 0:21:27.600 give us a glide path to higher yields or by definition, 0:21:27.680 --> 0:21:30.000 do we have to have a jump condition when the 0:21:30.040 --> 0:21:33.080 shot gun aw comes that we're actually gonna have normal 0:21:33.119 --> 0:21:37.520 interest rates. Um, I think we could have a glide path, 0:21:37.680 --> 0:21:41.600 but markets never tend to work that way. But what 0:21:41.720 --> 0:21:45.800 would help is if the FED began to unwind its portfolio, 0:21:45.920 --> 0:21:49.119 but at least stop reinvesting and start allowing it to 0:21:49.240 --> 0:21:53.640 shift the assets back into the private sector in a 0:21:53.680 --> 0:21:59.240 gradual manner. But the FEDS seems intent to hold onto 0:21:59.280 --> 0:22:04.840 its at portfolio until maturity. And maybe that helps with 0:22:04.840 --> 0:22:09.240 the bly path, but it keeps they market from adjusting. 0:22:10.240 --> 0:22:12.359 John Riding with us with our d Q economics and 0:22:12.400 --> 0:22:17.040 we will continue this. There are headlines out of Lending Club. 0:22:17.320 --> 0:22:20.600 They have been in the news and it's been challenging 0:22:20.640 --> 0:22:24.199 news to say the least. The Lending Club chairman and 0:22:24.280 --> 0:22:30.240 Chief executive Officer Renold Laplanche resigns. Hans Morris is named chairman, 0:22:30.720 --> 0:22:35.879 but very importantly Scott Sandborn will serve as acting CEO. 0:22:36.760 --> 0:22:39.800 They will not provide guidance at this time. That's probably 0:22:39.800 --> 0:22:42.760 the key headline. Things are so messed up. They got 0:22:42.760 --> 0:22:46.040 to sort out what's going on in their lending club. 0:22:46.160 --> 0:22:50.879 The violation of practices and a lack of disclosure is unacceptable. 0:22:51.520 --> 0:22:55.160 Lending Club a previous seven dollars ten cents is giving 0:22:55.160 --> 0:22:57.960 me an indication self. We'll try to firm up that 0:22:58.119 --> 0:23:00.840 bid an ask on Lending Club as well. Again, the 0:23:00.920 --> 0:23:04.960 present chairman and CEO of Lending Club resigns. Futures of 0:23:05.040 --> 0:23:08.080 five down, futures of forty one, the yield one point 0:23:08.119 --> 0:23:14.080 seven seven. To check in with Michael Barr and get 0:23:14.080 --> 0:23:16.760 the latest world and national headlines. Michael, Mike time, thank 0:23:16.760 --> 0:23:19.560 you very much. British Prime Minister David Cameron called on 0:23:19.640 --> 0:23:24.120 Britain's not to vote to leave the European Union next month. Cameron, 0:23:24.160 --> 0:23:27.560 in a speech at the British Museum in Central London today, 0:23:27.840 --> 0:23:31.560 says leaving the EU is genuinely a leap in the dark. 0:23:32.160 --> 0:23:35.640 Mexican government officials say the new Mexican prison holding convicted 0:23:35.720 --> 0:23:39.480 drug lord Lakina L Chapo Guzman is rated as the 0:23:39.600 --> 0:23:44.360 worst in the country's federal penitentiary system for inmate conditions. However, 0:23:44.720 --> 0:23:48.159 the former head of the international operations for the US 0:23:48.280 --> 0:23:52.280