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Speaker 1: Brunch you by Bank of America Mary Lynch with virtual reality,

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Speaker 1: Virtually everything will change. Discover opportunities in a transforming world.

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Speaker 1: VI of a mL dot Com slash VR, Mary Lynch,

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Speaker 1: Pierced Fenner and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best of economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com,

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Speaker 1: and of course on the Bloomberg. We like to do

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Speaker 1: history with David Folcus Landau of Deutsche Bank. Francie Kwan, London.

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Speaker 1: I'm Tom keenan New York. Let's get right to it morning.

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Speaker 1: Mustard b Virto Gallo and Algebrath writing up a Bloomberg

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Speaker 1: View column. And this is on the Great Minsky of

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Speaker 1: Washington University St. Louis and Columbia. We may be approaching

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Speaker 1: a second Minsky moment. By keeping races at record low levels,

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Speaker 1: central banks have made it easier for inefficient firms to

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Speaker 1: survive as an a rising tide that lifts all boats.

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Speaker 1: Last week, Cherry Yellen said a financial crisis is unlikely

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Speaker 1: to happen, and David Folkarts Landau's lifetime if he were alive,

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Speaker 1: If Minsky was alive, Minsky would be shaking his head.

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Speaker 1: Shaking his head in London. Is David Folkard's Landau. This

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Speaker 1: speaks to shocks to instabilities out there is sovereign debt,

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Speaker 1: the growing debt, the size of the debt. Is that

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Speaker 1: a possibility to be an instability. It's that combined with

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Speaker 1: the liquidity overhanged us in the system. I mean, you

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Speaker 1: have to look at that together. Uh, there's no doubt

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Speaker 1: I think at this point to say that we cannot

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Speaker 1: foresee if the financial crisis doing our lifetime strikes me

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Speaker 1: as not having learned the lessons of the last thirty

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Speaker 1: years as long as I've been in this profession, that's

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Speaker 1: been the crisis every eight years, starting at eighty two

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Speaker 1: and let Him Dead crisis, and on and on and on,

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Speaker 1: Tequila crisis, Asian crisis, and two thousand one and two

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Speaker 1: thousand seven, so and none of those, none of those

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Speaker 1: we had ever anticipated. All we can't quite see our

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Speaker 1: way through how a crisis might happen. And so I

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Speaker 1: think that leads me to be quite cautious about where

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Speaker 1: we are right now. We've got a twelve trillion central

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Speaker 1: bank overheaded liquidity, we have almost a forty to forty

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Speaker 1: increase in the government debt outstanding of the major countries. Um.

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Speaker 1: So yeah, and and we have become very very used

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Speaker 1: to the calming influence of quee uh and so to

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Speaker 1: think that there's no no hidden dangers lurking in the

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Speaker 1: system as rates go up, I think it is is

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Speaker 1: fulati who's the adult in the room that can actually

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Speaker 1: get us away from the dangers or preempt the dangers

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Speaker 1: that you're just mentioning. It is the FED. I believe

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Speaker 1: that the FED will lead the way with a gradual

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Speaker 1: rate increase, with very careful communications and with a very

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Speaker 1: good understanding of the risk and how the system work.

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Speaker 1: When I think of the current fedboard with yelling and

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Speaker 1: people like stand Fisher, um, there's little they do not

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Speaker 1: understand about this. Yes, but I think it is important

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Speaker 1: to recognize that the rates, including at the short end

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Speaker 1: but also at the long end, at a historical low,

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Speaker 1: and they and they're completely out of whack. If you

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Speaker 1: look at the numbers in the UK, for instance, the

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Speaker 1: UK ten years ago at the last increase and you

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Speaker 1: look at the constellation now of unemployment rates information and

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Speaker 1: so they're much they're much more calling for an increase

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Speaker 1: in in rate increases now years ago. Yeah, we're not

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Speaker 1: doing it. We got to leave it there, David focused Land,

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Speaker 1: are generous with your time to thank you so much.

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Speaker 1: Look forward to seeing you in New York. Um, we

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Speaker 1: are exceptionally lucky in the next half hour to have

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Speaker 1: with us John writing of our d Q Economics, he

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Speaker 1: has defined the debate since the financial crisis began with

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Speaker 1: sharp analysis of central bank policy in the American economy.

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Speaker 1: In a special treat this morning, to have with us

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Speaker 1: Adam Posen, the head of the Peterson Institute, his public

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Speaker 1: service to the Bank of England, and arguably with Richard Clarida,

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Speaker 1: are two experts on the relationship of Germany to the

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Speaker 1: United States. Adam posing let me begin with you with

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Speaker 1: this g twenty meeting. How will President Trump be greeted

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Speaker 1: by this Germany you've studied for decades. Thank you for

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Speaker 1: having me on tom And in terms of Germany, we

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Speaker 1: saw the big signal already a couple of days ago.

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Speaker 1: Chancellor Merkel in Hall he campaign and speech materials officially

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Speaker 1: stopped preferring to the United States as a friend. Now

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Speaker 1: that sounds pretty penny anti. But for Merkel, who's a

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Speaker 1: confirmed Atlantis, who's an internationalist, and for Germany especially, that's

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Speaker 1: a big shift. So there's gonna be wariness. There isn't

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Speaker 1: going to be confrontation. Maybe we have a generational shift

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Speaker 1: out opposing with a funeral for a helmet call. Last week,

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Speaker 1: I was quite taken by Bill Clinton's comments as well.

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Speaker 1: How will Mr Trump be greeted? Do you just assume

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Speaker 1: there will be protests honest travels across the continent of Europe.

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Speaker 1: I think the Bill Clinton speech was wonderful in this case,

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Speaker 1: and it obviously is falling on deaf ears both in

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Speaker 1: Washington and Hamburg. Um. I think there will be protests.

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Speaker 1: They're always protests at eachwenties these days. But Mr Trump,

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Speaker 1: particularly on climate change, it'll get worse. So John writing

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Speaker 1: with this, you know, Johnny's wonderful to have you here.

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Speaker 1: The tenth anniversary of the financial crisis. We're beginning our

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Speaker 1: coverage of that. You know, you notice coordinated chit chat

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Speaker 1: last week. Is banks coordinated? Their forward guidance is a

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Speaker 1: monetary policy of Europe and the United States in sync

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Speaker 1: or do you still look at them as separate beasts. Well,

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Speaker 1: I don't think it was coordinated in the sense that

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Speaker 1: there was any agreement to coordinate, but the message is clear,

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Speaker 1: and I think that you're previous guest exactly the Dodge

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Speaker 1: Banks Econmers was right. There's this large central bank overhang. Um,

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Speaker 1: there are potential financial risks building, and it's a theme

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Speaker 1: that all at least a lot of the central bank,

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Speaker 1: particularly Bank of England d CB and of course leading

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Speaker 1: the FED is on because there are risks building. You

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Speaker 1: had a headline story today about problems in Norway's housing market.

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Speaker 1: I mean that's maybe maybe a small thing there. There's Venezuela,

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Speaker 1: there's Argentina issuing a hundred a year bond, as if

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Speaker 1: we hadn't seen Argentina default with a few times within

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Speaker 1: the last couple of decades. So, um, I think there

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Speaker 1: is a feeling that central banks need to get on

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Speaker 1: with the balance sheet and start reducing the size of

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Speaker 1: debtness health Yeah, Adam, do do you worry about the

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Speaker 1: central bank policies and policy mistakes red scene? I think, unfortunately,

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Speaker 1: everything your guests just said, and most of what focused

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Speaker 1: land out said is totally wrong. Um, the FED is

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Speaker 1: going to continue tightening for a bit. The ECB and

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Speaker 1: Bank of England came out of the b I S

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Speaker 1: meeting saying talking tough, but they're not gonna do it. Um,

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Speaker 1: then there's no reason for them to talk. At the

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Speaker 1: Bank of England, there's an argument on the macro prudential

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Speaker 1: side that there's huge imbalances in terms of savings and

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Speaker 1: UH real estate and credit in the UK specifically, but

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Speaker 1: that's what the macro prow the Financial Policy Committee supposed

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Speaker 1: to deal with, so interest rates don't have to do it.

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Speaker 1: And given the inflation and other problems in the UK,

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Speaker 1: I think they'll be reluctant to move ECB even more so.

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Speaker 1: Voidman is talking because he's running for ECB president, not

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Speaker 1: because there's no need for policy change. UH. FED is

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Speaker 1: also going to basically wimp out, probably starting next spring.

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Speaker 1: And finally, all this talk about I saw folkas landa

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Speaker 1: you tweeted was talking about the pain or your guests

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Speaker 1: just talked about Argentina. Let's get real. Argentina may be

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Speaker 1: a very foolish thing to buy a hundred year bond in,

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Speaker 1: but it's not gonna affect anybody if anything happens in Argentina.

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Speaker 1: Al right, John needs the right of reply because posing

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Speaker 1: John Toles says you're completely wrong, Well, time will tell

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Speaker 1: and uh as focused and everybody. People fail to anticipate

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Speaker 1: the next financial crisis, and they come along every so often,

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Speaker 1: he said, every eight years. I don't know that there's

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Speaker 1: necessarily that rhythmic cycle to it, but nevertheless, we do

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Speaker 1: have a habit of ignoring the lessons of the previous crisis.

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Speaker 1: And here we are coming upon the tenth anniversary of

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Speaker 1: the worst financial crisis since the Great Depression. Um. But

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Speaker 1: it's the wrong lesson, guys. I mean, it's not about

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Speaker 1: mon terry policy tightness. It's about financial supervision laxity and

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Speaker 1: regulatory laxity. And in the data, David David's assertion about

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Speaker 1: the every eight years, which I agree with you is

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Speaker 1: a little too rhythmic, is misleading. If you go to

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Speaker 1: the run Art Rogue offer the i m F data set,

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Speaker 1: there's negative auto correlation of financial crisis. Look at Japan, Canada, Sweden.

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Speaker 1: Once you've had a financial crisis, you usually don't have

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Speaker 1: one for decades. Look at the US after the thirties.

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Speaker 1: But so I think people are chasing ghosts. I would

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Speaker 1: just saying, but the problem with macroprudential is it's an

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Speaker 1: unused tool in it's not even clear what the tool is.

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Speaker 1: I remember being in an Atlanta FED conference and the

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Speaker 1: former tragedy of Secretary Paul Rubens said the reality of

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Speaker 1: macropudential policy is that there is no reality. Um so

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Speaker 1: again it's about monitoring, trying to pick up the vibrations.

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Speaker 1: But you have all this liquidity in the system, and

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Speaker 1: that does encourage mistake. Let's go to this liquidity doesn't

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Speaker 1: do anything. That's the whole point of the last in

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Speaker 1: years we're dealing here with with wonderful economic theory for

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Speaker 1: a Wednesday, let me get back control of this. Is

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Speaker 1: Adam Posing steals the shows he's been known to do.

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Speaker 1: Adam Posing is about Duley Garber and dfl versus a

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Speaker 1: lot of people like you that really disagree with flow

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Speaker 1: analysis has to do folks with stock and flow, and

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Speaker 1: we're not gonna get into it. What I want to say,

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Speaker 1: Adam Posing is the overlay that John writing in dfl

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Speaker 1: C is an odd fixed income market. Do you have

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Speaker 1: confidence at central banks can find a stable trajectory from

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Speaker 1: where interest rates are now, both on a nominal and

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Speaker 1: a real basis, as I fell to things, Tom, and

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Speaker 1: I'm sorry to be over stepping with the stuff. The

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Speaker 1: first first thing is, uh that in the short term forecast,

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Speaker 1: and that was where I was primarily different distinguishing from David,

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Speaker 1: and that I just don't think they're going to do

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Speaker 1: very much. But in the second point, if things prove

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Speaker 1: unstable because of it'll be because of real reasons, like

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Speaker 1: the collapse of productivity growth in the UK or the

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Speaker 1: collapse of wage growth in the U S and many

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Speaker 1: other countries. That is what will destabilize things. It's not

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Speaker 1: going to be central banks tightening. The central is just followers.

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Speaker 1: Do you see wage growth occurring and will we observe that?

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Speaker 1: Friday and the Job's Report interview after your interview, I

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Speaker 1: don't see people talking about appropriate wage growth for politicians

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Speaker 1: or central bank heads. Mm hmm. Well again it's sort

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Speaker 1: of stock and flow. I mean, on a rate basis,

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Speaker 1: there's a legitimate case to be made. I thought, I

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Speaker 1: don't think it's open and shot, but there's a legitimate

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Speaker 1: case to be made that wages are finally picking up

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Speaker 1: a bit in the US almost in line with a

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Speaker 1: very flat Philips curve, and so unemployment is gonna stop falling,

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Speaker 1: wages will go up a small amount. That's the flow basis.

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Speaker 1: The stock is. Remember that the wage growth in the

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Speaker 1: US and number of other countries with exceptions like Germany

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Speaker 1: UM has been very poor for over a decade, and

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Speaker 1: so if you're going to catch up, then it's a problem.

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Speaker 1: But but on the subject, But on the suguct wage growth.

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Speaker 1: Productivity growth in the US has been very poor for

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Speaker 1: the last ten years, and our analysis suggests the primary

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Speaker 1: reason for that is inadequate capital spending UM. And so

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Speaker 1: wage growth isn't out of line at all with what

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Speaker 1: the economy is producing. And now if we have wage

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Speaker 1: increases ahead of productivity gains, that's going to continue to

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Speaker 1: squeeze profits and undermine the capital spending story. So my

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Speaker 1: concern isn't that wage growth is too low. My concern

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Speaker 1: is productivity growth is too low, which is the real

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Speaker 1: underlying reason behind the poor wage gains. Yeah, except the

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Speaker 1: two things. First is the profit rate has been going

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Speaker 1: up for years, so the idea that profits are being

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Speaker 1: squeezed is wrong. So you're right, the wage growth in

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Speaker 1: US has been lead some productivity, so we don't expect

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Speaker 1: big wage growth. And he since wage growth is continued,

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Speaker 1: productivity has been lousy. You're right, so we shouldn't expect

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Speaker 1: big wage growth, but there's still been additional profits going up.

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Speaker 1: And the second thing is it's not just the investment cycle.

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Speaker 1: The causality runs the other way. The reason people aren't

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Speaker 1: investing because they don't see the productivity growth. What I

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Speaker 1: love about this is the two of you are lightening

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Speaker 1: up on emails. Thank you for the many responses in here.

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Speaker 1: Here's partial score folks writing seven pos in five. We'll

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Speaker 1: see if we can come back and have dr post

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Speaker 1: better time here. Well, we'll see. You know it's great.

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Speaker 1: This is what we love about Bloomberg Surveillance, A debate

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Speaker 1: that's out there. Brunt you by Bank of America, Mary Lynch.

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Speaker 1: With virtual reality, virtually everything will change. Discover opportunities in

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Speaker 1: a transforming world via a mL dot Com slash VR,

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Speaker 1: Mary Lynch, Pierced Fenteran Smith Incorporated. Let's bring in Mega Green.

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Speaker 1: Let's get right to it this morning. Mega Green is

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Speaker 1: with manual life, looking at not only the international economy,

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Speaker 1: but maybe focus here more in the US economy as well,

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Speaker 1: which corner, Megan, good morning, is cherry yelling painted into

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Speaker 1: within the many themes of domestic economics. How has she

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Speaker 1: painted herself into a corner? Is it about wage growth?

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Speaker 1: I don't think it is about wage growth. I think

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Speaker 1: right now actually a lot of about instlation UM. And

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Speaker 1: I'll be interested to see what comes out in the

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Speaker 1: minutes later today on the effllency discussion around inflation, because

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Speaker 1: it it has been pretty paltry recently that says they're

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Speaker 1: looking through it but um, but maybe they shouldn't be UM.

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Speaker 1: So we'll learn more about their discussions around that. And

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Speaker 1: I do think that is driving a lot. I do

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Speaker 1: think that the fat is painted into a corner though

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Speaker 1: I'm not not cherry yelling spec aglieve. But the set

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Speaker 1: is um in terms of starting to shrink their balance

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Speaker 1: sheet before Terry Ellen's term is up next year early

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Speaker 1: next year. So I do you think that they will

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Speaker 1: probably get that process started because they would like it

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Speaker 1: to be automatic and transparent UM and already running by

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Speaker 1: the time that she leaves, so that it can't be reversed. Yeah,

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Speaker 1: And within all of this, how critical is the jobs report?

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Speaker 1: This Friday, and I don't mean the unemployment rate, I

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Speaker 1: mean just the whole thing, and also the wage dynamics

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Speaker 1: as well for someone like you, is it or does

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Speaker 1: it really matter for July UM. I always think that

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Speaker 1: you know, each individual jobs reports one data point UM,

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Speaker 1: so it's not worth obsessing over UM. But I would

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Speaker 1: say that the trend going into this job's report is

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Speaker 1: all age growth UM, which which in theory, if we

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Speaker 1: had strong wage growth, it would feed into inflation data

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Speaker 1: and the set would be hitting its dual mandate UM.

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Speaker 1: And it's not now because even though unemployment is a low,

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Speaker 1: inflation is looking pretty bad. And I just don't see

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Speaker 1: any reason to fact that we will see stronger wage

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Speaker 1: growth this time around. UM. Everything you had a single

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Speaker 1: data point of good wage growth, you know, analysts will

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Speaker 1: all say, well, now, finally a wage growth coming in

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Speaker 1: because the labor market is so tight UM, and it

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Speaker 1: never lasts, and UM, we're gonna back to continue. So

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Speaker 1: I think will continue to be pretty bad wage growth.

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Speaker 1: Most of our jobs being added in really low wage,

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Speaker 1: low our sectors. And that's partly because what we consume

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Speaker 1: now these these mostly services which tend to be low wage,

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Speaker 1: low hour um jobs and also because we have such

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Speaker 1: a glut of cheap labor globally, So these are big

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Speaker 1: kind of global drivers UM that aren't going to change

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Speaker 1: month to months. Megan Green coourse with that manual Life

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Speaker 1: based in Boston, and Megan, let me ask you about

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Speaker 1: what we could learn today from the Federal Reserve from

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Speaker 1: their last meeting. Now, I guess three weeks ago about

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Speaker 1: the balance sheet, we were talking with John Riding at

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Speaker 1: the top of the show about timing. Is there more

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Speaker 1: to it than that? What can we learn about, say,

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Speaker 1: their their composition of the unwined So I think we

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Speaker 1: know a bunch of details now, all that the caps,

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Speaker 1: for example, how they plan to make it as transparent

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Speaker 1: and automatic as possible. I really do think timing is

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Speaker 1: the key thing we can learn about the balance sheet,

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Speaker 1: specifically this afternoon, UM, but I think there are a

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Speaker 1: few other key things to look at. I mentioned earlier,

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Speaker 1: you know, the discussion around how they're really looking at inflation,

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Speaker 1: but also financial stability, which they haven't really talked about publicly,

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Speaker 1: but they've got to be concerned about given that, you know,

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Speaker 1: US equities just continue to score even though policy isn't

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Speaker 1: coming through. Economic growth isn't coming through to back it up.

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Speaker 1: So there should be a big question about our our

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Speaker 1: evaluation is going to catch up with the markets or

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Speaker 1: is there gonna inc on our surveillance feed. Right now,

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Speaker 1: the President of the United States walking across the tarmac,

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Speaker 1: David Gura, this is his second big trip. Mrs Trump

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Speaker 1: with him as well as they go to Air Force

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Speaker 1: one m the entourage, I would say measured, maybe a

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Speaker 1: lot of people on board right now. The President goes

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Speaker 1: up the stairs. They don't they don't have a walkway

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Speaker 1: like we do. They get the stair to the yeah,

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Speaker 1: to the Gulf Stream. It's easier, easier entry for us

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Speaker 1: into that into that plane. But he's off to ward

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Speaker 1: cycle speaking for tomorrow for the Gulf Stream. We just

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Speaker 1: got one of the little plastic step things over at

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Speaker 1: cost highly portable. President waving. Now the traditional wave is

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Speaker 1: it begin what's sort of it's a sort of wave.

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Speaker 1: There's a wave, there's more of a wave by the

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Speaker 1: brother there there we go. Now the third wave. We

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Speaker 1: got the presidential wave and you know, speaking to France

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Speaker 1: and the choir, Matt Miller with coverage of the G

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Speaker 1: twenty meetings. In the meeting with Mr Prutin scheduled. I

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Speaker 1: believe I could say that it'll be interesting to see

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Speaker 1: a little he's got to be focused on North Korea.

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Speaker 1: Megan on on the issue of the G twenty. Do

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Speaker 1: we expect much to be discussed or to come out

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Speaker 1: of this centering on economics? Is this going to be

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Speaker 1: squarely about geopolitics and less so about the economic picture?

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Speaker 1: So I think that's right. I think the focus will

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Speaker 1: be on geopolitics. We might get something out on trade,

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Speaker 1: which is you know, regularly a focus of these twenty

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Speaker 1: meetings these days, UM, but I think classics will probably

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Speaker 1: overshadow at Let me ask you a bit about sort

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Speaker 1: of what we're seeing it comes to the consumer in

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Speaker 1: the US. Has the picture of the US consumer improved

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Speaker 1: at all? What are the indications you're looking at to

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Speaker 1: see how the consumers doing so? All of the confidence

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Speaker 1: data for the consumer looks fantastic and has much great

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Speaker 1: UM since before the election. But you know, particularly UM

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Speaker 1: at the end of last year the beginning of this year,

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Speaker 1: and we've seen the consumer UM confidence measures sore UM.

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Speaker 1: The problem is that there's little UM indication of how

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Speaker 1: much consumers are actually going to spend what we've found

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Speaker 1: generally is that incomes tend to affect consumer spending more

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Speaker 1: than just pure confidence. And so the soft data, all

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Speaker 1: the confidence data, looks great. If you look at the

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Speaker 1: hard data, so retail sales, new car registrations, it looks

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Speaker 1: decidedly less good. Um, new car registrations looked really awful

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Speaker 1: at the end of the first quarter of this year.

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Speaker 1: They've since come back a little bit, but but they're

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Speaker 1: not looking great. Retail sales have just been bumbling along

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Speaker 1: in positive territory um but nothing to write home about.

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Speaker 1: And of course the consumer drives every recovery in the

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Speaker 1: US has done since, you know, in our modern history.

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Speaker 1: So the consumer is a thing to be looking at

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Speaker 1: in its recovery. But there's little evidence that the confidence

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Speaker 1: is really translating into marketsumer spending. But within this is

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Speaker 1: just the simple core idea of where the economy is.

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Speaker 1: Have we reached escape velocity or do we struggle now

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Speaker 1: in America between an okay quarter allows e quarter, an

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Speaker 1: okay quarter allows e quarter? In that do you do

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Speaker 1: within the micro data and as you say, some of

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Speaker 1: it's optimistic, can you say we've reached an escape velocity

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Speaker 1: to some form of consistency, so I don't think. So

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Speaker 1: we're growing above our potential GDP growth, so that's pretty good.

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Speaker 1: Our potential GDP growth is around one and a half percent,

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Speaker 1: and we're around two percent. Okay, but is that eurosclerosis?

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Speaker 1: Did you just define eurosclerosis um to someund degree to

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Speaker 1: percent isn't enough to address the issues that have as

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Speaker 1: in for example UM. But among the developed countries percent

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Speaker 1: growth is actually pretty good. So we're having an escape

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Speaker 1: velocity in the sense that we're gonna go ahead now

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Speaker 1: as the administration would like and expects. I don't think.

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Speaker 1: I think fundamentally the US is a two percent economy,

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Speaker 1: but again it's better than our potential GDP growth, so

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Speaker 1: that's not terrible. Back in greening with us from a

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Speaker 1: many lifetime, I'm looking here at our Jennifer Jacobs tweeting

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Speaker 1: about who is accompanying the president on that trip, Milannia.

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Speaker 1: As you said, his his wife, the first lady, will

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Speaker 1: be there, Gary Khne going with him as well, and

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Speaker 1: as well Mrs Michael Barr. You're supposed to tell us

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Speaker 1: when the president Trump's and particularly when they're important. These

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Speaker 1: set of Trump of of tweet Trump treats are he's

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Speaker 1: gonna getting ready to leave for Poland and we just

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Speaker 1: so I'm getting the airplane. David Gura, the United States

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Speaker 1: made some of the worst trade deals in world history.

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Speaker 1: Why should we continue these deals with countries that do

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Speaker 1: not help us? And then this one's more important. I'm

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Speaker 1: sure Michael Barr is gonna go. This is more detailed.

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Speaker 1: Trade between China and North Korea were almost in the

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Speaker 1: fourth quarter. So much for China working with US. Wow,

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Speaker 1: but we had to give it a trial. He continues

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Speaker 1: there with with that tweet, I'll point out what I

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Speaker 1: said with Adam posting just a few moments ago. The

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Speaker 1: marl Lago summit took place just I think three months ago,

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Speaker 1: maybe three months ago. And then Terry Brandstad the form

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Speaker 1: of Governor Vaowa has been on the ground in Beijing

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Speaker 1: as the US ambassador to China for just six days.

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Speaker 1: Uh so a particularly important it's the important tweet from

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Speaker 1: the present there about the relationship between the US and China.

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Speaker 1: And or thanks to Megan Green, Megan Green, the chief

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Speaker 1: economists that manual life joining us on our phone lines.

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Speaker 1: This is truly one of our most popular guests. Luis

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Speaker 1: Shimada joining us on our phone lines. Louise does charts

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Speaker 1: and does them with a respect for what economics and

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Speaker 1: what fundamentals are doing. Is well, Louise, wonderful to speak

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Speaker 1: to you again. Thank you so much for quoting Martin's

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Speaker 1: way as you do on page four the late Marty's

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Speaker 1: wide don't fight the Fed. What do your charts say

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Speaker 1: about what cheer Yellen is doing? Well? Interestingly, the two

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Speaker 1: year note is moving up in the tenure which had

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Speaker 1: broken support, has started to turn around a little to

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Speaker 1: move higher. Um. But I think that in terms of

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Speaker 1: the equity market, we were becoming concerned in May about

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Speaker 1: the parabolic in NASTAC and some of the technology stocks,

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Speaker 1: and I think that we don't have major tops here.

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Speaker 1: You still have upturns in plate, you have moving averages rising,

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Speaker 1: and monthly momentum is still positive. So this could be

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Speaker 1: just the speed bump that allows for consolidation that could

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Speaker 1: be followed by another rally UM. But I think that

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Speaker 1: there are some external things that need to be watched. Okay,

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Speaker 1: And of course the jargon with Louisia Mada is like

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Speaker 1: she's a pro. She's not going to dumb it down

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Speaker 1: for Tom Keen. The parabolic is the acceleration or second

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Speaker 1: derivative in a semilog space. Do you like that, Louise

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Speaker 1: I hope I got that right on the two year

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Speaker 1: yield chart. On the chart Janet Yelling cares about there

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Speaker 1: was huge distribution across all of two thousand sixteen. I'm

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Speaker 1: gonna make it even fifteen months. Distribution at zero point

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Speaker 1: eight zero is a center tendency, and we've lifted up

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Speaker 1: in an organized manner. Can you say escape velocity on

429
00:24:38,400 --> 00:24:41,119
Speaker 1: the two year yield to a higher yield a lower

430
00:24:41,200 --> 00:24:44,200
Speaker 1: note price. Oh? I think so. I think that that's

431
00:24:44,200 --> 00:24:47,040
Speaker 1: where we're really going to see the change. The decline

432
00:24:47,080 --> 00:24:52,080
Speaker 1: that you were talking about in essentially slipped under and

433
00:24:52,160 --> 00:24:56,160
Speaker 1: bounce right back up over the uptrend. We've been talking

434
00:24:56,240 --> 00:24:59,800
Speaker 1: about the six to eight year basing process um in

435
00:25:00,080 --> 00:25:06,400
Speaker 1: the interest rate profile. I would say because rate changes

436
00:25:06,560 --> 00:25:10,080
Speaker 1: or rate reversals from falling rate cycles have historically taken

437
00:25:10,119 --> 00:25:13,240
Speaker 1: two to fourteen years, so sixty eight years doesn't surprise us.

438
00:25:13,280 --> 00:25:16,639
Speaker 1: You're going through one I think one sixties next on

439
00:25:16,720 --> 00:25:19,359
Speaker 1: the two years and David, one of the charms of

440
00:25:19,480 --> 00:25:22,239
Speaker 1: miss Amata is she has a courage to look at

441
00:25:22,280 --> 00:25:27,479
Speaker 1: a long term x exis Yamada goes out longer on charts,

442
00:25:27,680 --> 00:25:30,440
Speaker 1: which is a rare commodity. Today, Luis, we're talking with

443
00:25:30,520 --> 00:25:33,240
Speaker 1: Adam Posing a few moments ago, and he was expressing

444
00:25:33,359 --> 00:25:35,200
Speaker 1: his frustration with the fact that we don't really have

445
00:25:35,240 --> 00:25:37,800
Speaker 1: a good definition of what the neutral rate is. How

446
00:25:37,840 --> 00:25:41,000
Speaker 1: does that complicate your outlook not knowing exactly what the

447
00:25:41,040 --> 00:25:44,560
Speaker 1: neutral rate is? But I think that that complicates everybody,

448
00:25:44,680 --> 00:25:47,000
Speaker 1: including the FED. I mean they've even acknowledged to a

449
00:25:47,119 --> 00:25:49,639
Speaker 1: certain extent that they, you know, they're not sure exactly

450
00:25:49,680 --> 00:25:51,320
Speaker 1: where it is. I think she's looking at two and

451
00:25:51,359 --> 00:25:55,080
Speaker 1: a half percent UM, so it's it's going to be

452
00:25:55,240 --> 00:25:59,040
Speaker 1: a test as we go and if we move carefully

453
00:25:59,160 --> 00:26:01,600
Speaker 1: and see what the results are as she raises rates.

454
00:26:01,640 --> 00:26:04,280
Speaker 1: There are times when you're in a in a structural

455
00:26:04,359 --> 00:26:08,800
Speaker 1: bull market, which we think we still are UM when

456
00:26:09,119 --> 00:26:12,800
Speaker 1: the rate rises don't start affecting the equities until a

457
00:26:12,920 --> 00:26:15,920
Speaker 1: fifth or a sixth rate reverse, you know, rate rise.

458
00:26:16,840 --> 00:26:19,040
Speaker 1: But we're at the point where I think we have

459
00:26:19,200 --> 00:26:21,840
Speaker 1: to start paying attention, taking a look at the market

460
00:26:21,880 --> 00:26:23,760
Speaker 1: and sort of a bipedal way as you do looking

461
00:26:23,800 --> 00:26:25,679
Speaker 1: at the first leg there between two thousand and nine

462
00:26:25,680 --> 00:26:27,679
Speaker 1: and two thousand fifteen is the first leg up here

463
00:26:27,720 --> 00:26:30,680
Speaker 1: we are in the second UH one one one to

464
00:26:30,720 --> 00:26:32,200
Speaker 1: think that we are due for a correction at some

465
00:26:32,320 --> 00:26:34,479
Speaker 1: point as soon. What are the indications you're looking at?

466
00:26:34,560 --> 00:26:36,159
Speaker 1: Do you see any that a correction is on the

467
00:26:36,240 --> 00:26:39,879
Speaker 1: near term horizon? Well, no, except for the fact that

468
00:26:40,040 --> 00:26:42,680
Speaker 1: in two the beginning in two thousand and nine, after

469
00:26:42,720 --> 00:26:44,440
Speaker 1: about a year and a half, you got your first

470
00:26:44,480 --> 00:26:47,840
Speaker 1: step back. It was just a consolidation corrective phase. But

471
00:26:48,280 --> 00:26:49,760
Speaker 1: you know, we're a year and a half into this

472
00:26:49,960 --> 00:26:52,240
Speaker 1: now and I think that it's possible that we have

473
00:26:52,840 --> 00:26:55,399
Speaker 1: um more of a corrective phase. But you know, if

474
00:26:55,440 --> 00:26:57,920
Speaker 1: you even just came back to the trend line, that's

475
00:26:57,960 --> 00:27:02,760
Speaker 1: a single digit pulled back and nastac it's barely You

476
00:27:02,920 --> 00:27:05,680
Speaker 1: have a textbook chart. Very quickly here, Louise, I want

477
00:27:05,720 --> 00:27:08,399
Speaker 1: to come back on golden oil. You have a textbook

478
00:27:08,440 --> 00:27:13,600
Speaker 1: you amodit chart. On consumer discretionary sector, it's been a

479
00:27:13,800 --> 00:27:17,359
Speaker 1: boom within this boom bull market. Can you say higher

480
00:27:17,560 --> 00:27:25,480
Speaker 1: higher on twenty six and multiple consumer discretionaries. Consumer discretionaries

481
00:27:25,560 --> 00:27:28,000
Speaker 1: have been a mixed bag. You've had the retail there

482
00:27:28,080 --> 00:27:31,000
Speaker 1: that has done incredibly poorly, and the relative strengths have

483
00:27:31,200 --> 00:27:35,679
Speaker 1: continuously gone to new lows over an extended period of time. Uh.

484
00:27:35,760 --> 00:27:38,320
Speaker 1: And then you have others which have included media and

485
00:27:38,720 --> 00:27:42,280
Speaker 1: and and some of the cable and satellite and those

486
00:27:42,880 --> 00:27:45,880
Speaker 1: areas that have done particularly well. So I think one

487
00:27:46,000 --> 00:27:49,040
Speaker 1: has to really divide out which stocks, which groups are

488
00:27:49,080 --> 00:27:53,280
Speaker 1: talking about in consumer discretionary overall, it's not performing the

489
00:27:53,359 --> 00:27:57,440
Speaker 1: way the financials have just turned up. A technology has rested,

490
00:27:57,480 --> 00:28:01,960
Speaker 1: and industrials may be coming in, and healthcare, but particularly

491
00:28:02,119 --> 00:28:07,280
Speaker 1: the um equipment, the equipment department in health care. Let's

492
00:28:07,280 --> 00:28:09,120
Speaker 1: come back Luisia Matta with us. And I know, folks

493
00:28:09,160 --> 00:28:11,359
Speaker 1: you want to hear about golden oil. What a range

494
00:28:11,400 --> 00:28:14,440
Speaker 1: for oil as well. We'll come back with Louisia Matta.

495
00:28:14,920 --> 00:28:17,320
Speaker 1: Let me say particularly warm good morning this folks, this

496
00:28:17,400 --> 00:28:19,040
Speaker 1: morning to our listeners in Boston who are listening on

497
00:28:19,080 --> 00:28:22,159
Speaker 1: Bloomberg one oh six one, our new new station in

498
00:28:22,560 --> 00:28:24,840
Speaker 1: in Boston, at our new home for Bloomberg Radio in

499
00:28:24,880 --> 00:28:26,679
Speaker 1: the Bay State. And Louise, let me ask you. Look

500
00:28:26,680 --> 00:28:28,280
Speaker 1: at so many ratios, let me ask you about one

501
00:28:28,280 --> 00:28:31,520
Speaker 1: in particular, that is the ratio of emerging markets and

502
00:28:31,600 --> 00:28:33,440
Speaker 1: developed markets. When you look at that right now, what's

503
00:28:33,440 --> 00:28:36,280
Speaker 1: it telling you? It's telling me we're in a bit

504
00:28:36,359 --> 00:28:39,440
Speaker 1: of a neutral range. Uh, if it were to live

505
00:28:39,600 --> 00:28:42,200
Speaker 1: through this year plus trading range that it's been in,

506
00:28:42,320 --> 00:28:45,800
Speaker 1: then you begin to see the emerging markets outperformed but

507
00:28:45,880 --> 00:28:48,680
Speaker 1: hasn't happened yet. So I'd say they're sort of in

508
00:28:48,760 --> 00:28:51,960
Speaker 1: the tobal war. Emerging markets haven't made it through the

509
00:28:52,600 --> 00:28:56,040
Speaker 1: longer term downtrend on their own, and the developed markets

510
00:28:56,080 --> 00:28:58,040
Speaker 1: are some of them are doing well, but some of

511
00:28:58,080 --> 00:29:00,840
Speaker 1: the emerging are doing well too. Um. I mean, you've

512
00:29:00,840 --> 00:29:06,240
Speaker 1: got the decks at New High's, the Taiwan coffee, India, Jakarta,

513
00:29:06,400 --> 00:29:11,479
Speaker 1: even in Mexico here of course, so it's it's a war, Louise.

514
00:29:11,600 --> 00:29:14,200
Speaker 1: The world stops when you come on is people just

515
00:29:14,320 --> 00:29:18,360
Speaker 1: simply want to know Louisia Mota on gold. Like oil,

516
00:29:18,400 --> 00:29:20,440
Speaker 1: it's sort of been blocked. Are they just in these

517
00:29:20,680 --> 00:29:24,240
Speaker 1: these ranges? The strange phrase ranges is that where we

518
00:29:24,320 --> 00:29:27,720
Speaker 1: are home on the gold range. Well, I've seen gold,

519
00:29:27,840 --> 00:29:30,360
Speaker 1: We've we have questioned whether or not the rally that

520
00:29:30,480 --> 00:29:34,640
Speaker 1: we had in either or this year is is nothing

521
00:29:34,720 --> 00:29:38,760
Speaker 1: more than a cyclic cyclical bull in the structural bear um.

522
00:29:39,080 --> 00:29:42,240
Speaker 1: It has not been able to definitively break through the

523
00:29:43,080 --> 00:29:46,080
Speaker 1: eleven down trend. And I think what's even more important

524
00:29:46,200 --> 00:29:49,120
Speaker 1: is the ratio. Talk about ratio is the relative performance

525
00:29:49,200 --> 00:29:53,600
Speaker 1: between equities and gold, and um those have topped with

526
00:29:53,880 --> 00:30:00,560
Speaker 1: major equity market tops sixty eight two thousand and moved

527
00:30:00,600 --> 00:30:05,200
Speaker 1: into outperformance of gold as the equities undergo bear markets.

528
00:30:05,280 --> 00:30:07,240
Speaker 1: But in two thousand and ten we saw a turn

529
00:30:07,320 --> 00:30:10,960
Speaker 1: in that ratio in which the equities are outperforming gold,

530
00:30:11,040 --> 00:30:12,880
Speaker 1: and we don't see any reason for that to change

531
00:30:12,880 --> 00:30:15,720
Speaker 1: in the near future. How do you respond, particularly on

532
00:30:15,800 --> 00:30:19,040
Speaker 1: a Friday, Luisia Mota, to all the gloom articles that

533
00:30:19,080 --> 00:30:21,080
Speaker 1: are out there. I mean, you're you're someone with a

534
00:30:22,160 --> 00:30:25,520
Speaker 1: pencil and paper in your hands and decades of experience.

535
00:30:26,200 --> 00:30:28,480
Speaker 1: When you see the world's coming to an end, go

536
00:30:28,880 --> 00:30:31,719
Speaker 1: sell this, Sell that, don't be in this that. How

537
00:30:31,760 --> 00:30:35,520
Speaker 1: do you respond to that? I tend to look at them,

538
00:30:36,240 --> 00:30:41,080
Speaker 1: ignore them, and go with the price. I mean you

539
00:30:41,200 --> 00:30:43,160
Speaker 1: have to if you if you have enough faith in

540
00:30:43,600 --> 00:30:47,160
Speaker 1: technical analysis and the idea that in price there's knowledge,

541
00:30:47,400 --> 00:30:49,480
Speaker 1: you have to go and look at the price. And

542
00:30:49,600 --> 00:30:51,920
Speaker 1: a lot of times things that are being recommended just

543
00:30:52,040 --> 00:30:54,640
Speaker 1: don't have the price patterns to back them up. And

544
00:30:55,280 --> 00:30:57,920
Speaker 1: I think that's a story of gold. I can't tell

545
00:30:57,960 --> 00:31:00,600
Speaker 1: you how many people send me positive article on golden.

546
00:31:01,080 --> 00:31:03,040
Speaker 1: You know, we're just not seen that in the chart.

547
00:31:03,440 --> 00:31:06,840
Speaker 1: How about the dollar charting about the d X Y chart, Well,

548
00:31:06,960 --> 00:31:11,600
Speaker 1: the dollar unfortunately was in a nice breakout there through

549
00:31:12,240 --> 00:31:15,040
Speaker 1: through a two year trading range between ninety three and

550
00:31:15,120 --> 00:31:18,320
Speaker 1: a hundred, and it hasn't been able to sustain the

551
00:31:18,400 --> 00:31:21,920
Speaker 1: targets at higher levels come right back into that trading

552
00:31:22,040 --> 00:31:27,160
Speaker 1: range and it's about mid range now close to But

553
00:31:27,480 --> 00:31:31,040
Speaker 1: it's possible here both momentum models weekly and monthly are

554
00:31:31,200 --> 00:31:36,760
Speaker 1: are negative. It's possible it comes back in teste. I mean,

555
00:31:37,240 --> 00:31:39,200
Speaker 1: what's going on in Europe and the end of their

556
00:31:39,240 --> 00:31:42,280
Speaker 1: easing so to speak, is having an effect. And now

557
00:31:42,400 --> 00:31:47,680
Speaker 1: we go. Folks were few. They fear to tread oil. Louise,

558
00:31:47,800 --> 00:31:51,160
Speaker 1: oil is maddening to look at with a soup, toxic

559
00:31:51,240 --> 00:31:54,600
Speaker 1: soup in it, But what does the price action really see?

560
00:31:54,640 --> 00:31:58,080
Speaker 1: What I would suggest, respectively, folks from March we've seen

561
00:31:58,200 --> 00:32:03,560
Speaker 1: a set of lower high and three lower loads as well. Louise,

562
00:32:04,960 --> 00:32:08,240
Speaker 1: did I do Okay? Can I go home? Now? Okay?

563
00:32:08,880 --> 00:32:11,480
Speaker 1: Just what I was going to tell you only that,

564
00:32:11,680 --> 00:32:14,320
Speaker 1: but you're now below the moving averages. You've broken in

565
00:32:15,360 --> 00:32:17,880
Speaker 1: uptrand and it looks like every time price starts to

566
00:32:17,920 --> 00:32:20,120
Speaker 1: go up to somebody's there to sell it. Yeah, and

567
00:32:20,240 --> 00:32:23,440
Speaker 1: what's so important your folks in this this? I gotta

568
00:32:23,520 --> 00:32:26,600
Speaker 1: go for brownie points here with Mr Martin. David, we've

569
00:32:26,720 --> 00:32:30,840
Speaker 1: one to three times going perfectly to two standard deviations

570
00:32:31,320 --> 00:32:36,080
Speaker 1: of volatility, and we're there again at three. And the

571
00:32:36,280 --> 00:32:39,080
Speaker 1: vectors going from his gartment would say, from the upper

572
00:32:39,200 --> 00:32:42,920
Speaker 1: left to the lower right, is that? Okay, Louise, that's fine.

573
00:32:43,000 --> 00:32:47,400
Speaker 1: I'm taking on Thursday and Friday. Okay, David, Louise, let

574
00:32:47,440 --> 00:32:48,960
Speaker 1: me just ask you. Let's let's close here by talking

575
00:32:48,960 --> 00:32:51,280
Speaker 1: about equities a little more. And I wonder when you

576
00:32:51,320 --> 00:32:53,560
Speaker 1: look at sectors and let's talk about technology. What are

577
00:32:53,560 --> 00:32:57,920
Speaker 1: you seeing the technology sector at today? Well, the technology

578
00:32:58,000 --> 00:33:02,440
Speaker 1: sector is underperforming slightly, but it's still within the relative

579
00:33:02,520 --> 00:33:07,200
Speaker 1: strength uptrend UM, So it's not UM. It's not something

580
00:33:07,280 --> 00:33:10,280
Speaker 1: that's telling us that it's any more than a speed bump.

581
00:33:10,520 --> 00:33:12,520
Speaker 1: But I think that we have to watch for the

582
00:33:12,600 --> 00:33:17,760
Speaker 1: potential for contagion or for this consolidation of That's what

583
00:33:17,840 --> 00:33:19,760
Speaker 1: we're going to call it to to pull back a

584
00:33:19,840 --> 00:33:26,000
Speaker 1: little farther. Um. But overall, technology has been outperforming for

585
00:33:26,160 --> 00:33:29,160
Speaker 1: so long that I think it would be healthy if

586
00:33:29,240 --> 00:33:32,120
Speaker 1: it had a rest. But you haven't broken the You

587
00:33:32,200 --> 00:33:35,760
Speaker 1: haven't broken the relative strength uptrend. You could if if

588
00:33:36,240 --> 00:33:39,160
Speaker 1: technology comes back further. But I think you can take

589
00:33:39,240 --> 00:33:42,160
Speaker 1: that ten percent in the NAZ back and and maybe

590
00:33:42,200 --> 00:33:44,320
Speaker 1: turn up again. But we'll have to see it as

591
00:33:44,400 --> 00:33:47,120
Speaker 1: we go. We do have negative divergences in some of

592
00:33:47,160 --> 00:33:50,920
Speaker 1: our technical indicators, and as those extend over time, UM,

593
00:33:51,240 --> 00:33:55,080
Speaker 1: you can start defining a problem. We don't necessarily think

594
00:33:55,120 --> 00:33:57,400
Speaker 1: it's tomorrow. The A D line is still high in

595
00:33:57,440 --> 00:34:00,680
Speaker 1: the monthly momentumus positive, Luis, Thank you so much, Los

596
00:34:00,720 --> 00:34:13,120
Speaker 1: your madam. Thanks for listening to the Bloomberg Surveillance Podcast.

597
00:34:13,600 --> 00:34:18,800
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

598
00:34:18,920 --> 00:34:23,200
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom Keene,

599
00:34:23,320 --> 00:34:27,640
Speaker 1: David Gura is at David Gura. Before the podcast, you

600
00:34:27,719 --> 00:34:42,239
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio, brought you

601
00:34:42,360 --> 00:34:46,400
Speaker 1: by Bank of America Mary Lynch. With virtual reality, virtually

602
00:34:46,600 --> 00:34:51,840
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603
00:34:52,000 --> 00:34:56,520
Speaker 1: of a mL dot com, slash vr, Mary Lynch, Pierced

604
00:34:56,520 --> 00:34:58,480
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