Speaker 1: Brunch you by Bank of America Mary Lynch with virtual reality,
Speaker 1: Virtually everything will change. Discover opportunities in a transforming world.
Speaker 1: VI of a mL dot Com slash VR, Mary Lynch,
Speaker 1: Pierced Fenner and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
Speaker 1: insight from the best of economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com,
Speaker 1: and of course on the Bloomberg. We like to do
Speaker 1: history with David Folcus Landau of Deutsche Bank. Francie Kwan, London.
Speaker 1: I'm Tom keenan New York. Let's get right to it morning.
Speaker 1: Mustard b Virto Gallo and Algebrath writing up a Bloomberg
Speaker 1: View column. And this is on the Great Minsky of
Speaker 1: Washington University St. Louis and Columbia. We may be approaching
Speaker 1: a second Minsky moment. By keeping races at record low levels,
Speaker 1: central banks have made it easier for inefficient firms to
Speaker 1: survive as an a rising tide that lifts all boats.
Speaker 1: Last week, Cherry Yellen said a financial crisis is unlikely
Speaker 1: to happen, and David Folkarts Landau's lifetime if he were alive,
Speaker 1: If Minsky was alive, Minsky would be shaking his head.
Speaker 1: Shaking his head in London. Is David Folkard's Landau. This
Speaker 1: speaks to shocks to instabilities out there is sovereign debt,
Speaker 1: the growing debt, the size of the debt. Is that
Speaker 1: a possibility to be an instability. It's that combined with
Speaker 1: the liquidity overhanged us in the system. I mean, you
Speaker 1: have to look at that together. Uh, there's no doubt
Speaker 1: I think at this point to say that we cannot
Speaker 1: foresee if the financial crisis doing our lifetime strikes me
Speaker 1: as not having learned the lessons of the last thirty
Speaker 1: years as long as I've been in this profession, that's
Speaker 1: been the crisis every eight years, starting at eighty two
Speaker 1: and let Him Dead crisis, and on and on and on,
Speaker 1: Tequila crisis, Asian crisis, and two thousand one and two
Speaker 1: thousand seven, so and none of those, none of those
Speaker 1: we had ever anticipated. All we can't quite see our
Speaker 1: way through how a crisis might happen. And so I
Speaker 1: think that leads me to be quite cautious about where
Speaker 1: we are right now. We've got a twelve trillion central
Speaker 1: bank overheaded liquidity, we have almost a forty to forty
Speaker 1: increase in the government debt outstanding of the major countries. Um.
Speaker 1: So yeah, and and we have become very very used
Speaker 1: to the calming influence of quee uh and so to
Speaker 1: think that there's no no hidden dangers lurking in the
Speaker 1: system as rates go up, I think it is is
Speaker 1: fulati who's the adult in the room that can actually
Speaker 1: get us away from the dangers or preempt the dangers
Speaker 1: that you're just mentioning. It is the FED. I believe
Speaker 1: that the FED will lead the way with a gradual
Speaker 1: rate increase, with very careful communications and with a very
Speaker 1: good understanding of the risk and how the system work.
Speaker 1: When I think of the current fedboard with yelling and
Speaker 1: people like stand Fisher, um, there's little they do not
Speaker 1: understand about this. Yes, but I think it is important
Speaker 1: to recognize that the rates, including at the short end
Speaker 1: but also at the long end, at a historical low,
Speaker 1: and they and they're completely out of whack. If you
Speaker 1: look at the numbers in the UK, for instance, the
Speaker 1: UK ten years ago at the last increase and you
Speaker 1: look at the constellation now of unemployment rates information and
Speaker 1: so they're much they're much more calling for an increase
Speaker 1: in in rate increases now years ago. Yeah, we're not
Speaker 1: doing it. We got to leave it there, David focused Land,
Speaker 1: are generous with your time to thank you so much.
Speaker 1: Look forward to seeing you in New York. Um, we
Speaker 1: are exceptionally lucky in the next half hour to have
Speaker 1: with us John writing of our d Q Economics, he
Speaker 1: has defined the debate since the financial crisis began with
Speaker 1: sharp analysis of central bank policy in the American economy.
Speaker 1: In a special treat this morning, to have with us
Speaker 1: Adam Posen, the head of the Peterson Institute, his public
Speaker 1: service to the Bank of England, and arguably with Richard Clarida,
Speaker 1: are two experts on the relationship of Germany to the
Speaker 1: United States. Adam posing let me begin with you with
Speaker 1: this g twenty meeting. How will President Trump be greeted
Speaker 1: by this Germany you've studied for decades. Thank you for
Speaker 1: having me on tom And in terms of Germany, we
Speaker 1: saw the big signal already a couple of days ago.
Speaker 1: Chancellor Merkel in Hall he campaign and speech materials officially
Speaker 1: stopped preferring to the United States as a friend. Now
Speaker 1: that sounds pretty penny anti. But for Merkel, who's a
Speaker 1: confirmed Atlantis, who's an internationalist, and for Germany especially, that's
Speaker 1: a big shift. So there's gonna be wariness. There isn't
Speaker 1: going to be confrontation. Maybe we have a generational shift
Speaker 1: out opposing with a funeral for a helmet call. Last week,
Speaker 1: I was quite taken by Bill Clinton's comments as well.
Speaker 1: How will Mr Trump be greeted? Do you just assume
Speaker 1: there will be protests honest travels across the continent of Europe.
Speaker 1: I think the Bill Clinton speech was wonderful in this case,
Speaker 1: and it obviously is falling on deaf ears both in
Speaker 1: Washington and Hamburg. Um. I think there will be protests.
Speaker 1: They're always protests at eachwenties these days. But Mr Trump,
Speaker 1: particularly on climate change, it'll get worse. So John writing
Speaker 1: with this, you know, Johnny's wonderful to have you here.
Speaker 1: The tenth anniversary of the financial crisis. We're beginning our
Speaker 1: coverage of that. You know, you notice coordinated chit chat
Speaker 1: last week. Is banks coordinated? Their forward guidance is a
Speaker 1: monetary policy of Europe and the United States in sync
Speaker 1: or do you still look at them as separate beasts. Well,
Speaker 1: I don't think it was coordinated in the sense that
Speaker 1: there was any agreement to coordinate, but the message is clear,
Speaker 1: and I think that you're previous guest exactly the Dodge
Speaker 1: Banks Econmers was right. There's this large central bank overhang. Um,
Speaker 1: there are potential financial risks building, and it's a theme
Speaker 1: that all at least a lot of the central bank,
Speaker 1: particularly Bank of England d CB and of course leading
Speaker 1: the FED is on because there are risks building. You
Speaker 1: had a headline story today about problems in Norway's housing market.
Speaker 1: I mean that's maybe maybe a small thing there. There's Venezuela,
Speaker 1: there's Argentina issuing a hundred a year bond, as if
Speaker 1: we hadn't seen Argentina default with a few times within
Speaker 1: the last couple of decades. So, um, I think there
Speaker 1: is a feeling that central banks need to get on
Speaker 1: with the balance sheet and start reducing the size of
Speaker 1: debtness health Yeah, Adam, do do you worry about the
Speaker 1: central bank policies and policy mistakes red scene? I think, unfortunately,
Speaker 1: everything your guests just said, and most of what focused
Speaker 1: land out said is totally wrong. Um, the FED is
Speaker 1: going to continue tightening for a bit. The ECB and
Speaker 1: Bank of England came out of the b I S
Speaker 1: meeting saying talking tough, but they're not gonna do it. Um,
Speaker 1: then there's no reason for them to talk. At the
Speaker 1: Bank of England, there's an argument on the macro prudential
Speaker 1: side that there's huge imbalances in terms of savings and
Speaker 1: UH real estate and credit in the UK specifically, but
Speaker 1: that's what the macro prow the Financial Policy Committee supposed
Speaker 1: to deal with, so interest rates don't have to do it.
Speaker 1: And given the inflation and other problems in the UK,
Speaker 1: I think they'll be reluctant to move ECB even more so.
Speaker 1: Voidman is talking because he's running for ECB president, not
Speaker 1: because there's no need for policy change. UH. FED is
Speaker 1: also going to basically wimp out, probably starting next spring.
Speaker 1: And finally, all this talk about I saw folkas landa
Speaker 1: you tweeted was talking about the pain or your guests
Speaker 1: just talked about Argentina. Let's get real. Argentina may be
Speaker 1: a very foolish thing to buy a hundred year bond in,
Speaker 1: but it's not gonna affect anybody if anything happens in Argentina.
Speaker 1: Al right, John needs the right of reply because posing
Speaker 1: John Toles says you're completely wrong, Well, time will tell
Speaker 1: and uh as focused and everybody. People fail to anticipate
Speaker 1: the next financial crisis, and they come along every so often,
Speaker 1: he said, every eight years. I don't know that there's
Speaker 1: necessarily that rhythmic cycle to it, but nevertheless, we do
Speaker 1: have a habit of ignoring the lessons of the previous crisis.
Speaker 1: And here we are coming upon the tenth anniversary of
Speaker 1: the worst financial crisis since the Great Depression. Um. But
Speaker 1: it's the wrong lesson, guys. I mean, it's not about
Speaker 1: mon terry policy tightness. It's about financial supervision laxity and
Speaker 1: regulatory laxity. And in the data, David David's assertion about
Speaker 1: the every eight years, which I agree with you is
Speaker 1: a little too rhythmic, is misleading. If you go to
Speaker 1: the run Art Rogue offer the i m F data set,
Speaker 1: there's negative auto correlation of financial crisis. Look at Japan, Canada, Sweden.
Speaker 1: Once you've had a financial crisis, you usually don't have
Speaker 1: one for decades. Look at the US after the thirties.
Speaker 1: But so I think people are chasing ghosts. I would
Speaker 1: just saying, but the problem with macroprudential is it's an
Speaker 1: unused tool in it's not even clear what the tool is.
Speaker 1: I remember being in an Atlanta FED conference and the
Speaker 1: former tragedy of Secretary Paul Rubens said the reality of
Speaker 1: macropudential policy is that there is no reality. Um so
Speaker 1: again it's about monitoring, trying to pick up the vibrations.
Speaker 1: But you have all this liquidity in the system, and
Speaker 1: that does encourage mistake. Let's go to this liquidity doesn't
Speaker 1: do anything. That's the whole point of the last in
Speaker 1: years we're dealing here with with wonderful economic theory for
Speaker 1: a Wednesday, let me get back control of this. Is
Speaker 1: Adam Posing steals the shows he's been known to do.
Speaker 1: Adam Posing is about Duley Garber and dfl versus a
Speaker 1: lot of people like you that really disagree with flow
Speaker 1: analysis has to do folks with stock and flow, and
Speaker 1: we're not gonna get into it. What I want to say,
Speaker 1: Adam Posing is the overlay that John writing in dfl
Speaker 1: C is an odd fixed income market. Do you have
Speaker 1: confidence at central banks can find a stable trajectory from
Speaker 1: where interest rates are now, both on a nominal and
Speaker 1: a real basis, as I fell to things, Tom, and
Speaker 1: I'm sorry to be over stepping with the stuff. The
Speaker 1: first first thing is, uh that in the short term forecast,
Speaker 1: and that was where I was primarily different distinguishing from David,
Speaker 1: and that I just don't think they're going to do
Speaker 1: very much. But in the second point, if things prove
Speaker 1: unstable because of it'll be because of real reasons, like
Speaker 1: the collapse of productivity growth in the UK or the
Speaker 1: collapse of wage growth in the U S and many
Speaker 1: other countries. That is what will destabilize things. It's not
Speaker 1: going to be central banks tightening. The central is just followers.
Speaker 1: Do you see wage growth occurring and will we observe that?
Speaker 1: Friday and the Job's Report interview after your interview, I
Speaker 1: don't see people talking about appropriate wage growth for politicians
Speaker 1: or central bank heads. Mm hmm. Well again it's sort
Speaker 1: of stock and flow. I mean, on a rate basis,
Speaker 1: there's a legitimate case to be made. I thought, I
Speaker 1: don't think it's open and shot, but there's a legitimate
Speaker 1: case to be made that wages are finally picking up
Speaker 1: a bit in the US almost in line with a
Speaker 1: very flat Philips curve, and so unemployment is gonna stop falling,
Speaker 1: wages will go up a small amount. That's the flow basis.
Speaker 1: The stock is. Remember that the wage growth in the
Speaker 1: US and number of other countries with exceptions like Germany
Speaker 1: UM has been very poor for over a decade, and
Speaker 1: so if you're going to catch up, then it's a problem.
Speaker 1: But but on the subject, But on the suguct wage growth.
Speaker 1: Productivity growth in the US has been very poor for
Speaker 1: the last ten years, and our analysis suggests the primary
Speaker 1: reason for that is inadequate capital spending UM. And so
Speaker 1: wage growth isn't out of line at all with what
Speaker 1: the economy is producing. And now if we have wage
Speaker 1: increases ahead of productivity gains, that's going to continue to
Speaker 1: squeeze profits and undermine the capital spending story. So my
Speaker 1: concern isn't that wage growth is too low. My concern
Speaker 1: is productivity growth is too low, which is the real
Speaker 1: underlying reason behind the poor wage gains. Yeah, except the
Speaker 1: two things. First is the profit rate has been going
Speaker 1: up for years, so the idea that profits are being
Speaker 1: squeezed is wrong. So you're right, the wage growth in
Speaker 1: US has been lead some productivity, so we don't expect
Speaker 1: big wage growth. And he since wage growth is continued,
Speaker 1: productivity has been lousy. You're right, so we shouldn't expect
Speaker 1: big wage growth, but there's still been additional profits going up.
Speaker 1: And the second thing is it's not just the investment cycle.
Speaker 1: The causality runs the other way. The reason people aren't
Speaker 1: investing because they don't see the productivity growth. What I
Speaker 1: love about this is the two of you are lightening
Speaker 1: up on emails. Thank you for the many responses in here.
Speaker 1: Here's partial score folks writing seven pos in five. We'll
Speaker 1: see if we can come back and have dr post
Speaker 1: better time here. Well, we'll see. You know it's great.
Speaker 1: This is what we love about Bloomberg Surveillance, A debate
Speaker 1: that's out there. Brunt you by Bank of America, Mary Lynch.
Speaker 1: With virtual reality, virtually everything will change. Discover opportunities in
Speaker 1: a transforming world via a mL dot Com slash VR,
Speaker 1: Mary Lynch, Pierced Fenteran Smith Incorporated. Let's bring in Mega Green.
Speaker 1: Let's get right to it this morning. Mega Green is
Speaker 1: with manual life, looking at not only the international economy,
Speaker 1: but maybe focus here more in the US economy as well,
Speaker 1: which corner, Megan, good morning, is cherry yelling painted into
Speaker 1: within the many themes of domestic economics. How has she
Speaker 1: painted herself into a corner? Is it about wage growth?
Speaker 1: I don't think it is about wage growth. I think
Speaker 1: right now actually a lot of about instlation UM. And
Speaker 1: I'll be interested to see what comes out in the
Speaker 1: minutes later today on the effllency discussion around inflation, because
Speaker 1: it it has been pretty paltry recently that says they're
Speaker 1: looking through it but um, but maybe they shouldn't be UM.
Speaker 1: So we'll learn more about their discussions around that. And
Speaker 1: I do think that is driving a lot. I do
Speaker 1: think that the fat is painted into a corner though
Speaker 1: I'm not not cherry yelling spec aglieve. But the set
Speaker 1: is um in terms of starting to shrink their balance
Speaker 1: sheet before Terry Ellen's term is up next year early
Speaker 1: next year. So I do you think that they will
Speaker 1: probably get that process started because they would like it
Speaker 1: to be automatic and transparent UM and already running by
Speaker 1: the time that she leaves, so that it can't be reversed. Yeah,
Speaker 1: And within all of this, how critical is the jobs report?
Speaker 1: This Friday, and I don't mean the unemployment rate, I
Speaker 1: mean just the whole thing, and also the wage dynamics
Speaker 1: as well for someone like you, is it or does
Speaker 1: it really matter for July UM. I always think that
Speaker 1: you know, each individual jobs reports one data point UM,
Speaker 1: so it's not worth obsessing over UM. But I would
Speaker 1: say that the trend going into this job's report is
Speaker 1: all age growth UM, which which in theory, if we
Speaker 1: had strong wage growth, it would feed into inflation data
Speaker 1: and the set would be hitting its dual mandate UM.
Speaker 1: And it's not now because even though unemployment is a low,
Speaker 1: inflation is looking pretty bad. And I just don't see
Speaker 1: any reason to fact that we will see stronger wage
Speaker 1: growth this time around. UM. Everything you had a single
Speaker 1: data point of good wage growth, you know, analysts will
Speaker 1: all say, well, now, finally a wage growth coming in
Speaker 1: because the labor market is so tight UM, and it
Speaker 1: never lasts, and UM, we're gonna back to continue. So
Speaker 1: I think will continue to be pretty bad wage growth.
Speaker 1: Most of our jobs being added in really low wage,
Speaker 1: low our sectors. And that's partly because what we consume
Speaker 1: now these these mostly services which tend to be low wage,
Speaker 1: low hour um jobs and also because we have such
Speaker 1: a glut of cheap labor globally, So these are big
Speaker 1: kind of global drivers UM that aren't going to change
Speaker 1: month to months. Megan Green coourse with that manual Life
Speaker 1: based in Boston, and Megan, let me ask you about
Speaker 1: what we could learn today from the Federal Reserve from
Speaker 1: their last meeting. Now, I guess three weeks ago about
Speaker 1: the balance sheet, we were talking with John Riding at
Speaker 1: the top of the show about timing. Is there more
Speaker 1: to it than that? What can we learn about, say,
Speaker 1: their their composition of the unwined So I think we
Speaker 1: know a bunch of details now, all that the caps,
Speaker 1: for example, how they plan to make it as transparent
Speaker 1: and automatic as possible. I really do think timing is
Speaker 1: the key thing we can learn about the balance sheet,
Speaker 1: specifically this afternoon, UM, but I think there are a
Speaker 1: few other key things to look at. I mentioned earlier,
Speaker 1: you know, the discussion around how they're really looking at inflation,
Speaker 1: but also financial stability, which they haven't really talked about publicly,
Speaker 1: but they've got to be concerned about given that, you know,
Speaker 1: US equities just continue to score even though policy isn't
Speaker 1: coming through. Economic growth isn't coming through to back it up.
Speaker 1: So there should be a big question about our our
Speaker 1: evaluation is going to catch up with the markets or
Speaker 1: is there gonna inc on our surveillance feed. Right now,
Speaker 1: the President of the United States walking across the tarmac,
Speaker 1: David Gura, this is his second big trip. Mrs Trump
Speaker 1: with him as well as they go to Air Force
Speaker 1: one m the entourage, I would say measured, maybe a
Speaker 1: lot of people on board right now. The President goes
Speaker 1: up the stairs. They don't they don't have a walkway
Speaker 1: like we do. They get the stair to the yeah,
Speaker 1: to the Gulf Stream. It's easier, easier entry for us
Speaker 1: into that into that plane. But he's off to ward
Speaker 1: cycle speaking for tomorrow for the Gulf Stream. We just
Speaker 1: got one of the little plastic step things over at
Speaker 1: cost highly portable. President waving. Now the traditional wave is
Speaker 1: it begin what's sort of it's a sort of wave.
Speaker 1: There's a wave, there's more of a wave by the
Speaker 1: brother there there we go. Now the third wave. We
Speaker 1: got the presidential wave and you know, speaking to France
Speaker 1: and the choir, Matt Miller with coverage of the G
Speaker 1: twenty meetings. In the meeting with Mr Prutin scheduled. I
Speaker 1: believe I could say that it'll be interesting to see
Speaker 1: a little he's got to be focused on North Korea.
Speaker 1: Megan on on the issue of the G twenty. Do
Speaker 1: we expect much to be discussed or to come out
Speaker 1: of this centering on economics? Is this going to be
Speaker 1: squarely about geopolitics and less so about the economic picture?
Speaker 1: So I think that's right. I think the focus will
Speaker 1: be on geopolitics. We might get something out on trade,
Speaker 1: which is you know, regularly a focus of these twenty
Speaker 1: meetings these days, UM, but I think classics will probably
Speaker 1: overshadow at Let me ask you a bit about sort
Speaker 1: of what we're seeing it comes to the consumer in
Speaker 1: the US. Has the picture of the US consumer improved
Speaker 1: at all? What are the indications you're looking at to
Speaker 1: see how the consumers doing so? All of the confidence
Speaker 1: data for the consumer looks fantastic and has much great
Speaker 1: UM since before the election. But you know, particularly UM
Speaker 1: at the end of last year the beginning of this year,
Speaker 1: and we've seen the consumer UM confidence measures sore UM.
Speaker 1: The problem is that there's little UM indication of how
Speaker 1: much consumers are actually going to spend what we've found
Speaker 1: generally is that incomes tend to affect consumer spending more
Speaker 1: than just pure confidence. And so the soft data, all
Speaker 1: the confidence data, looks great. If you look at the
Speaker 1: hard data, so retail sales, new car registrations, it looks
Speaker 1: decidedly less good. Um, new car registrations looked really awful
Speaker 1: at the end of the first quarter of this year.
Speaker 1: They've since come back a little bit, but but they're
Speaker 1: not looking great. Retail sales have just been bumbling along
Speaker 1: in positive territory um but nothing to write home about.
Speaker 1: And of course the consumer drives every recovery in the
Speaker 1: US has done since, you know, in our modern history.
Speaker 1: So the consumer is a thing to be looking at
Speaker 1: in its recovery. But there's little evidence that the confidence
Speaker 1: is really translating into marketsumer spending. But within this is
Speaker 1: just the simple core idea of where the economy is.
Speaker 1: Have we reached escape velocity or do we struggle now
Speaker 1: in America between an okay quarter allows e quarter, an
Speaker 1: okay quarter allows e quarter? In that do you do
Speaker 1: within the micro data and as you say, some of
Speaker 1: it's optimistic, can you say we've reached an escape velocity
Speaker 1: to some form of consistency, so I don't think. So
Speaker 1: we're growing above our potential GDP growth, so that's pretty good.
Speaker 1: Our potential GDP growth is around one and a half percent,
Speaker 1: and we're around two percent. Okay, but is that eurosclerosis?
Speaker 1: Did you just define eurosclerosis um to someund degree to
Speaker 1: percent isn't enough to address the issues that have as
Speaker 1: in for example UM. But among the developed countries percent
Speaker 1: growth is actually pretty good. So we're having an escape
Speaker 1: velocity in the sense that we're gonna go ahead now
Speaker 1: as the administration would like and expects. I don't think.
Speaker 1: I think fundamentally the US is a two percent economy,
Speaker 1: but again it's better than our potential GDP growth, so
Speaker 1: that's not terrible. Back in greening with us from a
Speaker 1: many lifetime, I'm looking here at our Jennifer Jacobs tweeting
Speaker 1: about who is accompanying the president on that trip, Milannia.
Speaker 1: As you said, his his wife, the first lady, will
Speaker 1: be there, Gary Khne going with him as well, and
Speaker 1: as well Mrs Michael Barr. You're supposed to tell us
Speaker 1: when the president Trump's and particularly when they're important. These
Speaker 1: set of Trump of of tweet Trump treats are he's
Speaker 1: gonna getting ready to leave for Poland and we just
Speaker 1: so I'm getting the airplane. David Gura, the United States
Speaker 1: made some of the worst trade deals in world history.
Speaker 1: Why should we continue these deals with countries that do
Speaker 1: not help us? And then this one's more important. I'm
Speaker 1: sure Michael Barr is gonna go. This is more detailed.
Speaker 1: Trade between China and North Korea were almost in the
Speaker 1: fourth quarter. So much for China working with US. Wow,
Speaker 1: but we had to give it a trial. He continues
Speaker 1: there with with that tweet, I'll point out what I
Speaker 1: said with Adam posting just a few moments ago. The
Speaker 1: marl Lago summit took place just I think three months ago,
Speaker 1: maybe three months ago. And then Terry Brandstad the form
Speaker 1: of Governor Vaowa has been on the ground in Beijing
Speaker 1: as the US ambassador to China for just six days.
Speaker 1: Uh so a particularly important it's the important tweet from
Speaker 1: the present there about the relationship between the US and China.
Speaker 1: And or thanks to Megan Green, Megan Green, the chief
Speaker 1: economists that manual life joining us on our phone lines.
Speaker 1: This is truly one of our most popular guests. Luis
Speaker 1: Shimada joining us on our phone lines. Louise does charts
Speaker 1: and does them with a respect for what economics and
Speaker 1: what fundamentals are doing. Is well, Louise, wonderful to speak
Speaker 1: to you again. Thank you so much for quoting Martin's
Speaker 1: way as you do on page four the late Marty's
Speaker 1: wide don't fight the Fed. What do your charts say
Speaker 1: about what cheer Yellen is doing? Well? Interestingly, the two
Speaker 1: year note is moving up in the tenure which had
Speaker 1: broken support, has started to turn around a little to
Speaker 1: move higher. Um. But I think that in terms of
Speaker 1: the equity market, we were becoming concerned in May about
Speaker 1: the parabolic in NASTAC and some of the technology stocks,
Speaker 1: and I think that we don't have major tops here.
Speaker 1: You still have upturns in plate, you have moving averages rising,
Speaker 1: and monthly momentum is still positive. So this could be
Speaker 1: just the speed bump that allows for consolidation that could
Speaker 1: be followed by another rally UM. But I think that
Speaker 1: there are some external things that need to be watched. Okay,
Speaker 1: And of course the jargon with Louisia Mada is like
Speaker 1: she's a pro. She's not going to dumb it down
Speaker 1: for Tom Keen. The parabolic is the acceleration or second
Speaker 1: derivative in a semilog space. Do you like that, Louise
Speaker 1: I hope I got that right on the two year
Speaker 1: yield chart. On the chart Janet Yelling cares about there
Speaker 1: was huge distribution across all of two thousand sixteen. I'm
Speaker 1: gonna make it even fifteen months. Distribution at zero point
Speaker 1: eight zero is a center tendency, and we've lifted up
Speaker 1: in an organized manner. Can you say escape velocity on
Speaker 1: the two year yield to a higher yield a lower
Speaker 1: note price. Oh? I think so. I think that that's
Speaker 1: where we're really going to see the change. The decline
Speaker 1: that you were talking about in essentially slipped under and
Speaker 1: bounce right back up over the uptrend. We've been talking
Speaker 1: about the six to eight year basing process um in
Speaker 1: the interest rate profile. I would say because rate changes
Speaker 1: or rate reversals from falling rate cycles have historically taken
Speaker 1: two to fourteen years, so sixty eight years doesn't surprise us.
Speaker 1: You're going through one I think one sixties next on
Speaker 1: the two years and David, one of the charms of
Speaker 1: miss Amata is she has a courage to look at
Speaker 1: a long term x exis Yamada goes out longer on charts,
Speaker 1: which is a rare commodity. Today, Luis, we're talking with
Speaker 1: Adam Posing a few moments ago, and he was expressing
Speaker 1: his frustration with the fact that we don't really have
Speaker 1: a good definition of what the neutral rate is. How
Speaker 1: does that complicate your outlook not knowing exactly what the
Speaker 1: neutral rate is? But I think that that complicates everybody,
Speaker 1: including the FED. I mean they've even acknowledged to a
Speaker 1: certain extent that they, you know, they're not sure exactly
Speaker 1: where it is. I think she's looking at two and
Speaker 1: a half percent UM, so it's it's going to be
Speaker 1: a test as we go and if we move carefully
Speaker 1: and see what the results are as she raises rates.
Speaker 1: There are times when you're in a in a structural
Speaker 1: bull market, which we think we still are UM when
Speaker 1: the rate rises don't start affecting the equities until a
Speaker 1: fifth or a sixth rate reverse, you know, rate rise.
Speaker 1: But we're at the point where I think we have
Speaker 1: to start paying attention, taking a look at the market
Speaker 1: and sort of a bipedal way as you do looking
Speaker 1: at the first leg there between two thousand and nine
Speaker 1: and two thousand fifteen is the first leg up here
Speaker 1: we are in the second UH one one one to
Speaker 1: think that we are due for a correction at some
Speaker 1: point as soon. What are the indications you're looking at?
Speaker 1: Do you see any that a correction is on the
Speaker 1: near term horizon? Well, no, except for the fact that
Speaker 1: in two the beginning in two thousand and nine, after
Speaker 1: about a year and a half, you got your first
Speaker 1: step back. It was just a consolidation corrective phase. But
Speaker 1: you know, we're a year and a half into this
Speaker 1: now and I think that it's possible that we have
Speaker 1: um more of a corrective phase. But you know, if
Speaker 1: you even just came back to the trend line, that's
Speaker 1: a single digit pulled back and nastac it's barely You
Speaker 1: have a textbook chart. Very quickly here, Louise, I want
Speaker 1: to come back on golden oil. You have a textbook
Speaker 1: you amodit chart. On consumer discretionary sector, it's been a
Speaker 1: boom within this boom bull market. Can you say higher
Speaker 1: higher on twenty six and multiple consumer discretionaries. Consumer discretionaries
Speaker 1: have been a mixed bag. You've had the retail there
Speaker 1: that has done incredibly poorly, and the relative strengths have
Speaker 1: continuously gone to new lows over an extended period of time. Uh.
Speaker 1: And then you have others which have included media and
Speaker 1: and and some of the cable and satellite and those
Speaker 1: areas that have done particularly well. So I think one
Speaker 1: has to really divide out which stocks, which groups are
Speaker 1: talking about in consumer discretionary overall, it's not performing the
Speaker 1: way the financials have just turned up. A technology has rested,
Speaker 1: and industrials may be coming in, and healthcare, but particularly
Speaker 1: the um equipment, the equipment department in health care. Let's
Speaker 1: come back Luisia Matta with us. And I know, folks
Speaker 1: you want to hear about golden oil. What a range
Speaker 1: for oil as well. We'll come back with Louisia Matta.
Speaker 1: Let me say particularly warm good morning this folks, this
Speaker 1: morning to our listeners in Boston who are listening on
Speaker 1: Bloomberg one oh six one, our new new station in
Speaker 1: in Boston, at our new home for Bloomberg Radio in
Speaker 1: the Bay State. And Louise, let me ask you. Look
Speaker 1: at so many ratios, let me ask you about one
Speaker 1: in particular, that is the ratio of emerging markets and
Speaker 1: developed markets. When you look at that right now, what's
Speaker 1: it telling you? It's telling me we're in a bit
Speaker 1: of a neutral range. Uh, if it were to live
Speaker 1: through this year plus trading range that it's been in,
Speaker 1: then you begin to see the emerging markets outperformed but
Speaker 1: hasn't happened yet. So I'd say they're sort of in
Speaker 1: the tobal war. Emerging markets haven't made it through the
Speaker 1: longer term downtrend on their own, and the developed markets
Speaker 1: are some of them are doing well, but some of
Speaker 1: the emerging are doing well too. Um. I mean, you've
Speaker 1: got the decks at New High's, the Taiwan coffee, India, Jakarta,
Speaker 1: even in Mexico here of course, so it's it's a war, Louise.
Speaker 1: The world stops when you come on is people just
Speaker 1: simply want to know Louisia Mota on gold. Like oil,
Speaker 1: it's sort of been blocked. Are they just in these
Speaker 1: these ranges? The strange phrase ranges is that where we
Speaker 1: are home on the gold range. Well, I've seen gold,
Speaker 1: We've we have questioned whether or not the rally that
Speaker 1: we had in either or this year is is nothing
Speaker 1: more than a cyclic cyclical bull in the structural bear um.
Speaker 1: It has not been able to definitively break through the
Speaker 1: eleven down trend. And I think what's even more important
Speaker 1: is the ratio. Talk about ratio is the relative performance
Speaker 1: between equities and gold, and um those have topped with
Speaker 1: major equity market tops sixty eight two thousand and moved
Speaker 1: into outperformance of gold as the equities undergo bear markets.
Speaker 1: But in two thousand and ten we saw a turn
Speaker 1: in that ratio in which the equities are outperforming gold,
Speaker 1: and we don't see any reason for that to change
Speaker 1: in the near future. How do you respond, particularly on
Speaker 1: a Friday, Luisia Mota, to all the gloom articles that
Speaker 1: are out there. I mean, you're you're someone with a
Speaker 1: pencil and paper in your hands and decades of experience.
Speaker 1: When you see the world's coming to an end, go
Speaker 1: sell this, Sell that, don't be in this that. How
Speaker 1: do you respond to that? I tend to look at them,
Speaker 1: ignore them, and go with the price. I mean you
Speaker 1: have to if you if you have enough faith in
Speaker 1: technical analysis and the idea that in price there's knowledge,
Speaker 1: you have to go and look at the price. And
Speaker 1: a lot of times things that are being recommended just
Speaker 1: don't have the price patterns to back them up. And
Speaker 1: I think that's a story of gold. I can't tell
Speaker 1: you how many people send me positive article on golden.
Speaker 1: You know, we're just not seen that in the chart.
Speaker 1: How about the dollar charting about the d X Y chart, Well,
Speaker 1: the dollar unfortunately was in a nice breakout there through
Speaker 1: through a two year trading range between ninety three and
Speaker 1: a hundred, and it hasn't been able to sustain the
Speaker 1: targets at higher levels come right back into that trading
Speaker 1: range and it's about mid range now close to But
Speaker 1: it's possible here both momentum models weekly and monthly are
Speaker 1: are negative. It's possible it comes back in teste. I mean,
Speaker 1: what's going on in Europe and the end of their
Speaker 1: easing so to speak, is having an effect. And now
Speaker 1: we go. Folks were few. They fear to tread oil. Louise,
Speaker 1: oil is maddening to look at with a soup, toxic
Speaker 1: soup in it, But what does the price action really see?
Speaker 1: What I would suggest, respectively, folks from March we've seen
Speaker 1: a set of lower high and three lower loads as well. Louise,
Speaker 1: did I do Okay? Can I go home? Now? Okay?
Speaker 1: Just what I was going to tell you only that,
Speaker 1: but you're now below the moving averages. You've broken in
Speaker 1: uptrand and it looks like every time price starts to
Speaker 1: go up to somebody's there to sell it. Yeah, and
Speaker 1: what's so important your folks in this this? I gotta
Speaker 1: go for brownie points here with Mr Martin. David, we've
Speaker 1: one to three times going perfectly to two standard deviations
Speaker 1: of volatility, and we're there again at three. And the
Speaker 1: vectors going from his gartment would say, from the upper
Speaker 1: left to the lower right, is that? Okay, Louise, that's fine.
Speaker 1: I'm taking on Thursday and Friday. Okay, David, Louise, let
Speaker 1: me just ask you. Let's let's close here by talking
Speaker 1: about equities a little more. And I wonder when you
Speaker 1: look at sectors and let's talk about technology. What are
Speaker 1: you seeing the technology sector at today? Well, the technology
Speaker 1: sector is underperforming slightly, but it's still within the relative
Speaker 1: strength uptrend UM, So it's not UM. It's not something
Speaker 1: that's telling us that it's any more than a speed bump.
Speaker 1: But I think that we have to watch for the
Speaker 1: potential for contagion or for this consolidation of That's what
Speaker 1: we're going to call it to to pull back a
Speaker 1: little farther. Um. But overall, technology has been outperforming for
Speaker 1: so long that I think it would be healthy if
Speaker 1: it had a rest. But you haven't broken the You
Speaker 1: haven't broken the relative strength uptrend. You could if if
Speaker 1: technology comes back further. But I think you can take
Speaker 1: that ten percent in the NAZ back and and maybe
Speaker 1: turn up again. But we'll have to see it as
Speaker 1: we go. We do have negative divergences in some of
Speaker 1: our technical indicators, and as those extend over time, UM,
Speaker 1: you can start defining a problem. We don't necessarily think
Speaker 1: it's tomorrow. The A D line is still high in
Speaker 1: the monthly momentumus positive, Luis, Thank you so much, Los
Speaker 1: your madam. Thanks for listening to the Bloomberg Surveillance Podcast.
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