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Speaker 1: This is Bloomberg Surveillance. Good morning everyone. Economic Indicators. This

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Speaker 1: job to day brought to by Commonwealth Financial Network. When

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Speaker 1: it's time to change the conversation, talk of the broker

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Speaker 1: dealer r I A that's ready to listen called six

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Speaker 1: two three six three eight, or visit Commonwealth dot com

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Speaker 1: to learn more. A constructive report, here's our Vinnie Dell Judais,

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Speaker 1: Good morning Tom. Non farm payrolls up by two hundred

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Speaker 1: fifteen thousand in Marching. Yes, that tops Wall Street forecast

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Speaker 1: the prior month. Provides to pit higher the unemployment rate

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Speaker 1: creeping up to five percent from four point nine percent

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Speaker 1: average hourly earnings topping forecasts up point three piece up

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Speaker 1: point three percent, so generally speaking, a strong report. Non

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Speaker 1: farm payrolls again March up two hundred fifteen thousand, unemployment

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Speaker 1: five percent versus four point nine percent average hourly earnings

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Speaker 1: up point three percent. These are all March numbers, and

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Speaker 1: that point three percent reverses at the client and earnings

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Speaker 1: in February at the Bloombark First Work Desk company del

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Speaker 1: two days. Let's go back to New York and very

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Speaker 1: very quickly, I'm moving the yields three basis point move

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Speaker 1: two year yield higher, the ten ye yield one zero percent. Barry,

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Speaker 1: what do you see? Uh? Interesting to see the unemployment

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Speaker 1: rate tick back up. That's actually a positive, as counterintuitive

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Speaker 1: as that sounds. More people are returning to the labor

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Speaker 1: force looking for work, and that's why we're starting to

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Speaker 1: see a little bit of increase in the in the

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Speaker 1: unemployment rate. It tells you people are optimistic about the

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Speaker 1: possibility of finding work and so they come back to

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Speaker 1: the labor market and that ticks. Uh. That's that's why

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Speaker 1: we ticked up from four point nine to five point percent.

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Speaker 1: Jim Glassman with us for a few more minutes. Is

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Speaker 1: he what a privilege of this? Jim Glassman out of

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Speaker 1: Robert Gordon's Northwestern giving us perspective here, and I think,

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Speaker 1: Jim Blastman, if I see one thing the net revision,

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Speaker 1: I've never seen this was a negative one. I mean,

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Speaker 1: it really shows some stability. And I'm going to suggest,

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Speaker 1: as Barry mentioned Jim Glassman, it maybe a five percent

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Speaker 1: unemployment rate is a better idea. Yeah, And and I've

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Speaker 1: been thinking, as long as the job market is steady

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Speaker 1: and employment is growing and the unemployment rate is not

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Speaker 1: coming down, and that's fine because what it means is

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Speaker 1: we know there are jobs being created, and we know

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Speaker 1: there's a lot of people who left the market, awhile ago.

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Speaker 1: As the job market improves, they're gonna be coming back in.

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Speaker 1: So you shouldn't expect kind of one right to go

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Speaker 1: down much. Job leavers explodes from nine point seven percent

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Speaker 1: up to ten point five percent, showing some of the

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Speaker 1: optimism that Barry Ridholts will walk out the door here

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Speaker 1: in the coming hours. Yeah, that's right. And um, you

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Speaker 1: know we're seeing a reversal. Remember last month we had

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Speaker 1: some weird declines and wages and hours work. Now we're

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Speaker 1: seeing some reversal of that. And my guess as well,

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Speaker 1: we're really on the track that we were on before.

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Speaker 1: This is a really steady report and it's it's consistent

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Speaker 1: with a DP and with jobless claims which have not

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Speaker 1: been doing anything really, Jim Glassman, thank you so much.

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Speaker 1: With JP Morgan right now, folks on Bloomberg Radio and

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Speaker 1: Bloomberg Television worldwide, we welcome all of you. As we

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Speaker 1: speak with Bill Gross of Janice Capital. Bill, the bond

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Speaker 1: market moves, yields up, price down. We want to get

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Speaker 1: you before you have to run back and salvage your portfolio. Uh,

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Speaker 1: you know, one month does not make a report, but

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Speaker 1: this shows some of the resiliency that you're yelling. The

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Speaker 1: ambiguity that you're yelling dealed with last weekend her speech. Yeah,

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Speaker 1: I think so. It's a good report. We just did

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Speaker 1: better than expected. And of course jobs are doing about

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Speaker 1: the saying that the two hundred thousand plus and so, um,

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Speaker 1: you know, good, good numbers. Domestically, What what strikes me,

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Speaker 1: I guess about the fit, and that's your question, is

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Speaker 1: that the you know, the Fed's clearly countered easy moves

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Speaker 1: by the e c B and the b o J,

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Speaker 1: whether intentional or not. As you point out, minute by minute,

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Speaker 1: the dollars weaker by five percent against both the euro

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Speaker 1: and the yen over the past month or so. And

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Speaker 1: so the conundrum, as they say, is that, yeah, they're

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Speaker 1: data dependent. They focus on jobs, unemployment rates, wage growth.

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Speaker 1: That's what we saw just for the moment. Yet it's

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Speaker 1: global as opposed to domestic conditions that they grabbed Yelling's attention,

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Speaker 1: and uh, I don't. I'm playing the markets for being confused,

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Speaker 1: But clearly markets are a little confused as to whether

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Speaker 1: to be bullish about this. Reporter look globally for other reports.

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Speaker 1: The the moving averages of non firm payrolls bill grows

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Speaker 1: conflate right down to two three months, to eleven six months,

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Speaker 1: to forty six one year, right near the six month

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Speaker 1: two thousand. By any standard, those are good number. Hers

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Speaker 1: review with us again the reticence the chair Yelling has

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Speaker 1: to act, which you wrote about so strongly in your

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Speaker 1: latest Janist report. Well, hopefully she recognizes. I think she does.

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Speaker 1: She's in charge there to my way of thinking, strongly

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Speaker 1: in charge. I think she recognizes that those jobs are

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Speaker 1: not necessarily translating into economic growth. I mean, we've seen

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Speaker 1: industrial production flat and to some extent down. We've we've

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Speaker 1: seen um, you know, other statistics in terms of retail

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Speaker 1: sales being flat down, and we have a forecast of

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Speaker 1: the first quarter GDP at the points six percent from

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Speaker 1: the Atlanta Fed. You know, those are numbers that suggest

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Speaker 1: robust group despite the job's situation. And so I think

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Speaker 1: she has some domestic caution although she doesn't express it,

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Speaker 1: and she certainly has some global caution in terms of

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Speaker 1: emerging markets and UH and European in Euroland situations. Bill,

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Speaker 1: is this to America's I mean, when you wrote your

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Speaker 1: report last week and what we see today and the

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Speaker 1: challenges at Barry Ridholtz and I've seen over the last

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Speaker 1: international week. To bring it back domestically, is there's two Americas.

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Speaker 1: The Janet Yellen is trying to manage him to deal

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Speaker 1: with well, certainly, and we know she's trying to do

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Speaker 1: it all by herself, right to the extent that the

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Speaker 1: fiscal policy side has been absent for years now and

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Speaker 1: probably will continue to be absent, and it's all on

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Speaker 1: Janet yelling shoulder, and she's trying to some extent to

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Speaker 1: balance that out. Now, in my view, she's doing it

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Speaker 1: incorrectly to the extent that interest rates are low or

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Speaker 1: even negative in some countries, as I pointed out in

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Speaker 1: my Investment Outlook, then that has negative implications for job

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Speaker 1: growth in financial institutions. We see cutbacks day by day

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Speaker 1: there because they can't generate the same profitability and low

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Speaker 1: interest rates, and insurance companies, pension funds, even the household

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Speaker 1: savor is affected by these low rates. So you know,

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Speaker 1: it's not only two America's, but it's it's two conceptual

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Speaker 1: ideas in terms of what works and what doesn't work.

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Speaker 1: And I think she's still stuck on the old model

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Speaker 1: of low interest rates work. Let's reset right now for

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Speaker 1: Bloomberg Radio and Bloomberg Television worldwide. William gross joining us

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Speaker 1: from Jana's Capital, as he always does, a good jobs

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Speaker 1: report yields higher Grosser's portfolio lower over the last ten minutes,

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Speaker 1: one point seven ten year yield, a two year old

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Speaker 1: point seven five April fool's bill uh point seven five

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Speaker 1: or seven a two year yield, and futures negative eight.

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Speaker 1: I want to bring in Barry Ritholts with some perspective

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Speaker 1: with Mr gross Berry. So just very simply, is there

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Speaker 1: anything in this report that should dissuade chair Yelling from

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Speaker 1: moving come June? Well, you know the dissenters, so to speak,

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Speaker 1: and there's a few of them, uh Evans and Williams

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Speaker 1: and bullard Um, you know, would would point to wage growth.

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Speaker 1: There's a potential down the road for a June move,

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Speaker 1: and I think several of them as suggested that two

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Speaker 1: moves in two thousand and sixteen Barry are what we

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Speaker 1: should expect. Now, they change their minds and their data

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Speaker 1: dependent and it's up to the global situation, I suppose,

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Speaker 1: but you know, it's my way of thinking some of

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Speaker 1: them at least realize that they've get to normalized interest

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Speaker 1: rates or else and and to the extent that they

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Speaker 1: have an opportunity in terms of higher wage growth, to

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Speaker 1: the extent that they have an opportunity in terms of

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Speaker 1: two hundred thousand plus jobs month after month, then yeah,

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Speaker 1: June looks like a likely month to do one of

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Speaker 1: those two hikes. So we saw wages tick up modestly

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Speaker 1: point three percent. This is the political year, This is

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Speaker 1: a political silly season, and a lot of the angst

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Speaker 1: that's out there may be attributed to the lack of

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Speaker 1: wage growth. When as an economy, we're going to start

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Speaker 1: to see that pick up. Well, the Fed clints that

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Speaker 1: we're starting to see that, then that will continue to

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Speaker 1: see that as as unemployment stays at five and moves

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Speaker 1: lower than five over a period of time. You know,

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Speaker 1: that's the old Phillips curve, you know, type of logic

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Speaker 1: in which you tighten um the unemployment rate and ultimately

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Speaker 1: way just go up and the inflation is produced um.

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Speaker 1: To my way of thinking, that's an outdated model. We

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Speaker 1: know that because of the participation, right, that's sort of

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Speaker 1: Jimmy the the entire equation. We know that you nine

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Speaker 1: is uh, our new six is probably at nine point

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Speaker 1: nine to ten percent um and and that's a more

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Speaker 1: realistic level to my way, you know, the amount of unemployed. Bill,

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Speaker 1: I want to talk about productivity and efficiency. Now. We

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Speaker 1: are going to bring up, folks, an actual photograph of

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Speaker 1: Bill Gross's Monroe Trader from nineteen sixty four. Here it

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Speaker 1: is right here. This is productivity. When Grosser's in the

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Speaker 1: mail room at Pimco, and we move all the way

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Speaker 1: forward Bill and on radio worldwide, all I can say

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Speaker 1: is everybody has a mystery of productivity. Moving from Bill

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Speaker 1: Gross's Monroe Trader to the koufl announcers slide rule he

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Speaker 1: uses today. Bill on productivity, is it really there is

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Speaker 1: the new efficiency there? Will it create jobs? Well, that's

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Speaker 1: the critical one for the FED that that it's subjective

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Speaker 1: to certain extent, But the numbers, as as you're beginning

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Speaker 1: to point out, are dramatically down three point five percent

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Speaker 1: average on a five year basis only five years ago

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Speaker 1: at the peak of the of the economy, and now

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Speaker 1: at point five percent average annually for the last five

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Speaker 1: So how can I Let's come back with Bill Gross

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Speaker 1: will continue this discussion on America's productivity survalance. Brought to

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Speaker 1: mobile app and on your radio. This is a Broomberg

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Speaker 1: Business Flash and I'm parin Moscow. This updates brought to

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Speaker 1: Powerful Outcomes VIX, the Pound appreciating to its weakest level

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Speaker 1: versus the Euro, and fifteen months as the report showing

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Speaker 1: manufacturing output held near the lowest and highlighted concerns that

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Speaker 1: UK growth is slowing. U Stock Index futures meanwhile remain

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Speaker 1: lower after the data showing employment climbed and wages picked

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Speaker 1: up in March, signs of labor market durability in the

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Speaker 1: phase of the argic Global growth SNP. Even the futures

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Speaker 1: down ten points DOWNEY Many futures down eighty two and

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Speaker 1: NAS DOCU Many futures down twenty two. That acts in

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Speaker 1: Germany's down two and a half percent ten Your treasury

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Speaker 1: down three thirty seconds, the yield one point seven seven percent.

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Speaker 1: Nim X screwed oil down two percent or a dollar

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Speaker 1: eight to thirty seven, twenty six of barrel and co

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Speaker 1: mix gold is down one per cent or eleven dollars

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Speaker 1: ninety cents to twelve twenty three fifty announced the euro

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Speaker 1: a dollar fourteen o three and that's a Bloomberg business flash,

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Speaker 1: Tom and Barry Karen, thanks so much again. An important

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Speaker 1: interview today. John Nickel Twait, our editor in chief, in

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Speaker 1: conversation with the Deputy Crown Prince of Saudi Arabia on oil,

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Speaker 1: on a Ramco and on their new Sovereign Wealth Fund

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Speaker 1: as well. We now welcome Bloomberg Television and Bloomberg Radio worldwide.

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Speaker 1: We continue with William Gross of Janice Capital. Bill, let's

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Speaker 1: talk bonds now. Villain bowder On earlier with his call

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Speaker 1: of a global slowdown, you've had the same idea of

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Speaker 1: a weaker global economy, lower yields, higher bond prices. You've

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Speaker 1: had terrific performance in your unconstrained bond fund right now, Okay,

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Speaker 1: that was that's old news. Bill, give me the new

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Speaker 1: news for the second quarter and into this year. How

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Speaker 1: will you position given global slowdown? Well, I think you

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Speaker 1: have to position for you rather static monetary policy. That

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Speaker 1: that that doesn't mean that uh you know, we don't

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Speaker 1: have one high cour so in in two thousands and sixteen.

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Speaker 1: But you position with a static policy and what does

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Speaker 1: that get you? Does that get you one eight percent

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Speaker 1: on a tenure treasury for the next twelve months, that

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Speaker 1: that's not very much. Um So, I think rather than

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Speaker 1: buying bonds, and certainly you don't want to buy buns

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Speaker 1: or German bonds at the yield negative rates all the

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Speaker 1: way out to eight years. You don't want to do that.

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Speaker 1: What you basically do is you you sell volatile around

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Speaker 1: uh the yield in order to take advantage of what

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Speaker 1: I perceived to be a you know, a rather gradual

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Speaker 1: if that interest rate hike in in terms of the

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Speaker 1: federal reserve, and if it's gradual, then volatility will be

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Speaker 1: low and instead of buying any want to sell it

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Speaker 1: and generate the higher yields that way, very importantly, Bill,

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Speaker 1: before I bring in Barry Ritholts, without question, the theme

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Speaker 1: of the week in every interview is the difficulties in

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Speaker 1: China again Professor Bowder of City Groups saying it is

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Speaker 1: the dire straits of China. Bill gross on the quality

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Speaker 1: of Chinese and emerging market debt right now, what do

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Speaker 1: you deserve in the price action? Well, the Chinese debt

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Speaker 1: is increasing at geometric levels on most that's an exaggeration,

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Speaker 1: but but moving much higher corporate GDP and UH that

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Speaker 1: corporate debt to GDP and China's too, which is probably

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Speaker 1: twice what it is in other countries. And so it's

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Speaker 1: a potential problem down the road to the extent that

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Speaker 1: China can't continue to forgive some of that debt. And

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Speaker 1: and Tom, here's the the incredible thing about a month

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Speaker 1: ago they suggested a policy of of debt swaps, that is,

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Speaker 1: swapping debt for equity. And in the United States we

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Speaker 1: call that bankruptcy, but in China they call that a

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Speaker 1: debt swap. And so you know, they have significant problems there,

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Speaker 1: much of which is underneath the carpet, so to speak.

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Speaker 1: And we'll never know until we know, so to speak.

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Speaker 1: But I don't trust China. I think it's the mystery

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Speaker 1: meat of global economies, and being a mystery you know,

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Speaker 1: it's incumbent upon an investor to to observe and to

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Speaker 1: expect ramifications down the road. I think it's just amazing,

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Speaker 1: very how Bill Gross uses the phrase mystery meat, which

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Speaker 1: is what they served at the Yellow Lunch. I've I've

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Speaker 1: been talking about and talking about Monty Python spam all

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Speaker 1: morning on Twitter, and and that's the same mystery meat. Bill.

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Speaker 1: Let me ask you an important question. It's something Tom

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Speaker 1: and I have been discussing all week about investors who

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Speaker 1: are looking for yield and where they put their money.

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Speaker 1: And a quote in the Bloomberg column about your great

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Speaker 1: performance this quarter, finishing in the top ten of unconstrained

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Speaker 1: bond funds. You you specifically said quote, if we can't

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Speaker 1: make money on pure bonds, let's make money on these

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Speaker 1: other things. What are these other things? Well, the other

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Speaker 1: things that are incumbent to all financial markets, uh, their

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Speaker 1: credit risk, volatility risk, which I mentioned a few minutes ago, um,

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Speaker 1: liquidity risk, and to a certain extent, currency um. Those

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Speaker 1: who incorporate to me all of the total risk within

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Speaker 1: the market. And so if you don't want to take

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Speaker 1: a risk in the bond market, that is taking duration risk,

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Speaker 1: buying a five or a ten year treasury with price

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Speaker 1: risk UM, then you want to take or you want

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Speaker 1: to sell credit risk, or you want to take or

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Speaker 1: you want to sell volatility, and you want to take

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Speaker 1: or you want to sell liquidity risk. And so those

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Speaker 1: are the ways to generate income. You've got to be

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Speaker 1: on the right side, um, and you've got to have

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Speaker 1: the right forecast. But that's what an unconstrained strategy can

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Speaker 1: do for you. So so let's step back and put

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Speaker 1: that into even larger context. You said something um recently

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Speaker 1: which reminded me of a very similar quote from Howard Marks.

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Speaker 1: And I've had both you and Howard on Masters in

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Speaker 1: Business where you each did a fabulous job but the

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Speaker 1: quote that you said that stayed with me. Put together

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Speaker 1: a succession over sixteen month periods where you're in the

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Speaker 1: top seventy and over five to fifteen years, when everything

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Speaker 1: is said and done without any blow ups, that puts

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Speaker 1: you in the percentile. Explain how merely finishing in the

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Speaker 1: top quartile ultimately puts you in the top one. Well,

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Speaker 1: it's uh, it's not mathematically simple and not necessarily the case,

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Speaker 1: but it's the same thing as Let's take an NBA

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Speaker 1: playoff game. If if the Golden State Warriors win each

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Speaker 1: quarter by four points and that's not a lot, then

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Speaker 1: at the end of the game, it's a near blowout

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Speaker 1: at a sixteen point victory. And and so it's the

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Speaker 1: same way in many aspects of investing. If you finished

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Speaker 1: near the top over a shorter period of time and

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Speaker 1: combind that in terms of quarters, then ultimately at the

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Speaker 1: end of the game, you've got a blowout victory. Bill

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Speaker 1: years ago on this program where you're commitment to Bloomberg surveillance,

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Speaker 1: you made clear there was a place for dividend and

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Speaker 1: dividend growth. What's changed, and some of this is Central

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Speaker 1: Bank induced, is we have dividends ever so popular and

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Speaker 1: high multiple big cap consumer stocks. Can you change now

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Speaker 1: where you say a dividend is not a yield proxy

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Speaker 1: and that there's risk in dividends stocks just because they've

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Speaker 1: been priced to perfection. Well, you can in certain areas,

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Speaker 1: and you know, certainly not in terms of the large

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Speaker 1: cap companies like A three M or a procer or Coke.

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Speaker 1: You know that those dividends have been consistent for years.

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Speaker 1: But we've seen that in the energy patch, have we

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Speaker 1: not that the dividends, uh, you know, whether they're in

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Speaker 1: specialized vehicles or in oil production or in drilling companies,

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Speaker 1: that those dividends are risking. So that that's at the margin.

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Speaker 1: And as as the economy slows down, if it slows

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Speaker 1: down to the point where where growth is threatening profits,

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Speaker 1: then dividends ultimately are threatened to Sorry, dividend is not

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Speaker 1: a perpetual thing. It always goes up, Dylan, the time

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Speaker 1: we've got left you this morning, I've got to address

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Speaker 1: what is front and center for all of global Wall Street,

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Speaker 1: and that is the challenges of European banking and even

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Speaker 1: indeed large cap too big to fail American banking as well.

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Speaker 1: I think of Jenny Strasburg's article on crying of Deutsche

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Speaker 1: Bank in the Wall Street Journal today, What is your

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Speaker 1: to do list for European banking so that they can

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Speaker 1: creatively destruct to greater stability that helps all investors worldwide. Well, they,

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Speaker 1: like American banks in two thousand and nine, need more capital.

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Speaker 1: Now in the US we observed that rather quickly, and

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Speaker 1: we recapitalized banks almost forcibly um and later on we

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Speaker 1: uh basically suggested that they raise equity and they did.

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Speaker 1: You know, American banks are much better capitalized. European banks

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Speaker 1: are slower on the get go, so to speak. And

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Speaker 1: you know, it's been incumbent upon the e c B

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Speaker 1: to not buy bank bonds, but to buy corporate bonds

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Speaker 1: and they'll let the follow through into the bank market

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Speaker 1: supported to support those levels. But ultimately banks need to

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Speaker 1: raise equity. That's that's the simple solution. And rank and

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Speaker 1: it's hundreds and hundreds of pages, you know it should

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Speaker 1: address it in a simple paragraph. B War equity capitals left,

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Speaker 1: what would it need for you to be able to purchase?

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Speaker 1: And I'll pick on Deutsche Bank, Deutsche Bank debt, Deutsche

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Speaker 1: Bank derivatives, Deutsche Bank equity. What do you need to

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Speaker 1: see in a given major bank for you to become

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Speaker 1: enthusiastic and a deep value investor, Well, a rock bottom price,

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Speaker 1: and that begs the same question, I suppose what's the

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Speaker 1: rock bottom price and and some some openness and open

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Speaker 1: air in terms of their their actual balance sheet. You know,

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Speaker 1: Deutsche not to be critical, but you brought it up.

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Speaker 1: You know has for a long time been the subject

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Speaker 1: of question marks in terms of how much capital they

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Speaker 1: really have in the extent of their non performing loans,

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Speaker 1: and so you know, it's a mystery there. And I

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Speaker 1: would simply move to higher quality banks as opposed to

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Speaker 1: expect to find the Deutsche Bank at such a low

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Speaker 1: price that it couldn't go down any further, because we

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Speaker 1: know some banks can write. Bill Gross, You've been very

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Speaker 1: generous at the time, William Gross, folks of Jana's capital

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Speaker 1: joining us in the course with a really terrific quarter

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Speaker 1: and in the year of performance, it is unconstrained. Uh

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Speaker 1: fun The futures deteriorate negative ten down to negative twelve,

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Speaker 1: the yield one point seven seven percent. We continue, Barry

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Speaker 1: Ridolts and Tom Keane another hour job's day of Bloomberg surveillance,