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Speaker 1: We have spoken him far too much recently and somehow
Speaker 1: Mike to June he is gonna be like our best friend.
Speaker 1: He is head of Brexit rate strategy at U b S.
Speaker 1: I'm kidding. John Raith has had a UK rate strategy UBS,
Speaker 1: which means he is as much as anybody I know,
Speaker 1: knee deep and thinking about where Brexit goes. Generate once again,
Speaker 1: good morning. Will will Brexit be the only topic of
Speaker 1: the meeting? I mean, is it the backstory at the
Speaker 1: G twenty meeting? Nobody wants to talk about UM. I'm
Speaker 1: sure it will. It will come up. I think for
Speaker 1: some of the countries there it will be a major preoccupation.
Speaker 1: For others perhaps a little less so. We've heard some
Speaker 1: comments today from UM from from Bullard for example, a
Speaker 1: FED officials saying that he doesn't think Brexit, even if
Speaker 1: it does happen, will have a major impact on the
Speaker 1: outlook for the US, but clearly closer to Europe and
Speaker 1: the Eurozone, and obviously in the UK itself it's it's
Speaker 1: a very major event. Is uh have you been able
Speaker 1: to has anybody been able to quantify the impact, say
Speaker 1: GDP basis a national accounts basis or is it too complicated? Yeah?
Speaker 1: I mean that the issue we have really, of course,
Speaker 1: is there's no precedent for this. I think, um, you know,
Speaker 1: I should stress our view is that ultimately the UK
Speaker 1: will stay in EU, and any dip in activity that
Speaker 1: we see in the next few months running up to
Speaker 1: the vote on the sort of uncertainty and nervousness will
Speaker 1: probably bounce back in the second half of the year.
Speaker 1: But if the UK were to vote to leave, then
Speaker 1: there's a whole range of scenarios as to how the
Speaker 1: situation would unfold, and we've sort of categorized them as
Speaker 1: a softer Brexit, where there's a sort of fairly friendly
Speaker 1: and rapid re establishment of trading agreements and so on,
Speaker 1: um and and all the way to sort of hard Brexit,
Speaker 1: where some tough negotiating and the establishment of trade barriers
Speaker 1: means that the hits of GDP will be larger. How
Speaker 1: did Sterling rebound yesterday? You know, when you talk to
Speaker 1: the experts at u b S about how a bid
Speaker 1: comes in, what's the why that the big came in.
Speaker 1: Was it just the street set enough and they looked
Speaker 1: for a quick scalp or is there an underlying story
Speaker 1: to that? What we saw is today up to well,
Speaker 1: I mean, I suppose you have to see it in
Speaker 1: the broader context that we were up at sort of
Speaker 1: one fifty four not very long ago, that the decline
Speaker 1: is dramatic and there will be temporary corrections. And that said,
Speaker 1: you know at the moment that which is somewhat ironic
Speaker 1: in this debate, the economic data in the UK continues
Speaker 1: to print pretty favorably. So there are some sort of
Speaker 1: fundamental reasons for temporary periods of Sterling strength, but in
Speaker 1: our view, sure to be overwhelmed by this background risk
Speaker 1: all the way through to June generates review for American
Speaker 1: audience the flows of capital and current account within United Kingdom.
Speaker 1: I think we've got a real idea of the flip
Speaker 1: in current account balances in Japan. Tell me about the
Speaker 1: current account surplus deficit flows in the United Kingdom. Yeah,
Speaker 1: I mean that that's that you've hit on something important
Speaker 1: in this debate. There's a large, persistent current account deficit
Speaker 1: in the UK, exacerbated over recent years by the fact
Speaker 1: that the UK economy has been growing so much faster
Speaker 1: than most of those in the Eurozone. Um and often
Speaker 1: when you see a sliding the currency on the scale
Speaker 1: we've seen recently in Sterling, attention turns to the current
Speaker 1: account situation, and when there is a large deficit, it
Speaker 1: exacerbates the risks of a sort of more out of
Speaker 1: control decline in the currency because of the fact that
Speaker 1: external investors are having to fund the current account. The
Speaker 1: odd solution Michael was to send Aubrey and matter and
Speaker 1: Aubrey looks like ROSSI crawl. Send him down to take
Speaker 1: over Barbados again. There used to be uh, the pound
Speaker 1: is so widely used in such a deep currency is
Speaker 1: are we Is there a chance we see a really big,
Speaker 1: disorderly decline. There is a chance, I think you know,
Speaker 1: we would compare this really to the to the financial
Speaker 1: crisis when in the year running up to it. As
Speaker 1: the financial system deteriorated, we saw Sterling weakened steadily, as
Speaker 1: I would argue it has been recently, and then when
Speaker 1: things went really wrong in in late two thousand and eight,
Speaker 1: it was sterling that suffered the most because of the
Speaker 1: UK's exposure to the financial sector being that much larger
Speaker 1: than anyone else's. I think when the same situation again,
Speaker 1: this sort of gradual weakening of sterling slightly to continue,
Speaker 1: and if on the twenty June the UK has taken
Speaker 1: the decision to leave the EU, then you could see
Speaker 1: a much more significant fall in the following months, although
Speaker 1: as I said before, that's not our central view. We
Speaker 1: still think the UK will be a member of the
Speaker 1: EU beyond the referendum. Well, at this point the currency
Speaker 1: reflecting uncertainty. Is it x Brexit vote? Is it fairly
Speaker 1: vald or are we seeing where you know, moves that
Speaker 1: should be made given the current account? Um, well, I
Speaker 1: think you know that was all factored in before as
Speaker 1: far as currency markets were concerned. I think the only
Speaker 1: new information in the last few months that's coincided with
Speaker 1: this fall in sterling is is the referendum suddenly coming
Speaker 1: into focus. The date being fixed. Um, it's becoming imminent
Speaker 1: in in terms of markets, attention span, UM and having
Speaker 1: and having a big impact. Another said before, you know
Speaker 1: that the data in the UK just doesn't merit this.
Speaker 1: I mean, if you look, just as one example, at
Speaker 1: the UM that the p m I industries, they're stronger
Speaker 1: in the UK than than any of the other major
Speaker 1: global economies. Unemployment slow, retailselves are strong. You know, there's
Speaker 1: no reason for Sterling to be undermined, like well said,
Speaker 1: but does that imply an expectation of a slowing United
Speaker 1: Kingdom real GDP? Yeah? Possibly, But when you look at
Speaker 1: the extent of that implied slowing compared to where we
Speaker 1: are in other economies already, and in the context of
Speaker 1: the scale of the fallen Sterling, I think it goes
Speaker 1: way beyond what what most forecasts are. I mean, you know,
Speaker 1: ours is that the recovery continues at a similar pace
Speaker 1: to the past few years. And I mean I think
Speaker 1: that's pretty much the consensus unless we do get a
Speaker 1: vote to lea the EU, at which point I'm sure
Speaker 1: there would be a lot of downward revisions to GDP
Speaker 1: and and every chance that the recovery stalls at least
Speaker 1: for the balance of this year. Okay, but if we
Speaker 1: get you know, clearly the elite outcome, which is no Brexit,
Speaker 1: and you know everything's do you have a level that
Speaker 1: sterling rebounds to. Well, I mean over the over the
Speaker 1: sort of coming months after that. It will take a while,
Speaker 1: and it will depend on any sort of significant dent
Speaker 1: to activity in the interim. But you know, we still
Speaker 1: see a possibility of of sterling ending this year um
Speaker 1: significantly stronger than its current level. But as I say,
Speaker 1: it will depend on activity indicators beyond the referendum, which
Speaker 1: will tell us how much damage has been done and
Speaker 1: how persistent or temporary it may turn out to be. Well,
Speaker 1: let me ask about that. The the O E C
Speaker 1: D among others have been talking apparently a new NOE
Speaker 1: doubt from your competitors. It's DID group. I've been talking
Speaker 1: about much much slower growth around the world. How does
Speaker 1: that affect the UK um again exprexit. Yeah, I mean
Speaker 1: it clearly, if it is a global slowing, it will
Speaker 1: it will affect all to a degree. I mean, I
Speaker 1: think you know, as recent years have shown us, the
Speaker 1: UK has proved quite resilient um to the slower growth
Speaker 1: and the woes of the Aurozone in particular. And I
Speaker 1: think a large part of the reason for that is
Speaker 1: it has been long a service based economy, which is
Speaker 1: more able to perform domestically and more insulated from global
Speaker 1: slowdowns in terms of dropping demand for manufactured goods and
Speaker 1: so on then certain other economies are. So, you know,
Speaker 1: the recovery is somewhat mature, and I'm sure that if
Speaker 1: growth starts it's slow, it might see you know, slowing
Speaker 1: or even an end to the decline in the unemployment rate.
Speaker 1: But um, if there is a sort of genuine slowing
Speaker 1: of growing demand, I don't think the UK is at
Speaker 1: most risk from that by any means. Race with Us
Speaker 1: will continue this discussion. He was with UBS Michael McKie
Speaker 1: the Bank of England Museum with an important tweet today.
Speaker 1: In seventeen twenty three, Sir Christopher Wren died. I've been
Speaker 1: doing a cycle of his churches in when I'm in London.
Speaker 1: It's really something. Most of them were destroyed in World
Speaker 1: War Two and with a lot of courage they were rebuilt.
Speaker 1: It was very, very uh cool. Mr Murdock's father was
Speaker 1: instrumental in helping rebuild Brides and Fleet Street, and it's
Speaker 1: really I really urge people to go see Christopher Wren's magic.
Speaker 1: Outside of our new headquarters in London is his jewel
Speaker 1: right next to Mansion House. Sir Christopher Wren on this
Speaker 1: day died in seventeen twenty three. Futures exactly flat. Let's
Speaker 1: bring in John Taker now with the latest news from
Speaker 1: around the world. John Houston is gonna be the site
Speaker 1: of the night's Republican presidential debate, with Donald Trump rivals
Speaker 1: getting one more chance to try and derail the GOP
Speaker 1: front runner. Uh Santa emergency in Virginia. That's where four
Speaker 1: people were killed after tornadoes damage homes left thousands without
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Speaker 1: out of America's shale formations is now available to the world.
Speaker 1: The liquefied natural gas tanker Asia Vision. It left the
Speaker 1: Shaneer Energy Sabing Pass Export Terminal in Louisiana yesterday with
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Speaker 1: with a growing array of options on its cars, robots
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Speaker 1: human workers on the assembly line reclaiming space there to
Speaker 1: put in those options. Interesting, did the natural gas thing? Yeah,
Speaker 1: look Rod, Mike, look at net gas one point seven
Speaker 1: three five gazillion British thermal units. We'll have to talk
Speaker 1: near with David Wilson, will do that in the next
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Speaker 1: US Dock index futures are little change this morning. Let's
Speaker 1: go to the First Word Breaking news desk for today's
Speaker 1: morning call, and here's Bill Maloney. Good morning Bill, Good
Speaker 1: morning Karen. That's right. US futures are now trading little
Speaker 1: changed as crewe fixtures fade from the highs down. Futures
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Speaker 1: futures are lower by two Shanghai plunge six point four
Speaker 1: percent overnight as money market rates surged, while upm markets
Speaker 1: are trading higher by two percent gains in France, UK,
Speaker 1: Italy and Spain. On the US economic front. At eight
Speaker 1: fifteen FEDS, Lockhart speaks in Atlanta at a thirty initial
Speaker 1: Jobs claims and Durable goods orders at ten thirty natural
Speaker 1: gas storage change, and at eleven o'clock Kansas City fed
Speaker 1: after Divelos Nights Salesforce boosted your views, trans Ocean beat
Speaker 1: and Restoration Hardware Q four prelimery at just EPs missed estimates,
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Speaker 1: on the United Kingdom economy. All of the uproar over
Speaker 1: Brexit is John Wraith of UBS. John, if you were
Speaker 1: to have a one on one with the Chancellor of
Speaker 1: the Exchequer or the Prime Minister or other elites of
Speaker 1: England trying to keep the nation within Europe, what do
Speaker 1: you think you would hear? What's the number one sales
Speaker 1: pitch from elites to do no harm? Um? Well, I
Speaker 1: mean you know that the the argument has raged in
Speaker 1: one sense or another for many years in the UK
Speaker 1: about the relationships with the You I mean, I think
Speaker 1: you know that the British people generally want convincing that
Speaker 1: staying in is going to be better economically. Um. In
Speaker 1: the medium and long term, and that's something which is
Speaker 1: an argument that not hasn't always been been clear. And obviously,
Speaker 1: as we've been talking about already today, over recent years
Speaker 1: at least, the UK has been growing much more dynamically
Speaker 1: and rapidly than the rest of the EU and certainly
Speaker 1: the Eurozone, so that that argument is a difficult one
Speaker 1: to make, which I think explains why opinion balls have
Speaker 1: been have been pointing to such a close outcome. One
Speaker 1: of those things like trying to convince people trade is
Speaker 1: a good idea because it's easy to find a picture
Speaker 1: of a guy who's out of work and much harder
Speaker 1: to the dispersion of benefits. Yeah, and you know, again,
Speaker 1: as as with everything to do with this reference, and
Speaker 1: there's two sides to every argument. And there are a
Speaker 1: lot of voters in the UK who feel threatened by
Speaker 1: um the open access to the UK labor markets for
Speaker 1: other EU citizens. But but equally there are some who
Speaker 1: see the of efficient labor that they bring with them
Speaker 1: and the wider economic benefits that arguably are delivered. So
Speaker 1: you know, these things we'll keep raging. And that's one
Speaker 1: reason why we and most people think that the debate
Speaker 1: is going to remain up in the air until the
Speaker 1: day of the vote itself, which will will probably continue
Speaker 1: to undermine sterling among other things over the coming months.
Speaker 1: We always talk about our currency being weak or strong,
Speaker 1: as if strong was good and weak was bad. What's
Speaker 1: going to be the impact on GDP in the UK
Speaker 1: from a weaker sterling? How long is the j curve effect? Yeah, well,
Speaker 1: I mean that's that's one of the ironies in this
Speaker 1: is that as long as the fall in the pound
Speaker 1: is reasonably stable and orderly, it's actually got a lot
Speaker 1: of benefits to bring to the UK. We're in a
Speaker 1: situation where global demand, as we discussed before, is potentially slowing,
Speaker 1: and therefore, you know, for for for trading markets, having
Speaker 1: a more competitive currency might help tap into that lesser
Speaker 1: overall demand. The UK also, in common with a lot
Speaker 1: of other countries, has inflation well below the central banks
Speaker 1: target and and a and a weaker currency should raise
Speaker 1: imported inflation, so that there are certainly some benefits to
Speaker 1: the lower level of sterling, But it does smack of
Speaker 1: a loss of investor confidence and some overseas investors taking
Speaker 1: or slowing their investments into the UK because they're worried
Speaker 1: about the outcome. So you as long as it doesn't
Speaker 1: become a protracted and rapid for starting to call into
Speaker 1: account into question the current account situation, then you know
Speaker 1: there's certainly it's certainly not all bad to see Sterling weaker.
Speaker 1: For sure, this um going to change the calculation for
Speaker 1: the Bank of England at all. Well, they're very careful
Speaker 1: at the moment not to sound to opinionated one way
Speaker 1: or the other. They obviously can't comment on such political
Speaker 1: event as a referendum, other than to say they're aware
Speaker 1: of it, and they did say that they think it's
Speaker 1: one of the reasons behind the weakness of sterling. But
Speaker 1: they will wait for the outcome and they will react accordingly.
Speaker 1: And if, as in our view, the UK stays in
Speaker 1: the EU recovery continues, lost momentum returns, then we think
Speaker 1: they'll very quickly tell the market that it's got too
Speaker 1: dovish and too concerned about the outlook. Fifteen seconds, what's
Speaker 1: your calling Europe when you're just a dovetail that was sterling? Um, Well,
Speaker 1: we're more upbe on the outlook for the for the
Speaker 1: Eurozone than than the consensus. We think growth fair is
Speaker 1: going to be a bit quicker um as far as
Speaker 1: the sort of euro sterling exchange rates concerned, we see it,
Speaker 1: you know, potentially ending this year not far from current levels,
Speaker 1: but being fairly volatile in the interim. January is exceptionally valuable.
Speaker 1: Thank you so much. What a primer and all that
Speaker 1: is going on, you know, the Kingdom. And only to
Speaker 1: give a shout out to Francine Laqui, who was way
Speaker 1: out front of this, Michael. She told me in Dava's
Speaker 1: before Davas to this is gonna be a huge deal.
Speaker 1: You Americans don't get it. She was totally right, come on,
Speaker 1: big deal. Not sure Americans didn't get people, excuse me,
Speaker 1: I didn't. But then I didn't get red socks. I mean,
Speaker 1: it's almost a time of year where I have to
Speaker 1: try to gauge am I done with the red Sox
Speaker 1: in late April or early day. I'd give them till May.
Speaker 1: They maybe have fixed gotten the team better. That's the
Speaker 1: pound euro cross euro sterling. We'll quote that some more.
Speaker 1: I'm so I've been remiss not to quote that. What
Speaker 1: I can quote flat euros yields are infractutionally one seventy three.
Speaker 1: I'm gonna call it a quiet tape. Oil Churrance, you're
Speaker 1: thirty two on American oil Brent curteen right now downy
Speaker 1: seven uh since Michael mentions euro sterling uh point seven
Speaker 1: eight nine four pence. It's like Michael Pence and Nobel
Speaker 1: Laureate they had one twelve fifty three. Stay with us.
Speaker 1: We're pun friendly. On Thursday. Bloomberg Surveillance coming up there
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Speaker 1: This is Bloomberg Surveillance. Welcome back Michael McKee along with
Speaker 1: Tom Keane. Economic Indicators and we've got a lot this morning.
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Speaker 1: Here's Vinnie Dell Judas at the First Word Desk, Michael,
Speaker 1: perhaps a bit of a respite for Manufacturing Commerce Department
Speaker 1: telling us durable goods orders up four point nine percent
Speaker 1: in January, the most and almost a year topping forecast.
Speaker 1: Departments decline not as sharp as previously reported, excluding transportation
Speaker 1: up one point eight percent, a measure of business investment
Speaker 1: up three point nine percent. We also have figures on
Speaker 1: initial jobless claims up by ten thousand to two hundred
Speaker 1: seventy two thousand last week, roughly in line with forecasts. Again,
Speaker 1: durable goods orders up by the most and almost a year,
Speaker 1: jobless claims creeping a bit higher. At the Blue our
Speaker 1: First Word Desk on Videl Judas, Let's go back to
Speaker 1: New York. This is really interesting to be looking at
Speaker 1: the durable goods breakdown and there were no categories that
Speaker 1: decline during the month. Let me explain what I do
Speaker 1: on this. I'm not going to put the chart out
Speaker 1: because people will drive off the road. It's too complex.
Speaker 1: I take, Michael, and this is off of the good
Speaker 1: work of Janatzi, Goldman, Sachs, inventories, durable goods, whatever. I
Speaker 1: take a three month, a six month, a twelve month
Speaker 1: moving average, so I smooth it all out, and then
Speaker 1: I look at the slope the derivative of those three
Speaker 1: moving averages. All you need to know is all three
Speaker 1: moving averages are moving in an up direction. That's the
Speaker 1: massive headline. I'm eyeballing here, Michael. When the last time
Speaker 1: that occurred? I'm back to May of two thousand fourteen
Speaker 1: and then somewhere in the vicinity of November of two
Speaker 1: thousand thirteen. It is rare and distinctive. Neverman Varavish is
Speaker 1: chief economist at the consulting firm I h S. And
Speaker 1: he is joining us now to talk about rare and
Speaker 1: distinctive movements in the US economy. Um, what are we
Speaker 1: to make of this? Is this uh a turning point
Speaker 1: in the economy? Are we out of the slow patch?
Speaker 1: I'm not saying we're gonna go gangbusters? But um, are
Speaker 1: we looking in the rear view mirror at the fourth quarter? No,
Speaker 1: I think Tom's right, and looking at these longer term trends, uh,
Speaker 1: and and I think one way to look at what's
Speaker 1: having manufacturing and especially durable goods and you know, capital
Speaker 1: spending in a more general sense, is that I've been
Speaker 1: hit by three things. Um. The first is an inventory
Speaker 1: cycle that's gonna end this year, and it's already ended,
Speaker 1: you could argue, and I think that's what some of
Speaker 1: these numbers today suggest. The second is that huge plunge
Speaker 1: in energy sector capital spending. Also uh, less of a
Speaker 1: drag now on on growth because oil prices are leveled
Speaker 1: off and that recount is beginning to sort of bottom out,
Speaker 1: uh in terms of drilling and in terms of investment
Speaker 1: in in the energy sector. Uh. The third drag is
Speaker 1: the dollar that's going to stay with us for a while.
Speaker 1: But but to Tom's point and to your point, Mike,
Speaker 1: is that the two two of the negatives are pretty
Speaker 1: much behind us, and so I'm not surprised to see
Speaker 1: these trends beginning to look much more positive now than
Speaker 1: they were before. So to fancy a question growth this year,
Speaker 1: we think maybe two and a half percent, moving up
Speaker 1: to maybe you know, closer to three percent by next year. Well,
Speaker 1: that's not terrible. It is not it's running faster than
Speaker 1: what is your view of potential? Well, it's it's you know,
Speaker 1: we can go back and forth on this a little bit.
Speaker 1: Potential is probably just around two and a half, maybe
Speaker 1: a little bit less than that. UM, So we're close
Speaker 1: to potential right now. We'll probably go above that for
Speaker 1: a year, maybe even two, So which means the unemployment
Speaker 1: is probably gonna drift down towards four and a half
Speaker 1: over the next year or two, slowly, but but nevertheless
Speaker 1: down towards four and a half. Is there a connection
Speaker 1: between the durable goods numbers and hiring in manufacturing? Um,
Speaker 1: clearly there is. I mean, obviously, demands tends to lead employment. Employment,
Speaker 1: as we all know, is a lagging indicator. So as
Speaker 1: this turns around, we'll start to see better numbers out
Speaker 1: of manufacturing. As you know, almost all of the growth
Speaker 1: and employment has been in the service sectors. UM. Manufacturing
Speaker 1: has been a bit of a problem until recently. Actually
Speaker 1: the last number was was reasonably upbeats. But I think
Speaker 1: we'll start to see some better numbers in manufacturing. And
Speaker 1: there when somebody asked me, the young kid here at
Speaker 1: Bloomberg said, why is this guy on? And I was
Speaker 1: bragging about the back of your research reports where you
Speaker 1: classically and uniquely set up three scenarios. You were the
Speaker 1: our buyer of gloom and optimism. Which way does i
Speaker 1: HS tilt right now within your three scenarios? Which way
Speaker 1: is the Vish vector tilt? UM? Well, I mean clearly
Speaker 1: that the highest probabilities are base case UM, so that
Speaker 1: sets around UM. We're giving about a chance to recession,
Speaker 1: but only fifteen to an upside. That's a slight tilt
Speaker 1: towards the negative. I think, mostly because the risks outside
Speaker 1: the US not so much risk within the US UM.
Speaker 1: But that may change over the year. We may we
Speaker 1: may come out with a more balanced view in terms
Speaker 1: of the risk as the year proceeds. Now, it's gonna
Speaker 1: ask how often you adjust that given the frequency data. Well,
Speaker 1: there are times we adjusted every month, sometimes even weekly,
Speaker 1: depending obviously you know two thousand, two thousand and eight.
Speaker 1: But but often it's it's more like once a quarter.
Speaker 1: We we really look at it carefully and say, okay,
Speaker 1: what do we really think here? So mostly once a quarter,
Speaker 1: but but sometimes it's much more frequently than that. No,
Speaker 1: I don't in many ways to go here. Uh, Nerman
Speaker 1: bearish with us. We're going to continue this discussion with him.
Speaker 1: Uh And like as you mentioned there, you featured that
Speaker 1: idea of tours three percent. Given the gloom, the gloom flow,
Speaker 1: the global gloom flow, we forget remodeling. Is it morning
Speaker 1: in America? No, it's not. Let's all get over it.
Speaker 1: But some would say, what would Michael Faroli say? Is
Speaker 1: this above potential? I mean that's something we can talk
Speaker 1: with Nerman Barrish about here. Pretty good economic growth. Mr
Speaker 1: Bullard commenting this morning on the freight train to higher
Speaker 1: interest ry at the freight train to hire interest, I
Speaker 1: feel like a Glenn Miller song coming on chat St.
Speaker 1: Louis six five thousand, something like that. They yield in
Speaker 1: two basis points one point seven features up A glorious,
Speaker 1: a glorious one point. This hour of Chavals brought you
Speaker 1: by Mazda White Plains. Visit Masda and White Plains dot com.
Speaker 1: Here's John Tucker with news headlines and Michael and Tod
Speaker 1: were Republican presidential CAMPAD has told their final debate ahead
Speaker 1: of the March first slate of primers and caucuses and
Speaker 1: more than a dozen states and territories. The debating hosted
Speaker 1: by the University of Houston. Senate Republicans have pledged a
Speaker 1: block President Obama's nominee for the next Supreme Court justice.
Speaker 1: But now a twist, the President said to be considering
Speaker 1: Devada Governor Bryant Sandiville, a Republican, a state of emergency
Speaker 1: in Virginia, wherefore people were killed after tornadoes damaged homes,
Speaker 1: also left thousands of people without power across that state.
Speaker 1: And uh, I guess this is a public service. February
Speaker 1: twenty nine to anybody who visits a Pizza Hut restaurant
Speaker 1: shows a photo ID to prove they were born on
Speaker 1: Leap Day, we'll receive a free one topic personal pan pizza.
Speaker 1: As good a reason as any to get a fake idea.
Speaker 1: I suppose, okay day February all right, well that's Monday,
Speaker 1: we'll be here. Do we have Leap Day this year?
Speaker 1: We do? We do have Leap plan. Whatever I was
Speaker 1: looking at still come back and talk about that in
Speaker 1: just a month. First we gotta get dash because it's
Speaker 1: time for the Katina Auto Group Bloomberg NBC Sports Up Day.
Speaker 1: We get an extra day in John on Monday too,
Speaker 1: because it's yeah, leap day, Yeah be here. Carmelo Anthony
Speaker 1: might get expressed his frustration with the Knick struggles, but
Speaker 1: he was the one struggling last night in Indiana's had
Speaker 1: five for twenty, only fourteen points and air ball on
Speaker 1: a three pointer at the end that would have tied
Speaker 1: the game. Carmelo outplayed by Pacers star Paul Georgia at
Speaker 1: twenty five second half points. Indiana won one oh eight
Speaker 1: to one oh five with Melo office game, kristophs Porzingi
Speaker 1: scored twenty two, Jose Calderano surprising twenty points, made all
Speaker 1: four of his three pointers. Kyle O'Quinn off the bench
Speaker 1: for nineteen in sixteen minutes, but now thirteen losses the
Speaker 1: last fifteen games. New coach Kurt Rambis is one and four,
Speaker 1: you know, and they do a good job. The Pacers
Speaker 1: do a clog in the lane, they get people in
Speaker 1: the paints. It south slot of penetration, and we turned
Speaker 1: the ball over and unfortunately some of them you know,
Speaker 1: heard us significantly and they got on runs. But if
Speaker 1: we if we could have taken care of the ball,
Speaker 1: just write everything else that happened in the ball game,
Speaker 1: we would have given ourselves a much better chance to win.
Speaker 1: Nick so Stoor Lando tomorrow. Nets are in Phoenix tonight
Speaker 1: another one for Golden State won eighteen one twelve and
Speaker 1: my ammy Steph Curry forty two points. The Warriors are
Speaker 1: fifty one and five local hockey teams were all off
Speaker 1: or all on the road tonight. College basketball, the Big
Speaker 1: Game is in the Big East, battle of teams ranked
Speaker 1: in the top five. Xavier beat number one Villanova eight three.
Speaker 1: Jets coach Todd Bowles was revealed he had surgery to
Speaker 1: remove a be nine mass that bowl says was the
Speaker 1: size of a golf ball from his throat. Bowls actually
Speaker 1: had it during the season. Was told he could postpone
Speaker 1: the surgery, said he's now fine. With the Bloomberg NBC
Speaker 1: Sports update, I'm John stash Aller, John, thank you so much.
Speaker 1: Michael McKee frentic across our studio looking at the statistics here,
Speaker 1: um Neil Payne over at dot com points out it
Speaker 1: has been twenty three years since the Canadian team won
Speaker 1: the Stanley Cup. Do you think that will change this year?
Speaker 1: Do you know how many teams if the season ended today,
Speaker 1: how many Canadian teams would be in the playoffs Vancouver,
Speaker 1: they even close zero. This is we're on track for
Speaker 1: something that's only happened once before nine seventy where there
Speaker 1: were no Canadian teams are global audience. This is a
Speaker 1: source of national Don Cherry's apoplectic about this. I mean Toronto.
Speaker 1: Some people are calling him an h L team and
Speaker 1: Montreal has got to be the implosion of modern history.
Speaker 1: They start off so well. More hockey talk on Bloomberg Surveillance.
Speaker 1: The Sports Apart was brought to you by Ricottina Autogroup.
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Speaker 1: dot com. Global business news twenty four hours a day
Speaker 1: at Bloomberg dot com, the Radio plus mobile app and
Speaker 1: on your radio. This is a Bloomberg Business Flash and
Speaker 1: I'm terin Moscown. There's updates. Brought to you by Sector
Speaker 1: Spider e t F. So I buy a single stock
Speaker 1: when you can invest in the entire sector is its
Speaker 1: Sector spdr s dot com are called six sector et
Speaker 1: F orders free US capital goods rebounding in January by
Speaker 1: the Moon's June fourteen, bookings for non military equipment excluding
Speaker 1: commercial aircraft jump three point nine per cent. That was
Speaker 1: more than forecast, and it follows a three point seven
Speaker 1: percent decrease in December that was smaller than previously reported.
Speaker 1: The number of Americans filing applications for unemployment benefits rose
Speaker 1: last week from a three month low and part reflecting
Speaker 1: the typical swings during holiday periods. US Dock Index future
Speaker 1: is meanwhile little change after equities staged a late day
Speaker 1: rebound yesterday as investors assess a sell off in China
Speaker 1: overnight in a rally and European markets. You check the
Speaker 1: markets every fifteen minutes throughout the trading day. On Bloomberg SNP,
Speaker 1: EMNI futures up half a point, Dowie Mini futures up
Speaker 1: four and Nasdachi mini features down one. DAX in Germany's
Speaker 1: up one point seven percent ten, Your treasury up five
Speaker 1: thirty seconds, the yield one point seven two percent. NIMEX
Speaker 1: screwed oil down one point four percent, or forty five
Speaker 1: cents to thirty one sixty nine a barrel COMEXS gold
Speaker 1: is down to tens percent or two dollars seventy cents
Speaker 1: to twelve thirty six, the euro a dollar ten twenty
Speaker 1: the end one twelve point five too. And that's a
Speaker 1: Bloomberg Business Flash, Tom and Mike Churn, thanks so much.
Speaker 1: It is on Wall Street. The following is from Bloomberg
Speaker 1: View Opinions in comment Jerry from Bloomberg Columnists. I'm Jonathan Bernstein,
Speaker 1: a columnist for Bloomberg View. Maybe things are moving perfectly
Speaker 1: for Donald Trump. He has three victories now, and he's
Speaker 1: leading in polls in many states and leading big in
Speaker 1: national polls. A contrasting view, Marco Rubio is still set
Speaker 1: up nicely. That's the case if Trump is unlikely to
Speaker 1: increase his support. If he can't, then outside of his
Speaker 1: strongest states and Nevada, where he won big on Tuesday
Speaker 1: was one, Trump is only barely competitive in a three
Speaker 1: candidate race and couldn't win a two man showdown. Trump
Speaker 1: may not have a ceiling, but he may already have
Speaker 1: won all the voters who were likely to back him.
Speaker 1: Adding new support may prove increasingly difficult. Of course, in
Speaker 1: a three candidate race, Trump may only need a small
Speaker 1: percentage of new voters to prevail, but in the limited
Speaker 1: polling we have in the Super Tuesday races, he's in
Speaker 1: the low thirties or worse in most states. He's going
Speaker 1: to have to pick up some new voters to win
Speaker 1: those states, and he hasn't shown he can do it
Speaker 1: so far. I'm Jonathan Bernstein. For more of you, please
Speaker 1: go to Bloomberg View dot com or view go on
Speaker 1: the Bloomberg terminal. This has been Bloomberg View and Bloombergview
Speaker 1: Commentary cam here hourly weekdays. I'm Bloomberg Radio, Michael. Just
Speaker 1: a turn to the screen, red green, red green, red
Speaker 1: green red. Yeah. Oddly, UM features turn a little bit south,
Speaker 1: but we shoe oil prices turn a little bit south
Speaker 1: to which maybe the reason behind. Anyways, good day to
Speaker 1: talk economics, Good day to talk economics. A good person
Speaker 1: to talk economics with is Nearaman Baravis, who was the
Speaker 1: chief economist at I h. S. Tom brings up a
Speaker 1: very good point and you mentioned this when we started
Speaker 1: talking about durable goods UM the idea that we may
Speaker 1: be seeing a flattening out of the decline of the
Speaker 1: decline in spending on UM durables for energy production. UH
Speaker 1: has this surprised you that energy has been such a
Speaker 1: drag on the economy when everybody said, following all prices,
Speaker 1: we're going to be a big benefit. Well we've got
Speaker 1: Here is a timing issue, Mike, Um in the sense
Speaker 1: that you know, the pain came early and it was
Speaker 1: very intense. Basically, capital spending in the energy sector is
Speaker 1: at half what it was two years ago. It's a
Speaker 1: big plunge. It's only two percent of the economy, but nonetheless,
Speaker 1: when you get that kind of plunge, even in two
Speaker 1: percent of economy, it drags down overall growth. Um. So
Speaker 1: it came early, came fast, it was painful. The benefits
Speaker 1: are are much more spread out. The way I like
Speaker 1: to describe it as Okay, So, because of lower gasoline prices,
Speaker 1: the typical US household gets a tax cut in quotes
Speaker 1: of a thousand dollars a year. But you don't get
Speaker 1: it all at once. You get in dribs and drabs.
Speaker 1: You get it every time you go to the gas station.
Speaker 1: Five dollars here, ten dollars there. What do you do
Speaker 1: with it? You buy snacks, you buy cigarettes, if you smoke,
Speaker 1: And that's the way it's showing up. It is showing
Speaker 1: up and it's helping consumer spending, which is growing do
Speaker 1: we think at a rate of around which is quite respectable.
Speaker 1: So you know, everybody sort of saying, well, you know,
Speaker 1: it's it's more negative than positive. Yeah, it's early on, yes,
Speaker 1: but as things move on and as a negatives start
Speaker 1: to abate, we'll start to see a lot of the
Speaker 1: positive show up. What should a policymaker do if this
Speaker 1: were to be a trail? What you just sit back
Speaker 1: and enjoy the benefits? Now? Well, yeah, I think so,
Speaker 1: I mean I think what what? What? What could we
Speaker 1: do at this point? Is you know, it's it's pretty
Speaker 1: I mean, if you're gonna do anything, you would have
Speaker 1: done it a year and a half ago. Now it's
Speaker 1: it's almost too late. But but it's it's there's no
Speaker 1: need to do anything. Okay, there's no need to do anything.
Speaker 1: But you know that's the attitude. I got a Davos nearman.
Speaker 1: I mean, you wandered around the August halls of Davos.
Speaker 1: I'm sorry. It's one massive interest rate illusion of low
Speaker 1: nominal and low real rates within the micro study that
Speaker 1: you've done it. I h s is that artifice shoull
Speaker 1: interest rate illusion affecting behavior and investment decisions in this nation. Uh. Yeah, Tom,
Speaker 1: undoubtedly it is. I mean I'm not going to debate
Speaker 1: that one. I mean, we we all agree that, uh,
Speaker 1: they sustain low interest rates creates um, you know, lower
Speaker 1: risk if you will, and increase uh you know, people
Speaker 1: making risky bets, especially in terms of financial assets. So
Speaker 1: there's there's a fair amount of that going on. And
Speaker 1: you could argue that some of the rise in the
Speaker 1: stock markets until last summer had to do with that.
Speaker 1: So yeah, fair enough. But on the other hand, I'm
Speaker 1: not sure what choice central bankers have. They're the only
Speaker 1: game in town. So it's like they really can't do
Speaker 1: anything but keep pumping money into the economy and the
Speaker 1: hopes of things turn around. Good news is it's worked
Speaker 1: for the US, partly because it's been coupled with serious
Speaker 1: banking fixes. The US banking systems in much better shape.
Speaker 1: It hasn't worked in Europe because their banks are still
Speaker 1: in trouble. They haven't done what the US banks it.
Speaker 1: So I think it's it's it's important to kind of
Speaker 1: distinguish the US experience, to say, from the European or
Speaker 1: even the Japanese experience, we are not I guess you
Speaker 1: would say in a liquidity trap. Then not in the U.
Speaker 1: S We're not. We might be in Europe, we might
Speaker 1: be in Japan, but I don't see it in the US.
Speaker 1: So does the FED need to keep its foot on
Speaker 1: the pedal at all at this point? Or is it?
Speaker 1: Would it be better for the various reasons people say
Speaker 1: for them to back off again? I think that the
Speaker 1: FETE is probably in a good position to begin to
Speaker 1: raise rates, but very very very gradually. I mean, let's say,
Speaker 1: let's say they raise rates two more times this year,
Speaker 1: and for example, they will have gone from ultra loose
Speaker 1: monetary policy to extremely lose monetary policy. By the way,
Speaker 1: here I'm quoting stand Fisher, vice chair at the Federal
Speaker 1: Reserve UM. But but the point is that monetary policy,
Speaker 1: even after these very modest increases will still be pretty
Speaker 1: accommodative in the US. So I think it's appropriate. US
Speaker 1: is doing fairly well. You know, we we have the
Speaker 1: ability we could afford to start raising rates. Europe Japan can't.
Speaker 1: What's the impact of the FED on the economy right now, Well,
Speaker 1: I would say it's very small. I mean, a quarter
Speaker 1: of the basis point. I mean started a quarter yeah,
Speaker 1: quota points a quarter of a percent uh an increase
Speaker 1: in interest rates which they put in place in December,
Speaker 1: basically zero impact. Um. You know, let's say they do
Speaker 1: two more hikes. Okay, maybe just the flight tightening, but
Speaker 1: even there, that's It's the FED is not going to
Speaker 1: get in the way of this recovery, certainly not this year.
Speaker 1: I mean I I look near men at the complexities
Speaker 1: that you cover each day, whittle down for our audience,
Speaker 1: not the pros and cons gloom optimism, but if we
Speaker 1: all understand the artificialities, the great distortions that we're living in,
Speaker 1: what is a simple message within all that complexity. The
Speaker 1: simple message is that we have been through a very
Speaker 1: bad situation, a you know, serving a financial crisis what's
Speaker 1: referred to sometimes as a balance sheet recession, which is
Speaker 1: an asset bubble that bursts. And in the in the
Speaker 1: wake of that, um, we are struggling to come up
Speaker 1: with the appropriate policies. I think, an appropriate policy mix.
Speaker 1: I think the US again has had slightly better success
Speaker 1: than most, with growing faster than most. I would say,
Speaker 1: you know, follow the example of the US, I mean,
Speaker 1: other countries don't like to hear it as much. But
Speaker 1: but to me, it's not just monetary policy, but monetary
Speaker 1: policy coupled with fixing the banks, and I think we
Speaker 1: went a long way forward. There's still issues in the
Speaker 1: banking system, but we went a long way forward and
Speaker 1: fixing our banks. Are we going to see the economy,
Speaker 1: as it continues to motor along this year, get better
Speaker 1: in such a way that the angry voters will notice it? Well,
Speaker 1: often there's a political lag. There's a lag between political
Speaker 1: perceptions or to our perceptions, and the economy. If you
Speaker 1: remember that happened in two to George H. W. Bush,
Speaker 1: the economy started to recover, but voters are very angry
Speaker 1: about the economy. I think the same thing is gonna
Speaker 1: happen this time. Voters are very angry, and that anger
Speaker 1: is not gonna go away, I would say for another
Speaker 1: year or two. Nerman, thank you so much. Nerman, Barrifish
Speaker 1: with us as we look it just it's a I
Speaker 1: urge you. We again we protect the copyright of our guests,
Speaker 1: but I urge you to get your hands on HS
Speaker 1: material is always more than interesting. Michael, I. I think
Speaker 1: the way they do it with three scenarios is interesting.
Speaker 1: I'm surprised more people don't do that very much like
Speaker 1: the Federal Reserve with the team presented his staff presents
Speaker 1: the FED with FED officials with different scenarios, three different scenarios.
Speaker 1: Got a lovely note yesterday from someone an email thanking
Speaker 1: us for trying to not be hysterical. We try to
Speaker 1: not say plunge or collapse surge that can sort of
Speaker 1: go with but these big words. I mean today it
Speaker 1: works because nothing's except for China stocks fits the mold.
Speaker 1: But we're trying to bring in economics, finance, investment, international relations,
Speaker 1: some politics up to Super Tuesday with what we hope
Speaker 1: is a more measured conversation, give a framework to think
Speaker 1: about it. That's what we're so you can make your decisions.
Speaker 1: And looking at the data screen, uh yeah, showing some
Speaker 1: weakness here. Two days in a row from a one
Speaker 1: eleven handle at the West Texas seven down twenty seven cents,
Speaker 1: Bran crew thirty four gold down five dollars announced a
Speaker 1: more measured hour another hour of Bloomberg surveillance