1 00:00:03,960 --> 00:00:07,920 Speaker 1: This is Bloomberg surveillance. We have this massive disconnect between 2 00:00:07,960 --> 00:00:10,600 Speaker 1: central banks the way they see the economy and the 3 00:00:10,640 --> 00:00:13,239 Speaker 1: way the markets view central banks. When we look at 4 00:00:13,240 --> 00:00:16,560 Speaker 1: that Bourmont average, we've seen this doallward trend and jobless 5 00:00:16,560 --> 00:00:19,400 Speaker 1: claim for more than a year now. The US FED 6 00:00:19,640 --> 00:00:21,800 Speaker 1: is the global central bank of the world, and when 7 00:00:21,840 --> 00:00:24,320 Speaker 1: we move maybe that basis points, it feels like a 8 00:00:24,400 --> 00:00:28,400 Speaker 1: hundred basis points one on the global scale. Bloomberg Surveillance 9 00:00:28,600 --> 00:00:32,159 Speaker 1: your link to the world of economics, finance, and investment 10 00:00:32,400 --> 00:00:35,839 Speaker 1: on Bloomberg Radio and good morning everyone, Bloomberg Surveillance. It's 11 00:00:35,880 --> 00:00:39,960 Speaker 1: a crisis over edition of Bloomberg Surveillance. Michael McKee and 12 00:00:40,080 --> 00:00:43,760 Speaker 1: Tom Keane Futures up, twenty down, Futures up one. Deutsche 13 00:00:43,760 --> 00:00:48,000 Speaker 1: Bank acts they retire senior quality debt with a number 14 00:00:48,040 --> 00:00:51,800 Speaker 1: of billion dollars of cold hard cash, oil advances a 15 00:00:51,840 --> 00:00:55,920 Speaker 1: dollar fifty other good things on the screen. Bloomberg Surveillance 16 00:00:57,400 --> 00:01:00,240 Speaker 1: and our FOREX Brief brought you by Interactive Brokers, winner 17 00:01:00,240 --> 00:01:04,000 Speaker 1: of f X Weeks two thousand fifteen award for the 18 00:01:04,040 --> 00:01:08,880 Speaker 1: Best Retail for X trading platform. Visit ib at ib 19 00:01:09,440 --> 00:01:13,680 Speaker 1: k r dot com slash four x I b k 20 00:01:14,120 --> 00:01:17,640 Speaker 1: R dot com slash four x, and we thank you 21 00:01:17,640 --> 00:01:22,080 Speaker 1: Interactive Brokers for a week of support of Bloomberg surveillance. 22 00:01:22,160 --> 00:01:28,240 Speaker 1: Yeen one one one ten handle early in the Asian board, 23 00:01:28,280 --> 00:01:31,200 Speaker 1: and that was shocking. A much weaker yen over the 24 00:01:31,280 --> 00:01:34,360 Speaker 1: last twelve fifteen hours Euro was a one thirteen. It 25 00:01:34,440 --> 00:01:38,720 Speaker 1: pulls back weaker off the Deutsche Bank News. Dollar strength 26 00:01:38,720 --> 00:01:41,920 Speaker 1: I'm gonna call it modest is shown by d x Y. 27 00:01:42,080 --> 00:01:46,479 Speaker 1: I do want to highlight Mexican paso, which is exceptionally 28 00:01:46,520 --> 00:01:50,240 Speaker 1: weak over this week. W e A K over this 29 00:01:50,520 --> 00:01:53,680 Speaker 1: w e e K one nine point one nine is 30 00:01:53,760 --> 00:01:58,760 Speaker 1: no laughing matter to Mr Carston's, Dr Carstens and Mexican authorities. 31 00:01:58,800 --> 00:02:01,640 Speaker 1: A much weaker Mexican can pay, so Mike, if that 32 00:02:01,720 --> 00:02:05,040 Speaker 1: moves further, that's front and center with an emerging market 33 00:02:05,040 --> 00:02:08,160 Speaker 1: debates into February. I am no currency analyst, but I 34 00:02:08,200 --> 00:02:11,520 Speaker 1: did see a note this morning somebody suggesting you might 35 00:02:11,560 --> 00:02:14,840 Speaker 1: want to pair the Russian ruble and the Mexican page. Oh. 36 00:02:14,880 --> 00:02:19,960 Speaker 1: I like that. That's that's I'm trying to come up 37 00:02:19,960 --> 00:02:21,760 Speaker 1: with a I'm trying to come up with a phrase 38 00:02:21,800 --> 00:02:26,919 Speaker 1: they used on a trading just Mexi, Mexi, Russy, Russy, Mexy, 39 00:02:27,440 --> 00:02:30,519 Speaker 1: something like that. Anyways, there's our four x report to 40 00:02:30,600 --> 00:02:33,200 Speaker 1: save us with the equity report, I don't know. Is 41 00:02:33,240 --> 00:02:36,000 Speaker 1: it whiplash Wilson this morning? I mean what a week? 42 00:02:36,240 --> 00:02:40,680 Speaker 1: Oh yeah, no question. I mean you've aged. We all age. 43 00:02:40,720 --> 00:02:44,000 Speaker 1: It's just a question of how we get there. I'll 44 00:02:44,040 --> 00:02:46,440 Speaker 1: tell you. Since you mentioned Deutsche Bank, it's worth noting 45 00:02:46,480 --> 00:02:48,800 Speaker 1: that stock is up about eight and a half percent 46 00:02:49,000 --> 00:02:52,079 Speaker 1: in US trading in response to with plans to buy 47 00:02:52,080 --> 00:02:55,119 Speaker 1: back about five point four billion dollars of bonds. You're 48 00:02:55,160 --> 00:02:59,240 Speaker 1: also seeing gains among Deutsche Banks US piers, notably JP 49 00:02:59,360 --> 00:03:02,760 Speaker 1: Morgan Chay up four and a half percent. Chief executive 50 00:03:02,840 --> 00:03:06,440 Speaker 1: Jamie Diamond bought half a million shares yesterday for twenty 51 00:03:06,520 --> 00:03:10,200 Speaker 1: six point six million dollars. Person familiar with Diamonds thinkings, 52 00:03:10,200 --> 00:03:12,600 Speaker 1: and he made the purchase because he sees the stock 53 00:03:12,680 --> 00:03:16,280 Speaker 1: as chief. You look at JP Morgan's peers, you see 54 00:03:16,280 --> 00:03:19,960 Speaker 1: City Group up three and a half percent. UH Bank 55 00:03:20,000 --> 00:03:22,600 Speaker 1: of America also up about three and a half percent, 56 00:03:22,840 --> 00:03:26,000 Speaker 1: and Wells far Ago two percent higher in early trading. 57 00:03:26,400 --> 00:03:29,280 Speaker 1: American international groups. Since we're talking financial companies, a I 58 00:03:29,360 --> 00:03:32,320 Speaker 1: g up two percent. The insurer at five billion dollars 59 00:03:32,320 --> 00:03:35,200 Speaker 1: to a stock buyback program and raises quarterly dividend by 60 00:03:35,240 --> 00:03:38,000 Speaker 1: fourteen percent to thirty two cents a share, and he 61 00:03:38,120 --> 00:03:42,160 Speaker 1: also named headsman manager John Paulson, and an associative activist investor, 62 00:03:42,200 --> 00:03:46,040 Speaker 1: carl Icon, to its board. You've got energy stocks higher, 63 00:03:46,080 --> 00:03:50,400 Speaker 1: with crude oil rallying above twenty eight dollars a barrel 64 00:03:50,480 --> 00:03:54,240 Speaker 1: earlier today in New York, x On Mobile up one 65 00:03:54,280 --> 00:03:56,920 Speaker 1: percent in early trading, Chevron up one and a half percent, 66 00:03:56,960 --> 00:04:00,360 Speaker 1: Conical Phillips up two and a half percent, Activision Blizard 67 00:04:00,440 --> 00:04:03,360 Speaker 1: Doe down five and a half percent. The video game 68 00:04:03,360 --> 00:04:06,120 Speaker 1: makers fourth quarter earnings and revenue trail the analysts average 69 00:04:06,200 --> 00:04:09,200 Speaker 1: estimates and the Bloomberg survey. Sales of these Skyladers and 70 00:04:09,280 --> 00:04:13,240 Speaker 1: Guitar Hero games failed to meet Activision's projections. Elsewhere on 71 00:04:13,280 --> 00:04:16,080 Speaker 1: the earninges front, inter Public Group up three percent. The 72 00:04:16,120 --> 00:04:19,800 Speaker 1: advertising agency owners fourth quarter earnings and revenue beat estimates. 73 00:04:19,880 --> 00:04:22,320 Speaker 1: Interpublic said would buy back as much as three million 74 00:04:22,360 --> 00:04:25,120 Speaker 1: dollars of shares and raises quarterly divided by twenty five. 75 00:04:25,160 --> 00:04:30,600 Speaker 1: Everybody down there, you know the flowers in her hair? 76 00:04:31,200 --> 00:04:33,840 Speaker 1: You want down okay, neat Apps down three and a 77 00:04:33,920 --> 00:04:36,200 Speaker 1: half percent. The maker of data storage systems cut the 78 00:04:36,200 --> 00:04:42,320 Speaker 1: equivalents off from Neutral Atlantic Equities, Zillo Group down. The 79 00:04:42,360 --> 00:04:45,320 Speaker 1: real estate website owners Ernies forecast where this year trailed 80 00:04:45,400 --> 00:04:48,360 Speaker 1: estimates even though it expects revenue to beat projections. And 81 00:04:48,600 --> 00:04:52,799 Speaker 1: the direct seller new skin enterprises. They're in the nutritional 82 00:04:52,880 --> 00:04:58,640 Speaker 1: supplements cosmetics game down twenty They're great, thank you. What's 83 00:04:58,640 --> 00:05:01,360 Speaker 1: with the negative waves here? You know, I don't know. 84 00:05:01,360 --> 00:05:04,839 Speaker 1: We're we're up twenty points. It's just too much. Let's 85 00:05:04,839 --> 00:05:08,200 Speaker 1: talk about something where everything is always rosy. Mitch Rochelle 86 00:05:08,680 --> 00:05:12,120 Speaker 1: has become a most popular guest because he actually brings charts. 87 00:05:12,279 --> 00:05:15,479 Speaker 1: He even put on Twitter today his chart operation colored 88 00:05:15,600 --> 00:05:17,880 Speaker 1: chart of his charts. You can see it out on 89 00:05:17,920 --> 00:05:21,840 Speaker 1: Twitter at Mitchell shell m I T H underscore r 90 00:05:21,880 --> 00:05:24,480 Speaker 1: O S c H E L l E or look 91 00:05:24,520 --> 00:05:27,760 Speaker 1: at my feed and I retreated it out. There was 92 00:05:27,800 --> 00:05:30,880 Speaker 1: a philosopher once at Bloomberg that told me once Tom, 93 00:05:30,960 --> 00:05:35,160 Speaker 1: never forget real estate. It eats. It's young and right 94 00:05:35,160 --> 00:05:40,119 Speaker 1: now it's the amount of money every month we put 95 00:05:40,200 --> 00:05:44,719 Speaker 1: towards Rent's article after article. Mitch, what you do best 96 00:05:45,279 --> 00:05:49,560 Speaker 1: is you just show one stupid chart. Here's an answer, Folks, 97 00:05:49,600 --> 00:05:55,359 Speaker 1: were all Atlanta and Jim Paulson's Minneapolis St. Paul is 98 00:05:55,440 --> 00:05:59,840 Speaker 1: where we want to move from Los Angeles, Miami and 99 00:06:00,120 --> 00:06:04,280 Speaker 1: zip code surrounding Michael McKee's house, because it's a lot 100 00:06:04,320 --> 00:06:08,640 Speaker 1: more affordable. And that's the big reason. If you graduate 101 00:06:08,680 --> 00:06:10,919 Speaker 1: from college and you want to start a job or 102 00:06:10,920 --> 00:06:12,920 Speaker 1: start a career and you find a place to live 103 00:06:12,960 --> 00:06:15,320 Speaker 1: that's affordable and you can find work, you're gonna stay there. 104 00:06:15,680 --> 00:06:17,960 Speaker 1: And Atlanta is one of those stories. Interestingly enough, you're 105 00:06:17,960 --> 00:06:20,719 Speaker 1: a little bit more data for the next rest of 106 00:06:20,760 --> 00:06:23,800 Speaker 1: the decade. Atlanta is leading all cities in terms of 107 00:06:23,839 --> 00:06:26,520 Speaker 1: net immigration, more people moving there than any other city. 108 00:06:26,480 --> 00:06:28,120 Speaker 1: And what's great about you? You're not like a real 109 00:06:28,200 --> 00:06:30,720 Speaker 1: estate broker, right, You're not trying to sell me five bedrooms. 110 00:06:30,800 --> 00:06:33,080 Speaker 1: You know school? Okay, what's great about you as you 111 00:06:33,120 --> 00:06:36,520 Speaker 1: actually work for an adult company p w C, which 112 00:06:36,560 --> 00:06:39,240 Speaker 1: links it to the rest of the story. Our business 113 00:06:39,360 --> 00:06:44,880 Speaker 1: is going to Atlanta, Minneapolis, San Antonio, Seattle, Austin because 114 00:06:44,920 --> 00:06:47,880 Speaker 1: of Metro Sal's chart. Uh maybe not because of my chart. 115 00:06:47,920 --> 00:06:50,000 Speaker 1: They're moving there and I catch onto it and I 116 00:06:50,040 --> 00:06:53,279 Speaker 1: stick it into a chart but there's a herd mentality. 117 00:06:53,400 --> 00:06:56,560 Speaker 1: So the easy answer to question is yes, because if 118 00:06:56,560 --> 00:06:59,159 Speaker 1: it's affordable to live and it's also affordable to do business, 119 00:06:59,160 --> 00:07:03,440 Speaker 1: companies are gonna go there. Uh. But the dynamic in 120 00:07:03,480 --> 00:07:05,640 Speaker 1: the United States does seem to have changed a bit. 121 00:07:05,640 --> 00:07:08,480 Speaker 1: I mean, the whole story was go west, young man. Uh. 122 00:07:08,640 --> 00:07:10,600 Speaker 1: The economy slows in one place, you pick up on 123 00:07:10,640 --> 00:07:12,520 Speaker 1: your move and you find a job somewhere else that 124 00:07:12,600 --> 00:07:15,320 Speaker 1: doesn't seem to be The mobility doesn't seem to be 125 00:07:15,360 --> 00:07:18,360 Speaker 1: there any you know, something like I'm finding in some 126 00:07:18,400 --> 00:07:21,200 Speaker 1: of the research we're doing that this notion at millennials 127 00:07:21,280 --> 00:07:24,720 Speaker 1: are total vagabonds that will move anywhere and they just 128 00:07:24,760 --> 00:07:27,040 Speaker 1: have their one suitcase and they go isn't really the case. 129 00:07:27,080 --> 00:07:30,520 Speaker 1: It's I've been hanging with my children. No I know, 130 00:07:30,600 --> 00:07:32,360 Speaker 1: I know my own, but they're they're young enough to 131 00:07:32,400 --> 00:07:34,760 Speaker 1: still be tethered to my house. But the fact of 132 00:07:34,760 --> 00:07:38,520 Speaker 1: the matter is they're stickier than you think, and employers 133 00:07:38,560 --> 00:07:40,400 Speaker 1: know that. And if you believe the notion that there's 134 00:07:40,400 --> 00:07:42,360 Speaker 1: a little bit of a skilled labor shortage, employers are 135 00:07:42,400 --> 00:07:45,800 Speaker 1: gonna stick with the people are too. So prosperity finds 136 00:07:45,840 --> 00:07:48,640 Speaker 1: those markets that are affordable to both live and do business. 137 00:07:48,800 --> 00:07:53,840 Speaker 1: Speaking of Tom's children, um, you're almost yeah here almost 138 00:07:53,840 --> 00:07:57,400 Speaker 1: at that they're almost at that age um where they're 139 00:07:57,400 --> 00:08:00,280 Speaker 1: going to start forming households of their own, shall we say. 140 00:08:00,440 --> 00:08:03,040 Speaker 1: But by the way, Mike, so statistically when children move 141 00:08:03,080 --> 00:08:05,200 Speaker 1: out of the house, that's the household formation. So are 142 00:08:05,240 --> 00:08:08,239 Speaker 1: you encouraging him to check his kids out? Well, actually, 143 00:08:08,240 --> 00:08:10,920 Speaker 1: his kids are. His kids are out, So they've the 144 00:08:10,920 --> 00:08:12,520 Speaker 1: one ti I'm talking about. I mean there are some 145 00:08:12,560 --> 00:08:19,000 Speaker 1: who are and acquisitions, we've acquired a children. We're gonna 146 00:08:19,320 --> 00:08:23,720 Speaker 1: talk about synergies later. But uh, you're you have some 147 00:08:23,800 --> 00:08:26,760 Speaker 1: charts here suggesting that we are beginning to see a 148 00:08:26,840 --> 00:08:31,240 Speaker 1: turn in the very depressed household formation numbers. Yeah. So 149 00:08:31,360 --> 00:08:35,840 Speaker 1: what's interesting about formations is they're outpacing new supply. So 150 00:08:36,040 --> 00:08:39,040 Speaker 1: simple supply and demand is we're creating demand by virtue 151 00:08:39,040 --> 00:08:42,080 Speaker 1: of formations, and that's demand for other rentals or for 152 00:08:42,080 --> 00:08:45,040 Speaker 1: for sale buying, and we haven't created supply. A matter 153 00:08:45,040 --> 00:08:47,040 Speaker 1: of fact, existing homes are at three and a half 154 00:08:47,040 --> 00:08:49,559 Speaker 1: months supply. That's like the lowest that's ever been and 155 00:08:49,640 --> 00:08:52,720 Speaker 1: that's just driving prices up and edging people out. So 156 00:08:52,880 --> 00:08:55,920 Speaker 1: it's becoming a little bit of a vicious cycle around affordability, 157 00:08:56,200 --> 00:08:59,120 Speaker 1: and as Tom pointed out, rent affordability is becoming a 158 00:08:59,200 --> 00:09:02,320 Speaker 1: much bigger issue and buying affordability, but down payment is 159 00:09:02,360 --> 00:09:06,439 Speaker 1: what's your prediction of what happens? This is insane. I mean, 160 00:09:06,760 --> 00:09:09,960 Speaker 1: you're not not everywhere, and good morning across this great nation. 161 00:09:10,320 --> 00:09:14,520 Speaker 1: But let's take it from Boston, San Jose, Orange County, 162 00:09:14,520 --> 00:09:17,240 Speaker 1: Santra I mean, it's all the places everybody's living, right 163 00:09:18,120 --> 00:09:22,160 Speaker 1: it is it sustainable? I don't. I don't believe it's 164 00:09:22,360 --> 00:09:27,040 Speaker 1: entirely sustainable. And San Francisco is an example. Sorry to 165 00:09:27,080 --> 00:09:29,199 Speaker 1: the folks getting up early there, but San Francisco is 166 00:09:29,200 --> 00:09:32,440 Speaker 1: an example of where the new additions to supply there 167 00:09:32,520 --> 00:09:34,960 Speaker 1: are really on the high end, and we're not doing 168 00:09:34,960 --> 00:09:38,160 Speaker 1: anything to find more affordable places. So San Francisco people 169 00:09:38,200 --> 00:09:39,960 Speaker 1: are just gonna get priced out of. So where do 170 00:09:40,040 --> 00:09:42,079 Speaker 1: they move if they're priced out of San Francisco is 171 00:09:42,080 --> 00:09:44,679 Speaker 1: the question? How long is the commute is the discussion. 172 00:09:44,760 --> 00:09:46,880 Speaker 1: How far out do they go? San Francisco is a 173 00:09:46,920 --> 00:09:50,040 Speaker 1: good city from a mass transit perspective, whether you're in 174 00:09:50,080 --> 00:09:52,280 Speaker 1: the East Bay or on the other side of the peninsula. 175 00:09:52,320 --> 00:09:54,360 Speaker 1: But the fact of the matter is people are just 176 00:09:54,360 --> 00:09:56,760 Speaker 1: gonna move farther and farther away. And and the other 177 00:09:56,800 --> 00:10:00,319 Speaker 1: thing is as families start, you know. So one of 178 00:10:00,320 --> 00:10:02,480 Speaker 1: the other things we try to highlight in this research 179 00:10:02,559 --> 00:10:06,360 Speaker 1: is families are starting and if they can't afford to 180 00:10:06,400 --> 00:10:09,560 Speaker 1: be in the city because of price and they want 181 00:10:09,640 --> 00:10:12,160 Speaker 1: quality education for their kids, they're gonna start moving to 182 00:10:12,200 --> 00:10:14,839 Speaker 1: the suburbs. So we may see a big shift where 183 00:10:15,080 --> 00:10:18,440 Speaker 1: baby boomers sell their houses to millennials who want to 184 00:10:18,559 --> 00:10:22,320 Speaker 1: be in the suburbs. Again, sounds good. Um, well, there's 185 00:10:22,480 --> 00:10:24,360 Speaker 1: we'll talk about more about that. And just a moment, 186 00:10:24,440 --> 00:10:28,199 Speaker 1: had heard an interesting story about that the other day. Um, 187 00:10:28,400 --> 00:10:32,760 Speaker 1: we're talking with Mr Rochelle from uh the PwC real 188 00:10:32,880 --> 00:10:38,640 Speaker 1: Estate advisory practice here on Bloomberg Surveillance. We'll go ahead, please, 189 00:10:38,640 --> 00:10:41,840 Speaker 1: I'm just gone that we have economic data on housing 190 00:10:41,920 --> 00:10:45,559 Speaker 1: coming up next week. So UM, continuing with the idea 191 00:10:45,559 --> 00:10:47,640 Speaker 1: of whether the US is in good shape or not. 192 00:10:51,520 --> 00:10:53,440 Speaker 1: First we're gonna check with black Bar and get the 193 00:10:53,480 --> 00:10:56,200 Speaker 1: latest world in national headlines. Michael, Mike, Tom, thank you 194 00:10:56,280 --> 00:10:59,280 Speaker 1: very much. A Humanitarian task force on sirious as a 195 00:10:59,320 --> 00:11:02,199 Speaker 1: new deal. It provide a breakthrough to get a two 196 00:11:02,240 --> 00:11:04,880 Speaker 1: civilians in the war tour in the country. The head 197 00:11:04,920 --> 00:11:07,760 Speaker 1: of the Norwegian Refugee Council is leading today's meeting in 198 00:11:07,760 --> 00:11:11,080 Speaker 1: Geneva on how to carry out an agreement to accelerate 199 00:11:11,120 --> 00:11:14,840 Speaker 1: and expand deliveries of humanitarian aid to be see Syrian 200 00:11:14,880 --> 00:11:18,559 Speaker 1: community starting next week. Today, the US, Russia and of 201 00:11:18,640 --> 00:11:22,040 Speaker 1: the Nations agreed to temporarily halt the hostilities in Syria 202 00:11:22,280 --> 00:11:25,400 Speaker 1: within a week. The World Health Organization says it could 203 00:11:25,400 --> 00:11:29,239 Speaker 1: be at least another eighteen months before there are large 204 00:11:29,280 --> 00:11:33,560 Speaker 1: scale trials on a possible zeke of vaccine. German Chancellor 205 00:11:33,600 --> 00:11:36,760 Speaker 1: Angler Merkel as a Hollywood friend backing her open door 206 00:11:36,840 --> 00:11:40,720 Speaker 1: policy in the refugee crisis. Actor George Clooney is in 207 00:11:40,760 --> 00:11:43,560 Speaker 1: Berlin to promote his new movie, and he lent his 208 00:11:43,559 --> 00:11:46,840 Speaker 1: support to Merkel during a meeting Today. Global News twenty 209 00:11:46,880 --> 00:11:49,760 Speaker 1: four hours a day, powered by our journalists and more 210 00:11:49,760 --> 00:11:52,120 Speaker 1: than a hundred fifty news buraus around the world at 211 00:11:52,160 --> 00:11:55,040 Speaker 1: Michael Barry. Michael Barry saw the Clooney headline with Miracle 212 00:11:55,120 --> 00:11:58,040 Speaker 1: and I thought it was a government official. I didn't 213 00:11:58,080 --> 00:12:01,559 Speaker 1: put Mr Clooney together with a chance alert. Mr Clooney himself. 214 00:12:01,559 --> 00:12:03,960 Speaker 1: She will do anything to hang out with George Clooney. 215 00:12:07,960 --> 00:12:10,400 Speaker 1: Bloom Bigs Market Drivers Report brought to you by your 216 00:12:10,400 --> 00:12:12,640 Speaker 1: Mercedes Benz Tri State Dealer. When it comes to winter elements, 217 00:12:12,640 --> 00:12:14,760 Speaker 1: put your best four wheels forward with Mercedes Benz four 218 00:12:14,760 --> 00:12:16,720 Speaker 1: back all wheel drive. Is it your Mercedes Benz Tri 219 00:12:16,760 --> 00:12:23,160 Speaker 1: State Dealer for a test drive? Today? Global Business News 220 00:12:23,200 --> 00:12:26,120 Speaker 1: twenty four hours a day. If Bloomberg dot Com the 221 00:12:26,280 --> 00:12:29,360 Speaker 1: radio plus mobile lap and on your radio, this is 222 00:12:29,400 --> 00:12:33,080 Speaker 1: a Bloomberg Business flash and I'm Karen Moscow. US stock 223 00:12:33,160 --> 00:12:36,520 Speaker 1: Index futures are rising with the SNP five pois to 224 00:12:36,559 --> 00:12:39,880 Speaker 1: snap its longest losing streaks in September as crude prices 225 00:12:39,960 --> 00:12:43,200 Speaker 1: rebounded in data showed retail sales increased for a third month. 226 00:12:43,240 --> 00:12:46,280 Speaker 1: In January. We checked the markets every fifteen minutes throughout 227 00:12:46,280 --> 00:12:49,640 Speaker 1: the trading day. A Bloomberg SNP EVENI futures up nineteen 228 00:12:49,679 --> 00:12:52,720 Speaker 1: points now EVENI futures of a hundred forty one, NAZDAC 229 00:12:52,760 --> 00:12:56,120 Speaker 1: eveny futures up forty acts. In Germany is up two 230 00:12:56,120 --> 00:12:59,200 Speaker 1: point one per cent ten Your treasury down ten thirty seconds. 231 00:12:59,200 --> 00:13:01,439 Speaker 1: The yield one points x nine percent yield on a 232 00:13:01,520 --> 00:13:04,559 Speaker 1: two year point six six percent. Now I'm excret oil 233 00:13:04,760 --> 00:13:07,600 Speaker 1: is up six point four percent of a dollar sixty 234 00:13:07,679 --> 00:13:11,560 Speaker 1: seven at seven eight cents, and Barrel Comic School down 235 00:13:12,520 --> 00:13:15,719 Speaker 1: eleven dollars thirty sets to twelve thirty six thirty and 236 00:13:15,840 --> 00:13:18,439 Speaker 1: ounce the euro and dollar twelve forty six the N 237 00:13:18,520 --> 00:13:21,679 Speaker 1: one twelve point eight seven. And that's a Bloomberg business flash, 238 00:13:21,760 --> 00:13:24,680 Speaker 1: Tom and My Kern. Thanks. So much of Bloomberg surveillance 239 00:13:24,720 --> 00:13:28,199 Speaker 1: is pruning budget by c I T from transportation to 240 00:13:28,320 --> 00:13:33,040 Speaker 1: healthcare to manufacturing. C I T offers commercial lending, leasing, 241 00:13:33,640 --> 00:13:37,360 Speaker 1: and treasury management services are small and middle market businesses. 242 00:13:37,480 --> 00:13:41,400 Speaker 1: Learn more at c I T dot com put knowledge 243 00:13:41,559 --> 00:13:46,480 Speaker 1: to work. We think c I T for their support. 244 00:13:46,559 --> 00:13:49,400 Speaker 1: Michael McKee, Um, we've we've made an official You and 245 00:13:49,480 --> 00:13:53,319 Speaker 1: I are putting hud our incoming to rent and ownership. 246 00:13:53,840 --> 00:13:56,240 Speaker 1: Were miserable, but there's whole another country out there. Help 247 00:13:56,320 --> 00:14:00,640 Speaker 1: us with matu rosell uh. Well, at this point the 248 00:14:00,760 --> 00:14:04,080 Speaker 1: question becomes what can the people who are now forming 249 00:14:04,120 --> 00:14:07,439 Speaker 1: the household, etcetera. What can they afford? Prices have been 250 00:14:07,760 --> 00:14:12,079 Speaker 1: rising faster than incomes in two thousand and eight. Of 251 00:14:12,120 --> 00:14:14,319 Speaker 1: course that was a real problem. It doesn't seem to 252 00:14:14,360 --> 00:14:16,319 Speaker 1: be as much of an issue today, although it just 253 00:14:16,440 --> 00:14:19,920 Speaker 1: makes a little bit harder. Right. So the easy answer 254 00:14:20,000 --> 00:14:24,640 Speaker 1: is the trend we're seeing is existing homes selling ten 255 00:14:24,760 --> 00:14:28,120 Speaker 1: times more than new homes. So what's really happening is 256 00:14:28,240 --> 00:14:30,440 Speaker 1: if you can scrape together that down payment, people are 257 00:14:30,480 --> 00:14:35,000 Speaker 1: buying fixer uppers, and the do it yourself craze makes 258 00:14:35,040 --> 00:14:38,320 Speaker 1: sense because if you're fearful, even though prices are going up, 259 00:14:38,320 --> 00:14:41,080 Speaker 1: if you're fearful that you could somehow lose money in 260 00:14:41,160 --> 00:14:44,440 Speaker 1: that house, why don't you create equity and value by 261 00:14:44,480 --> 00:14:46,720 Speaker 1: fixing it up. So that's that's the sort of advice 262 00:14:46,840 --> 00:14:49,880 Speaker 1: that I have for new couples is by whatever it 263 00:14:49,960 --> 00:14:51,960 Speaker 1: is that you can afford, even if it needs a 264 00:14:52,040 --> 00:14:53,720 Speaker 1: lot of T l C, and fix it up and 265 00:14:53,800 --> 00:14:57,600 Speaker 1: create value for yourself. The other question about um prices 266 00:14:58,240 --> 00:15:01,320 Speaker 1: is what you have to pay to borrow the money. 267 00:15:01,800 --> 00:15:04,520 Speaker 1: The interesting thing about the Fed raising interest rates in 268 00:15:04,640 --> 00:15:08,440 Speaker 1: December is that the average UH thirty year fixed mortgage 269 00:15:08,840 --> 00:15:11,440 Speaker 1: I'm looking at bank rates version. Everybody has a different version, 270 00:15:11,480 --> 00:15:14,800 Speaker 1: but they all show the same thing has fallen significantly 271 00:15:15,480 --> 00:15:19,560 Speaker 1: since then. Uh we're about forty bases points lower since 272 00:15:19,600 --> 00:15:23,200 Speaker 1: the FED raised rates. Bank rate quotes a fixed thirty 273 00:15:23,280 --> 00:15:26,400 Speaker 1: year right now at the three point right, Well, the 274 00:15:26,560 --> 00:15:29,160 Speaker 1: ten year hit won five oh right, so it's gonna 275 00:15:29,280 --> 00:15:33,360 Speaker 1: keep rates down. The interesting thing is the FED action 276 00:15:33,480 --> 00:15:36,640 Speaker 1: and all the media attention around it created a lot 277 00:15:36,680 --> 00:15:39,240 Speaker 1: of anxiety and in the minds of home buyers because 278 00:15:39,280 --> 00:15:42,520 Speaker 1: they assumed that it would translate to the cost of 279 00:15:42,640 --> 00:15:44,680 Speaker 1: funds going up. So there's a big race to the 280 00:15:44,680 --> 00:15:46,640 Speaker 1: finish and we saw a lot of the housing data 281 00:15:46,760 --> 00:15:49,320 Speaker 1: came out in January, which was December data caused the 282 00:15:49,320 --> 00:15:52,360 Speaker 1: big flurry. Is it's sustainable though, Mike, I'm looking at 283 00:15:52,840 --> 00:15:56,080 Speaker 1: off of Mitch's good research. Raleigh Durham, North Carolina. Good 284 00:15:56,120 --> 00:16:00,520 Speaker 1: Morning down in North carolinae Caster Lane for eight hundred 285 00:16:00,600 --> 00:16:03,160 Speaker 1: and sixty thousand, which Mike and I could do with 286 00:16:03,240 --> 00:16:06,440 Speaker 1: a rounding era. We can on almost seven thousand square feet, 287 00:16:06,480 --> 00:16:08,880 Speaker 1: five bets, four beds. Is an English pub in the 288 00:16:08,960 --> 00:16:10,880 Speaker 1: basement the only thing Mike and I have in the 289 00:16:10,920 --> 00:16:15,080 Speaker 1: basement of rats. Okay, does it come with Carolin Hurricane tickets? 290 00:16:15,400 --> 00:16:17,720 Speaker 1: I think it does. But you can not even watch 291 00:16:17,800 --> 00:16:20,960 Speaker 1: Denver Broncos football in the west wing of this monstrosity. 292 00:16:21,520 --> 00:16:24,840 Speaker 1: Is the inequality in our housing. The same is the 293 00:16:25,040 --> 00:16:29,920 Speaker 1: inequality in our income. I mean the geographical difference. I 294 00:16:30,000 --> 00:16:32,720 Speaker 1: don't think I've ever seen. But what's interesting, Tom, is 295 00:16:32,800 --> 00:16:36,160 Speaker 1: in every market you can find really really high end 296 00:16:36,240 --> 00:16:41,320 Speaker 1: product and really really low end product. What's interesting is 297 00:16:41,440 --> 00:16:44,520 Speaker 1: what what's needed in this country is stuff that's affordable, 298 00:16:45,240 --> 00:16:49,360 Speaker 1: and people are still can't we manage a policy. So 299 00:16:49,560 --> 00:16:52,400 Speaker 1: Toll Brothers, not to pick on them, but they've got 300 00:16:52,440 --> 00:16:55,160 Speaker 1: great stuff on Linxington Avenue here can do what you 301 00:16:55,320 --> 00:16:59,600 Speaker 1: just said. The challenges the construction costs continued, Tom to 302 00:16:59,760 --> 00:17:02,040 Speaker 1: ride is right. So that's one of the big headwinds 303 00:17:02,080 --> 00:17:04,240 Speaker 1: that the home builders them all are finding, which is 304 00:17:04,280 --> 00:17:07,159 Speaker 1: their construction costs are going up mostly around labor and 305 00:17:07,359 --> 00:17:09,880 Speaker 1: finding labor. It's not really materials because of where commodity 306 00:17:09,920 --> 00:17:13,600 Speaker 1: prices are. So the all of the big activity in 307 00:17:13,640 --> 00:17:16,600 Speaker 1: the housing market is people buying existing homes, as I 308 00:17:16,640 --> 00:17:20,120 Speaker 1: said earlier, and it's driving the supply down to three 309 00:17:20,160 --> 00:17:23,119 Speaker 1: and a half months. So there's gotta be somebody who's 310 00:17:23,119 --> 00:17:25,480 Speaker 1: gonna jump in and find a way to create product 311 00:17:25,560 --> 00:17:28,840 Speaker 1: price similar to existing that remains affordable for the first 312 00:17:28,880 --> 00:17:31,840 Speaker 1: time home buyer. Alright, let's put it into terms that 313 00:17:32,040 --> 00:17:36,000 Speaker 1: the average investor cowering under his desk this week can understand. 314 00:17:37,160 --> 00:17:41,800 Speaker 1: How is the housing industry as a component of the 315 00:17:42,000 --> 00:17:48,119 Speaker 1: US economy. So the housing industry in terms of the 316 00:17:48,280 --> 00:17:51,600 Speaker 1: home builders who are building new homes, they're building at 317 00:17:51,640 --> 00:17:53,920 Speaker 1: a fraction of the level that they historically had been. 318 00:17:54,480 --> 00:17:56,560 Speaker 1: The rest of the housing industry are all the folks 319 00:17:56,600 --> 00:18:00,520 Speaker 1: who make a living in the brokerage business, the banking business, 320 00:18:00,720 --> 00:18:04,240 Speaker 1: the attorneys. It's amazing if you would have gone to 321 00:18:04,359 --> 00:18:06,879 Speaker 1: Phoenix before the housing bubble burst and looked at a 322 00:18:06,960 --> 00:18:09,560 Speaker 1: suburban office building, more than half the tenants in that 323 00:18:09,600 --> 00:18:12,600 Speaker 1: building were somehow tied to the housing industry um and 324 00:18:12,720 --> 00:18:15,240 Speaker 1: a lot of those jobs that had been lost because 325 00:18:15,280 --> 00:18:18,520 Speaker 1: the housing industry was decimated or back. So when you 326 00:18:18,600 --> 00:18:21,800 Speaker 1: think about the housing industry, might think about all of 327 00:18:21,880 --> 00:18:24,920 Speaker 1: the other ancillary businesses that are around it. And since 328 00:18:24,960 --> 00:18:27,199 Speaker 1: we're back to the levels that we were at from 329 00:18:27,280 --> 00:18:30,720 Speaker 1: an existing home sales perspective and that volume, that's a 330 00:18:30,800 --> 00:18:32,520 Speaker 1: good story. The thing that we're not back to was 331 00:18:32,560 --> 00:18:36,040 Speaker 1: the new homes. What's the b WC call and um GDP, 332 00:18:36,280 --> 00:18:37,920 Speaker 1: I mean, I know you guys are in a wall 333 00:18:37,960 --> 00:18:40,520 Speaker 1: Street firm trying to make day to day quotes. Does 334 00:18:40,600 --> 00:18:44,640 Speaker 1: your consultancy have a belief on the nation's economy. It's 335 00:18:45,000 --> 00:18:47,720 Speaker 1: well based upon the research we just did by interviewing 336 00:18:47,800 --> 00:18:51,400 Speaker 1: CEOs around the world before our CEO survey, UM, there's 337 00:18:51,440 --> 00:18:54,919 Speaker 1: a lot more pessimism around GDP growth globally than there 338 00:18:55,040 --> 00:18:58,359 Speaker 1: was a year ago, so our call on GDP would 339 00:18:58,359 --> 00:19:02,280 Speaker 1: probably be not hitting xact. My research is the p 340 00:19:02,600 --> 00:19:08,000 Speaker 1: w C Davos Wednesday afternoon kickoff has the best orders 341 00:19:08,119 --> 00:19:12,880 Speaker 1: of the interesting. That's my serious tell Sam, it's my serious, 342 00:19:13,480 --> 00:19:17,399 Speaker 1: major analysis. So within the basement of the Belvedere Hotel, 343 00:19:18,760 --> 00:19:23,080 Speaker 1: you win best orders with j JP Morgan's tie head vote. 344 00:19:23,240 --> 00:19:26,280 Speaker 1: But you guys, and it's it's because it's early in Davos. 345 00:19:26,640 --> 00:19:29,560 Speaker 1: No one's exhausted when they go to your part item 346 00:19:29,680 --> 00:19:31,920 Speaker 1: that suits your fancy in the orders. They have the 347 00:19:32,040 --> 00:19:35,119 Speaker 1: Swiss lentil soup that they sort of wonder by you 348 00:19:35,320 --> 00:19:38,879 Speaker 1: that I will I will make sure that all of 349 00:19:38,920 --> 00:19:42,480 Speaker 1: the people here that positive feedback. Please have important feedback. 350 00:19:43,000 --> 00:19:45,840 Speaker 1: Mr Schell, thank you so much. With p WC, I'm 351 00:19:45,880 --> 00:19:47,560 Speaker 1: real estate and really, folks, this is gonna be one 352 00:19:47,600 --> 00:19:50,359 Speaker 1: of our themes this year. Is percentage of your income 353 00:19:50,480 --> 00:19:54,040 Speaker 1: going to rent and homeownership is h Well, it's a 354 00:19:54,600 --> 00:19:56,520 Speaker 1: I don't know if it's a scandal, but it's a fact. 355 00:19:56,760 --> 00:20:01,080 Speaker 1: It is stunning in some of our geographies. Coast to coast. 356 00:20:01,320 --> 00:20:07,679 Speaker 1: Bloomberg Surveillance the Bloomberg Ski Report is brought you by 357 00:20:07,760 --> 00:20:09,639 Speaker 1: land Rover. If it's in your nature to cast off 358 00:20:09,680 --> 00:20:11,639 Speaker 1: the every day and seek adventure, the Discovery Sport was 359 00:20:11,640 --> 00:20:13,840 Speaker 1: built to help your search. Visit land Rover. Just tie 360 00:20:13,880 --> 00:20:16,440 Speaker 1: state dot com for special offers during the only Adventure 361 00:20:16,440 --> 00:20:25,200 Speaker 1: Sales event. Land Rover Above and Beyond broadcasting live to 362 00:20:25,400 --> 00:20:29,240 Speaker 1: New York, Coolberg an Will to Washington, d C Bloomberg 363 00:20:29,359 --> 00:20:32,680 Speaker 1: ninety nine one to Boston, Bloomberg Well unders to San 364 00:20:32,720 --> 00:20:37,000 Speaker 1: Francisco Bloomberg nine six, to the Country series Exam Channel 365 00:20:37,040 --> 00:20:40,440 Speaker 1: one nineteen and around the globe the Bloomberg Radio plus 366 00:20:40,520 --> 00:20:45,200 Speaker 1: AVD Bloomberg dot Com. This is Bloomberg Surveillance. Good Morning 367 00:20:45,240 --> 00:20:48,080 Speaker 1: of Cameron Moscow along with Tom Keene and Michael McKee 368 00:20:48,119 --> 00:20:50,119 Speaker 1: and the Opening Bell brought to you by se I. 369 00:20:50,280 --> 00:20:54,119 Speaker 1: Imagine when cognitive computing shapes the experience you create for 370 00:20:54,200 --> 00:20:57,639 Speaker 1: your investors. See how seis global operating platform can be 371 00:20:57,720 --> 00:21:00,520 Speaker 1: your catalyst for a business intelligence at se i C 372 00:21:00,720 --> 00:21:04,280 Speaker 1: dot com, slash imagine and stocks are higher at the open. 373 00:21:04,359 --> 00:21:06,440 Speaker 1: The S and P five hundred is up seven tenths 374 00:21:06,480 --> 00:21:09,239 Speaker 1: per cent or twelve points to eighteen forty one. Dow 375 00:21:09,320 --> 00:21:12,560 Speaker 1: Jones Industrial Average up seven ten percent or one hundred 376 00:21:12,680 --> 00:21:15,800 Speaker 1: seven points to fifteen thousand, seven hundred seventy five. The 377 00:21:15,920 --> 00:21:18,400 Speaker 1: NASDAC is up nine ten percent or thirty nine points 378 00:21:18,480 --> 00:21:21,080 Speaker 1: to forty three oh six ten. Your treasury down ten 379 00:21:21,160 --> 00:21:24,240 Speaker 1: thirty seconds. The yield one point six nine percent yield 380 00:21:24,280 --> 00:21:26,800 Speaker 1: on the two year point six six percent. Nim X 381 00:21:26,840 --> 00:21:29,280 Speaker 1: Screwed oil up seven point one percent, up a dollar 382 00:21:29,320 --> 00:21:31,800 Speaker 1: eighty five to twenty eight dollars six cents of barrel 383 00:21:32,080 --> 00:21:34,880 Speaker 1: comes goal down one percent or twelve dollars thirty cents 384 00:21:34,960 --> 00:21:37,760 Speaker 1: to twelve thirty five forty ounce. The Euro at dollar 385 00:21:37,840 --> 00:21:41,160 Speaker 1: twelve forty three. Thegn's at one twelve point nine zero. 386 00:21:41,280 --> 00:21:43,560 Speaker 1: Tom and Mike Karen, thanks so much. Mike, I want 387 00:21:43,600 --> 00:21:44,920 Speaker 1: you to bring in our next guest, but I want 388 00:21:44,960 --> 00:21:48,359 Speaker 1: to say this, it has been an extraordinary week. Michael 389 00:21:48,400 --> 00:21:51,120 Speaker 1: McKee and I have a team behind us that pushes 390 00:21:52,000 --> 00:21:54,280 Speaker 1: I'm gonna say fifteen, but Mike, to be blunt with 391 00:21:54,359 --> 00:21:58,080 Speaker 1: technical it, maybe twenty people who have made this crazy 392 00:21:58,280 --> 00:22:01,960 Speaker 1: week going, we've been flat were guested by the quality 393 00:22:02,040 --> 00:22:07,720 Speaker 1: of the conversation, the perspective, the insight of guests, and Mike, 394 00:22:07,760 --> 00:22:12,240 Speaker 1: it's nice to finish strong. Yes, we are indeed finishing 395 00:22:12,359 --> 00:22:17,399 Speaker 1: strong because the fashionable discussion on Wall Street over the 396 00:22:17,480 --> 00:22:19,639 Speaker 1: past couple of weeks has been negative interest rates, and 397 00:22:19,720 --> 00:22:22,560 Speaker 1: boy did Janet Young get an earful about that over 398 00:22:22,600 --> 00:22:26,480 Speaker 1: the last two days, and the folks at JP Morgan, Chase, Bruce, 399 00:22:26,560 --> 00:22:29,760 Speaker 1: Kasman and his team have put together um the Ultimate 400 00:22:29,880 --> 00:22:33,359 Speaker 1: Report on negative interest rates, Bruce along with Malcolm Barr 401 00:22:33,480 --> 00:22:38,240 Speaker 1: and David Mackie noting that you can take uh, negative 402 00:22:38,320 --> 00:22:41,919 Speaker 1: rates much lower than people think, but there is an 403 00:22:42,000 --> 00:22:44,600 Speaker 1: open question about how well they work. So welcome to 404 00:22:44,920 --> 00:22:49,840 Speaker 1: Bruce to surveillance, and let's just start with the very basics. 405 00:22:50,000 --> 00:22:52,879 Speaker 1: The case for negative interest rates. This was always a 406 00:22:53,000 --> 00:22:56,800 Speaker 1: theory that yeah, you could maybe do this, but why 407 00:22:56,880 --> 00:23:00,560 Speaker 1: did it all of a sudden become fashionable. Well, let's 408 00:23:00,600 --> 00:23:02,560 Speaker 1: even step back a little further and just say this 409 00:23:02,800 --> 00:23:06,200 Speaker 1: the case for negative rates and the case for monetary 410 00:23:06,240 --> 00:23:09,200 Speaker 1: easing right now is that we've had a global economy 411 00:23:09,240 --> 00:23:11,960 Speaker 1: that has slowed. We have financial markets which have have 412 00:23:12,160 --> 00:23:15,280 Speaker 1: sold off, and if you look back in past experiences, 413 00:23:15,320 --> 00:23:19,080 Speaker 1: even when those experiences haven't represented an economy going into 414 00:23:19,520 --> 00:23:23,720 Speaker 1: a recession, usually central banks have come and have provided insurance. 415 00:23:23,760 --> 00:23:26,280 Speaker 1: Our our estimates are that in the current environment, particularly 416 00:23:26,320 --> 00:23:29,280 Speaker 1: looking at what's happened to global industry, UH, you probably 417 00:23:29,320 --> 00:23:32,399 Speaker 1: should be getting in the developed market economies something like 418 00:23:33,520 --> 00:23:36,760 Speaker 1: basis points easing. So now the issue is how do 419 00:23:36,800 --> 00:23:39,000 Speaker 1: you deliver it? And I think we're sitting in a 420 00:23:39,080 --> 00:23:43,320 Speaker 1: world in which there's concern that the UM ability to 421 00:23:43,400 --> 00:23:47,639 Speaker 1: continue to buy assets and compress the term structure, the 422 00:23:47,960 --> 00:23:50,400 Speaker 1: ability to continue to use forward guidance in the world 423 00:23:50,480 --> 00:23:54,160 Speaker 1: in which UM the interest rate profile is already pretty flat, 424 00:23:54,720 --> 00:23:56,640 Speaker 1: is limited, and that's where we start to get into 425 00:23:56,720 --> 00:24:00,439 Speaker 1: this issue of well, why not negative rates? UH. Negative 426 00:24:00,520 --> 00:24:04,040 Speaker 1: rates have been I think questioned because of the existence 427 00:24:04,080 --> 00:24:08,119 Speaker 1: of currency so that both banks and non financials can 428 00:24:08,200 --> 00:24:11,680 Speaker 1: move UM out of negative rate instruments. But I think 429 00:24:11,720 --> 00:24:16,000 Speaker 1: what Europe has been doing and now Japan is experimenting 430 00:24:16,080 --> 00:24:19,200 Speaker 1: this in ways, this shows that UM there are ways 431 00:24:19,280 --> 00:24:22,800 Speaker 1: to structure negative weight environment that to some degree limits 432 00:24:22,840 --> 00:24:26,720 Speaker 1: that and therefore allows the policy stance to move significantly 433 00:24:26,800 --> 00:24:31,399 Speaker 1: into negative territory. Yeah. I mean, the basic simplification of 434 00:24:31,480 --> 00:24:33,720 Speaker 1: what you're talking about is, if I have to pay 435 00:24:33,800 --> 00:24:36,359 Speaker 1: you to store my cash, then I'm just going to 436 00:24:36,480 --> 00:24:39,840 Speaker 1: keep it under the mattress exactly. And the banks, I guess, 437 00:24:39,880 --> 00:24:43,359 Speaker 1: are finding out that isn't necessarily true, at least at 438 00:24:43,400 --> 00:24:47,360 Speaker 1: the level of rates that they have now, because there 439 00:24:47,400 --> 00:24:50,080 Speaker 1: are costs to keep you under your mattress. There are 440 00:24:50,200 --> 00:24:52,920 Speaker 1: there are large costs, particularly for big institutions. And the 441 00:24:53,000 --> 00:24:55,440 Speaker 1: other side of this is that central banks are starting 442 00:24:55,480 --> 00:24:58,960 Speaker 1: to generate schemes where they're realizing the amount of the 443 00:24:59,000 --> 00:25:01,440 Speaker 1: reserve position the banking system that you actually have to 444 00:25:01,600 --> 00:25:04,800 Speaker 1: tax with negative rates to get rates go low is 445 00:25:04,800 --> 00:25:07,719 Speaker 1: actually pretty small. So you're they're creating these tiered systems 446 00:25:07,760 --> 00:25:11,359 Speaker 1: that are not creating big incentive for central banks for 447 00:25:11,560 --> 00:25:14,840 Speaker 1: for banks excuse me, to change their uh their structures 448 00:25:14,840 --> 00:25:17,040 Speaker 1: in a way that would be required to start holding 449 00:25:17,240 --> 00:25:21,359 Speaker 1: large amounts of cash within This is the side debate 450 00:25:21,680 --> 00:25:27,360 Speaker 1: that negative rates affect institutional behavior but are basically useless 451 00:25:27,680 --> 00:25:32,040 Speaker 1: until they affect citizen and I might say voter behavior 452 00:25:32,240 --> 00:25:35,840 Speaker 1: as well, if we drive to the shocking negative rates, 453 00:25:35,920 --> 00:25:40,639 Speaker 1: you model, not predict, but model if point if zero 454 00:25:40,840 --> 00:25:45,400 Speaker 1: point seven five negative becomes negative two or negative two 455 00:25:45,440 --> 00:25:49,000 Speaker 1: point two, whatever that number is, Will that filter over 456 00:25:49,200 --> 00:25:54,120 Speaker 1: into a direct effect on the citizens of a given nation. Well, 457 00:25:54,200 --> 00:25:57,200 Speaker 1: that's I think that's the the the key question, and 458 00:25:57,359 --> 00:25:59,600 Speaker 1: I think there are there are two at least two 459 00:25:59,640 --> 00:26:03,080 Speaker 1: issues here. One is there's a strong bias, i think, 460 00:26:03,160 --> 00:26:06,240 Speaker 1: both on the part of policy makers and also on 461 00:26:06,359 --> 00:26:11,160 Speaker 1: the part of banks not to push retail deposit rates negative. 462 00:26:11,320 --> 00:26:13,640 Speaker 1: And if you're going to create a structure where wholesale 463 00:26:14,080 --> 00:26:18,200 Speaker 1: rates go negative and retail doesn't, you create segmentation in 464 00:26:18,240 --> 00:26:21,800 Speaker 1: the financial system, and it's much more questionable of whether 465 00:26:21,800 --> 00:26:23,600 Speaker 1: you're going to get the bang for the bucks. I 466 00:26:23,680 --> 00:26:26,280 Speaker 1: think that's that's one issue. There's some technical issues around 467 00:26:26,359 --> 00:26:29,159 Speaker 1: that as well. The second issue, I think is a 468 00:26:29,400 --> 00:26:32,359 Speaker 1: is a more general one, which is UH, as you 469 00:26:32,480 --> 00:26:36,679 Speaker 1: lower interest rates in the current environment, given the um 470 00:26:37,080 --> 00:26:40,159 Speaker 1: the frustration with central bank effectiveness up till now, are 471 00:26:40,200 --> 00:26:42,280 Speaker 1: you going to limit the ability that that has to 472 00:26:42,800 --> 00:26:48,480 Speaker 1: influence expectations, UH, to affectum behavior with lower interest rates, 473 00:26:48,520 --> 00:26:51,160 Speaker 1: and especially the questions there's always an income effect, which 474 00:26:51,200 --> 00:26:55,320 Speaker 1: goes against the positive effects of encouraging people to just save, 475 00:26:55,760 --> 00:26:58,320 Speaker 1: and whether in this environment those income effects actually turn 476 00:26:58,400 --> 00:27:01,680 Speaker 1: out to be bigger. Mike, what does it say about 477 00:27:01,760 --> 00:27:05,200 Speaker 1: doing income and substitution effects with Bruce Casman on a 478 00:27:05,280 --> 00:27:11,000 Speaker 1: Friday morning. I mean, it doesn't nothing better than we 479 00:27:11,320 --> 00:27:13,359 Speaker 1: want to get into some specifics in a few minutes. 480 00:27:13,440 --> 00:27:18,359 Speaker 1: But first, just in general, the one fallacy with UM 481 00:27:19,920 --> 00:27:26,320 Speaker 1: trying to encourage consumers to just save or UM institutions 482 00:27:26,440 --> 00:27:29,240 Speaker 1: to make more loans is you can lead a horse 483 00:27:29,280 --> 00:27:32,600 Speaker 1: to water, basically, but if people don't want to borrow 484 00:27:32,640 --> 00:27:36,720 Speaker 1: and don't want to spend for whatever psychological reason, they're 485 00:27:36,760 --> 00:27:40,120 Speaker 1: not going to I think that's Look. I think there's 486 00:27:40,160 --> 00:27:43,440 Speaker 1: a very basic point here that we don't know how 487 00:27:43,560 --> 00:27:46,880 Speaker 1: the transmission is going to work in the current environment, 488 00:27:46,960 --> 00:27:50,480 Speaker 1: and especially pushing significantly into negative territory. However, we have 489 00:27:50,640 --> 00:27:53,879 Speaker 1: to weigh that against the possibility that if we are 490 00:27:54,000 --> 00:27:56,840 Speaker 1: in a weak economic environment we're going to need more stimulus. 491 00:27:57,320 --> 00:27:59,639 Speaker 1: We don't have the hopes the fiscal policy can come 492 00:27:59,680 --> 00:28:02,320 Speaker 1: in and save the day, and we're weighing the use 493 00:28:02,400 --> 00:28:06,040 Speaker 1: of negative rates against the use of other unconventional measures, 494 00:28:06,080 --> 00:28:08,440 Speaker 1: which also are questionable in terms of how far they're 495 00:28:08,440 --> 00:28:10,159 Speaker 1: going to go. So at one point we're trying to 496 00:28:10,240 --> 00:28:12,480 Speaker 1: make is if if we do go into a bad 497 00:28:12,560 --> 00:28:16,120 Speaker 1: economic situation, I think central banks are gonna likely experiment 498 00:28:16,600 --> 00:28:19,320 Speaker 1: and they're likely to combine a negative rate strategy with 499 00:28:19,520 --> 00:28:22,880 Speaker 1: further unconventional measures along the lines of what we've seen 500 00:28:23,040 --> 00:28:25,800 Speaker 1: up till now twenty seconds, and we'll come back and 501 00:28:25,840 --> 00:28:28,760 Speaker 1: talk about this. If they do that, do they do 502 00:28:28,920 --> 00:28:34,000 Speaker 1: it with stability? And can they boost economic growth? I 503 00:28:34,359 --> 00:28:36,880 Speaker 1: think my answer is that they can, but I think 504 00:28:36,920 --> 00:28:38,840 Speaker 1: the bank for the buck would be less than a 505 00:28:38,920 --> 00:28:43,120 Speaker 1: similar size move in positive rate territory. Thank you, That's 506 00:28:43,160 --> 00:28:46,160 Speaker 1: exactly where we're gonna go. Bruce Kasman leads a charge 507 00:28:46,200 --> 00:28:50,200 Speaker 1: at JP Morgan. This has been extraordinary week centering around 508 00:28:51,000 --> 00:28:54,640 Speaker 1: JP Morgan's landmark research. I'm going to say two years 509 00:28:54,680 --> 00:28:58,240 Speaker 1: ago now on the terminal value. We will do that next. 510 00:28:58,320 --> 00:29:02,400 Speaker 1: We'll talk with Michael keepers Kasman. Uh, Mike, I just 511 00:29:02,520 --> 00:29:05,240 Speaker 1: think we've got to revisit what the new terminal value is. 512 00:29:05,840 --> 00:29:08,680 Speaker 1: Somehow I think we're gonna hear it's lower. I think 513 00:29:09,280 --> 00:29:11,680 Speaker 1: it's just possible that we would hear that we're up 514 00:29:11,680 --> 00:29:14,680 Speaker 1: a hundred and six points fifteen thousand, seven hundred sixty 515 00:29:14,760 --> 00:29:18,080 Speaker 1: seven the vix In. As you would expect some complacency 516 00:29:18,160 --> 00:29:21,760 Speaker 1: out there after a wild week twenty seven point to six, 517 00:29:22,000 --> 00:29:26,920 Speaker 1: negative point eight eight point move on the vis West 518 00:29:27,000 --> 00:29:30,800 Speaker 1: Texas twenty eight handle, twenty eight dollars, sixteen cents of barrel, 519 00:29:30,920 --> 00:29:38,360 Speaker 1: up almost two big dollars. Let's check here with Blakeabar. 520 00:29:38,440 --> 00:29:42,160 Speaker 1: Now get the latest world and national headlines. Mike Time, 521 00:29:42,200 --> 00:29:44,880 Speaker 1: Thank you very much. Former President George W. Bush is 522 00:29:44,880 --> 00:29:48,000 Speaker 1: sending the campaign trail for his brother Jeb Bush ahead 523 00:29:48,000 --> 00:29:52,080 Speaker 1: of the South Carolina Republican primary. Republican front runner Donald 524 00:29:52,120 --> 00:29:55,920 Speaker 1: Trump says Bush bringing in his brother is a desperate 525 00:29:56,000 --> 00:29:59,480 Speaker 1: move that didn't work out so good. Now he's bringing 526 00:29:59,520 --> 00:30:03,600 Speaker 1: in his father. Uh. I won't say anything. I'm gonna 527 00:30:03,640 --> 00:30:06,400 Speaker 1: save that for after his brother makes a statement, because 528 00:30:06,440 --> 00:30:09,760 Speaker 1: there's plenty to say about what happened. Okay. Jeff Bush 529 00:30:09,840 --> 00:30:12,760 Speaker 1: disagrees with Trump. What Donald Trump says about my brother 530 00:30:13,360 --> 00:30:15,920 Speaker 1: has no relevance to this. He is popular because he 531 00:30:16,040 --> 00:30:20,160 Speaker 1: kept us safe. People here are pro military pro veterans. 532 00:30:20,440 --> 00:30:23,680 Speaker 1: My brother served as commander in chief, and people respect that. 533 00:30:24,160 --> 00:30:28,280 Speaker 1: Hillary Clinton is accusing Bernie Sanders of diminishing President Obama's 534 00:30:28,320 --> 00:30:31,720 Speaker 1: record and short changing his leadership. Sanders called that a 535 00:30:31,880 --> 00:30:35,480 Speaker 1: low blow and has supported the president. The two Democratic 536 00:30:35,520 --> 00:30:39,160 Speaker 1: presidential candidates sparred for two hours last night in Milwaukee. 537 00:30:39,600 --> 00:30:42,200 Speaker 1: The World Health Organization says it will be at least 538 00:30:42,280 --> 00:30:46,600 Speaker 1: eighteen months before a Zeka virus vaccine will be available 539 00:30:46,680 --> 00:30:50,520 Speaker 1: for large scale trials. Global News twenty four hours a day, 540 00:30:50,600 --> 00:30:53,440 Speaker 1: powered by our twenty four hundred journalists more than a 541 00:30:53,560 --> 00:30:56,360 Speaker 1: hundred fifty bureaus from around the world. Now Michael Bart 542 00:30:57,040 --> 00:30:59,360 Speaker 1: assuring to a better risk on We've seen that all 543 00:30:59,440 --> 00:31:02,080 Speaker 1: morning again. For those of you just joining the economic 544 00:31:02,200 --> 00:31:05,920 Speaker 1: financial derby, Deutsche Bank retires senior debt. They will spend 545 00:31:05,960 --> 00:31:10,000 Speaker 1: a number of billions of dollars to a signal liquidity 546 00:31:10,360 --> 00:31:14,600 Speaker 1: is available. Marcus Will improved gallup hundred two points. Stay 547 00:31:14,640 --> 00:31:22,560 Speaker 1: with us with Bruce Kasman, JP Morgan, Bloomberg Surveillance Bloomberg Surveillance. 548 00:31:22,600 --> 00:31:24,400 Speaker 1: Brought to you by s c NB V Bank for 549 00:31:24,480 --> 00:31:26,480 Speaker 1: business on the Move. Are you looking for the right 550 00:31:26,520 --> 00:31:28,640 Speaker 1: banking partner? Go to s c nb dot com to 551 00:31:28,720 --> 00:31:31,040 Speaker 1: learn more. Now open in Long Island City. Get your 552 00:31:31,080 --> 00:31:38,960 Speaker 1: business moving with s CNB Global Business News twenty four 553 00:31:39,000 --> 00:31:42,080 Speaker 1: hours a day at Bloomberg dot Com, the Radio plus 554 00:31:42,160 --> 00:31:45,280 Speaker 1: Mobile Act and on your radio. This is a Bloomberg 555 00:31:45,360 --> 00:31:49,120 Speaker 1: Business Flash and I'm Karen Moscow. This updates brought to 556 00:31:49,200 --> 00:31:51,640 Speaker 1: you by Sector Spider e t F. So I buy 557 00:31:51,640 --> 00:31:54,120 Speaker 1: a single stock when you can invest in the entire sector. 558 00:31:54,320 --> 00:31:57,400 Speaker 1: Sector visits Sector spd r s dot Com or call 559 00:31:58,400 --> 00:32:02,360 Speaker 1: sector et F. Stocks are higher. They're rising, with the 560 00:32:02,480 --> 00:32:05,800 Speaker 1: sn P five hundred snapping its longest losing streaks since September, 561 00:32:06,120 --> 00:32:09,160 Speaker 1: as crewde prices rebounded and data showed retail sales increased 562 00:32:09,200 --> 00:32:11,520 Speaker 1: for a third month in January. We checked the markets 563 00:32:11,520 --> 00:32:14,560 Speaker 1: every fifteen minutes throughout the trading day on Bloomberg. SNP 564 00:32:14,760 --> 00:32:17,160 Speaker 1: five hundred up seven tenths percent or thirteen points to 565 00:32:17,280 --> 00:32:20,360 Speaker 1: eighteen forty two. Dow Jones Industrial average of seven tenths 566 00:32:20,400 --> 00:32:22,520 Speaker 1: per cent or a hundred eight points to fifteen thousand, 567 00:32:22,560 --> 00:32:25,160 Speaker 1: seven hundred sixty nine now is dacts up six tenths 568 00:32:25,160 --> 00:32:27,640 Speaker 1: percent or twenty four points to forty two ninety one. 569 00:32:27,920 --> 00:32:30,479 Speaker 1: Ten year Treasury down eleven thirty seconds. The yield one 570 00:32:30,480 --> 00:32:32,880 Speaker 1: point six nine percent yield on the two year point 571 00:32:32,920 --> 00:32:35,840 Speaker 1: six six percent. Nimex screwed oil up six point nine 572 00:32:35,840 --> 00:32:37,680 Speaker 1: per cent or a dollar eighty one to twenty eight 573 00:32:37,720 --> 00:32:40,160 Speaker 1: oh two a barrel Comex goal down eight tenths per 574 00:32:40,200 --> 00:32:42,480 Speaker 1: cent or ten dollars ten cents to twelve thirty seven. 575 00:32:42,560 --> 00:32:45,320 Speaker 1: Forty announced the Euro at dollar twelve fifty one the 576 00:32:45,520 --> 00:32:48,360 Speaker 1: end one twelve point eight nine. Deutsche Banks sang It 577 00:32:48,400 --> 00:32:50,840 Speaker 1: plans to offer to IVAC about five point four billion 578 00:32:50,880 --> 00:32:53,560 Speaker 1: dollars of bonds and euros and dollars as it seeks 579 00:32:53,600 --> 00:32:56,560 Speaker 1: to reassure investors at its financial position is solid and 580 00:32:56,640 --> 00:32:59,720 Speaker 1: retail sales increased for a third straight month into January. 581 00:32:59,800 --> 00:33:02,160 Speaker 1: That you can to present increase matching the previous months 582 00:33:02,200 --> 00:33:05,200 Speaker 1: advanced that was initially reported as a decline. That's a 583 00:33:05,200 --> 00:33:08,160 Speaker 1: Bloomberg business flash. Tom and Mike Karena, thanks so much. 584 00:33:08,240 --> 00:33:11,160 Speaker 1: This morning. Bloomberg Surveillance brought to you by c B 585 00:33:11,280 --> 00:33:14,000 Speaker 1: O E r M C. Come to the c B 586 00:33:14,280 --> 00:33:19,640 Speaker 1: O E Risk Management Conference February nine to March two, 587 00:33:20,400 --> 00:33:25,400 Speaker 1: February to March two at the Highatt Regency Coconut Point, Florida. 588 00:33:25,960 --> 00:33:29,000 Speaker 1: Register and learn more at c the O E R 589 00:33:29,200 --> 00:33:32,400 Speaker 1: M C US dot com. That's c B O. E. R. 590 00:33:32,600 --> 00:33:36,560 Speaker 1: M c us dot com. One of the great things 591 00:33:36,720 --> 00:33:41,160 Speaker 1: about harm bondles of UniCredit is in his English has 592 00:33:41,240 --> 00:33:44,920 Speaker 1: really gotten good, but because it's is German in the 593 00:33:45,080 --> 00:33:49,080 Speaker 1: English language, Mike, he writes with a bluntness that you 594 00:33:49,200 --> 00:33:53,680 Speaker 1: don't see in most market economic notes. Quote, there are 595 00:33:53,760 --> 00:33:57,800 Speaker 1: no signs whatsoever that the growth engine of the U. S. 596 00:33:57,880 --> 00:34:03,480 Speaker 1: Economy is starting to sput are Quite the contrary classic bundles. 597 00:34:03,800 --> 00:34:08,280 Speaker 1: Consumer spending has shown some impressive momentum at the beginning 598 00:34:08,440 --> 00:34:13,239 Speaker 1: of the year. You love art bundles. He is so direct. Yes, 599 00:34:13,440 --> 00:34:17,600 Speaker 1: Bruce Casmine would never write that. Well, Bruce, the numbers 600 00:34:17,680 --> 00:34:20,799 Speaker 1: not too bad today. Um, and uh, when you talked 601 00:34:20,800 --> 00:34:22,160 Speaker 1: about the U. S. Economy in just a moment, I 602 00:34:22,200 --> 00:34:23,640 Speaker 1: do want to go back to the idea of negative 603 00:34:23,680 --> 00:34:26,279 Speaker 1: rates and how it's affecting other economies. But we have 604 00:34:26,440 --> 00:34:31,480 Speaker 1: seen them. Uh, they haven't even officially gone into effect 605 00:34:31,560 --> 00:34:35,880 Speaker 1: in Japan. And Um, I guess the snarchy way to 606 00:34:36,160 --> 00:34:38,440 Speaker 1: put it would be, how's that working out for them? Um? 607 00:34:38,680 --> 00:34:40,560 Speaker 1: You know, you look at the currency and it is 608 00:34:40,640 --> 00:34:44,000 Speaker 1: going the opposite direction from what they want, suggesting that 609 00:34:44,080 --> 00:34:47,000 Speaker 1: maybe this isn't the cure. All that central banks would 610 00:34:47,080 --> 00:34:49,640 Speaker 1: hope it to be well, it's certainly not a cure 611 00:34:49,640 --> 00:34:51,880 Speaker 1: all and we shouldn't expect it to be one. And 612 00:34:52,239 --> 00:34:55,360 Speaker 1: and I totally agree that the experience in Japan so 613 00:34:55,480 --> 00:34:57,800 Speaker 1: far has not been one that's been in line with 614 00:34:57,920 --> 00:35:00,840 Speaker 1: what policymakers would have expected. But I think we have 615 00:35:00,920 --> 00:35:03,800 Speaker 1: to take the broader, you know picture here and recognize 616 00:35:03,800 --> 00:35:06,520 Speaker 1: how turbulent financial markets have been for a lot of 617 00:35:06,600 --> 00:35:10,600 Speaker 1: reasons here, and also recognize we've been experimenting with the 618 00:35:10,800 --> 00:35:13,160 Speaker 1: negative rates in Europe for over a year now, and 619 00:35:13,440 --> 00:35:17,080 Speaker 1: the results there are modestly encouraging. You've been seeing passed through. 620 00:35:17,840 --> 00:35:21,040 Speaker 1: You haven't been seeing a movement of money into cash 621 00:35:21,400 --> 00:35:23,880 Speaker 1: in any size um And I think, you know, taking 622 00:35:23,920 --> 00:35:25,840 Speaker 1: the picture broadly, the jury is still out, but I 623 00:35:25,840 --> 00:35:28,400 Speaker 1: wouldn't take the Japanese experience in the last couple of 624 00:35:28,480 --> 00:35:31,160 Speaker 1: weeks as a very strong sign of anything in terms 625 00:35:31,200 --> 00:35:33,680 Speaker 1: of how this this is going to work. Well. What 626 00:35:33,800 --> 00:35:36,040 Speaker 1: about in the US though, One of the things that 627 00:35:36,239 --> 00:35:39,080 Speaker 1: FED has been very worried about is we have a 628 00:35:39,200 --> 00:35:44,960 Speaker 1: very strong and important money market system. And you know, 629 00:35:45,040 --> 00:35:48,440 Speaker 1: if you're a business who relies on commercial paper to 630 00:35:48,680 --> 00:35:51,480 Speaker 1: you know, maybe make payrolls or to pay some of 631 00:35:51,560 --> 00:35:54,120 Speaker 1: your invoices. How are you going to feel about negative 632 00:35:54,160 --> 00:35:57,600 Speaker 1: interest rates? Well, I think for sure there's there's issues 633 00:35:57,680 --> 00:36:01,239 Speaker 1: the FED is concerned about. I think in addition, we 634 00:36:01,280 --> 00:36:04,239 Speaker 1: should recognize FED policy rates are at plus point five 635 00:36:04,320 --> 00:36:06,719 Speaker 1: on the deposit rate right now, so there's actually room 636 00:36:07,120 --> 00:36:09,480 Speaker 1: to maneuver if you need to provide support without even 637 00:36:09,560 --> 00:36:13,000 Speaker 1: thinking about going negative on on rates. Um And I 638 00:36:13,080 --> 00:36:15,800 Speaker 1: think this is a very good reason for thinking that 639 00:36:15,880 --> 00:36:17,400 Speaker 1: a FED is going to do this. It's only going 640 00:36:17,440 --> 00:36:20,360 Speaker 1: to do so in an environment in which the economy 641 00:36:20,440 --> 00:36:23,560 Speaker 1: feels like it's under enormous stress, going into recession or 642 00:36:23,640 --> 00:36:28,360 Speaker 1: something like that. Um So, I think those are important issues. 643 00:36:28,400 --> 00:36:30,680 Speaker 1: There are other technical issues the US has to deal with. 644 00:36:31,200 --> 00:36:34,399 Speaker 1: But I also think the idea here is that the FED, 645 00:36:34,520 --> 00:36:36,480 Speaker 1: if the economy is really under risk, is going to 646 00:36:36,560 --> 00:36:39,319 Speaker 1: recognize the money market funds are going to get hurt here, 647 00:36:39,360 --> 00:36:41,520 Speaker 1: but that's not going to be their primary concern, and 648 00:36:41,560 --> 00:36:43,600 Speaker 1: they're going to believe this is more of a transitional 649 00:36:43,680 --> 00:36:47,280 Speaker 1: issue that you requires moving slowly than than it actually 650 00:36:47,320 --> 00:36:49,640 Speaker 1: prevents them from going negative. Verse one of I know 651 00:36:49,760 --> 00:36:52,439 Speaker 1: you hang on the radio show here. You know every 652 00:36:52,520 --> 00:36:55,000 Speaker 1: minute that we're on all through your morning. But within 653 00:36:55,200 --> 00:36:57,840 Speaker 1: that one of our themes today has been one of 654 00:36:57,880 --> 00:37:01,080 Speaker 1: the central bankers witness Draggy speech in Brussels on Monday, 655 00:37:01,719 --> 00:37:05,320 Speaker 1: just begin to say, the institutional authorities were done. We 656 00:37:05,440 --> 00:37:09,200 Speaker 1: can't do anymore, will continue to be responsible, will continue 657 00:37:09,200 --> 00:37:11,320 Speaker 1: to be good citizens. As you say, we'll do a 658 00:37:11,360 --> 00:37:13,680 Speaker 1: blend of negative rates and the other stuff. But you 659 00:37:13,760 --> 00:37:16,200 Speaker 1: guys gotta finally step up and do something. Are we 660 00:37:16,280 --> 00:37:20,720 Speaker 1: anywhere near that nirvana? I I don't think that's nirvana, 661 00:37:20,760 --> 00:37:22,800 Speaker 1: and I don't think that's the right thing to do. 662 00:37:22,960 --> 00:37:26,000 Speaker 1: In fact, we ran that experiment in Japan for fifteen years. 663 00:37:27,400 --> 00:37:29,719 Speaker 1: It was putting Japan on a path which I think 664 00:37:29,840 --> 00:37:32,239 Speaker 1: was quite distressing. I mean, the end of the day, 665 00:37:32,520 --> 00:37:35,680 Speaker 1: we have limited tools. We have um problems that we 666 00:37:35,719 --> 00:37:40,040 Speaker 1: can't coordinate monetary and fiscal policy. But central banks have mandates, 667 00:37:40,120 --> 00:37:42,400 Speaker 1: and I think as long as they're not hitting their mandates, 668 00:37:42,440 --> 00:37:45,160 Speaker 1: they're gonna have to look within the realm of what's 669 00:37:45,520 --> 00:37:49,160 Speaker 1: appropriate and legal, uh to try and and and create 670 00:37:49,239 --> 00:37:52,400 Speaker 1: and innovate greater stimulus and monetary conditions. And I think 671 00:37:52,480 --> 00:37:54,879 Speaker 1: that's the that's probably the key message here is don't 672 00:37:54,960 --> 00:37:58,160 Speaker 1: underestimate UM the ability of central banks to innovate and 673 00:37:58,440 --> 00:38:01,320 Speaker 1: uh and do things, whether it will be effective or not, 674 00:38:01,440 --> 00:38:04,920 Speaker 1: I think, as we've talked about is a big uncertainty. Well, 675 00:38:05,000 --> 00:38:07,360 Speaker 1: let's talk about whether they might be needed or not, 676 00:38:07,520 --> 00:38:10,319 Speaker 1: you know, to at this point we don't need them. 677 00:38:10,560 --> 00:38:15,040 Speaker 1: But uh, what is your outlook for the US economy? 678 00:38:15,680 --> 00:38:19,439 Speaker 1: Janet Yellen kind of left it so no matter whether 679 00:38:19,480 --> 00:38:21,400 Speaker 1: you're a bull or a bear, you could have it 680 00:38:21,480 --> 00:38:25,840 Speaker 1: either way. Well, I think our outlook is that the 681 00:38:25,880 --> 00:38:30,320 Speaker 1: economy is being buffeted by some fairly powerful external shocks, 682 00:38:30,360 --> 00:38:33,239 Speaker 1: were creating a lot of divergence and sectors. Uh, we 683 00:38:33,360 --> 00:38:35,759 Speaker 1: do think that the economy can continue to grow here 684 00:38:35,800 --> 00:38:38,279 Speaker 1: at about a two percent or so pace. And and 685 00:38:38,400 --> 00:38:41,160 Speaker 1: I would agree with what you were talking about a 686 00:38:41,239 --> 00:38:43,680 Speaker 1: moment ago that today's retail sales report and some other 687 00:38:43,760 --> 00:38:47,120 Speaker 1: data last Friday's payroll report are consistent with a stronger 688 00:38:47,320 --> 00:38:49,960 Speaker 1: first quarter than than the previous quarter by a fair 689 00:38:50,000 --> 00:38:53,600 Speaker 1: amount um. But I think you know, the concern we 690 00:38:53,719 --> 00:38:57,520 Speaker 1: have is that within divergences, within these powerful shocks, there 691 00:38:57,520 --> 00:38:59,880 Speaker 1: are imbalance is being created in the economy, which do 692 00:39:00,320 --> 00:39:02,760 Speaker 1: generate some risks. And the big one we're worried about 693 00:39:03,480 --> 00:39:06,360 Speaker 1: is the profit squeeze on corporates right now. And I 694 00:39:06,560 --> 00:39:08,360 Speaker 1: note that that's not just because of the dollar and 695 00:39:08,440 --> 00:39:10,600 Speaker 1: not just because of weakness abroad. It's also because of 696 00:39:10,640 --> 00:39:13,840 Speaker 1: the very poor productivity performance right now. And our biggest 697 00:39:13,880 --> 00:39:16,560 Speaker 1: concern is that while we haven't seen the reaction in 698 00:39:16,600 --> 00:39:19,480 Speaker 1: a negative way yet, that the squeeze on profits could 699 00:39:19,600 --> 00:39:23,040 Speaker 1: get businesses to turn more negative here and then begin 700 00:39:23,200 --> 00:39:26,640 Speaker 1: to create more downward momentum. It's not our baseline, but 701 00:39:26,719 --> 00:39:29,040 Speaker 1: it's certainly a risk we think is more elevated right now. 702 00:39:30,280 --> 00:39:32,600 Speaker 1: Verse So you look at the week, and I know 703 00:39:32,719 --> 00:39:36,560 Speaker 1: it's exceptionally sensitive for you to comment on your good competitors. 704 00:39:36,600 --> 00:39:38,360 Speaker 1: And I had a chart this morning that showed the 705 00:39:39,520 --> 00:39:44,080 Speaker 1: the relative performance of your shop versus many others in equities. Um, 706 00:39:44,600 --> 00:39:47,719 Speaker 1: we we've tested the derivative markets this week. When you 707 00:39:47,840 --> 00:39:51,440 Speaker 1: deal in your financial economics, JP Morgan, do you have 708 00:39:51,520 --> 00:39:54,960 Speaker 1: a confidence on what's on the global balance sheet? Are 709 00:39:55,000 --> 00:39:57,520 Speaker 1: we smarter about what we have on a balance sheet 710 00:39:57,760 --> 00:40:01,640 Speaker 1: than we were in July of two in seven, Well, 711 00:40:01,840 --> 00:40:04,880 Speaker 1: leaving aside the specifics of JP Morgan performance, as we 712 00:40:05,000 --> 00:40:08,400 Speaker 1: look across the landscape for banks, certainly I think the 713 00:40:08,520 --> 00:40:11,000 Speaker 1: situation is is not only a lot better in terms 714 00:40:11,000 --> 00:40:14,520 Speaker 1: of bank balance sheets, in terms of capital positions, um, 715 00:40:14,800 --> 00:40:17,440 Speaker 1: but it's also I think a situation where banks are 716 00:40:17,520 --> 00:40:19,960 Speaker 1: not exposed in a in a big way, at least 717 00:40:20,000 --> 00:40:23,880 Speaker 1: not banks in the US to the kinds of UH 718 00:40:24,160 --> 00:40:26,400 Speaker 1: stress points that are hitting the energy sector and some 719 00:40:26,520 --> 00:40:29,040 Speaker 1: of the emerging markets that are weak. It's one of 720 00:40:29,080 --> 00:40:32,280 Speaker 1: the things that comforts us. This clearly tightening and financial conditions, 721 00:40:32,320 --> 00:40:35,279 Speaker 1: but the likelihood that it will spill into funding and 722 00:40:35,400 --> 00:40:38,360 Speaker 1: the kind of stresses that were associated in part with 723 00:40:38,440 --> 00:40:40,600 Speaker 1: the two thousand eight nine crises seems to us a 724 00:40:40,719 --> 00:40:42,960 Speaker 1: very very small probability. There are risks here, and there 725 00:40:42,960 --> 00:40:46,560 Speaker 1: are significant risks, but that's not one we're particularly concerned about. 726 00:40:48,000 --> 00:40:52,880 Speaker 1: So the rest of this year, the FED on hold 727 00:40:53,120 --> 00:40:55,920 Speaker 1: while we wait to figure this out. I think the 728 00:40:55,960 --> 00:40:58,759 Speaker 1: FATS on whole until we resolve the uncertainties. If we're 729 00:40:58,800 --> 00:41:01,759 Speaker 1: sitting here continuing to feel as uncertain as we are today, 730 00:41:01,840 --> 00:41:04,640 Speaker 1: the Fed's not moving, but there's you know, there's an 731 00:41:04,760 --> 00:41:08,480 Speaker 1: unfortunately elevated chance which we put in about that the 732 00:41:08,520 --> 00:41:11,120 Speaker 1: economy breaks down over the next few months, and you know, 733 00:41:11,239 --> 00:41:13,800 Speaker 1: we might then be talking much more seriously about negative 734 00:41:13,800 --> 00:41:16,719 Speaker 1: interest rates. However, if we don't, then we're growing to 735 00:41:17,040 --> 00:41:21,560 Speaker 1: present the unemployment rate is tightening and financial conditions stabilized. 736 00:41:21,680 --> 00:41:23,360 Speaker 1: We still think that we're going to be tightening in 737 00:41:23,400 --> 00:41:25,800 Speaker 1: the second half of the year. Bride Kasmin, thank you 738 00:41:25,880 --> 00:41:29,200 Speaker 1: so much. He leads a shop of economics at JP Morgain. 739 00:41:29,280 --> 00:41:30,880 Speaker 1: We would point out that one of the joys of 740 00:41:30,960 --> 00:41:35,080 Speaker 1: speaking with Dr Kasman is the comments on a probability 741 00:41:35,160 --> 00:41:38,040 Speaker 1: of an outcome, rather than the certitude which is permeated 742 00:41:38,560 --> 00:41:41,520 Speaker 1: so much of the debate. UH this week Michael McKee final, 743 00:41:41,680 --> 00:41:44,160 Speaker 1: I mean green on the screen, Michael McKee were two 744 00:41:44,760 --> 00:41:48,880 Speaker 1: some points below, down sixteen thousand. I guess the gloom 745 00:41:48,920 --> 00:41:53,520 Speaker 1: of bear market analysis of the last forty hours is paused. 746 00:41:54,440 --> 00:41:57,439 Speaker 1: You know, like those cowboy movies where the hero says, 747 00:41:57,600 --> 00:42:00,279 Speaker 1: my work is done here and it's on it's I'm 748 00:42:00,320 --> 00:42:03,680 Speaker 1: not here in the sunset for you and I We're 749 00:42:03,680 --> 00:42:07,200 Speaker 1: gonna leave now. Really, you know, are you working Monday? 750 00:42:07,719 --> 00:42:10,279 Speaker 1: We're not working Monday. We're gonna We're gonna leave. With 751 00:42:10,360 --> 00:42:12,239 Speaker 1: the Dow up a hundred five points, in the SMP 752 00:42:12,360 --> 00:42:16,480 Speaker 1: up twelve points, and Brent Crude up five West Texas 753 00:42:17,000 --> 00:42:20,000 Speaker 1: up five percent. We've done our job for the day. 754 00:42:20,440 --> 00:42:23,759 Speaker 1: My final tweet is My final tweet is crisis over 755 00:42:24,040 --> 00:42:27,000 Speaker 1: discuss something like that. We need to thank all of 756 00:42:27,080 --> 00:42:30,520 Speaker 1: our team led by Rachel Worspan worldwide, particularly to John 757 00:42:30,600 --> 00:42:33,719 Speaker 1: Farrell on an airport John Farrell moving from London to 758 00:42:33,760 --> 00:42:36,760 Speaker 1: New York that was announced today out on Twitter. I'm shocked. 759 00:42:36,800 --> 00:42:40,880 Speaker 1: I had no idea this was happening. Like the women, children, 760 00:42:41,040 --> 00:42:43,240 Speaker 1: hor I know his people didn't talk to mind people. 761 00:42:43,480 --> 00:42:48,400 Speaker 1: John Farrell safe travel across the Atlantic. This is Bloomberg's surveillance.