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Speaker 1: Broadcasting live to New York, Colomberg to Washington, d C,

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Speaker 1: the Country Series Channel one ninety and around the globe.

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Speaker 1: The Bloomberg Radio Plus happened Bloomberg dot Com. This is

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Speaker 1: Bloomwork Surveillance. Good morning everyone at Barry Red Hilton. I'm

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Speaker 1: king Michael McKee off this week our economic indicators. We'll

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Speaker 1: look for those at nine o'clock our case Shiller or

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

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Speaker 1: dealer r I A that's ready to listen Call eight

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Speaker 1: six six four six two three six three eight or

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Speaker 1: visit Commonwealth dot com to learn more eight six six

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Speaker 1: four six to three six three eight. Visit Commonwealth dot

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Speaker 1: com to learn more. Well, we've got economic data coming

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Speaker 1: up on a housing has been a seattle slew of

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Speaker 1: economic data in the last few days. Stephen shootou is

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Speaker 1: with missooo and we welcome in this morning. Stephen, good morning,

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Speaker 1: Good morning town. Where where is our economic data right now? Sure?

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Speaker 1: Yelling clearly showed some glimmers. We've seen glimmers. Good job market,

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Speaker 1: I guess, but recently there's been some challenging data. Which

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Speaker 1: way is it well? I think the reality is this

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Speaker 1: economy is just stuck it. It's just a matter whether

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Speaker 1: it used to be stuck above two two to two

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Speaker 1: and a half percent. Now it seems to be stuck

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Speaker 1: in this one and three quarters to two and a

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Speaker 1: quarter type growth. Right There has been about a bit

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Speaker 1: of modest downshift in the growth environment, but it's not

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Speaker 1: it's nothing to really get worried over at this point.

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Speaker 1: It's just a modest downturn. I think a lot of

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Speaker 1: that reflects the change in the expectations of monetary policy,

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Speaker 1: and I think it reflects a lot of what's happening

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Speaker 1: in terms of the counting market. What is the catalyst

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Speaker 1: that it will be better out X number of months, quarters,

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Speaker 1: or years. It's really a function of two things. It's

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Speaker 1: a function of demand related policies being implemented globally, and

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Speaker 1: they starts starting to be some discussion of that coming

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Speaker 1: out of China and coming out of Japan. It's also

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Speaker 1: demand related policies being implemented here. Monetary policy has run

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Speaker 1: its course it really has no more major today. Well,

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Speaker 1: I don't think it's Yellen's message today. Unfortunately, she's probably

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Speaker 1: gonna repeat everything that came out of the policy statement. Uh,

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Speaker 1: And I don't think she's gonna give too much emphasis

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Speaker 1: one way or the other. This is something that she

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Speaker 1: should be doing when she speaks in front of Congress

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Speaker 1: and when she gives presentations and internal responses to questions

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Speaker 1: from members of Congress about what they should be doing

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Speaker 1: versus what she can do to contribute to growth environment.

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Speaker 1: So let's talk a little bit about infrastructure spending since

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Speaker 1: if that it's not going to be monetary, it's likely

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Speaker 1: to be fiscal. You mentioned you recently experienced the joy

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Speaker 1: that is Amtrak. Do we have uh any money to

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Speaker 1: spend over there? What can be done to bring the

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Speaker 1: United States into the twentieth century of transport? And I

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Speaker 1: choose that century purposefully. Yeah, No, I agree a percent

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Speaker 1: with you, Barry Um. There's a lot they can do.

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Speaker 1: I mean, there's a lot of projects that they know

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Speaker 1: they need to do. There's a lot of infrastructure build

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Speaker 1: in terms of bridges, uh and tunnels and roads that

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Speaker 1: we need to There's a lot of simple stuff we

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Speaker 1: do there's ports that we need to construct and rehabilitate. UM,

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Speaker 1: there's whole coastline developments that we can do. It's just

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Speaker 1: a matter of setting the priority and getting them going

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Speaker 1: in the right direction. Part of the thing that we

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Speaker 1: need to do is we need to begin to focus

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Speaker 1: in on these issues and begin to earmark money that

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Speaker 1: goes for them, uh and really really make sure that

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Speaker 1: we're getting our bang for the buck in terms of

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Speaker 1: the process. And I think one of the reasons why

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Speaker 1: people are so reluctant to use fiscal policy. We've seen

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Speaker 1: how much pork gets loaded into fiscal policy developments, and

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Speaker 1: therefore people get disappointed with spending that money. Uh And

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Speaker 1: and this becomes one of the problems. So it really

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Speaker 1: requires an increased controls being put on the spending and

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Speaker 1: making sure the spending is going where we need to

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Speaker 1: be done. And then you'll get a bigger bang for

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Speaker 1: your buck rather than getting it letting it get all

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Speaker 1: you know, kind of diffused out through the pork of politics.

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Speaker 1: You know, I look at it where we are and

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Speaker 1: this you know, we here from so many people Stephen

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Speaker 1: like yourself, that this is what we need to be done.

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Speaker 1: It has no dovetail with the presidential campaign, with the

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Speaker 1: dialogue of the campaign, and with any of the back

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Speaker 1: and forth of really any of the candidates. Maybe I

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Speaker 1: would exclude Secretary Clinton from that where she's trying to

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Speaker 1: do a bigger national view. You know that may change

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Speaker 1: in the next six weeks or six hours, But where

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Speaker 1: do you have faith that any capital around the world

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Speaker 1: wants to affect fiscal stimulus? Well, again, as I said,

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Speaker 1: I think you know you're started teaching. Does some commentary

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Speaker 1: of it coming out of Japan? I wonder whether that's

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Speaker 1: going to be executed properly. And keep in mind japan

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Speaker 1: as tried this before and failed. Part of the reason

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Speaker 1: why they failed before they hadn't corrected their balance sheets

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Speaker 1: before they attempted it. China is now talking about doing

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Speaker 1: exactly the same thing, But again, China hasn't corrected its

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Speaker 1: balance sheets as well. So I mean, there could be

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Speaker 1: some positive spill over to global growth, but I doubt

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Speaker 1: if it's gonna solve China's problem with the correct their

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Speaker 1: balance sheet problem. Here. On the other hand, we have

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Speaker 1: solved most of our balance sheet related problems. I think

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Speaker 1: you will get the bank for you about But I

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Speaker 1: agree with you from the political side, very very disappointing

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Speaker 1: where the rhetoric is going right now and where the

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Speaker 1: focus is right now. I mean, are you modeling sub

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Speaker 1: four GDP's nominal for nominal GDP? Guess that's very that's

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Speaker 1: I honestly can tell you, folks, I never thought I'd

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Speaker 1: say that sub fo d P sixhenominal GDP correct topline

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Speaker 1: ad inflation and the real g d V just as

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Speaker 1: a simple calculation. So within that, what sectors of the

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Speaker 1: economy do you think are potentially, uh the leaders of

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Speaker 1: our three to four percent GDP. Well, that's a good question.

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Speaker 1: I think if you look at it from where we

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Speaker 1: are right now, the real thing is going to be

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Speaker 1: the currency environment, and I think there is a transition

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Speaker 1: taking place in the currency. I think the currency is

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Speaker 1: beginning to shift its focus from nominal short term interest

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Speaker 1: rate differentials to real short term interest rate differentials, i e.

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Speaker 1: Those countries which are stuck in deflation I e. Japan,

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Speaker 1: um and the region of Europe. I think where they're

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Speaker 1: going to see their currencies on average tend to appreciate

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Speaker 1: and the dollar tend to go lower. And I think

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Speaker 1: that's going to benefit some of the cyclical side in

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Speaker 1: the U. S. Economy. Now, this isn't the great stock call.

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Speaker 1: This is a rotational call within the stock market. I

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Speaker 1: think the multiple is fairly expensive where it is right

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Speaker 1: now given earnings UM. But I do think there is

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Speaker 1: an opportunity for the cyclical trade to continue. Although you

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Speaker 1: just had some commentary coming over from other colleagues on

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Speaker 1: the street talking about big potential declines in commodity prices

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Speaker 1: coming down the pipeline. I think the dollar is going

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Speaker 1: to defend us a lot in that regard and keep

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Speaker 1: that from happening. Steve Zo, well today some wisdom there

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Speaker 1: as we go to the yelling uh speech at the

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Speaker 1: Economic Club of New York. Bloomberg Radio will carry that

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Speaker 1: in its entirety. Futures negative six down, futures negative sixty seven,

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Speaker 1: oil down ninety three cents. Now that's a big move

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Speaker 1: in this hour of Bloomberg surveillance. Brought to by Vobo Cars,

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Speaker 1: White Planes. Visit Volba Cars, White Planes dot Com to

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Speaker 1: the news. Here's Michael Barr, Tom Berry, thank you very much.

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Speaker 1: The Cypriot Foreign Ministry says it's over. A man who

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Speaker 1: hijacked domestic egypt airplane has been arrested. Cypriot authorities had

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Speaker 1: ruled out terrorism as a motive. One official says the

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Speaker 1: hijacker was most likely motivated by a personal relationship. Egypt

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Speaker 1: air Flight one was heading from Alexandria to Cairo when

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Speaker 1: the hijacker forced it to land in Cyprus. About fifty

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Speaker 1: five people were on board the airbus. Syrian antiquities officials

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Speaker 1: and as two days of work has ended with hundreds

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Speaker 1: of minds still in the archaeological site in the historic

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Speaker 1: town of Palmira, recently liberated from the Islamic State group,

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Speaker 1: experts have so far removed one hundred fifty bombs planted

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Speaker 1: by Islamic State. Syria's head of Antiquities and Museum says

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Speaker 1: the technical team could not reach some remote sites because

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Speaker 1: of the mines. South Korea says North Korea fired a

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Speaker 1: short range projectile from an area near its eastern coast.

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Speaker 1: Joint chiefs of Staff Officials says it is unclear if

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Speaker 1: the projectile was a ballistic missile or an artillery show.

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Speaker 1: It appears to be another weapons test scene as a

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Speaker 1: response to military drills between the US and South Korea.

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Speaker 1: Global News twenty four hours a day, powered by our

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Speaker 1: two hundred journalists and more than one hundred fifty news

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Speaker 1: bureaus from around the world. I'm Michael barn Tom Barrys,

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Speaker 1: and Michael thanks so much time off for the Bloomberg

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Speaker 1: NBC Sports Report. Next top. Seems like it's always something

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Speaker 1: with Matt Harvey. There was the elbow surgery last year,

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Speaker 1: in the debate over how many innings he should pitch.

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Speaker 1: When we last saw Harvey in New York, he was

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Speaker 1: convincing manager Terry Columns that keep men that World Series

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Speaker 1: game that he ended up losing. Harvary now dealing with

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Speaker 1: a medical issue that arose unexpectedly and it is not

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Speaker 1: orthopedic related. He may come to New York for more tests.

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Speaker 1: He will not make his schedule start today. Not known

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Speaker 1: if Harvey can still pitch the Mets opener Sunday night

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Speaker 1: in Kansas City. Latest Knicks lost in New Orleans. Nicks

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Speaker 1: were up ten and then scored only ten in the

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Speaker 1: third quarter. Carmelo Anthony scored twenty two in the final minute.

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Speaker 1: He was greeted on the court by a young boy

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Speaker 1: that was that was the first hound that that ever happens.

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Speaker 1: Very surprise, surprise, a little kids, a little kid. I

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Speaker 1: was shocked. I didn't really know who was it until

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Speaker 1: I actually looked over and so that it was a

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Speaker 1: It was a kid that's lost in Miami one ninety nine.

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Speaker 1: The dynasty continues with the Yukon women be Texas eight

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Speaker 1: six sixty five, off to a ninth Strade Final four,

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Speaker 1: seeking a fourth straighte n C Double A title. Yukon

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Speaker 1: has won seventy three games in a row a hundred

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Speaker 1: and nineteen to the last a hundred and twenty, and

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Speaker 1: all of those wins by ten or more points. With

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Speaker 1: the Bloomberg NBC Sports Update, John Statue, that's John, thanks

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Speaker 1: so much. Lots to talk about this one. It has

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Speaker 1: been a most interesting day. Let's review some of the news.

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Speaker 1: John Williams of the San Francisco FED making a routine speech,

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Speaker 1: I guess in Singapore, but it really garnered some headlines.

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Speaker 1: Maybe not market moving, but he really taking a shot

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Speaker 1: at the idea of the dots having value. He felt

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Speaker 1: they did have value and wanted to walk away from

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Speaker 1: negative rates um as well. Some other news slow as

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Speaker 1: well of Europe at all. Really looking forward to the

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Speaker 1: yelling uh speech here at twelve noon. We'll see that

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Speaker 1: in about three hours, always important speeches. She speaks to

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Speaker 1: the Economic Club of New York. Futures deteriorate. There's a

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Speaker 1: weight to the tapes of the morning. Oil Down ninety,

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Speaker 1: Barry Dholes and Tom Keene. Bloomberg Surveillance. Bloomberg Surveillance brought

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Speaker 1: a d R dot org. Oil leading commodities lower, pulling

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Speaker 1: down the currencies of raw material producing nations, and helping

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Speaker 1: to lift government bonds. You want to stock index futures

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Speaker 1: are declining as well, and we check the markets every

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Speaker 1: fifteen minutes throughout the trading day on Bloomberg SNP e

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Speaker 1: Many futures down six points, Dowie Mini futures down sixty

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Speaker 1: NAS DOCU Many futures down ten that action, Germany's down

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Speaker 1: two tenths per cent ten Your treasury of nine thirty seconds,

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Speaker 1: the yield one point eight five percent yield on the

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Speaker 1: two year point eight five percent. Namax screwed oil down

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Speaker 1: two point four percent, or ninety four cents at thirty

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Speaker 1: eight forty five of barrel. Comex's goold is little change,

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Speaker 1: down sixty cents to twelve forty announce the euro a

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Speaker 1: dollar twelve oh seven, the yen one thirteen point four six.

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Speaker 1: Federal Reserve Bank of San Francisco President John Williams saying

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Speaker 1: the U S economy appears to be weathering cooler global growth,

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Speaker 1: and he repeated that the central Bank will race interest

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Speaker 1: rates at a gradual pace. Well it spent the comments

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Speaker 1: in a speech in Singapore today, Lenar, the second largest

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Speaker 1: US home builder, reporting first quarter profit and revenue that

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Speaker 1: beat outalysts estimate, says US job gains bolster demand for

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Speaker 1: real estate purchases, and that's a Bloomberg business flash. Tom

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Speaker 1: and Berry, Karen I think so much, Tom Keane and

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Speaker 1: Berry holds right now. It is on Wall Street. The

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Speaker 1: following is from Bloomberg View opinions in commentary from Bloomberg

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Speaker 1: of Moosts. I'm Justin Fox, a columnist for Bloomberg View.

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Speaker 1: For the past five years, Kansas Governor Sam Brownback has

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Speaker 1: been conducting a fiscal experiment. Brownback is pushed through big

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Speaker 1: cuts in taxes on individuals and businesses, the March to Zero,

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Speaker 1: he calls it. The theory is that the tax cuts

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Speaker 1: will spur business creation and job growth. How has that

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Speaker 1: been working out? I took a look at the states

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Speaker 1: jobs numbers since Brownback took office in two thousand eleven

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Speaker 1: and compared them to those of its neighbor to the north, Nebraska,

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Speaker 1: which has a similar economy but has not undertaken a

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Speaker 1: Kansas style tax experiment. Well, employment has been rising faster

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Speaker 1: in Nebraska than in Kansas, and the growth gap between

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Speaker 1: the two states has gotten bigger over the past year

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Speaker 1: or so. There are lots of possible reasons for this.

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Speaker 1: Kansas has oil wells in the past year has been

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Speaker 1: tough on the oil industry. Kansas also has a bigger

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Speaker 1: manufacturing sector than Nebraska, and the global slowdown as hurt manufacturers. Still,

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Speaker 1: it does cast some doubt on the idea that cutting taxes,

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Speaker 1: especially in a state where axes weren't all that high

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Speaker 1: to begin with, is the ticket to economic resurgence. Taxes matter,

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Speaker 1: but other things matter more. I'm Justin Fox, a columnist

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Speaker 1: for Bloomberg View. For more Bloomberg opinion and commentary, please

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Speaker 1: go to Bloomberg View dot com or view go on

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Speaker 1: the Bloomberg terminal. This has been Bloomberg View and Bloomberg

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Speaker 1: View commentaries can be heard on early weekdays. I'm Bloomberg Radio.

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Speaker 1: What a most interesting day. We've been very heavy on

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Speaker 1: economics with Cherry Yellen coming to New York and some

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Speaker 1: of the other news flow out there. Let's switch gears

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Speaker 1: and let's go over to investment. Barry Redholtz with us,

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Speaker 1: of course, for years, the big picture really blending in

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Speaker 1: an interesting mix, always centered on common sense, or at

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Speaker 1: least the attempt of common sense. Barry is a common

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Speaker 1: sensical to own individual stocks and bonds like her parents did,

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Speaker 1: or do we just give it up and go with

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Speaker 1: managed products? You know, when you look at the academic evidence,

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Speaker 1: when you look at all the re searching all the data,

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Speaker 1: as much as it's fun to chatter about individual stocks

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Speaker 1: at cocktail parties and barbecues, and as much fun as

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Speaker 1: we have plowing through, and at least for me, plowing

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Speaker 1: through research reports and quarterly statements. The data makes it

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Speaker 1: pretty clear it's much more efficient, much more cost effective,

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Speaker 1: much more tax efficient to own a broad index and

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Speaker 1: leave it alone for a few decades. Now, that doesn't

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Speaker 1: mean you can't take a small percentage of your portfolio

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Speaker 1: and put it into your favorite sector, a tactical allocation,

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Speaker 1: or things along those lines, but the bulk of the

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Speaker 1: average investors money should be broadly allocated to low cost

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Speaker 1: indices around the world. Let's walk through that. We're gonna

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Speaker 1: go through the exercise. Folks, if you're bored by it,

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Speaker 1: put both hands in the wheel. Don't take notes. You

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Speaker 1: can take notes off our podcast later. So, if I

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Speaker 1: have an active fund, the average fee is blah blah blah,

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Speaker 1: about one percent. If I have an index fund, the

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Speaker 1: average free is about ten basis points. So let's say

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Speaker 1: Ridholts is wrong and it's not a point nine percentage

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Speaker 1: point per year difference. Let's say it's point five instead

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Speaker 1: of point nine. The difference, Now, Barry, is there was

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Speaker 1: a time where we made seven percent, eight nine, double digit.

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Speaker 1: There was this belief in in equity returns, in total

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Speaker 1: return in bonds, So that delta in the fee feels

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Speaker 1: differently now than it felt fifteen years ago. If the

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Speaker 1: so called new normal thesis is correct, and I have

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Speaker 1: to tell you I'm not a believer in that, but

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Speaker 1: if that is correct, and we're looking at five six

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Speaker 1: seven percent growth, uh for an index like the SNP

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Speaker 1: five DRED with dividends reinvested versus the past century, which

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Speaker 1: is nine or ten percent with dividends reinvested, then even

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Speaker 1: fifty basis points compounded over time makes a big difference.

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Speaker 1: So there's really two issues we're talking about. One is

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Speaker 1: do we ignore a century of data and and pretend

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Speaker 1: mean regression isn't gonna happen. When you look at the

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Speaker 1: market returns from two thousand to today, they are very

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Speaker 1: similar to the market returns we saw from nineteen to

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Speaker 1: eighty two. I think when we finally come out of

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Speaker 1: the other side of what I've been calling the Reinhardt

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Speaker 1: and rogue Off post credit crisis recovery, the reason this

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Speaker 1: recovery feels so punk is because it's not your usual

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Speaker 1: post World War two recession recovery. This is a recovery

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Speaker 1: from a credit crisis. And when you look at the

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Speaker 1: piece roy Not, roy Not and Rogoff put out in

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Speaker 1: December of of two thousand and seven, before we saw

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Speaker 1: the collapse and bear Sterns and long before A. I. G.

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Speaker 1: And Lehmann hit the skids, they said, when you have

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Speaker 1: a credit crisis, you should expect stock markets to get

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Speaker 1: cut in half, real estate to drop by about a third,

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Speaker 1: and the recovery to take at least a decade of

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Speaker 1: subpar GDP, subpar job creation, subpar retail spending. We've had that.

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Speaker 1: I want to switch gears now, but take the same

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Speaker 1: theme over to Wall Street. Right now, Wall Street is

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Speaker 1: grasping with what to do with fixed income. This is

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Speaker 1: a huge issue. I would suggest most of the global

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Speaker 1: Wall Street naval gazing on fixed income is about profitability.

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Speaker 1: It's not about competition or regulation. Is that the other thing?

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Speaker 1: How do you make money in a low coupon off

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Speaker 1: a low coupon desk? So if you're looking at fixed income,

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Speaker 1: you have a couple of options. And we discussed yesterday

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Speaker 1: dividends are not a substitute uh for fixed income. However,

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Speaker 1: you can look at things like municipal bonds, which on

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Speaker 1: a tacks adjusted basis are actually paying a fairly reasonable rate.

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Speaker 1: And you could look at an assortment of reats in

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Speaker 1: both UH the US and overseas as another way to

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Speaker 1: get some income without taking a whole lot of additional risk.

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Speaker 1: And risk is the key word there. Where people get

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Speaker 1: into trouble is where they're reaching for yields by either

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Speaker 1: going further out on the duration curve or further out

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Speaker 1: on the risk curve, thinking that that those chickens aren't

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Speaker 1: going to come home to roost. We learned to know

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Speaker 1: ay a O nine, taking additional risk for a few

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Speaker 1: additional basis points of of coupon is a terrible, terrible

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Speaker 1: approach to to fix income investing. Yeah, I just I

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Speaker 1: think it's challenging all in all, What do we do

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Speaker 1: if we have a two oh one k were not

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Speaker 1: like John Tucker, it's been on steroids incredibly fortunate digit returns.

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Speaker 1: You know, the key factor for retirement accounts is is

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Speaker 1: one number and that's your age to retirement. So if

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Speaker 1: you're forty years old and you have twenty five years

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Speaker 1: until you retire, you should be very heavy equities. You

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Speaker 1: should be very heavy global allocation, and you should expect

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Speaker 1: that this is going to be a four one K,

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Speaker 1: a three oh one K, of five oh one K,

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Speaker 1: a two o K, and a six o one K

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Speaker 1: before you're done. You should expect that sort of volatility.

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Speaker 1: But it's that is why you get returns. If there

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Speaker 1: wasn't volatility, if there wasn't risk. You know, if you

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Speaker 1: want no risk and no volatility, you get cash and

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Speaker 1: you lose a little bit versus inflation every year, and

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Speaker 1: that's a money loser. If you want a little bit

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Speaker 1: of risk, well you buy treasuries and you'll see two

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Speaker 1: percent and that's barely going to keep up with inflation.

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Speaker 1: If you want to retire, you have to accept risk

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Speaker 1: and volatility as part of that equation. That means equities,

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Speaker 1: that means twenty to thirty years, and that means you

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Speaker 1: have to be willing to just sequester these uh portfolio

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Speaker 1: was and just waited out for for the decades. I've

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Speaker 1: been distressed recently at the number of people that have

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Speaker 1: quietly told me they're not retiring, and they don't A

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Speaker 1: lot of them are very active professionals. They don't want

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Speaker 1: to retire, but also that dreaded word. They can't well

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Speaker 1: that that's a dual issue. You have some people who

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Speaker 1: know that as soon as they had to Florida start

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Speaker 1: start golfing. Uh, they're on a really short timeline. But

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Speaker 1: the bigger concern is and and Charlie Ellis and others

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Speaker 1: have written quite eloquently about this. We have a fomenting

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Speaker 1: retirement a crisis. It is something that we are wildly

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Speaker 1: under saved for, not just um, the upper classes, the

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Speaker 1: middle classes especially Sha, but Americans are underfunded. Give me here,

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Speaker 1: masters in business. Uh. Last weekend was Philip Tetlock, which

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Speaker 1: was good, fascinating. We're gonna have him on the show

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Speaker 1: this week um. And and coming up this weekend, we

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Speaker 1: we have um Tom Dorsey of Dorsey Wright, one of

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Speaker 1: the original technicians, essentially brought point and figure charting back, fascinating,

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Speaker 1: fastenating conversation, brought relative analysis, relative strength, strength, That's gonna

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Speaker 1: be fascinating. I'm a huge fan of Tom Dorsey's groundbreaking work.

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Speaker 1: Another Hour with Barry rindholds, this is Bloomberg's surveillance