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Speaker 1: Masser and Jason Kelly on Bloomberg Radio Live from the
Speaker 1: Miami Convention Center. We are live on Radio Row Carol
Speaker 1: Master along with my co host Jason Kelly on this
Speaker 1: FED decision day and of course awaiting that latest FED decision.
Speaker 1: And the FED decision is out as expected, though leaving
Speaker 1: the benchmark rate unchanged, says policy is appropriate. They are
Speaker 1: lifting the ioe er rate five basis points and we'll
Speaker 1: be looking at that reverse repo to one point five percent.
Speaker 1: The FED extending REPO operations at least through April. That
Speaker 1: is one thing that Wall Street has been very closely watching,
Speaker 1: all right, and I'm just taking a quick look in
Speaker 1: terms of market reaction. Looks like equities are certainly pretty
Speaker 1: much so far staying pat uh in terms of where
Speaker 1: they were prior to the release of that information. And
Speaker 1: I'm just checking on that tenure uh it two is
Speaker 1: pretty much staying where it is, so we're not seeing
Speaker 1: too much reaction. I think widely expected what we were
Speaker 1: going to get from the Fed today in this first
Speaker 1: meeting of twenty but nonetheless at press conference will be
Speaker 1: very key in terms of predicting a little bit of
Speaker 1: outlook and what he has to say about some of
Speaker 1: the big factors are out there, including the virus. Absolutely,
Speaker 1: we're going to break that down what the statement has
Speaker 1: We're gonna hear from j Poll in just about half
Speaker 1: an hour. But before we get to that end to
Speaker 1: our team's analysis, let's get to Charlie Pett back into
Speaker 1: your k Charlie, thank you very much, and good afternoon,
Speaker 1: Happy FED Wednesday. With the DAL, the SMP and NED
Speaker 1: stack all higher. Right now, we are seeing the tenure
Speaker 1: up thirteen thirty seconds yield there one point six o percent.
Speaker 1: We've got the SMP higher by eleven again. There are
Speaker 1: four tenths of one percent thirty two eighties seven right now.
Speaker 1: The down pushing higher by a hundred and thirty one points,
Speaker 1: up five tenths and one percent. Navstak is up thirty
Speaker 1: eight points again. There are four tenths of one percent.
Speaker 1: Gold up three tenths now fifteen seventy one the ounce
Speaker 1: crude oil West Texas Intermedia down thirty five cents to
Speaker 1: barrel Trump. There of seven tenths of one percent in
Speaker 1: addition to the FED. The other big story today has
Speaker 1: to be earnings and earnings reactions. Lots coming out after
Speaker 1: the bell. Facebook will be among them, along with Tesla
Speaker 1: and Microsoft. Apple shares climbing to a record after last
Speaker 1: night's report up by three percent. A m D the
Speaker 1: other direction down by seven percent. General Electric the major
Speaker 1: standout today up by ten percent. Recapping. We've got the
Speaker 1: tenure up twelve thirty seconds yield one point six one percent.
Speaker 1: SMP up eleven again, there are four tenths of one percent.
Speaker 1: I'm Charlie Pellett's that is a Bloomberg Business Flash. You're
Speaker 1: listening to Bloomberg Business Week with Carol Messer and Jason
Speaker 1: Kelly on Bloomberg Radio. Do you want to get more
Speaker 1: reaction to today's FED decision? This is a big deal,
Speaker 1: first meeting of the year on while it was pretty predicted, um,
Speaker 1: fairly well, really well by economists and folks watching this decision.
Speaker 1: We still have to wait for that live press conference
Speaker 1: that's gonna happen at the bottom of the hour with
Speaker 1: j Pell c s Yankees with US back with US
Speaker 1: Chief Economic Advisory UM kill Point. He is a former
Speaker 1: US Treasuring and White House National Security Council staff member
Speaker 1: based in Washington. He's in our Bloomberg Interactive Broker studio
Speaker 1: back in New York. Also with US is Frances Donald,
Speaker 1: chief economist, head of macro economic strategy at Manual Life
Speaker 1: Asset Management. On the phone from Toronto. Steve, let's start
Speaker 1: with you, so nice to have you back with US. UM.
Speaker 1: You know, we all pretty much called this one fairly well.
Speaker 1: What's important about this, this meeting, this decision so far,
Speaker 1: and what's to potentially come from j Powell? Well, the
Speaker 1: meeting came off as expected, as you said, no big surprises.
Speaker 1: Everything was anticipated. H think that the biggest challenges they
Speaker 1: see the FED right now, are this uh um quantitative
Speaker 1: easy which they don't describe as quantitative easy, adding to
Speaker 1: their balance sheet to deal with the refail market problem. Uh.
Speaker 1: They've telegraphed that that'll end after tax season in April.
Speaker 1: But I think the challenge is going to be while
Speaker 1: they don't see it as quantitative easy, and they can
Speaker 1: explain why the market season is quantitative easy, and when
Speaker 1: it stops, how they explain it. It's gonna be very,
Speaker 1: very important so as not to leave markets spook the
Speaker 1: way we saw at the end of two thousand and
Speaker 1: eighteen right well, and for instance down we remember that
Speaker 1: all too well. That really for that first period in
Speaker 1: Chipell's tenure, it felt like the market was cool with
Speaker 1: the statement, and then he opened his mouth and investors started,
Speaker 1: uh selling off. He's learned a lot about communication. I
Speaker 1: think it's fair to say, but what do you read
Speaker 1: in the statement and what do you need to hear
Speaker 1: when we do hear from chair Powle it a bit well,
Speaker 1: I think in terms of what do you analysis today,
Speaker 1: I'm sorry, I was going to go ahead, Francis from
Speaker 1: the statement. The message from the statement is pretty clear,
Speaker 1: which is that cheer Powell isn't blinking. He's not blinking
Speaker 1: over coronavirus. He's not vocal blinking on market based in place.
Speaker 1: He's guys falling, falling every little in the statement, he's
Speaker 1: only made two slow changes to the language. If we're
Speaker 1: gonna get any form of debbish or pocket plant, it's
Speaker 1: going to come in the press conference. But my sense
Speaker 1: is if they wanted to send a message that the
Speaker 1: power put us back on, there would have been more
Speaker 1: to digest for the statement, and there just isn't. So
Speaker 1: if we head into that press conference and we don't think,
Speaker 1: not my senses, that equity markets, they might be a
Speaker 1: little spirits for lack of a better term. Steve, come
Speaker 1: on in honest, Well, I've Ruth Francis. Uh uh. They're
Speaker 1: very careful in the statement. There was really nothing that
Speaker 1: they needed to say. The you know, the the slight
Speaker 1: tick up and interest on access reserves was expected not
Speaker 1: to have done. It would have probably just cause some
Speaker 1: head scratching because everything is working so well right now.
Speaker 1: Probably the only irritant out there is is some recent
Speaker 1: comments by the President about why the Fed doesn't do
Speaker 1: more to to cut interest rates. But they're just going
Speaker 1: to be steady about that. They don't have to do
Speaker 1: anything about that. What they do need to be thinking about, though, is, um,
Speaker 1: what are some additional recession fighting tools that they need
Speaker 1: to be developing internally and thinking about so that when
Speaker 1: we come on down the line and then they haven't
Speaker 1: cut rates, or even if they have cut them a
Speaker 1: little bit more than they have so far, what's going
Speaker 1: to be in their tool kit to deal with that?
Speaker 1: You know, you know, I'm Steve. I want to ask you.
Speaker 1: I I'm looking at our FED live blog and everybody
Speaker 1: from the you know, our Bloomberg news team and economics
Speaker 1: team kind of weighing in, and um, they pointed out
Speaker 1: one of our individuals, UH, the FED as marked consumers
Speaker 1: spending to market as the only real change in the statement.
Speaker 1: And here's why it's maybe worth keeping a watch on it.
Speaker 1: The annual growth in the national paychecks that we're talking about,
Speaker 1: the twelve month change an average weekly hours average weekly
Speaker 1: pay payrolls has decelerated to three point a percent, its
Speaker 1: slowest rate of growth since January. UM. Consumer, we talk
Speaker 1: about it, you know, at nauseum about how important it
Speaker 1: is to the economy obviously, UH, and keeping things going.
Speaker 1: What are you keeping an eye on for the consumer?
Speaker 1: Anything out there that makes you a little bit nervous
Speaker 1: about whether or not the consumer is going to be
Speaker 1: able to keep up spending well. I pay a lot
Speaker 1: of attention to consumer sentiment to the University of Michigan
Speaker 1: study and the Conference Board Consumer Confidence and UH. And
Speaker 1: right now consumer confidence and consumer sentiment is high UH
Speaker 1: and it seems to be staying there. The only the
Speaker 1: only slight ding in that is that the release in
Speaker 1: January from my University of Michigan showed that the forward
Speaker 1: looking outlook in terms of consumer sentiment is off a
Speaker 1: little bit. So long as they remain confident and feel safe,
Speaker 1: they will continue to spend. What we're also hoping for
Speaker 1: is that we're going to see some return of business investment,
Speaker 1: and there are signs that that's starting to appear. I
Speaker 1: do want to bring some headlines to our audience about LIFT.
Speaker 1: There have been some reports earlier from The New York
Speaker 1: Times that LIFT was planning some job cuts as part
Speaker 1: of a broader restructuring, announcing this ahead of earnings. Bloomberg
Speaker 1: now reporting that LIFT is going to cut about ninety employees,
Speaker 1: representing about one point six percent of its staff. It
Speaker 1: says it's cutting staff also at the same time planning
Speaker 1: to hire more than a thousand people in the stock
Speaker 1: had been down almost four percent earlier in the session,
Speaker 1: now still down, but a little less than sure dipping,
Speaker 1: I would say on those headlines, yeah, for sure. And uh,
Speaker 1: you know, this is a company like it's chief rival,
Speaker 1: rival rival Uber Uber. Can't say rival or Uber, Uh,
Speaker 1: it's chief rival Uber that's trying to figure out, you know,
Speaker 1: how to make money essentially. That seems to be the
Speaker 1: big question. Yeah. And I think what's interesting to Steve
Speaker 1: and and you know, this is something that we've been
Speaker 1: talking a lot about. You know, whether it's a FED
Speaker 1: decision day, whether it's trade tensions. Uh, you know, companies
Speaker 1: are making decisions, whether it's to cut workers spend money differently.
Speaker 1: I mean, do you feel like companies there's enough out
Speaker 1: for the out there for them to increase cap spending,
Speaker 1: to be more confident about the outlook. I think that
Speaker 1: there is a in many of the sectors. Interestingly, what
Speaker 1: we haven't seen much in the headlines uh lately is
Speaker 1: all of the tail um businesses that are closing up
Speaker 1: stores and laying off thousands and employees. Um, you know,
Speaker 1: it's it's headlines of job cuts that the ding consumer
Speaker 1: confidence directly, it's a phenomenon if someone else is losing
Speaker 1: their job, how safe is my job? And of course,
Speaker 1: I mean it's understandable. In the retail space, there's there's
Speaker 1: been a shift from in store consumer spending to online
Speaker 1: consumer spending, and we've watched that evolve. Uh, But but
Speaker 1: there is that vulnerability in two consumer confidence in in
Speaker 1: these job shifts, as the new jobs are not telegraphed
Speaker 1: as much as uh, the jobs that are lost when
Speaker 1: when these stores and shops close up. And so for instance,
Speaker 1: Donald chief economists over at Manual Life Investment Management come
Speaker 1: on back in. I do want to ask, you know,
Speaker 1: sort of given what we've been talking about with the FED,
Speaker 1: given what we've talked about, what we know so far
Speaker 1: about the coronavirus, what's an investor to do in this
Speaker 1: type of market? How do you synthesize all of this
Speaker 1: into a strategy at this moment, Well, you have no
Speaker 1: choice but to accept that there's more uncertainty that if
Speaker 1: you were counting on a China rebound, it might be delayed,
Speaker 1: and you have to widen your confidence intervals, and this
Speaker 1: is exactly what the FET is going to have to
Speaker 1: do and all central banks will have to do, is say,
Speaker 1: we just need to be a little bit more cautious
Speaker 1: as we assess the damage as it heads out. But
Speaker 1: most pandemics have showed us to turn out to be
Speaker 1: a buying opportunity. We just have to get a sense
Speaker 1: of when that might be. My bigger concern is that
Speaker 1: this is landing in a period where I suspect we're
Speaker 1: still going to have weak group growth to one being
Speaker 1: a problematic a quarter for growth, it might compound some
Speaker 1: of that weakness and make it difficult to differentiate between
Speaker 1: what is true cyclical weakness and what is this virus
Speaker 1: compounding on top of it. All Right, so of course,
Speaker 1: let's just remind everybody at the bottom of the how
Speaker 1: are we will hear from FIT Chairman J Powell is
Speaker 1: regular press conference coming after the meeting. We will take
Speaker 1: you live there to the FED in Washington to listen
Speaker 1: to that. So, Steve, I think I ask you this
Speaker 1: every time we're together, But what would you want to
Speaker 1: ask J Powell right now? I really want to ask
Speaker 1: him what his biggest concern is in going forward? And
Speaker 1: developing new tools and having to address the day of
Speaker 1: reckoning with shutting off the money spikett that they've had
Speaker 1: on since September. You know, four hundred four hundred billion
Speaker 1: dollars in uh in new liquidity is a lot of
Speaker 1: money in the markets have come accustomed to it. And
Speaker 1: how would he help us understand how that's going to
Speaker 1: get tapered in a way that doesn't really change the
Speaker 1: way things work in the markets. And Francis, let's put
Speaker 1: that question to you. What would you want to ask
Speaker 1: J Powell today? I'd like to know how Chair Powell
Speaker 1: is thinking about inflationary pressure. As we've had a pullback
Speaker 1: in oil market based inflation expectations are lower, um, you know,
Speaker 1: average hourly earnings have pulled back. These are all deflationary pressures,
Speaker 1: and yet the Fed doesn't seem to be too worried
Speaker 1: about them. In the statement, I'd like to get a
Speaker 1: sense of how much their view on that outlook has
Speaker 1: changed and what they're gonna do if these problems worsened
Speaker 1: and and those problems worsening again, like what I guess,
Speaker 1: for instance, I'm trying to understand and we've talked about
Speaker 1: this a little bit, but this virus, we're still trying
Speaker 1: to get our our hands around it and our arms
Speaker 1: around it. Especially from an investors perspective, when do you
Speaker 1: act on the fear or the worry? At this point,
Speaker 1: I think markets have already acted on the fear and
Speaker 1: the worry. They've already placed in a probability of the
Speaker 1: worst outcome. That's what markets do, they say. I think
Speaker 1: there's an ex percentage chance that this turns into something
Speaker 1: worse than it is now. We've seen that in the market.
Speaker 1: The bigger question for me is when do I buy again?
Speaker 1: And if Powell comes out in this press conference and says,
Speaker 1: you know what, the door is open. If this produces
Speaker 1: more damage, then you know we will pull the trigger,
Speaker 1: that to me will be an important buying opportunity, just
Speaker 1: like it was in the other thing. I want to
Speaker 1: ask you guys, because I feel like this is another thing. Um.
Speaker 1: When we're hitting the tenure anniversary this past summer of
Speaker 1: the longest economic expansion on record, I think we're like, Okay,
Speaker 1: that's it. It's gotta you know, something's got to happen. Steve.
Speaker 1: When you look at this economy, is there more momentum
Speaker 1: to kind of keep it going like we have seen
Speaker 1: the last few years. Well, the momentum seems to be growing,
Speaker 1: and there's an expectation that could be even better than
Speaker 1: obviously there's a lot of things that can affect that
Speaker 1: along the way, but very you know, you look just
Speaker 1: across the sectors and economic growth has been robust. Employment
Speaker 1: continues to grow, housing starts in December year over year,
Speaker 1: and another six percent in building permits. Uh uh that
Speaker 1: that continues to be strong, consumer confident, consumer sentiment continues
Speaker 1: to be strong, Small business optimism off a little bit,
Speaker 1: but continues to be strong. And so when we see
Speaker 1: what happens with business fixed investment, I think that will
Speaker 1: tell us a lot. But if but if that starts
Speaker 1: to move forward, that that would be a very good
Speaker 1: indicator as to where we might end up with a
Speaker 1: level of economic growth, probably somewhere in the range of
Speaker 1: two to two and a quarter percent in right, Just
Speaker 1: kind of does that make it more of the same.
Speaker 1: Francis you agree with what Steve is Steve's assessment that
Speaker 1: we could keep this economic expansion still moving along. Yeah,
Speaker 1: my senses, we've actually had three almost recessions in the
Speaker 1: cycle already and had we not seen fed cuts Q
Speaker 1: four this year. In Q one could have been something
Speaker 1: that looked much more like a recession. So now what
Speaker 1: we're seeing in a re acceleration, that sort of V
Speaker 1: shaped recovery that we see after these weak economic times,
Speaker 1: and that can persist in the second half of But
Speaker 1: there are still some missing ingredients that that a robust recovery.
Speaker 1: And the biggest one is where is China stimulus. It's
Speaker 1: not as powerful, it's not as national as it used
Speaker 1: to be. Um, you know, we're still looking at some
Speaker 1: elevated global debt levels that are relevant to this. I'd
Speaker 1: like to see a weaker US dollar help contribute to
Speaker 1: that rebound. Uh. You know, there's some components here. They
Speaker 1: are not quite like those past recoveries. So can we
Speaker 1: moddle through, absolutely, but we've still got to get through
Speaker 1: a rough Q one. Let's not discount the fact that
Speaker 1: global growth hasn't yet turned. Global trade still falling, world
Speaker 1: industrial productions still falling, real car loadings still falling. We're
Speaker 1: not out of the woods yet. Alright, Gonna leave it
Speaker 1: on that note. Thank you so much. I really appreciate
Speaker 1: both of yours insights and analysis. Steve Skanky, chief economic
Speaker 1: advisor at Keel Point. Back in our Bloomberg Interactive Broker studio.
Speaker 1: Francis Donald, chief economists and head of macro economic Strategy
Speaker 1: at Manulife Facet Management on the phone from Toronto. You're
Speaker 1: listening to Bloomberg Business Week with Carol Messer and Jason
Speaker 1: Kelly on Bloomberg Radio. Let's break it down with our
Speaker 1: team back in New York. Bloomberg News Bounder reporter Alex
Speaker 1: Harris is there and Josh Wright, chief economists at I Simms.
Speaker 1: They're gonna help us recap it all. Josh, I want
Speaker 1: to start with you. What jumped out at you, if anything,
Speaker 1: from what you heard from j Pow. This is really
Speaker 1: a press conference for the nerds, and I think of
Speaker 1: it as this is the education of a fed him.
Speaker 1: This ones for the nerds. What a journey this has been.
Speaker 1: What a journey? Huh? It used to be? These are
Speaker 1: really short press conferences, and he was really candid and
Speaker 1: somewhat off the cuff, and this time it was longer,
Speaker 1: it was much more scripted. It was very disciplined. He
Speaker 1: was on message, and you can see very clearly that
Speaker 1: he's prepared to talk about the process for unwinding what
Speaker 1: they've been doing with the balance sheet. But he was
Speaker 1: not going to be taken off course, not for one minute. Yeah,
Speaker 1: it doesn't feel like very much like he had a
Speaker 1: fail a plan and really did stick to it. I agree, Alex.
Speaker 1: What do you think besides I know you laughed big
Speaker 1: time there a h Josh, and we prefer front end wonks,
Speaker 1: not nerds. But now there there was really it was
Speaker 1: there was a feast of information, I think, on on
Speaker 1: the front end and their plan. And you know, there
Speaker 1: was a bit in the implementation note, which is you know,
Speaker 1: the FED issues their statement at two o'clock and then
Speaker 1: they put in a note with all their processes and
Speaker 1: none of this was really in there except for the
Speaker 1: fact that we're extending the repo operations, you know, into April.
Speaker 1: And so for him to come out and say, well,
Speaker 1: we're going to continue these repo operations, but you're going
Speaker 1: to see us adjust the quantity and adjust the price.
Speaker 1: You know, that was new and that was more for
Speaker 1: the market. And I think it takes a lot of
Speaker 1: surprise out of the next few months when we get
Speaker 1: these repo schedules. You know, every ninth business day of
Speaker 1: the month. And then the other thing is his his
Speaker 1: comments on the bill purchases and the fact that they're
Speaker 1: going to taper those before outright ending them. You know,
Speaker 1: that was another surprise, you know, I think it was
Speaker 1: funny and we were laughing here in the studio about
Speaker 1: the number of times people ask variation on the question
Speaker 1: of what is your definition of ample? And like Joshua
Speaker 1: pointed out, they did not waver from that. He was saying,
Speaker 1: the minimum is one and a half trillion dollars of reserves.
Speaker 1: But I think it also tells you that there's still
Speaker 1: a long waves from even hitting that level and feeling
Speaker 1: really comfortable because there's so much variation and those number
Speaker 1: the level reserves can vacillate so much, especially in April
Speaker 1: with the taxiason upon us speaking of not being happy
Speaker 1: the FED chairman saying not comfortable with inflation persistently below
Speaker 1: two percent, expect inflation to move closer to two percent.
Speaker 1: Josh if I had a nickel for every time I
Speaker 1: heard someone say we're going to get there, were going
Speaker 1: to get there. Um, I don't know. You could be
Speaker 1: in the repo market. I could be in the reput market.
Speaker 1: I could own an NFL team playing. But I mean,
Speaker 1: what about inflation? I mean, I don't know. It does
Speaker 1: feel like something is different, U. I think we might
Speaker 1: say that we're at the desperation point here. You know,
Speaker 1: the FED does not change its inflation framework words policy
Speaker 1: framework lately, and as you can see, even once they've
Speaker 1: announced this process however many months ago, it's still going
Speaker 1: to be another six months and they're not ready to
Speaker 1: talk about it or give any overt hints, although there
Speaker 1: are some signs based on some of the informal comments
Speaker 1: and some interviews you've heard recently, Basically the FED is
Speaker 1: saying we're not getting there. We don't The tools that
Speaker 1: we've been trying to apply before don't seem to be enough.
Speaker 1: Although they don't want to say that explicitly, the fact
Speaker 1: that they want to roll out a new kind of
Speaker 1: tool for a new kind of approach suggests that they
Speaker 1: see a lack and they want to close that down.
Speaker 1: And so, Alex, let's chalk a little bit about the
Speaker 1: REPO mention and everything that's been going on. We know
Speaker 1: you love to talk about it. So what does it
Speaker 1: mean for the bond market going forward? That this is
Speaker 1: a friend of mine? Oh, this is going to be
Speaker 1: a very boring repo market for the time being, and
Speaker 1: you've seen it already. They've really kind of held rates
Speaker 1: well but in a good way, right. I mean that's
Speaker 1: that you kind of want a boring repo market, right.
Speaker 1: And this is where this is where it sort of
Speaker 1: disagree with with Jerome Powell saying on behalf of the
Speaker 1: Fed where we want volatility, like volatility in this market
Speaker 1: is normal. Well, if volatilities normal, start rolling back those
Speaker 1: repo operations sooner rather than later. What are you afraid of?
Speaker 1: Because the other issue is this is remember the the
Speaker 1: benchmark of choice to replace libor as as directed by
Speaker 1: the official sector, is the secured overnight financing rate that's
Speaker 1: repot back so first, and if that remains steady and
Speaker 1: there's no volatility there, if you're an investor, like a
Speaker 1: money market fund, why would you want a SOF linked
Speaker 1: floating rate debt instrument. There's no volatility there, there's no
Speaker 1: opportunity for yield, and I think that's maybe why we've
Speaker 1: seen such a drop off in issuance in that area
Speaker 1: transition moving forward, and I think it's going to be
Speaker 1: a problem. So it's almost like the FED was too
Speaker 1: clever for their own good here and and it might
Speaker 1: end up being a problem for them in this other area.
Speaker 1: And I don't think anyone's really thinking about that right now. Hey, Josh,
Speaker 1: let's talk a litt bit more about finding financial market conditions,
Speaker 1: because I I thought it was interesting that he did
Speaker 1: address asset values. Uh, some concerns. I'm looking for the
Speaker 1: little headlines. Yeah, yeah, thank you, Yeah exactly. So, UM,
Speaker 1: I don't know how do you assess it in terms
Speaker 1: of some of the asset values that are out there. Well,
Speaker 1: he made the right call that you've got to focus
Speaker 1: on funding risk and you've got to focus on the
Speaker 1: leverage in the system. And that's the key distinction between
Speaker 1: what we see now versus what we saw back in
Speaker 1: the two thousand six to two thousand eight period. Although
Speaker 1: we do have elevated levels of debt in non financial
Speaker 1: corporations and that is a concern and as he said,
Speaker 1: that could really amplify any shocks. What we have in
Speaker 1: the financial system proper is things look relatively stable, Households
Speaker 1: look good, labor markets still look strong. Um, the real
Speaker 1: issue is what's going on with confidence, because that's one
Speaker 1: of the areas where you could get a shock. A
Speaker 1: lot depends on how earnings go, valuations do look stretched,
Speaker 1: and if there's something that goes bumping the night with
Speaker 1: tech earnings or I p o s, then we could
Speaker 1: find ourselves in a different kind of situation. And so Alex,
Speaker 1: you know, what do you think about FED wise in
Speaker 1: terms of your market between now and the next time
Speaker 1: we hear from the FED, what do you worry about?
Speaker 1: What do you I mean, does virus sort of factor
Speaker 1: into the bond market at what point? Yeah, a little bit.
Speaker 1: I think it's going to continue to just be headline
Speaker 1: driven as we've seen before. You know, when you look
Speaker 1: at the very front end, what will be interesting is
Speaker 1: is what we get out of the minutes. You know,
Speaker 1: do we get any more details or get any sort
Speaker 1: of um information on you know, where their discussion of
Speaker 1: you know, pairing back you know, these treasury bill purchases,
Speaker 1: paring back the repo operations. You know where does where
Speaker 1: did that stand with this meeting? So that'll be kind
Speaker 1: of interesting and then just seeing how the market continues
Speaker 1: to respond and when they do decide to pull back
Speaker 1: on these repo operations. But what I think for now,
Speaker 1: you know, the virus and the knock on effects. It's
Speaker 1: all going to be headlines driven, you know, the same
Speaker 1: as it's been with all the big issues like trade
Speaker 1: and such. So, you know, but I do think now
Speaker 1: people are sort of paying attention to the curve flattening
Speaker 1: post f O m C right now. Um, you know,
Speaker 1: and now everyone's wondering, you know, is the Fed missing something?
Speaker 1: Are they making some sort of mistake here or is
Speaker 1: this just a response to his comments on inflation um
Speaker 1: and remaining you know below you know, remaining below two
Speaker 1: percent and what's going to get us there? And that
Speaker 1: might be a driver as well. Just remind everybody we
Speaker 1: is Bloomberg Bus this week, Carol Master, Jason Kelly live
Speaker 1: in Miami and Radio Row at the Miami Convention Center.
Speaker 1: Just hearing from the Federal Reserve keeping rates unchanged as
Speaker 1: widely expected, and then of course hearing from j Powell
Speaker 1: coming up uh in just a few minutes Goldman SAX
Speaker 1: Chairman and CEO David Solomon on the bank's first ever
Speaker 1: investor Day. We've been covering a lot of headlines coming
Speaker 1: out of Goldman today, so we'll hear from that. Bloomberg Radio,
Speaker 1: Bloomberg TV. Simulcast in the meantime, Josh, what didn't you
Speaker 1: get from j Pal that you would have loved have heard?
Speaker 1: Or was everything pretty well covered well? He was certainly
Speaker 1: pretty comprehensive on what the plans are for what they're
Speaker 1: going to do about the reaper market for the time being.
Speaker 1: I was surprised that he didn't say more actually about
Speaker 1: the coronavirus. And I'm one of those people that normally says, hey,
Speaker 1: let's step back and take a little more time, but
Speaker 1: he really didn't want to say anything. He said they
Speaker 1: weren't going to speculate. They want to have some cautious optimism.
Speaker 1: It's definitely awkward timing. You know, the story just broke
Speaker 1: a couple of days ago and have to go out
Speaker 1: and face the world press. Um, you're supposed to be
Speaker 1: the man, but the plan when you don't even know
Speaker 1: what the situation is, Uh, that that's a tough position
Speaker 1: to be in. I surprise he wasn't a little more reassuring.
Speaker 1: But judging from the market, it seems like he's going
Speaker 1: to get away with it all right. Harris's last thought
Speaker 1: to you anything else going on in the desk among
Speaker 1: your colleagues that you want to make sure our listeners know, oh,
Speaker 1: it's it's everything we've covered here. You know, it's trying
Speaker 1: to make sense of all the comments about REPO operation,
Speaker 1: Treasury bill purchases. You know, the one thing I think
Speaker 1: some people were hoping that we'd get into is to
Speaker 1: talk about SOFA. There was a letter from Randy Quarrels
Speaker 1: and John Williams, two members of the Alternative Reference Rates
Speaker 1: Committee and there the public Private partnership responsible for the
Speaker 1: Lieboard transition, and they're saying, you know, we're going to
Speaker 1: start looking at SOFA plus a credit based component, and
Speaker 1: you know that affects a lot. You know, that affects
Speaker 1: the regulators that you know, that affects the fet itself,
Speaker 1: that affects the transition and how people perceive it. And
Speaker 1: I think it would have been nice to have gotten
Speaker 1: a question or two from that and listen to Powell,
Speaker 1: you know, and their thoughts on it. But again, you know,
Speaker 1: to get as many questions about the balance sheet as
Speaker 1: we did, I think was a tall order in general.
Speaker 1: So I'll take that there was a lot, I agree,
Speaker 1: and kind of right out of the gate we got
Speaker 1: a lot um all right. Gonna leave with their folks.
Speaker 1: Thank you so much. Alex Harris, Bond, reporter at Bloomberg News,
Speaker 1: back in our Interactive Broker Studio along with Josh Wright,
Speaker 1: chief economist at I Sims. Both of them in our
Speaker 1: Interactive Broker Studio. You're listening to Bloomberg Business Week with
Speaker 1: Carol Masser and Jason Kelly on Bloomberg Radio. All right,
Speaker 1: so a busy day, busy day in New York, busy
Speaker 1: day in Washington, busy day here in Miami. Let's stay
Speaker 1: in the state of Florida and check in with David Kotoki,
Speaker 1: of course, as the chairman and ce IO at Cumberland Advisors.
Speaker 1: He joins us on the phone from Sarasota, Florida. So
Speaker 1: from a couple of current Floridians to another, David, what
Speaker 1: do you make of today's market, how it is absorbing
Speaker 1: all these different inputs as it were? Oh my gosh. Well,
Speaker 1: first of all, I'm delighted you're in Florida. We welcome
Speaker 1: visitors to Florida, as you know, and we're happy you're here.
Speaker 1: I know, we're happy to be here, and you have
Speaker 1: Carol with you. Wonderful, She says. She likes the cold weather,
Speaker 1: but decided to at least taste a little of sunny
Speaker 1: far what to make up today's market? The market has
Speaker 1: gone through what five six percent correction or adjustments from
Speaker 1: the coronavirus news some number like this, and then that
Speaker 1: seemed to be over the metaphor. I would say market
Speaker 1: agents are using as stars. Um, they're looking at this
Speaker 1: as not any permanent impairment of the trajectory of very
Speaker 1: low growth, but positive very low inflation, but positive very
Speaker 1: low interest rates for a very long trajectory. And that
Speaker 1: is an environment which is great for stock prices. Um,
Speaker 1: it's also great for alternative investments. You just had an
Speaker 1: interview with Goldman's initiative and alternative investments. They're not necessarily
Speaker 1: as liquid, and they may be opaque or not as
Speaker 1: transparent as stocks or bonds, but that's an environment for
Speaker 1: them as well. And it looks to me as if
Speaker 1: the market wants to continue based on that trajectory. So
Speaker 1: David lower for longer, right, just when you know, HARKing
Speaker 1: back to just this past summer, when we you know,
Speaker 1: hit the longest economic expansion on record, and I think
Speaker 1: everybody's like, all right, maybe it's just time. It's got
Speaker 1: to be over. But you know, market cycles, economic cycles,
Speaker 1: they don't follow a calendar necessarily, and certainly this one
Speaker 1: doesn't seem to but lower for longer, potentially by the
Speaker 1: Federal Reserve for various reasons, and also because they don't
Speaker 1: have to raise rates if you look at what's going
Speaker 1: on with inflation. So this market environment, this economic environment
Speaker 1: can go on for longer in your perspective, Well, it
Speaker 1: certainly can, um and it has much longer. And I
Speaker 1: don't remember years ago now, I think we did an
Speaker 1: interview on on a show and I never in a
Speaker 1: million years would have forecast this long a trajectory and
Speaker 1: the state of where things are. And had I done so,
Speaker 1: you would have had locked up. So look, so we
Speaker 1: have to lock up a lot of people. Well there
Speaker 1: you go. So you know, I don't know how much
Speaker 1: longer this goes on if we have no recession, and
Speaker 1: I think there is a risk of a couple of
Speaker 1: quarters of damage from the virus, but it would be
Speaker 1: viewed as transient. It might scare people, worry them a
Speaker 1: little bit, but the fact is it would be viewed
Speaker 1: as transient. And so you could say yourself, teach, what
Speaker 1: if we have this one and two um policy interest
Speaker 1: rate average around the world. We keep inflation suppressed. It
Speaker 1: doesn't have a way to ignite. I don't, by the way,
Speaker 1: agree with some forecasts at Bloomberg's and talking about the
Speaker 1: great interview that was from Davos and says we don't
Speaker 1: have business cycles anymore. We don't have boom and bust anymore.
Speaker 1: Bridge you know, I I think that the old boom
Speaker 1: and bust is alive in in many ways we are
Speaker 1: creating the terrific bust of the future while we have
Speaker 1: this asset boom, and we have asset inflation induced by
Speaker 1: monetary policies worldwide. So the negative interest rate in the
Speaker 1: euro in Germany translates into the United States through something
Speaker 1: it's an exotic transaction for many listeners called the cross
Speaker 1: currency interest rate swap. But what that mouthful does is
Speaker 1: take negative rates in the Eurozone and translate that into
Speaker 1: the financing of the cheap money financing of the commercial
Speaker 1: development in Los Angeles. And that's the world in which
Speaker 1: we live. The fet is stuck in the middle of that,
Speaker 1: and it will probably be there for a while until
Speaker 1: we get persistent inflation on a rising trajectory. Broadly, based
Speaker 1: on the price level. It's not the asset prices. We
Speaker 1: are going to continue in this and I don't know,
Speaker 1: Carol how long that will be. Yeah, all right, David Cochalk,
Speaker 1: always good to catch up with you, Chairman, chief investment
Speaker 1: officer of cover Lenden Advisors, joining us on the phone.
Speaker 1: Just sort of up the road ish in Sara Sota, Florida.
Speaker 1: We're here in Miami. Thanks for listening to Bloomberg Business Week.
Speaker 1: You can subscribe to the podcast on iTunes, SoundCloud, or
Speaker 1: Bloomberg dot com. You can also listen to our radio
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