1
00:00:03,440 --> 00:00:07,520
Speaker 1: This is Bloomberg surveillance. You can't take fiscal policy out

2
00:00:07,520 --> 00:00:10,000
Speaker 1: of the political process. It is the political process, and

3
00:00:10,119 --> 00:00:13,280
Speaker 1: essentially it's gridlocked in most countries. The massive flows out

4
00:00:13,280 --> 00:00:15,680
Speaker 1: of active and enter passive have I think created more

5
00:00:15,720 --> 00:00:18,680
Speaker 1: irrational pricing at the stock level than we've seen sometimes

6
00:00:18,760 --> 00:00:20,919
Speaker 1: at the end of the oil age in the twenty

7
00:00:20,920 --> 00:00:23,479
Speaker 1: ft centuries of the twentieth century, with the age of

8
00:00:23,480 --> 00:00:27,640
Speaker 1: oil will be the age of electricity. Bloomberg Surveillance your

9
00:00:27,720 --> 00:00:31,319
Speaker 1: link to the world of economics, finance, and investment on

10
00:00:31,440 --> 00:00:35,800
Speaker 1: Bloomberg Radio. Good morning. I'm Michael McKee along with Tom

11
00:00:35,880 --> 00:00:39,680
Speaker 1: Kenadian is seven am on Wall Street. Seven pm in Tokyo,

12
00:00:39,760 --> 00:00:43,720
Speaker 1: where overnight nothing happened, and that is news. The Bank

13
00:00:43,760 --> 00:00:47,560
Speaker 1: of Japan decides to stand pat adds no news stimulus,

14
00:00:47,560 --> 00:00:51,840
Speaker 1: and that is disappointing investors worldwide today the no monetary

15
00:00:51,920 --> 00:00:55,880
Speaker 1: fixed dts sending the knick down seven tenth hangover that

16
00:00:55,920 --> 00:00:59,120
Speaker 1: has continued in the up in the in Europe and

17
00:00:59,360 --> 00:01:03,360
Speaker 1: the US stock six right now down by a three

18
00:01:03,640 --> 00:01:06,679
Speaker 1: point five percent three point five points rather that is

19
00:01:06,959 --> 00:01:11,360
Speaker 1: one percent on the day uh the docks is off

20
00:01:11,440 --> 00:01:15,240
Speaker 1: by fifty points, that is half a percent. The euro

21
00:01:15,680 --> 00:01:18,920
Speaker 1: is down from yesterday, a little bit stronger, a little

22
00:01:18,920 --> 00:01:21,959
Speaker 1: bit weaker rather, but it is um at this point

23
00:01:22,560 --> 00:01:27,319
Speaker 1: UM little changed on the day one six. The foot

24
00:01:27,360 --> 00:01:31,000
Speaker 1: see is down by thirty nine points right now, six

25
00:01:31,000 --> 00:01:33,960
Speaker 1: tenths of eight percent, and the pounds going for seven

26
00:01:34,000 --> 00:01:37,000
Speaker 1: that's down a full percentage point. The Bank of England

27
00:01:37,040 --> 00:01:42,440
Speaker 1: does not meet until Thursday. UH. Nothing expected here as

28
00:01:42,480 --> 00:01:45,600
Speaker 1: the Fed begins it's two day meeting, but equities are off.

29
00:01:45,640 --> 00:01:48,200
Speaker 1: The SMP evening futures are down eleven points half a

30
00:01:48,240 --> 00:01:51,160
Speaker 1: percent of four tents drop. For down futures they're down

31
00:01:51,280 --> 00:01:55,360
Speaker 1: seventy four points, and NASDACI futures down eighteen points, four

32
00:01:55,400 --> 00:01:58,560
Speaker 1: tenths of eight percent. In the bondo market, we have

33
00:01:58,680 --> 00:02:01,840
Speaker 1: seen some games of four bonds. Yields off a little bit.

34
00:02:02,000 --> 00:02:04,320
Speaker 1: One point nine three is the yield on the ten

35
00:02:04,400 --> 00:02:07,400
Speaker 1: uere the five year one point for six ninety four

36
00:02:07,760 --> 00:02:11,760
Speaker 1: basis points for your two year. The dollar index at

37
00:02:11,960 --> 00:02:15,200
Speaker 1: ninety six point seven six nine tad stronger but still

38
00:02:15,200 --> 00:02:18,239
Speaker 1: in the nineties six range for UH most of the

39
00:02:18,360 --> 00:02:21,440
Speaker 1: last week. Oil maybe a driver. Hard to separate out

40
00:02:21,760 --> 00:02:25,840
Speaker 1: oil prices from what's going on with the central banks,

41
00:02:25,840 --> 00:02:29,280
Speaker 1: but West Texas down two and a half percent to

42
00:02:29,520 --> 00:02:32,040
Speaker 1: four bread Crew thirty fifty five two and a half

43
00:02:32,080 --> 00:02:34,200
Speaker 1: percent as well, So people saying, now we've put in

44
00:02:34,240 --> 00:02:38,040
Speaker 1: a top for the time being, I'll have to consider

45
00:02:38,240 --> 00:02:41,080
Speaker 1: that possibility. Major economic dated this morning, retail sales in

46
00:02:41,080 --> 00:02:44,680
Speaker 1: the US doing eight thirty well Street time. Mark Handler

47
00:02:44,760 --> 00:02:47,520
Speaker 1: is head of four X at Brown Brothers Harriman, and

48
00:02:47,520 --> 00:02:52,080
Speaker 1: he kicks off our look at the central bank world today. Mark,

49
00:02:52,280 --> 00:02:55,440
Speaker 1: with all the things I just mentioned, what's the dollar

50
00:02:55,600 --> 00:02:58,959
Speaker 1: trading on these days? We've had central banks move, We've

51
00:02:58,960 --> 00:03:03,119
Speaker 1: had central banks in one place. Uh, and yet we're

52
00:03:03,120 --> 00:03:06,440
Speaker 1: not seeing the dollar as represented by the dollar indexes

53
00:03:06,480 --> 00:03:08,600
Speaker 1: move a hole heck of a lot either way. Yeah,

54
00:03:08,600 --> 00:03:10,120
Speaker 1: I think it's kind of quiet. I think people are

55
00:03:10,120 --> 00:03:12,760
Speaker 1: waiting really for the most part. Two things. One of course,

56
00:03:12,800 --> 00:03:15,200
Speaker 1: is the settle deserved tomorrow. And the key issue I

57
00:03:15,200 --> 00:03:18,440
Speaker 1: think is really not so much to risk assessment, but

58
00:03:18,560 --> 00:03:20,760
Speaker 1: really how many how many dots plots are there? That

59
00:03:20,840 --> 00:03:24,120
Speaker 1: is to say, in December they they pointed to four

60
00:03:24,200 --> 00:03:27,280
Speaker 1: right hyps. This year, uh, are they going to move

61
00:03:27,280 --> 00:03:29,680
Speaker 1: it to two or the three? My sense is probably

62
00:03:29,720 --> 00:03:31,760
Speaker 1: the three, But the market needs to wait to see

63
00:03:31,760 --> 00:03:34,120
Speaker 1: that tomorrow. And the other thing I think you mentioned

64
00:03:34,200 --> 00:03:37,760
Speaker 1: is about the possible U near term top in oil prices.

65
00:03:38,280 --> 00:03:40,400
Speaker 1: UH selling off again today, and that I think is

66
00:03:40,480 --> 00:03:43,440
Speaker 1: one of the weights on the commodity So called commodity

67
00:03:43,440 --> 00:03:47,480
Speaker 1: currencies Canada are the key Wei. I find Sterling interesting

68
00:03:47,480 --> 00:03:49,280
Speaker 1: to Sterling is down heavy, as you mentioned on one

69
00:03:49,280 --> 00:03:51,520
Speaker 1: percent is really down the most are the major currencies,

70
00:03:51,840 --> 00:03:53,840
Speaker 1: and I think it's just some nervousness ahead of ahead

71
00:03:53,840 --> 00:03:57,280
Speaker 1: of the budget tomorrow and more talk about Direxit and

72
00:03:57,320 --> 00:04:00,480
Speaker 1: the possibility that the UK leaves the EU and that

73
00:04:00,640 --> 00:04:06,880
Speaker 1: vote is late in June. Can I ask a stupid question? Um?

74
00:04:07,000 --> 00:04:11,360
Speaker 1: The dot plots are not a consensus forecast for the

75
00:04:11,360 --> 00:04:13,760
Speaker 1: fat the ft Is does not present them that way,

76
00:04:14,200 --> 00:04:18,120
Speaker 1: and they're never They never end up being right. They

77
00:04:18,240 --> 00:04:20,280
Speaker 1: end up being adjusted in terms of what the Fed

78
00:04:20,360 --> 00:04:22,480
Speaker 1: is going to do. So why did the guys on

79
00:04:22,800 --> 00:04:28,160
Speaker 1: trading desks pay any attention at all? Yeah? A good question.

80
00:04:28,160 --> 00:04:31,520
Speaker 1: I mean a couple of reasons. One is that the

81
00:04:31,560 --> 00:04:35,599
Speaker 1: closest thing we have, I think, to a transparent sense

82
00:04:35,760 --> 00:04:39,240
Speaker 1: of where Federal Reserve officials think could be an appropriate

83
00:04:39,320 --> 00:04:42,520
Speaker 1: level for FET funds, which strikes me. Um, I guess

84
00:04:42,520 --> 00:04:45,800
Speaker 1: that the market is often critical of of yelling and

85
00:04:45,800 --> 00:04:49,800
Speaker 1: the Photoserve being dubbish, but yet the fits dot plots

86
00:04:49,839 --> 00:04:52,119
Speaker 1: point to a more hawkish Federal Reserve than the market.

87
00:04:52,200 --> 00:04:54,159
Speaker 1: Is it just I think a way to see where

88
00:04:54,160 --> 00:04:57,479
Speaker 1: the market is relative to monetary officials, and I do

89
00:04:57,520 --> 00:04:59,680
Speaker 1: think that the market pays attention to it, perhaps more

90
00:04:59,720 --> 00:05:02,480
Speaker 1: int and the Federal Reserve would like. But I suggested

91
00:05:02,600 --> 00:05:04,280
Speaker 1: is to avoid some of this, is if the Federate

92
00:05:04,320 --> 00:05:07,600
Speaker 1: had dropped this dot plot completely, since it's maybe adds

93
00:05:07,640 --> 00:05:10,640
Speaker 1: more confusion than it might be worth. I suggested the federer,

94
00:05:10,839 --> 00:05:13,520
Speaker 1: if you think about having a federal press concepts after

95
00:05:13,560 --> 00:05:16,400
Speaker 1: every meeting, the way the ECB and the Bank of

96
00:05:16,480 --> 00:05:19,120
Speaker 1: Japan do, and that way that would help avoid this

97
00:05:19,240 --> 00:05:22,920
Speaker 1: kind of gaming of which meetings and which means that

98
00:05:23,000 --> 00:05:25,800
Speaker 1: fedos there could move and and would help diminished this

99
00:05:26,200 --> 00:05:29,560
Speaker 1: the confusion at the dot plots. I think Tom I

100
00:05:29,560 --> 00:05:31,200
Speaker 1: would like to have a dot plot for how long

101
00:05:31,240 --> 00:05:35,320
Speaker 1: the dot plot lasts well, which which so so silly

102
00:05:35,320 --> 00:05:38,000
Speaker 1: it is It really just goes back to the study

103
00:05:38,040 --> 00:05:41,280
Speaker 1: of communication and central banks, which goes back to Timberlake

104
00:05:41,360 --> 00:05:45,359
Speaker 1: and Bernanke and other academics over the years marked the

105
00:05:45,400 --> 00:05:48,800
Speaker 1: same old, same old disease institutions by definition and reactive,

106
00:05:48,839 --> 00:05:52,279
Speaker 1: aren't they? I suppose I think that's I mean, I've

107
00:05:52,360 --> 00:05:56,040
Speaker 1: still would given the Federal Reserve credit for raising lates

108
00:05:56,160 --> 00:05:58,960
Speaker 1: last year. And despite the market thinking that the fedos

109
00:05:59,040 --> 00:06:00,640
Speaker 1: have made a mistake, many peop in the market thing

110
00:06:00,680 --> 00:06:02,479
Speaker 1: and that said made a mistake. I think the fact

111
00:06:02,520 --> 00:06:04,599
Speaker 1: that Petto deserved is going to continue to press ahead

112
00:06:04,960 --> 00:06:08,719
Speaker 1: with his normalization of monetary policy is important. My sense

113
00:06:08,800 --> 00:06:11,480
Speaker 1: is that almost everything the photos had expected in December

114
00:06:11,520 --> 00:06:15,680
Speaker 1: has panned out. Inflation, core measures of inflation are creeping higher.

115
00:06:16,160 --> 00:06:18,679
Speaker 1: I think that the core a PC one point seven.

116
00:06:19,920 --> 00:06:22,480
Speaker 1: Unemployment continued to fall, which means that the flack and

117
00:06:22,560 --> 00:06:24,960
Speaker 1: labor mark can continue to be absorbed. We did have

118
00:06:25,000 --> 00:06:27,599
Speaker 1: a weakness in Q four last year, one percent growth

119
00:06:27,800 --> 00:06:30,160
Speaker 1: kind of dismal at an annualized pace. But here in

120
00:06:30,240 --> 00:06:32,839
Speaker 1: Q two, excuse me, here in Q one, they kindly

121
00:06:32,839 --> 00:06:35,320
Speaker 1: looks like it's returning to a trend growth around two.

122
00:06:35,960 --> 00:06:40,760
Speaker 1: What is the ramifications of dollar strength when someone says

123
00:06:40,760 --> 00:06:43,960
Speaker 1: to you, without your expertise in the markets, oh, the

124
00:06:44,000 --> 00:06:45,760
Speaker 1: dollar is going to go up two percent or a

125
00:06:45,760 --> 00:06:49,520
Speaker 1: big move ten percent or whatever. How do you digest that? Well,

126
00:06:49,520 --> 00:06:52,719
Speaker 1: mostly people think, but I think what people mean. I

127
00:06:52,839 --> 00:06:55,120
Speaker 1: think they mean by saying that is that probably hurts

128
00:06:55,160 --> 00:06:59,039
Speaker 1: the hurts of exports. And at the reason for the

129
00:06:59,040 --> 00:07:02,680
Speaker 1: photos ave not type not to tighten policy. My sense

130
00:07:02,839 --> 00:07:04,920
Speaker 1: is that you know, we talked about this before that

131
00:07:05,040 --> 00:07:07,280
Speaker 1: the way US company service for demand is not really

132
00:07:07,320 --> 00:07:10,320
Speaker 1: by exporting. The US will only export about fift of GDP.

133
00:07:11,160 --> 00:07:14,080
Speaker 1: US companies building locally. Selling locally is really the way

134
00:07:14,200 --> 00:07:17,679
Speaker 1: the primary way US company service foreign demand. And if anything,

135
00:07:17,920 --> 00:07:20,160
Speaker 1: in the past six weeks or so, the dollar on

136
00:07:20,200 --> 00:07:23,120
Speaker 1: a trade weighted basis has pulled back and this might

137
00:07:23,120 --> 00:07:25,760
Speaker 1: give the petos of more scope to raise rates. My

138
00:07:25,880 --> 00:07:29,600
Speaker 1: senses that the Federals of Auto raise rates tomorrow. But

139
00:07:30,000 --> 00:07:33,360
Speaker 1: and UH went faced with doubts. The FED errors on

140
00:07:33,360 --> 00:07:36,040
Speaker 1: the side of caution, like they did for the sepering,

141
00:07:36,160 --> 00:07:38,240
Speaker 1: like they did for the first rate hike, so too

142
00:07:38,240 --> 00:07:41,680
Speaker 1: with the second hike. Mark Chandler was US Brown Brothers,

143
00:07:41,840 --> 00:07:45,880
Speaker 1: Harriman Bloomert Surveillance this morning brought you by Investco. Investco

144
00:07:46,000 --> 00:07:49,080
Speaker 1: believes it's time to say goodbye to the traditional sixty

145
00:07:50,160 --> 00:07:53,960
Speaker 1: stock bound allocations say hello two alternatives as a court

146
00:07:54,000 --> 00:07:58,280
Speaker 1: part of Modern Portfolios learn more and investco dot com

147
00:07:58,360 --> 00:08:03,080
Speaker 1: slash alto investco dot com slash al a l T

148
00:08:03,480 --> 00:08:09,240
Speaker 1: s Alts Michael Mark, We've got the retail sales report

149
00:08:09,280 --> 00:08:13,240
Speaker 1: out today. How much UH weight should we put on, Matt?

150
00:08:13,520 --> 00:08:16,360
Speaker 1: I mean, obviously it's a trading event between eight thirty

151
00:08:16,400 --> 00:08:19,000
Speaker 1: and eight thirty five, But um, is it going to

152
00:08:19,040 --> 00:08:21,120
Speaker 1: tell us much about what the feed is going to do?

153
00:08:22,080 --> 00:08:23,440
Speaker 1: I don't think so, Mike. I mean, we do have

154
00:08:23,480 --> 00:08:26,080
Speaker 1: the retail sales this morning. The headline is going to

155
00:08:26,160 --> 00:08:29,080
Speaker 1: be likely to be depressed by the dropping gasoline prices.

156
00:08:29,360 --> 00:08:32,960
Speaker 1: We also know auto sales sequentially we're flat. But the key,

157
00:08:33,120 --> 00:08:35,520
Speaker 1: the key to watch would we be the what what

158
00:08:35,520 --> 00:08:38,240
Speaker 1: what Bloomberg called the control group, which is basically the

159
00:08:38,240 --> 00:08:42,160
Speaker 1: component of retail sales that used for GDP calculations, and

160
00:08:42,200 --> 00:08:46,360
Speaker 1: that would exclude autos, gasoline, building materials, and the likely

161
00:08:46,400 --> 00:08:48,800
Speaker 1: to be up around point two percent, which you have

162
00:08:48,920 --> 00:08:51,840
Speaker 1: to point six in January still tells that the U

163
00:08:51,880 --> 00:08:54,640
Speaker 1: S consumer is off to a good start for the

164
00:08:54,720 --> 00:08:58,120
Speaker 1: Q one. Remember it's fueling consumption. Now, it's not unlike

165
00:08:58,120 --> 00:09:02,160
Speaker 1: paths cycle, it's not credit cards evolving. That is flattish

166
00:09:02,960 --> 00:09:06,240
Speaker 1: uh which really was really fueling consumption is a couple

167
00:09:06,240 --> 00:09:08,800
Speaker 1: of things. One is more people are working, they're getting

168
00:09:08,800 --> 00:09:12,160
Speaker 1: paid a little bit more per hour. And I'd say

169
00:09:12,200 --> 00:09:16,200
Speaker 1: that the dropping gasoline prices increases the disposable income for

170
00:09:16,440 --> 00:09:19,440
Speaker 1: so less money leaving the country in imported oil, more

171
00:09:19,440 --> 00:09:24,839
Speaker 1: money staying in the country buying buying food. Apparently, if

172
00:09:24,840 --> 00:09:28,240
Speaker 1: we get that kind of UH number, what does it

173
00:09:28,320 --> 00:09:31,240
Speaker 1: tell us about what the economy is going to do

174
00:09:31,920 --> 00:09:36,000
Speaker 1: going forward? Well, that's a good question because we know

175
00:09:36,080 --> 00:09:38,600
Speaker 1: that consumption is a big part of the economy. Consumption

176
00:09:38,640 --> 00:09:41,040
Speaker 1: seems to be going growing around three percent, which is

177
00:09:41,040 --> 00:09:43,120
Speaker 1: what it did last year, which is the strongest in

178
00:09:43,160 --> 00:09:46,880
Speaker 1: about a decade. Uh So, I think that the Federal Reserve,

179
00:09:46,960 --> 00:09:48,679
Speaker 1: I think, can feel comfortable that as long as the

180
00:09:48,720 --> 00:09:53,000
Speaker 1: consumer sector remains firm, that the economy can do. Okay,

181
00:09:53,920 --> 00:09:58,080
Speaker 1: that if the capital expenditure, that business investment still seems

182
00:09:58,320 --> 00:10:01,520
Speaker 1: fairly slow. I mean, spending might be a drag, but

183
00:10:01,600 --> 00:10:03,920
Speaker 1: s really the consumer of the backbone and actually a

184
00:10:04,000 --> 00:10:09,120
Speaker 1: function of job creation. Mark excuse me not the red button.

185
00:10:09,559 --> 00:10:12,000
Speaker 1: So dazzled by three Central Bank meetings back to back,

186
00:10:12,400 --> 00:10:14,720
Speaker 1: I can't even find the red button. We're by the

187
00:10:14,720 --> 00:10:16,760
Speaker 1: red phone waiting to see what the Fed will do tomorrow.

188
00:10:16,760 --> 00:10:19,920
Speaker 1: We'll do that. Mark Chandler with us with Brown Brothers Harriman.

189
00:10:19,920 --> 00:10:25,000
Speaker 1: Thank you so much, Mr Chandler. Uh this morning special program.

190
00:10:25,000 --> 00:10:29,000
Speaker 1: Note Tomorrow afternoon, Mike McKee and I will squeeze a

191
00:10:29,040 --> 00:10:33,319
Speaker 1: twenty hour day out of what a nine hour day,

192
00:10:33,520 --> 00:10:37,360
Speaker 1: something like that. It'll be fun. One pm tomorrow, Scarlet Fool,

193
00:10:37,360 --> 00:10:41,599
Speaker 1: Michael McKee and myself. I'm Bloomberg Radio, Bloomberg Television with

194
00:10:41,760 --> 00:10:45,680
Speaker 1: special coverage of the FED meeting. Futures negative eleven down,

195
00:10:45,720 --> 00:10:53,240
Speaker 1: futures negative seventy this morning, sat down to check out

196
00:10:53,240 --> 00:10:55,959
Speaker 1: with Michael br and get the latest world and national headlines.

197
00:10:56,040 --> 00:10:58,320
Speaker 1: Like Mike tom thank you very much. Donald Trump and

198
00:10:58,440 --> 00:11:01,480
Speaker 1: Hillary Clinton are hoping for a big day as five

199
00:11:01,559 --> 00:11:04,800
Speaker 1: states old primaries today. Trump could have more than fifty

200
00:11:05,360 --> 00:11:08,200
Speaker 1: of the Republican delegates if he runs the table today.

201
00:11:08,600 --> 00:11:11,960
Speaker 1: Florida's Marco Rubio and Ohio's John Kasy are looking to

202
00:11:12,000 --> 00:11:14,880
Speaker 1: win their home states for the Democrats. Hillary Clinton has

203
00:11:14,880 --> 00:11:17,480
Speaker 1: a big chance to pad her lead over rival Bernie Sanders.

204
00:11:17,920 --> 00:11:20,760
Speaker 1: North Korean leader Kim John Un has vow to conduct

205
00:11:20,760 --> 00:11:23,640
Speaker 1: to know the nuclear test in a short time. North

206
00:11:23,720 --> 00:11:26,400
Speaker 1: Korea's official news agency says Kim made the vowel after

207
00:11:26,440 --> 00:11:29,520
Speaker 1: he watched assimilation of a rocket with a warhead re

208
00:11:29,840 --> 00:11:34,160
Speaker 1: enter the atmosphere. A senior Iraqi intelligence officials says top

209
00:11:34,240 --> 00:11:38,000
Speaker 1: Islamic State Group leader Omar al Shashani has died outside

210
00:11:38,040 --> 00:11:41,800
Speaker 1: the Islamic State stronghold of Rocca in Syria. Dallas c

211
00:11:41,960 --> 00:11:44,000
Speaker 1: V has won his fourth I did a rod slued

212
00:11:44,120 --> 00:11:47,000
Speaker 1: dald race Global News twenty four hours a day, powered

213
00:11:47,000 --> 00:11:50,120
Speaker 1: by our journalists and more than a hundred fifty news

214
00:11:50,160 --> 00:11:53,480
Speaker 1: bureaus from around the world. I'm Michael Barr. To Michael Barr,

215
00:11:53,520 --> 00:11:55,640
Speaker 1: thanks so much. You get fustures negative eleven, risk of

216
00:11:55,800 --> 00:12:00,720
Speaker 1: field across all assets OILS thirty six three. This is

217
00:12:00,720 --> 00:12:08,079
Speaker 1: Bloomberg's surveillance. Bloomberg Surveillance brought to by flushing Bag. But

218
00:12:08,160 --> 00:12:10,439
Speaker 1: a complete business checking account with fifteen thousand dollars or

219
00:12:10,480 --> 00:12:12,680
Speaker 1: more and get a free sixteen gig WiFi tablet. Visits

220
00:12:12,679 --> 00:12:14,920
Speaker 1: flushing back dot com for details. Remember F D I

221
00:12:15,000 --> 00:12:16,200
Speaker 1: C Equal Housing Winter