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tv   Whatd You Miss  Bloomberg  December 12, 2016 3:30pm-5:01pm EST

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pennsylvania, michigan, and wisconsin. a federal judge halted michigan's recount. wisconsin's has been completed and the state elections commission is planning to vote to certify the results. donald trump narrowly won all three states over hillary clinton. >> at the director james comey swung the election. they had to the presidency to downfall. won thes would have white house and regained control of the senate's internet for comey's handling of secretary clinton plus email server investigation and allegations of russian hacking. in philadelphia, a congressman has been sentenced to prison for a racketeering scheme that included money laundering and bribery. a federal judge called the six-year-old democrat's crimes
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astonishing that the editors tv anchor wife had $500,000 in annual income. he insisted that the justice department vasquez was likely motivated. was sworn in as secretary-general of united nations. that the ninth u.n. chief in the 71 year history. thanl news powered by more 126 countries worth of journalists. live from new york, i am scarlet and i am joe. u.s. stocks are falling.
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the energy companies are failing. joe: the question is what did you miss? scarlet: are sendingrices them higher today. u.s. president-elect donald trump has upped the ante with beijing saying he will use the one china policy as a bargaining chip to get a better trade you. we will look at why this is a big deal. ugly explain how people make choices that seem to go against their interests. we will talk about the next. joe: let's look at where the major averages stand. abigail doolittle is standing by. we're looking at what we've have been looking after most of the day. mixed trading.
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that being said we do have the dow only out of a very small game. one that puts the dow on pace for a sixth record close in a row. let's really focus in on this dow strength. helping the dow higher today to its potential six record high. was after johnson and johnson looked like it could climb. it is having his best thing since the election. the company did raise his company dividends. finally, exxon mobil, training nicely higher. through julysting 2013. they have agreed to cut supplies and really helped the oil price. as for whether or not these record highs for the dow can continue, are the markets frothy? #btv 3505.at the
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dow is traded nicely higher. it is up 13% on the year. on pace for the best year since 2013. on the bottom of the chart, we have the relative strength index. this is a momentum indicator. typically when it goes above 70. is aboveat the dow that 70 mark. it has been there for the longest stretch of the last year. the highest level since 1996. basically in 20 years. krinsky, heonathan is saying that overbought doesn't mean over. he has a point. it will be interesting to see whether this is a cautionary tale of caution or not.
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we have some breaking news on viacom. become an he is saying that it has stopped the explanation. it has named bob as permanent ceo. ceo of mtv,t nickelodeon and comedy central was looking to be reunited with cbs. redstone and her family do have a controlling stake in both viacom and cbs. you can see that the viacom shares have been tumbling all day, down by over 9%. what did you miss? in the latest university of michigan survey, there were some exceptions to the optimism. mainly among those with a college degree and residents of the northeast. reinforcing the extent of the divide in the country.
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thank you so much for joining us professor. andee it in the markets domestic all see and for policy -- foreign policy, when there are no specifics given yet on any policy prescriptions out there. i think that anyone who is trying to put logic and do anything that has happened in the last six months or so in elections is going to have a hard time. both brexit and the trump bection, people seem to voting against their self-interest. from a behavioral standpoint, is there a reason life in the absence of any real details about what trump is going to do or even have brexit is going to affect the u.s. economy, people start telling a positive story? we hear all kinds of stuff.
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fiscal stimulus. even though trump is not really talk much about that. people have really glommed onto this really positive story without any of the negative sides. what makes us do that? >> people suffer from something called the confirmation bias. they seek evidence that is consistent with their beliefs. they go out and look board. so if you would like to think that the economy is going to be great, you will latch onto any bit of information that may support that regardless of where comes from. littleg off on that a bit, to continue that idea, how do we talk to people who understand that the choices are against their better economic interest but do it anyway to send a message. they are coming off their nose
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to spite their faces. how do we explain that? >> one way of thinking about this is like when you have an inch, when you have a mosquito bite or poison ivy. they tell you not to scratch it. what do we all do? we scratch it. this is just human nature. that is the way people are acting these days. they have an itch and they are going to say no, they are going to reject the status quo because they are angry. they will look for something else. or votinging the eu for the non-status quo candidate. the believes of many of these voters has nothing to do with reality.
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i saw an interview with one trump voter who said she was voting for trump because obama had ruined the economy. the unemployment rate was very high. inflation rate was high. the dollar was week. if those are your beliefs, i don't know where you're getting them. are there certain conditions that arise in a society in which people might be more inclined to cast a vote that is more burn it and it normally we have elections and someone representing the status quo and the existing norms of politics. usually, some might that emerges. the normaly flaunted stuff we have an election. was this a fluke or could this have happened anytime? whether questions and conditions that made for them?
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>> it has happened before, we can hope it never happens again. i think it is safe to say that people are acting emotionally. we do a lot of stupid things when we are emotional. that is as deep as we need to go. if somebody insults you, you are likely to say something that you will later regret. someday regret some of the boats they have made. >> you have been saying that a lot of people are saying this, there is a seeming rationality. donald trump cantilever on what people want to deliver or maybe they have a misconception in the example you cited about the current state of the economy. is it also possible that economics is not equipped to
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understand what motivates the voters and that maybe people have the print -- different interests that traditional measures can really get at you. economists are not very good at understanding the psychology of voters. very few people are. what is curious is i think we have seen a big decline in the value of expertise. the media had a talking head you bring on, people don't put much stock in what we are saying anyone. i put some of the blame on this, if we will call it claim classes woulding
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have not got through. >> you bring up a very good point. i want to go back to the emotion part of it because it seems like can be contagious, infectious even. we have seen brazen already. we have seen the italian referendum. pauseight give people next year to hold back on the emotion and the both more but will test both more logically? in the case when you have a couple of holes that are voted in favor of the emotions of people continue to run with it? >> i think it is true that brexit and trump are the same phenomenon. --is not the trump voters i'm guessing most trump voters without even know what brazen it was. it is not that they got carried up in some way that started in
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england, as much as the working ground have been losing for the last 30 years and they are angry about it. that same phenomenon is happening in various places around the world. course, everything matters. i think it would be wrong to over interpret the selection. all, 100,000 votes going a different way, we would all be talking about how trump lost and how anyone could ever have thought he would win. is a shocking result.
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his favorite since the election has made a more shocking. we have to remember that more people go to for his opponent than him. scarlet: thank you so much for joining us richard. he is the founding father of behavioral economics. will talk about the selection of rex tillerson as the next secretary of state. this is bloomberg. ♪
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caused this pickens and cause the selection perfect. he said roughly two world of the oil, he saysl --
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he is well skilled for the position. mr. pickens joins us now on the phone. mr. pickens, thank you for taking the time, my first question to you is have you been in touch for rex tillerson, the campaign or do they have the company said he will be named secretary of state? >> i know wrecks and i am not a touch with this decision on secretary of state. other than through the tv and other news media. but i know rex tillerson. a great addition to the cabinet. >> mr. pickens, as you mentioned, many of the hottest jail little -- geopolitical spots are oil nations. from that perspective, rex tillerson would have great insight. on the other hand, wraps the
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interest of the energy industry is different than what the interests would be overall as a pretense to security, human rights and other things like that. i you confident that rex able ton would be separate the interests of oil from the interest of the country? >> yes, i would. rex tillerson is a major all company guy. he has had so much experience and he is a good man. scouts anded boy different organizations. no, i would have no question about tillotson being a good secretary of state. he is a good man. he is a hard-working guy and he knows the world. exxon operates around the world
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and i would think that he would be an excellent choice. likes that may be the case but to follow on the question, how does rex tillerson make sure that there is an conflation interests ands.'s the energy industry's business interests? how does he is sure of he would not have a conflict? rex tillerson is a worldwide personality. he is leaving exxon. he is off to a different part of his life. he would go to the secretary of state and he would perform that function dislike he would if he was at exxon. decisionng to make a for exxon. be working for the united states government and
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doing every thing he could to be sure that our business would go forward and be well executed. -- i think tillotson would be great for this job. this name has come under great criticism. i think it is because he is in oil ceo. his perceived relationship with vladimir putin. out on bloomberg about how rex tillerson are currently went to the white house regarding the russian sanctuary. he wanted to make sure that competitors would not gain an edge through it. trump is already , is this going to create a headache for trump? the idea of having a secretary
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of state that presents the idea that this white house would be more favorable to russian interests? to tellacking, i hate you all this but i don't really know how to hack anything. tillerson, i think you would be great. he knows putin. he could sit down and talk to him about things. to make someut polish deal. i can't emphasize this more, when tillotson leaves exxon and goes with the state department, he is 100% state department. exxon has plenty of people to run and son. they don't need another ceo. they have a ceo.
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the -- all links to be the very best secretary of state the united states has ever had. you bring up exxon mobil because i wonder what your thoughts are if you have any on exxon mobil's president darren would. if the company has a ceo in waiting, is he the ceo in waiting? >> is he the ceo in waiting? is he the one that would succeed rex tillerson? wouldon't know who succeed rex tillerson. don't worry about exxon, they have plenty of executives. they have good ceos who are available there.
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the day he leaves and goes to work for the state department, he will be 100% for the government. he is not working for exxon anymore. >> i want to switch gears. that thee is news organization seems to be getting it together. they are looking to cut more than expected. do you think of have will be able to execute what they said? do think it will be able to go it well without cheating and boosting the price of oil? >> no, i think it is long haul. they want more for their oil. have said, what you are going to do? they will cut supply. the price of oil will come up.
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the producers of oil, whether they be opec, the russians, whether it is the guess industry in the next days, they have all had enough. you will be at $60 a barrel within 30 days. >> $60 a barrel in 30 days, that is your forecast? >> i think you will have those in januaryu will see of next year $60 a barrel. >> what about much higher than that? i feel it we can quickly discounted the idea that we're going to see triple digits. anytime soon? is it plausible that we could get back there? what do you see for 2017 or 2018? >> taking me out to 2018, you have a chance.
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you're not going to have $100 oil in 2017. but i do think you're going to have $75 oil. scarlett: there have been a lot of instances where opec is not been able to comply. bethink that they expect to wobbling along the way? where they can't quite commit to let that have promised? what might those look like? >> usa that if they won't stick with it. stick withhey will the deal. i believe it will happen. opec needs money. yes, i think they will stick with the deal. the saudi's have said they will below 10 million a day. so they are cutting out a million barrels a day.
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they have to be the biggest one. they do it when they perform. when they show the leadership. and they will. the other countries will come along. we'll quickly, some of the skeptics of the deal, including goldman sachs have argued that prices go up and the u.s. supply of oil, quickly. can u.s. production react to any price increase? >> i can tire that i know the oil field. you know that. it will not come on fast. the cause that they have a new oilfield, have other jobs. monday offwomen field. they tell their husband, you look, you get a job. >> no, i will go back to job when the rate goes back to work. no, you get a job, you're not hanging around the house. guys have got jobs and
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that's it. thank you mr. pickens. he is the president of bp capital. this is bloomberg. ♪
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♪ scarlet: what did you miss?
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another record day for the doubt. -- dow. of wednesday'sad decision. i am scarlet fu. joe: i am joe weisenthal. even follow us on twitter. with ourwe begin market minutes. for the s&p 500 which is about two points down. this is the worst day since december 1. hard to believe. crude oil is the star if you want to .1 out. it has gained 1.5%. highother dow record returns to the norm here with the dow rally and the nasdaq selling off.
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terms of the actual stocks to pay attention to, it started in asia. i see a lot of red arrows over there. they all fell. china took a much stronger tone with donald trump. joe, they care more about the one china policy. they are down 2.4%. energy stocks are also big movers as oil prices rise. they rallied in the early part of the session. that is at its highest since last june. you can see them up by 1%. let's look at government
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bonds. yield is marginally higher. both the two-year and the tenure are up a little bit. let's look at the chinese. we have the ever thought about chinese government bonds. let's look at this. this is a one-year chart of 10 year yields in china. they have really shot up a lot lately. this represents another form of tightening. you can see the equities selling off. there was also bond deal. this might be something that you want to keep your eye on. >> we will talk about this a little later with david will. i told us to currencies where oil experts and currencies rise. you can see they are also the mexican peso. even with today's advance. a quick check also on the turkish era. depreciating for a third day.
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there are a number of concerns here. they also increase political risk because on saturday, there were more than 40 people killed. of course the backdrop of oil rising. commodities, speaking of oil, that is the big one. up 1.7%. it had been up quite a bit higher earlier in the day. on this news of deeper cuts. >> up as much as 5.8%. >> we had a much bigger earlier goal. higher but that is all giving an eye on those industrial metals. i would to take a look at a one-year chart to give you the perspective here. what a monster year. up 46% in the last year. it is really remarkable is how the we were earlier in the year. he started the year with a 29% plunge in the first couple
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months of oil. that has really come serving back. it had been quite a year for oil. >> a pretty remarkable move there. what did you miss? those were today's market minutes. >> what did you miss? many strategist and analysts say that if he would win, the market would tank and the economy would head into recession. david wu joins us now. >> i think of all the strategists, your postelection forecast in the event of the donald trump victory was the closest to being correct. most people saw do and gloom -- doom and gloom. there is a big bond component. it really underperformed. even more than the equity rally. the defining aspect of this
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postelection. has been the selloff and the failure of diversified portfolios. the potential for higher growth, higher inflation if donald trump one. that certainly seems to be the expectation. a much further can we see these books play out? : there is some room for these traced to continue. trump wanted 4% gdp. you look at the consensus forecast, for 2017, two point 2%. 2018, 2 .2%. most people say that these -- most people are worried. i think honestly that people are finding excuses for why they don't have the traits bond. i think the bottom-line is that
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you cannot look at this as pure fiscal stimulus. this has to be measures to boost confidence. to free up the animal spirits. i think that this is also going to be about easing access to credits. this is no question that is going to be a very important part of the regulations. i think is about shopping the u.s. economy to do what it does best. take a risk and invest in growth. >> what with the next age of the rotation look like if there is still room to go? what would it look like in the next age? >> that is an excellent question. most of the celebrate have happened in the backend. by everyen driven pricing of expectations. break evens tend to break even at 2%. i have no qualms. has getthink the market
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to a price for example, the race market is the belly of the curve. think about this, the market is still owning a. pricing fors only 2018. that is inconsistent with a 3% plus jp. i think as long as the market is still pricing below the fed's on docs, forget about any revision in the docs, i figured if my have more upside. either that anything linked to rates is more likely to go. >> listening to you say the donald trump is going to bring with him a whole cocktail of reforms reminds me of all the different fiscal ones. the monetary deregulation. a national greatness missing. getting people excited about the japanese economy. i think the verdict is mixed at best. do it at this cocktail as you put it will actually translate? why will it translate effectively? back, this lost
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momentum. it does not work out well. but in the first three months, six months, 12 months, that is all people talk about. of that hedgely funds made on this money, 2013. training of economics. i think the point that we are only one month after the u.s. election. this is a wanted to go. at least until operation day. -- inauguration day. this is a buy the rumor face. but not unless you remember, mostly trump, when he won in 2012, he did not a troll the opera house. couldd that i knew we boost to gdp growth. exhibit with the republicans. with him to do what they said they really want to do, which is repeal obamacare, they have not
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got enough seats in the senate to do it they wanted it. they can think of another hc. they are not putting the political polices. torlet: i want to go back some of your clients's question. this is been the longest running expansion in postwar history. how much further can it go? i know that people say that these martyrs of diebold age, it has gone on for a long time. you could argue that it was started to peter out. >> you may be right but when we say this? they cannot be talking from both sides of their mouth. only a month ago, the day before there was no with that the fed was going to be able to hire this.
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we have always underemployment in the economy. later, people will worry. i think the honest truth as the -- i think what people are getting wrong is that people want to focus on the infrastructure. everyone is saying that you did -- infrastructure spending equals success. i think that the infrastructure piece is going to be the last piece to get through. one thing is to go to the tea party as a we will blow up the deficit. another thing is to say we are going to blow it up for infrastructure spending. to build a bridge, you are going to have a bridge to build. to be late 2017 and maybe early thousand 18. i'm not as worried about them
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running amok. i am more worried about chinese houses. you mentioned that i love the skepticism of your thesis is caused by the fact that people they were have the -- caught really upside. we know that people were wildly bullish on bonds, even within the stocks, they like the bond proxies. how far off sides are investors still, given the moves we have already had? >> i was say that the bench -- hedge fund committee has well-positioned. i think that the mutual funds, i think they are still looking to take it vantage of any of it to be dipped in bonds. i think those are the guys. >> david wu, global rates and currency and research at the bank of america and merrill lynch. you are sticking with us. we will talk trump's
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geopolitical agenda with china. >> and some breaking news. boeing is planning a deeper cut in production next year. that is the company's second-biggest source of profit. boeing plans to slow output of its twin engine model. that starts in august of 2017. that is a drop from a previously announced cut. that is what you expect early next year. they are trading marginally lower. this is bloomberg. ♪
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♪ hasoldman sachs president
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accepted the job as chief donomic policy advisor for from. that's according to the truck transition team. he has been whether 25 years at the investment bank. trump is i'm former presidential rival college arena -- carly fiorina. she met with them in new york. >> we talked about the opportunity that the president elect has do reset things. to reset the trajectory of the economy, reset the role of government, to reset the role of america in the world, how we are perceived. i think that is why he's getting such fantastic people in his administration. >> he is mated with another former presidential rival as well. former texas governor rick perry. he is a candidate for energy secretary. .nd all college members
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jamesent a letter to klapper, a director of national intelligence. they say that they are concerned about his disregard of the intelligence communities privileges about the hacking. and donald trump plus continuing friendship with vladimir putin. i mean a melendez, this is bloomberg. donald trump has upped the ante with beijing by saying that he will use the one china policy as a trading chip to get a better trade you. still with us is david will, global rates and bank of america david with. and he for staying with us. the first thing that donald trump that he is truly done his turnover the table on china, being very explicit. the one china policy is not
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saying that he was to use that as a bargaining chip. how does this play out? what you see being some of the next steps here? david will: this is my face i think that the u.s. and china could be on a collision course. trump has two major policy pillars. as the policy and trade policy. his goal is -- fiscal stimulus is going to be rate for the u.s. dollar. he actually need a weak dollar. does he want a strong dollar or a weak dollar? those are the biggest contradictions. now, i think he is ultimately going to want a weak dollar. the problem is that china also needs the week one. company will have with currencies? the more successful the trump is going to be, many, the stronger the u.s. economy, the stronger the dollar will be. that will only increase the
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pressure on trump. it is a most self fulfilling. how it plays out, i think this is going to be the biggest head ache for investors in 2017. by speaking with the president of taiwan on the phone, he is mixing it up even further. does it derail the areas with trumpet we do have? >> three days after he had this conversation, he appointed governor of iowa. -- 70 mixedstanding messages to chinese. i think that is clever. if you're seeing rebel without a cause? that they missing when he was playing chicken with this guy who is going to jump out of the car. it was like he is about to play this game with this guy who has beingtation of
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unpredictable and reckless and dangerous. i do know that the chinese will be somebody to jump in to begin with trump. i think his unpredictability will help lower the probability of crisis. because we all know that if there were to be a crisis, it would be the mother of all crisis. >> there might be somebody say for the strategy. the while strategy. >> i think so. it is the same strategy that he is using toward carrier, toward boeing, so forth. and some sense, because people don't know what he will do. people have no idea about his policy reactions. people are going to think twice. to achieveble something without having to try to hard. joe: china is facing its own issues about limits on atm withdrawals. that in itself is probably not a huge thing but signifying a much deeper concern for the level of capital outflows. how bad is it right now for the country and how -- what more do
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you expect to see on this front? >> what is the difference between today and a year ago? and thear was going up collapse basically brought about the collapse in markets. it cannot happen again this time. the difference between this year versus a year ago is that a year ago, this is before the rmb was included in the fdr. loosen capital controls. now they can afford to go out there and tighten controls that any consequence of the r&b being kicked out of the sdr. i think that as mike real estate agent in new york would tell you that at this time, 20 apartments sold over $2.5 million were sold to chinese people. right now, zero. is becoming or difficult to get money out of china.
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if china is indeed successful and containing this outflow, which i think you have to assume that i'm going to give them some benefit of the doubt in doing this, this is was going to allow the u.s. to -- from that point, china possibility to crack down on outflows, it would be very important for donald trump's success. in addition to cracking down on capital outflows, they cannot predict what troubled in next. what do they do to proceed what they do to inform the economy? david will: that's of the to show four. from that point of view, i think that it is going to be more limited for that result. they are going to be managing the economy even more closely than usual. i think the geopolitical spirit is more complicated.
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recommending selling the korean won. maybe the chinese are going to be nervous about sticking it to trial. what does china really have? north korea. is going totrump struggle to come up with out of box promotions. i think that given the political crisis in south korea, the korean plimsoll a 10 minutes -- >> david blue. he will be sticking with us as we talk about his other currency calls. this is bloomberg. ♪
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♪ wu is super bowl is about the mexican peso. tell us why. david: let's think about this. as president of the united states, he does have the right to throw now to out the window and rip it up. he doesn't have the legal right to renegotiate the terms without congressional approval. i tell you right now, forget about the democrats, even republicans have no opportunity and this path. remember, mexican as was to the point, mexicot
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will be the biggest window. joe: one factor that has driven the peso is oil. what is your take away on the significant of this agreement to cut. >> is unprecedented. i think there are many different interpretations. nevertheless, when you figure it will be the biggest winner, i think it will be the u.s.. it is almost like a welcome party. this, that means that opec is coming back on production. it means that u.s. producers are going to produce higher prices. this is going to be bullish for the u.s. gdp growth. there is no question about russia in april we sought by today. >> is one of the biggest this year. >> i think there are two emerging markets that i like. mexico and russia.
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russia also has the advantage i think under a trump presidency, we are morally -- more likely to get a deal under ukraine. i think that will be additional bonus for russia. >> real quickly, i see you have a call on the new zealand dollar. the d.c. for them? i think is more of a technical call. i think that this currency looks pretty expensive. i think in general, if you are worried, the whole infrastructure strength -- and spending is not going to happen until much later this year. have and scams. of the spending will slow. will, and of global rate securities at bank of america. don't go anywhere because we would talking central bank policies from the fed to the vue, to the ecb. this is bloomberg. ♪
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house speaker paul ryan says the house intelligence committee will look into russian cyber threats of the dnc but says any investigation should not cast doubt on the decisive outcome of the election. white house spokesman josh earnest had this to say. >> you did not need a security clearance to figure out who that a fitted -- figure out who russiand from malicious cyber activity. the president-elect did not call into question. he called on russia to hack his
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opponent. he called on russia to hack secretary clinton. >> ernest called government intelligence officials patriots. after the prime minister submitted the lineup of his government to be prime minister. he will remain in his post as part of the coalition government. prime minister renzi resigned after voters rejected his reforms. manhunt in france for thieves who stole $1 million in gold for from aeves took it highway and set the vehicle on fire. global news 24 hours a day in more than 120 countries.
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scarlet: let's tell you what happened in the minutes while nina was speaking. boeing has increased to $1.42 per share. this is a bigger than expected increase for its quarterly dividend. sets a $14 billion buyback of shares. size, thean all-time dow jones. joe: what you miss? are set to meet this week. wu,l what does is david bank of america, head of currency research.
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peter was the former undersecretary of for domestic finance at the treasury department. take you for joining us. everybody expects a hike. we don't need to talk about that. the question is what does that indicate going forward? a lot of focus will be on those. think they will position the ongoing hiking cycle? peter: it is hard to say. my best guess is they are not going to incorporate any trump fiscal plans. they are going to have to reflect the fact that the economy is a little firmer that wasn't set timbre. the labor market is a little tighter. it will be interesting to see how much there inflation expectations and how the fed moves on them even if they are not able to incorporate trump fiscal plans. scarlet: what do you think? you think there is upside risk to both gross consensus
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estimates here. how much does the fed move up in its forecast for gdp? the people who are going to be contributing to the whole consensus, i think it will be strange for them not to miss the plight. there will be some volatility. at least in the individuals who will be passing votes for the dots. there is going to be more upside. joe: it is interesting looking at the situation now versus where we were at the end of next year when they hiked. this chart demonstrates it nicely. on top, the white line is the u.s. economic surprise index. this is for 2015. it was headed down toward the end of the year. you can see the purple line is shooting up, along with the .arket
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a very different vibe. do you think that we might see a continuation this time due to strengthening economic cycles? david: that is a possibility but the hardest thing for the fed is they don't know where they will be in a year or two from now. they don't know how much on top the trumpll administration put. this janet yellen no that she has to pull back from forward guidance? she has to pull back from knowing she knows the fed point in 12 months from now. that uncertainty will come back to the market heard i think it is healthier. i think forward guidance has done its thing. scarlet: we have more to discuss on the forward guidance dilemma for the fed. it seems like central banks for
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the last couple of years drove the bus. they have dictated how asset prices move. now we are in a situation where fiscal policy takes center stage. who looks where raising currency has come at the we need to pay more attention to what donald trump tweeps? david: i have been saying this for a last number of years. they kept rates low because it fiscal policy was too restrictive. i think growth is going to matter a lot more than interest rates. fed can't pretend to be able to see in their crystal ball. growth is going to speak for the fed and the market. we're going back to trading growth rather than the interest rates going forward. scarlet: that is the scene in the united states. the bank of japan and european central banks, they are still in an extraordinarily
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easy monetary policy. you look at the balance sheets which is in blue and has been pretty stable. it is trending down. the bank of japan is an purple and has come off a little bit. the white line is the ecb and they have extended their qe program. u.s.,t feels like in the there is a lot about what the fiscal picture is going to look like. in europe, it seems like not even fiscal as much as political, what will happen with the election in italy, the election in france. how do you see the raw political risk affecting the economic situation that ultimately will be reckoned with? david: when you are bitten by a snake once, you were afraid of it for the next 30 years. by market was surprised trump and brexit, so it does not want to make that mistake again. i am not worried about the
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german election. one thing we know is that the right and the left in europe, they hate the far right so much they will do anything to keep them from getting in power. arethree central candidates equally popular. they might cannibalize each none of them getting to the next round. the market is assuming pen will wipe- le the floor. saying that it is going to be difficult to get any votes from the left. in the second round, this will be extremely crucial. --rlet: this sets up a next
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up an interesting situation for the ecb. they have to cover election outcomes in netherlands, france. peter: it seems to be they are treading water and hoping something turns out. they are just treading water. that is the announcement they made. they will not likely get a fiscal boost meaningfully in europe. the politics, whatever the outcome of the election, it will be constricting. the process of the election is not going to be good for consumer confidence. i think the ecb is keeping its fingers crossed. joe: so your interpretation of the latest ecb decision is that it was basically the political approach to keeping the exact same policy? peter: exactly. scarlet: keeping the peace, basically. giving a bit of everything to the hawks and the doves. internaley have ramifications. in the u.s., there will be some
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fiscal policy that comes around. not in japan and europe. scarlet: what about japan? we talked about abenomics. now that trump will be president, does that give autonomic's another -- abe now benomics another push? david: trump is the best thing that could happen to abe and kuroda. dollar-yen was going down. nobody cares about that anymore. see dollar-and going through the roof. japanese equity markets have been one of the best performance. the key issue here is that the bank of japan has gone a step beyond qe. they essentially become the
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central bank of the years. -- of the world. you will see japanese investors piling into that market. it is also capping long-term rates globally, including the u.s. joe: is that sustainable? will the bank of japan be able to keep their long-term rates like that or will they have to run at some point? peter: i think they will have to run. i interpreted the move they made an september to pay the 10 year rate as a realization that over the coming years, they will have to let it back up. it will not have the stamina to keep it there nor do they really think they want to because the negative rates did not work. curve yield hurt intermediation. i think it is a lesson for other countries that tried extraordinary policies that unwinding these, you don't want your yield curve too fast.
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corroded got ahead of it so he can manage it overtime. which policy doesn't move more on? peter: i think there is going to be more changes in the u.s.. i think it is u.s. change will drive that exchange rate because we know what is coming inside japan. it will have a big impact. joe: i love the way you put it, that bank of japan is going to become the world central banker because everything becomes the fact oh using money to rush to bond markets around the world. how big a dampening effect on long-term yields in europe, the u.s., will lead have ultimately? david: this year alone billionght $300 in bonds. that is a lot. they wanted to allow japanese investors to buy more bonds.
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i think this is for the marginal buyers. there is no question that if you look at the past few weeks, you seem aggressive buying from japan. i think long-term rates in the u.s. would go up a lot more than it did. scarlet: david wu, thank you so much for joining us. peter fisher is staying with us. we are to talk about the problem with the fed watch forward guidance next. mrs. bloomberg. ♪
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scarlet: fed forward guidance played out. peter fisher is still with us and he says perhaps it is time to get rid of the dot plot. the famous dot go.
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whereeen line is a medium members have projected. the blue line is the market projection and they converge in early 2017. when we talk about forward guidance, it is not just dots, is it? it is rhetoric. it is the communication policy they have overall that has adopted to use dots. peter: bernanke was talking about this when he was first governor, the four he became chairman. during the crisis, it was a powerful device to assure everyone monetary policy was staying easy for a long time and the dot plot was an easy way to spread that out. it is really not credible that will be maintained over time. .ncertainty is going to kick up we will have stimulus from the trump administration. at some time we will have to
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worry if there is a recession in the coming years. this idea that we can put down exactly what we think the forward path is for several years and that is going to be credible is going to be expiring. i don't expect yellen to say anything about that itself, that i wonder if there will be a hint tomorrow or the day after that they realize there is whitening uncertainty. we can look in their forecast this time or in three months time that if the range of the forecast is getting wider and gnp inflation, we will find less information from the dot plot. joe: peter: -- innovations that came about during the crisis. the. is one of them -- the dot is one of them. dot would argue that the
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force them into a december hike because it was out there. were these innovations valuable during the crisis period and perhaps outlived their usefulness, or in retrospect, did not fully serve even in the crisis period? peter: i think the press conference is a useful device so the chair can speak to the world representing the committee. i think it is a shame that we only think we are going to find something out about what they are going to do when the chair gives a speech away from the committee. i think we would like to know that policy will change it committee meetings, not just can't strop during speak -- hints dropped during speeches. i think the dot plot is a different problem because it anchors policy. it creates inertia in policy that i don't think is helpful. there's an uncertainty about the economy and it will be particularly binding an awkward
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to pretend this is helpful to spell out where we will be. when i ran the open market for the fed years ago, it was a big deal to imagine we know what would happen at the next meeting. no one had any idea. binde would want to their hands as to where they think they would be two or three meetings away. that is a healthy outcome, to realize that uncertainty is natural in the economy. is forward guidance more of a blunt hammer or a device that lacks -- peter: i think forward guidance was used to pump up asset prices. house prices and equity values. he wanted to hold long-term rates down for a long time. you might not always want to be doing that. it is more difficult when you
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want asset prices to go where they will and not just where the fed is directing them to go to that is what the fed has to get out of and that is the exit problem they are having. having have seen oil is a massive year. how much did rising oil, rising gas prices play into inflation expectations and ultimately into real policy? peter: it is an important part, but what the fed will look for is to see whether a rise in oil prices gets embedded elsewhere. i think the public has misunderstood this and the fed has not in as articulate as it should be. the reason to look at core and cpi with energy in it is to see whether big movements, volatile movements in commodity prices get embedded in non-energy prices. if you are eating out on the highway, does the food away from
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home reflect higher energy prices? now it is getting embedded in the psychology of inflation. i think that is the thing that the fed will be looking for. scarlet: peter fisher from dartmouth college. wednesday, you will want to watch our special coverage of the highly anticipated fed decision. that begins at 1:00 p.m. in new york. ♪
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exxon mobil ceo rex tillerson is said to be under consideration for secretary of state. tillerson, he -- is a worldwide personality and
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to go from ceo of exxon -- he is leaving exxon. he is off to a different part of his life. us now.in cirilli joins how confident does it look like is going to be the pick, and how have these people had a chance to digest the news? the oil industry likes it. trumpthat question to two transition sources today. they told me to expect an announcement sometime in the next two days about who the pick will be. is the perceived front runner -- tillerson is the perceived front runner. scarlet: if he is chosen, tillerson could have trouble being approved in congress.
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not just from democrats, but from republicans as well. john mccain, marco rubio. kevin: you have folks like senators mccain and rubio who have had a rocky relationship with trump in the past, criticizing him for his perceived wranglings with russia. i would anticipate that right now, the transition officials are doing everything they can to shore up support. we did see trump give an .nterview and tweet out clearly this is someone he thinks highly of, but whether or not he would be able to get confirmed remains to be seen. a lot of intrigue around this pick is just a latest development in what has become a fascinating journey for the secretary of state pick. joe: do the headlines over the last few days over russia and wikileaks and its reported preference of donald trump make the tillerson pick more difficult given the lack of
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desire for more russia headlines? kevin: trump knows how to drive and manipulate the media. i would anticipate more headlines involving the russian involvement in the election wednesday. joe: kevin cirilli, thank you very much. ♪
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scarlet: when we look ahead to tomorrow, don't miss this. overnight you have china releasing data for november industrial production. joe: tomorrow is the start of a two-dave fed meeting that could discuss the first hike since last year. on wednesday, we will have special coverage beginning at 1:00 p.m. on television and radio of the announcement. scarlet: thanks for watching. joe:
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presidentman sachs gary cohan was the heir apparent to lloyd blankfein and has accepted the job as president
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trump watch chief economic policy adviser. the kremlin is disputing claims that it used to hacking to interfere with the presidential elections. the press secretary to vladimir putin told reporters that the allegations have nothing to do with reality. trump and his team are pushing back on the claim. a brazilian soccer player who survived the deadly plane crash in colombia has woken up from a coma. the player had no memory of the crash. he wanted to know the outcome of the game. 71 people died. german chancellor angela merkel this a priest with president-elect trump on china. merkel says she is standing by the one china policy. thep says that upholding one china policy will depend on trade. this is bloomberg.

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