tv Whatd You Miss Bloomberg December 14, 2016 3:30pm-5:01pm EST
others that are substantially will they begin to tell chair yellen what she has to do, beginning next year? think chair yellen has to recognize the fed is not just the domestic central bank but a global central bank. global currency. while she will not speak to it because ultimately it is not her concern but it should be, so yes, the federal reserve has to because just in terms of raising interest rates. usually effects emerging economies such as the one she just mentioned. mexico, brazil, and others here
and it will ultimately be caution -- costly for them. i was struck by the response about a hot economy. you have written about this. we are nowhere near a high-pressure economy, are we? bill: no. i think fed knows there are demographic changes and many more potential employees in the labor force than are accounted for in terms of the unemployment rate. hot economy for janet yellen could be described by or .7% unemployment rate. tom: let's go to the wage growth if we can. we showed this earlier with tom
of rbc capital markets. wage growth of another time, we are nowhere near that now, though we are being signs of wage growth. investadjust how you because inflation means higher wages, means high-pressure label -- labor economy within the u.s.? bill: ultimately, i think that is where we could -- where we are going. the advantage for labor is not what it is going to be or what .t would have then i think it is shifting in the favor of labor and shifting profits as well. as the short-term interest-rate's move higher and five in 10 moves higher, corporate margins will be affected more than investors really believe. much of the increase over the past 10 or 15 years in terms of
margins has been due to lower and lower interest rate and now the potential for that reversing i think exists. russiansuple of more on the greater economy before we turn to dynamics in the bond world. i look at deflation and there are three outcomes. a further higher interest rate regime, a junk condition we have had, yield stability or even an that we might rack -- migrate back to a lower environment. which is best for chair yellen, and ill gross? rack -- migrate back to a lower environment. -- bill gross? a gradual upward movement in terms of the forward curve is for markets.ome
i think that potential is really on because of several factors. although today'statement was more hawkish than expected, i think in terms of jgb's, now would theoretically be 0%. opportunity for foreign investors to invest in a 10 year treasury, a pickup of 80 basis points, there are limits to what the treasury can do and what the bank of japan is doing. are we anywhere near the , toof a bond bear market many of them that you have enjoyed. bring up the global total return
index. ais is a great chart with great bull run bonds from 2009 up. i will put this out on social. 7% on the aggregate index. are we heading toward a bond bear market? when you combine the effect of higher interest rates and narrow credit spreads which then you are beginning to see the potential for a negative sign in front of annual total return. we have not seen that yet, but as you mentioned, it has been dramatically down in the past month or so be those of higher interest rates. when you combine thatfor with credit that could widen out potentially, and yes, you have a potential in front of bonds,
though probably not significantly, unless you see a tension type of moment which we have seen a few times. tom: we have seen that a few times, we know that. constrained,ully assuming higher yield, a yellen or a trump reflation, that bill constrained, assuming highergross has to adjd your portfolio significantly? it has the potential to go negative in terms of duration. it was one of the reasons for the genre over the sector's's initiation seven or eight years ago. wonder in terms of growth and unconstrained fund, how they could you doing so well with interest rates rising and bond prices going down. the duration has been zero or negative anticipating that effect.
an investment manager can play both ways as opposed to vice versa with a typical bond aggregate manager. tom: you are now one of the elites of the leads -- of the elites. i thought the essay in the washington post was magnificent on flyover america. you grew up in flyover america. mr. trump is constructing a cabinet with financial elites. is it a signal of a greater gilded age or can he somehow take the elites and reach out to the rest of america? bill: i think the former. i think a trump talks he has better odds on that than middle america. i grew up in a town called middletown, ohio.
the embodiment of what you just described, the reason trump was elected, will his policies favor and lower wage americans? i have my doubts. i think it is focused on corporate profits and the trickle down type of effect that began with reagan. airplanes.te we had a meeting today of technology elites, the famous gurus. i think jeff bezos showed up, they all showed up at the trump tower in new york. will you fly to meet with mr. trump and financial elites to explain the linkage of your world into trump'certitude? i wish i could. had to join that
potentially, but i am happy in california. but i would like to, i would like to sit down with president-elect trump and basically tell him about our finance aced economy that is -- dependent upon leverage and at some point will not necessarily be productive after the spending package is over. tom: one final question. on novemberchanged 8. can you tell our viewers and listeners that we are all clear of financial repression? room -- boom, can you say we leave financial repression? bill: i do not think so. the critical question is what is the appropriate real interest
.ate i do not think we could go back to a 2% real rate, it minimizes by the taylor model. i think we need to stay at 0% real or even negative, which is financial repression. that was talked about, historically it has in more than a seven-year time in which investors have to be financially repressed in order to regenerate and a practical economy. so no, i think repression is still ahead of us. generoushave been most with your time. we look forward to speaking with you after the san francisco niners actually win a game. i asked him once if you could by the 49ers and put them out of his -- their misery.
we have been looking at the equity markets make a rebound. with the s&p, out tao, and nasdaq look like. it is interesting. a big spike up following the fomc announcement and the press conference. we will zoom in so you can look at what happened. we have made a comeback in the last 20 minutes or so. i will take a look at the sector breakdown. technology has turned positive. all 10 sectors in the s&p 500 were flashing red. utilities, real estate, trust. tom: look at the 10 year yield
breakout. joe: i think we are seeing the reverse of the correlation we were seeing all your or through the middle of the summer. for so many days in the weinning part of summer, were talking about everything going up at once. today is everything going down. bond like stocks getting slammed, the reason is u.s. government wants are. tom: it is a huge deal to we have been waiting for that. scarlet: i love the chart that you pointed out earlier, the asian dollar index, which we do not talk about often. it is a more measured balance. indexhe bloomberg dollar is way better map. joe: -- math. joe: they are both shooting up in both very close to the highs of the day. 1.26, this is a big move particularly on the two-year.
you do not see 10 basis points lose very often but it speaks to not only the hikes expected next year but a level of confidence that maybe dodd-frank should be taken more seriously. this is all it is except japan, it will be interesting to see going over to the asian coverage. he is the former vice chairman of the federal reserve at princeton. -- therely describes book about the crash was exceptionally important. he joins us this afternoon. professor, it is a most unusual time. i thought chair yellen delicately danced around the nation's capital political economics. do you have concerned about the independence of your federal
reserve system? >> i have huge concern, absolutely. she was exactly right to dance around it. there are things going on in congress, i do not know it they onl pass, but things going such as control of the federal reserve's budget, which are frightening from the perspective of maintaining that will reserve in attendance. scarlet: it is something that she would not really address, but a lot of people have questioned. i want to get your thoughts on whether we need the kind of the school stimulus that seems to be in the pipeline here. someone asked chair yellen and she indicated she and her press -- predecessor had pushed for some kind of fiscal stimulus or that handoff, back when unemployment was a lot higher than what we have. infrastructure's been in boost the economy and growth and reduce unemployment
at this point? >> a little. i think the main point is that we do not need it now. it is the great irony. for years and years, we needed it. the fed shot most of its bullets and was practically taking the fiscal side of the house for help, as you just said. refused to deliver it. now the trump is president-elect, all of a sudden, they are in favor of a fiscal stimulus when we do not need it. no one knows exactly the full employment and unemployment rate, but we are certainly in the neighborhood of full employment. incourse the fed is moving the other direction to tighten very gingerly and gradually. it is not looking for help from fiscal stimulus anymore. it was one of the things chair inlen had to dance around
the press conference because she does not want to interfere in any way with politics. are the risks of going ahead with a massive infrastructures ending plan when the economy does not needed at this point? >> i doubt the infrastructure plan will be massive here let's put that aside. is the tax massive cuts when the economy does not needed anymore. the same question you asked applies to massive tax cuts. i think what it will do is hasten the fed's case of raising interest rates. it is going up. nobody is surprised. time hase for a long been gradual, gradual, gradual. months, you might hear that gradual phrase start
getting gradually phased out by the fed as it concludes it has to move more vigorously. left december,, they end up getting one hike, this time, there are three dots seen in the future. is there reason to believe maybe ,hat is more credible this time that maybe we'll get three and two?o -- >> i believe so here's why. why we got one hike and set of four is the fed thought it would be an inflation was lower than the fed thought it would be. they were wrong on the forecast as were lots of people. i will happens again,
get a similar disappointment. unlikely, whether from infrastructure or tax cutting or both, if the economy is put on a sugar high by fiscal expansion in the on implement rate falls beyond where the fed thinks is safe, and inflation goes up, i think that will get the fed raising interest rates more. to me, the risks of the central or cast, 2-3 and the fed said three interest-rate hikes, it is on the upside. if there is more fiscal stimulus and more growth and inflation than we think, the fed more aggressive. scarlet: what do you think are the prospects of esther hiring just on companies coming out and saying they will hire 25 house and workers in the next watch her years, to get ahead of what dressingct to be a
down from donald trump, president-elect, in terms of doing their part to boost growth and the economy? >> it is president-elect, in terms of doing their part im. i would say history suggests that jawboning of that sort does not have a large effect on the economy. jawbone carrier and maybe they sent 7 -- will send 730 jobs fewer to mexico, but there are millions of companies in the united states of america. he cannot be jawboning everybody. so there may be some effect, but i would not expected to be large. remember the numbers. atn job creation is going
roughly the rate it has been creation at 2 job million per year. that is a big number. mentioned things like jawboning, it is small in terms of accomplish in -- a couple she trump want to do. completely sad goal and anything done towards that would be counter productive? >> it depends what is done. trade protectionism, then i think it would be counterproductive. raise prices, the people who cannot afford price increases
and a general slowdown adaptation to the next phase of industrialization. researchou talk about and development, better education, job training, helping people move from a declining sector to an expanding sector, a whole plethora of policies like that, some of which will bring back manufacturing jobs, that is all for the good. joe: thank you very much, former federal reserve vice chair. scarlet: thank you for joining us for this special coverage. let's get final thoughts from the group as we close out our special. mike mckee at the auto reserve set for janet yellen's news conference. tell us what you're thinking. attention moves up constitution avenue from the fed to capitol hill, the possibility of the school policy is when do
get what until they kind of fiscal policy that congress will pass. janet yellen was asked about that many times in her news conference and she said fed officials discussed it at their meeting and comes to no conclusions. we are operating under a cloud of uncertainty at the moment. we have time to wait and see and to factorccur those into our decision-making as "-- greater clarity. >> so we do not know what the fed will be facing and what the economy will get out of it at his point. we could see the fed move again before fiscal policy is in place. or we could see them move more quickly if we get fiscal policy that would be extremely inflationary. i love the clip you played
and the idea of greater clarity. is deeplyair who knowledgeable on history and that the rules do not get made a new president and do not get made by a gop house or senate, white house, and the rules do not get to me made by the fed. i would suggest genuine 27th, -- e three meetings scarlet: the fed had projected there would be four rate increases for this year because of china and brexit. there would be four rate increases for thisjoe: there isf that could and will happen. so who knows about the three hikes. were you surprised with high-pressure?
i did not see that coming. not only did janet yellen bring that up in the conversation in boston recently, but a number of economists made is what yout it needed at least on the productivity side to encourage investment. i thought it was interesting. tom: we can to a jargon alert. the -- havemers on the high ground on this in their research from a good 30 years ago. larry summersg long ago. when you are out of a job, you become less and less trainable and rehire bowl a few you are out of a job for a long time. the economic policy institute has missing employees right now, down 2.3 million. this keeps coming up among academics. when we look at how
everyone is excited and reacting to three rate increases next year, the chief economist at bloomberg intelligence points out if used strip out the nonvoting members of the fed, the median among voting members for 2017.kes it is what down the middle between the two then had been previously forecast for 2017 and the three it has and rounded up to. we are splitting the difference. tom: keep the car up here -- the chart of the chart appear, mike. you see it run higher. ,ike: it is not a huge change but it is interesting, the move higher on the short end and the long and. in what we out to me learned from the fed, rates have reallysing and they
kicked into higher gear after the election, and at no point with anything in the press conference to the fed lean against that in any way. moves one really big the two-year, also significant on the 10 year, both had fresh multiyear highs. it is a big move for short-term rate. people might have looked for something dovish. janet yellen has some thing of a reputation for dovish. the fed did not give a particular reason to think this could go further. markets are --n markets. scarlet: bloomberg daybreak asia is later this evening we want to thank everyone, michael mckee reporting from the federal reserve, tom keene, a 16 hour day. joe weisenthal and myself will
the closing bell. the fed finally raised interest rates. i'm scarlet fu. joe: i'm joe weisenthal. welcome to our viewers tuning in live on twitter. you can watch our closing bell coverage every day. scarlet: as we have been reporting federal reserve officials raised rates for the first time this year. the prospect was quickly diminished after stocks moved lower following the fed's first rate hike this year. the dow lost more than 100 points. wti oil dropping. oil stocks taking a leg lower. joe: let's look at the bond market. i want to start with the two end 10 year yields, shooting higher.
the 10 sometimes moves like that. a big move. a reflection of not only the .ncrease in 2017 the fed looking for three hikes as opposed to 2. convictione increase that unlike last year when they saw four dots in the year ahead maybe this three dots will happen. we see the intraday 10 year going out on a high. yellen passed up opportunities to sound hawkish. longer yield, and a much look at the two year yield going back 10 years. we are not anywhere close to where we were precrisis but we are at our highest level since
2009. creeping up there on the short term. >> let's also look at currencies. it was a straight shot up for the u.s. dollar. you can see that came after the fed announcement. if you look at the individual , you can see dollar strength all around. in, amployment data came sign perhaps that there was disappointment in the hard data since the brexit vote. we are going to keep a close eye on that. commodities, oil falling 4%. of of the selloff after
that the decision, over $50 a barrel. gold down over 1%. similar with what we saw with treasuries. anything like that getting sold off. gold down a little bit. alix: those are today's -- scarlet: those are today's market minutes. us: joining us, we have with deutsche bank chief securities andomist and andrew 11, professor 11, thank you for joining us. -- two things stood out. they're going to be three rate hikes next year. dot tickederm higher.
yellen gets a lot of credit for leading this committee. they had a unanimous decision today. the statement that they issued ofy eight words changed out 500. so the extent to which there , theyhips in the dodd were up by a quarter point in each calendar year. that is what you see the bond market is moving. little explanation from the fed about what is the underlying reason for that. the critique of the communication, you can see very clearly it is illustrated today it seems to arbitrary, not transparent enough, not explain
clearly enough what its strategy is. it is a difficult thing. one thing that she clarified, which was not helpful for rates, she said i never said that i wanted a high-pressure economy which is part of a communication she did discuss, but she pointed out that i never wanted to be dovish. i never said i would keep rates low forever. i said this is something we should be thinking about what the consequence could be a we will raise rates if needed. the biggest wake-up call for rates investors is that it is not the case that she is inherently dovish. >> did that surprise you? many commerce asian shifts she gave that speech were around
that issue. but now she clarified i am not always dovish. if conditions change. joe: she just say she wasn't for it. like she is willing to hike rates if needed. you thishat is telling recovery is pretty strong. scarlet: this maximum option now the the fed seems intent on is more hawkish than what investors are accustomed to. we have gotten we will be accommodative matter what. do as soony need to as possible is start preventing alternative scenarios. about thencertainty economy. it is not clear what
leaders in congress are willing to do next year. the sales report was week. core retail sales barely moved. the reason you saw it in the morning, the bond market dropping because the reason they shot up this afternoon was because people may have been expecting the fed made some reference to these questions, like what we saw last december. we could be in a situation where just as the fed is tightening the path it expects to follow the economy isn't cooperating. scarlet: the economy is very different. >> the unemployment rate is loyal -- lower. the improvement in unemployment was not because of the strong labor market. bill gross said the fed itself knows the unemployment rate is not a sufficient statistic for
the labor market. joe: there is some confusion about why the dots went out. several try to get her to talk about the new administration. she didn't really say that much. in the synthesis of all of the option that that is what is bleeding into the expectations. >> there were a lot of unspoken things. it is uncertain how much fiscal stimulus we will get. arrived. we see the rate hikes come that we have been waiting for for so long. solution to resolving this problem? you, what is the next step?
>> there are several clear improvements. the chair should start giving a press conference after every policy meeting. if the chair had given a press conference in early november the same question that came up today could have been asked at that point. to except she gave the speech in boston she could have explained you are misunderstanding what i was trying to say. over the coming year there could be rapid changes. this policy outlook, global , the fed needs to be prepared to be more agile than it has been. we have seen clearly is that it is difficult for them to move when there is not a press conference. having a press conference after every meeting would make the fed more actual. scarlet: next year we get a
change in the voting members. you got a bunch of new people coming in. some of the ones that had been dissenting actually leave. some people say to them were dovish tone. we looking at the prospect of three rate increases. we're hearing from janet yellen. that is now for 2016. it could be a different picture. has gone up. we could see a number of shark spikes that could argue why the outcome could be much lower. the standard deviation seems clear that there is a lot of disagreement. what does the committee think about the trump plan? what do they think about what could be coming or not coming?
>> let's get to the first word news this afternoon. top names in tech to meet with president elect donald trump on their agenda, avoiding policies they think will hurt policies. trump tried to reassure his guest telling them i'm here to help you do well. the room including facebook, jeff bezos and tim cook. not in attendance, twitter. the room banned from
because of a fight over emojis. tillerson will help navigate a pass over more than $187 million in unvested stock awards. to avoid a conflict of interest he will need to sign off and get that from the top u.s. government ethics agency and exxon mobil board of directors known for its hardline on executive compensation. investigationy found michael flynn inappropriately shared classified information with foreign military officers in afghanistan. that is according to records obtained by the washington post. flynn has dismissed the case as insignificant and given few details. the turkish president is urging al sides to abide by
cease-fire agreement for the syrian city of aleppo even as the deal rapidly unravels. is the the accordance last hope for the innocent. iran is congratulating syria on driving rebels from the city. global news 24 hours a day powered by more than 2600 journalists and analysts in 120 countries. this is bloomberg. scarlet: back with us now, our security chiefs international -- nt and whatw, let's start with was not said during the fed news conference. there are no questions posed about international events by china, europe. those were events that overcame the federal reserve and derail ed increases this year.
>> the statement which repeated the same words, the risks are roughly balanced, there are significant risks to the broader global outlook. bill gross mention this. they have done lots of work. marks about european politics are very important. and the question marks about china are very important. turnhree dots might tend out to be three. it could be zero or one yet again which is why the federal reserve needs to start communicating using alternative scenarios and contingency plans and not just focus on a single benchmark outlook. joe: it is always hard to know where the risks come from very everybody thought it was going to be brexit, trump, italy. none of those things matter to
the markets. it seems to come out of nowhere. if you had to win i had and anticipate what the be the most salient risk, where you looking? >> the important way to think about this, what is the market story, what is the narrative? we are going to get a boost of gdp growth. we might even get a boost to inflation. ares as if those risks somewhat put aside. we have a lot of risk from china. --ot about the huizinga housing market in china. , i basically no questions from clients about that despite the risk still growing in the background. it is it the narrative cannot be too complicated. if there are too many setpoints you say i don't understand that. the narrative is certainly the two few stories.
the fed is confirming things are good. maybe we should just believe in that narrative. the risks and the rest of the world, that is not a big risk at the moment. t has come to godo the bond market. yellen's talk should be a wake-up call. let's say we don't get a huge stock -- a shock. where could rates go? >> they could go to 310. the bottom line is there is still significant amount of evidence that the economy is close to full employment and we are having infusion -- inflation at 1.7. you would say i would have to do a mandate. it looks like we need to move higher. markets have been hesitant in accepting they would move higher.
scarlet: the 25 basis point rate doesn't do a lot. that will have repercussions, won't it? >> i think people should understand if the 10 year treasury goes up that high it is going to slow the housing market. if the five and the two-year go up as much that is going to slow auto sales. the goal of trying to strengthen manufacturing is going to be harder in the environment. there is going to be complex cross currents both for the economy as a whole and individual sectors. >> we don't know what 25 basis points will do. every cycle the impact is different. , the you run in purpose model of the u.s. economy, you raise it by five basis points.
the impact is relatively modest. this is telling us that communication challenge for the fed is a norm is. the fed does not want to disrupt financial markets. the fed wants everything to be smooth. if they could do anything to avoid any disruption and volatility they will do everything in their power to prevent crashes, volatility to move around. >> can you remember the last time a central banker said fiscal policy may not be the answer at this point? that seems like a big deal. i get that we are at a different point but that is a shift. >> i fell out of my chair. for a long time in europe and japan the answer has been more fiscal. now we are at full employment. the reason why she is saying we don't need it, if you do, the main thing you get is inflation. it makes sense but it is a
regime change from the way that central banks have been talking about things. >> maybe i can interject. the congressional budget office has credibility as an expertise. if they don't think we're at full employment yet, they think broad numbers we're at a million full-time jobs short of full employment. are alongessments some lines. we look at the part-time workers who want full-time jobs, when you look at the unemployment ratio of females, that is still way below where it was precrisis. it was flat during the early 2000's. some evidence that there is still significant slack in the labor market. we know the unemployment rate is not a sufficient statistic. accommodatedhaving
with modest stimulus brings those people back out of the sidelines. it is important for the economy that we accomplish that. to our guests, fantastic to get your perspectives on a pretty big day for the federal reserve scarlet: . coming up, donald trump met with the biggest titans from silicon valley. we get a live update from trump tower. ♪ this is bloomberg. -- this is bloomberg. ♪
outspoken opponents during the presidential campaign. they met with him for the first time since november 8. attending, theesenting a who's who of most valuable companies. the meeting has just wrapped. we named a couple of the people who attended. there were some that were not in attendance. >> there was a broad range of executives that attended. jack dorsey was not there. that was because they were actually traveling. many investors entered the building. said she was looking ahead of the meeting.
at the meeting trump actually struck a conciliatory tone. he said he was proud of the innovations of the sector he planned to work with and that he was there to help them. toe a listen to what he had say. >> i'm here to help you do well. you are doing well right now. about the bounce. everybody in this room has to like me at least a little bit. help.said he was there to joe: there were some complicated issues that affect tech companies. immigration is one. also for the hardware companies that have complex global supply chains, the ability to trade freely throughout the world is important for them.
are these areas where they will find common ground? >> definitely. it's unclear if they got to those issues. on immigration trump has one-flopped on these h these is. you mentioned foreign trade. trump has said today that he was going to try to make deals easier but he has made many comments that have alarmed the tech industry even inciting a trade war with china if necessary. we just have to wait and see after this meeting. we will have to wait and see what will come out of that. >> coming up next, we speak with the legendary bond investor about the fixed income market.
>> let's get to first world news. donald trump says he is receiving intelligence briefings three times a week. donald trump said he doesn't need to hear the same information every day. tosays he is told officials let him know if situations change. 4 million people signed up for affordable care act plans for the first six weeks of the 2017 period. it includes 1.1 million new customers and 2.9 million
renewals. donald trump said he wants to repeal and replace president obama's health care legislation. the u.s. is accusing to former executives of heritage of polluting with generic companies to fix prices. charged ineser philadelphia. there is the first criminal charges mean from a two-year investigation said to spend more than a dozen companies and two dozen drugs. appears to have installed antiaircraft and missile systems on all seven artificial islands in the south china sea according initiatives.y it is based on new satellite images.
global news 24 hours a day powered by 2600 journalists and analysts in 120 countries. this is bloomberg. scarlet: thank you. let's get a recap of today's market action. the federal reserve raised interest rates for the first time this year. the dow jones industrial average losing 118 points. 19,000 was the final print. the sectors except for health care ended up declining. ones, thelly brutal bond market got slammed with rates rising. .et's bring in dan we have seen a pretty extraordinary move. business has more to run? >> it is probably an adjustment upwards.
it has not been that severe but it is moving up. seeow much further could we 10 year rates go to? >> several weeks or months. we are coming into the year end adjustment and that will dominate. after that, it depends on what the next move looks like. it is too early to tell that. you have to back off from that. the fed is going to watch what is happening. i don't think they have their hands tied one way or the other. theyld be surprised if reverse. i think that is out of the question probably. their concern is not the u.s. economy. if the u.s. economy where the entire thing you could start to look for to, maybe three
increases. >> in terms of where you see treasuries headed, joe has -- tell us how you adjusted your portfolio? >> far from panic? the -- we cut the average on the bond fund. gradually over time. we will stay right about there. we have built into the portfolio a yield curve. sort of a mechanical thing. but the passage of time help you. we are into a situation where there are a lot of bonds that have been issued selling at discounts. far fewer selling at premiums.
market a different bond than a year ago. it allows for different strategies. it doesn't mean turnover goes up a lot. a different sort of bond. when there is an adjustment up in rates, you have another compensation going. you can do what is known as writing the yield curve. it incorporates as well. the mechanics of the market are important. what we have to bear in mind is we don't have a market that is anywhere near as likely in corporate it was 10 years ago.
that is a hindrance and an advantage. it is an advantage to the investment manager but overall it is a hindrance to the efficiency in the markets. joe: explain that more. how do you take advantage to declining liquidity? scarlet: as long as it doesn't go away completely. as it lessons. >> let me put it this way, the middle of the market used to be like this. even eight years ago like this relative to the size of the market. , the market does short periods of time. we have the factor of the etf's coming in looking for offers. but that aggravates it. watching in the markets all of the time you wind up filling a
role of providing bonds to the market when they desperately needed and vice versa. >> i want to get your thoughts on one of the proposals, they have floated the idea of selling longer dated treasuries to help fund some of the fiscal spending projects the trump administration has in mind. this is the current repayment schedule. the blue part -- what do you think of this proposal to sell longer dated treasuries? would you be a buyer? >> i would not be a buyer. i think it would be a wonderful thing if you could do it. i wish this had been put forward a year ago. even now i think it might work. you would have to watch your size. your target would be the liability measures.
that is a limited market. scarlet: if you won't buy it, who would? >> it would appeal to somebody who wanted to match a long-term quality,, with high probably not very good market ability. anybody that is really constrained by the duration of reliability, it would be a little too long but some of the pension people definitely would. the foreign buyers might. when i first thought about i thought that wouldn't happen. and i thought yes, it would. you would have a limited market. treasury has resisted doing this . steve's idea is a good idea. where was steve two years ago? he wasn't the apparent treasury secretary.
make a perpetual at a low rate. would that be the buyer? joe: you talked about how you let the maturity of your portfolio, rates have been rising since the middle of the summer. is this different in some way? it is a cyclical thing in a rising rate environment. bottom in the market was july of 2012. as you get out to the long bond, you can see it was more reasons
than that. now wea long time and are into the rising rate environment. what was so different than the last times we were in this study is the central banks concerns .re international constrained rates. higher what happens to inflows outflows. what about the people it is leaving? they need it and it is leaving. that is the problem our central bank has. if you say prayers at night do that. >> that is my plan. thank you very much.
joe: the bloomberg dollar index at a record high. ther raising rates for first time this year, more on let's bringmarket, in our guests, mark. what is the big thing? one is your number take away? >> the ecb indicated easing policy further by buying more bonds for longer. , the germannce two-year fell to record lows. a big divergence. we have to get past a lot of uncertainty. how does it shape out? then we get into next year. elections andpean
each one a populous person could win theoretically. each time that happens you would expect there to be less of a market impact. brexit shocked everyone by the time was the italian referendum it was barely a shrug. >> the defeat of the referendum is not really an anti-european vote. the next one, the dutch. we have election the papers part of next year. i think that is the focus. what has cap does at peace. there has been integration and a weakening of nationalism. the globalization integration is the glue that holds europe together. >> this rates move that we have
seen, the dollar move, is this a cyclical thing? how big is this in the big picture? is this a big break in policy or is this an upward tick? >> it is an important shift. if you look at the magnitude, the u.s. u.k., u.s. and canada, very wide. this is the third big dollar rally we have had. before this dollar rally is eurozone is going to go back down for 2000, which puts the dollar index at $1.20. i'm talking about a big move over the next two years while policy divergent. much is this going
to setback donald trump's administration goal of 4% gdp? >> i think you are right. level of so much the the dollar but the pace of it. the pace is quick and since the election. i'm not sure we should count on this to be a straight line up. we're going to get more details. some republicans in congress different. eagerats are not so to sign onto tax cut's. it is a little bit faster paced. we are getting closer to the fed target. maybe we don't go for percent. it is time for me to see the fed forecast. happens when it does become a parent? maybe fiscal stimulus is in all it is cracked up to be?
maybe it is focused on rich people and their tech crunch question mark how does the market react? the markets have this big positioning. you can see this every day almost. i think we get a decent size correction. the first half of this year, the federal reserve did not find a bottom until may or june. picture, the euro going back down to the play how long does this out? >> another couple of years. i think we have some room to go on monetary side before the ecb can consider changing policy. it is hard to tell with the doj is doing.
-- boj is doing. it is hard for people to get their heads around. how could europe and japan be in such bad shape and the u.s. doing so well? scarlet: in this interconnected world. >> this divergence is not just interest rates but economies. it has a way to play out. head will rear its ugly with asian economies waking up to that stronger dollar. scarlet: coming up, donald trump met with some of the biggest titans from silicon valley. we will discuss and show you the names. this is bloomberg. ♪ >> going back to president-elect
trump said meeting with emily chang. now from sans francisco. what did you find out about this meeting? phone just got off of the , the meeting was friendly and productive. there were no points of tension which is interesting given how vocal silicon valley has been against donald trump's election. the top three topics that came up, jobs, immigration, china. ,here were a few subtopics infrastructure, education, repatriation of foreign capital. looking at the remarks from donald trump himself, it started off flattering of the people in the room.
can starty is they off on this foot but they still disagree on big issues, immigration or net neutrality or encryption or a range of social issues. he did indicate he wants to do everything possible to help them when it comes to trade. he can certainly help when it comes to tax rates and repatriation of capital. this is an interesting first up and it seems they are getting off on the right foot if you will. a lot remains to be seen. >> donald trump's favorite social media tool was twitter but they were not in attendance. what is the back story? emily: the donald trump team says twitter was not big enough for the meeting. politico has been reporting that donald trump's team was not happy with the way twitter and jack dorsey personally handled an issue with a crooked hillary
emoji the team wanted to use on the platform. this is not something we have independently confirmed. jack dorsey in particular has not been shy about sharing his political views on twitter. he did a periscope with edward snowden yesterday. peter thiel, who is responsible a lot of the folks at this meeting has not been fond of twitter as well. founders firmis is they want something more innovative than 140 characters. something there that will definitely continue to watch. joe: you would never guess you talk about a story of tension of the president involving a failed deal involving a crooked hillary emoji. emily: not at all. donald trump has used twitter to great effect throughout his campaign. he uses it several times a day. is obviously very fond of the platform itself.
it is interesting to think about how politics could potentially intervene in the business of twitter. we are going to be talking more about that coming up on bloomberg tech. scarlet: thank you. emily chang, bloomberg tech anchor from san francisco. you need toup, what know for tomorrow's trading day. this is bloomberg. ♪
what'd you miss? the federal reserve raised interest rate spread stocks fell per the dollar rose. pretty much everything felt, particularly short-term bonds. across the curve that postelection post summer story of higher rates continues after today. scarlet: that certainly persists tomorrow we're looking ahead. the central bank's decision moment is not over. the bank of england will make its decision on interest rates tomorrow. joe: so much central-bank
activity. i will be looking at economic data tomorrow, jobless claims have been low. scarlet: and speaking of central banks we have the bank of mexico rate decision at 2 p.m. we will be keeping an eye on that when we break it to you live. joe: thank you for watching. scarlet: have a great evening. this is bloomberg. ♪
fighters and civilians and aleppo is back on hours after a collapse. a spokesman for three rebel groups said the cease-fire would go into tonight and implementation of the deal would begin early thursday. president-elect donald trump's teams as he gets intelligence briefings three times a week. they say trump is also meeting daily with incoming national security advisor michael flynn. trump recently said he doesn't need to hear the same information every day. he says he has told intelligence officials to let him know if the situations change. more than 4 million people signed up for obamacare plans for the first six weeks of the 2017 period. officials say that doesn't include sign-ups in states the run their own exchanges, such as california and new york. a u.s. study of pregnant women 6% resulted in birth defects. the rate was nearly twice as high for women infected early in pregnancy. the study was published by the journal of the american medical association. global news 24 hours a day, powered by m