tv Bloomberg Markets Americas Bloomberg March 9, 2017 2:00pm-3:31pm EST
♪ from bloomberg world headquarters in new york, from washington to paris, moscow, in the next hour. here are the stories we are following. in markets, crude oil dipping .elow $50 a barrel non-opec producers not doing much to combat record stockpiles. politics, president trump's one trillion dollar infrastructure plan, they are taking matters into their own hands. to raise are doing money for roads and bridges. the president has will cannot the animal spirit. find out what else he had to say about the president's impact on the economy in our exclusive interview. markets close in two hours. the drop in oil prices are weighing on the energy shares.
>> slightly more negative as we enter the afternoon. they were higher and now they are lower not i much. day of declines potentially as we continue on in this direction and ahead of the tomorrow drops report. what is the balancing act we are seeing? care is the best performing group today followed by financials which have been rallying. telecoms are the -- one of the best performing groups. on the flipside, higher yields and higher mortgage rates as well. energy is more heavily weighted. .hat is more of a factor that group is off by three quarters of 1%. something else i want to look at his relative valuations. investors are talking about this more and more as stocks get higher and higher.
about two engine the ninth year of the bull market here the dividend yield in white and the 10 year treasury yield in blue. what are you getting for your money for the various different asset classes? you can see the treasury yield a gifted man -- advances and premiums earnings deal going back to 2014. that is one way to value it. it is not just a 10 year yield we are watching climbing higher and higher. it is a two-year yield as well. up two basis points. 1.37% is the highest since 2009. not only do we have tomorrow's jets are what, we have the fed decision coming up on march 15. 100% being priced in two fed funds futures, up a rate increase at this point. >> thank you for setting the
scene. >> let's check in on mark crumpton the newsroom with more. president trump says contrary to media reports, plans to overhaul health care are coming along great. the president also said this afternoon, we are talking to many groups and it will end in a beautiful picture. the second of two key congressional committees have cleared the bill. the energy and commerce committee approved the legislation by a vote, 31-23. julian assange says his group will work with technology companies to help defend them against hacking tools. in an online press conference today, he'd knowledged companies have asked for more details about the cyber espionage toolkit whose existence he reportedly revealed in a massive leak on tuesday here >> -- tuesday.
>> we have decided to work with accessive them exclusive to the additional technical details we have so the fixes can be developed and pushed out. far, the cia declined to comment directly on the authenticity of the leak. vladimir putin and benjamin on thisu held talks situation in syria and israel's concerns about the role of iran and its proxies. president putin emphasized a high level of trust between them. .etanyahu praised russia's role strongsame time, concerns were raised about the presence of iranian and has bluff forces in syria. mr. netanyahu's visit follows his talks in the white house. scotland may hold a second
referendum late next year according to scottish british minister. first, there must the more clarity about written's exit from the european union. they said independence is inevitable unless the u.k. softens its exit stance. that 185n japan say cases of thyroid cancel found in children who live near the 2011 nuclear disaster cannot be linked to radiation. the team of doctors said today the cases were found due to blanket screening and not the radiation that leaked from the plant. they also said stress and changing lifestyles have wanted obesity and diabetes, increasing the risk of strokes and heart columns. global news 24 hours a day powered by more than 2600 journalists and analysts in over
120 countries. this is bloomberg. j.p. morgan chase believes president trump will get at least part of his agenda done. he said today in an exclusive interview at the 2017 global markets, in paris. he was asked how he thinks the president would handle regulation on wall street. >> i hear people say, we had a crisis. no one is if for that. we want to be a recent voice to look at the things inside not just dodd-frank, but things that need to be recalibrated, coordinated, there are too many people involved. is hurting lower paid, first-time buyers, small business owners. we need to do it for the sake of all people. no one can rationally say it was a proper and fair and coordinated system. open it up and have an
intelligent conversation about the consequences and can we get the economy going faster? if you do not have a healthy health care system, you will not have a health the economy. it is not good for financial players. it is good for the citizens of the country that it is a bad idea if you want jobs and growth. >> in dialogue with the trump administration, it is healthy and constructive. with him directly? ? play through steve mnuchin. , but i thinkma again, i am a believer that collaboration will win and finger-pointing will not. there are solutions to problems. you have is in this collaborating together. some of these businesses are the finest on the planet.
we take care of our people and our client. we did not need government help. we're trying to help people. i want to make sure we do our jobs helping the economy get a little bit better. >> speaking to a lot of european , terrified you're not in a level playing field anymore. >> i think it is a good thing. i think some of the criticisms are legitimate. i think at the end of the day, steve mnuchin, they will work out something that makes sense for everybody. american banks have far more capital. the european banks to thrive. if they don't, europe will not thrive. regulators should look at the things that will help them compete and thrive to grow economies. they financed 80% of the
economy. what are the chances of the u.s. ignoring the rest of the regulation in the world. are you certain they will reach an agreement? .> the u.s. made it harder i hope they reduce some of that, and i hope it takes a deep breath to make sure the next round is top really calibrated to soundness and enhance growth. they should be looking at both and not just one. >> smarter regulation? >> smarter. proper securitization rules, proper legal safe harbor, things like that. people have been reluctant. in the united states, small business formation is lower,
because small businesses tend to generate in recovery so the next formation is negative, for the worst time. got out a whole bunch of small business. always on intended regulations. how hard it is to hold certain small businesses, real estate loans, and because of that, they manage their risk. inver: that was jamie dimon an exclusive interview from paris. 10 year treasury yields, we're at highs here. you are looking at financial stocks since the start of the year. let's bring any -- ring in a financial editor. we will build on those comments from deregulation. we know the white house will attack the affordable care act and then will of -- address tax
reform. where does financial deregulation fit in? could happen with some speed at the regulatory agencies. jamie dimon's talking about stress tests and capital rules. congress does not really have to get involved. if you are wall street, you shouldn't want them to get involved. be a long time before they get to dodd-frank. the problem for the trump notnistration is they are being quick staffing these agencies are people are dropping out four important jobs at the federal reserve, some of the most important jobs on financial regulation. people are saying they do not want to do them. there is a bit of an error with the trump administration. they could be moving faster on deregulation as regulatory agencies and it is not happening. having to matter of work through the details of how
they will be repealing or changing dodd-frank and that type of stuff, or can gary: and steve mnuchin and president trump sit down to figure out the path they want to take and push it off? >> the most important job in all of this is the vice chair of supervision, at the federal reserve. one of the main at the job dropped out yesterday. steve mnuchin can advocate policy. that job at the federal reserve, that is the person who works on federal reserve rules for regulation. question aboutn why people don't want to do these jobs. on the one hand, people like jamie dimon are saying the but putting right people in place on the ground in washington to execute that sentiment is not happening. >> obviously jamie dimon is a big voice for the banking industry. let's see what was said earlier this week.
they will getink substantial legislative change through the congress, except areas where there may be some midsized and smaller banks in ways that don't in any way undermine the regulatory framework. horizon, inn the the absence of legislative changes, do we presume regulators will enforce less stringently? >> yes. they can enforce less stringently, interpret things differently, it can be interpreted differently, but there is almost -- only so much flexibility there. if you want to do a wholesale awrite of the rules, it is bureaucratic and time-consuming process which goes back to the point i am making. that donald trump and steve mnuchin can get the agency staffed, the sooner they can start the process.
they are not making a lot of headway. >> a lot of investors are waiting to see this sort of regulation change, as we have observed in markets. andou are an investor to you want to set up a timeline to say when i want to reassess reality and expectations for what ise of overhaul, the timeline to keep in mind here? >> bank stocks traded as if it already happened. a lot of it is on the expectation it will happen. i would say you are well into 2018 before we start to see major changes to financial rules , the dodd-frank act. >> all right. thanks so much. thes we mentioned earlier, yield on the 10 year treasury topping 2015 highs. it is at the best levels of the session which means it is
scarlet: this is bloomberg markets. i'm scarlet fu. theer: if you check out terminal right here, you will see we are now approaching the 2.6% yield level, which would sing -- signal the start of the bear market if it holds on a weekly basis. gross inear from bill the next hour. here to put it in some perspective is lisa, who writes about this for bloomberg gadfly.
the 2.6%, it is not the first time since we saw it on the chart. let's get perspective here. but it get bear market, is not the first time we have been at this level. we were here earlier in 2016 and obviously way back. >> looking at technical to show the bulls will basically be forced out of their position and made to sell and price in higher yield. to ask isant question not necessarily whether the yield reached this 2.6% level, for the broader u.s. economy and what that is signaling about long-term growth. five-year, at the measure of inflation, if you look at the yield curve, the differential between five and 30 year u.s. treasury yields.
number of other measures, they are signaling the same thing. as rates go higher, growth outlook is deteriorating. pretty rapidly. this is the important thing to watch in my opinion. >> high-yield bonds are starting to show a weakness. it is not territory we have never been to, but there is a lot more concern this time around. >> right. etf, the biggest year today outflow and biggest since the u.s. election in november, it signals the idea of lower growth over the long-term being priced in. if you believe in accelerating growth outlook, you would think riskier companies would to seeing you will rising.s
higher yields riskier and slowing growth. the federaltly what reserve typically wants to do, raising rates. a lot of people believe if the fed raises rates, because they are coming from a low base, it will not matter. thatarket is signaling helps is not the case. >> you see this shift actually happening, where do investors -- we have been watching the stock market. quite a bit of inflows. i wonder, when you talk with your sources, which is that money go in terms of where we invest specifically? >> set is the next owned question. is question that leads to
how fully invested investors were leading up to this point. we have talked about high cash balances last year, anecdotal evidence suggests investors have been fully invested at this point. you could see investors pulling out their money into cash. consider that it is causing the market to reprice. it does not mean the money is going out. while there is not weakness in the stock market that we know of at the moment, there has an a lot of talk about people going get a higher yield, does that happen? >> of course. bond etf andd
other index funds, yes, you have who are circling retailers, for example, thinking perhaps now is a good time to delve in. it is a scary trade but you are seeing that and there are pricesrs who say we have and we will buy things but we is not there yet bill gross coming up later in the next hour. i wanted to highlight something. yellen, shet janet is a modern-day goldilocks. our financial system is like a truckload on a bumpy road. that is a stark image there. clearly concerned about the level of debt here. what extent is janet yellen and the fed going to look at the move we have seen in 10 year that give them pause when they decide on interest rates wednesday?
watch,s something to whether traders are hiking in, fewer weight -- fewer rate hikes. not fazed by this. that said, a bloomberg view the more did highlight debt and economy has, the more an asset priced correction will hamper the economy. that is something to watch and it is something i am sure the fed will deal with as well. >> bill gross will speak with us coming up, details of his latest investment letter. to hear all of the fixed income news, catch our new program hosted by jonathan ferro, airing friday at noon, 5:00 p.m. in london. biggest ahead, the takeover bid ever may also be its toughest to complete.
in agriculture, corn and soybeans slumping. a report says soybean production will be at a record level this year. production will also be strong. in trading. lower let's turn now to metals where gold is trading, and eight a slipping below the $12 level, just down below 1203 announce. a near certainty the fed will raise rates next wednesday. oil, nymex crude falling, currently at 2943. its lowest level since november, and the latest catalyst is record domestic supply. lost over 5% since monday. here is the context. this is 1342. crew -- crude prices in blue, long positions in white.
in positioning for further gains. many investors were caught by the slump in oil and that like the exacerbated the price to climb. us is the director of commodity strategy. we have got oil below. sharedstocks selling off at what happened? i thought opec's was in control here. >> we thought so. we discussed this the last time we were on. toange is opec's role define both ends of the market, it is really just to calibrate the low end of the market and they successfully did that with the first coordinated cut and the compliance which was pretty impressive. the real question is everyone looking at the end of may see if they will step
in again, i think they know the role has been watered down, controlling the bottom of the market. is they are likely not going to the end cuts later in the day. i believe the market consensus is they will cut. if we are correct, the market could see a further downside if it doesn't see what it wants to see. some people look and say opec's numbers lay the game by moving maintenance forward. is are theyto you going to show output discipline one prices are clearly not going to move much higher? >> i don't think so. this there said i don't be a bit of, want to do this alone anymore, a
saudi stance since the 1970's. you are starting to hear more of the rhetoric. highly compliant in their cuts, few other cut -- few other countries were. notain players have committed to cuts as quickly as they wanted. i think the saudi's are comfortable with what they are able to accomplish. they feel as though they are wearing the burden again on their own. >> that is kind of your burden. they can make it feel comfortable going on board in another round. a complete collapse below $40. they continue to see guidance from the oil and gas sector.
>> i want to point your attention to opec. crude production, a big red 34%, food production, which can make it larger as well. for the latest leg lower, will that build up the inventories and the way they chip away at the commitment down the road? >> i think so. they are china to navigate a narrow strait. the heart of the problem is this. the rate of inventory declines is nowhere near this production of growth at a price level no one saw. to add the amount of production
they had and no one really believes it. the wronglooks at thing. looking at the cost curve. greater thanmuch the amount that costs were able to reflate. for -- 10%oing up 10 on average throughout the u.s., whereas efficiency gains are blowing that away. break costs have remained low. the key indicator to look at is the rate of cost reflation. very from a couple of specific things in the cost structure, it has been relatively muted. look at the potential for volatility in oil, do you see the bit of a range here? >> we have got more to go. it is going lower.
i do think we are going lower. people going to get getting equity, and continue to sell futures as a hedge against those positions. i think that will happen. the index is usually a better guide and there has been a massive emergence between crude prices. when you start getting below $40 per barrel, the ability is there. >> director of commodity strategy, thank you. a quick note. shares are higher. oil giant has chosen a firm on an upcoming ipo according to people familiar with the matter. they say -- it could be the biggest ipo ever with a valuation north of $2 trillion. >> a transition from the topic
we just discussed. let's check on the headline with mark crumpton. mark: steve mnuchin sent a letter to paul ryan and other lawmakers to inform them treasury with will need to start taking extraordinary measures when the statutory limits on reinstated march 16. in the letter dated march 8 and post on the treasury website, sect termination also said honoring the full faith in u.s. outstanding debt is critical commitment. the trump administration, 68 nations fighting the islamic state. plan the next moves as it loses ground in iraq and syria. rex tillerson. senate majority leader mitch mcconnell says there is no evidence that former president barack obama wiretapped trump
tower in new york city. comets were made at a political event in washington. the president said over the weekend mr. obama had tapped his phone over the weekend but had no evidence to act up this accusation. mr. obama said neither he nor any other house official had ever ordered surveillance on any u.s. citizen. no reason was given for president putin pointed toward a series of arrests to senior officials last year. mr. putin has reshuffled -- widely seen as -- presidential election. global news 24 hours a day powered by more than 2600 overalists and analysts in
bank,the owner of jos. a shares down 32% after the company's fourth-quarter results missed estimates and not just missed, but one analyst called the results and to mx, across geographic regions and different the stocks become cheaper trends, but analysts say the company needs to restore said bill -- stability. you also have a grocery store chain, coming out with earnings that is -- missed estimates. initiated a new coverage at guggenheim, to underperform. one of the jewelers, the various the company says it will close as many as 170 ofations and reopen as many
those in other places. a little better than estimated as did earnings from sears although that company still embarked on a turnaround in the company had a narrower loss than predicted, so that helping matters for sears. we are really seeing retailers lag in the overall market. versusail etf in white purple, the etf attracts the s&p 500. it opening up since the election, since the beginning of the year. this is a ratio on the bottom. tells us the retail sector is trailing the s&p 500 the biggest of 2009, the end beginning of 2010. >> thank you. >> a new report may strengthen president trump's and as he tries to secure $1 trillion for
infrastructure projects. the quality of u.s. infrastructure gets a great of be plus. additional $2 trillion is needed to raise standards. now, mark writes about infrastructure, all parts of a focus on infrastructure week. this report here does seem like and mr. trump has painted the infrastructure as being .truggling what does the report at onto what we know about the country? >> this report comes out every four years, a survey of 16 different infrastructure sectors and comes up with an overall grade in this shows we have not made him -- enough progress. some improvement in some sectors, some declines in
others. just shows a need to do more to invest in infrastructure. an estimate of what the need is to bring the overall grade up to it is like $4.59 trillion. when you count the available funding, a $2 trillion shortfall. >> some massive numbers there. the president says he plans to invest $1 trillion in u.s. infrastructure. know there are a lot of things that require improvement in funding. the president did meet with elon musk, for instance. >> right. part of what they talked about, there were questions that elon musk was pursuing. we heard the president talked about a whole range of different types of infrastructure for roads, bridges, tunnels, some things you might not necessarily inc. of for infrastructure.
one of the pieces will be how do we define infrastructure and what ultimately gets included in the proposal for funding? the needs are great and you could count a lot of things as areastructure and you seeing a push from a lot of different sectors trying to get in on the money. we have heard suggestions the national park should be canada's infrastructure because they need funding. >> we have heard about the potential for private public partnership here and being a conduit for the infrastructure work being done. is that a realistic focus to be here, it does seem like trump is keen on making that happen. >> there will definitely be a push to get public-private partnerships more in the mix. we have trillions of dollars in capital out there waiting to
invest. the issue will be what will the ultimate mix the between public and private funding in whatever package emerges and gets approved? folks will tell you that while public -- public-private partnerships are useful for some projects, they are not feasible or even possible in some cases. you have a rural area or an area that is a low population or income, you will probably not the able to get a user fee or a kind of revenue stream, so the argument even amongst some republicans is you need to have the government pay for infrastructure improvement we need done. >> can you tell us what went wrong with president obama pauses attempt to jumpstart infrastructure? the democratic administration also attempted it but did not get far. what are lessons learned?
>> part of what president obama was trying to do with a stimulus proposal in 2009 was jumpstart the economy. he wanted to see things done quickly, getting money flowing into the projects and people get economic boosts. he ran into the problem that he promised there would be millions and there was not really anything as much as shovel ready, that it takes time to get the permits for these projects. shorter-term improvements, but really economy, boost the -- job boosting, so one of the things democrats have tried to push is the idea that we need more direct funding that is predictable to get planning and projects in the pipeline. the republican leadership in congress wants to see more private spending. push inl be the big
congress, what is the mix to pay for the trillion dollars. quite a few have got to get a great score, a lot of great stories including another one. already getting underway with infrastructure projects. >> we have never had such a pro-business president since the founding fathers. i am not sure that is true. consumer confidence, small business confidence, all skyrocketed because it is a growth agenda. ♪
oliver: this is bloomberg markets. is speakingresa may at the european council summit in brussels telling reporters it is time to get on with negotiations. she repeated they plan trigger article 50 by the end of month. watch the comments right now on live . the march deadline is a self-imposed deadline. >> let's talk about a chart. it does a good job characterizing jamie dimon where he said animal spirits are back in the market. all into what i think is a beautiful chart. let's start with the white line, university of michigan consumer confidence. the last was slightly lower. and -- still elevated. >> menu look at businesses, you
have got the business outlook peaking now. the highest in several years on both of these counts. check out the a line here, a ratio of irish to bullish, a big pickup, and what that means is you go to the bottom panel. there has been about $26 billion into the sp wide bts. i think he is right when he says there are animal spirits, whether or not they will laugh and what it means, and whether they are properly applied is a for debate. a soft data, people responding to questions, it is not actually hard data. we so far have not seen quite as much of an up take. >> it is a great point and that is an emerging theme.
views the fed as a certain thing. the day is obviously solid but it seems it is coming off of the sentiment type surveys. we will keep an eye on it as we get closer to the fed. right now, a look at the business stories in the news today. according to people familiar with the matter, the home sharing startup is valued at $31 billion. bloomberg first reported the additionalorizing an $153 million in equity since its start in 2008, airbnb has raised more than $3 billion. to sue for as much as $650 million according to people familiar with the matter who confirmed amazon's returned to the negotiating table after the company walked away from the deal earlier this year.
talks stalled in january when both companies could not agree on price tags. amazon is the only company involved after all of the other bidders back away. coca-cola ceo saw his compensation rise about 20% in the last full year as chief executive, falling revenue and declining stocks. salary in 2016, unchanged from the year before and a $4.1 million cash bonus. shares7.5 million in while his annual stock was cut to $2ost one third million. a 1.2 billion barrel oil -- the lord is -- largest in the u.s. in 30 years.
the oil producer said in a filing today the contingent resources of light oil were found after drilling in a geological formation. bloomberg is this flash update. coming up, bill gross will speak with us, out with his latest investment letter. he will give us all the details and speaks to us as we get the u.s. 10 year yield hitting for the first time since back in december. 2.594%. the 2.6 percent would indicate -- ♪
oliver: and we are live from bloomberg headquarters in new york for the next hour. with one hour left in the trading day, the s&p is on track for its fourth straight loss, and yields on the 10 year treasury note falls to its highest level since december. gross is out with his latest industrial letters. and says people should not be llured"rd" by the -- "a by the trump bear market. and a look at similarities in handlingresidents are our economic scenarios. now.r four, but we were not going
to be until the last hour. what changed? maybe some thought it was bill gross. 2.6%, that's where the yield got to. take a look at the bloomberg. we've got the 10 year yield in orange. ..6% is right around here when a got to that level, we started to see stocks rollover in more decided fashion. team -- our stocks there were computer-driven cell programs that were triggered when we saw the threshold being reached. why do i bring up bill gross? because he said when we see sustained yields at or above 2.6 percent, that is when we could see the end of the treasury bull market. looking across the treasury curve at various other treasuries, we now have the 10 year yield and 30 year yield at
the highest price all year. as for the two-year yield at 1.37%, it is at its highest, going back to 2009. also moving forward is oil, falling below $50 a barrel, at $49.25.nt at a lot of people weighing the supply against the cuts opec has been doing. exxon mobil, interestingly, has turned higher in the last little bit, but energy still a drag on the averages. finally, we are looking ahead to tomorrow's jobs report, especially after the edp number we got earlier in the week. we have seen -- there did not used to be much of a correlation. adp was not much of a predictor. there has been a tighter co-relation across the past few
reports, so we will see indeed if adp predicted the strengths that we might see in that report tomorrow. oliver: julie, thank you for the update. scarlet: let's get your check of the headlines. mark crumpton has more. mark: british prime minister theresa may says "it is time to get on with leaving the european union." she was speaking with reporters at a summit in brussels, saying it is time to trickle -- trigger article 50 of the lisbon treaty. she says she will use brexit to build a fairer economy. we will continue to follow this story and bring you more developments as we get them. washington state is asking a federal judge's to block president trump's revised travel ban. state would ask the judge to extend his temporary restraining order against the first band to mr.'s advised order. schneiderman says his state
will join the lawsuit. hawaii filed a lawsuit against mr. trump's travel ban, saying it will harm the muslim population and foreign students. the president has scheduled the .ally in nashville, tennessee the president's campaign website, still in operation, is advertising the event next wednesday at the nashville municipal auditorium, the second rally since his inauguration. he held the first last month in florida. sean spicer says the president intends to hit the road to sell the public on the republican health care plan that he supports. environmental protection agency chief scott pruitt says he does not believe carbon dioxide is a primary contributor to climate change. he tells cnbc, "there is tremendous disagreement about the impact."
he cites climate scientists who beat record hot temperatures across the growth -- across the globe on greenhouse gases. german chancellor angela merkel was among the eu leaders in attendance for a summit in brussels. the leaders are doubling their inport for free trade opposition to the trump administration's protectionist stance. global news 24 hours a day, powered by 2600 journalists and analysts in over 120 countries. this is bloomberg. janus capital fund manager bill gross is out with his latest investor newsletter, in which he compared janet yellen to goldilocks and warned investors to be weary of trump. bill, the enthusiasm that drove the dow industrials to record close 12 times in a
115last month, and 20 1000, last week has been described two ways. -- 21,115 last week has been described two ways. animal spirits on one hand, sugar high on the other. what camp are you in? mr. gross: not necessarily animal spirits in the economy. the economy is only growing at 1.5 to 2% of the moment, but i think future market gains in stocks and higher interest rates are dependent on -- you know, the old new normal phrase that originated in 2009 is being replaced by what i would call the old usual, free lehman real growth to 4% and significantly higher inflation than in recent years. the benefit from expanding credit, we had productivity at
3%, much higher levels of vestment -- investment. it is harder for me to believe that the u.s. and global economy can return to those healthy levels anytime soon. oliver: you expecting a selloff? we have already seen the beginnings of a selloff in high-yield. mr. gross: i don't think so. it is hard to step in front of a if it train, especially is moving at 100 miles per hour, so it is best to call for a significant decline in stocks based on continued expectations of brighter days ahead. i do think deregulation and corporate tax cuts and, perhaps, infrastructure spending will 2% toe economic growth to 2.5%, but the market expects 3.5% to 4%, and i think that is what cap said in terms of expectations.
corporate profits don't grow much in a 1% to 2% real gdp environment. i think we are in those times. >> how much headline risk is there in washington right now? mr. gross: there's a lot, not just in washington, but globally . headline risk in terms of health care, in terms of the tax lan, the deficit spending, how large will it be? no one really knows. there is risk globally and in the elections in italy and france. lots of headlines investors have been voided, simply because -- have avoided, simply because of the momentum, 3% to 4% growth consistently going forward without any problems, i think has carried us to this point. i would be careful to this
point, not necessarily expecting a 10% decline, but expecting low returns. >> how much headline risk is they are in resident trump's twitter account -- in president trump's twitter account? mr. gross: i don't know. investors have come to expect the strange twitters from trump. riskld think headline would come out of paul ryan these days, in terms of whether he can put together a health care package, whether he can put together it when -- put together a plan for a balanced budget, which i don't think he can. i think it comes out of congress as opposed to trump. we are expecting strange twitters from trump. >> in january, you called for a 2.6% yield on a 10 year treasury and inflection point. we are back there once again for the first time, since the middle of december.
you have raised two this is either the bear market or your term, the kindness. which is it? mr. gross: i don't know. to servet is important and then decided the 2.6% level is broken significantly. long-term downtrend line from 1984 on the 10 year, starting perhaps as high as 11% or 12%. it has gone down on average by about 30 basis wednesday year. -- basis points a year. is that technical mumbo-jumbo? not really. it means the economy has needed ten-year rates to decline in order to prop up investment markets and economic growth. at this point, that the decisions going forward is rather 2.6 requires another 30 per -- 30 or 40 basis decline.
if we break 2.6 on the upside, it would suggest yes, a return of some extent to the old usual as opposed to the new normal. in other words, inflation of 2% and real growth of 1% to 2% is therefore a 10 year approaching three, as opposed to declining from 2.6% to 2.3% into 2%. timen you recall another in your career, perhaps even stretching back further than that, when a fed chairman was that explicit about a coming rate move? : no.ross perhaps during the days in which lower interest rates were required in weekly, during ben bernanke. , perhaps -- the bernanke period, perhaps. i think it is a slamdunk. there is no doubt the fed is going to raise interest rates. it is in the market, and stocks
are doing well, which is a significant indicator for them, so i think they will raise interest rates. what they do going forward depends on economic growth in the strength of the dollar. they don't want the dollar to strengthen too much, or it presents problems. tell us the fed will raise rates again in june and again in december. what do you expect? mr. gross: that's the key. two more interest rate hikes after this one would be three for the year, and it approaches 3%. i think the fed believes that the natural interest rate in nominal terms is around 2%. that suggests that at inflation is 2%, then short-term interest rates should be close to zero in its natural state. inflation today is perhaps a little above neutral in terms of its heat. i think three interest rate hikes during this period of the
year is what we should expect, absent some significant global event. economic growth is key, the level of the dollar also important. what about crude? crude is in freefall. how closely are you paying attention to the oil market? mr. gross: crude is an indicator of the current state of the economy. to a certain extent, it is also an indicator of undersupply and oversupply. we have a problem in terms of inusting to the situation the united states where fracking can oversupply or undersupplied based on a marginal price of oil. i am not that worried about it. a lower oil price would stimulate consumer spending. erik: i am thinking about it more in terms of inflation, because for more than two years after that thanksgiving day
decision by the saudis, but defends -- the feds cited earlier declines as a reason why it was not at 2%, were a reason why cannot raise interest rates. mr. gross: i can go with that, but i would say that oil has not the that much in order to produce some type of deflationary momentum. obviously any central bank is concerned about deflation, to the extent that we have oil where it is, to me, that is not a deflationary indicator. if we were another five bucks down, perhaps we have problems. erik: you saying in your monthly investment outlook, published sayy on janice.com, and you , "our highly levered financial system is like a truckload of nitric us learn -- of
nitroglycerin on a bumpy road. are you ringing the alarm bell, or just putting people on notice? mr. gross: i think putting people on notice, calling her regretting, ringing the alarm bell is really hard -- calling armageddon, ringing the alarm bell is really hard. it is easy to see the smoke, not really easy to see the flames. when i talked about in the investment outlook was the growth of credit from the early perhapst $1 trillion to $65 trillion today in the u.s.. we know it has grown tremendously in countries like china and brazil. the growth of credit can be very be very dangerous if interest rates are not accommodated for it. erik: is that to say there is
not enough capital in the banking system to absorb that kind of shocked? mr. gross: i think so, and there is not enough capital to my way of thinking in terms of the fed's balance sheet. we have $65 trillion worth of credit. what does that imply yakima it implies perhaps a 6% to 7% equity -- what does that imply? perhaps a 6% to 7% equity in the credit system. i think it is at the margin. what does that mean for markets? it means the fed can never practically the leverage its balance sheet, they can never sell their treasuries because it would deliver the system in the process. erik: what about the commercial banking system? hopes iton said he
will give relief based on capital standards. is that such a good idea? mr. gross? -- mr. gross: i respect jamie dimon, he has done a great job, but in terms of asking for relief in terms of the amount of equity the bank is supposed to hold in terms of only six or seven years following a crisis that created the great recession , perhaps the potential for another great depression, i think that is a little much. that's get equity into the banks, let's keep it there, let's make it grow, because that, more than anything, is the regulatory measure which makes banks safe. erik: bill, i want to thank you very much. that is ill gross, manager of janus capital. scarlet? gross will be back tomorrow morning on bloomberg surveillance to react to the
julie: thank you so much, scarlet. from the cboe in chicago, dan. it has been kind of a curious day, because throughout much of the day, stocks were holding relatively well and then pulled back. was it that 2.6% 10 year threshold that said it off? what can you tell us? guest: partially bad, the bond yields. second of all, the rotation. you are seeing oil stocks, under pressure. on the surface, the market looks orderly, but underneath the market, some of the sectors are pretty significant. russell might close down for the sixth consecutive day today and give up most of the gains for this year. julie: we have not seen
volatility overall in stocks. there has not been much in bonds or fx either, but you mentioned that oil volatility is picking back up. guest: it is. we saw the kobe x pop up over 30. that is the high for this year. we are seeing oil breaking below 50. what does this mean moving forward? you are seeing repricing as well, so that's why i think you are seeing it being ramped up as we see weakness in the oil sector. bute: volatility there, happy anniversary to the bull market, completing eight years since march 9, 2009. your trading today is on one of the best-performing groups during the course of the rally, which is consumer discretionary. you are looking at the xl why -- xly.
do you think it will continue growing? guest: i think it will. i believe that looking at this, i'm not willing to pile into the etf itself. i am using discretion by looking at gaining access to options. i am buying a june call spread, but selling that to finance some of the cost of the call spread allows me to participate through the upside. however, i live in a my downside it we see pickups in the market for the next few months. julie: thank you. we will be watching to see if it keeps continuing. back to you guys. scarlet: still ahead on "what "what'dmiss from go -- you miss," a look at future relations under the trump administration. from new york, this is
in a tweet this afternoon, the president also said, "we are talking to many groups, and it will end in a beautiful picture." the republicans pays a party badly divided over the camp -- over the overall campaign. groups claim it does not do enough to repeal and replace the law. the time, two congressional committees have cleared the bill . the energy and commerce committee approved the bill this afternoon. the president's travel ban could derail the 2026 world cup dream. the u.s. is considered the favorite to stage the event last year, after hosting -- after losing hosting rights for 2020 22 qatar. to qatar.- 2022 saysthe -- fifa