tv Bloomberg Surveillance Bloomberg November 1, 2017 5:00am-7:00am EDT
big meeting with the bank of england. this search for american wage growth. higher over the month. we will continue the discussion and look at european and united after paulld well, will we see more from robert mueller? this is bloomberg surveillance. upxceptional treat is coming , you will be outside the bank of england tomorrow. we see a reprise? >> that is what the market is expecting. becausebank disappoint the credibility is at stake. getconsensus is we will some dissenters against that rate hike. it will be very much in focus. >> let's continue with your first word news.
>> president trump has offered tougher screening of immigrants following the attack in new york. down a bike lane in manhattan a truck injured almost a dozen. a police officer was shot and arrested the suspect according to the new york times he was found near the truck indicating that the suspect was not related to the islamic state. on capitol hill, a house republican scheduled the release by a day. there are unresolved questions about the corporate tax rate cuts and other proposals. republicans also sell disagreeable about whether to repeal a tax break for local taxes. resident of catalonia now has to choose between a possible prison term for a life in exile as the spanish court has summoned him to appear with charges. he fled to brussels after spain seized control of the government
in response. his declaration of independence. a new study says the decision to leave the eu has cut income by over $800 per household that come from the national institute of economic and social research. they say the vote has pushed inflation ever higher and has also her productivity and investments. global news 24 hours a day powered by more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs, this is bloomberg. >> thank you so much. let's get right to it. odd day before we get to the news of wednesday, thursday, and friday. the dow future is very much near a record high. it iss american crude, near 55.11. they show the elevated low prices.
it is extraordinary because it shows the solid market -- i am sorry that is the wrong screen. it is 9.82 right now. stocks upeed european on 10th of a percent. cable also holding their gains from yesterday. there were more on the news, of course in focus it will be the bank of england meeting tomorrow. it also has a two-year high, in general they are big in the session. i thought i would also flip the script and put bitcoin because they will be traded by the end of the year. it has led to another surging cryptocurrency. these isnook at manufacturing series. they go back before eisenhower and truman. what we are going to look at is a remarkable volatility in the ancient age graded that is
starting at 1985, a much quieter level of volatility. here is the ugliness of 1973 of the double recession of 1980. here is the lehman financial crisis. it is not as bad as what we saw here. we are getting out near two standard deviations of enthusiasm. >> speaking of enthusiasm, mike chart shows a labor differential when it comes to the conference board of sentiment. americans becoming even more upbeat on the labor market. something to keep ahead towards friday coming after the decision. >> very good. it is important to set up where we are with the global market. at this hour it is more of london focused. of course there is the meeting
tomorrow. guests too wonderful drive your conversation forward. g10ave the head of their research. as well as management. wonderful to have both of you here. >> i guess you have to look at what is happening globally and cyclic key is what you expect the local outcome will be. we do have this global synchronized upswing, that has certainly benefited the u.k. and europe. we do have the strength that is very important. all of the questions you have about the eurozone and productivity in terms of
demographics that is still there. it looks good, five years from now will we have that no so much. >> this goes to some of the assumptions of the short-term and where we are. you wonder out there, the euro pricing right now is very much near the 1998 level. where does germany want this right now? >> also on a broader scale if eurozone it is still looking relatively cheap. there is still a outside dollar of purchasing power using this as a whole. the euro is definitely cheap. that underpins our call for this. the euro is a big part of that. it is a cyclical upturn which is
broadening deepening with the investments and consumer confidence, it is high as well. there is a fairly steady uptick in demand. that could certainly help it from here. >> let me ask you ahead about cable. this shows what could happen under various rates are you first you have a hike which could take it above 133. this could be around 130. actually, could we see a even bigger drop than that given all of the expectations? >> the pound has moved already ahead of the market. whole the pound remains a function of where we go with the brexit negotiations. it makes it so positive on paper. if carneyn the look
is hawkish, on the whole it will really matter for the markets and it is the credibility of the boe. the way we see things at the moment, the u.k. data, all of those brexit prospects will lend credibility to the masses. hike the rateo outlook would depend on the inflation outlook and the potential to hike will come across as more credible than what we had in august. they could indeed come after tomorrow. expectderstand that you rates to hike again ahead of tomorrow. let me ask you, if we get that hike signal there will be further rate hikes. with that be a policy mistake? intent that wes are not quite sure they are
going to other than that. there is a question of the economic justification. i think it would be a little dismayed if that was the signal. if there areto see new expectations that we have not heard. >> we are going to get this later in the hour. this question is so important i have to ask. daniel morris, how do you raise ,ates with the negative rates how do you do that politically? >> i am trying to come up with a explanation. saw tohearsal that you postpone the vote, it does seem to go back to status quo given that the reaction of the economy was not quite as bad as people predicted. if you look at what the data is telling you it is difficult to see why it is very necessary. all of the questions we
have a read those negotiations, i agree if you are trying to justify and explain what this make sense it is difficult for anyone. constructive on the rate hike cycle, why is that? >> it is about the credibility of the bank of england. the markets will pay close attention to what they have to say. of cable output, there are two factors, we see the more constructive outlook. seeing the pound to be cheap relative to the dollar, that is the target in the year of 2018. things are looking a little bit different against the euro. we are seeing 90 would be that level where you have to spend longer, on the whole we believe a lot of negatives are there. from the point of view, it is a
chief currency. >> its ordinary news flow, we will continue on this with wednesday today. with all of the special programming we have a show of scarlet fu covering in washington, what a wonderful set of guests. blackrock andfrom the former vice chairman of the fromnd william gross janice henderson. ♪
they also came up short. the ceo is in the third year of trying to rebuild the reputation and balance sheet. have not had a high since 2008. the company has rose 11% after posting record profits last quarter. sony also boosted their forecast with high mtv's offsetting slower growth in the playstation business. honda set to move past the senate as the biggest japanese automaker in china. they raise their profit forecast after reports that their growth work up 18%. chinese drivers have been snapping up the full-size suvs. that is your bloomberg business flash. >> thank you so much. is trying to sift through the events we saw in washington on monday. a truly historic event. one place to turn is bloomberg view. analysis ofien owns
the president of united states finances. this goes back to a story written decades ago. this is him talking about manafort, papadopoulos and gates. they say some actions relating to collusion could be crimes. they also could withstand a collusion fight in the court of public opinion particularly with his intensely committed a stated we touch on that yesterday. is what he fears the most in the probe. . -- not collusion. ashas had a wonderful career a reporter and the editor within the market division. with politics and government, that means he is completely qualified to talk about this madness. what was the response to this, and that you saw in london paris? how was this taken abroad from washington this remark >> as
much as there is american politics overseas, puzzled would probably be the best word. they aren't scratching their heads at the partisan rancor and the republican response which should be fairly straightforward matter of wrongdoing and clearing the house. at the same time these countries withsimilar experiences russian meddling with their elections. they took proactive steps. part of the puzzlement is why the resistance of the administration to the embellishment of the reality. >> the story moves forward, is there a belief within europe suitably with the president traveling to asia the this could dampen workmen foreign policy of the united states with this massive distraction at home. hist is hard to see ted
policy -- his policy towards anything weirder or more times. build a bridge in france. for the most part he has stiff-arms traditional allies. if there is any foreign policy this,hat results from that would weaken his position it may actually help transatlantic relations. >> also writing on bloomberg you talk about all kinds of constitutional questions being raised here, notably how far the president pardon power runs. how far doesn't run, could this lead to impeachment? really in the legalese. this was in response to a column that called on trump to pardon
everybody and clear the checks. is, i don't know, i am not a constitutional scholar. are trying to switch the terms of the debate towards things like the pardon power and away from the facts that are on the ground. >> i would like to point out his monograph, it is a small book entitled impeachment. oneducates folks forward this process and the odd word of impeachment. one final question, i have to ask you about paris and give away from the distractions of emmanueln, how is macron doing? the honeymoon is way over. , as he have a momentum positive momentum with the
people? >> his polling numbers are certainly not great. the honeymoon as you put it is over. selleople who he has to the business elite, they are buying in. , while his popularity is not great in the polls there has not been a tremendous amount of noise. it has not been a tremendous amount of resistance to what he is doing. there have not been days long strikes and marches. the pathnly say that is not clear and there are plenty of reasons for skepticism. so far he is continuing to put one foot in front of the other. >> thank you so much. our two guests are still with us. when you looked at the dollar. you focus much more on the prospect for tax reform and what
the fed is going to do. >> these are the two key drivers for the inflation trait we have in the week. the primary beneficiary of that is the dollar. we are cautiously optimistic on the dollar, to highlight that certain risk ahead, if you want to express any bullish view with it being higher. we are seeing a continue to strangle against the european currency in general. on the whole reason i think it will be a game changer when it comes to long-term growth. we think productivity was mentioned earlier today in the case of europe. the case in the u.s. was the same. it is less likely that you are going to see a sustained increase on the facts by trump. with the fed the facts that whoever succeeds whether it is jay powell, the fed will be facing a fairly subdued
inflation outlook from here which will likely keep the policy where it is. >> some of the voice places to go, we will continue with these two coming up. austin at the university of chicago, he is the economicairman of advisers for president obama. it is a good time to talk to him about economics and politics. this is bloomberg. ♪
keene in new york, bitcoin climbed to a record high after the cme announced they would start trading futures in the cryptocurrency by the end of the year. the move i the world largest exchange will up the gains or the software reader to asset and bring it some regulation. senior investment strategist is joining us and the head of g10 research. have a chart here joined the rise of bitcoin and showing the relative strength index. it has not been oversold in two years. i amthis announcement assuming demand may increase for bit going, what does that say about how sustainable these gains are? >> it is determined by a restrictive supply and by the same time it is limitless. the latest development, you can now bet on the future gains
makes it more attractive for investments by further gains from here. the thing is i am certainly couldskeptical that this continue on a sustained basis because the restricted supply and unlimited supply could be elsewhere. so morecreated currency of that could pop up before long. >> that was quite good. i am a little skeptical. a little skeptical, a little bit. i am skeptical about the fed show, alan blinder will join us on the changing of the federal reserve system. ♪ is this a phone?
see how much you can save. choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit, or go to xfinitymobile.com. ♪ welcome all of you in london >>, don't forget our fed coverage this afternoon. the new york times will wonder in and bill gross will join us
with jeffrey rosenberg and we are thrilled without lineup. it is a boring meeting but guess what? it is never boring and you have yes like these. city, right now for our first word news it is taylor riggs. >> there is take -- tighter security on the streets near that terrorist attack. a man drove a truck down a bike path injuring almost a dozen. a police officer shot the man and arrested him. he is described as a immigrant from opec's according to the new york times think of was indicated that he had no allegiance to the islamic state. five of the dead are from argentina. if former trump advisor who pled guilty has made a significant claim during the campaign. in a email george papadopoulos said officials had agreed to a meeting before the election with a representative from vladimir putin.
there is no indication this meeting took place and it is unclear if he was simply posting. in the u.k. prime minister theresa may closest l.a. is accused of sexual harassment. first secretary of state damien made denies this that he inappropriate advances. seniored her most official to investigate. gives $150d manager million to the university of chicago. it is the second-largest gift in history. it will provide financial aid to students and their economics department. will also expand faculty resources. global news 24 hours a day powered by more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs, this is bloomberg. >> thank you so much. we have some breaking news on the bloomberg.
u.k. data just crossing here. and you fracturing strengthening in october. this is the ihs market coming in at 56.3 rising from 56 in september. also beating the estimate. we have this showing a inflation ihs buildup coming from the buildup. our two guests are still with us. , looking at this latest data coming through with the inflation rate professors -- pressures building up, you did hikeee the inflation rate going up tomorrow. i know it is only one data point, do you see this happening? >> we see the underlying factor is the currency. at theare going to look oil prices and the currency and
will look at the effects. we know it is going to happen. it is hard to see underlying pressures despite this pmi figure. we will see this ultimately feedthrough support for consumers who have been hit by the currency. >> going back to june and july of last year. this goes into england and the pessimism and gloom it has turned to resilience and optimism. bring up the chart if you want. this is a chart we showed a lot back in 26 in. this is goods and services traded in the u.k. and the worry is that this would add away. as the united kingdom falls off the atlantic cliff. this is the deficit for money flows and we have seen a nice pop up here in both series versus the gloom of 6% gdp. why did this not the car?
why did so many people get this wrong? >> i think we have to keep two things in mind. the hitest focus was on to consumer sentiment and what people anticipated would be a fall in consumer demand because brexit. that clearly did not happen. at the same time people did not pay enough attention to was the inevitable benefit of fx from the sterling. it is going to help. both of those factors were there. people focused on the run one. >> what currency level after that discussion is optimal for the united kingdom? we saw a one-time shift in british pound sterling, where to from here? given the success of sustaining flows in the country. >> the thing that is still undervalued here with further railing the of the
exporters. more importantly the estimate is close to 90. the u.k. exporters may benefit if this does move a bit higher. we will stay around 92, that may just be ideal both in terms of trade performance and income account that could be supportive. especially if the return on those european assets managers have reported over the years start performing with it moving gradually towards the exit. have news that the u.k. is preparing to compromise over the question of money in the brexit talks and those talks are going to resume for a two-day session. how much do you actually factor this into when you look at the pound sterling and u.k. assets generally? rallyn you look at the you saw in sterling following
the election and the expectations that the negotiations would go better. been the mostly determinant factor in the direction of the sterling. with the strip feeds of more encouraging news that seems to benefit the sterling. we hope that will be the underlying trend between now and the deadline in 2019. it is probably one of the most in -- important things we can say. >> is the ultimate goal he could get back to 146 or 148 sterling? i think ultimately valuation have to make sent -- sense for the investors. we have been seeing that the pound is cheap. and china you could not book your flight back because all of the flights are booked. is the case. from the point of view, evidence or not it is still the case that
we have always europeans coming over to do their shopping. that is positive for the economy, it is not a game changer, it remains challenging but the pound is cheap. >> what is your call? the firsthear for time that we are going to get the sterling back to one 47, are you with me? >> long-term, why not? >> there we go. somebody is waiting, what is he saying? what is your call on that? >> we have 140. that is our current estimate, for some reason considering the value it is going to close at 90. that is on the whole as i mentioned. they will grow to across the board really. that is where we see the most value.
especially with the cyclical recovery and the eu economy, this could push to further gains further on set. the call onwe heard sterling. i know you think we should be a little more cautious with a rate hike. is there a risk that if he comes under pressure to hike, he always has to have his eyes on this. >> that is a very good point. not just how they reacted and what they would like to do. certainly if you look at the fed projections for next year go back to the beginning of this year when people said they will never hike three times. they have, now they are saying they will do four or five times. they made. that is going to create a pressure on the european experience it is going to be a push on what they are going to do and what they cannot do. >> we are going to continue with
and offe on meetings meetings, you told me this is a off meeting but there is always interest in the statement of what will you look for? tobesides and it reference the world series which may be the most exciting thing for them to talk about today we will look at the inflation expectations and what they think of the outlook for inflation. since the last meeting they said they expected to go back up to 2%. it hasn't. it has stayed the same, inflation expectations have come down a little bit. that is probably what everybody will look for first. nobody expects any kind of news or anything that will move markets. >> to the troops around that building get a glimpse or a glimmer of friday's job report data? do they get the two days ahead of us? >> the white house gets it the night before. they do not get it at the fed.
do their own economic forecast, they probably have a pretty good idea of what we are. this month is not going to matter all that much. it is a catch-up month because of the hurricane damage in the month of september. they are going to look past that along economy is chugging picking up speed a little bit. hand that for any they will move through september. they will preserve their optionality which is a phrase they like to use. it foruld like to leave the markets to decide. decide,the markets to is there any risk that we could see a big move in markets if there is any sort of hints about that rate hike? >> i would say probably not. we will have that announcement coming likely tomorrow. also a announcement on the tax
plan. thereis so much news out that people have to be wary of. they are not going to react too much to this one. that fed chair announcement hanging over the meeting. you want to talk about awkward, that guy who is sitting across the table. anys there going to be applaudoes anyone yellen with this meeting, the former president of the san francisco fed, what would you expect to occur as the meeting comes to a close before we go on air? >> i am not sure we would expect anything. the announcement is not formal and we don't know what donald trump will do. you look at the past transitions with the meeting and there could be applause and praise for janet yellen. everybody thinks she has done a good job.
she has two more meetings after january. it may be premature. we are with a senior investment strategist and the head of g10 fx research. beautifully parsed within your research, a 2.3% rate of u.s. gdp, is that enough of a economy for chairman powell or chairman taylor? you take us from the 3% and you come down to a rate that seems i little subpar. it does not get it done, does it? >> i would say just the opposite. , that is a 2.2% rate above the potential growth rate for the economy. that is the perspective that the fed is taking, it is not like the good old days. above inflationary
pressures, we need to be hiking rates now. generally that is perfect with understandable. >> to you think the fed is going to keep their optionality of them or are they going to rate that hike in december? >> i don't think there will be a explicit mention. it will highlight that. this statement is unlikely to point to that created nevertheless it will continue to see a december rate hike is a done deal. i don't think that is going to have a sustained impact on the market. >> certainly the base case to not have much reaction. there is the downside with the rates given the potential for hawkishness is the price. the market focused elsewhere, i think they will be very quick to move on to that nomination tomorrow.
the textile proposal will actually have any clues of process will it be slower and slower. the greed may be on the downside given there is a disappointment that so many have priced at growing so some cautiousness may be warranted. going to the fed with all of the risks that we have. >> you mentioned potential gdp is way under the 2.2% rate, we have heard that from jpmorgan among others. the politicians do not have to worry about potential gdp. they have to worry about being elected, one of the points of desperation we see is tax reform legislation that assumes deficit expansion. fed chairman going
to be a policy expert? >> it is certainly their perspective and it is going to be crucial to the administration. to the notion that you get the tax cuts it will be physical stimulus. much of that is going to be translated into inflation and is the fed going to hike rates more, in the end you do not have a fundamental change the trajectory or hopefully more optimistically is the reform such that it goes productivity and you get more investment so that you are able to raise that growth rate. i think that is very crucial when it comes to determine how the youreact read >> have a look at that through your studies, is a 4% of gdp where the fun begins or is it further out, five or 6% of gdp? would be higher, i
think the comforting news is that the deficit is expected to be around 3.2%. and we have been talking if you have a deficit over $1 trillion. that would increase the deficit from about 2.2% to about 3.8% rated it is a good rate increase it is finance spending. it is where we don't think the market be that nervous. , stay withw lloris us. i know you can stay with us on your bloomberg. you can see them talking to us right now. you can click and find out more about our guests. all of also check into the charts we have shown can the show" them to your bloomberg did this is bloomberg. ♪
sales of the iphone with backlash overpricing. eight and the iphone iphone x. best buy said they will only sell the iphone to have traditional installment plans. againstsachs spending the treasury with that chairman of the federal reserve. goldman argues that they are underestimated the intent, i thought they could raise three years. your bloomberg business flash. >> thank you so much, taylor. drop,of a stockpile meanwhile nickel record to a two-year high as investors bet on a long-term boost to the rise of electric cars.
are we seeing a decoupling of commodity currencies with the underlying commodities and does this tell us something about the underlying commodities or is this a buying opportunity? >> i think this is a buying opportunity. i think we have to be selective on that. our currencies and the region are suffering because with the australian dollar decoupling from the industrial metals at the moment. the culprit is the dollar itself or the inflation trade with the markets turning more bullish on the dollar. the fact that there is the deviation between commodity prices and commodity currency is extreme levels and it may suggest that those currencies are now looking with the dollar. especially your opinion currencies have a interesting eyeing opportunity.
>> to you see a difference in the outlook for oil versus metal s? >> they are always going back to with the outlook for china. past thew paste -- national rate. they can pump that up a bit. generally we are expecting slower growth in china for next year. on the oil side we need to think about reaching $60 per barrel. what is that going to do for u.s. producers, they are going to be selling into it and will ultimately make rises go down. >> one more observation. in up this chart, please. this is extra ordinary. this is the old index from way back trade this is a older series and i use it going back to 1956 in 1960. long-term commodity deflation and inflation adjusted. we go up there and we come over
here, can we get them here again. can we retest the historic weakness in commodities? >> i don't think we are going to see that outlook for commodities. even if you have china slowing a much bigger economy than it was one decade ago. the absolute increase is still going to be significant, we have europe and the u.s. growing. there is enough support on the demand side. >> dan, thank you so much. this extraordinary day, stay with us, #more to talk about in our next hour we will talk about profits and economics from sydney. this is bloomberg. ♪
mckee will be there. a jobs report and the search for american wage growth. yields grind higher. again, higher rates. robert have to see what mueller does next. good morning everyone. this is "bloomberg surveillance." i am tom keene. tomorrow ising fascinating. do you assume 100% certitude of a rate rise? >> you can never assume with mark carney. has been called the unreliable boyfriend. the market is fully pricing in that rate hike tomorrow. what happens if mark carney disappoints?
the banks credibility at stake for one thing. and bill alan blinder gross will join us. right now in new york, first word news. trump hasesident ordered tougher screening of immigrants filing the terrorist attack yesterday in new york. an immigrant from uzbekistan killed eight people and injured a dozen more. a police officer injured and arrested the suspect. a note founder of the truck indicated allegiance to islamic state. , the scheduled release of the tax bill has been delayed by one day. there are unresolved questions about the rate cut and other proposals. the ousted president of
catalonia has to choose between a possible prison term and a life in exile. he will appear to face charges of sedition. spain seize control of his government in response to catalan declaration of independence. a new study says the u.k. has cut to leave the eu disposable income by $800 per household. the pounds a drop in since the brexit vote has pushed inflation significantly higher and hurt wrought activity and investment. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. -- hurt productivity and investment. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: one board today. tom: quieter markets. futures with a little left. that surprises me. up 115.ures
a little curve steepening. that off of good pmi data. oil, we talked about that in the last hour. >> metals grinding higher. nickel hitting a two-year high. commodity producers leading the gains. meanwhile, sterling spikes higher after some pmi data from the u.k., but holding gains from yesterday as brexit talks resume . the big focus is the boe. i threw bitcoin in there, hitting another record high. where else will you get bitcoin to four digits. tom: there you are. that is very cool. shows the speed with which markets can move.
there is good economic data and a real lift across assets in the last 20 minutes. script andrip up the spend some serious times in washington. kevin cirilli joins us this morning. we saw a muted reaction from the white house yesterday. the shock is done and onward. what would you expect from a white house today? the fallout from the still on thew york minds of so many. the president: for more vetting in tweets, but we have not heard from the president on camera. the robert mueller probe, it is still ongoing. , theallout on capitol hill new reality of washington, still setting in out there.
luck, we are hearing the tax proposal supposed to come out today has been delayed until tomorrow. tom: you are so good about theing around into different debates. let me go to this horrific event in new york city. there is a distinction here between immigration efforts versus people within the country. how does the white house parse that difference? taylor: we have seen the overdent try to win americans on his policy for more extreme vetting. kevin: this is one of the more controversial proposals he had during the campaign. the second point i would raise is this is just the first time type of attacks we americans have seen overseas in europe around the world has happened on u.s. soil.
it is a new reality. it is an unfortunate new reality, but a new reality. >> it is a new reality, and a sad one at that. you said we are expecting the president to make some sort of statement about this. what tone mighty take? will meet president with the vice president, rex tillerson, national security team today. he will receive a national intelligence briefing this morning. i think he will match what he says in his tweets. it is important for the to heart, for americans from this president when the reality of washington is setting in. his former campaign manager facing charges of conspiring .iainst the united states think he\ will have to somehow explain these new vetting procedures and
how he helps to prevent problems in the future. tom: one final abrupt shift on washington and that is how tax reform is faring. to be an ugly day yesterday for mr. brady. does the house have a plan or is up aterally being made the bar down from you? kevin: they were supposed to release this today and will wait until tomorrow. that is an illustration of the divisions on state and local tax this,ion, how to pay for the same issues we have been talking about for weeks. they have to release it if they want to get it done by the end of the year. time is running out. until we get this bill, we will have to wait until tomorrow. tom: kevin cirilli is our chief washington correspondent.
comments from the president and others in washington today on this horrific event in new york city yesterday afternoon. steven wieting is with us. to november.t we have to get to the end of the year. what are you doing with new money? >> putting it to work in a across the way world. this will be an environment where international profit growth catches up to what has happened in the united states. it exceeds it given the earlier stages of recovery and other parts of the world rebounding from a bad 2016. tom: i believe you and i remember when general dynamics and you'll dynamics were linked at the hip. they are still not. they are just so odd and out of kilter.
are we anywhere near where they get back to the traditional relationship of dividend and yield dynamics? you think about how markets can erase a whole year of dividend yields over at a, it is something that contributes and provides an underlying basis for the quality of the investment. determine how a particular quarter or year will run in particular region of the world. >> to follow on from tom's point to a certain extent, how do you hedge when you are looking at u.s. equities? you hedge with derivatives, you are looking at hedging costs that have fallen to all-time lows. if you take a look at term , particular costs, if you want to hedge over a long
you dout it is true that not have from traditional asset classes like u.s. treasuries a very high yield and a good level of price appreciation in the event of a correction. do have record lows in hedging costs, and that is coming into focus with asset classes. tom: it is november first with the huge news flow. link out politics and economics later today on bloomberg radio. stay with us. this is bloomberg. ♪
taylor: shares of standard chartered are lowered today. profit came up short. bill winters is in the third year of trying to rebuild standard chartered's reputation and balance sheet. shares of sony have not been this high since 2008. the company rose 11% in tokyo after posting record profit less quarter. sony boosted its forecast. demand for camera chips and high in tv's offset slower growth and its playstation business. honda set to move past nissan is the biggest carmaker in china. sales rose 18%
through september. chinese drivers have been snapping up the company's full-size suvs. that is your bloomberg business flash. fed now it is time for our nerd fest. we try to keep it simple. we have to qualify guests to nerd out on a wednesday. city private bank, linking markets into markets, and ira jersey from princeton. he joins us as well. let's get into it right now. willollipop chart, we inflict this. it is a long chart. what you need to know is sloped matters. have we reached escape velocity? the second derivative of
acceleration towards higher rates? >> in the front in the come of the market continues to underprice the possibility the fed will hike. we are pricing for a hike this year, a hike next year, and what if the fed goes twice? at 1.7 5% tong year yield even if the fed does not meet the dots. nejra: tom: we are nowhere near the old normal. the john taylor normal. where is the new normal on our short-term rates that businesses have to deal with, the new libor , the new two year the new commercial paper. >> i think we have to watch the yield curve. the yield curve is almost inverted. when you look at 10 year yields, now 2.40%.
the long-term historic average is only 100 basis points, but it is a up and down. tom just pulled up a yield curve chart. when you are this late in an are addingcle and 200,000 jobs per month the since 2011 and here we are 2018, we actually have built up a real business cycle recovery the fed will have to be protective of if it is not fighting inflation. if it will go to the john taylor seek secular is to disinflation and drop the interest rate, the fed would have to do more than it has. >> that is something the fed is trying to deal with, how do we hike rates a little bit and not generate too much inflation, but not destroyed what we have. steve, you said we have
to keep an eye on the yield curve. do you see that continue to flatten and what is dragging down the long end, inflation expectations, the term premium going to weigh on the 10 year yield, or do you see an argument for rates moving higher? it is expectations for growth over the balance of the business cycle. the yield curve has flattened in every fed tightening on record. at this stage when the inflation is up 2%, it tells us long-term bond yields are protected. tom: here is your morning briefing, tv . here is the vanilla spread. ira jersey has this tattooed on his left arm. fade,we go with the trump
so forget about that. the pros like you are out further on the curve looking at the nuances. to me this is a huge deal. this is way out on the yield curve. tens-30 spread way out on the curve is flattening out. what does that signal? >> we don't expect the market expects a lot of inflation or growth a long time for now. when you look at forward rates and think about where 30 year yields should be in an environment like this, you are saying demographics are not so good, global growth is not particularly high, so you have the whole curve continuing to give flat. tom: this is the absolute critical question. what he just said, does that filter into what is thought about on november 1 in december 13? >> absolutely.
you were talking about tens and 30's, if the economy were about to sink, we would see 30 year bond yields below 10 year yields. if we had a really tight monetary policy, financial conditions would not the easing across global markets. we are where we have been a few times before. it is called a conundrum. global interest rates are remarkably low. basis points for g7 economies across the yield curve in terms of where their borrowing costs are for governments, so this is a very low global rate environment. we are at a high spread. the ability to earn that spread is difficult for international investors, but this is contributing to a relatively easy into stage of monetary policy and financial conditions are not terribly tight. nejra: morgan stanley see aively saying don't
yellen share. tom: look at that. nejra: they say fade it quickly. which focusing on fed chair could be picked, but should we be focusing in 2018 about what this week's text says about any kind of ideological shift and whether we see a more hawkish fomc next year? >> we have to see who the chair is. hehn taylor and th federal reserve will be more hawkish. plotjerome powell, the dot remaining the same. i think it will be important to what you see in these forward rates that we can look at where five-year inflation
rate, is that going to move higher with jerome powell? probably not, but if you get someone like a john taylor, you could see five-year inflation expectations go down because you think the fed will go too far and kill inflation. in terms ofn more the other fomc members in 2018 and what the entire fomc looks like. this week's pick tell us anything ideologically in that sense? >> it could. if president trump thinks i am not worried about who is in there and i want to get good people on the board of governors , then yes. at the same time, ideologically president trump wants to be more dovish. he does not want a lot of hawks on the board of governors. tom: this is great. yourcan be used in
we will digress quickly here. i want to talk about the theme of mine pricing power of corporations. are they losing pricing power? are we seeing a redux of 25 years ago? >> i'm not sure they have had it for a while. we have a competitive global environment for goods. we have innovations that quickly come along. there is aetplace, lot of pricing power that is lost pretty quickly. the environment is not one where we have shortages. tom: we will come back. stay with us. ♪
a man drove the truck down a bicycle path, killing eight people and injuring two dozen more. a police officer shot the man and arrested him. he is described as an immigrant from uzbekistan. notes found near the truck indicated the suspects allegiance to islamic state. five of the dead were from argentina. george papadopoulos made a significant claim during the campaign in email. he said top trump officials had agreed to the meeting before the election with representatives from russian president vladimir putin. there is no indication the meeting took place and it is unclear whether he was simply boasting. u.k., theresa may's closest ally is latest to be accused of inappropriate behavior and sexual harassment. the first secretary of state denies the claim that he made inappropriate sexual advances.
may ask a jeremy heywood to investigate. giving 150 million dollars to the university of chicago, the second-largest gift in the school's history. the money will divide financial aid to students in the economics department and will explant faculty resources and research. griffin is founder and ceo of citadel. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. i am taylor riggs. this is bloomberg. tom: thank you so much. benson, his nephew is can benson. -- ken bentsen. house in thehe democrat. it is interesting to see a democrat for taxes. there is 5-6 left.
there are too many topics to the regulation of our financial services, cybersecurity and the rest, but one of the things front and center is the place of brokers and advice in the future. how are you dealing with the new administration and brokers giving advice? >> good morning. thank you for having me. the industry issue has been working on. front arguingut there should be a formal best interest standard when giving personalized investment advice.
the company is sharpening its focus on the fast-changing network infrastructure business. best buy has stopped some sales of the new iphone due to backlash over pricing. a 100ers complain about dollar premium on the iphone x and iphone eight. best buy says it will now sell the iphones only through the installment billing plan without the extra charge. is betting against treasuries no matter who is picked to be the next chairman. argues investors are underestimating the fed's intent to raise interest rates and says the fed could hike rates three times next year and that 10 year yield could hit 3%. that is your bloomberg business flash. told capitolck has hill the extent of russia's manipulation of social media in the election is still unclear
and they don't have the power to prevent it from happening again. lawyers from facebook, google, and twitter testified and sarah frier has the details. give us a bit of the flavor of what it was like a net room. these companies were ridiculed to a certain degree. >> they came in and wanting to present themselves as collaborative. they made a lot of promises. the senators poked holes in those promises and got the companies to say they don't have the technical capacity or human capacity to stop this from happening now. if they build it in the future, it may never get to the point where they can be totally sure there won't be interference in future elections. guy: the hearings continue today as well. nejra: what can we expect later? was aboutay's hearing the question of the intelligence
threat and the security threat. today's hearings will be more focused on the problem at hand, this russian interference, and how it might connect to whatever political strategy there may have been and what the companies know about that. we are expecting to get more detailed questions on that. tom: did anyone ask them if they are media companies? that's the question they don't want to answer. they have a team of 47 lobbyists sitting behind them. the whole thing is stage manage. there was everything but people having sushi and espresso instead of cigar smoke and another day. is anybody talking about the elephant in the room that these are media companies? >> all the company said they were not. tom: i am shocked. >> you are as sharp as the senator who asked google.
the companies see themselves as technology platforms, but the senators tried to get them to say that they could -- tom: how did they respond? i don't have time to watch this garbage. how did they respond to the comment from the senator of texas? what did google or facebook actually say? we don't think about it in terms of neutrality. we are a platform for all ideas. they were very quick to bring their talking points for it. senators were quick to bring them back to yes or no direct answers to the questions they were asking. frier, thank you so much, greatly appreciate it. i read jersey uses facebook once jersey uses- ira facebook once in a while. about is thet talk
hockey stick in these valuations. i hope you have this chart to get out on tv . this is a two standard deviation trading envelope and you have a little left here. you have this jump condition in technology. distort does technology our views of the general market? >> it would be a bigger problem if it was not for the fact that eps for the sector is rising 20% and far outperforming broader profitability. these are companies that have had consistent revenue growth rates in the neighborhood of 30% for 15 years. suddenly there is a big problem with these , butnies, well, there was there was for department store retailers. tom: i did not think we would be having this conversation in november. this is the bloomberg equity
screen. it is too much data for tv. up 30%, up 22% for the s&p. is distorted by those people with their hands up in washington. succeed is distorted to and displace other obsolete technology, we don't call that a distortion. companiest 1999 where that are failing have multibillion-dollar valuations. the companies that are seriously displaced, speculative retailers , these kinds of companies have fallen a great deal. it has been a displacement, one business model replacing another. we have seen from the date had that this can persist for years. you have those companies in the
i.t. sectors who have fallen behind. they stay in these indexes for and thed years successful companies continue to plow on. tom: this is what steve is talking about. up here at $80 per share, then you get this nice rally. buy it to go on, then down. tom: i want to take the technology over to asia. leading thees, tech rally. when we talk about global allocation in a portfolio, a lot of people are telling me very are positive -- telling me they are positive on japan. >> take a look at the opportunities in china for example where the most well owned chinese stocks are technology stocks and they have lower comparables the united states.
their home audiences 1.3 billion people rather than 300 million in the united states, said the potential for some of the successful business models and technology to work in other parts of the world i think is still under tapped. tom: i want to bring up this chart. too much excitement with steve whiting and ira jersey. here is an apple corporate piece. i know you can go with this. this is an apple bond bill note .3% interest. is apple swiss paper. money is free now. >> with interest rates as low as they are, these go to the fact
that financial conditions are lose even with the tightening the fed has done. there is still a lot of demand for anything with any yield. going onok at what is in europe and switzerland where you have negative interest rates on the front end that go all the way out in germany to seven years, it is free money within those economies. if you are an american investor and by european paper, there are some hedges to have a positive return rather than a negative return, but if you are a domestic investor in germany or switzerland, you're buying five-year paper at negative interest rates. why are you doing that? because you have some need to do it. you are not doing it because you expect to make money. it is capital preservation. tom: bring up the chart again. i'm going nuts here. this is tv bonanza here, of frenzy.
this is the debt structure of apple. the blue is equity. the yellow is more debt than a lot of people understand. ebt. have 12% d >> look at cash on balance sheet. technology is something where you cannot take for granted that your products will be successful in the future. if you had a portfolio of these companies, you would have to look and say where their net costs are. are we really troubled at the 20 multiple? no. tom: what a great discussion. we will continue. all of these charts are on tv . andbring up -- tv you can steal most of these charts. stay tuned, fed coverage at 1:00
surveillance." steve whiting of citibank. we talked about the dollar and the huge surprise of the weaker dollar over the summer. you don't buy this dollar rally. discuss. >> the dollars gain from 2011 to 2017 put it high on a trade weighted basis. the real purchasing power of the dollar has moved up tremendously. droverces that exceptional u.s. returns, the oil boom, the fed tightening before others, they have played out, but there are four things right now -- two of them, tax thought werekets not possible, and the other one and the thing we have had to worry about in the near term is a different approach on monetary policy out of the fed. ira, do you buy that idea?
>> i think john taylor would be more hawkish than jerome powell. these dollar, we get 5-7-year cycles and the dollar. we had this big uptrend for five-six years, and now you are at the point where we know the fed will be more hawkish. europe is going to start their own version, and when that happens, the euros and other currencies will rally. nejra: on that point, how do you look at rate differentials and how you trade currency crosses like sterling-dollar? >> the market is slightly underpriced. the very moderate dovish course of the ecb is more dovish than the fed. the world has been bracing for policy divergence.
interest rates have been rising in emerging markets compared to the united states. currencies are falling. that set us up for the u.s. dollar to retrench, but positioning has gone remarkably harish over a short -- bearish over a short time. tom: thank you. again, our fed meeting this afternoon. mckee will michael be with us with alan blinder, bill gross, and jeffrey rosenberg. we leave you with new york city and a strength that will continue forward. ♪ retail.
under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered.
threaten their effort to pass legislation before thanksgiving. a tale of two cities for big tech. record highs on wall street, and a grilling in d.c. it's day two on the hill for facebook, twitter, and google. and one fed decision due today, another tomorrow. economists see no change to policy. investors wait for the president's fed chair pick. good morning, good morning. this is bloomberg daybreak. i'm jonathan farrow, alongside david westin. alix steele is out today. lisa is stepping in. let's begin this wednesday by getting you up to speed on some of the action, shall we? we close out october for a seventh straight month of gains on the s&p 500. we begin november with futures positive, up 10 or 11 points. in the f.x. market, you're euro-dollar stable as we count down to the fed nondecision later. and to payrolls on friday. treasury yields grinding just a little bit higher by a basis point to 2.39 on the u.s. 10-year. david: as jonathan said, we're not going to getheax