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tv   Bloomberg Markets Americas  Bloomberg  January 5, 2018 12:00pm-12:30pm EST

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way certainly and in every comfortable with everything i have reported in this book. sale today,goes on already number one on amazon. the environmental protection agency is touting cleanups in seven of the nation's most polluted places as his signature accomplishment in the trump administration's efforts but records show the work was completed before donald trump took office. records show the seven superfund sites delisted last year fall short of the average pace set under president barack obama and george w. bush. have agreed to talk about reducing tensions in the run-up to the winter olympics in south korea next month. regime accepted a proposal to hold discussions on tuesday, they will discuss overall discussions and north
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korea's offer to send a delegation to the winter olympics, the first formal talks since 2015. the united nations security council will hold an emergency meeting this afternoon about iran, nikki haley passphrase the demonstrators, saying "the united nations must speak out on their behalf." russia has warned against external interference and what it sees as iran's internal affairs. 21 people have died and hundreds arrested in a week of antigovernment protests and unrest. global news 24 hours a day, powered by more than 2700 overalists and analysts in 120 countries. i am mark crumpton. this is bloomberg. noon in new york at 5:00 p.m. in london and 1:00 a.m. in hong kong. i am shery ahn. vonnie: i am vonnie quinn. welcome to bloomberg markets. ♪
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shery: from bloomberg world headquarters in new york, here are the top stories. it is payroll friday, jobs report delivers a worse than expected rise of just 148,000 jobs with wages come in line. we will discuss that and more with austan goolsbee, the professor of economics at chicago -- university of chicago boon school. front, naturaly gas fell to the lowest in a week as cold weather in the eastern half of the u.s. is expected to ease after january 8. isnie: abigail doolittle with us because we're halfway into the trading day. the final trading day of the first weekend 2018. >> happy about what she just
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mentioned, the cold weather will ease after january 8. natural gas down about 3% on the news on the big cold weather we have had an moving forward we hopefully will have the thaw. why natural gas is down. major averages, we see a rally, major averages up for a fourth day in a row, more record highs with animal spirit stirred by enthusiasm for tax cuts. saidtay capital, david that the euphoria does not in well as he sees a 10% correction at some point in the first quarter and katie, at the tig believes there will be eight to week 24-week fullback -- two pullback.ur week best week for the s&p 500 in a year. sector wise, more sectors are
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higher than lower. tech up talk -- up top. energy down with natural gas decline could be a piece of it. the tech winners, there does not appear to be anything to fundamental behind this, more investors wanting in on more of yearhas been the case last , tech the top sector for the since0, up 37%, best 2013. apple and microsoft are higher, electronic arts and ebay among the top percentage winner within the technology space. a lot of strength. where we do not have strength is oil. down about 9/10 of 1%. after the inventory report yesterday, oil cooling off. vonnie: thank you for that. shery: president donald trump touted tax overhaul as a key to fueling economic growth in the u.s. the tax bill is encouraging
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corporations to hire and spend more on wages. will the new law deliver on his promise? mckee is in philadelphia at the annual american economic association meeting. michael: we are here with austan goolsbee, the university of chicago, and for this discussion he was chairman of the council of economic advisers in barack obama's first term. when you came in in a crisis and had to design a stimulus bill. when you look at what they are doing, the economic fundamentals are completely different. does stimulus work? is it good for the economy and should we find the positives in the tax bill just passed? >> i hope we can find some positives in the tax bill. when we are teetering on the edge of a depression, the case for how do you, on the monetary policy side or fiscal policy side, keep the
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--nomy trump cratering cratering, then if the president comes in with the lowest unemployment rate a new president has inherited and i think about 50 years. you have to be a little mindful of what are you trying to do and would you be able to generate jobs in the same way? michael: what did you learn when you pass the 2009 still is still about its effect on the economy and how quickly and well it worked? should we anticipate a lot of economic jolt from this bill in ?he short run >> there are two parts, the stimulus bill of 2009 was a huge bill and it embodied a bunch of things, some of them were fast acting relief and some were slower than what was anticipated
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or what we wanted them to be. perhaps some of the lessons would be the infrastructure and the long legged type things were not near as fast -- they were not anticipated to be the year it passed but even with the expected leg, they took longer to ramp up than we thought. and, the argument about tax cuts , that if you just put them straight into the paycheck by changing withholding and people do not receive a check, that they will get the money and spend it and it will be stimulative, i would be careful with that. the same thing we did and 2009 at 2010. if you remember, the argument then became, how dumb was it not to have sent them a check because they did not know they
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got the tax-cut and no one spend it. hearing the same arguments now. a different economic environment, but i wonder about that part. billel: infrastructure this year, you went through that and found that there were not as many shovel ready projects as you wanted. what advice would you give to allison makers of either party to put together something like that -- policymakers of either party to put together something like that? austan: i do not know if they have sorted out the details of their infrastructure package. what is rumored, it is a reduction of federal spending on infrastructure and perhaps try to delegate more of it to the states. or to the private sector. ,he only thing about that is the reducing of federal spending on infrastructure, in my opinion, is not what is warranted right now.
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if you can start from where we are and magnify leverage, get more by doing an infrastructure or public-private partnership, i think those are ideas worth thinking through. if this is kind of a veiled the way to cut spending on infrastructure, i do not see that would -- politically, hard to sell and economically, i do not see it having as high of a bang for the buck as you would want to michael -- want. large federal deficit came down a bit but a lot of ofticism in the campaign 2016 for that. we will go back to that now, it appears, any lasting harm done from the deficit you guys created? austan: be careful, remember,
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, 2010, 2000 of 2009 11, even with $275 billion per year, the deficits explosions were almost entirely because of the economy. deepest recession since the depression and with deep recessions, incomes go down and spending goes up. you have automatic stabilizers. that is the overwhelming reason the deficit increased by over $1 trillion. it was not because of stimulus, primarily. for that reason, i think that markets did not panic in that moment. because they could see that there was a path, if we can get out of this recession than the deficit will come down substantially. that is a different question than -- if you are in the middle of a boom, should you start running deficits of 5%, 6% of
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gdp? i think it is a bad idea. it is and was the objection under george bush, of what was different about running deficits in the 2000s than in the recession. if you start increasing the deficit during a boom, i think you eliminate all of your weight will room. if we went into a recession in the next three or four years, the deficit will explode once again and you just not -- do not have running room. michael: markets are not worried. austan: they do not seem to be worried. let's hope that the markets are correct. that there is not policy uncertainty and there will not be a recession or downturn. i hope that is true. i guess i am personally a little nervous about maybe they got too
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far out in front of the skis. thus far, it looks fine. michael: we will see what happens. thank you, austan goolsbee. shery: michael mckee, our editor . pressing the pause button on economic momentum, the u.s. economy added fewer than expected jobs in december, what will it mean for the fed plan to raise rates? we will discuss. this is bloomberg. ♪
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♪ shery: this is bloomberg markets, i am shery ahn. vonnie: and i am vonnie quinn.
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the u.s. created fewer jobs than forecast in december and wages just off, a two .5% rate year-over-year but the unemployment rate at the lowest since 2000. pointing to signs of full employment. .oining us is george goncalves economic forecasts are taxtering, people scoring reform differently, talking about corporate earnings and changing their outlook. --n do we see a market surprise --ad a big people were too pessimistic before and more optimistic for quarter one. we need to get to see and observe more data in the early part of this year but we think the momentum is carrying forward and we will get a boost. shery: in the interview with
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austan goolsbee, he continued to emphasize that increasing deficits during an economic boom is not a great idea. not surprising we see this environment where the fed's tightening and at the same time it is hand-in-hand with less deficit funding. that should be the norm but we go in the opposite direction with fiscal policy and what impact will the unique environment have? >> i saw the interview with austan goolsbee. he brings up good points, when you are doing deficits out of a recession, it makes sense but when you add fuel to the fire with a full employment economy, it runs the risk of inflation and bond markets having to discount that on the curve. the way the bond markets behave, they are dismissive of this having a lasting effect. one of the reason bond market investors are putting on flanders we did you they are dismissive of stimulus working
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through or deficits matter. vonnie: one of our strategists was talking about this this morning. may be committed positions. >> possible that people are used to do this standard that fed hikes put her planner and then retire, that is a bad decision we think early on, the curve has flattened so much and we are faced with the physical paper coming. we do not know how it will work out, full employment, fed unwinding, that should introduce a drag on long-term rates. no one cares about it. investors will be confounded when rates rise across the curve, not just short-term rates. a reason is people are used to the low rate environment for so many years. and, number two, the structural factors of demographics that have kept rates lower for longer but this may be the year, we think it is, where cyclical
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factors like inflation and more debt will weigh on all moves across the curve. shery: could there be opportunities in 2018 to short a steepening curve here and there? >> absolutely, time of deepening pressure which will take people out of that positions put on right now. vonnie: what is your advice for investors? some who are over allocated to bonds? >> moving down the curve a little bit makes sense, there is some value created in treasuries versus ois spreads. get out of agency paper. rise, the fed to move rates higher, short-term rates will prevent -- provide an opportunity to buy more money market instruments. shery: could they delayed the to later in the year, which would confuse everybody? >> an interesting year because we are changing fed leadership when everyone thinks the fed is
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on cruise control, the bond market has been skeptical of the fed for the last three years and with the skepticism the fed has delivered three hikes. they pushed back one. vonnie: comeback, we have a lot --themes to talk about here come back, we have a lot of things to talk about but favored traits in 2018? >> tips makes a lot of sense. commodity prices giving an early read. trading the curve and not married to a flatter. -- flattener. shery: thank you. coming up, natural gas markets receiving a jolt from the icy weather that has swept over the eastern half of the united states. we will analyze what is happening and what is coming up for a economies this year. this is bloomberg. ♪
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♪ vonnie: this is bloomberg markets. i am vonnie quinn. shery: and i am shery ahn. natural gas demand side across the northeast and our next guest says this winter could surprise the markets. here with his commodity outlook is michael hague, the global head of commodities association. we have seen the weather with winter storms, the snow bomb and still natural gas prices are not seeing a bigger bump. they are declining. why? >> natural gas, the derivative market, louisiana, most people are paying attention to places far away from that, the northeast, chicago, the midwest. ande are basis locations pipelines feet into the locations. when you get extreme weather,
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you have a greater demand for natural gas in the areas. not enough infrastructure to get enough gas into the regions and that is when gas prices at $150 per mnd to you versus henry have, less than three dollars. shery: u-revised the year forecast/ >> still optimistic the market should be above three dollars. a very good entry point. the problem with natural gas from a paper perspective, market focus is on wider issues and one of those issues is the fact that oil prices are so high. 30% of natural gas comes out of the ground is associated with oil and it comes out free. the other thing, hedge funds have given up on natural gas, we had two years consecutively, the last two years, natural gas, mild winters.
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if you look at the short positions and long position of natural gas, people have exited so massive volatility. vonnie: your outlook for this year, the primary driver of commodity prices? global synchronized growth? trade dynamics, which could change the equation/ . >> a lot of the attention is on oil. oil -- in three ways, fundamentals of oil, hedge fund community, with the positioning geopoliticsand lining up to be bullish. i'm a geopolitics side, situations in libya, tensions in deadline friday, the -- shery: certify me iran nuclear deal with could affect their oil exports. >> donald trump does not like the deal as it is but what he
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doesn't like also is the fact he has to sign it everyone hundred 20 days. days. that is a very low probability .vent shery: we have seen a supercharged rally in base metals. this week, a breather. slowing gdp.fset a if we go to the numbers of different policy programs and we expect copper demand to be resilient out of china, 6% on copper this year, that means take supply and demand elements of copper, running into a deficit this year in copper and most of the base metal complex. we have had low prices for several years. mining investment has been low. it has to catch up with resilient demand. absent a big kick up out of
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china or the em space, basement will prices are justified fundamentally but they have gotten ahead of themselves. vonnie: best rate of the year for commodities? >> natural gas side, focus on the core summer months, the curve on natural gas is flat, prices at 280. you will get increased power demand from natural gas because prices are so low and i would buy in the summer months. shery: thank you. michael haigh, global head of commodities. vonnie: coming up, don't miss real yield, 12:30 new york time and 5:30 london time. this is bloomberg markets. ♪
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jonathan: him from new york city to our bureaus worldwide, i'm jonathan ferro. with 30 minutes dedicated to fixed income this , this is "bloomberg real yield." ♪ coming up, u.s. payrolls disappoint, which growth stalls, and unemployment sticks at 4.1%. one week of an expected jobs report is unlikely to derail the federal reserve. the economic data in europe looks hot, but inflation calls. we begin with a big issue -- the payrolls report. >> it isn't bad. i wouldn't overreact to this report. >> growth in the jobs market is solid. >>


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