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tv   Bloomberg Surveillance  Bloomberg  March 19, 2015 6:00am-8:01am EDT

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we consider $20 oil. corporate america loses patients with the yellen dollar. it is just like cinderella. your bracket turns into a pumpkin at 12:00 noon today. good morning, everyone. this is "bloomberg surveillance ." live from new york. thursday, march 19. i'm tom my bracket is the worst keene. let's get to our top headlines. here is oklahoma sterns. olivia: once the fed does start raising rates, it has indicated it will go slowly. it has indicated it will be patient in raising rates. she said that does not mean raise will -- rates will not necessarily rise in june. janet yellen: economic
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developments that will unfold are uncertain. what market participants should be doing is looking at incoming data, just as we are. olivia: fed policymakers indicate that before they raise rates prices are being pushed up. speaking of prices, the price of oil is falling again today. west texas intermediate is back below $44 per barrel. in tunisia authorities are looking for several gunmen after a deadly attack in a museum. at least 42 people were killed, mostly foreign tourists. -- 22 people were killed, mostly foreign tourists. brendan: some of the biggest
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banks are getting hammered over loans they made to energy companies last year. they could lose tens of millions of dollars. thanks to the collapse in oil prices, they cannot get rid of loans even after cutting prices. target is making news. they are setting up a $10 million fund to settle class-action lawsuits over the hack. in sports, i hope you have turned your bracket in. rock chalk jayhawks. last night at the last to play in games, dayton beat boise state and robert morris b north florida -- beat north florida. yes, i have kansas going all the
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way. tom: eric knows less than i do. in our morning meeting. robert morris beat north carolina. olivia: i choose my team based on the initials. tom: we will have fun with it. we have a special announcement on bloomberg television. let me do a data check. post fed. all the debris on the euro. we are giving back the movement we saw yesterday. oil is front and center in this hour of "bloomberg surveillance ." on to the second screen. the two year yield. we go right down to 0.58. enough said about janet yellen. the curve flattens. some maneuvering after janet
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yellen discussion. what matters here? let's bring us to the bloomberg terminal. here is 0% on american gdp. this is the storm of a year ago. that gave us the terrible first quarter. over here you have the blue-chips near 3%. the atlanta fed is much lower here. this is brendan greeley. brendan: the atlanta fed has the gdp now forecasting model. they are looking at the forecasting model a lot sooner. the atlanta fed model has trouble getting the net exports right. there is still some uncertainty there. tom: let's get right to the strong dollar. we are less patient this morning. they recalibrate this morning. oil will adjust lower.
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first, the dollar and ellen zentner's call for delay. do you keep your long-term view of a strong yellen dollar followthrough? hans: absolutely. in 2012, we called for a move between 45% and 50%. we think in the long-term better growth is going to matter that will be dollar supportive. for now we are looking for a pause. tom: dovetail in ellen zentner's
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call for a delay until 2016. how do you fit the moving parts together? hans-guenter: we are in absolute agreement. you should not confuse the old morgan stanley with the new morgan stanley. one house, one view. we said that the u.s. dollar has to be strong but not because of developments in the united states. we never identified the united states is the country of milk and honey. in asia, the credit multipliers were breaking away. the world outside america was weakening. because america was holding its drawers better.
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it was in this environment that the two views came together. it has made the fed very successful. the u.s. dollar is going to pause. you will have a euro-dollar rebound because of the fed. olivia: yesterday, we saw a huge move in the euro versus the dollar. when does the euro hit dollar parity? hans-guenter: i think that we have to wait a little bit. i believe that the euro will be much weaker in the future. one interesting data point to pick up here when you look at the recent decline in commodity prices that does not affect the
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five-year as much as it did in the united states. that gives us a very good look at the differential. maybe it is a buying opportunity. that does not mean anything that the euro decline is finished. tom: thank you so much. joining us is omar accu larp of charles schwab. how linked is dollar dynamics with the oil movement? >> it was linked strongly yesterday.
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we have already seen the dissipation in that link. tom: i am absolutely stunned at this focus on the dollar right now. how do we adapt to dollar and oil dynamics? edward: they are in a lucky position in that their earnings are in u.s. dollars. they have a benefit on the depreciation of the currencies that they are buying goods and services and. meanwhile, they are sweating it out on the oil prices. olivia: production in the u.s. is at a new record high. what is the capacity situation? how much more spare capacity cushion is there? edward: the last time cushing hit this level was two years ago.
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there was no relief at cushing from pipelines. we now have over one million barrels a day of capacity to close that. the roach motel is no longer there at cushing. tom: are you taking a shot at steve roach? edward: not at all. [laughter] olivia: our producers going to have to start producing less? edward: our last option is to ramp up exports a bit more. the ability to move crude out of the u.s. was over. the ability to push u.s. crew down -- we have a little bit of room on the export side. unless refiners really ramp up quickly, we are weeks away from the point at which shutdowns may be necessary. brendan: i want to get back to the fed. your macro call says it is a
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stable u.s. economy, but low to nonexistent inflation. do we not need a little bit of inflation for a stable u.s. economy? omar: absolutely. it will drive it at a different pace. the pace that the fed will raise rates will be slow. that will be related to inflation. inflation comes in different flavors. we are not seeing any inflation related to wage growth. target and walmart started that announcement yesterday. tom: you can link the target announcement into yellen policy? brendan: it sounds like he is calling the target announcement anecdotal. omar: it is very anecdotal. the fed has a 2% inflation target they have been very explicit about. when you see the components of gdp that are targeted toward
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consumer spending, there is a very good linkage into what you would need to have an wage growth relative to what the consumer growth is to the gdp. tom: we will continue on that. olivia: our twitter question of the day. are you more worried about the fed moving too soon or too late to raise rates now that fed chair janet yellen has opened the door with the potential to rate hikes? tweet us. this is "bloomberg surveillance." ♪
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omar:tom: good morning, everyone. "bloomberg surveillance." olivia just mentioned the german 10 year. let's get to our top headlines.
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brendan: we begin with the federal reserve. it has opened the door to the first interest rate increase in almost a decade. the fed does not seem to be in a hurry. when they start raising rates, they will do it slowly. the price of oil is falling again after a brief rally. west texas intermediate is trading at under $44 per barrel. also crossing the bloomberg terminal, investigators are trying to figure out why a navy seal plunged to his death. his parachute failed. penn state's president's warning students involved in the nude photo scandal could be expelled. they posted photos of women naked and unconscious on facebook. police are also investigating. coming soon, your favorite tv shows on your videogame console.
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playstation has its view service. it offers live and on-demand programming. the sale of cds in other physical formats fell 20%. those are your top headlines. olivia: who is still buying city's? don't go away. plenty still to come on "bloomberg surveillance." electric car sales are gaining traction. in 30 minutes, the winners and losers of march madness. tom: very good. on oil, this is not your mother's grandmother's collapse. it is a key theme for edward morse -- oil must touch in
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the area of $20 per barrel to clear massive oversupply. we are down to $43. how rapidly are we going to get to $20, $25? edward: if we have it for another five days, we will have oil in the 30's. oil in the 30's means we have a government that does not allow exports and the only give is to either lockout imports, which is really hard, or to chain production. tom: when you speak at the council of foreign relations you can hear a pin drop in the room because you talk about the minutia of pipelines. what is different about the american pipeline system now versus midland, texas of a million years ago or 1986?
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edward: we used to have pipelines. we used to have them coming from the u.s. gulf coast moving inland. that is because the u.s. was not producing enough to consume inland. we now have an abundance of crude inland. almost all of those pipelines have been reversed. tom: should we export oil edward:? it is the rational way to balance the market -- edward: it is the rational way to balance the market. there are all export -- obstacles to exporting. the u.s. can export oil to canada. we were exporting none. we are going to go back to 400,000 barrels per day. we can export as much alaskan crude as the market wants. sometimes that is open to sell
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the crude in asia. we predict it will be open sometime this year. that is another chunk of thousands of barrels per day. the government has ignored negotiating with mexico to allow exports on the same conditions that we can export to a contained u.s. country. we import crew that can be reexported. we are able to move a lot of crude. we can move about as much as ecuador produces. even without keystone, we can use -- move it to the canadian border to the -- from the gulf coast. olivia: there have been energy ceos in washington this week lobbying the president and the government to open up exports further. in the headlines iran, nuclear talks, the israeli elections. what would an iranian nuclear deal due to the price of oil? edward: there are bullish
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factors. the biggest bearish factor is a deal with iran. it would open up more exports from iran, maybe adding a half a million barrels per day in three months. that would be a 50% increase in the amount of oil sloshing around in the world. there were a bullish factors. venezuela, algeria are in terrible shape. tom: let's talk about that in our next section about opec with edward morse from citigroup. coming up the interview of the day, alan zentner -- alan zentner -- ellen zentner staking her career. ♪
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omar:tom: good morning, everyone. "bloomberg surveillance." this is "bloomberg surveillance." let's get to a morning must-read. decades in the egyptian perspective on the middle east. ed, i'm staggered by what mr. gheit said. opec will implode.
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do you agree? edward: some opec countries will definitely implode. tom: omar, you took your degrees in mexico. what does it mean for mexico? edward: mexico is in a different position. the government depends 30% on the revenues of oil, but they are in a very different position. they are no longer a petrol state. brendan: is that a way to draw a distinction between oil-producing companies? the ones who are not petro states will survive? edward: some will survive. russia is a petro state, but it has human capital and technology. tom: recalibrate $20 per barrel. are you at $20 now or $22? give us a better number. edward: the average that we had
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for the second quarter is $35. we are moving quickly toward the number. the $20 number is likely to what -- is what will happen. tom: do you realize that he talks and the price of oil just goes down? [laughter] olivia: we have yet to get to the demand side of the conversation. brendan: you guys keep talking, i'm going to go day trade. [laughter] olivia: are you worried about the fed moving too soon or too late? ♪
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tom: good morning, everyone. "bloomberg surveillance." let's get right to our top headlines. olivia: the fed is clearing the way to raise interest rates.
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policy makers are dropping the assurance that they will be patient when it comes to raising interest rates. that does not mean the fed will be impatient. janet yellen: we anticipate that it will be appropriate to raise the target range for the federal funds rate when the committee has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium-term. olivia: janet yellen said that that does not mean raise -- the race will come in june necessarily. oil futures falling 3%. west texas intermediate is selling for a little more than $43 per barrel. oil is down 19% from its peak last month. the u.s. drone strike has killed the suspected mastermind of a
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deadly terrorist attack in kenya. the drone hit a vehicle in somalia caring -- carrying a top commander of al-shabaab. brendan: california is taking more steps to fight a drought that is in its fourth year. there will be emergency legislation unveiled today. earlier this week, regulators briefed new cutbacks -- residents can only water their yards two days per week. a big victory for tesla. they will be able to sell electric cars directly to consumers in new jersey. state automakers a block the deal. governor chris christie signed a deal that overhauled dealership laws. time is running out for you to get your march madness bracket done. i have the jayhawks. tom has the wildcats going all the way. 16 games.
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president obama has his bracket in. he is playing it safe with his picks. the president has picked only one national champion correctly since taking office. those are your top headlines. olivia: you can call it the dollar dent. oracle abercrombie are pinning their disappointing earnings on the dollar. omar aguilar is the chief investment officer at charles schwab. it falls on him to tell you how to allocate your cash. 16% is a lot better than the s&p. are we better than --in cash than the equity market? omar: that is a good question. you probably know what i picked for march madness. clearly the colors are beautiful. going back to that. the dollar today. everybody talks about the
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strength of the dollar. we think about, what is the reason for this? a lot of it has to do with the quantitative easing in europe. the flow of assets went to emerging markets. for those five years, the gdp growth was driven by emerging markets. when you think about what is happening with qe in europe, a lot of the assets are flowing to the dollar. when you think about people having cash, it is an indirect exposure of qe in europe. when we think about asset allocation we go back to basketball. it is having a good three-point shooter. having something else. olivia: how exposed our u.s. multinational companies to the stronger dollar? barclays group had a report out that there was virtually no impact in stocks continue to rise. omar: multinationals, 40% of the
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earnings in the s&p 500 have sales overseas. earnings will be impacted area -- impacted. tom: do you change your allocation because of that? do you have to make a strategic shift because of the dollar? omar: you have to reallocate your risk. u.s. equities versus international equities. tom: where is charles schwab on that right now? omar: in terms of allocation? one interesting statistic, you look at performance in dollar terms in local currency versus dollar it is about 15% or 16%. what is holding out the international exposure is the dollar. it is a big difference in terms of risk allocation. brendan: omar you are a blue devil.
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you say that emerging markets are facing headwinds. you put brazil, china, and russia in the same basket. would you really design -- describe all of them is facing the same headwinds? omar: they all have different flavors of trouble. russia has a lot of geopolitical risk. commodities are affecting russia differently. the situation in china is more of a government trying to get inflation under control. tom: ed morse can't talk about hydrocarbons, you can. how are you waiting on oil stocks in the u.s.? omar: producers are going to have a hard time. capital spending is a huge part of the energy sector in the u.s. tom: how do you know when to go into oil stocks? omar: it is very hard to predict. the whole oversupply is something that will be affected.
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olivia: thank you so much. still to come more americans are buying electric cars. it is a booming industry. this is "bloomberg surveillance." ♪
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tom: good morning, everyone. "bloomberg surveillance." futures are -3. dow futures are -17. olivia: tom, are you driving a tesla get? tom: i looked and no, no, no. olivia: is the roof not tall enough? brendan: they have a folding up backseat. olivia: we are waiting with bated breath on the tesla suv. monthly sales of electric cars are rising. up nearly 66% since 2010. the key is that we need to get a point where we hit a critical mass of infrastructure. as soon as we do that, that graph is going to turn into a parabola experts say. everybody likes the idea on principle, but people are worried that they are going to
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drive to the hamptons and lose power and be stuck. you need infrastructure. that is why tesla and elon musk are working on these power stations. they want the infrastructure before people can feel confident. that is the appeal of the hybrid. i don't know what you gentlemen, were doing this weekend. i was in miami. i was covering the formula e motor circuit race. it is very cool. i caught up with richard branson, the founder of the virgin group. he is one of the sponsors of the races. he has a very keen interest in getting into this industry. richard branson: we have virgin racing on the side of the car. we are developing work on electric cars. you never know. we may find virgin competing tesla in the car business, as we
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do in the space business. we will see what happens. olivia: richard branson saying he might be giving elon musk a run for his money. tom: other than sir richard and pretty girls what is -- are they really thinking that race cars will be electric? olivia: they are thinking that formula e promotes interest and investment into research and development into green technology. they hope that that trickles down from the racetrack to main street. brendan: that technology then becomes consumer technology. a lot of the stuff starts there because people are willing to sink lots of money into winning. is is this a subsidy for new technology development. tom: the internal combustion engine, is it under threat? edward: not as much as when gas prices were lower relative to oil. i think eventually it will be under threat. tom: on a gallon of gas -- do
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you have a tip point when olivia goes out and buys a hummer h2? edward: the tip point will be more on the regulatory side and what government to do or don't do to make sure that the petitions are in the market. brendan: olivia was talking about the real question being the infrastructure. there was a precedent for that in the combustion engine. the model t had two carburetors. one for alcohol and one for gas. this is not new. edward: it is not new. you have trucks with the capacity to run on natural gas or oil. in brazil, you have three fuels. olivia: the pickup is instantaneous. it is pretty cool. it is a high-pitched hiss. brendan: make the noise. make the noise, olivia. olivia: you are standing around
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trying desperately to be very cool and the guys are actually blowing into whistles to try to make the noise so everybody gets out of the way because the cars are so silent. you hear them sort of hissing and it sounds like a wine and you can hear the tires skidding, but there is not that huge, deep roar that you associate with formula one. tom: i just can't see james garner in an electric formula one car. it is always james garner. brendan: all my god. please let us move on to some top photos. clowns scuffled with police officers during the blockupy movement. this is a little silly with a clown, but it is very serious stuff. this is not kiev, this is frankfurt. it is amazing to watch. tom: why now? what was the catalyst for this?
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you have been so good on european protests in dresden and other places. this is different. brendan: it is not different from that. the german hard left -- there was always a very strong movement against nuclear power that never disappeared and reared its head three or four years ago. that is who this was. number two photo, new zealand. the fifth leg of the volvo ocean race finally begins. thank you. "bloomberg surveillance" photo editor. it was delayed by three days to avoid cyclone pam. the race is poised to finish in sweden in june. they will travel 40,000 wet salty miles in total. number one is stonehenge. this is former astronaut buzz aldrin. sending a message to the cosmos. he is revealing a t-shirt that says "get your ass to mars."
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he was the second man to set foot on the moon back in 1959 -- 1969. that is a reference to "total recall." olivia: that photo looks like that because of the angle. it is not nearly as big as that. hugely underwhelming. a bunch of rocks. brendan: if you are not buzz aldrin, you were not allowed to stand next to stonehenge. you have to walk in a big circle. we are looking at the winners and losers of march madness. we are talking about money when "bloomberg surveillance" returns. available a bloomberg.com. ♪
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tom: good morning, everyone. "bloomberg surveillance." ellen zentner with us in the next hour. olivia: the federal reserve may be running out of patience. they are hinting at the first interest rate increase in a decade. when they start raising rates, they say they will do so slowly.
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oil futures are down again this morning. west texas intermediate trading under $44 per barrel. the fed cut its interest rate estimate. the israeli politician who finished second to benjamin netanyahu is saying he will not join the prime minister's coalition. herzog said he will lead the opposition in parliament. if you can't get to starbucks they will be bringing it to you. they will start deliveries later on this year. the service will be tested in new york city and seattle. those are your top headlines. also take a quick look at what is coming up in the next half hour of "bloomberg surveillance." in 10 minutes, we focus on the fed with morgan stanley's chief economist ellen zentner. we look at the rage against the ecb in 20 minutes. in 30 minutes, we look at if wall street can be a force for good. tom: we are talking about the
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microeconomics of oil, but what about the future of debt and equity for american oil companies? there has been a prediction of an implosion of high yield energy paper that was out there and then there is the equity market. do they come right down? do they correlate? edward: they don't exactly correlate. there are good companies and there are companies that are overleveraged. if you look at the basic data on u.s. production from shale, it is about 70% of the production coming from 30% of the companies. 70% of the companies produce only 30% of the output on the other side of it. tom: andrew mellon talked about combinations. can american energy commodities be stronger because of the combinations that we know are coming? edward: i think we are going to
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see the stronger companies coming out. the costs of shale are going down. the companies as a whole, have been a negative cash flow. some have already gotten to the next step area did -- the next step. after this is all over we are going to be seeing robust, but significantly lower growth of production in the u.s. it is going to continue for a longer period of time. tom: edward morris, i am apologizing that we placed you next to a rabid duke fan. [laughter] we usually try to avoid that. but brendan set us up here. he wears blue. brendan: are we talking about paul sweeney or omar aguilar? tom: paul sweeney. brendan: that is the duke chair. paul sweeney bleeds blue devil blue.
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bloomberg is following the money. the ncaa is in a 14 year deal with cbs worth $10.8 billion. paul sweeney does not get any of that money, but he is here to help us understand the ncaa's basketball fund. paul: they get to share in what is one of the biggest sporting events in the united states. it is huge business for the cbs and time warner networks. they spend a lot of money to get the rights for this basketball but they also charge a lot of money for advertisers. brendan: i want to take a look at something that bloomberg data analytics pulled together this week. these are the biggest conference tournaments. what happens with that money that they are getting from cbs and turner broadcasting is that that goes into a fund. it goes to the winning conferences. we are looking at the top five
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conferences. no surprises. big ten, big 12, big east. we threw a couple conferences the don't really deserve to be there. conference usa is where to land, my all more moderate, is. in the basketball fund, you have winners and losers within the actual conference. you have a lot of conference pockets, but then there is subsidizing. paul: it moves towards the super conferences. you have the big five conferences. we are talking about football and basketball. they are big revenue generators. there is more of a have and have-nots snapshot area did -- snapshot. tom: every article is about woe are the basketball players. what is in it for a combine like oklahoma? olivia is all oklahoma. [laughter] what is the thing for oklahoma? what do they get out of it?
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paul: they get money from the conference. these big sports rights. tom: isaiah. isaiah. [laughter] paul: it is a lid big business for the big power conferences. tom: will it help english professors at oklahoma? paul: probably not. brendan: no. no. [laughter] we will take a look at tom's top bracket pick. at louisville. it let's look at what they will learn this year. olivia: so obvious. brendan: the f t it to department earned $570,000 in 2014. they are making a lot of money because they don't own their stadium. paul: all the big schools particularly for the ncaa tournament you participate in
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this big pool of money that is coming from the broadcast networks. we are seeing sports rights fees around the world for everything from world cup soccer. brendan: is this a professional sport? all: i think it is. we are talking huge amounts of money. olivia: why don't the players get paid? paul: they don't. but i think it is changing. we are starting to see the ncaa allow for certain stipends to be paid to the players in football. we are moving very slowly toward it. tom: doesn't that help with players leaving early? and i'm told the game is not as boring because everybody plays so conservative. do you find that march madness is getting more boring season to season? paul: as long as my duke blue devils are in a season to season, it is not boring. you will see huge ratings.
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every single game will be played. every single game is going to be aired live on one of the turner networks. tom: was $10.8 billion a steal? paul: no. it is at best a breakeven proposition for the networks. olivia:brendan: paul sweeney of bloomberg intelligence and duke university. coming up, march madness is here. filling out your perfect bracket. we've brought together our talents to take together their shots in the contest. follow along. ♪ tom: ed morse, think is a much
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for coming in. paul sweeney, go away. the euro. stay with us. ellen zentner is next. ♪
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>> this is "bloomberg
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surveillance." tom: yellen uses patients, but it is a data dependent fed. ellen zentner joins us for the entire hour. numerous nations reaffirm a negative interest rate policy. what do money managers do when rates normalize? i never thought we would see it. blue-chip computer joining the industrial dow jones average. good morning, everyone. this is "bloomberg surveillance." march madness starts today. i'm tom keene. joining me, olivia oklahoma sterns. brendan greeley is with us as well. olivia: the fed's opening the door to raising interest rates. the central bank has indicated that once it starts raising rates, it will do so slowly. janet yellen is saying it does not mean the rates will necessarily rise in june. but she will not rule anything out. janet yellen: we cannot provide certainty and should not provide
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certainty because economic developments that will unfold are uncertain. what market participants should be doing is looking at incoming data just as we are. olivia: fed policymakers indicate that before they raise rates they want to be sure that economic growth is pushing up prices. oil has resumed falling after rallying from the lowest price in six years yesterday. west texas intermediate is trading below $43 per barrel. prices rose 3% yesterday after the fed cut its estimates for interest rates. tunisia has been considered a haven from the instability that rocked the middle east. not anymore. authorities are looking for several gunmen after a deadly attack at a museum. at least 22 were killed. most of them were foreign tourists. tunisia escaped the turmoil that many countries went through during the arab spring.
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brendan: some of the biggest banks may be having second thoughts over loans they made to energy companies last year. citigroup, goldman sachs, and others could lose tens of millions of dollars on loans. they cannot i get rid of the loans thanks to the command -- collapse in oil prices. target is setting up a $10 million fund over the giant data breach. the money will be used to settle a class-action lawsuit. meanwhile, target is raising the pay of its lowest paid workers next month. employees will get at least nine dollars per hour. walmart is now unveiling a similar plan. it is your last chance to get your brackets done. 16 games today, 16 more tomorrow. last night was the last two of the play in games. robert morris b north florida. dayton beat voice he state.
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-- beat boise state. those are your top headlines. tom: a data check very quickly coming off the festivities from yesterday. a little bit of a giveback. we are down to 1.0695. crude is down 3.4%. that really gets my attention. we just heard ed morse strongly reaffirm lower crude prices. we clean up the debris after yesterday's fed festivities. there is no one more interesting to speak to them ellen zentner on her own march madness, that would be 2016 madness that is janet yellen will be overcome and forced to keep the punch bowl full into next year. other economists are migrating this morning in the ellen zentner direction. john rogers is also with us. i look at september 17.
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when will they all get on your level? what will it take for you not to be an outlier call? ellen zentner: over time we have to see how further appreciation of the dollar plays out. tom: dollar dependent, not gdp dependent. ellen zentner: a lot of policymakers are aware that some of these effects driving gdp to such a slow growth rate are temporary. i don't think she is worried about growth. it is the pace of appreciation in the dollar. at some point, if you tell people you're going to continue to raise rates, the dollar is going to start ripping higher. tom: your call is notorious.
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are there presidents or governors that agree with ellen zentner? ellen zentner: there are important governors on the committee that agree that they need to see a turn upward before they will raise rates. it is faith versus proof that are fighting with each other. those who have faith in their outlook and will go on that versus those want to see proof in the data. it is not about the labor market at this point. it is all about core prices. who on that committee would want to see an actual turn up in the data course before they are convinced prices will continue to move back toward? brendan: when you talk about faith versus proof. is there a new important word that you pulled out of the press conference? ellen zentner: they took outpatients and inserted reasonably confident. they can say, we are reasonably confident that we can raise rates. they wanted to go to data
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dependence only. they finally got rid of that faith-based guidance. that is stan fischer behind the scenes with a guiding hand. they also took out the word solid. olivia: janet yellen describes the recovery is solid, but yesterday she described economic growth as moderating somewhat. brendan: she opened with, we will make an assessment. my word yesterday was assessment. it means we are still working on this. ellen zentner: i thought that the bond market reaction to yesterday's events was overdone. at the end of the day, what are they still telling us? they want to raise rates this year. as stan fisher puts it, we don't know what will happen. tom: what are the implications of your call to wall street? what does it is actually mean if ellen zentner is right? ellen zentner: i think the
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concerns over the timing of the first rate hike or misplaced. investors continue to month -- to not put as much focus on what the rate hikes will look like what they do begin -- when they do begin and that is the more important issue here. the bond market tends to reprice when the fed starts a policy hiking cycle. historically, they have never priced in less than seven rate hikes. the fed does to wait later in order to us start. olivia: could the fed tipped the applecart over? could they trigger a self-sustaining recession? ellen zentner: bringing in the 1937 example where the fed got a little too ahead of themselves and not realizing the transitory boost, that does raise the risk that they go to early. dudley and yellen have both talked about the asymmetric risk
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, which really plays into this. when you are at the zero lower bound, the risks of going to earlier greater than waiting. why risk it? i know we have been at the zero lower bound for so long and it feels like a fed that has an itchy trigger finger, but why risk it? it is much more safe to wait longer and go when you are darn sure that all the conditions are in place. brendan: i was also curious to see that not only did they revise -- the committee revised also the pace of the rate increases down. we are looking at 2016 and it will possibly be a 1.875. what do you make of the change in the predicted pace? john: clearly with the strong dollar and the mixed signals from the economy, it looks as though it is not a green light immediate in a sustained series of increases. the new slow in the data flow is next. there is a lot of confusion about how strong the economy is. olivia: part of the news flow is
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that target has agreed to raise its minimum wage to nine dollars per hour. is that a reduction in the estimate? ellen zentner: no. from a macroeconomic point of view, we felt like it was not necessarily sending the market a message. but it was coming to the realization that when you have a 5.5% unemployment rate and you have an estimate that is clearly wrong -- you would see accelerating wage pressures and we have not. for economists, the writing was on the wall that you need to lower the estimates of where you think full employment is. the market took it as, ok, the fed is not going to feel pressure from the labor market tightness for longer. they are telling us they have a longer runway. that is a markets have reacted. tom: have you ever seen a market and a fed so far apart?
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i am thunderstruck. ellen zentner: i have never experienced it possible policy tightening cycle where we are looking at dots. tom: do people stop you on the street and go, ellen, you are nuts? ellen zentner: ask my husband. he is the only one who stops me and says you are nuts. but that is a different issue. we have never dealt with dots before. they are very frustrating. olivia: not all dots are created equal. so much more to discuss. ellen zentner you are staying with us. this is a great segue to our twitter question. are you worried yellen will raise rates too soon or too late? ♪
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tom: good morning, everyone. "bloomberg surveillance." talking with john rogers and ellen zentner about fed policy. we have a wonderful morning must-read. olivia: blockupy protests are absurd.
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we started to see these pictures on air early yesterday. incredible scene in the streets of frankfurt. cars lit on fire. 94 police officers were wounded. 550 people were detained. this is frankfurt. this is really wild. the ecb is a friend of leftist groups because by continuing to fund greek banks, they are propping up that party. brendan: i wonder the same thing when i saw these pictures. 10,000 people gathered at the medieval town square. this is not very frankfurt. they should have been marching on berlin. the us tear it he is not coming from frankfurt, it is coming from berlin. olivia: it should be pointed out that these are german germans. you do see a bmw that gets its tires lit on fire every once in a while and frankfurt, but this is unprecedented.
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look at that area i have never seen riot police in frankfurt. brendan: there is some solidarity of the hard german left with greece. it is fascinating to watch. the hard german left has never really disappeared the way it did in the u.s.. there is a very active anti-nuclear power movement which was very successful in getting angela merkel to change her policies two years ago. there is a very active anti-nato movement in germany, as well. olivia: they are protesting austerity in germany. as far as i'm aware, there was not much austerity in germany. brendan: they are protesting german policies. i'm confused whether you're are protesting the ecb. the problem is not in frankfurt. olivia: it looks like a wto building. tom: i just thought it was
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bizarre yesterday. it should have been in berlin. to your point. there is nothing there this morning. are we clear? olivia: nothing has come across our headlines. 94 police officers wounded. still to come on "bloomberg surveillance," we will discuss market dislocation and solutions next. this is "bloomberg surveillance." ♪
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tom: good morning, everyone. "bloomberg surveillance." i guess i am watching oil. 43.06. let's get to our top headlines. from brendan maryland greeley. brendan: the federal reserve is no longer promising patients. -- patience. policy makers say when they start raising rates, they will do it slowly.
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a barrel of west texas intermediate is trading under $44. oil is now down 19% from its peak last month. also crossing the bloomberg terminal right now investigators are trying to figure out why a navy seal plunged to his death. his parachute failed during a training jump in california. it is the navy's second failed skydiving accident this year. citigroup will vote on deferring a chunk of executive pay for 10 years. they are urging shareholders to reject it. the maker of the angry birds video is setting off to hollywood. the company is focusing on cartoons, plush toys and a 3-d angry birds movie coming out next year. the revenue fell 9% last year. they have not had any new products to match the angry birds success.
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your favorite tv shows on your videogame console. playstation's vue service offers live and on-demand viewing. those are your top headlines. go terps. olivia. olivia: let's take a look at what is coming up in the next hour. in 10 minutes, we bring our focus back on the fed. in 20 minutes, we talk about apple's debut on the doubt. in 30 minutes, we talk with ellen zentner about the u.s. gdp. tom: we talk about the grind of the quarterly and annual performance. you are up or you are out as a corporate officer. john rogers is a former president of the cfa institute. full disclosure, i am a member of the cfa in the two. mr. rogers, wonderful to have
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you here. corporations have to find a better good in the marketplace. nobody agrees with you. how do we get to that change in fiduciary responsibility? john: i don't think i am alone in believing that finance can be a force for good. tom: it hasn't happened. john: but there is still hope out there. mark carney calls that the tragedy of horizons. it is short-term thinking. when long-term investors have the luxury of time on their side , time is a great advantage. thinking short-term can lead to some very poor investment decisions. it can lead to bad externalities. poor working conditions. those sorts of things. the costs of cleaning that up
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come back and bound back on these long-term investors, not today, but 10-30 years from now. the future beneficiaries of these long-term investors are going to be paying for the cleanup costs, the externalities downstream. brendan: there should be a price and negotiate away the externalities, but why can we not put a price on them? john: the accounting standards are good at measuring short-term outcomes. if you look at the sustainable accounting standards board'ss, they are working on coming up with accounting standards that seek to capture the true cost of economic activity. tom: for our radio audience michael bloomberg is a principal owner of this company and of bloomberg radio. i look at a quote from john rogers. this speaks to the phrase
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externalities. finance is powerful. this approach is based on matching capital and long-term objectives, embracing the concept of universal ownership and can do during externalities. -- considering externalities. olivia: it is a fascinating conversation. this idea of exclusive capitalism. i have heard mark carney discussing it in london. what is the solution? do you need to set up pension funds that only invest in socially responsible vehicles? john: it is interesting. the solution comes from two different parts. one is these large institutional investors who have a fiduciary responsibility to act in the best interest of their people overtime. they are universal owners, in effect. they own the whole market. they have got to engage with
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corporate officers, as well as in the public policy framework. interestingly, retail investors have started to invest with their own social and environmental agendas. wall street has responded with a slew of products that are oriented toward individual investors, high net worth investors who want to make a statement with their investment. olivia: for example, we had even e ellis on and she is running a portfolio that invests in companies that have 30% female leadership on their boards. tom: we have got to have you back on this, john. the tensions that the cfa institute faces versus the hope of fiduciary capitalism, it is fascinating. john rogers, thank you so much. some incredibly smart writing in the book. olivia: coming up, apple
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celebrates another milestone. it is not $1 trillion quite yet it is just joining the dow later on this morning. ♪
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tom: good morning, everyone. "bloomberg surveillance." you have heard ellen zentner of morgan stanley talk about dollar dynamics. this ever stronger dollar and what it means for the american economy. what does it mean for gdp? let's go into the bloomberg terminal. the blue line is gdp. here is the zero line. this is from the atlanta fed. this is the blue-chip advisors call of an optimistic 3% or 2.5% gdp. here is the reality we are going to see in the future from the atlanta fed. that is an ugly number from atlanta. brendan: i find the academics
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behind this prediction fascinating. they borrow a quote from lawrence summers. as was the case in the 1960's -- you are seeing the attempt to look at the business forecasting and put it back into the academics tom:. tom:-- academics. tom: ellen zentner where is morgan stanley on gdp? ellen zentner: not that gloomy. we were tracking at three point 6% and now we are at 1.2%. tom: the critical question -- is morgan stanley's delay in the fed an indication of a more tepid gdp forward? ellen zentner: the delay in our fed call is not about headline growth. whether west coast port activity that was hampered -- there are some transitory effects that are going to come back and express
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themselves in the rebound in the second quarter. there is some rebound activity that is lost. if weather damages the economy we don't go out to eat twice the next day if we don't go out one day before. we still buy the car. there are a lot of temporary factors. we are seeing households not spending as much of the gas savings as we thought they would. they say, i'm going to get ahead on bills. tom: i need a transitory effect to transition to headlines. here is olivia sterns. olivia: the fed is now putting in interest-rate hike on the table. the only question now is when. fed chair janet yellen discussed a possible timetable. janet yellen: it is still the case but we consider it unlikely that an increase would
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happen at the april meeting. such an increase could be warranted at any later meeting depending on how the economy evolves. olivia: they want to see more improvement in the labor market and be sure that inflation will move back to the 2% target. oil futures falling more than 3% in u.s. trading today. west texas intermediate is selling for a little more than $43 per barrel. the price rallied 2% yesterday after the fed cut estimates for interest rates. the death toll is climbing in that attack in tunisia. 23 people died when gunmen stormed into the tunisian parliament and then fled through a museum. most of the deaths were foreign tourists. no one has yet to claim responsibility. tunisia was the birthplace of the arab spring uprising. brendan: california is ramping
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up the battle against the drought in its fourth year. governor jerry brown unveils emergency legislation today. california up reservoir is less than half full. there are new cutbacks for water use including that residents can only water there yards two days per week. tesla is open for business in new jersey. they can sell cars directly to consumers in the garden state. governor chris christie has signed a bill that overhauls the dealership laws. they must maintain a service center in new jersey where consumers can have their cars fixed. march madness kicks into high gear today. 16 games. you should have your bracket done. president obama has his bracket in. he is playing it safe. he is going with kentucky. the wildcats may not be thrilled about that. the president has picked only one national champion correctly since taking office.
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tom: a data check. equities, bonds, currencies commodities. oil is a huge deal. the euro one .0695. it is a weaker euro this morning. good morning, everyone. "bloomberg surveillance." with me, olivia sterns and brendan. olivia: aren't you psyched? tom: who is the new girl? olivia: scarlet fu. scarlet: it is a bigger table. olivia: she looks so well rested. scarlet: i am pretty well rested. tom: she darkens the door at 8:03. olivia: scarlet came in early because it is a special day. apple will finally join the dow
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jones today. what took so long? is the dow still relevant? scarlet fu is joining us now. remind us how a stock gets into the dow. scarlet: it is a price weighted average. it is not based on market caps. you have a lot of lopsided members in there. visa ibm. the dow did not have apple. now that visa has cut its stock and apple has entered, you see that goldman sachs is the heaviest weighted member of the dow industrial. apple comes in a number five. olivia: there are a lot of industrials in there. -- not a lot of industrials in there. tom: you wonder why it is still called the dow industrial anymore.
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scarlet: you wonder if there is a pressure on goldman to split but the indication has not been to split their start. a lot of companies did that in the 1990's. it is a stock market dominated by institutional investors and etf's who do not care about the share price of the stock. brendan: ellen zentner i want you to prepare to get nostalgic as you look at a chart that i prepared last night to read you can look at the number of appearances a word makes. i looked at nasdaq, s&p 500, and dow jones. these are mentions of these indices in books and newspaper articles. from the 1930's, there is not that much mention of financial indexes at all until the late 19 excuse and then it is the doubt. we reached the peak in the 1980's, greed is good. then the.com bubble bursts.
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do you miss the dow? is it even relevant? ellen zentner: when i look at the charts that you prepared, it is an interesting chart. all of those indices, whether one falls out of favor or another comes to the forefront, they have all grown sharply over time in terms of the mentions, as you mentioned. that is alongside the phenomenal growth and financial wealth in the global economy, not just u.s. in terms of falling out of favor, which one is favored and which one is not, i can't a which one that means for what people decide to invest in. -- i can't say which one that means for what people decide to invest in. tom: what is a blue-chip stock? scarlett: it is one that is widely held by people. it is one that if you don't invest in it, people feel like they miss out. we what -- put together a chart if the index that added apple way back when.
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tom: it is a big number. scarlet: the dow would have gained 221%. tom: john rogers. is the dow an anachronism? john: the tao is not used widely at all by index funds -- and the dow is not used widely at all by index funds, it is somewhat of an anachronism in terms of why views. scarlet: $1.87 trillion for the s&p 500. ellen zentner: does this change apple's investment base at all? scarlet:tom: did she do ok?
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should we have her back? scarlet: i walked in at 8.05. olivia: our twitter question of the day. when will we raise rates? ♪
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olivia: we are looking at live pictures of new york city. a very sunny day in new york city. this is "bloomberg surveillance." i'm olivia sterns with tom keene and brendan greeley. tesla wants to take the worry out of driving in an electric car. they will have an announcement coming up affecting its model s line. musk says he has a solution for range exide he -- elopn muskn musk says he has a solution for range anxiety. betty: it is very real. i drove a tesla and i had arranging zaidi. i was calculating in my head, where's the next charging station? he promises to take care of this with this software up a. -- update.
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the only way to really cure range anxiety is to make a tesla that can go 400 miles plus. that will eliminate ranging zaidi. -- range anxiety. it could be anything from making the batteries run more efficient , so that much more of the juice goes into running the car then powering your electronics within the vehicle. it could be a power saving mode. maybe there is a portion of the battery that gets saved and with a click of the button, you have 30 miles extra to get to a charging station. the real way to prolong the life or range of a tesla is going to be hardware upgrades. making the battery itself last a lot longer and making the charging much faster. you can spend upwards of an hour
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and a half just charging or more. i know you want a tesla. olivia: i definitely do want a tesla. i drove one. it is a very good drive. i was down in miami this past weekend covering the electric e race. qualcomm is looking at using a battery pack that you drive the electric car on top of. this battery technology is what everybody is focused on. this is the big holdup. this is why they are creating for giga factory? betty: this is why they are creating the giga factory. it is very expensive to make the batteries. it is fine if you are selling a $150,000 car at tesla, but how are you going to make the batteries last long and be cheap
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and then maketh for the masses? that is the big conundrum. olivia: when are we going to get the tesla suv? betty: right. [laughter] that is supposed to be later this year, guys. what was it like? the race? silent? olivia: it is not silent. it is a high-pitched whine. betty liu on the tesla announcement later today. as we had to the break, our twitter question of the day. ♪
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tom: good morning, everyone. "bloomberg surveillance." we have a $42 print on oil a bit ago. and more's reaffirm -- ed moresese reaffirming oil headlines. olivia: the federal reserve is opening the door to the first interest rate hike in a must a decade. they do not appear to be in a hurry. when they start raising rates, things will move slowly. the price of oil falling after a brief rally. a barrel of west texas intermediate trading under $44 per barrel right now. prices regained more than 2% yesterday after the fed cut its interest rate.
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the president of the swiss national bank is pledging to keep interest rates low in that country. thomas jordan technology and dropping his defense of the frank had added to his country's economic challenges. he said the currency remains overvalued. the s&p is predicting and in -- s andnb is predicting the weakest inflation rate since 19 60. the israeli politician who finished second to benjamin netanyahu says he will not join the coalition. the zionist union will lead the opposition in parliament, he said. he said campaign comments about arab voters by benjamin netanyahu touched on racism. cabs are still getting far more fares because they are rolling
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around the clock. streaming revenue is passing cds for the first time. sales of physical formats fell by 20% in the last year. those are your top headlines. just quickly a look at what is coming up on bloomberg television in the next hour. in 10 minutes, we look ahead at the end of alibaba's lockup. in 20 minutes, we talk about the budget battle within the gop. and then in 30 minutes, we look at the push for the mgm split. brendan: every first quarter, its snows and every second quarter, we sit around and wonder whether the first quarter was affected. the weather. port shutdowns. how much of this will become permanent? ellen zentner: the dollar's impacts are already being felt.
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as the fed mentioned yesterday, export growth is slow reflecting that stronger dollar. the weather some of that is going to be transitory. if you did not buy a car this month because there was a lot of snow on the ground, you're probably going to go next month and test drive it and buy it anyway. port activity. in the west coast, we have resolved the labor disputes but it takes 8-10 weeks to work through the backlog. some of that is going to be made up. honda said they had slowed production because they cannot get their parts out of the port. now they have and they will ramp up production to make up for the shortfall. that will be a rebound in the second quarter. there are going to be some problems with the ports that will not be made up. retailers could knock at the merchandise they needed to sell on their shelves. if you did not have the sweater went i went to shop for at the first time, i'm not going to look for it weeks later.
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tom: you have made your name on the minutia of gdp. there was an important speech about 2008 about looking for the new new. do you give up on that dream and just assume we have a lower american rhetoric? ellen zentner: i don't think you give up on that dream. that would be the larry summers point of view. i don't know what technological advances will happen in the years ahead, but when i look back and look at the amazing things we have done in just short decades that tells me that we cannot rule out that those technological advances will not boost their productivity and their growth. i look at the young demographic, the children of the baby boomers, they are an amazing huge youth bubble that is going to move through the economy pretty quickly into their prime, working into prime earning
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years. that is going to raise growth in the economy. i just don't buy it that we cannot get to the higher level of growth. brendan: the stagnation argument comes down to, are you hopeful or are you not hopeful? ellen zentner: yes, imo hopeful. 12 years ago when i first started coming on bloomberg, tom called me the pollyanna economist. olivia: oh, how not sexist. [laughter] ellen zentner: just the ever optimistic economist. the sun shines every day in texas. i'm from the south, i cannot help it. the financial crisis has crushed optimism, but it still bubbles up from time to time and so it put on my blue suit because i know spring is coming soon. tom: ellen zentner and john rogers. how are we going to unwind from negative interest rates? john rogers, to use cents
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stability as we come out of this great distortion or is it going to be a wild ride? john: i am fundamentally optimistic about this economy. i don't buy the secular -- secular stagnation. tom: even with lower bond prices, bill prices, higher yields. john: it has been all monetary policy and no fiscal policy. when you get that kind of a situation, it is a little unnerving to see negative interest rates, yes but we have healed for six years now and we have got technological innovation, we have health care innovation we have a young vibrant demographic in this country. i'm a believer that we are going to normalize. olivia: our twitter question of the day is very germane to the conversation. are you more worried about the fed moving too soon or too late on interest rates? the first answer is no. it is so overhyped.
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the second answer of the day, of course the fed will delay, the global economy is to fighting -- deflating. tom: i can tell that that is christopher whalen opining in the. good morning. olivia: the third answer, i believe she will be too late. stronger dollar, weaker exports. i take it you consider with christopher whalen. ellen zentner: when i sit down with clients they say it is hard to wrap their minds around march 2016, it is too far out. what they do take away is their conviction that the fed is going to move later than sooner. the rapid pace of in the strength of the dollar is going to make it difficult for them to raise rates when they want to. olivia: you were way out ahead of the pack before the dollar started ripping. did you foresee this run-up in
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dollar strength? ellen zentner: no, of course not. i'm one of the most honest forecasters out there. i did not. the overarching theme of the stronger dollar will remain with us. that is going to be there. it is the pace of the extent that has been stream late -- extremely surprising. no banker likes to see rapid currency movements in a short amount of time? . tom: is it a yellen bull market? john: i think it is a central bank bull market on a global base. tom: what happens when they take the punch bowl away? john: it is going to be difficult. tom: bear market difficult or do we manage it to a correction? john: we may end up with just a correction. tom: can i ask you about the cfa question level two 18 years ago?
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did you write that question? john: i will of solve all knowledge. [laughter] tom: thank you. let's get to the agendas. my agenda is ellen zentner. it is that simple. ellen zentner has single-handedly changed the dialogue on american economics. she is a piñata for this. except everybody is starting to respect the piñata. are you on speaking terms with james gorman? ellen zentner: of course. there are a values of difference in opinion in organizations. olivia: eu leaders are meeting in brussels today. it is very interesting to see how things will shake out. brendan: watching march madness. espn has texas in a surprise upset of the butler bulldogs. i have butler in my bracket
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. tom: it will be fun. we will keep you abreast. stephanie ruhle's wonderful charity work. ♪
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betty: good morning. it is thursday, march 19. we are live from bloomberg headquarters pretty were in the loop. we have a great show lined up for you this morning.
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the anticipation is over. there is no rush to raise interest rates. stocks around the world rallying. we will speak with morgan stanley's portfolio manager. the republican strategist on the war within the gop and why a few voters in new hampshire our think jeb bush has a zero chance of winning. he's the activist investor turning the real estate world upside down. john on why he is pushing mgm to split off its real estate asset. we will have much more on that. global markets showing investors like what they are hearing from janet yellen after she said at those central bank will move

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