tv Bloomberg Surveillance Bloomberg November 4, 2016 5:00am-7:01am EDT
hours. five days to vote. clinton maintains a narrow lead over donald trump. investors swap to safe havens. the brexit vote in parliament. this is "bloomberg surveillance." i am francine lacqua in london. tom keene in new york. it is all about the pound. we look at currency. and the treasury. tom: brexit followed from yesterday. there is still a lot on out from that court ruling. ellen zentner will join us in the next hour. francine: we are also getting a little bit of data out of europe. in terms of what this means for theation, overall pmi for euro area rising 50.08.
i'm sure that will have some impact on euro. we may have to watch euro and mexican peso next week. >> police in turkey have extended their crackdown. they had rounded up a number of kurdish lawmakers in late-night raids. president erdogan is consolidating power. in south korea, embattled president will cooperate with prosecutors investigating and influence peddling scandal. confidence is at a record low. he has admitted to sharing government documents with a close friend. that friend has been arrested. iraqi special forces have resumed their push into the city of mosul. they have launched attacks on
urban areas of the city held by the islamic state. they are being backed by a us-led coalition. the race for the white house enters its final weekend. hillary clinton holds its -- holds a narrow lead over donald trump. polls out there is a show clinton is either type or trailing in some battleground states. clinton held a rally in new hampshire on sunday. she is being forced to spend more money on advertising in michigan and colorado and new mexico. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you. our most interesting friday as we go to the jobs report in washington. oil grinding lower. 44.72 down at the bottom. dollar weakness through the
week. 21.93. a grinding week for equity markets. , we will let francine talk about that. mexico churning in a clinton direction in the last 24 hours. francine: this is what i am looking at. it is similar to you. the pound dollar is what we're looking at. 52.50 was falling much more than that 5100. yesterday, it was gaining significantly. but we have to look at the implications. i chose the msci. turkish lira. let's not forget this because it has been weakening the family after what we heard from president erdogan overnight. tom: the slope shows the
travails of erdogan and the lira significantly. a crazy week. the bank of england, this is an amazing chart. 25-54, and theen, green circle is the nirvana of the 1960's. the red line is mostly women entering the workforce. structural change in employment. we got better in the 1990's with that yellow circle. nowhere back to the employee nirvana of the 60's. there is a very high 10%. unemployment. down tok is we come 3.9%, but we are nowhere near back to the nirvana of the 1990's. this is the huge social tension across so much of america.
senator sanders and mr. trump. peter navarro a supporter of economics will join us today. francine: i really like that because it is a ross over between what we are hoping to hear from some data and crossing into politics ahead of that election next week. here's what i have. it is a tom keene chart. i feel like this is really your animal spirit chart. payrolls in white. in red is the recessionary periods. 2000 actually gaining. this is a 12 month moving average. quarter on quarter change for gdp. you can see that is slowing and going back. it is normalizing again. it gives you a snapchat of the u.s. economy. thank you for joining us.
patrick, let me start with you. the markets are nervous. rightly so? patrick: short-term why would you want to take a big risk with the election in four days. you may have issues. you have brexit which is an ongoing saga. it makes sense to put money on the sidelines in the next few days because it looks like an uncertain outcome. francine: you have money in the game. you look at the polls or do you hedge? patrick: i look at the polls. a month ago it looked like an easy clinton win. but now it is a much tighter race than it appeared. we have been long dollar all year. we have started to ease off of that. francine: how do you play from an ethics point of view, jordan? if you look at your mexican, we have the most extreme.
jordan: mexico is the biggest proxy of this election. it is looking like clinton whenever mexico rallies. asia is the second most impacted of a trunk victory after mexico. bet right now,e jordan, how exposed is orange red, and how exposed are we at -- foreign trade, and how exposed are we to one big short cover or trade cover? todan: if you think back brexit, the week leading up to the vote itself, you saw a lot of hedging. when the polls shifted to remain, you saw some of the biggest shifts in volatility before the vote itself. that was only been by the actual outcome of the vote. people are not as hedging as they were ahead of brexit. the week before brexit, polls
were complying brexit by about 3%. people are not hedging as much frequenting -- for clinton. tom: do i go for mexican peso before the vote? jordan: i think i would cut my position on mexico. knows, itnd, who could be a remember the fifth of november event. people could get a bit more touching. francine: -- tom: when you say short mexico, you mean a weaker mexican peso? stronger dollar? we have to get that clear. these guys talking greek. i cannot understand a word he was saying. francine: we will send you the
translation in the next couple of hours. shorting the are ftse 250. we are pressing and all the negative outcome possibilities you could see. the ftse 250 has been resilient. you have strong economic data post-brexit that will fade. be a bigoing to headwind. francine: you are expecting a large correction. for the global audience, the companies thats are much more dependent on domestic consumption. >> the ftse 100 has bp. 10% correction is something for that. it is easily 10% over the next 12 months. you're getting much better higher growth markets trading in the teens. francine: what does this mean
for the pound? is there a scenario where you see intervention coming in? >> god no. yesterday, they made a good move. economistsgo 70% of were calling for a banking cut. that only changed a few days ago. they have much more neutral medication than it was a few months ago. -- munication that was a few months -- communication that was a few months ago. policy. trying to ease by fx intervention tightening policy, it does not work. tom: we're going to continue. the jobs report at 8:30. our usual conversation with william gross at janus capital. on will look at that
♪ francine: this is "bloomberg surveillance." i am francine lacqua in london. tom keene in new york. let's get to the bloomberg business flash. airwaysarent of british has cut their long-term earnings outlook. they cut capacity and spending plans. the drop of the pound has hurt their revenue. airliner.own irish gopro plunged in premarket trading. they expect a lousy holiday
season and lowered their forecast for holiday sales. they missed work order estimates -- third quarter estimates. that is your business flash. tom: thank you so much. back-and-forth in the last few days, senior executive editor for government in washington. he joins us now. an extra man close to -- mary close to an election -- an extraordinary close to an election. they were talking about an exhausted election. >> they are on adrenaline. busyhave an unbelievably schedule over the next four days. they are just going to sprint to the end. be: mr. trump has learned to a politician. his supporters have said that he is a politician and training. is he closing out the election
like he is supposed to do, or is he flailing around? >> he has actually shown unbelievable discipline over the last two weeks ever since the e-mail controversy that the fbi dropped on us a week ago. he has stayed on message. he has just been up hillary .linton on this issue of tom: which state matters? >> for me, it is florida. all of the early voting. everything suggests that florida is going to be an unbelievably tight race. we just hope will not have another 2000 where we wake up wednesday and do not know who is president. francine: do the next three days really matter? i know they are campaigning, but are they decisive? >> we will find out on
wednesday. if it is as close as the polls suggest, these days do matter. what i'm looking for are any bombshells over the weekend. at all theooking papers and looking to see if anybody has a bombshell they want to drop on this election. francine: a bombshell of be some kind of scandal or something that comes out. what is the mood of the american consumer? how much does the mood of the american consumer impact the election? or is this something the mainstream media cannot really judge? >> i don't think anyone has shown being particularly adept at tapping into what the american voter is thinking. i think there is a lot of fatigue. a lot of people are very happy that tuesday is upon us. tom: i'm going to bring up the chart earlier. this is unemployed 25 to 54. it is an extraordinary charge.
bring us up-to-date on the angst that senator sanders and donald trump captured. the anger about the man session. notjobs report today does matter to the marginal vote in those key states. profile ofook at the the typical donald trump voter. male whoangry white thinks the economy has left him behind. that is the core of his strength. comes inhe jobs number as expected, 170,000 or thereabouts, it does not matter if you do not have a job. tom: thank you to you and all of our coverage nationally as we go to tuesday. we'll have special coverage through the weekend and into monday and wednesday morning to give you as much perspective as we can. marty shanker in washington. in our next hour, peter navarro will join us. he has been a donald trump economic supporter out of the
the markets seem to think there is still a way out. that is our focus. another focus, germany's second-biggest lender, commerzbank has swung to a loss in the third quarter. is a financial reporter from bloomberg news. he joins us from print for -- frankfurt. great to have you on the air today. comes out with discouraging news after discouraging news. how do you fix this bank? nick: if you listen to management, it is all about cutting 9000 jobs. then it has turned into a digital bank. moving away from paper and copy transactions to online. that is the way forward they see. they are looking for more revenue through consumer
finance. this comes with consumer risk and the risk of bad business. where are they going to go? francine: do we need a change in management? will the people in charge at the moment, will they do what is needed? nick: we have had a change of management this year from the head of the consumer banking division who has been made ceo. some changes in the management team around him. they have laid out their vision. it is a question of whether those visions are realized. earlier,ere talking you absolutely nailed the idea that nobody is living negative rates like commerzbank. we were talking to academics. they are all loving the theory of negative rates. explain to our global audience
why commerzbank is getting crushed by negative rates that go back to years on the two-year german. ck: it is the negative rates of the ecb that have really hurt them. they have a lot of consumer deposits in consumer banking and retail banking. they have corporate clients that are holding cash at the bank. they don't want to hold this cash. they now have to pay for it when they bring that money over to the ecb. they have been telling corporate clients come you cannot deposit cash with us or we will charge you for it. tom: how long do they go? i don't need an idea of if they can get through november or december, can they get to june of next year given sustained negative rates and this experiment? nick: on a gross basis, they
have lost revenue compared to the year. net020, it goes down to a 100 million this year. the pain will continue. all of the mitigating to stop it. francine: thank you. when you look at the banks, they are under so much pressure. why still invest in them? patrick: i don't think you should be investing in the german banks. their profitability and business model is not working. a catalyst may be a consolidator. francine: what needs to happen for them to consolidate? patrick: you need someone to have an interest to buy these for r.o.e. investment businesses. they are trading at one half to two times book value. if you can put in a nice capital
ratio and pick up assets, and you do see the end of negative interest rates coming, you can have a quick turnaround. this is a possibility, not our base case. francine: a possibility. thank is a much. patrick armstrong there. jordan rochester with us. later today, we get reactions later today after the jobs report. that conversation is later at 11:00 a.m. in new york. we are watching stocks. tom keene is talking to bill gross later today. this is bloomberg. ♪
i've spent my life planting a size-six, non-slip shoe into that door. on this side, i want my customers to relax and enjoy themselves. but these days it's phones before forks. they want wifi out here. but behind that door, i need a private connection for my business. wifi pro from comcast business. public wifi for your customers. private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business. ♪ need to let you know what we are doing today after the jobs report. william gross. before that, we will talk about these linkages on finance
investment before the election on tuesday. and we will go beyond that. what do we need to do in november and into 2017. we will do that later today. right now. your first word has. >> four days to go before the november election. both candidates campaigning in the battleground states. andld trump's temperament comments about women and minorities make him unfit to be president. nationwide polls suggest a race that is tightening, but donald winning appears to be harder. according to bloomberg politics, donald trump is showing strength in iowa and ohio. democrats and republicans in florida have cast ballots in nearly even proportion.
u.s. prosecutors have taken and at -- u.s. drugmakers. according to people familiar with the matter, it began about two years ago and involves more than one dozen companies. some criminal charges could be filed by the end of the year. thousands of people have been fleeing the city of muscle. -- mosul. --qi forces have gained global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you so much. poised for its first gain since november. patrick armstrong is the chief investment officer.
bring me over to my bloomberg terminal. this is the week in terms of safe haven. is -- they move in tandem. if you are the swiss franc, you have no say whatsoever. >> that is always the case. with the election, most people will wake up seeing things a little bit lower. we might have another surprise like we did last week. that could be more strengthening in gold and seeing dollar-yen lower. investment portfolio manager would reduce positions into the election. if you're going to have any protection, it will be in the safe havens. depending on the outcome wednesday morning, it either points to yen strength or we go to yen weakness.
weakness, wee yen have it 2% to 3% move on a clinton victory. weekend --ld weaken. a donald trump victory would be different. the markets are inherently nonlinear. so could be more. tom: i have not shown this chart in ages. charts the kuroda failure with abe. this was after that seismic boj meeting in february. then we go. have moved along here. what is the call on this? is it weaker yen like this? or could we get more strength to upset kuroda and abe?
>> assuming a clinton victory, we are talking higher. i would not be surprised if we reach 110 by dint of the year. in terms of the fed, the market will present a strong conviction for december. i find it interesting that today's payroll report, we are waiting for the election to be out of the way. the election is the most important risk factor right now. tom: i have no idea what a damp squid is. >> you have to be british. francine: really? tom: get the maroon carpet. help me right here with how all this affects talk folder over to our viewers. you just assume volatility? you assume volatility. you do not have to make a big decision over the next four
days. you are better off making your currency decisions based on the election. i'm not sure we will know on wednesday morning that this is an uncontested presidential election. that may drag on. we expect the federal hike. i think that is the driver of dollar strength for the next year as ecb eases quantitative easing. the bank of japan will probably try to weaken their currency. i don't think you need to put all of your investments in until you know the outcome of the election. francine: i'm going to help you out with your next crossword, damp squid an event that is much less impressive than forecast. is there a chance this will be what the u.s. election will be? if there is a donald trump win will we have overreaction? >> i think you will get a very
big move for the first few days, but the impact will probably be he is cutting taxes and infrastructure, and he will be pro-big business. he will probably try to put in a repatriation of capital. all those things could offset the volatility a grace. in the medium-term, positive. i want to make sure we get the same. help me out with sterling. you just mentioned weaker japanese yen. i would say one cent. maybe that is not a brutal move, but that is substantial. do we see a substantial move and sterling from here? septemberom now until , the high court ruling has provided the market with some hope. i think that is also. we will know which direction the government is going in, and that is probably hard brexit.
if you take into account the current accounts deficit, but you also have to think more detailed than that. what drives the current account deficit, which is very hard for brexit to reverse course. we still see sterling following below 120 115 next year. acceleration of current account deficits. tells ushe good data the u.k. consumer is still spending. i cannot buy a british made iphone. francine: we saw apple hike prices. certain economists believe that people are spending now because they are concerned about inflation. i want to buy goods because it is going to be 20% more expensive in five years. i will take the hit now. tom: with complete focus on the u.s. jobs day on tuesday, i thought yesterday was absolutely
remarkable in london. i would suggest it is actually a bigger story for the bloomberg world. i found it absolutely remarkable what we witnessed yesterday. francine: we knew that it would be messy. that brexit was never going to be a linear exit. i would point to two arguments. there is a lot of media that are now saying the courts may stop brexit. hardenit may also theresa may's position. this is one win. then it is politics. you cannot say one win and brexit does not happen. tom: jordan, i'm not going to ask you. in the timeoutu chair and they send you back to tokyo. patrick, do you believe london will prosper under the hard brexit that mr. rochester just
mentioned? patrick: absolutely not. it is negative for the u.k. economy. it is other factors that people voted for brexit four. it has nothing to do with sound economic principle. tom: absolutely fascinating. i wonder where we are going with this and the ramifications. update att a real some point on what we witnessed yesterday and an interpretation of it. francine: it was extremely important that the prime minister stuck to the timetable of march. the more complicated against the more this good drag on and the more uncertainty. tom: francine is in new york next week. then we will go to london to keep this story moving and talk to as many smart people as we can. michael mckee is in mexico city. he is with one of the most interesting people within our federal reserve system. michael mckee with robert kaplan
♪ francine: this is "bloomberg surveillance." i'm francine lacqua in london. tom keene in new york. we could have gone either way. we could have done the u.s. elections or something on jobs, but i picked out something on brexit. this is our column. they say as a matter of them accredit propriety, suffers first of all they talk about legislators doing their job on brexit. they say representative democracy members of parliament are elected to serve the interests of their constituents, not to take direction from narrow majorities. that was simple thinking
is sometimes oversimplified, which is parliament would probably as a whole be against brexit. there was a referendum. the government said we do not need to go to parliament to ask what they think he goes i have a mandate from the people. when you think about it, nothing is ever so clear as that in politics. jordan rochester. patrick armstrong. jordan, the problem is that it depends on the question that parliament gets asked. if the question is as simple as do you expect -- respect the will of the people, if you are an, you cannot go against that. the popular vote, if you translate that to the amount of constituencies, the way politicians are elected, it is more like 61%.
that is because only four regions of the 12 group voted to remain. itself, on the vote the first meeting, there might be some amendments added in. the mps might try to add into it that they want to try to achieve single market access. it is going to be scratched out. it is going to be the biggest possible article 50 trigger you can get. francine: unless it goes the other way and theresa may needs to go to parliament and say hard brexit because that is all i can negotiate. then you are stuck voting for something which is hard brexit, which means those -- no access to single market. jordan: if it goes that way, we cannot rule out a snap election. i think the article 50 vote goes through. but if it does not, it is easy to do another election.
if you look at the numbers, since the brexit vote itself, conservative party will pulling is 3% to 4%. her majority is around 12%. it depends on how you calculate it. goes up to 80 from the numbers we see. she might be tempted to say, you know what, i'm going to throw a snap election on brexit. in that election, it could be on a platform for a soft brexit. but there is no such thing in reality. it is in or out. tom: help me out here from across the transatlantic. piece from fabulous the day after brexit, this is what you get in a 50-50 referendum versus a constitutional vote. you get the editorial. you get one view, the view of the elites and the habs than the united kingdom. and my right that there is a modest level of pushback against
the idea of parliament superseding that vote? jordan: absolutely. the point of this is respecting the vote. to have a second referendum would be a sort of political crisis. what is going to happen is quite simple. irrespective of what happens, brexit is going to happen. , evengh court challenge if there is a vote in parliament, it is going to go through. it is going to be vague. the government does not want any act of parliament to hold them to account to a certain principle at negotiation. francine: is that right? we have had three months that have been crazy in the political world and the u.k. you cannot rule out anything. patrick: i think brexit means brexit as theresa may points out. if you get scotland voting unanimously and the mps in northern ireland, thinking they
can negotiate, market access, you cannot rule out anything. i think brexit is happening. it will be difficult for them not to vote for brexit. if theresa may gets into the position where she is not certain of it going through, she may even call no-confidence in herself to trigger that snap election. while the numbers are sound right now, she has a convincing advantage in the polls, so she probably would take more. that is a scenario open to her. even labour mps have to vote brexit. constituency voter that voted brexit. tom: it has only taken five years to get to the second tuesday of november. if you have a snap election in the united kingdom, when will that occurr
it is not our base case scenario. they can hold it within 17 to 25 days. u.k. elections are typically held in spring or autumn. in u.k. politics, you can never guess what will happen next. it could be anytime. tom: we will continue on. this has been fascinating. it has been a great diversion from the silliness of what is happening in the united states. a jobs report today. another jobs report on december 2. william gross will join us. we will go on radio and tv with william gross. ellen zentner here with us and a little bit from morgan stanley. we are thrilled to have them on. and youtube. this is bloomberg. ♪
boost for retailers in the u.k. sales grew slightly more than 1% in october. it was the first growth since january. they were up almost 12%. the maker of jewelry has shaken up management. but the ceo and cfo of the swiss company will retire next year. eight of the company's directors will step down. there will be new managers to run operations in watchmaking. their forecast profits fell 51%. that is your business flash. richemnot.cking with francine: i wanted to bring you to my terminal. investors have been asking for some kind of shakeup for years. there is a problem with
currency and some of the products, and maybe they felt the structure of it was not. reporting directly to the board and its chairman who has quite a stronghold in this. we will get more on luxury and more on those industries and more on richemont. patrick armstrong is the chief investment officer at -- jordan wells at numeric. patrick, when you look at this chart, when you look at the fact that they are struggling in asia. fx pressure onis top of it, what will this industry,? become?try patrick: you have some headwinds and the chinese consumer is not as growing as much as you hoped
it would. they are looking at a premium of. they probably have a 30% fall in the first six months of the year. they are not cheap. francine: there are a lot of them. patrick: there has been a slow steady stream of consolidation. consolidation is good when you're talking about profit margin. it is hard to improve margins through distribution and cross-selling and things like that. consolidation is already happening in this industry. tom: let's do this on a friday when everybody figures out how to spend their weekend. this is a swiss chard. it is classic from the lower left to the upper right. we would love to live that chart. would you suggest within our l article that luxury is done from of her capacity?
jordan: i would not say that it is done. it is a valuation thing. they are still paying a little bit of legacy from a sweet spot when everything was great. i think moving from a tailwind into a headwind. i don't think -- a few years ago, we saw positions in the first quarter of last year and have not gotten back there. tom: i know it is a little bit esoteric, but it is interesting to see the battle of luxury in new york. i simply does the same battle in london. fewer tourists. this is an industry in major turmoil. francine: five years ago they could charge whatever they wanted, and prices are coming down. quickly. patrick: we are short. it is a very expensive asset class. 2.7 times book value. moving into a higher interest rate environment, you are paying
premium multiples for an environment where there is better growth elsewhere. the u.s. economy is not doing much better than europe, but it is trading at 30% premium multiples. tom: we are thrilled to have you with us today. patrick armstrong and jordan rochester. he will drive forward to job stay. ellen zentner will join us. we will talk about morgan stanley. she has been absolutely outstanding on the delay of chair yellen. bill gross at 8:30. we are thrilled to bring you the former chairman of the present counsel on economic advisers. stay with us. ♪
can the jobs report's way janet yellen -- can be jobs report sway janet yellen? oil continues a quiet erosion in price. call it battleground state weekend. each --idates are in each and every el toro vote. i'm tom keene. with me, francine lacqua in london. it is upon us now. there is this real feeling of let's get this done, four days away. stocks spending some of the pre-votes spell off. we need to look at the turkish lira for another reason. tom: we will do the turkish lira chart and squeeze that in without good guests at this morning. turkey is showing real erosion this morning. here's taylor riggs. taylor: police in turkey have rounded up a number of kurdish
lawmakers in late-night raids. president erdogan is consolidating his power. he first had parliament pass -- korea, the embattled president says she will cooperate with prosecutors investigating a peddling scandal. denied being part of a religious cult. she has admitted sharing government documents with a cold friend who has now been arrested. fromirst wave of refugees basel. iraqi forces have gained a foothold in basel's eastern -- in mosul's eastern outskirts. hillary clinton holds a narrow
lead over donald trump and now donald trump has the state of new hampshire in play. for weeks, hillary clinton led by double digits in that state. she's either title trailing there. she is forced to spend more advertising money in michigan, colorado, virginia, at new mexico. 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. francine? tom? tom: right to the data right now. quiet this morning. i want to get to ellen zentner of morgan stanley. oil, this is a grind down. next screen, if you would. all this changes at 31 this morning. the vix truly elevated, well above 20 this morning. that is an extraordinary move in the vix. dollar-peso, 19.24. cannot figure out what to do on this friday before an election. francine: i was looking at
global stocks. the selloff is being extended. bit subdued,little but crude oil is also holding at a london-month low. investors are trying to hedge their bets and stay safe. brexit is only three months away, and it seems they do not want to repeat the pattern. you can see gold, 1300. pound, 1.24. i cannot tell you how it is getting ugly. people are choosing the judge -- accusing the judges of being political after the court decision. let parliament do its job. that is what it is therefore. tom: thank you. over to the bloomberg, we begin our coverage. how about that man session -- 25 to 54. you cannot see it at the top of the screen. here is the nirvana of american jobs report.
workforce, well under 2% unemployment. here is that structural shift with more women coming into the workforce. here is the low unemployment in the 90's, and here is that huge ssion as well and that recovery. that is the beginning of the discussion with ellen zentner of morgan stanley. she has made an exceptionally prescient call. chair yellen delays because of the slack two years ago. is there still slack in the american labor economy echo ellen: yes. when we dig down deep and look at just the brought unemployment rate alone, there are still sectors that are unemployed. underemployed. you provided combination to try just the labor market further in order to get everyone back and employed. the problem is that we are
creating enough jobs, we are creating a lot of jobs, and it is impacting people in the labor force, but they are coming back as unemployed. tom: you are ted white -- your ted wiseman does a great job. a stunningly cautious view on the future of this nation. it comes down to not only jobs and what we talk about every day, it is about the quality of american jobs. what is the quality of the 200,000 jobs? ellen: productivity has been in a secular decline since the 1970's as we moved further away from a manufacturing economy to led -- theysector are not cancers in the way that manufacturing jobs are. what does that mean? falling over been time, which means real wages have been falling over time. productivity tends to be the
single best indicator of the standard of living in the economy. for us, we have been laser focused on the productivity problem. we have been given a very bleak .iew of it when janet yellen talks about persistent headwinds, that the federal fund rates should rise, those headwinds have not faded. it looks worse than year than it has over the past five and a half years. that is why we have taken the stance that the fed should not hike the rate further come even though they will. toncine: we brought it back about the 1980's. this is what we saw in the last couple of years. is this not the new normal? maybe we are just doing things differently. ellen: absolutely. when i sit down with clients, miss measurement is the --
mismeasurement is -- it is a very weak argument that it is just mismeasurement. as you suggest, francine, there is a shift in that. how do you measure the amenity value? francine: is it just the fact that the world has changed? uber, airbnb. it is measured differently. this is something we have been very focused on. there is an amenity value on this, a nicety, a nonmarket measure of value that we get from a lot of the technological advances today. how can we measure in gdp terms? the answer is, we cannot really. dollars that a lot of shows, helpto apps
me enjoy my free time. so productivity is going to stay lower, maybe not as visibly low as it is right now in the u.s., but it is going to stay lower. a lot of that is because my life is better. i can enjoy more free time. it is not a productivity enhancer and it does not translate into gdp in the way it has in the past. francine: look at how tom is productive. it isot know if considered productive because you are doing two things at the same time. tom: i was reading about the chicago cubs in the "new yorker" magazine. and now a spectacular new iphone. am i being productive, or is this just a bunch of useless stuff with the american economy? is,n: the question for us were you productive before and now you're not productive? at home lastld
night, "you are not productive." francine, pick it up. francine: talk about the linkage between central banks putting so much money out there, ceo's not investing. does that have an impact on productivity? ellen: what we have seen is what will i would call -- what i would call the net productivity that has fallen off the map. you cannot blame them. i would take advantage of that as well. it is not going into the traditional capital deepening. we have seen productivity margins fall. tutees what everybody wants to know from ellen zentner, which is what are we doing with the fed. 2018, these dots are going to come down. will they come down with a vengeance, or will we wait for the fed to catch up with ellen zentner and the market? ellen: we have been waiting for the fed to catch up for quite some time. you can see the secular
stagnation argument quite a while back. it has been painstakingly slow for the fed to come around to that realization. some of the fact is that the fed is heavily weighted toward academics, and there is groupthink going on. tell you that right now the markets are not focused on what the fed shows for 2018 and 2019. who believes that, who knows what will happen that far out? nobody believes that ramp up in rate hikes later on because the fed is going through this now. this week, the same idea -- ellen zentner will continue with us, and we will speak about the federal reserve system. we will do that with bill gross as well, after a: 30, after the jobs report. a conversation with mr. gross on the fed, on jobs. words ons also with your financial repression.
francine: this is "bloomberg surveillance." we are looking at capitol hill in washington, d.c. we will get to marty schencker, who has our election coverage. focusing onare global stocks. selloff a expected on friday. now let's get some corporate news, tom, with the "bloomberg business flash" with taylor riggs. taylor: shares of gopro plunged in premarket trading. the company says it expects lowered forecasts for full-year sales.
it also missed estimates for revenue. productions it on problems, a new camera, and a highly anticipated drone. -- maker of cartier jewelry the ceo and the cfo of the swiss company will retire next year. a company directors will step down, and there will be new managers to run operations. richemont's first-half profit fell 51%. tom: that richemont announcement, you will see a lot more of that to come. our luxury is to speak with our senior executive editor, marty schencker. ellen zentner is with us as well. marty, we spoke earlier of the challenges of getting to the weekend and the vote. and our reporters learned about potential turnout in the last day? marty: one of the things we are
looking at his ohio. hillary clinton is going to be , and someeland today of the indications are not great for her. the polls say it is a tight race. as you know, ohio has called the election for the past five election cycles. what happens in ohio is critically important. ago,you recall four years i think it was 11:00, 12:00 at night, and everybody got wrong the turnout for the president. she needs to galvanize the same group. how does she do it? marty: that is indeed why surrogates like president obama and michelle obama are out trying to get the black vote. there are indications that that block is not coming out nearly as strongly as it did for the president, and they need to get out and vote. she has to make up ground with that group. francine: talk to me about florida. this is, again, a fiscal thing.
marty: it is. all the indications are that it is a dead heat. there are possibilities that in new hampshire and north carolina, hillary clinton can take those early. florida may not matter as much as it has, but if donald trump and some say he could even win in michigan and wisconsin, it could be a real nailbiter. it really could. francine: the markets are obviously very nervous. what should they look out for in the coming days? how many polls are we going to get from now until tuesday? going to get a lot of them, including some from us at bloomberg news. you have to look at movement as a definitive reading. there is no question that donald trump is moving in the positive direction. the question is, is there enough time for him to make up the ground that he has to make up to become the president? ,om: "the new yorker" yesterday
with a beautiful treatment -- mr. trump changing his tune in the philadelphia suburbs. as tobsolutely remarkable how he has to adapt and adjust to establishment republicans. will that be successful? marty: there are indications that "establishment republicans" are coming back home. he is trying to make up ground among educated women in the suburban areas and in cities. there really is not a path for him to win the election if he does not do better. tom: thank you so much, marty schencker, from washington. andt forget, tonight through the weekend, important coverage on monday and tuesday. mark halperin and john heilemann , "with all due respect." they will make you smarter toward tuesday. this is bloomberg. ♪
tom: shows you where this bloomberg surveillance -- a busy friday. we killed it on brexit in the last hour. this hour we look to the u.s. and the economy. and aout kathleen hays conversation with paul krugman. here is paul krugman on chair yellen and the fed. paul: don't raise rates this year or next year. do not fire until you see the
whites of their eyes. tom: this goes down to doing bush -- to dornbusch, the late rudy dornbusch. we are not even back to where we need to be, let alone to the overture that professor krugman wants. ellen: the fed has been implicitly showing us that they would like an overshoot of the economy, that that will help them get back to a 2% goal. in their own forecast tables, they expect the economy to read accelerate next year and 32018, above the economy's potential. the unemployment rate following below full employment. for that, which would show an indication that they want to run the economy hot, for that they hope to get back to a 2% core pce inflation growth rate by 2018. tom: i have a choice to make. we could talk for four hours of
this and it would fill up every minute. ellen: and no one would watch. well, i would watch. the bottom line here, francine, is the bigger picture. professor krugman and others have always looked at the macroeconomics combined of one america. you have had the courage in your research to slice and dice everything apart, and i would suggest it is because we are truly two economic americas, aren't we? ellen: exactly. before the financial crisis, you could look at everything in the aggregate. corporate took out debt, they hired, the consumer experience was the same for everyone. that was the extension of consumer debt. after a financial crisis when everything is in array, we cannot look at anything in the aggregate anymore. inflation rate going up? not for everybody.
people are coming back in the labor market but not getting jobs. consumer experience extremely different, once you start to open up the hood and look under the hood at what is going on. a uniquely different experience that upper income groups have had versus lower income groups. when we look at investment by company, all those billions of dollars going into r&d. it is an extremely different face today of where those dollars are going compared to prior. tom: francine, jump in here, please. francine: i have a simple chart, but it brings it back to 1986, and it shows payrolls in white. and then a change for gdp. what does this picture tell us? -- the u.s. is so much stronger than any other country out there. ellen: productivity has been nearly if notss
all major nations. so in the u.s., that productivity decline does not look quite as bad as others. what does look uniquely bad here is labor force participation. which looks much worse in the u.s. than other countries. we have had this massive divergence between the level of gdp and the economy, and the amount of jobs that we are creating. we are creating low-quality, low-paying jobs, but more and more of them. that has changed the base of the labor market. it has changed the base of how that relates to gdp in our economy. it is a unique environment that we find ourselves in. francine: what is the optimal level for dollars? this goes back to how many jobs are created depending on gel or -- depending on dollar strength. ellen: i look at the pace of appreciation of the dollar. just because the dollar is
rising and stronger, that is traditionally indicative of a stronger economy, or should be. what we have had is this massive adjustment in the dollar, which has been very difficult to digest in the u.s., and we are still seeing the lagged impact of that because we are just at a different place in our business cycle. we are later in the business cycle. the fed is on a tightening bias. other global economies are not as late phase in their business cycle, and the central banks are still easing. that creates a big divergence. tom: what we will do is talk about our economic politics. , in support of republican politics. ♪
the presidential election. both candidates campaigned in north carolina. hillary clinton took the stage with her primary rival bernie sanders. meanwhile, trump appeared with veterans and said he could not imagine clinton as commander in chief. nationwide polls show the race tightening. trump's winning enough electoral votes appears to be harder. --riminal investigation into according to people familiar with the matter, a probe began two years ago involving more than one dozen companies. some criminal charges could be filed by the end of the year. the chicago cubs were not the only winners in the world series. big, too. network won 40 million people watched game 7 on fox, the most-watched world series game in 25 years. the series was most-watched since 2004.
global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. this is bloomberg. francine? tom? tom: ellen, was all of morgan was allsete deprived -- of morgan stanley sleep deprived yesterday? ellen: just about, including myself. mr. angel with wisdom on the chicago cubs. irvine,varro of you cal has been in support of trump economics. he has been a piñata for the conventional economics business. 378 economists coming out earlier this week and saying maybe trump economics will not work. we would be rude if we did not have peter navarro to defend trump economics. what does he get right? the 300thdefend
letter this month. jobs.f low-paying that is what trump is trying to figure out. we watched eight years of extraordinary performance, where the first president in modern history has not had a 3% growth rate. 2001 at 3.5 1947 to annual. 2002.t off a cliff in so what is the problem? it is a structural problem, not a cyclical problem. it is not something you can solve with keynesian economics. you have to deal with it with tax, trade, and economic policy reform. you talked about productivity. there is a correlation in the wrong way between what we are seeing as what used to be nonresidential fixed investment here, robust in america, and what has become an exodus of external foreign direct investment.
what we see structurally in our economy is an imbalance globally. we have a trade deficit here of $766 billion, which probably shaves close to a point of gdp off here. that is mostly with five countries. tom: i could show you eight charts. i give mr. trump great credit within the second and third debate. i do not know what my chart of the year is. this is real gdp, back in mourning in america. here is where we are now. trump was talking about 1% real gdp, and we have come down 50% plus in our real gdp number. the tension in the american system now. fixes, secretary clinton talks about fair trade. what is fair trade for mr. trump? she talks about it, but
she has screwed up on that. what happened in 2001, we went down the cliff. bill clinton shoehorned china into the world trade organization, and we had billions of dollars of subsidized funds flowing into our markets. tom: i want to know what donald international vision is. i cannot figure it out. peter: it is very simple. we want to eliminate our trade deficit. we are going to attack this was primarily five different countries -- mexico, china, germany, japan, south korea. with china, it is things like the -- it is a lot of cheating. the thing here is to operate at the margin. francine: i hate to jump in. peter: let me just finish. it is a two-prong strategy. i think we all agree that if you
-- francine: let's just take a step back and focus on china. you are saying china, you are cheating. what is china going to do? peter: that is pretty simplistic. what we have in the white house , weak iner who is weak foreign policy and economic policy. china has its way with the united states. china is the biggest cheater. a steal $300 billion worth of intellectual property from us each year. we are the biggest market in the world. they are either going to trade with us fairly, or there will be consequences. peopleple of ohio, the -- it is like in england where people are saying, we are not going to be cheated anymore and we are not going to have rising productivity. i want tohold on, take it point by point. so you go to china and say you are cheating, they say no, you're not -- no, we are not.
economicnt to alienate ties with huge, huge countries that have huge global growth? peter: your premise is a cartoon. going to china and saying you are cheating -- that is not how diplomacy works. francine: that is what you are saying. i am telling you what you want to do. do not enter into trade deals illicit increases gdp. many give you an example of how not to do it, tom. this gets to the heart of the matter. in 2012, secretary clinton pushed the south korean deal on the assumption that it would do the following -- increase 70,000 jobs, and the trade deficit neutral. what did we get from that? lost, a5,000 jobs doubling of the trade deficit, and 75% of the damage in the auto industry. because that is a bad trade deal. donald trump would not cut that
bad trade deal. -- no one can tell me that was good for the american or the global economy. francine: i feel like i need to step in and it does not matter whether i am in england or not, in the u.s.ou are and i am in england, this is what a trade deal is paired nobody wants to sign a bad trade deal. peter: but we have. that is the point. francine: but it is about coming together. peter: coming together? of course. francine: you cannot say this is what i want, and if i do not get that -- peter: can you tell me the south korean deal was good for america? francine: i will tell you this -- is, of coursewer it was not good for america. we got screwed in that deal. donald trump will not allow us to be taken advantage of anymore. it is smart, tough, trade negotiations. we understand that we need global prosperity, that the supply chains all over the world
, but we cannot be the piñata for every other country in the world. germany runs a big surplus against us. japan runs a big surplus against us. china runs a big surplus. mexico, south korea. there is no reason that this country should be taken advantage of. francine: who do you see as your allies? britain, iting with see everyone of those countries as allies. china is a strategic rival. trump is only interested in global prosperity. we are out of whack. we cannot have a world where huge tradecause imbalances. tom: i want to bring in press of -- i want to bring in professor navarro with where we are on global trade. ellen zentner with us from morgan stanley. i know you do not want to get in
the middle of a political debate with trump and clinton. what help us out with this chart, which is to the extent what secretary clinton and mr. trump are both talking about. the collapse of world trade and our place in it. ellen, the moving average here, the simple moving average, takes us back to a world trade growth rate like the 1880's. help us here with a natural urge to a mercantile america, of going back to not a zero-sum america, a zero sum but a tendency toward that. is that a risk? ellen: i think it is a global risk. i feel like globalization is going to halt and possibly reverse course over the next four to eight years.
i think either candidate is probably not going to move the needle forward in terms of increasing our openness, open borders. the problem here is that we need stronger global demand. the global trade overall has collapsed since the financial crisis. tom: i want to know with a trump victory on tuesday, how mr. trump suggests this nation would be represented at the united nations. if we need to go in and do global trade, with the imf and these global institutions, donald is not a globalist, is he? how is he going to represent with the institutions we talk about every day. peter: i would prefer you to two documents. one outline what is going to happen on day one, what happened -- what is going to happen in the first hundred days. onbur ross and i did a piece
policy on the hundred days, the contract with the american voter. in terms of trade, the white strongas a surprisingly power to move the trade agenda along. the important thing with the globalism is that structurally, if we have these economies out of whack, we wind up in what we are now, which is slow growth central and a bunch of banks printing a bunch of money, and we have -- let me just say this, because it is the chessboard. we have this bond market which cannot earn returns, so that money is going over -- tom: we are over time, but i want to get this in, it is so critical. with president trump, do we have a more mercantilist, inward-looking america? peter: absolutely not. mr. trump is a free trader. the idea is to have free trade that works for the world. that is an important point.
the foot of rough on the newspaper there. let me go to the "morning must-read." this is absolutely must-read for anyone on wall street. the high court, the wicked ones found at the -- noah feldman. tom: simon kennedy is our expert. simon, discuss. the court did go to some great length yesterday to say they would not discuss the merits or demerits of the brexit vote. the simple legality of whether the prime minister alone can invoke article 50, which starts the talks. it has to go to parliament. francine: a we do not know which
way it will go. anything could happen at this point, are the markets overanalyzing? ison: the only certainty uncertainty, kind of the brexit lesson since june 23 when the referendum was held. where we go now is it is december, and unlike the u.s., which has been around 200 years, the supreme court here is only 70 years old. all 11 judges are likely to sit on it. -- they couldt knock it back. francine: if we are away from that, to have a vote in parliament today, which way would it go? simon: i think a great view of most is that article 50 would be passed. this is not really an issue of derailing brexit. is not even holding back from the invoking of article 50. what the parliamentarians will try to do -- and the reason is the people in parliament
are representative of the people in the country. if you break down the country by 1%, 62%encies, system back brexit. so if a block brexit, they have to go back to the people and explain that. the labour party is saying they respect the referendum. they are going to try to use it as a vehicle for controlling what theresa may is able to do with her negotiations and the kind of brexit that she wants. francine: simon kennedy, thank you. i like that, tom. the only certainty we have in brexit is that we have uncertainty. we get reaction later on from mohamed el-erian. the jobslso talk about report, productivity, and participation. that conversation at 11:00 a.m.
now, after the big trump move in the last couple of days. candor weaker -- canada weaker off of u.s. oil prices. francine? up shortly, itg is "bloomberg daybreak america's," with david westin, -- "bloomberg daybreak: americas, with david westin, alix steel, and jonathan ferro. alix: it is the ninth straight day, the longest losing streak since 1980. before the critical jobs numbers, we will be digging in with an official trump surrogate. he runs faster like hardee's, crawl jr.. -- carl's jr.. we will talk with alan krueger, princeton university economics professor. and roger altman, evercore founder. lots today into there. and what the jobs number will mean coming into tuesday.
tom, you are looking at bill gross. steel, thank you so much. mr. gross, and we will do that on bloomberg radio. now joining us, carl riccadonna, who has been quite good with bloomberg economics and bloomberg intelligence. i want to go right to the chart. this is what matters to carl riccadonna. what is 100,000 jobs that -- this signifying the line right here is a big deal. why? carl: the l a line is where we have been over the last 12 months. yellow line is where we have been over the last 12 months. the unemployment rate is just steady. we are slowing, below 100,000 jobs each month. we are probably starting to see deterioration in the labor market. 100,000 is the bare minimum to keep the fed on its glide path. zentner's colleague
ted wiseman did a beautiful job yesterday. buried within this are the terminal rates per both of you spoke about this. does carl riccadonna's 100,000 get you to the morgan stanley's of 2% growth rates? ellen: one, we do not need to create as many jobs to keep the unemployment rate low. tom: tell that to the politicians. ellen: exactly. we had plenty of that discussion already this morning. , trend jobwth growth, you can see the chart that carl put up there, showing that good job growth has been below that 12 month average of 200,000. that is ok. that is normal. we are moving later in the business cycle where the unemployment rate is already low. we do not need to create as many jobs to keep it low. but there is a break-even level. we need to see it stay above that later this morning in the report.
as long as it stays above that break-even level, the fed would be heartened that we see progress in the labor market. we do not have that high of a bar for the data to leap over in order to get to a december hike. carl: i agree with that. we should see some moderation in the pace of hiring, but the real question is going to be, was this simply a lagged reaction to the slowdown in the economy that we saw in the first half of the year, or is this evidence of a maturing cycle? it is really just a legacy of the first half of the year -- then we have to wonder about these questions janet yellen has been posing, that potentially we longer, aster for things start to get tight. francine: i want to ask about the u.s. election. let's say the u.s. jobs growth is good enough for a december rate hike. i know the fed is apolitical, but actually, what happens on
tuesday, and the fallout on wednesday, will matter hugely to the fed when they decide in december. carl: absolutely. the data is good enough to satisfy the fed -- and i do not see a jobs report today, a reasonable scenario for a jobs report that it sways voters' minds here. we are moving in the right direction. if we look at how economic factors influence elections, the unemployment rate is a key metric and it has been in a downtrend. when the unemployment rate is in a downtrend, it favors companies. you are at the white house this week. the idea of a fed that will delay and delay. do you look at ellen zentner's rate hike in december as a vector to higher rates, or is it a one and done rate hike? carl: i would not say one and done. this has been a glacial vote. tom: which has been the ellen zentner call. ellen: that is a great word.
carl: i could see it at a slightly faster pace next year. we are a group where we are starting to generate some wage pressure. maybe not by the end of the year , but that will force the fed to move faster. tom: thank you so much to both of you. we will continue on radio as we go to a: 30 this morning. ranting, and extraordinary moment for america. we begin the jobs report at 8:30. bill gross will be with us. alan krueger is scheduled to discuss as well. really looking forward to talking with mr. gross, particularly about what this actually means for investors. stay with us. worldwide, through the morning, this is bloomberg. ♪
the markets in focus, an eight-day losing streak on the s&p 500. switch up the board. the bond market, treasuries weak. yields down by two basis points to 179. a cable rate at 1.2475. alix: the october jobs report out in just 90 minutes, dropping four days before the election. economists are forecasting jobs to be created last month. 8:30 a.m., that data drops. and heading into the final weekend of the presidential race, it may all come down to just a few states. according to analysis from bloomberg politics, donald trump is showing strength in ohio and iowa, while hillary clinton's advantage in early voting looks stronger in north carolina and nevada. and that election uncertainty playing out today in markets. s&p 500 having its longest losing streak since the financial crisis in 2008, while