Stuart Frankel's Guilfoyle Expects The ECB To Hold Still(Audio)

earnings helping lift stocks today. We've got the Dow Industrials up sixty two points to eighteen thousand, six hundred twenty, a gain of three tenths of one percent. As stack up sixty a gain there of one point two percent. Ten Yere down eight thirty seconds, yield one point five eight percent, Gold falling fourteen fifty the ounce the thirteen seventeen, a drop there of one point one percent. Crude oil

back below forty five dollars of barrel ninety. Right now on West Texas Intermediate it is up twenty six cents, up by six cents of one percent. I'm Charlie Pellet, a Bloomberg Business flash. Bloomberg Jakime Stock, the Fed in focus, the interest rates start to row for where the economy is going. The question is how much higher ship it be. FED has increased to tass Yes, and in doing so it has increased its liability. Keeping interest rates at zero for a long time is not going to cause inflation

to go up. It's very controversial. I think what we need to do is find a way for the FED to integrate its policy and think more about its impact on the world. The Fed in focus on Bloomberg Radio. Godzilla, Godzilla versus Gegon, Godzilla versus Destroy Your Yah. Stephen Gilfoyle, chief market economist of Stuart Frankel, joins us now. He can be followed on Twitter at Sarge nine eight six. Stephen gilfoil I started off with a little Godzilla courtesy

of your most recent note. I thought you were going to tell me that the central banks around the world where god Zilla and those other large characters fighting it out, and that they would leave the world with a trail of destruction. Tell us a little bit more, Oh, I think that that's certainly the case. You're you're probably going to see that my god Zilla reference this morning that THO was having to do with this Pokemon in Japan. But but yes, I think I think we'll stay with Japan,

the Bank of Japan with their with that program. We're expecting them to go forward with next week, which really amounts to either perpetual bonds or helicopter money however you want to explain it is UH along with earnings. Part of this goose move we're seeing in the markets here with the record highs for the sp doubt for several days running now as Japan continues at stimulus program, A lot of that money is supposedly earmarked for infrastructure projects.

Those are projects that won't necessarily show up on any balance sheet or in any budget item. What's that going to do to the country's debt balance? Well, you see when they spend fiscally, what they're gonna do. I mean, even if they're spending it on infrastructure, it's going to go towards things like like supplies is going to go

towards UH, towards salaries, things like that. The money will be in the general economy, A lot of it will be They're going to erase it from the balance sheet of their central bank and from the liability side of their treasury. So it's going to be a strictly an increase in the monetary base with the money supply. So the idea here is that they can maybe wash away some of their debt by by getting some inflation. And you know, I don't think it's really a good idea.

I don't. I'm not certainly on board with anything like this, but it seems to be the way that ben Verniky has led them. Is it a bad idea? Will it create unintended consequences that may be worse than the original problem? It may, I mean, we all know what happened in Germany in the nineteen twenties. I'm not saying that's automatically gonna happen. They've been trying to get inflation over there

for decades now and it hasn't worked. I myself come from the Austrian school of economics, so I don't really like these extra wild attempts at at goosing things. But maybe you shouldn't. But they But in Japan's case, their economy has been in a death spiral for some time and they've tried almost everything else. So I do understand the desperation, all right. So the death spiral that works with a Godzilla character tell us about the European Central Bank.

What movie would they would they inhabit if indeed they were making a film or a documentary about the Mario Draggy and the European Central Bank. I don't know if I can think of a movie for you, But they're going to They're probably gonna hold still tomorrow. I mean, they're trying pretty desperate measures themselves. We all know they've kept interest rates very low. They're buying everything from corporate bonds to government bonds to pretty much everything accept goods

and services, so they've been very aggressive themselves. I think they have to give it a little more time. It's their first meeting since the brexit. We I think it's playing to see for orl right now that the brexits hurting Europe more than it's going to hurt the UK UH and I think they're probably gonna need another meeting or two to see what they need to do. I don't think they, I think will be imprudent of them to get more aggressive with their monetary policy at this time.

I don't know whether you've been following the details of what's been going going on by at the European Union's top court, but they denied Italy's request that taxpayers, not bondholders, be on the hook to a bail out to the banking industry. What are your views on the Italian economy and the banking industry there, Well, they're going to they're going to have to allow Italy or maybe the the Eurostone itself to bail out the Italian banks. If not.

A lot of our premise here for the move higher, which I know I just blamed a few other things, but also part of the part of the move here high was because that the worry that we saw a week or two ago over of a Deutsche banks exposure and and the Italian banks themselves, really it seemed to go away a little bit. It seemed to be we seem to be a little bit at ease over it, because we had believed that the Italians would be able to monetize their banks, capitalize their banks if they needed

to once those banks fled dry. If they don't let them do that, then it's going to be a different ballgame. Well, Luftanza has just cut its forecast for earnings before interesting taxes for twenties sixteen. A bit more on Europe. Is there anything that you believe that the European Central Bank can do without the support of the politicians to some way figure out how to get the economies and the banks in Europe to start growing again, you know right now.

But they're basically paying the banks to len right And is it working? Not really. You saw the zoo numbers out of Germany. You say, there's e W numbers. I mean, so, so things seem to be going the wrong way there. I'm I am concerned over Europe, but I my first concern is here in the US, and I you know, if we can it's going to hurt us in the long run, if we're being the cleanest shirt and the dirty hamper analogy. But I mean it's it's ready to hurt us in trade because our dollar is going to

become too strong. It's all, what's the Dixie over ninety seven right now? Our yields are are low enough already. We don't need them going any lower. And I think it's just it's going to hurt all of our multinationals in the long run. Not that valuations can't stretch, because we all know that fundamentals aren't what they used to be. In stock valuations are not they are not what they used to be either. I like them. Maybe we can use that as your quote of the day. Fundamentals aren't

what they used to be. Well, maybe maybe they are what they used to be. But how we how we attach ourselves to them is the interpretation isn't what it used to be? Well, thanks very much, Stephen. Sergeant gilfoil He is the chief market economist for Stuart Franklin. He's joining us from the floor of the New York Stock Exchange. He can be followed on Twitter at serge nine eight six. You're listening to taking Stock. I'm pim Fox and this

is Bloomberg coming up on taking Stock. What are the expectations for the next f O m C meeting next week. We'll find out more details when we speak to Marvin Lowe of b n Y Melan