Growth is Not Quite as Stable, Morse Says Description:

and of course commodities for the bank. Ed Morris expect the unexpected, or maybe the shocks come away from the certitude of looking at Syria or that I'm looking at a dollar Turkish lira of four seventeen, which screams to me instabilities. What's the instability in the region you're focused on? Uh? Is you use all of the research capabilities of your bank. I don't know where to start on this. Uh there's uh, you know, putting aside what's happening with the Turkish lyra.

These are all economies in the Gulf that are pegged to the US dollar. They've benefited remarkably by uh what's happened with the price of oil? Um the pressure on them too. Deepegg has gone away. Um uh and um. What's next is really know how these economies going to adjust to this new world of getting out of oil. It screams shuttle diplomacy, except we don't have a Secretary of State to get on the shuttle right not yet, and it remains to be seen whether he's going to

be confirmed by the Senate. What do you make of the price section that we've seen over the last couple of weeks, said, because I'm looking at this risk off move and I'm saying risk off with inverted commas on either side, because treasuries a bit, yes, but yields it down like three bay Sis points and Dolly ends off by about a third of one percent. And I think if you look at the equity market alone, you would think something very vicious has been happening in the market

over the last couple of weeks. But everything house seems to be holding up Cross asset, and I think, Tom, what's been really interesting over the last couple of weeks is that this risk on risk off regime of the last few years has changed. It used to be sal equities by treasuries in a proportional amount and do the same thing with the Japanese yen, and I don't see

that in the same way anymore. What's changed, dead Well, one of the things that's changed we haven't talked about it is a commodity is actually outperformed both equities and bonds in the first quarter. Uh. That's something to keep your eye on, and we can talk a lot about that. Another thing that's changed is the I think there's been an acceleration of risk on risk off. One of the things to worry about is with this risk on risk off have been massive inflows of debt issuance and equity

investments into emerging markets and out of emerging markets. And that's that's also flirted with the notion that growth is not quite as stable as it might be. So when you look at the situation worldwide, do you actually see a firm macro backdrop, because there are some people starting to question that. I imagine I'll speak to many investors today and I'll talk to them about this geopolitical risk store and they will say shore in the short term,

it's it's going to be a sentiment driven story. What this means for markets expects the more volatility, but the fundamentals will re assert them sounds earning season is going to start and a macro backdrop is still firm. Is the macro backdrop still as firm as people say it is, Well, it looks like that's it's fraying at the edges. There are a lot of data points that are coming in that show weakness, that show that the growth may in fact be impacted. And that's that's the problem of the

brinksmanship that we're seeing on the trade front. Where brinksmanship when you when you draw lines in the sand and somebody says they're not going to budge, what do you do? What would you say to General Matters Right now? I don't know what you say to the State Department. I'm sure I don't know what you say to the sixty under Pennsylvania Avenue. But with all of your years of experience,

what do you say to the Secretary Defense into our military? Well, yeah, they're they're the last bastions of consensus politics, and and you've got to assume that the military, given their organization, are going to tow the line. So that's the encouragement that they need, and that's the voice of reason that's that's required. I mean, within that is the surgical strikes certitude that we've all seen within modern warfare, you know, whether it was the advent of air the air force,

or whatever. We can be surgical and your experience of the Middle East, surgical really doesn't work, doesn't now the danger in the Middle East, and and maybe you know, maybe there's something that will will will unmask, uh what's happening.

But uh, Now, Russia's an economy that's slightly bigger than the state of Florida, slightly smaller than the state of New York, and they've been managing to do something on the global front, partly because of what's happened with their relationship with Saudi Arabia on the oil side, that that has made them seem a lot more powerful than they actually are. So maybe we're gonna see something resulting from that.

Edward Morris, thank you so much, greatly appreciate your effort to come in today for an extended period with Bloomberg surveillance. Dr Morris, of course, with City Group running all of their commodity or with us right now Gary Shilling on inflation. Gary, the big deal right now and with the data here in forty minutes is the base effect the base effect is where and the fourteenth and the fifteen month drifts away. How do you respond to people saying, well, inflation is

going to be higher because is the base effect? Well, there, there certainly isn't effect. I mean, if you go back to all months, of course it was a reverse that was reversed. And that's what you're that's what you're talking about. But I think it's more important to concentrate on the future. And one are the basic forces there. And you know, we're in a globalized world. There's a lot of deflationary forces there. You're seeing lower inflation and medical medical care

and education. You're seeing Amazon what they're doing to bricks and mortar stores and prices. Uh, And you know, I I think they're just there are a lot of downwards pressure. Let's rip up the script here, folks. That's what we do on Bloomberg surveillance. Hn Farrell demands I do it once a day. Gary, you went there. It is stunning. The second derivative of empty stores in this nation. Everyone, even his his arch angry opposites, agree with President Trump.

There's a lot of empty stores. How does that market clear? A wise one, one would hope, And and and a lot of areas they tear down the buildings and make parking lots. But but you know, but rental price can come down. And that's a very heavily leveraged business time as you know, and so there's no reason that those rental rates can't come down. But you know that the reality is it isn't going to get any any easier.

I mean, you pull out your your spark, your smartphone, you got an app there, you push a couple of a couple of buttons and you can find the absolute lowest price. You know, there is no ability to compete on everything is coming in years decades of experience at Mary Lynch and inventing market economics. I'm gonna say with that, Hyman is well, maybe you're denial throw in there is well, Gary Shilling, how do you clear and absolutely unique tobaccle

in real estate? Which is what we all observe. Everybody listening to this program coast to coast is observing it. Well, what happens is that at at a long enough price, uh, those buildings are worth something you have to convert into alternative spaces. Now that's what's happening to malls today. Of course, because you're seeing they put in fitness centers, they put in restaurants, UH, they put in they put in movie theaters and so on. But that still means that they

don't replace them at the same rental rates. Because anchor stores UH generate a lot more traffic and they support a lot of the small jewelry stores and sestionary stores, and the severe she have to mark the price down, in other words, the market in price, and the text is that the landlord pays have to clear it will lower rate. Well, that's that's right. And of course this is what this does is it puts a lot of

pressure on everything. It puts pressure on the municipalities and point out because of the taxes, it pulls pressure on the area. You look at a lot of of areas in this country and tremendous amount of of suburban housing real estate is around malls. You know where where I am,

Short Hills, New Jersey. They built a Short Hills mall basically to UH to Prudential did this because they were developing a huge amount of land around there for residential right after World War Two, and that mall was really there to in effect attract people into this residential area, and that's obviously far from unique. So you do have a lot more than just the retail stores, particularly in the case of the malls. To switch your back to showing one oh one, do you stay in your newsletter

with lower rates? And how low is the Is there a new low? I should say for Gary showing is it a higher low? I don't. I don't think so. You know, I've been of the opinion that we would get to two percent on the thirty year bond and one percent on the ten uere and I don't see any reason to change that. I just think there's an awful lot of We're in an excess supply world, and I don't think that's going to change. You labor markets

are tightening up in this country. But unless we're gonna unless Trump is gonna build not only a wall in the Mexican border, but a terrible wall completely around the country, you're really you're really faced with a whole globalization effect. It's a huge coal Gary. What's the what's the time arising for that? Cool? Because I think many people would say,

but it's the next recession. Then I think a lot of people might say that could make sense because we hit around mark on a ten year and we weren't in a recession. So is it the next recession you're thinking about, or is it in this cycle? What's the time arising for the cool? Well? Uh, one of the great forecasters of history say you should forecast what will happen or when it will happen, but not both. Yes, I'm not dumb enough to put a put an exact timeline on that, John, But but I do think that

is in the cars. And you say, I mean, you look at this, you look at the situation today, and given the fact that everybody is screaming about tight labor markets and and that's where inflation only starts to his eyes, and where are you? You know, you're below three percent on the third ear The characteristics of the treasury market has adapted somewhat in the last couple of months, though on a morning like today, with features down quite hard, you've only got a bid that comes into treasuries that

generates a move of negative three basis points. Were down three basis points on the US tenure now in in risk off of previous years, we might have been bound down ten perhaps even fifteen. We aren't seeing these big haven flows rush into treasuries in periods of risk aversion. Something's changed, Gary, can you put your finger on it? No, you're right. As a matter of fact our April newsletter.

I look at that because it is it is. It is strange because when when you saw the starting in early February, when you saw the collapse of the of the of the volatility trade, the vixed trade, uh, you did not get the normal rush into treasuries and gold. And I think there are offsetting things. I mean, one is, people are worried about inflation, they're worried about big government deposition.

Of course, you've got to you've got to at least one trillion over ten years for the tax cuts, and another three billion for the two year uh two year spending bill. And then behind that you've got the retiring post for our baby, social Security, medicare funding those things. And then and we talked about this on TV earlier time, about about about down the road, military spending and infrastructure. You've got a lot of things. And now I don't

think those are going to be that I don't. I think the the treasures will, they'll they'll find homes in race will be lower. But there's a lot of concern about that right now. And I think this is this is holding off what normally would be a greater rush. Finally dr showing the zite guys just three to four rate increases this year. It's April, we're dashing to May. I believe it's the schedule right now. Does that crack? Do we do? We do we reset with all the

discourse and the finale seeing a message? Do we? Yeah? That what you see like June, July, August. Yeah, I really suspect there will be a dialing back. I mean again, the Fed does one higher race. They'd like to have some higher race to cut when the next recession comes

along the ground. As John was pointing out, Uh, you also have their tremendous concern about the speculation to take a look at bitcoin and everything in between that hedge funds of private equity people have so zealous for yielded. FED worries about that. Uh. But at the same time they've they've got this lack of inflation and that that really is bothering him now. They basically have said this

is a one off deal. Uh, you know, Yelling kept saying it was it was a matter of the of the cell phone race coming down, and then medical care UH, Medicaid, etcetera. Powell has adopted some of the same policy. But when you get a series of one offs after a while, you say, that's a trend showing thank you so much. This great all the time on Bloomberg television and radio with Bloomberg surveillance. Before we had president's tweeting, we had

people writing thoughtful books about people and changing things. You should be David Kirkpatrick, and of course many of you that know me know my rave review of The Facebook Effect. It is not a dated book. It is a wonderful window into a young Zuckerberg. Your book, The Facebook Effect. We've moved on from that, haven't we, David. It was a different moment, So we're having a Facebook Effect. I

think that could be absolutely agreed upon. But certainly my book was, you know, an introduction to a company that you know, the book came out originally in so people really didn't even realize it was important at that time. But what really brought their ten to do it was the I P O. Of course, and it it you know, did it well then? And then it dropped because they didn't get mobile and he came back, and Zuckerberg showed

great leadership in that period. But I think what we've really learned, and what I think even he's learned even this week, is that he hasn't shown enough leadership when it came to certain key things around privacy and security. And you know, it's it's shocking to me that they made so many oversights when it came to that area.

But I will say, listening to the hearings yesterday and spending too much of my time thinking about this company, I am relatively cautiously optimistic that they are moving in a direction that will be extremely productive for them and for society, because that's where we've gotten to that. It's the relationship with society is the thing that matters of Facebook. They are that globe spanning, that influential in our daily lives.

David Kirkpatrick, I'm just curious if you are covering any other company, and there had been a situation in which years prior to an event, there was a mess up of this magnitude that caused the CEO to have to appear before Congress, and there was an actual paper slash email trail that connected various executives Okay, well, um, I don't know about you, but in most companies someone gets

shown the door. Yes, who's accountable here other than someone saying I'm sorry, I don't think that lets you keep your job in most companies. Here's the one of the many oddities about Facebook, which is one of the reasons I chose to write a book about it because I really felt that it was a unique company from the beginning, is that there really is only one person who's accountable for everything, and that really does change the calculation in

a situation like what you're describing. So it really is, in some central sense Zuckerberg's fault that all this happened. He didn't put the priorities where he should, and ultimately he unilaterally and solely that's the priorities at Facebook, which let's acknowledge, for a company that is worth half a trillion dollars, it's a very weird thing. You know, everybody showing I think I saw an MSNBC or CNE and David. Everybody shows this guy in intense conversation with the one

guy he can talk to, who's David Kirkpatrick. Chapter six, Chapter six of your book, David Becoming a Company every single business person listening to this program is going, you gotta be kidding me. You got this kid running the show. He's a billionaire. Great congratulations, Miss Samberg is messaging who's the adult that could come in and shift this company to proper business practices? You mean then or now you're talking about now? No, he needs some I will agree

with you. He needs somebody. You know. I was actually you know who I suggested the other day, Jerry Brown, because it's not really a business leader that he needs that. Jerry Brown has got a job, we know that. But the point is he needs somebody of that degree of gravitas that he can't ignore. Who you know, he would still be somebody who had no real power because Zuckerbert

controls literally everything. But he needs he needs gray hairs in there who really understand the way the world works and share some of his idealism about how the world ought to be. But that who are capable of saying to him, Mark, listen to me, this is wrong. I mean, David just described David Kirkpatrick, Well, okay, if Jerry Brown won't take the job, maybe David Kirkpatrick, Well, well, you know it's funny because I I sometimes this is arrogant preps.

But sometimes I think that I am in a role. Since I'm sixty five, I've been around journalist, business journalists thirty four years or whatever. But sometimes I think I'm trying to give them a message. And when I interviewed him on stage at the Techonomy conference in two days after the election, in which is when he said his faithful fake news comment, that got a lot of this inquiry,

you know, and in this controversy started. I asked him four times did Facebook have a unique responsibility for given its scale, given its impact an election, given the power of the news feed in media. And I used that word four times. He never used the word in response. When you read his stuff now, he all he says his responsibility. He doesn't want to listen until he's ready. That's the thing about David Kirkpatrick, the author of the

Facebook Effect. Right now, Kevin's surreally with us, our chief Washington correspondent, Kevin, have you ever seen the cot, the proverbial cot that speaker Ryan's sleeps on at the house. I have not, the completely honest I have not taught, but I can tell you that yesterday I spoke with a Republican lobbyists who told me, hey, have you heard

about the Speaker Ryan's timing? Reverse uh, that we could get this announcement, you know, because he has to declare by next Friday whether or not he's gonna seek reelection. So this has been whispered about all of the Congress for quite some time. But it's the timing of the announcement this day in particular, I find, you know, I mean, it's just such a crazy day already with period the news flows overwhelming, and we have to change it here

in the next eight minutes thirty two seconds. But Kevin's really when when we look at this and we compare and contrast to other House speakers, and of course Mr Bainer of Ohio, was he run out of this job? I don't know if he was run out of his job in the way the Speaker run or Speaker Bayner was, but I do think said it's worth noting that back on the campaign trail, when I covered candidate Donald Trump and we went to Speaker Paul ryan district, they were

booing Paul Ryan. Donald Trump was on stage and had them booing Paul Ryan at the mention of his name. So the relationship between Speaker Ryan and President Trump has been tent putting it mildly for quite some time. They were never really big fans of each other. And even I can tell you this, like the Aids that I talked with on to President Trump still don't like Speaker Paul Ryan, Kevin Sirelli. I don't know where where where

you want to go? Do you want to talk about the Wisconsin first and who takes who takes the seat, or what happens to all those committee ships and the

actual running of the legislative branch. Now that the Speaker Ryan has already said that he's not going to be returning to the halls of Congress, well, so this is very It's interesting because we talk about the different political factions within the Republican Party all the time, but a lot of these new factions and political alliances in the halls of Congress have really been dramatically redrawn, and the steers of influence, particularly within the last twenty four months,

have really been shifting and and and look no further than then Speaker Ryan's political alliance with Ryank's previous and UH and UH as well as that former apparatus Sean Spyser, Well, talk about having a Wednesday moment. I couldn't remember Shanna Shawn Spyser. Paul Ryank's previous and Paul Ryan were really a trio about town when I was coming up as a Cup reporter. To see them essentially be irrelevant right now,

it's not irrelevant, but to see them really equipped is remarkable. Um. And the Freedom Caucus is going to be pouncing on those. I was just gonna say, I'll offer up the tweet that presidents Wednesday for the President. And you know, when you were a Cup reporter, I don't know, maybe they didn't even have Twitter, you didn't have to follow us on a regular basis, but we've always had Twitter, all right in short pants? Um uh, just a minute ago,

the President tweeting the speaker. Paul Ryan is a truly good man, and while he will not be seeking re election, he will leave a legacy of achievement that nobody can question. We are with you, Paul, exclamation point. So who takes over from Paul Ryan from the Wisconsin First Well, he would like to see Kevin McCarthy or Steve Scalise replace President Trump has developed personal relationship with Congress Mr. Scalise. So remember, of course the tragic baseball shooting several months ago.

Uh and uh, they've had a close relationship on the foot side of that. I spoke with an aid to the Kim Caucus just within the last hour who said that they're carefully watching this any developments out of the Freedom Caucuses, and that I point four hours. But but there's gonna be attention. I would just also note, and you guys know this the Trump's world. They're preparing and folks are preparing for a blue wave in the fall.

But there's going to be some new voices from ultra conservative districts throughout the country who are fully aligned with President Trump and everything he stands for their Republicans when they're watching this and they view this as an example of being drained the swamp and right. But Kevin, Kevin, one of your great charms is you're in Capitol Hill a lot. It's damaged you. We understand that, but you

get the zeit. Guys to the hill. Is Kevin McCarthy gonna be anointed and assumed to be Speaker of the House or is there just a Republican a GOP tone that he's running to be the Minority head. That's a great point. Well, here's what I can tell you. Mark Short, the President's top Legislative affairs director and lieutenant on titol Hill,

so to speak. Uh, was wanting to be seen outside the Marge Zuckerberg hearing yesterday and he walked while he was on the cell phone, past a lot of cameras that was engulfing that part Senate hearing room, and he went into a private meeting with Senator John Cornyn, Republican from Texas. And that I think shows the level of saviness that this White House is trying to exert and the pressure behind the teams of Republican leadership who will be meeting with President Trump at the White House Lader

this evening. They're definitely making a play for the but we don't know where they stand. But there's no question President Trump has had frustrated with Speaker Ryan and Republican leadership in the past and started leader Mr McConnell for that matter. Uh. But you know, and I would also know that, Uh Bernardo the Sentiment Arty leader Truck Shumer just David saying, Hey, Speaker Ryan's on cha. Now, let's hope that he breaks ties from the altar conservatives can

also puts pressure on President Trump. Outline, Pimfox, that's gonna just offer this. Do you talk about the Twitter and the Senator Ran Paul saying, quote promising war by tweet insults not only the Constitution but every soldier who puts

their life on the line. Uh. We seem to have a you know, government by tweet, and uh, Kevin surreally does the President's position on Syria and possible military action make it that much more difficult to have any real, uh sort of political consistency when it comes to any

anything happen to do with legislative achievements. No, right before I came on, Eric, before Riley Dabs called our producer here, as I spoke in the hallway with Senator Linday Graham, Republican from Carolina, he called a quote unquote defining moment for this presidency. Uh, and he's hoping that not just at one time military strike, but part of a broader, more articulated plan. Obviously, you can't articulate a military plan

a full on Twitter with regards to Steria. But I can tell you that every Democrats spoken with Senators Warner Bloomenthal, Democrats from Virginia and Connecticut respectively, as well as every Republican but the exception of the likes that people like Senator Rand Paul fully support some type of military response in response to the chemical attack. On the side, I just spoke with Representative Diane Black Republicans Senna Stee, who is also saying that this steria issue has to be

dealt with military forces. Is something that is military strike roud is something that is fully on the table and many people are anticipating with the Kevin, thank you for the good work this morning. Is our chief Washington correspondent was just sir, really where us on television and radio? Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Winter at Tom Keane before

the podcast. You can always catch us worldwide. I'm Bloomberg Radio.