Surveillance: Gross Counsels Caution Despite Good Jobs Report

of course on the Bloomberg again. About niney minutes to go until we get the October job support. Joining us in studio is Ellen Center, chief US economist at Morgan Stanley. Morning. Ellen, what's the relative importance of this report? We had the FED meeting this week that the two a FED meeting, a dead meeting as we as we characterized it, looking ahead here to December. This is the first of two jobs reports will get before the next FED meeting in December.

Put this into some context for us, Well, I hope that it's an unexciting report. Uh, but there's always with the employment reports, there's always the scope for a big surprise. UM. I think the sense is that, uh, you know, these employment reports are supposed to be that very important incoming data that the FED is watching as their data dependent UH and making decisions meeting by meeting. But they have

lowered the bar so much for going in December. Uh. I can't say it's a foregone conclusion because everything can fall apart between now and then, But the employment report has a very low bar UH that it needs to rise above UM. And I think as long as we get UH anywhere between a hundred thousand and two hundred thousand, that's right in the pocket UM. And that's fine for the FED. And will it'll be sort of a hum report because it's going to come in not far from expectations.

Is this report more important in the political context again? The election here next Tuesday. This is something that could be Trumpet died or bally hood or or the opposite here in the coming days. Is it more important how this is consumed by the political side of things in the FEDOM? Yeah, Well, you know, good data is always good for the incumbent party, and it's it's not unique.

This happens every election cycle, where if the data looks really good and it's benefiting seems like it's benefiting one party the other party will exclaim that the government is manufacturing the numbers and that they are fake. You know what happens this morning, if we get a blowout three hundred thousand payrolls, you might see Uh, Republicans step up and say this data is manufactured in order to make a Hillary presidency look better. Um, And of course that's

not the case. But we also want to be fair and say this is not different than any other election cycle. We always have these exclamations of of falsehood, if you will. If the data is looking one way or the other, looking ahead to that that next FED meeting on the of December, what are the near term risks that they could crop up aside from from an election result that maybe goes against what people expect. Well, I think certainly if you if you had some sort of collapse in

the hiring rate, Um that that we came. We just got very weak job growth in this report, and we get another job's report before that December meeting. Um, if the job growth is weak enough that the unemployment rate starts to tick back up. Uh. That is something that Janet Yellen indicated in her Q and A after the September meeting that she was laser focused on the unemployment rate needed to fall further. Uh. So job growth just isn't strong enough in order to get the unemployment rate

to continue to take down. Uh. That might be something that leads to softer expectations of December, and then the Fed has a big decision to make. Uh do they get out there and and talk down expectations for December high on those reports, or do they continue to guide towards a December and just say, but we're not going to do much on the other side of it. Evidence Ellen Zenter with us with Morgan Stanley. What a spirited conversation we just had. Ellen over with surveillance on television

with Peter Navarro and support of Trump economics. I want to back up and talk about this strange word mercantile is um, which comes over to a zero sum worldview, and maybe we get a zero sum America, whether it's President Trump or President Clinton. Help our audience understand what zero sum means in a center world. Well, zero sum would mean that no one's running a current account deficit, and that trade is completely fair and balanced on both sides, and that uh, we we have a basically a neutral

trade balance with everyone. Right, we export a lot to others, and we import a lot from others, and at all evens out. But that's never the case, right or ever one's currencies would be on par Uh. Currencies are the great equalizer, and it just so happens that, yes, growth doesn't feel great in the US, but you know what, it's better than elsewhere, and our currency reflects that, and it means that we do have to take one for

the team, so to speak. If there's a global team, we're taking one for the team right now because we are on stronger footing than our major global trading partners. What that's done, though, is make it very difficult um to digest when we ourselves are not growing that strongly. We don't have a strong of a labor market as we like, businesses are not investing as much as they like. And the easiest thing to point a finger two is is that somebody else's fault, and it's because they're stealing

share uh from from from our well being UM. And that leads to this populous sentiment, which is a global phenomenon now in rising right, and that has been the trend here in the US as well. How long are we going to have to take one for the team. Do you think looking at the dollar your ninety seven to fIF Uh, it's been strong for a while. How long do you think that's going to persist? Well, I

think it's going to depend on the global business cycle. Um, how close or other major global central banks to uh coming off that easing bias. Right, we are on a tightening bias. The Fed hasn't done much, but we're on a tightening bias because we're just a different place in our business cycle. Um. But you have the the e c B and the b o J, you know major global central banks out there, um that are still on an easing bias, and that's going to continue to keep

pressure upward pressure on the dollar. So to the extent that their economies start to bear the fruits of that labor and those central banks can come off at easing bias, then you start to take some of the pressure off the dollar. Um. But this is a global cycle that's taking a long time to play out. And uh, you know, areas of of Europe are years behind us in terms of where they are in reparation post financial crisis. In the radio, I didn't get to this before. What does

Hans Hdecker say about dollar for this year. How does Hans Rhdecker at Morgan Stanley dovetail a Zentner vision into his dollar call? Well, it's it's it's a Zentner vision. I like the way you put that, Tom makes me feel very important. Excuse me. It's a red Hans. I know you're listening. It's a Hdecker vision. Well, but it's it's so uh So Hans Rhdecker sits down with our the global economists, right, so it's not just my team and says, well, what is your what is your thinking

around monetary policy? If if if the feed is going to continue to tighten, other global central banks are going to continue to ease. Well, that's going to play into how he feels about flows into the dollar UM and driving the dollar higher. I will tell you that. And you've talked to Rhedecker plenty of times. UM. If you want to have an hour long program, he can. He can bring you to tears talking about current account deficits matters for his forecasts. But but let's keep it simple.

Let's keep it simple. A lot of that global central bank divergence matters for his calls. When he's thinking about the dollar. Just to me, it's an extraordinary jumble here. And again we want to congratulate you on your call of eighteen months ago that this would be a FED that would delay and delay the dots, don't come down next year all that much. Well, here's the thing, and this is something that our clients have been very, very focused on. Last year, the Fed hiked in December, and

they hiked because they said, look, you're expecting it. It's been extremely well communicated. We expect little market reaction. What they underestimated was the global reaction to the perceived promise that they were going to follow it up with four hikes.

Here we are today. Have they delivered one of those no um at the September meeting that we've just had, they lowered the path of the dots quite a bit, and now they're showing us that they would like to hike in December, and they, at best, which is how we should look at it, at best, intend to follow it up with two hikes next year. That's a much slower pace than what they were showing last year. Our clients are asking us, so do we get the global

fallout that we did last year? Same as last year last year, or is everybody going to digest it better? Showing us already that the path at best is going to be much slower. I think we'll go far and trying to appease global markets. Gotta leave it there, Ellen Saner, thank you so much. With Morgan Stanley, it is Job's day. Much coming up on economics. It is Job's day. It is Job's day. Four days before the matter of an election.

He is darkened the door of the Oval Office and Public Service to the Nation of the former Chairman of the President's Council of Economic Advisors, Alan Krueger. Are you overtly in supportive Secretary Clinton? Are you you know? Neutral? Are you? Are you going to come out for Trump economics this morning? What are you doing? Ellen? Next? News here? The uniformity of the economics profession against Donald Trump has been truly spectacular. I have to say I I am

Tom and informal advisment to the Clinton campaign. Okay, very very good. I want to rip up the script here, folks, it's job today. We're gonna get to that in fifty minutes with all of our usual good guests. Professor Krueger, Jacob Winer in the forties, wrote the definitive piece on middle twentieth century mercantil is um. We didn't want to go back to that. We didn't want to repeat history, and a lot of courageous people from Atlantic Charter on said, we're not going to do it like we used to

do it. Do we risk from Secretary Clinton and from Mr Trump tending towards zero sum America and an inward America that replicates the nineties. I think that's certainly a risk from the Trump campaign. I think Secretary Clinton has voted for a trade expansion in the past and voted against trade, so I think she's had a more nuanced view.

But a candidate like Donald Trump, who says he wants to tear up long standing trade agreements, I think is a real risk to the global trading system that we have, and more importantly, to the stability that we've built up

since World War Two. This overlays on your true expertise on the minimum wage and on labor in America to find how you hear the primal scream from Senator Sanders and Mr Trump's supporters well, the passion for doing more to help those who have been left behind in the economy I think is real and I think needs to be addressed. But I don't think the right solution is to turn inward to build walls. UH. That hasn't helped us in the past, and that will not help us

going forward. I think that we need to look for solutions that grow the size of the pie and for solutions that lead to more equal sharing of the benefits of economic growth, and I think those are out there. For example, of responsible increase in theminum and wage would help. UH, A greater UH wide, more widespread program of trade adjustment assistance would help. We've seen we've seen the minimum wage rise at the local level at some state levels. UH. Is it at all likely that we would see it

rise at the federal level? Or is that ship sale? And is this something that is percolating is happening at a more local level? Now, Well, we we've seen this movie before in the nineties when Congress didn't raise the federal minimum wage, the states acted and then remember a new Gang Ridge led Congress raised the federal minimum wage. So I think that there's UH some hope that will see a reasonable increase in the minimum wage in the future.

What's the what's the one thing say that Hillary Clinton took away from the the economic platform that Bernie Sanders espoused when when he was when he was still running for president. How would she bent? Uh? In response to what what Tom called that primal scream, Well, I think there are a number of areas where Uh she took

on his ideas and they infused her ideas. I think the most prominent has to do with access to post secondary schooling, making college affordable, making college debt free, which was a major theme for Bertie Sanders and one that Secretary Clinton has adopted an espoused and seems passionate about. I want to just quickly hear close a loop and we were talking about earlier to the Chinese want a

bigger pie. We're talking mercantilism. You supose that we need a larger pie, dude, The Chinese want a larger pie of trade. I think clearly trade has been beneficial for their economic development. I think what they need to do in the future is to generate their own demand, particularly with household consumption um. But as an economic advisor, I would advise them that they benefit from from from a bigger pie. No question. Jobs day, oh forty minutes or so.

We'll get to that, and among other worthies, William Gross of Jenna's Capital will join chief worthy right now was Alan Krueger of Princeton, the former chairman of the President's Council of Economic Advisors, were waxing political Professor Krueger let's now wax more job market. I did a chart today of the man's session, the idea of twenty four to

fifty four year old men. Uh boy, it was good in the sixties and the structural change of women in the labor force, and it was ugly and they've come back, but they can't get back further. Give us your research now on that interesting separation and combination of men and women in the workforce. What's the dynamic you're focused on? Labor force participation rate trends are really fascinating in the US. In the post war period, labor force grew because more

and more women joined the labor force. Men have been on this long term downward trend and that trend has continued. What's changed is that women are now mirroring men in terms of labor force. Participation of women peaked into thousand UM and that I think is significant because it means unless we have more population growth, primarily through immigration, it's unlikely we're going to see a major rebound in labor

force participation. But now getting to the men, I have a new study that I presented at the Boston Federal Reserve Conference on October four where I found that around half of the prime working age men are out of the labor force suffer from a serious disability UH, either mental or physical. Almost half are taking pain medication on

a daily basis. So I think we need to address the health concerns UH in order to raise labor force participation for for for that group in particular, when when when you look at the numbers today, what will they tell us about where the jobs your your your paper at that Boston Fed cards, Where the jobs? Where all the workers gone? Where the jobs today? Who is hiring? Is this still hiring? That's largely confined to the to the service sector. Well, we largely have a service sector economy.

One of the interesting developments, however, is that in the recovery, manufacturing has started to increase jobs. I was talking with the CEO at Party City yesterday, and they're bringing jobs back because expenses are getting higher or abroad so I think we're seeing reassuring and manufacturing, but certainly it's the case that the bulk of job growth currently and in the future is going to come from the service sector. Take a quick diversion here for a sect. You mentioned

the Boston FED conference. You were there, of course, Jenny Ellen giving that speech on on running a high pressure eccunty, suggesting that it could be done, not committing to it by any means, but introducing the concept. How did that play in the room. That's a good question. I spoke right after her, so I was kind of focused on my remarks, but I did read her remarks that I was there for them. UM economists have known for a long time that there are benefits of a high pressure economy.

There's a famous paper by Arthur Oakin and the Brookings Papers with the title the high Pressure Labor Market. Larry cats and I wrote a paper nine on the high pressure labor market of the nineties, which I was actually pleased to see that Cherry Ellen had cited. So I think there are many benefits of the high pressure economy.

UM wage growth is one. I think we see more opportunity for disadvantaged workers, for younger workers, I don't think it has that big an effect on labor force participation, but I do think there are many benefits of a high pressure labor market. Professor Krueger ellen Sander was on earlier and she I believe made the statement. I don't want to put words in her mouth, but she suggested that too many of the jobs today are what we

would call less quality jobs. Are they? I mean, how do I you know, I know when you're you know, darker than the door of the Oval Office. You got to say a certain tune. And Jason Furman has done that with terrific research at the White House. But help me, here are these quality jobs. I think the job growth that we've seen looks a lot like the makeup of jobs that we have, and I think what we need

to focus on is how do we raise wages? In fact, Jason Furman and I have an op ed in the Wall Street Journal this morning where we uh point out that in many cases, companies are taking non competitive practices to keep wages low. There was an example of a court case in Detroit where eight hospitals settled a suit for non competitive practices where they raised nurses pay, gave out a settlement of ninety million dollars because they had

suppressed pay. Non compete classes are far too common. So I think that there are steps that we can take to make the labor market more competitive. Little rays pay across the board. Thank you monopson No, no, this is a major deal, folks. I go One of the great tests I have of an economics textbook is I literally go to the index and see if they even mention monopsony because Monopsony, to me, Professor Krueger is white underrated

political debate. This is not monopoly. We're not trying to get Oriental and I don't want Baltic Mediterranean, Professor Krueger, we need a clinic right now on how man opsity is important and it's not monopoly? Is it? To me? It is rubber plantations in Singapore. That's always a model I'm used where your price you just you get the price you get. Monopsony is the flip side of monopoly,

means that there's one buyer as opposed to one seller. Now, one of the things that we've learned in economics research is that you can have monopsony apart from a company town, not only in those rubber plantations. But companies can reduce competition by requiring their workers to sign on compete agreements. Adam Smith, if you go back to the Wealth of Nations and which you wrote an incredible introduction for within

the world that at the moment, but thank you. If you go back to the Wealth of Nations, Adam Smith said that employers, whenever they get together, they tacitly talk about how do they collude to keep wages low. So there's been this pressure in the job market for a long time, and I think that's one of the reasons why we've seen job vacancies rising. Company he's saying they can't get enough workers, but they've been reluctant to wages.

The price economics think in Chicago. Here Chicago is his school. It's out West, Professor Krueger, it's just just sell of the cubs. You're the white sox um. If you look at the price theory of Monopsony, our listeners are saying, Professor Krueger, you don't know what you're talking about. If we have to raise wages, we're going out of business. How do you respond to entrepreneurs in America who say, we've got a collude, whether it's direct, indirect, monopsusy whatever,

or we go out of business. How do you respond This clearly isn't the case. I mean, we hear this whenever the minimum wage goes up, and we only see more and more job growth. If workers have more wages, that's going to help the macro economy, that's going to help consumption, and the whole economy will grow. I was astonished reading your your piece with Jason from this morning. Uh, the portion about non compete clauses you write of American workers have signed them. Why Why are we seeing so

many noncompete clauses in employment contracts today? What's remark well to me as we're seeing him in places where they clearly don't belong, for warehouse workers, for fast food restaurant workers. And it's I think a very clear example of companies trying to restrict competition to make it so that they have more of a tied workforce, to make it so that they don't leave for higher wages down the street.

And that's restricting competition. Uh, and that has really run a muck and I think it's a sign of the imbalanced and bargaining power between workers and companies help us. Let's circle around here the minute a half we've got left with you, Professor Krueger. If we have an election in both candidates say we don't want to be a rubber plantation in Singapore. We don't want to have monopsimistic tendencies in the United States. State the case for your candidates,

Secretary Clinton, how is she going to make us less monopximistic. Well, I think she got both the positive and the negative. I mean, Donald Trump has stiffed his workforce in the past, has really shown no commitment to raising wages for middle class workers. Certainly his tax plan wouldn't help middle class compared to high income folks. Uh. Secretary Clinton has spent her career trying to provide more opportunities for disadvantaged workers.

And there's a lot that the administration could do. One of the things we point out in our ed. In addition to raising the minimum wage, which I think would help to counteract some monopsny power as long as it's raised to a reasonable level, the administration can more actively enforce antitrust laws which prevent companies from or legally should prevent companies from occluding to keep pay low One of the things the Obama administration and the Justice Department just

did was to announce a hotline for human resource professionals to call in and report instances of uh illegal competitive behavior in the labor market. And I think that could help identify these cases and we could bring more court cases like the one in Detroit. Does that move jobs abroad? Does that move jobs to states that are more sympathetic

to ober plantation psychology? You know, that's a great question, and this is really a win win solution because the answer that is no. If companies are colluding to keep pay load, they can't get enough workers. That's why they have vacancies. Um. And what you see with monopsony is if you do raise pay if you do force the cartel to break down, employment actually rises. So it could be a win win situation where we raise wages and raise jobs. David, did we get them fired up enough? Sugar?

I'm going to send out on Twitter a whole bunch of attachments on this. This happens to be a pet project of my monopsionistic dynamics. Furman Krueger, the Wall Street Journalist Morning on your rubber plantation. Who you put your trust in matters. Investors have put their trust in independent registered investment advisors to the tune of four trillion dollars.

Why they see their roles to serve, not sell. That's why Charles Schwab is committed to the success over seven thousand independent financial advisors who passionately dedicate themselves to helping people achieve their financial goals. Learn more at find your Independent Advisor dot com. Joining us now, Bill Gross will join us, and we welcome Bloomberg Television as well. Bill, Good morning to you. The basic idea I would I would suggest is this does not derail December, and it

certainly doesn't affect the election. It's another good report, and yet you continue to counsel caution I do. I would admit it's a it's a good report. I zeroed in on two important factors. That work week was a point four, which is higher than average, and earnings. You know, we're growing more than a normal as well, and so you combine those together and that's good for the consumer going forward.

But I counsel caution on the basis of structural changes, on the basis of a recent report by the Federal Reserve itself done over you know uh six to twelve month period of time. That spoke to demographics and a negative influence on growth over the past several decades and

the potential for it to continue to be negative. UM. I focus on structural items such as a high debt and leverage and technology displacement of jobs over a longer term basis, and so UM, you know, the economy tamed to me is in a one to one and a half percent real growth mode. And you know, as we shift to markets and the influence of that growth on markets, which is an important consideration. UM. Earnings not earnings per share, but earnings don't really grow at one to one and

a half percent growth rates. And that's been the case for the past five quarters. GDPs average one and a half percent, and we've had an earnings recession mild as it is, So UM, you know, markets had better look to real growth as opposed to unemployment and unemployment which Janet Yell intends to do for an accurate forecast as to where asset prices headed, Bill, you bring up growth. We got those GDP numbers a few days ago that the headline number there of two point nine percent. Look

under the hood, maybe some worrying signs there. What does that say? How does that influence the FEDS path forward? Well, um, I think they're not necessarily sensitive to GDP. I heard your discussion with Jim Glassman in terms of the FED not necessarily focusing on a specific growth measure, and that's true. They focus on two percent inflation. But you know, ultimately that type of growth rate to influences financial markets, and I do think the FED is focused on financial markets.

Should we get a shock, for instance, in terms of an election, should we get an ultimate realization that the major reason and equity markets are being held up is due to the magic of central banks and quantitative easing, then you know, at some point, if markets start to decline and the FED will back off, the FED as a slave to the financial markets as opposed to vice versa, which is what I experienced and many of you have

experienced over the past ten, twenty and thirty years. Been a few weeks back, you made the analogy of central bankers to Martin Gale gamblers. Here, Macau is Frankfort, I suppose, and the strip is thread Needle Street. From what we've seen here in the intervening couple of of weeks. Do you see central bankers now taking stock reevaluating, becoming introspective they've been all of these policy reviews. Are central bankers coming to think about or maybe accept the limits to

what they're doing? I think, I think to some extent, you know, to me, the ultimate question, uh, is what is the new neutral policy right? Not just for the real economy and it's reflection and financial markets and asset prices, but for savers and savings institutions such as life insurance companies, pension funds for one k individual savers. And I think an increasing number of FED members as well as uh, you know, other spokes men and women for other central

banks are coming over to the side gradually. We've seen two descents three descents recently in the in terms of the FED statement, but they're coming over to the side that considers savers and return on savings instead of just a rate that stabilizes asset markets. Bill, who are you going to support for president? I mean, I don't want to be direct, but it's four days to go here, uh, Mr gross And and I look at the job economy. I look how prescient you've been on our financial repression.

Do you have a preferred candidate that can give us less bill gross financial repression. I don't you know. Trump is uh minor ely attacked the FED, and I don't think I'm quite sure what would happen if he became president, whether yelling would be asked to leave or not. So that's that's not positive, But it doesn't speak to financial repression and the fact that interest rates may gradually move

higher and remove some of that repression. I think, um, Hillary is a status quote type of candidate, and therefore the financial repression that's existed for seven or eight years now in terms of low interest rates would be part of our mantra to my way thinking. But he hasn't really spoken to that, has you Bill very quickly? Here? I spoke with Nicholas Comfort and farm for today the effects of negative interest rates on commerce Bank of Germany.

Negative interest rates are out there. You know, it's a raging debate. Do we need to pull ourselves away from this experiment of negative rates? Do we maintain it in the next year? What would be your counsel to global leaders now? I think we need to pull away. I think that's one of the reasons, uh you know, yeah, has been influenced, but some of the the Fed members

in terms of just that, uh, you know, consideration. I think it's an experiment, uh to raise interest rates in a period of time in which you know, inflation is quiescent, so to speak. But you know, subjectively, as I've spoken for the last year or two and others. Um, you know, negative interest interest rates have a influence on the real economy, and it's not always positive. It's not always trickled down.

And to the extent that bank interest rate margins are narrowed and profits uh in that sector aren't doing well. And to the extent that pensions and four one case and insurance companies are hurt by negative and narrow interest rate margins, then ultimately that affects the real economy, and it has for the last year or so. David Gurr and Tom Keene worldwide and joining us now in the studio. He's not wearing a wig like the justices in England.

John Farrell with us this morning, and uh they will jump in here in a moment with do Good, Bill Gross of Janice Capital of David David Gray here on Bloomberg Surveillance. Greetings to our listeners on Bloomberg Radio around the world, our viewers on Bloomberg Television as well. John Fair, the anchor of Daybreak Americas on Bloomberg Television, Daybreak Europe

on Bloomberg Radio, joins me. But we're with Bill Gross of Janis Capital and Bill, let me ask you about how the clarion call for more fiscal stimulus is ringing out in Newport Beach. How are how are you responding to the growing chorus of cries for physical stimulus from central bankers around the world. Well, we don't have that many potholes and new Form beachs. The Irvane company ceased to that, and uh, you know, the infrastructure seems to request seems to be just that, a a plea for

fixing our bridges and fixing our potholes, and that's fine. Uh. You know what amazes me, though, is that the word canes rarely comes up on either side, rarely comes up in the press. It's almost like he's um, you know, been disked in history, and that the canes in solution to economic growth when it lags significantly in terms of fiscal spending, it is never addressed. It's addressed in terms

of infrastructure shovel ready. Even Obama has suggested that his shovel ready program didn't really do much and took one to two years to get going. So, you know, to my way of thinking, it's it's vastly insufficient on either side. And what we really need is a fiscal spending program of significant proportions, perhaps as much as one to two of g d P on an annual basis, in order to pull us out of this thing. We'll play it

out for us here real quick. Tom Keene asking you if, if if you have a candidate in this election, both of them promising to do significant infrastructure spending, looking at how that will affect the markets. If we have many billions of dollars spent on infrastructure, any measurable effect that you see in the near term and even in the

long term, sure on the markets. You know, in a large Kansian stimulation, if it went that way, even infrastructure spending of you know, hundreds of billions of dollars is a is a negative for for the bond market. Bond the bond market likes to see monetary stimulation, a fiscal stimulation, and so you know, I would expect after next week any result that that came out in the form of larger government spending as a percentage of g d P

would be slightly bond negative. On the other hand, let me suggest that interest rates the tenure treasury for instances this sort of pinned by what other countries and other central banks are doing. But with the b o J at zero percent on their tenure, that's a significant magnet for US interest rates to stay relatively low. Japanese investor can sell a j g B to their central bank at UH at minus six basis points for the tenure and reinvested in treasuries at a currency hedged level of

maybe forty or forty five basis points pick up. So it's import and where in Japan is. It's important where the e c B is, and it's obviously important what happens in the election. But you have to blend all of that into consideration, and that to me speaks to interest rates. Take the tenure being in a relatively tight range because of the Japanese magnet and because of the potential for higher government spending after the election. So let's break out of the six months range and talk about

a thirty year bull market. Are you seeing anything on the horizon that suggests the thirty year bull market is over. Well, I see a suggestion that perhaps the rates bought them. That's not the definition of a bull market being over. I I would suggest a definition of bull market being over would be the initiation of a bear market. And I I simply don't see that. As long as central banks continue to do what they do. Uh. You know the three banks that are actively engaged now in the UK,

the e c B and the Bank in Japan. Yeah, it's a hundred and eighty billion dollars a month in terms of spending towards towards bonds that ultimately flows into equities, and even those countries are buying equities and corporate bonds. So as long as that continues, it's very hard for a bear market. It doesn't mean, and I will put it right out front, as I have for the past twelve to twenty four months, that this artificial stimulation one

day will end in in ruin. But as long as the money keeps being pumped out and you have a buyer for bonds in the face of higher inflation, uh, you know, whether it's two or two and a half percent still to be defined. In various countries, then it's hard for a bear market to begin. We'll belly you that buyer. What we've seen recently is a steepening of the yield curve. I just wonder whether the flattener returns.

You came on too Limberg television a couple of months ago and set the shortened duration as you portfolio changed. Since then, yeah, the duration has been short you know, centering around zero my point, and I've talked to Tom about this and Mike about this over the past uh,

you know several quarters. Is that in this type of environment, If if your main theory is that yields a range bound within a basis point range, then it's not the buying or selling um on a trading basis that that you know, produces a total return, but it's the the selling of volatility around those ranges that produces a much higher yield and a much higher return. You have to be right on that range. And if the ranges are broken,

obviously um, you're not making money. But the selling of calls and puts on a range bound market is perhaps the most attractive way to make money in that type of market, and that's what Janice has been doing. And that's why we're you know, had by five point three percent this year, beating stocks and beating bonds. So you've written with with alarm and in sweeping terms about what central bank policy is going to mean for for capitalism,

transformation of capitalism. Uh, do you see that transformation underway right now? Is it inevitable? Where does that stand? Oh? We do, and you can see it. Uh, there's a there's a counter argument to what I'm about to disclose, but there's you can see it. I think in the form of capital expenditures relative to g d p UM. You know what what zero interest rates and negative interstrs rates do is bring consumption forward in a multitude of fashions.

And to the extent that consumption has been brought forward, and corporations since that, in other words, they sense that future consumption will not match past consumption. Then capitalism itself, the willingness to invest money in capital, plant and equipment, you know, is diminished, and we've seen that. We also

see it in terms of productivity numbers. Yes, they were good, Uh this week around three percent, but year on year it's a flat zero percent, you know, productivity increase, and so yeah, we're beginning to see capitalism as we once knew it, Uh, you know, fade at the margin? Um and and is it because of zero percent interest rates? Or is it because of some savings glad as a ex chairman Bernanke would describe, I think it's the former

as opposed to the latter. I don't think any economists with common sense as opposed to you know, uh university trained modeling, would deny that the zero percent interest rates distroyed capitalism. Capitalism can't can't function. Uh, if there's no return on short term money or low return on long term money, just is common sense. Let's return here your lastly to the jobs numbers today. I'm curious about how that factors into your investment strategy. What you're looking at

these job numbers for. Uh. Your sense of the role of central banks here seems very well well established. When we get a monthly report like this one doesn't change anything measurably for you, Well, it does it from December the December is to mess slam dunk. This is a good, good report and there's no reason now for yelling to continue to bluff and to bluff and to suggest that at the next meeting they would consider it seriously. They will raise the funds rate in December. The question becomes

how often will they raise it after that? What is the pace of normalization? And I know that the markets only believe that FED funds in short rates will be raised by twenty five or even less over a twelve month period of time. But but in any case, um, you know, what today's reports suggested is that the Feds on the move, But I suggest they'll move very very slowly, and that interest rates and financial uh intermedial intermediation will continue to exist as it has. Bill Gross, thank you

so much. Just remember Bill Gross, it's a great Southern California tradition. Vote early, vote often. I'm sure you will assist in the Mr Gross, thank you so much. Here is with Jannis Capital, and of course I do urge you to read his essays at Jannis Capital widely available and of course, with his great influence on the bond market. People pay attention. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud, or whichever

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