public confidence in the fed. thought that was a very important point because that public confidence in the fed really pulled us out of the big banking crisis in 2009 it was the stress test and it was the messaging from the fed that reinserted the good faith and credit of the central bank back into the banking system and got us moving gep. so it's important they do stay independent. what we've heard though from her was that things at least from the fed's actions and perspective look like they're on the right track, could continue and they're going to be sensitive about the balance sheet. >> so greg, going back to the point you made i want to make sure people caught this. if they missed it, you said that was the press conference that powell should have given now it is interesting she's coming out and being you know and doing this interview of course she's on the speaking circuit. she works at brookings she's out and about. what do you make of that people are going to draw the comparison that you just drew. should s

today we get minutes from last month's big fed meeting.s is the meeting where the fed made a sharp turnaround in its rate policy stance they said now patience -- that was the keyword there. they talked about gradual increases before we'll have full coverage of today's big fed minutes release at 2:00 p.m. eastern time on "power lunch." let's bring in ken, president at mercedian asset management let's start with the fed because we just talked about this idea that there has been a big about-face in some of the rhetoric coming from the fed is it now a situation where investors don't have to fear the fed any more >> i don't know about anymore. i think the fed is kind of off the table certainly through the summer you would think that they're not going to change the stance that they just changed. i don't expect the fed minutes to say anything earth-shattering today because these would be the minutes of the meeting where they kind of got the message that the marker wasn't hang. we can all debate whether the fed is following the idea of keeping the

and all think the fed will be that aggressive.onathan: the market price at rate hikes and inflation to a great extent as well. i am wondering what you see optionality to get inflation protection? tony: i think the risk is the inflation side. i think the inflation dynamics as we see them, particularly with impulses coming from china and europe, i find it hard to believe in the next 6-12 months we will see an inflation scare. i think the fed will be patient -- if they are back in the second half of the year, my view is they will not be back and have two or three more in 2020, it will be one in 2019. jonathan: guys, you going to stick with me here in new york. tony rodriguez, jim keenan, and met tom's. coming up, issuance taking off in 2019 with investment grade and high-yield making a big comeback. this is "bloomberg real yield." ♪ ♪ jonathan: i'm jonathan ferro, this is "bloomberg real yield." i want to head to the auction block. january pricing more than $17 billion. the highlight of the week, trans time, the biggest jump on offer

fed people around you?hter] jay: what i'm trying to do is explain what we're doing and why we're doing it in a way that's comprehensible to the interested public. that's what i do. i try hard not to use that or lapse into the latin, for that matter. [laughter] david: speaking of latin, you have a skill you have perfected since college. you can take a word and pronounce it backwards. take rubenstein. you can say that backwards. jay: yes, it's something i was born with. i can spell -- i can see your name spelled forward and backward in my head. david: is there any advantage in life from having the skill? [laughter] jay: it's been surprisingly lucrative at times. david: really? you're not an economist. jay: i spent a couple of years hitting the books. i sat next to janet yellen. she used to come in my office and go, are you coming out today? i hit it really hard there. i felt like i had a a lot to learn, and i did. ♪ ♪ david: you grew up in the washington area and you went to undergraduate at princeton, and th

the first is the fed negative net worth. this equates to a 170% capital and means on a market to market basis, the fed had a net worth of negative $27 billion. if interest rates continue to rise, the unrealized loss will keep getting bigger and the net worth will keep getting more negative chairman powell, does it matter that the federal reserve is insolvent? >> no. it doesn't matter at all for any purpose. in no sense are we functionally insolvent. >> does the mark to market negative net worth make it difficult to raise the federal rates? >> absolutely not. >> next question is, another discussion on the balance sheet and the balance sheet reduction program. in your testimony you stated the fed made quote, substantial progress on reducing reserves and that the fed is quote prepared to adjust the balance sheet normalization program. this does seem to be a shift from your comments in december when you said you believed the run off of the balance sheet has been smooth and served its purpose and i don't see us changing that. i t

believing that the fed would push rates up.he story should be a patient fed allows growth to percolate. inflation with it. look for a steepening of twos, 10, near 50 basis points, and there is foreshadowing for that. tony: i agree you will see some steepening, i might not be that aggressive. i think the 10 year will be range bound and we will get back into the 3% range. i could see some modesty through the year. i don't think the fed will be as aggressive. the market has priced out rate hikes and inflation to a great extent as well. i am wondering what you see optionality to get inflation protection? tony: i think the risk is the inflation side. i think the inflation dynamics as we see them, globally we don't see them particularly with impulses coming from china and europe, i find it hard to believe in the next 6-12 months we will see an inflation scare. that is why i think the fed will not only be patient -- if they are back in the second half of the year, my view is they will not be back and have two or three more in 2020, it

powell stuck very closely to words from his january fed meeting and the press conference when the fed pivoted from a policy of gradual increases to a policy of patience powell offered an optimistic view on the u.s. economy but the headwinds he was talking about were foreign and domestic, saying they have clouded the outlook. powell suggested he didn't see any threat from the economy running out of workers the economy is drawing in workers from the sidelines, lessening any inflation threat day two of powell's testimony is tomorrow in front of the house that could be more contentious with several new committee members, especially on the house side, that have their own agenda >> steve, you emphasized patience when it comes to describing powell. what came to my minding initially was political. i read this article on cnbc.com about how many times powell went to capitol hill and visited lawmakers, a total of 98 times, which was four times as many as yellen did in her first year in office i just sort of wonder if he's got the message in terms of the pivot, in terms of the pause, in terms of

the fed is in focus. key commentary coming up this am afternoon. >>> southwest airlines grounded at goldman sachs the one airline they say to buy instead. the halftime report starts right now. good to have everybody here today. the rally has taken the s&p to its highest level since the beginning of december. nasdaq rallying for seven straight days. going for eight now. you're as active in this market as i can remember. >> i've completely flipped around where i was what i meep an by that is we ta about the short term options while it was volatile, the options weren't what i wanted to buy. i wanted to buy stocks that i thought had been depressed of the downside i was always way down to 7 option positions now i'm back up to 17 of those i've cut my stock positions in half i'm been very, very active i'm trying to use this volatility in the market i'm trying to use the opportunity to job on the best return in the shortest amount of time i think the calls is the best way to do it >> where sort of do you see thin

scott, what are you looking for from the fed?when we look back at the fourth quarter, we knew risk assets had to have some sort of response to a higher interest rate regime. i think chairman powell might have felt he shanked that one of -- a little bit. we are at 1.5% inflation. the term premium is still negative. suggesting a lot of complacency on the bond side, not a lot of confidence in the future direction of policy. he needs to hit something more down the middle and concrete. he needs to be transparent and a little more sensitive about what financial markets are telling him in regards to risk. jonathan: for those not familiar with golf, when you set up to the ball, and it goes pretty much straight in front of you. it is not pretty. have we cleaned up the communication mess? have we gone too far? have we corrected too much of the federal reserve? >> as always here in bloomberg european headquarters, they are looking after me well. i have a nice glass of water and a slice of humble pie to eat. last time i came on, i was very b

the fed needs to be very nimble and depends on the datea just because the fed is a little more uncertain right now doesn't mean they shouldn't raise rates particularly if, in fact, inflationary pressures start to rise that could very well happen. the fed is saying it's data dependent and there has been a change of views in the last cycle that, in fact, the fed is more concerned about weakness in the global economy not just in the u.s. but the rest of the world. which way it's going to go is not clear but the fed should be nimble and very willing to move rapidly in a different direction if that's what's called for. >> sarah, i thought the discussion about the balance sheets was fascinating and januariette yelen saying that it didn't see financial conditions tighten at all that could change. could that now change again by simply seeing the rhetoric change by the current fed chair or do you think that is on a definitive tightening path from here on out? >> so -- >> is that to me or sarah? >> sarah, go first. >> so, yeah, i think that there is a way in which the balance sheet can be thought

the fed is going to be more easy. they are going to pivot to a different framework and try to boost inflation, which we think there is a possibility this cycle could continue for a while. you will get paid for owning this credit. jonathan: 400 basis points on high-yield. is that too tight? >> 7%. 430 in investment grade. those are not terrible returns in the current environment. you have had a backup in yields and spreads over the last couple of years. our message is it is a reason rate environment. you have to get credit risk with duration. if you are wrong and we come off the rails, that duration will help. jonathan: i think it is the v-shaped recovery that has people worried. do you consider them to be too tight? >> in terms of the quality of the balance sheet, the state we are in the cycle, the tools of policymakers on the fiscal and monetary side, the size of the bbb market, the overall quality spreads are too tight. essentially we are very late , stage in the cycle. the politics we see economically in terms of t

it the yoga fed.le around responding to the data chiwhich think the right thing. the reason this is so profound is you have what's a more symmetric fed. the you invest in equities it is commodities, whatever you invest in, the fact you had to worry about rates moving higher that's gone i think it's a big deal and now thinking about do i hold interest rate exposure in the portfolio against the equities or otherwise you can do it and why you don't have that ugly ominous gosh we'll see the discount rate continue to rise. >> there's bit more certainty and did get into a bit of explanation surrounding the inflation mandate and you wrote you believe the drivers of inflation misunderstood. without an inflation mandate, what should the fed be looking at do you think? >> one of the things i said that i think is really important, inflation volatility at an 85-year low meaning you don't have to do a lot you can be patient that we're actually at a level, core cpi to 230. it is not that scary at all. what tends to

seems like the fed still things, from your answer from the behavior of the fed, the best way to help workers is to shore up big bank profits and hopes the profits trickle down. fed has the duty to be creative, to help workers share in the prosperity they create. my staff will follow up with your staff on ways of doing that. one more question. it seems too big to fail is alive and well. we're seeing a potential merger commencing growth in the largest banks. suntrust and bb&t, each with over $200 billion in assets, decided to merge, saying it was too difficult to compete. what message does the fed sand to regional -- the fed send to regional -- if this merger goes through? mr. powell: we have a process we go through evaluating a merger. we will go through that process carefully, fairly, and thoroughly, and with a model transparency. when we do get an application, we do not have an application on that matter, and expect to get that in the next few weeks. we will do all of that. i would just say, we cannot prejudge anything. we will do our work on that, professionally, carefully, and tra

i think everyone's trying to understand the consistency of the fed.hey have certainly reestablished the put. but being said, if their economy is healthy and more stimulus comes into the market and that service growth, they could start to tighten. if they stay consistent, it will hold volatility down. jonathan: how confident are you that they will stay consistent, that you have a good idea of the reaction function of the federal reserve? i think a lot of people would sit around this table, and they have done, saying the fed is at the right place, but the way we got here was absolute mess. and does that tell you anything about where we are going in the future? you might be in the right place now, but wherever the be in six months? tony: it is concerning. i am in the camp that they may be back in the market later on in the year, but they will be saying things like the balance sheet is on autopilot. they will continue with the mantra of data dependency, flexibility, and patience, and that is a good environment for the next couple of quarters for the fixed

in your testimony can be stated the fed had made substantial progress on reducing reserves and the fed is prepared to ad just the program. this is a shift from comments in december when you said he believed the rough of the balance sheet has been smooth and you do not see "us changing that." i recognize that currency has doubled from $850 billion to $1.7 trillion, but please explain what caused the shift in the fed's balance sheet reduction plan and give us a better understanding of the final destination between the $4 trillion size right now and the $1.7 trillion currency level. chairman powell: in our november meeting, we began a series of meetings to engage on just this set of issues. and what is balance sheet normalization going to look like. i do not want to get ahead of the committee in december. and also i think the markets became much more sensitive to these issues. they had been insensitive for some years. we have now had three consecutive meetings on the balance sheet and we have worked at, i think, the framework of plan better hope to be able to announce soon, that will ligh

. >> a number that is great for the fed. i think they can ride this out and i don't think they are going to make another move into the second half of the year. >> are they really data dependent? are they stock market dependent? is inflation ultimately going to become the only thing that pushes them off of this? >> i think people continue to underestimate the strength of the economy. by the way, it is not inflationary. >> their mandate is full employment price stability. we are not at full employment if we are still creating this and price stability is fine. there is no rush. they are making the right call. >> the market completely pricing out any hikes for this year is a position that will be revised. jonathan: joining me around the table in new york city, jim keenan and tony rodriguez, and coming to us from atlanta is matt toms. let's begin with you, jim. are we underestimating the strength of the u.s. economy? jim: i don't know about underestimating. the market moved on expectations that the fed was going to slow the econo

is the fed less of a component now? >> so one of the good pieces of news right now in the economy is that inflation has fairly low. and so the fed isn't really under any pressure to rse rates. that was one of the fears in the second half ofea last that caused the market sell-off, that people were afraid the fed would ways rates and push the economy into a recession. it sounds like the fed intends to beie patnt and can afford to be patient. >> you say good news will be good news nnd bads will be bad news. is it as simple as that when you have such murkine in some of these numbers? >> i said that because sometimen in the past w people were afraid that the fed would raise ra as, bad economic number would come out and the market would go up because they'd say, oh, good, the fed will ease or won't rate hike. now the fedd has s we're not going to raise rates so that mean the economy has to stand on its own. it atrick, we'll leave there. thanks so much. >>> well, on wall street stocks were lower in a choppy trading session as

this isn't really the fed's work. there are policies we need to do that everyone should be able to agree on that will enhance mobility, improve people's chances in life, and enable people better to take part in the work force of the future. where technology will be a bigger factor and that's going to require advanced skills and technology. >> we'll turn to a question here in the board room from laura rom hermitage high school. >> good evening. i'm from hermitage high school in henrico, virginia. i would like to ask you if you could offer advice to all today's teenagers, what would you tell them? chairman powell: interesting. i guess i would say having raised some teenagers myself. a couple things, i'll say again i think economics is really interesting and it's great. economics was not taught in high schools when i was in high school. not at all. and it is now. that's a great thing. my kids took some economics in high school and took some in college. i tried to get my kids to major in economics. none of the three major

what are you looking for from the fed?i think we go back to the fourth quarter, we knew risk assets led to a higher interest rate regime. tee.he ball is back on the he has to acknowledge we are in ,n environment of 2% gdp growth the term premium is negative. a lot of space on the bond side. he needs to do something down the middle and more concrete, more transparent, when you go to hit the golf ball --it is not what you want to do on the golf course. policy attalk about the end of last year. too far and corrected too much? i have a nice glass of water to drink to make sure i do not get parched. show, i wason the hawkish with the fed. i do not think they cleaned up the communication at all, i think it is worse. i cannot rationalize economically the policy steps and guidance, it is hugely concerning for the medium term relationships, the federal reserve and financial markets. you are rewarding bad behavior. money around the financial system has not found its way to the real economy. they need to encourage good behavior in th

from the proposals, the fed has put out after the passage of s 2155 it looks like the fed and you are going along. the economy looks great from a corner office in wall street but it doesn't look so great from a house on main street. corporate profits are up, executive compensation has exploded. all because of the productivity of american workers. but workers wages have barely budged. hard work doesn't pay off for the people fueling this growth. seven of the 10 fastest-growing occupations dawn't pay enough to afford rent on a modest one- bedroom apartment, let alone for a down payment. household debt continues to rise taking its toll on families. at the end of 2018 think about this for a minute. end of 2018, 7 million americans with auto loans were at least 90 days past due in their payments, 7 million americans with auto loans were at least 90 days in the past due payments. even though the president brags about unemployment being record lows. too many americans of all ages are saddled with mounds of student loan debt. the trump shutdown revealed another frightening reality. too many a

fed and otherhe central banks starting to turn dovish. theda: interesting to see worst of all worlds, as the chief economist at allianz said, if france stop supplying and germany stops producing, you are in trouble. that is what the data is showing. the whole euro could be tracking 41% growth, and that is not enough for the rest of the world, let alone the weaker parts of that economy. shery: those numbers not looking great. european growth really at risk of not even barely topping 1% this year. amanda: the cost to consumer goods and services unchanged in the u.s. in january thanks to falling gas prices, another sign inflation is still no threat to the economy here, so how should investors be digesting that news? we have a couple of guests. inflation clearly not a threat. investors?this leave just enough inflation is what you want to signal there is growth and health in the economy. >> i think we have that. you are looking at study inflation trends. you are right, we are focused on inflation breaking to the upside but we also don't want t

economic outlook is what the fed will be concerned about. -- do youhink the fed think the fed is going to look at the trade narrative? clearly this is having an impact globally. we have seen it in europe. how do you think that is playing out in the u.s.? >> i think it is extremely politically charged. for the fed to say the trade issue is a definite negative is hard for them. this is the most politicized environment i have seen. the fed will be careful to say that trade is not necessarily a negative, but there is significant uncertainty. i think they will couch it in that format and talk about uncertainty in the treetops talk .bout a reduction in tariffs it looks highly unlikely. to the extent that they end up in a neutral scenario, the fed does not want to extrapolate too much. need a time when we handle from the fiscal stimulus to the corporate sector. i think they will couch it as uncertainty. guy: how long do you think the economic cycle is going to be? the fed has hit the pause button. what effect does that have on the cycle? >> that is a fair point. this is a fairly long cycle. i

we'll await the fed minutes a little later -- 6/10 of 1%. we await the fed minutes.you an idea of what is going on. the banking sector really and focus today. ubs trading down quite sharply as it loses a major court case in france. there will be an appeal, but nevertheless, this is a big blow to management. ubs down 3% now. 12.95%. trading down bein t

so things look pretty good for the united states and fed. he said since inflation is low, there is no need to worry about raising rates now. we wojcicki been eye on things going forward. as far as far as nonmonetary policy questions, -- we will just keep an eye on things for now. as far as nonmonetary policy questions, he did comment on what should happen to raise growth in the long run. at monetarying policy tools and what should change, if anything, where the senator is interested in that or what were they mainly asking about? mike: senator pat toomey was interested in that and ideas of price level targeting, which posits the fed would let inflation run about 2% for a while to make up for the time it runs below 2%. to me does not like that. paolo said we have decided nothing and we are just looking at things as an option on the table. much of the question was on bank regulation. there was a new bill that makes changes to dodd-frank and they want to know how quickly the fed is implementing that. elizabeth warren was worried about bank merge

and a key fed barometer, the philly fed manufacturing index going negative first time since 2016 now,t. louis fed president jim bullard in an exclusive cnbc interview saying the data within line of expected economic slowing but not worse than anticipated. >> we are expecting growth to slow down in 2019 relative to 2018 we are going do get 3% plus growth for 2018. 2019 probably suspect going to hit that 2.25% i think is a good number not a terrible outcome it just means that the economy's returning to trend growth. >> bullard was an early advocate of the fed stopping the rate hikes and a policy the rest of the economy tee has come around to belatedly he sees a risk of recession but thinks the u.s. can avoid one now that fed policy on hold, guys. >> sounds like he's of the view it's a slowdown and not worse. i feel like wall street has a

>> i think the fed has done a lot of work on this.t of new york fed did a lot and reduced the estimate of the so-called real neutral rate. from two to maybe about one and means that the nominal rate would be three rather than four. that's where they were aiming. i think they're continuing to aim in that direction and the best consensus down a little bit but the negative rates around the world are still negative and i think there needs to be global normalization global normalization the fed is part of that, ecb and bank of japan is part of that and have a more stability economic system in globally and in the u.s. with the normalized position before too long. >> john, there's still vacancies on the fed your name comes up have you had any conversations with the administration? do you think someone like h herrmaherman kane would be a good addition? >> people talking to the white house, interviews, i think it's important to fill out the fed. they're a little short just go ahead. there's been people nominated. but i don't know the particula

as for the fed, remember something. these minutes occurred when jay powell was pivoting to being patient regarding future rate hikes so that's important. the markets come to believe this essentially is signals no more right headaches in 2019. we'll see about that and it could change the roll-off in the federal balance sheet if needed. all that to watch coming up. >> coming up, rick santelli is watching the bond market for us. rick >> reporter: kelly, i'm looking up at the board, and i see rates creeping up just a bit not sure how much is out there with regard to the fed i can't wait to hear from steve, but as you look at the two-day of ten, you can clearly see we're going nowhere fast but that doesn't mean we're no an important place. if you look at since the last fed meeting for tens, clearly a downward bias, and if you look at the dollar index there's clearly a bias but a much firmer stance that's going to the upside which is very counterintuitive for the dollar. we want to monitor how growth is perceived by the fed b

we'll break its latest comments and get comment reaction from former fed governor mishkin. >> and jp morgan's joyce chang joins us nasdaq is slightly in the red. that dip an hour ago wasn't so much off the fed minutes but rather due to that brief headline about possible tariffs on the eu. we shrugged that off again and are not too far off the highs of the session. sara has an interview with the ceo of kimberly clark in ten, 15 minutes time sara >> good afternoon, wilfred and morgan yes, i'm here in dallas. kimberly clark is hosting a leadership meeting and the brand new ceo will open up to us exclusively his first interview since becoming ceo we'll talk about everything from the brands like kleenex and huggies diapers, which ones need a turn around and what's really going on with pricing as far as what's being passed on to the u.s. consumer and inflation, macroeconomic environment and a lot more i'll see you in a few moments. >> we are looking forward to it, sara, thank you. we'll see you in a few minutes let's get right to, speaking of, the fed minutes that came out last hour. steve

the fed is on the sidelines.u do get a better trade deal, some kind of a plan to roll those 10% tariffs back, that will give you some upside to the markets. alix: nick bendenbrook and linda bakhshian, thank you very much. david: time to find out what's going on outside the business world. says thee francis catholic faithful around the world one more than just condemnation. they want concrete action to put an end to clergy sex abuse. there was a warning at the vatican. the pope calling the summit after botching a high profile cover-up case of clergy sex abuse in chile. sebastian meeting with the president at the white house. he says mr. trump seems to have it in for germany. he's the youngest head of government in europe. germany is about to make it easier for major banks to fire their top earners. lawmakers are about to pass legislation designed to shield the finance industry from shock waves caused by brexit. the law would loosen protections for the bank's so-called risktakers who earn $250,000 a year or more. g

from the new hear york fed. still with me, my guests. what are you looking for from the fed speak?go back to the fourth quarter, we knew risk assets had to have a response to higher interest rate regime. at the chairman powell probably might have shanked that one a little bit. now the ball is back on the tee. he has to a knowledge were in an inflation, with 1.5% a lot of complacency on the bottom -- the bond aside, not a lot of confidence in the direction policy. needs to be more down the middle and more concrete. it is can be more transparent, aware of what markets are telling you. jonathan: for those who aren't aware, when you hit the golf ball, and it doesn't go where you wanted to. not pretty. i want to talk to about policy at the end of last year. cap we cleaned up the communication mess or gone too far? have we corrected too much from the federal reserve? >> here in european headquarters there looking out for me very well. pie.e a slice of humble last time i came on the show, i was very hawkish with respect to the fed, and i got a slump in the facing q4. i don't think they cl

the fed has plenty of time. we're not seeing a lot of pressure from inflation. >> before you go, if the fed starts raising rates, what do you think the market doesbout that? >> well, it depends on why the fed is raisingrate if it's because the economy is strong and you'd like to see continued growth in earnings, i choke off here's any danger growth here and i think that's still a positive outlook. >> all right,cott own, the chief economist of ray mond tonight. >> thank you. >>> on wall street s me andered for a second day. a rise in technology stocks helped the nasdaq turn in its s eighaight day of gains. by the close the industrial average was up 63 points to 24,959, theda n added 2 and the s&p tacked on about 9 points. >>> the resolution of the u.s./china trade talksst could the thing that drives equiti higher. bob pisani takes a look at where stocks might be heading. >> the market is pricie in a trdeal. the question is how much exactly is priced in?t cashman thinks it's 50% but it could be more. with that com

the fed was easing through qe programs. this time the fed is not easing. in fact they're still involved in qt and just the in other words, they're still shrinking their balance sheet. so even though they have changed their topeka quine quite a bit they'r no longer raising interest rates, they're still tightening slightly here. if earnings d continue to move lower as we move through the year, it will be a concern for me. again, i'm not turning wildly bearish here, i'm just saying after a huge move that we've i had. an nine weeks in a row is good, but usually after nine weeks in a row of a rally, it tl falls off a lbit. >> and the economy itself, you know, we're subject to what's going on globally. we've talked about this in the past here. if we're seeing a global slowdown, inevitably it eventually ends up here because of trade concerns and things.ut what a that and its impact on the stock market? thing., that's the same we have a combination of slowing global growth. even though the u.s. economy is doing better than the rest of the world or mostre of th of

the fed comes out and says they will be patient. a tightening and for 10 straight sessions we see credit tightening. tightenedime but it's like that u.s. stocks were at an all-time high. there is a mismatch here. it will be more important for u.s. stocks as it goes on, half of u.s. stocks have high-grade credit. 20 years ago about 90% had high-grade. u.s. markets not caring too much. this is the goldman sachs week in january it bounced back from a poor december, beating 12%, the benchmark gained 8%. that is their best performance since back here. this weakening economic picture we are starting to see, that data will get investors to care, and we may see this reverse in credit and equities. great charts, thank you so much. christophe donay, head of asset allocation & macroeconomic research, banque pictet & cle is still with us. i was asking yesterday whether the fed turning dovish would encourage risk-taking in the market and further fuel imbalances in the market. we have this rally in january bonds, even, and in ahead of this dovish

could you bro viprovide an updan additional measures the fed is making and confident the fed would prevent any payments if similar hack was attempted in the future. >> another bank starts to and is able to. it's intended to be that central bank it's something we have a lot of resources. >> received a lot of comments of some viable time left, is there anything you're looking to clear up >> will the gentleman yield? >> madame chairwoman. >> do you yields >> if you would respond more on the stress test. >> you have given banks the answers ahead of time. that's not what is intended in dodd frank would you help us with that in. >> it's probably the most successful places, regulatory innovation we intend to preserve stress testing as a key pillar especially for the very large financial institutions the idea we would give the actual models is not a good idea that would be shown given away the test we stopped way short of that but provided more transparency in our system of government a level of transparency and i think we tried to strike the right balance. >> if i could reclaim my time. i'd like

yes, the market pushed the fed. is it correct to push the fed? yes. can do whatever they like, and it is up to the fed to respond. as for the jobs market eating very good, i would question that. i've repeatedly said the jobs market is not as strong as it seems to be. the participation rate is lower than the peak we had before the 2008, beginning of the great recession. second, wage growth has been meager. you have had higher income people investing in the liquidity market who have done well, the people depending on wages are not doing well. multiplee people hold jobs, meaning one job is not enough to provide enough of an of those jobs holders are staying close to 8 million on 5% of the workforce almost throughout the last 10 year history. me that the fed's benefits of the quantitative easing has not paid off for the economy, and the labor market has a lot of slack. scarlet: joe made that point on twitter earlier as well. nice job, joe. joe: thank you. always good when the guests are aligned. scarlet: how convenient. i want to go back to the markets. c

be off the fed for now.: can we talk about the william dudley op-ed? heind it fascinating that said the market has got the wrong end of the stick. we can put the quote board back up. he basically said the fed really did not change tank when it comes to the balance sheet roloff. u-turnket perceived a and that means the fed at some point along the way messed up . does dudley's argument cold water? matthew: his argument is basically how the fed thinks about the balance sheet and the wind down and the effects they are or are not having on the market. it is not even that much we are running off. that gives you a good idea of how fed officials think about it . if you look at the market reaction to the fed, they were able to convince the markets that even if they do not see the balance sheet, runoff is having a big effect right now. at least planning and preparing for the time when they are going to stop that roll off. ball, know what they are doing, and preparations are under the way -- underway. vonnie: i think b

fed will clearly be behind kurt. -- the fed will clearly be behind the curve. vonnie: just getting an email from a viewer suggested perhaps it is the political uncertainty that will shape the market in the next 12 to 18 months with the campaign getting underway. >> in the u.s.? vonnie: this. -- yes. >> it is interesting. i wonder how much u.s. political risk the market has priced in. the focus has been on the deals, the trade deal in whatever deal we get to avert a government shutdown. we are waiting for the mullah report. u.s. political risk is not going to go away. i have been going back to the kind of things we wrote about the potential for president trump before he became president. markets got carried away with all the fiscal expansion and some of the downside we expected from trump did not emerge because of the fiscal side. now some of the downside around u.s. political risk is potentially opening up. guy: how much more are missing pivot around trade? if you take trade and get a good economy hass. the potential to get into a or pick upgher gear in core in

we'll take you back to the fed chair in a moment. we have news breaking on tesla phil lebeau has that >> carl, what we have is regarding fiat chrysler. shares of fcau, a stock that will be in focus today, the company announcing a major expansion in the detroit area, adding 6500 jobs, that's how many plans to add in the detroit area, investing $4.5 billion in new production here's how it breaks down. there will be a new plant built in the city of detroit, converting an old engine plant into a new plant, adding production at five other facilities, all of this to expand for the jeep brand. two new jeep models. this is a stock, guys, that's been under pressure. again, announcing a major expansion in the detroit area. 6500 jobs. $4.5 billion back to you. >> my apologies. i thought you were referring to the judge ordering musk to explain by march 11th why he shouldn't be held in contempt. that also broke in the last half hour back to the hill and fed chair >> student loans and research that shows that for students that can't discharge or s

the fed and the fdic did not join that release. the contraled to see lori's and said if he could not reach agreement with your agencies the occ would go on its own with cra reform. with that be a good outcome? told different regimes lead .ash a minute on diversity i believe diversity in the federal reserve's leadership including at the reserve banks is crucial because it is hard to stay committed when the leadership lacks an understanding of these communities it comes from experience. i and so many on this side of the aisle have pushed to diversify to more closely represent the american public. directors areard 74%banking or business, white and 62% male. they also cite that in 2013, 12 of the 105 or directors were african-american. that number has increased to 22 out of 108 today. this is an improvement but it still does not look good. federal reserve governor brainard recently spoke about increasing diversity efforts at conference.ander right now even before search is how is the federal reserve trying to build a pipeline for more

and i think that's why the fed is backed off.y're seeing the numbers, responding to the market and so i think the only way you get inflation i think from here is to have a stronger economy and a stronger economy means higher stock prices and all kinds of feeds into itself. going back two months, the fed to raise rates forever and the balance sheet to shrink now for a long period of time an now completely reversed and been significant change the most important thing that's happening now an concernedabou is the five-year t-bill and one-month t-bill are roughly the same the curve is flattening and dramatically in the last couple of months. not the long but the short end and that to me is something i'm watching pretty carefully. >> meantime, of course, trade talks between the u.s. and china ongoing at the white house today. kayla tausche was there in the room and has the latest summary of what took place >> reporter: after two days of cabinet-level negotiations and one week before the deadline on trade, president trump and the chines

from the proposals the fed has put out looks like the fed and you are going along. the economy looks great from a corner office in wall street. it doesn't look so great from a house on main street. executive compensation has exploded all because of the productivity of american workers. worker wages have barely bulged. hard work doesn't pay off. seven of the ten fastest growing occupations don't pay enough to pay rent. household debt continues to rise taking its toll on families. at the end of 2018 -- think about this. at the end of 2018, 7 million americans with auto loans were ninety days past due on their payments. too many americans of all ages are saddled with mountain of student loan debt. the trump shut down revealed a frightening reality. too many americans live paycheck to paycheck even with stable jobs. after 35 days of no pay those workers went back to their jobs and eventually received their pay. more than 1 million government contractors weren't lucky. custodians, security guards, cafeteria workers going 35 days without pay and getting no compensation la

we get knee-jerk reaction to the fed.it for the next day to get a better feel how the street feels about it. we got knee-jerk move. 70 points down. now we're back up near the session highs. what is leading us today? material names are leading us. energy is leading us. michael, i have to ask you, i know they were laggard last year, whether industrials, energy, materials, what does it say about not just this rally but the economy? >> well, if we look at what is going on with the energy prices and we look at the supply demand, first of all energy has been so convoluted. everyone loves crude. crude was going to $100 last october, then the bottom fell out. hal pointed out earlier in the show, a lot had to do with chairman powell. then it fell off and was going to $20. now we're back up. watching that rally, watching these material stocks finally starting to rally, year-to-date real estate has been on fire, hole builders, what is it telling us? it is telling us december was a bit of a head fake, growth my be sloyer but levers t

it seems the fed still thinks from your answer and from the behavior of the fed, the best way to helprs is to shore up big bank profits and hope the prosperity trickles down over the last decade, it's been creative in how it accomplishes this i believe the fed has the authority and duty to be creative to help workers share in the prosperity they create. my staff will follow up with your staff on ways of doing that one more question. it seems like too big to fail is alive and well we are seeing potential merger -- we're seeing growth in most of the largest money center banks to regional banks as you know suntrust and bb & t, each with over $200 billion in assets decided to merge saying it was too difficult for them to compete with the money center banks, investment and technology what message does the fed send to regional and community banks about their future if the fed eventually approves this merger? >> well, we have a process that we go through in evaluating any merger it's set forth in great detail in the law and in our guidance we will go through that process carefully, fairly an

it depends on the fed, doesn't it?lar-yen, don't forget the bank of japan stands ready to do whatever it takes in that marketplace. just a little bit of turnaround in dollar-yen. breaking news coming through on france klm. this is the revenue numbers, 26.5 billion. that is bang in line with the market. that's look at the forward statements, they see 3.2 billion euros worth of and they are below 1.5et ebitda times. like should carriers around europe are enjoying a better time than the low-cost carriers. it seems to be the ability to sell business seats versus low-cost. the fuel bill is going to rise, 650 million euros. this is guidance for them in terms of their costs for the year forward. let's get the business flash headlines with olivia in london. olivia: the tesla ceo elon musk has shared his latest production forecast. he's aiming for a half million cars this year. the numbers are broadly in line with what markets had said before, but it's difficult to gauge, given his proclivities to stretch goals. tesla's total d