on their fed accounts. when the fed began raising its targets for short rates at the end of 2015 it relied on this tool, mainly it raise the interest paid on the reserves to push up money market rates generally. this tool has been used throughout the recent tightening cycle and this operating regime is working quite well so the fmoc has now decided that it will remain in place and last the fed to avoid day-to-day intervention in the money markets and is compatible with large reserve holdings by banks of the federal reserve, something that banks now want to sasatisfying liquidity requirements. from a financial stability standpoint the regime is also much safer. when the fmoc seizes the runoff in october the feds asset holdings will have declined to around $3.7 trillion in the process will have ran its course. balance sheet runoff has the potential to provoke considerable financial market disruption. indeed the difficulty of acid purchases had been a concern in the committee and in congress which some observe

that the fed ought to cut rates and quantitative easing. why even have a fed? if policy can and should be dictated from the white house, what's to stop us? no, no, that's not what he's saying i agree. >> so then -- >> follow it through that the president and the executive branch can and should publicly diskoriate the federal reserve and muscle them into public policy >> for a second, why is the fed being muscled? right? if you believe the president can't fire the fed chair, most people believe, why would they listen to him? if they're being jawboned into it, they could simply turn off the tv and not be jawboned that seems to be having an effect or they're agreeing with the president which would suggest the president was maybe right in his criticism at the beginning. >> we create these structures and we call them independent, yet they still only exist with popular political support. if that support erodes, the institution erodes. >> political support from congress though. >> fair enough, fair enough. >> just because a branch or an organization that is independen

>> the fed should drop rates. i think they really slowed us down. there is no inflation. i would say in terms of quantitative tightening, it should now be quantitative easing. jonathan: so many different ways we could go with all of this. robert, the fed's next move and how the president's calls play into it. >> that was quite expansive call on his part, quantitative easing. to the point that the job growth has been strong, that is to the fed's credit. they have been more cautious than any fed in terms of raising rates, and that's been spectacular for the length of this expansion. the financial institutions are really well-capitalized here compared to past cycles. people are scarred by the past cycles, worried we will have a balloon if we get faster growth. i don't think that's true. to krishna's point, your population ratio is very low. there are a lot of people on the sidelines that really need to come into the workforce. given the demographics, savings levels in this economy. i think it has quite a way to go he

fed people around you?hter] jay: what i'm trying to do is explain what we are doing and why we are doing it in a way that is comprehensible to the interested public. that's what i try to do. when people start using these technical words that don't mean anything to them, it is just irritating. so i try hard not to use it, or lapse into the latin, for that matter. david: speaking of latin, you have a skill you have perfected since college. you can take a word and pronounce it backwards. so, take rubenstein. you can say that backwards. is that right? jay: yes, it is something i was born with. i can see your name spelled forward and backward in my head. i have been a what to do that since i could read. david: is there any advantage in life from having this skill, or? [laughter] jay: it has been surprisingly lucrative at times. david: really? what did you think when you first on the fed? you are not an economist. jay: i spent a couple of years really getting the books. i sat next to janet yellen. she used to com

equity risk premiums, the fed model, the rule of 20. you can go longer term, price to sales, the buffett model it really is a function of what metric you choose to use let's also admit that valuation is as much a sentiment indicator as it is in the roots fundamental indicator. there are times investors are willing to play nosebleed valuations for stocks and times where investors don't want to pay anything for stocks. so this idea that it's sort of this hard and true fundamental number belies the fact it's a sentiment indicator. >> it's josh brown we've had quite a drop in the ten-year quite a drop, not quite as big of a drop in the longer end of the curve but mortgage sub-4%. there was a lot of concern about housing numbers falling off a cliff this winter, allegedly, although we know how cold it was and, whatever. but is that an area of concern that you would say has now been amply addressed by falling rates? >> yeah, i think the prospects look good for housing. remember, though, it's a smaller driver for overall gdp and kind of what's

fed.> this corroborates what they've been saying all along. >> inflation pressures remain pretty subdued. >> goldilocks job report. >> we are threading the needle. >> businesses have not lost confidence. >> chairman powell's famous words, he is not sure if it is debt or fake, but it is resting. >> people said, watch the phillips curve. we will be talking about that every month. it will not happen. >> very little risk of wage inflation. >> huge growth when you look at education, leisure. that shift is a big deal because that means less inflation, more stable inflation. >> all of that points to the fact that things are looking good for the u.s. labor market at the moment. jonathan: continuing the conversation, we have robert mcteer. scott kim vaughan joins us from bmo. krishna mamani joins us from oppenheimer funds. do you agree with all of that, is this a goldilocks job report? krishna: absolutely, it's been a goldilocks environment for quite a bit. the driver of that is relatively straight

i mean, the fed doesn't.ugh you've been raising rates this last year and a half, rates are still very low. so to you get concerned about that, that if, in fact the, there's a situation where you do feel like you need to cut rates, can't go much lower. >> it's true, but that speaks to where the neutral interest rate is, and the neutral rate is lower. we don't control that. that's controlled bid broader macroeconomic forces. but if we did have another recession, we could cut rates. we could turn back to quantitative easing, we do have other tools that i think they're not perfect tools, but they did work in the wake of the financial crisis in helping to boost economic activity. so i don't feel like we would be out of ammunition if, unfortunately, a recession were to occur. maria: well, you're right. let me ask you about the balance sheet drawdown. the federal reserve balance sheet is still above 4 trillion right now? >> it's around four. maria: you want to get it down to one and a half? >> well, no. it's going t

my biggest threat is the fed because the fed is raising rates too fast. i think the fed is far too stringent and they're making a mistake. >> this is why the fed is meant to be an independent body because every president would like loose money heading into an election, make the economy artificially pumped up to make them look good. that's why the fed has to be so independent and why there are so many concerns about the president trying to put two insi insiders, people close to him on the board. >> this is another way the president breaks with tradition, unorthodox, there were reports about him firing jerome powell because he didn't like the way he was operating the fed. speaking of president trump, he's set to travel to the u.s., mexico border. early thursday, he said this. >> we're going to give them a one-year warning and if the drugs don't stop or largely stop, we're going to put tariffs on mexico and products in particular cars. and if that doesn't stop the drugs, we close the border. >> just a few hours later, trump back peddled on ever closing the b

years over a rising fed hike lack of fed hikes puts pressure.her end you've seen deposit betas lower than expected banks have not raised the costs as thought and loan growth is good. one of the things you'll see from the banks this week and next is you'll see decent loan growth both the factors should compensate for margins that don't expand as much as anticipated and allow the banks to grow. >> what are your three top choices among the banks on display today? >> today i would say jpmorgan and citi are the standouts today. generally we're constructive on the group. giving your view despite the changing rate and backdrop, we think the backs continue to grow earnings and book value. buy back a lot of stock and continue with positive operating leverage >> jason goldberg, we speesht it >>> ahead on power lunch, is pinterest management too nice for wall street? we'll explain and all the details ahead of disney's investor day tomorrow when power lunch returns. val, vern... i'm off to college and i'm not gonna be around... i'm worried about my parents'

krishna: blame the fed. david: exactly. but the fed has corrected itself. the year? what are you looking at? betsy: it is fair does -- krishna: it is fair to say first quarter will be the trough and things will pick up in the back half of the year. international growth will pick up. gdp growth will pick up. across the board, the earnings outlook and the topline growth outlook and the gdp outlook improves materially in the second half. alix: fairpoint. -- fair point. part of it will be evaluation due to rates. >> i am long on overweight financials. it is far and away the cheapest sector in the s&p. alix: that is kind of what you were just talking about. if we do get rates that could be a good thing. krishna: maybe. i think this has been the story with banks for the entire cycle. everyone likes banks because they have decent earnings. stocks do not go anywhere. that is going to be the case for a while. alix: what will make that go somewhere? betsy: loan growth. buybacks. alix: it will not come from a steeper curve or the fed? betsy: i'm not predicting the int

is doing but they're preserving fed independence by not issuing explicit orders to the fed or expecting the fed to carry out the orders larry kudlow was at an event earlier today saying almost exactly that word for word but the question is here to what degree is the fed bowing to administration and trump pressure or to what degree was trump right when he said interest rates didn't need to be higher thanthey were and ought to be coming down? it's not the white house's fault, they'll argue if they were right and it took time for the fed to figure it out >> there's almost a feedback loop the president says something, the markets react. powell rackets to the market which is a data usually don't comment. when the fed does move, you have the doubt as to why they did it. and eamon, i take a little exception with the normalized way that you just talked about that >> sure. >> okay. it was weird when the president first made those comments. right? >> yep >> i feel like they've crossed a line here. when somebody says the fed should cut by a half a point, the idea that they're no longer directing f

economy, why would the fed cut rates. vonnie: larry kudlow was saying that the president is pressuring the fed, certainly not on policy, and an opinion. the two latest nominations, herman cain comes on the heels of a nomination of stephen moore's who would have to be stephen moores confirmed by the senate. it is an ongoing saga. we will be following his trip to the border -- the mexican border with california and will be bringing you all of that later on. this is bloomberg. ♪ vonnie: live from new york, i am vonnie quinn. guy: live from london, i am guy johnson. i want -- i thought that payroll number would have been that are for equities. equities are going nowhere in a hurry and are trading on light volume. here's abigail doolittle. abigail: we are looking at gains in the u.s. and in europe. they are relatively small. take a look at the s&p 500 and nasdaq up .5%, and not reacting to president trump's comments that the fed should stop shrinking the balance sheet. there is the stoxx 600 up .2%. in china, perhaps -- expres

criticized the fed over the weekend. if the fed had done its job properly which it has not, the stock market would have been up 5,000 to 10,000 additional points we assume those are dow points, not s&p points and well over 4% instead of 3% with almost no inflation. quantitative titlening w tight inflation. quantitative titlening w tigeni killer all he can do is watch the data and work towards the dual mandate of maximum and price stability. >> people will criticize but as long as we continue to look at the data, can explain it relative to what we're supposed to be doing, we just have to accept criticism and if you're in this and you don't have a thick skin, then you have to consider how to get or grow a thicker skin >> mario dragi weighed in saying trump's criticism concerns him and might undermine the fed's independence >> i was just going to say, fall of 2020 is a long time off and now part of the conversation >> the fed may not be doing things it doesn't want to do because it can't be seen >> it's the number one tool,

the white house is negotiating with the fed the question is whether the fed is negotiating back in terms of rate cuts but you can see the president there comparing the fed unfavorably to the chinese government and saying that if the u.s. administration and the fed were to work together, the economy could be going up like a rocket and we could have very good things happening here if there was a 1 point rate cut. >> calling for more quantitative easing as well that's moving the goal post. thank you. >>> uber preparing for an ipo and the ride sharing company faces strong competition in one of its key markets we'll tell you about that and what it means for uber >>> are things getting brighter for ge shares popping on the earnings beat this morning. we'll talk with one of the biggest bulls on the stock i consulted with your grandmother's doctor. we can do the screening at her house. hi. this is the man that's going to check your eyes grandma. cognizant ai solutions are helping healthcare companies advance diagnostics and prevent blindness in patients with diabetes. everything looks good. you

trump call for the fed to cut rates and then go even further >> i personally think the fed should drop rates. i think they really slowed us down there's no inflation i would say in terms of quantitative tightening, it should now be quant tative easing >> so joining us now with more is former dallas fed president richard fisher he's with us from dallas mr. fisher, welcome back qe4. that's what we need. do you agree >> qe infinity, right? back in the old days >> some suggested that's what we should have done all along what about the president saying we should do quantitative ease again? >> the balance sheet as of last thursday when they update the h41 filings is now below $4 trillion they are taking it down, probably to 3.75 should be done as per their last statement around september you've got currency in circulation $1.7 trillion on one side of the balance sheet. also on that side of the balance sheet, bank reserves at $1.6 trillion add the other factors on that side of the balance sheet. you really can't get this balance sheet below where they plan to be in september. i don't get it i

the fed told us they are done with hiking.nk people felt more comfortable about fixed income, but in the last couple of months, there has been this fear they were going from goldilocks to a recession. if you're nervous about that and the fed is not hiking, you put your money in the front end. so money market fund inflows have been extremely high. that is not investing in the riskiest assets, so i see where he is coming from. gershon: as much as i hate to agree with larry fink, he is right. and his results show it. people put a lot of money into passive funds. but that does show people are not investing enough in risk assets. in equities and other risk assets. i do not think that is anything new. how many studies have to be done tha show the s&p returns 11% over time? the average investor gets 3% or 4% of it. they consistently buy high and sell low. everyone was so nervous in the fourth quarter last year with selling. now we are up on the s&p year to date, people are chasing it. jonathan: let's explore this a little further. th

. >> the fed is no longer your enemy. >> the fed has called a truce on us bond investors. >> it is allowing this reach for yield. >> reach for yield coming across all different asset classes. >> the market has maybe more upside. >> more juice that can be squeezed out. >> we think there is more room to run. jonathan: joining me is the head of u.s. rates strategy at societe generale, michael collins, senior portfolio manager, and bob miller. great to have you with me. let's talk about that support mechanism. low rates and why they can remain low for a whole lot longer. >> central banks wanted that way. it is not just in the u.s. but globally, the ecb and the other central banks are keen on providing accommodation. if you listen to the fed speak thatweek, the feeling is 2.5 is close to neutral, so we are -- they are pretty much happy keeping rates where they are for an extended period of time until they get an indication of moving policy either way. bob: i think the fed has pivoted in a very durable fashion and will not go back to last year's game plan. instead of following the methodology and

. >> the fed is no longer your enemy. >> the fed has called a truce on us bond investors. >> it is a support system. >> support for risk assets. whether it be equities or high-yield credit. >> it is allowing this reach for yield. >> reach for yield. >> reach for yield coming across all different asset classes. >> the market has maybe more upside. >> a little bit more upside for equities. >> more juice that can be squeezed out. >> we think there is more room to run. jonathan: joining me is subadra rajappa, the head of u.s. rates strategy at societe generale, michael collins, senior portfolio manager, and bob miller, head of u.s. multisector fixed income at black rock. guys, great to have you with me. let's talk about that support mechanism. low rates and why low rates can remain low for a whole lot longer. >> central banks want it that way. it is not just in the u.s. but globally, the ecb and the other global, central banks are keen on providing accommodation. if you listen to the fed speak this week, the feeling is that 2.5 is close to neutral. so, they are pretty much happy keeping

he worked for the kansas city fed. he has a lot of real world experience we should like at the fed.publicans right now to make the argument we're not going to take this lying down just because you decided he is unqualified. paul krugman or whoever. doesn't mean that we're going to accept that. charles: the idea that president trump stacking the fed from a wall street perspective, what is wrong with that? >> well, again, you have to go to the source. of course they want some who will cut rates and be more dovish on the spectrum. that is what you will get. from a credential perspective i agree with carol, he has a lot of background. i grew up eating godfather's pizza. that seals the deal already. no, he clearly has a lot of experience with the fed. charles: president trump, by the way, folks, that is el centro, california. he headed to the border. he is in a great move. pushing his agenda very, very well. we know he is very serious about this. he will show off what a new wall looks like to the american public. didn't mean to cut you off. dan, carol, thank you very much. we appreciate

by the fed.f you look at real rates, 10 year real rates hit 1.2% late last year. i'm nervous that if the fed continues hiking or let the balance sheet runs off, if real rates continue to rise, they -- the economy cannot handle it. they will not go above neutral and then they stop the balance sheet run-up. that has taken these much lower. they are not trying to murder the economy. they might be able to achieve what no other fed has been able to do, which is essentially not murder the business cycle. jonathan: let's talk about what is happening with treasury yields. it has been interesting. the fed has backed away. the data looking ok in the united states. yet we still cannot unlock materially higher treasury yields in terms of nominal and in terms of real yield. what are your thoughts? gershon: the market is saying they do not believe the fed will be able to generate inflation. it is pretty clear. you would expect, if we were to go into a recession and the fed was going to start to raise, the shor

president trump renews his attack on the fed. he says the stock market would be much higher if it wasn't for jay powell's policies. mario draghi adds to that story. he says he is increasingly worried about the fed's independence. steven mnuchin says the u.s. and china are closer to a deal, but he is also worrying about currency manipulation in japan. >> let's get you started with a look at the markets close in the u.s. brought optimism over the global economy because of positive data out of china. s&p 500 gaining for a third consecutive week. onancials leading the gains friday, positive earnings out of jp morgan. the only sector in the red was health care, insurers falling for a second consecutive session as we had congress debating drug costs. u.s. futures holding at 29.13. let's see the asian session. sophie: some of the optimism may be happening for asia. futures are narrowly higher and we are seeing the tone set in wellington. we enter a week that offers chinese gdp numbers and u.s.-japan trade talks in the wake of japan high

the fed has backed away.e still cannot unlock materially higher treasury yields in terms of nominal and in terms of real yield. gershon: the market is saying they do not believe the fed will be able to generate inflation. you would expect, if we were to go into a recession and the fed would start the race, the short end would be rallying more than it is. you have the short anti-rally or the long end -- the short end rally or the long end selloff. i'm just as bullish as the others but it is not like there are not risks out there. in the fourth quarter, everything was terrible, the world was falling apart, no one could do anything right. it is not 100% rosy. we do not have a final trade deal. europe is still spiked, it is not his best people think, but it is not rosy over there. we need central banks to keep doing what we're doing. jonathan: let's talk about the gravitational pull of the rest of the world. we still a positive real yield in the united states and i wonder if that is an incentive to go lower for a

the fed being more accommodative. now the start of earnings season what do you see as the next major catalyst for a move either up or down >> well, absolutely you are looking now for the effects to come through and to affect earnings strongly in earnings season i think that we see the u.s. obviously having rallied up significantly. but i think we're more excited about the kind of term urn we si the asian markets. we see a bottoming at some of the economic data including policy support and some of the political risks in both economies. >> rick, what do you make of the ecb today? it did have a bit of a negative impact on u.s. committee mequits >> they did a little bit, but all things considered, when we talk about inflation in the states, just consider if we had a rampant rise in inflation think about how other central banks like japan and europe would have to deal with it they would have to go more negative on the short end and the long end, they would have a steep curve and mostly likely be entirely negative. i guess

if you do not learn much from the fed conference, maybe the fed minutes.t is less of an event risk today. if we have more signs about what would tip them from neutral into cutting interest rates, that could have an effect on the dollar. i am not too excited. . nejra: how high is the bar for a rate cut? jordan: you saw the remarks, pretty high. they are unlikely to simply say -- so the risks are to the downside in the u.s. are they going to start to say we will act upon that? i don't think so. it's not like europe where you are below trend and collapsing. the fed pricing is about 30 basis points or so over the next year. we could be talking the end of the year when this materializes. i think china will bail out a lot of these economies. nejra: i want to ask you about dollar-yen. it has been nor -- negatively correlated with three-month imply volatility. jordan: volatility is near record lows. what makes volatility pick up is when you start to see central banks diverge. not going to happen anytime soon, i guess. when the recession trade happens, that's when

and the president hammering the fed to cut rates, again.hether the ten-year yield is going back below 2.5% >>> self-inflicted wounds. the president is not changing the housing market enough and that fannie and freddie still need to go how likely that outcome is >>> plus, a big milestone in music terms for apple. is this a sign the services push is working if so,he

they created the fed. so wherever the fed is today, there's a major flaw in how it was created and how it exists which is that it exists ultimately to benefit its members. it says it exists to help greater -- the greater economy and sort of the greater public but the reality is if you look at the actions, they are very visceral when there's a situation where a wall street large institution is in trouble or there's a necessity to help a goldman or jpmorgan chase or someone who has an institution that is part of the history and the fabric of how the fed was created, has benefited from how the fed is created and continues to benefit from this sort of implicit subsidy that not just the fed but all of the central banks provide to the largest banks in their respective countries. i think that's a flaw. >> are the u.s. and china central banks, in your view, colluding? >> okay. so this is a very interesting question because the major collusion i talk about in the book had to do with predominantly the g-7 countries.

we'll talk more about bonds and the fed coming up. hey, look at the u.s.reen back it got lost in all the stock talk, but the dollar index, versus a basket of other world currencies may by down now but it's on pace of -- a strong dollar has been a big theme over the lasti year as well. if you were not paying attention to how strong the first quarter really was, don't worry we've got you covered. look at these gains since the beginning of 2019, the dow up 11%, s&p up 13, and the nasdaq up 16% unless futures turn around, we are going to add to those gains today. inside the markets, every single sector is higher this year among the best of the best, well, technology takes the top spot up 19%, real estate up 17%, and the industrial group up 17% as well. don't lose sight of energy energy stocks and oil have been on fire as well. crude oil on pace for its best start to a year since 2002 crude oil up 33.5% just this year, so what to make of this run and more importantly, what is in store for the second quarter? let us bring in david nelson, chief strategist at bel

louis fed. we think people are looking at the wrong yield curve because what has happened is deposit rates, which is funding bank lending, have remained very low. that yield curve remains steep. francine: conrad dequadros of rdq economics. both stay with us. coming up on bloomberg markets, a conversation with the coca-cola chief executive. we spoke to him in davos talking about classics -- plastics in the oceans. that interview is 10:00 new york, three: -- 3:00 in london. indicating ares lower start to the day but they seem to be range bound. i'm looking at markets. they did reopen after a long weekend. earnings season, ramping up but we are looking at crude oil, 65.96. twitter and snap today. this is bloomberg. ♪ francine: this is "bloomberg: surveillance." it is a national day of mourning in sri lanka. the death toll has climbed to 321. according to the government, a local jihadist terror group is responsible for the attack that targeted christians and foreign tourists. therpol has joined inve

the fed will be even more worried than today.onathan: i want to get to a dynamic that has been worrying people. treasury yields are coming this week and the dollar strengthened. can you make sense of that? greg: the u.s. is still the high-yielder in the world. now, if you are a levered investor and looking to borrow money to buy something, you are not coming to the u.s. because it cost money to borrow here. if you are a real money investor and are willing to take currency risk coming you are going to come to the united states. that has supported the dollar despite what most people have thought. jonathan: investors are looking at the united states, coming in you end up with a result of a stronger fixed income market, asset prices rich enough, and the dollar gets stronger as well? iain: we are definitely seeing signs of that, and it is not just europe, it is happening in asia and japan as well. we are in a world of negative yields. big increase in the amount of negative yielding bonds across europe, japan. let's look to the u.s. 10

the fed will be even more worried than today.onathan: i want to get to a dynamic that has confused a lot of people. it has been an interesting conflict, the idea that treasury yields are coming this week and the dollar strengthened. can you make sense of that? greg: the reality is this -- the u.s. is still the high-yielder in the world. now, if you are a levered investor and you need to borrow money to buy something, you are not coming to the u.s. because it costs money to borrow here. but if you are not, if you are a real money investor and are willing to take currency risk, you are going to come to the united states. that has supported the dollar despite what most people have thought. jonathan: are we seeing increasing signs of that, that the foreign investor, particularly in europe, is starting to look at the united states, come in unhedged, whereby you end up with a result of a stronger fixed income market, asset prices rich enough and the dollar gets stronger as well? are we seeing signs of that? iain: we are definitely seei

personally think the fed should drop rates.ly slowed us down there's no inflation i would say in terms of quaintive tightening it should be quantitative easing we're doing very well. >> mr. president -- >> going in a little different direction. ron is a good man. we're going in a tougher direction. we want to going a tougher direction. >> what exactly is offensive about joe biden's behavior and are the right messenger for that >> i think i'm a very good messenger and people got a kick out of it. he's going through a situation let's see what happens but people got to get wis-- we to smile a little bit. [ inaudible >> i don't see him as a threat i think he's a threat only to himself. i just don't see him as a threat he's been there a long time. his record is not good he would have to run on the obama failed record. you look at what happened with so many different things north korea. the middle east. the economy. never got going. no, i don't think joe is a threat i would love him to be look, i would be happy with any of them, to b

there is a lot of pressure on the fed. -- of this talk from the fed about the fed from trump and allf his nominations from the -- for the vacancy alluding to this. >> i have a chart on my terminal. we had that yield curve inversion. at the same time, you have equities continuing to rally. how are you viewing this discrepancy in terms of all of the -- all of it? possible think the fed us if he is to wait and see whether this conversion sustains. they're looking at the tenure curve -- 10 year curve. i think they are on hold for now. let's see what happens. cynic, it low number is really surprising on the downside. be a consensus of a 120,000 range. that will send downward bias toward market expectations. i think the fed will continue to reign in- rain in -- any hawkish expectations. rishaad: on the 10 year, we have the yield negative still. -- the outlook for european growth is not good. of course, germany being the powerhouse of the eu, it is central to that forecast. selena: that is the case. irs for shadowing the global forecast. germany has been going through a soft bash. essential