the prohibition of pce of holding mortgages and providing a bright line distinction between pce and issuance of securities. we recognize the importance of a limited government role in the housing finance system. particularly in the form of an explicit government guarantee. the principles include the need for a single, independent regulator that provides stability and confidence in the market. we're concerned that the fhfa relationship and vision to the bill could become a de facto dual regulator structure that has the potential to create confusing directives in the market. our member credit unions have general concerns about the overall cost and workability. including the transsuggestiitio. we urge general caution and enhanced flexibility as major changes are complicated. it's critical any increased cost be minimized as to not increase the cost of borrowing for consumers. not serve as and try for small lenders and not allow large lenders to dominate the system. as congress considers reform, treasury and the fa are also evaluated potential administrative rules. we have encouraged the fhfa to

based pcs -- pce is only 1.4.ne.at's problem number and that is what i think the market is most concerned with. but it is also worried about the balance sheet. the fed is draining $50 billion a month from the liquidity pool that it pumped in in the last 10 years. frankly, we don't know. the economics profession doesn't know and the fed doesn't know because we have never done anything like this. you never pumped it in and we never pumped it out. but if you think about why the fed pumped it in. it was to raise asset prices. you want to do that, but you want to do it all at once. i think they are getting a loud message from the market that they are doing it too fast. jason: i'm interested in the research you put out to your clients. one thing you mentioned, if you look back at history, chairman volcker and chairman greenspan both essentially changed their minds. they went back on what they said they were going to do in terms of raising rates and in terms of other policies. do we need essentially a change in policy, a

providing a bright line distinction between pces and issuers of securities. a recognize the need for limited government role in the system. a limited government role also means that many of the operational details of the housing finance system should be left to the entities. congress should not be mandating requirements like a minimal down payment. this is a requirements that can be put in place by the regulator. it should be flexible, to accommodate for economic fluctuations. single, independent regulator who provide stability and confidence in markets. we do not want confusing and conflicting directives in the market. our credit unions have general concerns about the overall cost and workability, including the transition to any new housing finance system. great strides have been made to address his concerns, but we urge general caution and enhanced flexibility as major changes are contemplated to the housing finance system to ensure that reform is done right. it is also critical that any increased costs associated with establishing a new system be minimized

it's really hard when you consider that pce or core pce, which is what the fed is looking at is showing signs of declining to continue raising interest rates. i'll refer back to ed highman. we'll see it at 1.6% in the next few months with inflation that low, the fed clearly has not fulfilled its mandate to get inflation to 2% and i think they're looking at the data i think that's one of the reasons i'm becoming more and more confident that they're going to say let's just take a break and watch the data and give the market room to breathe. that should be good for risk assets and we will get what i've been referring to as an indian summer all of a sudden -- >> are you calling the bottom for the equity market, scott >> i think it's near by, brian i would be a buyer more than a seller even if we get a further collapse in prices from here is going to result in the fed announcing it will take action we're close enough to a bottom. >> scott this is jenny harrington i have a question for you. can we get more granular and as you think about these defaults what specific companies or industries do

. >> isn't pce you are looking at? >> core pce or something like that.t matter too much. you are overly sensitive to the data if it depends on that. >> do you think the economy is rolling over? we see the yield curve flattening, housing data has been pretty mediocre. how robust -- forget the fed. how robust is the economy? >> i'm not especially good at that but we had a tax cut gave some fiscal stimulus and if anything it tends to fade out, there is the crowning aspect from higher interest rates. you would expect the economy to slow down. i don't see it rolling over. ♪ >> now let's turn to global politics in the wake of the g20 summit in buenos aires. the g7 nation issued a statement condemning russia's use of force in ukraine. following the summit petro poroshenko spoke exclusively with bloomberg, and we will revisit that interview in a few moments. but first, here's erik schatzker's exclusive conversation with argentina's president, who still has to reassure investors that his reforms can stabilize the economy and control inflation. ♪ workinge committe

. >> pce? >> i am a core pce or something like that. it shouldn't matter much.e to data if it depends. >> do you think the economy is rolling over? yield curve flattening. anding data pretty mediocre u.s. -- in the u.s. how robust is the economy? >> i am not especially good at this. we had the tax cut. tax cut gave fiscal stimulus. no more after this. out ofy the crowding sectors from high interest rates at times. you would expect the economy to slow. rolling over, i don't see it. abigail: let's turn to global politics. g-7 nationsof g20, issued a statement condemning russia's use of force and ukraine. petro poroshenko spoke exclusively with bloomberg. here is the exclusive conversation with the argentina president macri who has to reassure investors that his reforms can control inflation. we are committed to keep working hard, to resist inflation. we know that affects the poor people first. >> can it be lower than 20% by the end of the year? pres. macri: no. no forecasting. i will not be trapped. >> let me ask you, you have articulated economic strategy to mark

>> well, i think we look at both, but core pce is a good indicator. it has -- what's happened over really 50 years is that inflation has become much less reactive to changes in growth. there was a time when inflation reacted really quickly to changes in growth and changes in unemployment, and that time is behind us, and that is often attributed to the success of central banks in anchoring inflation expectations, so that people believe inflation will come back to the target or around the target, so it doesn't go down as much. inflation doesn't go down as much in a downturn, doesn't go up as much when, you know, when the economy is strong. it's really true, though, that inflation has not reacted a lot on a road from 10% unemployment to now 3.7% unemployment. it did move up last year, but in terms of just targeting growth, you know, i think, i actually think our dual mandate works very well, which is maximum employment and stable prices. most of the time those two things work together. when they work temporarily in different ways, we take a balanced appr

. >> is it pce you are looking at? >> no, i am a core pce or something like that.ld not matter too much. you are overly sensitive to data if it depends on what you use. >> do you think the economy is rolling over? we see the yield curve flattening. we see housing data this year has been pretty mediocre in the u.s. how robust is stash forget the fed for a second. how robust is the economy? >> i am not especially good at this. we had the tax cut. the tax-cut gave you some fiscal stimulus. but it is no more after this. if anything, it fades out. there is probably the crowding out effects from high interest rates at times. you would expect the economy to slow down. i would not -- i do not know about rolling over. i don't see it. abigail: let's turn to global politics. in the wake of the g20 meeting, g-7 nations issued a statement condemning russia's use of force in the ukraine. following the summit, the ukraine president petro poroshenko spoke exclusively with bloomberg. we will revisit that interview in a few moments. first, here is erik schatzker's exclusive conversa

i'm renovating the bathroom, that's why nothing is in its proper pce right n.he smer, i sre thing herebove theven. i'd kno you wercoming,i'd ha. my gndchildr like toide d play ihere becse it's warm . goodbye. come and visit me the next time you're in the area. host: there are around 5.5 million small-scale cocoa farmers worldwide. their yield mainly goes to middlemen, who pass it on to exporters. the cocoa beans are then processed in factories. then the large chocolate-makers step in, the first to really make a considerable profit. they sell the chocolate to retailers, who collect around 40% of the total revenue. cocoa farmers, on the other hand, earn the least. but in indonesia, that's set to change. reporter: suitcase, laptop, boarding pass -- familiar companions for sabrina mustopo, who is constantly on the move for her work. she was born in indonesia, went to school singapore, and stied at a prestigious univsity in the u.s. t in 2013, she came back home to srt a cocoaompany. today she on her wafrom jakarta to sumatra. sabrina: i've always felt that i had an

the three p's of life insurance on a fixed budget are price, pce, and price. a price you can afford, a price that can't increase, and a price that fits your budget. i'm 54 and i was a smoker but quit. alex, what's my ice? you can get coverage for $9.95 a month. i'm , retired, and take medications. what's my price? also $9.95 a month. i just turned 80 and i'm on a fixed income. what's my price? $9.95 a month for you, too. if you're age 50 to 85, call now about the numb one most popular whole life insurance plan avaialble through the coloenn program. it has an affordable rate starting at $9.95 a month. thess than 35 cents a day. you cannot be turned dowbecause. no medical exam, no health questions. your acceptance is guarantee and this plan has a guaranteed lifetime rate lock,an so your rateever go up for any reason. and with this plan, you n pick your payment date so you can time your premium due date to work with your budget. options start at $9.95th, plus, you get a 30-day money back guarantee. so call now for free information. and you'll also get this free b

is the only pce thas stop sign cameras. recently though the town of glen echo request an amenment to allow them to put up a cneera glen echo park. in virginia the state allows loca jurisdictions to use red light cameras only. >>> all it took w a simple facebook post to restore the joy of christmas to one local family. meet lacey milner. she was 22 years old and suffers fr cerebral palsy. newspapers are like medicine to lacey. her mom says they are part of her morning routine. with the holidays approaching lacey's mom knew all she'd want ts more newspapers so she took to the internd the response was as iunding. had a friend say it would be cool if you could get papers from other areas. i thought itoc would be l friends or relatives we have in other states. i didn't w think itld go this far. >> that is the one single facebook post. they came in from all ove the country. lacey's mom will store this on sis verycial newstand for her. >> every now and then the internet is good. >> social media. after you talk about all of the pri

core pce is 1.5.based pce, headline and core, are at 1.4 we're now below 2 which we -- used to be the fed's target. >> it is not that trump's pushing them around. not that the market's pushing them around. jus on the inflation data themselves even if the economy's strong you're saying they shouldn't hike that's a weird situation to be in we noticed this morning "the wall street journal" op-ed page saying they agree that the fed shouldn't hike but this is an organization that's like the titanic. they can't decide they're right. they have to signal. they have to come to a consensus about this this is a first of a two-day meeting. can they take a hike off the table? >> back in the old days, when i was a fed governor, we didn't issue a statement at the end of the meeting. i don't know what we have to prepare the markets for. i think kane said it right, kelly. when the facts change, i change my mind. what do you do, sir? and, frankly, the facts have changed since the september and even since the november m

>> well, i think we look at both, but core pce is a good indicator. it has -- what's happened over really 50 years is that inflation has become much less reactive to changes in growth. there was a time when inflation reacted really quickly to changes in growth and changes in unemployment, and that time is behind us and that is often attributed to the success of central banks in anchoring inflation expectations so that people believe inflation will come back to the target or around the target, so it doesn't go down as much. inflation doesn't go down as much in a downturn, doesn't go up as much when the economy is strong. it's really true, though, that inflation has not reacted a lot on a road from 10% unemployment to now 3.7% unemployment. it did move up last year but in terms of just targeting growth, i think, i actually think our dual mandate works very well, which is maximum employment and stable prices. most of the time those two things work together. when they work temporarily in different ways, we take a balanced approach but i think that approac

possibly moderation or a topping outn the ina flags trends, particularly with the drop in oile and in c pce we saw last week, showing a little coming off the edge. >> after celebrating the weekend trade talks between xi and trump, a second look by the markets suggested there might be less to the than first met the eye. that creates the possibility that the u.s. and china will be on the verge of another trade war just 90 days from now. second, economies aowing, especially abroad. and investors don't quite have a read on how much u.s. growth will eased back as a result third all of this has investors trying to came out howhe federal reserve reacts by pushing ahead on raising rates or easing up on rate hike plans while the inversion has a good history ofpredic but there is no sign if to it remains po so there is a chance there is a false signal. for nightly business report, steve liesman >>> the trade concerns that steve just mentioned were acknowledged today by the ceasury secretary at the "wall street journal's council meeting. >> i think tha the market is noah wait and see. the market is tr

is a timef i shocor what,ut thereas an awful lof piticalizion the took pce and tt 15 to 2020 mites whwhenhe cs just let go with h everything they had. a c clip from "the word home" about the dodow chemical protest at the university of wisconsin. glenn silber, talk about this moment. >>>> it w was a real turning po. the antiwar mode meant in madison -- movement in madison and ashshley they confronteded e pepentagon and the was a a conft like this, but dow chemical of you know, the university was so stupid. they should have just had their little recruitmement often thehe hiltlton or something. sometimes in movements, i think there are moments when somemethg unexpepectedappened. you and a were very involved in the central america crisis. no one thought it was a good idea to o rate and murderr four became athat t is what turning point to wake people up. amy: and before that, the killing of archbishop romero who is now been -- >> a saintnt. one of the lessons i get out off looking at the war at home today is there is a relationship between a smaller core of people that are the most dedicated o

-- they will be tolerant of a little volatility around that 2% in core pce. to pay in terms of their goods. when you think about that, it impacts the margin story for corporations. one of the concerns right now is slowing earnings growth. this is one factor to consider as we move forward. earnings growth for 2019 has come down from 10% to about 8%. perhaps there is even more downside to go from there. it could be things like trade, pressure,be margin wage growth rising. for us, we think about a 20% earnings growth in 2018 falling to about sub 8% in 2019. that says a lot in terms of where market potential is, and were total return for the s&p can come out. you add market multiple compression, you are looking at single-digit concerns. do witherything has to oil. ryan lance, ceo of conoco phillips -- we spoke about price levels and capital spending. ryan: at $50, you will see pare back of capital programs. growth will moderate. long-term, it may have impacts on this business. i think it is healthy in the $50 to $60 world. sub $50.orth -- worse by the cost of sup

providing a bright line distinction between pces and issuers of securities. a recognize the need for limited government role in the system. a limited government role also means that many of the operational details of the housing finance system should be left to the entities. congress should not be mandating requirements like a minimal down payment. this is a requirements that can be put in place by the regulator. it should be flexible, to accommodate for economic fluctuations. single, independent regulator who provide stability and confidence in markets. we do not want confusing and conflicting directives in the market. our credit unions have general concerns about the overall cost and workability, including the transition to any new housing finance system. great strides have been made to address his concerns, but we urge general caution and enhanced flexibility as major changes are contemplated to the housing finance system to ensure that reform is done right. it is also critical that any increased costs associated with establishing a new system be minimized

. >> we don't know if it's arrived to its destination in one pce either. it's probably broken and it serves him right. >> absolutely >> people. >> i know. if you're going to steal anything, steal an umbrella. at least that you could use every day. crazy rain. >> you could hold the tv hver yod if you wanted to. >> quite before the storm. >> yes, indeed. it will tlhicken up and it will be wet for your friday evening plan and wet for all of your weekend activities as well. so the rainfall record here at national airport,e are 23 inches almost ahead of rainfall for the area and this amount, 60.78 is just a little more than half an inch below the all time record that record will in alla likelihood this weekend. it will rain most of tomorrow. off and on showers. thugh much of tay on sunday. monday is when we turn to the sunshine and blustrey northwest wind. we have your storm forecast in there for you. you can also follow and like me on social media to stay ahead of the weather and an interesting little tidbit of weather statiswacs. 38 in ington. but colder, 27

when we talk about the 2% level, it is a pce year-over-year numbers. that is back down to 1.8%.n starts moving negative, that is going to give the fed's some pause in their rate hikes. that does not mean they are stopping or cutting rates, but it does mean they will probably take a pause at this point after the december hike. vonnie: holly liss at the cme with us with futures in focus. guy: a quick look at the markets. this is the picture we find ourselves with. the s&p sold off in the first hour, stabilizing a little at the moment. ups and fedex are having a tough day. interesting to tie a line to that in the trade story. we'll continue the market coverage next. this is bloomberg. ♪ ♪ >> 30 minutes left in the european trading day. >> this is the european close on bloomberg markets. ♪ >> here are the top stories we're covering from the bloomberg and around the world. treading low, stocks are up, the partial inversion of the u.s. juncker. europeandvisor to the says that britain can cancel brexit without that you permission. but not for long. and not a done deal. saudi arabia wit

pce have a forecast of core staying at 2%. question is, if inflation is only 2%, why are you hiking? the way he could have explained it in their view if they hike, that inflation stays at 2% as opposed to going higher. i think that's the disconnect. caroline: and their views seem to be hiding -- hidden in their original statement. what triggers that? is that an indication of the hike and he should -- should he be talking more to that? seth: that's a very important point in something i have not seen enough coverage of. they have a view, and where the longer run levels is bashar, but they adjusted that as well. longer run at that estimate of the unemployment rate in the forecast, over the past couple years, as inflation to miss, they continue to ratchet down the estimate of where the natural rate of unemployment is. what they meanis by data dependence. they have an idea of the way the economy works, but they have to say of the data is consistent -- have to say is the data consistent with our view? they said it was an unanimous d

david brought that up, pce deflator. true form of inflation.ter, last three months it is at 1.2%. that is significantly low. that's a huge selloff on inflation. so what are the you know pinnings? why is it not going up again if we're in such a strong healthy economy? we saw data from china. the second largest economy, right? considerably weak today. so buy the dip crowd is gone especially in a tightening market. we're seeing it. the credit markets are leading the market. that is the is problem. the buy the dip crowd won't come back until they see confirmation on data. charles: robert, part of the buying the dip, whatever was temporarily pushing the market lower would reverse itself. you had to have some sort of belief things would get better and you want to get in ahead of that news. >> i agree, charles. just like the other guests are saying. the markets are a leading indicator. we've seen the markets pulling back for white a while now. when you look at the data the data hasn't been extremely compelling. at some point you reach a bottom. you ta

current inflation using the fed's preferred core pce rising to 1.9% this december. writes quote we think inflation will be the most important driver of fed rate hikes in 2019. at pantheon, they say the fed doesn't want to be blind sided by a surge in wage growth. this chart looked at the number of officials by the number of hikes they expect from the last forecast from the federal reserve. a third, a third, a third if you want to call it that more or less with two folks at zero hikes that's why you have the media now at two and we'll see if that goes down to one would be my expectation perhaps when they put out the forecast again in march. you can see fwis there's a big debate there at the fed and among wall street economists and forecasters here and it's going to be the economy that's going to determine what the fed does unless the market makes big and troublesome moves. >> thank you another busy week in terms of fed speak with powell speaking on friday. >> atlanta i'll be there. >> looking forward to it >> happy new year >> central banks were a big theme in 2018 a

i thought it was a goldilocks number in part because personal expenditures, the pce part of it was 1.8cluding food and energy. robust numbers by the same token non-inflationary. we've seen this a lot. going into the end. year, everyone says 2019 will be a bummer. what about now and end of the year? how do you see the economy? >> the economy is in great shape. you're right it is goldilocks in a sense. seeing great consumer spending. you're not seeing spending of overheating in the inflation figures that is key extending the cycle. investors could get more worried if we saw signs of overheating. we don't see that. looking friday, we expect another solid month, charles. consensus looking for 188,000 jobs added in the month of november. i will take the over, charles. i think we could exceed 200,000 again during the month of november. and there is some possibility the unemployment rate ticks down, down to 3.6. i think charles, that is the really important number, not only for november but over the next 12 months, we could see unemployment rate fall even further, perhaps getting as low as 3.

so if you raise the inflation -- caroline: but what is really -- orl: i am a core pce, something like you are overly sensitive to the data, dependent on use. joe: do you think the economy is rolling over at all? we see the yield curve flattening, how the data this year has been pretty mediocre in the u.s. how robust, forget the fed, how robust is the economy right now? paul: it is -- i am not good at this, but for what it is worth we had a tax cut, that gave us some fiscal stimulus, but it is no more after this. if anything, it will fade out. the crowding out effects from the higher interest-rate, those take time. you would expect the economy to slow down. i do not know about rolling over, i do not see that. romaine: from an economist perspective, when you think about the tax cuts, why didn't we see more of that money go from businesses and roll into capex or repatriation overseas -- why didn't we see evidence of that? paul: it was all accounting maneuvers and much of it went to stock buybacks. thefact of the matter is is capital expenditure is not that -- to cost the capital. not lik

. >> if you look at overall inflation according to the pce core index, we're at about 2%. if you only care about soybeans, soybean prices have fallen because china stopped buying our soybeans, and it's completely irresponsible for you to tell the public things that are not correct. i am old enough to remember when ten years ago during an actual deflation you went on tv on a rival network and said we were about to have hyperinflation and it was irresponsible for them to keep rates low, and now deflation means prices are going down, and if you go to the supermarket, prices are not going down. when we have normal inflation, suddenly your hard-money ways have disappeared and you are claiming the fed should pump money into the economy. >> i am looking at the index of not just one or two commodities, i am looking at 35 commodities. they are down by 10% -- >> that is not overall inflation. >> commodities are the one thing that remain constant over time. the reason you have price rising in telephones, because telephones are better than -- >> they are actually cheaper, but okay. >>

is ian astonhing fil t before go deep into th filmif you cld comme on what h taken pce in spn anhow soh idirectly relate to whatou covern th fm. >> tnk youou a, thank you for having me on the show. it is beautiful to be here to share the story of this film. what has happened in spain, for the first time since the death of franco in 1975, the far right has taken over certain parts of power. what we try to do in the film was precisely to bring back the past, to make a film about the legacy of the franco regime in the present so that new generations could actually learn what had happened. because if you don't know what happened in the past, it is very hard to fight for your future and for your present. we never u understood that t the future we work trying to avoid was going to become present, like, so fast. amy: talk about your film, the lawsuit is is based on, and who the people are who have brought this lawsuit. -- wethe film follows filmed for six years. we followed the journey of a group of survivors, victims and survivors who decide to take on this internatialal lawit.. it is bad on

at a 50-year, multiyear low at the same time, you have average hourly earnings north of 3% you have pce numbers which is what the fed looks at around that 2% mark as well so everything according to their playbook is actually preceding in line where it should be it was in the last come months we saw financial conditions tighten. in reality, if if the market was panicking from before, if there were no real signs of inflation, we wouldn't see the wage average -- wage earnings creep up as well >> i think that's true you are seeing wage rowth. but that's good. we need wage growth here in the united states. especially after the last nine years of zero wage growth. so we embrace wage growth. but what we're seeing on a overall number with inflation is actually the numbers are coming down they're not gaining momentum the united states cannot go it alone. i think paying attention to the global environment is very important. especially when you're -- when the dollar is up over 5% this year emerging markets are destroyed look at what is going on in japan, deceleration. look at what is going on in e

. >> i wanted to have a career in renewable energy and i was just looking for a pce that with my missionlp people -- help low income families in underserved communities. >> reporter: grid alternatives does about 1500 installations a year across the u.s. and overseas. a project like this would typically cost $30,000. over the projected life of the solar system, the family is expected to save about $10,000 in energy cost. the system is designed specifically for each site. bank of america and other corporate sponsors provide free labor. the bank provided a half million dollea t ppart t tntrahis solar installa training program. >> we are trying to make an impact and we have the power to make an impact, so we are helping our communities be more sustainable. >> reporter: by the time the solar system is turned on, the family expects to see a savings of about $42 a month on their utility bill. in east palo alto, david louie, "abc 7 news." >>> all right. stay with us. more to come. restaurants and bars now have new competition. talking about cannabis lounges. >> yes, we will take you inside this

do you still think that core pce is still a good measure of whether the economy is overheating? what do you think of other measures like setting a target for economic growth and relying more on that >> well, i think we look at both, but core pce is a good indicator. it has -- what's happened over really 50 years is that inflation has become much less reactive to changes in growth. there was a time when inflation reacted really quickly to changes in growth and changes in unemployment and that time is behind us and that is -- that is often attributed to the success of central banks in anchoring inflation expectations so that people believe inflation will come back to the target or around the target so it doesn't go down as much. inflation doesn't go down as much and a downturn doesn't go up as much when the -- you know, when the economy is strong it's -- it's really true though that inflation has not reacted a lot on a road from 10% unemployment to now 3.7% unemployment now, it did move up last year, but -- but in terms of just targeting growth, you know, i think -- i actually thi

while the most recent reading encore pce inflation ticked down, , indicators of underlying trend inflation remained encouraging over all. providing little sign of an outbreak of inflation to the upside on the one hand, and some reassurance that underlying trend inflation may be close to our target on the other. in the figure, figure one, you can see the strong decline in unemployment. on the left inflation moving back to target on the right. economy has grown 3% over the past year and there are good reasons to expect growth to remain solid next year. supported by the strong underlying momentum in domestic demand, consumer spending looks to be robust going into the fourth quarter and ongoing gains in income and employment should provide positive fundamentals are in addition business investment should be solid even with recent declines in oil prices. sizable fiscal stimulus has provided an important boost to demand this year and will likely contribute somewhat further next year given the usual lags and outlays and ten ten effects ofx cuts on spending. so the most likely path for the economy

. >> a public pce at a busy time in the evening.t's very concerning. >> we would ask residents in the area if they see anything suspicious or see anybody acting suspicious, call us. >>> police are also looking through some camera footage inside and outside that church. >>>e're learning new information this morning about a murder. this is in prince george's county investigators say several witnesses are being questioned right now in the shooting death of a man. it happened friday morning on 68th place. the victim was shot several times and died at thesp al. police say this was not a random killing. they believe there was some sort of fight between the victim and the shooter. >>> fiworks inside a local police station and only news 4'w camerae there to capture this. the city of district heights called in maryland state police to help remove their police .chief from offi city leaders voted to place the chief on leave. when they told him, officials say he refused to hand over his gun and leave. there were no threats, but the news 4 team

you see core pce dropping and rolling over. give them the have that they need -- heft that they need? raj: that risk was probably about six years ago. the policymakers mistake has already been committed. i should not disagree with mr. krugman. i think the fed it should have really been raising rates after two or three years of growth, and that would put it back in 2011 or 2012, not now. what we have now is this huge accumulation of debt around the world. the reason i think the yield curve is beginning to flat already and we maybe already seeing close to the top of the federal reserve rate hike cycle is that we let debt buildup too much. happens when you cut interest rates to zero and we kept them -- that's what happens when you cut interest rates to zero and we kept them at 02 long -- too long. this chart basically shows that this has occurred before during times of stress. that are many bits of the curve we can look at. i want to bring in the mliv question. what does the u.s. yield curves march towards inversion mean? raj: we

pce, it isat the still below 2%. you take a look at the economy and inflation.hey still have her into meth economy run. the data is basically telling you, go slowly. slower,hey are going depending on protections that are out there. john, thank you so much and happy new year. john trainor is chief investment officer at people's united advisors. coming up on the next hour, our guests were tell us why he thinks apple is one of the names to watch in 2019, which is interesting. as i look at the markets, the s&p 500 is up about exploits, the dow up 110, the nasdaq down about 12. from new york, this is bloomberg. ♪ amazon prime video is now on xfinity x1. so when you say words like... show me best of prime video into this... you'll see awesome stuff like this. discover prime originals like the emmy-winning the marvelous mrs. maisel... tom clancy's jack ryan... and the man in the high castle. all in the same place as your live tv. its all included with your amazon prime membership. that's how xfinity makes tv... simple. easy. awesome. romaine: i have a here look at the

confirmation pce is sticky at the 2% handle. us as investors, we would love the fed to come in with a dovish hike. unfortunately, when you look at the macro indicators on balance, they need to go with their glacial pace of rate hikes. isthink two more across 2019 par for the course. seems more to be -- i am seeing rate hikes -- forward guidance, the unwind of the balance sheet which the fed has almost tell us, that is on autopilot. should we look at the unwind as part of the policy mix? in 2018.hat we saw >> you are right to point this out. a lot of things are in the air for the fed. jerome powell has made it clear every meeting is a live meeting. there are respirators -- they will make the communication process more straightforward. of course, they could be on autopilot with balance street reduction. we look at where rates are going, you can draw some conclusions. if you pull up your treasury uplds, they are inching reasonably strongly. late 2017. perhaps the fed needs to take a closer look and come up with some new formula. we

to your question, it's a combination of the big drop in oil, reducing inflation expectations, the pce core number last week that moderated was slightly below expectations. but there's a legitimate concern about slowing growth overseas. the impact on housing, autos do to the rising rates here i think it's a combination of those things it wasn't just that stock market that really surprised us, it was a dramatic flattening of the curve in two days it was like a reverse parabolic move >> hit us over the head first thing in the morning we were wondering whether we would get a two handle >> the move in the fives changed everything >> the two-year, the day before powell soundeddovish was trading 2.82 >> but the fives moved >> the fives moved and the ten-year moved substantially a lot of the move in the yield cuff h curve has been on the short end. >> how much of this is because of what's actually happening in the economy right now with slowing housing, with slowing car sales. how much of this is fear and concern that starts with ceos and somehow winds up with consumers? is this a self-fulfil

want to provide that degree of forward guidance a more effective strategy would be to say hi, core pce inflation has been declining we're not going to hike again until it peaks above 2%. by most measures it looks like inflation has been declining since july of this year and quite frankly if you look at core pce inflation over the last ten years, it's been above 2%, 5% of the time, and i think that brings stability to the treasury market and the 275 to 3 area should be an area of stability for treasury yields. >> gentlemen thank you very much ry . >>>less moonves is not going to get $120 million in severance from cbs the board there found that there were in fact grounds to fire him for cause. "new york times" reporter ed lee joins us next. >>> as we head to break, here's a look at the biggest premarket. we'll try and look at the winners, but mostly the losers yesterday in the dow ♪ there's no place like home ♪ argh! i'm trying... ♪ yippiekiyay. ♪ mom. ♪ >>> welcome back to "squawk box. we have the big fed meeting tomorrow the market off yesterday dow looks like it would open up about 14

. >> the data that they watch, is that pce number and unemployment.the inverted it's inverted at the two side. the fed watches something different. according to what they watch is inverted. david: look at this chart now, is financialne conditioning which is tightening. don't they have to pay attention financial conditions. that's early precursor of things to come. the u.s. sneezes the world catches a cold. too far too fast, that's a problem. they need to probably raise in december. maybe pause in march. at the last speech, he indicated there's a lag in policy. you have to wait six months to a year to see how the policy bakes the economy. if he wait foss see what happens, that's okay. but they lose credibility if they don't hike. this if they hike rates week, does that tighten conditions further >> it tightens a little. this rate hike probably priced in. that's just math. it does tighten them little bit. more about tightening too far. i don't think this would be too far. into 2019, i think the to 3% ifan absorb up they get above three that might tighte

they are looking at the pce index. they are below 2%. they are slowing the rate of growth.hey are trying to understand how to reconcile these different pieces of evidence coming in in real time. accelerating productivity? that allows you have noninflationary wage growth. that's what people are looking for. lisa: i want to bring up president trump because he's been ratcheting up the pressure on the fed not to raise rates. he just tweeted out moments ago, another wallead street journal editorial. president trump is very much focusing here. is he helping or hurting the matter more? people would agree the fed should slow down and waited see some of these other indicators you were just talking about turn up a little bit to give them more confidence. matthew: the u.s. economy has thrived in no small part because we have a fed that is independent from the political process. i think we benefit from allowing jay powell to look at the data and talk to business owners in the u.s. and make the decision they see fit. jay powell and his colleagues are looking at a strong labor market, th

saying it's going to come down because you don't see a lot of signs yet that the headline pceers for pceed back. just a little bit, but they are both still around 2%. that is one of the things the fed chair made at his press conference. hayden: you are spot on. it should have peaked out around the fourth quarter. the leading indicators are showing us on a three-month on three-month momentum that they are starting to bend down. one of the big phenomenons we will see is how much of an impact oil will have and how it seats through. obviously, that has not happened yet. we have got to see if oil stays at the low 40 hamels. if it does, we are in for a bit of a shock on the inflation front come next year. paul: what about the risk of the inversion of the two-year and 10 year curves? can you still see that happening ? hayden: easily. as the fed starts to ratchet back the expectations around the rate hikes, lower implosion rates happening -- inflation rates happening here, we expect it to start to slow, not collapse. you throw that into the mixing bold, you can see them invert again. obviously,

it struggles to keep pce above 2%. the fed has plenty of reasons to hold off here. hoping for a dovish hike. we think they should do a hawkish pause. they should not move at all. have a narrative that gives them the flexibility they want. they can always move in march. itthey do more of the same, tells the market they are ignoring the feedback loops. i think that is a bad position for the fed to be in. priya: i think they have to connect week because of the negative signal that might give to the risk markets. what does the fed know that we don't know? the market is almost one of 2% price for a hike. 100%almost -- almost priced for a hike. they are in the range of neutral. , give it 300 reinforces idea of one and a dark room walked slowly, the functions change a little bit. uncertainty is high. you have taken rates up to neutral. then you can wait and see if inflations start to accelerated. the idea on october 3 were far from neutral and go about neutral, they need a walked back from that i would argue. alix: we are waiting for mario draghi's press conference. we hav

pce inflation, is at a ten month low having peaked in july. target at 1.8% i think he struggled with those questions about what's going on with inflation and had to kind of bob and weave around that the market is saying very clearly one thing that is pretty clear at least from our work on cycles, cycle risk is not that it is kind of knowable it is what we do the cycle is down. i think that part of the story is crystal clear actually. >> you gave us the big tease earlier. what's the play here >> i think the case is this is a bull market. it benefitted from this astonishing wave of monetary ease they have had zero rates they had four guidancing all of those things have been taken away they realized no more hand holding from the fed it means normal times. it means normal volatility stocks have got to adjust to the risk to your world out there the part that i'm a little bit worried about though is that it follows. what if it's the case that the 3% growth that we had in the last three months was ahead fake we had a sugar rush and it turns out this

nike boots you a lines and carnival roring that day friday november data for durable goods, pce pricesg. the economic data here in the u.s. painting a mixed picture. if you look at numbers inside the retail sales today very strong and you put that against the global back drop which continues to weaken and we look for signs in the u.s. of whether things are turning. >> i had to say i slightly agree with our guest from hsbc earlier clearly the data in china not what you want. the direction is growth for us they have the fire power and still 8% retails sales year over year yes the tap is on you would like to see better. the french data is soft it might be a one off. >> because of the protests. >> because of the protests brexit not going smoothly. also the ecb lowering the outlook. that's the one to watch for 2019 in q 1 next year. >> but i think the corporate results come out nike, a global company any commentary they have seen double digit growth in the china business that's scrutinized heavily it's a driver for that company north america has just started to turn around any signs of cons

inflation is going down not up you would want to fight this battle if the pce was at 2.5. >> i thinkt jay powell was doing was justifying his rate hike, mentioning the economy and a number of the indicators i think he was trying to represent his board. he was not the only one expecting two interest rate hikes and he had to speak to the consensus on the committee they were trying to justify in the the data. >> but you could be more flexible with more openness to this could go either direction as opposed to the rigid we're not touching qt, we think there's two more rate hikes, everything looks great, everything is wonderful. the market wants to hear you know what? maybe everything is wonderful and that's your view but if you're wrong, we need to know you're in the backseat making sure this is going to work out like you have been for the last ten years and you didn't get that feeling on wednesday last week. >> you agree with this if so, does it lead you into a tradable rally >> i think -- i see the fed as less politicized i think than david does the fed really wanted to get to the botto

and the deflator month over month,.1, one-tenth lighter t er than .2 sequentially so we see that core pcer over year was hotter and the fed likes to watch that the big number, university of michigan sentiment december final, the mid-month gets tossed out. that was 97.5 and it's a good one. 98.3 98.3, if you look at october, that was 98.6. 97.5 in november so you can see it fits in there the high watermark was 101.4 in march. that was going back to '04 and there aren't many reads over 100. inflation, what the university of michigan survey says, one year inflation, 2.7 equaling our last look and five to ten year 2.5 a bit higher than the 2.4 mid-month read so you can say hotter we're continuing to hold very solid on rates they're down on the day but not much we'll continue to monitor if we can reclaim to 80 territory in 10-year note yield sara, back to you. >> still below that level. rick, thank you >>> our road map for the hour will start with shutdown showdown just hours away from the partial government shutdown. the president set to meet with senate republicans at the white house this ho

one of our strongest isommendations for the draft that the pce's that are envisioned should be entities able to going to be actively manage credit risk and to do that, they really have to that mortgage credit risk at the loan level. we also think these entities holding dedicated capital against that mortgage credit risk and be slaibl available through all market cycles. we fully support what the other doing but those are going to be somewhat spot markets, available in certain in others.unable we really think it's essential that you've got permanent thates of private capital can really take on this risk. >> my time has expired but as we move forward with the bipartisan effort, i certainly agree that we need more pmi and more credit risk transfers and the more private capital that we can get if wee, the better, even do need a federal guarantee. let's make sure that private robust position back.th that, i yield >> the gentleman from california, mr. sherman, recognized for five minutes. guarantee.a federal yes, the jumbo market works well those are super qualified buyers. and the rest of us