it because the economy -- was like the fed was dumping -- >> was it because of how the fed navigated interest rates in the context of their easing? >> yeah, but don't forget we had the worst recovery from a recession since the great depression in that period. so, you know, i think, absent a lot of the policy mistakes that were m that period, we could have had a much healthier economy and a bigger spring-back -- >> i mean, the inverse -- of course, you can't prove it, right?/ but the inverse of this is --nt abome of those kind of policies, we might have had a worse -- >> no, you're exactly right. the counterfactuals are hard to prove. i will say this, though, thatin when obama cam office, every single year, margaret -- you can look at the statiscs -- every year, they predicted we were gonna get 4% growth, with the fiscal-stimulus plan, and we didn't get anywhere near 4% growth.we idn't even get 3. so i think they have a lot of explaining to do themselves. a lot of people got hole period wrong. >> it's been a month since donald trump called and asked you to serve as a fed or. when do y

and then we hathe bubble burst, and then the feds -- you know, i'm not so sure the fed -- everybody says they ved the economy. they didn't save the economy. they contributed to the -- exactly the point that milton friedman was making in that interview. >> well, you clearly disagree with the idea that the fed saved the economy, in terms of 2008 and 2009. >> you know, that was a period of panic.-- i remember iou know, it was a surreal experience with banks failin you know, i don't know what i would have done if i had been on the fed at that time.yo >> at the timeargued we should have just let lehman go. do you agree with that now? >> i don't like bailouts. i don't like the idea of the vernment bailing out companies -- >> you cheered lehman's failure, though. do you think that that was a mistake, in hindsight? >> you know, i'd have to -- i'm not so sure.lo i'd have t back at it, and i don't know all of the, you know, details of this, but i don't like bailouts. and i thought, you know, it's one thing , like, bail out the people who held the deposits in these banks, but to bail out the people

fed with a blistering bloomberg piece on the history of the fed. stay with us, this is bloomberg. ♪ ♪ this as surveillance," taman francine from london and new york. -- tom and francine from london and new york. theresa may in public and private meetings today as she runs out of possible moves. talks with the labour party have been going for a month without a breakthrough. still with us are peter dixon and stephen king. studio -- according to ray new scientific find -- according to a new scientific find, theresa may is the most evasive leader in the u.k. we see the three books you put on your twitter page. if you had to write a book on brexit, what would you call it? despair" would be one and "i wish i was not british" would be another one. it is a collective act of self-harm for britain, a remarkable thing. the question was far too simplistic when asked. no one discussed the terms of departure and that was the weird situation, trying to get something through parliament, we will end up with a compromise much for the brexiteers and much differen

the credibility of the fed goes right at that. i look at monetary policy and our balance sheets, i know they are in independent agency, independent of politics on capitol hill or the white house, but i recognize regulatory authorities, and that is where i spend my time looking at the fed. those regulations can have as much of an impact interest rate setting as from the federal reserve, and those areas, the hill has necessary and proper oversight in a forceful and meaningful way. wherein, you can see interest rates and balance sheet questions we have given to them to be independent of the hill. >> given that independence, does it mean the president or any high ranking official should be -- should not be giving explicit public guidance to the fed chairman and potentially threatening their job prospect? rep. mchenry: the president tweets what he thinks and feels, that is different than previous presidents. some people like it, some people do not. the president has made his decision. what he is expressing is what every president has e

the credibility of the fed goes right at that. when i look at monetary policy and balance sheets i know they are an independent agency independent of the politics. we given the regulatory authorities and that is where i spend most of my time looking at the fed because those regulations can have as much of an impact as interest rate setting has from the federal reserve. has proper oversight where inningful way you could see their interest rate setting their balance sheet questions. we've given to them to be independent of the authorities of the hill. christina: given that independence does that mean the president or high-ranking officials should not be giving explicit public guidance to the fed chairman and potentially threatening their job prospects? rep. mchenry: the president tweets what he thinks and feels. that is different from previous presidents. some people like it, some people don't. i hear quite a bit about it but the president has made his decision on this. what the president is expressing is what every president has ei

lots to say about the fed and we will talk more about the fed through the program. press conference of jay powell strength today u.s. economy, inflation, and trump. he will be asked about a pressure from president trump to cut rates. that is part of the conversation and trade, some new flow. let's get a first word update with olivia hows in london. said theresident trump economy would soar like a rocket if the fed cuts rates i a full point, double the reduction his advisor is calling for. this comes as more senators expressed doubts about the president's trophy the fed -- pick the fed board. stephen moore's chances are looking uncertain. apple shares are rallying on signs iphone demand has stabilized. reports quarterly sales that beat analyst estimates and reported services revenue grew 16%. apple shares have surged more than 40% from a 20 month low in -- 21-month low in january. that was after lackluster iphone sales cut the forecast. ken griffin says raising tax on the wealthy is not the answer. he said socialism is a failure and a generation of students is disill

and fed policy. the fact that affect that -- that the senator said this is not right gives you indication there is a place where you can inject politics. the wall street journal editorial put this very well. i was defeated and had to step down. it had nothing to do with my economic ideas or this issue of independence. that was a good subject of debate. it was about things that were written 20 or 25 years ago. i tell this story in my piece in the wall street journal. the media went to the fairfax county court and unsealed my divorce and splattered all of those over the newspapers. i think any fair-minded person would say, what does someone's divorce have to do with whether or not that person -- it was a personal character assault against me. it was not about my economic ideas. my one regret about the procedure is that i wish i could've gotten to that hearing to make my case. it was a teachable moment for the american people about what the role of via -- of the fed should be. host: have you talked to t

their fed account. when he began raising its targets for short rates at the end of 2015 it relied on this tool. namely, it raised interest and paid on the reserves to push a money market rates generally. this tool has been used to wrap up the tightening cycle and this operating regime is working quite well so the fomc has decided that it will remain in place. it allows the fed to avoid day-to-day intervention. large reserve holding banks at the federal reserve. satisfying liquidity requirements. from this financial stability standpoint this regime is also much safer. when the balance sheet runoff in a tober, the asset holdings declined to around $3.7 trillion in the process will have run its course. we have the potential to provoke considerable financial market disruption. indeed, the difficulty of exiting from asset purchases has been a concern in the committee and in congress with some observers anticipating that a run down of the fed balance sheet would spark financial bedlam. unfortunately things ha

the fed is washing the pce. as we saw last year with the tariffs implemented in late 2017 to 2018, inflation was relatively benign. we did see three-month about 2%, but since then, we have fallen back down into this very clear this inflationary trend. shery: we heard from chair powell talking about potentially using an inflation range as one option that should be reviewed. what do we think of these remarks? lindsey: i think it is giving the fed a bit more flexibility. members haveittee been clear, is a bit more policy really has in the capability of targeting for giving themselves a broader range allows for flexibility and does not necessarily put the fed into the corner, into a box. especially if they do think that a lot of the fluctuations we have seen in prices as of late have been temporary or will prove to be transitory, so giving themselves this wider range allows for additional for stability and policy. notingthe fed officials the improvement we have seen in the stock markets recently. this gtb chart on t

that bounce was solely predicated by the fed. the only reason the market has done what it has done in 2019. the european story, i agree that is a credit story with the peripherals. as we know, european politics can be tricky, change quickly. that is the train you are making. jonathan: interesting call coming out of alliancebernstein. u.s. high-yield over equities for the next three to five years. areost equity strategists calling for 6, 7, 8% returns. high-yield historically over eriodsg five-year pu tend to come back. that will compete with equity returns. if we are wrong about this bullishness, high yield always goes down a lot less than equities. jonathan: robert, your view on that call? is a goodthink this investment environment, has been for the last handful of years. these underlying risk we rates have been falling, volatility of the business cycle is down. and i look at the market equity valuations, they are attractive. i also think credit valuations are reasonable. tighter than average, but usually at this point in the cy

the world of finance awaiting the fed decision. i think the fed has gone crazy. the federal reserve is getting a little too cute. it is ridiculous what they are doing. stringent,far too and they are making a mistake. at a high interest rate because of our fed. i would like the fed not to be so aggressive because i think they are making a big mistake. despite that, they are doing well but it's not necessary in my opinion, and i think i know about a better than they do, believe me. you look at inflation it's very low. hopefully, the fed will not be raising interest rates anymore. taylor: joining us is ira jersey with bloomberg. confirm with me that nothing that we heard their influences jay powell. >> it is in the back of their heads but it won't. they are professionals and a lot of them are economist. now we looking at the data. where are we now, where we going? therefore the best course of action right now is to remain on hold, not do much. amanda: that was a private that this bed made, the word patient is one to watch out for. a series of data points, all over t

>> i think it's mostly the latter >> the fed >> i think it is mostly the fed. the market overexuberance, you've been paid to fade that. volatility is very low it's been predicated on a fed doing an insurance cut which it could argue they did in the '90s but regularly doesn't do and powell today really had no appetite to feed that discussion anymore with volatility this low, it seems it's a one-way street to me and i think likely volatility will pick up and i think risk is predicated on a world where the fed is -- >> you're shaking your head. >> let's take a step back. if someone said, oh, markets are hitting new highs because the fed paused and had a 20% rally, i think most of us would say that doesn't make any sense, especially given hedge funds are sitting on high cash they've been shorting this rally i think what we're seeing is maybe a market sort of coming back to trend line because returns are still below like 10%. so the market is essentially coming back to trend and i think of economic momentum if it picks up, that's where new highs can be >> megan, doe

the kind of balance that was solely predicated by the fed. the only reason the market has done what it has done in 2019. the european story, i agree that is a credit story with the peripherals. as we know as brits, european politics can be tricky, change quickly. that is the trade you are making. jonathan: interesting call coming out of alliancebernstein. u.s. high-yield over equities for the next three to five years. >> most equity strategists are calling for 6%, 7%, 8% returns. high-yield historically over rolling five-year periods tend to get close to the starting yield. 6%, 7% today will compete with equity returns. the nice thing is if we are wrong about this bullishness, high yield always goes down a lot less than equities. jonathan: robert, your view on that call? robert: i think this is a good investment environment, has been for the last handful of years. these underlying risk re-rates have been falling, volatility of the business cycle is down. when i look at the market and equity valuations, they are attractive. i also think credit

the fed needs to understand more of the same does not do it. the fed really needs to set the market up for fiscal policy expansion, which you will see if you have a left or right-leading policy, it will be justified either way. europe will be coming out with a policy rethink shortly thereafter. so what we have had does not work and we need a much more holistic rethink. jonathan: let's spend the next couple of minutes getting back to portfolio management. you have been making an intensified call to temper down volatility in your portfolio, reduce equity risks, and build up an allocation to high-yield. have you been vindicated the last few days? is this an example of what you're trying to communicate? gershon: it's easy to say yes, but my reality is that my call is much longer in nature. jonathan: it is a five-year call. gershon: it is a five-year call. equity strategist are saying, expecting 6%, 7%, 8%. you usually get it in high-yield. equities have been down 3% from their highs at this point. high yield is down half a percent. jonathan: going

let's get back to the fed policy decision. kathleen, how worried is the fed about inflation? radaren: it is on their screen. they have a 2% inflation target. they continue to fall away and .eadline pce the court takes out energy only 1.5%, moving in the wrong direction but jay powell told us at the press conference after the policy meeting, it is temporary. higher in the second half of the year. where does this leave the fed in terms of policy and its next move the majority joining us, the former atlanta fed president dennis lockhart, president of the atlanta fed 2007 to 2017, very interesting. glad to have you on this day. i want to ask you this. if you were on the fomc -- always glad to have your. if you were sort of in the center, you could listen to dennis lockhart and know what the fed was thinking, would you be concerned about the fat inflation is falling? >> i didn't quite get that. kathleen: inflation is falling. if you were at the federal market committee, would you have expressed a view that is more cautionary, saying if it continues, we could have to do something l

it isn't every day that we have a vice president on talking about a fed, about the fed and fed policy and i get to throw it at president, a voting member of the fomc, who says you ought to be lowering rates and maybe not considering the employment mandate, just have an inflation mandate. take it away >> i actually have supported single mandate for the fed in the past i've said that it would clarify what the fed can actually do over the medium term i don't think actual policy would change very much we would still react to the economy and everything, but it would clarify in people's minds that the only thing the fed can do over the immediamedium term s control the inflation rate. >> do they have a point that growth is strong, inflation is low and the fed ought to be cutting rates and if it did cut rates, the economy would sorar >> the way you think about the current situation, you have to step back a little bit there has been a sea change in u.s. monetary policies since january 4th when the chair was at -- in atlanta at the aa meetings that sea change has altered the structure of intere

louis fed. he said he felt the fed over did it on tightening, but i understand you feel the fed has maybe overdone it on easing. >> james bullard has a lot of contacts and is in a lot of meetings that i'm not an, but as i travel the world, travel certainly the united states, speak to investors, speak to companies, there has been an underlying strength over the last multiple years that the fed has been very cautious with. now that is rolling over a bit, but it is rolling over in the context of the fed really not having a lot of room to support. i really view the fed as having been behind. today, the fed is really walking a knife edge. if they move too quickly or to either they engender inflation and instability or cause a slowdown. they have painted themselves if it into a corner by not raising rates a little bit more aggressively in the market essex is me, when the economy was stronger, so now it is a question of what do you do? they are really not where they need to be as far as being ready for

what could the fed do if we have to go to zero again? remember, no one thinks we are -- some people think we're at the neutral rate but the philly not above it. it is not true with growth the way it is that the fed will oblige, especially if trump keeps challenging them to do it. >> that is a really good point. what we have to think about is how the market has not been reactive. the point we made earlier, it's been very sanguine. we are tired of this. the market is exhausted. what you are seeing is spreads are widening out. there is a paralysis in the market right now. we will talk about credit and a little bit. investors rushing into high-quality paper. it says to me that investors are looking for liquidity and safety in the market. what we need to do is bring in your active risk. trim risk where you are not confident in positioning. right now adding risk is not really a wise choice. jonathan: do you agree, diana? diana: that is a good point in terms of the market being exhausted by these constant headline risks we are facing and actual

we think the fed cuts rates. the market expectations are looking for three rate cuts between now and into 2020. market expectations throughout the cycle have been a better indicator of where it go versus the fed dots. jonathan: craig, just to pick up on mike's point, do you think real yields in the united states can come down to zero, potentially subzero? craig: yes, i think they can. jonathan: do you agree, kathy? kathy: i think they can but it's a little early to make that call. i think you may be right, but we might be early on that was. jonathan: what time horizon are we on? michael: growth is not that bad, we are not seeing recession. it is just ultimately, i think the path is being dragged down by what we're seeing around the world. right? sometimes the data tells you what is happening in the market. sometimes the market tells you what is going on in the world. the ability to keep real yields positive i don't think is sustainable. jonathan: let's talk about the market and talk about global policy. we have h

the fed needs to understand more of the same does not do it. they need to set the market up for fiscal policy expansion. which you will see whether we have a left or right-leading policy, it will be justified either way. europe will be coming out with a policy rethink shortly thereafter. what we have had does not work and we need a much more holistic rethink. jonathan: let's get back to portfolio management. you have been making an intensified call to taper down volatility in your portfolio, reduce equity risk. buildup and allocation to high-yield. have you been vindicated the last few days? in the way this week is playing out, is this an example of what you're trying to communicate? gershon: it is easy to say yes, but the reality is my calls are much longer in nature. equity strategists are saying, expect 6, 7, 8%. you usually get it in high-yield. when things like this happen, you go down less. equities have been down 3% from their highs at this point. high yield is down half a percent. jonathan: going forward, is that the allocation you want

but the fed does not run the show. the economy runs itself. this idea that the government is going to run the market, run it through the fed, i think, misses what they knew 70 years ago when they said the job of the central bank is just to lean a little bit into the wind. and you will get the signal from the market which direction it will be. jonathan: we got that signal at the end of 2018. so i wonder, andy, and you washed on it, in 2018 there a belief among certain investors and economists that a few more hikes is a policy mistake. i want to test the extreme end of the conversation now and reverse engineer it. are we in a situation now where the markets start to test the fed the other way? if you don't cut, that is a policy mistake. or are we way off of that situation? andy: i mean, it wouldn't surprise me if the market tries it, but we mention the booms and busts cycles in the past. asset cycles are going through a boom and bust cycle. q4 last year versus q1, fundamentally nothing has changed dramatically, but we have been up and down 20%.

the fed? in order to get out of this situation, do we need them to come out and at least say they're going to cut rates >> no. because the fed usually lags the market tremendously. they look at the economy they -- and they have their economic models. traders in the financing markets and the money markets are much more sensitive so typically those markets lead the fed. the fed would be a confirming indicator if they finally cut. futures down 150 basis points since november the equivalent of six fed cuts, meaning when this correction ends we're going to have more shadow banking, not less a more intense credit boom going forward. >> why you're still bullish in the long run what about you, again, how much do we need the fed to do and when for markets to pull out of this >> we don't think the fed cuts this year. the most part, economy slowed, moderated from last year that was expected. again, things going on with taxes and fiscal spending that weren't going to be repeated think things are okay in t

what could the fed do if we have to go to zero again? and, remember, no one thinks we are -- some people think we're at the neutral rate, but definitely not above it. it is not true with growth the way it is that the fed will oblige, especially if trump keeps challenging them to do it. >> i think that is a really good point. what we have to think about is how the market has not been reactive. the point we made earlier, it's been very sanguine. we are just tired of this. and the market is exhausted. what you are seeing is spreads are widening out. there is just a paralysis in the market right now. we will talk about credit in a little bit. you see investors rush into high-quality paper. it says to me that investors are looking for liquidity and safety in this market. what you need to do is bring in your active risks and trim risks where you are not confident in positioning. right now, adding risk is not really a wise choice. jonathan: do you agree, diana? diana: that is a good point in terms of the market being exhausted by these constant

saying the fed's will cut rates? >> fed needs to. it's a tough call whether or not they actually do it. >> you are right, chris. >> air high fives from jon najarian, made that argument top of the show. chris, appreciate it do it again soon next time in person, i hope. >> thanks, scott. >> chris hyzy bank of america. see how it shakes out. >> chief investment officer over there. >> it's the -- >> a big -- >> slowdown in the rest of the world, exportation of deflation that's the problem global central banks are going to cut, which will force our hand unless we want to see the value of the u.s. dollar rally significantly. >> about a minute left carrie, kick it off with "final trade. >> march mclennan insurance brokerage firm everybody needs you're in business and it's not connected to interest rates. >> okay. steve weiss? >> going with crown castle defensive and still got 5g growth not a great yield enough to keep you interested i think it's not only great defensive holding but also offensive as well. >> and a lot of times in a sell-off

we think the fed cuts rates. the market expectations are looking for three rate cuts between now and into 2020. market expectations throughout the cycle have been a better indicator of where it go versus the fed dots. jonathan: craig, just to pick up on mike's point, do you think real yields in the united states can come down to zero, potentially subzero? craig: yes, i think they can. jonathan: do you agree, kathy? kathy: i think they can but it's a little early to make that call. i think you may be right, but we might be early on that was. jonathan: what time horizon are we on? michael: growth is not that bad, we are not seeing recession. it is just ultimately, i think the path is being dragged down by what we're seeing around the world. right? sometimes the data tells you what is happening in the market. sometimes the market tells you what is going on in the world. the ability to keep real yields positive i don't think is sustainable. jonathan: let's talk about the global bond market and talk about global polic

contract's expiration that means if the consensus is the fed will raise rates to 3%, the fed fund rate will go to 97. this was what predicted it that's when people made that bet, they made a lot of money. what does the chart tell us right now? right now the fed funds futures for december are a little below 98 this is today which tells us speculators are anticipating the federal funds rate will go to about 2% by the end of the year. this is clear evidence the sfeklators are banking on one or two rate cuts over that period of time. when you see where the ten-year treasury went out today, interest rates plummeted again, you can see what the consensus is talking about why? right now the federal reserve's target rate is 2.5 if investors expected jay powell to do nothing for the rest of the year, the fed futures would be at 97.5 the fact that they're at 97.9 may not seem like a big deal to you, but it's huge trillions of dollars bet in this market, it means the futures markets are forecasting that the fed will start easing sometime in the next six months that doesn't mean these speculators w

i think the fed on hold is terrific. as far as the direction of interest rates, as far as i'm concerned, the risk is higher rates, not lower rates because the backdrop of the economy is just strong. very good. very good. liz: hey, 3.2% gdp in the first quarter, come on, that's really nice. chris robinson, looking at the reaction in treasuries, that was rather interesting. i mean, we saw a decent basis point move from the low to the high. >> yeah, i mean, initially when the report came out, it looked like the market was pricing in some sort of a rate cut. it really did. you had the rates moving. you had the bond market rallying. and the number one thing when we turned, as soon as he said it's transitory, that's when we broke. that's when everything corrected. you saw the dollar move off. you saw the stock market move down. why did we break off that one word, transitory? it means that he's willing to be patient. he's not going to be forced into any sort of a cut. that was really what you had that sudden repricing. you can

in the fed statement the fed said it could be patient with the muted inflation. the upgrade or federal reserve upbraids the assessment of the economy. the federal reserve characterized economic growth as solid, a change from march when it said economic growth had slowed. consumer, business spending slowed in the first quarter. inflation playing a big part of changes in the federal reserve statement. noting that it declined. board members acknowledged excluding foot and energy it is running below 2%. core pce we know is 1.6%. on the balance sheet side the federal reserve says it will begin shrinkage of the tapering. it will roll off instead of 50 billion a month, it will roll off $35 billion a month. that ends the roleoff in october. fed chairman jerome powell says the it will be around 3 1/2 trillion dollars. federal reserve lowered rate it pays for bank reserves. that is done to keep the target federal funds rate within the range of 2.25 and 2.50% t was in upper range so they lowered that. this statement was unanimous, charles. wait and see. still the word of th

that bounce was solely predicated by the fed. the only reason the market has done what it has done in 2019. the european story, i agree that is a credit story with the peripherals. the challenge is, as we know as brits, european politics can be tricky, change quickly. that is the trade you are making. jonathan: interesting call coming out of alliancebernstein. u.s. high-yield over equities for the next three to five years. take a listen. >> most equity strategists are calling for 6, 7, 8% returns. high-yield historically over rolling five-year periods tend to come back. 6.5% to 7% today, more if you go global. that will compete with equity returns. if we are wrong about this bullishness, high yield always goes down a lot less than equities. jonathan: robert, your view on that call? robert: i think this is a good investment environment, has been for the last handful of years. these underlying risk re-rates have been falling, volatility of the business cycle is down. when i look at the market and equity valuations, they are attract

i joined the fed in 1997. you may or may not recall, but that was at the height of the asian financial crisis. i was tasked with working with asian central banks to work through that, because i had more international exposure than others. the other thing i had done at mckinsey was i was interested in some of the payment systems institutions. fairly technical, arcane things, but the fed runs both the large dollar payment system and the small payment systems for individuals. at my point, i was the only governor who was really interested in that, so i became the person who was overseeing the regulation of the payment systems. david: you were in washington, d.c. on the morning of september 11, 2001. the only fed member who was there at the time. take us back to that. what did you confront? roger: the first thing that you confront, that anybody confronted, was this massive uncertainty. one did not know what was going on, but you knew it had to be bad when both of the twin towers are on fire, and i turned on the tv

the credibility of the fed goes right at that. i look at monetary policy and our balance sheets, i know they are in independent agency, independent of politics on capitol hill or the white house, but i recognize regulatory authorities, and that is where i spend my time looking at the fed. those regulations can have as much of an impact interest rate setting as from the federal reserve, and those areas, the hill has necessary and proper oversight in a forceful and meaningful way. wherein, you can see interest rates and balance sheet questions we have given to them to be independent of the hill. >> given that independence, does it mean the president or any high-ranking official shouldn't be giving explicit public to the fed chairman and otentially threatening their job prospect? rep. mchenry: the president tweets what he thinks and feels, that is different than previous presidents. some people like it, some people do not. the president has made his decision. what he is expressing is what every president has either privately expresse

inflation data will drive the fed. core pce at the end of next week, expected to come in below the 2% target. that will be the driving factor to us. in our view, transitory inflation is incorrect. low inflation is here to stay. the fed will tee up a rate cut by the end of the year. >> in addition to inflation, financial conditions, it does work to tighten significantly, that would move them faster rather than slower. also some indicators that we watch on growth. starting to see the rollover. the most important would be the unemployment numbers. -- employment numbers. we see a rise in unemployment by .5%, that they would move quickly. michael: we had the base case that the fed would not do anything, but the bar -- everyone talking about the hurdle -- the bar to cut has continued to come down in our minds. right now, they are definitely more predisposed to cut over the next six months than to hike. jonathan: we have seen a massive rally in the global bond market. what was interesting and unique about this week? a little

bash is only breached if the fed let's it. verye fed is forward-looking with policy and very clear, it is up to them to defend their independence. but if you are on the front pages for a very long time, it is a tempting target for politicians on all sides to try to use the fed's printing press to wander into fiscal policy and regulatory policy, a big question for reform that we will take up today. mike: you work in the markets now. you were on the fed. do you think policy is set right for the markets? was the december move a mistake, as the president would suggest? kevin: i don't really understand where policy is set. if the important decisions that are made is not what his policy today, what is the rationale, the compelling evidence the fed is giving, then markets can before learning. businesses and households can react. the business message seems to be something i don't understand. i don't really know what the current policy stance is. mike: are we too tight. mike:? are you seeing the economy or the markets heart by where th

isted and you know another myth going around is that the fed is unwinding q.e. the economy is amazing there's real growth everything is perfect and all those newly minted billionaires on wall street member jamie diamond lloyd blankfein they became personally billionaires since the financial crisis and that seems unusual right because how do they become billionaires and their economy that is decimated and all we have left are unicorns running around in north dakota well the fed will give banks a $36000000000.00 taxpayer funded subsidy this year so this actually comes ultimately from the treasury is pay they pay banks 36000000000 dollars this year and this is a something that a lot of people don't point out to what has been happening in the united states in particular it's not happening in europe because they have negative rates on deposit but before 2009 the fed did not pay interest on banks excess reserves held at the fed this practice was introduced as a tax payer funded subsidy to the banks during the crisis taxpayer funded because the fed turns over any profi

in that scenario, what with the fed to? -- fed do? erik: strictly speaking, fed to look through the one-year effect and tighten because tariffs will lower the potential growth rate. economy byshockingly making trade less free, our potential growth rate goes down. that calls for somewhat tighter monetary policy if you are a strict inflation targeter. tom: this is very simple. it is the abrupt move in a rate cut that we have seen over the last couple of days out to january of next year. d almost to the peak that we saw in march. you are an optimist. can you model a rate cut? -- i don't share the optimism that williams said. your colleague pointed out that the first quarter was not as robust as it looks. i think there is a case for a cut. tom: that is amazing to hear. for eric nielsen to say "there is place for a cut." thank you. this is bloomberg. ♪ tom: this morning, it is the morning after. 600 plus points down. the yen weaker. after.he morning now what? farmers voted for the president. in this hour, a congressman whose constituents

>> first, i agree that the fed went too far last fall i think the fed funds and treasury bills should be at 2%, right in line with inflation so, i agree with vice president pence on that. i disagree on the dual mandate if it ain't broke, don't fix it. the fed has engineered inflation dropping from 15% in 1981 to 2%, and unemployment from 10% down to 3.6%. so, the fed thinks they've done a great job, and i'd see no reason to change their mandate. >> but you're just saying they made a mistake last year would a single mandate have helped avoid that mistake? because if they didn't have 2% inflation, then they probably wouldn't have raised four times. >> european central bank has a single mandate and look where they are we're in much better shape than they are, and we've handled this last decade much better. >> so, joe, quickly, you were going to say something about how we do have a global problem when it comes to inflation, and maybe that's part of why the fed has struggled to get to its target. >> right also, the ecb, for what it's worth, has a single mandate, and they raised rates in ju

has the fed -- is the fed going to ride to the rescue here? the ideaean towards that they will be cutting in the second half of the year, whether that's riding to the rescue -- let's go back to what i mentioned about confidence. we've done some statistical work on this, and the reaction of the market and the economy to the fed stimulus is very dependent on investors' emotional states. if that consumer confidence series, one we like in particular, i will throw it out there, is the conference board's -- consumer confidence in their present situation. that has taken a hit in the last few months. that is the one that is historically the most tightly correlated with stock prices. it will be interesting to see whether this -- it's not till the end of the month when we get that number, but whether that continues to roll over. if it does, it says, look, confidence is fading. even if the fed were to cut rates at this point, which would surprise people, i don't think it will be a surprise later in the year -- hard to see the dollar being really strong i

there is no doubt the fed has stopped. from that point of view, that is helping to support risky assets. ironically, that is giving trump more ammunition to continue this trade war with china for the time being. shery: late last year, we saw sharp tightening in financial conditions which led the fed to change course. how are financial conditions at the moment? david: the u.s. stock market until a week ago was an all-time high. -- from at real rates that point of view, there is no reason for the fed to cut rates. of recent -- light in some sense, you could argue tone overed's dovish the past three months partially reflects that they are starting to see the significance of the global trade war from the point of view of political uncertainty . it has been weighing on the economy the last three or four months. view, we arent of waiting with great interest to see what happens with this trade war. if it gets sorted out, i don't think there's any reason for the fed to cut rates at all for the rest of this year, given the strength

inflation data will drive the fed. core pce at the end of next week, expected to come in below the 2% target. that will be the driving factor to us. in our view, transitory nflation is incorrect. low inflation is here to stay. dependant of a rate cut by the end of the year. >> in addition to inflation, financial conditions, it does work to tighten significantly, that would move them faster ather than slower. also some indicators that we watch on growth. starting to see the rollover. the most important would be the unemployment numbers. we see a rise in unemployment by .5%, that they would move quickly. michael: we had the base case that the fed would not do anything, but the bar -- everyone talking about the hurdle -- the bar to cut has continued to come down in our minds. right now, they are definitely more predisposed to cut over the next six months than to ike. jonathan: we have seen a massive rally in the global bond market. what was interesting and unique about this week? a little bit of additional fuel coming fro

the credibility of the fed goes right at that. i look at monetary policy and our balance sheets, i know they are in independent agency, independent of politics on capitol hill or the white house, but i recognize regulatory authorities, and that is where i spend my time looking at the fed. those regulations can have as much of an impact interest rate setting as from the federal reserve, and those areas, the hill has necessary and proper oversight in a forceful and meaningful way. wherein, you can see interest rates and balance sheet questions we have given to them to be independent of the hill. >> given that independence, does it mean the president or any high ranking official should be giving explicit public guidance to the fed chairman and potentially threatening their job prospect? rep. mchenry: the president tweets what he thinks and feels, that is different than previous presidents. some people like it, some people do not. the president has made his decision. what he is expressing is what every president has either privately e

the president of the fed bank of st. louis told bloomberg that the trade work would have to continue for an extended time to impact policy decision. >> for this to actually affect fed policy, these tariffs would have to stay on for quite a while. summing like six month. -- something like six month. the manager at the eaton vance global income group. great to have you with us, andrew. powell.eard from chair he last time we heard, sounded more upbeat about the state of the economy. does that mean we are not expecting any moves from the fed, at least this year? >> the minutes that are going to, later today, we have to keep in mind at that the meeting was three weeks ago. what was happening three weeks ago? the stock market was hitting a new high. the credit spreads had been ratcheting tighter. to expect something to come out of the minutes that is extremely aa. the market is -- extremely dovish. some extreme escalation in the trade war and a deep down turn in the economy, if you look at the market pricing, that is quite a b

does the fed talk too much? is there a problem with the fed delivering their message given what we have seen? david: the fed's message is just a mark to market message. sayard clarida will , justent things next year like ben bernanke when he said subprime would stay contained. we have to stay ahead of the curve. i disagree that the u.s. economy is in great shape. it is incredible how lucrative the market is and not digging in. real gdp growth in the first quarter, but when you add up consumer spending, construction, business spending, the domestic guts of the economy was barely 1%. it was stall speed. , that is theayroll only number out there. a survey which nobody talks about does a much better job then payrolls do, that household employment was down to 103,000 last month. the u.s. economy is weakening more than people think. the stock market, it is almost impossible to know what is driving the stock market. the bond market historically gets the story right before the stock market. the fact that we have the 10-

the fed. he has urged them to cut interest rates and accelerate bond purchases. now he is tying that to the trade conflict with china. centralsts that china's bank would make similar moves in order to boost its economy. he wants the fed to take action even though the u.s. economy is quite strong. it's a rather unusual position for the president, to want the fed to help them in this trade war. to insist that even though the economy is doing solidly with unemployment at a 49 year low, that the u.s. needs more stimulus to continue on. paul: if the u.s. were to go down that path, what would some of the implications be for its relations with other countries? insisted,. has long long complained of other countries trying to influence their central banks for political purposes. if the fed were to make some moves that could drive down the dollar,e value of the which would certainly draw complaints about currency manipulation from other countries, it's something that the u.s. has long complained about.

the fed needs to understand more of the same does not do it. the fed really needs to set the market up for fiscal policy expansion, which you will see if you have a left or right-leading policy, it will be justified either way. europe will be coming out with a policy rethink shortly thereafter. so what we have had does not work and we need a much more holistic rethink. jonathan: let's spend the next couple of minutes getting back to portfolio management. you have been making an intensified call to taper down volatility in your portfolio, reduce equity risks, and build up an allocation to high-yield. have you been vindicated the last few days? is this an example of what you're trying to communicate? gershon: it's easy to say yes, but my reality is that my call is much longer in nature. jonathan: it is a five-year call. gershon: it is a five-year call. equity strategists are saying, -- staying expects 6%, 7%, 8%. , you usually get it in high-yield. equities have been down 3% from their highs at this point. high yield is down half a percent. jonat

another fed pick is out the door. resident donald trump says stephen moore is withdrawn from consideration for a spot on the board of governors, hours after moore told bloomberg he was all in. tesla's cash drain. the electric carmaker is hoping to raise $2 billion through debt and stock offerings. and hedge funds are resurrecting the cdo trade. why this time they say it will work. here.check on the market we are seeing a second day of declines, ahead of economic data, jobs numbers tomorrow. we are seeing some consternation around trade news and maybe some disappointment emanating from farmers of what happened between the u.s. and china. it is a down day. we are seeing energy one of the big on the s&p 500. -- one of the big decliners on the s&p 500. big names including caterpillar and disney weighing on this market. tesla is a bright spot, though. if you like plant-based food from you might look at beyond meat. it rocketed out of the gate, as you can see. 34.3%.p a whopping off the height of the session, but they are g

inflation data will drive the fed. next pce at the end of week, expected to come in below the 2% target. that will be the driving factor to us. in our view, transitory inflation is incorrect. low inflation is here to stay. the penalty of a rate cut by the end of the year. >> in addition to inflation, financial conditions, it does work to tighten significantly, that would move them faster rather than slower. also some indicators that we watch on growth. starting to see the rollover. the most important would be the plumbing numbers. we see a rise in on a plummet by .5%, that they would move quickly. we had the base case that the fed would not do anything, but the bar -- everyone talking about the hurdle -- the bar to cut has continued to come down in our minds. right now, they are definitely more predisposed to cut over the next six months than to hike. jonathan: we have seen a massive rally in the global bond market. what was interesting and unique about this week? fueltle bit of additional coming from u.s. weakness, ma

francine: is the fed 100% independent? the consummate attacks from the president, does it change the way the fed thinks at the margins? carl: i think the fed is independent, and i would use the number 100%. attacks,he president's because they are so public and overt have insulated the fed to a certain extent. i think the president's nominees, there is willing to be suspicious if they would be carrying out his bidding. people were suspicious primarily because how open the president has been attacking the fed. francine: well that change, or is not the way it goes? we need to worry about central-bank independence across the western world as we had ray dalio saying mmt is closer than you might think. then we will have something new emerging. carl: i think in the u.s., we are a long ways from that. -- there is an idea out there that i hope would by spending onps infrastructure you could boost productivity, so you could have low inflation growth. of. we should be in favor as the fed in danger of not being independent? no. what h