Latest / Bloomberg Intelligence / Stuart Frankel's Guilfoyle Expects The ECB To Hold Still(Audio)

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Stuart Frankel's Guilfoyle Expects The ECB To Hold Still(Audio) · Bloomberg Intelligence

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  Speaker 1: a Bloomberg Business flash. Bloomberg Jakime Stock, the Fed in focus,
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  Speaker 1: the interest rates start to row for where the economy
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  Speaker 1: is going. The question is how much higher ship it be.
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  Speaker 1: FED has increased to tass Yes, and in doing so
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  Speaker 1: it has increased its liability. Keeping interest rates at zero
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  Speaker 1: for a long time is not going to cause inflation
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  Speaker 1: to go up. It's very controversial. I think what we
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  Speaker 1: on the world. The Fed in focus on Bloomberg Radio. Godzilla,
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  Speaker 1: Godzilla versus Gegon, Godzilla versus Destroy Your Yah. Stephen Gilfoyle,
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  Speaker 1: chief market economist of Stuart Frankel, joins us now. He
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  Speaker 1: can be followed on Twitter at Sarge nine eight six.
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  Speaker 1: Stephen gilfoil I started off with a little Godzilla courtesy
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  Speaker 1: of your most recent note. I thought you were going
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  Speaker 1: to tell me that the central banks around the world
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  Speaker 1: where god Zilla and those other large characters fighting it out,
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  Speaker 1: and that they would leave the world with a trail
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  Speaker 1: of destruction. Tell us a little bit more, Oh, I
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  Speaker 1: think that that's certainly the case. You're you're probably going
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  Speaker 1: to see that my god Zilla reference this morning that
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  Speaker 1: THO was having to do with this Pokemon in Japan.
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  Speaker 1: But but yes, I think I think we'll stay with Japan,
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  Speaker 1: the Bank of Japan with their with that program. We're
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  Speaker 1: expecting them to go forward with next week, which really
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  Speaker 1: amounts to either perpetual bonds or helicopter money however you
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  Speaker 1: want to explain it is UH along with earnings. Part
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  Speaker 1: of this goose move we're seeing in the markets here
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  Speaker 1: with the record highs for the sp doubt for several
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  Speaker 1: days running now as Japan continues at stimulus program, A
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  Speaker 1: lot of that money is supposedly earmarked for infrastructure projects.
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  Speaker 1: Those are projects that won't necessarily show up on any
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  Speaker 1: balance sheet or in any budget item. What's that going
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  Speaker 1: to do to the country's debt balance? Well, you see
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  Speaker 1: when they spend fiscally, what they're gonna do. I mean,
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  Speaker 1: even if they're spending it on infrastructure, it's going to
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  Speaker 1: go towards things like like supplies is going to go
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  Speaker 1: towards UH, towards salaries, things like that. The money will
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  Speaker 1: be in the general economy, A lot of it will
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  Speaker 1: be They're going to erase it from the balance sheet
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  Speaker 1: of their central bank and from the liability side of
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  Speaker 1: their treasury. So it's going to be a strictly an
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  Speaker 1: increase in the monetary base with the money supply. So
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  Speaker 1: the idea here is that they can maybe wash away
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  Speaker 1: some of their debt by by getting some inflation. And
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  Speaker 1: you know, I don't think it's really a good idea.
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  Speaker 1: I don't. I'm not certainly on board with anything like this,
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  Speaker 1: but it seems to be the way that ben Verniky
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  Speaker 1: has led them. Is it a bad idea? Will it
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  Speaker 1: create unintended consequences that may be worse than the original problem?
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  Speaker 1: It may, I mean, we all know what happened in
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  Speaker 1: Germany in the nineteen twenties. I'm not saying that's automatically
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  Speaker 1: gonna happen. They've been trying to get inflation over there
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  Speaker 1: for decades now and it hasn't worked. I myself come
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  Speaker 1: from the Austrian school of economics, so I don't really
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  Speaker 1: like these extra wild attempts at at goosing things. But
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  Speaker 1: maybe you shouldn't. But they But in Japan's case, their
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  Speaker 1: economy has been in a death spiral for some time
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  Speaker 1: and they've tried almost everything else. So I do understand
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  Speaker 1: the desperation, all right. So the death spiral that works
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  Speaker 1: with a Godzilla character tell us about the European Central Bank.
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  Speaker 1: What movie would they would they inhabit if indeed they
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  Speaker 1: were making a film or a documentary about the Mario
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  Speaker 1: Draggy and the European Central Bank. I don't know if
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  Speaker 1: I can think of a movie for you, But they're
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  Speaker 1: going to They're probably gonna hold still tomorrow. I mean,
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  Speaker 1: they're trying pretty desperate measures themselves. We all know they've
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  Speaker 1: kept interest rates very low. They're buying everything from corporate
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  Speaker 1: bonds to government bonds to pretty much everything accept goods
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  Speaker 1: and services, so they've been very aggressive themselves. I think
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  Speaker 1: they have to give it a little more time. It's
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  Speaker 1: their first meeting since the brexit. We I think it's
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  Speaker 1: playing to see for orl right now that the brexits
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  Speaker 1: hurting Europe more than it's going to hurt the UK
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  Speaker 1: UH and I think they're probably gonna need another meeting
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  Speaker 1: or two to see what they need to do. I
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  Speaker 1: don't think they, I think will be imprudent of them
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  Speaker 1: to get more aggressive with their monetary policy at this time.
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  Speaker 1: I don't know whether you've been following the details of
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  Speaker 1: what's been going going on by at the European Union's
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  Speaker 1: top court, but they denied Italy's request that taxpayers, not bondholders,
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  Speaker 1: be on the hook to a bail out to the
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  Speaker 1: banking industry. What are your views on the Italian economy
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  Speaker 1: and the banking industry there, Well, they're going to they're
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  Speaker 1: going to have to allow Italy or maybe the the
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  Speaker 1: Eurostone itself to bail out the Italian banks. If not.
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  Speaker 1: A lot of our premise here for the move higher,
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  Speaker 1: which I know I just blamed a few other things,
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  Speaker 1: but also part of the part of the move here
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  Speaker 1: high was because that the worry that we saw a
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  Speaker 1: week or two ago over of a Deutsche banks exposure
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  Speaker 1: and and the Italian banks themselves, really it seemed to
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  Speaker 1: go away a little bit. It seemed to be we
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  Speaker 1: seem to be a little bit at ease over it,
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  Speaker 1: because we had believed that the Italians would be able
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  Speaker 1: to monetize their banks, capitalize their banks if they needed
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  Speaker 1: to once those banks fled dry. If they don't let
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  Speaker 1: them do that, then it's going to be a different ballgame. Well,
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  Speaker 1: Luftanza has just cut its forecast for earnings before interesting
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  Speaker 1: taxes for twenties sixteen. A bit more on Europe. Is
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  Speaker 1: there anything that you believe that the European Central Bank
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  Speaker 1: can do without the support of the politicians to some
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  Speaker 1: way figure out how to get the economies and the
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  Speaker 1: banks in Europe to start growing again, you know right now.
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  Speaker 1: But they're basically paying the banks to len right And
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  Speaker 1: is it working? Not really. You saw the zoo numbers
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  Speaker 1: out of Germany. You say, there's e W numbers. I mean, so,
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  Speaker 1: so things seem to be going the wrong way there.
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  Speaker 1: I'm I am concerned over Europe, but I my first
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  Speaker 1: concern is here in the US, and I you know,
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  Speaker 1: if we can it's going to hurt us in the
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  Speaker 1: long run, if we're being the cleanest shirt and the
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  Speaker 1: dirty hamper analogy. But I mean it's it's ready to
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  Speaker 1: hurt us in trade because our dollar is going to
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  Speaker 1: become too strong. It's all, what's the Dixie over ninety
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  Speaker 1: seven right now? Our yields are are low enough already.
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  Speaker 1: We don't need them going any lower. And I think
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  Speaker 1: it's just it's going to hurt all of our multinationals
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  Speaker 1: in the long run. Not that valuations can't stretch, because
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  Speaker 1: we all know that fundamentals aren't what they used to be.
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  Speaker 1: In stock valuations are not they are not what they
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  Speaker 1: used to be either. I like them. Maybe we can
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  Speaker 1: use that as your quote of the day. Fundamentals aren't
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  Speaker 1: what they used to be. Well, maybe maybe they are
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  Speaker 1: what they used to be. But how we how we
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  Speaker 1: attach ourselves to them is the interpretation isn't what it
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  Speaker 1: used to be? Well, thanks very much, Stephen. Sergeant gilfoil
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  Speaker 1: He is the chief market economist for Stuart Franklin. He's
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  Speaker 1: joining us from the floor of the New York Stock Exchange.
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  Speaker 1: He can be followed on Twitter at serge nine eight six.
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