Transcripts For BLOOMBERG Whatd You Miss 20160301

The nasdaqs best day in six months. Only United Technology declined in the doubt. Rally,ge day, huge really telling that we got a week chinese pmi, different flavor to the markets in january. Alix you can see that amplified in the bank stocks. F, s p financial sector, a 50 day moving average, just below that. Data,s deepening yield curve, the banks take off. Joe speaking of the steepening yield curve, the spread between the two year and lot,0 year, flattening a so this trend which had been going down jumped up today in a reversal. Also, amazing fixed income news, japan selling 10 year debt at negative yields. Stocks rallied, bonds fall, so it follows that the japanese yen should weekend. And particular, backing off a threeyear high. Alix oil, boom. I 31 rally from its low in february. Vladimir Putin Meeting with the heads of big oil companies. That had the markets taking off. Scarlet we should mention auto sales another important piece of data. Ford and feel chrysler betterthanexpected numbers. Unexpected drop because of a cutback in deliveries to rental agencies, a way to boost profitability. The shares of all three automakers climbed. Scarlet those are todays market minutes. To take a look at the Construction Spending data we got this morning, the blue line, topline construction numbers, does not look like recessionary data. , highway andne street Construction Spending. 30 , a lot of noise there, whether in stuff, but some nice numbers. Scarlet i will build on what you showed us yesterday with European Economic data coming in weaker than expected. U. S. Economic data surprising to the upside. What does this mean for the dollar . The dollar has been appreciating and value versus the euro. European Economic Data disappoints, and this is the set up as you head into the nonfarm payrolls report. Volumeou have to look at. It is rare you see volume up on and up day. Volumecked up usually picks up on a down day. Volume was 50 higher, also for utilities, health care one point. There is a lot of juice to the rally today. Joe a lot of chasing and panic buying. Scarlet emily chang as of the rsa conference in san francisco. She is joined now by u. S. Attorney general loretta lynch. Emily thank you for being here. I want to welcome our listeners from bloomberg radio. You say there is a middle ground between apple and the fbi, and i was wondering if there is a middle ground, where is it . We see the middle ground and anyw enforcement company goes to the court stood arbitrate the disputes as to what the law means or what compliance means or whether someone should comply, we go to court. Case, a we did in this and thats what we think is the current state of affairs and where this will play out. However, it is also the middle ground of the larger form of ideas in our country. Having a discussion about what it means to have both privacy and security. We do it all the time. We can do it in this case also. Judge justbrooklyn roll that apple does not have to do this in a separate case. Yourthat undermine argument or change your strategy . Know it does not change our strategy or reliance on the court. With thatappointed decision, but will resubmit it to a judge with additional information. I would also note that was a case in which we were working very well with apple. Help us withed to that particular device, an older device. That figure case does not involve encryption. We still feel there is a path to discussion to working on all of these issues as they come up. Its not just about one phone. It is about every phone and the future. Had you responded that . That . Do you respond to apple wasecently, able to reply does comply with our request, and they have some of the strongest security out there. Careve our health companies, finance companies, all important sectors of the economy, depending on encrypted data to protect every single one of us, but also maintain the ability to manage that data and keep us safe and secure. Askingthe government is the same in 14 other cases, 14 phones, drug dealers, but not terrorists, so i wonder where is the middle ground. Indicates just how important our devices have become and how much data they contain. That we at the doj do, we see a electronic evidence becoming paramount. Papers andll get documents, rely on interviews with people, but electronic evidence is what we are seeing in every case. That is how we store data, maintain data, access our devices, but the fact that there are other funds and shows this issue is going to grow, but in every single one of those cases the same as if we were going to go into someones house and look at documents, we craft a report request, narrowly tailor it, only look at what the law will allow us to look at. We go to the companies to help is voluntarily. If they feel they cannot do that, we go to court and get some help deciding that issue. Emily what does a compromise look like to you . How does this play out . It is about more than one phone. It is about how we access evidence anywhere, and we are applying the same principles as if we were trying to go into a home and look and to some papers. Look into some papers. In this case its important to note that the customer, the actual customer of the phone that is it issue, is the one that has requested help. Resolve this is for apple to work with its own customer and work out a way to resolve this issue. Is not havingmise access to information is a curate he issue, but arent Companies Like apple creating products that cant be hacked into or infiltrated by cyber terrorists, are they making us safer . Fbi and making this request inadvertently making us less safe . Think about the current state of Business Affairs in which companies every day use and protect our data by encrypting it or by a variety of means to keep us safe but also retain the ability to respond to warrants, to respond court orders, to respond to their customers when the customer calls the bank and says i need to get a copy of my last month statement, the bank does not stay it is encrypted and even i can get a hold of it. We retain all the time the andity to do all things, american industry, the greatest in the world, can certainly do that. Say about theou idea around apple creating an unbreakable operating system . That isng something the government cannot get into, do you believe they can do that, and should they stop it . An engineer and cant answer that question. I think innovation and creativity is important, but i think the reality is that we are in this together. Great all part of this experiment called democracy, great social compact we have to look out for each other, and weve all agreed that no one is above the law. As i have said before, were not against strong encryption, are warrantproven gretchen, and companies are developing things every day. Technology has changed so much years, threewo years, and we dont know what is on the horizon. It is hard to say. I find it curious that a company would say that when it comes to this issue we will not go any further. We will lock this data away, throw away the key, and not give any thought to about how we might need to access it. To how we can comply with a court order and continue to create and innovate in so many other important ways. Emily apple is saying that doing this would infringe on my rights and your rights. Is there something to that argument . It is in everybodys interest to have strong privacy. It is also an everybodys interests to have strong security, and the court is where we balance those rights since the beginning of our democracy and thats why we have gone to court to get that neutral third party to give us an answer here and why we will continue to pursue the issue there as well as continue to have those discussions. We do this all the time, balance privacy and security in so many areas, and in fact part of the governments role is to support the strong privacy issue as well. Could the government go to the nsa to break into this phone, and if not, why not . Comment on the specifics of the techniques we may or may have not used because it is an ongoing investigation, but in this case we find yourselves in a situation where we would like to try to obtain information on that phone. We dont want apple to break into the phone. We dont want to go into the phone and pull that out. We want them to preserve the information on the phone and disable the password that would destroy that data as we try to gain access to it. Emily they say that would compromise every phone. That someone could use that to get into my phone in your phone. It is an interesting argument. Interestinge are technical issues here, but it is bigger than a technical issue, and particular when a company has been able to respond to government requests for help, so they clearly have the ability to do it, and in many of the devices we have talked about in some of the other cases those devices predate the current operating system and dont even deal with the issue of encrypted a and their devices were they had the ability to provide the assistance that they have provided for years, but have chosen not to in this instance. Emily was speaking with attorney general loretta lynch, specifically about this ongoing standoff between apple and the fbi. In an interview with fox news, you said that one of the things that keeps you up at night is threats to our corporate intellectual property. You also expressed concerns for u. S. Vulnerabilities to chinese economic espionage. How is forcing apple to develop less secure products or a less secure solution to a particular situation not in contradiction . The discussion about how we protect corporate intellectual , how we deal with economic espionage, involves so much more than Just One Company. Its a Great Company that makes beautiful products, but so much more than Just One Company and how theyve chosen to build a certain set of devices. Ifs about how we track data they try to infiltrate systems, about how we identify actors as they try to infiltrate our systems, about issues not tied to a specific device or specific commercial venture or marketing structure, but are about how do we deal with other governments. That involves diplomacy, Law Enforcement issues, and it also involves making sure we keep an , suchhat they are doing as the fbis investigative efforts, we work closely with industry across the board, not just the Tech Companies, but financial industry, health care industry, to talk about threats theyare seeing, what are investigating, we provide insistence, they provide information, all to create a profile of what the latest attacks may be. These very from industry to industry, company to company, so that issue is much bigger than apple. In this instance, as we have said in our court papers, where asking apple to do what it has done for years, help us preserve information on a device so that we can try to see if it is relevant data to a terrorist investigation. Emily some lawmakers are working to draft legislation, specifically with the administration seek legislation, what kind, have you seen any drafts . I have not seen drafts at this time could whenever senators propose legislation, it is something we look at. We have not propose that itscular bill, and again more than Just One Company, more than one issue, we have found that is the most effective way to deal with the issues good that may be something that comes up is the issue grows, and we would welcome everyones participation in the discussion about that. We have important decisions we have to make, how we will conduct important investigations, balance privacy and security, and the more people are involved, the better. Emily everyone was to know about the one thing you cant speak about, Hillery Clinton emails, and i wonder why have you been so hesitant to speak about them given that they could have such a huge impact on a really consequential, and some might scary, election . Is why dower to that we not talk about any investigation. We dont talk about open investigations or matters within the department as a matter of policy, governed by law, driven by policy, riven by fundamental fairness to anybody who might be involved in that, and we dont talk about ongoing matters him about what i will say is what i have said, which is that i understand peoples fascination with it, but it is a matter to review of how classified information was handled by one agency, similar to many others we have conducted over time, and it will be handled like every other investigation that willory, career lawyers look at all the facts and all the evidence and they will come to a conclusion. Donald trump is getting endorsed by the ku klux klan, and there is some controversy about how he felt about that endorsement, now disavowed it. How do you feel this kind of rhetoric affects america and are 2016 thatsed that in we are talking about it . Oni dont have any comment any candidates are the issues they are facing. I think its unfortunate that the ku klux klan continues to be. Force within america frankly, weve always talked about bouncing privacy and security, our First Amendment protects all kinds of speech, even hateful speech. My concern is when that speech crosses the line into inciting violence. Certainly it is not consistent with our american values. Emily your office is responsible for enforcing legislation,ation Tech Companies are looking how to improve racial diversity, is that something youre tracking . It is not something we are tracking, but i applaud those efforts. Our country has always been better with his been diversity in the marketplace of ideas, and certainly the Tech Industry is founded on the principles of innovation, creativity, thinking outside the box, so the more they can bring different voices and different backgrounds to that debate, the stronger we will be. Emily . The administration is gearing up for a Supreme Court nomination fight. Will the president submit a nominee, will it be you, are you interested . Spoken andident has stated his intentions to submit a nominee. I do not know who the nominee is. I am very happy in the greatest job in the world in my opinion as attorney general. The one thing you would like to accomplish before the end of your term that wont be done by Republican Attorney general . View the role of the department of justice and Law Enforcement is something that isnt dependent on party affiliation. All of us who have the concern about the safety and security of the American People take it very seriously, no matter what letter might be beside our name, all of us work hard towards a goal. Emily attorney general letter lynch thank you for joining us on Bloomberg Television and bloomberg radio. Whatd you miss . More of more of whatd you miss . Next. Scarlet whatd you miss . Intelligence releasing fresh analysis of the president ial candidates. We will be digging into theres reports. Our focus today is donald trump and his trade proposals. The leading republican candidate is proposing a 45 terrified chinese imports. Ning us from washington proposing a 45 tariff on chinese imports. The goal is to bring jobs back to the United States from china. What does your analysis show . Dont have a history of making smart phones in the United States. In textiles, apparel, furniture, you may see some of those jobs come back to the United States, but more likely you would see go to vietnam, cambodia, other centers of low cost labor. Joe when donald trump talks about these things, he always talks about renegotiating deals with china, japan, mexico. What deal could he theoretically negotiate, and would doing so with awl that you drawl the u. S. From various withdraw the u. S. From various treaties . Tpp, tryegotiate the oninclude tougher provisions currency manipulation, that would be his goal. The question is whether our trade partners would work with somebody who is such an of valid protectionists who is such an of valid it also presumes we would be leaving the wto, imposing a tariff on trucks from mexico against nafta. Policies assumed we would be much more isolationists. At the valuelook of chinese made cell phones imported to the u. S. , 200 dollars of phone, so of 45 percent tax, how much does that cause me or how much is that cost apple . 200 is the amount apple pays when they are importing cell phones. 45 tariff on average would cost , and 90 per cell phone they would have a choice of absorbing that or passing that along to the consumer. Wants tomagine no one pay more for their smart phones than they already do, highly unpopular with the public. To pay more wants when it has been getting cheaper. Donald trumps 45 proposed a tariff on china is conditional monetary management. Its not a static number. Currencies are relevant one to the other. Fullyt isnt necessarily clear, lets put it that way. ,oing back to this point freetrade advocates point this out all the time, free trade hurts parts of the u. S. Labor market, but cheap goods can be a huge win for the u. S. Consumer. Hurt consumerst to enter into a trade war or increased terrorist with all our partners around the world . Sorry about that. Just imagine going to target and a huge range of products across the stores are imported from china. Consumers would have to pay 50 more for those items. There would be tremendous consumer pain. Walmart and target would hardly be able to be lowcost retailers anymore, highly unpopular. Alix great stuff. Thank you very much. Much more coming up. We will be right back. Lets get the first word news. The legal fight between apple and the u. S. Justice department is waged on capitol hill, at issue a lot iphone belonging to one of the San Bernardino shooters and whether apple should help the government break into the phones encryption. Comey has been testifying, apple officials also. sdges granted ted cruz request to throw out a lawsuit by ben carson claiming that ted cruz was born in canada. Ted cruz is facing similar lawsuits in multiple states. Join us on with all due respect for extensive coverage. Senate democrats and president obama met at the white house with republicans over the Supreme Court vacancy ness toyre willing thi approve nominees. There will be a you and vote on north korea sanctions tomorrow. Global news 24 hours a day powered by our 2400 journalists and more than 150 news bureaus around the world. I am mark crumpton. The s p 500 and dow rallied, so a look at asian markets. Paul allen is in sydney. Good morning. A very strong lead from wall street. Things looking good in wall street at the moment. 35 , expecting healthy gains in australia as aesce the asfs opens sx opens. Make a deal with foxconn to inject muchneeded capital, but a more urgent problem looming. The month, their credit line and loans expire, so the banks and sharpie to reach an agreement before those loans can be renewed. Australia will be releasing gdp figures and a couple of hours. 2. 5 year on year growth, gdp growth meaning is maintaining 2 . The rest of the world would give anything for these sorts of growth figures. Astralia 25 years without recession, although there have been drags with recent weaker commodity prices. Alix whatd you miss . Bernie sanders controversial economic plan claims it will andte 26 million jobs increase gdp by over 5 , but the New York Times says those numbers are based on faulty math, and the Biggest Issue was an overestimation of Government Spending growth. Economist now is the behind the plans analysis, gerald freedman. Joe thank you very much for joining us. Showing much work more aggressive fiscal stimulus, more growth, more employment, more productivity than people this, but there is complaint that people have brought up about your math. They say that there is confusion between level and growth rates. Do you stand by your analysis . Yes, theres no math confusion. There is difference in models, perspective. Model,ing a keynesian where we recognize that there is your employment, and when increase the growth of the economy and absorb some unemployment you can have faster growth, and that faster growth process. If you look at times when we , in had depressions before particular in the 19 30s, and coming out of that depression in the 1930s we had growth rates , and frome digits 19471973, when we have aggressive fiscal and monetary policy, much higher growth rates. Canrnment intervention boost the growth of the economy. Joe just to clarify though, the growth three mates growth rates would remain elevated even once the level of spending got fixed. Cans intuitive that demand grow as Government Spending accelerates, but the complaint is once the sanders plan spending hits a new level, your analysis continues to show growth. Thats right. We have primed the pump. After you get Government Spending in there, you get more employment, then businesses will be investing more, consumers will be spending more because they have more money and that will put more money and other peoples pockets, encourage investment, and as the economy of approaches full employment, businesses will be looking for ways to raise productivity through investment and people working harder and more productively. The economy going, then it will continue to go. Of employment,ng there is a question about the Labor Force Participation rate. A lot of people wonder whether we are at a peak level. You have the retirement of baby boomers that represents a structural change. There is a certain amount of structural drag, but keep in mind that the decline in withinor force has been demographic groups, within eight groups. Within age groups. It the Labor Force Participation rate with an age groups is back to where it was in earlier times , there would be plenty of workers available. As the economy expands, immigration will be increasing. Use very conservative numbers for the increase in immigration that we get, but if the jobs arent filled within the country , there will be pressure to bring more people into the United States. Figure, it has been subject to some criticisms that i might be willing to. Ccept it could be that the multipliers i used are a little too high. The point is that if you use the most conservative assumptions, low multipliers, no effect from the redistribution of income youugh the minimal wage, still get a significant boost in growth coming from the sanders program. Joe so you say youre using a conservative approach to this, why the criticism . Re was an open letter from we are concerned to see the Sanders Campaign citing extreme claims by professor friedman, claims that cannot be supported by the economic evidence. If you are using standard keynesian models, conservative estimates, why the strong pushback . Because they are not using keynesian analysis. The others, for whom i have great respect, but we see things differently. They are working in the classical model. They are assuming the growth rate of the economy is set by demographic factors and by Technology Independent of the state of effective demand. This is exactly what was criticized when he wrote the general theory. It is the approach that was rejected in the United States during the golden years from the late 1940s to the early 1970s when we had higher rates of growth in the economy and productivity growth. Many in the economics profession law swung back to the old that supply determines demand, and the you automatically have full employment. Critics ise by my they adjust their expectations what iseconomy to actually happening on the assumption that we are basically always at full employment or moving towards it, so they have lowered their estimates of capacity growth, how fast the economy can grow, and line with what has been happening in the last five years when we have been in this. Time of stagnant growth. Alix are you voting for sanders today . I and still undecided. I am a still undecided. Hillaryie clinton. Are we looking at a bottom for u. S. Manufacturing, new data, next. Scarlet i am scarlet fu. It is time for the Bloomberg Business flash. Sports authority filing for bankruptcy this week, rivals there to pick up the pieces. Sports authority talked about selling shores stores to dicks sporting goods. Sports authority was once the largest chain in the u. S. Reachedheart media has an agreement over whether the struggling radio broadcaster violated deals. The agreement gives creditors an opportunity to propose a plan to a dress than 12 billion in debt. Scarlet olympus has agreed to pay 630 5 million to settle federal investigations. Unit will pay 612 million plus interest to end an investigation into kickbacks. The latin American Business will pay 23 million to settle a bribery case. That is your Bloomberg Business flash. Alix whatd you miss . . Has a u. S. Manufacturing reached its bottom . Are aty released numbers a sixmonth high, so is that a sign of stabilization . Construction activity up 10 from a year ago. Joining us to discuss the data are our guests. Has manufacturing bottom . It looks pretty promising. For about nine months you have had three factors at work, oil industry slipping into depression, Financial Markets played off what happens in the oil markets, so equities and credits have gotten worse, and then final demand, Consumer Spending and whatnot, so the markets are worried that it would push through to end the is encouraging is the isn manufacturing data and todays data suggesting stabilization and better times ahead in the future. Joe george, what you seeing . We agree with that assessment. If you look at the trend and ,ore durable goods orders stripping out some of the most volatile, orders and shipments look to be picking up yearoveryear and trending higher, growing 6 annualized in the last three months, so that is very constructive getting with the headwinds from the u. S. Dollar, and were looking for growth from the u. S. Manufacturing in a long time. M reflects that. Look. S an interesting factories are seeing sales grow. What is this say about the u. S. Manufacturing industrys ability to recover from a stronger dollar . It says the u. S. Economy is dynamic and robust. One of the things that has been frustrating is that the effect on the real u. S. Economy has not but thege, manufacturing data has had a huge impact on Financial Markets, so hopefully markets stabilize and give people confidence to buy more durable goods. Joe in january and february, we heard the word recession more than we have heard and long time, but suddenly people dont talk about reception recession with the rally. Is this just a story of the price setting the narrative . Would be that the data has improved in 2016 releases, retail sales, durable goods, december industrial production, leading indicators. Economy is taking up to start the year, whether the market is responding to that, the fed, or the self, is hard to determine. We are seeing a nice uptick on data points. Onx the one potential drag manufacturing is the high inventorytwosales ratios. Not be that much room to go, and they are still very high. High inventory to sales ratio does that mean that we will see factory orders less . Will see some transitory inventory drawdown, apparel over , retailers season stocked up too much, so that could be a drag for the next quarter or so. Weike the housing sector, will be through that through the middle of the year. Scarlet a big jobs report on friday, including mining, what would you be looking for to confirm manufacturing has bottomed . Relative to how the job market was, manufacturing is not nearly as impactful, but we have seen a lot of job losses in the oil sector, so the mining component includes the oil sector and the hope as that loyals levels out, one more sign that there is stabilization in manufacturing and energy. Joe we still see this gap between the last that and what and what theet market is expecting. Serious about being data dependent, then theoretically eight march hike should be on the table. Based on data dependence or on the economy . Either one. Those are different questions. The Economic Data has not picked up since they hiked. Andhey are data dependent they saw it as necessary to hike in december based on the daytime, then there is a strong case to consider a strong hike in march. Maybe we will hear that from vents beakers, but we have heard quite the opposite, so it will be interesting to watch the balance between the Financial Markets and with a vet is saying and what the data is saying what the fed is saying and what that data is saying. It is sending a very ambiguous message. Alix thank you very much. Scarlet have global currencies lost a fundamental anchor . Alix wti falling in late trading after the release of api inventory that the inventory data. A little bit of the decline in after hours. Scarlet alix i am alix steel. Whatd you miss . Our currencies going in the wrong direction . Currencies going in the wrong direction . Has weekend, why akened, why . Not some sort of absolute measure where currencies have to track the twobanged year yield two year yield. Is relating to different Interest Rate markets. Markets and the relation between them can change over time. We noticed is that we are seeing simultaneously across a number of big liquid developed currency market pairs the verge and sees that have held steady for some time. Will recover, maybe they wont, but we think it is an interesting comment on what is driving Global Markets, stable and predictive relationships are not working. Joe what is driving Global Markets now . Is a lot going on. You have to balance a rubbish fed with an uptick in the u. S. Economy, sending the markets in different directions, balanced extreme policy experimentation going on, maybe it works out well, maybe not, Interest Rates in the eurozone and japan, and we have even seen speculation around u. S. Negative interest down when sentiment was earlier this year and the impact it would have even though it is not clear the fed can do that legally, so i think it speaks to the sentiment and what is driving these currencies are reactionary as opposed to investors saying that japanese economy is outperforming versus the euro, so the euro should trade cheaper. Those relationships are not holding now. Comes at a time when markets are questioning the ability of Central Banks to get anything done in the market. Scarlet there is a lot of skepticism. You have noticed these different pairs, but what do your clients say . It depends. For some, they just want to be oh aware of what is going on in fx, others think this is as another data point, but some think this is weird and will take a look at it further. Scarlet are they worried by it . Not look at these relationships breaking down and saying this is dangerous. I would not say that. Excuse me, it is a symptom of a market influx, a market requiring thing itself towards new inputs of information, and in doing that old relationships break down. It just means that there is a lot of flux in Global Markets, and youve seen that. Scarlet thank you very much. What you need to know to gear up for tomorrows trading day. That is next. Scarlet i am scarlet fu. Whatd you miss . Twohour with all due respect. Tonight. Tonight. Dont miss it this is the Fourth Quarter and economists are looking for a 2. 5 print. Basically, no change there. Alix the eurozone at 5 00 a. M. We saw a move lower in the eurozone. The path for lower oil . We have the ecb meeting coming next week. A silent quiet time coming. Done looking for clues. Got to wait for the big number. That is all. Thank you for watching. Quite have a great evening. Have a great evening. The candidates are making their closing arguments. Mr. Trump i have seen him sweat like i have never seen anything like it. The Campaign Testing the candidates resolve. Mr. Sanders last week, i bought my second pair of underwear. I think we are getting off track. This is crazy. This is just nuts. With all due respect