Forbid, one day we get too restrictive policy that would end financial repression. Which year when we get there. Would we get there . Bill i think it would take longer than two years. To contract is neutral interest and right now it is below zero and it has been below zero the last five years. Prior prior to lehman brothers, it was 1 or 2 . What is the answer for a high level world that was damaged significantly in 2009 and 2010 . The fed is proceeding gradually. I think the neutral rate of interest in nominal terms is probably around 2 , 2. 5 . Is ituggesting 2019 is at 3 . It is approximately 0 on a longerterm basis, which means real Interest Rate at a zero percent level. It is a delicate process, and not only the fed, but the ecb, all doj all boj Central Banks have to tread carefully as they move up. Scarlet janet yellen stretched stress they were looking at a gradual rate of great increases. Can the commitment of a gradual pace coexists with discussions on how to shrink the Balance Sheet . Bill oh, perhaps. As i have spoken before on your program, i do not think the fed is ever going to reduce its Balance Sheet. I think that is all poppycock. A 4 trillion Balance Sheet, basically reflective of a highly levered economy where there is 65 trillion of credit, and that we do seem the 4 trillion back to 1 trillion by reducing the 4 trillion back to 1 trillion, shows the economy levered at a one type of level, and that is to highly levered. The fed and the boj will never reduce Balance Sheet. Pressureget there is on the European Central bank to do just that consider tapering and quantitative easing. What would that look like once investors get wind of the European Central bank making concrete steps in that reaction direction . Right now it is increasing almost 80 billion a year. With the ecb does in terms of tapering, as you mentioned in your question the most significant factor in terms of treasury yields Going Forward of the ecb begins to taper over the next three or four months, 5reasury yields that 2 at 2. Basically are at risk. Theyear the comparison over 10year bonds would narrow. They would cease, at least as far as it is concerned with institutional investing. It could precipitate a light tapering in terms of treasuries. Tom we have been privileged to speak with richard clarida, and one of the constant things we have gotten is there is more debt than there was years ago. We seem to be doing a fed policy, orthodoxy that goes back 10, 20, 30 years. Bring up a chart right now this is something mr. Gross mentioned in his monthly notes at janice total debt to gdp. Over on the right side of his ronald reagan. Of we go to bush senior, the gdp,on weakness in debt to the bush blowout, up to president obama, up to President Trump. Bill gross, what should be the policy description given our high debt levels . Road toll, it is a hard get out of this particular trend, tom. 350 of debt to gdp is basically a highly levered type of number, and it needs to increase in order to continue to sustain nominal gdp growth. Look at it in terms of an individual. If your credit card is not expand, and you cannot bring consumption forward like you did over the last several years, then your particular person power and spending power declined. It is the same thing in the u. S. Economy. Unless you can continue to doned debt, as china has at a rapid rate, the central bank has problems in terms of monitoring the economy. It could be a deflationary moment. Moment. Tom are you finding comfort in bonds because you are worried his to do, ashas duke will go to the final four. The white line is equities total return. Right now, equities are way out front. Are you comfortable on constrained in bonds because equities are going to explode . Like bonds. Dont i dont think equities are going to implode because of the potential trump policies, and the market always maintaining some type of hope, and yellen maintaining a dovish posture. Bonds are not my favorite vehicle. For the 10 year treasury, the forward curve for two years forward puts them at 3 , which is close to it fourpoint loss, which eliminate the most all of your income. Bonds, to my way of thinking, even u. S. Treasuries lets talk about german bonds, which yield nothing for the most part. Bonds are not a favorite asset class in my opinion. Scarlet 30 you want to be, then, in your portfolio then where do you want to be in your portfolio . What do you want to be taken advantage of in your positions . Bill i want to take advantage of a gradual fed. There is the possibility of the ecb tapering, and that can precipitate some type of movement. If you see a gradual increase, what you want to do, and this is complicated, but when you want to do is sell volatility. You want to take advantage of a very compressed market, and a lowvolatility market precipitated by centralbank policy. Tom scarlet so, you want to sell volatility. Tom showed the chart on the return on fixed income versus equities. Do you see volatility coming back even more in equities as well . Bill i think almost certainly. 12. Vix is down below one would have to expect some type of movement not necessarily a black swan or a grey swan. 12 monthsnext six to of precipitates volatility in the equity markets. You have to be careful where you sell it. It is best sold, for instance, in the bond market, where it is hard for me to see you on the 10year german bond moving any lower than 30 or 20, and to me, that is a lowvolatility type of world. Tom lets rip up the feds script, talk ecb, the election in the netherlands, the French Elections, the two elections in france april into may, you are talking twice here about a bund play. What you presume european bond markets will do as we staggered through the French Election . Risk, tom,hat is the and you bring up appropriate appropriately. No investment is risk, shorting or going on. If the French Election turns upside down, we have problems in italy, the netherlands, yes, nds take a bit because there is the expectation that maybe the euro dissipates, implodes, and german bunds go back to german marks in terms of pricing. There is a 20 , 30 black swan longtail risk in terms of that trade. Matters, billhis gross. I have to fill out my bracket. I believe it is statistically possible that duke could play ucla in the final four. Is that where bill gross is headed this evening . Well, i think that is a possibility can i think ucla is pretty good and better than a three seed. Two cats shown in the less four for a one seat. I look for ucla, kansas i dont like kansas, but i like kansas to show up in the final four, and i like duke. We will see. They have a great bunch of kids. Tom bill gross does he know there are 4000 312 janice shareholders just in kansas alone . Bill gross, think you so much. I went with you because if i dont, david gura wont talk to me. Scarlet for professional reasons you would with unc. Tom i would with unc and purdue because of our wonderful executive producer. People happy. Keep i was going to go with a blue theme. Let me do a data check. Get off of basketball. Scarlet has been watching the bonds. The curve flattening at 119 basis points. The dow launches back toward the 21,000level as well. We will continue. Good perspective with Joe Weisenthal. All of that coming up on bloomberg radio, bloomberg. Levision, the fed decides joining us now is bloomberg executive scarlet editor, Joe Weisenthal, and Carl Riccadonna. Generally, the fomc Rate Decision has come and gone 25 basis point increase, as expected. Janet yellen answered a couple of questions. I thought it was interesting that we have a definition now of gradual three Interest Rate increases for the year, give or take one. . Hat was your takeaway, joe Joe Weisenthal it is interesting look at the Market Reaction the widespread of the relative sometimes we used to talk about the everything rally, and that is broken up since the election with equities rally in, bonds selling off. Today, you throw a dart at the screen, and you will probably land on a green square. I always like to look at the ao are etf, which takes a 60 40 equities bonds portfolio a portfolio split a lot of people have. It is having its best day since november 7. It is its best day since the election. It shows the degree to which people are buying everything on the board and brought diversified broad, diversified portfolios are doing well. How about you, carl . Carl riccadonna the biggest surprise, news, fed this is a fed not changing its stripes. It is extremely gradual. Chair yellen expressed her comfort a high degree of comfort in having this gradual approach. They could take away or at a single rate hike to any of the future years, but this is not a said going through any sort of major conversion in terms of their outlook on the economy, and given that the market was not expecting a rate increase today until this Extensive Communications campaign, there were some lingering concerns out isre that maybe this fed starting to reassess the outlook and where they stand, and from chair yellens press conference, from the lack of changes to the forecast, we see that was the filling out the case. Saw marge is an opportunity to strike, sensing it would be a long, hot wait to hold on until may or june for the next move, so they struck when the iron was hot. Scarlet she made clear she is not envisioning anything from the past joe . Joe she was very clear this is not a reassessment. Reassessment, strategy shift we are as dovish as we always were. Do you think she might have been leading her colleagues in the march rate hike or following in the march rate hike . Carl that is a question maybe we will understand better when we see the minutes or the transcripts. I did not get the sense that she has always been so cautious and moderate, that she was necessarily leading the charge. I think she is on the dovish side of the spectrum on the committee, and i suspect the hawks might have led. Tom the hawks have said what is the big rush here i thought Kathleen Hays within her to longer questions nailed it on gdp, where shall yen and chair yellen chair yellen said it is a noisy statistic. Bill gross absolutely gdp. Neil cash curry has to do with gdp. It is not there, carl. When will we see decent gdp . Carl it is not there, and we will not see it in the First Quarter. That being said, i think policymakers have the confidence that we are grounding grinding to an ever lower Unemployment Rate below the estimated level of the neutral right, and you will generate more wage pressure, and that means more Consumer Spending and more gdp growth. So, it is coming relatively soon. Wouldoe weisenthal, i suggest the title of the book from a president earlier, hope and audacity the hope and audacity means we will get who . L the question of joe the question of why the change a coin flip, to make sure knew the fed was going to hike in march. I do not think she had a great interest to the question she said gdp was noisy. I still dont think we quite know why they put march on the table like that. Carl if we read the tea leaves, maybe it is the fact that we saw such a brilliant performance in the equity markets, and when you are a policymaker, you cannot say Financial Market instability. Tom this is important. We are down here in the smear mortal building of Bloomberg Television and radio. Carl riccadonna is on the death star what is your gdp estimate to your noisy her noisy discussion . Carl for the First Quarter i think it is going to fall. Tom out further. Carl for the full year we could do better than we did last year less you big 1. 9 on year on year terms. This year, 2. 25 is certainly within reach. That is better, but not lighting the market on fire. Tom what you see in literature is there a 3 economy out there to pull off this . Measured rate . Joe most people seems measured rate . Most people are skeptical we can sustainably be over 3 . Who knows. People are always wrong. Scarlet i thought the question of conflict between the Federal Reserve and the white house was interesting. She said she would welcome growth policies and it is not a point of conflict. Do you agree, carl . Carl i think she would welcome it if we had the right to prevent the structure and whatnot. We can support faster productivity growth than we have seen. That being said, she made it clear in no Uncertain Terms that if there is a significant fiscal policy leading to faster growth, the fed will have to lean against that. She met with the treasury secretary a while back, and i presume they had a similar conversation then, but i was a bit surprised how she so clearly stated, yes, we are looking at approach three by three approach to the next three years, however if there is fiscal policy coming along, we will move more aggressively. Of course the market interpreted that as dovish as well. Joe weisenthal was thick with us. Carl riccadonna, thanks so much. Tom let me do a chart here. This is the Carl Riccadonna chart the most my chart of the year. Lets bring it up your, michael, if you can. The idea, real gdp over 40 years. Morning in america is on the left side of the chart. We are down, down, down to a run rate a regression below 2 , and the goal is to get that turned around and moving higher. Noisy gdp chart. This is the fed decides bloomberg,. The fedd morning decides good afternoon, i should say. I will be here tomorrow morning on bloomberg surveillance. Scarlet fu. Joe weisenthal appeared. Scarlet we brought him in early because we knew to get intelligence final thoughts on the last hour of the fed coverage from Janet YellensNews Conference. What was your take away . Joe lets look at the work function on the bloomberg. We talk about it all the time. Tom there you go. Joe to try to figure out what is next as you can see, the markets not assigning much volatility of a may hike. June is a coin flip, 47 . We are several months out from all of these, and we know what we were a few weeks ago go into this meeting, in the last two weeks the fed job owned it into a lock. At the moment, the markets assessing another hike as soon as june. Scarlet so, coin for, as you mentioned. And, tom, we have the updated dots everyone has been looking at, and you have been adding circles to the dots as well. We look at rate increases, but there is more coalescing their. Tom we go up on the median line, then go flat, flat, flat. Kathleen hays is in washington or she has some final thoughts on one of the high points of todays press conference. Kathleen for one thing, it is interesting there were a couple of different ways in which people asked janet yellen what happened between december and march that you suddenly signaled that a rate hike would be appropriate in march. Janet yellen said we have been saying that all along. One thing for sure she made it clear, the set is not facing the trajectory for rate hikes on anything the Donald Trump Administration will or wont do when it comes to fiscal policy. She said this many different times. Lets listen to this version i want toen emphasize that while some participants have penciled in some fiscal policy changes into their projections, that the basis for the decision is the long goal of a maximum employment and price stability. President of the minneapolis fed dissented. It is not think they should raise rates now. That is what i asked about you dont see which pressures indicators,ugh two and furthermore gdp is tracking weekly. Janet yellen says the data moves around. We are on the path where we see things moving toward the goal. And it is interesting to see we are not on a preset course, confident, but we will have to watch both sides of the trade when it comes to the fed and the rate hikes this year. Scarlet i want to turn everyones attention to fed go our landing page. You are allowed to look at marketimplied policy rates not just for the u. S. , but the rest of the world as well. It gives you a calendar. Evans will be speaking on march 20, for instance commit one 10 00 p. M. Our thanks to Kathleen Hays, tom keene, and Joe Weisenthal. That wraps up our special coverage of the Federal Reserve announcement, the fed decides. Would you miss and the market closes next. The dow up 122 points. This is bloomberg. Scarlet we are moments away from the closing bell. Whatd you miss . Reasuries rally im scarlet fu. Joe if you are tuning in live on twitter, we want to welcome every our coverage weekday from 4 00 to 5 00 p. M. Eastern. Rates bythe fed raise 25 basis points this afternoon, as had been widely expected but it was a little more dovish than a lot of people anticipated in terms of its production for future rate increases and projections for Economic Growth and inflation. The take away for everyone was, the fed is sticking to its gradual path of rate increases. All systems go for equities and bonds. Morethey could have made hawkish language. All they did was the height. Everything else was pretty stable so investors took that as being pretty dovish. In terms of industry movers, its a pretty broad advance. A 108 point gain for the dow. Laggards were the financials, down about. 10 . They benefit from higher rates are the idea that the Monetary Policy is tightening. You can see they were the laggards in that they didnt gain. The big gainers were energy stocks. Energy had taken a huge hit over the last couple of days with oil tumbled two dollars a barrel. Of individual movers, lets pull up some the companies we are paying attention to. Mining among the big gainers. Gold prices advanced following the fed division fed decision. Southwestern energy a highlight citigroup raised its recommendation to buy. Joe lets look at the bond market