tv Bloomberg Markets Americas Bloomberg February 19, 2021 10:00am-11:00am EST
guy: friday february, 30 minutes into the trading day in the united states. from london, guy johnson, alix steel in snowy new york. it is a day for commodities. they seem to be in charge. alix: you are saying that for me, happy friday to me. it is not necessarily about yields. the reflation trade seems to be alive and well. i want to focus on the 10 year yield. 132 is where we said, that is where we were a month ago. at the same time tech continues to outperform. the nasdaq up. materials are part of that story as the see a good 2021. the other court -- the other part of the lag is the weaker dollar. we have some key technical
levels we are going to talk about. copper had a ferocious rally up up by 4%. you can blame the weaker dollar, speculators. it is going to be about a building stuff, pipes or houses. guy: the housing data is out and we have seen what has been happening with lumber prices. the existing home sales numbers coming ahead of expectations. we saw a bounce back in existing home sales. we are starting to see stabilization. nevertheless positive data being delivered. 6.9 billion -- million is the headline number. the month over month number coming in at .6. the pmi came in, i am stunned about the cap between surface pmi in the states, the gap
between services sim in the states and europe. it is wide. alix: and it will only get wider, michael mckee joins us now. michael: good morning. the interesting number in the existing home sales number is that revision, we revised from 6.76 26.75, which means when we got the rate for the month of january, it was an increase of .6. even though it would have been a decrease if the numbers had not been revised. we are getting stabilization. single-family home construction -- sales rose by .2%. condos, co-ops by 4.1%. those numbers go back and forth eight -- each month.
mortgage rates and existing single-family home sales, rates have flattened. so have home sales. inventory, a home supply .9, they have gone down significantly. that is one of the things weighing on home sales and prices. the median price goes down to 3907. maybe people are getting out of it. pmi is good news for the service industry and manufacturing industry, both of them up on the month. that puts the composite tire. at 58.8, this number is not widely followed on wall street. guy: we focus on the pmi and we watched with envy what is happening.
talk about that tomorrow in comparison in a moment. michael mckee, bloomberg's economic and policy correspondent. u.s. equity fees -- u.s. equities snapping their slide. yields are higher, once again. the story in stocks continues, it will be a four day for the states. >> what a week. the stock that we have seen over the past 230 days has been nothing short of stunning, for the s&p a rally of 70%. to see such a rally, that means across the sector from large caps to small caps, they are ads or not far off from highs. because of the consolidation, none of these benchmarks are in
-- territory. every single one of them below 70. that delegates -- demarcates. valuations have expended. the s&p 500 ratio at 32, a record high compared to a historic average of 17. meanwhile that is the white line, the blue line -- near their lowest levels on record. sentiment levels are elevated. we have seen it in the spac boom , meme stock mania and survey data. aaii the highest since 2018. that is the backdrop. you have the fed, fiscal policy supporting it. alix: if real rates stay negative it is hard to make a
case for something else. sarah: that is the argument here, real rates are extremely low. at what point when we see real yield rise those that hurt valuation? alix: thank you so much. sarah ponczek joining us from bloomberg. let's look at how policy is driving the markets. joining us is a nobel laureate and columbia university professor. always a pleasure to talk to you. you have advocated for automatic stabilizers. you have heard the story, what support would you be advocating for based on this data? joseph: the point is you cannot predict the future. we are hoping that there will be a strong recovery.
there is every reason to believe that we will. especially if the rescue plan -- almost all of the pieces will get enacted and that will provide strong support for the economy. there has been controversy about whether it is too much. one of the points of automatic stabilizers, if the economy recovers, you do not put as much money into the economy. one part of the biden plan that is an automatic stabilizer is unemployment insurance. if the economy recovers, the amount that we will be spending on augmented unemployment will go down. it will not be the 1.9 trillion dollars, it will be smaller.
the spending is automatically adjusted for the state of the economy. guy: good morning, compare and contrast the europe and the ice age later on. let's talk about where the markets are. do these markets need stimulus from the fed? it continues to by billions every month, is that necessary? joseph: the fundamental point is there is a lot of uncertainty in the economy. the normal patterns of cash flow are interrupted. the service sector is still not back to normal, airlines, restaurants, hospitality sector. those parts are suffering cash flow problems. that is where there is a need for support.
there are other parts of the economy, like the tech sector is doing well. what you have to think about is programs that take into account the position of various parts of the economy. alix: based on that impaired automatics the blazers, how quickly and those react -- can those react to overheating? joseph: the fed monitors closely, we have a lot more data coming in real time. the fed has the capacity to respond. month there is a significant uptick -- when there is a
significant uptick. that is why i am not worried about inflation. the last 12 years, we have been in a peculiar situation where nominal interest rates are close to zero. interest rates have been negative that leads to a distorted market. you see it in the search for yield that distorts the market. from my perspective, it will be a lot better if we moved our economy to where interest rates are positive and nominal interest rates are somewhat higher. guy: what i am wondering, is what happens next?
we are seeing a k shaped recovery. the top 20% are benefiting hugely, the stock market is blind, the hard assets are doing well. they are massive beneficiaries of the fiscal and monetary policy. the bottom 20% are continuing to struggle. you highlighted that. we are hopefully going to see a minimum-wage story developed, i do not know how that will work. we are trying to figure out whether inflation will be regressive? how do we protect the bottom 20% while making sure the incremented equality does not why not too much with the top 20% benefit with too much liquidity? joseph: the biting plan does -- biden plan does a lot in that direction.
it is focusing on children. making sure that children get education, health care, so we do not build in the equality -- in the inequality in a multigenerational sense. america is distinctive in a regressive tax system, where there is who are rich pay a smaller percentage than those below. we have an unusual tax system or the desk where the -- unusual tax system where the text structure does not pay for infrastructure, so we had to raise rates. we have to do that in a progressive way. a lot of it has to do with the rules of the game. the rules of the game have to be
stacked against those at the bottom. we need more competition policy. a lot of the money at the top is the result of -- power. we need to address labor legislation over the last 20 years, workers bargaining power has been eroded. legislation has weakened unionization. we think our corporate governance laws, there are lots of aspects of our economic structure, roles or how we spend money that can make a big difference -- rules or how we spend money that can make a big difference. dr. does not -- that does not make a k shaped recovery permanent. guy: let's prevent and talk
about the gap, you were talking about automatic stabilizers. let's look at the divergent trends between the u.s. and europe. germany, the u.s. and france. unemployment has taken a massive drop in the united states and a small drop in france and germany. part of that is it seems like the scheme in germany, u.k. have tight employers to employees -- tied employers to employees. in the ice age it is not the same way. they have been laid off. is the u.s. able to pivot more flexibly? last year we were applauding the europeans, now i am margaret
whether these furlough schemes are the right way -- now i am wondering whether these further schemes are the right way? joseph: in the united states we hoped to keep workers better connected. it was not a philosophical difference, it was the result of our failure with the trump administration not being able to figure out a program. when they finally had a program, unable to administer it effectively. if it was a success, it was by accident. of a failure to design an appropriate program. it was important that we keep connection between workers and employers, because the united states needs more.
-- needs more than relying on employer-provided health insurance. when workers got disconnected they lost their health insurance, in the middle of the pandemic is not the time to be without. okay that was history, not long ago history. going forward, is the united states in a better position to move to a post-covid economy? i am not sure that is yes. in moving from the old economy to the new economy, you have to do a lot of training. you have to shift the labor force. workers who have been unemployed , and then economic system that does not provide equity --
adequate training, a lot of european countries have much better programs. the way we designed the system is going to make it more difficult to transition. there will be fewer people employed in airlines, low skill or medium skill service sector jobs. moving them to the parts of the continent that are doing well, is going to be difficult. that is where having active labor market policies, of the kind european countries have is likely to pay dividends. alix: mckenzie just had a report out on how many low income workers will have to switch jobs. much more coming up with you, professor jeff is a -- professor
joseph stick with us. this is bloomberg. ♪ (announcer) do you want to reduce stress? shed pounds? do you want to flatten your stomach? do all that and more in just 10 minutes a day with aerotrainer, the total body fitness solution that uses its revolutionary ergonomic design to help you to maintain comfortable, correct form. that means better results in less time. you can do an uncomfortable, old-fashioned crunch or an aerotrainer super crunch. turn regular planks into turbo planks without getting down on the floor. and there are over 20 exercises to choose from. incredible for improving flexibility and perfect for enhancing yoga and pilates. and safe for all fitness levels. get gym results at home in just 10 minutes a day. no expensive machines, no expensive memberships.
alix: time for etf friday. some are benefiting from that climate counselors investing and sustainability focused equity funds have seen inflows in 2020. we have seen $18 billion inflows as of january of this year. the question is how much of these track tech? if you see changes in the dynamics, do those funds sell off with tack and appear less attractive? that is the question going forward.
do you just like to have it in your books? guy: let's talk about the price of carbon. the u.s. official rejoining the paris climate record. this as we are seeing the price of carbon hitting a record in europe. we reached 40 euros per ton a few days ago. still with us is professor joseph, we are at 40 in europe, you think that should be higher. how much higher and why? joseph: twice or more. more like 100 -- $100 or 90 euros per ton. if you ask, how do we get from here to there? here, net neutral by 2050, the
broad consensus that is if we are going to prevent the worst risks associated with climate change we have to get there. you set that as your goal. then we look back from there and say we have to be motivated. firms to invest in green technology, motivate consumers to purchase electric cars. you ask what price of carbon would shift a market economy towards neutrality by 2050? when you go through that calculation, the numbers you get are around $100 per ton. #like 40 euros -- numbers like
40 euros will not get you there. alix: if we learned anything from texas, we need redundancy. if you take a look at the cost of alternative energy it is cheap, effector in the redundancy for the customer it is not. i am wonder if these high carbon prices become regressive for the consumer. joseph: the advantage in technology over the last decade means that renewables are in the electric sector very competitive with fossil fuels. that is an area we could achieve the resilient electric grid over the long run.
at a lower cost than fossil fuels. the lesson in texas is you have to spend money to get resilience. they did not have adequate regulation. they believed the market would take care of everything. the market was good to the investors who got short-term dividends but not for the state of texas. guy: broadening out, is there a danger that we are getting to trying to plug too much into the grid? relying on electricity too much? governments in europe made a mistake trying to encourage customers to buy diesel cars, that was a costly mistake, a
mistake many automakers are paying for, consumers and the people who have to read the air -- breathe the air. are we focusing too much on electricity and not allowing the market to figure out alternatives? some might work, some might not and at least we might have choices. joseph: one of the points of a carbon price, is it opens up incentives for people to figure out what is the best way of achieving the goals we need to achieve. which is net neutral by 2050. if price is a scarcity, currently it is not adequately priced. the scientific community is
convinced the only way we will get to that neutrality is a greater reliance on the electric. . that means we have to make sure it is resilient. the problem in texas, you did not want to be interconnected with other states because i thought they could avoid federal regulation -- they thought they could avoid federal regulation. guy: professor we would have to leave it there, appreciate your thoughts there. professor joseph, nobel laureate want to save hundreds on your wireless bill? with xfinity mobile you can. how about saving hundreds on the new samsung galaxy s21 ultra 5g? you can do that too. all on the most reliable network. sure thing! and with fast nationwide 5g
february 2020, the fresh year to date high. the reflation trade front and center, equities are taking it not on the chin. the data is backing up the move in yield. guy: you are seeing the commodity story backing up this week. the huge moves in copper, confirmation. what i'm waiting for is the front and to move, when that starts to happen we are off to the races. the other thing worth bearing in mind is how central banks react. the central bank and the other states has a gravitational effect. the ecb will not be happy to see yields higher if it is not being represented by the data coming out of the eurozone economy. . alix: how much can these
companies diverge? i real grilling of the robinhood ceo yesterday. joining us is a bloomberg communist. sonali: this was so much about robinhood. let's start with how they make money. we got color about the fact that they make more than 50% of their revenue from payment for order flow. almost 40% from securities, wolverine securities, all well-known names on wall street. at they took away payment for order flow that would impact them significantly. would it impact can griffin, hard to know. it will be a bigger loss for robinhood. i want to draw your attention to the fix. -- vix.
another big issue they said they did not have that $3 billion on hand. it draws attention to whether they will need more capital in the future. another point that is lesser understood, the way that make money from payment for order flow is as a percentage of the bid ask spread. does that mean they are incentivized to have clients taking on credit and profit in times of volatility? another big point brought up was shortselling. gabe plotkin said he and others will take a hard look at shortselling, levels might not be as high as they have seen. the other thing he would take it look at is by using data science to monitor social media.
whether this regulation or self regulation, you might see record -- market changes. alix: if you know i know him? he dated my friend for two years -- did you know i know him? he did my friend for two years. sonali: that is something to ask him about. alix: our next guest is a former e-trade investor. when you were listening to the hearings, was there a take away that we can look to? >> the topics raised on the payment for order flow side and shortselling and the settlement procedures on the backend. going from two plus 222 plus one -- two plus two to two plus
one. guy: they were not ready for the call that they got requiring 3 billion. you wonder what could have wrong -- have gone wrong, there was a scramble to raise that money. did we come close to an accident ? karl: the line of questioning talk about how close william and did you have a scaffold when that phone call came -- how close were you and did you have a scaffold when that phone call came? -- through calculations that are done on a daily basis. it is the other side where the clearing corporation was demanding to put up capital to cover the risk. that is the peace that they were
not able to cover. we are a lot closer than people realize. i heard anecdotally, they were a lot closer to the edge. alix: how do we fix that? this puts cold water on two plus one. everything has to be perfect to get to that level. how do we solve that? do we have to have these brokerages set aside more money? karl: a calls into question the business model when trading is relying on payment for order flow. i do not know if that is enough funding. if they do not have other revenue, there is not additional capital for that rainy day, a
black swan event. i do not know if this is a black swan event, we have seen a lot of those. guy: i compare payment for order flow with google, you get a gmail for free but you are effectively the product. it is different but the comparison is worth drawing. how different would the model be if payment for order flow did not exist? would it exist in its current form? karl: in terms of the customer becoming the product, it is the order that becomes the product itself. the way they can put the together and monetize on the others or internalize -- on the others or -- other side or internalize.
d have to pay for that order coming in and said that business model survive without it? i do not think it can. if over 50% of my revenues are based on payment for order flow and take that away and have it be there. it is a systemic -- you have to look at the entirety. yesterday we heard a lot of people talking about these. ken griffin who lives and breathes this every day, helps people on the streets, i know this term of personal experience as a vendor when i was at e-trade. went black at the way they able -- when you look at the way they were able to do these things, when the retail trader has the best speech, best education, free trading, all of that made possible by payment for order flow.
there are these things that people are getting into in terms of conspiracy theories, how are they making money? without that model i do not think you have as many platforms available. you are raising the bar for the retail investor to get what they need to participate. alix: are they getting the best execution? these trades are not free because yet the payment for order flow. there is lots of evidence about how you try to talk to somebody and there is nobody there. it takes a while to get through, you do not have the right education. is the customer getting the best experience? karl: in terms of the business model, without that customer service reach out, call centers, that is a way to move entirely to technology. some people are okay with that.
when you're dealing with finances, they have worked so hard for every color, there are times if you cannot pick up the phone and speak to a human being can be frustrating and scary. that is another area they need to look at that when choosing a retail brokerage. what does customer service peace look like -- piece look like? the modeling they are talking about, it does not free or where aoc started the comments around that. it is part of the overall model. you need to look at the brokerage and say are they compiling -- complying with their best interest obligations? you have to make sure they are giving you the best possible and they stand out. you see the speed of execution,
price improvement. you are not allowed to look at what they are paying you, that is how you know they are doing their job. they all have the requirement if they are doing it right, the system works well until they find one that works better. guy: thanks for your time. stay warm, thank you. former e-trade ceo. angela merkel briefing after the g7 call, talking about the fact that multilateralism has taken a step forward in terms of the arrival of the biden administration. it got dinged up during the trump administration. she wants to increase cooperation with china. the g7 wants to increase
cooperation with china. that will be a tussle between the europeans and americans on which way to go. alix: talking about digging relationships, as they try to threat the line as both sides deal with iran. the biden administration is reopening a diplomatic door, restoring a nuclear deal. we talk to the greenwich media strategy ceo. this is bloomberg. ♪
approach to affairs today. at the para conferences, they will call on industrialized micro ceased to confront the pandemic and climate change. he will make calls to the group of seven and the munich security conference. republican senator ted cruz has returned to texas after eight criticized family trip to cancun, mexico. he was dealing with widespread power outages, he told reporters that he did this because his doctors were called -- daughters were cold. the u.s. is willing to meet with iran to restore the nuclear deal, but aranda says not so fast. it wants the u.s. to rejoin the deal and revoke sanctions. president trump left the deal and imposed sanctions that hammered iran and infuriated world leaders.
global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am karina mitchell, this is bloomberg. alix: let's stick with u.s. and iranian relations. angela merkel is willing to talk with iran. this is their oil production and exports. the blue bar is production of oil, you can see what has happened since president trump took office. you are looking at millions of barrels of light, the question is how fast can they come back? some site you can get a lot on m3, others say it will take longer. that is the big question for being key for the oil market. you have current and new production, what states are these wells in? if they have not been able to use them or invest money? guy: trying to get everything up and running, the deputy general
in orion, angela merkel talking about getting talks done. the greenwich media strategist ceo, a spokesperson for terrorism and counter intelligence. also a spokesperson to the u.n.. what do you make of the decision? the normalization, how far away could that be? hagar: it will take a while. president biden stated that rejoining the security deal would be a priority. it is a priority, but they are going to look for including other capabilities from iran such as ballistic missile capabilities and support for terrorism. they said they only want to talk if the lysate lifts sanctions. president biden has said that is a no go.
that is going to take a lot longer, then the oil market should be reacting to. having worked on the iran deal, they were months before january 14 when the negotiations formally started. there was a minimal amount of sanctions waived, then it took a year and a half. those last six months, every week we were not sure if it would get there. it is going to be a long, difficult discussion. the trump sanctions have complicated thing. -- things. alix: there are elections coming in the summer. iran wanted to make the overtures to begin with and hardliners are against that and elections will complicate things. hagar: the ayatollah has said he is not in favor of negotiations.
that has surprised me because he has no interest, he does not have the same interest of the politicians. the politicians are concerned about the economic pain. they're concerned about the difficulty in getting relief into something that is top of their mind they had their foreign policy, they are very interested in continuing supporting terrorism across the region. there might be difficulties there, if the united states administration begins to behave as if we are not the ones that is leverage. iran is leverage that we have to get in there before the election, then the iranians are going to take this message as if they have the upper hands. given the goals of the emaciation they have to be tough and healthy take this. guy: what does the sunnyside
want -- sunni side want? what do the israelis want? hagar: they are not excited about where things are going. if i were sitting in the gulf side, there are certain maneuvers that would give me concern. we are no longer going to be selling arms to the saudi's, we are not going -- to the saudis, we are not going to support the human civil war. if i'm in the gulf i would consider these concerning in terms of how they will pursue a relationship with iran. they should not see it as that, for the fact of the matter saudi arabia's behavior is concerning. they are going to view it this
way. it is on the biden administration to reach out to them. the iranian post a significant threat and the path for 50 years, the maximum pressure campaign has not proven that it has held aranda back in terms of nuclear activity. what they have been able to achieve is the maximum pressure campaign was able to siphon off money that went to the hezbollah soldiers in syria. going to have to be very careful with how we pursue any economic relief. bloomberg wrote a good article about this, the relief the buy demonstration is looking up to allow the imf to give a loan to the coronavirus relief. humanitarian efforts. alix: there are some the
questions but from a market can -- perspective it is all about oil, i am one if you can give perspective on the state of the oil fields concerning the massive underinvestment of the last few years. hagar: as you reported, there is what we sold that is not being sold. there has been an increase in their oil, that is one of the arguments against the maximum pressure campaign. is that they have continued to sell the oil. there is a lot that is not sold and the biden administration has said that is not something they are willing to look at. when we did the iran deal -- there were steps where we gave a certain amount of sanctions relief while negotiating before the deal was agreed to and the
massive amount of sanctions we lifted. the sanctions we lifted did not include work, things like allowing the sale of parts for airplanes. certain trade measures, allowing them to export olive oil and rugs. things that work lower scale -- were lower scale to build trust. that is where i want the biden administration to go, not oil, because that is what allowed them to fund terrorism in the region. alix: so great to talk to you, such a pleasure. ceo of greenwich media strategies. the g7 are pledging to continue fiscal support for economies, also considering that relief for developing countries. this feels like a different g7. guy: there is also pressure to
distribute unused vaccines that exist in europe and the united states. the french were proposing this, the u.s. pushing back, making it clear, that at the moment the priority is to vaccinate the u.s. population then figure out how to distribute. thou be interesting to see. the global economic needs to recover, needs to be vaccinated. alix: i think the u.s. is over 4 billion, they updated -- opted for money than actual vaccine. this is bloomberg. ♪
alix: is this the third one i've had, apparently that is what i do now? the market is not reacting like we saw yesterday and the day before. guy: the pound one point for zero, absolutely flying -- 1.40 absolutely flying. the pound has been reacting, it will be interesting to see how much further we have to go. massive announcement from boris johnson on monday. i am not sure the pumps are coming soon, but i will take some things reopening. jeff we are going to talk to next for the european this is bloomberg. ♪
guy: live from london, i am guy johnson, alix steel is over in new york, and we are counting down to the close of the european market. the pound bricking up above 1.40 against the dollar on boris johnson's big announcement. he will be talking about reopening the economy monday. over here, the ride-hailing company loses a landmark u.k. court ruling. we will be talking to what of the lawyers involved. and president biden delivering his first international speech at the munich security conference. america first may be history, but are the u.s. and europe on the same page when it comes to china, russia, climate change? we will talk about that later. let's talk about the markets. stoxx 600 up by 0.6%. we talked about the pound -- more details in a mom