Bernanke Speaks Out: Bottom Line (07/10)

REPLAY VIDEO
Your next video will start in
Pause
  • Info

  • Comments

  • VIDEO TEXT

July 10 (Bloomberg) -- On today's "Bottom Line," Mark Crumpton provides insight at the trading day's critical hour, with careful analysis of big events for investors. (Source: Bloomberg)

This is "bottom line" the intersection of business with a mainstream of perspective.

The u.s. needs stimulative monetary policy according to ben bernanke.

Then, the annual sun valley conference.

And we will profile a company known for six-figure, handmade watches.

Too ever viewers here in the united states and those joining us from around the world, welcome.

We have got full coverage of the stocks and stories making headlines tonight.

Su keenan tracks a dramatic rise in oil.

A companies tech top -- tech conference in idaho.

We begin in washington with comments from ben bernanke.

Good evening.

Good evening.

Ben bernanke reiterated the u.s. will need a very stimulative monetary policy for the foreseeable future and he suspended the fed's efforts that could have telegraphed their strategy.

He asked the audience is too sponsored today by the national bureau of economic research to consider the counterfactual, what might happen if the fed moves to cut its purchases and raise rates with little notice.

I would suggest, not withstanding volatility we have seen, that speaking now and expanding what we are doing may have avoided much more difficult situations.

Bernanke has moved to calm the markets in the past couple weeks on the concerns there would be tapering.

In the minutes of last month's meeting released today, many officials say they want to see more signs of employment picking up before they will consider scaling back the billion dollars in multi-bond purchases.

He ended on an upbeat note and called it encouraging the u.s. continues to grow and create jobs.

What did he say were some of the biggest concerns?

He cited housing and said the job growth was positive but he mentioned fiscal restraints placed on the economy by the legislative assess has created probably -- problems for fed economists and their projections.

They are a little bit concerned about how it will take place, what the impact will be, and if there will be any major changes they cannot understand right now due to a lag.

He also talked about the unemployment rate.

To explain five, that is the threshold he has laid out.

What did he have to say about the current state of the country's employment?

Reiterates 6.5% threshold, not the trigger.

He pointed to the current rate.

He called it misleading because of a low participation rate, the fed is not happy with 7.6% and they feel like employment is even worse off than that in general.

It is an interesting view on the current rate.

Joining us from washington, thank you.

More on the fed and chairman bernanke coming up, the international advisor will join me to discuss today's minutes and where he thinks the economy is headed.

That is coming up in a few minutes.

Let's show you how the equity markets finished the session today.

Stocks were little changed as investors analyzed the fed minutes on how the central bank might slow the pace of bond purchases.

The s&p 500 index was up less than one point.

The nasdaq composite index was up six points.

Let's get you the stories behind the numbers.

Here is su keenan with the details.

The interesting thing, it looks like investors were on hold waiting for those to hear the latest from the fed and the minutes from the meeting.

You can tell right when they were released.

They take away the headlight with more job gains.

Bernanke needs a highly , this monetary policy for the future.

The stock has been on a roller coaster ride, down almost one percent.

15% to 281 million.

The analyst estimate was $.54. signs of a possible rebound after the outbreak of avian flu is dared diners away from chicken and hurt them for several months.

Apple fell by one third of one percent after the company played a central role in conspiring with others.

Separate trials to determine damages.

They have to pay triple damages.

Government lawyers ability rejects talk about a rebound.

Up 10% today after losing half of its buyer.

More deal drama over at dell.

What is the latest?

It is not a done deal.

The pc maker is still facing hurls.

Urging dell shareholders to seek a higher price.

They comes with a deadline to decide which offers they like.

Oil rose to its highest price in 60 months.

The price difference is spread, widely used in europe.

Two dollars for the first time since 2010. more on that in the commodities report at the bottom of the hour.

Su keenan joining us.

Thank you.

We have learned from three sources u.s. and european financial regulators are repaired to announce an agreement on how they will jointly oversee the $632 trillion global slop market.

They are working to break a dead -- a deadlock.

Sources say the statement , which could come as early as tomorrow, will does -- will describe how they will use recognition of the rules to oversee banks including j.p. morgan chase and citigroup.

Tech titans are in sun valley idaho for the 31st annual allen and company conference.

Barry is one of the attendees.

Jon erlichman caught up with him earlier today.

I know you asked him about the online tv service he continues to back.

What did he have to say echo a lot of traditional media players.

You see that with disruptive service.

In an event like this, where you have traditional media executives and new technology executives, there is a reality out there.

Traditional media is seeing its traditional business model change.

It is one of the reasons why he has backed area.

There have been a lot of legal battles along the way, with some of his longtime friends.

We talked about where area is going from here and the aggressive rollout land of the aerial service and markets of ross the country.

Here is more.

It is not that i'm getting tired of it.

It is very overblown.

This will not be the end of broadcasting.

This is not a threat.

It is simply an alternative for people who either say, i would like to have all lies television that broadcasters offer, but i do not want to spend $100 for cable or have never been on cable, so i think it is a net plus.

It is understandable the incumbents resisted because incumbents always resists things.

It has been way overblown.

Is the reaction different from last year?

It is only more because there is more out there.

Every time we expand to a city, a new person pursues it.

We expected that.

Where do you think the biggest opportunity?

You are still am vicious.

We will probably be in 20 cities by september or october or something like that.

We also asked him about the newsweek brand, which she has been interested in selling.

He feels like they have much appreciated content in that is all he said.

Were there any deals generating buzz?

Certainly, there has been a lot of talk about some of the deals potentially going to happen.

We came into the conference with bids already in for hulu, directv, and att in -- at&t. we will see if anything comes to freshen on that front.

We knew bloomberg news caught up with the ceo of sony, feeling they would spin off their entertainment business.

Bloomberg news team getting the sense from the ceo of tony that they are happy with the way things are.

We will see how things playoff . what is happening with the conference tomorrow?

We will continue to talk to all the negative about where they see the future of media and technology and get perspectives from all sides.

We will be joined on bloomberg west and talk about the transition in technology we are seeing right now.

We will also talk to a well- known producer doing phil -- not just films and producing television, but on netflix.

A lot of that to digest for tomorrow.

Jon erlichman joining us live.

Thank you.

Remember, for all things tech, tune into bloomberg west like it -- twice each today -- today.

Weeknights 6:00 in the east and three clock in the west.

Coming up, fed policymakers cannot agree on when to begin pulling back on monthly asset purchases.

Former fed official joins me when we continue in just a moment.

? welcome back.

The head of smith feels foods was in washington trying to say that a takeover from a chinese company would pose risks to the food supply.

A hearing on the pending deal with schwenk way international, he told the committee the deal is not about importing chinese port -- chinese port into the u.s. but to export chinese market into the brand.

This company will have to operate under the laws of the united states, not china.

The usta, and the food inspection process and our own programs beyond that.

I think to your constituents back home, nothing is going to change.

This will be an american company and we will to can -- continue to protect these.

The committee chairwoman says the proposed purchase of smithfield raises many questions, including the impact on food safety and security.

The deal is valued at 7.1 billion dollars, including debt, and is subject to federal and shareholder approval, expected later this year.

The latest minutes from the fed last meeting showed they were -- officials were split.

Others would like it to continue into 2014. if you wanted it stopped weeks ago.

For a closer look at the direction the fed is headed, let's take a look at an international advisor and former economist at the stock exchange and senior economist of the federal reserve act in new york.

Welcome.

I'm glad to see you.

There were divisions among said members about when to slow the bond purchases and when to end them all together.

Do they threaten to muddy the fed smash it -- message?

We had a terrible recession, particularly centered in housing.

To get housing moving again is taking time.

Now it is happening.

Part of the reason is because long-term interest rates came down a lot and mortgage availability and cost improved for the homebuyer.

Now, we have the seeds of the very vigorous recovery in the area and quantitative easing contributed.

Now that you have housing on stronger footing and car sales at terry high levels, you still need that and committee members are split and there is no doubt about it.

The biggest split i have seen, detailed in the minutes since probably the mid 80's. jobs reports, august second, september 6, they are key.

What type of sustained momentum to policy makers need to see to a cut monthly bond purchases beginning in september?

I would think you cannot know he what the threshold number four payroll employment gains, but if it starts getting north of 200,000 month, and if it is full-time jobs, not simply moving people into part- time jobs, which happened in the most recent in june numbers, then i think it would speed up their move away from quantitative easing.

They will not move away from low federal funds rates for a long time.

There, they have a threshold of 6.5%. even then, they might in a fit from the very low inflation rate to continue to have a low federal funds rate at zero for a year, a year and a half, and two years.

Is inflation being discussed enough?

Does that concern you?

Lacks i am not concerned by low inflation because wage growth is low.

If wage growth were much higher, there would be a question raised about sustainability of these low rates.

The real rate is negative and that is a stimulative factor.

Circling back to unemployment in a second, when the latest round of easing was announced, unemployment rate was 8.1% and now it is 7.6%. how much more improvement does the economy have to show before the fed begins to move it?

Is 6.5%, is that threshold written in stone?

I do not think it is.

It is not written in invisible ink.

We all know about it.

If you still had a one percent inflation rate, a year and a half from now, and you raised 6.5% to 6.4 or 6.3%, it would not necessarily force them to move.

If you had 6.5% and the inflation rate went up to two and a half, you would have it earlier than that.

The inflation situation is favorable for the fed to have room to maneuver.

You mentioned interest rate.

Bond -- bond purchases helped keep interest rates low.

Are you concerned ones that the ends, there might be volatile reactions in the markets because of it?

We had it -- reaction to be sure the committee was becoming more split.

That was coming through clearly in the discussion after the meeting and the chairman's press conference.

That really stunned a lot of people.

When ec the minutes,, you see there is a real split.

It could happen sooner.

My guess is the economy is moving in a direction of two percent and the private sector is growing much greater than that.

1.5% is being subtracted by the government sequester.

A two percent economy does not force them to move for the end of the year.

Mr.

bernanke spoke in massachusetts today and said the fed had to reinsert it mission of preserving financial stability during the recent financial crisis and he said the maintenance of financial stability is coequal with the fed's responsibility of management to the monetary policy.

What is your reaction?

If you look at the lineup on the federal board and they presidents, you do not get the impression financial stability is being given the same amount of attention in terms of hiring.

In terms of the staffing of top officials.

They would need to move in that direction.

Roger is an international advisor, former chief economist at the new york stock exchange, joining us, and we have not seen each other in a wild.

Thank you.

Good to see you again.

Coming up, what kind of bill, if any, will emerge?

We will have the latest when we continue in a moment.

? welcome back.

House republicans are confronting the politically volatile issue of immigration.

John boehner -- john boehner says the house will work on immigration step-by-step.

Republicans are divided and the way forward is unclear, even as national gop leaders pressure them to act.

The latest prominent republican to enter the debate was george w. bush.

I welcome you to this free nation and i congratulate you and your families and it is an honor to call you ferret -- fellow americans.

We have a problem.

The laws governing the immigration system are not working.

The system is broken.

Mr.

bush urged congress to reach a positive resolution on laws, a goal that eluded him during his residency.

He did not directly endorse a senate approved land.

Here is the background.

They combined to pass citizenship for 11 million undocumented citizens in the u.s. with a ford or sit -- 46 billion dollar plan.

46 republicans joined democrats passing the bill last month.

Many house republicans say the provision amounts to amnesty and they -- insist they will not accept it.

The house immigration and order security chairman will be al hunt's guest on political capital friday night at 9:00 p.m. eastern.

Also, senate democrats failed on student loans, signaling undergraduates might raise rates as high as last year.

The proposal for democratic leaders would have left interest rates at 3.4%. right now, 3.8%. the most popular government loan program could cost an average of 26 hundred dollars in interest payments.

The measure failed to overcome a siege role -- procedural proposal as democrats urged colleagues to consider a plan that would link interest rates to the financial market and reduce con -- reduce congress's role in borrowing rates.

They failed to get the 60 votes needed to advance the measure.

The vote was 61 to 49 with no republicans voting to move it forward.

Coming up, we will look at the impact of the u.s. and japan central banks on asian markets, the top stories are next.

? welcome back.

I am mark crumpton.

Thank you for staying with us.

As we hit the bottom of the hour on this wednesday, july 10th, 2000 13, the markets turned quiet today and just managed a not of six straight games.

The market was up fractionally at 1652 and the dow jones industrial average turning lower, it dropped 8.5 points at 15,291 and the nasdaq composite index on wednesday was up nearly one half of one percent.

Let's get to some of the other tests -- top stories we are following.

We begin on -- with new information on the flight in san francisco.

The pilot initially told passengers not to evacuate right after the the plane crash landed.

It was evacuated 90 seconds later when a fire lookout -- broke out.

They are also looking into why the pilot changed modes.

The death toll has been raised to 20. 30 people are still missing and presumed dead.

A company is blaming the tragedy on an employee who failed to set his brakes properly.

It was loaded with oil when it wrote loose and rose downhill before crashing and exploding into flames.

The suspect in the boston marathon bombing made his first public court appearance today and entered a plea of not guilty to charges of killing four people and injuring 260 others.

Many victims and their families were in the courthouse and about one dozen supporters of the suspect demonstrated outside.

It is time now for the commodities report here and let's go back to su keenan for a look ahead.

Oil imports are fueling this in search of the highest 15 months as oil supplies fell for the second week.

The supplies were the ones to watch.

The numbers really surprised everyone.

The expert tatian push for a drop of 3 million barrels came in three times that, more than 9 million barrels.

The whole supply and the market has now gone into backwardation, the price is highest in this conference rather than further down later in delivery.

Metals rebounded in a big way . we had gold, silver, and copper higher.

The highest since june 26. reaching the highest price since july 5. looking at after hours trades right now, a lot of activity , a senior commodity group are, the market is pleasantly surprised and rallied on the minutes that take away that the easing is here for some time.

That was positive for commodities.

If you take a -- a look at trading, you see a lot of movement in lumber, a big winner in the regular session, rallying to a seven-week high, and that is continuing to climb in extended trading.

Oil is now ahead -- heading for the $107 mark.

For thursday and the rest of the week?

A lot of speculation about about where oil goes from here.

It is said you have to look at these suppliers reports.

In the last two weeks, we have got a 20 million barrel drop.

In may, when we were talking about surpluses, john, who works for the hedge fund talked about how everything is really going for oil.

You have gas demand that is also higher and pulling on refineries.

All of that is bullish for oil.

Su keenan with the commodities report.

Thank you.

Let's take a look at asian stocks reacting on ben bernanke's comments about winding down stimulus.

The top -- we are joined from hong kong.

Hello.

I am looking at futures and the currencies in asia.

Ben bernanke's comments pushed the dollar index down.

When that happens, you will see strength in asian futures and currencies.

Australia and new zealand , it is already trading right now.

We have gains in that market.

Looking at reports of futures in australia, they are also looking for gains down under.

Futures on the hang seng , china enterprises index, which will give us a sense on how it opens, which will be in japan in just 30 minutes time.

Futures up.

The bottom line mark, they really do love stimulus and the premise holds in asia.

We are expecting the trading day to be positive.

Also coming out with a policy decision.

What is expected?

The bank of japan will probably, most likely, keep its stimulus unchanged.

That is what many traders are telling me.

The economy shows signs of recovery.

The bank of japan hopes that will boost inflation to its goal.

The central bank may adjust policy in the future.

All of that depends on conditions in your part of the world.

Thank you.

Coming up, chinese cyber intrusion was at the top of the u.s. agenda.

We will look at how both countries are looking to improve competition and cooperation next.

? the united states and china have begun a two-day dialogue over relationships, policy, and business.

Jack lew is urging china to move toward a more market-based growth.

The first day of the fixed summit is over and both sides have laid out in the markers.

Joe biden said china's beth -- beth of intellectual property has to stop, while insisting china's rise in the world is to be welcomed, a prosperous china is good for america and the world.

Those were biden's words.

There is also responsibility.

The chinese rarely mentioned cybersecurity and said it was one of many global challenges.

Jack lew pressed china to continue to let the currency appreciate and the goal was financial stability.

I encourage them to follow through decisively.

An employee -- important commitment toward balance and growth.

It is critical to china's excess and consequential to the world economy.

Jack lew said the u.s. economy is poised for strong and broad-based growth and they expected 1.7% growth in the u.s. and it does not match china's numbers and china's economy is cooling.

China's economy is projected to grow 7.8% this year and 7.7% in 2014. on the big question of that snowden and whether or not the candle would influence the conversations, there was no mention of edwards noted.

Back to you.

Let's get you more now on those talks.

The senior professor of trade policy and economics at orono university and senior fellow at the routines institution.

He is also the former head of the china division and joins us now from ithaca, new york.

Good to have you back on.

Good evening.

Always a pleasure.

What is the most critical part of this two-day dialogue?

The key issue is to continue talking and making progress and issues that tend to get clouded over and currency and so on.

The date issue is stronger commercial and trade relations between the two countries.

What china wants is better investment opportunities in the u.s. and what the u.s. side wants is better market access to china and better protection of internet -- intellectual property.

That is a good basis for dialogue and now that the economic playing field just a little bit in the u.s. bouncy and u.s. economy is picking up, and the chinese economy is slowing down, it is a good time to move these discussions forward.

Jack lew said china will need to undergo significant and fundamental shifts in policy to sustain growth in the future.

What are the shifts he is referring to and is the new regime in china equipped to prepare to undertake these reforms?

What the u.s. and the rest of the world wants and what china wants, is a more balanced and sustainable growth, that means less dependence on domestic investment.

The idea is to shift towards domestic consumption.

For that, they need to undertake a lot of reforms , including reforming the state owned banks and enterprises, strengthening the social safety net.

There is no disagreement of the objective.

This is what the chinese government wants to do and in the initial days of the new leadership, all the signs are positive and they have talked about making these for the economy and they have started taking some steps.

The problem is the chinese economy is cooling.

There is a lot of opposition.

Although the leadership wants it, there are a lot of headwinds making this difficult area some of those headwinds on the hang seng market year to date, the market is there 7.3 quarters percent.

What happened that -- has investors scared?

They are concerned about uncertainty, a lot of which is coming from the u.s.. the economy is strengthening . it is creating concern in markets.

A lot of money flowing to emerging markets, including china.

There is a lot of money floating out.

Growth process -- prospects in china, i think they are getting back to a time where there is extreme uncertainty, especially in the emerging markets.

Washington, they focus on climate change.

What can washington and beijing do in a coordinated effort to address the concerns?

There are issues on both sides about how far to push this along.

On chinese side, growth has been seen as paramount and the objective of perceiving the environment clean, even china, both leadership and the people have realized growth is coming at a heavy price and they came to do something without cutting growth too much.

The question is whether the u.s. can constructively help.

The u.s. has been doing a great deal in terms of clean energy.

The best thing for them to do is lead by example, rather than trying to lecture the chinese.

Actions by the u.s. would help.

What can the united states do to encourage china?

Though reforms include addressing the value of the lawn and how it is -- reflects trade in death between the two countries.

It is getting unbalanced.

Last year, the trade deficit of the u.s. and china about 315 billion dollars.

That is not really the core issue.

A lot of the goods coming from china across -- the value in china is limited.

It feeds into a broader goal of financial stability, as secretary lose said.

If china is the most flexible currency, they could have a more monetary policy.

It would help them have a better financial system.

As being in the interest of both sides of the world, that is exactly the right approach that could gain traction.

We have less than a minute left.

Last month between president obama and fusion thing, is that lay enough of a groundwork for a subsidence in depth -- sub stances groundwork?

These are two great powers getting used to dealing with each other and they can have a cooperative relationship but there will be significant owns in the road.

The best way to get through these bones is to be able to talk to mediate these disputes.

And to have technical discussions about what really matters, away from these senior- level meetings, to have technical meetings go on, it is the right approach.

This meeting in washington will be a step forward just make sure there is progress, measurable progress in each of these directions.

Talks will resume tomorrow, a senior professional -- professional, and former head of the china division joining us from ithaca.

Always a pleasure to have you on an get your views.

Thank you tonight.

My pleasure.

Coming up, economic down turn keeps on ticking and turning out very valuable watches.

We will go all the way to geneva for a first and a second hand burk -- handbook.

? welcome back.

Imagine wearing something the price of a manhattan apartment on your wrist.

If you own a watch, you know just how that feels.

Trish regan takes us on a rare look inside the factory in geneva to the what makes these timepieces so unique.

It takes a year to make, all 252 of its parts assembled completely by hand.

A half-million dollars.

This is a split second, graph , one of the most coveted objects on wall street.

They work with parts so small, they can be naked to the human eye.

Over nearly 12 months, they follow a precise blueprints, gradually piecing together the watches inner gears, keeping perfect time.

Learning the process requires working with very small parts.

The smallest that exist in all of watch making, making it a very delicate endeavor.

The old hand assembly tradition has been followed by watchmakers since the company was founded in 1851. a risky dedication considering a rival switch -- watchmaker palms out over 700 thousand watches each year, 14 times the volume.

Technological advances like computers programmed to cut with wager -- laser precision have allowed them to have an assembly process but it is the combination of past and present that will always make them unique.

There is a mix of innovation and tradition.

Now, -- it is why this factory , every watch will always be by hand.

That was trish regan reporting.

Still ahead, you need to be 30 five years old to run for president of united states.

But the mayor of one minnesota town will not have to worry about that.

For 31 years.

Hot shots is next.

? it is time for a look at some of the most compelling images of the day.

? most on the -- michelle provided a backdrop at the 11th stage of the tour de france.

Germany's tony martin was the favorite to win this 20.5 mile torus and he delivered by completing the leg in 36 minutes.

The 12th stage of the race is tomorrow and covers 135 miles of terrain.

The tour ends on july 21 in paris.

Now to a different set of wheels, the smart tutor is smart technology coming from a japanese company, and the echo friendly machine will be powered by a lithium ion battery that also connects with your iphone.

The connection will not only help with navigation but will display times as well as electricity and battery consumption.

The production is begin this smoke -- this fall in vietnam.

Now, under the saying that all politics is local, bobby is ready for his second term.

At the ripe age of four.

He first became the mayor in minnesota, of the restaurant capital in the world.

Anyone can vote as many times as they would like but one is the mayor.

You can get the latest headlines at the top of the hour on bloomberg radio and streaming on your tablet.

That does it for this edition.

I am mark crumpton reporting from new york.

Thank you for joining us.

I will see you tomorrow night.

? .

This text has been automatically generated. It may not be 100% accurate.

Advertisement

BTV Channel Finder

Channel_finder_loader

ZIP is required for U.S. locations

Bloomberg Television in   change