Let the Yield Curve Do the Talking: Rosenberg

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June 13 (Bloomberg) -- Gluskin Sheff's David Rosenberg, Pimco's Mark Kiesel and Glenmede's Jason Pride discuss the state of the U.S. economy on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

We thought rates would go up here.

Sooner than everyone is expecting.

Didn't that have to do with the u.k.? was there a poke in the u.s. direction as well?

He is not governing u.s. monetary policy.

The u.k. labor market is red hot.

The question mark is wage cycles.

The housing market is on fire.

The one thing i will say is this.

I think the labor market is tightening more than people think.

The mistake they are making is that the field that the people in the labor force will come back in.

Why haven't they yet?

What are they waiting her?

When you set up an incentive system that pays people not to work, and we have many benefits -- a lot of people are not coming into the labor market.

It is very controversial.

You get paid more.

You are getting all the benefits.

That is an example.

That is the first way.

& -- trying to be correct on television.

This is something that we were talking about.

The unemployment rate will go down.

The urban institute did something.

We were talking about the central bank and economic advisers.

What happens is if you are in this minimum wage bracket for your salary, if you go back to work and you lose all those benefits, there is a whole series of them.

Nearly $17,000 you can get in collected benefits.

You are being taxed at a marginal rate of 80%. you are giving all this stuff up.

If you are a rational person, why would you not do that?

If you think they would be caught flat-footed, how can you be bullish on stocks.

I did not give a specific time.

Something has to change.

When will they start raising interest rates?

It could be the first half of next year.

I always say, let the curve do the talking.

It is the best indicator out there.

It really tells you how the market is responding to what the money market is doing in terms of liquidity.

When the yield curve reverts -- the second half of the cycle is when you get the problems.

I'm looking at the 10 year yield stop that is in line with what the fed 10 year yield is giving you.

I think it begs the question, are we looking at a potential asset bubble in fixed income?

People are going after these exotic instruments.

How is it that they can be the same 10 years for spain and the u.s.? the yield -- low yields in europe, spain is trading below where the u.s. is.

German yields are at 1.4%. people are looking at the real yields.

What is happening here is with low inflation.

You are getting a positive rate of return.

The bond market is not a conundrum.

It reflects the fact that the fed will be patient.

People are calling for higher rates six months ago.

Look at what happened.

Rates came down.

It shows you how much slack there is.

Inflation flows globally.

He can say that again.

Go ahead.

What is going on is in the u.s., it is a broad.

We are going through a process of starting to tame the bull market.

We are freezing it that way with our clients.

It is going to keep running as long as we do not clamp down hard.

We want to get there.

It has been six years.

We still need a little bit more.

Where will we go?

What are we getting too?

Right now, we are at 61. that is the return from the low.

That is on.

There are three scenarios.

They have gone longer and higher.

There are many ways we could go.

I will not give an estimate, except to say this.

Just to repeat.

When you have positive growth, you are typically in a bull market.

Trish, if you are bearish, the recession calls.

You will not be able to show me historically that we went to a bear market.

At some point we will get a recession.

The cycle is not dead.

The amplitude has been muted.

The point that inflation will stay low in definitely, we have art he had rampant asset inflation.

Talk about a narrow inflation measure.

Here's what is happening.

Bank lending has accelerated over the past 13 weeks and percent we -- rate.

It is commercial real estate.

It is consumer.

It is mortgages.

What has kept inflation low, even as the head has created all this honey, is that it has collapsed.

Bank credit is accelerating.

Look at the charts.

It will bottom out.

We are talking about what happened in the past.

That was your doing.

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


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