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tv   Street Smart  Bloomberg  March 27, 2015 3:00pm-5:01pm EDT

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/. . . alix: welcome to the most important hour of the session. 60 minutes left until the closing bell. i am alix steel and this is "street smart." janet yellen will be speaking at a fed conference in san francisco within an hour. we will bring that to you live. the rally takes a positive suite. we will look at what investors are most worried about. "street smart" starts right now. here are the top stories we are watching ahead of the closing bell. startling to convince berlin it
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will do what it needs to get more bailout money from brussels. greece is facing a monday deadline. athens wants to have a deal approved by next wednesday. they are among the investors backing a bermuda venture seeking to raise $2 billion. they also have plans for an initial topic offering within five years. the dallas -- fidelis will compete with rivals. tim cook is slamming the indiana law that could allow businesses to refuse to serve gay people. he says their stores are open for everyone. gay-rights groups worry the act will be used by businesses who do not want to provide services for gay weddings. gay marriage became legal in indiana last year. we have less than an hour until the close of trading. let's go to the breaking news desk where scarlet fu is looking at all the action on wall street or perhaps lack of action. scarlet: stocks are attending to
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and four straight days of losses. this is a tame come back. the dow is 25% below the 10-day average. in the s&p 500, energy, tech, and financials are the biggest drags and the heaviest weighted sectors in the market. without their participation, you cannot get a broad-based rally going. if you look at treasuries, the final rita fourth quarter g.d.p. shows consumer spending was stronger than anticipated. that drove growth. even so, people were reacting to the headline number which was that the economy grew at a slower than expected rate of 2.2%. that is partly why treasuries are higher pushing yields lower on the 10-year. oil prices are consolidating after a five-day 13% gain. we know the back story here. saudi arabia launching airstrikes in yemen. fears of an oil supply disruption not necessarily holding. goldman sachs today put out a
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note saying the unrest is unlikely to have much effect on global supply in the near term and they see a continued increase in inventories in the second quarter. so that is not going to change anytime soon. alix: it adds on transportation costs to the price of oil. we will check back with you later in the hour. new developments are out of the germanwings crash that killed 150 people. french prosecutors found documents in the pilot's home it could indicate he was hiding his illness from his employer. lufthansa was forced to introduce new rules on keeping two crew members in the cockpit at all times. but not all airlines have adopted this rule. for more on this story, let's bring in justin. take us through the process of what has happened for airlines after this crash. what airlines have changed their policy? justin: there have been quite a few. it has been rapid as far as the big ones yesterday. air canada, air france said they are looking at it. air berlin as well.
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it became a big rush to copy a u.s. style regulation in the sense of maybe it does make sense to have two people at all times on the flight deck. alix: the other part brings us to the psychological state of the copilot. it seems he was in distress. he has been working with doctors. but lufthansa thought he was safe to fly. do you think we will see psychological procedures implement it for price the pilots? justin: i think there will be pressure for more frequent ecological exams -- psychological exams. most pilots will have annual physicals. the older you are, the more often they occur. the psychological aspects are not quite as rigorous. i think we will see more discussion about whether that needs to happen more often and more in depth screening. alix: does the u.s. do it differently than europe when it comes to psychological screening
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like they do with the two-pilot rule? justin: every nation is different by region. another component is the economics of it. you're talking about higher costs when you talk about more screening. that will be an issue airlines will grapple with. i think we will have a lot of discussion about. alix: definitely will continue especially as you look for the motivation behind the crash. thank you for joining us, justin bachman. i want to move on to silicon valley. the month-long saga could be coming to an end. this is any high-profile example yet of silicon valley's boys club. the former junior partner sued the company on being wrongly denied the motion and retaliated against for complaining to her bosses about discrimination. after two days a closing arguments, which side will the jury take? joining me to discuss is sarah frier from san francisco.
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any word on when we might hear a verdict? sarah: we don't have any word on when it will happen. the longer we wait, we wonder how complicated this verdict is going to be. is it a clear win for either side? there are so many different counts they have to look at, so many different numbers they have to look at. it is a big task for them. alix: what is at stake for the reputation? we talk a lot about the stakes for her, but what about kleiner perkins? sarah: kleiner perkins' name has already been dragged through the mud with the case. we have had partners talk about what goes on in the firm in great detail. it has given everyone a lens into how venture capital works and how the industry is so subjective and how it decides to employ people, promote them, and measure success. a lot of it is very much dependent on personality and traits that caused ellen pao to
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feel she was discriminated against. alix: we talk about the importance of this trial and how it might reshape gender discrimination in silicon valley. do we need a verdict for that or has it already done that by virtue of talking about it? sarah: facebook and twitter have been hit with different discrimination suits. people have been posting blogs about their own experiences. we have already seen quite a lot of discussion around this. today, some venture capitalists posting on twitter there opinions. whatever the verdict, people have already seen this as an out in the open discussion about the future of silicon valley's relationship with women in the upper ranks. alix: we are still waiting for the verdict. thank you, sarah frier, for joining us from san francisco. our big story of the day, what fed chair janet yellen will say in 45 minutes. she will be speaking on the new
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normal of monetary policy which could mean some clues on when the fed could be raising rates. the bloomberg economist joins me now to preview her statements. what does the market want to hear? the market has been confusing this week, muddy, what do they want to hear? >> first, there's the ongoing debate of june, july, september 2016. they will be looking for clues on that front. what we need to focus on is yellen's view on the strong dollar on the economy. we have heard from a lot of fed officials and heard a spectrum of views from it does not matter to it will have a very significant impact and potentially mean the fed should wait until 2016 to raise rates. that is an important theme of her remarks. also, this new normal language. alix: what does that mean? carl: it is loaded language. a few years ago, economists were talking about the new normal for the economy.
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that was a new era of slower growth. we have seen that in this growth cycle because normally the economy grows 4% out of recession. this time, it has been only half as much, 2.25%. alix: is the new normal referring to how fast the economy will grow or referring to fed policy? carl: it refers to both. if we are in a new normal economy growing slower a new monetary policy stance will be appropriate as well. we are getting clues of this from the fed. if we look at the last meeting, the medium was just at about 3.75%. that is the long-term neutral funds rate. in the prior cycle, that was closer to 4.25. the median is just on the cusp of slipping down to 3.5%. the new normal for monetary policy, as she describes it is probably a u.s. economy more sensitive to the value of the dollar or currency movements and
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the fact that monetary policy in this cycle may not be moving as high as in prior economic cycles. alix: you are excited. carl: i am very excited. alix: we will have that for you at 3:45. you will be with me during the press conference as well. janet yellen is preparing to speak in san francisco. we will be bringing that to you live, so stay with us. oil prices plunging despite a second day of airstrikes in yemen. the latest on the battle between saudis and the iranian backed group. we will be back. ♪
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alix: here are the top stories we are watching ahead of the closing bell. the economy grew at 2.2% in the fourth quarter lead by the biggest gain in consumer spending and eight years. the report also showing corporate profits following in the last three months of the year capping the worst performance since the recession. the senate adopting a fiscal
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2016 budget the calls for $5.1 trillion in spending cuts but does not privatize medicare. pulling an all nighter, the senate passed a budget which hopes to achieve balance in 10 years by 52-46 votes. harry reid announcing his retirement. in a video, the nevada lawmaker says he is losing -- temporarily losing his sight in one i gave him time to think about the future. he said we have to make sure the democrats take control of the senate again and it is improper for me to soak up those resources when it could be devoting those to the caucus. the battle continues in yemen. the saudi led forces extend air forces on the houthis for a second day hitting at least six provinces, including one rich in oil and gas. joining me to discuss is michael weiss and the ashmore group
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regional director and former saudi arabia economic ministry advisor on oil and yemen. john, i want to start with you. what do the houthis want? >> the houthis want control power, money. the saudis want to control instability. they want to have to be secure. they do not want an influx of new minis -- yemenis. alix: iran has been dragged in on the margins. iran has called for talks between saudi led forces and the houthis. do you think these discussions are realistic? >> i don't think iran has been dragged in. iran has been backing the houthis rebels. there is word commander of the
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revolutionary guard corps is in route to yemen which gives you an idea of how much importance they place on seeing the rebels succeed. what you are seeing is a romney hegemony spreading like a cancer. it is in iraq, syria yemen lebanon palestine. the problems the gulf arab states and now turkey which have had cordial relations with iran are facing is iran has gotten everything it wanted to get with the nuclear weapon without having a nuclear weapon. which is to say, this umbrella for the expansion of what it sees as an empire. it started with the 2003 invasion of iraq and the toppling of saddam's regime. now it is metastasizing at an alarming rate. we can talk later about the battle of tikrit but all these things are interrelated. the fact this came together so quickly the actual operation
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was announced in rapid succession. according to bloomberg today, the centcom commander, the head of the u.s. forces in the region, only had one hours notice before the operation got underway. in addition to trying to rescue this country that has descended into sectarian civil war, the optics are simple. the sunni majority countries are putting the united states on notice that iran is the long-term security threat, even more so than isis. alix: what do you think about what michael said, the longer-term threat playing out in terms of iran's hegemony? john: iran is trying to encircle the arabian peninsula. saudi arabia is being threatened by the presence of iranian influenced people in yemen as well as the rest of the arabian
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area as well as parts of egypt as well as syria, iraq. it is feeling all the time it is in danger. the regime is not going to falter. it is not going to fall in saudi arabia. the family is steadfast. one has to give credit to the saudi decision-making this time around. they were very quick in being decisive to attack. but the saudis feel threatened as well as the rest of the gulf arm states. alix: is there a downside? stratford had a note out today talking about the saudi led a taxing the collateral damage and civilian casualties -- the saudi led airstrikes saying it will galvanize opinion against ryad. is it that you cannot win either way? john: you are right. at the same time, there are tribal forces supporting the
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saudi coalition forces. they know there is no other way. there is no other way to use ground troops. you will see the influx of ground troops from possibly pakistan and egypt. alix: michael, do you agree we will see roundtrips sooner rather than later? michael: i'm reluctant to say these countries will insert ground troops. there was talk jordan might dispatch special forces or the military into syria and iraq. that did not happen. i think airstrikes for now. i have seen reports the president of yemen has called for negotiated settlements after the airstrikes. no doubt, he is concerned about the collateral damage and destruction of the yemeni capital. alix: how do you recover from that? if you have nothing there, there is no stability or money. michael: the united states puts
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a high premium on its counterterrorism capability in yemen. this was the yemen model the president praised. we have no intelligence footprint in this country any longer. u.s. special forces pulled out last week. we cannot guide drones to bomb targets in yemen. the whole thing is a disaster. alix: unfortunately, we have to leave that there. thank you for joining us. michael weiss, you are staying with me. coming up, islamic state. to be the richest jihad organization in history. where are they getting all their money? details next. ♪
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alix: welcome back to "street smart." i am alix steel. how has the fighting in yemen change the way the united states fights the islamic state in
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iraq? they find themselves in a difficult situation working in opposition in yemen but he mainly on the same side in iraq. joining me to discuss his michael weiss. this stood out to me. one of the main backed militias decided to suspend action in tikrit because the u.s. was involved. how does that play out? michael: it was backed by the revolutionary core and shiite militias. these militias are very anti-american. they are looking to export the islamic revolution into iraq. the battle was supposed to have been finished by now. 25,000 forces, of which 20,000 or more were of these shia militia groups. they were supposed to sack tikrit in no time at all. last week, the battle was stalled.
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isis has maybe 700 militants holding the city. booby-trapped the place with i.e.d.'s, snipers, suicide bombings. they have bled the militias severely. iraqi government says we cannot win without u.s. air power. the united states is saying this is a victory for us because it means iran cannot do the job iran would like to do. i have seen statements coming out from centcom, the pentagon, the state department. these militias have not gone away. in tikrit today, you had two advisors in central tikrit. but that they have suspended operations does not mean they will not occupy after isis has been flushed out. some of them are saying we think the united states invented isis
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and are dropping supplies to isis. this is all a conspiracy. therefore, we will target u.s. airplanes in our path. a very dangerous state of affairs. u.s. is pretending these guys will not inherit the spoils of an american led victory against isis. their 100% are going to. alix: looking at isis, how much money do they have? how long can they continue to sustain an offensive like this? where do they get that money? michael: the first question, the answer is nobody knows. it is a murky economic scenario. i have heard they used to be earning about $3 million per day. now it is down to $1 million per day. how do they make their money? isis when it was al qaeda in iraq have become self financed since 2006. they equipped global al qaeda in terms of revenue. there was a point where oh some of bin laden asked for a loan. they get it from smuggling oil, artifacts on the black market.
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they get it from ransoms they hold against kidnapped journalists and aid workers and taxing the people they lord over. alix: we have to leave it there. we have lots more to talk about. "street smart" will be right back. ♪
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alix: here are the top stories we are watching ahead of this closing bell. federal reserve vice chairman stanley fischer same more work must be done to reduce risk. he said many nonbanks still need security, short-term funding to operate. we will hear from fed chair janet yellen speaking from san francisco in just about 10 minutes. dow chemical agreed to sell almost all of its chlorine business in a move valued at about $5 billion, and that means the ceo will meet a target of selling $7 billion of assets. google is joining forces with
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johnson & johnson to develop a robotic surgical program. the companies will explore ways to help doctors during operations. we are just 30 minutes until the close of trading. let's go back to the breaking news desk, where chief markets correspondent scarlet fu is looking at the big movers. a lackluster day, but there have to be some movers. scarlet: rite aid has been up all day long. it is trading at the highest level since 2001. there are a lot of call values on this stock. every so often, you hear takeover chatter on rite aid. analysts have said it is a good takeover target and they have proposed walgreens as a good fit for a buyer. you see right it and walgreens both rising in late trading. alix: thank you, scarlet. iran nuclear talks are facing a
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two-day deadline. if a deal is reached, sanctions could be lifted, leading to a return of oil exports. joining me is fadel gheit managing director and senior analyst at oppenheimer, and still with me is michael weiss. fadel good to talk to you as always. do you think we will see a deal reached? fadel: number one before we put the cart before the horse, we have to see if we will have an agreement here. an will -- agreement will be negative for oil prices. the perception is the iranian government is so desperate for cash a will try to get as many barrels of oil -- they will try to get as many barrels of oil in the open market that they can
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and they will not have to settle for price cuts on the black market. so, they indicate they have between 7 million barrels and 35 million barrels ready to go once an agreement is reached. a lot of people are saying these numbers are probably very inflated, and they will probably have much lower than 30 million barrels, most likely closely -- closer to the 7 million barrels. 7 million barrels will not drown the market. the perception is more to come, and most likely, we will see the influx of capital if the economic sanctions are lifted. most likely we're going to see lifting the various for an israeli company to put capital back into that country. alix: michael, from where you sit, do you think a deal gets done? michael: it is hard to say.
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i have seen rhetoric from the state department saying we have had a tough discussion. the expectation is lower for the weekend. the u.k. foreign secretary told "political" it would not be a written document, but an open narrative, which means they can say one thing, and the iranians could say something else. the ideas to kick the can until the end of june before details have to be hammered out. alix: michael weiss, great to have you on set. fadel always great to talk to you. thank you for the insight on oil and around. next, federal reserve chairman janet yellen is preparing to speak in san francisco. we are counting down to the closing bell and her statements. "street smart" will be right back. ♪
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alix: here are the top stories we are watching ahead of the closing bell. u.s. company bond sales approaching $200 billion, and poised to make march the second busiest month on record. issuance is up 25% since february and will be the most since december, 2013. blackstone is preparing the first offering of bonds that opens the door to a new type of debt that will make money more available to housing investors, especially as demand for rentals rose. the transaction is expected to close next month. gamestop is expanding efforts to never supply, acquiring other technology retail chains. they are faced with a shrinking core business selling video games. we do have some breaking news now for you. we want to go right to scarlet fu at our breaking news desk on intel. what can you tell us? scarlet: "the wall street
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journal" says intel is in talks to buy all terra, the chipmaker. they seem to have resumed trading and are moving higher on the back of this report. we can also report that two other chip makers are moving on this report. they could be in play. the news is intel is in talks to buy altera according to "the wall street journal." intel also rising on this report. alix: we will be watching for the potential of that. in a few minutes, janet yellen will be speaking in san francisco and we are joined now for a preview by lisa abramowitz and carl riccadonna. what is the number one thing
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investors need to hear? carl: i will give 2 -- sensitivity to the dollar, the long-term fed funds rate. will it be at a lower level? alix: lisa what do you think? lisa: concerns about global growth. that is the biggest concern, whether the u.s. can escape the drag of the slowdown in the rest of the world's economy, and if she expenses confidence that we can continue to diverge, it signifies an inclination to a bearishness to hike sooner and stay the course. alix: if you guys were in the news conference, what would be the question, carl? carl: i would ask her how much confidence she has in the labor market holden -- holding up given the downdraft we have seen in the economy lately with
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industrial production looking week, soft surveys retail sales soft -- with the exception of labor indicators, a lot of economic data has deteriorated. i would try to see how much she is willing to chalk up q1 two westport -- west coast port disruptions and severe weather. alix: lisa, what would be the important questions? lisa: what are the market data points she looks at every morning, or does she even look at market indicators to queue off of? that is something that is telling. they have to be somewhat aware of what the bond and stock markets the futures markets are showing them, but if they are too close, it becomes a self repeating cycle. how closely are they watching? alix: really, it is all about the dollar, and we see the
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dollar headed for a second weekly decline, and traders speculate a jump in spending will not be enough to move the federal reserve closer to moving interest rates. do you expect her to say something concrete about the dollar? carl: she had the opportunity to do this in the post-fomc meeting press conference, and she addressed the issue slightly but she really focused on the export sector, and the very sort of, straightforward dollar linkage on the export factor. what i wanted to hear from her and i did not was more focus on the domestic economy, and what happens beyond the obvious export story. u.s. workers being priced out of the market because foreign workers are cheaper due to cheaper currencies, and also the flood of imports weighing on domestic industries as well. that is what i wanted to hear. she is attuned to that but she was not very specific in the press conference.
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alix: ultimately --lisa: ultimately, the fed is not supposed to have control of the u.s. dollar. that is the treasury. for him to give a speech about the dollar would be shocking, a divergence from her behavior. a colleague of mine, brian, in bloomberg news, had an interesting article this week when he was talking about the bang for your buck in trying to depreciate your currency -- it is, kind of, getting smaller and smaller less and less, because basically, export activity has been declining worldwide because of the slowdown globally. it is getting to be less advantageous to have a lower currency. basically, the export activity does not justify all that goes into depreciating your currency. alix: it leads back to carl's point and that it winds up being about the jobs numbers. there was an interesting note from any economist that employment gains might be running too hot relative to
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economic growth, and here it is -- "under our baseline forecast for 3% real gdp growth this year and next, we expect a gradual deceleration to roughly a 200,000 rate." that is not something you hear very often, that the rates will decelerate. carl: they are highly correlated, so if the economy is downshifting from the 4%, and the 5% growth we saw last year down to something, again, this new normal that janet yellen might be giving us color on, of 2% growth, and likely below 2% growth in the first quarter -- if we have downshifted 200,000 on payrolls is not likely sustainable. i agree. lisa: there is a lot of talk that we are under-bawling doug growth. there has been an incredible amount of job creation that
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people are dismissing changing the denominator, or basically, it is not showing the whole picture. honestly, that is one thing people are looking at. her hips we are seeing some of the signs and the results of oil -- perhaps we are seeing some of the signs and results of oil. alix: janet yellen's speech was released. peter cook, what is she going to say? peter: she has a lot to say, a lengthy 19-page speech, where she does not offer more specificity, beyond they are giving serious consideration to later this year. she does offer more guidance on why they are considering raising interest rates, and why the pace of those increases after that will be gradual. she goes into that in some detail. let me walk you through some of the key parts of her speech, in which she talks about the circumstances that would be necessary for the fed to raise
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interest rates. she says, very notably, a pickup in neither wage or price inflation is indispensable to achieve reasonable conference -- confidence. that said, i would be uncomfortable, she says, raising the federal funds rate if readings on wage growth, core consumer prices, and other indicators of underlying inflation were to we can. -- we can -- weaken, or if market-based measures of inflation a petition where to fall appreciably further. she was on to say the path overtime will be gradual. she says the actual path will evolve as economic conditions evolve, and policy tightening could speed up, pause, or even reverse course, depending on actual or expected live element real activity and inflation. she goes on to say do not look to historicals, past tightening
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experiences, because they might not be reflective of this unique moment in time, and the extraordinary policy the fed has been under for such a long time here. she wraps things up, again going into a lengthy description about while it might be necessary to remain accommodative for a longer period than we have seen in the past, saying when determining when to increase and how to adjust thereafter, it will be data-dependent reflecting evolving judgments. bottom line here she says it will depend on the data, but there are lots of things for us to consider. there are some special considerations the fed will be looking at, and it is the pace of those increases over time not the timing of the first rate increase that might be over -- important overall. alix: thank you so much, peter cook. we are awaiting janet yellen and joining the onset is carl riccadonna and lisa brummel what's. any standouts from the text?
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what stood out was the wage growth she talked about because she said before it was not important, and now it seems it was more important than she said. carl: it does seem to be more important which means she is not convinced with what she is seeing in the labor market just yet. the unemployment rate pushing through the 5.5% level and the fed telling you the neutral level is probably lower than that, probably 5% to 5.25%, so we have a wild to go before significant wage pressure. this is buying more time. also, in the first batch of headlines, she is saying it may be warranted this year, so it is not table-pounding. it certainly keeps the option for a delay possibly beyond the september meeting. alix: and it seems very clear the path will be gradual. she was not mincing words there. carl: the path she is hammering home is that it will not be a
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steady repetition of hikes -- height pause, hike, hike -- it will be very erratic. lisa: and this is consistent with what members of the fed have been saying over the past week, with the exception of bullard. one thing she said that was interesting is that policymakers cannot wait until they have achieved objectives to begin adjusting policy. the effects can be felt after you end the potential stimulus. so they are concerned about overheating the markets, and that seems pretty clear, which is interesting -- they are still very concerned about that even though conditions have tightened somewhat. alix: and specifically talking about inflation, cannot wait until it is down to 2% before moving -- up to 2% before moving. peter cook? peter: i want to emphasize the point that you are making -- what she is actually saying in the testimony is we cannot wait
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to see inflation back up to the 2% level we were hoping for. we're not going to wait to see wages moving significantly higher. we have to have confidence that there are other factors out there that will lead to the outcome eventually. i think are mention here is, listen, we might be moving a lot sooner than people thought maybe in line with what the expectations are, but once we do it, again, it will be gradual. no measured pace. that is a foregone conclusion. that is not going to happen. there going to stop, increase rates at some point, stop, look around, see what the reaction is and move from there. this is a different period. this is a different said. -- instead -- this is a different fe. dalix: i want to look at the market reaction -- not a lot of movement, the s&p up four or five points, that if you look at the oil market, we see a significant decline lower as we heard the remark trickle out. to be fair, oil started to grind
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lower around 2:00 p.m., and is continuing to trade around the bottom of the session right now on these results. dollars and commodities tend to move inversely to each other, so the idea, of course, if we see a stronger dollar maybe, it is end up selling off as well. janet yellen pointed out that housing was subdued -- she used that word -- and she specifically said the stronger dollar is hurting exports. it seems everything is more forceful delivery, and taking a side. would you agree? carl: as i look at the headlines, i see she is and she expects above-trend gdp growth despite the movement in the dollar. she is acknowledging the exports story but seems to be dismissing the downdraft on the domestic economy, which we were highlighting before the speech. one thing i am noticing in her comments, which i heard from vice chair fisher earlier this week, it seems to me the way they are selling these rates moves is that they will be throw away moves that do not guarantee the fed is in tightening mode
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now. let's throw one or two rate hikes and, see what it looks like. that is an easy way to sell the market on this without causing a big concern that the fed is going to really start tightening policy. it gets us off the zero bound without actually doing much damage at all to economic prospects. alix: of course, you see a live shot there on janet yellen. we are waiting for her to start speaking. she is speaking. she is just starting right now. we are going to tune in in just a moment. lisa, what is your other take away from here? i mean, will the fed be dependent on the day -- same data points, jobs, the dollar lisa: i think she has been brilliant at communicating. she has been able to say yes we're going to raise rates but we are concerned about these other factors out there that we do not normally expressed concern about. we are aware of your issues. we will not hike for the sake of
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hiking, so that columns the markets as well. alix: i am looking at the 10-year, and it is below 2%. it seems investors are not that concerned with the rate hike taking it in strike -- in stride. lisa: exactly. that is my point. there is not been an extreme market reaction to any of her many words, or her colleagues many, many words. in that aspect, she is succeeding what she is setting out to do which is to say we are looking at the same data, and we are confident the market can handle it. the market seems to be taking it in stride. alix: this was different from the fed speak we heard specifically from the cleveland had president -- cleveland fed president we will get to janet yellen. let's listen. chair yellen: the return of the federal funds rates to a more normal level is likely to be gradual. in doing so, i will address three questions. first what has the committee
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judged that an increase in the federal target is likely to become appropriate this year? second, how are economic and financial considerations likely to shape the course of monetary policy over the next several years? and finally, are there special risks and other considerations that policymakers should take into account in the current environment? before turning to these questions, however, let me first review where the economy is now, and where it is likely headed -- a necessary backdrop for understanding why, after more than six years of maintaining a near-zero federal funds rate, and accumulating a large portfolio of longer-term securities, the committee is now giving serious consideration to beginning to reduce, later this year, some of the extraordinary monetary policy accommodation currently in place.
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although the recovery of the labor market from the deep recession following the financial crisis was frustratingly slow for quite a long time progress has been more rapid of late. the unemployment rate has fallen markedly over the last few years. it now stands at 5.5%, down from 10% at its peak. payroll gains have averaged 275,000 per month over the past year well above the pace needed to sustain further declines in the unemployment rate. of course, we still have some ways to go to reach our maximum employment goal. the unemployment rate has not yet declined to the 5.0 to 5.2% range that most fomc participants now considered to be normal in the longer run. involuntary, part-time
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employment, remains high by historical standards. labor force participation is still somewhat lower than i would expect after accounting for demographic trends. and which will continues to be quite subdued -- wage growth continues to be quite subdued. i think we can all agree the recovery in the labor market has been substantial. i am cautiously optimistic that in the context of moderate growth and aggregate outlook in spending, labor market conditions are likely to improve further in coming months. in particular, and despite the somewhat disappointing tone of recent retail sales data, i think consumer spending is likely to expand at a good clip this year, given such robust fundamentals as strong appointed gains boost to real incomes from lower energy prices, continued increases in household wealth, and a relatively high level of consumer confidence.
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of course, not all sectors of the economy are doing as well. dollar appreciation appears to be restraining exports. low oil prices are prompting a cutback in drilling activity, and the recovery in residential construction remains subdued. but overall, i anticipate that real gdp is likely to expand somewhat faster than its potential in coming quarters thereby promoting further gains in unemployment, and declines in the unemployment rate. in assessing the actual strength of the labor market and the broader economy, we must bear in mind that these very welcomed improvements have been achieved in the context of extraordinary monetary accommodation. while the overall level of real activity now appears to be much closer to its potential then it was one year or two ago, the economy, in an underlying sense,
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remains quite weak by historical standards for the simple reason that the increases in hiring and output that have been achieved thus far have required exceptionally low levels of short and longer-term interest rates, reflecting a highly accommodative stance of monetary policy. interest rates, -- interest rate have been, and remain very low and have underlined conditions to truly return to normal. the economy should be booming. as i will discuss shortly, this assessment concerning the underlying strength of real activity has real policy implications. while there has been considerable progress on the maximum employment leg of our dual mandate, progress on the price stability leg has been notably accent -- absent. personal inflation measured by
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expenditures has been running below the fomc's longer-run goal of 2% for a number of years. alix: welcome to our viewers around the globe. you are watching bloomberg television. i am alix steel, and this is "street smart."we are minutes away from the closing bell . janet is speaking in san francisco. we want to look at how her remarks might be moving the market. we want to get to scarlet fu. what have you noticed? scarlet: most of the action took place before she took the podium and the contents of the speech were released. few look inside the bloomberg turnabout -- terminal, these are the three major indices, and right around here is the three minutes preceding her text release so there is a run-up, but we are talking about modest gains. we are up only .25 to one. of a
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percent. we are holding up -- holding onto the few gains we have made so far, and this would be enough to break the four-day losing streak for the s&p, dow, and nasdaq. in terms of industry groups infotech got a we do have a gain here for the dow jones industrial average. the s&p 500 gaining. the nasdaq putting on 5/10 of 1%. still while under the 5000 level. alix: also seeing a yield in the 10 year. we want to go back to fed chair janet yellen. yellen: the current stance is
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providing considerable economic stimulus. it has facilitated a sizable reduction in labor market slack over the past two years, and appears to be consistent with gains. a modest increase in the federal funds rate would be unlikely to hold this progress, though such an increase may slow its pace somewhat. we must keep in mind the full effects of monetary policy are felt only after long lags. policymakers cannot wait until they have achieved their objectives begin adjusting policy. i would not consider it prudent to postpone normalization until we have reached or are on the verge of reaching our objectives.
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we create a risk of overshooting both our objectives of maximum sustainable employment and 2% inflation, potentially undermining economic growth and employment if the fomc is forced to tighten policy abruptly. in addition holding rates too low to long could encourage inappropriate risk-taking by investors, undermining the financial markets. we must be confident at the time of the first rate increase that inflation will move up over time to a 2% of objective and such an action will not impede solid growth in employment and output. an important factor working to increase my confidence in the inflation outlook will be continued improvement in the labor market. alix: you have been listening to
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janet yellen speaking. joining me, i am here with carl riccadonna and cliff. we have been listening in my question is, what gdp does she need to see to not raise rates? carl: she conveyed in the speech she expects gdp to above trend this year, given that environment she sees the fed likely moving on rates. she expects to be above that. that gives you the idea where the threshold is. if we are not hitting 2% growth it is unlikely we will see it in the current quarter. if it doesn't look like we are going above that 2% threshold it doesn't look like she will be convinced we will have enough momentum to turn the inflation
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trend around and initiate lift off. alix: what do you think, when you hear what she says, what is your biggest take away? clint: there were knows of prizes. she said what people expected. people are concerned about unusual actions. this is alleviating that. they market had 1/10 of 1%, which is relieved. that is good, she was focused on inflation, on gdp growing. i don't think there were surprises. alix: david, what you think? we see the yield down below 2%. david: janet yellen and her colleagues are telling us this is about data dependency. she is a labor economist. she is being very real.
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what gdp we need is going to play out here. investors who are focusing not just on rates but the path and the pace we can see for a right cycle. alix: when she was speaking, you brought this up earlier, her chat about inflation what inflation gauge she was going to be looking at, and what trajectory she needs to see. karl: she is telling us with rates at zero you don't wait for inflation to get it 2% because you will be to flat-footed. she is saying we don't have to be a 2% but we have do have confidence we are turning the corner. if we see inflation decelerating she is not going to have the conviction to start moving on interest rates. not 2%, at the aero has to point up. we're getting breaking news considering intel.
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scarlett? scarlett: intel is in discussions to acquire intel. this was in discussion. we have heard intel is an discussion to buy it's smaller intel rival. i was looking back, the biggest purchase up until now for intel was its 2010 acquisition of mcafee. you are looking at the screen of altera in regular trading. you can see the big pop in late trading following that court. we have the after-hours trade as well. it is staying near highs. it is holding on to that gain. we got a boost in the other chipmakers. again, the discussion right now
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is that intel would be buying altera. others are getting a bit as well. the context here, intel had warned they would not live up to expectations because the pc refresh cycle was coming to an end. alix: interesting that you -- thank you for bringing that to us. speaking of the dollar devaluing currencies boost exports. that has been the theme we have seen across central banks. can the fed do something other central banks are not doing? is currency wars a winning strategy? does that wind up helping economies? anyone? alix: guests: i will jump in. alix:-- alix: despite the annual growth rate has slowed. this is the chart we are looking at.
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that says to me that this currency devaluation has run its course. alix: i would beg to differ. we saw how they help to view us. they can influence the level of the dollar through policies. what we are learning, we sought in the u.s., we are starting to see signs of that in japan and europe, exports picking up given the slide. the real lesson here is that qe works through a number of channels. when you devalue you stimulate the export sector. alix: is there more payback to come? david: what we are seeing is that the u.s. dollar being so strong relative to other areas that is helping consumers. it is a tax cut for them. that is an economy that matters.
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outside, europe needs to get exports going in order to press ahead. that is now why we have the qe allowing for opportunities to get behind that. alix: we saw exports can grow a little bit but not as much as they are valued. guest: this is a global financial experiment. these other countries devalue the currency trying to jumpstart their a week economies. it is a difficult situation. it is impacting positively these countries on a short-term basis. it is a real interesting experiment. alix: speaking of, you brought up bank of japan. bank of japan will have to maintain its record monetary stimulus or expanded. the key inflation gauge pretty much grinding to a halt as consumer spending slumps.
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what do you think janet yellen would do if she was looking at a chart like that? karl: she is getting us to think ahead. that is an economy that faces tough demographic situations. we have a robust economy we are bringing to bear. if we don't see the inflation pickup to a level that janet yellen is comfortable with that is going to push off. alix: if she was looking at that chart, what do you think she would do? carl: i think she is going to take a page book out of the bernanke you playbook says when inflation assumes to be rolling over you need to double down on stimulus. through fiscal measures, or monetary measures, cut interest rates or expand the balance sheet.
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that is the chatter now with bank of japan potentially taking a more aggressive stance. alix: i want to get to scarlett with breaking news. a verdict on the ellen pao case. scarlett: we don't have the actual verdict yet. it will be delivered at 5:00. the jury has reached a verdict and that will be announced. closing arguments began tuesday. this seems to be a relatively quick verdict. they will rule on a gender bias case in silicon valley that has rocked that community. so many people they are looking at this to send a message or to give a verdict on the state of gender hiring and gender biases in corporate america. alix: it has only been two days
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of deliberations. it was pretty quick. thank you. thank you to everyone here on set helping breakdown the fed speak. street smart will be right back. stay with us. ♪
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alix: here are the top stories we are watching after the closing bell. intel in talks to acquire altera. it would be the largest purchase
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for intel. harry reid announcing his retirement in a video posted on youtube saying temporary losing sight in one i gave him time to think about the future. " i feel it is inappropriate to soak up resources on me when i could be devoting those resources to the caucus." the senate adopting five point $1 trillion in spending cut but does not privatize medicare. we are waiting for the verdict in the ellen pao case against kleiner perkins. the jury has been in deliberations for two days. they have reached a verdict. we will be getting details at 5:00 and we will be outside the
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courthouse later in the program to discuss. staying in politics, a lobbying group once employers to create their own worker plan. the association responsible alternative to workers compensation members include big law, nordstrom, and walmart. they want companies to pick and choose what they will cover as if an employee is injured on the job. is this unusual for companies to push like this? john: i think there have been a lot of efforts by companies to reduce their costs, whether it is workers compensation laws like this, which are very much in every state. as well as you see, right to work laws around the country. there is an effort to cut down on labor costs. alix: do you think this will
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have legs here? something they floated is they could pay money for long-term care for just three years. that would be limiting. john: if you are on the worker side of the equation you are going to look at efforts and states all over the country where the electorate's are conducive to this, you will start seeing these efforts gaining steam. whether that triggers reaction at the federal level are not i am not entirely sure. the balance of power between workers and employers is definitely something that is a ways up for grabs. alix: staying with this worker conversation, amazon is requiring employees to sign 18 month noncompete agreements and that could apply to seasonal workers who get laid off. it has stood out to me, what did you make of this? john: who doesn't can beat --
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who doesn't compete with amazon? for workers, you are talking about potentially getting a short-term job and then having signed in 18 month agreement not to go work for somebody that competes. that is a tough thing for workers. there is a lot of competition for those jobs. folks are looking to sign on with amazon are going have a tough decision to make. i'm not sure to the extent which they will enforce those noncompete agreements in cases of people where they don't see a particular harm to them. we will have to see. alix: the enforcement being the question there. good to see you as always. coming up, china is giving a thumbs-up for more foreign investment. is it time to tap into those markets? we will tell you why after this break. a new bill paving the way for discrimination in the state
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of indiana. americans are furious over this development. much more on this one we return. ♪
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alix: breaking news on madison square garden. scarlett, what do you have? scarlett: msg has filed paperwork to separate from its media business. msg is the owner of the new york knicks, the new york rangers and the new york liberty. they on the concert business and they own regional sports networks. they're looking to separate for a tax-free spinoff. we have seen shares rally. they recently have been on a tear outperforming because the ceo was looking into it way to
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split up the assets. he wanted to split up the entertaining but now he has settled on sports and entertainment versus the media assets, the regional sporting networks. this is the latest. the stock is moving in after-hours trading. alix: thank you for being with me. we want to turn focus to asia. china is sending signals even more open for business. china's foreign exchange regulator has tripled the investment quota to access the capital market. this is first time a nongovernment institution has obtained a quota over $1 billion. joining me angie lau. angie, thank you. this struck me as significant this morning. describe what this means for fidelity. angie: they are prodded that
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themselves. this is what we are calling queue feed. $1 billion cap. and, it essentially allows a very tight control over the amount of money you can tap-in the chinese market. they have bumped that up to more than $1 billion. $1.2 billion. they are proud of it. fidelity is proud because what it does is it expands the universe of china's markets to foreign investors. china of course is part of the big chess game. this could be a very interesting moves in terms of welcoming liquidity into the market. alix: looking ahead to this weekend, china is gearing up for 2015, the asian world economic forum. the big names are coming like bill gates tesla ceo elon musk,
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and the president will be delivering his address tomorrow. it is the who's who of fancy people in the world. what can we expect? angie: it is like dov owes you have the best and the brightest coming together to figure out what the direction is for china. what we are going to listen for his directional reform. this has been a year of reform. they have downgraded the growth expectation to 7%. this is the lowest growth goal for china's gdp in 15 years. how are they going to lift up an economy that is slowing down? they are looking at property values dropping. they are looking at liquidity for some of the companies. of course, the debt issue. how are they going to address all of that? that is what we are going to be looking for. alix: it was so nice to have you here. thank you so much for joining
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us. first, check it out. next, an explosion in new york city leads investigators -- leaves investigators searching for answers. more answers coming up. ♪
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alix: welcome back to "street smart." janet yellen has been speaking at the san francisco fed. let's listen in. janet: nominal rigidity has stopped inflation from following. it is that research that motivates me to bear in mind the possibility that as unemployment continues to fall and labor market slack diminishes, we might see inflation pickup more substantially than would be
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suggested by estimates that try to two determine occur based on the last seven years data. we have to keep in mind the long run real interest rate as well. >> you have mentioned the rebound on interest rates. the lower bound on interest rates may be zero. what is the thinking at the fed on where is the affective lower bound on interest rates? janet: the possibility of taking nominal interest rates negative? >> yes.
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janet: it is interesting to see these european countries moved to negative interest rates. in a way, i am surprised that there hasn't been more pickup in the demand for cash. cash is not a very convenient store of value. i would have thought that there would be some move in that direction. we debated for a number of years during the crisis when we took interest rates down to zero and a quarter percent to potentially take them negative. we were worried about the possible impact on the
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functioning of money markets. that does not seem to have been thus far a problem in places that have gone negative. that was one concern. given the limited scope we saw to do it we thought that could make a modest contribution, but probably not more. we focused on long-term assets purchasing. that is a tool we are seeing used. alix: you have been listening to janet yelling -- yellen talking about inflation and when she might expect to see some pickup and what that might mean for raising rates. the fed is optimistic over productivity growth, and it will pick up going forward. this is after a speech he gave this afternoon where she set a
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rate rise may be well warranted later this year and that the tightening pace could speed up slow down pause, or, leaving a lot of options for the federal reserve as they prepare to hike rates. you have been listening to janet yellen speaking at the san francisco fed. a programming reminder, the jury has reached a verdict in that kleiner perkins discrimination case. we will bring that to you live at 5:00 p.m. eastern after two days of jury deliberation. stock ending slightly higher to in the week. scarlet fu is at the breaking news desk. she has a look at the two biggest stock stories of the day. scarlett: let's start with intel . altera's stock surged 28%. intel also rallied.
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a deal with the -- would be the biggest ever. other chipmakers finished higher. msg has fired paperwork to separate its life sports and entertainment businesses. that would be from its media businesses. that is a tax-free spinoff. it is expected to be completed this year. a lot of people had expected and they are now delivering by filing paperwork. alix: thank you, scarlett. coming up, an explosion in new york city leaving investigators searching for answers. it injured 19 people. i will have answers from a former fire marshal. stay with us. ♪
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alix: yesterday a seven alarm
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fire broke out following a gas explosion. it left to individuals unaccounted for and 19 people injured. this could be only the beginning of gas related exposures in new york city. joining me is jean west, a first responder to the world trade center, and currently inspector of the fbi national academy. it is so great to get your perspective on this. is this kind of thing normal? is this really unusual? gene: these gas explosions have happened and will continue to happen. the degree to which -- degree of damage which this particular gas explosion caused is unusual. usually we have these explosions limited to one building, but there were secondary effects of
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the explosion the caused damage to the other buildings. they are not unusual and will continue to happen. alix: we have heard reports that mayor deblasio saying that gas may have been inappropriately accessed. what does that mean? gene: there are certain protocols that a contractor has to follow. it involves the quality of the people that are doing the work whether or not he conducted that work properly with oversight. whether this person based on the statement made by mayor dimaggio, was accessing -- mayor deblasio was accessing or failed to shut down the gas service properly or whether he
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was even supposed to conduct that type of work at all are questions that are going to be investigated and answered by the investigators. alix: to your point, did connie had dropped the ball. -- con-ed drop the ball. -- dropped the ball. gene: i don't know what they saw when they went there. they disapproved of the work. they are part of the process when upgrading gas in a building. they have to come in and approve the worker they saw something they did not like it what they saw has not been made public yet. we don't know what they did. we don't know if there is an associated infrastructure problem with the gas supply line coming into the building. that will be sorted out by the investigation, but we have the explosion in harlem last year
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and i did part of that investigation, that was purely an and for structural problem with a 100 year old gas main failing and gas migrating into the building. this may be a little bit different. this may be workers doing something they should not have done and they may have seen that and told them to cease and desist. we don't know what they did and whether they should have done more. alix: regardless of what they did or did not do, the city has a 100-year-old infrastructure. will we be seeing more and more of these as time goes on? gene: it is going to happen and continue to happen. there is no way around it. the expense of replacing all of the gas piping underground in new york city is astronomical. the only problem with that is, and it does not give me comfort to know, the utilities usually respond to these incidents and a reactive manner. something has to happen.
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that is not a good thing. we wish there was enough money and resources to replace all of these mains but it's not there. alix: we have this, harlem last year, together isn't that enough? gene: in this case it may not be an infrastructure problem. it may be the piping inside the building. a lot of these buildings are old , especially in that area of new york city on the lower east side. we expect to have failures of this piping over time and so we will have gas related problems in these buildings and we will continue to have infrastructure problems. alix: so scary. those pictures were unbelievable. thank you for stopping by. coming up, indiana signed the religious freedom act into law. will this prohibit the first gay
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athlete in the mba from attending? we will discuss after the break. ♪
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alix: the ncaa has a major problem. a week before the final four is set to take place, the state of indiana has signed a religious liberty bill into law. the bill was approved by governor mike pence, and they are concerned that it will allow business owners to refuse service to gay people. the nz aa has said that they will work diligently to ensure student athletes competing in and attending are not impacted negatively by this bill. with me to discuss how this could impact discuss how this could impact is our guest.
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also with those is rate cats media and marketing at columbia university. todd sears, out on the streets founder and principal. a lot to go through here. thank you for joining us. todd, what do you think? >> i think it will cause a lot of problems for the final four. anytime you have a law that is arguably meant to discriminate against anyone, there are economic consequences. when governor pence signed it into law he did it in a private ceremony. he actually compared it to illinois, saying that illinois has the same kind of law. indiana already did not have protections for lg bt people in the state. you can be legally fired for being gay in indiana. alix: people say it's not discrimination, it's about religious freedom. we are looking at a map that
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shows states that do have a religious freedom restoration act. this puts them in a rough spot. not only do they have operations, they have to play there. >> you are talking about the super bowl of college sports coming to indianapolis next week. you have a couple hundred thousand people making the trip to indiana. you have a billion dollars in ad revenue throughout march madness. the ncaa as an organization has got to be vocal on this matter next week. if they don't, the sponsors will force them to do it. alix: we saw the ceo with a post yesterday. tim cook saying that he is deeply disappointed in indiana. it is the responsibility of private businesses? >> we have a variety of big events another final four for
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men and women, the nfl combine the big ten championship in 2021. they have to get out in front and student athletes they have to be the role model. >> i think this will cause concern. it really does call into question basic safety for these players, for student athletes, and ultimately it will cause a challenge for business. alix: i am looking at something here from jason collins. he tweeted this. that is the big question here. ray, when you see this in the ncaa, is there a reputational image to the ncaa now? >> i think it will be a
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challenge. when you look at the pay for play issue, you have to consider if you look at the 15 coaches of the 16 that are disclosed the mean salary is 3.7 million the mean is 2.1 million. the money is clearly there. alix: not for every school. only a few schools will break above even, right? a lot of them are not even breaking even at all. >> when you say breakeven, many of them run as not profits -- nonprofit. as a nonprofit, you have to spend the money. you end up with exceptional facilities and nonrevenue sports remain a challenge. if you look at conference realignment in many cases the non-revenue athletes are the ones challenge by. if you want to play golf in the
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big east, you're not displaying in the northeast. you may have to go to creighton and that is a tough trip. it is an interesting conundrum. alix: what you think that biggest challenge is to the ncaa? >> they have to look at the fact that they have to be a head of this issue right away. they have done this before. just a few years ago, they did this with the indiana law to make marriage legal for the lg bt community. before that, there was a mascot issue of 13 schools that got hit with sanctions from the ncaa regarding mascots that had violated discrimination issues. they have done this before. the super bowl did it with arizona and the same type of situation. this is not outside of their -- alix: thank you for joining me on this complicated issue. a lot more coming up on "street smart" and i will have results
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from san francisco.
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alix: recapping breaking news from this hour. the kleiner perkins gender bias trial has reached a verdict. joining me now is cory johnson outside the courthouse. he has the latest. we are just minutes away from hearing what this verdict is. tell me what is at stake. cory: a lot is at stake at least $100 million, the reputation of kleiner perkins, already besmirched by the trial. it could be significantly besmirched by a loss. we found out the jury actually worked through lunch and came up with a verdict. that was about 1:15 p.m. in san
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francisco. they put out word to everyone involved. we saw pao walk into the courthouse. she says that she feels good. as much as $100 million coming to her if she wins this case. she could be a whole lot better in an hour from now. the jury reconvenes at the top of the next hour. after 10-15 minutes, we will hear what that verdict is. there are four counts, discrimination, two counts of retaliation, they would not give her a raise or promote her to partner. not only was she discriminated against the firm did not protect her from that discrimination. those are the four charges that that jury has considered. they will announce a decision any time now and next minutes. that is the courthouse right
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behind me in san francisco. we were here what they say. alix: there are four counts that we are looking for, but regardless, and we expect an appeal to happen? cory: yeah, there could be an appeal if kleiner perkins were to lose this case. we might expect that. particularly because the damage is will be hard to calculate. $16 million she claims and lost wages. if she was made a partner at the firm, how well with those investments have done. how long would she have been expected to last in such a job? there are a lot of questions yet to be determined by this jury not just whether they did it or not. alix: absolutely. like you said there are a lot
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of counts we have to weed through and put a number on that. are there any representatives from kleiner perkins that we can expect to see after the jury's verdict? cory: we spoke with kleiner perkins lawyers. their office is in silicon valley and so getting here makes that difficult. there was a flurry of activity when they found out -- some have been booted out, and all of a sudden the court announced there was a verdict and everybody jumped to their feet. i did not die about the sixth floor window, but i thought about it for a minute. alix: don't do that. cory: i want to help. alix: can you hear? cory: i can hear you.
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go ahead. alix: we are looking for special coverage of the jury verdict. we are looking at four counts $60 million of potential claims. ♪
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>> this is a special edition of bloomberg news regarding the ellen pao case in san francisco. cory johnson is standing outside of the san francisco jury court as we await a jury finding in the sexual discrimination suit against kleiner perkins. i am pimm fox along with alix steel. we understand that they work through lunch time in order to present a verdict and that they will be doing so shortly. the verdict could go either way.


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