Chart of the day
>> the spread between the 10 and two-year treasury notes narrowed further today, shrinking to levels not seen since february 2001. economists at a.b.m. amro say the fed could take more aggressive action to raise short-term interest rates that investors should be prepared for longer and higher rate hikes. that is the subject of “chart of the day.” here to explain is our editor-at-large tom keene. he joins us. with this chart, looking at these spreads that have been so much in focus.
>> we tried to link two things. i thought on a friday ending the week this would be of interest. here is the spread back 20 years. looks like a mountain chart. what it amounts to is up, up, up we go. this is a wide spread, a steep yield curve. the 10-year yield much higher than the two-year yield. then down we go. here is the boom of the 1990’s, then up again, up, up, up we go. here is this descent. from 275 basis points, 2.75%. down today in the morning today, 22 basis points getting quite close to that inverted yield curve.
>> that yellow line here is going to be that point where it inverts?
>> it doesn’t happen too often, which is interesting. what a.b.m. am row is saying, great g.d.p. report, booming economy. the fed is bringing rates up. if we begin to see inflation as governor bernanke talked about earlier, if we begin to see a continuians of a boom economy, the fed may fall behind. he is suggesting you may see one or even two 1/2 percentage point increases in the next six months or out a bit further from there. that is something unusual.
>> are the economists today and the reports you are reading and economists you are speaking to, are they saying investors new year there trying to catch up because people have been so keeping those deals so low when it comes to the market ?
>> there is a complacent. they kept the yields go to get the job market low again. it’s going pretty good. they kept the yields low to get the economy going again. we saw today terrific numbers below that 3.4%. there is a point where they have to catch up. they are doing it in this measured pace. we begin now and suggests in the july into august, we may see economists saying, what about .5%, 50 basis points. not august, not september, but into the end of the year into 2006.
>> what about the reaction specifically to today’s report? it did come in weak earn had been expected in terms of the consensus. people viewing it as bullish for the economy given that we had this string of quarters above 3%.
>> right. persistently good numbers above historic trend line 3.3% or so. the headline number 3.4%, ho-hum. beneath it we saw this interesting idea of booming demand coming out of the inventories. the theory now is now we have to reglennish those inventories, which looks good for this third quarter. richard bernard at morgan stanley said, look, the question is now to soft patch. it’s surprisingly strong resilient summer economy.
>> i was just talking to gina martin making that same point. the strength will come, she believes from the business side but perhaps weakness is from the consumer side.
>> then you get this worry about what the fed is worried about, inflation. you heard governor bernanke. inflation looks in good control. right now a measured rate.
>> thanks, tom. tom keene, our editor-at-large in bloomberg. police investigating the july 21 attempted bombings in london have arrested four men in the british capital as well as rome. mark crumpton joins with us the latest.
>> a police official says all four men whose security camera images were released are believed to be in custody. one was arrested earlier this week. one is in custody in italy, the other two are believed to have been captured in london. sky news reports two of the men are suspected of being among the would-be bomb horse attempted to detonate the devices on three london subway trains and a bus.
>> investigation has, of course, moved with some speed. i must emphasize it is still continuing. it is dynamic, it is wide-ranging. there will be more very visible police activity
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Listen Money and sports
>> bob good gnaw resigned this week. came after the nhl and players ended their lockout. in this week’s “money and sports,” we’re joined by mike beauto in our atlanta bureau. give us a recap of why and who is going to replace him?
>> exactly. to anybody that follows the nhl lockout this was the worst-kept secret that bob goodenow would be out of a job when this ended. bob goodenow and bettman stepped back. the two had been at each other’s throat. it became personal rather than a business-like situation. 24% rollback in salaries plus a salary cap which they―the players were against from the beginning thrafment’s what you have in place now. when players get stuck with sock they didn’t want they vote and they voted out bob good e now.
>> what are the expectations in terms waff his plans are and what we could see him do?
>> ted saskin is good night replacing him. a lot of people say he is the one that reached ate yeement. he is a different personality than bob. players like him. the owners seem to have a little more respect for him. it’s still contentious between the two sides. this seems to be a safe bet for the near future.
>> let’s turn our attention to football. al michael signed an eight-year contract to stick with “sunday night football” when it switched to espn next year. how important was it for espn to get him?
>> it was extremely important. when you think of “monday night football,” at least in the last 20 years or so you think about al michaels. his voice is synonymous with “monday night football.” abc lost “monday night football” to espn next year. it is a big step. his only other choice was to go to nbc. nbc has john madden. al michaels and john madden paired up last year. aving al michaels is a big deal for espn. it will give them the credibility they need on “monday night football.” the big deal for al is the money involved, about $6 million a year. the other offer was about $3 until. an easy decision for al michaels.
>> what other changes could we see on this front?
>> like i said. squon madden is going to nbc so al michaels needs somebody to work with. he’ll have joe theseman who is on espn before. he is a very opinionated commentary and suzy kolber on the sidelines. the most important piece is in place as far as espn is concerned and that’s al michaels.
>> let’s talk about larry brown coming to the new york knicks. did not come cheaply. how is his signing going to affect the knicks’ financially?
>> the good news is it doesn’t go on to their player payroll. it goes under their coaching payroll. about $12 million is what is reported in the new york area papers they’ll be paying him per year to get that money back, knicks will have to get at least in the second round of play-offs to recoup that salary money the way the money works out in the play-offs, knicks could make about $2 million per game. you do the math. you need to get to the second round before you get your larry brown money back.
>> in terms of the prospects, what is the buzz about this?
>> you get a big coach in place. that attracts the players. knicks haven’t made the play-offs since 2000. you get on the west coast phil jackson back with the lakers. larry brown in new york. two biggest markets , two biggest profile coaches. the players will follow. at least the knicks are hoping so.
>> have a great weekend.
>> thanks, ellen. when we come back, we’ll get you caught up with the latest world and national headlines. also the world’s “world’s biggest movers.” today a look at the turkish stock market .
