Interview: North Dakota---Hoeven, John---Governor
>> just about 20 minutes away from “money & politics.” michael mckee is here to tell us what’s on tap today.
>> we’re down in washington, lots of good news on the economy coming out of this town. today, the president, quick to claim credit and pitch his policies for keeping the economy on track. we’ll tell you what he told me in an oval office interview today. one thing mr. bush is looking for is to have his tax cuts extended. but tax negotiations failed on capitol hill last night. we’ll ask senator max baucus why. all that coming up on “money & politics” at the top of the hour. you’ll want to stay with us.
>> thanks for that. let’s get another slant on today’s employment data. north dakota has been one of the―one of only three states in the nation to grow manufacturing in the last five years when the sector has been declining nationwide. joining us now with his take on employment and outlook on the overall economy, let’s turn to governor john hoeven, joining us from bismarck. hi, welcome.
>> hi, lori, how are you?
>> i’m very well, thank you. north dakota’s unemployment rate below the national average. you have the second-highest per capita income growth rate in the nation. tell me why your state’s job market is ahead of the rest of the country?
>> we’re working very hard to build the best possible business climate in north dakota. we’ve been at that over the last five years, so we are seeing good economic growth in a number of different industry sectors. that includes energy, manufacturing, as you said, tourism, technology-based companies and a number of other areas that we’ve particularly targeted for growth.
>> i want to pick up on the manufacturing. one of the interesting trends in north dakota is that manufacturing is growing, manufacturing jobs. we lost jobs last month nationwide. so are you concerned that the overall trend will start to impact your state?
>> well, no, because over the last five years, we have consistently grown our manufacturing base. we really focus on advanced manufacturing. we have a work force that’s really second to none. tremendous productivity, we have a very good business climate, a low tax environment, favorable regulatory climate. and i may sound like i’m putting in an ad, but we have tremendous access to government officials, as well, that really work with our industry in north dakota. so we’ve had consistent growth here. we actually believe we’re picking up momentum.
>> give me an example of the so-called advanced manufacturing in your state?
>> a good example that you might be familiar with is the bobcat company, which is a division of ingersoll-rand. they make skid steers and they export them throughout the world. a dominant player in the market , it’s a very high-tech piece of equipment and high-tech manufacturing process but on a tremendous growth curve. we think it has an exciting future. and there are many others like that, as well.
>> on the tourism industry -- how fast is that growing?
>> the tourism industry is actually now our second largest industry in north dakota. we’re traditionally an agricultural state. we’re doing a lot not only in traditional agriculture with farming and ranching but also value-added agriculture, things that dove tail with the industry sector, for example, biodiesel, ethanol and the gamut of biofuels and renewable energy. in the area of tourism, though, that is, as i say, our second largest industry. we have the beautiful bad lands, high-tech town it’s prairies. we’re particularly taking advantage of what they call the experience destination, rather than just a vacation, but when you go out and there’s an adventure to it. if you’re out seeing our wild life like the buffalo, our tremendous fishing, just a whole range of outdoor opportunities. the monahay trail, one of the foremost biking trails in the country.
>> i want to get you to give us more detail on the alternative energy program. you have the go-e campaign for your own state-branded ethanol. if you could tell me how it works out dollars and cents-wise for your state?
>> we have a variety of incentives for the development of biofuels. that includes marketing incentives, production incentives, tax incentives and finance incentives. one of the marketing incentives is that we have north dakota branded ethanol. as you said, it’s called go-e, and so we market it that way. i’ve been involved in the marketing campaign myself. what we’re finding is that the demand for ethanol not only in our state, but beyond, is actually outstripping our ability to supply it so we’re building new plants, not just the 10 to 30-million-gallon-a-year plants, but now plants that are 100-million-gallon-a-year plants. same thing with biodiesel. we have two new 50-million-gallon biodiesel plants in the works, as well, one already under construction. >> governor hoeven, thank you for joining us.
>> thank you, lori.
>> governor john hoeven of north dakota. the mets are looking for a stadium sponsor while the yankees promise sponsorship to a community. money and baseball in “money & sports,” up next.
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Listen Market briefing -- Lori (slow)
Interview: PIMCO---Gross, Bill---Managing Director / Partner
>> so, are you ready to shift your position in the bond market ? people always want to know, i’m sure you’re not surprised, what did bill gross do today? did bill gross and pimco decide to lighten up on that sweet spot from two’s to five’s? what are you doing right now?
>> a good question and i applaud you for trying to pin me down. pin me down as much as you want knent for the three-count in wrestling terminology. but we continue to believe in bill poole and the fed in terms of our most certain bet whether it’s 5% or 5.25%, that’s wherey they will rest so as far as the reversal in the demand at the five’s, 10’s and 30’s, we like the front end. we continue to be at the front end. yes, our front-end forecast at 4.5% and 4%, six and 12 months ago has been voided but there’s more certainty with mr. poole than there is with any governor in the bank of japan and that’s where we go.
>> what about mortgage bonds and mortgage-backed securities. if the 10-year note breaks above the 5% yield, it seems that the benchmarks like 4.5, 5, 5.25, it will kick off selling in mortgage rarkets related to the treasury move. will this be a big deal if and when the 10-year breaks above five and continues to move higher?
>> there’s some risk there but not as much as in prior years. the fact that fannie and freddie are less dominant factors in the marketplace and therefore less likely to induce what we call convexity hedging, that as rates go up, there’s a necessity to sell mortgages in order to reduce the duration of a portfolio. fannie and freddie don’t own as many and don’t control that market like they used to so you’re not going to see as much volatility in the mortgage market as you might have but there’s going to be some, we saw some of that today.
>> do you still have the view that by the second half of the year the fed stops raising and is perhaps cutting and that is the door opening for bond yields to fall and, again, what would itic take you to really change that view and say we’re in a new era of higher long-term rates, an economy growing faster and pimco’s got to alter its sense of where we’re going?
>> there were two parts to that question. one, you said what would it take to alter our view in terms of where the fed stops. a continuing stronger economy, a housing market that refuses to to crack would be the two primary factors. the question about long bonds and 10-year rates is now, as i’ve suggested, at the pleasure of the bank of japan and so we will be observing that. i don’t necessarily say that the 10-year stops here because we might have a reversal of the conundrum of the prior few years. we’re just going to have to analyze that. but what i’m suggesting is that because the economy is going to slow, in our opinion, that inflation will remain contained, that mr. poole and the fed will stop at 5 or 5.25 and that’s where we invest and we’ll leave the five-year, 10-year and 30-year portion of the curve to the bank of japan and try to analyze it before the rest of the market does.
>> that’s what makes this so much fun, trying to analyze this and talk to people like you. thank you very much for taking your time, i really do appreciate it. my thanks again to william poole, president of the st. louis federal reserve bank for taking his time, as well. lori rothman, i’ll send it back to you in new york.
>> thank you, kathleen. let’s bring you up to speed on this last trading session of the week. broad declines today. the broadest selloff―let’s have a look. energy, pharmaceuticals, technology among the weaker industries today. treasuries also had a rough day. traders say, given the drop in the unemployment rate last month, wage growth may start to accelerate, raising concerns about inflation. 10-year bonds way down today, off 20/32, yield up to 4.98%. you just heard bill gross talking about that, the yield at a four-year high. the five-year today down also with the yield at 4.91% and the two-year was the yield at 4.90%. as for currencies, big day for the dollar with the dollar gaining strength against the yen, euro and the poundlet. oil took a breather, though, falling from a two-month high following comments from opec. opec’s words are important since the cartel accounts for 40% of total output. at a speech in paris, opec’s secretary general said the markets are well supplied and there is enough spare capacity. separately, nigeria’s oil minister said production could return to normal in may. nigerian rebels disrupted production for the past month. he said opec probably would not cut production this year. crude oil futures for may delivery fell 55 cents, $67.39 a barrel. declines across the board for gas, heating oil and natural gas. did you know north dakota is just one of only three states to increase its manufacturing base for the past five years? and the housing market is heating up. some are calling it a boom in north dakota. the governor, john hoven, tells us what is driving that state’s economy, coming up next.
