Transcripts For BLOOMBERG Market Makers 20240622

Stephanie greece has responded to that ultimatum in europe by asking for a new bailout. Today, the greeks formally asked for a new bailout. In return, greece said it would impose tax reform as early as next week. This morning, the greek Prime Minister promised to deliver. In the next two to three days, we will put forward concrete proposals in detail and i am confident we will be able to meet the obligations of the crucial times. Stephanie the European Commissioner meanwhile says there is a scenario if greece has to leave euro. We will hear from the Economic Affairs commissioner in europe in the next hour. Erik in china, the government is trying to stop a meltdown. Nothing is working and on paper, investors have lost trillions of dollars. Down with 30 since june 12. Here is the issue. Much of that money is wrote money. Borrowed money. At one point, walk locked out of the market because the trigger had been tripped. Jpmorgan is preparing to settle federal investigation into credit card and Debt Collection abuses. The bank will resolve these claims by paying at least 25 million. Also providing inaccurate information. Stephanie we will be seeing a lot more of this. Thousands gathered in los angeles to salute the u. S. Womens soccer team for the world cup victory. It is the first to honor the team that does not have the word new york in its name. Historical moment here in our fair city. Those are your top headlines for the hour. Erik top five things you need to know right now. We should begin with china. Stephanie that is what our number one is. A senior markets correspondent has a further look. Julie, talk to us. Julie deep selloff across asia triggered by china wiping out trillions of dollars in market value. The shanghai composite index is down almost 6 32 since its peak in june. The hang seng was down almost 6 , the most since the financial crisis. A lot of people are locked out of the market because market regulators have suspended trading in many different stocks. One third of the stocks in the shanghai composite and then a bunch of others have had limit suspensions. They automatically get suspended. There is an incredible call from Goldman Sachs. Based in hong kong who covers the Chinese Market says it is not a bubble. Authorities do have enough tools in their arsenal to stem the bleeding if you will. Goldman is speaking with the call that there will be a rally in the levels, 27 from tuesdays close. There are still people who are buyers here as we see a freefall. Erik for every seller, there is always a buyer. Stephanie not necessarily in that if the problem. That is why the knife keeps falling. Erik when we get a price, that means there is a buyer pair lets talk about greece. I just returned to from greece. The Prime Minister has upped his request for a program for the stability mechanism. Hans nichols is in brussels where the action is now. He has the latest for us. What can you tell us . Things are changing minute by minute. Where are we now . Hans we heard from the spokesperson saying trust needs to be restored in talks. It gives you a sense how far things have deteriorated and how far things will have to go if this will be approved. Another deadline is thursday night. How will they make numbers add up . Pension reform is not quite accurate. They said pension related measures. It could still be the big sticking point. Value added tax was a huge issue before. Crucially, we have a muted offer to continue to talk about debt restructuring. That is one point where he did not make a clear demand that he needed to have a debt restructure if he would get another threeyear package. A little bit of softer news from the greece side. It gives you a sense of how deep the whole is. Nothing has been done to restore trust. Earlier, he was speaking at the parliament and seemed to blame some of the countries by saying had a just in the Eu Commission the set of buildings i am in now, we would have had a deal, not exactly a way to ingratiate yourself. Erik a dose of realism from the german finance ministry. I cannot say that is enough fear we will get a dose of optimism from the European Commissioner of Economic Affairs. The finance minister will be a 9 00 its morning. Stephanie big moves in banking over barclays. The chairman ousting the coo Antony Jenkins from the head of the bank. Jon ferro just spoke with chairman macfarlane and joins us now from london. What did he have to say about the decision . Every time we here from Antony Jenkins, he does not seem to want to talk about the business is. It is more about changing to be a culture led organization. What really matters is shareholder returns and the bottom line for a lot of people he was not doing it quick enough. When you look at the comments from the board and the chairman specifically, the bottom line is he was fired. This is specifically what the chairman said to me earlier. It essentially was a recovery position. We had the management crisis about three years ago. He was given a terrible role and he has really come through that quite well. Companies are in a much better position to stabilize. Going forward, we have a very different agenda. If you look at the price it is the same as it was six years ago. Something is to move on that. When we reinforce the strategy at the meeting, and considering how we might bring forward the ecig edition of that, realized we need a different sort of person to do it. Another departure in europe and another one on the surface of it that is a bit of an identity crisis. The big Investment Banking ceo at barclays went and they brought in the retail guy. He gets the food as well. A lot of people are asking what are you looking for and who is that guy . Just like credit squeeze suffering from a bit of an identity crisis. Erik you are putting it into perspective. Heads are rolling. This is the third major change in months. Stephanie it is all about shareholder return. I love when jon ferro, he said forget the fluff. That has been made people within barclays and outside who follow the industry bank. That is not what matters third it is returning to shareholders, it is simply not are you doing good. That is not the egos of the business. Erik returns. Number four, minutes to come out today. The imf has reiterated its view that the fed should hold off on raising Interest Rates until 2016. It came as the annual assessment of the u. S. Economy. Stephanie how about number five for you, more jobs could be cut at microsoft as soon as today. The Company Plans to lay off additional workers. The cuts would be on top of 18,000 workers the Software Maker said would be dropping about a year ago. People are waiting to see the next chapter on what he will do it if the game plan is cut, that is not what we like to see. Erik it depends on why it is important. Those different parts of the company, the Cloud Computing strategy, may not be as, i dont know. Stephanie i know how to get the answer. Invite him to come onto Bloomberg Television today. Erik that is a good idea to it we will be back after a short break talking about that scary stock market plunge. Morgan stanleys had wrote china is experiencing symptoms. Stephanie coming up later this afternoon the president and ceo of the New York Times will join Olivia Sterns live from sun valley, idaho. Mark thompson. Stephanie erik some top stories. Diplomats in vienna say theyre closer than ever to a deal on nuclear programs. They are still at odds over several key points. They want the arms embargo lifted and there is disagreement over what would happen if iran breaks the deal. Elon musk is so china figure out why his spacex rocket disintegrated shortly after last month. The rocket broke up while carrying supplies from the International Space station. He spoke to bloomberg in idaho. I think it is something we can recover from. Make sure the future, that we identify any issues and adjust them. We got a lot of support from nasa and commercial companies. Erik that was spacexs seventh miss it seventh mission. Hubers china to raise as much as 1 billion of funding for its china business. China has been discussing evaluation of its budget, 8 billion. It is the first time the service had tried to get investors for an operation in a single country. Those are some of your top headlines. Stephanie joining us now on the phone head of equity and macro and Morgan Stanley Investment Management and author of you had an oped in the wall street journal this morning in which you write that there are four basic signs of a bubble. Prices disconnected from underlying economic fundamentals, high levels of debt the chinese stock market is at the extreme end on all four metrics which is rare. The bubble is upon us. What will happen next . I think the bubble is unraveling ferociously. You look back at the u. S. In 2007, the valuation of the equity market, even in the 2000 tech bubble in the u. S. , the economic fundamentals in terms of how strong Economic Growth was, in the china case, the growth has been very weak. I think that really is the problem. The market rally is created out of nothing. It is unraveling at such a for oshas space now. No fundamental bases at all for this. Erik i am no Technical Analyst is it possible we see a freefall to 2050 before we know what the next move is . The market is heavily distorted as you know. The market would already be at such levels. That is something not reflected in these levels. Erik i want you to explain yourself a little further. We are not actually seeing the real price action in shanghai stocks because so many stocks are not trading . In other words, if everything were trading, we might see the index closer to 3000 . Is that your point . Yes. We do not have a government intervening to try and prop up some of the stocks. I think the realistic level for the market is much lower than what the current headlines would suggest. Erik what does it tell us that Central Planning, so successful in many other respects as far as the chinese economy is concerned him a seems to have absolutely no power over the stock market . I think the merits of Central Planning have to be overstated here. If you really go back in china, you really have to go back to 2008. The economy was beginning to slow down under the weight of the global crisis. The Chinese Government in acts in its ambition to meet a growth target, decided to leave a lot of debt and the quiddity into the system. As i write, china has taken on 20 billion dollars of new debt since the Global Financial crisis broke out in 2008, even as the rest of the world and a parts of the developed world are deleveraging in that space. You know have the china debt level probably at a higher level than a richer countries such as the United States at about 300 of gdp. That is really the problem that yes when they were freeing up the economy since 2008, they had been growing on the back of more and more debt. The stock market is a symptom of that. The highest as a share of the market for any market history. Stephanie we will leave it there. I am scared and worried and upset. Ruchir sharma. Erik i just want to reiterate the point he made at the beginning of the conversation. We are not actually seeing real prices in chinese stocks because so many of the stocks are trading. If they were, the selloff overnight, 6 would have been much steeper. Stephanie think about the major people on the markets, three weeks ago when he was so bullish on china, many investors had been. You hear from them saying we are not approaching a bubble, the disaster is beginning. Erik stephanie a great investor. I am sure he is a ok. We will be back with more. Stephanie futures read across the board. I want to change the subject because i do not like bad news and i have good news and five me. Then he is a doctor who taught himself how to invest in his spare time it turns out he is good at it. The 2 billion fund he manages was the topperforming diversified u. S. Stock fund over the last five years. Lets find out how he is doing it. Walk us through. You went to medical school, and then . Vinny then made the transition to practicing medicine for a while. I did a residency and fellowship at the hospital and went from that to research fellowship. He does main reasons. The first main reason is we fundamentally have a message that we think needs to be heard. We are a socially responsible fund and as investing its ownership, we think that implies the ownership could confer ethical responsibility for what you own. There is a set of criteria that investors tend to care about and terms of avoiding pornography, tobacco, vices. But there is Something Else people do not appreciate in that world which is that there is also a positive dimension. One of the things we are convinced of is that with faithbased and sri investing if you find Companies Creating value for the world in positive ways, it is actually a way to generate over the long haul. Erik why have you found success with this socially responsible approach when a lot of the social responsible industries do not show a performance relative to the benchmark . Finny most of those are concerned with excluding that actors and companies. Exactly. Behaving in ways that we try to formalize in a lot of different ways. Stephanie like 10 commandments . Erik what are some of your principles, your investing guidelines . Finny one thing we have found and it is codified in the ultimate book countries trying to put their customers above making a profit ironically make more profit in the long haul. The trick is to try to identify companies that are actually doing it. So you are right but if you companies are actually doing it. Most come to his taken over by number crunchers focusing on the bottom line as opposed to those truly trying to add values to their customers. A lot of companies we like. One thing we have found is looking for companies that have particularly high mechanisms when it comes to employees, you just had elon musk in an earlier segment. We have been longtime investors in tesla and it worked out really well. One of the things about tesla as an example they have raving fan clubs. We had a quote from an employee who said he would work at tesla even if you were paid there. Stephanie where do you draw the line . I have gone to tesla events because and they are filled with hot women in short dresses. One would think if you are avoiding vices, it does not feel very christian. Finny a good question. One thing we are trying to identify is what is the core business . It is hard find a business we would agree with entirely. Does the fundamental Business Activity seem like something we really like . Stephanie investors as owners, does that mean you have our turnover was 16 and we believe in longterm ownership. Erik is there a conflict between your approach and clearly or beliefs and your belief system, and your expertise . In biotechnology . Some people might point to a challenge reconciling one with the other because what is going on in gene therapy and what some people would call playing god. Finny biotech is one of the most amazing areas from a social perspective. There are roughly 20,000 human diseases out there. We have therapies for a very small number of those. It ought to be the area were the most excited about. There are still a lot of people dying from a lot of pretty terrible diseases. It is a space in which one can innovate and create interesting therapies. Erik what about the cost . When curing hepatitis c costs 20,000 a year the approach is a vast improvement over anything done before, but the cost and a profit that a Company Wants to book it is hard for people to get their heads around. Finny there are three ways to think about cost. With cost, there is one dimension of cost that is, are you lowering existing cost of whatever it is you have. That would be an example. They actually made a pretty compelling argument that their chart their therapy was cheaper than existing therapies. The second ways you can look at Something Like quality and try to benchmark, am i adding value relative to the quality benchmark that we have agreed upon. The third is, there is an implied social contract that exists right now between society, particularly the American People and biotech companies. If you deliver meaningful advances in health care, society will pay for it. People do not want liver transplants. They do not want to die a horrible cancer death. As that contract continues to exist, it does not exist outside of the world usually. One thing that is a byproduct of that would be, it is very risky and very expensive. If Companies Continue to add on and deliver, the American People have spoken and said, we will not pay for that. If you trying really, some of them are unreasonable but they are often unjustified given the risk taken. Stephanie i producer will care me but i have to ask. Has there been an investment you looked at that would have been a home run for your investors but you stopped and did not fit within the faithbased, socially responsible parameters you have set for yourself . Finny yes. There have been a lot of companies in spaces that are tied in embryonic stem cells abortion things like that, that we have not been able to invest in. Stephanie abortion is an issue for you. Finny right. As a broad representation of the christian faith. The claim is not that every company that does not meet this criteria will fare fail. You should feel good about the companies you are investing in. Erik we do have two run. We need to do this again. A quick question. Does Climate Change belong . Finny i think it does. Stephanie i am glad he admits it exists. Are you listening, florida . Thank you very much. The cofounder and cio. Erik we need to take you to vonnie quinn in the newsroom with an update on what is happening with Chinese Markets. Regulators there have just made yet another move. Tell us what is happening. Vonnie that is right. Chinas security regulator banned major shareholders Corporate Executives and directors for set from selling any other stakes for six months. Just after the 3. 5 trillion out in stocks. The China Regulatory Commission says controlling Investors Holding more than a 5 stake how much a selling if any thanks to these people a lot of the trading we have seen has been thanks to run off in march and that. Obviously, the regulator is probably quite happy to do and then down some speculation. At this point, taking the measure from actually controlling any of those stakes. Erik huge news out of china, the governments efforts to put a floor under the market. Stephanie also, we cannot forget about greece. Stay tuned for an exclusive interview with the european Economic Affairs commissioner pierre moscovici. Only on Bloomberg Television. Erik the Chinese Government effort to curb in the stock market had little effect thus far. The shanghai composite index continued its steep decline. Bloomberg intelligences chief asia economist tom, from beijing. We will get back to the pace of selling. It is maybe not shocking because we are talking about china. Maybe major shareholders, Corporate Executives, and Company Directors from selling anything for six months seems, i can hardly get my head around it. Tom it is a remarkable move and it is the latest in a series of remarkable moves. Even before this announcement 1300 shares on the mainland markets can sell their stake in the big investor or small investor. I think it is clear the Chinese Government has the resources and determination to draw a line under the falling market. What kind of market will they have left at the end of that . Erik precisely. If china is willing to limit the economic freedom, why would they ever come back . Stephanie and if investors are not participating in a free market, why have any faith in the system . Tom these are consequential questions. 2013, the big commitment from chinass new leaders was that they would let the market play a decisive role in resource allocation. The latest extraordinary intervention in the market really cuts against the entire reform agenda. Erik did chinese regulators lose sight in the market or are they so inexperienced in the matters that they did not realize what the consequences might be . Tom i do not think china is unique in this respect around the world. Nobody criticized the regulators when the markets were on their way up. When they were on their way down, we were all looking for someone to blame. So yes, they took their eye off the ball and let margin finance rise too fast and too quickly and they are now paying the price. Stephanie we could say that about any industry. Tom that is a good question, but i think what china is learning with the equity markets right now is that that cycle has exhilarated. Things can go up very fast and come down very fast. They needed a reason why they can move so drastically in the market. We have seen such a sharp fall in shanghai and set jen jen that that could pass into the real economy, hitting things like consumer confidence, Equity Fund Raising and the concern than would be what we saw taking hold in the chinese economy in the Second Quarter erik thank you for taking time out of your late evening in beijing. More as the selloff continues. Stephanie there are headlines out on greece. Vonnie quinn has more. Vonnie capital controls will be extended until friday according to a spokesman, following something we did not expect. Getting details of the new proposal. That will happen tomorrow. Institutions will receive more details of a proposal being worked on. You can see the spread widening out today little bit. Not too much on the latest headline. Extending it at least through friday. Stephanie i was going to move on, but erik checked me. Erik it just shows you first of all that the sippers government has broken its promise. They promise on several occasions that the banks would reopen on tuesday. It is important. If anything, i am just to investors. Stephanie but theyre in a crisis. You might promise something and then when youre in a crisis situation, things change. Do you think he was being dishonest . Erik i think they were being disingenuous. Stephanie four maybe just really optimistic. Disingenuous politicians . What are you talking about . We will cover that during the commercial break be when we come back, we will talk about an overnight sensation. Victory at the world cup has catapulted womens soccer stars carli lloyd, to fame and hopefully fortune. But she has got to play it right. Next we talked strategic game plan. Stephanie it is good to be carli lloyd. The superstar had three goals in 16 minutes her teammates after making history, she is now a sports icon. The ceo of United Entertainment group often connects superstars and sponsors. He tells us it is critical carli lloyd makes the right decisions. He joins us from skype. Here is this moment, a moment for women in womens sports we really do not see or what does carli lloyd need to do . A huge opportunity that she needs to pounce on right away. I would say over the next 23 months, some keefe sponsors key sponsors potentially as a pop culture icon to all of society as well. Erik you are right that there is a moment in time for a female soccer star to capitalize on this kind but what is the incentive if it will only last for a few months, why lock someone in for a few years . That is part of the negotiation. The brand to keep her top of mind awareness to consumers as well. You have that for the next 360 five days, it will be a true 11 partnership. The brand has a responsibility in the movement, after going in the next window of opportunity. Stephanie i want to share points she made earlier this week and get an understanding. Allowing me to do what i do come im thankful for that. Stephanie i only care about swimming at a specific point of time who wants to buy this carli lloyd magic for how long . As i think theyre obvious i think there are obvious brands that talk about female empowerment. I think it should be notice also that this is a tremendous a consummate for title ix. This is a way to celebrate title ix and its glory alone. Stephanie does title ix sell . Were talking about carli lloyd making money. It provides a reason and a credibility for a branch to continue the conversation. There is a moment of time we are celebrating the championship but title ix can be the connective tissue that brings her year to year next 34 years. Hair care brands, credit card companies, visa automotive, any brands that really talk to millenials. It can be about sports in general, not just females. Stephanie thank you. An extra nice story and an amazing win. It is so great we are talking about carli and not sepp blatter when it comes to soccer. Erik coming up, oil trading at a three month low. We will have more on what Goldman Sachs calls the new oil order. Vonnie it is the second such setback for united in weeks. The move was triggered according to the federal aviation administration, and we will keep you uptodate on united flights as we get more news. Erik thank you very much with the latest grounding of main carrier flights. Stephanie nationwide. Erik futures, they suggest stocks will open quite a bit lower. This follows a huge selloff in china that sent the shanghai composite 33month low. Julie hyman has more. The analyst action you need to know, what is number one . Talk about china. Julie you mentioned at the top of the show, i wanted to delve a little more deeply into Goldman Sachs men Goldman Sachs strategist. The csi 300 specifically in the next 12 months. This follows a big selloff as we have seen in all of the major averages in china. The shenzhen csi 300, to be more specific. Year to date, it is still higher. This selloff is a 32 selloff, a 30 2 plunge since june 8. Pete a little ahead of the shanghai composite. Still calling for an increase. He said in an in in an interview he is not in a bubble per the Chinese Government has a lot of tools to support in the market. There has been all this talk about marginal ending. It has supported the markets in china. Take a look at the bloomberg terminal. You can see the climb that has basically been in line with the increase in the markets there. A lot of the buying in chinese stock has been on borrowed money. That now has written beginning to unwind. We see the decrease monday. Margins fell by about 7 . However, it is not a big enough problem to cause him to change his target. He does not think the unwinding would be detrimental to the Chinese Market. Erik thank you. Stephanie, faster than a speeding bullet, Central Planning, the super selloff in chinese stocks. Still ahead, an exclusive interview with economics Affairs Commissioner appeared he said the greek exit in the euro would be a terrible failure. Live, this is market markers makers. Erik we will start with this. An update on united flights in america. United has grounded all u. S. Flights. According to the federal aviation administration, which has just released that, automation issues is the official claim the faa is making for the grounding. United suffered a similar issue in june 2. We know that subcarriers are able to fly, this is the main line only to we will keep you uptodate. For right now, the fights are all grounded. Erik the greek Prime Minister Alexis Tsipras told the parliament greasewood submit proposals by thursday. The debate is not only about greece, but the future of the euro. We have an International Exclusive for you on Bloomberg Television. The Economic Affairs commissioner is with us from paris. We thank you very much for spending some time with us. We gather from the talks taking place in brussels that your european colleagues have set a deadline for sunday with a deal with greece. What happens if there is no deal by sunday . I am working on one scenario, to avoid the grexit. For the history, for the sake of the euro, for Important International currency, we need the eurozone. That is a mandate given by the head of state. The eurogroup will fight hard, as we always did, to secure the integrity of the eurozone. Agreement is now possible difficult but possible, and that we night we need to make it now. We have got to do our best efforts. Stephanie just because it is a piece of history and you want to maintain integrity, what if greece entered without integrity and not being honest about what their financials were . What we expect from the greek government is to be very concrete, to bp to be resized. We need a set of reforms that are credible and owner to have a stronger Greek Economy in order to have a competitive economy where you can reinforce its constructive miss. That is what we want and we wanted by tomorrow if we wanted to conclude by sunday, the deadline being set by heads of state and government. This morning, the greek government sent a letter and in the letter, he requested a new program from the European Team for three years and he promised to make reforms from next week in fields such as taxation. Clear and concrete commitments now. It is not if not, the deal would be more than difficult. Erik but you believe the deal is still possible. That is what everybody wants, everybody wants a deal. Everybody wants the alternative. The president of the European Commission was quoted as saying that europe has a grexit scenario prepared in detail. Could you please enlighten us as to what that scenario is and what it involves . Certainly, i will not. We all mobilized and all focused on avoiding this scenario, the scenario of the worst. That is clearly the commission the commissioner in negotiation with greece it is clear the commissioner is a defender of the european interest and must be ready for any kind. We are ready and we know what we would have to do but again, what i hope in what i believe, because i get is actually necessary for the eurozone and the european and World Economy is that well find a deal. All of our energy is mobilized on meeting this deal. Erik with all due respect i think people do need to know or have a little idea as to what you would do in that scenario in that eventuality, even if you still consider it a lower probability than reaching a deal. I think people need to know two thanks. The first is that everything is ready in any eventuality in the second thing is that the eurozone is secure, that it is protected. We have got firewalls such as the banking union. The economies are much stronger and the Financial Stability is reached everywhere. Everybody must be secure for the european economy. The markets have nothing to fear. But again, what i hope in what i am working for and what we will achieve, im sure if there is a well by sunday, we will have a deal and we have a strong eurozone with greece inside and we will be ready to do that for the success of the eurozone and the success of europe and the good of our economy. Also, the sake of the greek people. I never forget them. I know there is a humanitarian crisis we need to address. Stephanie two people in germany and other European Countries where you said there are stronger economies, do they want to be the backstop for peripheral countries that are really a mess . Again, i would not say that that weight. What we rolled what we want from greece now, is to make the reforms that have not been dealt with in the past months or even the past years. We need to have a credible and Strong Economy in greece. When i saw to be the commissioner it was last november. The forecast for the greek group were among the best in europe. No more in recession. In this economy is capable of reacting and being strong. I still forecast a possible 3 next year. If there are credible reforms. That is what mr. Tsipras and his government are to deliver. Everything is about delivery. We expect tomorrow a critical and copper has a set of reforms which are capable of being greece in a stronger position. That is what mr. Tsipras promised this morning in the european parliament. Erik we have to talk about scenarios because people cannot bet only on what you hope to achieve. They have to consider all possible scenarios. If there is no bailout in greece ends up in solvent with a failed banking system, would europe consider and ultimately provide these two two words that have become the buzzwords . Humanitarian aid . Whatever happens, but again no one wants to talk about scenarios pretty can torture me as much as i want. Our best referred option by far the only thing on which we are dedicating some political energy, myself, now out of this eurogroup, in three weeks, we are ready to meet. We clearly believe the place of greece in the eurozone by voting no last sunday, the grace to not turn their back to the eurozone and we must not turn our backs to greece. It does not mean we are ready to do in agreement of bad quality p or we need strong commitments while waiting for them now. Stephanie has Alexis Tsipras been disingenuous to the greek people . We were discussing earlier that now the banks will be close to longer than he initially promised. He is young and inexperienced. Talk to us about what he has really done and the danger it potentially caused to greece. Quasiim not commenting. The primacy greece. He runs his country. He represents Political Forces not the ones to which i sympathize but which i respect to the has a mandate from the greek people. He obtained a vote sunday. The only thing i expect from him now, i do not want to comment on his past or future behavior. Delivery, delivery, delivery. It is clear there has been a lack of trust and a lot of time wasted. We need to rebuild. I believe that yesterday, for the first time the meetings in brussels were constructed, positive, and that makes a real change. We must now move to a change of tune and a change of positions. I truly believe this is possible. It is more necessary than ever. Erik do you agree with the imf and mr. Tsipras and his government that debt restructuring or reprofiling, however you choose to characterize it, needs to be part of any agreement reached between greece and its creditors . We will have to address that question in due time. Debt sustainability assessment. And the program, the main priority, is reforms. Erik just to be clear [indiscernible] i am not talking about any kind of reform. We are working for that now. I said tomorrow or the day after. By sunday, and everybody was clear about that the president of the commission, the president of the eurogroup and the finance ministers or commissioners, everybody expects the deal to be done by sunday. Stephanie unless sunday comes and the group collectively says next sunday. Why should we have faith this particular day will happen . Because you know, it was yesterday, the first time there was a real concrete, deep clinical talk inside the euro summit, the meeting between the leaders, Prime Ministers, and they decided they would have to deal with that. If there is a mandate by the Program Companies to be a vote by a national parliament. And that merkel wants it to happen by this time. It is clear for everybody that is now. Time is running short. Very short. It is possible because we did not lose all, because we have negotiated for five months and we know what needs to be done,s tsipras also needed knows what needs to be done. Erik commissioner, i have to say, i admire your optimism in the singlemindedness with which you and your collies are pursuing a deal with greece. I have to ask you this question. You are probably a of this. Mr. Tsipras earlier today said if the talks had been with the eu only, there would already have been a deal. What is the point event agonizingly European Central bank and the imf at a time like this . Pierre i am not thinking that way. I am not an optimist. I know the deal is difficult. Must also deliver reforms and then results. My political will i want serious moves from the greek government. The second thing is the fact is mr. Tsipras has to negotiate with Member States and the eu, but also with the imf and the ecb, with creditors. That is a constraint. Unanimous agreement with everybody. Erik one more thing before run. You mentioned earlier humanitarian aid would be provided no matter what happens. What more would it take . Pierre we do not know that yet here on the one hand, we would have a program and also financing. On the other hand, it would be something quite different. What i meant is that everybody must be aware that this country in the last five years has lost 25 of gdp, more than 25 of the creeks more than 50 of the greeks under 25 years old are underemployed. There is enough inequality increased that we cannot accept that. We need to help the greek government to show those questions. Whatever happens, the country is a member of the european union. Stephanie who is to blame for that . Pierre the responsibilities are certainly shared. The origin of the problem relies in the fact that this economy was not serious or Strong Enough. That is why reforms are so necessary. Even more necessary now. They are absolutely imperative. Erik we thank you so much. Pierre moscovici the Economic Affairs commissioner. Stephanie that was fantastic. If their economy was not serious and Strong Enough to begin with should they have been in the euro from the getgo . We have got to take you out to the newsroom. Vonnie microsoft is down about. 3 . 7800 positions. This was telegraphed earlier today by the New York Times. To do something, many people are looking microsoft. Microsoft says it is looking at a charge on top of the restructuring charge. Getting all this out ahead of earnings july 21 for the fiscal first quarter. Stephanie thank you. We had to take a break. How much lower can crude prices go . Stephanie goldman says it will take a long slump in commodities to break a cycle of excess production. Commodities declined to almost 7 this year. Concern about economic stability in china and europe. Goldman sachs head of Commodity Research joins us now. No fear . It depends on what direction fear creates. We remain bearish. In terms of oil, we see 45 barrels of oil in this october. The downside on the base metals as well as the bulk complex. It is being driven by what we see, three major macro themes. The deflationary impact of Commodity Prices. The second one is diversions. Stronger u. S. Growth against the rest of the europe it creates a stronger dollar, week and reinforces deflationary pressure. The third thing, what we like to call deleveraging. That is going on in china. They have to rotate the economy to be more consumption driven all pointing to lower Commodity Prices. Erik if there is one commodity to watch that will carry the day at least in your call, what is it . We view copper as being that. It is a bellwether of what is going on with the u. S. Dollar, and a bellwether of inflationary impulse given what is going on in oil. Stephanie is there a catalyst that would cause you to change your view . He would be u. S. Growth beginning to falter. It would force the Federal Reserve to start creating more stimulus over the last decade. A Monetary Policy helps yield commodities to the upside. The big driver here is the fact the u. S. Started to join the corner turn the corner. Erik it is still stimulative. Jeff absolutely. Erik we just stop quantitative easing or the japanese are quantitative easing, the europeans are. The chinese are pumping all manner of stimulus into the economy. Is that not enough to counter the slight reduction of stimulus . Jeff think about it, european stimulus helps commodities in europe. The japanese stimulus helps. We are talking about commodities globally that are nominated in the u. S. Dollar. We think about the cost of producing copper. What do lower copper prices do . They drive the cost of producing oil down. Erik we will take a commercial break. The opening bell is coming up. So much more in this conversation. Stay with us. We live in a pick and choose world. Choose choose choose. But at bedtime . Why settle for this . Enter sleep number dont miss the final days of the lowest prices of the season. Sleepiq technology tells you how well you slept and what adjustments you can make. You like the bed soft. Hes more hardcore. So your sleep goes from good to great to wow only at a sleep number store. Dont miss the final days of the lowest prices of the season. Save 300 to 700 on selected mattress sets. Ends sunday know better sleep with sleep number. Erik we have been talking to jeff curry, head of Commodity Research at Goldman Sachs. Thanks for sticking around. What is happening in Commodity Prices and what is happening in the chinese stock market. Iron or. Lets bring up what i have on my screen. This is a bloomberg tried. You can see that over the past few days, the selling has been accelerating. 7 decline overnight and if i percent decline before that. A 3 decline before that. At the same time, the shanghai comp is down 6 overnight. What kind of correlation can we draw . Jeff theyre a two components. What is happening in a clear markets and the second, what is happening in a broader economy, started to happen in this rotation away from investment in back to consumption which started well before the rise of equity markets. I like to emphasize this has a bigger impact on confidence that it had on the fundamentals pair what were witnessing is for the first time policy makers in china Stephanie Stephanie stephanie what is more important, confidence or fundamentals . Jeff fundamentals. The stat that came out is significant. If you look at gdp growth in china come it used to be 50 . Firstquarter numbers show a drop. Investment in oriented activities is dropping, which is pushing down iron ore. Erik if chinese regulators and central planners are mortals, what does that mean for the longterm fundamentals that you need to support Commodity Prices . Jeff searching to see what happened in china is more like what happened in the western world. When you think about one of the equity markets, they are more dynamic than the typical types of levers china has used. I think when we think about the longerterm outlook for commodities, it boils back down to the rotation away from investment and back toward consumption. Future growth and consumption. Erik how long does it ultimately take for Commodity Prices to reverse trends . Jeff i would argue we are in a slump that could be five to 10 years. We look at history going back 100 years. Commodities go through super cycle data. Basically, lets think about a brazilian offshore platform. You spend 30 billion, 10 years building the platform. It is up and operating for the next 15 to 20 years. Recall that an explication phase of the super cycle. We went through the investment phase, and now we are transitioning to the exploitation phase. What are they usually characterized . Low and declining Commodity Prices. Stephanie lets say i believe everything you said, amen, love it, want to follow it. What do i do . Jeff we would argue selling Commodity Prices, typically oil. Still selling above 60 per barrel. These Higher Oil Prices are doing, we saw in drilling last week in the United States, which underscores these markets have too much capital. Too much cash erik i want to see if we can pull up the chart i have on my bloomberg terminal. The value of the index, it goes way back to 1994. Stephanie there you go, on the screen. Erik backing 2001, it was 150. Are we headed back there . Jeff they are reinforcing to the downside. Where we find equilibrium is unknown but the best guess for brent longterm is 55 a barrel, 55 for wti. Why am i saying that . The reason i am saying that is you look at these macro variables, they are shifting. Saudi arabia put out a balanced budget based on 70 bread. They import everything from europe. The currency is pegged to the dollar. We think there is another 15 to 20 discount. The brazilian riel is weakening. You have these at the same time. Until you establish equilibrium in one, it is difficult to establish equilibrium in the other. Stephanie i want to make sure viewers caught this how did he come up with this just like this. You can do it too. Jeff kerry. Thank you. It is a busy day for traders. Investors weighing chinese stocks and greeces crisis has markets twirling. A cio joined us yesterday and we asked him to come back to respond to the market. He joins us from via phone. Yesterday you said the china situation will only go in the same direction, spiraling downward and it will end in full qe. Is that where we are headed with seven exclamation points . Shahraab you are seeing cap elation. I would expect some sort of balance before another down trade. I do not think we see q. V. For another year or so, but it is time to cover shorts and take a technical long position. Stephanie we spoke to you yesterday around 9 00 a. M. It seems many investors got whipsawed. What has it then like where are people positioned today . Shahraab people are still getting whipsawed appeared a look at greece, one minute it is positive, one minute negative. On china, that has come out of left field. What is interesting is when i watch my email traffic, it has gone from 100 greece to 80 china. That tells me and might be time to take a short holiday from the trade. Erik whered you go to hide treasuries, cash . Shahraab i think you by chinese stocks. Erik that is where you go to hide . Shahraab i think that is the trade that has been fleshed out. That is the liquid version of the chinese trade. It is probably what a lot of people had on. Stephanie earlier, when we spoke to pr muscovy about the situation in greece and he said there is nothing to fear what do you think about a european official making a statement nothing to fear . Erik markets have nothing to fear. Shahraab he does not run a hedge fund. He draws a government salary. For him to say that is probably easy. Erik easy, perhaps, but he is challenged just channeling some channeling some of mario draghi. Stephanie does he have the power he used to . Shahraab i think the power is undisputed. I do not think anyone is questioning the ability of the ecb to backstop the market. Over the last couple of weeks with nasty headlines, draw lines drawdowns have not been significant. At the same time, i think the point is not at the money. It is lower from where we are. So, if you are trading, you have to decide what is the Market Pricing right now and what is implied. So, just the fact in his view a 5 drawdown is not a big deal. For a lot of investors and traders, it is probably a big deal. Stephanie on monday, saying that the response from the markets were pretty tempered as it relates to greece but greece, tack on everything that is happening in china by the end of the month will macro funds be carted out, maybe even shut down . Shahraab i was at an event last night with a lot of macro investors. People seemed pretty happy. There were a lot of smiles around the room. I got the sense that whatever macro trays are happening, they are not the ones getting crushed. I get the sense that the losses have been taken much more kind of, on the retail side, or the longonly side. So, i think from, kind of, a marketneutral perspective, those trades have probably performed ok. Erik which trades are we talking about, do you think what are some of the more popular trades that have been working . Shahraab i think if you have been in any kind of, basic, relative value trade, betting on the corporate actions or some of the earningsrelated trades i mean, those have been still, you know, pretty rational. So we have not really seen the kind of irrational moves we used to see in 2008 or 2011, or maybe in august of 2007. So that suggests to me that there is not that level of pain out there. I do not get the sense there is one particular set of investors out there that are really hurting from these moves. I think it is more longonly by his that is taking the pain. Stephanie like having you on yesterday. Love having you want today. Shahraab ahmad, the cio of decca fund. Good luck. Put your hand helmet on. Erik the nasdaq officially open for business about seven minutes ago and it is a down day for u. S. Docs. It is not a steep selloff, the likes of which we saw in china overnight. Well have more on that in a moment. But the benchmark index the s p 500 down about two thirds of 1 . Stephanie guess what we need the top three things to be looking at today. Executive editor Tracy Alloway is with us. Erik lets not forget about exotic enough aksana. Can we drill down stephanie can we drill down and say there are three things . Tracy i would say there are 10 but lets stay on three. We saw a dramatic move by the chinese Securities Regulator saying they would than major shareholders and Corporate Executives from selling shares for six months, which is kind of mind blowing but i want to talk about contagion for a second. You are mentioning commodities. Take a look at the screen. Why am i showing you a picture of egg prices . Because egg prices are down along with commodities like sugar because people in china are selling what they can at this moment in time. We know the Chinese Market is built on margin leverage. They are getting margin calls. They have to sell their portfolios. Something like 1500 Margin Companies are suspended on the exchange. They cannot sell those, so they have to sell eg and other things. Gs erik they have to sell something. Tracy basically. Erik aksana, you are in the fixed income markets. If you were invested in a class of securities in which a regulator did that to you, would you go back to that market . Oksana that is a real issue. Regulators are coming out with a tremendous a lot of liquidity in that system. Stay tuned. Tracy number two, i do have something fixed income related for you. Stephanie she comes bearing gifts. I like that. Tracy amber how we are supposed to give the u. S. Interest rate hike sometime this year now it looks like not so much. We had this drama so traders are pricing a hike into the first corner of next year according to the Morgan Stanley index and that is quite a change because just last month this index was saying we would get an Interest Rate hike later this year. Erik so Christine Lagarde was right. Tracy [laughter] you said it, not me. By the way, we have fomc statements. Oksana although i would to anyone parsing fed statements for truth is to find a new hobby because statements have been off by 40 every one of the last six years. They just cut their 2015 gdp forecast in march by 24 during the june meeting. In the interest of keeping it interesting, or in the spirit of keeping it interesting, i will go for a different opinion on the rate situation. I do not think we should discount a september move. The jobs number continues to come in strong pet on a planet at 5. 3 has now gone through strong. Unemployment at 5 has gone through. The fed estimates between 5. 1 and 5. 5 . 5. 3 is closing in on that. I would not discount the possibility of september and if the risk of continues in addition to that, that creates a ton of volatility. Stephanie madame, where 45 seconds. Number three. Tracy for the purpose of levity, it has been a serious day, i want to talk about bitcoin. Stephanie bringing a clown car . Tracy im trying to make people feel better. Bitcoin is valine. There have been reports about people buying ipads in greece luxury cars, and now reports about them buying bitcoins. Stephanie shopkeepers will not take your American Express but they will accept a bitcoin . Tracy there has been talk about creating some sort of bitcoin related solution to the greek debt problem. Stephanie i mean, honestly. Erik to call it smoke would be generous. Stephanie who are the people that have said there is a bitcoin solution . Are they wearing wizard hats and capes . Tracy i imagine that are related to the bitcoin position industry and have long positions in bitcoin. Oksana i have nothing on bitcoin, but in general, when you look at what is happening in the markets, we see a lot of consensus trading. Investors are piled into a few consensus trades and any sort of catalyst that undoes that consensus trade creates a tremendous movement to the other end of the boat, so to speak. The consensus rate is short rates, long risk. Anything that puts that view into question creates a volatility episode which overlays on top of the fact that liquidity has been a challenge because the broker Dealer Community has taken a huge step back and, by the way, liquidity issues are not limited to credit. We see liquidity much more constrained in the treasury market, the bond market as well. Book order debt is declining. Stephanie is there a strategy or defense, whether it is from the Banking Community or the buy side to prepare or handle the lack of liquidity . Oksana i think first of all liquidity is king, and the role of cash in portfolios has always been underappreciated. We are going into a time right now where it escalates. Right now it is about at 90 which is not close to the longterm average yet and it feels pretty bottom of national volatile. I think liquidity is going to be looking better and better as we continue down the path of greek negotiations, what happened china etc. , so standing by to provide liquidity is key and most portfolio are not ready to do that. Number two, looking for sources of return we are finding more opportunities in private markets and their left to the compression of spreads, etc. Also, again, if you are willing to provide liquidity for a longerterm basis, that is pension opportunity. Finally, the judicious with your asset allocations to the point of being contrarian and not buying into the her mentalityd. Erik stay way from the crowded trades. Oksana aronov fixed income strategist at j. P. Morgan, thank you. Stephanie a great way to avoid herd mentality how about honor the fact there are four people talking about the most important stories in Business Today three women and a canadian. How about that . Erik Tracy Alloway, thank you. Stephanie i love that. Coming up this afternoon, mark thompson, the ceo of the new at times will join New York Times will join another special woman, Olivia Sterns. You want to go anywhere. \ julie welcome back to first. Bloomberg. Julie welcome back to market makers. I am julie hyman. We saw a 6 drop in the shanghai composite. We have been talking about what is going on in the Chinese Market. If you want to traded in the u. S. , this is one of the vehicles to do it. People are still selling. Well see what happens in china tomorrow. Also linked to china, we have a number of companies in the United States whose revenue is dependent on china. Yum brands is one of them. Half of its revenue comes from china, if not more. It is down 3 . Yahoo also falling today. We saw it fall yesterday, along with alibaba. Alcoa is also linked to china, at least in part, as so many Commodity Companies are, down 2. 7 percent. It has been declining leading up to earnings. Alcoa has been trying to shift revenue mix toward engineer products, stuff you make from aluminum versus melting of the aluminum itself. We will see how that business is doing. They also bought a titanium company, so analysts will be looking for an update on how that acquisition is going. They are also predicting analysts, that is, that revenue is flat last quarter. We will see if anything can distract anything from greece and china. Libby will be earnings season. Stephanie well see. Julie hyman given us the latest. China just seems to go from bad to worse. We are asking the question where is the bounce question mark that is what we want bounce . That is what we want simon to tell us. China bad to worse . Simon the market is going from bad to worse, but the point i would like to make is the stock market in china is not the economy in china. They have been divorced on the way up and on the way down. I know people are getting nervous about the stock market in the real economy, but that is something that is not a immediate concern other than the interim sentiment. Erik ok so youre thinking about the bid for chinese stocks in fundamental terms in other words, if the chinese economy is ok, stocks will settle at some level simon level. Simon this is a market that is up 70 year over year. Stephanie erik the shanghai composite at 3500. When you say settling, where might it go . Simon at a valuation level were looking at 16 times earnings. The question is what is that discounting is that discounting a recovery in earnings in china . We are way off of that. If you look beyond some of the s o, banks, energy companies, we are trading ates stretch valuations, 40 times earnings. The question as well is one of those earnings. China is a market that does not have an enormously deep securities analysis industry. If youre looking at american copies, you can trust those earnings. We are trading at 40 times earnings, but are those earnings real . I do not know. There is a real concern. Stephanie you cannot trust those earnings, we are in a scenario where the Chinese Government could be pulling levers that affect the way the entire dynamic works, couldnt investors simply say i am not playing in a game where the rules to not make sense . Simon Foreign Investors will certainly play that game and that is why they have not gotten involved. Foreign investors have the valuation in china and say why would i buy the same company in china but i can buy in hong kong for a 30 discount. Now the valuation discrepancy is 50 . So, certainly, Foreign Investors are going to take a long, hard look at china. Erik what should Foreign Investors do about the other markets . The cost is down more than 1 . Taiwan is down. Is this an opportunity . Simon if this is a kneejerk reaction and a change in sentiment, a reaction of markets and managers that they would rather take a step back, yes, i think there is an opportunity. Those are markets that are more institutionally dominated and trade much closer to a fundamental fair value. I think there is an opportunity. As is market selloff, if they selloff in parallel to china, foraging opportunities. Erik now, or do you wait . Simon i would not necessarily jump in today. I think the nervousness will get worse. Stephanie if there is one thing people could do, should do in china right now it is obviously not today. You think we will only go down from here. Give us a timeframe when will they step in and what should they do . Simon to say we should wait for panic selling obviously we can see more of that. You need to step in when youre looking at larger cap companies, when you can trust the earnings because there are a share parallel to those a shares and you see real value emerge. You need to they give you an with the Chinese Government is doing in terms of the regulation, but its an Interest Rate. It will have a real effect in turning around the economy. At some point down the road yes, it is going to happen in the market will discount those improving fundamentals. Stephanie simon, thank you for joining us. Simon male. Erik earlier we told you the faa has grounded all flights. Bonnie has an update. Bonnie we heard united flights across the country were grounded. This image that you are saying is los angeles airport, a fairly still grounded. The faa said united was expansion Work Connectivity problems, basically computer problems. United is dropping. It is picking up a little after were getting word that logan flights are we boarding. Well keep you updated throughout the day. Erik all right, limited service on united flight. They are slowly resolving their issues. That will do it today for market makers. Stephanie what a day. Erik so many highlights. Stephanie i appreciate the disconnect. Pr saying there is nothing to fear. 20 minutes later, we speak to Shahraab Ahmad a Hedge Fund Manager who says the guy draws a government salary, he is not managing money. Easy for him to say. Erik we have a textual tomorrow. Tune in for jeff sachs pleading for a deal. Answer Martin Sorrell the ceo of wpp. Steve ratner. It all started 00 p. M. It all starts at our new time, it 00 p. M. A. M. Eastern. Market makers stephanie i have to take a break. See you tomorrow. Matt it is 10 00 a. M. In new york. Erik you are watching bloombergs market day. Met four days to negotiate a deal with regulators. After that, it could be looking for more chaos. Erik the government seems to be doing all it can to stop the slide in china. Matt what is sergio marchiones plan for chryslers future . Doesnt have to include General Motors . Does it really have to include General Motors . Matt good morning. I am met earlier. Matt miller. Erik i am erik schatzker. We will start with greece. A grexit. Erik