Earnings will hit. David President Trump gave a interview with Bloomberg News. Among the things covered, his interest in bringing back glasssteagall. We are looking at that. There are some people who want to go back to the old system, so were going to look at that. We are looking at it right now, and doddfrank is going to be very, very seriously changed so the banks can go back to running lending money. David Kevin Cirilli is with us to put his comments in a broad perspective. He did say he is looking at this. How seriously is he taking that . Is this a priority . Kevin no. This was a great interview and this was in line with what President Trump said on the campaign trail. The conservative and democratic bases of both parties we have seen this rhetoric of reinstating glasssteagall frequently. That said, people like Elizabeth Warren, the way they went to implement making up the big banks is very different. Democrats want to have more regulation. Republicans are advocating to provide in offramp for do regulatory policies four deregulatory policies, so themding an incentive for to decrease regulation. They argue if that happens, they would be able to end the project big toproblem of too fail. It is a different policy and that is the point investors should be watching. David it is ironic President Trump appears to be on the side of Elizabeth Warren. We also hear from steven mnuchin, gary cohn. They keep talking about the 21st century version of glasssteagall. What do they mean . That any Large Financial Institution would have to somehow provide some regulatory disclosure in order to qualify for removing part of the doddfrank. Essentially, as lawmakers in the next couple of months begin to craft some reform to doddfrank, they would have to put up banks would have to put up some incentive to qualify for getting that offramp to some of these regulations the banks have lobbied heavily against. David we will come back to you later. Jonathan nothing to take away from yesterday . Jpmorgan stock did this and then this and finished flat on the session. David people took a look and said, not so much. Jonathan i think, believe it when i see it. I do not think it will be those brutal rates many people were thinking about. Joining us is a director policy research. I just wonder what we are moving toward. They proposed an arrangement in the United Kingdom where you insulate the retail bank away from the investment bank. There was not a brutal wakeup. Is that something we might move toward on wall street . Realistically, we can have a conversation about the merits of vulckerg some of the cl rule if they take steps toward resentencing, but that is a broader conversation and one i think will be more of a regulatory concept and legislative concept. We saw President Trump yesterday offering more of his political you then a policy proclamation. It is going to be months before we get to the point where we can Start Talking about real world impact, which is, what are we going to do with covolcker . Jonathan lets talk about the timeline briefly. The United Kingdom given until 2019 to get everything in place. You have to put policy into law, how many years are we talking about before these banks can radically change their Business Models . Isaac if you believe something is coming which i am not sold on lets use the baseball as an analogy, we are not even in the first inning. The players are still driving to the ballpark. This is nothing more than political rhetoric. It is important political rhetoric because it did have a brief impact on the Price Movement of big banks, but that is all that is, and the Market Action told you that. David when we talk about glasssteagall, we think of congress. Is it possible for the president through the circle and appointing areas people to agencies to achieve the same results . Isaac i think one of the things that we have been recommending is to start separating the which aree actions, becoming less likely with each passing day from the administrative actions. There is a line that Elizabeth Warren said, which is personnel is policy. Banks, they are two subparts important. Number one, who are we going to name to these top spots . That theinue to think federal reserve. There are reports that the comptroller bowl be replaced, so those are important. Those meaningful mile markers may be the upcoming doddfrank status report that is due in the beginning of june from treasury secretary mnuchin. I think that will lay out the road map for administrative regulatory relief, which is more likely than broadbased legislative action. Are watching a computer yesterday, dan to be with trump flashes, you see this headline, what do think . Do you dismiss it . How do you interpret that . Isaac i think we are all becoming at least trying to become experts in reading the trump t leaves tea leaves. I cans how you the phrase looking at when the president uses it, looking at. I place less value on that. That seems something he usually purposes that he usually says when discussing generalities rather than specifics. I do not place a lot of significance on things when he says he is looking at them. Furthermore, i think it is important to note t had just met with 100 Community Bankers from the icy ba icba. In his mind, he wanted to show the difference between Money Centers on one hand and Community Bankers trust just met with. Jonathan thank you for joining this program. Coming up on bloomberg, tom keene interviews ben bernanke. That will come to you at 12 30 p. M. Eastern time, 5 30 in london. Live from new york and washington, d. C. , this is bloomberg. Emma i am emma chandra. The board of italys Flagship Airline alitalia has agreed to start bankruptcy proceedings. They were unable to carry out plans after workers voted against job cuts. The last 270 million in 2015. Bp reported firstquarter profits that beaded estimates. That beat estimates. But net debt rose again, showing how they are struggling to cover the commitments. Bp stock has been the worst performing this year among europe oil majors. Hire 1000 American Employees the next two years. The minister should has argued other outsourcing firms are unfairly taking jobs away from u. S. Workers. That is your Bloomberg Business flash. The President Trump is not only one looking at breaking up big banks. Bloomberg tv he would be really excited to see a breakup to increase competition and boost the economy. He spoke from a global conference in beverly hills. Ken it is way too early to tell. At 100,000 beats, the move to reduce regulation in the United States i applaud. This is the single greatest lover they can pull together can pull lever they together economy to grow faster. I started my business when i was in a torment harbored. I could launch a hedge fund in 1987 when i started my hedge fund. I could launch my hedge fund in 1987. You cannot launch on today given regulatory matters you have to deal with. That has discouraged new asset management. It is the burden of regulation. The energy space, the transportation space, it is everywhere in america, the weight of regulation reducing your business formation in america and that is a tragedy. The administrations focus on reducing the Regulatory Burden on the american who has a dream, i applaud that. The last k the last administration was interested in producing more transparency in the bond market. What about this one . Ken i hope they follow through on that. Transparency creates confidence that you have been treated fairly, that you understand what is taking place in the marketplace, transparency is the underpinning of a healthy capital market. Is opaque, that incumbents enjoy information advantage of that area and of that. That does not make for a good market, so this administration continues to carry that baton and shine light on how treasuries are in trading, that would be good for the market. Erik if they dont . Ken i think it is unfortunate. Bills we are looking at, whether the tax bill, the infrastructure bill, we are taking our deficit higher. I think it is important we take steps to continue to drive the u. S. Fixed income market, treasury market, to be perceived at the most liquid, fairest market in the world. That will drive down the cost of borrowing, which will save money for every american taxpayer. Erik President Trump told my colleagues that he is taking a serious look now at steps to break up the big banks. Would you be in favor . Ken i would. I believe when a market because overly concentrated, you reduce competition. And competition is the lifeblood of what makes free economy work. When you have firms that are competing to get ahead, that is when you that is when creativity and innovation takes place and when consumers win. Crisis in 2000l eight, decisions were made quickly that resulted in a massive consolidation of the u. S. Banking system. I do not think that serves the interest of our country well. What where they argue to break these banks into small banks . Think aboutld we separating commercial banks from investment banks . I would be excited to see that. Erik you think it would be good for the economy . Ken i think it would be great. Erik do you think it would be good for your firm . Ken that is a mixed blessing. We would have more competitors but then it gets good for america. When American Investment ranks are at the forefront of innovation, now, not all innovation is good, but over time, the majority of innovation creates value for our economy. David that was ken griffin. To take us into the story of what glasssteagall would mean in the real world, we are joined by nathan dean from washington. You heard ken griffin saying he is in favor of deregulation. What are people really talking about when they say break up the banks . Nathan they are two things. Essentially returning to glasssteagall, separation of the big banks. This other is the idea that the white house is pushing you hear about this sometimes in congress more like a glasssteagall in disguise, high leverage requirements on investment banks. Maybe not a pure separation under the banking sector, but similar to what is going on in the United Kingdom. You say you want to push forward glasssteagall, they are also working on doddfrank deregulation. David there is that practical constraint. Isnt thatthis, close to a we were in the 1990s before the repealed glasssteagall act . A lot of banks are doing the things that are now permitted . Not permitted. Try to implement a ring fencing idea, i do not think you will see a portion designed to investment banks. At the qsc language about raising capital requirement. Republicans now have a bill that raises Capital Requirements to the 240 billion for the eight largest u. S. Banks. Bipartisanre some might open up, this idea that if we are going to target large banks, we want you to decrease their Systemic Risk are the Investment Banking activities and we will look at capital and see what we can do. David lets call it glasssteagall lights, do they need legislation or could the president do it through regulatory agencies . Nathan you do not need legislation to do it. They have the ability to put capital. The question is timing. Regicide is is the legislative is the quickest way. If i am donald trump and i want to implement glasssteagall lite, i will direct my new agency heads to put something in increased capital, for example, but it would take a lot of time. Happily nine months to 12 months probably nine to 12 months for a new fed chair had comes in and before the banks get to that point. Alix thank you. Coming up, sky Bridge Capital senior Portfolio Manager will be joining us. Live from new york, this is bloomberg. Alix it is no longer just a hint. Steve mnuchin giving his clearest sign saying that ultralong bonds could make sense for the u. S. Studying ultralong bonds. That is something we are considering that treasury. We have a working group looking at it. We think it is something that can make sense for us at treasury. Alix could make sense, joining us now is citigroups managing director. It seems note after note, will they or wont they issue ultralong bonds . What is your case . We do think it is an idea that has been around for a while. A lot of countries have gone down that route. E think it is pretty plausible we have to see what the market reception will be before it can go down that route. Alix this ties into your role, the fed. Demandthey stack up what could be when the fed will have to be paring back but then the Capital Outlay will rise . It is a funny time for the treasury to consider this, given we are in the early stages. We will probably see Balance Sheet reduction later trade we think it will shrink by 300 to ponder billion dollars next year to 400 billion next year, which is why i think they will because just. They will test the waters and frontload some of the other issuance in the next couple of months. Jonathan we get to demands and price, what is the objective of them to do this . I think a lot of this around locking in low Interest Rates. Interest rates are low, but inre is a demand rationale there. Investors have been clamoring for longer Horizon Investments and there has been some scarcity for it. Jonathan i wonder what the money will be used for . When they came in with this plan, i do not see the secretary who has the mindset to blowout the deficit and use long bonds to do that, so what will it be used for . I think part of it is interest. If Interest Rates were to rise, but i do not think it is on that clear what the money would be used for. Alix if they are going to have to end up wind loading friends issuance or if there is a long bond, what does it do to yields . Ebrahim in this case, i think it will be a cautious move, so they will probably issue relatively low marks. I do not think it will be dramatic, but it should be somewhat upwards and an indication of what investors will view that they will be pursuing a policy. I do not think the fed will be to affected. Too affected. I think they will be less affected by what the fed will be doing. David what is the principle affects . If you did not issue more debt and you had to be longer maturities, that means the average maturities of treasury debt outstanding goes longer read what does that do . Whose life is changed . Ebrahim i think these are marginal effects. There are investors i mean, Insurance Firms and pension these, butooking at i dont think as a whole, there is a deal of effectiveness. What yous talk about love, and that is the fed meeting. They have a two day meeting today. The ecb has to acknowledge the dad is getting softer while keeping june on the table. The opposite for mario draghi last week. How do expect them to do that . Ebrahim the fed does not have a press conference this week area a number this week. I think it will be easy for the fed to keep a steady hand at this meeting. I think they will keep it close to where they were the last meeting, and for now, i think the approach seems to look through that mixed data we have seen him at our two q2 and help the data will pick up. Jonathan the Economic Assessment is near the bottom with the Balance Sheet conversation, does that get changed . Do we push forward . Byahim not this summer, june, there could be changes and this time around, we are in the early stages. It probably will be in the minutes. Jonathan given they want to communicate at the back end of the year, if the pressure wants to get there, and they want to get the two other hikes out of the way they forecasted, is the pressure on june and september . On the for now, we are path that they will hike in june and september if data picks up, so it is more conditional now then we said one or two months ago. Otherwise, they will continue to have a rate hike or quarter. Per quarter. Later, theoming up north star chairman and an interview with david rubenstein. From new york city and washington, d. C. , you are watching bloomberg. Ways wins. Especially in my business. With slow internet from the phone company, you cant keep up. 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We are north of the dollar at nine cents. Look at some the Asset Classes out there. Emma lets get you caught up. The president will meet with kim jong done. He spoke to Bloomberg News yesterday. The right circumstances, i would absolutely meet with them. Most political people would never say that area under the right circumstances, i would eat with him. Emma they have become the biggest foreignpolicy challenge. He has defied International Sanctions by continuing longrange missile test print the ceo of United Airlines testifies for the First Time Since they dragged a man off a plane. He is likely to get chart questions. They settle with the passenger. They also have new policies to keep it from happening again. In france, is trying to extend his reach five days before the president ial election. He told backers of Marine Le Pen that those who backed the far left, he understands their anger. He has a doubledigit lead over le pen. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. Jonathan thank you very much. Its hard to reconcile the politics economics. Eurozone manufacturing is expanding at the fastest pace in six years. The optimism seems unaffected why political uncertainty. Joining us is the eurozone economist david powell. Isthis evidence of a a, that recovering . Does suggest is recovering. A note of caution is needed. Those surveys have been very strong for several months and the hard data has not necessarily caught up with him. Survey haduarter pmi gdp at 0. 6 . It is unlikely to be that high. They do have good signs, things are probably not as good as they suggest. Jonathan we are coming off a lower basis. You brought up the hard data situation. Lets look at unemployment. It is 9. 5 in the eurozone. The conversation with draghi last week, he was asked. He did not want to go there. I that its considerably lower. Tell me how much capacity is left across the continent and david there is some left. Our estimates at Bloomberg Intelligence is that Spare Capacity measures 1. 5 of potential gdp. Spareis some additional capacity to be averted. That would require growth being above the trend rate. We estimate that it 0. 3 . We have firstquarter gdp coming in tomorrow. In theyfor it at 0. 4 are above the trend growth and that will continue. It is still there. Jonathan are these aggregate numbers . We had a conversation about a call that was doing well. It was relative to a was happening down south in the periphery spain and italy and greece. What does the picture look like now we break down the continent into its individual countries . David one of the fastest growers is spain. That is a reflection of the fact that it was hit so hard by the crisis. Now its coming back quite strongly. In the First Quarter, the economy expanded 0. 8 . That is much stronger than the eurozone as a whole. This is not because the spanish economy is in a great place. Its recovering lost ground. Jonathan its always great to catch up with you. He is managing director of the citigroup. The situation in europe, a lot of people say by euro. Then they filed for bankruptcy. When you look at the details, there was a restructuring plan. The workers voted against their own job cuts. Itsmight make sense, now suicide bankruptcy goes through and a load or people get laid off. Is that the essence of europe still . The unions, the labor laws, the workers that are too deep to understand . Abraham you raise one issue already. It is the average that your. Its distribution. At the end of the day, italy is the focus of attention for the next 18 months. When it comes to the issues that are holding countries like ittory back, they are around did issue system. Same you can make the issue in france. T will it do for growth . By own country is not examining thats exactly a front runner. In france, the cree issue is going to be what can get done . Will the have a majority in june . Will he be able to get some structural reform on the way. Reform,rench managed to and i think there is a decent chance, the germans might get back to the table. Alix this raises the question of better pmi. Is there a domestic demand driving that . Is china doing pretty well the same time . You raise that point, we have to get that her. The eurozone has been a different recovery. Its been primarily consumption. Typical recovery which is gaining strength. We should not discount that. At the end of the day, it will come to raising potential growth. I think there is quite a bit of work to be done. David is this about longterm growth . It was so bad on so many fronts. Its got to get better essentially . Youve got demographic problems and immigration and political problems. You dont have a lot of reform going on. Veryim right now, it is much cyclical. In that sense it is shortterm. There have been reforms in certain countries like spain. The had a tough time, but reforms are adding to their growth. For the the longterm, its demographic. Structural issues are going to weigh down europe and they have to respond to that with more emphasis on reform. David there were some Structural Reforms in germany, in the labor markets. By dont other countries learn from that within your . Why dont they say germany is doing well because of reform they enacted . Ebrahim things were bad in the early 2000s. They rallied around these reforms. Take a long time, even for the germans to get around to taking it to that is what is so critical right now in europe. Dont waste a good crisis. Dont waste this opportunity. Ofathan did the lack reforms matter if you are an Equity Investor question mark do they matter at this point . Ebrahim where the reform matters is where it goes in the place. That day will come. I will reemphasize policymakers need to get that straight. There are enough reasons to be optimistic. Alix what about trade . We hear President Trump going after germany. What is the actual risk for the european economy . Ebrahim there is risk. Europe is tied to the rest of world more than the u. S. Is. Trade isnt adding that much to growth. The worst concerns about the u. S. Administration have not manifested himself. I think europe would be affected. Fairly cautious look. It is great to see you. Thank you very much common up, the top performer reports after the closing bell. Apple is sitting at record highs, adding 120 billion in market cap. Your earnings preview is next. And interview with the twitter coo and cfo. This is bloomberg. Emma coming up in the next hour, sky Bridge Capital senior Portfolio Manager. This is bloomberg. Now to the Bloomberg Business flash. Pipeline companies are pushing back on the buy american rule. Departmentommerce that using American Steel would disrupt operations. The Steel Industry is in flavor favorite of the rule. It may test his ability to keep promises. Bill ackman lost 4 billion. The ceo of Pershing Square Capital Management appears to learn the lesson. He spoke with francine lacqua. Bill we made the mistake. We could not see what was going on. That was a big mistake. Prancing are you going to stay away from pharmaceuticals . From we will probably stay pharmaceutical companies. ; herbalife is still his favorite. For a platinum parachute peter krause. He will walk away from 99 million after a surprising shakeup. Nine directors were moved from the board. The majority owner wants to have more direct control. That is your Bloomberg Business flash. Jonathan we sat down with the pimco ceo at a global conference to discuss the fixed income equities and the future of pimco. They turn over six time what the s p turns over. The the fact that you have ecb and the fed as people buying bonds. Buyers whove other are accounting driven. Think insurance companies, think Pension Funds. The opportunity we think is much larger in fixed income and equities. There is a possibility the government could cause problems there . They are trying to push things through because they think its cheaper . Manny there could be legislation which would push for the lowest possible price. We think over the Business Cycle we can add a quarter percent. When you add this over the last time of retirement account, the difference is significant. When you consider we are talking 2. 3 1. 5 when rates are in the u. S. , the performance is substantial. You focused on the fixed income. You havent gone to these other things. Explain that. Is that purely because its the area you can excel . Manny i think its the reason we wanted to do something. We want to have a very focused strategy. We want to be the best at what we do. We dont think we can be the biggest or all things to all people. We think we can be good at managing. It gives us plenty to do. We want the firm to be focused on this and simply this. Emco,ou look the dna of we think we have a process and an Investment Committee and a number of cios who all come from the fixed income background. This is our forte, this is what we know how to do. We are focused on strategy. Investor standing in front of you, what is the main thing you put in front of people russian mark . Manny we explain how we make money. We talk about poor olio construction and solutions. We talk about what the issues are and what a may need. We try to be good about the Business Cycle. Have added value on the table. Will pimco be as american as it is now . Will it be more global . Manny i think there is an urge for globalization ross all businesses in america. Its quite exciting, but its hard to size. Get into thet to moment. We think there is growth in emerging markets. Asia and latin america will be exciting places to invest. We have more resources. That was our editor in chief and the pimco ceo. There are some things going on there. Emco, itt title at didnt work out and now the justification is about making bonds and why active investment is so radical in the bond segment. We were explaining this yesterday. In the equity segment, you put your money into and etf and you know that. They remain pretty stable. The churn is much higher. The duration has increased as well. In terms of the bulk of the index made up of low yield securities like tragedies, where do you get the gains as a passive investor . David for the most part, a stock is a stock is a stock. A bond can be a wide range of things. It creates an opportunity. There is also a risk if you get the wrong active manager. Alix when it comes to emerging markets, local debt is denominated and that can cause a problem. That says a lot to take in. David youre giving me a tough time. Alix you can watch us online. You can interact with us directly. Just look at your terminal. In thatissed anything interview, you can click on it and watch it again. This is bloomberg. David emily chang got to sit down with the twitter cfo yesterday. She talked with him about what that role meant. Anthony we dont have visibility on it seen the revenue trend improve. That is based in a number of factors. Significancee the we have driven. It is more attractive than it was six months ago. Our audience is accelerating. Our prices are down 60 . David that was anthony noto. Was talking about the fact that their traffic is up a twitter, but they are not getting the credit they deserve from advertisers. He thinks that is still to come. We will hear about his role as cfo. Anthony i love working with jack and the rest of the team. We approach running the company as a team that is focused on specific priorities and we divide in conquer. Of the day, we divide up the priorities and whats most important to accomplish. I wouldnt want to work with anyone else. Jack, he is an inspiration. He had no reversals and no script and just delivered hearted soul of what twitter is. I live in paris every day to help that vision come to life and thats what is made twitter so special. He could not be a better partner. Workinghat is it like with a guy who is ceo of another company . Anthony is there for 100 of the decisions. He has insights and license to make decisions none of us could ever make it its a powerful relationship to have with the company. I think it makes us better in the last two years that he has been at the helm of twitter. Emily we talk about the drawbacks. Are there any benefits that come with that . Anthony the media wants to talk about dual roles. I dont think about it until the media asked me. We talk about it. When someone discusses a team, we talk about it as a team. We are together for 100 of the decisions. Emily youre still looking for a cfo. Anthony once we have news, we will share that with you. Emily twitter explored a sale. Whats the latest. Anthony we have not commented on the situation. The board understands its duty and they support a plan and there is progress. Ive and around the internet sector since 1998 and ive seen Companies Come and go. I can count on one hand the ones that saw a deceleration in growth that twitter did and then reaccelerate in 2016. Its a herculean accomplishment. Of our design team and the rest of the employees who make it happen every day. We have a lot to do. We are still at the beginning of the beginning. We have not come close to accounting our longterm goals. We will recognize the missteps we make and make sure we dont make them a second time. David you see twitter as an independent company . Greaty i see it having a impact. Alix that was anthony noto. He did not what answer the question. We are open. We will see. My focus is going to be on apple. They are reporting after the bell. Right now, they are sitting at a record high. Earnings are two dollars. Its really going to be about the average selling price. Is it overpricing what that might be . David its a about the iphone. If you 5 of revenues from iphones. They have all these other initiatives. When the going to move forward on that . Alix some of the rednel checks, there is a flag. In other movers, amd missed estimates. Chips are sales falling. That is still under the consensus. You have that Community Health reporting earnings. They have a loss of . 27 per share. Fullyear revenue was above estimates. They did set a fullyear earnings higher than estimates. They are trading flat, but getting a boost. Bp, revenue is higher. Its at the highest level in 10 years. A silly to raise money to pay for the dividend which is not yet sustainable. Jonathan that is great work and coming up, we have the sky Bridge Capital Portfolio Manager. With markets trading and futures a little bit lower, you are watching bloomberg. Jonathan wall street races or President Trump. He is considering breaking up the big tanks. Looking to lock in low rates for longer, the secretary secretary is serious about launching ultralong debt. Manufacturing expands to the fastest pace in six years. New york city, good morning. I am Jonathan Ferro. We are alongside david and alix steel. It looks Something Like this in your futures are flat. These are getting back to work in europe. 1. 09. O stable at alix we will get auto sales coming out. They will fall for the fourth straight month. The transportation and Infrastructure Committee will hold hearing on oversight of u. S. Airline Consumer Service after the united ceo testifies is. That should be a lot of fun. Apple is reporting earnings as the stock sits at a record high. David in an interview yesterday, the president gave a sense of how expensive is agenda is, including breaking up the banks. We are looking at that. Some people want to go back to the old system. Were going to look at that. We are looking at it right now. Be verynk is going to seriously change to the banks can go back to loaning money. David we did the interview with a colleague. She is here to tell us more about what she learned. Congratulations. Talk to us about this breaking up of the banks. Where does this come from . Im not sure if we took them seriously. Margaret he did talk about it on the campaign trail. A lot of other stuff happened between november and now. Weve heard some are marines from the Steve Mnuchin world that there is something coming. Yesterday, he put it out there. He knew he was talking to bloomberg. He wanted to make news. No one asked about doddfrank. That was all him. He is looking at packaging these possibilities together. Some reform ort bank up breakup. What does it all mean . What is he really going to do . We need to see the details. I would wait to hear from gary cohn and the top staff. Its a real question both in terms of messaging and politics of getting this anywhere if you decided to pursue it. David we are waiting for the details on tax reform, health care, infrastructure. To add one more thing to the agenda . Margaret if it were part of some sort of grand bargain. This has the potential to do some partnering with some democrats across the aisle. Are we talking about Bernie Sanders analyst warned . Sure. Is that what he is trying to do . It was under president will clinton that it was repealed. There is so much interesting political messaging in this across the aisle as well as what hes trying to work out within his own party. There are questions about the economy, what impact us will have. It is provocative and interesting. Its not clear where its going. David we can go through the whole interview. An increase in the gas tax . Where do that come from . Margaret jennifer asked that question. You were interested to see where he would with it. He suggested it something is considering the cousin some of his friends in tracking mentioned it. Its hard to gauge how much he is made up his mind. Sean spicer in the briefing later seemed to dial it act. If the president move forward, this represents a second potential outreach across the aisle. There are questions about is this a regressive tax. The notion that you would make the argument that this is something that business wants and something that would improve geographic areas the country that were strong some orders for him. David he keeps it interesting. Thank you so much. Great reporting. Is then joining us Portfolio Manager. 12 months ago, i called troy tony. It was the one time his wife watched him on bloomberg and i apologize if apologize. Lets start with a bang. The headlines are interesting. I watched the stocks rollover. Then i watched this come back and finish in positive territory. What do you take from me price signal . Ssian mark that seems like a long shot to us. That being said, one point we have tried to make is if you look politically from a regulatory standpoint, everyone is on board with rolling back regulations regional banks. The house, the senate, the white house, there is uncertainty about the big tanks. Capital is to jack up the level of force them to dismember. Now youve got others talking about glasssteagall. From regulatory relief standpoint, we see no risk and a lot of upside on regional banks. For the larger banks which have done well, there is some Regulatory Risk involved. Alix how does the shape your thought about bank stock . Troy the biggest concern for banks is the lack of lending growth. That is clearly an issue. That may be a oneoff. The other issue is will the yield curve go back up. It looks like tanks are going through a pause after a rise post election. I think they go higher because they are relatively cheap. You will have a transfer to the Financial Service sector. Investors have to be patient. The the yield curve and loan growth, at the end of the day, it feels like it is demand holding back loan growth. Its like regulation is holding the back loan growth. Troy for the smaller regional banks, the cost of meeting regulations has been enormous. That has reduced their ability to lend. Larger banks its less clear. There would be more loan growth with less regulation. How much is it . Is it 10 . Its not like they are going to double their lending growth if doddfrank is revealed in repealed. Alix is this good or bad for risk when it comes to banks . If you wind up taking them up, do they want that . Most of the experts think repealing reinstating last eagle is not a win win. Its more of a political point instead of making the economy more stable. That being said it, alyssa for an has a good point. Bedfrank should not repealed and the full for rule not be repealed from the standpoint of twice and large bank able to take deposits and then speculate on high risk security. Thats why we dont think it will be repealed. David the president said he is concerned about growth. When you talk about overall growth, which is more important . Regional banks or the big banks . Troy politically, regional banks are focused more on the middle part of the country. There is no exclusion, but politically if you are trying to euro in red states, regional banks would be beneficial. From an economic standpoint, you cant divide the country up and say its ok if big banks struggle as on his regional banks do well. There are Many Services big banks perform. David we hear that most of the job creation comes from small business. Not from the big as this. Is there a correlation with more Regional Community banks in terms of their lending money to get the job growth going . Troy historically, regional lending growth has been much more robust. Is that causality . Its hard to say. Most reasonable economists or forecasters agree that they were handcuffed by such extreme regulatory costs. They would be more willing to lend. On the margin that would lead to better Economic Growth and better labor market growth. Alix that is good stuff. He is sticking with us. Mastercard is that with earnings. They are trading at a record high in the market. 2. 73e is coming in billion. They see growth in the low doubledigit. It was a good quarter. Bigthan coming up, a question. How do you unwind a Balance Sheet . Ben bernanke and tom keene sit down with the former fred chair. Tomorrow. Ve in you are watching bloomberg. Alix Steve Mnuchin has a message wall street and the u. S. Is serious about ultralong bonds. It could make sense. We are studying ultralong bonds. That is something we are considering a treasury. We have a working group looking at it. We think its something that could absolutely makes sense for us and treasury. Alix joining us is michael hansen. Still with us is try. Do we take him seriously . Very early. His is they are kind of throwing things against the wall. With low Interest Rates, there is an attraction to it and will there be enough demand to support it and thats an open question. Well heard mixed use our own clients. It is early days on that one. Troy it depends what the yield is. Alix at what yield would you buy . Say 4. 5 would be very enticing. Maybe thats not enough. Jonathan you would be lucky to get 4. 5 are in troy that would be attractive. Jonathan wheres the man going to come from. Most people i have spoken to are looking to 15 plus 20 basis points. Who wants 50 . Michael it thats a great question. We have talked to life insurers and Pension Funds. It comes down to the yield. Troy you would assume the liquidity would be much lower. Thats why you demand extra compensation. Curve, itsrice the reasonable. We think 4. 5 would be attractive. Jonathan how important is the line from the treasury . How important is it in the community . Michael they want to know what the schedule is going to be and it very much matters rum woody and understanding how the market is going to of all in jonathan lets say they come up with a 50 year. Are we talking about a billion dollars to test the appetite best and mark michael its very early stages. It depends what happens on the in school side. That is going to make a big difference. If they do, i think you will see experimentation early on. Forward, whys goes would the government do it . Is this to fund our current obligations . Infrastructure . Troy the bottom line is there is a lot of demand on longduration. If you can tap that amanda and lockin that interest rate, it makes the picture look better than if we get into a time where inflation comes back. David what effect would it have on the rest of the bond market . Troy one would think more supply that far out of the curve could cost overtime. That being said, it has to do with where the other issue is is , if they suddenly shut that down. That could create a big flat in her in the curve. We think stepping back could cost some steeping. That could be driven by a substantial issue. Alix on monday the treasury will announce the schedule. What we learn about the debt ceiling limit and with the treasury think they will spend the money on. Michael probably not a lot. Were not going to know what the plans in terms of tax reform look like until much later this year. Theres a chance it spills over into next year. In terms of the debt them it, this is the challenge. When we start to really get the headlines around the debt limit comes. It will be hard to come up with a plan at the same time. Especially if youre a conservative in the house or senate and i think we are going to get his the treasury is going to build up a cash buffer. I dont the we to get signals at this point. David what about the fall . In the interview, President Trump said i am going to come back on the wall. All that stuff is going to come back in the fall. How much should the markets be concerned about the crisis in the fall . Troy markets have been used to political shenanigans. His magazines try to make a big issue about this shut down. The probability was always low. The markets shrugged. Life went on. We think there are so many other reform, issues, tax regulatory relief, infrastructure. Those of the things are going to move markets. Forpotential for a shutdown 2 billion, we really dont think thats a huge focus for investors. They are going to be staying with us for a while. Barrick. M we also have an interview with david rubenstein. From new york, this is bloomberg. Emma the insurer has raised its outlook for the year. They have benefited from better results in the business. They have largely gotten out of obamacare. The act and lost 4 billion. Ceo of Pershing Square Capital Management has learned the lesson. He spoke with francine. Mistakes wasthe not being on the board. We could not see what was going on. Francine doesnt mean you will stay away from pharmaceuticals . Bill he will probably stay away from pharmaceuticals. Emma they are working on two big investments. That is your Bloomberg Business flash. In his interview yesterday, the president talked about his tax reform plan. He readily and that what he was putting out there was a starting point eared everything is a starting point. Maybe he wont have to change at all. Everything is a starting point. We are joined by michael from morgan stanley. Michael, let me start with you. What do we know about what the president is trying to take us on tax return . Michael its tough to say. We get a lot of information from the president , but not a lot of it is useful. We have some principles to work with, but they dont tell us about the endgame. There wasnt any clear indication there was going to be a real effort toward bipartisanship. Not good enough for the middle class. We are left with republicans working on their own for the budget reconciliation process. That tells us weird you with something thats going to take a long time. Its probably smaller than we expect. David what about the direction . We dont have a lot of details. The president has been consistent about where he wants to had. He wants lower rates. He wants to make sure we bring money back overseas. He wants to cut back of infections. He is been very explicit about that. Thats some point will he get his way . Michael i dont think we learn much from reestablishing those. Theyre the same principles that were established in the House Republican plan. The devil is in the details. Investors care most about is this going to impact the deficit . Will this happen sooner rather than later russian mark out of the we learned much to tell us were going to get a major stimulus from this and it will happen within a short time frame. Good news is a couple of months ago the expectations were sky high. Expectations are much more rate sized around this. Alix here are three scenarios. What is the most important for you as an investor . Think its a good point you made about how expectations of come back to reality. You dont have the danger of disappointment leading to a selloff. That being said it, you know the president is going to move ahead with regulatory relief and tax reform is the question. The one thing we did learn is its not going to be revenue neutral. Deficits are going to grow if they have their way. Its going to be temporary by definition. That should lead to a meaningful stimulus over the short and medium term with ramifications for longerterm budget pushed out. Thats different than trump saying i talked to the advisors and weird want to go for a 25 Corporate Tax rate. Were going to do a 5 cut ross board for consumers. He went the. Hes not want to get everything he wants. Its not owing to be neutral and its going to be short term. Trading, you have to look at the curve now. New supplyricing in at the long end. Bond investors and not pricing in inflation trending back up. Ind market is not pricing meaningful growth going up to 3. 5 . The bond market shrugged. They dont take much is going to get done. If you are long on duration, just a cautious. Dont expect the tenure to go through 4 overnight. The shortterm family bess shortterm stimulus, will that maintain things in a significant way . The drama is of they will say it is. Thats one of the reasons that we think ultimately this plan has to be smaller. Outcomes, ioth would say there is not a definitive way going about it at this point. Thank you very much. From new york, you are watching bloomberg area ] hey youve gotta see this. Cmon. No. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. Jonathan big earnings coming up from corporate heavyweight apple. Futures marginally negative. Down six points on the dow. We go nowhere on the s p 500. The ftse up. 7. The data in europe really terrific. Manufacturing expanding at its fastest pace in six years in europe. A stronger pound story. Remarkable resilience of the u. K. Economy continues in the face of a lot of political complexities across the continent. Lets get you some headlines. Heres emma chandra. President trump has another phone call today with vladimir putin. The white house isnt saying what the call is about. They spoke last month after a terrorist attack in st. Petersburg. That was when trump said relations between the u. S. And russia may be at an alltime low. The ceo of United Airlines testifies before congress for the First Time Since police dragged a passenger often overbooked plane. Has reached a settlement with the passenger and issued new policies. In the u. K. Manufacturing unexpectedly grew last month at the fastest pace in three years. Im emma chandra. This is bloomberg. Eurozone manufacturing expanded at its fastest pace in six years showing Economic Optimism seems to be unaffected by the regions political uncertainty. Joining us is david powell. I want to ask the question. Is very on the pmis good. The spread between the soft and hard data, how pronounced is it. Certainly is a big difference. If we look at industrial it shows that it contracted during the First Quarter of this year. Surveys area, the probably exaggerating the strength of the economy. To an expansion of. 6 in the First Quarter. When we get the actual number tomorrow its likely to be lower. The consensus looks like. 5 and Bloomberg Intelligence looks for. 4. Alitalia the airline has started bankruptcy proceedings for the second time in a decade after the workers rejected the restructuring plan. The workers and the unions have pushed this down the bankruptcy route. What are they buying into domestically and is reform happening in a significant way . The by europe crowd is buying into the recovery which is being theby stimulus and reduction of austerity. They are not buying into longterm reform. More reforms still need to be done. The market italy could use additional reform. The most pressing matter is getting the banks into shape and allowing the extension of credit to be started once again in italy. Banking reform is probably the key. Jonathan david powell, thank you very much. Andl with us, troy gayeski michael hanson. Week you said you cant like europe if you dont like the banks. Do you share that as well . Banks are an exceptionally cheap part of europe. If you dont get better lending growth its hard to see how you get better Economic Growth. Banks would certainly wish for better Economic Growth. They are intimately tied together and that has been one of the soft spots for europe for quite some time. They have taken so long to reform their Banking System which is one of the reasons private credit extension has been much more muted than in the United States. We had a Big Conversation in one of our meetings to say we have to find someone who didnt want to buy europe. That tell you about the state of affairs and positioning around the by europe trade . The story for the shortterm is right. Monetary stimulus is really having an effect. The fiscal backdrop has become more benign. Existential uncertainty hanging around the French Elections has abated. Europe had been underpriced for a while. There were some existential risks. Alix we found one stock investor who said im cautious on europe. I agree that the medium longterm picture for europe is not great. Bad ashe trade is not as other places. Whats going to be the negatives . The problem is getting any kind of sustained growth in europe is still very much an open question. Thats 1. 5 percent above trend. That is clearly not sustainable. Thats a cyclical recovery. Out overing to play the next many months but not the next several years. Alix how do you view that investing in europe . Europe was a disaster in 2011 and 2012. Everyone fruit it off in 2013 and 2014. Ff in 2013 ton of money flowed in. Almost all of that money flowed of late 2015 through most 2016. You have meaningful discounts in terms of price versus earnings. Ecb. Ave an accommodative improving earnings. A verysing ingredient is good technical picture workflows have just started to turn after quarter upon quarter of liquidation. We are not wild european bowls. We are with you. Theres more opportunity on a relative basis. You still have to be cautious because italy is the biggest wild card of any of the countries in the continent. Arent investors listening to whats being said around this table . Itsarkets working, not such a good deal. What is the market seeing that we are not. Investors have been burned on europe time and time again. We couldnt understand why people were piling in but they did. Reality set in and it was liquidated. It takes a long time for people to get over the recent pain particularly relative to the United States. Jonathan lets explore that. It could look attractive forever because people wont go in. We are learning pretty quickly aat it might just be permanent feature of being an investor in the eurozone. How crucial is that. At some point it really occupies the market. Then it kind of fades into the background. You find some sort of story you can catch onto. Ecbre finally seeing the getting meaningful traction now. You had a real reversal in what was a significant fiscal drag. Back then it was like 14 times in europe and 15. 5 times. The valuation discount wasnt even that meaningful to start with. Now it actually matters. Jonathan you are bringing up equity. Lets talk about credit. There nothing to do in credit. Jonathan can equity outperform and can be ecb step back without credit blowing out . If german bonds are trading at 2 its hard to see how equities go higher. Thats going to be the interplay we watch closely as the ecb gets closer to winding down quantitative easing. Do you get a yields spike . David isnt there a reason why the redenomination risk will never go away . Policynot have monetary separate from fiscal policy. Thats inherent in the structure of the eurozone. There should always be a discount. The redenomination risk, the politics have always been much messier. There is much more threat you can point to. We always expect to europe to trade a discount. The question is the next six to 12 months. On a relative basis to the u. S. If ever there was a time you would expect some degree of outperformance its probably the next six to 12 months. Bix that is a reasonable ull case. Coming up, the markets top performer reports after the closing bell. Apple adding more than 120 cap. On dollars in market we have Shawn Harrison of Longbow Research next. This is bloomberg. This is bloomberg daybreak europe im emma chandra. Later, u. N. Secretary of transportation joins us live. Now to your Bloomberg Business flash. Mark mercks drugs have risen. It is gaining ins rates against bristolmyers squibb. Profits that beat estimates. Net debt rose again. Bps stock has been the worst performer this year alone oil companies. Alix apple is the markets top billionr adding 120 dollars in value since the election. Shares are at a record high. For more on what to expect from the companys earnings we are joined by Shawn Harrison. Talk to me about what happens when you have a earnings for a company where Everybody Loves to get in and trading at a record high. Theres an expectation very shortterm that its waiting for the next super cycle along with another big cash return announcement. It is still at a discount to the s p ahead of what could be a very robust cycle for the iphone in the coming months and quarter. In the meantime you might have to deal with some softer q3 guidance of iphone sales. What kind of risk is there shorterterm for the stock . Against very easy you will see the iphone 7 plus becoming more and more popular. In the very shortterm expectations are muted. Growth will be relatively muted. Low expectations shouldnt deter investors from being in the stock right now. Alix the other issue is their average selling price. What kind of price and power they could see when the new iphone comes out . Expectations are around 660. We are well above the for this quarter based on the popularity of the seven plus. S8 is sellingss better. You could see a mid 800 price point driving esp is up yearoveryear if that model is as possible as apple anticipates. David its a great company. It has done very well for the shareholders. I cant think of another company of this size that has this much hinging on one product. When was the last time we had a super cycle . The iphone 6 was the last in line with the s p. A little over two years ago you had a super cycle. Newe are potentially products coming to market that arent as big as the iphone. Saw ample testing and not ton of as well. Jonathan whats the appropriate multiple for this company . Trading in line with the market would be fair. You are trading at a super cycle you have a pending cash return announcement likely tonight. If we get any type of tax reform theres a lot of money coming could deploy to drive shareholder returns in terms of capital or incremental growth. This time last year it was trading at 10 or 11 times earnings. Now we are north of 17. Is it the growth stock once again . In the very shortterm it is a growth stock. There was very low expectations for the iphone 7. It ended up being somewhat of a hit. You now have a big tax reform dynamic that could potentially help out the stock and it has also raised market valuations. Alix if we get a 10 tax on repatriation do you expect apple to bring that money back . I do think apple would look to bring the money back. They could return mormoney to shareholders. Apple has promised to double the size of the Services Business over the next four years. That requires a high growth rate. The easiest way to do that is increased revenue per user. Theres been plenty of conjecture on who they would buy. In theing content Services Business would be an interesting opportunity for m a with that capital. David is there something they could buy that could be big enough that it would not be diluted . They would be using cash. Likely be. Uld alix thank you, harrison Shawn Harrison. You can click here to ask you guessed question. This is bloomberg. David this is bloomberg. Im david westin. Ken griffin spoke with Erik Schatzker in an exclusive interview yesterday. He talked about the challenges facing hedge funds these days. Here is what he had to say. I have been in the almost 30 years. There has been an explosion in the size of the industry. It has been an unbelievable growth story. Like many growth stories we are going through a period of retrenchment. Today. Rder theres more competition. Theres a lot of very sharp people trying to find opportunities in the marketplace. This is causing some of the secondtier players to fall by the wayside. Secondtier firms that dont have a competitive advantage eventually have to move on. Erik why is it so hard to generate excess returns . They come from market inefficiencies. The work everyone has done over the last 30 years to monetize data and information means our markets today are much more efficient in the short run. Erik is there less alpha to be had . Think of a Company Announcing earnings. Beay those earnings would analyzed. People have preemptively decided if the company is going to announce this, heres what we are going to do. Literally within seconds of the Earnings Announcement you are already seeing the stock price adjust to where it should be. Take an interquarter period where youre are looking at data that comes from Consumer Credit cards having you insight into how the quarters are evolving. All these dynamics are making the markets more efficient and more fair. For the industry it has reduced the amount of alpha that is available to us as a community. Is your position offenses or defensive right now . Its offense. Erik in what way . Count. He quest for there are a number of really talented individuals that we can hire and bring onto our team in this environment. With firms shutting down theres a lot of good people that we want to bring in. When firms are struggling theres a chance to bring good people in to citadel. It is built on a belief that super talented individuals working together as a team can create extraordinary results. Erik what Investment Strategies or approaches do you believe will be most successful in this environment. And the way you see markets evolving. Well overfind works time is having a deep expertise in the area you are participating. That investment is almost certainly not going to work. I dont understand the company, the country, the pricing dynamics and whats relevant. For us, the core belief we have is deep expertise is rewarded. We organize where people specialize. There are specialists in pricing natural gas across europe. Each specialization we think drives differentiated and superior returns. Erik what is working well . We have been successful across the vast majority of our strategies. It comes back to individuals with a deep degree of expertise and professionalization who work as part of a team. Teams are really important today. Together the mosaic of information you need to have an insight different from your competition the teamwork dynamic is really important. They are supported by great quantitative analytics. Jonathan that was Erik Schatzker with ken griffin. It doesnt matter which ceo you speak to come they want to talk about regulation. John cryan of Deutsche Bank speaking at the moment in berlin. The banks are not well positioned to invest in infrastructure. The overall effect of regulation needs to be reviewed. Do they sense an opportunity . David on both sides of the atlantic they want less regulation. Ken griffin, the low hanging fruit has been picked. Its getting harder and harder for them. In terms of the divide between hedge funds and banks in what. S. Versus europe, kind of disadvantage does that put european banks if the u. S. Goes the opposite direction . Have a new regulator coming to the fed. Coming up in the next hour, Anastasia Amoroso and Julian Emanuel as we count you down to the market open. Youre watching bloomberg. Jonathan wall street braces for regulatory overhaul. President trump since he is actively considering breaking up the big banks. Steve mnuchin is serious about launching all caps on debt ultralong debt. Or new york city, good morning as we count you down to the big earnings report. You are watching bloomberg daybreak. Im Jonathan Ferro alongside david westin and alix steel. S p 500 futures unchanged this morning. Treasuries on offer at the margin. A weaker dollar story against the stronger euro with impressive Economic Data. Sixyear highs for manufacturing in the eurozone. 16 of the rally year to date has come from apple. Whats the risk into earnings . Analysts are estimated to dollars a share for earnings. You had ubs warning yesterday of a after iphone demand. He says it could be a cautionary flag. You have a super cycle coming potentially in the fall. It missed estimates s server chip sales really stalled. There was a bright spot. Secondquarter revenue outlook was up 12 . We have murder tuesday for you. Iac buying angies list. Trading well below that now. Its going to combine angies list with home advisor and create a new spinoff company. 38 . Ues up angies list has been really hammered. Our top story, President Trump tells bloomberg hes at least taking a look at breaking up the banks. Here is what he told us yesterday. We are looking at that. Some people want to go back to the old system. We are going to look at that. We are looking at it right now. And doddfrank is going to be very very seriously changed. Did theargaret talev interview and she is with us to tell us more about what she learned. I see that the congressman is talking in washington to community banks. Endis saying his bill would too big to fail finally. Past bailouts . T this may give us an important piece of the puzzle. Piecesu put all the together you got congress, republicans beginning to step up the tackling of doddfrank. Youve got President Trumps team talking about the potential to follow through on something he talked about in the campaign. And youve got democrats who have said they want to break up big banks. Its not entirely clear who President Trump is trying to make the deal with or what hes trying to do. This may help us understand and comes all fits in at a time when both President Trump and republicans on the hill are meeting with Community Bankers who are in town. Mean what with this all would this all mean . In exchange for deregulation. Would that help or hurt the banks . Offset for the counter offer to the protections put in place with doddfrank. His President Trump trying to crack down on banks or is he trying to give wall street more flexibility while saying hes going to address the problems that led to the 2008 crisis . It all depends on what language he is either drafting from the white house side or getting behind on the congressional side. Its not even entirely clear how fully baked his ideas are or how much he was just reflecting the fact that he is in the process of having these conversations. David thank you, margaret talev. Jonathan this was yesterdays session. Trump says he will actively consider breaking up the banks. The stock goes like this and like this again. I want to ask Anastasia Amoroso about a very technical chart i just drew in thin air. What did you make of the price action . A market that went straight back up again and brushed it off. Its another element of uncertainty that was introduced into the market. Necessarily a legislative or even a president ial priority. Is priority that the market focused on right now is health care and tax reform. Thats how i would explain that price action. Everyone is focusing on tax reform. What is your base case right now . Tax reform is not going to be what the proposal was last week. Earningscase is that are not reflecting any positive outcome from tax reform and for that reason i like that we have reset those expectations lower. Any incremental change even with some adjustments is a positive for stocks. Alix in terms of banks, how much of deregulation is baked into bank stocks right now . I think some. I dont think that is the driver of the bank stops. The steepness of the yield curve has been the primary driver. Banks theok at larger amount of risk control that has should bento place sufficient to solve for worries we might not otherwise have. The worry is that something on the commercial side may jeopardize something on the consumer side. Every division of the bank has its own risk control. The risk ratios are absolutely reflective of that. How does a rollback position u. S. Banks versus european banks . I think they are going to be sticking. This is a process. I dont think we are going to unwind overnight. We have come a long way to making sure the capital ratios are where they are. Both banks are on a more level Playing Field with respect to the capital ratios as they have been in years past. David bank stocks like the election of donald trump. If it was the yield curve more than the deregulation what has happened on the long end of the yield curve . That how coming off of much of that valuation holds true today . Have definitely had a reset in longterm rates and expectations. We have also had a softening. Down bankragged stocks, yields and the whole reflation trade. I am going to take the other side of that equation. Dataconomic disappointments we have recently seen i think will turn around. We will see a better vehicle sales number. See better Consumer Spending data. The long end of the curve should continue to rise and not fall. David we get vehicle sales today. Think we will see a rebound from the number we saw in march. Jonathan you are not worried about the cracks . Not yet. We are still optimistic and constructive on u. S. Equities. What would make us not want to be in is if we see signs of accelerating inflation. If we see signs leading to a more aggressive fed that would make us a more cautious. If we see signs of can do is running out of steam that would be the case. We dont see that now. David what about credit growth . There is some concern that is softening. It is something to watch. It has been going down across the board. It has been happening in the consumer space and the commercial space. The reason we like the opportunity in the United States and we like the opportunity in europe better. Credit growth in the eurozone is picking up from 2 . Thats why we would give it to europe. Jonathan Anastasia Amoroso of jpmorgan will be sticking with us. Coming up, the treasury secretary gives his pitch for ultralong bonds. Thats next. , mr. Tom keene will be sitting down for a conversation with former fed chairman ben bernanke. From new york city, youre watching bloomberg. David yesterday we heard it from Steve Mnuchin himself. The United States is seriously thinking about ultralong bonds. He said it could absolutely makes sense. We are studying ultra long bonds. That is something we are considering at treasury. We have a working group looking at it. We think that its something that could absolutely makes sense. Joining us now is Michael Mckee. Still with us is jpmorgans Anastasia Amoroso. If i am not a primary dealer, why do i care whether they issue 50 or 100 year bonds are not . In essence you dont. It could cost the government a lot of money. Successive treasuries have proposed this and no one has ever done it. You can see the reaction in the bond market. Was a quick pop up in the yield curve. Its steepened briefly and traded absolutely flat and spend. Isody thinks this necessarily going to happen. The argument is for low rates. Now ifld lock that in you think the deficit is going up. Leave aside any trump fiscal programs. Entitled and entitlement spending is going to rise. Every time treasury asks if its a good idea the primary dealers premuch all say no. David what about the United States government . Larry summers says, with Interest Rates this low why dont we lock in money for a long time the way u. S. Corporations are doing . Generally primary dealers say their customers are more interested in the Corporate Bonds than they are in Treasury Bonds because the yield differential for taking that duration risk. Its going to be expensive for the government. The treasury has built the whole market on regular and protectable issuance. There isnt going to be a lot of demand for fiftyyear paper. Its hard to say you could issue it on a regular basis. Tot means the cost is going be greater to the government for doing it. 30 year bonds are primarily Pension Funds and they hold some maturity. The Trading Volume for five year bonds, you can see a significant difference. The blue line is three to six year bond area. Much more traded in the shorter maturities. If they are not traded very often its going to cost you more and premiums are going to go up. Just hold it for the next 50 years. Youre not a big pension fund. If there was a 50 year bond what with the yield be for you to want to buy it . I think the price is right now. A lot of Pension Funds in japan are turning away from the domestic gdp is an looking towards it treasury market. So this looking to do year on an unhedged basis. Treasuryon longterm is an attractive proposition. I think there would be foreign demand which is probably why the time is now to consider Something Like this. Most of the dealers say you will get a 15 to 20 point basis premium. Tois going to be harder sell. You also have the problem that the fed is not going to unwind the Balance Sheet and that suggests there is going to be less demand because they have been the primary prop for the long end. Forward vehicle sales forwardd forward ford vehicle sales. What do you think . Lets see how the rest of the day shapes up. We will see a rebound from the First Quarter. One of the biggest dragged of consumption was the decline in Motor Vehicle sales. I think that turns around. The rates are still attractive. Even though there are some concerns about the subprime auto issuance of the consumer space looks good to us. Jonathan how good of a read across are they for the broader economy . Longerterm to be a purchase. A turning point is slower. Everybody got nervous when auto sales dropped. A lot of retail layoffs. Were going to need to see more months of data. We will have to see how this plays out. David its ironic how this plays against President Trump. Up autos and what a difference he has made in the auto industry. The sectors he has gone for havent done so well. Havent. The overall market has. Despite some of the disappointment with early expectations the overall market is up 7. 3 . This puts a cloud over the fed meeting. They are going to have to reconcile keep june alive. Or hardave the soft data and vehicle sales are the next example. Very mildr a statement from them that doesnt suggest we are falling off a cliff. They want to keep their options open. If this continues its going to be a red flag for june. Alix has been a trend. There has been a trend. The market has done really well. Alix Michael Mckee and Anastasia Amoroso, thank you very much. Y calm, buystak stocks. Julian emanuel joins us next. This is bloomberg. Hitting its lowest level in a decade. Trading almost three times more if you are Trading Options on the vix. Highest at seconds level in april. Joining us now on set is Julian Emanuel. Underneath may be seeing movement in terms of pricing. Tweets saying, i want a good shut down in september. Do you have to buy the vix here . You do. The setup coming into the brexit vote and the setup coming into the u. S. Election vote was hedge yourself. Make sure you are protected. We saw the hedges were unwound immediately. Outcome the market judged to be more problematic in both cases occurred in the market kept rallying. The exactit is almost opposite. People are looking at the French Election. Hedges are cheaper than they have been in many years. Thinkt perspective we even if the market rallies volatility is so low that its likely to stay. Alix what would you protect against . For the professional investor there is an element of it is a cheap but it makes sense to buy. Those are the people looking at their screens. Context 250 o gains. We dont think the bull market is over. We havent had a pullback in a number of months. The market has treaded water even though we have had great earnings. Therefore these valuations you are susceptible to a pullback. Its the kind of situation where you would rather be a buyer into weakness that have to be a seller into weakness. Thats why hedges make sense here. David we tend to talk about a market as if its one thing. Its a lot of things. Of the low vix is explained by the reduced correlation among those individual things within the stock market and is the real question whether the same thing drives all the stocks. The phenomenonng of low correlation to an unprecedented degree. You have seen a couple times through history. Is the primary reason the fix has been driven to this level and a sensible he the reason that is happening is because you with thesconnect economy growing and confidence levels off the charts. Viewa positioning point of people position for better growth and now they are waiting for the convergence of the Economic Data to the confidence data and that is basically causing a donothing attitude. David as long as we have slow and steady growth do we remain where we are with the fix vix . You can. Alwaysity market doesnt reflect that. If you strip away the bubble thes you are arguably at highest valuations that we have seen and 30 or 40 years. Jonathan you mentioned some of the events of last year and how investors have been conditioned by big event risks they took out hedges for. Thats event risks. How do you think about event risk versus just risk whole full stop . Lasten you look at the year the concept of event risk is taking on an entirely new meaning. On the one hand we hear break up the banks. On the other hand we hear Government Shutdown would be a good thing. Alix a good Government Shutdown. The fact is we are living in an environment of heightened risk. There are some discreet ones we know. The fed is this week. Likely to raise rates in june. We know theres a French Election. We are remaking the geopolitical map over the course of time and we are trying to get legislation done and all of these things carry risks that investors are over discounting. Goingan some people are to say, we also know the fed is going to go at a snails pace. We also know the French Election doesnt really matter. I say, the fed may go at a snails pace but if the economy doesnt pick up, a snails pace may be a headwind for equities. April u. S. Auto sales down 4. 4 percent. Not after medic as ford. Another disappointment for auto sales. Theill continue conversation. Julian emanuel will be sticking with us. Futures unchanged on the dow and the s p 500. Youre watching bloomberg tv. Jon to our viewers Worldwide Committee were watching bloomberg tv. Futures are dead flat this tuesday morning. Up a marginal three points on the dow. Unchanged on the s p 500. Toyota come a downside surprise. The auto sales figures come through for the month of april. Switch up the board quickly. Treasuries, yields higher by a single basis point pigot single basis point. Alix a little bit of poignancy here in the markets. The dow jones up 40 points. The nasdaq hitting another record high, up. 1 . The nasdaq has now had six new record highs in the past nine days. Apple on deck can also sitting on a record high into earnings. Got some good and some bad loss of . 27 a share. Revenues did come in just a bit light. That stock getting a boost by 12 . Community health up 5 . It did beat on earnings. Becton dickinson, revenue was better. It did expect revenue to rise to. 5 the rest of the year. A little bit of softness in the stock. 5 the rest of the year 3. 5 . How do earnings and stack up with the rest of the world . There come of the story is about europe. The white bar, citigroup earnings revisions index. The blue bars for the global index. Seeing much more upper revisions in europe and the u. K. Than the rest of the world. Profit growth over in europe, 24 . Ere in the u. S. , 1214 half of the growth we are seeing in europe. His europe a good tactical buy . Will answeremanuel that question. The by europe trade. You have to sell the u. S. To buy europe . Julian you dont have to, but practically speaking, the flows we are seeing my people are trimming their exposure in the u. S. To buy europe. There isnt an unlimited buying power globally. Europe really does remain a compelling story to us. Really for the reasons, its all the right reasons this time as opposed to early 2015 when it was purely a weak currency trade. Now, it is a sign of strength. The euro will appreciate over the course of the year. That is not going to hurt this time because so much business is going to emerging markets. Jon more auto sales coming out of the United States. Weve got gm in just a moment. Gm april auto sales down 5. 8 . Another downside surprise. To pivot back to the United States, bank of America Merrill lynch coming out with their latest client survey. The lowest of any april since 2011. Climbs hedge funds that a lot of clients elsewhere coming exposure. Trimming exposure. , for us,fo s certain numbers this morning are disturbing. Will be focused on the numbers over the next several weeks. If you look at the isn yesterday, there was downside surprise. Look at bank lending to , that slowed down. Mirroring what you saw in auto sales. There are cracks in the story. But come it is nothing that we cannot get through. The expectation is that we will. Data is going to be exceptionally important this time. David we want to bring in our experts from our the trade bureau. Detroit bureau. Here to take us through the april numbers, u. S. Auto editor jamie butters. It doesnt look very good for either ford or gm right now. Jamie not looking good for the whole industry. These are the three biggest players in the u. S. Market. They are all down more than analysts had anticipated. Definitely some soft is playing out. Gms retail sales were up a little. Theres not a lot to hang your hat on. Car sales had been falling and i suv sales have been making up for it. Theres just not enough growth and suvs to make up for the plunging auto sales. This is more of a car story than an automotive story. Suvs, light trucks are holding up all right. Tastesthe consumer against cars shows no sign of abating. This is four months in a row of sales declines, which is a pretty solid trend. Theres a strong finish to 2016 and maybe that carried over and gave a soft start to the year. We have to watch the next few weeks and see how may and june play out. It looks like we are past the peak. On the downside of a plateau and maybe starting to contract. Alix what about Pricing Power . Jamie prices went up again last month. Which helps the push out those marginal buyers. They should start to see some better deals in the used car market. Which is good for those consumers. Little extra competition for the new car dealers and the manufacturers. Thats another headwind for the industry. Alix where are we in the cycle . It does appear as if. Les are past the peak it is concern. Its part of the disconnect that the data from where that that is tells you the cycle is later. However, the economy hasnt had the surge that normally comes with it being later. The confidence has surged. Jon david picked up on something. Up. Sales have held im wondering if auto firms have made the switch quick enough. The volume story doesnt impact the bottom line in a majorly significant way are using a strategic shift amongst the businesses . Jamie a little bit. Theyve seen this coming. Tastes for suvs have been strong. Using factories change over you have seen factories changeover. Thatf the analysts noted last april, 3 of the car being sold were from the previous model year. This year, it is a percent. 8 . This is old inventory losing value. It is potentially a big problem. David jim is cutting back production. Will they have to cut back further . Gm is cutting back production. Jamie mexico does more on the small car side. They could bear more of the brunt of the cuts that need to happen. Weve seen some cuts here and there. If sales keep falling and falling more than the automakers and analysts are predicting, they will have to cut deeper. We are seeing gm at 100 days supply. Were hitting the big selling season. If it doesnt selling off start selling off quickly, they will have to idle off some plants. Jon if the money is switching out of u. S. On valuations slowing growth, where is it going . Is it more focused on europe or the yen . Julian it is europe primarily. We expect that to accelerate if the political outcome is judged by the markets to be less volatile and france in france. This flows into emerging markets as well. We are getting declines in japan because of the inflation story. E. M. Best is into that is that a relative value trade . Julian it is. Notdata from china has been consistent with a growth trajectory. China has its own political issues it needs to deal with this fall. Jon thank you for joining us. We are 10 minutes into the session. Higher, up little. 3 on the dow. As the auto sales grab the toyota, fordgm, all deliver downside surprises. The stocks trading lower. Gm down over 2 . Youre watching bloomberg. Emma this is bloomberg daybreak. Coming up tomorrow, tom keene sits down with ben bernanke at 12 20 p. M. Eastern time. Apple stock trading at a record high again. Second earnings coming out after the closing bell. Adding 120 billion in value since the election in november. The stock is also responsible for sticking percent of the nasdaqs rally so far this year. 16 . Joins us now from Credit Suisse , Julian Emanuel of ubs still with us. We wont get much information about the super cycle. People look at these results and im fairly sure they will be up 50 billion in revenue frankly, the reason the stock has been tightening, how good the next iphone will be. Quarter from a purely nearterm trading perspective is a bit more challenging. Alix also, the Revenue Growth. Has the market accepted that point of view and is that what hear from expect to hear from apple this afternoon . Kulbinder Revenue Growth will be low. That is no surprise to anyone. As we have this iphone cycle, what is the longterm earnings power . The earnings could grow from nine dollars and change this year to more like 13. Thats what investors are bracing for over the longer term. The first cap slower Revenue Growth is not surprised to anybody. First half slower Revenue Growth is no surprise to anybody. I think both have to occur for the stock to work. Our best Case Scenarios the services will grow from 20 of gross profits to 30 . Thats important. The quality of the business improves. That services story playing out is something that does happen over the next 23 years. 23 years. Fiat chrysler come april auto sales down 7 . We got gm and toyota and ford and now, Fiat Chrysler come all disappointing further auto sales. Sales. Their Auto Technology has delivered. The Fourth Quarter was great. This quarter was great. We think the technology is an area of the market that can sustainably grow at low double digits over the course of the year. We like the text is probably because of the growth trajectory and the valuation is not a premium to the broad market. In point the cash on the Balance Sheet overseas from technology, health care as well you think about tax reform, repatriation is the thing all the politicians can agree on. What do they do with the cash on the Balance Sheet . Kulbinder the likelihood is they will do a balanced approach where they can do a major capital returns of they have 230 billion offshore they will have to pay some tax on that. Sense, do think makes you increase the capital thed by 500 million only thing that potentially make where the Services Platform is on content they should go after netflix. Jon why . Has 700 million active iphones in circulation. Apple could distribute netflix very aggressively into their user base and it would simultaneously give them some they dont have any content of their own to negotiate with those media suppliers. You would simultaneously get some original content and you buy a tv video content over the top layer. Over the top player. David how deluded would that be to earnings for apple diluted would that be to earnings for apple . Kulbinder for this to work, two things have to happen. You have to have material revenue synergy. Apple has a significant user base. You distribute netflix towards that. You would get leverage with the operating income and apple could improved,derately ifir earnings per share that is changing, theres other things apple can do with netflix. Imagine of apple turns around to all the users and say here is apple music and heres our Video Service we will bundle in those services for free. That sells more phones and gives you more business on the hardware side as well. David very interesting. Where does the extra money come from . Subscribee are into netflix or they can charge more to the existing people . Kulbinder definitely the former. You have 110 million netflix users. Penetrate the 700 million apple users out there. Alix great stuff. Kulbinder garchainder of credit ubsse and Julian Emanuel of. You can check out tv go and is online and click on our charts and graphics and indirect with us directly. Watch is online and click on our charts and graphics and interact with us directly. This is bloomberg. Jon this is bloomberg tv. In mud s p35 seconds 500 grinding on the lower into negative territory as the auto sales figures keep coming through. April auto sales down 1. 5 . Nissan. De surprise from weve already had downside surprise from gm, toyota, ford gm negative three. Fiat chrysler down over 4. 5 . Weve been waiting for the moment when things would top out and roll over. A lot of people thought it would happen last year. It is starting to lose momentum now. David this stock has not been trading at the level it should have for any of these companies. We are joined now on the telephone by the tigris Financial Partners cio. Thank you for joining us. What should we make of these numbers . How bad is it . It is disappointing because weve been following a strong trend in auto sales. The expectation was it would cars. Ue at 17. 5 million a number of the key drivers are still in place. The average car on the road is over 10 years old. In the last trough of the otto cycle, we were at a point where it was nine years old. Auto cycle. Some of the issues, theres been lack of incentives. The manufacturers are not incentivizing as much as they have in the past. Theres been concern about credit quality deterioration and auto portfolios. I dont think they have been aggressively lending as they have in the past. David what happens to the auto sales . Also, what it says about the economy are they prepared for this . Can they whether this storm . Barra says they been preparing for a day like this. Ivan they are in the best position theyve ever been they have plenty of cash and capability to weather a significant current significant downturn. Bad. Is not that have increased manufacturing with that allows them to adjust plans quickly and ramp up again. Theres inventory in the channel. Dealers are not sitting with an abundance of cars. Alix is this a reach over to the Global Economy . Canary in the coal mine . Ivan Consumer Confidence has been incredible he strong and has built up a lot since november of last year. The consumers are not spending to the level you would think based on the level of confidence. Jon thank you very much. And nissan downside surprise. Stocksut of the four deep into negative territory. This looks like a bit of a correction now. David they for this. They have been caring for this. They have been preparing for this. Jon stocks starting to roll over. You are watching bloomberg tv. Vonnie from new york, im vonnie quinn. Mark welcome to bloomberg markets. Markets. Erg vonnie we will take you from new york to london this hour and cover stories out of los angeles and tokyo. President trumps next move. Will it hurt his ability to get any significant reform done . Mark strong corporate earnings around the globe fueling stock gains today. Havens in decline. We will look at whether any events could disrupt the market. Vonnie the pressure is on apple to deliver in todays Quarterly Earnings report. Shares soaring this year, up 25 . Can apple keep up its rate of sales as users wa
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