Headtohead with apple music and spotify. Tesla taking reservations with a massmarket vehicle on the third 35,000 model three. People put down a 1000 reservation on the car. It will not be available until 2018. His master plan to enter the highend of the market and then drive down the market as fast as possible to higher volume and lower prices with each successive model. William explains why tesla needs the model three to sell like hotcakes. The model three is arguably the companys most important vehicle yet. The new car will not launch fully until next year at the earliest will be priced more for the massmarket. With massmarket comes competition. Their success today mean s competitors like gm and bmw are working hard to catch up. Just five years ago, there were only four electric models in the u. S. By the end of next year, there are expected to be almost 60. As any car dealer knows, the more people you are up against, the harder to make a sale. The more you have to spend to promote and market the product. This uses up a lot of cash. Tesla already burns a lot of cash. Worse, both competitors have a big edge. They sell millions of regular cars and trucks to observe the absorb the losses on their electric product. All of which is a problem for investors paying top dollar for tesla shares. Tesla is valued at 30 billion, putting it in the top 10 carmakers of the world. But its sales do not come close to matching other companie you cannot even see them in this graph. To buy this stock at this price, you have to believe they can change the global car market and beat everyone else what they do so. The model three will have to move fast to catch up. I spoke in portland, oregon with more on teslas plans. The most important issues here, tesla has a huge number of challenges going for. They have said all along, even as a luxury company, their brand is underpinned by this idea that they are on a mission to make cars available everywhere. This is the first vehicle that will take a step in that direction meeting fully. Meaningfully. Execution is everything. Tesla is fueled by big subsidies for the car. Some states have added to that. Weve seen those subsidies have going away in europe, norway in particular. The suggestion is that by the time this gets out, they say theyre going to ship in the last quarter of 2017. Only made six cars the last time. Look at all of the competition out there. Mercedes, bmw, we have a lot of cars that will be there to compete with them in the all electric space even before this thing is in production. I think that is why tesla is taking this step of going ahead and collecting deposits before they even show the car. They want perception that they will be the first to market with the affordable car. The reality is there will be a lot of competition when they get to market, assuming they do not delay the actual launch of the car. Which they have for all their other vehicles. Huge challenges there. Back to that pricing, is that 35,000, does that not include a lot of the extras people will want with the car . We have seen that where the average price is a lot higher than the base model. They have a choice, they can either have an affordable car that beats all the competitors by every metric, or they can have a car that beats profit delivers solid profit over the competition. They cannot have both of those things. The real question here with this launch, what we will look at, is which side of that equation are tesla is on. Are they going to continue to be the competition and build their brand by offering more for less or are they going to start generating profits at some point to support their ridiculously high valuation . I think they have to do the latter. But that threatens to disappoint consumers. Who are used to this prestigious come high level of execution on the product. Cory the model s is so cool. Even at 100,000, they lose money on every sale. What are they not going to put in this car . If you lose money on every sale, you cannot make it up in volume. As great a product as the model s is, its reliability and quality has been quite bad. If you do the research on this vehicle, Something Like 80 have had the driving unit replaced once. That is a big deal. Edmonds is a car in tumor consumer advice company, their test model s had the drive unit replaced twice. They are on their third drive unit. As you get into this massmarket, people become more demanding. It is an interesting dynamic. Mass consumers rely on their car more than luxury consumers. They will be a lot less forgiving if these problems persist. As they ramp up production, without a great track record of manufacturing quality, those defects are likely to go up. All this together spells a tough challenge for tesla and elon musk. Cory microsoft makes a big bet on Artificial Intelligence after their last ai bet led to a stream of sexist, racist tweets. Well show you their take on ai. Spotify and pandora singing a different tune. . Cory this week, microsoft is hosting their annual Developers Conference in San Francisco. Their ceo announcing their intention to be a leader in Artificial Intelligence. Their latest attempt was kind of hilarious. They launched an ai tweeting program. It ended up tweeting racist and sexist things. We want to take that power of human language and apply it to all of the computing interface. To do that you have to infuse into computing all around us, intelligence. That means you have to bring forth these technologies of Artificial Intelligence and Machine Learning so that we can teach computers to learn human language, have conversational understanding, teach them about the broad context, People Places people, places, things. Context about your preferences, your personal knowledge. So they can really help you with your everyday tasks and everyday life, both at work and elsewhere. Cory does microsoft have a future in ai . Chat bots are ai programs that do things in a human fashion. Microsoft wants them in commercial areas, but also to sell you things and provide customer service. Theyre going to make them themselves and ask people to write them. They put out developer tools. Cory weve had people say on this program that microsoft is quietly making a big comeback. Is microsoft very relevant . People are paying attention again. There are exciting, interesting things happening. This company is more tuned into the overall state of programmers than it used to be in the world of coding than it used to be. Every now and again the old microsoft comes out and bad things happen. Cory i think it is so interesting that microsoft as a thats was a Company Microsoft was a company that dominated technology, every conversation about technology regardless of the aspect not so long ago 10 or 15 years ago , maybe. What matters most . What matters most is building a future. They missed the mobile revolution. Steve ballmer, that is probably the one big hit on his agassi. It put microsoft in this position. For the future, it is carving out a new market. Artificial intelligence seems to be a strong part of that. Conversation as a platform is a strong part of that. I also think that the success of the platform. Cory the success of azure or whatever everyone pronounces it differently. I say azure. That is a huge success for them. You see a lot of your clients talking about this. I think they are part of the big two. What microsoft hopes to do is infuse intelligence into that delivery of cloudbased services. Intelligence like a bouncing paperclip. Hopefully it will be better than our old friend, clippy. In this instance, developers can call on these different apis to create these bots. There are all these cameras today, and they could tell you your emotional state. They could tell you youre happy, sad, you are 31 years old, your 51 years old. That you are you are 51 years old. Theyre trying to make those tools available so developers and incorporate them into their own programs. I think that they are killing it in the cloud. They are number two. Azure is a big deal. Cory i like this it im not the only one who cant pronounce this. I think we are back to clippy. It was based on the idea that conversational interface would help people deal with all the complex of the in mark software. Theyre trying to do it for the whole world, not just one application. Why didnt that work . The idea was not a problem, but it had no intelligence. It did not know what you needed most of the time and it and did most of the time and it did not know when to shut up. Microsoft is thinking with ai and Machine Learning, these things will understand your context, what you need and when you need it. That is the bet for them. Cory have you used amazon echo . It is catching on for a reason. It seems to understand natural language. You can do something with it, too. Siri works, but i dont use it. I think that is a common expense. People use it for things like they are in the middle driving, and they need to send a text. That is not super intelligent. Today, they showed this idea of being in a chat about travel and there is a box that gets into the conversation that makes a recommendation. That is proactive intelligence. Cory is this anything more than the advancement of moores law . Machine learning has been talked about for 70 years or so. Are we finally at a point only because of the advancement of semiconductors or Something Else going on driving this . People in the world of ai will tell you that there has been new approaches and models for representing knowledge and doing weird things with ada. With data. A computer just beat a person at go thanks to google. Things are happening. There are new approaches. A lot of excitement. The basic idea is the same. The idea, the dna is not entirely dissimilar to what we see from clippy. We see a lot of Information Available on the open web and giant databases. There are billions of more users to interact with. Cory that is our own deana vass, jp and paul. A littleknown japanese pinball maker soaring this week after reports that it might be behind the fbi hack of the San Bernardino iphone. That story is next. Sound cloud launches a long awaited premium service. Why sound cloud will survive the streaming wars, from their ceo. . Cory lets take a look at apple. The fbi said they cracked the security of the iphone used by the San Bernardino gunman. A littleknown company worked with the fbi to crack the phone. They saw their shares soar 40 after that report. I sat down with alex webb. Alex suncor sounds like the company we should all know about. It is completely off the radar. It has a rudimentary website. It is like a holding company. The have a number of assets, one is this israeli firm. A small company. This is an interesting company. We should see it more as a shuffle master, a company that makes slot machines, things like that. It is interesting they are in this business. This is not a huge secret in the intelligent community. Alex the fbi does contract with a lot of different people. When i was looking last week, people were saying there may be maybe a Dozen Companies that could do this and any number of those work with the fbi in some capacity. There could be an office in San Francisco with two guys who are experts that might help the fbi locally. People talk about this, but it is a box that you can plug into a pond. That plug into a phone. Cory it is a machine that the company it is a machine, the Parent Company is based in japan. Alex it was bought by the japanese in 1990. It remains largely independent. They have offices in the United States. Their r d is done in israel. Cory there is a lot of Cyber Security work that happens in israel. Alex that is one of the reasons bloomberg expanded our tech coverage there. Theres a lot of innovation there. Cory heres the question. If the fbi has had a contract with them for a long time, the fbi said they needed apple to get into this phone, and they did not meet apple. One wonders why did they realize they did not meet apple and if best need not need apple and if the court case was an excuse to get a legal ruling to get into a lot of iphones. That is something experts have been talking about. It seems the fbi could have done this for a long time, that means judges will be circumspect Going Forward when they look at these rulings. They will have a second look and say to Law Enforcement agencies, are sure you cannot do this. Who are you using . Have another try and come back. Cory we dont know if these founders of this company that leads to a lot of companies doing Cyber Security. It suggests that israel has some of the strongest ability to hack and get information when they want information. Alex going back six years now, if you think about the bug that infected a lot of factories around the world. People suspect that came out of a combination of israel and the United States. Cory it has been reported that it was the u. S. And israel combined. Certainly a focus in defensive and offensive tools. Alex they have a huge amount of ability there. People say that the greatest concentration in this area is the nsa. If the fbi cannot do it, surely the nsa can. Cory that was our Bloomberg News reporter covering apple for us. It is getting crowded in the market or music streaming. Pandora and spotify have high hopes of cracking this market. If you like bloomberg, check us out on the radio. You can check us out in the United States on sirius xm. We continue after the break. . Cory welcome back to the best of bloomberg west. And im cory johnson, in for emily chang. Competition is heating up in the music streaming business. This week got hotter. Deezer is the most popular in france, that is just the beginning for this company. They hope to fuel International Growth with an ipo. Those plans were squashed. Francine lacqua sat down with hans albrecht. We decided that the market was not there. There are conditions which were complicated. We always had other options. The finalized our funding privately. You raise 100 billion euros from our main shareholders. We will keep all the options open at this stage. Francine when you talk about the options not being there, is that because it is difficult to get funding on the markets . Because the markets are volatile, were you sell something uglier . I think there are two issues, the markets are very volatile. Tech Companies Like ours. We always a good market support. Second thing, it was just a few months after the apple launch. There are concerns about groups like pandora. It didnt make the environment the good news was, we had options. Francine give me a sense of the United States market. This is the toughest to crack. I know you are present in france. Investors are saying youre maybe too close to orange, how do you crack the market, is it pricing . Do need to get the music acts on board . I think we need Good Partnership models. I think we need big telephone Companies Like orange or others. I think we are going to be one of the big three in the world. We have a Successful Partnership with at t and cricket. We are observing the market. We operate in the market. We have not found the right time to go in. Francine do need to spend more on marketing . You asked for an example. A few hundred million is not do the trick. If you are committed strongly, you have to put a lot of Financial Resources behind it. It is a question of options. Francine how, is it social media . Everyone knows spotify in the u. S. If you want to tap into that market share, what kind of narrative do you have to play out for consumers . Is a mix of social media and traditional media and pr and communication. You need to explain to people what you get that is different. The Biggest Issue of all is how you access the consumer. What are the best sales channels. Telco partnerships are good solution. Francine a lot of the music acts have wanted more of a say on what music goes into what service. Some competitors have given into that. Will you . We are in constant debate with people as well. We have explained very good to our artists and the Music Industry the big debate is on the free side. That is fair. The only has to prescription model. It passes to a subscription model. We are at the beginning of a big market. More than 50 of the revenue is digital revenue. You can see the potential. Francine are there any markets or countries that are willing to pay . We are the leader in the emerging markets. We have some asian markets. Columbia, for example, was a small market or the Music Industry, but now it is a double digit Million Dollars market. Those markets will leapfrog. People jump into streaming. Francine is it infrastructure . It is infrastructure and mobile economy. Francine is that five or 10 years away . It is shorter. You will see the top level of customers. In latin america it goes fast. Africa, it may take a bit longer. Cory that was deezer ceo hans holger albert. Talking with Francine Lacqua in london. Meanwhile, spotify is said to raise 1 billion in debt. That debt is a loan that converts into stock in certain scenarios that turn into class a shares. This deal has some toxic terms. Caroline hyde is monitoring that story from london. Caroline there is a lot of ipo noise coming from the streaming industry. With deezers chief executive saying the French Company may revisit the listing after pulling an initial share in october. It seems spotify has also started the clock on their own idea by raising funds that get more costly for the business if it does not sell shares in a year. The streaming company with a presence in about 60 companies has raised 1 billion in convertible debt. Perhaps using the instrument rather than using normal fundraising to ensure it does not have to lower its previous valuation, guessing it will be worth more in one years time. It is reported that spotify has signed up to give investors in the debt higher coupon and a juicier discount on share sales if they have to wait longer than 12 months for an ipo. That is a big bet for spotify as they tackle the challenge of apple music and have to pay higher fees to music labels. They arty have 30 million paying subscribers and 100 million that listen for free. Now its a race for the ipo. Caroline hyde, Bloomberg News, london. Cory sound cloud is jumping on the streaming bandwagon. They will be similar to pandora and apple music. Sound cloud go, for 10 a month, users will get 125 million songs and licensed content on demand. I spoke with the ceo to ask him how he is going to compete against bigger and better financed rivals. The unique thing about sound clout is that it started from a sound cloud is that it started from a Greater Community from the beginning. It has gone from directly at the source, which is the creators. We pay about 12 million creators every month. That has rated 125 million unique visitors every month. We have had a much larger catalog than any other service out there. Cory why use the word creator instead of musicians . Are you talking about people who put mixes together as well . I say creator because it is broad. It could be musicians or podcasters or comedians, teachers, any kind of creator. Cory i will give you that. What makes your service very different from what we are already seeing from apple or spotify or pandora . Soundcloud go, our Subscription Service for 9. 99 every month, you get some features at three. Offline sync is huge for our millions of users. It is our most requested feature. We have a radically expanded content catalog. We offer over 125 million tracks. Everything from the biggest hits to the deepest underground tracks that just came out. It is the only service in the world where you get that full breadth of content. Everything from giants to emerging creators. We have starts from yesterday, today, and tomorrow in one service. Cory i wonder what your take is on apple music. Lets not be kind. When you look at what they have succeeded at and failed that, what do you see . I think that they were in some ways a little late coming into streaming. As i said, we are early in the market over all. Then helping the market grow from the perspective of their service and in terms of focusing on it from a device perspective is good. Choice for consumers is always good. We have always wanted to build the Music Service that can contain the entire worlds creativity. All the different creators out there. I think that is really appealing. Cory let me ask about pandora. A different kind of service. They are going through some struggles with their ceo suddenly out this week. The founder comes back again. If you were looking at pandora, what do you think they need to do . I think what they have done well is capture peoples intent to listen to radio on their mobile device. Have a simple experience to listen to long and uninterrupted sessions. I think theyve done that will previously. People want to be able to open the app and just listen to a great stream of music. That is why we have featured track stations. You can start a station from any track and have it play for as long as you want. Cory do think they are focused on a different kind of experience . Is there a downside to not have individual tunes . I think todays music consumer wants to be able to listen in different ways. I know that i open up the app and just want to let it play because im lazy. Sometimes i know exactly what i want to go to. Some days i want to listen to a top 40 track, and some days i want something that was just released and is not available in the system yet. That is universal for most music listeners. We are trying to cover all those different cases. Depending on your mood, you can have the experience you want. Cory that was the sound clout ceo Alexander Young joining me. Fitbit outselling the apple watch. I will ask the ceo if he can keep it up. We will talk to a hot startup that has a megaround of funding. Cory the battle of the fitness bands. Fitbit remains in the lead. It is still dominating this market. Earlier this week, we spoke with the ceo. With the fitbit ceo james burke, we started asking him about the fitbit blaze watch. The company has grown pretty explicitly. Our idea last year, but we had about 5 million in revenue in 5 million in revenue in 2010. Last year, we had 1. 9 billion in revenue. We have been growing pretty quickly. We announced the fitbit blaze in january. It got great reception. We have 17 awards and counting. We shipped over one million blazes within one month. A phenomenal launch. Cory what is interesting about this device is it is really focused on athletes and best suited for runners even. That differentiates us other products on the market. It is geared towards the active consumer segment. These are people focused on fitness and interested in cardio activity. It really has that sweet spot between focus on the right features, primarily fitness, and battery life. It has five days of battery life. David how much of a hurdle is it you to sell a device to that consumer and what is the likelihood that he will buy another device . Is there a saturation point you are worried about . We are not at saturation point yet. Were growing rapidly in north america and internationally as well. Retention of our users has been great. If you look at the devices of the past six years, 59 of our users are still active. 59 over six years are still active. That is very engaged. If you look at last year, 72 of all users that bought devices in 2015 are still active. Cory im surprised by that. I feel like anecdotally, people buy these devices and put it in the wash, forget it. That might be true for our competitors. What makes us sticky is the power of our software. We have seen that layer of social and Community Engagement that drives longterm retention on our platform. Last year, we had an increase in the average number of friends people had on the platform. That speaks to the power of friends and family driving you to your health goals. Cory i made the mistake of putting someone who gets more steps on my list. Hes pretty competitive. There are always those stealth people who have treadmill desks. You are wondering, i do think they go out. Cory i looked at the reviews online. I looked at how you guys were doing with your watch. It is really surprising to me how much more discussion there was of your watch than the apple watch. I cant decide if that is his device was new or you are getting more buzz than the watch. The buzz has been phenomenal. This has been the best launch we have had to date. If you look at amazon, 85 of the reviews are for or five four or five stars. People of this product. Cory a couple of years ago, you launched a scale. I thought it would start to see a slew of other products that go beyond stuff you wear on your wrist. Havent seen that from fitbit. Is that part of your longterm plan . The longterm plan for fitbit is that we are not just a wearables company. We are Digital Health company. We want people to become more active, lose weight, feel better, manage their stress. Our products are filled with devices that are wearable and nonverbal to address those nonwearable to address those goals. Cory that was simulcast on Bloomberg Radio and tv. Up next, robo advisors in the world of finance. We meet the startup that is writing that trend and just got a megaround of financing. Cory on this weeks funding board, betterments. When it are Million Dollars in new venture capital, raising it to 700 million. These Advisory Firms have some of the biggest firms on wall street, all taking notice. I spoke with john stein in new york, began by asking him how disruptive he thinks this bill this his business could be for the broader financial industry. John weve been building a crazy business and Financial Services that really turns the traditional models on their heads by providing unbiased advice and Better Service than people of had in the past. This is threatening to be in comments, socially with some of the stuff weve seen around this disruption in the space. The financing is a big validation, we think for the model. And for us is the leaders of this movement. Cory im sort of interested in the financing. Lots of Companies Get lots of money, they say you are not coming on the show just because you raise money. Its interesting in this environment given the size of your business, gimme some indication of what that sizes in terms of your revenues. John we dont talk about revenues. The euro a year ago we had 1. 5 million under Asset Management and we had 50 million customers. Today we have 3. 9 billion dollars under management and were hundred 50,000 customers. We grown customers three x, and balance even more that. I think thats what has people excited. January was an incredibly volatile month in the market. January was the fastestgrowing month ever. I gave people confidence in the business model, where is moving thought that would be bad for business like ours, we really had a good month. Cory january we have the nasdaq down by 9 . You had more money than ever before. John good morning deposits from existing customers, not every metric, it was our best month ever. Now march is going to be our best month ever. We keep growing faster and faster. In these markets, that is something that investors in particular like to see. Cory what are you going to do with the money . John we are starting to build our original vision of becoming our customers central financial relationship. We always said we want to try and use our advice in our vision for managed Financial Services to help people do more with their money to make it stretch for sure further, to do more with it. You can see from our functions, where you can see a dashboard of your finances in one place. We want to be your central financial relationship. We are also investing in our advisory business that partners with advisors and the new 401 k business, which is growing like crazy from the start in january. Cory lipsky get out on the corporate finances. We often talk about the money will evaluation, we dont talk a lot about terms. What did the term sheets look like . John we look like really term sheets. We took an offer from a great partner that can tell you about why. Part of the deal was that it was a clean term sheet. Cory no liquidation preferences, no ratchets, nothing . John its the most common friendly terms. Everyone are ounces have that same friendly structure. To us, we prioritize the value of our shares. Im a common holder, all my employees are common holders, we put them first. Cory we see a lot of Companies Taking late rounds with all sorts of hair on the deals. John we saw those offers two. That stuff may seem good at the time, then you get into a rough spot and all of a sudden you really regret having a structure. I also think what you have that structure, your next investors are going to want to put it in, and the ones after that even worse. Weve always had clean turn sheets, which gives us a strong negotiating position we come to the table. Cory that was our interview with ceo john stein. Thats it for the best bloomberg west bloomberg west. We will see you again next weekend. Ear uryear pursuit, saying he has deep respect for innovation and leadership area and games for the year as saudi arabia says a newtions and queensland coal mine is a disaster waiting to happen. Welcome to first up. Coming to you live from bloombergs asian headquarters right here in hong kong. New Zealand Dollar is at . 68. Lets head over to japan. Futures pointing to a higher open. Back on25 did give friday after a very disappointing survey based on a higher yen. Spots 73. S 111 111. 73. Our top story has been a fouryear chase. Foxconn has its hands on the prize. He says he respects the companys leadership and innovation. It has been a story four years in the making. A lot to be done to turn around sharp. The help in the first place, which is why it went looking for a buyer. Foxconn agreed to pay 2. 5 billion. It was less than originally offered because they found out about some liabilities. They have paid a deposit of 9 million. Sharp has Financial Issues it has to deal with. Ofexpected an operating loss ¥170 billion for the Financial Year ending in march. Also a net loss for the just ended Financial Year, and l billion. Than 10 sharp is facing intensifying competition from the likes of samsung, and thats white it it turned to foxconn for help. Also, not to lose independence and not to take sharp apart, so in some ways his hands are tied when it comes to putting together restructuring to turn around sharp. What can he do . , tryn invest in technology to boost sharps ability to make these smaller and midsize screens to take on the competition. Of 1. 8 investment billion. Also, ¥60 billion will go to improving yield and increasing lcd operations. Talk about the difficult situations that the company faces. This is what he had to say. We can not driving change and sharp or Global Company enters competitors were eat us alive. Said they have remain competitive in order to stay alive, but said he wasnt afraid of the challenges to come. Angie he has his baby. What is he going to do with it . They look to push into the smaller midsized market. Samsung is definitely the main competitor. Thats followed by japan display and lg display. Sharp comes in fourth at 9 of the market. If it wants to do to take away share from samsung or the other two competitors. Say that sharp could become a key apple supplier. Foxconn already is, so if sharp can move into this, it can boost its viability. The other question is consumer electronics, an area that foxconn is not an expert in. Foxconn will have to decide how they want to proceed on that. Angie maybe that is the key value to foxconn. You can get more on that and all the days top stories at our digital destination, Bloomberg Business bringing together the best of Bloomberg News, business week, bloomberg television, and Digital Content all in one address. Donald trump back on the attack ahead of the primary in wisconsin. Model threethe new help elon musk make tesla at the apple of automobiles . That is bloomberg. Com asia. Check it out. A whipsaw first quarter, erasing gains for the year after saudi arabias crown prince said the kingdom would only freeze production if iran and others followed pursuit. It looks like this month talks are on shaky ground already before they begin. Haidi thats right. It does look like the major driver for this rally, this 50 something recovery we have seen an oil since february. That may have come to an end. Story if youop oil want to look at it on your bloomberg. It is going through exactly what happened after the saudi prince gave those statements to bloomberg. He said that essentially the leave it open to cutting output if other producers do the same. Every single proposal along this rhetoric has been result with iran not saying anything and showing no indication it would be willing to do that. Futures capping the first weekly decline, down a must 7 for that week, mid february is when we saw the start of that rally from that 12 year low. We did have march oil rising 14 on the back of those hopes that we will see that end of the supply glut, but that is seemingly coming to an end. Levels we aree seeing iran tumbling, the highest since 2012, new numbers coming through, Oil Production rising 100 barrels a day to 2. 3 million in march, the most since may 2012. You can see that in that line there. This is still 30 below the presanction levels, where iran says it was to get to before it will entertain any idea of a supply cut. Producers meant to meet oha, things dont look to positive i guess. Haidi thats right. There would seem to be this sentiment if you take a look at what oil prices did following those comments. If you take a look at the levels we are seeing from iran, iraq, russia, the Energy Minister in russia saying on friday that he has not heard anything from his iranian colleagues, rather saudi colleagues about this potential and a refusal to entertain a supply cut or freeze unless iran does the same. Really what we are seeing is the standoff by saudi arabia as the biggest player. It is really the smaller players who will feel the detriment should these talks go ahead, but we have no real result. In fact, a local iranian report in the media over the weekend saying the iranian minister saying that he will only attend these talks if he has time. So things are not looking very good ahead of the meeting, and prices starting to come down a little bit from that 12 year low rally that we saw going through to friday. Angie thank you so much for that. , tradersdlines for you are pricing in at rate cut and australia in the next 12 months even as growth outperformed last year. U. S. Is because the falling dollar is giving the aussie dollar a lift, clouding growth prospects. The aussie dollar has surged 13 since january from a sevenyear low. Monthlykers hold their meeting tomorrow, economists expecting no change. After a lackluster performance, Fund Managers are betting the ball has room to run. Futures dipped from a 13 month high, but hedge funds are the most bullish since january of last year. That is after gold posted its 17 . St close, rising march saw the dollar at its biggest monthly loss since 2010. A Tobacco Company closing factories as the government announces new packaging rules. It was forced to shut plans because it did not have time to implement larger Health Warnings. Indias Tobacco Industry and the government are fighting over the regulations which say Health Warnings must cover 85 of the cigarette packs surface. Converty allow banks to one trillion yuan of bad loans into equity. We have tom joining us for more. Welcome. You will be our new beijing correspondent, but youre hanging out with us and hong kong today. What is the story . We heard talk about these problems with nonperforming loans on chinese banks and Chinese State owned enterprises, now we have details. The government will allow one trillion yuan of bad loans to be swapped into equity, so that is some of the Major Chinese banks like the Chinese Development bank, icbc, and china merchants bank. They are shifting were taking some of those bad loans from the state owned enterprises and converting that into equities. It is just the first age of the plan we are dealing with, likely to finish off in three years. These are early days, but some details following discussions we heard around the National Peoples congress, obviously an attempt to tackle this big problem of debt come up to juliet state owned enterprises. Angie there are concerns with this. There are concerns. Likes of the the chairman of China Construction Bank saying he would not want to see that debt turned into bad equity. Basically the chinese banks tanking on the bad loans from the state owned enterprises, not dealing with the problem. That was his concern. We also heard from the Vice President who said it has to be capped. Being voicedern to by chinas banks, showing how concerned they are. Most of these balances are with the state owned enterprises, and questions about how much state support might be given, so if there are cash injections, that may help ease things at the chinese banks as they take on these bad loans and the equity. In 1999, we saw a bailout effectively. Unlikely to be politically feasible this time around, so there are many questions, but we know corporate leverage in china is at record levels. Angie perhaps optics is behind the move in china. Here,s biggest ceo interesting salary cut. The chairman of icbc saw his 2015. Ashed 72 in this is the Worlds Largest bank. His pay in 2015 was just under 85,000. That is around the amount the head of a department at a British School in london might get come and he is in charge of the Worlds Largest bank. This comes as china is trying to curb compensation, balance out inequality issues. Jamie dimon, ceo of j. P. Morgan chase, earns 27 million in 2015, so 0. 3 of that. Angie that is a tough job for that pay. Thats the way it is in china. Thank you for that. Coming up next, we will take a look at the key economic crisisd ask about a debt in australia and whether it is overblown. Two. T up returns and it is 7 16 a. M. And hong kong , these of the stories making headlines. Indian police considering murder charges against people arrested in connection with the collapsed ,verpass, 26 People KilledOfficials Say building regulations had been ignored. Androadway was being built the project was years behind schedule. More data from the missing Malaysia Airlines plane. It is said to be from the interior of the aircraft. Last july, debris washed up on reunion island, and Officials Say to bring other parts in h370. Bique are from m north korea says it has tested a new antiaircraft missile system. State tv shows kim jong on watching the launches, but its not possible to say where or when the pictures were taken. South korean officials the tech did a rocket launch, but it is not clear if it is linked to the north korean claim. South korea and japan says they will Work Together to prevent the north from advancing its weapons program. Powered by over 2400 journalists and 150 bureaus around the world, this is Bloomberg News. Angie time now for a look at the big events we are watching this week. The first monetary statement tomorrow after the indian budget , Prime Minister modi is stuck with his growth target. Of 25 basis points expected, 6. 5 . The Central Bank Cut rates four times and has left them unchanged for the last to bring meetings. Bignames gathering in the bahamas on thursday for the annual meeting of the Interamerican Development bank. And chileanef central bank governor. The global diversions of Monetary Policy will be high on that agenda. Also on thursday, vietnam should get a new Prime Minister. Leader ist deputy expected to be voted into the top job by the national assembly. Predecessor,ce his who failed in his bid to become common his party chief. Saturday is the start of the Indian League extravaganza, the ninth season, and the first matches between mumbai indians and rival supergiants. Value of the franchise at more than 2 billion. More now on the data and decisions that may move markets this week here at this week. I guess all eyes are on australia for tomorrow. They certainly are. Certainly in the Foreign Exchange market. The australian situation is quite interesting. The economy has performed remarkably well given the circumstances. Rba willnt mean the have to cut Interest Rates further. About the outlook of Economic Growth linked to investment, both residential and mining investment, and also inflation outlook will be weaker than most people expect, but the latest thorn in the side of the rba in australia is the strength of the austrian dollar, and for an economy like australia, that will hurt it, so i wonder if tomorrow the rba will try to talk down the dollar in its policy statements. Angie how can they job on the thear down jawbone dollar down when it is janet higher,riving fx especially in australia and new zealand where rates are higher . Thats right. A lot of the strength in the Australian Dollar recently is due to the actions of the u. S. Fed, not the reserve bank of australia itself, but Exchange Rates have two sides to the coin. Just as the fed can influence the Exchange Rate between the dollar and the austrian dollar, the rba could do the same. Could try and influence the dollar. Im not saying it would be extremely successful, and im not suggesting the reserve bank of australia is more powerful than the fed, but sometimes it is best to try to do something rather than do nothing. Angie at least internally and australia, growth is robust and australians seem to be buying into that story. That,n covering a lot of 186 to their disposable income. Are these concerning levels of debt for you . I think it has to be a concern. The issue is how big of a concern is it. Australia has amassed a huge amount of debt over the last some degree and to it has helped it through the global financials crisis when other economies were struggling, australia wasnt, so there are some reasons to be thankful, but the high level of debt and housing debt is the single biggest risk to the austrian economy over the next few years. Thats not to say i think we need to get too concerned about this. There are reasons why the situations are as bad as the headline figures suggest. Australian households have done well putting away money in offset mortgage accounts, which means the debt is not as high as the debt headline figures suggest. That the some signs High Percentage of mortgages, interestonly mortgages, more dangerous, is starting to reseed, so i think it is a big risk. We should not discounted completely, but i dont think it is going to drag the austrian economy into a recession and a cheer or two. It is something into a recession in the next year or two. We should not rule it out as a risk. Angie interest only mortgages only work if prices go up. If they cut back because of a slowing economy, what will that mean for the possible bubble . This is exactly the risk i was talking about. In real danger is perhaps twothree years time when the reserve bank of australia finds it has to increase Interest Rates from Current Record levels. Adjusting point that those interest only mortgages become much more vulnerable, and of course there is always a situation about how the International Demand plays into the sydney housing the market, because it has been a big factor over recent years. The Housing Market is slowing and will continue to slow, and i would not rule out some falls in house prices, either at the National Level or in certain cities such as sydney or melbourne. The amounts of excess that would a u. S. Style housing plunge angie we will leave it there. A green light, for the construction of a controversial new coal mine near austrias great area reef. Details when first up returns. Angie welcome back. Youre watching first up. Capan and superman have t their grip on the box office. Resistantsus superman to poor reviews, collecting 52. 4 million over the weekend. Zootopia took first spot. Next, japans negative Interest Rates. Could the Property Market the overheating crisis . Of negative rates in japan, we are live in tokyo when first up comes back to you. Angie it is 8 30 in tokyo. That is a look at the end have imperial palace. It is Cherry Blossom season. We are 30 minutes away from the opening of trading, and you are watching first up. Foxconn chairman has finally completed his fouryear pursuit of sharp. He and the sharp president finished the deal in osaka, running up negotiation that seems on the verge of collapse. Sharp revealed liabilities that could mean a 1. 5 million billiondollar for the fiscal year. Crude is down a 10th of 1 in saudi arabia this year. Production ifop karen follow suit. They could discuss output later levels later this week. They have ruled out production cuts for the time being. Usdas mainland and unit is pushing ahead with plans to become one of the worlds elitist commercial leading commercial banks by deposit. The new president says it is looking at writer acquisitions in the u. S. Further acquisitions in the u. S. Due to steady growth, and the opportunities to tap into asias expanding middle class. Significant impact in the next fiscal year. Powered by over 2400 journalists, this is Bloomberg News. Lets check in on markets right now, this monday morning. The first trading day of the full week in april. Zealand, rising a 10th of 1 . There is also speculation that some point, they will have to cut rates. 68 u. S. Cents at the level there. Also counting down to the open korea,ralia, japan, and the time change means sydney is going to open in about half an hour from now. We have sydney futures pointing to pretty much a flat open, as this was the story on friday, with australian equities falling 1. 6 , after oil fell as well. A lot of investors probably wary what itopec promises likely will do. The Australian Dollar is at explain 76 rather, 76 u. S. Cents. Lets go over to japan. Pointing to a higher open. 225, less close friday three and a half percent down. Lets see what today brings, especially on the heels of a weaker japanese yen. Indian Power Generators has been granted three licenses to begin building a giant carmichael mine incarmichael coal australia. It will create 5000 jobs. Lets go over to paul allen in sydney. It is a project with a troubled history, isnt it . Reporter yes, many hurdles here, environmental, financial, and bureaucratic, and most of them related to the location of the mine. It is in the middle of nowhere , in far west queensland. It is going to need a 600 kilometer long rail line to get out of the ground. This is an important step. Company is saying they will continue to follow finalize approval for the clear aim of beginning construction for 2017. Mineillion to build this and the associated infrastructure. It is estimated the project will create about 5000 jobs. Angie given the trouble and expense involved in building it, does this mine stack up in an era of low coal prices . Reporter that has become a question that comes up every time the carmichael mine is discussed. Gold prices are the weakest in eight years. They are 43 per ton, well off the 2011 price. A number of banks, including National Australia bank, have refused to back to the project. Even the queensland treasury has called the mine unthinkable unbankable. And then there is the ecological effects. Coal mining is water intensive. Is dredging of the port, very close to the Great Barrier reef. Environmentalists are well. Why group has called this the most dangerous, dumbest idea. Angie paul allen, out of sydney, thank you for that. The bojs introduction of negative rates has helped trigger a property boom in tokyo. That has led some investors to warn that the market is overheating, and that a mini bubble is forming. Lets bring in the bloomberg tokyo area keep. What is happening at the moment . Reporter the bojs negative rates policy has pushed down returns for investors across assets. Find hes do need to returns, so they are flocking to the japanese Property Market. They are bringing a lot of cash. That is pushing up prices. Angie is it a bubble . Peopler well, i think say bubble and mean different things. The investor that our reporter spoke to called it a mini bubble. He says theres a 10 20 chance of a crash. That is a pretty small possibility. The baseline scenario is for price gains, as well. Angie what does this mean for boj policy . Were the if i governor, i would be thrilled that i could successfully used the Property Market. You have to remember, the negative rates policy is unprecedented in japan. No one was quite sure how it could work. So when the governor went into the boj boj board and discusses whether the economy needs more support, he and his colleagues will know the negative rates cant policy is effective on the margins. Angie thank you for that. Lets take a look at what else we are following on the bloomberg this morning. Apples latest attempt to crack the Smartphone Market in india has had new problems here it. Secondhand sell iphones because previous campaigns have been hit by tight regulations, and the relative expense of devices due to low incomes. Couldnts warned that this jeopardize local companies and open the floodgates to electronic waste. Alaska air is said to be close to a deal for virgin american. Derailed bytill be a bid from rival suitor jetblue. Both of the west coast network, including los angeles and San Francisco. Billion. Th under 1. 4 the central bank of Singapore Says it wants to date give Financial Firms more room to experiment with technology. They hope to create an environment for experiments to fail, safely and cheaply, without major consequences. However, it would still be up to the companys management to assess any risks in the new adoption of technology. Investors ech taking a stake in u. S. Genealogy service ancestry. Com, valuing the company at 2. 6 billion. Ancestry provides data on family trees and runs a dna testing service. Usa today says genealogy has become the most popular hobby in america, after gardening. That was a look at some of the stories making headlines. Week ofts a busy Economic Data in the u. S. We are also going to hear from the Federal Reserve about the last policy decision. We have a preview from new york. Reporter the week ahead on wall street, u. S. Investors continue to focus on the latest Economic Data, as well as the signals from the fed. One of the biggest of the week will be the recent midmarch meeting of chair janet yellen and fellow policymakers. Investors hope to gain fresh thinking. To their we will be getting that on wednesday. We will also be getting a new reports. Economic economists surveyed by bloomberg say u. S. Service produces probably expanded at a stronger pace in march. That would be the first increase in five months. They also forecast the u. S. Trade deficit was probably little changed, after widening at the start of the year. Ofthe political front, lots action. Democratic and republican president ial primary voters going to the polls in wisconsin. The last major contest before the new york election on april 19. Monsanto,f earnings, bed bath beyond, and writing among companies to report numbers. In new york, su keenan, Bloomberg News. Angie in the two months since the boj took Interest Rates negatives, negative, the market for overnight loans has frozen. The Outstanding Balance in the market has tumbled to a record low of 26 billion since the bank started charging interest on lenders reserves. Lets speak to our bonds and fx editor. Why has interbank lending dried up . Reporter the basic problem is that now banks have to pay in order to lend, instead of getting paid. None of them are sure they want to do that. A lot of them are having problems pricing the impact of that on their longterm finances. Away, andtaying taking their money and doing Something Else with it, or just leaving it where it is. Angie it is a question of, how negative rates really has affected japans Financial Markets here. He said he wanted to flatten the yield curve and he succeeded in doing so. The problem is, i think for a lot of players in the japanese market, negative rights are such a strange beast that they dont quite know how to fit that into their world. The other difficulty is, if you are a bank, you are totally glass. The looking there are Major Concerns being raised about what that means for Bank Profitability and bank shares. Angie what are the longerterm implications, then . Among the longerterm implications are that the boj has become the player in the japanese market. Everything revolves around it, its negative rates, bond buying, and at some stage in has to turn things around and exit stimulus. When it does, there are huge concerns that will lead to massive volatility. In fact, there is already plenty of volatility going on in some parts of the bond and Financial Markets, and that is raising concerns now. Angie garfield, thank you for that. Coming up next, the dollar has had its worst quarter in more than three years. We are going to be asking our next guest if he thinks the rally is around the corner. Hear from citigroup, after this break. It is 8 44 a. M. In tokyo. Here are the stories making headlines around the world. A group of journalists say a new data week leak reveals celebrities hiding money and offshore banks and shadow companies. Companiestor of shell denies fostering illegal acts. The kremlin said it would protect the honor and dignity of president clinton, after after theretin, were links to his associates. Police in the maldives have used pepper spray to break up a protest, accusing the government of suppressing media freedom. 9 people were arrested the maldives remain a multiparty democracy, and critics accused the president as eroding civil rights and liberty. Brussels airport has reopened after the terrorist attacks last month, with heightened security. About 800 passengers per hour with a part, the part, less than 20 of the usual capacity. Is suspending its new york to Brussels Service until next year, because of weakening demand. The airport said returned to full operation by early july. This is Bloomberg News. The dollar has just had its worst quarter in over three years, but the bulls are clinging onto history for redemption. Lessons from the past are showing even with these years losses, the currency may still have legs. Lets go to todd elmer at citigroup. He joins us from singapore. Are you going to buy u. S. Dollars . I think it is too soon. Certainly the divergence trade where the fed is tightening could come back later this year, but for the time being, we arent getting validation from the fed in line with the pickup we have seen in data. That is not enough to keep the divergence trade alive. I think that means the dollar is going to weaken, particular against risk currencies. This is a risk positive environment. I think it is good for commodity producers and emerging markets. Angie surprising though, even after adding 215,000 jobs, betterthanexpected. This is a key indicator for fed moves. We also saw wages coming up slow learner slowly in the u. S. Are these not signs that the fed might raise rates sooner than later . I think there are certainly signs that the economy is progressing relatively well, but we have heard from the chairman herself that she is willing to discount some of the strengths for the time being. I think that means the dollar is really on a tenuous putting, footing despite the fact that the data has been coming out stronger. With that helped currencies like australia, and who else . I think australia does well. I think even new zealand could benefit from this phenomenon. I think the key is that investors are going to seek yield. When we look at places like australia, the domestic factors, are not doing enough to stand in the way of that trade. I dont anticipate the rba is going to push back against currency strength anytime soon. I think those looking for the rba to engage in verbal intervention at the meeting are probably going to be disappointed. Of course, the weak u. S. Dollar and concerns about volatility has propped up the yen to strong levels. Do you see that continuing . I think thats actually an opportunity to go short the yen. I think part of what has been supporting the yen over the past month or so is the fact that there has been an acute need for corporates and japanese investors to hedge ahead of the fiscal year and, but now that , but now year end that that has passed, these are attractive levels for investors to buy foreign assets. We know japanese investors likely need to continue shifting their Portfolio Allocation in favor of other securities. I think that is going to weaken the yen, particularly in combination with this push toward additional easing, as we do anticipate there will be an additional round of fiscal stimulus moving forward. Combine that with negative Interest Rates, and i think it will have a very powerful impact in weakening the yen. Ahead . And the euro the euro would not be my choice to go short against the dollar sorry, to go long dollar. The i do think there is Political Risk premium. But i think it is very difficult to fight this broader dollar trend for the time being, because there does seem to be consensus over among global policymakers that this is the best course of action. Should clear that, concerns. A lot of investors worried about that. Thank you so much for joining us from citigroup. Coming up, gloomy profit forecast for hyundai. They started the week with big moves. Coming up, when first up, returns. Angie will him to the stock exchange. We are taking a look ahead to the open in australia, japan, and south korea. We have our intrepid reporters here. Welcome tom mackenzie. It is his first talk exchange. So you guys, behave. David its a holiday in hong kong. This is the stock i am watching. Japanese stock out of also the. If you are out of osaka. If you are familiar with rice zojirushi. Firstquarter profit, up 21 . They have jacked up the fullyear forecast by 26 . It has done a lot over the past year, 3 call it flat. It is not covered by a lot of analysts. Angie is it more domestic sales or do they export . David it is a mixed. There are bright cookers made in japan, made in china, and they are cheap. I cant complain about the quality. Rosalind my turn now. Hyundai motors, in. Firstquarter operating profits expected to fall 19 percent 19 , according to kgb security. It is not the only analyst to predict the weaker outlook. Firstquarter earnings are expected to drop, according to another Financial Market data provider. Thats a lot of upside there. Tom . Tom they operate tokyo disney resort. They have 30. 1 million visitors last year. Restaurants the around the resort. But the visitor numbers were down from the previous year. They had a p e ratio of 35. There isly have concern, because there is change a disney opening in china in june. That may add regional competition. That is one that we will be keeping an ion as well. Angie certainly not a barometer, but i was in japan last week, and we drove past tokyo disney. I pointed to my three kids under age seven, and they were just like, all right. That is the verdict of the stock exchange. 17th century Imperial Seal, discovered described as the most important historical objects, and is expected to start at 6 million u. S. Dollars on auction. We spoke to suffer the about this rare piece of history to sothebys about this history. This is the largest steel meaning is the ruler of heaven. The markets for historical works like this whose value is based in history, that has only gone up in the last 15 years. This records all the seals of this emperor. This one is the largest of them all. Is that the impression is an absolute match. The last time this seal was in contact with this paper was in 1781. We will accept this from 15 million onwards. What is it worth, i dont know. They say it is really a symbol , a legendary ruler of china. Is pure power in an object. There is still thinking that is ingrained in china that is relevant to any collector or wealthy person. And imperial feel like this one could interest anyone Imperial Seal like this one could interest anyone to buy it. Angie after a fouryear courtship, foxconn finally w angie sealing the deal, terry gou wraps up his pursuit of sharp, having the perspective innovation and leadership. Oil erases gains as saudi arabia the production priest depends on others. China may let banks convert loans into equity, but not everyone is convinced. Welcome to first up. Lets get to the markets in the asiapacific