Transcripts For BLOOMBERG Bloomberg Go 20160212

The hour. We are delighted to have both of you here. Kicking us off right now is vonnie quinn. State johnretary of kerry and his russian counterpart agreed on a ceasefire and a meeting in munich. They also agreed to airdrop humanitarian aid to syrian cities. Still be planes will able to attack islamic state. In oregon, the last four holdouts in the occupation of the wildlife refuge go before a federal judge today. They surrendered to agents yesterday. Now that they are battling oneonone, more differences between democratic president ial candidates are emerging. As they debated last night, referred toton Bernie Sanders ideas as unrealistic. But Bernie Sanders says he thinks voters are ready for a new reality. Bernie sanders the American People are tired of establishment politics, establishment economics. They want a political revolution. Come together, not let the us,ps of the world divide and say in this great country we need a government that represents all of us. Caucuses will be held in nevada eight days from now. I am vonnie quinn. Julie we have a rebound in markets this morning. U. S. Futures pointed to a higher open as we were seeing a little bit of a recovery from all the selling yesterday on pessimism that Central Banks around the globe cannot do enough to stem the tide of some of the slowing economics that we are seeing potentially around the world. If you look at what happened, what is happening in europe and what did happen in asia, the rally that we are seeing did not extend to japan. Japan profits fell. It was a holidayshortened week. S p, the stoxx europe 600 was helped in part by what we are seeing in the banking industry. Commerzbank shares are rising after it became one of the few European Banks with fourthquarter earnings that beat estimates. Are surging, and they are pulling up many other European Banks along with them. Deutsche bank, Credit Suisse, and ubs. We will talk much more about this theme throughout the show. Going into today, we have seen the msci global index enter into a bear market. Last may is when it hit its high, now i decline of 20 . Technically we are in a bear market. I wanted to check on currencies as well because i mentioned what happened in japan. We are seeing the dollar strengthened versus the japanese yen, but that has been the exception rather than the rule. Weakness, soeeing brought dollar strength, dollar rebound that we are seeing today. I also wanted to look at oil prices. Aere, too, we are seeing rebound. Brent is up 5 as we are hearing rumblings from the uae that maybe we will see an agreement on Oil Production cuts. Surgingtility has been along with overall oil volume. Here you have a chart going back a year. This volatility number is the highest since 2009. David markets are rising this morning, but it has been a week that has been turbulent with selloff, and that has been pushing insiders to start buying. Dimon,ns ceo, jamie yesterday purchased 26 million in his companys shares with his own money. Bill daley, you are a former colleague of jamie dimons. You aboutthis tell his bank and what is generally going on with banks . Bill he is in it faster and sees that he is an investor and sees a opportunity, but he sees the importance of stepping up in a time of great uncertainty and making a statement about his bank. It was a statement more important about the bank and the then and even about even about him as an investor. David why is it that we have seen such a selloff in banks . Why have banks become such a vote such a focal point . In europe, and that is where it really started, you see an opportunity and real challenges with these banks. We are in many ways, our Financial Sector is very strong. We are kind of in the eighth or ninth inning in the regulatory battles, and all of the things that went on. Europe is way behind that, so there is still a tremendous challenge from a regulatory point of view. There is a bleed going into the u. S. Financial sector that it is a little too much considering the health of that industry. When you look at a lot of the energy clients, no question that they will be stretched for quite a while. David take a look at this and react. I think it can do both. U. S. Banks have corrected reasonably as well. The right thing to do in the current environment is to spread your bets. Buying some European Banks and buying some uris banks some u. S. Banks bill to me it is a value play. These things are trading at. 6 book value, so far under book value in either the book value makes no sense, which i am not sure that is right. There is a lot of equity in these companies. A lot of them have been recapitalized and are looking as strong as ever. This is a potentially buying opportunity, but with European Banks, you have to wonder how they will make money Going Forward. They are getting out of Investment Banking in a wholesale way. Julie one of the other things they are looking at you talked about book value, and price to earnings ratio. Bank earningsci index. There is quite a gap, quite a discount that banks are trading at right now. Something else i wanted to look at, since we are looking at insider buying. It is not only investors saying lets step in and make some and by banks of shares of banking stocks. This is i nsd on bloomberg. You see insider buying of financials in yellow, versus insider buying of the s p 500 broadly. You see this surge is not just jamie dimon. We are seeing other Bank Executives make similar moves. There is a big difference with what the u. S. Banks look like right now, the assets they have on their Balance Sheets, the transparency, and what the European Banks are holding and the lack of transparency there. That is why we see them valued at less than half look. Exactly. No one talks about the asian banks and the difficulties. When people realize their potential challenges, that is going to be a problem. Bill getting back to jamie dimon, jpmorgan has had two years of record profits. About 25 billion in net income. He has been the ceo for close to 10 years, more than 10 years, and he is buying at a time when the bank is making record profits. He knows a lot about what is going on at that firm, and if he is buying, that is a bullish sign, let alone taking his fullyear salary. Matt he will still have some money left over. Think about jpmorgan and the difference with Credit Suisse. Bill European Banks are basket cases. David that is before you get to asian banks. There was a note that came out yesterday saying there could be a huge problem. Wel it may dwarf anything are concerned about in europe. The health of our Financial Sector ought to be celebrated, and many people in the political system continue to eat up the banks. When you look at what we have done, and the pain that has been there, obviously the shareholders, the employees we took the pain very early in our Financial Sector. That was a great statement about the leadership of a lot of our and the regulators at the time, making sure that changes were made early on, pain was taken, and they moved on and are strong. We act surprised that insiders are buying stocks. Forget about the opportunities they may see. These are leaders, and they should be doing this. Not if they really believe their institutions are in trouble, but nobody ever says that anyway. But the fact that they are stepping up, we should not be surprised and we should not maybe think that is such a great thing. They should be doing this. They are leaders of institutions. They stand up and say their institutions are healthy and they put their money where their mouth is. Matt jamie dimon can see that he may be does not have the Energy Exposure that European Banks do. Lets look at the Underlying Energy markets. Late yesterday, the uae said opec members are ready to cooperate in production cuts. How many times have we heard this . From russia, from iran, it was rumored. Venezuela set it. None of that has come to fruition yet, but it helped to boost crude higher. What i find interesting is when 4 or 5 and we are still only at 27. 41 a barrel. It has been a rough week for crude. Janet yellen also spoke of her surprise at how far oil prices have fallen. Janet yellen markets have been and we have been quite surprised by movements in oil prices. I think in part they reflect supply influences, but demand may also play a role. Matt lets get more with Stephen Schwarzman with stephen. Before we get into concerns about the macro environment, what do you think about these reports that opec may hold talks and may cut production . If you are willing to buy oil based on what the uae or what nigeria or venezuela are saying, i will sell you all the oil you want to buy. So until the saudis come out and say something, until they with iraneally ok building a nuclear arsenal, and i am really ok with iran putting posts oil on the market and , iing my market share away am ok with that. Until the saudi say that, i am skeptical of any words coming out of anybody of the saudi arabia. Up wellu have been set for this route in crude because you are bearish on the economy. You have been saying for a while that you think the u. S. Is ready for a recession, or headed for a recession. Why do you say that when we see gdp growth last quarter standing at 2 , 2. 5 , unemployment below 5 . Wages finally starting to rise. What makes you think we are headed for a recession . Stephen curry first and foremost, unemployment stephen first and foremost, on a plummet is not below 5 . First of all, unemployment is not below 5 . Any jobs created at the end of the great recession, we borrowed 420,000 for each job. We created 1. 6 jobs for every job lost during the recession. To put that into historical context, after the doubledip recession, we created six jobs we everyone job three created six jobs for every one job. Almost a third of them have been wagers and bartenders. So while we are looking at the energy patch, which has shed 150,000 jobs that pay twice the average of every american out there, and we are replacing those with bartenders and waiters. I cannot get bullish. More to the point, when we look at, durable goods, when we capex, durable goods, everything will headline is below record levels or levels we have only ever seen during a recession. So, that said, the scariest thing you said was janet yellen is playing ademand decline in oil prices per thanks, janet. We have seen not just a decline in oil prices, we have seen it in iron ore, in coal. David the scariest thing that you said is that our government is lying to us. You said unemployment is at 10 . Are you really saying that they are misrepresenting our unemployment situation . Stephen no, the media is. David janet yellen said unemployment is at 4. 9 . I did not. Stephen janet yellen is not lying. But i can strangle numbers to make them say whatever i want. When you look at the headline employment number and factor in the Labor Force Participation rate, it is now at 40year lows. When you factor in Labor Force Participation before the recession, where it was over the last 30 years, the Unemployment Rate is 9. 9 . The government are not lying in the media is not lying. It is choosing which headline they want to talk about. Matt so you are referring to the you six number. Youre right, it is around 9. 9 . Stephen schork, he has been very bearish on the u. S. Economy, which has set him up well for this oil trade. A lot of people do not agree, and that is why we see the slight rebound, maybe one of the reasons we see the slight rebound in stocks today. Earlier we talked all about headwinds facing European Banks, but one german bank has investors cheering today, sending shares up 15 . That is next. I am vonnie quinn. Pandora has been battling online rivals and the music industry. Mayinternet Radio Service lose the fight to become a standalone radio company. It may put itself up for sale. It is facing growing competition from spotify and apple. In the wireless world, at t is ericsson tol and meet the increasing demand for sports, movies, and smartphone access to home appliances. Ford is launching four new sportutility vehicles because they say baby boomers and millennials like them. They will be phased in over the next four years. Tt now to global go rose 15 thisares morning, leading the way to a rally in European Bank stocks, which they desperately needed. Martin blessing speaks to hans nichols about the impact of negative rates on the strained banking system. Martin we see negative Interest Rates already for some time. We are pricing deposits of large deposit holders on the negative side, but you cannot pass on these rates for private consumers, so of course there is a certain margin squeeze on the deposit side. We are trying hard to offset this, but that creates a difficult earnings environment for banks. Guy mario draghi is going to be convening the ecb on march 10, and there is speculation we could see negative rates going even further. Is that something you would be happy to see . Would you advise them against that because of the effect it is having on the Banking Sector, the tax him as you just described it . Sector,on the banking of course it will put another burden, but in the end, the ecb has to take the position not to basically increase Bank Balance Sheet or profits, but to see a Monetary Policy that is up to their position. They had to fulfill the mandate, so we will see what mario does in the coming weeks. Guy but europe needs the banks, and europe needs the banks to be working properly, and you look at what is happening right now with regulations, negative rates, you just described the effect it has on your business. Is this a cocktail that will be ultimately positive for the european economy . Well, of course it puts a significant burden, regulation and the low Interest Rate on bank profits, but if you look at the overall credit supply in europe, that is slightly up. Gross Growth Numbers we expect growth this year to be up around 1. 3 . That is not great, but the economy is growing. Faster growth would be better, but i think we will see a painfully slow recovery in europe. But things are moving forward. Not that was guy johnson, hans nichols. But obviously martin blessing, the important part of that, that hehat he cannot cannot say anything percent of banks, but his bank is faring well. Aig is down 18 so far this year, the Second Straight Quarterly loss yesterday. There are a couple of new people on the board. More on that story on bloomberg. David welcome back to bloomberg. Aig posted a Second Straight Quarter loss yesterday. In the aigets bring reporter for bloomberg news. Bill daley and bill cohan are still with us. Andt was a really bad loss people were accounting for some of the trouble at aig, but this was worth than analyst estimates. A lot of people new Hedge Fund Performance is had really been bad at aig, and also activists came in at the right time. So they put a couple of activists on their board. They put john paulson on the board, and a representative of carl icahn. Navistar,he board of hertz. Go on the didnt carl board himself . He said he was too busy. Something that kind of shocked me, out of the 10 most notable campaigns, since the beginning of 2014, he has huge settlements in nine of them. David a pretty good track record. Matt aig winnowing its business down. Bill daley and bill cohan. We will be right back with more on bloomberg. The conference call. The ultimate arena for business. Hour after hour of diving deep, touching base, and putting ducks in rows. The only problem with Conference Calls eventually they have to end. Unless you have the comcast business voice mobile app. It lets you switch seamlessly from your desk phone to your mobile with no interruptions. Ive never felt so alive. Make your business phone mobile with voice mobility. Comcast business. Built for business. Welcome back. Futures up across the board. Are over, tom keene says. Oil is down now. It was up when i came in. 27. Still at we were at 30 . , former white house chief of staff, former secretary of commerce. Ohan is with us. We are also here with tom keene. Matt an Important Role in television is you need to be seen. Lets start with a vonnie quinn. Vonnie the u. S. And russia compromised to agree on a truce in syria next week. The world powers met yesterday. Kerry said there are many crosscurrents that make it complicated. But we are convinced that is the only way syria survives and can flourish again and that you can make peace. Coalition forces will still make attacks against islamic state. Meanwhile, he manager and assistance will go to the towns hit hardest in the fighting. Has been spewing natural gas for months. It will cost the utility involved more than 3 million, including potential fines. Is trying totions destroy the zika virus. The u. N. Atomic Energy Agency proposed sterilizing male mosquitoes, so when they made, mate, the progeny never hatch. Thanks. I told bill daley before you came in, you have the perfect thing for him. Dr. Weinberg has experience from 20 to 30 years ago. He is impatient. We have never before i am trying to speak like a daily. We have never before awakened to see conditions in as sour a state as today. Why is no government leader anywhere in the g7 calling a confab to address of the collapse. This is criminal neglect of the eurozone. Are we just worn out . Is true. K that there is a serious challenge to democracies for government leaders to step forward and act. Look at our country. 2011, we got close to a big deal in the deficit. But now we are supposed to wait a year. Until serious action can be taken. Democraciesoid in in europe and in the United States doing something about creating growth. There has to be policy changes. There is a serious challenge to democracy. Night had no sleep last watching the rollover. Will bounce up with optimism today. But when i look at the banking collapse the last couple of days, can you carry that action over into getting leaders to act . To say it like should, but there does not seem to be good signs of that. Look at our own elections. Are people talking about these issues . Were these issues driving the debate last night . Are people talking about the plans to address these issues . David we were talking about jamie dimon stepping up as a leader. What will it take to get leadership out of our political leaders . Bill c. beats me. We have not seen it in a long time. I give president obama credit for stepping into this when he can, doing what he can with executive orders, which are then challenged legally, which they may which may be should be. I give him credit for that. I am distraught over the lack of effort by congress to do anything to face these issues. This has been going on a long time, which is why we had the fed do quantitative easing, which raised asset prices all over the place. Now we have an addiction to cheap money we are trying to take out of our markets. The d. there is little of president can do. He must have Congress Working with him. The media must get tougher with the candidates. Matt we want checks and balances, right . Bill c. but that does not mean nothing should get done. The media is so focused on this election in november that they have lost the forest for the trees. David we have had checks and balances and leadership before. Tom we have. But it was only a one hour but in thee changes we got and where we are now, the gridlock also comes from a lack of nominal gdp. The theme of hollowing out the middle class. I would link the actions of this week into that. There are two gains the wall street gain. The plutocracy and the gilded age. And a huge body of americans are not attached to the world when i looks strong. Yen most americans are saying i do not care. Matt but that has been a big issue. Bring up number of nomura. It is a real role of her. What concerns me most, if you look at global activity, is the japanese move ted negative rates. Move to negative rates. They have incredible strength that is not what they paid for. What do they do to stop these slide into the equity market and bring back a little weakness . List, ohhe to do whether it is japan, sweden, or the politicians in washington, is if youre going to apply medicine, apply medicine. This is the word from the cfa institute. A little bit does not work. Says if one camp that youre going to apply the medicine, do it, and do negative Interest Rates as an experiment. Another school says you have to , which the structural goes back to the linkage of politics and economics. Did the bank of japan did not do enough . It is not it should not be the obligation of the Central Banks. But with the volatility going on right now, you have this divergence of policies, where all of them were together six years and a policy. Out towant to do a shout the midwest. We are all midwesterners. Tom i want to do a shout out to charles evans, the leadership of the chicago fed. Front withy out humility on the certitude of getting a higher Interest Rate. He was way out front, whether right or wrong. Matt bringing the focus away from the Central Banks, the japanese government is at least attempting something with the economy. The european governments less so. The u. S. , nothing. Will be president ial election change anything . Bill c. that is what we are hoping for. Now we have to sit a couple of months. If you look at the candidates, instead of addressing the concern about what is happening to the middle class, whether donald trump, Bernie Sanders, or Hillary Clinton speaking. They really have to do something next year, and i have no reason to believe anything will get done this year just because of the politics of the campaign. At the same time, the media has to to demand honest plans. In the debate tomorrow, they have to ask tell me why your plans will make a difference. At theas you look debates, helmet questions have been asked about the economy. The questione give us your plans for the economy has been asked specifically. But the answer has not been given. What do you think about the state of the political donald trump and beie sanders . Will that really helped fix this next year . Thef it is, then we think person who owns this building has pledged that he would jump into the race. I am just repeating what has been we want to thank tom keene for being with us. Bill cohan. Bill daley, you are staying with us. David welcome back. Coming up on bloomberg , scott oneil will join us for the tech summit in toronto. Here is your latest business flash. Greece is back and recession. Greek economys strength shrank 6 10 of 1 . The greek government is planning more tax hikes. Shares of rollsroyce rose as much as 15 . Stors cheered it cut its dividend more than 40 . Told the British Parliament it will not pay the google tax. It said that Global Companies policies to avoid taxes. That is your Bloomberg Business flash. Last nights democratic president ial debate, Hillary Clinton sounded more like Bernie Sanders that she has in the past. She looks to do so after sanders postNew Hampshire climb. The most heated moment as clinton tried to drive a wedge between senator sanders and president obama. Hillary clinton the kind of criticism we have heard from senator sanders about our president i respect from republicans. Sanders adam secretary, that is a low blow. David joining us is mark halperin. I heard a different approach from Hillary Clinton. Will it work in South Carolina . Mark she needs to show confidence, which she did. Her supporters wanted to see her mat after such a loss in New Hampshire. And she needs to build coalition. Senator sanders is making a play for the vote, but she needs to keep an eye on the national coalition. We will see National Primaries across the country. She will need a national message, not one tailored to the upcoming states. Embraced felt like she president obama more than she has in the past. Bill it is smart. Electorate,k at the not only in South Carolina and nevada, but when they come to the midwest and to the south, they have a different electorate than the first two. New hampshire and iowa are not very reflective of the demographic of the democratic party. She is now on a stage that she will be much more comfortable running in. I think she will go to the obama becauseith of her years as secretary of state. That was the highlight, the way she tried to separate Bernie Sanders and some of his policies , which she has tried to say our reflective of obama but are really critical of him. Seems to bers appealing to a younger demographic. I wonder if what Hillary Clinton is doing a speaking to women and minorities. Been the cross cut her in iowa and New Hampshire, where senator sanders did well with young people, regardless of gender. It will be interesting to see in South Carolina if you will use age to trump race. Words, can he do well with young africanamerican voters and ring them out to vote and bring them out to vote. Campaign is relying on the fact that the Clinton Campaign has a demagogue that almost for her topossible lose. Senator sanders will try to win a share of those voters by making a different appeal. Matt i know you think hillary her aims seem calculated. Outhas brought bill clinton to do some of her work. It a lot of people get the feeling she is incredibly political, which i guess she should be. What do you think about Bernie Sanders performance . Bill c. here is bonded well to the charge from hillary that he had distanced himself from obama. Performed well in response to that by saying it is not true. I am a senator, i am allowed to disagree. Hillary, have you ever disagreed . I am sure she had plenty of disagreements with president obama, both as secretary of state and when she was senator of new york, though not with president obama. I am sure she had plenty of disagreements with president bush. David mark halperin, while you were talking, we put up the report card of the candidates, both of which were bss. Did they achieve what they wanted to achieve . Show people she would not be faced by the loss. The nature of her attacks, but she stood firm, which she believes that senator sanders is proposing to many things that she believes are unrealistic in terms of cost and the chance of passing. And senator sanders took some chances, with some aggressive remarks that we have seen sometimes in races involving a male and female candidate could backfire. It is testament to the fact that Hillary Clinton has been treated as a candidate, regardless of gender, that he will not see as much of a blowback. But it will not do much to the fact that sanders won in even is a win for clinton. About southnfident carolina, which mirrors with the sanders folks think. They think they can win nevada. They are not sure they can do near as well in South Carolina, because of the percentage of the vote that will be africanamerican. But saturday night, a week from tomorrow, this same night of the republican primary in South Carolina. Contestome in the first may not matter as much. The big one will be South Carolina. In no matter what the result either case, these will set the table for the march contest, where the midwest comes into play, and Bernie Sanders will have to prove what happened in New Hampshire is not a fluke. , thank you. Alperin you will continue to cover this exciting election. I want to go to julie. Julie we are rebounding. All major averages are up following the gains in european oil is, partially as rebounding. The question is whether these rebounds have been sustainable. They have not been thus far. Keep in mind, retail sales, out at 8 30 come out at 8 30. Mover, square, the Electronics Payments company. Shares surging 16 . Visa took a 9. 99 stake in square. Mark palmer says this is a sign that square could be a takeout candidate. That is a reason we are seeing shares go so much higher. Matt thanks. Coming up later, nba commissioner adam silver joins us live from the nba tech summit in toronto. Onid Stephanie Ruhle is location at the nba tech summit in toronto. I know it is tough for you to be up there with all of the nba guys. Stephanie it is. And sunny toronto, where else would you want to celebrate the allstar weekend . But it is not just basketball, it is a business. If you think about the transformation in media, it is live Events People still pay for. The average franchise in the last four years has gone up three times. , team owners where buying teams as part of a vanity projects. You have the top five teams being worth four times the amount of the bottom five. So i will sit with nba commissioner adam silver. This year, they have big sponsorship deals with verizon, pepsi, replacing coke and sprint. Uniforme the new nike deal, which has raised the value of the deals almost 150 . When you think of the team these, like mark cuban, people understand the value of franchise and finance. It is a big day to talk big business. David then you have to think how much business affects the competition. The riches can make you more competitive. Stephanie without a doubt. We have seen such a massive selloff in the Global Market. People are losing money. But in the media landscape, tv deals for the nba are up. We expect player salaries to go up as much as 54 . Maybe the point is we should all try to be pro basketball players and set of Hedge Fund Managers. I do not think there are too many Hedge Fund Managers who have their salary go up 54 this year. David thanks. In just over 30 minutes, we get for january. Matt did consumers give the economy Retail Therapy . We will get the latest figures. And will prices ever go their separate ways . Is in toronto with the nba tech summit. We will hear from the commissioner adam silver and the owner of the sixers, scott oneil. Matt welcome to bloomberg. I am matt miller. I am david westin. Stephanie ruhle will join us later. And peter mike mckee coy, who has written about oil and equities. First, first word with vonnie quinn. Vonnie there is a partial ceasefire in syrians civil war. Humanitarian assistance will be provided to the hardest hit areas. Secretary of state kerry says represent a pause, not an agreement to end. German chancellor amerco says that the country cannot throw away its values and the refugee crisis. She is working on reducing the Record Number of refugees entering the nation. Looks like Hillary Clinton was trying to steal some of laste sanders thunder that when they debated one on one for the second time in the president ial campaign. Income is lowquality income incomety inequality is one of Bernie Sanders themes. Hillary clinton there are not enough good paying jobs for young people. And the economy is rigged in favor of those on the top. Held incaucuses will be nevada a week from tomorrow. Julie. Now with julie after yesterdays selloff, we have somewhat of a recovery and a rebound in their futures. At the futures in the s p, you see a steady climb if you look at the intraday chart, gaining strength as the morning has progressed. A couple of things contributing to this oil prices are higher. We will talk about this and more about the correlation between oil and stocks. First sessionthe in seven about renewed optimism. The other reason we see a recovery is the European Banks are recovering, led by commerzbank after coming out with earnings that beat estimates. Shares are surging, bringing up of the European Banks and the u. S. Banks for the year to day and month today monthtodate. Couple of other movers i want to highlight. One is activision blizzard, coming out with earnings that missed estimates. Heronders and guitar missed estimates. And groupon going in the other direction. Its profit coming in ahead of estimates. Analysts were looking for a break even, and the company 4 cents aense share. David thanks. The global stock rout is easing a little. But it has been a flight toward safety. So mike, i want to ask you about the letter are word the 4 word. Mike no one has been able to predict a recession. Wash we analysts get asked by clients, so they come up wall street analysts get asked by clients. The best guidance came from jpmorgan, who noted we are in a profits recession. Profits retracting in the most recent quarter. When that happens, you see a recession in about three years. That is a broad timeframe, but it could be coming. We have job openings at the highest level since 2000. The slope is good. Cheaper,s are now wages are finally starting to rise. Are comingearnings down this year and last corner, but where is the pessimism coming from . I am with you. In the article we are talking about, i quote David Rosenberg,ointing out in 1986 and 1987 oil prices were falling. Those were the two times when sessionk earnings did not predict an economic recession. Matt and David Rosenberg one of the biggest bears in the world, does not expect us in recession. Peter so cheap oil is a good thing in the u. S. Economy and the global as a whole. Peter makes a good point. We are looking at what the nerds would call a j curve. We get the bad effects of cheap oil first, and then greater spending will take longer to play out. Look at aanted to survey of u. S. Recession probability. We have heard anecdotally from several people. Of folks onrvey wall street, what they think the chances of recession are. We are seeing an uptick towards 20 . But has been above and below that level ever since the financial crisis. The consensus does not seem to be there yet, but the calls seem to be multiplying. I know earnings are down yearoveryear, but should it not be multiple earnings over quarters . We do not have that yet. We are looking at contraction in the first quarter, and one possibly into the Second Quarter of 2016. We have to sell we have to separate it out. If you take out energy, you are not looking at a contraction of firstquarter earnings. As wages rise, that will cut into earnings. As Interest Rates rise, that will cut into earnings. Part of the reason profits have been high is the fed is generous on Monetary Policy. That is changing. The negative side, profits are coming down. But on the positive side, people have more money in their pockets and have higher Interest Rates. So the shift is not a bad thing. People have been complaining that has not been the shift. You have to be careful what you are worried about. A pullback and corporate earnings could he positive for the economy. And productivity has been low. Dothat does not come up, we not see the share of profits going to labor at a faster rate. That is what people are worried about. Good point. Economies are worried it is not rising to the level it was. L c. a lot of questions because we do work on computers, does that mean we can do work faster or more . Problem onrn to a European Banks. Here is what executives are saying. People are scared. Panic and fear setting in on some of the European Banks. Some are trading at 30 of book value, which is a stressed environment for a bank. Ubs is only at 46 basis points. All of these banks in europe have been overly aggressive. The first bank of portugal, in createdbail concerns. And when Deutsche Bank kitchen sinked everything, they made the groupon payment in question. Are ahead of the rest of them. Credits lease are in a better position than deutsche credits lease Credit Suisse are in a better position than deutsche. We took our medicine early. We raced capital early in the process and raced capital a second time. Some European Banks have been slow to get themselves recapitalized. Unhinged, weecome are in a different place. I do not think that will happen, i but i would keep an eye on it. David how much of this is specific to the Banking Sector and how much of it is a bellwether for what people think of the economy globally . S are always aank leading indicator of demand for loans, the economy generally. Differentiateto between the u. S. Banks. As gary cohn said, we took our medicine early. Not have a lot of leverage. They have some loans that are probably at risk. For free,aw material or close to free. Jpmorgan had record earnings the last two years. Some of the other banks are not far behind. This will be a golden age for wall street banks. Banks, a different story. D too much into the american economy. The overall concern is demand. Is it falling off around the world. The Financial Sector there is a good place to focus your concerns because they will focus on it profits go down. Mohamed elerian made the point that you need to differentiate. When you look at the options of spread in u. S. Banks, they are low. And specific banks like Deutsche Bank, they are higher. But commerzbank had higherthanexpected earnings. You have to look bank by bank. Matt i am looking at the ea page on the bloomberg that say there has been a 10 decline in earnings over the same quarter last year. Energy companies had a 74 decline in earnings. The problem is a lot of them on the Balance Sheet, energy in the loans. We mentioned the Bloomberg Businessweek carver. Quote article, you citigroup. The toughest problem for people to deal with is oil getting linked with the market. We have seen the correlation get stronger and stronger. Classicrday was a example oil and stocks fell. Today, oil up, stocks up. It is not always both going down. The point is they are tightly linked. That does not make any sense to me . I think they have become overly link. It is unhappily codependent. Look at oil and they say the reason oil prices is low is because demand is falling, and that hits everybody. It may not be correct, but that is why people are doing it. One of the things that took way from the article is that demand for oil has gone up 3. 1 Million Barrels a day. That was a surprise, because i thought demand was going down. But supply is going up even more. But it is not because china is buying less. Even chinese demand for oil rose. Matt until last month. It felt a of 1 in january. 1 init fell 8 10s of january. You have to put oil in those gas guzzlers. David so bill cohan, peter coy, and mike mckee, thank you. Coming up, tack and sports meet at center code center court. Vonnie i am vonnie quinn. Here is your business flash. Uber. Million after0. 5 they are accused of misleading customers. The money would go to riders. Shares of groupon are soaring. It be estimates. Groupon has struggled since its ipo in 2011. Verizon in the race to develop a faster wireless network. The Wireless Industry is trying to get increasing demand smartphone access to home appliances. Julie i want to get to what is going on in gold. You are looking at gold priced in oil. We have seen it an incredible climb. Today gains have been impressive. It is trading at its highest and about a year. This is the flipside of what we have been talking about four weeks see the concerns people have over global growth, whether the effect ofnks, lower oil prices, general concern about the risk of recession. Places people the are going. Lets also talk about copper. Although copper futures are also gaining, copper is more of a proxy for Economic Growth rather than a hedge against it, particularly tied to what is happening in china. , here isly the dollar it year to date. The dollar has been declining versus a basket of currencies by nearly 3 this year. Matt thanks for that interesting look at the market, be anwill clearly interesting open to watch this morning. , to makek basketball no turn at all. Nba commissioner adam silver will join us from the toronto nba tech summit. Stephanie ruhle will be there and talk basketball all day long. A quick data check. Stoxx 600 up 1. 7 as banks recover. Oil up almost 5 , but still 27. 55 a barrel. The pound a little stronger here. S p futures also gaining three quarters of 1 . David welcome back to bloomberg. Now for the business of sports. A Stephanie Ruhle is live in toronto covering the nba tech summit. She is with nba commissioner adam silver. Stephanie thank you. It is not just nba allstar weekend. We are at the tech summit. Are up are up to three times in the last four years. What are you doing, how are you realizing the Digital Opportunity . Adam one by distributive our gains in more than 200 countries and territories. At the end of the day, we are a media company. Our gains, our content. The social media chatter. Are focused on what the future should be with all of this great technology. A lot of our owners and Business Partners are technologists. This is an opportunity to say how will we continue to distribute this content on a global basis . Stephanie are you concerned it will slow down . Given what Global Markets look like, are you worried we will see a slowdown . We will runorried out of the number of countries. There are only so many countries to expand two. I am not concerned about a slowdown, because we are seeing the brand expand. If anything, it differentiates itself and away that it has not. Live, Premium Sports content is clearly king these days. Is about thed it fan experience. How do you get people to the games . Many arenas need to be updated, and it is and there is debate whether public funding should happen. Adam it is somewhat counterintuitive. Hd was coming down the pipe 10 years ago, we thought people would potentially prefer to stay home and watch the games on the big digital screens. But the opposite has happened. I think the arenas have become modernday town halls. Despite all of the great digital media, people want to gather and be with each other. Where are people going they are going to arenas and stadiums. The stadium business is different, but for new arenas, a year. Used 300 days the nba only has 41 home games. So even if the team goes far into the playoffs, maybe it is 55 dates out of 300. In milwaukee recently, there was a new arena don in partnership with the government done in partnership with the government. About basketball. It is for having graduations, having concerts in town. These are multiuse facilities. Aree musicality use recognizing they want these stateoftheart facilities. Stephanie had you help some of the bottom teams and raising franchise value . If you look at the top five teams, they are worth about four times what the bottom five teams are. I do that therenot agree are more marquee players who want to be in marquee markets. Some of our best players are in , oklahoma city. Golden state was not viewed as a marquee market. Miami was not historically viewed as a marquee market. Inis in the bottom 15 terms of market sizes. Of course, they want to get money. If i were representing a player and saw an opportunity to make significantly more money in a certain market, i would be attracted to that. But these guys want to win. They won in elementary school, high school, college. They are attracted to great situations. Stephanie that money is about to go up significantly. Are you concerned the game will get muddied by money and stoppage of play . Adam i am not concerned about a stoppage of play. There is new money because Television Deals are going up. And our salary cap system is derived from the total revenue in the league generates. The players get half of that. That is a fantastic ring. That means players will get even more money by virtue of the fact the league is making more money. And we have the collective bargaining process that we begin early. Your job last two verses of this year in terms of your interaction with Companies Like snapchat and google, how big of a conversation is it for you about these businesses . Adam we are now reaching roughly one billion people through social media. Is connectingth with the nba in some way through social media. Companies like google, facebook, platforms wegram have not even heard of yet. We spent a lot of time in Silicon Valley learning from these companies. It is part of the reason we are holding the tech summit. Stephanie there is one idea you have been supportive of. Supervised adam what is going on with daily fantasy demonstrates how much content of interest there is in a legal format to participate and engage with our gains, whether with our games, whether it is viewed as orously ask fantasy technically gambling. Our view is that what is fantasy should be used as gambling. Sports betting is an and underground business. And up to 400 billion business in the u. S. We know it will happen. Bring it to light and regulate it. And tax it. We need money for our infrastructure. The dollars. Ing in adam silver live at the nba tech summit. We are here for allstar weekend. Matt thanks. Back here at the desk, we have confirmation that Deutsche Bank is going to buy back some of its debt. About 3 billion euros or 2 billion. David this was expected. It makes sense. Especially interesting on a day when it is a different story. When you hear jamie dimon is expanding twice 6 million on its own stock david my understanding is there is a 20 profit, which goes straight to the reserves. You are the one with the Balance Sheet experience. It is interesting on both sides. I also want to get to julie hyman, because you have a chart . Youre going to show me what you have on your bloomberg. Decline, are seeing a if you glued on those and gas company will gain fortunes of 1 . That is a catholic percentage point better than estimated. T getting these numbers age point percent better than estimated. A small sign that this is beginning to happen. Lets check back in a minute. Usually there is a delayed reaction. As for Deutsche Bank, and how those shares are trading, we had and having asing leg of after this came out. The shares were up 10 for now they are up by about 8 . Already, the European Banks are teaming on the backs of this. Matt we had reported this yesterday morning. Necessarily market moving news, but confirmation of a bloomberg story. More on retail in a few minutes. Im going to bring in bloomberg news. It is good to have you. Talk more about consumers. The numbers are encouraging. And is unexpected. An expectation game. Retail is taking a beating because we have not seen a Great Holiday season. So i think expectations have been moderated a little bit here. But as julie said, we got some encouraging wage Growth Numbers spread unemployment coming down. We have been talking about gas prices for a long time. We are seeing some signs that it is improving. Could have been worse. Matt was your Holiday Season as epid is as the t overall in the industry . Yes. Theres a lot of storytelling behind the growth regenerated last year. Star wars was one of them, but there were a lot of other stories. I have been hearing from the ceos of big retailers, that they thought they had a big toy season as well. Why do you think that is . It is true that parents are looking to move away from tablets and electronics in fact to nostalgic toys like legos and star wars . This is the 11th year of growth for our business, which is supported by the fact that there is a limit to how digital parents want to go, but also how kids want to go. We have done a good job of blending those two worlds at the same time. But what has really driven the industry in 2015 was just right innovation. The industry has been an industry where we see great innovation. There were some strong products in 2015, and there were strong stories to anchor those products with. We all buy things. Our household has both a lot of legos over the years. But i you interested in what it may tell us about the consumer. 70 of the economy, consumers have been saving a fair amount of money. Seems to be that they are spending in select areas. They are spending more on experiences, less on stuff. Be an experience, sitting down, play with your children, or travel, or movies, or even technologies. Move away from your typical combined we do get you a sweater, a tablet, a new gadget, and more experiential area of the economy. David what is your experience . Lego is more than just a tech tell toy. It is surrounded by digital experiences, the opportunity to tons legoland parks, and of content out there. Movies out there. Matt the kind of things that kids play with them with their friends. I think that is spot on. It is experience product. What about reaching out to girls . They think it is pink and have a dress, they think it goes for girls. Last year we grew more than 20 in the girls space. We tried for many years to find unappealing route to girls, and i think we have begun to figure it out. Our approach to it is fundamentally is that the experience is still similar. It is lego bricks that should be together, but the way the entry point is different. Of course, some of the are different from a conventional voice approach. Wonder abouts people who make things that are petroleumbased. Do you find your cost thinking with the price of oil . Syncing with the price of oil . Differenta very product and then oil or petroleum. It does not correlate. Matt thank you. I want to pass it over to julie. We have a morning meeting. Number ofre are a value stocks that have defensive qualities that could lead to strong growth in the coming year, according to our next guest. The instructor and at tjs origin who has these picks for us. I think people want to play defense for their strategy right now given this environment. I am looking at some of the text you have here. Your of all, what is criteria, what is your definition of value and defensive in this environment . As you say, there are a lot of fears. There is the canned good approach. Then there is the most oppression most aggressive approach. We went in the middle. We look for credit growth stories that can grow regardless of the market, and then we look for stocks that should have stability, but also have drivers of upside. That could be restructuring, turnarounds underway. You are not looking for a flat stock. You are looking for something with appreciation. Julie and looking at your stuff, i sing a couple of themes. Imc a couple of things. Technologies and computer associates. Are you counting on the government client . The thesispart of behind this. Almost 100 of the revenues are from the government. Those revenuest should be stable, but additionally we also think that spending there is going to influence government spending. They generate a lot of free cash flow. Attractive is because the government aspect gives them some defensiveness, but there are some upside drivers as well. Julie you are also looking at church and Dwight Company toothpaste. If youre talking about these personal staples, the thesis is that they continue to grow at a slow rate even in slowing Economic Growth. That is correct. That business, one of them is laundry, there are specific things theyre doing in laundry that can drive growth. We think there is a strategic angle there as well. Think they can do to further the top line. You have this defensiveness, but then you have some upside. Talking about defensive value place in this market with room for appreciation. Thank you. Matt thank you. To recap the breaking news we have had, Deutsche Bank is going to buy back bonds, about 3 billion in euros, about 2 billion in dollars. Be 4. 5 billion. All bankshares are really getting strong in europe after a big drop. Philadelphia owner is down with Stephanie Ruhle. Matt it just a minute we are going to toronto where Stephanie Ruhle will interview scott oneill, resident of the 76ers. President of the 76ers. Go back to Stephanie Ruhle in toronto. She is covering the nba tech summit. Who do you have with you now . Scott oneill, owner of the philadelphia 76, but also the new jersey devils. 76ers, before we talk about how the team is doing what you just did a deal with stuff of. How does this help the team, how do you help fans . You want people to go to those games. Absolutely. People what three things, safe, convenient, and easy. This puts all the tickets in one place. It blends the primary and secondary market. Complete revolutionary change. I do not know why teams would not do this. Anytime you can make it easier for fans to buy coming you want to do it. Anything we also get into data is data. It is pretty easy to segment and direct market. Stephanie lets talk about how to gets them in those seats. We have a problem with the value of the data, but you need a team that wins. The top five teams are worst five times the amount of the bottom five teams. Do you do . We are going to build a winning team. That is the process. The good news is, as weve talked about several times, is the value of franchises just goes up and up. When we are in a market like philadelphia, we are wellpositioned. We have two good young players. They are both rising stars. We have our pick. We might have the lakers pick. What have miamis firstround pick and oklahomas firstround pick. We are positioned to be very good very quickly. This is a big summer for us. Stephanie why build a big Practice Center in camden, new jersey. How does this help with the experience . We just came off of a super bowl where the studio was all about technology. If you do not have a stadium that does not interest technology, you do not have anything. Tenets of philadelphia, so we work with comcast as a partner, and they are terrific there. Building in camden, new jersey does an accountable drop incredible job of incentives for the businesses to build. It is 120 5000 square feet, most technologically advanced, with dutiful, most spectacular, and practice facility in the world. Stephanie but we are in a selloff. It is why candidates like donald trump and Bernie Sanders do so well. Highght not have seen risk a year ago, but now it might. Do you want to be in camden . We do. We want to be in centers where we can be a difference. It has proven time and time again that when you invest in a community in need, and he reach out to the community and develop programs to lift of the city, it has a pretty impactful change. Great example of that would be washington dc, where you put a arena and, and a 10 years later it looks very different rate stephanie t. More peopleore and are facing lower wages, even though unemployment is at a good place, people are not spending. Given the data you have, what does the economy look like in your mind . Surprisingly, with a team that struggled over the last three years, it continues to go up in the corporate level and sponsorship spending. We have seen our ticketbased double in the last three years with the team that struggled. From our perspective, the passing passion points are beating the pocketbooks. Stephanie are you concerned that you can see that slowdown . Things turn, and corporations stop spending that means for you . Fans do not have to buy tickets. But these are the passion. Give get some Something Else up to go see their favorite team. We have the advantage. It is not a refrigerator. This is something that is going to happen once. Stephanie when you hear the value of life events is owing going up, do you have to deliver more . Absolutely. If you came to us, you would walk in, you would have the coach addressing you before the you might go sit in courtside seats and watch him shoot. You might get a locker room tour. Were getting you behind the scenes in places you cannot get. Youre getting your picture on the court. Experience has changed. Start from it and from an investment standpoint, how big a social media for you . I do not the steelers between social media and media marketing. That is the way to reach our fans. It sports you have a to his advantage over other brands. People pay money to wear your logo on their shirt. People want to get in, they want to engage. The tools now make it easy. Stephanie right now, what is your biggest challenge . This is a tough time, when they are looking at the markets and say things are looking bad in the short term. With big be faced budget you plan for and then to take the things tighten up. One thing is talent, talent, talent. How do we retain to keep the best in the world . We are getting there. We are doing a better job of reaching corporate america. That might be impacted there. Stephanie coming from new york, how much harder is it to be in markets like new work and philadelphia . It is different. That to new york in grand and management, and new jersey is greasy and passionate. On that note, we are going to end this segment. Of the 76ers and the new jersey devils. Back to you. Matt i have seen trading places, so im going to have to agree with him. Stephanie that is a good point. Matt coming up, Deutsche Bank announced it is buying back then. Were going to take a look at Deutsche Bank stock and european markets when we come back on bloomberg go. Welcome back to bloomberg go. We want to go to mark are in london for a look and banks. Mark the date news is that the debate is buying back Deutsche Bank is buying back bonds. Nz a crazy roller coaster week. This is a fiveday charge. We started the week with concerns that Deutsche Bank would not be able to pay the coupons on its riskiest debt. Then there was the rumor that it would buy back its debt, and shares came down. Now shares were rising ahead of this news, and since the news shot up. Ares have interestingly, over the weekday, shares are actually down by 1 because they fell 9 monday, they fell 4 tuesday, they rose 10 wednesday, they felt 6 thursday, and they are over 10 today. It has been quite an incredible, volatile week. Look at the stoxx 600. We were coming off the highs of thae day. Really settling the market. Went to be fair, we were gaining anyway. These are all the Industry Groups. Among the bestperforming Industry Groups today, all 19 were rising today. Chart i had ready for the battle of the charts, Perfect Timing whatis in light of Deutsche Bank is saying. This is the industry for 2006 from 2016. We have not followed for seven weeks since the height of the financial crisis this chart perfectly honest rates that break the white line has come down. We are in level of august 2012. Interestingly, that was just a month after mario draghi says we will do whatever it takes to save the euro. Banks were getting back all the gains from those levels. Look at the price target between the banks and the 12 months. David paas for just a moment. Julie has a great charge. I got this from the bloomberg, a story that it was attached to. This is the capital ratio of the banks. Not all things are created equal. The purple line is Credit Suisse, the bottom line is Deutsche Bank brady just give you an idea of the Capital Position of the bank. David marks chart speaks to equities. But there is a story in the bloomberg that Deutsche Bank lags all of its competitors in the capital ratio. But it is up to 8 billion to get up to the next competitor. , it iso close the gap only two tens of a percent, but it would cost 8 billion. That is what they were talking about. They took their medicine earlier. They did capital increases in the financial market. David mark, last word . The relative strength index has fallen below 30 on 12 locations. It is not even do that in 2008. Is it time to buy Deutsche Bank shares . David we will come back to that in the next hour. Thank you. In the top of the next hour, peter will join us on bloomberg go. David we are now 30 minutes from the opening bell in new york. Stephanie ruhle is on assignment in toronto at the nba tech summit. She will be joining us a little bit later. Joining me is Matt Miller Matt we have a couple of basketball fans with us now. Jim karen joining us, senior Portfolio Manager at morgan stanley. Your basketball fan . S. I am, but celtic matt lets get a check on the markets. A look at futures this morning, we are seeing them rebound b, helped by a couple of things. Seeing a little bit of a rebound as we see largecap banks, like bank of america, jp morgan, and citigroup owns back. They are being led by European Banks after we heard used for both commerzbank and Deutsche Bank coming out with earnings that beat estimates. Confirming a buyback plan of up to 3 million euros. This rebound that we are seeing this morning is coming on the heels of a dramatic underperformance by stock. Take a look at the bloomberg, the global index is indeed entered a bear market. This is something that happened as of the close yesterday. The rebound today bring us out of this a little bit. That is the technical definition of a bear market. Oil is also coming back this morning. The first session inside and. Getting a little bit of a rebound on hopes in the market that there will be some kind of opec agreement on a production cut. I want to take a look at what is going on in the race. A little bit better than estimated in retail. The 10 year yield is moving up slightly, but still 1. 69 . To look at w. A. R. P. This is something we were looking at earlier. Both of us data double takes when we put this up. Interest rate increase, or Interest Rate cut in the coming meetings. The odds have gone up a little that, but still extraordinarily low compared to where they were a month ago. The probability of the cuts now standing around 2 , going out over the next year or so. As we were talking about, there has been a remarkable change in sentiment. I have your first word news. Deliveries to areas cut off by warring factions, but they will not be led by a. Korea stops supplying power and water to the factory complex is shared with the north. More than 50,000 South Koreans were working at the site. And a vaccine will not be able to stop the zika outbreak. The vaccines are at least 18 ready fory from being largescale trials. The virus has been found in more than two dozen countries. Global news, 24 hours a day. Thank you. We are discussing it throughout the morning, the Banking Sector is being punished investors, thanks to concern about Falling Oil Prices as negative Interest Rates around the world. We learned that Deutsche Bank is debting a 3 billion buyback. On the phone from london is christopher wheeler, a banking analyst. What do you think of this move . The market is responding well. I think it makes a lot of sense been r dads has sense. Their debt has been crushed in w recent weeks. They can fight back as less than they issued it, and it makes a lot of sense. It reduces their leverage, and signal to the market that they have the cash on hand, we are not worried about being able to send our bills. Matt they are buying back to billion dollars as well. You, wheeler, let me ask what do you see as Deutsche Bank doing this . Is this a desperate move, or a smart move . Is a smart move, clearly with the stalks the week on monday, not being able to Service Content capital, they put the story out to that they were thinking of doing this buyback on tuesday morning, and the stock bounced. Then they thought they would announce the transaction, which will benefit earnings because they are going to buy back stock as your other colleagues said at below par. That is going to obviously boost their capital is as well as their shareholder funds. Triggered this was downs of subordinated debt. How worried are you . This is the lowest part of the capital structure. These bonds are doing exactly what they supposed to do. Hey can convert into equities clearly, in times of stress, that can get taken out. When that is actually doing is protecting the higher parts of the capital structure and to the extent that is support for Deutsche Bank is going through, i view this as a small positive. They are worried that equity is not going to be worth much in the future, maybe even nothing. The potential downside is that Deutsche Bank is taking some of their flexibility away. Liquidityooking at crash that they could lose down the road to protect themselves. They certainly do not have any problem, so they are having to spend it today. David this doesnt come as much as a surprise . A bear market makes you feel good about losing money. I am down 50 , lets throw a party. By about 10 , now im only u down 45 . We have seen historically that tends not to work for many companies. But what they are saying is we do not have a good use of our equity, so we are going to do it use it to prop up our stock price. They call it the polar vortex, we are entering a polar vortex of liquidity. That is our problem in the economy right now. Concernsmentioned about oil, exposure to the industry, concerns about china. And then concerns about interest margins . Julie we are seeing the yield curve flattened as we get throughout this year. But if the confession between the long as short end of the curve this has different implications for the bank. Banks make money on what they borrow, and then what they lend out. That is getting compressed. In addition to that, we see this flattening yield curve from the that can be a sign of recession or slowing growth. Banks depend on a growing economy as well. A year ago, these were seen to be a big by because they gave some highyield. That low Interest Rate market. There is a lot of higher yield up there, people complain low heels is a market, but that comes with a lot of risk right now what has happened over the past several months is the risk remained premium in general has been the race had. China, which is a more structural issue, and both are theting ripple effects in markets, as it is devaluing these asset. To some extent, some of these are well priced toy a big slowdown. Those are the first sectors to always get hurt. Chartwe were showing a that shows Deutsche Bank as last because of the ratios. Think the chances are that Deutsche Bank comes out with equity holders ons gaze, or being in the money at all . There is a high chance of that. There is a bit of confusion here. 11 goes through five and the night. That is a awful long way before they convert to equities. Can stop thes coupon being paid in times of stress. Deutsche bank has demonstrated they have plenty of earnings to fund those, so my view is that actually there is still some pain to go because this egg is still going through restructuring. But what they had announced his buying back their debts. It enhances the equity, because they will make a gain on buying back at senior deck. Senior unsecured debt is not subordinate death. Matt you must love all the other European Banks as well, right . I just like following the stronger with a physician. Banks with a stronger position. They did not go about the way the u. S. Thanks have done, so i see this going successfully. You are in a bear market. We just heard that phrase you look to sell rallies. Trading is very simple. Do i sell rallies or do i buy debts . Was by the jets, and now it is seldom rally dips, and now it is seldom rallies. Very defensive, not commoditized sectors, are looking better. High yields today are around 9. 8 for the overall index. You can look at the nonenergy sector which is using about 8. 6 . You can take part of the economy that are very boring, and boring is beautiful in fixed income. Packaging will yield you around 6 . These are areas that will you decent yields that are not very cyclical or ties to the commodity sector. They are pricing in default that may not be materialized even if we get a small recession. If we get a major recession, that may be a small recession, it is about the price point. Bank is still in crisis, down 40 from its highs. Credit suisse is down about 40 from its highs. Commerzbank came out today and boosted the entire sector. What is into doing right that Deutsche Bank and Credit Suisse are doing wrong . Good question. All of these guys have not raised as much capital and they need it. So Deutsche Bank and Credit Suisse are going through huge restructuring spread we talked about that a lot. They are doing it with very thin capital cushions. That is really the concern here. That is what the ranking of European Banks generally, who has the capital, who doesnt. That means there will be questions about the likes of Deutsche Bank and credits we Going Forward for months. I read the release with commerzbank, it was Retail Banking that was up for that substantially. They managed to get rid of a lot of their shipping loans that were hanging over their heads. Maybe Investment Banking is not the place to be, maybe not in europe. We have seen the pullout of the u. S. About investment in u. S. Banks being in good shape, and they are taking a lot of market share in europe. It is good for the u. S. Banks. It certainly is. As chris said, Deutsche Bank is going to be a survivor here. And Credit Suisse as well. Matt one of their biggest problems is negative yield in europe. Are they going to see more of that . And goal more negative, and japan maybe on the fence. Ecb still sees this as a viable plan. I think they will cut rates by about another 10 basis points. They may answer in figure qe program. Iny are about 60 billion euro purchases per month. Right nowkey point, they have been buying bonds along the gdp basis. They may do it on a more debt basis, meaning that whoever has the most bonds gets the most benefits out of this. Italy would be one of the big benefactors of that as well. Italian bonds, if that were to occur, it may be a 20 chance that mario draghi announces that, but he wants to know Something Big in march. David thank you. Stick with us. Theres much more ahead on bloomberg go. Later in the hour, Stephanie Ruhle will be speaking to paul jacobs in toronto. As we had to break, lets get a check on one stock that is surging in premarket trading, square. Visa reported a 10 stake in square. Heres your latest Bloomberg Business flash. Retail sales rose 2 10 of a percent in january. Cars and online spending led the way. Report claims that airbnb covered up for users that broke state law. And ford is doubling down on the vehicles, planning newaunch cointrea cointreau suvs. Julie thank you. The company is in the process of acquiring key digital. Buybacks. Cus on been looking for breakeven earnings at four cents a share in earnings. The stalking gaining quite sharply. It is a stock that has been beat up. Finally, a company that sells variousic pieces. The roll out of a couple of new products were not very successful. That is definitely we know shares. Back, cbs posted a higher fourthquarter. We will have details on that Earnings Report and the media declines we have seen natalie, coming up next. David welcome back to bloomberg go. Cbs reporting financial res ults a week after they fired their chairman. Affiliatedg and groups grew pace. To 3. 91 billion. Lets bring in our media analyst from princeton. Also with us, kwok capital strategist. Talk to us about this. Nothing that jumped out to be the most from the cbs announcement was how well they are doing with retransmission of that money. Absolutely. Such amission has been great growth driver for all of these broadcasters, especially cbs. They are most will go in the industry. Through going to get billion dollars in total retransmission. That is expected to go to 2 billion by 2020. Just from away, not cvs, is that we are seeing strength in the advertising market. That is fairly high exposure to advertising, almost 2 of their revenue. But we are seeing this across other Media Companies as well. Many different quarters of anemic ad growth, we saw a rebound, and now it is gaining momentum. Was at theough it national level, and the international level, not the local. Tv stations and radio did not do so well. That will come back. It jumped later this year, a big boost in the local ad dollars and the political and dollars. That is supposed to go to Something Like 4. 5 billion of tv ad dollars. Cbs will get a huge chunk of that as well. They are in pretty good shape, especially for the back half of the year. David i want to use cvs for the overthetop. Cvs all access. Cbs all access. That is what they are trying to do here. Cbs is something that is a first mover, very proactive cap they have a showtime offering. They are trying to create original like the star trek show that is going to come out in 7, two be felt descr two vfl subscriber numbers. Matt this is something that you would put on your tv to watch his cbs content without having to watch cable. That is going to explain why cbs is doing better than cable companies. More and more kids are only watching apple tv or letting the computer through these apps. They do not to pay time warner 80 a month. Exactly. One of the things that works in cbss favor, opposed to other media peers, is the fact that it has slightly lower affiliate fee exposure. These are the fees that hates tv operators a to Cable Network owners. Concern with cord cutting, and subscriber losses of the Cable Networks that is causing a lot of nervousness in the market. But cbs has relatively low exposure. That puts them at an advantage in this position. David julie has put together a charge. Chart. Ofie cbs has been the worst the Media Companies. I did this back to the august Earnings Report from disney, one thing started to Gain Momentum down to the downside. Is the purple line. It is a little hard to follow. Then viacom is the worst performer, followed by time warner, then discovery. Disney is not connect with discovery. Havef the stocks underperformed the s p 500 since that time. Least bad, andast all of the others lower. You can just see is in the equities. Absolutely. Bloomberg intelligence, thank you for joining us. David stick with us, later in the hour we will have the qualcomm chairman and coowner of the Sacramento Kings sitting down with Stephanie Ruhle. Matt she gets all the best jobs. David she loves the nba. She has a pretty good freethrow. Matt she beat steph curry. David and she did it in a cocktail dress and heels. Moore bloomberg go after the break. We will be right back. The conference call. The ultimate arena for business. Hour after hour of diving deep, touching base, and putting ducks in rows. The only problem with Conference Calls eventually they have to end. Unless you have the comcast business voice mobile app. It lets you switch seamlessly from your desk phone to your mobile with no interruptions. Ive never felt so alive. Make your business phone mobile with voice mobility. Comcast business. Built for business. Matt welcome back to bloomberg go. Stephanie ruhle is in toronto hanging out with the nba. Go to a oneday for the Industry Groups. They seek resources are the biggest gainers, followed by oil and gas and then banks. We do see link strength, but not as big as commodity strength. Lets take a look at Asset Classes as we hear the opening new york stock exchange. Clifford the big red dog is that the nasdaq. We see gold is down right now, as it seems to be a little bit more of a risk on trade today,. Il coming up, even a 7 rally a risk on trade today. Am i going too far to say that it is astonishing and incredible to see these kinds of moves in the japanese yen . Am i being too alarmist . Not at all. It is a question of how people hedge assets. That all turned sour. We continue to talk about oil. Correlating everything to one. All of these other asset prices are going down and you need to find a hedge. The ones that are working the best right now are u. S. Treasuries and being long on the japanese yen. It is a risk off currency. It is where people retreat create when they do not have other options. These of choice right now. It is because of the closing of the trade, and it is because it is a strong momentum hedge. It is not because of some type of relatively safe haven that the japanese have. They have gone to negative Interest Rates. Why would you pile in their . Money have to get the somewhere. Where is is coming out of . It is coming out of risky assets. Taking out the of the nba. It is a close run, and then you have 20 21. We have japanese years at zero. German at 25. We have a lot further to go essentially on the downside in our industry, relatively speaking. They can only go up. So now i may want to own yellen. Does it go to harm . Par . Matt janet yellen wanted to leave us with the impression she was on track to raise rates this year. Not think you have a rate raise it december and youre going to turn around in the middle of february and go sorry about that i was wrong. Youre going to try to defend that position. The markets are bigger. Monetaryports analogy policy is defense. We have no offense. We need to score some points to win. So the economy, the consumer is contracting at a slow right now. The irony is low Interest Rates, we have not had any increase in Social Security because of their time to the cpi which has been low. That forces people to actually save more and spend less. We are in this polar vortex we are having a liquidity problem. We need help. Our fiscal policy is totally off the rails. Until that get fixed, a doesnt matter what happens to negative Interest Rates around the world. As you report onwer world markets, it is a matter of getting out of risky assets and into longterm treasuries. They have been a bigger seller, which we saw yesterday. Today we got a little but of a pop in banks. A lot of that is from overseas news, some buyback programs. But in terms of risky assets can you look at chinese banks opening on monday. You to look at that and think who would want to belong going into this environment. There is a little bit of sense might be the time to look into defensive sectors. Maybe now is not the time to look at risky assets. Or maybe if we are not heading into a recession, this is the time. Talk about who is selling fake stuff, but the bottom line is, are we going into a recession, because that is what these markets are priced four. I see all of these positives, oil prices have to be a positive. Falling unemployment, rising wages brady seems like we are finally coming out of this great recession, finally coming to a point where we can see inflation. There are five components to think about a recession. First is growth, growth is ok. Second is jobs, job numbers have been good. Third is income, has been ok. Consumption, consumption is ok. The fifth component is credit, that is component that is hurting us. Four out of five is good, one out of five is bad. A 20 chance, a 25 chance that we go into a recession. The key here is do a asset market prices break down enough that this negative feedback will move into the economy and create a bigger slowdown . Is this a selffulfilling markets led recession . I think the battle right now is can the data stay strong enough, aside from the market prices going down, if the data against a strong enough, eventually the fundamentals will win, and the technicals will turn and follow it. But the singles are pretty negative. Negative. Are pretty howe i am looking at Economic Data is gapping below what economists have been estimating. There are a lot of up and down choppiness. Here is the past recession, we economists with a big gap. We have seen a trending since then, but not as large as economists predicted. Matt that is the city economic surprise index. Bloomberg has ecs you, where we look at all of the economic indicators, and gauge a surprise. The only one where we see positives is the labor market. Everything else has negative surprises. You drive, looking the review mirror, youre going to have a life full. Is of these numbers, that the best were going to get. We just had the best wage growth. We are looking backwards. Looking forward, the data is indicating, if you believe in markets, i think the market is telling a story. You cannotebt issue, solve a debt problem by creating more debt. That is what Deutsche Bank said. That is what the treasury markets are telling us. The spread between the hyg and the u. S. Treasuries has blown out. Yet everybody is amazingly complacent. That concerns me. We cannot have a 2008 . Maybe we can, but it will be different. Good point. The data is backward lurking. The question is do we see signs of the state attorney of this data turning . When well have two recognizes that those technicals can change relatively quickly, but we do not have evidence of it. Jobs, extent that we say 4. 5 percent, we are close to full employment. Wages still need to go a lot higher. But the issue here for me is that we are looking backwards with this data, but is a lot already in the price for this bond that reflects what peter is talking about . When i look at highyield, when grade, itinvestment is telling you we are going into recession. It is telling you we are rise for a mild recession. For a male recession, i think we are priced for it. David thank you. Peter, you will remain with us. Julie, what is happening . Rally that was predicted by the futures this morning. As we have been talking about, it isnt bank led rebound, following on the gains we saw in European Banks, u. S. Banks have also been rising this morning. Downhave also been beat quite a bit, financial the worstperforming group this year. You see jpmorgan rising on this news that jamie dimon has made a big insider purchase of shares, equivalent to a years salary for him. We are looking at aig this morning, posting their second straight loss. A fived authorize billion dollar buyback, and appointed john paulson and a representative of carl icahn to the bank. We are seeing a rebound there as well, a big one day gain for Oil Following six straight down sessions. Lets get a check on the nasdaq with abbeville dolittle. Wynn resorts are up nicely after fourthquarter earnings are up nicely. They made 1. 03 in the Fourth Quarter versus estimates of . 76 per share. Setup ism seller compelling, and he also likes the fact that steve wynns purchases gete more confidence in china and macau. There is an upside to his price target. There is a nearterm trade for investors in wynn resorts. Matt thank you. Ahead, qualcomm german and coowner of the Sacramento Kings ruhle atith stephanie the nba text summi text ch summit. Matt this is bloomberg go. I am here in our green room. Stephanie ruhle is going to sit down with the pagliuca, and mark kuvin at the nba text ch summit. Now we get back to toronto where stephanie is sitting down with qualcomm chairman paul jacobs. Stephanie thank you. Better toe is no one Talk Technology in the nba venue. Your stadium is going to be the most technologically advanced out there. Why does that matter, and the fact that youre making such a big push in tech, isnt it a risk that people will not be able to afford those expensive seats . You get people coming to the arena, you have to give them an experience that they have at home, as least, and in a want to come in and see us live. Ahead to allg sorts of things. Whether it is people doing what they do today, getting on social media, or broadcasting themselves, or even using Virtual Reality in the arena so in the arenaigh can feel they are sitting at courtside. It will feel really cool. Stephanie is not going to price fans out of the game . You have to look at it from a highend level of this is what youre looking to deliver. We are looking to reduce the price to your phone in the arena. At the super bowl we did optimization, and they built a distributed antenna system. That is stateoftheart right now for providing cellular coverage. Thatve a new technology has very little places that will transmit back and forth to your phone. We can reduce the cost to deliver about 150 times. It has a lot of capacity and about 10 times less cost. Stephanie is this the punchline we are missing . Those looking at the Global Market selloff are saying mass r d spending well diluted share. You are looking at your business saying it is expensive, and you say it is the opposite. Those projections are going to continue to grow. We can afford to do the r d and what that r d is former is to give you, the consumer, a better experience at a lower cost. And people wanted. They want more data, they want better streaming videos. They talk about 75 of the traffic will be video traffic. That is before we Start Talking about 360 degree video and all this kind of stuff. We have to drive the cost down through r d and we drive the performance up. Stephanie you are going to have more and more fans that never need to walk into an arena. Are you worried that will hurt your business . I dont think so. There is always the person who whats to be there live. Music. Ike you can listen to a band on a streaming service or some other technology. To that is not like going the stadium and actually seeing the band live, or going to the club and seeing them live. There are people who want to be able to say i was there and i saw that dont come or saw that incredible gamewinning shot stephanie. Stephanie is it only a hot market where you find this . Some segmentways of the relation that will go to the game, and sex and that will not. As you build an arena, your you are building the lower bowl with excessive seasonality of vrable with less extensive seats in our arena will be in, outdoor. We have these huge doors that open. For Concerts Committee will be able to have cheaper seats for people who are standing outside. We have not worked it out with the nba to have an indoor out your arena. We will get there, and we will see how this helps things out. Stephanie is your vantage point, what do you think economy looks like . Big markets, obviously, is china. Everybody says the chinese economy is slowing down. Were still seeing very strong sales in smartphones in china. From our industry, we are somewhat insulated from the economy. You find that people will disproportionately spend money on their Wireless Service and wireless devices. We think that particularly in emerging markets, where people will spend large parts of their Discretionary Income because they want to be connected to each other and to all the information and the world. With emerging markets such a great opportunity for you, as we have this selloff, could that be a source out . Sore spot . Are trying to drive the cost down. As i said, it is not a luxury to haveand people want estimated the to have a, at need to be connected. , ife will be some impacts there was a big meltdown in the emerging markets. But that is not what were seeing. Stephanie all the Cool Technologies are your jim. Drones, Virtual Reality, driverless. Are you concerned that we could see some of this innovation drop off if we do face more of a slowdown . Some of our r d budget because we were having a little bit of slowdown in the business. But we are still spending over 4 billion a year. That because the market is so large. We are talking about right now there is 3. 6 billion using cell phones. Still areose people old technology, and were going to bring those people to the latest mobile broadband technology. That will drive a lot of growth for us as well. Stephanie is the strategy going to be m a . Given more markets are command Smaller Technology companies, is this a year where you are going to spend inorganic growth . We are looking at inorganic and organic growth. We announced a deal where we are doing a joint venture what all of the little pieces of radio components that go in your phone that allows to do all the different fans around the world that the thing is to talk to now. Were mostly doing technology tough in times of acquisitions. People are going to push us to do something transformative acquisition, but that is not what we are thinking. We have a lot of growth in the core business, and we have these adjacent market that are growing. We will grow more content in the devices we have great that will give sick a lot of growth opportunity. Chipsp almost a billion for you. If you get one more dollar for by 1you wrote just grow million. Stephanie with the kings, what is the one thing you want to do . Win. Stephanie there you go. Nice and tight. Back to you. Matt thank you. Hall jacobs talking about indoor, outdoor arenas. Very exciting stuff. Coming up, bloomberg go highlights. David after a we got market for a while, time to look at our best conversations this week. The keyword and hispanic. Theres nothing fundamental driving these markets. This is fear. We have had a long ball market, and the air is coming out of the bubble. People are worried about politics, theyre worried about china, they are worried about oil and the economy is fundamentally sound. This has served as relatively well for the last few years, and it is ending. This is an important turning point as far as emerging markets. That is where the growth is going to be in the next five and 10 years. What has happened over the past several months is that risk premium in general has risen. Every asset class you own has been rerated. We know the reasons why. China, a more structural issue, and oil which is more cyclical. Ripple effectse in the market. In the political system continue to beat up the banks. When you look at the pain that has been there, obviously the shareholders, the employees, we took the pain very early in our Financial Sector. That was a great statement about the leadership. David lets get some final thoughts from peter. As we get through this weekend, what should we be thinking about . Peter thanks for having me. It is the friday before long weekend. People may be squaring positions, so we can have a night short nice short rally today. China has closed for a week. About that keith 2800 level, edited has broken below and held below that. On sunday night and our futures markets are open, is going to particularly following through to europe on monday. If we have a nice rally today, 1890 or so in the s p, if it gets that high, that is where you sell. David thank you. That does it for bloomberg go. We are off monday for president s day. Coming up tuesday we will have steve runner on bloomberg go. 11 0000 a. M. In new york, p. M. In hong kong. Welcome to bloomberg markets. Here in new york, good morning, im betty liu. What were watching at this hour, we are about half an hour into the trading session. What a difference 24 hours makes. Oil is heading higher. New data this morning showing retail sales increasing for a third month in january. Maybe those lower gas prices . Nba techake you to the summit where we will hear from dan gilbert, and the majority owner of the cleveland cavaliers. Also, Kenneth Feinberg telling you about his role overseeing claims from the volkswagen emissions scandal. Plus, what he thinks about current practices on wall street. Lets head straight to the markets desk were julie hyman has the latest on some breaking news on consumer sentiment