Transcripts For BLOOMBERG Bloomberg Go 20160311

Essentially may pay them to lend and that the dax would drop, you would have locked me out of the room, but that is what happened yesterday. David we have someone to explain it all to us. Our very special guest is Mohamed Elerian. We think of him as a bloomberg columnist. Welcome back. It is good to have you here. Mohammed co. Wonderful mohamed wonderful to be here. Jon the republican caroline the republican president ial candidates stayed away from namecalling. Trump said his campaign has been a positive force. Frankly,ump i think the republican establishment or whatever you want to call it should embrace what is happening. We are having millions of extra people join. We are going to beat the democrats. We are going to beat hillary or whoever it may be, and we are going to beat them soundly. Caroline trump his favorite to win primaries next tuesday in florida and ohio. With getting a boost former candidate ben carson agreeing to endorse him. The Islamic State is expanding its presence in libya. Inh the death of market off 2011, libya has been a failed of moralwith the death mark and off he in 2011, libya has been a failed state. And a deadly earthquake in sunol me more than 18,000 people were killed on japans is coast. It also caused the fukushima power plant reactors to melt down. The japanese government estimates it will take 40 years to complete. Global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am Caroline Hyde. Lets take a look at the markets. How are they doing, that . Matt we are seeing gains across the board. S p futures are back up 1 . Dow jones futures up 140 three points. S p futures now are rising to the highest level they have seen since january 6. We are getting closer to unchanged on the year. If you watched yesterday, we were down after the ecb meetings , and we rallied up hard in the last hour to finish unchanged across the board. Take a look at europe. You see big gains over there as well, with the ftse up, the least of the major indexes. 2e cac up 2. 2 , the dax up 2 3 . Down after the ecb, but today the market has gone up after that. We will talk with Mohamed Elerian about it. They seem to like it in equities. Stephanie i think you need a picture of mario draghi in a superhero cape climbing that axis there. If you think about what he did yesterday for European Banks, especially the peripheral ones, it was a massive safety net of protected effort, and the market particularly likes it. Matt if you do a gip chart, you can see it. It was pretty intense. All of a sudden we were up 3 , and then we just dropped like a lead zeppelin. Recovered all of that drop in some of the gain from yesterday. Take a look. Mohamed, we have a new function here called gmm. It is so cool. If you type gmm go on your bloomberg terminal, what you see in these columns equities, forex, sovereign bonds, and commodities i have them sorted by the biggest move away from the 90day mean. It is pretty cool. Euro stocks is the biggest gainer. Italy has a bigger percentage gain, but since it is a more volatile market, it is not as much of a move as the euro stocks. Are arranged you by different regions because you can see things that you normally would not be screening for. Palm oil check typically, but we see it today. Oil has been pretty intense to watch. Goldman sachs you see a gain 38. 75, getting closer to 40. Put out some numbers on oil. The 12year low for oil, the 17year low for natural gas. Remember not want to 549, you can type g btv. When you think about how this affects people everyday. Price for a average gallon of regular gasoline yesterday jumped four cents. That is the biggest oneday jump since january of 2009. So when we say when are these moves going to affect people . Yesterday, four cents. I filled up my harley at a shell station, and it was a ripoff. David stay in yonkers. It is cheaper. Jon a startling move i the ecb yesterday, 18 billion euros. Choosing to cut every single Interest Rate in the ecb, pledging to buy nonbank corporate debt as well. Euro. Y expect a weaker that is not what happened yesterday after the news conference. Lets welcome back in Mohamed Elerian. My take on this is judging the potency of this program by looking at eurodollars like going to the beach in the going to the beach in florida and complaining about the skiing. Mohamed i do not like disagreeing with you, but ultimately if you want to assess this assess assess the success of the ecb and what they are doing, Exchange Rates will help or hinder the european economy and inflation trends. Today you have words today you have used the words massive, dramatic congo and, like you, if you told me yesterday morning that they did what they did, i would have told you need to i would have told you nero to 1. 07 or 1. 06. Are we getting closer to the point where these policies become ineffective . Jon ineffective in the sense of the effects market. That is in the sense of the fx market. Can he make that pivot from the ,x channel to the pivot channel and will it take more time . Mohamed it can certainly take more time, but it could be like pushing on a string. As he is pressing the accelerator, the regulators are pressing the brakes. That is why you do not get the impact on credit that you expect, and we see this playing out in the u. S. The u. S. Is lucky because it has other areas of growth. Clear that with Monetary Policy and the fx, can impact the man . You have written in your book that can it impact demand . They say we will pay you banks at some point to loan to people. Is it possible that they can affect demand for that mechanism . Mohamed it is possible but not probable because demand is being held act by a lot of things. First, we have decoupled the ability to spend from the will to spend. Secondly, more important, we are lacking structure will reforms that give people confidence. Thirdly, the companies are not responding. This is yet another attempt good for him, good for the ecb because they should have done it but i hope behind closed politicians are coming to the end of the road and it is time for the handoff. Stephanie is it not risky . Look at credit products. Yet again, investors are piling into an asset class, even if it is an Investment Grade that is corporate. Let me buy a highyield print guess what, if the market falls out again and you have nontraditional investors invested in an illiquid product, which is highyield, they will be hedged, wedged, and screwed in there. And they cannot get out. Do we realize those ramifications . Mohamed we do and the Central Banks do, but they will argue that the risk for them is due to unintended consequences. But if we get the benefits, that is ok. Stephanie and if we dont . Mohamed then we will find out that we get economic weakness, and critically, the Central Banks will go from being part of the solutions stephanie to being part of the problem. Instigator. Ckst this is the itra europe, illiquid, sub Investment Grade nonbank holdings in europe. Stephanie glencore ripping and off the ecb announcement. , rep sore, all of these companies have their cbs adding cheaper and cheaper. Making it easier for them to raise money, essentially, but is that a good idea at . If it was hard for them to raise money in the first place, maybe it is not a good idea to make it easier for them now. It is like allowing subprime borrowers to buy houses. Mohamed we have seen this movie over and over again. This is the movie we have seen since 2010 in the u. S. And since 2015 in europe. We have seen it over and over again, which is you get this impact based on policies, and then fundamentals assert themselves. Ie process, you start made you cough. Banks do not want to be doing this, but they have no choice. It is they got one of that yesterday. They did not get the second half. The other point to make is that you look at that particular chart there, and at the bottom it is debt. Deutsche bank, commerzbank, the spanish, german banks need it to come down because the rate is at 20 basis points. Isnt that good news . Mohamed it is good news that there is some support for the banks, but ultimately the support for the banks have to come from the Balance Sheet side and their assets being worth more because the credit risk has come down. You only get that through other policies. Go back to the g20. It is about fiscal monitoring and structural. Sayd i am delighted to that you are staying with us. Up next, we go to mark orton in london. To mark barton in london. On bloomberg. Caroline this is the Bloomberg Business flash. Overall we have bp escaping from billionslity in damages from the oil spill. Paid out 55y billion in damages on the spill. The worst may be over for oil. The International Energy agency says the price of crude may have all about. The iaea says that disruptions oil prices have risen 50 from the 12year lows they hit in january. Bank of america is cutting back in asia. It has fired 15 senior bankers in its Investment Banking unit this week. The deal they also cut jr. Positions. Banks around the b of a also r positions. That is your Bloomberg Business flash. Jon we keep it in europe, london, with mark barton standing by to keep us through the european markets. Where do you start . All that stimulus moves, the number really expected in that way, shape, or form yesterday. Talk me through it. Mark investors come with a slightly different position today. That is the polite way of putting it. You know what happened yesterday. It rose as much as 2. 5 after the draghi measures. That had investors scratching their heads. No more Interest Rate cuts. The index finished the day 1. 7 lower. We bounced back today, and over the two days, we are up by one half of 1 . Banks are the fascinating stocks today, the bestperforming Industry Group or a they fell by half a percent yesterday. They are the best performers today on the stoxx 600. Deutsche bank, which is 6 higher today, cut its bonus by 4 . Revenue in the Investment Banking industry to drop this year as climbs pullback from trading, from fixed income securities, and refrain from doing deals. Every bank is rising today. This is fascinating. I know you love the euro. This is euro, this is dollar, this is the last couple of days. We start we fell as much as 1. 6 . We finished up 1. 6 . The focus has moved from the fx channel to the credit channel. It is a subtle change but it is a big change, isnt it, jon . Jon it is we have Mohamed Elerian with us. It is going to take a long time for people to look at credit specifically, and a long time to see it through to Inflation Expectations. Talk about whether this can have a material expectation going forward, mark. Draghise a look at measures, the fiveyear, five have your forward inflation. Know, on february 11, this measure fell to an alltime. Ecord low of 1. 36 in the last bill stays in the last two days, we have seen a pickup in expectations, one point 48 . We are still below the highs of last year, 1. 9 . But the trend is upward. That leads to my question will the trend continue to be an upward one when it comes to Inflation Expectations . Jon i will put that question to him after the break. O draghi up next on bloomberg , we take it to oil. Can we trust a backup we will get Mohamed Elerians take next. Stephanie you are watching we are backgo. With Mohamed Elerian, and turning our attention to oil. It recently touched a three month high. 38 29 cents high. Welcome to the new normal. Iaea says oil prices have bottomed as these highcost producers are reducing output. How big is this for you . Is this the moment we have been waiting for . Mohamed when i was with you a month ago, i said you cannot justify oil prices being so low on the basis of supply and demand. Demand will pick up. The problem was that the market was not finding its feet after opec exited the role of producing. Now the market has found its footing, and we are getting supply disruption. I think this rebound is real. It will remain volatile. But we are seeing the bottom forming in a significant way. Pointed toreport what they projected as 750,000 barrels a day reduction in production. We had wilbur ross on recently. Lets play a little bit of that for you. Theur oil probably did hit bottom when it was around 30 a barrel, but on a given day, given the events of regulation, it could go anywhere. But in terms of where is the real level, i do not see it going much below 30. David this is my question. This oil the symptom or the disease . We have spent so much time focused on oil, does it really affect the underlying fundamentals of Global Economy on growth . Oilmed it does, but low prices have gone from being a blessing to a curse. The reason why is the volatility that has come with low oil prices. 3 to 7 moves daily in oil have become common. Oil is not a penny stock, it is a widely traded commodity. If you get 3 to 7 moves in that commodity, it is telling you the system is becoming less stable. This is important. I agree with him. Look at the volatility of oil because it gives you a good insight as to how stable is the underlying volatility in markets. Matt i wonder about the bullish comments from goldman and the iea. If you look at opec go in the bloomberg, you can see there is an Oil Production tab. It does appear to have rolled over. Obviously at a record high, but rolled over. How much do you trust this kind of reduction in production from opec . It seems like most of the members outside saudi arabia are going to produce as much as they possibly can. They need the money. But i think that is where they are. This is maximum production. Libya comeback onstream . What will happen to iran . For most opec members, they are at maximum up performance. Matt so they can freeze at that level . Mohamed of course. That statement had absolutely no value. Stephanie why . Mohamed because they cannot produce any more, so of course they will freeze at that level. Either you need it venezuela, nigeria, ecuador or you are predicting market share saudi arabia. Bailout will of a this be for Central Banks that are struggling . Mohamed this helps. What has happened in the last five weeks . Oil and commodities have come back. Talk of a u. S. Recession has declined, and currencies have supported inflation in europe. I think there is a tactical change in inflation outlook. I do not think it is a strategic change. David is that your answer to mark bartons question . ,ohamed q things have changed but they are key things have changed, but they are still tactical. The ecb will no longer worry about disinflation. Can the u. S. Economy with stand massive volatility in the oil markets . If we take a leg right back down, which we could next week, can the u. S. Economy keep on trucking . Mohamed i think there is a lot of good in the u. S. Economy, but it is a good that allows us to grow around 2. 5 . It is not where we should be, which is at escape velocity. Stephanie you sound like larry fink. Mohamed we have two big headwinds. One comes from financial volatility, and the other one comes from the weakening in the emerging economy. What we cannot afford is a problem at home. Jon Mohamed Elerian, thank you for joining us this morning. Coming up, last nights republican debate. Not as contentious as what we have grown used to. Futures are positive. David it is not just european equities up today, but futures are t two hours ahead of trading could tom keene is here from radio. We will go to london and Caroline Hyde with the first word. Aroline Angela Merkel faces a major test three german states will hold elections could Angela Merkel is not expected to quit even if they lose all three votes. More problems for the present of brazil as she fights to stay in office. Prosecutors want to place her presenc predecessor under arrest after widespread accusations of corruption and kickback finances. Its a new role for irish leader ed mckinney. He lost the bid in parliament for a new term and threw it in political limbo. His coalition lost big in the last election. That means that kenny is still favored to eventually be reelected. Global news 24 hours a day powered by 2400 journalists and more than 150 news bureaus around the world. Jonathan tom keene is back alongside us. It is morning must read time. What have you got . Tom this is Lawrence Lindsey associated with president bush wanted to and reagan. The progressive ruling class do not view of america as a cause, only a country. Therefore, they feel little compulsion to protect the cause of liberty that america stands for. Do not expect a robust defense of American Interest from them unless they themselves are threatened. This came out with a first line that the public is angry. It look better presented for the political discourse right now. David that is simply undeniable with what is going on the president ial election. It is so important what words you choose. Progressives would not agree with that, but people like Lawrence Lindsey take liberties. Progresses might take the quality and say they are not wiling to second is a quality. Book,ts a libertarian but it has elements of criticism on both sides. Jonathan you mentioned the quality, but the quality equality and opportunity are not result. A lot of people are not satisfied where they are at and that is a problem political leaders in this country at least. A to theres it from problem at the end does not see the benefits of globalization. You see this in Great Britain with the brexit. What are we getting out of it . In the United States, we have nafta. The average worker in my home state of michigan said i did not get anything out of this. Like the its individual worker does not see the benefit of qe. That caused the rise of Bernie Sanders and donald trump. Tom we go into tuesday in florida and feverish campaigning this weekend after a debate that the headline saying it was a most of last night. David it was a most like they had a personality transplant. Hy forhat is your wife fo that . David i dont know. Stephanie has a theory. Stephanie i think the grand prix bot of the Republican Party was saying, hey boys, we are giving Hillary Clinton this because we are behaving like animals. Whether or not you like Bernie Sanders or Hillary Clinton, they were debating the issues and not up there spanking each other like schoolchildren. David donald trump is sitting on a lead and does not want to blow it. Rubio has already tried to grow hostile and it hurt him. John kasich has never been there. Stephanie trump is coming off all that circus behavior. His possible Campaign Manager is possibly roughing up reporters. Lisicki is trying to have a sober, responsible moment. Are you keen on sober responsible moments . We will let you have quite a few more of those when he had active surveillance radio right now. Tom keene, thank you so much. We will stick with politics. This is just before next weeks big primaries in florida and ohio, which means so much to john kasich in ohio and marco rubio in florida. A very toned down last night. Front runner donald trump evening knowledge how well behaved people on stage work. We are all in this together. We are going to come up with solutions. We will find answers to things and so far, i cannot believe how civil it is been appeared. Has been up here. Stephanie Mark Halperin joining us from miami. Who is this donald trump . Suddenly why are they all behaving . They all have motivation for behaving. Trump is trying to shift to someone who can quickly unify the party if he wins for a five states on tuesday. He will be in a position to try to reach up to people and bring in more people like Chris Christie and Jeff Sessions into camp and marco rubio had a huge onus to rehabilitate his image. John kasich has never been about attacking. Ted cruz did take a few shots at donald trump, but donald trump did not fight tha back hard. He wants a oneonone race with trump and trump did not rock the boat. Displays to trumps interests. He is ahead and i cannot imagine anything last night will hurt that standing. David does that mean trump won the debate last night . An a. I gave him minut the status quo favors trumps. He was very smart to calibrate. He does not want to give up being a counterpunch or. I thought he calibrated that very well. I give the other three guys bs. If this was the first debate, this would be fine, but this is the last debate before and elimination day in their home states. Stephanie is that because punching wouldve caused them to lose ground . Mark trump . I dont think he lost ground. Dayay not have had the best last saturday, but hes a strong position now. If his campaign sense is where they are in the five states that a voting like missouri, florida, ohio, illinois and north carolina, they cannot have a bad day. They can do only better or worse. He will come out of the debate with lots of delegates and a chance to potentially put the in aation away or end up oneonone contest, which may not be great for him, but still leave him as the commanding figure on the path for the nomination. Tonehan if this change in plays into Donald Trumps hands, others have to change there is and not maintain it. Quite clearly, this tone is not good for them but good for trump. What do they need to do . Mark theres not much of an opportunity to do anything. Donald trump is happening a press conference getting the endorsement of dr. Ben carson. Put in new ad in the local stations, you have to put it in today in time for next tuesdays vote. They can just hope that trumps performance on tuesday leaves him with a lot of delegates but not a majority. Most of them have acknowledged that they try to beat him somehow at the convention in cleveland by holding him short as a majority of the delegates although he will certainly have a strong plurality of the delegates. Stephanie while donald trump did tone it down lik last night, maybe hoping to gain support of the middle ground, he stayed somewhat on message, specifically with islam. Last night, you told cnn islam hates us. Id you mean all 1. 6 billion muslims . Its a lot of them. This is something you may not know about, but theres tremendous hatred and i will stick with exactly what i said to anderson cooper. Stephanie he did not go so far off the mark coul. He maintained his strong stance on something as dicey as islam. Mark he says what he believes. That ifalmost no doubt there was a poll on what he said last night, it would help them with the republican electorate. Controversyle that could galvanize the antitrump movement now, but in general, whether trump is going against republican orthodoxy by saying planned parenthood does good like last night, it is time to change cuba policy, or whether it is saying something that goes to the public and based like islam is at war with ability, trump has the to at least inspire and keep a hold on the people who support him. His support expands and a lesson to win the general election is a question for another day. We have seen time and time again with trump one of the truism in politics if a candidate is what they believe, its better than shaping their own position based on what advisers tell them to do. David i wonder if the most important person not being seen on a navy stationed as president barack obama. Isever will be elected dependent on the job Approval Rating of obama. His job approval numbers got back up to 50 . Is that possible that that is more important to determine what will happen in november . Mark no doubt, thats historically a huge number. It depends on whether the country feels its on the wrong track of the right track. All those things feed into is a obamas Approval Rating. My guess is whether his approval on election day is in the middle ,ow 40s or in the high 40s that band has been where he has been throughout his presidency. Is, the better chance a democrat has, but we are likely in a race where other factors will also be a big part of it, including the identity of the two nominees. Stephanie it is quite beautiful where you are this morning. We thought John Heilemann would be joining us. Is he getting a suntan . Mark he is getting morning beverages, i think. My nammiami is pretty nice. Im heading to ohio for with all due respect. Im guessing the water in ohio will not look at this. Stephanie columbus is the other miami. Mark i will be in the akron area. Stephanie even better. Jonathan Mark Halperin, thank you very much. You can catch him on with all due respect at 5 00 p. M. Eastern on bloomberg tv. Companies meeting with lenders to review existing loans. We will look at that next. Lets bring up the futures for you. The s p 500 futures of 18 points, dow futures up 142. Switch up the board very quickly, i dig rally for European Banks. Almost 44600 up Percentage Points. The big story is china and the u. N. Raising the losses for the year. We will talk about that later in the program. Wti up 34. 9 . Nd delet jonathan i am here in the green room. In the next hour, the chief strategy expert offering opportunities in todays markets. This is your Bloomberg Business flash. Deutsche bank is forecasting revenue will shrink for investors this year. The bank will refrain from doing deals. According to people familiar with the matter, Deutsche Bank has cut its bonus pool by 11 . Apple will introduce new versions of the iphone and the ipad later this month. According to a person familiar with the matter, the iphone will have a smaller screen and come with updated components. It will look to be an upgraded version of the ipad. Asone sales are not as going fast as they used to and ipad sales are in decline. Marissa mayer wants to keep her job running yahoo , even if the Company Changes hands. They are looking at alternatives, including spinning off the court business. She told charlie rose she helps theres a place for her. 11 yahoo and i have a threeyear Strategic Plan to turn around yahoo , but i think it is about our users ands about our employees. What is happening with all them, i certainly hope that our services are here a year from now and run even better. That should easily be the outcome. Caroline you can watch all that interview tonight on charlie rose at 7 00 p. M. Eastern on bloomberg tv. As the Bloomberg Business flash. Stephanie the spring the termination for Business Companies will take a turn this year. The head of m a at jones day is with us. Read determinations are here and these Energy Companies have drawn their lines of credit to have to step up to the plate with banks. Bob a lot is going to happen and people are stirring the pot because of numbers being almost at 40. I think it is too early to call it a party. There is a huge difference in terms of emp companies. Majors are not affected. Back anduppin cutting midmajors have raised a major amount of equity. And like devon en masse on and people like that. It is everybody else who has got the problem and they have the redetermination issue coul. The Capital Structures were put in place where oil was between 105 and 95 the. No one is saying that is happening soon. More. Been a lot one of the interesting thing so far as the guys who have Balance Sheets have not been coming to skip these companies up. Stephanie why do it yet . Robert thats part of the idea, but it is mostly guys coming in taking over the company. The fed has made it Crystal Clear to the banks that they are watching this. Lester, there were hedges in place and a lot of factors that helped out the frackers. Im talking about the bottom half of the food chain. They got it passed, including in october, when it was clear that prices were tanking. They are not going to get that kind of pass. When you have to get an outside verification of the reserve determination, that is real hard when you yourself have been cutting back your production. You have been laying people off. You have got leases that require a certain amount of drilling or you lose them ther. There are lots of factors going on. 90 bankruptcies in the first few months, we feel that will be over 500 this year. Stephanie well over 500 bankruptcies . Robert yes. Do not Pay Attention the exxon. They will be fine. Guys will be diluted, but theres not a lot of equity being raised by wellknown companies. There has been 90 in the first two months and there are probably more bankruptcy and m a lawyers per capita hanging around in Houston Hotels than certainly any other profession. David take us through the calculation. They better to wait until go to chapter 11 to pick up the properties if you are a buyer or going out to get the right properties . Depends. T one of the things that people with capital, including industry is thatants Financial Guys are buying when the debt get stumped. Theres been a lot of debt on the market. David one last question how much pressure is being put on the banks . How deep of the capital structure with thill this go . Robert they may have to put on that haircut. Stephanie will they even want to be in that business . Robert once that happens, they will be pulling up. Its no difference than the end of the big short. Stephanie no difference than the end of the big short. And 500 potential bankruptcies this year. Way to end the week on the high note, bob. David thank you very much for being here today. Next, matt miller and Jonathan Ferro dig in to gold on todays off the charts. Caroline welcome back to bloomberg. Matt did i still your answer . Jonathan lets start again. Welcome back to bloomberg. Its time for off the charts. Matt hillary and i are psyched about what is going on in gold. Here we have the first chart, which is 518. Clients can now access the entire library by topping g btv and taking what they want. This is interesting and we got this from a website called macro tourist. Com. Casey stocks tuc stocks with the s p going up as gold is going down. That is typical because gold is a fear trade. Of the last few weeks, gold has been rising the stocks. It is very interesting and could be the scourge and if you think about the way people over at zero heads think about it. We can show you the ratio of the gold price to the silver price has climbed to levels which may signal problems. If you look over history, the only time that gold has been worth 80 times silver has been world war ii, which was literally off the chart here, the gulf war, and we approached it during the Lehman Brothers financial crisis, but did not quite get there. We are looking at gold trading 82 times the price of silver and the gold bugs and zero heads tepid people think this indicates real issues in the economy. Jonathan the obvious question about that chart is wise the relationship between gold and silver so important . Matt they say that throughout history, it has been an important ratio. Back in the day, it was set by certain regimes, but now that it is floated freely, the fact that gold is used more as a fear trade or a store of value when you expect currencies to collapse, when Central Banks are doing things like qb not working, incredible volatility, for example, when people invest in gold, its an indicator that those things have gone too far and the economy cannot recover. Jonathan very quickly, the bullish case for gold. Given what has happened in markets the past four months, has the bullish case for gold diminished . . R as gold still at buy matt you would think it has diminished because equity markets have done fairly well. Even the credit markets, people think the economy is going to be ok. You not seen the 10 year yield down. But as the central bank continues actions and pulling new tools of the bag, people are concerned that this whole house of cards could collapse. Jonathan matt miller, thank you do muc very much. Talksup next, the head about opportunities he sees in todays markets. David europes biggest bank cuts the bonus pool and jpmorgan set to cut several emerging market credit traders. Marissa mayer speaks out exclusively to charlie rose on her future with the company. Have oil prices bottomed out . Iea says the Oil Prices May have found their lowest point as highcost production comes offline. David welcome to the second hour of bloomberg. Im david weston was Stephanie Ruhle and Jonathan Ferro. Stephanie were going to talk valeant, which is up. Mike peterson, the onagain offagain ceo, says the worst is over. We will dig into that. Jonathan the markets have an ecb package to digest and i do not think the yuan will have a huge impact on sentiment. Really interesting. To bring down the stores, matt winkler, looking forward to that conversation. Lets crossover to remy for the first word news. Remy donald trump and his rivals went lowkey at the latest debate c. We are all in this together. We will find solutions. And so far, i cannot believe how civil it has been up here. Is expected to get a new endorsement from former candidate, ben carson. Looking to next weeks primaries, trump is favored in florida and ohio. Aancellor Angela Merkel faces big test coming into sunday after a campaign focused on her open borders policy with refugees. Three german states will hold elections. Even if her Christian Democratic Party loses all three of the polls, merkel is not expected to quit, but resistance to her refugee policy would likely increase. A United Nations report ones that the Islamic State is expanding its presence in libya. It has been a failed state controlled by militias in the Islamic State is taking advantage of that turmoil and increasing its foothold. Global news story for how her day powered by a news bureaus and 150 journals around the world. Matt we are seeing real gains here. Yesterday, the ecb decision came out and you saw a huge rally in the euro stocks. And then went negative by the time we finished the day. We have now recovered all the losses we saw yesterday at 1. 5 and are adding more. Franceseeing germany and up about 3 right now. The ftse only up half a percent. The euro is also very interesting because it skyrocketed yesterday after the ecb decision. Within a half hour or 45 minutes, and i come back down. As recovered all that and more. We are looking at 1. 11 now. Financials are big laggard and they are a big laggard here as well. Equity markets came down and then recovered. We were basically unchanged to close the day on the s p. Were looking at a 1 gain on futures. 145 points for Dow Jones Futures as well. We are seeing that move in the premarket. Goldman sachs, morgan stanley, and jpmorgan all trading higher in the pretrade market. Futures up, they are up as well. Netflix up 2 in the premarket and netflix and amazon up 1 . Exciting story because its correlation with stocks is been so tight. That has started to dissipate over the last couple sessions really through the week. At see oil today at 2 30. 57. A lot of bullish comments out from Goldman Sachs in the iea about the supply and demand ratio balancing off and maybe the second half of this year and into 2017. Interesting to look at and maybe we will see that correlation pick back up. And asiane yuan currencies rally across the board. Jonathan one of the most read stories on the bloomberg this morning is europes dig Us Investment bank, Deutsche Bank, cutting its bonus pool by 11 after rising Legal Expenses hurt. Michael moore joins us from london. Heard Deutsche Bank talking about this again and again. Would this have come as much of a surprise to you when you got that paycheck . Michael no, its 13 for the whole company. That is not quite as severe as some may have expected for the end of last year. There is talk of cutting it by maybe 30 . This is certainly not unexpected and cry on has said the company will be underpaying relatively to peers as they work through legal issues. Stephanie i did work at deutsche and from all my ex colleagues, they are miserable. He ises john cryan think going to keep people in their seats later . Its not a culture led firm. Michael historically, they did have the reputation of pain pretty well. There certainly a transition there. I think he is hoping to hold on and preach hope for things bouncing back in the next couple of years, but then again, they also said trading revenue for the industry is probably going to be down in 2016 given the rough start to the year. There certainly a lot of questions there. Am not sure how is going to rally the troops, but this is something they have to do to get up. Roe stephanie is the trick to hold on to your seat . Bank of america is firing bankers in asia. Is it not about getting top cons, but getting a paycheck and making sure your work id is still functioning . Michael that may be his best hope here that people, even if they arent happy with this years pay, may not have somewhere to go because theres not a lot of places right now that are on big hiring sprees. Losing the top one or two people on a desk, but there is not a lot of competition out there for hiring right now. It is more of keeping your job. David as Michael Moore joining us from london. I want to talk Central Banks right now and its not unrelated to what we were talking about. Mohamed elerian said that when the referee Start Playing in the game, you got a problem. Ofn it comes to buying sovereign debt, you saw the ecb yesterday, but they are not the first elastic into this. They made the life of a bond trader a lot more tricky than it used to be. Trickier because there is less volatility. This is why traders are losing bonuses and losing their jobs because in the debt market, there is a lot less volatility. You can see that in the Janet Yellen Federal reserve. It is still a debt market that is much less volatile than it was under ben bernanke and much less volatile under Alan Greenspan. The other thing that you can look at is with respect to the ofo, the implied volatility the euro is declining lately, not going up. Matt i just want to hop in because i know what david is thinking. Volatility lately has been picking up, but if you look at the average over the last fans, matt winkler is right. Not only has volatility been reduced with janet yellen, but it has been reduced with ben bernanke. I dont have the data, but i would say paul volcker as well. Here you see greenspans volatility and you see the average of Ben Bernankes volatility in the average of janet yellens. This also correlates to their heights. Paul volckers may have been higher because he is 611. Tall do you think Alan Greenspan is . Matt i thought he was 63 at one point. Stephanie no way. Everybody is shorter than paul volcker. Andd we will go down measure Alan Greenspan and take a tape measure. So more broadly, lets take a step back yesterday. The ecb had very big news. What did you make of what they did . Matt winkler Central Banks matter and the market is telling you that Central Banks matter. Central banks are driving this bus. People may not like some of the policies that Central Banks are taking, but they are making very serious moves to try to affect what has been a disinflation economy. It is playing out as we speak. Jonathan big moves in japan as he boj owns half of the stocks right now and they will begin to buy corporate that debt. I want to know if you think that can we successful and spur the behavior they want to see. Matt winkler japan has serious them a graphic challenges. Demographic challenges. They are losing population. You have to applaud the central bank for doing everything they can, and also the government to some extent. There is fiscal stimulus going on, probably not enough, but it is maintaining a quality of life in japan that is hard to sustain when your population is declining. It is not a perfect situation by any means, but the fact that the central bank is acting is better than nothing. Stephanie the fact that we realize Central Banks are important, how is that new news . Matt winkler people forget and get lulled into complacency. Draghi and herio does something that people were not forecasting and did not anticipate and you see the reaction to that was surprised in the way the markets behaved yesterday and today. David the volatility in the japanese bombed market has gone very high. Matt david pulled this up with hillary and i was going to uses for off the charts actually. You can see the volatility in the 30 year just skyrockets. One of the reasons may be that banks are not holding deep treasuries anymore. The only game in town obviously, so tradersral bank, are try to anticipate these moves in a less look good market. I wonder what you think, matt . Marketnkler the japan is a conundrum because it has had the lowest Interest Rates for the longest period. Debt to gdp is Something Like 200 percent, which is hard to imagine on the side of the atlantic or pacific. These are very specific realities for japan. Im not sure you can generalize about what it means for the rest of the world. Stephanie given the massive reaction we saw yesterday to the ecb news, are we having the right actions . One would think that Central Banks should be the agent of creating stability, a slow and steady environment, but it seems like they are causing spikes and volatility. Matt winkler this has been a longterm problem because Central Banks, as i said, are the ones at the center where governments have been unable, for whatever reason, dysfunction or something else, to do their part. Theres not been the Fiscal Partnership with the central bank that is so important. Governments have not been leading, so youre left with Central Banks by default to do what really should be fiscal policies led by governments in europe and governments here. Jonathan the german argument for a long time has been let the market decide what the risk is and let them make the changes. Let them make fiscal changes. Its a brutal way of seeing the world, but its the argument of 2011 and 2012. Mario draghi said that if you go down this road, the reformers. Will stop,. Matt winkler thats easy for germany to say because germany Sells Everything to the world and dominates the european economy as the export nation bar none. If germany had a more balanced economy, we would be better off, particular in europe. That is exactly what im talking about. If germany is the biggest economy in europe and was in a position to lead domestically the way so many people asked them to for decades, we would be in better shape. But because it isnt and its left to the ecb to do all the heavy lifting. Stephanie good news ecb has to do the heavy lifting and you do for the next hour because youre sticking with us. Matt winkler is staying with us. Coming up, youre staying with us as well. I had a little bit of a bowtie confusion. I was overwhelmed for a moment. Presence of candidates blaming wall street for the problems of main street. We heard this before. Youre watching bloomberg. Dont move a muscle. Remy this is the Bloomberg Business flash. The International Energy agency says the price of oil may have bottomed out. The iea predicts shrinking supplies outside of opec and disruption inside the group will erode the global oil surplus. Oil prices have rise 50 from the lows in january. A big break for bp involving the gulf of mexico. A court has ruled that bp will not have to face lawsuits by Energy Companies over losses they planned on the offshore drilling ban imposed after that disaster. Bp has paid at 55 billion in damages from the spill, the worst in u. S. History. That is your Bloomberg Business flash. David our guest host this morning is matt winkler. You have written a Bloomberg View on wall streets role in recovery. Cover there is a perverse relationship between the presence of candidates who can blame wall street for the problems of main street . They have got it all wrong. This is what your piece goes through systematically and it shows. Matt winkler it starts with the crisis and regulators led by the unreserved repaired the damage. Reckless speculation was replaced by oldfashioned credit creation. It is been going on for some time. Now when we look at the landscape, wall street is a very different engine for the economy than it was eight years ago. It is a very good engine by the way. Loanse seeing c and i at a record. You are seeing the Household Incomes of americans becoming ever more wealthy. Part of the reason, by the way, is if you look at the house itself, american homeowners are 64 of all americans. Are within seven Percentage Points of the alltime high inuation of their home an 2006. It when mac comes on not only because he hired me 17 years ago, but he brings me great charts. This is a percentage of u. S. Disposable income that is used to repay household debt. 2007 to 2015. From it was at 13 and now its at 10 . Youre using less of the money in your pockets to pay off your debts. Im using the panel button here. When the reasons is that as matt just mentioned, total u. S. Home equity is 7 short of its peak. Our homes are worth a must as much as they were worth at the height. Things are getting back to normal and paying less to get there. Stephanie but the house are doing very well. The havenots are the reason we have seen these candidates do so well. Matt winkler actually, thats impossible. Stephanie why . Matt winkler if you look at two categories of companies in the United States, but description Area Companies Consumer Discretionary companies, amazon and netflix. Stephanie my Favorite Company is bloomberg, but whatever. [laughter] matt winkler there are consumer staples. Those are companies who are familiar with like mcdonalds, for example. Companiesk at those and their performance over a 12 month basis, they are both doing really well. The Consumer Discretionary companies are outperforming the staple companies. You cannot have a situation like that, stephanie, unless the American Consumer is spending money. The American Consumer has a lot more cash to spend then he or she has had in a very long time. It is at a record. It is impossible for there to be this widening economy between the haves and havenots. Stephanie then who is that decimated no class at the donald trump rally . Matt winkler the Unemployment Rate is well below 5 and will continue going lower. Americans are getting their jobs back. They are getting more income in their wallets. Weve been talking about energy by the way for a long time now. There is a benefit to Lower Energy Prices to American Consumers. And have more cash on hand are saving more money and have more money to spend. This is a very constructive story. Lets get back to the big point here, which is wall street is doing everything it was meant to do to help main street. Warren buffett, if you recall just a couple weeks ago, he was saying you cannot listen to what all these people are saying in these president ial debates. It is nonsense. Americans born today are going to have better lives than their parents did and that is Warren Buffett and he should know. Winkler, matt thank you very much. Read the story on the bloomberg. Bloomberg view. Com for that story. Valeant, the ceo had a private meeting with top executives. What did he tell his top team . Thats next in a bloomberg exclusive. Stephanie welcome back. Youre watching bloomberg. Mike pearson back in action and the company may be due for a turnaround. Im joined now by robert longworth. You put the story out on valeant. Mike peterson has been back for under two weeks talking to top executives. What is the message . Robert we have a source who told us what he said. Basically, he is putting a very positive light on events. Nos there are another other big shoes to drop. This is what he is saying and at valeant are much better than outside perception. Stephanie why isnt he saying this to a broad audience publicly . Hes speaking to analysts who like him and employees that have not left it. Robert theres very little news or information out of this Company Since he basically went to leave. They have not had their earnings yet. They told her guys he is coming back and he had this odd thing work you did some calls and reported with analysts privately. Then, the stock went up. Internally, there has been very little broadbased external communication. Communication has been internally. They say its better than people think. They say the reaction to the sec investigation he calls that overblown. Stephanie when are we going to hear from him . What are they going to show us the money . Robert march 15, there are supposed to come out with preliminary earning numbers. Theyre going to have something on march 15. Eventually, they will have the official 10k. Im not clear on when that is coming. Theres an ad hoc investigation of the board with their relationship to that pharmaceutical company. Started the heavyduty controversy because no one could understand what was going on and why they had this semi secret relationship with this pharmacy. That board investigation, pearson was saying they have to wrap that up soon and get it done because that is spooking investors. Stephanie is that why they are making changes to the board . Robert they have gotten ackman person in there. Ackman is one of the biggest shareholders and he said in terms of paying down debt, maybe they could sell bausch lomb. But they said they would not do that. Stephanie weve got to leave it there. Bausch lomb . I dont know. Thats 30 of the numbers for. eeeeohmumohweh hush my darling. dont fear my darling. the lion sleeps tonight. hush my darling. man snoring dont fear my darling. the lion sleeps tonight. woman snoring take the roar out of snore. Yet another innovation only at a sleep number store. Mrs. Bloomberg. This is bloomberg. Lots to discuss in todays market. Inocencio formy the first word news. Japan is marking the fifth anniversary of a magnitude 9. 0 earthquake that on including five that spawned a 30 foot tsunami. Also caused three Nuclear Reactors to meltdown. The japanese government says that the cleanup will take 40 years to complete. President obama will appear at the sxsw interactive tech festival. And former first Lady Nancy Reagan will be very today beside her husband on a scenic hilltop in california. Hundreds of friends and family will enjoy to the private service. Nancy reagan was 94 years old. Over to you. Matt a slew of analyst upgrades and downgrades moving individual stocks this morning. I want to start with u. S. Steel. Credit suisse has the greatest review on Steel Companies with a. Ullish outlook they havent outperform on u. S. Steel. We do see ak steel still falling in the market by 3. 6 . Win resort to wynn resorts, falling in the premarket. Anadarko is making some strong moves, chevron as well. Lets move on to the reaction to the ecb meeting yesterday. Surprised investors by cutting rates further into negative territory, and programg a bond buying into corporate j death. Debt. Very interesting Market Reaction to the ecb moves yesterday. First very positive, and the very negative, and today is the recovery. What is with the volatility . Marketer by the difficult to find out exactly what theyre doing. Got a piece saying that they had actually misread the ecb moves. The ashley scott the rate of 15 by 33 . I have added to the universal buy. They can it was more meaningful than people expected and Market Reaction today is make sense. Buy moreoing to Government Bonds in particular in the next two to three months. Their bond rate for by german bonds is going to the 200 for telling a day both about 135 million. With your meaningful figures. We see spread for highyield, not big corporate debt coming in. Is there an opportunity there for investors . Absolutely. He ecb is trying to move your away from a purely bank centric funding. To useks may be able this chief funding they are receiving. This is all very encouraging. Obviously with europe, as the happened that glacial speed, so we do not expect them to boom, so it just makes a recovery more likely. Is the bottom line. Will this moves the needle on gdp growth, unless inflation, which he seems mostly concerned with. We have not seen any movement so far. Lets put this in context. The euro zone is growing at the same rate as the u. K. And the u. S. We saw the second half of last year a strong bounceback invest in it. The issue is a very open block of countries, much more open than it has been paid mario draghi cannot do much about that. Inflation, neither the u. K. Nor the u. S. Has been able to generate much. The ecb is some years behind. They have a long way to go. Formally based agreeing to layout yesterday, rates are going lower still. About brexitked 10year note. Do you think investors are taking this seriously in . Offt is still a little way in the referendum is not until june the 23rd. Opinion polls have not moved in recent weeks. Net connect no and neck. The currency has reacted, but we have not seen the implications played out fully. Matt we appreciate your time this morning. Thank you very much. Back to you. Itshanie oil heading for fourth weekly gain as the International Agency says Oil Prices May have passed a lowest supply. Have we seen the bottom . Youarkets, if they do work the old adage, high commodity to curere the best way high Commodity Prices, and low Commodity Prices are the best low prices. In the United States were seeing some of these factors coming back. The International Agency is correct. Some of the highcost producers have to cut back. David you are worried about the circle structures Holding Back Growth around the world. This includes capacity. I wonder if things like what the thedid yesterday exacerbate problem or prolong it because it is money that is cheaper for longer allows suppliers to say we will get through this. The focus this morning has been on the ecb, but just as important in that regard is what the chinese are doing. The chinese seem to be moving towards a program of swapping the debt of their state owned enterprises into equities. At the same time they say they want to cut back excess capacity, and they are going to consensus capacity going and the banks are not going to have to cut back on in the lengthy, they. Ill just have equity i think theyre just perpetuating the excess capacity on a global basis. They have tried everything to stimulate loan demand, and it is not growing at all. Old adage about horses, you could take a course to water, but you cannot make thedrink, especially if horse spends a few years at the trough loading up on liquidity. Ramy from what you saw yesterday, what you say clearly is that this will take some years. Do you think it can make a difference . Once the Central Bank Intervention is done, and has been very bullish for stocks and for bonds. The Central Banks keep saying they hope they will be able to have a wealth affects that will trickle down in consumption and again, the big problem is the Central Banks just keep doing the same thing over and over again, encouraging people to borrow, so it is losing i wanttiveness rate to share expected effectiveness. I want to share perspectives of where we were a year ago. If you looked at your bloomberg this morning, the yield of the 10 year benchmark greek Government Bond is less than 9 , were always getting to his house size. In july it was 19 . Here was an issue that everybody was focused on the year ago milos raonic this table, and greece is in much better shape to where it was a year ago. Raises a question of whos buying the greek debt. Gentle guys are all over the place. Im not sure you can read much by looking into this and yield other than central things are being extremely aggressive and buying of all the bonds that are not nailed down. I would just say, lets go back 12 years ago. All the critics of quantitative easing in the United States, everywhere. Look where we are today. Q he is overcome the United States economy is outperforming every large economy in the world, wouldnt you agree . Absolutely but we can always do a thought experiment and us from our straight ourselves and just frustrate ourselves. Stephanie what is the ecb by this greek debt, an accident waiting to happen . Is not a good idea for central bankers to be messing around with mother nature. That is what they have been doing. They have been fighting the National Force of markets, and and go further and further on. Now you have a situation where banks can borrow from the tv, and get paid for it. David thank you. We will take a look at an exclusive interview that charlie rose did yesterday with marissa mayer, that is coming up next on bloomberg. Matt i am here in the green room. Coming up, Market Reaction to mario draghi surprise, and battle of the charts. Stephanie tuesday we bring in our friend from the west coast, cory johnson, talking yahoo . Rosa myers sent done with charlie rose exclusively yesterday. Woman should be on maternity leave, but she is pounding the pavement, trying to save you a hug. They have seen two new people join the board. Dsca sale happening . Cory it is interesting that they have people adding to the board. Marissa mayer talk to charlie rose about her future with this company, whether it stays as is or is sold off. Listen to what she had to say. And iove running it, think the people there are terrific. I love our user base, i love the products we get to work on. It is really exciting and i would love to see it through. But obviously we also are duties to find the most value. I hope, given strategic but that said, we will honor our commitments to our shareholders. David i appreciation was tuesday on. Will that be her decision to make . Cory probably not. Highly compensated person, so theyre going to have to decide if they want to keep current. The tech community, including yahoo , disagrees this is just one phone, just one case. Not have any tolerance for terrorism, but there is an element of trust around our services are when you look at hamels a stance over all, they are around west they could be asked to do could be abused and are notinst users that part of terrorism. There is a gray area in terms of that technology exists, how will it be used . Cory it is all about the slippery slope, all about the backdoor in silicon valley. Stephanie they are bringing on two Board Members that have financial parties, and these companies have no shortage of advisors in terms of finance. Piling on more people, are we around . Moving this cory i completely agree. Been how to build a Media Company about what they have. Billion on 1 template the same time that google spent 1 billion on instagram. Every expert you can, i reminded of the apple case. Unitedawyer in the states is saying it is a tale of two entirely different cases. , this issten to apple the biggest thing in the whole world, it will change the whole world committed massive. If you are the government, they say this is a simple search warrant with one iphone. This is standard stuff. We do this every day of the week. Who is going to win . In the governments case, the law is decided in pieces and incremental steps. The apple is worried they will have to unlock phones left and right. They are concerned with that will have on the Enterprise Software business. It is interesting to see the Different Companies that have come out and see this is for is low. As yahoo , google, even into amazon and their web services business. Tell us what you are walking up to the hollywood with the billiondollar checkbook. Cory imagine a place in hollywood where you have notes who do not a exist years ago. This is a guy Walking Around hollywood doing original series, and acquiring other content as well. They talk to us about how the internet original content and movies into sales of diapers and toothbrushes. And is working for customers. People do tend to get more engaged with amazon and shop more. It is good for them, and it works out for amazon as well that is essentially the full formula from making a show to buying a toothbrush. Cory really interesting, a giant business. Jon thank you for breaking the time of the breaking down for us. Battle of the charts is next. Ofid it is time for battle the chart. Joe weisenthal easier to take on matt miller. I want to look more on what has happened with the ecb past couple of days. The yellow line is the ratio of European Banks starts to overall european stocks. The white line is the german twoyear yield. As the shortterm jerking we negative re more as the shortterm yield rate has gone more negative, we have seen banks go more negative overall. And they today rally in bank stocks. At one point this morning bank stocks overall work of 6 . We are really seeing this was a major response within the euro zone economy, within the eurozone markets. Make mario draghi have to be excited about this. Investors do not like when entered trains get cut for banks, and the territory. It is interesting. Did you know that now Bloomberg Television viewers can access all of our btv charts . The entire library . Fortv our chart library. I am fronting that winklers charge. Bluemer discretionary in or at an all whole time high. Consumer staples are at an alltime high. The Consumer Discretionary f sales are at the highest or even higher than staples. They are at the widest they have been since 2008 and they do not have to spend as much for just food and shelter, clothing. David while the judges determine who is the winner, do you have an idea . And like them both. [laughter] i have to go with the Consumer Discretionary staples chart. I have been arguing for some time that you do not want to against the u. S. Consumer. American consumers are happy to spend money when they are depressed, they spend sometimes more. The consumers keep the Global Economy going. Im going with mailing first chart. [laughter] matt this tells you something surprising. So many people out there was a recession, and he is turbocharged told you these are not going. Stephanie im going with matt miller for the bowtie. David so i mind. Forhanie joe, thank you joining us. More be back with. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. When it comes to the fithings you love,. You want more. Love romance . Get lost in every embrace. Into sports . Follow every pitch, every play and every win. Change the way you experience tv with x1 from xfinity. And theio draghi markets. Plus, we will be speaking with pimco is a cio to cut treasuries. The cio of pimco about cutting treasuries. From theout 30 minutes opening bell, and this is bloomberg. Once a 24 hours in this market. Stephanie how about the last two months . Back and forth. Talk about volatility. Lets check in with our own matt miller. I love it when the markets are green. Matt a big rally. Yesterday was a strong rally at the end of the day. We came down pretty hard, and rallied up to unchanged at the end of the day. Refresh start we are seeing 1 gains in futures almost. Take a look at europe, a similar picture. Big gains in the ecb decision, then selling off, and now buying g back in. Take a look at the stocks 15, which is a broad measure of european stocks, and it came. Own yesterday and rose the euro was in interesting picture, up and then down. To one dollar, 1125. No more diversions. Look, right now i have it loaded to g20 countries. You would not normally seen moves in the south korean debt market that are such strong moves. I can look at moves that are 1. 5 standard deviations away from the mean. It is a much smaller universe but uninteresting picture. Oil has been an interesting picture i of late. Ing that they explore expect a supply, demand balance to go back into balance at the end of the year. Nymex crude, 38. 41. We are getting back closer and closer towards 40, and it is starting to look like wilbur ross was on the other day and said he thought we put in a bottom. If you take a look at chart 549, you can see your today oil has come back to him out of town where we started wrong. We had the spot of a 12 year low in the beginning of february. Lets go to first word news. Ramy teamwork. Turned out the rhetorical heat last night of the president ial debates in the head so did his rivals there was no sense of the namecalling that march recent showdown. Were going to come up with solutions we redefined the answers to things. Later today he is expecting an endorsement from former candidate ben carson. And further ahead, he is favored in primaries. The president said republicans are doing to threaten the court credibility with their plans to block whoever he nominates. Democrats are just playing politics. Former first Lady Nancy Reagan will be very today beside her husband at the Ronald Reagan president ial library in california. Family and friends from hollywood as well as washington will join in a private service. She was 94 years old when she died this past sunday. Over to you. Jon just over 25 minutes until the open. Here are the three stories that matter to markets right now. Giving doesrkets president draghis plan a second look. Thanks, the biggest gainers. Peripheral bonds leading dividends and sovereign debt market. The euro a touch weaker. A weaker euro, and then a stronger euro, and then we wake up this morning and started wondering this unwinding this again. David what do you think this means . All this change in sentiment over the last 24 hours is kind of difficult to gauge. I think it shows where we are headed now. Doesows the transition achieve his intended effect of reclaiming free inflating equities. This is all it is a cost in terms of distorting derivative environment, allowing marginal companies to survive, companies that should disappear. Obsession, but i think what is safe to say is the central bankers are not out of bullets as some people were worried about yesterday where there was the reversal. This does work, but it is a question of it works in a long time. Stephanie doing what specifically . Exactly. It is we inflating equities, and distorting markets, it is catnip. Waiting for the day when things are going to get normalized and capitalism is going to return. Stephanie two centimeters have to get out of the game . It would certainly work if they got out of the way, but central bankers at this point are almost responding to the markets. It is not the other way around. That indicates that the power dynamic is structurally changed. They may be responding to the lack of action on the fiscal side it seems the real question is is it possible for central bankers to actually affect changes in the fundamental underlying economy rather than Financial Assets . I think it is difficult for them to do that. These stimulus, qe, they are very blunt instruments. You see reflation areas that are not intended. In the u. S. , the original intention was to reinflate the housing market. That took a long time to happen, and it was unclear if that was causal from this fiscal or Monetary Policy. The equity markets are addicted to the. This is not a surgeon operating with a scalpel. Jon the staggering thing about this is that this has not the europeanelp markets. It has not have the same effect as it did in the u. S. What do you make of that . There is a hidden effect. What is going on in the weekly markets is that they would be struggling even works without the effect. It is the counter effect of the we carry of the agreement its. In my International Sector to out of the third of the Companies Lose money. They are only surprising has observed and are at this point, many years after the gec, those businesses would be gone. They were naturally to appear and it would be healthier for the economy. Stephanie deutsche employees seeing their bonus pulled by 11 . New coceo john kline said in january that the bank will be underpaying against our international p or group for last year. The also seen industrywide drop in trading. It is not strange to hear of a ceo say that the new normal, but does say you are going to get underpaid versus your peers, how does Deutsche Bank run a business . Hardly keep people in their seats . David i do not remember any ceo saying they are going to underpaid their peers. Stephanie explain the strategy to me. It is a little counterintuitive, it underscores how troubled that Business Model is. Asy say it every bit as bad 2009. I think he can probably afford to leave. The public sentiment against banks is so strong it is the least like Consumer Experience bailoutector, and post people hate banks, basically. I think you can lead with that sentiment, because that is for compensation is headed in the sector. Theres a lot of pressure on the call ratio, and whether the alternatives for bankers can go from one bank to the next jon why is it counterintuitive when you numbers . Why should the shareholder be the one that takes the less this . Take the losses . Pay more than your peers if the is underperforming and underperforming significantly . It is fair in that sense, and from a shareholder perspective of it is exactly why the premier fund never own space. It is a Business Model. , and it is ayze strictly flawed Business Model. We just do not touch it. We invest in companies that try to be self funding, so they do not even have to interact with thanks. Is a whole world we try to stay away from. Stephanie are your sales traders betting begging you for jobs . Is certainly happens sometimes theres no question that the Institutional Sales is a structurally challenged model at this point and commissions are inexorably declining. The same thing with fees on the investment side. But banks serve it indispensable function. There is no question that these entities need to access. When operating like utilities. With people who work of banks do not want to work at a utility. That is true. That seems to be worried is headed. For industries that cannot earn their cost of capital, the become utility like. It, not have a solution for but it really is much more structural than cyclical. David we have a bit of breaking news. Ben carson is endorsing donald trump for president. This is something that donald trump and did debate indicated would be coming. There had been some bad blood and marco rubio, it was reported. Course and trump is leading as we go into all the important and tuesday primers across these states, including ohio and florida, which is where ben carson is a. Right now. We will watch the story closely and keep you up to speed. In the meantime we go to the number three story affecting markets. The International Agencies is that Oil Prices May have bottomed out and nonopec supply barrelsline for 750,000 a day. We talked in the first hour about this, and said it was not of oil is the volatility of oil that indicates fundamental weakness in the Global Economy. Using this in your investments . I should make an observation on that comment. The volatility is going to be naturally Lower Oil Price we get a little too obsessed with the percentage moves when oil is at 38 instead of 120. There is certainly thats to consider. We do see oil impact on our portfolio. We do not invest in companies that do not have pricing power. We are investing in companies that sell indispensable services to oil companies, things Like Software actuators, things that are not really subject to cuts in the budget of an oil company. As a Portfolio Manager, it is simply impossible to avoid. When you get a move from 100 to 38 over several months, you see the impact in your portfolio. We have generally avoided direct Energy Producing Company Simply because they do not have pricing power. Talk about how Central Banks may be distorting the business. Is that part of what we are seeing in the energy area right now . Probably. I guess the washout in fracking and that area is so extreme, and the debt levels are so high that it do not think policy can save the most vulnerable portions of the market. Onkeeps all sectors going life support and hurts the good businesses. The good businesses are able to continue to compete, but part of their model is to take a share during week time frames. It does not allow them to do the process naturally. David that is the stories that matter. Later in the hour we will speak to marc gasol on why it is time o cut treasuries for national debt. David welcome back. Youre watching bloomberg. Bank of america has fired 15 senior bankers in their Investment Unit in asia. B is a cut junior physicians and backoffice jobs. Banks around the cutting jobs because of market turmoil and a slowing chinese economy is a break for vpn holding that massive 2010 oil spill. The people not have to face companies. Om energy bp has paid out 55 billion in damages tens of thousands of new may be stranded on monday. Tokers are threatening strike. Matt lets take a look at the major indexes, the futures here. I am sorry, i was looking at the run block and we will look at individual stocks. Analyst upgraded to a cautious overweight. Is 27 lowerget than the consensus average of 70. 80. 17. 80. Wideoil logo sees system sales in single digits. Holdings are down 7 . While were talking about restaurants, the range is higher. Sales just of the estimate for the streetrestaurants, the sea. The ceo says that this was strong competition. Up next on bloomberg , the manager of the Top Performing says what he is feeling how seriously optimistic about japan and then we will have the open and then i will show you the leader in the gaming. You are watching bloomberg. David you are watching bloomberg, and our guest is the Portfolio Investor for a premier fund. You are rated number one by morningstar 2015. You just got back from japan, and some people say we should be taking a new look there. Are you taking a new look . We are. We are more bullish than your average japan, but that would put us in the cautiously optimistic camp, because the fheo japan is quite bearish. Japanese equities represent about the percent of Global Equities now. They were 50 of the end of the 80s. In that time frame you lost a lot of levers and anarchy. What i have seen in general in japan has i think the higher end of the markets, the really highquality companies are leading a charge that is changing the corporate environment. Our own we is extremely important. In japan there is a whole index of companies that all want to be in the turn equity index. Children shareholder return, the levels of disclosure that i saw from the companies that we met with, not every japanese company, but the ones we met with have levels of disclosure unsurpassed in the market. They do not the stuff on the website, before for investors communicate tremendous disclosure. Corporate governance is improving. They still have a long way to go. General, and on average human out of the u. S. Standard or better european standard. But compared to the alternative of investing in other parts of asia, a lot of these have been exporters and play on emerging asia growth. I think it is the way to go. One of my favorite charts to look at is the Unemployment Rate versus jumps to market ratio. You see the Unemployment Rate down in your bottom right. The jobs jeff otah rate euro, more jobs. That should be a tight labor market were worried see the wage growth off the back. It is a big demographics problem. What can i do about that . Japan, and lever for this is slowly evolving, is to get women evolve. That is the easy lever. The more emotional lever is immigration. Immigration is that is a cultural issue. And it is part of japans identity that they are homogenous society. They are welcoming to visitors, but not visitors that wants to stay. It is a traditional and conservative society. The female participation is increasing in the labor force, and it is going to be low it is obviously have of the population, a large of a graphic to work with. Even if it is slow it can be impactful. David culture eats strategy for lunch. Stephanie there you go. We are four minutes from the opening bell. You are watching bloomberg. Stephanie were Just Moments Away from the opening bell here in nyc, and we are with the Portfolio Manager at rice fund. And joining us from newport pimcos marquee sell. The ecb announcement, buying corporate, you could not have been predicting that . Huge. S is this is one of the most Important Development a Global Market this year. The Central Banks are realizing the locations of negative rates, and we are transitioning to a world where you are going to see less Interest Rate easing and more credit easing. This is actually huge. The ecb literally could buy, over time, of 250 or more of the primary market and increased their stock of holdings and Corporate Bonds to say 20 over the next year. This will bigger positive for credit spreads. I think globally, this will cause capital to flow into the u. S. Market and continue to cause credit spreads around the world to tighten. Jon what happened yesterday . Credit towhile for get it. How long will this to take to sit in . How will this develop . It did take a while. The more i wrote on the details, the more positive i got to what it means for credit is two things. They are going to be able to borrow and use their collateral from the ecb directly, which will compress their funding cost. This is very positive for the credit spreads. The second thing, for nonfinancial credit in europe, a 600s basically billion market with the ecb is going to start writing this Corporate Bonds. The same thing you have seen happen with her. Read compressed is going to happen Corporate Bonds. The flowthrough effects to the world are going to be huge. 75 of the japanese Government Bond market has negative yields, and 75 of the german bond market has negative yields. Where these investors going to go . Global credit markets. And you have lifted the so carefully, is a correct that the loans that the banks have to make to take advantage have to be europeanbased . They have to have headquarters in europe . Yes. The way it works is they have to flash highquality collateral to then they can basically borrow from the ecb, alleging collateral as a prerequisite to they have to make those loans. Whether this happens or not is a question. Economy benefits of the may be less limited, but in terms of the impact for market is significant. It is significant because of technical spirit basically the ecb is going to start taking out supply of income producing assets from the world, and private sector investors institutional the countries all over the world need income are going to be the ecb for those bonds. That is what is credit spreads are going to tighten. Stephanie he stayed up all night parsing through the details. Does it change your strategy . Are you going to do anything different because of this . We have been positive on the credit markets for the last six pieces. E wrote several them thisen telling this. Rces stephanie are you going to kill us because you are long . The second are going to be very powerful. There have been three recent developments, which are also important. Been clamping down on capital flight. This is nearterm positive. China is going for stability. That is number one. Number two, looking what is happening with Inflation Development in the United States. This is actually up 3 . Oil prices are rising. That is very positive and that reduces the risk. The third thing is that the credit markets significantly overestimated the probability of u. S. Recession. We do not think that is going to happen. Use economy is healthy, growing at 2 . Those are additional factors that the market is not paying enough attention to. We had to go over the statement again and again to let it sink in. Was i reading when i was reading, the idea you could get paid to lead. Is inint i would make, four years mario draghi will not even be there. What do you make of that, then beyond 2019, what does that say about the underlying economy . An amazing point. There are limits to sacral banks. Central banks around the world cannot force wages to go higher in a world for nominal gdp trends are coming down in emerging markets, and were nominal gdp around the world is low. Centralbank effectiveness has been diminished. He d the fiscal Balance Sheets to engage. Clearly there are limits to Central Banks. The market is dealing with that. Stephanie we are now 5. 5 minutes into trading. What do things look like . Matt gains across the board. 500 of 1 . The Dow Jones Industrial average up as well. E gains in oil it is clearly risk on. Let us take a look at what is going on in gold, and at treasuries. Now still at 194. That is not bad. For futures down, but dollars, only into 126880. You can buy ¥113 for your dollar, just about 4 10 more. Han you could have bought take a look at the euro. This is the intraday chart. If you look at it over the last week to meet can see video games, compared to the lows that we had yesterday when the divergence like was hot for about a half hour. Now lets finally pull up my chart. When it went to do is show you how you can really skew the picture when you use charts, and you put two Different Things on the same access. Axis. They are positively correlated, but because i have two different points, oil is a 47 since february 11, where us stocks are only a 9 and change. Niles good Abigail Doolittle in the nasdaq with the latest at the open. We do have the nasdaq nicely higher on the open, but unless the index finishes up on the y by more than 1 we will see a snap in the threeday winning streak. One stock soaring on the open, although salon. They beat fourthquarter estimates across the board. Calling this a highquality meat. The computer also rich First Quarter earnings above consensus. They are saying this growth is being given by the companys customer centric model. In fact, jpmorgan is expecting this company to boulder market share. The to pull their market share. Stephanie thank you. I want to bring in marc gasol, and david mcdowell. We were talking about this move to credit. You have been waiting white some time but many investors have been hiding out, waiting to see what the fed will do next. Treasuries, what is your . Prediction . Prediction . We could see it go higher with oil. Seeing china stabilize nearterm and youre seeing the limits of Monetary Policy. Notcally, the currency may appreciate as much as it has in the past. Is influencing yes montana policy, that is a fact a stable dollar will of allow the fed to go. We think inflation will trend toward the end of the year. David the us economy is doing well, but i went back to ecb, because i do not spend all night going over this, but we are over this is that you cant understand it. It strikes me as more than a little ironic that all of the are up. Mario draghi said we are in such trouble that i have to pull out a bazooka and do something. The underlying fundamentals were week, and that is what caused him to act. The markets react as if everything is fine again. What i think is fascinating is that if you look at the ecb inflation forecast, even out two or three years, they are not even hitting their 2 objective for several more years. You are absolutely right. The economic reality is not positive. What choice do they have . In a world where central bank Balance Sheets the only game in town, they are using thats losing effectiveness. You need the private sector to come in. He private sector Balance Sheets to engage. Thats the way they will go up around the world. Central banks cannot control waged a moment. That is private sector. Jon question for you. From what you have just said, they hiked two times this year, and i can see that. We are pushing back towards 100 again. But based on what you have just said, the disinflation reinforces will keep a lid on the curve anyway . Yes. And there are limits on how high u. S. Rate can go, because the fact is u. S. Rates are a function of global development. Even the fed has cited the Dollar Financial conditions and what is happening with emerging and global growth. In a world where Global Economy slower nominal gdp environment, youre going to see a limit to how far rates go. Our view is simply that if you look at the front end of the curve, the honorable part because the markets only price in one hikes this year, and another hike into the 17. We think it will be more than that. Will see the curve flattened, but absolutely to your point the Global Economy, if it is week, theres going to be a limit to how high u. S. Rates can go. David what is your perspective on this . I had a quick weston for mark. I am in equity guy, so its a little bit of a worn world to me. With International Premiere type of companies yielding 3 , 4 in the market, how do you think , advising clients on where to get their the yield from . A very good question. I think the fact is equities are going to really tune honorable the trends, dividend yields and valuation changes. Valuations a relatively high right now. Dividends are not really living. Earnings growth is going to be relatively lower. We are in a lower return environment. And the equity returns are going to be five percent, 6 to 7 . You can earn that in the Corporate Bond market with one third of volatility. What we think will happen is clients around the world who have large yellow nations to equities are actually could as themselves the question, if i can get equity return in risk, why wouldnt i started investing in high heels bank loans . They will also get significantly less liquid ity, and it was that trap that hurt people back in 2008. That is true. But you have to look at your timeframe. Investors with a longerterm timeframe in terms of their thinking, they can capture something unique in the Corporate Bond market, which is that Corporate Bonds are significantly cheap to their underlying default risk. If you look at cap rick barnes in the u. S. Versus credit default swaps, that basis is minus 60, 70, 80 basis points. If you are a longterm investor, you can capture this risk premium. The agreement it does not offer that opportunity today. Not only haves the ability to deliver equity returns, but they are structurally cheap right now. That is why investors will buy this acid class asset class. Jon thank you for joining us. Bloomberg , u. S. Banks are picking of advisory and trading shares on the european rivals. Bloomberg view, columnist and former director of omb and congressional peter joins us on the show. Jon Deutsche Bank is playing for an industrywide downturn. Yesterday, berkeley ceo told Erik Schatzker that markets will continue to be challenging this year, and the survival strategy for Investment Banks is to get smaller. We have dramatically trying to introduce our assets. We have taken the rescue down and half. Face with that headwinds, by 2015, we have a long way to go. We have to do a lot on managing the cost in our Investment Bank. We will not rest until we deliver Investment Bank return equity that covers the cost of capital. That is what were going to accomplish. Erik schatzker is here to try and answer the question if they will ever be competitive again. There is a challenge for american and british bank again. The and they are combination of lehmans old, and the Barclays Capital that bob diamond bills. As a truck that really helps to answer your question. Have a look at this. This is the percentage of industrywide the revenue divided between the u. S. Investment banks and the european Investment Banks. You can see that the european share has been shrinking. It is now 70 u. S. , 30 european. What we do not capture her, and lets you will hear from bob diamond to go back to the prerice is timeframe that prior to the financial crisis it was roughly 5050. First of all, they used to split this in half, and now it is 7030, going towards 8020. It raises some Big Questions a. Stephanie in 2017 did not believe they were a big competitor. Erik and they have had a nasty wakeup call. David if you are a European Bank that has to that around, you have a lot of headwinds. You have regulatory overhang, you have to cut cost left right and center. How do you catch up and not world to do better than the other guy . The this is one of principal headwinds that they are facing, because global Investment Banks to certain degree all face the same regulatory pressure. In britain they have for additional pressures that raises funding cost in the Investment Bank. You have a Balance Sheet tax. You have bonus caps can we have what they call the senior managers regime, which means that senior executives, if they are proven to have committed this it will go to prison. These are all huge headwinds. With the challenge that hartleys faces, just turning the cost of capital, canvas continue . At a certain level of has to continue. These banks provided indispensable service in terms of capital raising, etc. , etc. It the nail on the head. Ways to be too low. This is a structural issue. He cannot persist. They have to do something. Erik something is going to have to change. That is right. Shares go back and forth. But it is a race to the bottom. Number of that chart, we do not sure, but it is something that is declining. Wells fargo is not really an Investment Bank. There is always an outlier. Business,line southwest can earn the cost of capital. But structurally, it is a sector that relies on government bailout, on constant restructuring. It is structurally not a sector that is really investable. Erik one of the economy does not catch fire, and the underlying conditions do not improve. Yes they will cut costs, but only up to a certain point. The compilation cannot be zero. Once that reaches the age point, what happens . Have you make it profitable to our cost of capital . Not see any way of raising prices on to the client. If the client has so many options and the provision of the service is essentially commoditized. The best the Investment Bank can do is to recruit a main maker from one Investment Bank to another. But the provision of service itself is ultimately a commodity. The market will determine what power they have. But structurally, something has to give. The consumer will decide what the pricing can be. Jon the biggest problem right now, the eurozone versus the u. S. , it is the timing of the restructuring that is really killing them. The fact that they are doing it now that is making it so difficult for them. Isnt that the bigger issue scarlet joe . Yes. They are so late to the party. David thank you. Bloomberg markets is coming up at the top of the hour. David girl joins us for a review. What do we have to look forward to . We are going to talk about the ecb decision and the second day after it was announced. Going tobiting have an exclusive interview from my colleague mark barton. We will talk about the prospects for a new eu trade deal. And the story i am fascinated by, Scientific Evidence pointing y, the identity of banks the street artist. David thank you. Final thoughts on bloomberg. Stephanie what a day, what a week in the markets. Thank you for joining us. Next week we will go even bigger, talking to the chief economist at mcmillan. It is 10 00 a. M. In new york. I am david corrupting for betty liu. E mark this is Bloomberg Markets on Bloomberg Television. David they take you from new york to london to and stumbled. Stocks in the u. S. And europe higher one day after the ecb move to increase stimulus. Markets are anticipating what the fed will do next week. Mark the International Energy may haveys oil prices highcost producers cutting back on production and what it looks like for the Global Economy. Carson indoors is donald trump in the lead up to tuesday. Wins in florida and [indiscernible] make his nomination inevitable. First, a look at the trading day. Julie looks like investors are taking a step back to take a