Transcripts For BLOOMBERG Bloomberg Go 20160328

Switch up the board. Japanese stocks higher, dollaryen higher for the seventh straight day. A stronger dollar, the theme across the fx market with the euro weaker once again weaker, marginally. Back to the low, 40 bucks a barrel. Vonnie it is one of the reasons why the dollar has been strengthening. Jon last week i got excited because the rate count we start rolling over and crude went with it. Here is your first word news. Syrian forces have scored an important victory over islamic state, taking over the ancient city of palmyra. Stateshows islamic destroyed many of palmyras statures and monuments. In pakistan, an offshoot of the isiban says it responsible for a deadly bombing, that killed 72 people and wounded more than 300. Many were christians celebrating easter. It is the worst attack in pakistan since the massacre in 2014. Bernie sanders wants to debate Hillary Clinton on her own turf. Sanders is calling for a debate in new york before the state holds a crucial primary april 19. He says he sees the momentum in the race after winning caucuses over the weekend in washington state, alaska, and hawaii. Global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am vonnie quinn. If there were to be a new york debate, it would be pretty stunning on the democratic side. There is never me in there has never been a need for one before. Jon friday, the markets were shut, we were dark, so we look back about three or four days to a 1. 5 revised gdp figure. Plunged 11 point 5 , the biggest drop since the end of 2008. Matt miller, one question in mind corporate profits plunged, typically the economy and jobs growth follows. Can we look at the gdp figures and say you have to do x oil. And commodities. Lets take a look at number 700. We have put this together. The blue line here is corporate profits. Obviously jobs 10 as corporate profits fall, jobs tend to follow. You do not see a recession every time. Mid1990,s, in the we had a big drop in corporate profits, and the red shaded areas are recession. Recession is not necessarily following after a corporate profit drop like this it also drop ining, and 11. 5 profits, but a lot of that has to do with the bp 20 billion payout to the u. S. Government. Is only ahat out, it 7. 6 drop in corporate profit, and that includes other energy, oil, and coal miners. If you take out the energy, the picture does not look nearly as bad as when it was in. You can look at the gdp figures stripping out. Jon there is still a decline of 7. 6 . Can you really strip out a sector just because it was bad . It is real income. There is a 75 drop in profits. You can leave it in if you want to, comparing apples to apples, but if you take a look, that is the sector that got hit the hardest. So maybe this drop in corporate profits does not necessarily lead to a recession like some of the others have. Look at the jobs here. , upkey figure that we got 1. 4 . It is the third increase in a row for fourthquarter gdp, and a lot of that was consumer spending. 70 of the economy if you have a consumer that strong that has to continue to push growth. Jon we will see personal vonnie the other thing to remember is that when you talk about coal miners, youre talking specific geography as well. Certain states would have gotten hit, maybe they were doing better before. So it is a very localized servicing. Is a function on bloomberg that i was showing jon a couple of weeks ago. Up where you see job growth and job losses. Are hit the states that hard by the energy losses. Louisiana for oil, West Virginia coal, north dakota, the shale play there. Those are where you see job losses. The green states are where you see job growth. You can look at this function not just with jobs. You can look at it with a number of different scenarios. This really breaks down the regional issue. Think about how huge the economy is. About the really talk european economy yet as just one big economy. If you look at strong growth in germany and france, you have problems in spain and italy. Look at the you european union, you talk about 28 Unemployment Rate. The Unemployment Rate in germany is more positive than that. Jon i was told something a number of years ago. When you are told this time is different, get nervous, but maybe this time is different and we should not debate it. The run of the dollar, dollaryet, climbing for a seventh straight day. Eurodollar down for a seventh straight day. Of thethis on the back fed saying there is the possibility of a rate hike in a goal in april that should be put back on the table. We will find out tomorrow is janet yellen validates that stance. Matt there were more dovish statements, recently John Williams out saying that we have to take into account what is going on in china and brazil. Those economies weigh heavily on the u. S. The fed has a dual mandate here. They have to look at u. S. Unemployment and u. S. Inflation. And a lot of people are concerned when the fed starts taking this international view, but all of those things are so closely connected that they kind of have to. I have a chart of dollar yen here. Jon, you have been talking about king dollar here, the strength of the dollar rising over the last seven sessions. What i find fascinating is that Oil Continues to rise as well. Oil has been fairly strong even as the dollar has been strong, and typically you do not see that. Of the show ip said we got excited. Maybe it was just me, matt miller, about a recount climbing by a grand total of one just last year. Week was a false one. Maybe that is why we so that tick higher in crude recently. Look at the strength that one rate has given. From a low here of february 14, i have oil in white, climbing up the basically 40 a barrel, and this rise in the dollar, the bloomberg dollar index, has not curtailed that increase too much. We are Still Holding pretty firm around the 40 level, even with the bloomberg dollar index climbing up. Normally, since oil is priced in dollars around the world if you are in japan and you want to invest in oil, you are not going to do it when the yen gets weaker, or you would not think you would. We should mention in relation to this yen movement, yen weakness, we missed inflation data on friday. We did not get in improving inflation rate in japan. Sure. I missed it for on friday i was grilling. Jon i do not know what matt miller was doing on friday. Kevin, great to have you with us this morning. A couple of questions with gdp last friday. The drop for core in profit a lot of people saying next gdp, andcoal has had a very difficult time of it. Even as used to energy and look at corporate profits, they are elevated and moving sideways to slightly down. If you look at most of the other sectors, excluding energy for the First Quarter, there is an expectation i think it is mainly seven of them that it is maybe seven of them that are seeing declines in the First Quarter. This is a very intense profit recession, also extending to the other sectors as well. Jon lets assume that the margins were flat in 2015. Look at the spread with what corporate profits are doing. That does not look too good. How does that spread reconcile in the months ahead . That is the trillion dollar question. There is a barometer that we have constructed that looks at the Global Economy and global growth. What we have seen in the last year and a half is deterioration. We have not seen an improvement in the last couple of weeks as the market has propped back up. Even the fundamental data starts to get better and catches up to what markets have done the last two or three weeks, or this improvement we have seen in markets will be a temporary thing. Those will roll back on themselves. Equities, we are looking to see improvement in the Financial Markets moving through to the real economy. We have not seen that yet. Vonnie if you are underweight equities, where are you overweight . Kevin it is mostly shorterterm bonds and cash. We have managed a variety of different portfolios. It depends on which portfolio you are talking about. The things we have been doing is to cut back the higher volatility sectors within the equities portfolios. As far as the bonds high things, we are short on the lower duration. Vonnie do you think the fed will manage the short and higher still . Coming into the year we felt that the fed would not be able to move as quickly as they have. We did not realize they would throw in the towel as soon as they have, but it looks like the rate on cash will stay very low for a while. Nobody really knows exactly how long it will take for them to get back to what they would ultimately like to see. To gets to be a stretch the 3 or 4 over the next couple of years unless you have a spike in inflation. One of the more interesting things happening is as you look in inflation, there is starting to be upward pressure on prices with increasing concern that if you were to get a surge up from here, all of a sudden the headline inflation would look more troublesome to the fed and they might have to move quicker. We are sticking with our best Case Scenario that this will not we have to be mindful of what is going on with inflation. Thank you so much. Coming up, activist shareholders taking on Japanese Corporate governance. Details next. Vonnie heres your latest Bloomberg Business flash. Sterling their services to japans ntt could there pay 3 billion to the largest acquisition ever. Dell is selling assets before completing its record deal. Storage provider is emc. Economist of becoming more pessimistic according to a survey. Theyre predicting weaker growth than later last year. They say corporate earnings will rise as much as 2 down from the forecast of 5 in december. Nice to the not newest superhero movie, but viewers were however. Awn of justice took in 170 million at the box office. Jonathan now to global go. Two reasons to be long on Japanese Equities youre long on the yen or you truly believe in turnarounds in Japanese Corporate culture. He holdings are in focus because that is dan loebs newest target. He went against nepotism in determining the next ceo. For more on this story, we go to crack in tokyo. Kim dan lemmon really be successful here . Can dan low really be successful here . G there is a focus on Prime Minister shinzo abe to get corporate japan to take seriously his socalled third arrow to improve Corporate Governance. Make ae seen dan loeb number of investments in Japanese Companies like sony a few years ago. A robot maker here in japan, suzuki motors is a household name, they own 711 stores. Loeb take an cautious tone. He has been critical of the way these companies failed to deploy cash. Case, he is the parting from that a little bit and taking a bit of a harsh stance against the ceo succession planning. Vonnie this is taking on a whole system, a whole history of Corporate Culture. Can one u. S. Activist manager be successful at this in japan . Thing if it was a japanese manager, but will anyone listen to dan loeb here . Craig it will be a tall order because what he is pushing back against is the current ceo. He is an 83yearold chief executive officer. He has been leading the company for more than a decade. Lays out in his letter is rumors that suzuki is succeeding his son to him as ceo and overlooking the head of 711 japan, which is the companye is making its money. He is critical of the board taking this route and promoting nepotism as opposed to putting someone in the ceo chair who is actually getting the job done. Jonathan matt miller. Matt one of the things i love to do in bloomberg is look at the comp function. You have a fiveyear look at total returns. Right here i have a chart of seven and by and white. In yellow, you can see the nikkei. As the nikkei 400. A couple of broader indexes. Look at the retail index, it is right up here with seven and i, but it has outperformed over the last years. Been 2016. Has over the last three months, we have seen the stock turned down sharply. Is this a succession issue, craig . Craig it is hard to tell at this point. You have seen some reports of the ceo succession planning from local media here, but this is really the first time you have seen a shareholder come forwa and be really critical. You have seen a lot of weakness and spending here in japan. Just recently, the companies and unions finish up their annual Wage Negotiations where you saw some really week results from those negotiations this year where people just arent getting raises. Are notas people getting raises, theyre are not going to increase their spending. That has really been the and thatheel for abe has to weigh on retailers like seven and i. Jonathan thanks for joining the program. We go from japan to china. Chinaad of investment and is issuing a strong morning for the countrys economy. That is next on bloomberg. Vonnie Goldman Sachss dire warning for a countrys economy next. Stephen engle caught up with Goldman Sachs managing director at the recent forum in china. But have a listen to what he had to say. I think china is determined to grow the economy at least 6. 5 in the next five years, but according to our forecast, i think that kind of growth is probably a bit higher. It will require a rapid increase in chinas qb situation. That is the highest amount in the developing world. How high do you see going . 6. 5 and next five years will push the situation to over 300 percent. In japan, it is much higher with Household Wealth. In china, Household Wealth is low. In the developing world, that is quite dangerous. What is dangerous . Debt is one, but you have a bubble forming again and property and you also have currency risk. A lot of things are interrelated, but the Chinese Government wants to maintain that activity. According to the international experience, when you maintain the Exchange Rate stability at a time when the Exchange Rate is weakening, chances are youre going to have a much sharper decline in the future. At the same time, i think if thea wants to destock property market, that is also quite risky. Rates in chinay are not low. In hong kong, they talk about high property price, but in almostschengen is higher. Stephen the inventory is whittled down in the third tier and 42 cities is not working because the money is pouring into tier one cities. It will create new problems because you may see how it goes down, but at the cost of rising leverage in the amount of households, that could cause bigger problems down the road. Vonnie that is the Goldman Sachs vice chair in china. Jonathan how they generate enough growth, but worrying about leverage and corporate profits. , use the housing bubble where but 20 year on year gains for shanghai. As want to be a concern for next up on this program, globalization plays an Important Role in the 2016 president ial elections. We take a look at the morning mustread and a look a ahead at a huge week on wall street. Oh, hi micky dolenz of the monkees here, getting ready to host the flower power cruise. announcer were taking the love generation to the high seas and reliving the 60s. Well celebrate that unbelievable era with the music that made it so special. Therell be over 40 Live Performances featuring eric burdon the animals, micky dolenz, the monkees lead singer and cruise host, the 5th dimension, the lovin spoonful, rare earth, spencer davis, three dog night, and many more imagine enjoying all that great music on the fabulous celebrity summit, leaving Fort Lauderdale and making ports of call in jamaica and the bahamas. Youll be back in the days of bellbottoms, peace signs, and so much more, with special theme parties and 20 funfilled celebrity interactive events. Cabins are filling up fast, so come on, relive the era you remember so well. The flower power cruise, february 27th, 2017. Let your freak flag fly. Dont miss the grooviest trip at sea. Jonathan the threeday weekend is over in new york. Lets get a look at Global Markets. Futures in the u. S. Are a little bit higher. 42 point higher on the dow jones. The nikkei to 25 of 7 10 of 1 . Largely of what is happening in the markets. It is a sevenday run higher with the eurodollar higher. King dollar is back on top, elevating a big week on wall street. Keene and now is tom Carl Riccadonna also with us. Vonnie quinn, the bases are loaded. Vonnie so exciting. [laughter] jonathan am i doing this right . Going to talk about first base, second base, third base later on. Belgium has now charged three more suspects with terrorism offenses. Same of theare not suspects are linked to last weeks terror attacks in brussels. They were among those arrested in police raids over the weekend. The debt total in brussels has been raised to 35 now. And that includes suicide bomber s. Irit a suicid a suicide bombing in pakistan appears to targeted christians. An offshoot of the taliban has quintess possibility. Presence of front runner donald trump says he has nothing to do with the story alleging that ted cruz had a next her marital affair or more than one. The story was published in the National Enquirer. Takers has denied the allegations, but donald trump says National Enquirer has a record of getting it right. Get to thent to research out overnight that really matters to global wall street. Piper jaffray analyst kevin barker is cutting north carolinabased lender bb t to a cell, which is very rare. Its very rare to see and analysts say to sell because of credit losses tied to auto loans. Loanst rates on auto are going to increase especially for lenders tied to subprime borrowers. They listed a bunch of those. I like capital is one, but theres also others. Thats great interesting to watch. Qualcomm has also gotten a downgrade to an equal weight so they are saying do not buy any more. As the barclays analyst blaine curtis. A target of 50 on qualcomm, which is 12 lower than the street consensus. Keep an eye on qualcomm moving in the premarket. In the other direction, and analyst boosted his price target on Dollar General to a pre 100 from 90. Bloomberg intelligence has a great primer to get investors up to speed on Dollar General. Cannot say enough about bloomberg intelligence. The data and the view that they give you is amazing. Mmer generally takes you to big retailers, but you can take and i getbject on bi, so much of my information from bloomberg thatof if you have not checked it out, you should do so this morning. Jonathan tom is with us for the morning mustread. The morning mustread, tom . Tom i do not even know it was jobs day. Heres paul krugman with a smart know. He is controversial, but he is controversial, but hes always interesting when he writes about his Wheelhouse International trade. Serious Economic Analysis has never supported the penn glossy in view of trade as winwin for everyone that is popular in elite circles. Growing trade can indeed hurt many people. Decades,he past few globalization has probably been on net a depressing force for the majority of u. S. Workers. When i saw this, i thought of classic 20r and a century article about the lose lose of market imperials. How close are we to a mercantile trade system . Carl theres a lot of systems out there and without naming names, there are those out there. Countries that u. S. Runs the largest trade deficits with. Tom theyre using currency as a weapon. Carl if you have a heavily subsidized or protected industry in a particular economy, then its very hard to compete in a freetrade sphere. Jonathan away from the economics, the backdrop is the politics. We have had a weekend here in the u. S. , looking at the present will race, and the media looking at the media themselves and sitting back and saying, maybe there has been a case of intellectual superiority in the way that we look to the support of Bernie Sanders and donald trump. We have not actually looked at why those particular individuals have gained so much support. I think it speaks to that, tom. Tom its a political statement as well. I would go back to secretary clintons phrase of almost 10 years ago now where she really talked about fair trade. Vonnie and a whole different concept. Conclusion is that generally free trade is better because it helps bring up depressed countries. In a globalized world, we should be thinking of other countries. The Federal Reserve would not necessarily say that. Should be we worried about other countries and their wellbeing . Carl you have to take it in a areder context, but if you helping to spread free trade and Industrial Development into these other economies, sometimes that does come at a cost to the master domestic industry. Should we be making socks and underwear and little widgets . Its not clear that is the case. But if you spread thats to other economies, those are u. S. Jobs lost. Kingdom has ad modest vote at the end of june. They are not talking about stocks and widgets in the united kingdom. Jonathan theyre talking about free trade though. This is not a vote for or against the Free Movement of goods and services. Formany people, its a vote or against the Free Movement of people. The discussion around trade will come after the vote if the u. K. Did votes to leave. Free trade will be at the heart of those negotiations. Most people on the leave side of things once those trade deals what those trade deals for sure. Tom im challenged by the differences country to country with the dampening of global gdp. The if you look at election outcomes, you mentioned donald trump and Bernie Sanders. They have had tremendous success in the states that have really been clobbered by globalization and the loss of u. S. Manufacturing jobs, the rust belt states. Jonathan from the politics of globalization to the economics of the week ahead, what a week ahead. Fed chair janet yellen is speaking in new york and then payroll friday is coming up as well. Profitstion on the friday. Carl we had the gdp released and we saw a slightly firmer Fourth Quarter. 1. 4 still not very good performance. The real good news in that report was corporate profits. Those a first look at company wide corporate profits and we saw nearly 8 decline in the quarter and 12 year on year. For the last five quarters have shown negative corporate profit growth. Energy. Ominated by out of energy, not quite so bad, but not a good profits environment. A a slowmoving economy with strong dollar come all these factors are weighing on corporate bottom lines and that matters because corporate profits drive private sector activity. We have sustained weakness in corporate profits and that could result in a pullback in investment and hiring. That would be a real problem for the u. S. Economy Going Forward. Vonnie its going to be the investment numbers that were looking at over the next quarter or two to see how healthy the u. S. Economy and the corporate environment is. Carl even more than investment hiring. Vonnie will this data be enough for the fed to take april off the table . Atl some policymakers are pains to keep able in place for policy meetings, but janet yellen and the dovish core do not think of april as a viable option. They need to see evidence that the dust has settled and the smoke has cleared and the weakness in q4. That means probably not until late into q2 will they have the competence. Tom what is your working run rate . Vonnie i would have done that for you, tom. Tom i will get it out. What is your working run rate for the American Economy right now . Sub 3 . Carl definitely sub 3 . I think 2. 25 is a realistic option this year depending on the factors like the strength of the dollar. Tom is that euro sclerosis . There are still definite hangover elements from the Great Recession and financial crisis. There is still not a full normalization of credit instance. , for the economy is limping along, but we are moving toward full employment. That really is a Game Changing factor. Jonathan we started this conversation with a shameless plug. In an important interview with tom keene and michael mckee, and a lot of people have walked away from you saying theres a whole host of policymakers that want to put april on the table. That he wants to introduce new ones in every meeting to be a live meeting . Tom as Randall Forsyth nailed ,his week off of the interview and by the way that was mike mckees interview. I just went along. Between what they were talking about, i got absolutely no sense of april 2 this whole idea of a the surveillance meeting at 5 02 a. M. Vonnie that is a very live meeting. Speaking of president bullard, and they do not want a vile representation of business coul. He wants union amenity you name of the in the meetings. If we get another payroll friday above 200,000, will we need to wonder . Carl with asymmetric policy risks now. The fed has an arsenal of tools to slow the economy down. They can raise rates and sell assets, etc. , etc. If further stimulus is needed, there are real questions over what policy is available. Negative Interest Rates do not seem to be too effective. The hurdle for quantitative easing is high. Reason, the fed wants the economy to run hot, build up some pressure,suppressio and you can easily slow that down if you need to could they d. To move awayant it from them, but to move in april seems premature. Vonnie a change of 210 thousand jobs created would be less than the previous month. Tom keene, thank you so much. He is returning to surveillance on Bloomberg Radio. Also, Carl Riccadonna, thank you so much. Hedge funds hireling into u. S. Governments next. We look at investor concerns over what that could mean for volatility. Matt coming up in a little over than an hour, skye Bridge Capital Partners Joins us on bloomberg. Vonnie heres a Bloomberg Business flash. In california, lawmaker and have raisens the minimum wage from 10 an hour to 15 an hour to make of the highest statewide minimum wage in the u. S. The minimum wage would not hit until the year 2022. Arep and Foxconn Technology to tone their deal after a month of delays. Agreed to by the Electronics Maker for more than 5 billion, but the takeover has been delayed while advisors study starts finances. Foxconn is likely to cut the amount it will pay. Tickets for opening day at the new shanghai disneyland sold out within hours of going on sale. The park opens june 16. Disney is targeting 330 million chinese that live within a threehour car or train ride cou. On the bullet train, that is probably taking you to the other end of china. Jonathan we are an hour and 45 minutes away from the open in new york. Lets get you up to speed on Global Markets. Europe is closed and the rest of the world at work. The shanghai composite down by 710 to 1 . Regulation for the Real Estate Market and several of the biggest cities in the worlds secondlargest economy dragging down the index. Positive with dow futures positive at 36. A real good run this morning for the nikkei 225 of 7 10 of 1 . A seventh straight day of gains for the dollar yen. Quickly,nd market very they drop of basis point to 1. 9 on the u. S. 10 year. Speaking of treasuries, hedge funds crowded to treasuries causing a low but at investor concern for the potential of more volatility. Latest data released by the Federal Reserve show that hedge funds were the biggest buyer of u. S. Government debt in the past year. Matt miller has got the breakdown for us. Matt 1. 27 trillion is what hedge funds or at least a proxy of Hedge Fund Holdings that the treasure uses. We have graph that here. At can get all of my charts matt miller charts and you will find it. This is the Hedge Fund Holdings of the u. S. Treasuries. Look at this jump here and where are they getting them . Other Central Banks around the world. Foreign officials have been widely selling treasuries. We have been showing you that. The problem is that hedge funds tend to move in and out of these things very quickly. That makes the market more volatile. The fed in the treasury are going to be looking at these holdings to see what they can do and what this means. Athan what is the worry that we get a repeat of october 15, 2014 and the flash drop in treasury yields . Is that what people are concerned about . Causedts not clear what that, but volatility may be not so quick and so big. Its a general concern for this market. Often by these assets with borrowed money and go in and out quickly for a trade as opposed to other Central Banks or other foreign officials that typically buy and hold in reserve. That is not what hedge funds do and that is a concern for the market. We have got to take a step back and think about why hedge funds would be piling into treasuries in the first race. Fedng the view against the never mind your for hikes, but look at your to hikes. Look at what that means to growth even if you do strip went out out what happened in energy sector. Consensus view among those funds piling up in the treasury is the antifed view. Would that be your take . Matt im more of an optimist than you are by nature. We have unemployment below 5 . At 2. 3 . Pi core pce iseferred around 1. 7 right now. Inflation and job growth, the two things the fed should be concerned about, are both really looking fantastic rinne. Now. The green line here is the fomc dots medium. The fed is going to be as optimistic as i am and possibly even more. The last thing you want is a fed that ones of a recession. Heres where the market thinks we are going, more along your lines of journalistic skepticism. Jonathan if anyone wants to know where matt miller is, it is somewhere north of that green line. What matters is where janet yellen is. To validate what we heard from the likes of evidence and bowler last week or she is going to say i am what the consensus view even though its a fragmented consensus be . View . Matt she has a fine line to play. She is obviously a dove, but she is now the chair the fed. ,ven if her actions are dovish she has to be telegraphing and much more optimistic view of the economy. Since the fed was originally intending to boost rates as many as four times this year and now it looks like we are only going to see two more rate hikes, maybe she will stick with company line. That is why people tune in to bloomberg to find out executive what she says. Jonathan matt miller, thank you very much. Says that the boj has dominated the bond market. What it means for Treasury Holdings next and off the charts. Vonnie you are watching bloomberg. It was a bracket busting weekend for College Football fans. The final four is now set. North carolina is in after beating notre dame last night. Y will face to start upstart syracuse on saturday. The other final is villanova taking on oklahoma. The bracket busting was evident in the brackets for a cause. It is our way to mark the tournament as the best in business and finest make the chance to thought the perfect bracket. Who is in the lead . Starwood Capital Group and are frequent guest on the show. You can follow all the action for a challenge at the website bloomberg. Com charity bracket. On the bloomberg terminal, follow along at br kt go. For all good basketball news, you want to type in hoop. Are you basketball fan . Jonathan i feel bad, but ive not. England beat germany. Thats a big deal. Matt thats a rarity. I will move away from that to the market so i do not upset people. Time for off the charts. Im sure you heard over the weekend on Bloomberg Radio and first word asia, a really big deal the survey of economists looking at jgbs and forecasting that japanese 10 year yields stay below zero. They stay negative for the rest of the year. Nothing that corona has done has been able to give the yen much weakness until last week. Finally has gotten some traction there. 704, ita chart at g btv shows the point at where he expanded the qb and negative rate policy. It is one thing that central bank has will be watching closely. We have to time this up with the discussion we had five mins ago. Jonathan we are talking about hedge funds along treasuries. This is why investors are long on treasuries. Even if you go out beyond the 10 and 20s and down to the 30s at the very back end of the curve, the discussion about whether that curve is a reflection of what is happening domestically to thinks. , you have the truc the treasury markets outside of the u. S. That jgb market is phenomenal at the moment. Tv to fall,r about it is getting expectations up. But we are seeing in the market is completely opposite. Overnighty bought showing that they think it will expand to the 40 year. Is he going to start buying fortyyear debt . Jonathan what we coming up on bloomberg. We have janet yellen speaking in new york city tomorrow and the payroll report on friday. Hour, an in over an analyst joins us here on bloomberg. Vonnie Chinese Industrial profit snapping a sevenmonth losing streak as Companies Fall deeper in debt will inventories grow. In the deals market, japans ntt unit has agreed to buy dell systems or a unit of dell systems for more than 3 billion. What it means to the Company Global footprint. Virtual reality race begins as the oculus rift ships out today. Would be a game changer for the social media giant . Vonnie welcome to the second hour of bloomberg. Vonnie quinn along with jonathan ferro. David westin and Stephanie Ruhle are away. Willhan in 30 minutes, we break u. S. Personal income and spending numbers. Before we get to all that, lets get to what is happening in the global Financial Markets. Europe is still on holiday. Do i wish i was with them . No way, im happy to be here. Dow futures of 30. 225 is up 0. 77 . The dollar yen up to 11350. The eurodollar is unchanged. It sixday losing streak against the currency dollar this morning. The u. S. 10 year at 1. 9 is that flat. A big week ahead nevertheless. Anticipation of the markets today and then europe reopens tomorrow. Jonathan we have some first word news with vonnie quinn. Vonnie dungeon is expanding its counterterrorism investigation. Suspects have been charged in the wake of last weeks attacks in brussels. There were also attacks in italy and the netherlands over the weekend. The government has raised the death toll the death toll to 35 after four victims died in hospitals. A suicide bombing in pakistan appears to target a christian soderling easter. The bombing killed 72 people and more than 300 others were wounded. An offshoot of the taliban says its responsible. Pakistan Prime Minister is calling for a fight against terrorism. Bernie sanders wants to debate Hillary Clinton on her own turf. He wants to debate her in new york before that states crucial primary. He sees momentum in the race after winning caucuses in the race in washington state, alaska, and hawaii come a making the delegate count tighter. Dayal news 20 for our powered by our journalism 140 news bureaus around the world, im vonnie quinn. Chinese industrial profit snapped a sevenmonth losing streak in the first weeks of this year. The data also show that companies fell deeper in debt and industries group. Katie stockton alongside us. Industrial profit snapped a losing streak and then they tighten that real estate regulation. Shanghai composite does not matter to me, but the fundamentals of what is happening in the economy do. Was that mean for you this morning . Katie i like the supply demand relationship behind those chinese equities. With that mind, the shanghai composite means a lot to me. We still have a longterm downtrend and the chinese stock market. But we have seen is a nice little relief rally similar to what we have had in the u. S. And it could very well be the start of a basing face, holding promise for this fundamental factors as well. Yet it is way too early to see that we have seen a real turnaround. Everything needs to be considered unfortunately. All intoo take it consideration and judge whether we have momentum coming behind the markets. Theie when you look at shanghai composite index, youre getting a different picture from some of the other indices. What are they telling you in regards to chinese equities in general . Katie theres a nice relief rally that could again be a start of a basing face. Longterm support levels and in the way look better than u. S. Stock market in relative terms because they became very oversold on a relative strength aces. Yet the momentum is not quite there yet. Theyre trying to convince you enough from a longterm perspective. Jonathan matt miller . Katie Chinese Industrial profits look great or not as bad as they have over the last 11 months. The inventories are up eight times and the debt is up 5. 5 to over 8 trillion. These Chinese Companies owing a lot of money. And a lot of them are government owned enterprises. They really have a heck of a lot of debt. Vonnie katie, how do you look at the debt of Chinese Companies . Katie as a technical strategists, i dont really look at it. It certainly is a risk factor. Matt you do use the bloomberg terminal. Function whicht is a great relative rotation graph. You can put in any index that you want. You can see all of the Industry Groups of the s p 500. Ghat do you see from this rr graph . Katie we do a lot of work globally and we have seen some defensive sector rotation. Looking at the graph, there has been rotation to utilities and telecom. Those of the sectors pointing up and to the right. Even the industrial sector has captured some momentum. I believe that is in part related to the dollar and the callback for loss of momentum in the u. S. Dollar. We have seen Consumer Staples do pretty well. Those trajectories based on the rotation graph are still there. Nowriskiest sectors right would be more financials, consumer discretionary, which have we momentum. Matt they are here and improving and we have seen the underlying Commodity Prices come back up a bit. Katie there seems to be a macro influence there certainly. We have seen some early signs of rotation into the sectors. Right now, it is still a countertrend move but its very promising that momentum has increased and could be the start of a pacing phase are bottoming process. Jonathan looking at the broader indexes, the s p 500 back in the red for 2016. The winning streak is done. One of the technicals telling you . Was that a rebound in the bear market . Katie it was very some which what we saw last october. Analog in mystrong work and the indicators lineup that we should see a greater on the momentum backfield. We saw a lot of overbought downturn. The relief rally has not really generated a lot of breakouts. Theres a a lot of resistance for the s p 500 for one, but the Broader Market to plow through now that it is overbought. Vonnie what do you make of gauges like the vix . I bet you look at it differently. Katie i look at a gauge of sentiment, but its one of many. What a like about it is that its a transactional gauge. Its not an investor polar we are saying, hey, what do you think . Is a transactional gauge of sentiment but its just one of many. Markd some signals where we often have as a guest flashed ix. Uy signal on the vo jonathan itself like you are quite bearish for the months ahead. Is that right . Katie i am. With intermediate overbought conditions having expanded to about 50 of the s p 500, we last saw that more than a year ago. It tends to peak around 50 60 . The short to intermediate term Downside Risk is very real. Initial support for the s p 500 is around 1950. Secondary support is really back at the october 2014 low around 1820. Vonnie do you look at gold and silver at all . What is it telling you . Katie i do. As it will bullish reversal and my work has seen former assistant around 1200 per ounce. We are pretty close to that with this callback that we have seen. Im looking at the opportunity tab to see an exposure to gold as early as this week. Were looking for to perform potentially us equities pull thaback. Do you reconcile these overbought conditions as you see them with an immense pessimism ins o sentiment . Katie theres not that much sentiment of pessimism built in the market right now. It is meant to generate bullishness and you could argue that its overly bullish. Matt what do you look at . With gold, but what sentiment indicators you look at . Katie theres one called the fear and greed index. This incorporates seven different factors, including the vix. These transactional gauges. It backed right up to that sort of overly bullish territory. Theie you dont look at debt of companies, but you look at treasuries and rates and so forth. We seem to be in this range that we cannot get out of at the moment. Katie i keep looking at that within a very longterm context. I look primarily at the 10 year treasury yields. It stopped around 19 to 2 . Downtrend you have a channel and that is what we have to remember as we see these backups. Vonnie on yields . Katie in the yield terms, yes. Vonnie what do you see as a bottom . Katie it would be around 165. Jonathan in terms of the technical skeptics, people looking at the bond market, especially further down the curve, wire technical so useful . Why are technicals so useful . Katie i could be here forever. [laughter] its all about identified supply and demand. There are times when the market breaks away from the fundamentals, breaks away from the macro. Often time, those periods can be explained by momentum and sentiment and behavioral finance. It really comes back to the behavior of the Market Participants and their behavior changes with different scenarios , of course. The technicals will help you not identify why but really what is going on. I think that is invaluable. Vonnie from buying stocks like facebook and amazon, the mountain stocks of leicester, is that over . Katie theyre still in longterm of trends, but theres a loss of momentum in those options. I believe that small caps may be able to outperform over the next few months but not in the very near term. We will have to see how that plays out. Often the names that were big winners last year are not often big winners the next year. I think that would probably qualify here, too. Jonathan Katie Stockton, thank you for joining bloomberg. Data buyingans ntt up dell systems for more than 3 billion. What it means for the global footprint ahead on bloomberg. Futures positive across the board here in the u. S. Vonnie heres the latest Bloomberg Business flash. Dell has agreed to sell to japans ntt. They are paying over 3 billion for that companys largest acquisition ever. He is selling assets before completing the record deal. Avon has reached an agreement with activist investors that adverts a proxy fight. Varying capital and arriving partners will be allowed to approve a director. Two years, avons revenue and stock prices from falling. It has agreed to sell its north american operations. The latest superhero movie deleted its not so super rivals at the box office. V superman dawn of justice grossed 170 million over the weekend. That is your Bloomberg Business flash. Want to seew if i to superheroes on one stage unless its matt miller and jonathan ferro. [laughter] matt the ball brothers. Jonathan can we keep her . Matt yes, we can. For at least one more hour. J David Anderson is out with a couple of cell equivalent ratings today. Oceanics on at would. It is a Global Offshore drilling contractor that has been cut to an underweight. Anderson also lowered his target price from six dollars to seven. It is still 28 lower than the consensus of 8. 38 for that driller. It was downgraded to underweight at barclays. Anderson gave the contract driller a target price of seven dollars per share. A couple in the drilling space there. Now for Berkshire Hathaway. That a shares are being initiated as a new by a ubs. They give that a shares a price target of 244,500 pe. That is a 16 o upside to thursdays close. The average price target is 230,707. 0 we have a story on that out. At that level, he would need to pass the Federal Reserve review if he wants to continue building his state. He has about 506 million shares in wells fargo. That is 9. 9 . Most of it is held by Berkshire Hathaway or subsidiaries of Berkshire Hathaway. If he wants to continue building his state and the lender, yes the past a Federal Reserve review, which im guessing Warren Buffett could do. Vonnie i think you probably could. Jonathan can we get back to that price target of berkshire . Matt 230 3000, but Brian Meredith says it is worth 244,000. Jonathan lets get to todays big deal. Big monopoly. s mak the company is buying dow systems for about 3 billion. Were joined by jeff mccracken. Gekk . Ll it now jeff dell is buying emc, a data storage provided it is the biggest deal for dell. They are in the process of selling off about 10 billion in assets t that are not quite cout to them. This is something they bought that mostly in 2009 when it was perot systems. They spent about 4 billion. They are selling a big chunk of it and getting about 3 billion back for it. It does not see much of was the best deal for dell in its history. Vonnie they dont seem to care much about money these days. In the tech space, thats the biggest ever. The perot deal was done in 2009. They spent about 4 billion to buy all of perot and then they went private three or four years later. They had a lot of changes. I think they know now what they want to be and data storage is a big part of where theyre going. It pc business as you know that has really shrunk over the years. They want to provide these Books Services to companies. Jeff and not just the hardware that you are holding in front of you. Vonnie why the Japanese Company . Jeff we have seen a lot of asian deals generally speaking this year. Chinese companies have been doing big mule deals into the u. A lot of that is tied into the slowing demographic or the aging demographic. I dont know if you have heard this before, but there are more diapers sold in japan to a dollar than children because that is how old the population is. That would get them to the health care space. Your building records as a person. Your surgical reckons for the doctors and incurrence Companies Insurance Companies Get into the hold billing space. Boomhan the japanese m a has a big scene this morning with dan loeb china get the Corporate Governance to change somewhat. What is changing and japan that is leading to these acquisitions . Its alluding to these Japanese Companies looking at this pool of cash that theyre sitting on for decades and nows the time to start spending it. Jeff the government there has been saying to them that you got to expand. Perhaps it made sense to keep your money here and not do big deals, but either our economy is slowing, probably in the case of china, but our demographic is getting older and not spending as much money. At theht to be looking most stable economy in the world, which is typically the United States. Potentiallying on hundreds of billions of dollars across japan. They are willing sellers and there are lots of companies willing to sell the whole company or big assets. Jonathan we have seen a lot of advisors going backandforth trying to trend thats spend that capital. Time used to spend that flying to london, but now your flight to hong kong or took if kyo. Vonnie certainly by no means an alltime high, but higher than in the years. Jeff they are not that well known in the United States and they do a lot of Health Care Hospital business in japan. It makes sense for them to expand in the United States told this is a pretty way get into the hospital space. Vonnie jeff mccracken, manager of global m a here at bloomberg. Thanks for joining us. We had to the cme group for futures and focus. We are talking gold. Jonathan this is bloomberg go. The u. S. And wall street getting back to work. Its get you up to speed on what is happening global Financial Markets. Futures positive and dow futures up around 24. The shanghai compounds are down 7 10 of 1 . That is weighing on property builders this morning. Crossing over to the commodity market now, lets go over to matt miller. Jonathan i want to talk about gold today in futures and focus. Matt tony coleman joins me from the cme. Todd, thanks for joining us. We just talked to Katie Stockton and she was saying that she thinks there are buying opportunities for gold. Do you agree . Todd i definitely agree. It has beenat gold, a barometer of fed expectations over the past year and a half. Right now, the fed really want you to believe that theyre going to raise rates in the either april or june. Push goal pricesld lower, but i believe the fed will have to sit on their hands to the end of the year. Y think gold is a but although you want to because just because we are in a downtrend momentum. Ultimately, we should see an extension higher as we had further into the year and no rate hikes. Matt what is your price target for gold . And why does no rate hike necessarily mean by gold . We have seen rules about gold as an inflation hedge and Central Banks and the effect on gold turned on their heads. Todd gold has become really a barometer for rates. If you look of the u. S. , rates have been at zero angle prices did very well. When a tech about rates going higher talk about rates going higher, you see gold prices fall back and there is the snowball effect. Call prices are fairly press right now, somewhere between 1200 and 1300. That is where it should be in the zero effective rate. If youre going to stay in their in that price in rate hikes Going Forward, gold has upside. 1250 andwas around that has extended to 1400 now that we have seen a good rates in japan and europe. Yet seen the u. S. Holding up half a percent. You have ye the rest the world catching up keeping the economies from busting up. I think gold is a safety measure in a savings vehicle. Matt they so much of the time. Thanks so much for your time. Coming back, breaking news on the economy. Personal spending and personal income. Jon no. 30 seconds away from some key data points. Green around much of the morning and positive on ands p 500 and dow jones nasdaq. We are five seconds away from the Economic Data. Matt it is a massively. That isget pce, preferred inflation gauge at 1. 7 . That is slightly below the 1. 8 percent,ng for but it is in line with the prior readings. Inflation holds steady at 1. 7 . Now lets look at one of the victims to the revised gdp number we saw on friday. A game of syrup. 2 . A gain of 0. 1 . The main thing to keep in mind is inflation is rising at a rate that would seem to suggest the fed should be thinking about increases and spending is up at a rate that is lower than the previous readings but in line with estimates. Remember, spending, 70 of the economy, whose to gdp to 1. 4 in the First Quarter. Lets recap of personal income figure for february, up 1 10 of 1 was the estimation but it was actually two tons of 1 . The personal spending data was revised lower from january, which had been up by 5 by. 5 . A little bit of a pop on eurodollar, we have come back down since then. Treasuries grinding slightly lower but no big moves on this data. We have such a pivotal week ahead with janet yellen speaking and payrolls on friday, everything is Holding Tight to see what this week brings. Are hanging on every little bit of data that comes out. We really in our chief economist now to break down these numbers. I want to go to the core pce month over month being not as strong as we were looking for. What will they say about that . See any realot change as a result of Julia Gillards commentary. As a result of these numbers in Julia Gillards commentary. Theyast Time Committee met ended up with a dovish commentary. The question is where we go forward with this data. The labor markets are more pivotal business particular component. The reality is the fed has enough reason to move in not as, fortunately of far as i can conservatively or just hanging tight until june. Fed when it ishe herselfral reserve, she at the economic forum. As the chair is, you tend to make last and you cannot would yourself out on a limb relative to other people in the group. Walk a tight line as to where she is doing and she has not deviated much ben bernanke did not deviate much, and neither will shape. Any earthxpect shattering news out of her commentary tomorrow. What do you make of the figures from january . Real personal spending a we thought was up, and it came in flash zero. You begin to think about what is happening for the First Quarter of the year and where we go forward from there. It will not be a particularly robust firstquarter. It is not setting up to be a particularly robust secondquarter. We are looking at an economy that is stuck around 2. 4 . To be ajust going problem for the fed Going Forward because it limits how much they really need to do in terms of additional Interest Rate hikes down the pipeline. I think the discussion they took less tightly lower all the dots are in line with this type of data that is coming out. I expect it to be lowered further as we go through. I have the economics of great literature of on the bloomberg. Fascinating stream, but seeing normally only thin surprises in the labor market. Area where they go in the spending more money on experiences . That got translated into responding relative to the income perspective. When you look back at the gdp numbers that came on friday, while everybody was off on gdp numbers will revise the scope of the gross domestic income numbers were revised down. You are seeing a little bit of a giveandtake going on in those numbers. The biggest surprises are still in the labor market numbers in the standout relative to everything else, especially get better before gdp is. Im not terribly surprised nor a terribly lifted up in my confidence of where the economy is going. I do not see downturn anywhere near soon, but i do not see acceleration either. Uck. E just st jon i do not think it matters site you cut out coming you are either flat or negative 7. 6. It is just not pretty. That spread between employment and corporate profit, the big question, never mind recession, typically, in fact almost always, employment gains go with it. Can we really say this time is different . This particular respects and thats expensive is different than previous expansions. One reason is reported that china, the drag on global activity from china. The fact that your legitimacy to deflation is having an impact on corporate profitability. Key differences the view changes radically wicked into a deflationary environment because you switch from the a you switchr s andnominal differential it becomes important trigger Going Forward. The if we keep going with this type of profit environment they will have to start legal to these reductions they had. Nticipated . What you see in the pmi data i think manufacturing is a pivotal component of the county, even though it is how is small. He used to be getting in manufacturing and we transited out to Service Company that support manufacturing. Those Service Company says huge multiplies for the county as well as manufacturing. Disappointment we are seeing in the manufacturing side of the economy, through the currency is one of the key things. Tothe currency continues lose momentum, vucevic i think it will to overtime because we are looking at real shortterm differential rather than novel Interest Rate differentials, you will get lift backup in terms of the manufacturing side of the economy. Gdp, can youck to really look at something because it was bad and just drove it out . No, you cannot do that. You cannot take out energy, he can take out food, you cannot do it in terms of inflation numbers, and from terms of growth numbers, the reality is this is the economy we have. We have an economy that is stuck to it seems to be stuck it two point 25 stuck between two and two and a quarter seems to be stuck between two men to a quarter. That theaying fed rate increase may come as soon as april. More is an fx strategist at bank of America Merrill lynch. Many first ask you about your take on this Dollar Strength that we have seen. It seems wickedly do nothing to weaken the as hes we can do nothing to weaken the yen. Is this continuing because of the policy convergence plan . I think a lot of the moves weve seen over the last week is some repricing of dovish expectations coming out of the last fomc meeting that we have had. More is an fx strategist at bank of America Merrill lynch. Many first ask you about your take on this Dollar Strength that we have seen. Themote says thatbut i will be set with Going Forward as real yields are moving against it. The nominal rise we have seen as data continues to pick up on the employment side, has been driven by breakeven. Real moves are against the dollar. Given our inflation will be setg forward as real yields are moving against it. Outlook and a real guilt outlook, this has east policy significantly recently. They have not been able to generate lower real yields in their economies as the market is questioning whether they can sustainably rise inflation over the mediumterm. From this standpoint we are to see the dollar a little bit under pressure in the near term until we get further along into the fed normalization process. We were looking for 1. 8 , just missing this estimate. But still not horrible. What you think that means for janet yellen as we wait to hear her speak this week . I think they are in a wait and see mood. This is something we will respond to very actively. They want to see more evidence that there is stronger underlying inflation in the economy before they do signal were strongly their intent to normalize policy further. From her perspective it is very much a status quo from the comments that she made at the fomc statement in the press Conference Following need a couple of weeks ago. , and you studied mandarin then you had a focus on china when you are at columbia. What do you think about the chinese dilemma with needing to weaken the but meeting to support it with all the effects reserves . They are in the situations of the fixed Exchange Rate so that the dollar has been strengthening recently. Normalization is starting to get priced in. China has been importing higher u. S. Policy from the fed. They are in the situation where the economy is in need Interest Rates, lower real Interest Rate in order to deliver that they really need to let the currency go to regain control of monetary policy. I think from that standpoint they are in a difficult position because the more dollars for that we see the more expectations for policy increases. We have more pressure on capital outflows which will create tighter financial conditions as well as tighter Global Financial condition. See it be weakening further over the course of this year as they , butto support the economy ultimately it will be a difficult process getting there. Matt thank you. Coming up, will oculus rift be a gain changer for facebook . Hp group. Live in the where to find opportunities to instruct your credit with our senior Portfolio Manager. Heres the latest Bloomberg Business flash. Economists are going more e pessimistic about the coming the economy. In california lawmakers and labor unions have reached a to agreement to raise the minimum wage and 10 to 15 an hour. That would make it the highest state been wage in the u. S. According to the Los Angeles Times the would not hit 15 until the year 2022. Day at for the opening the new shanghai disneyland sold out within hours of going on sale. The park opens junelabor unionso agreement to raise the minimum 16. 3 million chinese who lived within a threehour car or train ride. To the world of tech now, facebook data historic acquisition in oculus rift. What this purchase meant for the future. I think that it will be a lot of aople up when the ceo Tech Companies said that vr is the next computing platform. One of the biggest most Successful Company said this is it. Thank you to let people on board to go out there for that gets a lot of people on board. Jon here is the editor in chief cory johnson. I wonder when facebook investors will look back and say this is a big day for them . The biggest most Successful Company said this is it. Thank you to let people on board to go out there forcory that ie part. I have had so much behindthescenes. Theus to the jury is out device is out today, but it should be said that it is any limited release. I talked to an analyst is that his order is not expecting to shop until june. It is being released with the controller, thats with an xbox controller, but they have captured a lot of attention for this notion of Virtual Reality and the other first to market. Controller costing 599, it e it would be a not unreasonable price to pay for a new dental experience. But the stuff of experience does not moving the that is not working in movie theaters, will it work in peoples houses . The question of what it will be used for. At 600 this is somewhat works with the playstation device. The playstation Virtual Reality device, many think that this is industry leader. There are 37 and a half million homes that have playstation devices already. A half milliond units that have been sold through december. This playstation device which will ship about the same time oculus reaches full production is a much cheaper price they also are the have relationships with the gave makers that oculus is trying to strike. Units that have been sold through december. Something something weve seen for years and decades in the gave business. Katiee a gain business, convince them to develop that. It is interesting to watch them develop these devices. Convince them to develop that t. Coming up, battle of the church. Alix steel takes on matt miller. You are watching bloomberg go. It is time now for battle of the charge. Alix steel is taking on matt miller. Alex, we will let you go first. Alix i am very competitive, and i have one before. First off, quick lesson, what is this in the oil market . This has been a staple of the oil market in the last year and a half because of all of the oversupply, but it is slowly disappearing. This tracks the 12 months versus onemonth spot price. As that moves higher, that is deepening and that gap gets wider. Was 12 difference at its height. What we have seen over here in the past couple of weeks has gap,a decline of that meaning that is narrowing. Zero, treadingd into negative territory, that is meaning prices are more expensive now than they are in the future, which would be bananas because we have all of this oversupply. The question is why have we seen this fallout particularly this year . You have the supply coming down in the u. S. And you have the back end of the curve coming down due to hedging. Matt i have one i think you will like as well. Sebastian boy, Bloomberg News reporter down in brazil, just but thats on the terminal. It is the yield curve for petrograd and it shows you the historical yield curve versus what were looking at today. You think you missed this horrible stanzel horrible scandal that yield will soar. This is the yield curve six months ago starting at the short and with 17 Interest Rates. ,ere we look at two months ago and here is the yield curve today at only 10 . The question is, why is this happening . Why is it costing them less and less to borrow money, and the answer is the real. It is of up 8 year to date. Mounting losses able to pay off debt faster and then lenders able to give out money. For thank you very much that. That mess with it for me this time. I found it fascinating. This is an easy one for me. Alex still gets my vote. We go to the control room, who gets the time . Gets the win. Matt miller is bitter about this. Coming up, pricing in a recession. We are about 30 minutes away from the open. Futures are a little bit positive. Jon the fed chair speaks in new york and the payroll is due. We look ahead to a big week on wall street with king dollar back on top. The treasury bracing for more turbulence. Is japans and tt data buying more than 3 billion. Jon just under 30 minutes the opening bell, i am jonathan ferro, joined by alix steel. Alix here with us for the hour is trying to see, senior Portfolio Manager at sky Bridge Capital which has more than 12 million in assets under management. One word to describe the markets right now . Turbulence. Jon turbulent. Hold that thought, lets get you up to speed on what is happening in markets. 500 futures positive for points this morning. That features of about 21. Industrial profits snapped their decline, but on the other side of things, tied to regulation for the Real Estate Market. Closing higher this morning, up eight hits percent of 1 8 10 of 1 . Lar yen one turn team, dollar yen at 113. 36. It took us about a minute, 18 seconds with the vti crude of the tenths of 1 . Lets get to alix steel for some first word news. Alix some breaking news for you, and management shakeup piness and or median management shakeup happening at pandora media. They are naming ceremonies to be ceo. This is coming as the company is reaffirming their 2000 teen your target. Youre looking at Brian Mcandrews leaving his post as ceo of pandora, and the founder will be taking that post. Beltre is expanding its ,ounterterrorism investigation three were suspects have been charged in the wake of last weeks attack in brussels. There were also arrests in newly over the weekend. Meanwhile the government rate the death toll to 35 after four victims died in hospital. Fidel castro is weighing in on visit to cuba. s it was released by state media. Esther obama did not meet with castro but did see his brother, the cuban president raul castro. And Bernie Sanders wants to debate Hillary Clinton on her own turf. He says hes easily momentum in the race after winning caucuses over the weekend in washington and alaska and hawaii. The former new york senator still holds a big lead over sanders in the delegate count. She is leading the 708. Global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. Thank you. It is time to get to the free stories that matter to markets right now and number one, king dollar. The Dollar Strength continues especially against the japanese yen, rising for the seventh straight day. The best week since november. Fed officials saying potentially ting in a great harp putting a rate hike in the works for april. You do not buy this. My question would be to you, this rebound, can you reconcile that with the movement on the front and . If you step back and think about the Dollar Strength we have had for some time the tough thing for investors to evaluate is whether it is sustainable Going Forward. If we get back to the ground of strength, trees will be hit again, emerging markets will appear distressed. The tough thing about predicting those things is to sell is priced in and what is not. No one is unaware of the fact that they will hike two or three times this year. No one is unaware of the fact that they will continue quantitative easing as far as the eye can see. As a speculator it is a tough call right now. That being said it does make some sense to have protection in the event that china does do a big currency devaluation. That would be very destabilizing. Was the rumor in the market after the meeting that there was a core that happened over the last meeting in an effort to keep the dollar weakened, to help not have a massive devaluation. Do you buy into that . There has been a lot of dialogue at the highest levels of government. If you think about what the pboc has done to us as a warning shot across the bow. Perhaps theyve been successful. The only devalued several times for a small amount. This is one of the biggest factors taking into account or not, how much more currency instability in china could affect other parts of the globe. Jon this always goes full word manage. O this i just wonder what is happening in china right now any really in control anymore. We look at china as a potential for a hard landing at the bottom line is you will not know until it has happened anyway. They have various levels of a hugeisposal to manage decentralization. Alix how is this possible when the feds third mandate is expectations . T we like markets that are dislocating right now. We think the probability is quite low. One thing we can trust is highquality assets that only have meaningful downside in the event of recession. That is something you can hang your hat on. Back to the dollar versus the euro, very difficult to predict. More, maybeardens not much of that is priced in . In times like these where there is turbulence, and we have been in a time of relative calm, youve to go back to basics and say what can you count on to be there over the next 18 months, and why the ink thats what you think the loss outcomes would be if you got south . To us, that is a good risk, reward. Alix on the face of it, the latest read on Fourth Quarter looks encouraging. However this corporate profits are pretty quickly, plunging more than 11 from a year ago. The biggest drop since the end of 2008. Even if you back out that charge, the profits were down by 7. 8 . Analysts think the impact of the dollar is being priced in the last several quarters. Trade has been infected manufacturing. Most expect a profit rebound for the end of the year. Are concerns that valuations are reflecting that. Right now most investors to substantial rebound. If we get another round of Dollar Strength were there is weaker growth for emerging markets or manufacturing does not bounce back and services which is to get elected, we could get a big leg down again in equities. In august as we saw would january, but something that reminds people it will not be a Straight Line up Going Forward jon. Jon what is a fair value on the s p 500 . Based on what we have seen from the figures, should it not be Going Forward . Everything is relative at the end of the day. The bottom line is no one knows with the appropriate multiple should be when you have negative rates. The buyer and the corporate america, so profits continue to very that by our will wane rapidly which could set us up for another leg down. Let me tell you another negative here. Take a look at the bloomberg. This comes from matt miller of Bloomberg News. It is return on equity. Not big earnings divided by network. He points out we are at the lowest level since world war ii. Now worse than we were in 2008 and 2000. It must be really hard to look at this and say i will pay up right now. Inwhen you can buy assets strategies that have tangible cash flows, why are you paying 16 80 forward earnings would we are at bull market and recession is an evident that is inevitable . Recession is inevitable . Jon i asked those who were log on the japanese market, and they will give me two answers. They are the truly believe, or theyre looking for the long game,. , who believe he will just pass it on to this son. Does this story tell you it is not taking us to . Not changing fast enough . There was a last activist cycle in japan that people forget about. You had support from government now to move in that direction. That has been going slowly, to your point. They could help provide corporate japan. To take their eye off the ball and that this is a key moment to do the right thing for shareholders. If you own Japanese Equities because you expect the yen to go wildly abenomics to be successful, that is a poor reason to be long there. You have to hope that the probability will improve. Alix we talked about governmentrun to support things like inflation and higher wages. So whys not happened, are we so convincing can actually change Corporate Culture when activist have failed in the past . Is not the activist soli, it is also the support of the government. Trying to get inflation back in the economy is very challenging. Trying to get growth or wage talking forcing management into a seat is very challenging. But it is not that difficult for people to decide we are going to embrace more of an american style of Corporate Governance that might have its flaws but regarded as the cleanest in the world. It is a much easier thing to logistically accomplish. Much easier to just take a few on dollar yen, because those companies that have just been Corporate Governance, that company is is in that index. Yet that index has underperformed this year. It tells you that part of the hot money flows that came in japan on the hope that abenomics would be successful and they started the trend the other day, one micro factor appears in the First Quarter of the year. A lot of hedge fund deleveraging. They have forced the cell as they have had losses elsewhere. It is hard to reconcile the two, but perhaps the explanation is that a lot of the hot money in the Hedge Fund Community has pulled out as they have seen the writing on the wall. Jon the stories that matter to s. Rket much more ahead. Lets get a check on the stocks that are moving in the premarket. We wrap up the markets after the short break. Is r watching bloomberg i am alix steel, youre watching Bloomberg Business flash. Income rose to a 10th of a percent, pushing the savings rate to a oneyear high. Avon has reached an agreement with activist investors that avoid the proxy fight. New partners will be allowed to improve a new independent director. In return they will not launch a fight for board seats. And dell has agreed to sell its Technology Services unit to japans ntt. Theyre paying a little more than 3 billion for the companys largest acquisition ever. Dallas salix abbasids before completing this record deal dell is selling some assets before completing this record deal. That is the Bloomberg Business flash. Jon t walker lets get you up to speed on the premarket movers, starting with yahoo , 13 minutes away from the open. P by 1. 7 . Ck u switch off the board very quickly, we get to disney. Disneyland shanghai selling out in a matter of hours. In a few months. The stock down by 6 for gamestop. Breaking news, alix steel. Alix starboard hotel, saying that the group has made improvised proposal for the company for 82. 75 a share. Starboard hotel is a consortium that combines almost 89 of value. The have made a revised proposal. Not changed regulations for supporting the marriott to deal, so continuing to see some movement there. They are likely to have a superior offer. Some bidding ongoing for starwood hotels. Predictally you want to future potential for growth, and i have something stephanie and many have somebody else stepping in saying we will go higher. And you have to do m av because it is a slowgrowing world. Jon up by 2. 7 in the premarket. Lets go to matt miller for some of the bank calls on wall street this morning. Matt one that i want to focus on is the cold call. Ubs says that is constructive on gold. 1225 this year, but 1300 longerterm. And itestor position, highlights a couple of goldman your senate likes gold miners it likes. Goldber, a lot of these miners have shot up. You are seeing 40 gains for silver, but we have seen 80 gains for some of the other gold miners. These companies have a lower valuation, that is why they like these. I also want to talk about hyper jeffries, very interesting to me that analyst kevin baker is cutting on concerns of credit lysis tied to auto loans. This has been a huge issue for the carmakers. They need to a few subprime borrowers. And finally, qualcomm has gotten a downgrade to equal weight from overweight by the barclays analysts. 12 lower than the street consensus. Jon thank you very much. Next on bloomberg , we count you down to the market open. Alix this is bloomberg. Troicki of sky Bridge Capital is still with us. Uncertainty plaguing Global Markets and beginning of the year. But you were bottom fishing a structured credit right now. In testing versus other things, especially if you assume we will not have recession and six to 12 month. It is hard to be excited about , but ifng on anything you look at the legacy subprime option arm, Mortgage Backed securities and loan obligations, they are basically pricing in a high probability of recession in the next few. Months. Liquidation took place at the end of last year into this year. We see very attractive cash flow about Predictive Power of how they will behave in the next six to 18 months. Equities, the dollar, very hard to protect. We like in efficient markets and we like cash flows that we can predict or so in our relative basis we think that that market looks very ca attractive. Jon when you look at sovereign debt, this liquidity premium, when you look at structured credit and you are talking about the possibility formal four more for 2016 volatility in 2016, where do you go . When you had a lot of force selling. Are noreet dealers longer there to show up and take inventory down. For an investor wanting to sell, another by side investor will step up and they want concession for that. You are getting very reasonable cheap, to takely risks that are very definable. You are right, and a number of volatility, the prices go lower, of course. Had high bonds back to november levels, so if you trust those market signals at all, it is basically saying you have a lot of volume right now. One stock that has gone totally wrecked is values. Valeants debt is hard to avoid exposure. We like substantial subordination and can tolerate energy and commodity lysis and the one that there will be one off loss elsewhere. Most analysts on the credit were equities side assume they will not default because they do have real underlying businesses. Even if they do default the recovery value should be very high because this is not an issue where the company does not is that a level that can impinge the revenue. This is an issue of corporate , bad pr, terrible practices with overbilling. All of those things affect your business, but not enough that you would have a very low recovery value in the and and and in default. We think the probability is still low, but if it happens your coverage will more than compensate you for most of the leverage loans. The more junior debt securities, the more questionable. Jon it seems like the buzz word, the real word you need to listen to his homework. Next, the market open ahead of a big week on wall street. Payroll friday this coming week. 30 seconds away from the market open here in new york. Lets get you up to speed. Futures high in the open. The s p 500, positive 12 on the out. Mix china lower, japan, switch of the board here in new york. 2 . Softer Economic Data. Strip back the market open. Us to talk about the week ahead with fed chair janet yellen coming up tomorrow and perils on friday. For now, lets cross over to matt miller. Matt i want to take a quick look at the majors. Gains across the board. Celebrate is drawn monday, we had good friday off. Steel with of alix us but because it has taken the lower insharp leg trade. Lower in the last week, doing so well at almost 40 per barrel. Downou have seen oil drop to the 39 and 48 barrel. As far as the dollar is concerned, it had a great run. Today, we are seeing a strong pound. On cable, very interesting there. I have got a chart here that i just pulled up. Alex and john were talking about the great news on pandora, back in leadership role as ceo. Strategic be the officer. He stepped down in february 2015. 70 . En then and now, can see why you would want to bring the guy back. Breaking news concerning a change over millennia management. The global head of Credit Suisse Asset Management as he is going to help manage capital andcations and risk commodities this is information according to people familiar with the matter. A big change for Credit Suisse. He is leaving after two decades. Leaving from being a riskier security business toward Wealth Management. All to streamline and hone its cost as well. Leaving to millennium management. We will see more of this kind of thing. Jonathan they go into the Wealth Management business. Ago, he will expect to see more to move away from the bank and much more to millennium management. That is the big story. The other big story here at bloomberg is what is happening with the dollar. Its toss it over to abigail live from the nasdaq. higher overall for the todaq, from equal weight overweight. The chip maker has a tougher road ahead is intel take share with apple. Billions of dollars to lose. Modem ng its cheaper. Qualcomm is a now is now about flat on the year. It may be a turnaround. The u. S. Dollar heading for seven straight day of gains as it was announced they could soon raise rates. Were joined. The third mandate for the fed, what happens for the dollar . I think increasingly it is. That is our main concern. The negative feedback loop. The u. S. Economy is doing fine. You have the dollar rising, concerns about china devaluation, growth, commodity markets, those start to resurface. That is what we think will stop the fed from hiking and really lifting the dollar for now. Your chief economist call, premuch no hikes for years. My eye. 17 catches talk about the scenario and how that pivots and transitions to what you think will happen. Li every time we get close to the point of fed might be moveg, i think it is a into the second half of the year, the economy slowing a little bit, stocks rising a bit in the fed becomes more and comfortable hiking rates. That is why we think the dollar is not your best bet right now. They do well and risk sentiment is soft. You should be buying the dollar about the life of the aussie dollar, the canadian dollar. Those are the kinds of currencies that should do well. Is it just a risk currency call . It is both. Hike, the is able to dollar should do well across the board. Right, preventing the fed from hiking, most currencies will do badly, Commodity Currencies will do badly because of the risk sentiment. Lets take the silly scenario. Dollar strength. Dollar down, oil up, stocks up . Collects it is straightforward. Growth reasons, as well as feedback loops and emergingmarket credit. Looking forward again, it is back to what you can put it. The reality is a lot of uncertainty over the dollar. Stuff why mess with that when other things have a higher probability of success. Do you see the dollar going lower or stabilizing . Vassili i think we have another side of the equation. The bank of japan continuing policy. Not a lot of good news elsewhere. We may be talking slightly weaker. Click that assumes they do not hike. Do you buy the whole conversation to keep the dollar lower, relieve the pressure in the u. N. , do you believe that . Lets not really. You can see in some of the central bank moves, it has limited effect. Yes, but i think it is far from any kind of accord. It is more comforting. The idea that they are managing the situation for investors, the warm embrace of central bank. Sitting in a room and signing something in the paper to get the fact that if the Dollar Strengthens a lot, it will be there areblematic ways to send the message and the message has been sent. The other hot topic has to with buybacks. We have a great chart that looks of the blackout for buybacks, right before earnings. What happens if equity slows and the s p. The last blackout was quite severe. Lot. P falls quite a have always been a oneforone. It has not always been oneforone. What do you think happens . The guys that are more bearish on s p in particular, i think there will be another significantly down. The latter stages of the bull market have not been driven by investors. Corporate america has been buying shares. Picture, you will not have the provided liquidity. Evaluation, corporate default that people do not expect, terrorist attacks, you will not have the buffer. You will not have the liquidity. That will exacerbate the selloff. The next weeks look like it could be more turbulent than last week. Equities andout how to invest, you look at how he was doing it, is he doing it well, and now it is all about whether they buy back the stock or not. At a marketng literally determined by blackout . The short term, liquidity is an important factor. Quantitative easing, you are no longer boosting and thus you get paid for the risk. Technically you have to take that into consideration. What happens of corporate profitability falls . It ought that is again for multiples them in then where they are today. We have a stock market that will lose a buyer of the next couple of weeks. We will see a safe haven into the end and into the dollar and what about the euro . I think the euro should do fine. The largest surplus currency would be 10. It has not been performing as not be thet would currency that would sell in the environment. Block has had a tremendous rally in the past month. Some of the domestic Central Banks are starting to get worried about the currencies. If correct in terms of Downside Risk, thank you very much for joining. Funds. , hedge the trade is racing potentially for more turbulence. The story is next. We are 11 minutes into the session. The stock is flat. Matt i am matt miller. Later, what you miss with alix steel at 4 00 p. M. Eastern. Alix Internet Radio Service Pandora media says the ceo is leaving the country and a founder is turning it over to the chief executive. Pandora is working with Morgan Stanley to reach out to potential buyers. Quadrupling sales to almost 4 billion by 2020. The bidding war for star board hotels is not over. A revised takeover. The new offer is valued at 14 billion. Aarwood accepted billiondollar takeover bid from marriott. Lawmakers reached a tentative deal from 10 to 15 an hour. The l. A. Times said the men would not reach 15 until 2022. It sounds great until you are 2022. It is progress. Just as foreign Central Banks finance ministry, pulling back. Lisa abramowicz joins us to explain. Column on theer bloomberg terminal. Good morning. Hedge funds into treasuries. We talked about the liquidity premium. What is the driver now for these hedge funds . Overnightrs in japan about how 70 of the japanese bond market now carries negative yields. It is no wonder if you have got investors come into treasuries though you have central bankers eliminating assess to support their currencies. It makes sense why people are still seeing value in u. S. Treasuries. My colleagues wrote the story talking about how one measure that typically uses a proxy has dollars, the train most ever on record for the group. Still a lot of questions here. You could negative as if they would exacerbate volatility. Is that the risk . That is one argument. Hedge funds typically use more leverage, which create more magnified in both directions. We are seeing impressive volatility. This is goes to show the the spike we have seen in last few months. There is a difference between and tradingtrading on specific bits of news that come out on a daily basis and positioning toward Slower Growth in piling into u. S. Treasuries because they are relatively cheap compared with japan and europe. That is not clear to me. Hard to imagine hedge funds have piled in to such a big degree. From a tactical perspective that theyre getting out quickly. That would be the key point. Most of the buying has come from traders. Has been a powerful trend going on. In some cases for 30 years. Most of the buying from our perspective has come from systematic managers looking to as opposed to people saying we love treasuries at 1. 95, we think youre going to one. To ask youion i want about is, i do not get a yield but there is no such thing as a negative i can make money if i take the view that the yield will go deeper into negative territory. Whoyou one of the people trade there even with these levels . Classic gets back to your views on momentum and what the future. Olicy actions are why you would buy any asset that yields negative when you could buy u. S. Assets that have high digit is beyond us. Every time i look at the chart, he looks more and more phenomenal. A potential boon for Foreign Investors going into japan with dollars lending the next leap profit from negative yield assets even though they have negative yields. The former telephone monopoly, telephone is expanding its reach in north america. Of the company is acquiring dell systems for about 3 billion. Ed is here with the details. Why now . Ed a pretty broad sweep, 10 million is roughly the target. Of the to pay down some debt there. Sisi 7 billion deal. They announced that late last year. Telegraphart of a pre process by dell to raise money. Jonathan we have talked a few times about Chinese Companies piggybacking off the back of. Ome Companies Look at japan. Is it similar or different . It is similar but it is not to come in and bust up deals. They have relatively slow growth at home. Also, there is a similarity in that they are coming quietly. Similar to the chinese, they have got confidence from what is going on. They have seen the deals are priced more fairly, stability in the market and that has given them a in the conventions at this point. Ed m a has no or to go but down from last year. What drives m a, you need a strategic transaction. They exhaust themselves at some point. You need financing. Debt markets are tight substantially. Cash balances are high but not what they were. Going tot saying m as collapse. In the interesting phenomenon now, we talk about crossborder flow speed one of the strategies chinese bears. 2 is theyre trying to move the money overseas. That is why you have the chinese acquisitions, whether in europe or the u. S. , and part of the motivation is having a hedge to their arm the exposure. Part of it is grabbing good aspects. M a overall is training down as it always does. Years ate two to three her every 10. Credit spreads wide and credit becomes tight and the better opportunities are in the debt part of the capital structure, where we think we are today. We did not go from one billion to 500. Coming up at the top of the hour, Bloomberg Markets with betty liu and vonnie quinn are what if you got coming up . On the serious stuff, we are talking about the markets. Jonathan is joining us and he says look for growth, secular and also stable growth. Talking commercial real estate with the head of l. A. Is a hotays commercial market. Batman versus superman, did you see it this weekend . A box office hit. Back to you. I have a todds her and i do not see movies anymore. Ahead in theok week i what investors should be watching. Jonathan lets get you up to speed on where equities are trading this morning. About 1 10 ofup 1 . Very quickly, i will get you up to speed on what is happening. A sevenday winning streak, 1 10 of 1 . Euro strength at last after six days of decline. Some data out of the u. S. This morning. Consumer spending is rising in february at zero. 1 . Treasuries are little lower. Going forward in the week, what a week. Alix it is a huge week. Is speaking at the Economic Club of new york tomorrow on thursday, the and that survey is amazing, a forwardlooking indication of a small, medium, and Large Businesses and what they are feeling and friday is jobs friday. That feel me or does a little less important because its the fed does not seem to theyt much anymore just care about the dollar in Global Markets. Based on the recent data that happened in inflation, they should have height. My view on this particular argument is no one would stand that sisleys ago. This feels different. Especially when you get a reading of 1. 7 year on year. Of where we were expecting. Where is all the inflation . See much ofu do not it in the treasury market. That does it for bloomberg. A countdown to janet yellen and a special thanks to alix steel. It is 10 00 a. M. In new york, to clock p. M. In london. I am betty liu. Vonnie and i am vonnie quinn. This is Bloomberg Markets on bloomberg television. Betty we will take you from new york to detroit in the next hour. Heres what were watching, 30 minutes away into the trading session after the long easter break in new york. Stocks are fluctuating after the s p dropped last week. Investors are watching Economic Data for clues on the course for Interest Rates. Then, commercial Real Estate Market and how it could be affected by potential rate hikes from the fed this year. The changes from pandora after the company severed a decline in users. The cofounder is named the ceo more than a decade after he last ran. The world passes Largest Online radio service. Ea