Transcripts For BLOOMBERG Bloomberg Go 20160503

Markets. Futures a little bit softer. 500 futures 16. In europe it was all about the banks. Syncing over 60 in the First Quarter. Switch up the board very quickly. The aussie dollar thats the headline thinking by 1. 4 . The rba surprises with a rate cut. Renewed dollar weakness. Bit. Me back just a little in a commodity market, very much risk down by 1. 2 1 . Some crude related earnings as well. Matt just going through halliburton, seeing the loss widen. Four cents. S was it reported firstquarter revenue of 4. 2 billion. Unchanged in the premarket. To 2. 4s really widened billion dollars from a loss of 643 million in the same quarter last year. Pfizer reported firstquarter earnings that blew away analyst expectations on stronger sales on products such as a Breast Cancer drug. Earnings of . 67 and we were looking for . 55. Raising its fullyear outlook. Earningssee aig mr. Expectations missed earnings expectations. Mylan up on generic drugs. Starwood also beating estimates in the premarket. David einhorn saying his shortt capital is the commodities play, along the i. T. Play. And apple down yesterday. Its eighth day in a row with a loss on the stock market. Thats the longest streak of losses since 1998. If it finishes in the red today it will be the longest streak since 1991. It was about . 10 away from cutting that losing streak yesterday. It will be a story throughout the morning. The big story in europe is ubs. Banks have been struggling due to market volatility and tighter regulation. Ceo onnson spoke to the what he thinks is affecting the banking system. If i look at the kind of Market Conditions we have been operating at, those results are resilient. Profitability in those kinds of environments is not easy. Most importantly we have been doing that while keeping the and the possibility in a more normalized environment to deliver stronger results. Considering the environment i am pleased to see how we operated. Warned intty much march that things were going to be tough. I think i was pretty clear about the environment back then. I think it is our responsibility to highlight the Market Conditions we have been operating and our results reflect that. Client transaction volumes the lowest recorded ever for q1. Clients are terrified right now. How is that going to change in a hurry . We definitely entered into New Territory in the First Quarter. The last three to four years, you would have served weeks or months of strong Market Conditions. Some kind of positive pickups. The First Quarter was an environment that had only one constant. From the firstn to the end of the corridor. Is it going to be like last year but in reverse . Last year started off brilliant and got horrible. This year started off horrible. I hope so. It looks like we are still in a. Ery challenging environment of macroeconomic issues and geopolitical issues are now coming on. We have to see soon about brexit. Deescalation coming from the u. S. Elections. Potentially a lot of factors that may affect market sentiment. In that sense you see volatility but its not the kind that is translating to client activity. It is paralyzing volatility. Jonathan that was the ubs ceo. Talking with guy johnson. It is getting hammered even more, off by a. 6 . Money good, but the first worst First Quarter for transaction volume on record for them. This is the reason the is. K is down as much as it we knew these numbers were going to be horrible because he was at the Morgan Stanley conference in march and he told us they were going to be horrible. He is not saying things are going to get better from here. Look at his body language. Listen to the way he is saying things. It is still incredibly tough out there. The sense for q2 is that it is not going to look any prettier. The cost income ratio rising to 85. 7 in the First Quarter. That is up from last year and dangerously close to the crisis levels. He needs to bring it down to below 70 . Cost cutting is job number one. You cant control the markets or do anything about the brexit. He has to deal of the cost story. Hes pretty comfortable with where this bank is strategically. They made the switch. In many ways that has worked out. Now he has to figure out what hes going to do tactically. There are rumors swirling around about which job is going to go where. You are absolutely right. Where does the costcutting go and where does it fall . David were also joined by felix zulauf. We have been hearing quite a bit from the european banks. They are going through a tough time. This is part of a series. In the united states, we cant really grow our economy without the banks being healthy. Is this true in europe as well . Absolutely. Even more so. The loans are 80 of the financing of the corporate sector whereas it is only 20 in the u. S. You have much more securitization. The european banks are highly regulated. They cannot go back to earning the returns on equity that they used to in the past. Its a completely new ballgame. Jonathan its a global story. Season was ugly u. S. , ugly europe. The top five banks trading revenue down over 20 . Thats the u. S. Thats not europe. Is that going to change . In stock markets and commodity markets, i think that is going to help on the income side. You will see some improvement in the second quarter. That youieve have to own for the medium and longerterm. Guy johnson, for credit squeeze. Credit suisse. They wanted to look more like ubs. Does it look even harder to you . It does look really hard. If you are heavy into the Investment Banking story life is going to be fairly difficult. He saw that very clearly with Deutsche Bank you saw that very clearly with Deutsche Bank. All thet of idea from other guys about how they see things shaping up. Life is tough. Jonathan stocks down by over 8 . Guy johnson in zurich. , the moves in the market stunning. The aussie dollar taking a tumble after the Central Bank Cut Interest Rates to a record low. A move aimed to counter disinflation. Richard jones joins us from london. Everybody started thinking, Glenn Stevens pulled the trigger. Is there more to come . I think there is. Statement,the rba they said inflation will probably remain to low Going Forward too low Going Forward. Cut as early as july or august. Its very much in the cards. Of odds. Ree in terms we should not be surprised if we see the rba act again in the summer. Megan lets talk about the growth of australia. Where are we in terms of where they are Going Forward . Well we see this headwind in commodities and mining . Interesting part of the rba statement for me was that like the imf and the world , the rba is looking at a Global Growth picture that is slower than expected and being revised lower. That presents pretty serious challenges for australia. When the mas said that last month in singapore, theres another economy very much dealing with global headwinds and they are at the mercy of what the Global Trading markets are doing right now. Global growth is maybe not as buoyant and strong as we thought even a few months ago. Matt showing currency moves. This is a fiveday picture of the u. S. Dollar against the g 10 currencies. Is can see the aussie dollar the only one that underperforms the greenback. But theknow about you, story really isnt in australia. Its the amazing moves of the yen and the euro. This divergence still cant stop a dollar drop and yen strengthens still blows me away. Jonathan we were sold a story that there would be divergence. The fed has completely backed away from that. Look at the renewed dollar we is. Weakness. Equally so for draghi . Absolutely. Japan and the eurozone tried to weaken their currencies and they have done everything possible. It backfired. They have a strong currency. Both currencies are structurally running large current account surpluses. So they are by definition strong currencies. And you can only make them have important events politically and economically that are negative for the region or you have a conviction among International Investors that that currency is for whatever reason unattractive and capital flows out. Japan started the whole currency game. Yen started to weaken the and that was a dedicated policy. The economics plan. Its unbelievable that they have backstepped. Disappointing on all fronts. The currency is strengthening back to almost 100. Jonathan you are going to stick with us. Richard jones, thank you for joining us. What a busy session tuesday is turning out to be. Lets cross over to matt miller. Matt a lot of news. May be on the verge of delivering a knockout blow in todays indiana primary. Him with a 15ws point lead over ted cruz. Ted cruz has indicated he will keep campaigning to keep trying from winning the nomination. Bernie clinton and sanders are in a tight race. Clinton has 90 of the delegates she needs to become the nominee. Elipe hasing fole called for elections. The prime ministers first term ended in electoral deadlock. Mosts parliament is the fragmented it has been in history and it has not been able to agree on a coalition government. In turkeys parliament, emotions got a little out of control. Lawmakers fought each other over a controversial plan to strip them from immunity over prosecution that could pave the way for prokurdish legislators to be tried on terror related charges. Water bottles were thrown and so were a few punches. Megan coming up, the latest data coming out of china sending the markets some mixed signals. That is next. David this is bloomberg go. Im david westin. Some data out of china has been sort of mixed about how factories are doing. Onhad the official numbers sunday. Lets get another look. Felix zulauf is joining us. You had a note out just last week. You are bearish on china. Why are you so concerned . Excessa is the biggest in terms of investment and credit. Its a big bubble and it will eventually burst. They are trying all sorts of tweaks to carry on the bubble and make it even worse over time. Timing whenion of the bubble will burst and that will have implications on the currency. The currency will weaken and then its the biggest exporter in the world with a weakening so. Ency of lets say 20 or thats going to hit the World Economy because Pricing Power will disappear and product prices will decline wherever china is involved. That goes to the price margins and profits throughout the corporate world. David some say this is a very large economies that has grown rapidly and they are just making this transition from. Anufacturing to services uni they are trying to make the transition. It is not working. There is a big battle between the reformers that want to make the transition happened and the traditionalists in the promise an provinces. They increased capacity and the investment in real estate. There was more than plenty of that already. I think the interesting news coming out of china is there introducing a value added tax. Some provinces have that. They are doing it nationwide and they are taking fiscal power away from the provinces and moving it to the center. That tells you the reformers are probably going to win that battle. The fiscal impulse we have been seeing in recent months on the investment side construction etc. Is going to thinkear and thats why i this run in china will probably fade in the second half. Seen moves by regulators to force banks to be more honest about some of the loans they are carrying on their books. How concerned should we be about the Banking Sector in general and the growing shadow banking issue . Marketa is not the Free Democratic system. Most of the key banks are owned by the government or controlled by the government. So it looks pretty bad out there. Will the government the money to carry through. Down after this interlude we are seeing for the next few months. It will slow down and the currency walls will be opened and hitd it will weaken the World Economy. Jonathan the mechanism for that slowdown will come through the fx channel and not credit . Absolutely. The very wealthy chinese never had to go outside. They had an economic boom internally. Real estate, stock market. They never had to diversify internationally. Abouted to other markets 25 of the assets are outside, that is minor in china. You saw that in the First Quarter almost 100 billion tookg out because they over other companies. Investing outside of china. That game was stopped by the government when the starwood deal fell through. That was canceled by the chinese and that was government intervention. They were afraid that currency would get out of control. David thank you, felix zulauf. , google,ming up, fiat and Driverless Cars. Lets make a deal. Thats next. David Fiat Chrysler expected to come out with sales within the hour. It is also expected to make a deal with google in order to develop self driving minivans. Pacifica is aler fairly popular minivan. The Company Wants to make it self driving with google. You can see out so that down in the free market. We also have clorox shares moving. A ton of earnings back out today. Jonathan coming up, Warren Buffett has one piece of advice, the most important investment lesson in the world, next. Jonathan this is bloomberg go. By over deep in the red 1 . Do you like that, tom keene . We will break down the markets in just a moment. Lets can check of the headlines with matt miller. Matt the European Commission has cut its inflation forecast and warned of slower than predict growth. In gdp in the eurozone will increase by one point x percent this year, a full 1 below februarys forecast. That Helicopter Crash in norway is raising questions about whether Oil Industry Cost cuts are a threat to hd. Last weeks crash killed three people. Callss biggest oil union the action a wakeup call. It was the first fatal accident in norways oil industry since 1997. European companies are rushing to iran now that sanctions have been lifted but they are doing it without their favorite bank. They are unwilling to go near iran related business because of the remaining u. S. Sanctions on the country that has opened the door for chinese banks to get in. Jonathan some days you get into work and pay attention. Today its one of those days. Lets check on the equity markets globally. Red on down, deep in the the dax. The real story from the is fixed income and fx. Crept to a yeartodate high. Yields come again on treasuries by six basis points. Tom keene joins us from Bloomberg Radio. There are certain days where you pay attention. Almost standard deviation move in euro. Stages. T the brutal this is the Second Derivative day. Its about acceleration in vectors and trends. This is something that janet yellen cannot ignore. It is unthinkable that she could ignore the kind of shifts we are seeing. Jonathan in some ways, she is the catalyst for the weaker dollar. Great for china, some stability on their currency. Terrible for japan. Australia needs a weaker dollar we dont see that now. The Australian Dollar is challenged to say the least. Jonathan i would ask whether dollar yen is the canary in the fx mine. How much of that is dollar weakness . Tom i would take the cliche to the canary in the iron ore mines. You see that with the shock and off of what australia did today and the effects which makes this a very important day in the bond market for the whole year. Jonathan growth is picking up. Itsf it was picking up australia, the aussie dollar. If they are cutting rates you have to pay attention. How many guests have sat in front of us and talked about Monetary Policy . Where is it . Everyone else is pushing against the string. Tom it goes back to what you saw with the eu headlines today on reduced inflation combined with reduced real. That means growth plus inflation. When they both come down together that is clearly a reduced animal spirit and maybe thats the next step for the summer. Tom keene has to go back to Bloomberg Radio. Thank you for your time. An important moment in markets globally. Megan hedge funds under pressure. Last week dan loeb started of of high investors high fees and poor performance. There is no doubt we are in the first innings of a washout hedge funds. Joining us now is bobby fabio salvadelli. Lets talk. Why should anybody be paying two and 20 right now . We need the money. Many cases he in is completely right. There is too much following on. For a hedge fund trade the first things written in the bible were, it has to have some economic line, you have to have ariedy opinion v opinion, and some form of an edge. Is what isopinion falling apart. You are looking at stock positions there was an Oncology Company which had 48 different hedge funds at the same time. Suddenly 48 analysts are experts on oncology issues . Look at things that got people hurt. The pfizer and valeant deals. I think what was lacking was really good ideas, good talent and liquidity. It ishings go bad particularly ugly for Equity Investors stuck in the same names. David one explanation is its a crowded train. Is there another explanation . When you take down the yield it gets really hard to justify that compensation system. 4 a 4 orit a 5 yield, you have to get even. If you are long g. M. And short ford in the have the olden days in the happy olden days, you still made the 10 cash which you charged 20 of the performance on. Now the managers are quite cruel. Not getting 20 on any deposit amount. If you are long and short and had a cash balance, setting aside the short rebate, you actually ended up with a positive cash balance. In that respect it was better mechanically. Low ittes are this drives people into doing silly things. Things that are very only marginally profitable. Megan lets hear what chris had to say about fees. One of our Board Members said reducing fees is the best return on capital. We focus very much on costs in every single asked that. Aspect. Where does this go . Is there going to be competition on feeds . How does the market response . And more people are going to be looking at what are performing. They will look at there are now etfs out that track hedge funds biggest ideas. If you are starting to correlate to that, youve got a lot of problems. Ou are expensive beta is doing it. That research is good enough for me. That worked for a lot of coattail investors. Its not so easy to do. Down is coming aggressively. The 20 more people are holding onto. Investors are happy to pay that but they are not so happy for two and 20 for just showing up. Megan lets talk about talent. Is the industry really attacking attracting the kind of toptier talent . Kinkosretty much go to and get a Business Card with Hedge Fund Manager under your name and your kind of able to do that in a way that 50 years ago or 20 years ago the bar was set very high. Look at the characteristics of the older guys. Look at carl icahn. A year ago i love apple. Its a twice in a century stock. I would never leave this. When it goes down, i buy more. He calls up tim cook and says, by the way, i fired you. Carl. Met he does what he does and the number of investors who actually have the willingness to go against the grain, its very challenging. I have known some of the managers. The truth is that the best ones really do think outside the box. Wall street creates a lot of cookiecutters. It is so much easier to follow everybody else and say, im in valeant. Great start. Love it. Me and the boys are all in it. The guys who get out are like carl icahn. Its not just talent but also a character question. Megan a lot of people think the big short is the real deal. David we have been talking about what carl icahn thinks about apple. We will talk about what he thinks about aig. Aig posted a Third Straight loss yesterday. Thats coming up next on bloomberg go. Matt this is bloomberg go. Coming up in the next hour, gregory nassour. This is bloomberg go. Im Jonathan Ferro. Bp has thrown in the towel in the fight over the 2010 oil spill. Almost 1 billion in damages to fishermen and Seafood Processors it said did not exist. Lawyers for the seafood industry , claimed bp, fraudulently inflated the number of claims. In new been investing Technology Like a self driving electric cars. The Company Hopes it could replace its flagship model. Hugo boss promises to close stores that cannot make a profit. Hugo boss is struggling with lackluster demand in asia and discounting in the u. S. aig shares are down. Seeing its biggest loss in hedge funds. Sure knowledgeis ss li billionave about 810 they have about a 10 billion hedge fund portfolio. Is they haveut aig said they are going to cut their holdings by half. David the hedge fund holdings. Specifically. That has been contributing to so much volatility. Some of the underlying result, the combined ratio which is the underwriting profit the activists have really asked for. We have a representative from carl icahn and mr. Paulson going to the board. They will not be commenting on these earnings. Do you expect big changes because of them going on the board . They cant agitate for Management Changes until at least august which is not that far away. Are we going to be able to see him turn around results the way they want to before that time . Megan is this leading to paralysis in terms of strategically what they are doing exacerbating losses and allowing them to shift nimbly to respond to Market Conditions . Exiting dozens of countries. They are shrinking their overall portfolio. We are used to thinking of aig as this behemoth and its not going to be that way anymore. David they are putting this warchest together to give money back to shareholders. China was very strategic to them. They will maintain a strategic interest that they did sell a lot of that. The chinese stock market has been going down. Its an easy asset to sell. They put it in a portfolio things theyre going to get rid of. . Egan how many job cuts a lot. They have been reducing their operating sufficiently. They are cutting hundreds of jobs in new york and the u. K. It is really helping. They are cutting a lot of the most highly paid people in the room. Megan always a quick way to cut. David thanks for some knowledge to sonali basak. Me dol next. Off the charts is carmakers are expected to post big gains for april. Heres matt miller with more. I am putting the finishing touches on the chart thats going to show us auto sales have risen at an incredible pace. White total u. S. Auto sales. We have had this rollover at the end. 18 million is what we were looking at at the end of last year. The forecast is for this to increase pretty substantially from 16. 6 million to 17. 5 million. Not only from Industry Analysts but the president of general 17. 5s says he expects million sales. We are expecting a jump. Its not going to help carmakers shells. This is forward and ford and General Motors. We have been much higher in the past. To 18f we get a gain back million, these are not going to recover that much. There is one way for a carmaker to really boost a pe. Megan raise prices. Matt i have a chart that shows compared torgins other carmakers and luxury good makers. Pe ratio in red. That is four times what you see and General Motors. At General Motors. Most people consider it a luxury vehicle. In orange i have put a luxury goods maker whose color is orange. Megan louis vuitton. Matt hermes. So close. Here in purple i have put tesla. This is what is amazing to me. Fabio savoldelli is going to go have lunch with elon musk. It is an absolute luxury goods maker. More people think of it as a luxury than a car. Megan we will go over to david now. Reportednry schein earnings this morning. They were up across the board. Revenue net income across the board. Stock is up about 8 . Ceo stanley and bergman joins us now. Explain to our audience exactly what your business is. You provide product to the health care industry. Were the largest provider to veterinarians, dentists, and physicians outside of the hospital. To office space practitioners. Andt one million customers practitioners throughout the world. David explain why selling directly to doctors and offices rather than to hospitals or pharmacies why is that better . We are actually in the business of helping office space practitioners operate a more efficient practice so they can provide better clinical care. Thats our focus. We have unique logistics and services all the way from software to Practice Management advice. How to operate the practiced and provide great clinical care. David isnt it much more laborintensive . Of course it is more laborintensive and that is why the company is actually quite profitable. Than perhapstable some of the distributors that sell to the broader audience. We provide very unique services for the office space practitioners that helps the public receive quality care. Of 7. 5 ou have a goal margins. Are you on track . We expect that our margins will continue to grow as they have over the years. Both are sales and gross profits and operating margins. David theres overall pressure on price in the health care industry. Are you feeling that . There is pressure on pricing. There is also huge opportunity to increase the efficiency of what we do and provide Greater Services with higher margin. David you have grown your company through acquisitions. Modest acquisitions. Do you expect that further in 2016 . The markets that we serve are huge in terms of opportunity. Its a growing part of the economy. The middle class is going throughout the world. The middle class once dental services wants dental service and veterinary products. David are you protected from the price picture pressure because a significant part of your business is dental and veterinary. They opportunity for providing highvalue services is also there. The physicians are seeking Certain Services that we uniquely provide and that will help with our margins. We also have to accommodate the needs of price pressure. David you also provide software. How does that fit with your core business . The whole idea is to help the practitioner operate a more efficient practice and what better tool than software . We are the largest provider of dental software and veterinary software. David thank you, stanley bergman, ceo of henry schein. Jonathan coming up, a warning for the Banking Industry. Paralyzing volatility will continue to weigh on the worlds banks across europe and beyond. Make sure to tune in for an important conversation with the San Francisco fed president John Williams. Jonathan ubs profits plunge and the stock drops. The ceo tells bloomberg paralyzing relativity is waiting on client activity. Megan the dollar falls to its weakest level in almost a year while the yen and euro surge. David Warren Buffett slams Hedge Fund Managers for poor performance and high fees. David welcome to the second hour of bloomberg go. Im david westin with Jonathan Ferro and megan murphy. Megan there a new bond king in town. Regory nassour we speak to him in this hour. Jonathan looking forward to that conversation. Futures softer here in the u. S. S p 500 futures down. In europe you see the losses piling up. Stronger euro not helping. The strongest so far this year. Aussie dollar taking the headlines with the rba and an unexpected rate cut down to alltime lows. Off by 1. 4 . Record low rates. Thats the story a lot of people have in common. Here in the u. S. Treasury yields come in six basis points. Matt a lot of company stories out. Earnings wrapping up the season. Aig disappointing, posting a Third Straight unprofitable quarter on losses from hedge funds. Stock is down 3 in the premarket. We have pfizer beating estimates on strong sales from drugs. The innovative Drug Division could become its own separate company if managers decide to break up the business. 67 over 55. Still,rofits slipped but adjusted profit came in above estimates. A drugwill spin off business into a new publicly traded company. Of these Health Care Companies rising today. The biggest is apple at a threemonth low. Down for eight straight sessions. Thats the longest slew of losses since 1998. It is indicated to open slightly lower. Call this would unchanged. Its only. 01 . Now it is unchanged. Here is the deal. It will be the longest slew of losses since 1991 if it is down today. Jonathan from the open straight into the close. Thank you very much. A 64 drop in firstquarter profit, missing analyst estimates. Shares fell as low Interest Rates hit sales and trading. Size surprise increase. Listen. We had a very difficult firstquarter like almost all of our peers. Negative legislative environment. Nevertheless we have a Strong Capital ratio. Low risk profile. I think the Market Reaction will be solid. You see a lot of factors that may affect market sentiment. In that sense you see volatility but its not the kind of volatility translating to client activity. It is paralyzing. We saw lower client because they were concerned with our clients about the Global Growth. There were concerns about regulatory treatment of subordinate there were uncertainties about Monetary Policy. Biggest some of the names in european banking speaking to bloomberg today. John bellows is with us and Michael Moore joins us from london. Int i see across the board the u. S. And europe is a confidence problem. Clients paralyzing volatility. That volatility dissipates in a month to come. Whats your view . I think that confidence question is a big one. A lot of the banking leaders not just talking about the first moreer but seeming negative on the outlook. I think thats playing into investor fears. If activity doesnt pickup from these levels its going to be a tough year. When we see people talking about record low transaction volumes like at ubs this morning, where is the pathway forward to bring this back up . We not seeing the outlook across europe to change this dynamic in the near future. Its important to distinguish the First Quarter from what we are seeing Going Forward. The first six weeks of the years worth traumatic six weeks of the year were traumatic for investors. Low Interest Rates will be with us for a while. Growth we will be facing for a while. The first six weeks of the year will dissipate, but lower Interest Rates and slow Global Growth are longterm headwinds. Ubs has been thought of as having the strategic model and pacing outpacing rivals. Even these banks are working so investmenttion banks hit so hard recently. Is there concerned that perhaps strategically changes still need to come . I think thats right. The headwinds that i mentioned, lower growth and low Interest Rates, will affect everybody. There is no Business Model that can hide from those effects. Thats kind of vapors of basic pervasive feature. John sayshael moore, the First Quarter was particularly difficult. What sort of guidance Going Forward does ubs give . Do we have any reason to believe it is going to get better for them . A lot of the banks have talked about january and february being particularly , but they havent been very optimistic about the year Going Forward. Maybe not the type of wild swings we saw early on. The activity in april was not terrific. I dont think theres a lot of optimism there. We are seeing that volatility doesnt just affect trading. Has been seenent as a much more stable business but its also pretty cyclical and tied to the market. Jonathan globally it was ugly. If i were to draw a distinction between the analyst calls from the ubs and the ones today, u. S. Banks saw stability in march. They were cautious about it. Carrying through to april. The guidance i have seen from the european banks is quite different. I smell more cost cuts. Do you . Yeah, i think you will definitely see that. A lot of them are only halfway through their costcutting plans. Ubs among them. I think you will continue to see those plans come through that you will also see more pressure from investors to go beyond those initial plans if the markets dont pick up. A lot of the sentiment weve hasd orbital last few weeks been, those plans were great for the environment we had at the time. If that is significantly worse you need to readjust. Megan how much further than can they cut . We have seen massive job losses. How much further pain can they withstand . The point about the divergence between the u. S. And european Banking Systems they are in very different places. The u. S. Did a lot of the hard work coming out of the crisis. They raised capital, transformed their business lines and today theyre in a much more stable situation. The european system is still going through that transition. I think the european system does need to think about capital and business lines and strategy Going Forward. The u. S. Has already done that transition and i think that is responsible for the stability john is mentioning. U. S. Came through one crisis and the european banks went through another. A lot of people gloss over the fact that the european banks went through two crises in a matter of years. Matt im wondering how much you can lump them all together. Then you have to pull out credit suisse. You can see the competitive peers the ubs doing fairly well. They have taken losses from the beginning of the year but not huge. Ubs is outperforming them slightly. Credit suisse is the biggest loser here. Is it an outlier . David thats for john i think. Theres a lot of interesting syncretic features of banks like this. I would not want to draw conclusions from three months of trading. Go back to what is facing the Swiss Banking system. Low Interest Rates. Negative in switzerland. Also low growth. I would not drum which draw much in terms of one performance versus the other. Jonathan this is not the time to have a turnaround story. Trying tosse is implement a turnaround story at a pretty horrible time. Bloombergs Michael Moore in london. John bellows, portfolio manager. Inc. You very much. Matt miller. Thank you. Matt miller. Matt this may be ted cruzs last stand. A loss today could make donald trump all but unstoppable. A defeat could rekindle the chance of a contested convention in july. A recent poll shows trump with a 15 point lead in indiana. Hillary clinton and Bernie Sanders are in a tight race. But clinton has 90 of the delegates she needs to become the nominee. A u. S. Soldier has been killed by Islamic State forces in iraq. The u. S. Military says the american was advising kurdish troops when Islamic State forces penetrated the frontline and opened fire. Legislating turns into a fist fight in turkeys parliament. Lawmakers fought each other over a controversial plan to strip them of immunity from prosecution. That could pave the way for turkey to put prokurdish lawyers on trial for terrorism related charges. Megan after their deal was called off, one analyst tells us whats ahead for two of the largest oil services. And baker hughes is up next. Matt this is your business flash news update. Fiat chrysler has reached an agreement with google on self driving cars. The deal could be signed as early as today. Thele has developed software and vehicle control capabilities for Driverless Cars and has tested it for more than one million miles. German fashion retailer hugo boss promises to close stores that cannot make a profit. Hugo boss is struggling with lackluster luxury demand in asia and discounting in the u. S. Eropostale will file for bankruptcy protection this week. Sales have limited in the last three years. Thats your business flash. Im matt miller. Had theirliburton earnings reported today. They reported seven cents a share. With adjustments, its a loss. They walked away from their merger with baker hughes. Outlining its strategy in a conference call. , whong us is brad handler maintains a buy on halliburton and downgraded baker hughes to underperform. Just explain the halliburton numbers. The press release says seven cents a share. When you read down, its a very substantial loss. What is going on . Halliburton like many Oilfield Service companies that are taking an increasing hard look at their assetbase and determining whether asset impairments are appropriate, they took over 2 billion aftertax. They are reducing their headcount so there are severance charges buried in the numbers today. Halliburton there were other charges because they had treated certain cost associated with the merger they threw them below the line and they have to play catchup on that now that the merger is no longer proceeding. They took 3. 3 billion of pretax charges. David where did they put the 3. 5 billion breakup fee . That is not counted as a loss in the First Quarter. Im not sure thats going to be counted as a p l hit. Megan looking more generally, what is the future . Buybackhem do the stock and the breakup fee coming in. Are they still in play at all . Whats going to be the next move . Regroupburton needs to after throwing a lot of effort towards trying to combine. They need to say, we have been rationalizing costs trying to keep up with a devastatingly bad market. Now where are we . We think we are finding the bottom, at least in the united states. It will lead further down internationally over the course of the year. Comprisinging bottom the second really hard year of spending cuts in the upstream. Companies like halliburton are saying, lets take stock. Where to be rebuilt from here anticipating some recovery next year. Jonathan firstquarter revenue from halliburton was 4. 2 billion. Im going to ask you the question, is management in trouble . If you just lost 3. 5 billion on a deal you are certain was going to go through someone has to take a hit . I think its a very fair question. There was a lot of confidence around what was a very challenging deal from the getgo. There will be a lot of picking at whether they approached it strategically as well as they could have in managing the process. It is a very difficult process to manage. And theseen the doj european get harder about acquisitions. Many mergers across industries have not gone through over the last 12 to 18 months. Your question is a very fair one and shareholders and the board will certainly be taking a look. It certainly proved to be very expensive mistake at the end of the day. David thats brad handler, managing editor of Oilfield Services research at jefferies. A baker hughes called today about their strategy on the merger. Jonathan shares are up for pfizer after posting a Quarterly Report that Beat Estimates. Where is the company after scrapping its buyout plan with allergan . We will discuss next. Fedn San Francisco president John Williams will be here on bloomberg at 2 00 p. M. Eastern. This is bloomberg go. Im megan murphy. Shares are rising after posting Quarterly Earnings that Beat Estimates. This is pfizers First Quarterly report since it walked away from its megamerger with allergan early last month. Cynthia koons joins us now. Lets talk about this. How much is this result going to put pressure on them to split out the division we have heard analysts talk about . You see in these numbers today is strong growth in the innovative business. There are some factors at play. Some extra selling days in the quarter. The established products business is pretty stagnant. There are additions coming into the business that make it look like its growing. Truly the growth is end innovative. In terms of the largescale deals, a split is probably inevitable at this point. Megan do you think pfizer management looks back and thinks they misplayed their hand in being so open about the need to invert giving the u. S. Governments clear signaling it would not let this deal go through . Its possible, but its hard the company could have made the point that it was all about the drugs. The tax argument. They want to push for tax reform. They would love for congress to take on tax reform but they are not getting that. You have used it to push the ball down the field. Think pfizer is as embarrassed by these things not working out as they think. I think they know that is the risk of doing business and trying to do these big deals. I dont think they ever could have gotten away with not being political. David this is a tale of the Innovative Products and the established products. They are very focused on margins. They have done very well in their margins is this a matter of breaking up the company . Thats probably whats going to happen Going Forward. The innovative business will probably include consumer vaccines, oncology. The established products will be the ones going off patent but still have strong selling and a consistent market. Do they split in three . I think the way they have been accounting has been two and i think that is a more realistic way to look at pfizer Going Forward. Jonathan i find this sector so difficult to keep up with. There is some money to move around now. Medivation what is it about that company . Its oncology. Its the Area Companies want to be in now. There is amazing Pricing Power in oncology. New drugs are coming out and they are not getting pushback from insurers and payers who pay for these drugs. 200 50,000 combination and they are getting almost full coverage for that. Its clear the market is there for that kind of thing. Megan thank you, cynthia koons. Jonathan hedge funds under attack. That is next. It always comes every single day on bloomberg. [ soft music ] e. T. Phone home. When you find something you love, you can never get enough of it. Change the way you experience tv with xfinity x1. Shoah, ha ha. Ew artist. Show me top male artist. My whole belieber fan group. Its not a competition, but if it was i won. Xfinity x1 lets you access the greatest library of Billboard Music awards moments, simply by using your voice. The Billboard Music awards, live sunday may 22nd, 8 5 pacific, only on abc. John in new york city, lets go check on the global markets. We are down by as much as 116 points. The s p futures are down 14 points. We are deep in the red for germany. Switch up the board very quickly. When i came into the office early this morning, dollar weakness was the thing. We are raising some of that. The eurodollar is high is 116. That weakness is changing as the hours ago one. It is down 1. 7 . Down to an alltime low, 25 basis points lower. Continue with the bond market. Going up seven basis points on the u. S. 10 year up to 1. 81 . Matt we have breaking auto sales. They said they are beating the street estimate. We are looking at sales up 5. 6 . That growth of 5. 6 . The reason is that this company sold a lot more gs. Jeep has long been one of the strong points for Fiat Chrysler. 12 from sales jumped the year earlier. Fiat chrysler said it is expecting april sales to be up for the industry number 17. 9 million on the seasonably adjusted average rate. That is big. Do you know how my months in a row they boost their sales . Six years of monthly gains. Yet was actually meant to help chrysler. Matt chrysler has helped fiat. Let me put it in perspective, how important are euro sales . Earlier, theid turnover is going to sale auto investors. We are expecting to see a big rebound this year or this month from the same one a year ago. If that does happen, it is business as usual. If it does not, that worry will be back in a five. Resident auto expert. Glad to have you on the team. Hedge funds are coming under attack from the financial worlds it is names. Steve cohen said he is blown away about the shortage of hedge funds. The Bloomberg Simone Foxman joins us now. Simone, these are the guys who have had a terrific amount of money. They having a go at . Some of these guys have made a lot of money. Know, to your point, youre talking tutors and talking about these power structures, for the last few years, theyve not had the same outside returns. That being said, i think this discussion comes up all the time. I will believe it when i see it. Conference,e milton he was talking about how he manages a ton of money. When the figures Retirement Funds in the world. Is this kind of talk we are really, is a different . Pressure on the two if not of the 20 . Simone these managers are having a harder time getting to 1 billion or 2 billion of managing that kind of money, if you have a big pension plan, you should have been negotiating fees for a long time. They are coming in with big tickets. That has been going on since the financial crisis. Heres what i want, i even only what this part of your strategy. I why separately managed account. They have these large Institutional Investors with a large pose for the last for years. Push. Funds have a hope of adding some contingency on the market. Traders, mayve day be is a virtual fund. They cannot do it with anything. If they charge too much, they ruin the idea. That was Erik Schatzker at the milton conference. If i getd involved as any these big names through any the year, it is my is my complaint now that actually everyone is creating a bad name for me. If the problem in this industry got two big . Simone i think that is part of the problem. There are so much competition over people doing the exact same thing. I think this time, what might be different is that the big names not deliveredave these outside returns that they were doing in the early 2000s, in the 90s. That is really where they made their name. They can claim a doubledigit annual all they want. When you look at the last five years for someone to give it i, youre seeing a much smaller return. The question becomes why is that . Is that just because of new competition . Talent . Thatbout is the thing. He is going below the way with the lack of talent on the industry. Simone their goal is to train the talent the whole way through. Some of the talent is not coming off the same bank dennis as it used to be. Some students are saying out of go to silicon valley. There is a huge demand for talent. Is maybe, my view people are not looking at the right way. Managersso may value you can have. Maybe, the edges somewhere else. And people are not seen it. John this story is not going away anytime soon. Matt no. I have more details on another store that is never going away. Oner rico is default thing its 422 million bond payment. The treasury secretarys Warning Congress morning of an increasing danger if congress does not help them out of this price. Securityanleys analyst said legislation will be passed. Jenna me now, michael, thank you for your time. Let me ask you yesterday what we saw yesterday with those dvd bonds. These be worth anything . I see them sitting at . 28. Michael the process that is about to be set out if Congress Passes the bill, which we think it will. It will probably take a long time. First, they have to establish the facts of puerto rico. Engage in the to consensual negotiation process. After that, in theory, they would have to restructure the federal court system. A verythat would take long time. It would be complex when we deal with issues of the u. S. Constitution in the puerto rican constitution. Fors really impressive federal governments themselves. At the same time, bondholders probably are not getting paid. They will not be able to change it, not be able to deal with that at the same time. Basically, it is still too early to be adding to disclosure now. John im guessing that this trade has already gone to the distress guys, and your average investor is no longer involved in this. Michael there are certainly plenty of average investors. Whoever, for the most part, the investors who are very active in trying to position himself for a solution deal with less traditional bond investors. Puerto rico has a valid perspective on what should happen. What is going on now is that there is not really a mechanism by which they can reconcile the differences of law. That is what congress does not have a choice. They will create some kind of workout mechanism which is what is being considered now, the bill for the Oversight Board in the House National resource committee. Again, we think that touches of a long process were the outcomes are unknown. Matt we are looking at 2 billion of debt by july. John pointed out you will not get a coupon. It wouldnt really save your investment. Is that the kind of thing you would go into with open eyes . Or, do you just have absolutely no idea what the outcome is . Michael yes, i think it is the latter one. Certainly, if congress does not pass the bill, you cannot totally change the idea that there might be a coupon payment. The endgame is more or less the same that puerto rico would take you up on their word that they do not have the near future planned. The consequences of that would be some kind of cycle of default with lawsuits trying to force a claim. That would create the same kind bylongterm unknown outcome which to press the investment. Congress go heads and passes this law, which we think they might two, it will be this week or next week, but, we will have the law that is very much like it. We have the process we talked about earlier which is unprecedented. Until we know more facts of how the Oversight Board and the federal court system would thempt to create treat bondholders relative to close a fiscal gap in puerto rico, there is not much to model in terms of the recovery value. Matt thank you. From Morgan Stanley security analyst, and Erik Schatzker is speaking with jack lew from the milton institute of global conference later today. He has a few more details trying to change them from the fascinating story. John another thing im looking they are hoping to expand 100 billion of mutual money. Go up for over 90 of the rivals. That is next on bloomberg, at 5 00 p. M. U. K. David solomon the head of Investment Banking. Megan Stephen Schwarzman will be live on bloomberg at 1 00. Matt this is your business flash. The First Quarter loss got bigger and halliburton. In total, customer their budget. They had charges related to that field. It was at 28 billion. The Justice Department filed suit to stop the transaction. It will be 3. 5 billion and break up fees. Bp is in a fight over the 2010 gulf of mexico oil spill. The company lost the battle to avoid paying 1 billion. Bp had said lawyers and the industry deflated the number of claims. Plan a big blow to apples to go after the price Conscious Consumers in india. Request rejected apples to sell cheaper refurbished iphones. Lead toid that would abuse of electronics. Plus, they said it would defeat the Governments Program to and of local manufacturing. That is your business flash. Back to you. Average, greg rina store is the cohead of vanguard investment groups. One of his funds is the 25 billion in immediate term. It has attracted 1. 65 billion in smart. That is more money than any actively run market. He joins us now from valley forge pennsylvania. Lets start by explaining to me a little bit about what your secrets are. How are you different from your rivals . Cracks first of all, there really is no secret sauce, were on a great team for portfolio management. Managers and of traders. We have a fantastic group of credit analysts who keep us out of trouble. David you run a fairly short highyield. We are different in terms of vanguard structure. We can run a diversified highquality portfolio without exley trying to always hit a home run. David talking little bit about that small expanse you are running. We talked about hedge funds. How is it that you are able to charge so little for your service . Are owned by the shareholders of the portfolio. Given this low yield environment, it becomes a much more important in terms of how to manage your bond portfolio. Did gregory, as you look out there now, what are you looking at as a real opportunity . We will say it is close to a fair value estimate. This year, we rallied a lot since the middle of february. We like to credit spreading here. We look at diversifying the portfolio. We like the commercial mortgagebacked security. It is another diversify her in the portfolio. We are also looking at some of the e. M. Sovereign credits, such as mexico, chili, malaysia. Have mr. Keithly from pimco. He said it is the most attractive bond in the world. He is not convinced they are fully valued. Attractiveey are when you look over in new york. A twontly, the u. S. Has point 5 yield advantage over what investors can get in europe. Has the average bond, it has low yields. The alternative is for the euro low yield market. We do think well have an attractive alternative for investors. Vanguard has 440 billion with the managed bond market. That, you to weigh in on as a lot of people look on the passive approach, actively manage products, they underperform. What is your opinion on that offersegory vanguard over 50 portfolios. 26 of them are active. Is plenty ofere room in the portfolio. The passive piece is a core part of the portfolio. Based onay it on top these individual tolerances of an active approach. As we said earlier, the active portfolios do very well. Especially when compared to longterm performance. That is what were really focused on. Carol on a turn to the fed for a second. As they continue to hold off raising rates, how will that change your strategy . Gregory we are looking at the market now. The market consensus is pricing that in now. Get some outside surprise coming in, which we do not anticipate, we think that the market will stay relative. We believe it will stay the course. Treasuriesthe through the market. So, we think it will convene. John quite obviously, the yield picks up on u. S. Credit. There is an advantage. There is a story. But, things are pretty tight. I wonder if that is happening too much . Gregory they underperformed on january 3 middle february. They hit a peak with nothing but a strong rally since that time. Think thes why we investor credit can begin a fair value, that is it because of the recent tight. David thank you for joining us today. John coming up, im looking at how to strengthen the japanese yen with a fulltime yield. It is me talking with matt miller. Dont miss it. David your hand god is here with betty liu at 10 00 p. M. Eastern time. Carol it is battle of the chart. Taken on matt miller. Water to kick things off first . John im looking forward to this. With is a big conundrum how to reconcile the strong japanese yen was an alltime lowyearold. That rateearn differentials matter. Behind that yield, the strongest currency should be shifting through the manger. How to explain what is happening in japan . This is the alltime low yield in japan. Youre looking for a nominal yield. The reason is that the fx market is a reasonable yield. That is especially for the u. S. Yield in japan, it has narrowed. So, to pick up the u. S. Versus japan has come down. You can see that, right here on the white line. As that spread narrows, the pickup, when you look at a real starts with a favorite the yen. That is where received a japanese yen. You can see the relationship quite clearly. The gap has spread for u. S. Versus japan. As the spread narrows, the dollar yen comes down. When you try to reconcile the alltime low yield with the is onlyapanese yen, it nominal. Matt that is a clear chart. I will tell viewers that at ecb 63, you might have a hard time understanding it. Hear something easy to had the s p 500 and blue, and the bloomberg dollar index in white. We have seen that a falling dollar has been boost in the commodity prices. I thought it was interesting and i saw that it has been boosting stock prices as well. The argument is pretty simple, if the dollar gets weaker, more Big Companies can make International Sales and use to those sales, and, the stock price will go up. What im worried about, and what many economists are worried about as well is that if the dollar continues to follow such , they volatility of the changing currency prices is going to spook investors and, they will worry more about the global economy. Carol is it a coincidence . Matt hillary wants us to stay in a mold. I struggle with that. David for me this is an earnings story. If the dollar goes down, he potential will go up. John you have to understand with the doj is up against. Theyre up against the feds and they are taken a step back to capitulate for the year. That is what is really driving things. The mission that the chairman for the bank of japan has been the yield. Carol im going with matt. I am also. Also. I am john, sorry, you voted against me. John i quit, i am out. Up, we learn why the needs to be a shift to fiscal policy. David u. S. Futures portray sharp loss. The dollar going to the lowest races 2013. Carol traffic plunge thanks to Wealth Management trading. It is paralyzing volatility. Vadim after a 28 billion deal unravels, we address the top halliburton strategy. Well bring you the headlines. David we are 30 minutes from the opening bell. This is bloomberg go with jonathan and megan. Offm i almost took the mic after that battle. I take it very personally. I had the superior chart. Well get the market check 30 minutes away. Futures are off a low. Dow futures are down 6 10 of 1 . Over in europe, their losses coming in a little bit as well and 1. 6 . They had a miss of some of the euros biggest banks. So, well switch up the board quickly. The dollar weakness early in the session, we are raising some of that as we approach the cash break in the u. S. Here, we will be taking all the headlines through the rate chart. Rates and australia are at an alltime low. By one point 8 . Speaking of 1. 8 , that is the yield on the 10 year. By seven basis points. Crude coming in a little bit as well and 4 10 of a 1 at 44 . 59. Matt there is a lot to come. We are continuing to watch gm auto sales. Trading down, is adding to the negative hedge fund after posting the Third Straight quarterly loss. Back 4. 1pull it billion with the Hedge Fund Manager. They are posting week results. Meanwhile, pfizer Beat Estimates of strong sales for the integrated Drug Division. It could become its own separate company as managers decide to break up the business. They also reported their profits later in the quarter. Just as profit came in higher than analysts projections, there is also planned for generic trust. A lot going on in health care. Hb eight raised its outlook. Shares are falling after the hospital operator changed provisions up 800 million. Tenant holding is growing the other way. Shares are rising after better firstquarter earnings sales. I am not sure how great that is. The market likes it. Apple had a threemonth low. Rising in the premarket. You can see from the green on the screen, it is the longest hadng streak they have since 1998. They lost 74 billion in market caps on last eight days. Just staring at that apple stock going through the close. Coming up, we count down to the market open. Is the chiefw Market Strategist at abe. Welcome. Today, well talk about dollar weakness, the profit drop and paralyzing volatility. The dollaregin with slide. It continues to green back through its weakest level. It is holding the seventh day against the euro. The longest losing streak since 2013. That is pushing gold higher since yesterday. One of the most important developments has been a shift in the dollar. Dollar weakness. The dollar has been the single most crowded trade. Everybody said it would go higher, now it is repositioning. Through the First Quarter, there is a recognition. , noworld is not as robust we are seeing a windup of the crowded trade. Apple could do well while negative correlated with the dollar. We have commodities, emerging markets, value stocks and risk. At this point, i would say the long dollar trade is almost completely unbound. I think Going Forward we will see much more of a trading rate. That we will is have a similar impact with some emerging markets. In terms of taking that forward, were talking about safety stocks. Do you think that fits into the picture . Is a great question. The cyclical stocks for the reasonably still valued. I do think that the catalyst to get another leg up will come in the form of the end of inventory correction. Perhaps, the declining inventory of oil. T will probably not here be here until the Third Quarter or fourth quarter. Things are seeing somewhat more defensive. David over the longterm, rates should respect the strength in the economy . In theu look at those u. S. Versus china, where should these currencies be going . Fx took price parity. There were adjustments for productivity. I think the dollar is very close to a fair value. It might actually be a little bit overvalued. So, from a perspective of longterm value, it is fairly neutral. Shares were falling after analyst missed estimates. My favorite quote of the morning, paralyzing volatility. Joining us now is lionel, are columnist for bloomberg blog. What do you take away from this mornings earnings . Lionel we have a lot to do with expectations. Is a darling that has been intersected and battled a lot, partly because of its execution with its previous strategy to cut cost. They thought the story was over, it might be beginning again, and it might be. This point, we talked about who has the toughest job in the european bank, a lot of the job that people wanted was for the Gold Standard of Wealth Management. Things get started that harder Going Forward . Lionel it is an economic issue come you cannot keep playing the economy for long. They are seennks, as a reliable dividend. They balance a lot of expectations that could be disappointed if they do not promise to deal with them all. Money that washe a big feed on what we saw going in. 13 billion in total. 13 billion in total. What should we read from that . Lionel it is too early to tell. Remember, in previous quarters, the management said they were holding back from attracting flows to protect the margin. It is too early to tell what that means for the future. Remember, a drop in assets will hit the fees as well. So, that has paid in the past. It is too early to tell if the Strong Quarter is enough to change the trends of the future. Megan as you look out across ubspean banking, we have with a lot of the same story. Ishope the lack of flow that killing their earnings. Where do we see a bright spot coming forward . The banking side has been heard by Capital Requirements of regulatory pressure. Management side was supposed to be the bright spot. The problem is twofold. Number one was the transaction value of volume because of uncertainty. We have had a massive unprecedented shift away from active management. We have moved to passive. It is hard to make money on that. On top of that, the government has become much more involved in containing fees for the consumer. So, the business is facing a lot of pressure. David Wealth Management sounds good, but, theres not much of a motor on that business. There are a lot of people out there with a in active etf that are happy to help you manage your money. Lionel with the advent of these technologies, you are seeing a commoditization within certain sect ors. That we will see a greater bifurcation in the business. Some very large players wholl participate in these local businesses, then, youll see smaller businesses that are capacity constraint did dealing with the alpha return of the segment. Thank you. We move on to number three. Shares of pfizer arising rising in the premarket after they Beat Estimates. They also raised their fullyear adjusted earnings. For more, lets go to cynthia attendance. Cynthia this was driven by the new vaccine from pfizer, giving additional pay since patients in the older population. That is part of what is driving that. They have a breastcancer drug. That is doing better than expectations. Those are the key Innovative Products driving the beat today. Those are the ones that investors are excited to see. Wean when we look down, talked about this potentially putting pressure on pfizer to look at the business to get more return out of it. What do you think they are positioning today . Spent 400t already million in assessing the split. The twoy will report companies separately. It is hard to see them not go through with this. Especially since they pushed up the timeline for a decision. Far haslanguage so indicated that this is the direction they are going. Is the first time they have participated in the market since that original deal did not work out. This whole thing seems very inevitable. David once the split happens, do the more Innovative Products look for a greater acquisition . Seenia one thing we have is that this business ands up under a lot of pressure to deliver a blockbuster. That is very tricky. They have one way to augment the pipeline and by part of the development. That is typical across pharma companies. They say part of the drug in the market is something they require. So, they have gotten that heritage. So, i think there will be a big player. M a needs deals to. David thank you very much. The chief Market Strategist will remain with us. Lets go to matt miller for the first word. Matt an american soldier has been killed by the Islamic State in iraq. Said themilitary american was advising kurdish troops. Islamic state forces penetrated the state line and opened fire. Ted cruz is running out of time to stop donald trump. If ted cruz loses today in indianas primary, trop would be all but unstoppable. On the other hand, he could reconvene the chance for a contested convention. As a threepoint lead. Hillary clinton and Bernie Sanders are a tight race in indiana. Clinton has 90 of the delegates she needs to clinch the nomination. , we may have to wait another week before he is convinced for second term as prime minister. His coalition was defeated in the february election. Last week, the two biggest parties reached an agreement paving the way for a minority government. News, 24 hours per day powered by our 2100 journalists around the world. I am a matt miller. Megan much more coming up. Including avril falling for eight straight sessions for the First Time Since 1998. It beat aig analysts. We get the latest column on stocks. Matt four is out with breaking sales numbers. They are up beating estimates. Suvs had their best april ever. 65,000 vehicles. Sales were up 22 . This was interesting before the redesign. Up 20 drivenare by suv sales. Those are sitting at 72 . The story is for ford for chrysler and General Motors, it is still about the truck. It is still about the suv. Isy have gains, but ford missing street estimates. Megan thank you. The bank of japan held off the monetary stimulus. The a. B. Chief Market Strategist believe negative rates are not the answer. He is back with us now. Lets talk about this. You have talked a lot and written a lot about the benefits of the fiscal policy. They arethere say still too focused on monetary. What should they be doing instead . Walter you have to decide whether Monetary Policy is in control. The original plan was simple. Wealth three higher asset price. Itll bring confidence to the consumer. They will spend more. We will spend more. Well have more credit creation. We will have Inflation Expectations go up. That turned out to be half true. With higher asset prices, we have some credit creation, but, a lot of that is going back into share purchases and Consumer Confidence remains modest. So, the issue is, what else can be done . Simply driving the race to a negative level will not accomplish a great deal. That brings us to the only other alternative really have. Policys a sort of fiscal that is effectively this helicopter money. The issue there is the size. If you do too little, it has no impact. You do too much, and you have a risk of hyperinflation. That is the challenge. David i wish it were only a problem of size. I think there is the question of whether it gets done at all. Apart from china and japan backing off of the tax, i am not sure if any world what authorities are stepping up now. It is an issue of the chicken or the big. Why do they not do it . That is because there has not been a great history in terms of the government been able to size it appropriately. There is an obvious place. You give it to the people with a zero saving rate. They will spend it. That will cause a multiplier effect. Getting that done well has been challenge. That is the political hesitation. John said Monetary Policy could be exhausted. A lot of people look at that for a long time, but come i do not hear the ecb say that. I do not see the doj say that. This is me saying it. I think they are whistling in the wind. I would say they are pushing a credibility problem. A lot of people will lose confidence in them. If they were to ever to question those activities, that would unwind confidence. That is not really an option. We will continue to assert success until it is obvious you have failed. So, i think that will continue. To the extent that there is a gradual shift towards fiscal policy, thatll will happen with the big announcement. They are setting up a facility to support Small Business formation. Lets talk about the role of something we talk about in washington, Infrastructure Spending and where they can be boosted not only in the u. S. , but that could be a big boost. We never seem to get over the line. We have that pay scale structure. Walter without a crisis, political gridlock will prevent that. They are just some topical differences that have no grounding in fact. Page still persist. We have some fiscal policy working for short amounts of time. Of course, we might have a crisis. Outelieve we will find that within the next few months. We will see them over the last few quarters. There is a massive buildup of inventory. A lot of slow growth may be tied to the winding of inventory. , we haves wound up natural growth in the economy, if that remains low, at a 12 level, then we will shift to what we can do. Adb chief Market Strategist. Thank you for staying with us. Be sure to check out the bloomberg interview with John Williams on Bloomberg Radio and television. John up next, we look at some of the stocks on the move for the open. Halliburton is cutting Capital Spending by 75 versus 2014. Will break down the stocks to watch. A littlere shooting up bit of the open here, in new york. John this is bloomberg go i want to head over to julie hyman who has been watching the halliburton earning court. Out the action. It is generally up based on what is happening. Julie the call caps off with dissent of halliburtons now canceled acquisition of baker hughes. The executives on the call saying they are investing the shared to try to keep the deal happening. The president said it was not. That took goes to the beginning part of the call. They started talking about splitting cost. It is happening industrywide. Halliburton said it is cutting halliburton capital. Spending 75 compared to two years ago 2014. Halliburton will be making selective acquisitions here. Become he said it had 6. 6 dollars of liquidity after this campaign of baker hughes. John how the place 3. 5 billion. Megan there is a little bit of explaining to do. I love how they talk about the investment play. They have stocks moving with endless calls. John i will do that. Matt i will show you the Capital Expenditure start. You know what, lea michele you this. I have Capital Expenditure sales of baker hughes, i have halliburton here in green. It is coming down as their ratio sales. They have a competitive advantage. Now, lets get to analyst calls. They were downgraded to underperform neutral. The hospital operator said they have at admission to drop this year. Projections,nue they will try to cut profit estimates below the projected range. And, in terms of both cosco and outperformey will the 159 target, have cosco with the unique asset. They are positive with walmart trying to underperform the downside earnings with upside potential in the near term. Back to you. Next, the market is still deep in the red. They are 15 points on the s p 500. That open his next on bloomberg go. Show me movies with romance. Show me more like this. Show me previously watched. Whats recommended for me. X1 makes it easy to find what you love. Call or go online and switch to x1. Only with xfinity. Show show me more like this. S. Show me previously watched. Whats recommended for me. X1 makes it easy to find what blows you away. Call or go online and switch to x1. Only with xfinity. John we are minutes away from the opening bell. Abcs opening europe is much lower. Putting the 100 up best extensive 1 . When we get the cash open that will be in about 10 seconds time. The future goes about 10 seconds time. We have the cash open going up 114 points. The s p is up by about 14. When we see the opening bell in new york, we have this seen throughout much of the session. The dollar fell on the very recently. The treasury yield is still coming in. It is down eight basis points for the 10 year. Matt miller, theyre so much to think about. Only 20 seconds and. Cellsgm in april auto fell 3. 5 . The estimate was expecting a drop for. Gst analysts had ford sales not as much as estimated. They were up 3. 6 . I will keep talking about this throughout the program, lets first take a look at the index right here. This is the s p. In outcome is go to gm. Was go to the index. Im throwing the controller for a loop. Here, in the index come you can see down the board, down from the board, down from the snp. Terminal,k back in my you can see were down in every single industry group. This is the flipside from what we saw yesterday. Volatility is gaining here. You can see volatility and Health Care Staples of these with the only winners and least of the losers. Energy financials are the least of the loser today. Lets take a look at the stocks now, theyre down across the board, exxon chevron with conical fellows are all taking losses of a heavy sector. Lets look at halliburton. After saying they would cut their cap in 2014, it is still down almost 2 . Apple is the biggest arc in the world. It is one we have been following very closely. Apple is currently on the rise after eight Straight Days of losses, after sony 4 billion in market cap over less than two weeks, apple is bouncing back. John the big question, what is next for the Worlds Largest public company. Now are the keys Market Strategist still with us. Really come the story is matt miller talking with the seven 4 billion market cap. Is that justified from what you saw . Cliques even if youre talking about that after the quarter, i think a lot of these investors going to the quarter expecting things to be week. I think the concern is a trust factor with the company was a they can develop these products, or, provide Something Interesting enough in the next generation. The thing that is the stock where it is today is the hope that you will still get growth before december 4. That is a factor for the stocks. Megan how do they avoid that cycle when it comes out . That seems to be lacking on a lot of the latest estimates. Is something we hear with every new model. It is not incremental enough, every year, this will be on people stop upgrading. What were hearing from the operators is that customers are attached to the phones more. Maybe incremental changes are not that great. It is hard for anyone to imagine. We hear analysts come on television and talk about the ol db and a bunch of bells and whistles where it may not be enough for somebody to say if i upgrade every three years, maybe i will hold onto that a little bit longer and save myself some money on that monthly bill. David china was a big draw for apple. China is kind of a big unknown. I think the company has talked about that where there have been a lot of people. In a lot of these markets, people are paying five dollars per month. Spend thellingness to type of money people want with the apple phone in india or china come it may not be enough. Youll get brazil, smartphone usage has doubled. That is because phones that people are buying are less than 200. Answer,orts is tough to but, this is the most heavily researched company on the planet. You had a price target going to 2016. What has changed in the last three months . What has changed their research to predict this downfall . Walter i think there was a change where people are upgrading their phones more aggressively. I think you saw those upgraded rates with a lifecycle extending, the rates coming in where we should have acted is faster. I think it some point during the quarter come with should have been more aggressive in making those reductions. Now, youre in a state where the company will have a declining revenue and earnings for the rest of the year. Can they return . You have to evaluate the stock with every step. The next big question is will the iphone seven or whatever have enough interesting applications to it to get growth in the december quarter. Seven is a very important product at this point. We have heard a lot from the Management Team about new product categories. Theres really only one new product category that will hurt the launch. The launch. A lot of units relative to , a lot ofroduct products in the consumer electronic market. It is not exactly something they can hold their hat on as far as a successful product launch. If the iphone seven does not grow, they should be some question about the management situation. There a more strategic issue here . They have sold many gadgets. On the tech looks like its the software side. It is facebook, it is amazon, it is google. They have to think about whether they accept to go into a . To be it is tempting attracted by services and software. The revenue and profit is so is thethis service secondlargest revenue stream in the company. Bigger than mac, bigger than ipad. When you look at payments, theyre not big enough to move the league needle relative to Consumer Products in the world. What of the smartphone. It is hard, even if you believe in services and software for this to be enough to offset the risk that exists. When nokia was the dominant phone manufacturer, that a 23 operating market. They did up going down basically and a zero. They had operating margins for their phones at 30 . Consumer electronic margins back in the day were at 510 , is a different model now. Differencevast between the typical margin and where the iphone is today. So, Service Software sounds great. I am not sure if it is enough. They will try to upgrade their phone faster. Megan bringing you and tell what the implications, not just for apple, but come only look past the broader sector, is there a company with its own challenges . With what it wants to do . Walter im sure this is a supply through to apples cell. Tech has always been bifurcated. They always have the astronomical debate over how far the winner take all mentality can be applied. Were left forhey dead. Apple has transitioned. They are trading at a low multiple. The question becomes which part of the tech will win in the short term. Within this sort of value tech of semiconductors, where expectations are low, i actually facebook could persist Going Forward your i do not think it should just be read through for the sector. We can expect it to stay bifurcated with the evaluation. To yourspecial thing aimless. Thank you for joining us. David up next, bigger coming use, and halliburton outline future plans after the merger fell apart. Permission from their earnings call. That is coming up next on bloomberg go. Matt later today, do not miss blackstone ceo Steve Schwarzman live from the global conference. John welcome back. 12 minutes into the session, lets talk to lets check on futures. They are a session lower. 500, theon the s p deked was down by 1. 6 . There are so many stories out a ton going on. Met from cars to health care, lets talk about General Motors, missing the street estimate for growth. Actually, they sold fewer cars in april than they did in the same month last year. A drops were looking at at 1. 7 percent, as a result, General Motors is down. Ford is down, but still had a growth of 3. 6 . Fiat chrysler Beat Estimates with its fifth year of consecutive monthly gains. Kruger is another stock that is moving. Sales going up one fourth last year, 25 is the fifth time in the last six quarter that their earnings Beat Estimates by more than 15 . Smith wesson also trading higher while national gun purchase background checks went 36 in the First Quarter. Lot more gunsby a again, it is driving up stock prices. Number four, sprint posted higher than estimated earnings. They had anticipated gain. They had phone customer is adding 56,000 new users. They went up halfway through its program to cut 2 billion in cost. After seven days on a losing streak, we finally had gains yesterday. That happens. Abigail doolittle on the nasdaq. Abigail we have Specialty Pharmaceuticals trading a strong First Quarter. They beat earnings estimates by one penny, making . 75 per share. Now, Bloomberg Intelligence aimless say everything looks good here. The metaacquisition should help people diversify later this year. Investors are fairly certain they are stuck in a trading range. Tesla investors are looking for tesla to post a loss of 60 shares on revenue of 1. 6 billion. Something that really panned out here it was guidance. Expand . 11. It is a busy week for the First Quarter loss. They will also have Unit Production with the company hitting the 16,000 unit target at 90,000 unit guidance for the year. Tesla is suggesting that more of the same could be ahead. David this morning, shares for halliburton are down. They posted their first lost after taking charges with some related to the failed mergers baker hughes. We want to go now to julie hyman who is talking about the chief Market Strategist are with us. What are you hearing from executives over there . Julie as a mentioned, halliburton lost that acceleration during the call. It is unclear what would have led them to that. Their timeout cutting costs. It says it will reduce its annual run rate by forming dollars to the end of the year, we wonder if that will have been for the first of the quarter. Much will have been for the first of the year. The Company Thinks the recount will be borrowed overall and bottom into the second quarter, there is an interesting contrast to the two companies this morning, they say baker hughes is time a change in a strategy and retrenching and falling back in some areas, leading them to competition that will be a two basis for their activities, whereas halliburton is exhibiting a more stay the course strategy, the wants to be a full Course Energy operator here. They say they will expand in areas where it is not as president. Be baker hughes seems to shaking things up to a higher extent. Halliburton also aggressively defending its attempt to buy baker hughes. John they are calling out these regulators as well. Baker hughes saying they offered more than sufficient investment to meet antitrust objections. Against theing back regulators. What stood out to me was that halliburton will cut 2016 spending. More than that, moving aggressively to restore excess capacity. Question i would be asking, is this the deal to get them to back up to 2014, how much time has been wasted . . Julie . Let me ask you. It is 3. 5 billion. Im looking now, the total market cap for halliburton is not 30 billion. It is more than 10 of the market cap that they want to put on the table. That is pretty dramatic. Not getting it done. There is no doubt that we are disappointed. Vadim that is certainly worsen the disappointment. It is always easier to look at things in retrospect. We will need global consolidation. Priceride activation coming down. , i thinkalliburton that the whole notion of tosolidation makes sense as whether this particular deal will bring us more foresight. Do you think it is true it is true,u think or this is an example of investor not being good enough going from three down to two. You do not have a place that could satisfy their new way of looking at it . Vadim some of this is more intense because Many Industries have become more consolidated. Consolidationof rises, scrutiny rises, because you start getting to more predatory behavior. We have scrutiny, but i guess they did not approve. David want to thank julie hyman. The chief Market Strategist come im glad we did not lose you. It is Bloomberg Markets with betty liu and mark barton. What is on the show today . Will my partner in crime be interviewing the aig chief executive after the insurer announced his Third Straight unprofitable quarter. He rushed back to the office in coanchor with me. Willssioner of the nba join scarlet fu in the global conference. Catherine brown, executive director of the ny new york city valley has been successful in eliminating that until she joined 2009. Bloomberg has seen many of these next hour. We look forward to joining you then. Megan sounds hectic. Onlook at next at what is the agenda for today and next week. For bloomberg trends. We take a look at the top stories on the terminal. , butan find these yourself read to go. Well start with you. Not talked about this is a make or break today. Last night was time to shine. Tonight, donald trump could close out their public and primary race with a big victory over ted cruz. He is up with the latest polls we have seen. If he takes the majority of those from indiana, he will move on to be the likely nominee. He will go to california with a huge amount of momentum. He is looking very unstoppable. David do we have to wait until then . We will have to wait. He cannot get it all tonight. We will look at how the shifts from the indicated he has been, into how he will be as he runs against hillary clinton. He has run a very strange campaign. He is talking about hitting her hard, saying she uses the womens card. He is also appearing much more president ial. I think tonight will be a big moment for his campaign. David how much does he need to change . Megan a huge part of his appeal is that he is politically incorrect and speaks his mind. Thats why he has been able to galvanize a huge group of people behind him. But, heres my one thing. Once you break that link between what to expect and what the Political Class is giving you come i think we are at the point of summarizing it in this country, it is interesting. David you have the bloomberg trend . Have bitcoins will focused on. It has grown more interesting. This is statistical analysis. All you need to know is that it is on an upward trend. Volatility is relatively low. And, it is well above 61. 8 trading from the lows to highs in november, which has been in the trading range. We look back at the bitcoin price, of course, there is yet another trade going unmapped. With had a couple of these the past few years. Personally, i do not buy it, all you have to do is move bitcoin from the genesis block. They have not done that. I do not think he has the ability to do that. A more interesting take on bitcoin is that someone people at the milton conference are saying that this high tech wave of things like Bitcoin Technology could really turn of the Banking Industry upside down. David those are two very different things. Block chain has applications beyond bitcoin. Matt i understand, they are closely related. Are car sales as well down. U. S. Auto sales raking 14. 4 . The estimate is up. I think the word is mixed. We have seen some very big numbers. Ford has beaten estimates. David theyre up 3. 6 . Seeing honda are sales come out up 14. 4 . That is better than the estimate. We were only looking at a gain of 10 . A b four honda, a beaver Fiat Chrysler, and misfortune a miss for General Motors. Actually dropped 3. 5 . Where are still seeing predictions of 17. 5 and 17. 5 million percent million dollars. Last we saw was above 18. We did not hit 18 for the full year. General motors said 17. 5 million this month. I think fiat is around that. John thank you. We will wrap up bloomberg go 26 minutes into the session. We had a big bond market rally. An important interview with jon runyans in San Francisco, coming up on bloomberg tv Bloomberg Radio. If this is a Bloomberg Markets on bloomberg television. We are going to take you from los angeles to london to the new york stock exchange. Betty liu is waiting. This is what we are watching this hour. Aig reported a Third Straight loss. Peter hancocko live in just a few minutes. From the Milken Institute conference in los angeles, an interview with former nba commissioner david stern. Thats got over to the markets desk. Julie hyman has the latest. Hows it looking