Transcripts For BLOOMBERG Bloomberg Go 20160516

Jonathan we are looking forward to that conversation. Futures are largely stable. They are down about three points. It looks like we are going to have a stable start to the day. Euro, 11322. You can see the story at the bottom of the screen. Wt is wti is up two percentage points. The yield on the 10 year is upon basis points. 2007. The narrowest since david lets go around the world for indepth coverage. Both kennedy will tell us whats going on behind the surge in oil prices. Were going to start with merger monday. Pfizer is back at it again. Julie hyman is here with the details. Julie this is a much smaller deals and allegan. This is a 5. 2 billion deal. They are the target. Whats attractive about anna core, it does have revenue to treat fungal infections in the toenails. It is developing a drug that looks like its expected to be a high sell it to treat eczema. It has had some positive steps in terms of approval and in terms of studies over the past year or so. 9925. Ice per share is that is a 55 premium. Were not talking about a transformative deal by any means. Its more just an addon would look atd what has been going on for the past year, they saw a big surge last summer after the were positive trial results for that eczema medication. The stock has performed well. There are some other merger monday things coming up. In at is increasing its offer to buy tribune. Statement, its not enough percent of the closing price. That is the last trading day before get at publicly said it would get an offer for the company. To see if we are now going to hear back from tribune once again. They have been resistant to a deal. We are seeing a rise in yahoo shares. Warren buffett a says to be looking at it. How would yahoo fit into berkshires strategy . Jonathan there are a couple of things to keep in mind. He is not leading the charge. He is working with dan gilbert who knows a fair amount more about technology that i think Warren Buffett says he can bring to the table. He can be an important source of funds. Dealwill put a terrific together if that were necessary for him to do so. In terms of in terms of hitting specifically with the kinds of investments hes done in the past, this is a little bit different in terms of financing the deal. He has done that for. He is done that in the way that would let someone else take the lead. Is we important to recall really focus on something that makes a difference to the portfolio. There could be significant upside. I think thats certainly possible. Lisa thank you so much. Jonathan lets talk crude. Oil crimes to the highest price since november. Were looking at this, so we different ingredients. Whats the dominant one . Will nigeria has been the big story. Weve seen a resurgence of violence in the niger delta. More oilpposed to get revenue out of the central government. Theyve attacked several oil platforms. The production to a 20 year low. Can still trying to recover from the wildfire. Venezuela has an impact. It started to have a big impact in the market. Goldman sachs put out a report that says the market is rebalanced its deficit. It has already begun. He has called this so well over the last couple of years. You other market inside out. They been caught off guard by how fast its rebounded. Will thats a good question. In nigeria, whats gone could come back to canada will almost certainly come back. Whats interesting about what goldman reported, this is pretty close. Longterm the market may remain oversupplied. The really important question for the oil market is as we see prices rally into the 50s, will feel producers come back with fresh girls . Girls . Barrels. This will come back down to 8. 8 million a day. Where is this the spot for shale . Will people have seen 50 as a crucial level. The one that would see a lot of perils come back is 60 a barrel. This is still a very new industry. There is a lot of perils coming out quickly. Thousands of workers lost their jobs. Knows. Sure anyone jonathan thank you very much. David lets go to robin. There was more disappointing information coming out of china. Please walk us to the data. The date if it came out over the weekend, there were slumps and Industrial Production. This reflects the dilemma that chinese policymakers are facing. Try to control growth or affect it . Ry time david we lost robin. Thank you for joining us. Now we need to go to vonnie quinn. Vonnie they will Work Together to detect missiles from north korea. They conducted a Fourth Nuclear test. The bombings and Russell Martin turning point that had not been a terror attack in a western nation for a decade. Terrorists had been trying. Onres of attempts of attacks airlines, roads, and bus lines in the United States and western europe. Police work and occasional ineptitude prevented it more deaths. Donald trump says if he is elected president he is unlikely to have Good Relationship with david cameron. S proposalsled trump divisive, stupid, and wrong. I am vonnie quinn. Jonathan coming up, desperate for income and a yield starved world, investors ares peaking that also. Is the u. S. Still the best bet . Bob michael explains the hot for yield and a negative rate environment. Merger monday is picking up steam. We will take a deeper dive into the two mergers making waves this morning. David this is bloomberg. Lets get a check of stocks. Julie i won start over in europe and take a look at the best and worst performers. There was an upgrade over bank of america. This upgraded it by two steps. It almost doubled its target price. This came after the analysts and tank of america met with management. To have greater confidence on mandate and desire to deliver. The stock was down 75 last year. It has just about doubled so far this year. Rated as the equivalent of a cell. Bank of america changed its tune. ,e have the French Company those shares fell to the lowest since 2009. Morgan stanley says the company is in transition. Its more of a growth plan. The dividend cuts will be earlier and more substantial than the banks prior forecast for the company. Nextcut its own forecast last week. Here is another done deals this morning. Range resources will be buying memorial resource development. Its a 3. 3 billion all stock deal. There have not been that any during thes turbulence we have seen in the market over the last few years. Many analysts have been calling for more energy deals. This is just one example of the few that we have seen. Lisa Foreign Investors are starving for income. Take a look at japanese outflows. Is the u. S. Still the best place to go for hunting for yield . Bob michael joins us. How much are these japanese investors coming to the yet u. S. . Bob thats a really good question. Theyve been here for a while. Theyve been exporting capital. The bank of japan has done around of qe. They have sold their fees to the bank of japan and bought largely in corporates. What we see is a dramatic acceleration. The ministry of finance released data that showed it was the greatest surge of purchases in foreign sovereign debt ever from japan. Thats a big number. Thats on the sovereign side. We see a ratcheting up of buying in the u. S. We have some large institutions looking at u. S. Highyield. David when did you first notice the acceleration . Intowhen they cut rates negative territory. Much invented qe. To go to negative Interest Rate policies after some of the other Central Banks did created a mind of change in japan. I think everyone believes they can go to 10 basis points. Assetre going to see more purchases, more increase in the size. People want yield. It looks great. Over 3 lookst great. David i would guess the last thing they wanted was to take their investors and and then to the United States. They see the same data. What does this mean they will do next . Bob i think seeing all this capital exported overseas is somewhat problematic. Im not sure what else they can do. I dont know if they are supposed to increase asset purchases. I dont know if they are supposed to look at more equity. I think they have to pull some more arrows out of the three arrow policy. Lisa we are in a later stage of the credit cycle. Youve got to fall rates cleanup any significant pace. Rating agencies are surprised at how quickly the rate is going up. When japanese investors start accelerating their cash, is this the beginning of the last hurrah . Bob defaults are going up. First quarter earnings were a mixed bag. Bottom line and the top line was coming down. Down, top line is coming i want to see them take out expense. This is what Central Banks are responding to. They are desperately trying to reflate and create growth. This is the side effect of that policy. Jonathan how do you define upon the bubble . Bob i think thats a really good question. The things we have tended to look at in terms of bubbles are two plot things on a graph. If you get up curvature, that is a pretty good sign. Usually bubbles are that inflated. There has been a lot of our wing that has gone in. Are we in a bond bubble . Negative yields cannot be sustainable for very long. Be a scholarly approach to the markets that the banks are taking. Jonathan weve got this to 10 spread. It used to tell something about world. Said,verything weve just does that mean anything anymore . That the fed is on the move. Likely they are going to raise rates in june and depending what exit polls look like they may wait until july. A lot of money is pouring into the long end of the u. S. Its been exported from very low yield environments. There are other opportunities out there. You can go into us joy and pick up 50 or so asus points. I agree there has been some flattening. The thing i am hearing most is an inversion. Those who are saying this is ridiculous, we will not have recession. You are coming at it from the other side. We are headed in the resurrection. Maybe thats not a very healthy sign. Jonathan its great to have you with us. Coming up, china has disappointing data. Debra leer reveals what this data shows us about chinas economic transition. Its merger monday in full effect. Pfizer settling for second best . Jonathan after marginally eking out a weakerjonathan day last week, the s p is three weeks of losses. Lets check out the markets. Futures are largely a stable. Dow futures are down. Is abouturope, the dax 4 10 of 1 . We will whip through the fx market for you. Dollar yen is pushing back toward 109. A big story in the commodity market, crude is 47. That is a six month high. Its already just monday morning in new york. We already have a lot of m a news. And we have jeff here join us. Lets talk about pfizer. And core is surging. Pfizer has made a deal. They were worth about 3 billion on friday. That was the main product. Its a toenail fungus product. Something for eczema which should be approved in the next few months. Thats what pfizer is paying for, something thats come in in a few months down the road. David its a relatively small company. Is this about intellectual property . Pfizer, this is the next best option to break in two or three companies. Theyve got an established products business. The have future drugs. This will probably fall into the future business. You will probably see a lot of deals like this for pfizer. They create another company that will move forward. Lisa how much money is there in toenail fungus . Isnt there an empire over there . Why is now a good time for pfizer to be buying . Jeff in some ways, its a bad time. They have a lot of money and resources to buy other things. This seems small relative to pfizer. It will add up to what the future is going to be. I dont know about tongue toenail fungus. Theyve got a lot of cash. They can borrow cheaply if they wanted to borrow more. Its not a bad time to do that. David kennett is not going away quietly. Tribune said no and they come back and raise the price. Jeff they are going to have to start talking. They have jumped to 15 share. They are trying to get them to table. Le andga i would not be surprised if they get a deal done. David coming up next, chinas red flag. Disappointing data from china highlights the reformers trying to reform the economy. We will go to the numbers and find out whether china needs another round of stimulus. Lets get you up to speed very quickly. Futures are little bit staple stable. The crossd get to asset board. The dollar is on the back foot. High. Is at a jon lets get you up to speed him the Global Financial markets. Tom keene is falling asleep after Bloomberg Radio after these numbers. The 10 year is up two basis points. The spread is the narrowest since 2007. David we are just under two hours away from the opening bell. Pfizer has agreed to it deal for 2. 5 billion dollars to gain control of a treatment for eczema. Offert has boosted its for Tribune Publishing. Yahoo shares are up more than 1. 5 . Warren buffett is backing a group waiting for the yahoo internet access. Lets get first word news. Of attacksiraq, sirs by the Islamic State have killed at least 29. 14 victims died in attack in a natural gas plant north of baghdad in a series of bombings killed 15 more and others were wounded. Its a fifth straight day of attacks around baghdad. President obama took another shot at donald trump and a commencement address. Graduating students at rutgers that ignorance is not a virtue in politics. He criticized the president ial campaign for what he calls antiintellectualism. The World Largest cruise ship has set sail on its maiden voyage. The 1 billion harmony of the seas left france for the u. K. It has 16 decks, 23 swimming pools and can hold six the 300 passengers. 6300 passengers. Jon it is the chart of the day, the optimists say this is not 2007. Its the spread between u. S. Treasuries. That spread as the narrowest since 2007. Tom keene joins us now. That spread is kind of different. Tom its getting a lot of play. Within emphasize that any given spread, there are four its this thing which is most interesting. Move relative to the twoyear . The twoyear yield is rising and the tenets coming down at the same time and thats intriguing. Typically, that would tell you that things were not all good in the u. S. Economy. 100 it would, going through days always gets peoples attention. We had a clear indicator back to 2007 and 2001 of recession. I dont see much of a linkage at this moment into a true recession. Jon with twoyear yields rising and 10 year yields coming down, has ally the 10 year Global Hunger for yield. Tom thats exactly where i wanted to go. And not about the two year 10 year, this is about the banks. There is the idea of how they make money with the spread for the libor proxy. Those spreads are probably a lot more important for the central bankers. It there is a commodity market rally. How do you reconcile the rally in commodities with the flat yield curve . Tom we have not seen it yet. We are in the process of seeing commodities recover and there is a huge doubt whether that trend is there. Noted by an oil expert that he he does not see sustained higher oil prices. Think news for oil is in the market. We are focused on brexit and june 15. Jon is it too early to say these correlations are broken down . Tom yes, we and up talking about this which is correlations. I would look at the blunt instrument, the massive news from j. P. Morgan was they have seen a seachange and not that they are looking for a boom American Economy but they are looking for a better American Economy which would keep the yield curve steeper. Jon thank you so much on the flatter yield curve. David we have breaking news on apple weve just learned that Berkshire Hathaway has acquired an interest in apple. Im not aware how big it is but from previous experience, any interest Berkshire Hathaway has in a Company Means a lot on the stock is already up 2. 5 after prominent news has come out of apple. Considering that berkshire is potentially interested in backing yahoo . Are they getting into technology . We want to follow china where there is a run at disappointing data and it suggests the companys debt addiction may be tough to shake. Missedetail Sales Estimates as growth in car sales grew and Industrial Production went up 6 from year ago but the forecast were for 6. 5 . The senior fellow joins us now from washington. Thank you. This missed estimates but what does it tell the president of china . Does he have to increase stimulus . A pleasure to be here. These are disappointing numbers out of china but what is clear is the president of china is embarking on an aggressive reform agenda for the economy. There is dissent playing out within their own public papers with different parts of the bureaucracy. He has a challenging time i had an he is trying to introduce a new kind of economics to focus on supply side so they dont resort back to the whole strategy they have employed in the past of fiscal stimulus. They will have to do something to reenergize the economy and they are exploring different kinds of methods to do that. David one of the transformations is from rural areas into urban areas. Numbers tell sales us anything about how that transition is going. Question mark . Is a fundamental part of the agenda, it developing purchasing middle class. They need to move away from Government Investment and lowcost exports into this consumptionbased economy. Its disappointing to see these ambers and part of it reflect concern about the direction of where the chinese economy is going to massively as well is something the leaders themselves are focused on and that is why our Chinese People buying chinese products. Its a question of having confidence in whats being made in china and thats one of the areas the chinese leadership is focused on. How can they make sure that chinese supply whether its through automobiles or rice , people either have the confidence or the desire to buy. I was struck by the fact that the industries that were a bright spot were the only ones that have actually benefited directly from the stimulus that the Chinese Government has embarked upon. Been, has this been trickling out into the broader economy but has not had an effect . We need to focus on the longterm trend. We focus month by month so it will not be a pretty picture. Canquestion will be what you what compass overtime and there are indicators we have to look at. One of them is with the data on enterprise reform. Some of going to let these state owned enterprises go bankrupt . The second is the focus on what they do about overcapacity. They have pledged to reduce steel and Coal Production by 150,000 tons over 35 years and that requires letting people go. Massive unemployment potentially and how will they handle these issues . Are we going to start to see the stimulus again . I think it will be a combination of both. A few weeks ago, they announced the creation of the million mile road. This is going back to the old Government Investment in building the economy. David lets talk about the new world and thats green energy. Investmentnt is this injury to the president and the regime . The Environmental Issues have almost become what the trade issues were in the 1990s. An area ofme potential cooperation between the United States and china and can show president chi leadership in the world but its an area where they see there is tremendous potential. Goldman sachs said there is a potential of a trillion dollar private sector market in this base. He needs to find ways to drive drive at sector capital into cleaning up the environment because the government itself cannot afford it. There is great potential. The chinese have decided that this is the pillar of what they will have as their regime and they are trying to encourage the other g 20 members to adopt the same principles and practices they have. They see this as a way of stimulating chinese road but global growth. David thanks very much. Good to have you with us. Next, the hedge fund exit of apple and Warren Buffett steps in as Berkshire Hathaway gets a 10,000 a 10 million share stake in apple. The stock is up. Is there a boy who cries wolf problem here . With all the statements that come out, we might do it twice. It is 5050. To even get one rating, there is a big munication step between what the fed is thinking and what the markets are thinking. The fed has a challenge here. Own the markets around their view. They have to do it in such a way that is not tone deaf on the weak economy. Evidence thaty over the last 34 months, that jawboning has had any effect . Theyve only been lightly pushing. They can be much more forceful. Do not forget, we have the press conference after the june meeting. The june meeting statement will be very important. We will have a semiannual testimony sometime in july. Some of high profile events for the fed to say, we have been warning you about two hikes, and now we are getting serious. I do have to say, they have been the same for much of the same time. The market said that we do not buy it. Who has been right . The market. The fed is sticking to their methods here. It will really depend not so much on the inflation numbers, but by the labor data. We need to seek strong job growth and income creation. They said, despite all the weakness in the economy, including consumer spending, real Household Income growth is solid. That will be what saves their view. Widely keep hearing so much why do i keep hearing so much about july . June is too soon. It is simply too soon. You will not have enough data. You only have one job support and one report on consumer spending. There is just not enough data for them to convincingly sound the all clear. July is the next opportunity. Once you get past july, september and december. Bloombergs chief u. S. Economist, thank you so much. Coming up, is increasing Household Net Worth building another bubble on the horizon. We will discuss next trade next. If you want a confirmation that apple is now a value stock, this is it. Warren buffett steps in. They hold a 9. 1 million shares state of the ive phone maker the iphone maker. The stock is up to full percentage points. The fascinating thing is, here we are Warren Buffett getting into tech. He always said he would not do it. He would only invest in things he understands. Over the weekend, we got the news that he may be in a group of investors taking a look into yahoo . , this is a big shift for him and it is a big endorsement for apple. Good news for tim cook. Ofyes, there were a lot people beginning to ask about the future of tim cook over the next year. It is a last needing story, and we will continue to keep you updated. It could lift the overall market. Charts,now for off the a sharp rise in household networks has picked up the last two major bubbles. The. Com bubble and the housing bubble. We are seeing it again, the signs that something bad is on the horizon. Seen an increase in net worth. We have seen in a couple of places. The. Com bubble, as we were seeing, the asset prices were rising faster than income, because there was an inflation of tech stock. Housing crisis, we saw a big increase in the housing rises prices. When the bubble burst, it wrote it fell sharply. Let us talk about what is behind this. We are seeing an amazing rally in the stock and bond market. You have not seen the increase in the baseline wages. Ist you are seeing right now that the actual fundamental picture for the economy is not supportive of these values on a fundamental level. The reason i was watching this chart, was because dr. Daniel researcher,ongtime pointed to this in post. Said that this shows we are on the verge of a downturn. The economy is not supportive of where we are in markets. What is the cushion like now, compared to what it was like then . I wanted to look at another chart that was the savings rate. It has been kicking up. Here is the personal savings rate, and the spending rate. The spending rate is not so high , and the personal savings rate is higher. If we get a burst of a bubble, if it is indeed a bubble, our People Better positioned than they were during the. Com bubble or the housing bubble . Maybe we are not going to see some kind of massive explosion in the way that we did during the. Com or housing bubble. Com or housing bubble. This is a really important chart to show. It seems the question becomes how much leverage is backing these stock and bond personages purchases. I guess we will find out. Way, it is not a particularly rosy scenario. It is still something worth watching. We shall see. I thought it was very compelling. Lets head over to john. Thank you so much. Coming up in the next hour of bloomberg go, we would hear about what is now a credit sweet spot. We will deep dig deeper into Warren Buffetts move into tech. He is now looking at yahoo , maybe. Stockbout apples rise in , and the nasdaq rise thanks to apples spike. The apple of Warren Buffett i. Ffetts eye. And also the new whack a mole target. Eyes are on tim cook and global credit, we would hear about this week spot in global fixed income. Welcome to the second hour of bloomberg go. Lisa is joining us for the entire week. Lots to cover already. Lots of tech news and Warren Buffett news. 76ers willr and the talk about their new partnership. Lets get a check on the markets with jonathan ferro. You can see the nasdaq futures getting a nice little left that apple has risen. It represents 76 on the index. The s p 500 has been down for three weeks, coming back this monday by 32 points. There is a lot to talk about in the commodity market, with crude at a november high. With crude at a high. Yields given up in some of last weeks rally. There is so much to talk about. Lets get back to that story of Berkshire Hathaway, disclosing its bid into apple. Weve got a couple of hurting as filings this morning. This one really stands out. It is the story of Warren Buffett and the shift into tech, or is it a story about tim cook and eight saving grace for apple . I think this is a different than what heesis is using to think about yahoo . Specifically to apple, if you look at the acquisition criteria that berkshire uses, they have several of him. It should not be a huge surprise , given that the companys stock , and it iseen lower potentially an opportunity that berkshire has identified. What does it do for apple . How much does it give them a vote of confidence . Apple, but iover can only presume that because rapture has berkshire has a longrange turn in its investments, then this would suggest that it is a Bright Future for apple. Or pickupserm causes when it comes to rolling out products or development of products, it is perhaps something the company can readily overcome. Buffetto cover warren and his approach to investing. Does this indicate they have had a study of apple, and that they have made a decision that in the long term this is a good investment . I believe that is safe to assume. The cash generated by this company has been really fabulous over time, this company meaning apple. I believe work shirt is impressed with that, and they are impressed with the market increased that the company has shown. I suspect that Warren Buffett would make a careful assessment of management, which is important in any acquisition. It probably reflects very highly of apples management that berkshire is willing to take such a significant stake. What does it say about the overall market if berkshire is now looking outside its comfort zone, getting into tech . I believe it was Charlie Mungo that said when things change, they change their strategy great and this case, it is technology. It is such a large part of the economy and consumer buying habits. They need to begin to get more involved in that area. I believe it is correctly and are printed as correctly interpreted as Warren Buffetts desire to traverse and an area that he was recently uncomfortable with. Lets cross over to julie hyman now with a look at some of the market movers. Let us not forget that berkshire a Little Company theybm is raising are raising their stake in ibm as well. The steak was already at about a percent of ibms share, they were the top shareholder in the company. The share has not yet changed too much in that. Moves that other berkshire is making this moving this morning, we are seeing some decreases for Berkshire Hathaway in walmart. At t, in which berkshire was a fairly significant holder, that state is being eliminated entirely. That is notable, as well. There is the situation with yahoo that we have been talking about this morning trade there is news that redshirt is backing a group led by 10 gilbert of quicken loads dan gilbert of quicken loans. There are about 10 bidders in the running for yahoo . 48ial bids range from million dollars. It is interesting that berkshire would be identifying appling in technology in that way as well. It has been a longrunning situation with yahoo . We will find out eventually who will be the winner in that process. Joining us to talk about the wider markets is jonathan. It as a, you spoke of weapon will market. We know it started with energy and materials in the late 2014. We saw it moved to some biotech. Earlier, it was financials. We have seen some many markets that have just not happen at the same time. It is cap the overall market in this neutral trading range. I was struck by one can one statistic in your report. You wrote that the s p 500 Department Store index has lost quite a bit from its height last year. What is the next industry to see one of these rolling markets . We are starting to see some weakness back in the bio techs and financials. The yield curve continues to flatten. It is keeping a win for financials. The european banks are back at the lowes. It is tough to say which one will see the big decline. Pointe now getting to the we have already seen almost every industry see a correction of the highs. You are starting to get some areas that already signed our rebounding and rolling over again. On the one hand, you can say that this is good, because you have another industry coming along to pick up the slack. Does this say that the market is relatively strong or not . There is no advantage for the bulls are the bears here. Within the industry, you start to see relative strength active and utilitiesples which is a function of the lower Interest Rates and letter yield curve. That is not necessarily the most oldish makeup. We probably have a nearterm weakness but we are agnostic on the overall trend of the market. Whats the best way to play the market now . Youre looking for the Industry Groups that are exhibiting relative weakness. We mentioned biotech starting to show that. If you can break it down and be more tactical, thats probably a better bet than trying to call the big win in the market. Jon thank you for the breakdown on the market. David lets go over to first word news. Vonnie if shes elected saysdent, Hillary Clinton bill clinton will be in charge of revitalizing the economy. She cited the economic success of bill clintons presidency. Go before the to vote to campaign over whether the u. K. Should leave the European Union is getting more caustic. Ify europe is very contentions. Opponents say there is antieu supporters. That are losing their moral compass. Up, confused consumer, dismal week for Department Stores was capped off by strong april sales results. Can target and walmart avoid the retail malaise . Plus, crude reality after falling to a 13 year low in crude prices have rally nearly 80 in just three months. Is 50 per barrel around the corner . We are checking some of last weeks big losers in the s p 500. More bloomberg is next. David we just learned Berkshire Hathaway took an apple stake worth 1 billion in the first quarter. Reports are out that Warren Buffett may be backing a Group Reading for yahoo we have Jeff Mccracken with us now. Warren buffett was on the sidelines but have his views changed . Has he decided to get into technology . Warren buffett has spent a lot of time and money in ancient media like newspapers of this is just new media. Yahoo is the night quite bygone era but getting there. Mostly this is about him putting money behind someone he believes in which is dan gilbert. He will not have an equity stake in it or it hes just putting believesfor dan who there is something there for yahoo even broader than this, the reason why this leaked out is because the yahoo folks are worried they are not getting the money they were hoping. In there as well as yellow pages but there is not interest as they were hoping. The bids are not as high as they were hoping. what aspect of yahoo would Warren Buffett be interested in . He has a big holding an old media. I think he understands yahoo as a media company. Its got a website that people go to and its got yahoo news and sports and finance so he understands that and then there is the email. 3g and when in burger king wanted to buy tim horton. He will put money into things as long as he gets the terms he wants and the Interest Rates he wants. Thats what he is looking to do. David if he is backing dan gilbert chat does dan in yahoo . Quicken loans that dan has about 30 Different Companies he owns. Quicken is the one we know most but he also owns the cavaliers. He owns Different Companies. He owns a lot of real estate as well. Warren buffett is willing to put money with someone he believes in and dan and he have a Good Relationship. Lisa how much is Warren Buffett done that recently . He has been doing a bit of this kind of thing. 3g has put the most money in. The people behind burger king and behind the broad portfolio strategy of consumer products, he puts money in with them because he believes in them. He likes not getting his hands dirty. Heads and cutut back on advertising and get rid of headquarters by streaming operations. David do we have any sense of timing on yahoo . We should find out in the next several weeks. I think sometime in early june we will have a sense of it or. I think verizon is the likeliest winner. They have Tim Armstrong behind them so he can run it and maybe make it work. We will know for sure in 34 weeks. David thanks very much. Despite a rocky retail work for earnings last week, retail sales for april came in better than estimates. This week, investors are keeping up close eye on target and walmart for posting quarterly results. Isning us now with a preview the Wolf Research analyst. What are you looking for this week . After last weeks debacle, its hard to think it will be great. We did not expect a massive blowup in either walmart or target. Walmart is a huge Grocery Store at this stage with 65 of their sales in grocery or health and wellness. We were not expecting a disaster out of walmart. As far as target, its less of a Grocery Store but we thought the quarter would be ok. Week, it was hold on for your life. The retail sales number actually surprised to the upside. Maybe bricks and mortar are being sucked up by the internet . We just published a big report and millennials are going to amazon and we added up the numbers in almost 50 of incremental retail sales are going to amazon. It is taking a big piece of the pie. Or looking for with respect to the walmart and target earnings to highlight how much they are adapting to the internet . One thing that came out in our report which was interesting is when we asked people if you want to pick it up at the store or deliver to the home, 95 of women said deliver to my home or work. The companies are doing big efforts particularly walmart to invest in picking up at the store and we are not sure customers want that. Thatt the announcement walmart is experimenting with a today service. Amazon has got 27 msas doing same day. Its really a tough environment for these guys. Take a look at the relationship between the internet and bricks and mortar. Julie this is a modification of a chart the Joe Weisenthal used last week. Most of this is amazon but it includes catalog sales but this is ecommerce. We saw the beat for retail sales. We have the socalled general andhandise, target, walmart some of the mass merchants. We are still not seeing a recovery in these numbers. Things that target and walmart still do is sell food. That is something amazon is pushing into but its not quite there yet arian from your research, does that still give them an edge that other retailers dont have question mark it should help them to a degree. Is youllenge in this look at Everyday Essentials like toilet paper or laundry detergent. Women say bring that to my house. They dont want to go to the mass merchants anymore. Its very convenient. What amazon is doing is giving people their time back especially for these monday and chores like running errands over the weekend. Time is incredibly valuable. Amazon is giving people their time back especially when it comes to walmart, its hurting walmart and thats why the company is reacting so aggressively with investment in ecommerce to catch up. Men and women are asking them to bring it to the house. Thanks for being with us. The crude oil rally nearing an end . Should you lock in protection against another slump . We will discuss that next. Focusime for futures in which art rising to a sixmonth high as Goldman Sachs says the market has flipped to a deficit quicker than expected. Great to have you with us. On the supply side, the supply has been cut and it looks temporary. Come back online sooner than people think . I think so, the suppliers eventually, they have been overcome. Oil is one of the most fantastic turnaround stories and we are close to 50. We surprised if we see 50 in the next couple of days. It has been the plunge in the rigs thats one of the big stories which is down 80 in the last two years and the drop in u. S. Production. Where only at 8. 8 Million Barrels and you have supply disruptions like nigeria and people are talking about how long that comes back online. I think it will later this week. I want to look out for wednesday when we have that eia data. There may be another draw down of supplies. We will keep an eye on that. 50 is targeted and i would not be surprised that once we get slightly above that, some of the hedging comes back on and we reject that first time over 50 and will back up at the turnaround is real. Jon the inventories are huge. How much of a draw down do you need to see to get that price above 50 . If we see another 3 million daryles drawdown 3 Million Barrels drawdown, i always keep an eye and look out for what the Bloomberg Analyst expectations are. We will see that tomorrow and i wouldnt be surprised of its negative aura draw down in the expectation. You will probably see ill oil prices go back up. The dollar and oil have in correlated closely. How do you reconcile what potentially could happen in the efx market with crude . It is definite factor and we therelittle disconnect it is typically the shorter dollar pushing down the oil market but there is too many outside variables. And the euroit zones oh is in a tough situation so anything can happen with greece. These things start to come back after being off the radar. If the fed gets back on track and we start seeing stronger data points, you will see that thing strengthen. Jon thank you very much. Next, want the return of equities without volatility . We will explain what Corporate Bond market is doing. Jonathan this is bloomberg. About an hour away from the open, nasdaq futures up about a quarter of 1 , apple a big garner a big gainer in the premarket. The ftse down by about 4 10 of 1 , the dax closed for a public holiday. The at 11324, dollar at 1. 0 877. Crude oil at 47. 26, in november high a november high. With crossover to vonnie quinn. The u. S. Outh korea, and japan will hold joint military exercises next month, focusing on cooperating to detect missile launches from north korea. The north has been testfiring missiles and in january, conducted a Fourth Nuclear test. Opec repair finances that have been battered by cheap oil and the war with Islamic State. Its first a first for germany, clean Power Supplies almost all of the countries demand, was the boost Renewable Energy while phasing out nuclear and fossil fuels. Jonathan it is all about risk versus reward. Our next guest says we should favor our next guest is pimm cio for global credit, mark kiesel. Timely interest. You,to get to a quote from ,he increase in the limit enhance returns without significantly all thrilling altering the rest profile of the fun, how does that work . In creditee value right now, we see value in the investmentgrade market, high yield and also nonagency mortgages. Nonagency mortgages have a very attractive risk reward right now, given the fact that we are not making more of these bonds and housing prices continue to rise, these bonds are offering returns, riskadjusted so now is the time to increase credit. Jonathan you up to the count for 10 from 10 to 20 . Are you near it . We are not and that by no means suggests that we are going to 20 . What we are seeing around the world is low yield. If you look at what is happening in germany and japan, 75 of the Government Bond market is negative yield. On the 8 of the devil developed Government Bond investors are looking for income, we think it is a income 3 real growthto environment. Credit is a Good Opportunity for investors to earn their equity returns with significantly less volatility, so the case is compelling. Lisa how long do you expect the sweet spot in risky Corporate Credit in the u. S. , given the fact that we are seeing some stress in a variety of different markets . Mark within the highyield market, you want to be selective. 9 went on your show february and we said when oil was below 30, it would recover to 50 and as you know, it was quite controversial. Advocate buying particularly highyield energy or commodities, we are reducing that risk. There is value in highyield, and Building Materials, gaming, many areas in health care that look attractive. Management is key, you want to be more selective in highyield given the rally. Lisa how concerned are you about Liquidity Risk when you go into some of these sectors, given the act that the total return fund gives investors daily liquidity and the potential to redeem . On a we are sitting significant amount of cash in all of our portfolios as well as the credit portfolios. That gives us a position of strength. Pimco was one of the only buyers in the Energy Sector, so we were able to step into a market which buy very cheap very cheapnd buy assets. Investors can step in and capitalize, so when these markets dislocated, that is a huge advantage. David i want to talk about pricing and geopolitical risk, brexit in june, and the u. S. Elections, to what extent are you pricing in geopolitical risk . Look at the fed and the market, it is expecting less than one hike and less than two hikes, next year so the market in,rly is pricing this risk we think there is a higher chance the that will go, one or two hikes. In terms of credit markets, you want to be cautious on sectors tied to europe and china because china is rebalancing. We are more cautious on metals and the Retail Sector which has a big inventory overhang. We are sticking our investments investments on the u. S. Domestic economy. The u. S. Economy is almost 70 consumer and they are as strong as they have been in 10 years. We see significant value in telecom and gaming. Active management is key, and that is how we differentiate ourselves. Lisa there have been a lot of the stress situations, bankruptcies, how willing is p imco to get involved . Mark we are willing to step in. Back in january and february, no one was buying energy, but we were because we ought through our topdown bottomup analysis that many of these companies would in fact make it. 9turns out there are been billion of equity raise in the sector, so in our Research Suggests there is significant undervalued assets, we will step in and having that large cash that we have gives us a big advantage. Jonathan you called energy right. You look for that rebounding crude and energy assets. I wonder how you reconcile with a rebound in energy and then treasury yield going lower. What is the story . Mark the story is simple. The u. S. Treasury market is being set, not by domestic considerations but global considerations. Qe is expanding and that is because the bank of japan and the ecb and that qe is pulling down yield across the globe and that is why the longer maturity Treasury Bonds are not going up. You also have seen inflation yet to pick up. Constructive on inflation, we think that with china stabilizing, the rebound and oil and basically the domestic tightness in labor markets, we think inflation is going to rise. If you look at the facts, wages are up 2. 5 , jobs are growing 1. 6 . The income proxy u. S. Economy is up 4 . Economy thatestic is doing very well that is why we are constructive on inflation rising to 2 by the end of the year. Investors can capitalize on this by owning tips. They provide a very attractive hedge for inflation rising over time. Lisa you are favoring several areas in the u. S. Including housing, banks and consumers. Mark we like to Favor Industries where you have above trend sales growth and also significant Earnings Growth. Sales and Building Materials is growing two times faster in the overall economy. 8 ,are growing sales at more importantly because of the industry consolidating, a lot of these companies have 30 market share, so they have Pricing Power and because of operating leverage, your earnings are growing 15 . What that means for investors is a lot of Free Cash Flow is being produced and companies are using that to the lever. You are seeing leverage come down dramatically in the Building Materials sector. Fundamentals are very positive, what is happening is home equities are rising and the inventory is aging, some people who are buying existing homes are starting to remodel and the Pricing Power is there. The sector is deleveraging around the world. Mark marquee slur, keesler mark kiesel, think you so much. Thank you so much. Scott cutler and the philadelphia 76ers ceo join us to discuss their new partnership, next on bloomberg. Jonathan mrs. Bloomberg this is bloomberg. What he thinks the turmoil in brazil is leading to opportunity. David lets go to the morning meeting where we hear with what she thinks are talking about. John murphy joins us from his office in new york. Carjust released her annual wars study, looking at new carmakers and products. What did your analysis come up us , to mark with with . Come up with . John a big step up that is more normal, the automakers are spending like crazy on new product because they have been in a good cycle and this is consistent in the mid to late stages of a u. S. Auto demand cycle. Is, this ishing really broadbased among the automakers. There is a fair level of isomaker activity and gm leading the charge with about a 80 replacement rate over the next four years. Bring on moreu models, you will do better in the marketplace, which of the Auto Companies are going to be adding the most models . John gm is high on the list. Ford is not that far behind, honda and toyota are not that far behind. Him the divergence the emergence is smaller than it has ever been since we have been doing the study for 26 years. That will leave the automakers to lean on the supply partners for Good Technology to help differentiate the product as well as dealer partners at the pointofsale. Does this mean that we should be looking for market share gains from the u. S. Suppliers . There is a chance over the next four years that we see gains coming from gm, ward and at gmer, particularly because they are very focused on hot segments of the market, particularly the crossover segment and trucks. We are in the middle of a great resurgence and we think there is a chance they gain market share over the next four years. David crossovers and suvs, as that were the most models are coming . Than an better better third of the introductions coming across the line. Consumers wanting a truck like look and a car like ride with the utility of an suv. It is where the consumer is heading, a lot of great products with great fuel efficiency and truck like attributes. David that is john murphy, lead u. S. Auto analysis. Lisa in a deal that is among the first for u. S. Ports lees, stub hub has teamed up with the philadelphia 76ers to sponsor their jersey for the 20172018 season. This is the first of its kind in nba history. Onset with me is scott oneill. Along with scott cutler, sident of stub hub, scott, why is this a good time to do this and why the 76ers . Scott we can learn a lot from the brits and they have had logos on jerseys forever, so it is about time. This is an incredible time, the league is very hot, it is at its golden age and i think it is right. For us, with stub hub, it is a partner that fits. It is part of the overall fabric of business. Nike takes over the jerseys and is part of that coming in, we will have the nike swoosh. Of got dr. J ive got dr. J. David when you are watching nba, you see these guys up close and personal. You will be able to see stub hub pretty prominently. Scott that is key to why this makes sense for us as a brand. This generation is about experience and experience is the new currency and for us to be tightly associated with the experience and the performance, as is where we want our brand to be and that is the best way to get there. David if you are advertising and a traditional advertiser, you think you are competing with stub hub, on jerseys. This is about brand consideration, we want people to get off their couches and go to these events live and go to the venue that is why this is so exciting. Teams are shown to 212 countries around the world. This goes beyond a couple of people in the arena seeing the patch. [laughter] is,than my first question why has it taken so long . Scott we have a lot to learn. There are some traditionalists that say keep the jersey. And i say nike logo, stub hub logo, both part of the experience and a makes perfect sense. And it makes perfect sense. Jonathan the soccer experience is that the rich clubs get even richer, they are the guys that can get out there and get stuff up to pay the millions. The league is that of the bottom of the poorer clubs, they dont get the exposure in the same way, they dont get the same deals. That have that sports in this country, they try to keep rings equal. Scott 50 of the deal gets pulled and distributed to each of the teams. Doing this deal with the 76ers, would you do it with other clubs . Scott know, this is exclusive. David so if the Golden State Warriors came to you, tomorrow. 76ers. The 76ers the i have known scupper a long time, but will we like about the brand is their thoughts about innervation innovation. They Just Launched the new Innovation Lab with the 76ers and we wanted to find partners that have a like philosophy. David this is an experiment for the nba to try this out. Will we see patches from somebody other than stub have on other jerseys other than stub hub on other jerseys . Scott other teams will have patches on their jerseys, they have the opportunity to do it. It is the right time, but each team has the opportunity to do this. David and you do more than one patch . Scott no, and no disrespect to nascar, but it is about the jersey. Lisa you dont see people buying outfits of nascar jerseys. Could this have her sales of this merchandise . Scott i will tell you that as a data three daughters who are all active in sports, they just want to wear what the players on the field or court are wearing. We think this is very consistent. Boss, squaring up in the fa cup, the stadium is full of jerseys with a big logo on the front. Mark Scott Jonathan scott and scott, i just feel like i have to sort out my lining. [laughter] i bought mine was cool i thought mine was cool. David coming up, the search for yields, we let you know on the battle of the charts. Lisa take another look at shares of apple spiking. David it is that favorite time of the day, battle of the charts, julie hyman is taking oliver. Looking at earnings yields on the s p 500 versus the 10 year yield. Lots of questions about whether or not stocks are getting overvalued. We are at a pricing point in the stock market. At thely, we are looking blue line which is the s p 500 earnings yield, the inverse of the pe and this is a 10 year yield of the u. S. Government bond. The relationship we have today was not always that way. 2000, sinceto about 2009, we have seen this spread wide and out, higher earnings yield on the s p, you see that spread and if you take a look where we are, it has been about stagnant for the past four years but is still very high. Yield has been pushed down so far for so long that if you are looking at stocks and suddenly they may not look to expense as opposed to the pe which is still pretty high. This is to some degree, stock investors giving them some drag. Im looking at another way that investors are making their decisions and it and it is what they are prioritizing. All the cash coming back to shareholders in the form of buybacks or dividends, but sort of what investors are prioritizing to some degree. At the looking outperformance of an s p buyback index, then going into the early 2015, it was how these companies are using their capital. For companies that were the most efficient started to do better, but now it is dividends that are doing better, perhaps something to do with what all of her was talking about, the yield question as we see the dividends payers out before outperform buyback payers and capital efficiency. David that is a tough one. Lisa these are two fabulous charts. I learned something really interesting and julies chart and this chart raises a lot of questions, which is great. Let me put the pressure on mr. Weston and go with all over because it is so out of whack with whats happening domestically and i wonder whether he can really gauge much in the way that he used to. David im sorry oliver, i go with julie because this does tell a very important corporate story which i like, a lot. Up, dawn , aing world to were in the search for opportunity. Hiim here to tell homeowners that are sixtytwo and older about a great way to live a better retirement. Its called a reverse mortgage. Call right now to receive your free dvd and booklet with no obligation. It answers questions like. How a reverse mortgage works, how much you qualify for, the ways to receive your money. And more. Plus, when you call now, youll get this magnifier with led light absolutely free when you call the experts at one reverse mortgage today, youll learn the benefits of a governmentinsured reverse mortgage. It will eliminate your monthly mortgage payments and give you taxfree cash from the equity in your home and heres the best part. You still own your home. Take control of your retirement today jonathan the buffet takes a bite into apple, the shares rise in premarket. Monday, 5. 2 billion deal and gannett ups its deal for Tribune Publishing by 22 . Rise,oil on the production continues to push crude prices higher. Goldman forecasting 50 a barrel in the coming months. David we are just under 30 minutes from the opening bell in new york, this is bloomberg. Morning. What a up, nasdaqming futures of about five points. Nowhere. Ind of going the ftse rolling over, a touchdown by half a percent. Headline the board, a in the commodity market, wti at a november 2015 high. What you are seeing is creeping higher by about three basis points. Lisa it is a yield curve morning. It is time for the three stories that matter to markets. Joining us is investment director of private assets. Berkshireare talking hathaway buying shares of apple, im in a monday and rising oil. Warren buffett, Berkshire Hathaway disclosed a 1 billion stake in apple, buying over 9. 8 million shares. Companys shares have been on the slide over growth concerns after a softening in iphones. Theyll. What is your take . You are presuming i can think like warren buffy Warren Buffett. I have read about him and the things he says and i think the first thing he sees is a very strong Competitive Position what he calls the moat around the castle. He also focuses on the Management Team, the quality of. He team if you take those two things together and what you are saying about the slide of the shares, he sees what he likes to see which is a margin of safety. Is paying below what he thinks a fair market value of the stock should be. Lisa as this mean that he is going in tech . Federico i think Warren Buffett is known not to particularly love tech and what he sees in apple is less of a tech me at this point. They obviously have a tech component, but they have a a stream of very recurrent revenues. You can know where apples revenues are going to come from over the next five or 10 years and i think that is what makes it attractive to him. He is not taking a huge tech risk, it is more about the cash flows of this company can already generate given his level of maturity. Julie we have seen a big slowdown, this is the quarter over order revenue growth. It was a huge grower going back to 2011 and has slowed considerably and had that drop in revenue last quarter. When i think about other Berkshire Hathaway holdings, cocacola, kraft heinz, ibm, they are not the sexiest companies. If you think about one of these things is not like the other and you are looking at apple, i wonder what it also says about apple is not being an Exciting Company that once was. David you are saying that you do not think apple is sexy. What federico also likes a strong balance sheet, which apple certainly has. He loves a cash business. Consumer facing any does understand consumer facing can it is a consumer facing business and he does understand consumer facing businesses. Federico hell was talked about the Management Team with a High Standard but i agree, i think there is also the ability to continue to make transformative acquisitions if there are upsides, but at this point, many businesses within apple are cash generating. Significant cash generation is what buffet usually likes. Jonathan that takes us to story monday,wo, it is m a pfizer buying pharmaceuticals and only media side, cannot gannett upping its bid for tribune by 22 . Looking at the potential for a couple of these deals, it seems the premium gets bigger and bigger. Last year, how are people going to reconcile . Comes from a pretty run couple of months between the government and the eminent and the loss of the m a it was trying to do, but it shows that big, is pushing a huge price huge rhenium pipeline premium pipeline. I think one of the drugs they are interested in and will be approved but there buying is the future and i think that is why you see these premiums that will continue to increase as long as they can get the cost of capital as low as it is. Lisa you think now is a good time for pharmaceutical companies to be buying one another given the fact that we have already seen some trouble with our game and valeant allerganrgen and and valeant . Therico they have lost ability some want to create the next big blockbuster drug and the wave to ask is through acquisition and i think the trend toward acquisition will continue, whether it is a good or bad time, we will see if this was a good price point for pfizer to be coming in. Oil, the third story, rising to a sixmonth high. Goldman sachs is the oil market has flip to a deficit sooner than expected. Production disruptions in canada and nigeria have cut supplies by up to 2 Million Barrels a day. Demand, with sustained that has caused banks to raise expected prices to 50 a barrel by the end of the year. What do you need the oil price to be . Federico we invested in a company and needed the oil price to be 23, so we are hopefully in the money. It is interesting that goldman was saying oil was 25 a couple of months ago. Predicting the predicting the price of oil is a almost impossibly difficult affair. With a world of Oil Companies in general, they will not believe all by the wayside. Is the second thing is, at 50, you will not see the massive issues that we thought we would have with cheryl with shale. There are many oil products in basicallyhat are reproducing at breakeven or slightly above break even. Lisa given the fact that we have seen such a rapid surge in oil prices, can the disruptions simply evaporate and we are back to 23 a barrel . Federico we could, and i think it is going to be interesting to see because if you see the worst phase, it was trying to get the show producers out of the market and most of these shall producers ended up stopping the completion of their fracking wales and stopped fracking wells and stopped producing in the u. S. And if they turn them on, you may have a head fake or you may see reduction and inventories and stockpiles start to go up again, and then we see a return to the price. Jonathan what was the Company Position . Federico it is in the u. K. , so. T is in your area federico some of the stories that matter to markets, 20 minutes away from the open. Julie im going to bring together two of the stories, talking about oil and deals because we have memorial resource development, and 3. 3 but in dollar all stock deal if you put in the debt, gets at the 4. 4 billion. 75 a share is where it values memorial. Shares have bounced back by 70 this year, hence the all stock deal, and essentially it is getting access to some new properties in northern louisiana to take advantage of the rebounding price of oil and natural gas and also potential exports of natural gas in particular. Is when its a look at the oil and gas movers we are watching because we are seeing a general across the board lift in these stocks. Energy, marathon, is are traded stocks in the premarket as we see this bump in oil prices and also related to that deal. Finally, speaking of another deal, this when bringing together europe and the u. S. , terex is selling its lifting your business to combs crane of finland for 1. 3 billion. The abandoned a full merger, but this paves the way presume lion of china to buy the rest, excluding that lifting your business and you can see shares are searching in early trading. Lisa lets get the bloomberg first word news with vonnie quinn. Hillary clinton and Bernie Sanders are campaigning hard and heavy ahead of tomorrows president ial primary in kentucky. Secretary clinton visited a Union Training center while sanders also campaigned in the bluegrass state. Voters also go to the polls tomorrow in oregon. U. S. Attorneyia, of state john kerry that with the king about conflict in syria, yemen and libya. There have been violations of the truce on both sides. Cruiseship largest has set sail on its maiden for age maiden voyage. Harmony of the seas has 16 decks, 23 swimming pools and 5300 passengers 6300 passengers. Everybody is looking at the Supreme Court as it is going to bring some decisions. It is a eight member, split cointreau and four. Are they holding off on important decisions . Stop nextnext stop. Next. Jonathan 60 minutes away from the market open 16 minutes away from the market open. S p 500 futures seem to be going nowhere throughout much of the day. David tom keene falling asleep with you when he was here. [laughter] it is decision day at supreme at at the u. S. Supreme court. They will feature a variety of rulings that could be important. Ning us now is greg store joining us now is greg store. We are talking about affirmative action, abortion, immigration, although that is really less likely. Over puertoase ricos debt and its ability to force its creditors into a bankruptcy type proceeding. David lets talk about that puerto rico decision because it has been undercovered. Puerto rico has its own bankruptcy statute that they want to enforce their own bankruptcy statute with with which would sort of preempt what congress is trying to do. This is a case that you came into it and most people thought puerto rico was going to lose, the court was going to say no, puerto rico cannot set up its own local law and is out of luck until congress acts. People came out of it saying there is a chance the court could say this is fine. If the court agrees and puerto rico holds up its statute, congress can still act, but it gives puerto rico a lot more leverage in those discussions. Lisa sticking with puerto rico, given the fact there is such a kind words time constraint, when the Supreme Court take that into consideration in expediting their decision . That they need to expedite it because the court ends its term at the end of june. Probably the court will be anyway, that said, they understand that this is a pressing issue and they will try to speed things up when they know is a special that when they know there is a special urgency. David there is a consumer case involving internet that could have some broad ranging effects. What do you think about what the court might do in that case . That is a case for the court has a spectrum of options. Data broker over internet profile that had all sorts of errors in it and the question is whether that person can soon without saying they suffered economic harm because of those errors. A dozenld affect statutes and congresss ability to authorize consumers to sue, but theyre also narrowing ways that the court could decide this case. Coming up, the investment director for private assets is currently invested 50 of the u. S. Invested 5050 in the uris in the u. S. And europe. David investment director of private assets, looking for more global assets to have invest cash in. One bright spot according to him is brazil. He says the political turmoil has made the country a good entry point. There has been a runup in assets in brazil, already. Why isnt it fully valued at this point . Taking a step back with brazil, there has been a significant amount of turmoil, but if you think about what they have been able to accomplish, that sets the stage for a potential for recovery and most of what is happening in brazil is really selfinflicted. The country should not be contracting 3 to 4 this year because nobody is, but i would say that what i find interesting as we can take a longterm view, the second thing we see right now is that there is a currency overlay, the currency is available in not seen the last 40 or 50 years, so if you take those together and look at what the fundamentals of the country are and put those someher, there is still further appreciation that one could see. When you go into a place like brazil, how do you get your arms around what the Company Really is and what are the numbers are right and what the regulatory system is . Federico that is the biggest problem in brazil is understanding with the financials look like. Dos poorly pervades will we across the world, we look for companies that have very strong heritages in terms of regulatory oversight, we look for companies that going back to buffet and theonly a minion, but reality is, we look for companies that have the ability and generateevenue significant cash flow and hopefully they come from a heritage were you can actually get your arms around those problems. We are looking at one asset that would have those characteristics. Lisa we just came back from where you were hopping from place to place. One place is china, that you were not as enamored of when you possibly visited. Why are you not so enthusiastic about china . It is similar to brazil were the political and economic environment sort of converge. Political have a environment that is dysfunctional and eight economic environment that is functioning and a economic environment that is functioning. Jonathan what did you see in china . I imagine if it was to negative because you would not go back. Federico i was actually in singapore talking among other people who invest in china. When i used to go, it was all about china, everything in china, renewables and consumables. Now it is less about china and more about india, southeast asia. The absence of evidence or the evidence of absence is what makes it interesting, there is less interest in buying chinese assets. Jonathan a lot of people are going to shift into your world very soon because they cannot get the returns, the yield that they want from the traditional bond market and the conversation we had was that they become private lenders to some extent. Are they tourists in your world . Federico you see these things when things hit a wall9. Hit a wall. There are a lot of people going into the lending market in europe, but you also see players who did not used to be in this market who are very heavily getting in just in the search for some premium above the risk free rate the rest rate. Lisa there has been a lot of withdrawals from hedge funds, particularly by insurance companies. Are they putting that money into private equity . If youo i think so, look at the statistics, the private equity is a growing asset class and it is because it is the one place for you see yield both through equity and debt. You see funds getting directly into this market. I have not seen the u. S. Pension fund, but i think you see the rest of these behemoths, the sovereign wealth funds that the Pension Funds actually get directly into the market and there is a significant amount of Insurance Firms around the world that i met him visited with that are making middle met middlemarket direct lending. David you are doing some demographic investing and you are in the aging possible that population, tell us about that. Federico advocate is a general term that that is one of the things that is respected of the shortterm volatility of the market, the world is aging and with the world aging, there are a lot of markets and submarkets that are interesting, which i think feet into the longterm trend. Talking about drug development, there is a significant number of drugs that are being developed for the later days of our lives and we invested in a company that actually helps pharma develop these drugs. We also look at a company in a theer of Natural Products better for you type products which is a hugely growing market and is also related to lisa what is your most contrary and that . Contrary and that contrary anian bet . Mostico one of the difficult committees we had was getting through a process where we were investing into a falling knife which was the price of oil at the time, but now it has become more of a crowded trade. David thank you, so much. Jonathan investing into a falling knife, i like that. Futures of stable throughout much of the session, nasdaq futures of about six points. Approaching the close in europe, the ftse down a third of 1 . We discuss, very shortly. Show me top new artist. Ah, ha ha. 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. Jonathan this is bloomberg. Just moments away from opening bell. Allow. Me to get you to speed on Global Financial markets. Future stable throughout much of the session. Of about a single point. Plenty of markets close, including the german dax. As you hear the opening bell here in new york city, let me go through the Asset Classes for you. 1 on thef 2 10 of dollar. The dollar yen taking a temperature gauge of the fx market with the weaker japanese yen. Yields are up about four basis points to session highs. The big story in the crude market, 47. 25 seconds into the open, lets strip it back t to get to julie hyman. By oilparsley helped prices going higher, that will do some of the Energy Stocks in premarket trading could nasdaq leading the gains of about nine points to that is likely due at least in some parts apple, which is been talking about. Aftershare are higher Berkshire Hathaway diebold a billion dollars state diebold a billion dollars state stake. We have talked about this a lot of appleshare so berkshire is seeing value their. To acquireeing anacor. Those and a course getting a nearly 35 boost. Experimental an treatment and development. Pfizer shares trading lower by little bit. I just quickly want to bring you into the bloomberg and take a look at ma go. This looks at mergers and acquisitions. The blue lines are the deal volumes, the dollar values of the deals that we have seen. Last year was a big year for drug deals. Then you have the green line, which is the number of deals. The ones line is the deal premium. The deal premiums kick up in the early part of this year because stock prices have fallen. You get some larger premiums in some cases. There is the deal signed to get done here. Raising tolishing 15 a share here. Thats an increase over the prior offer. Ind net has been resisting order to avoid being taken over. We are waiting to see if theres any response from tribune to this latest offer. Jonathan lets stay with the markets. Companies have snapped up trillions of their own stock, but the biggest decline in buybacks since 2009. David joins us now. I believe youre staying bullish, but i want to know how you factor in the lack of buybacks into that call . These are Share Buyback announcements and not what has been executed. I think you also have to make a distinction to what actually happens and what companies intend to do. Earnings were down about 8 on a im sorry, 6 s in the first quarter. It is not tetley surprising that we are seeing a little bit of slowdown in buyback activity, but thats probably going to be the low point for earnings seeth and we should Earnings Growth resume in the second half of this year. It will probably support some further buyback activity going forward. Be queen, but a company ought to be buying back their shares when they are good bargain. If of this because some companys are concluding that they are fully valued at this point . David l. i think thats a fair point. Share buybacks tend to be somewhat cyclical. Companies are buying back stock usually when the have the cash. They have the cash when times are good. I think its more a reflection cashlittle bit lower flow incorporate amerco today because of what is happening in the Energy Sector as well has been happening to financials. I do think as those cash flows come back that you should see buyback activity improved. Is this the best time to be buying back stock . You want to buy back stock when shares are cheaply valued. I would say they are a little bit higher than average in terms of valuation right now, but i do not think it is terribly excessive at this point. Lisa what are you seeing companies do with their money that is giving you confidence to at least hold steady . David l. the way we look at it is that its really all about what is happening with earnings. Risings, share prices should be rising as well. Obviously valuation matters in that equation as well, but earnings are the primary driver. If you look at what has been depressing earnings over the last 18 months or so, it has been energy, it has been the dollar. In the first quarter, financials were a little bit week because of headwinds specific to that sector. All those issues are Getting Better on the margin, so that should provide a little bit better tone for markets as we go to the second half of this year and into 2017. Your marginalin call, you have a preference for small caps over large caps. Is that a valuation pledge currently . David l. valuations between small and large are relatively fair. Its more of a call on the fact that small caps are a bit more cyclical than large caps. We are going to see a little bit of improvement in Economic Activity and Earnings Growth. That should support Smaller Companies on top of that. Interest rates will creep up a little bit. That tends to be more of a headwind for the higher dividend paying large caps. A little bit of a cyclical improvement, a little bit of higher Interest Rates, and that in our mind leads us to favor small cap slightly. Are down andnings they are not buying as many of their own shares back, which affects price, you the priceearnings ratio has to go up or the value goes down. Isnt that right . , thisl. i mean, i think is going to be the worst part for earnings. We are going to see Earnings Growth resume, but in order for and move up higher faster than earnings, you would mathematically see some multiple expansion. Thats not our call. We say that market gains will be driven primarily by earnings, especially as we go into 2017. Lisa earlier in the show, we have bob michael talk about how japanese investors are flooding to the u. S. To invest in great bonds and fixed income. Pimco is saying the same thing. Goingch of this money is to u. S. Stocks and why is it more of it going into the u. S. Stocks . David l. i do not have the data on where foreign flows are coming into different Asset Classes, but i would say at the end of the day that if Company Fundamentals justify paying higher prices for stocks, i think you will see that. The other thing that people lose sight of is that pe multiples are slightly higher than longterm averages. The longterm average since 1960 is only slightly lower than we are right now. We also have a low Interest Rates and very low inflation. Thats a pretty supportive environment for pe multiples. As we get better corporate fundamentals, valuations that are not problematic, i think that is what drives markets higher. Jonathan david, thanks for joining us. Lisa coming up, between participating in a potential bid for yahoo and the billion dollars stake in apple, is Warren Buffett suddenly chasin changing course on Technology Investments . We discussed, next. Bloomberg. Tonie range and access northern louisiana. Raiseps looking to money for ipo after failed buyer. A jonathan ftse down a tenth of 1 . 47. 62. 2007. Est since yields to 1. 74 . Across the bloomberg. Buying pfizer is anacor. Becuase ofn control ceo. Nes from the yne biotech trading sharplu higher. Andons stock could rise poised toe multiply. Lisa nothing like discussing eczema. Fungus and news driving apple shares higher in early trading. Backing a said to Group Bidding for yahoo. Is this a sign he is changing his tune . Great question. He is yahoo case, willing to back that bid. Billion a holding at a dollars, which is not much for a stock investment. Is this something they are going to add to . A question of a successor . He brought these two guys in theirve been building own portfolios. Other in his 40s and the they are buying it. Lettingaybe hes them have their heads. An interesteres there. Thisey are doing independently and liked the fundamentals. Lisa what are recent investments made by underlings . General motos. Rs. There have been a couple in the oil patch. A couple years back, one guy made an investment in intel. Isnt were saying this buy and hold. They are selling out of it. David very unusual. Excetpions like exxon, but thats unusual for him. Ton ofes not a portfolio turnover, but they will hold it a couple years and will sell. Turning to yahoo, where buffettsfit into Current Media holdings . More would be structured like a fixed Income Investment. He has helped people with deal financing. Terms. N gets nice take often he will upsides. Withaned a lot of money media general, but ammade a fortune. Lisa this is not a bet on yahoo. Is that what youre saying . Warrants thatts if it does well, ghe gets some of the upside. Bloombergext, markets. Dollar andty in the whats to come this summer. Hike toy avoid a rate avoid brexit noise . Backedg the commercial market, what is days . G real estate these bloombergper into the 200index, ranking the top public paid executives. Paidumber one highest female executive. We will have a ranking of all the highest paid women. Abbott on how low oil prices are affecting his states economy. Jonathan this is bloomberg. Just over 20 minutes into the session, lets get a check on markets. Up half of 1 on the markets. S p 500 following three straight weeks of losses. The ftse 100e, creeping into positive territory as we roll toward the close. Heres the situation across that. Treasury yields giving up. I have to say that the big headline is that crude is punching much higher now. 47 and . 72. David it is been a pretty wild day. The possible buffett investment ofyahoo and theres a lot investment not fully reflected in the markets he. Lisa theres a lot of mystery. What are the driving factors . What is real and whats not . Jonathan we looked at a breakdown of the pe ratio. Its coming from growth down to value. It kind of looks like a Warren Buffett and company and very many ways. David whatever you think about the iphone, boy, what a bargain. It doesnt seem quite right. Lisa no was point was really compelling. It should be much more of a fixed Income Investment and much more the financing of a bid that has warrens viewpoint. David he has done that quite a few times. Remember the goldman investment and the bank of america where he made it in fusions of capital, which is basically fixed income . He had a right to get back with certain options, so he has done this before. We want to turn to bloomberg trends, a look at some of the top stories in the terminal today. You can find these for yourself on read. One that caught my attention was by our own michael bloomberg. This is a very important t subject. What this is saying is that sending all these kids to college is not necessarily the best answer, but there are other skills they can develop your they need post secondary education, but they do not have to go to college to be health care workers. Million investing 7. 5 and a program in portland that specifically identifies kids from new orleans as they come at a secondary school to have them have the training to get the certificate to really be conservative members of society. Lisa did you do work on this . David i cofounded a charity in yonkers and what we found is that its not always the right answer for these kids to go to for your liberals are education. And they come out with not necessarily the skills to get a real job. Youre going to get targeted on being a computer ji engineer. Jonathan is a cyclical on the labor markets . David figure out where the jobs are likely to be in the next 510 years and then target the kids for them, rather than train them for the things they cannot use. Lisa the danger here is tracking kids and getting them to attract were they do not have the option to broaden their skills and get to attract that is different. That is deathly something. Jonathan speaking of debt, the fixed income market. 10 year yields. If you have ever wanted to see what uncertainty looks like, heres the spread on the most bullish forecaster, down to 1. 5 . To 3. 5 , these are the urine forecast. Year and forecast. You know the debt market very well. It could be a very different world at the end of this year if you have a yield on the tenure of 3. 5 versus a yield at 1. 5 . This speaks to how uncertain the rest of the year is for a lot of people. Lisa listen to what i guess say and they are talking about potentially buying into highyield bonds and their people preparing for a recession. Its a split nature at this point. David we are all waiting on one person janet yellen. We are all guessing for what shes going to the. Do. Jonathan we are waiting for the fed to come out and say what they are going to do. We are all waiting for that one person. Magic may not be the operating word. Be sure to join us tomorrow. That does it for bloomberg. Bloomberg markets is next. It is to 00 in new york, 3 00 in london, and 10 00 p. M. In hong kong. I am betty liu. And i am matt miller live from berlin where it is 4 00. This is Bloomberg Markets on bloomberg television. Betty we are going to take you from new york to london to hong kong. Here is what we are watching. Oil prices surging to their highest level in six months, leading a rebound in commodities as Goldman Sachs increases its price forecast saying the crude oil market has moved into a supply deficit earlier than expected. Warns a vote in favor of a brexit could travel beyond the u. K. Border increasing negative rating actions on other e. U. Nations. Hasy Berkshire Hathaway taken a stake worth 1 billion, betting the company will