Transcripts For BLOOMBERG Bloomberg Go 20160718

We will have exquisite interview with the chairman and founder of Colony Capital, tom barrick. We want to check in on the markets. Jon is taking a look at the turkish indices and the turkish lira. Jon equity markets are down 5 . Not reflected elsewhere, you can see markets in europe fairly stable, the ftse outperforming, a third of 1 . There is a big move there. There is a 40 premium offered by softbank or that deal look looks like the ftse gets a nice little lift. Market, the turkish lira, a big move. Slightly stronger in todays session. But that riskoff tone not really reflected in the fx market, it is a weaker japanese yen story. We trade at 105. 62 on the session. In the bond market, this is where things get interesting. Last week, an ugly session for treasuries. Ields up 20 basis points again today, you see bond yields inching higher on treasuries. In the commodity market, slightly softer. 47. 36 is how we trade on brent. Alix there is news concerning lending club. Chiefk dunn will be the executive officer at the company. He had many senior roles at black rock, ishares, and barclays. The stock had apparel. After he resigned in may. Ick done lets go around the world and check in on Bloomberg Team for indepth coverage of all of our top stories. Riyadh hammadi is in istanbul on what is next for turkey after the failed to attend. Hugh son is in new york, and nejra cehic is in london on softbanks agreements to buy britains arm holdings. David the top story is happening in istanbul in turkey. React hammadi is from bloomberg riyadh hammadi is from Bloomberg News and what is it like on the streets of the stumble . Are people going on with their business . Are shops open . What is happening over there bank . I arrived last night, and it all seems quite normal. The only thing i can say was not that normal is that there are a lot of cars in the streets, people honking their horns, waving their flags, so a celebration of victory over the coup. I other than that have not been to ankara or other parts of turkey, but from what i can see, things have been relatively normal. David lets talk about the economy. The turkish economy was not having an easy go of it before coup. Tempted how will this affect the economy in turkey . Riad the crucial element is foreign money. That had been improving in the first five months of the year. Hey had a net inflow of money whereas last year there was an outflow of money. It was actually good news for the turkish economy. Now investors are going to be questioning the Political Risk efforts. David i understand that president erdogan is taking steps to reassure investors. What are they doing and saying . President erdogan has not spoken today yet. But his Prime Minister has spoken. The deputy Prime Minister, who is a member of the Economic Team , the last man standing in the economy team, they are reassuring investors saying that everything is back to normal, saying the central bank is having a meeting tomorrow on Interest Rates, which has already come out with a statement saying they will provide liquidity as needed. David many things to riad hamadi. I understand that the Prime Minister has put the number at 232 people have died in the two. In the coup. Alix the stock is up by about half a percent. But anyway you slice it, revenues are down. Profits are down. If you look at the actual earningspershare, up . 36, they beat by three cents. That is why you see the stock reaction up a bit right now. Alix how does this compare with j. P. Morgan and citigroup . The results are good. If you look at the results of jpmorgan, the results of citigroup, both of them beat because of their fixed income trading coming in higher than expected. If you look at the 2. 6 billion revenue in fixed income trading, that beat by about 250 million. On the flipside, equity trading revenue was like, down by 7. 6 . Also, net interest margins were lower. Talk to us about the downside. Hugh expenses have not fallen s fast as you would hope or expect. Net interest margin is compressed, the results of low Interest Rates, and they have not benefited as much as jpmorgan did by the december rate hike. There is alot to lot to look at. However, their valuation is low compared to jpmorgan and some other banks. So there is reason to be optimistic. Alix so it is all about value for that. Thank you so much, hugh son. You definitely want to head to the bloomberg. We do have news. Jon a chunky tech deal with quite a premium. , post brexit. There is an fx move to talk about. Lets bring in nejra cehic on softbank in the deal it is about to go through with arm. What is the stock price reaction . Nejra you can see it tracking on this chart, the holds jumping , up 43 at the moment. There was a 43 premium to fridays close, a 32 billion takeover by softbank of arm, cash. Ence per share in this will happen quickly, and you can see how quick the reaction happened as well. Let me give you some context because this share price move today is the most on record for arm. I have taken us all the way back to 1998. Short interest in arm holdings it was close to a sixyear high at the end of less week. People short on this stock are not looking very smart at the moment. Jon with arm you get every mobile Computing Device on the planet, the chips that go into those devices. The other thing to get the deal through is low execution risk. Onarly the market is trading a price that they consider to be low risk. They minister may says would move away from what she called a soft touch on one of the big deals. How do politics play into this deal . Nejra we actually got a contact a comment from the chairman of the exchequer, philip hammond. He said it shows the strength of the britain economy. He also said this deal would would turn this into a global phenomenon. It is positive from the u. K. Government at the moment. What might have helped is that softbank did say it would keep up their headquarters in cambridge in the u. K. , and would double the u. K. Headcount in the next five years. There were some concerns over reaction to this given what a homegrown tech Success Story is in the u. K. Thank you very much. The stock up over 42 in london trading. That is some of the big stories impacting the world of business. Here is taylor riggs with headlines. Rouge, in baton louisiana, the man who killed three Police Officers and wounded others was a former marine. The attack took place less than two weeks after it lacked man was killed by Baton Rouge Police. The there of will be daily demonstrations of groups before and against donald trump, and many of the elected officials and donors are showing their unhappiness with trump by staying away. Britains new foreign secretary says the u. K. Will not abandon its Boris Johnson arrived in brussels today. He was named the top diplomat in the shakeup after the country voted to leave the eu. Boris johnson it is good to be here for my first overseas trip, and the message i will be taking ismy friends in the council that in no way are we abandoning leading in europe. Taylor johnson said the events in turkey and france underscore the importance of working together. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world, i am taylor riggs. This is bloomberg. Alix coming up jon coming up, the fallout from a failed literary takeover. How it affects turkeys image as a stable democracy. More bloomberg is next. This is bloomberg. Jon from new york city, this is bloomberg. Joining us from new york city is turning us is mark grossman. For a lot of people from the outside looking in that are not familiar with turkey, i think they were surprised that those erdogansed president were also those who opposed a military coup. Can you walk us through the historical significance of military coups in turkey . Thank you for having me. I think this is an important development. The history of turkey over the years, they have had four military interventions, and i find it striking the fact that even those who oppose mr. Erdogan came out in the thousands to opposed to military to. They knew it would be bad for turkey, bad for turkish democracy, bad for turkey Going Forward, bad for the economy. It was a striking development. Jon it seems even though it failed it could be bad for democracy, given that president erdogan is speaking for executive powers. His role used to be ceremonial. How is this developing in the coming months . Marc that is exactly the right question. The issue is, what choice do they make . They have a choice to pursue the authoritarian path that they have been on. This increasing power of the presidency, pressure on the rule of law. Or the question for friends of turkey is, iit Wishful Thinking or an illusion that they might be able to take what happened friday night, the terrible death toll, the shock to the system, and recognize maybe there is a change in course required to i do not know whether that will be true or not, but that is absolutely the choice facing them right now. David the geoPolitical Risks for president erdogan do not limit themselves to the attempted coup. We also have the pkk and the problem with islam a state. He has to be concerned about security. Absolutely he does, and all of his friends, neighbors, alsos also have extreme have to be extreme concerned as well. If you see the comments from secretary kerry, what was the first thing on the agenda he act oh will you continue to fight isis, isil . Absolutely, the geopolitical piece of this is enormously important. One of the issues facing president erdogan is, can he restart or would he be prepared to restart a dialogue with the kurds if he chose to seek reconciliation with his own society . For that is a big question politics. The big question for business and investors, so far this years investors have been biased. When you cancel his people about the risk, the perceived risk in turkey, do they care about democracy act oh does democracy matter to them, or do they just care about certainty . Marc you are right about people making choices in business now. When you look at the economy, growth is slowing and tourism is down. What business is interested in is the rule of law. If they invest there, will there be rule of law . Do they have a chance to pursue their investments in an environment where they have a fair chance of redress, arbitration . I think that is what people will be looking for. Therefore, i think longterm investors are interested in a tolerant and pluralistic turkey focused on rule of law. We will see what happens next. David your point is exactly in the direction i wanted to go, which is the judiciary. We sometimes overlook the fact that real actions were taken and will continue to in terms of the judiciary. How concerned should we be as investors . Marc very concerned. 2700 jurists, including some from the supreme court, have been detained in some way. This rule of law question i think is fundamental. Is tolerance, pluralism, will of law. Those are all the choices that president erdogan and his supporters face right now. They can continue this path toward a more authoritarian system, president ial powers, or they can make a choice saying what happened friday night is a message that that system in Society Needs reconciliation. I do not know what will happen, but it is something we will all be watching for the future. Criticalrule of law is for turkeys future if they want to be part of the European Union. One member is set to leave the eu. I just wonder, the developments over the weekend and how you see this is set to continue in the coming weeks, months, potentially years, what does this mean for eu talks . Marc you would have to imagine that you took the brexit vote as , boy, i am glad i am a part of that. But i will continue to use my interest in the European Union to make sure this refugee deal stays on the agenda so that i can get more money, get more conversation with the European Union. So i think he will continue to see the refugee piece be an important focus on the conversation with the rupee in union. On the European Union side, they are going to be very concerned with a European Union. On the european side, they are going to be very concerned with brexit and what happens with the rule of law. The question here with the European Union is, can turkey and the European Union be honest enough with each other to get on with some useful ties, useful conversation, or will they continue to talk past each other . Rc grossman, former u. S. Ambassador to turkey. We are going to dig into these markets, the lack of understanding about politics. This took a lot of people by surprise on friday. Even people who know turkey inside out. Alix and with emergingmarket assets, many investors say they are bullish on them. What is the fact what is the effect on that . Second quarter profits falling by 21 . We will dig deeper into the report with the top analyst next on go. This is bloomberg. Vid this is bloomberg we are turning to bank of america earnings beat analyst estimates this morning. We are joined by paul miller, fbr and co markets head of institutional research. Paul covers the banks for them. Thanks for joining us. Give us an overview. They beat on revenue and on earnings per share. What do you take first and foremost away from these earnings . This was a Strong Quarter. The last two quarters have been tough for bank of america, due to the flattening yield curve and lower rates. But they did very well on the banking and investing and trading. Expenses were probably the lowest we have seen for these guys. They are still working through some of the tough situations they were put in through the crisis, but this is one of the better quarters we have seen in a while. Alix in terms of digging into trading revenue, equity trading revenue is down by 7. 6 , Wealth Management also down by 2 . Citigroup and jpmorgan set a high bar. Compare bank of america to its peers. And the other guys are much bigger in the Capital Market side of the business. When you get some really strong trading, those guys will fall to the bottom line quicker than bank of america. Bank of america is working through a smaller space that they have to work through. Relatively speaking, bank of america had a good trading quarter and a good Investment Banking quarter. David the equity trading was down, but their fixed income is up. That is much more important it fixed income is much more important than the equities in these countries in these companies. David yearoveryear comparison, they are off. The other banks are off as well. The thing that intrigued me was the return on tangible capital equity. How did they bring that up . Is theye bottom line had a Strong Quarter a year ago, so it is flat yearoveryear. The third and fourth quarters and the First Quarters of these companies were tough, so they are getting back to where they were a year ago in a very tough Interest Rate environment and a tough trading environment to boot over the last couple of quarters. It is tough for banks in general turn money today, and for bank of america, they are going to surprise on the upside and i think stocks will go up today on this news. Alix the other question to me was that the Consumer Banking unit, stocks were up today. That was different from the citigroup and jpmorgan, showing underlying consumer weakness. What did you make from that read . You are not getting all the real data, but, yes, consumers are still being tough out there bank, and it is still subtle. David as you pointed out, bank of america, perhaps more than its peers, are vulnerable to the swings in Interest Rates. When they come down, they get hurt pretty badly. What happens with Net Interest Income . Jpmorganstive to the of the world and the citis, bank of america tends to be more net sensitive. Rates going up and down like this is really tough for them. So david paul, thank you very much. All miller, fdr Capital Markets. Coming up next, the Republican National convention here on bloomberg. This is bloomberg. Jonathan this is bloomberg. Lets get a check of global markets. Gains,hree weeks of futures are a little bit firmer. In europe, things are stable. Some outperformance on the ftse 100. In the fx market, not risk off even with the events in turkey. There is a stronger pound and a weaker japanese yen. The interesting move last week was not the alltime highs in equity markets, it was a significant backup and treasury yields. Yield on the tenure were up around 20 basis points last week. In todays station, up another 2 basis points. Those are some of the moves in the markets. Groupon have to look at 11 . Piperp by about jaffray gave a 50 price increase, upgrading to overweight, saying they are not taking into account Consumer Loan growth. That helps groupon stock. Ericsson stock is lower today. The Company Recognized almost 17. 5 alien dollars in sales before clients were 17. 5 billion dollars in sales before clients were notified. Roche has a light cancer medication that is not showing improvement and that stock is down slightly in the market today. Lets look at whats making headlines. Taylor the Republican Convention gets underway today in cleveland. The party pozner National Chairman says it is Donald Trumps chance to convince americans he can be the partys National Chairman says it is donald trump chance to convince americans he can be president. President obama says there is no justification for attacks on police. The president spoke after amana baton rouge killed Police Officers after a man in baton rouge kill Police Officers. Described as a black former marine angry over the way black people were treated. French police have made more arrests in the nice terror attacks. For acquaintances of the man who run down scores of people with a truck were detained. The french government is defending its security preparations. The attack took place after the bastille day fireworks display. Day,l news, 24 hours per powered by more than 2600 analysts in 160 countries. Jonathan lets get back to the big story of the weekend, the turkish economy should have suffered growth effect after the military coup. Thats the morning mustread. Tom keene joins us now. He is a very interesting writer. Optimisticets and town so there is the optimism, nomic growth bus tryst buttressed against the politics since friday afternoon. Between the tension economic experiment of turkey which is actually pretty good and Everything Else which leads to what we observed friday evening. Jonathan what he writes about in this is the effects of military coups on autocracies and the effect of military coups on democracies. On democracies, if they succeed, it has a negative impact. Is turkey different . Tom every nation is different. Economics, every nation has a unique character. Clearly that is true with turkey from 1923 and the whole idea of a secular western istanbul based economy and the idea of the military being more ascendant. The military, unlike the politicians, have to look far east near northern iraq. The guests have come on the show and say continually em, the yell yield environment is talk pushing them into lowrisk environments. Is this a reality check for others . Tom yes and no. Em markets number of and i see strategists look to them for value less because of em markets and more because they perceive the United States fully priced. Proxy orut turkey as a mexico as of proxy for em, but you have to look at commoditybased em versus noncommoditybased. Look at when i political instability, you look at christine lagarde. You will sit down with her so what is your first question . Tom she will speak about some of the inside baseball. Go to theu have to immediacy of turkey and what institutions can do to assist mr. Erdowan. 6000 were detained it may be another 3000. The scope and scale of this is the equivalent to 25,000 people being detained in the military. Then you have to go to the challenges of europe which has been an institutional focus from the imf. Year,an this time last bright red was a message from the federal reserve. What is the message from the imf today . Tom the message for the Central Banks is that you cannot it alone. Christine lagarde was way out front a good two years ago to say to the United States that you cannot solve this through hi and the others. There has to be a National Response to growth. She looks pretty smart about weaker Economic Growth in the future if not out out right global recession. Jonathan later today, tom will sit down with christine lagardere. Alix to the politics of the u. S. , it is a big night i had an ohio as the Republican National Convention Opens in cleveland and we will preview that next on bloomberg. Alix this is bloomberg. Coming up, Colony Capital chairman tom barrett will join us on said in an exclusive interview you do not want to miss. Taylor the japanese softbank has agreed to buy british some might conductor maker arm holdings for 32 billion. They make money every time sample or apple or samsung adopted their designs. According to people familiar with the matter, blackstone unitts to take its homes public in the first half of next year and invitation is the Biggest Company in the home rental unit and would go public as a real invest in as a Real Estate Investment trust. The real estate boom in london is about to end. The london home values could fall by 30 because of of the british decision to leave the eu. Some companies will almost certainly have to relocate parts of their business from the u. K. To retain access to the eu single market. That is your Bloomberg Business flash. David thank you so much. Tonight, the Republican National Convention Begins in cleveland. Donald trump is facing a challenge with the weekend protest and fallout from the killing of three Police Officers in baton rouge. Megan murphy joins us from cleveland and welcome. Set the scene for us as we go into the convention, what is it donald trump needs to accomplish . good morning and welcome to cleveland. You can see people going in behind me where this evening, they will kick off the first night of the convention. The speaker this evening will be tromp. Omp he is trying to set the town for this convention after recent days and weeks of international and domestic violence. We had dallas, baton rouge yesterday and he will try to project himself as the law and order candidate with the most compelling economic message. And as the man who can really get things done. He will try to set himself as a different kind of candidate, a business candidate. We heard from what is his advisers last night. A set of it was up to him, he wouldve had fewer politicians and more businessmen on the dais. It will be a different kind of convention from a different kind of candidate. David we got an appetizer last night when donald trump appeared with his new running mate on television. He said we are trying to fight isis and now our own people are killing our police. Our country is divided and out of control and the world is watching. Pencer. Trump and mr. Tried to say that donald trump is the right person to address this but he was short on specifics. What specifically would he do to address these concerns . Throughout the campaign, donald trump is not been a man of detailed policy so dont expect that to change he. His advisers have talked about presenting him as a man and trying to humanize him and using his family. His daughter will introduce him speakingand his sons and his wife tonight and they will focus on projecting his record and what he has done and talking about what kind of family guy he is in talking about the principles he rest of that she represents. I dont think he will roll out to many more specific. He will leave some of that to mike pence. He is a much more disciplined candidate who brings that kind of Establishment Base with him to do the heavy lifting on policy. For donald, it will be about showbiz and the flash and i will be about projecting himself as a businessman and the billionaire he will project of the American People this week. , formerly apence member of the house of representatives has more of a track record on Public Policy and has been specific. He has been quite outspoken about against being against dodd frank and for more regulation of the fed. The nomination of mike pence indicate something where a Donald Trump Administration would go in terms of regulating the banks . If you look at his record, he was against tarp and is in favor of privatizing fannie mae and freddie mac. Donald trump also has been open about repealing dodd frank and he would be against future bailouts. That is akin to what we saw out of the crisis. Picking mike pants this is a guy who has been act of about being against tarp and for central policies that are anathema to many in the Banking Industry. Its a wing of the party that people worry about in terms of what a would do Going Forward. Aether or not we would seat Donald Trump Administration strip back. Frank when you talk about the specifics, its different. People in the financial industry want to roll back some of the to go onn, its hard when you have no details to go on. It is like shooting into the ee there for many people. Financial industry is watching closely in terms of specifics. David one of the reports from the weekend talked about contributions to the campaign and the nomination of mike pence might complicate things because a number of egg potential money donors to the Trump Campaign are doing business with indiana. Will this be a problem for them . Called a pay to play rule. Its a problem because of the strict rules that govern whether at question whether you are putting donations in. Donators say they will abide by the rules. Trump is struggling to raise outside money, he has funded a large portion of the campaign himself and came to the fundraising game late. This is not what he needs in terms of raising money. He has the ability to get all donors he needs to get all donors mobilize. He is struggling to get that money raised. Hillary clinton has a huge advantage and he will have to figure out who he will target and how he will close that gap. David thank you so much. Stay with bloomberg for more from cleveland. Will bell due respect at 5 00 p. M. Eastern time. Jonathan its monday. This monday, a huge deal coming through. This softbank deal is 32 billion to buy arm holdings. But price it in the end. The pound against the yen, down 20 so far this year. They look at a strategic view and then they look at price. 43 premium looks chunky in sterling but over the last year, it makes sense. I wonder how many Japanese Companies will i more companies will buy more companies. The last week, the war Prime Minister became Prime Minister, she said before the Prime Minister became prime the chancellor went straight on to twitter and said britain is open for business on open to foreign investment. Alix it helps their current account deficit. David what happens is the kiev says there is a 20 discount. Are you still interested . Jonathan there are fascinating angles to this story on the back of brexit and the way softbank got this deal done is pledging to keep the headquarters in cambridge and pledging to double the workforce in the u. K. Over the next five years. Assets are on sales but the politics will continue. David lets stick with brexit but go to ireland. Its one of the top read stories right now. Ireland is having trouble with brexit. I thought this would mean that people will move to dublin. That ireland is a major exporter to the u. K. With the pound plummeting, exports go down in irish shares go down and they have a problem. The Prime Minister has a problem with the possibility of Northern Ireland wanting to reunify because they want to stay in the eu. The only land border between england and the eu. Its a problem. Jonathan its a classic story of the shortterm economic consequences. In the medium to long term is where we will find the benefit of dublin. London with a big financial institution, you will decide at that point whether to go to dublin. We may not see the advantages for months or years to come. The Interest Rates could change in ireland. I am looking at ranks. At banks. Fixed income trading was supposed to come back in the Second Quarter. 15 and itosed to be was 14 which is the lowest since the economic crisis. The jpmorgan trading was so awesome, bank of america is good as well but its a high bar for Goldman Sachs and perhaps they cannot reap as much market share as they originally thought. I had to ask why. They had different customers. Citigroup and jpmorgan have large corporations. Goldman sachs has hedge funds and we know what happened to hedge funds. They also a Brokerage Firm so the quality of their customers have come under strain. The corporations have not. David if youre going to take market share, you have to take it from someone. Becoming ahis is contest all over again like it was in the First Quarter. Its a heat from bank of America Today with net income down 20 20 . Its ugly. You wonder when it turns . David those are some of the most read stories. Coming up, three economic reasons why the turkish coup failed. This is bloomberg. Jonathan from new york city, this is bloomberg. After three street weeks of gains for u. S. Equities, futures kicked up firmer. In europe, things are largely stable. Turkish assets are contained. Downurkish stock market is almost 6 after the failed military takeover over the weekend. Was open late friday when these events were unfolding. The biggest drop off in the turkish lira was 2008 area its slightly stronger. Tenyear treasury yields were up over 20 basis points last week. We add another three this monday. We talk a lot about what happened in turkey and why the coup failed. There are three economic reasons for why it did. The New York Times pointed out, it had to deal with debt, poverty, infant mortality rate per 1000 people is incredibly low, 11. 6 and it has come way down since the 70s. The other part of it has to do with growth. If your economy is growing and you are populating, you are doing pretty well and people will not be that displeased. Growth in turkey in the First Quarter was 4. 8 averaging 2. 6 per year since 2009. It is a slowing growth rate but well above the zero line. Last part has to do with poverty , how well off are your citizens . It is an they are not too shabby. Poverty as a percentage of population is about 1. 6 . This is the latest data we have from 2014. Its not the number but more the trajectory. It has not really gone down since 2010. It has leveled off and is well below what we saw back in 2003. Failed,k about why it you have babies living and not a lot of poverty and you continue to have an economy that growing above trend when it comes to other economies. David the president of turkey came in 2003. Alix so more of a case as to why they support him even if they dont like him very much. Tom barrickming up, joins us in a bloomberg exclusive. Turkey, power in is consolidated after military coup fails to bring down the turkish president. Softbank buysns arm. Alix bank of america is topping wall street estimates but profits to buy 1 and the stock is relatively flat. David welcome to the second hour of bloomberg. Its a busy monday morning with marcus responding to the failed coup in turkey and the bank of america earnings out this morning. Thethan softbank secured top banking Global Mobile holdings by buying arm for 32 billion. Alix coming up later, the tom barrick will be joining us. Lets check in on the mork its on the markets. The fx market was still open friday. A softer equity session in turkey and that hence mark was down five Percentage Points. There was no real spillover. The london was driven by the deal with arm holding. In the fx market, dollaryen last week was the biggest week. Yenakest the weakest since 2008. Continues. Kness a little bit of crude weakness, rent crude down by one percentage point. Story was the real the backup in yields. Treasuries at one of their worst weeks so far. The 10 year yields were having their worst week. They are off 20 basis points year to date. The selloff is continuing. We are at historically low levels on these yields but we see a continued backup. Alix lets go around the world and check in with our Bloomberg Team for coverage on our top stories. We go to istanbul for what is next on turkey and also in new york on thank of america earnings and also london. Picture ofpaint the whats going on in turkey. Thanks for joining us. How is istanbul different today than a week or a month ago . Think ever so slightly less systemic. I dont actually live here. It seems like a normal city. There are cars on the streets and the only thing i noticed last night is there were lots of cars honking so supporters of dowan were celebrating. David the market tried to reassure investors in turkey. What you see coming out of the president s office today . Ministerputy prime represents the euro where turkey was one of the leaders in Economic Growth globally. We had the Prime Minister today speaking, saying that things are back to normal and reassuring investors that turkey is open for business. In terms of activity, they it there seems to be a continuing wave of arrests. Moment, between the arrests and people fired from their jobs, more than 20,000 people. David how is turkish media covering this . What are you learning from the news pat newspapers and broadcasters . The media last night was focused on the demonstrations that erdowan had called for. Had whate tv stations appeared to be an old election add in support of the president. People were rushing to a flag and flying the flag. Ofre was some indication celebration. That erdowan won this battle. We want to hit on bank of america earnings in the u. S. , out about an hour ago. Beat on the top and bottom line but you still had profit down 21 . Is this a case of less bad for bank of america . Absolutely and for banks over all area they are exceeding low expectations and that is been the case all year. As the estimates go down and they put out bad news about Interest Rates and brexit, they managed to leap over those lower expectations. Alix nevertheless, where are the real pockets of growth . Where is the good news . There is no reliable sources of growth. It has always been about cutting costs. A hims quarter, you had from the investment thanks. There was higher revenue from bond trading but overall, the past five years have seen shrinking fees from trading bonds and equities in the trading are down by about 7 for bank of america. The other part is the Consumer Banking interest. You had bank of america saying the u. S. Recovery is ongoing but there were signs of underlying consumer weakness we did not hear about from j. P. Morgan and citibank. That makes you wonder if the bank of America Customer different from the other banks . They are a bit more reluctant having theirrs history of what happened to bank of america and their present us and their Predecessor Companies and extended credit and got caught short. Alix thank you so much and we will follow the Conference Call at 8 30 a. M. And we will bring you the headlines. Afteran softbank went arm for 32 billion dollars which is a they move in the stock market. Lets start with the business motive in the stock reaction. All on43 up on arm holdings. You can see the jump. Its a little below the offer from softbank. A 43 premium on fridays close. Looking at the context of this move, this is the biggest jump on record for arm shares and stock prices hit a record high. In terms of motivation, this move seems to be a that on the internet of things. There is the currency to take into account, weaker pound and stronger yen. They say this was not driven by brexit, its about driving the future. The other story is the politics of all of this. Talk to me about the political backdrop and how that has played into the deal. We heard from teresa may last there may be a little more of a clampdown on these big acquisitions of u. K. Companies. 15 minutes after the deal was announced, the chancellor said that this showed the strength of writtens economy in the wake of brexit and said the sale would turn into a global phenomenon. What might have helped is that softbank said it would keep the headquarters of arm in cambridge and says it would double employee headcount in the u. K. In the next five years. This is a company that has been considered a real home grown Success Story. It looks like the reaction of the moment from u. K. Government is positive. Jonathan thank you very much. Thats a wrap up of the big Global Economic financial and business stories. Taylor Louisiana State police are calling it an ambush. They say the gunman who killed three overs as and wounded three others in baton rouge was certainly seeking out police. The shooter was identified as a black former u. S. Marine and was killed in the shootout. 3 the killings happen less than two weeks after Baton Rouge Police killed a black man. In cleveland, theme of the first night of the Republican Convention is make america safe again. That was announced hours after the baton rouge killings. The convention will culminate thursday evening with donald trump accepting the partys nomination for president. Donors are staying away. The new posters that most french have lost confidence in the french president to keep them safe after the attack in nice. Most said they did not have confidence the government. Jonathan thank you. Debt has beenkish among the top performers in emerging markets and we will talk about the risk inem debt. Later on the program, a bloomberg exclusive with the Colony Capital chairman tom barrick. Much more coming up, this is bloomberg. Alix this is bloomberg. Turkey was a hot destination for many Portfolio Managers with the second strongest stock market and you had a lot of money coming in to five your turkish that. What happens now . We keep hearing we like emerging markets and investors seemed to have loved turkey before friday so what happens today question mark i dont know why anybody would love turkey except you have a strong leader who is now stronger. Im not sure people will pull away from turkey. The emerging markets that are interesting are those tied to china. I look to asia as the place to look. Its an area where in spite of what has been going on, we have had a good run. I think this is where the attraction is pretty you have to follow the demographics and you have to wallow china. Dovish centrala bank in developed nations like the u. S. And the u. K. And then you have the Political Risk. It seems that dovish Central Banks outweigh any kind of Political Risk factor we may see in turkey. I think the higher yield becomes an important part of the picture. Important ally in everything thats going on in the middle east. Weve got a stronger leader there. Im not so sure that money in the long run will pull away from this. The idea of a strong leader, whether you like what he is doing or not, is an important element. David beside the strong leader, it is a substantial economy and a has had good growth for quite a few years in a row and has become more integrated with europe. If you look at emerging markets in those senses, wouldnt it the a sensible investment . Yes, people have been investing because they thought it was moving toward the rest of europe. Its a question of whether this is a set back or not or whether the world is beginning to record guys, as much as you might not ore whats going on socially with religion or whatever, unfortunately, in that area of the world, you need strong leaders. That may pull money toward turkey. The eu has to work out a lot of rings. Jonathan after this has happened, the government has a long list of people they want to get rid of. That seemed to be there already because they moved quickly. Democracy is one thing but from the market perspective and investors, what are the consequences of the weekend events that would make you say that could damage investor appetite . Conflictve this whole around the world between capitalism and democracy. The more we moved to a raw democracy of the havenots who havee capitalists established the rule of law to their benefit, the more difficult this is going to be. I think it applies to turkey as well. Are the capitalists going to , they keep calling it a democracy, will that take effect . I think its a democracy that supports what is going on on the capitalism side. You have to talk about it being a capitalist country as opposed to a democratic country. Not all emerging markets are created equal. As an investor, how do you weight these . What do you look at . I look at the support from the government, whether i agree with it or not. I look at support of the government for the capitalist system, toward allowing investment to take place in the country and supporting that to whatever they do with their laws. If that is happening, as an objective investor, you have to put money to work there. Concept ofhave this looking for a democratic country in which to put money. You are looking for a capitalistic country in which to put money. Alix we saw that the flow into emerging market debt set records that first week in july. You had that search for yield. Investors will not flee turkish assets, what would be the best em investment Going Forward . Actually, i like the americas. Alix but they were hated for so long. You look at what the stocks have done in the first half of this year, almost every american asck, and i define american columbia, fuego to every stock market is up except venezuela. They already went through the populace thing and they are on the other side . There are some benefit for whats going on in commodities. You are the expert on that. Alix me . No. David you see this from brazil but you have been around long enough to know that in latin america, these bingo up and down. It has not been a Straight Line but it goes in long cycles. Cycleina had a very good that stayed with the dollar a little too long and that they had a terrible period but they are working their way back. A 710 year run and i think we are beginning to see that every year. Mexico is another place where this is happening as well. When you talk about the americas, its not an emerging market. Up next, we will take a look at the health of u. S. Financials and an exclusive interview with tom barrick from Colony Capital. Are 10 minutes away from we are an hour away from the u. S. Open on the stock market. The turkish benchmark is down almost four full Percentage Points but it has snapped back in the fx market. Its a stronger lire story this monday. This is bloomberg. Jonathan from new york city, this is bloomberg. Bank of america just reported secondquarter earnings. Over the last week, we have seen a series of bank reports similar things. The theme so far is loan growth. Pretty much every bank that has reported is saying the bank continues to grow loans and deposits and what they call a challenging environment. I think the loan growth which has been with us for a while, suddenly, people are seeing it. It is consistent with what has been going on with employment. These Companies Must be doing something and they must be having to invest money in one fashion or another. The money is cheap. I think they are borrowing. Corporations and services are prepared to put their money to work. They have to put it somewhere. Jonathan since 2008, you see the word loans and growth, that cant be good. David are we seeing increasing reserves for the banks as well . I think we are. They have to be very conscious of what their Balance Sheet is. They have figured it out. Corporations also understand they have to provide a very good allens she to get the money. Enough of it is happening. A very good Balance Sheet to get the money. Some of the underlying quality of the loans has become worrisome like auto loans. Things have to go down the quality scale to find the cool guys who want to borrow money. What is your take . On the auto loans, that is similar to what we saw on the housing front. You are dealing with individuals there. That, what we are seeing is loan growth supporting an actual business as opposed to there will always be some issues around the individuals and the loan effort there gets to be more friendly. David what about commercial real estate . There is concern about the growth in commercial Real Estate Lending and they are lowering underwriting standards. Is that a problem . That is beginning to happen to some extent. I look at where a lot of the moneys coming from. Its coming from the banks but its also coming from financing away from the banks. Everybody who is financing away has almost as good a legal staff as they have loan officers. They are putting in covenants. Jonathan to wrap this up, if you were to set up a banks several decades go, you will want deposits and demand for loans and that would be great. We dont have that so these banks right now are wellpositioned to take advantage of a rising Interest Rate environment but they are not getting it. How can the increase deposits and loan growth in half and when will it pay off . Maybe i can say after july. I think the july employment number will be significant. July is a time where nonadjusted people are leaving the workforce, about 1 million and it gets seasonally adjusted. Given what happened in june which was an overstatement, it indicates that Something Different is going on here in the hiring pattern. July could be a very interesting month to determine whether the fed will move sooner rather than later and it will take a fed move until these rates go up. Alix thank you so much for joining us. Great to get your perspective. Perspective,reat coming up, the founder and ceo of Colony Capital, tom barrick will join us in an exclusive interview next. This is bloomberg. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. Jonathan for our viewers worldwide, from new york, i am jonathan ferro. We have a series of all time highs and we could have another one in todays session. Futures are for her to kick off the week. In europe, equity markets are largely stable. Performance in europe is up. 4 , driven by significant performance by Arms Holdings after the takeover with a 43 premium. , a substantially weaker japanese yen. Another session, another day of a week japanese yen. Yieldsbond market, bond with german 10yearold up to 20 basis points. Worst week so far. Yields on treasuries pushing higher across the curve. Inelds come again on the u. K. , four basis points. So the risk in turkey but you dont see that they threw Asset Classes in other points in the world. To dothe first one has with lending club. The Company Announced this morning that it will get a new Financial Officer. You see the stock moving up higher in the premarket. This company lost value in the ceo resigned so they are bringing in new people. He will be coming from lack rock. Moving to groupon. , sixstock is popping dollars a share. A 50 increase. The take away here is that they seem more Customer Growth than what is modeled in other customer forecasts. Mover isgreat ericsson. You had a Swedish Company say they lost sales before paid. S were lets get an update on what is making headlines outside the world of business with taylor riggs. Taylor authorities in louisiana say the gunman sought out Police Officers and ambushed six of them. Three officers were killed and three others injured. The gunman was killed at the scene and has been identified as a black warmer u. S. Marine. The republicans unconventional convention. Trumpwho oppose donald are working to oppose the gathering. Are of the republicans showing their unhappiness with donald trump by saying away. Demandingresident is that the u. S. Turnover and islamic preacher he accuses of inspiring the coup. He has repeated his demands and ts the u. S. To expedite who lives index ill in pennsylvania. The u. S. Says turkey would have to prove its accusations. Global news, 24 hours a day. Powered by our more than 2600 journalists and analysts, in more than 120 countries. I am taylor riggs. Thank you. We turn to Erik Schatzker who is joined by tom barrick. And he is a speaker this week at the Republican Convention. Erik that is where i am going to start with tom barrick. Ack. Great to have you here. What do you plan to say . I plan to try to give a point of view that nobody has heard before. An up close and personal view of the man. Has been a friend of mine for 35 years. On andbeen in business off with him for 35 years. We had our kids birthdays together. We buried our fathers together. Im going to try to give a point of view of a character of what you dont see every day. Erik what is it that we dont see . See isat you dont compassion, commitment, dedication, character, integrity. You see that in his children. They say the measure of a man is simple look at the kids and you get a good glimpse of what that elixir, that blend of things are. ,ut if you look at the moment the world is shattered and it is at a Tipping Point and we need a leader. Being theship is not best military strategist or having the most experience with Foreign Policy, as we have seen, it doesnt lend very well. If you someone who has a vision who can inspire people. Who can take a vision and make it a reality. And what im going to do is give a glimpse of what he has done in the past and the character and integrity of the man inside the donald. Erik what do you hope it will do . What impact are you hope that your speech will have . The reality is that it wont have much impact. Organized, theis political process is quite complicated. So even when we talk about voters, we are in a representative elect oriole system. So your vote matters but we have an electoral college, no one understands that. But i think the impact it will have is that one person sitting in the field with him, having watched it all and talking about character and integrity and can , he ist and build teams standing with governor mike pence. An unbelievable first pick. It was thoughtful and considerate. In seven minutes i want to give an insight of the financial person who has run around the world and has seen most of the big businessmen and finance leaders of the world. What i think of him on a personal basis. Erik you till me a few weeks ago that your support was not political. So why do this . On stage anding speaking to party delegates, it is a decidedly political act. Tom it is a decidedly active act. If you look at the world today and you say, i dont want to participate, you will participate by being taken away from us. Right . There is no good news at home. So look at the social imbalance of what is going on and the status quo is not acceptable. If you dont have people from the outside who are willing to step into this quagmire donald trump is one of the few. Nobody sane wants to go through this unbelievable death march of agony in order to get to a political job. And it will be the worst job he will ever have. He has money and he has all of those things. So im behind the idea of having saying, what there i will do is chip away the status quo. Itther he gets there or not, is a great thing for america. That is why i am there. Erik so you support donald trump for leadership and a break political tradition and the status quo. What about some of the other stuff that people have issues with . You are the grandson of an immigrant. Do you not have some personal issues or concerns with some of the antiimmigrant rhetoric from donald trump . And the basic impulses it triggers in some americans . Nativism, xenophobia, even racism . Sure, it is a delicate balance. He has taken the politically incorrect route. I have grown up with my best s being sunnis and she has and the idea of muslim in my mind donald will tell you it is not a negotiating tactic that of someone who deals with them every day, it is a pretty good negotiating tactic because our friends and best allies like saudi arabia and the united arab are also theqatar subject of this fundamental despair that is going on inside of them. They dont like it, they dont want it. They want to stamp it out. It is a few of the billion muslims but america has to step in and have a descriptive Foreign Policy that is firm and supportive. It, what weok at have done with saudi arabia, the greatest ally of the 1950s and 60s. Although dobby, the same thing. And then in moments in which we have a catch and release Foreign Policy. We catch them and we support them until we dont like them and then we release. So that is what has happened across the arab world. , the gcccountries countries, they want a strong and supportive Foreign Policy for the u. S. It is the way he negotiates everything. The same with mexico. Mexico has the same issues with islam. Are they really going to pay for a wall . I doubt whether they are supportive of that. However, they have the same problem with illegal aliens sending money and arms back to them it is not a great thing for them. So i think all he is saying is look. The posture of what has been there is not working and we need Something Different. These are some of the issues that you take up in a piece that you have out this morning called globalization revisited. Stagnation ande growing inequality as the reason or among the reasons why so Many Americans are unhappy with the status quo and you diagnose some of the causes. I want to talk about some of the solutions. If donald trump president of United States, what would you have him do with nafta and the tpp . Tom nafta is a three decade old treaty. The idea of it was that if you take a concept, north america as its own entity it can survive by itself. We are surrounded by ocean. Weve never been attacked on our own shores except for hawaii. He shouldetting at, renegotiate. But the mexicans also want to renegotiate. The trade agreements, when they are born, are born out of Foreign Policy. See you have these financiers and unions saying, what is good for the American Worker . You have Foreign Policy diplomats who are primarily doing this for a militaristic and political purpose. Erik bankers are another group that you have issues with but they are not doing it for militaristic purposes. What would donald trump as president be able to do with unconventional Monetary Policy . Have deficit financing, we dont have a Gold Standard anymore. Erik do we go back to the Gold Standard . Tom no. But we have central bankers who have quantitative easing which nobody understands because every individual in the field says, i get it. Banks were too big to fail and now you bailed them out with more debt. I get that it is a problem. Aboutat should you do quantitative easing and the tax code and the federal debt . You need to ask him specifically. But you cannot affect the bureaucracy unless you crack because the bureaucracy will tell you that you need them to move slowly. We are dying and we are on the hospital bed. We have social inequality and division between lax and police. The police will step out and say ok, so that yourself. But look at what is happening around the world. Look at brexit. People dont want any more political dialogue. They want to see action. What is action . Stepped into the fray and rake it up. On nationalism my First Priority is the American Worker. I dont care about what the foreign applications are abroad. Ok . For lets talk about trade a moment. Because in this piece, you describe critically the act of 1930 pass at the outset of the depression which raised tariffs , and yet donald trump has said that he wants to impose tariffs on any country he deems as trading unfairly. How do you square those two positions . Tom it would take months to decide. You are a sophisticated financial importer and when you take that blend and say ok, i can manipulate trade and. Urrency so if i dont like my price, i can lower my currency and i will be more effective. I could do that through trade agreements or taxation or tariffs. I could do it through all of these instances. But it starts with strength. We have the largest consuming nation in the world. We have the power but we dont use the power. Somebody has to draw a line and say, this is it. So globalization, no academics can tell you that globalization has worked. They cannot tell you that. Eighte globalization is is a big illusion. The only thing that has really been globalized in Financial Services. That is what has been globalized. Cheaper goods, cheaper airconditioners made in mexico, dont hurt the carrier person in indiana. Problem with that Financial Services . Erik in this piece you talk about them appeal in 1999 as being one of the reasons that banks no longer function as intermediaries between borrowers and savers. Tom an interesting thought. Banks having the ability instruments created a perfect storm and the federally insured institutions that are taking depositors money and are syndicating weapons of mass it is the flow of the market. Transparency is the answer. And the too big to fail issue is complex. We have regulated the Banking Industry into a box. Ceos of major banks cant think. Above 50 billion, having the government monitor the details of that does not work. How did we get into this . In 2008, the toxic waste of sub prime was created by congress. Erik so how do we fix it . By hammering it down. Having someone come in who is not of them and say that he is going to make change. Erik does that fix the other . Roblem equity and real estate prices . Because we have a moving denominator. So of course there is a bubble. And the flood of exit capital is printing. In stamps of value exist these few assets. Are things Getting Better . No. Our corporations producing more money . No. Erik one last question. Of yourthe status Fundraising Efforts for donald trump right now . Tom its Getting Better. It has been slower. It is a slow moving train. And that is Something Else that has to be shattered. The political process. If people understood how fundraising actually works, there would be a revolution in the street. There would be. Super pacs are the only way to collect big money, they have their own agenda. I am not affiliated with them. So donald trump is disrupting the political process of campaign financing. Is not doings he so well but they also said the beginning that he would never be the presumptive candidate. So maybe there is a different element of the game going on when you look and say, where does the money go . Tom but he is doing better. He isnt doing as well as people had hoped and hopefully after the convention it will pick up. Erik thank you. People can read your piece and my colleagues have to cover turkey and baton rouge. Alix steel, my conversation with tom barrack. Alix thank you so much for rain that conversation. Moving to one of the top stories of the day, the lira down by 3 over the last few days against the dollar. Goldman sachs lowered its forecast for the lira over the weekend. So what is next . Enrique diaz alvarez joins us now. One of the most accurate forecasters of the turkish currency. You were already vulnerable on the lira, what is your downside target . Enrique probably 3. 3 . Versus the u. S. Dollar. We also expect the dollar to trade weaker. Alix so you were already negative before friday, one of the most bearish that i have seen. Presents arkey former abilities. In addition to that, it relies borrowers and the banks rely on the wholesale in the shortwing term in dollars and euros and that makes it vulnerable. 2003 with whatin we saw, it seems the funding is more longterm versus the short term that we did see in the last crisis . Enrique definitely, the banks have been very good at lengthening the base of the market. But nevertheless, i do believe it is going to hang a cloud of uncertainty over their ability. That, iton to encourages the central bank to maintain its reserves but to help them be able to deal as opposed to the currency. Alix tomorrow, the central bank has a meeting and there has been a call for a rate cut. 50 basis points is what the market is expecting. Do you think that is in the cards . Enrique absolutely. T has been made very clear it is very comfortable with loosening policy at the cost of weakening the lira. Be more swaye will over the central bank and we expect at least 50 basis points and a further weakening of the lira. About thet conversation with europe . There was a time when it was thought that turkeys future was with europe. Is it better for them to become more closely integrated . Or not . Enrique it is not that they really have much of a choice. European citizens that is another key source of currency. So over the longterm we think it will continue but over the short and medium term, we are talking about increased uncertainty and the pace of integration. Alix and it is about how we get there. Take a look at this bloomberg chart. We have a oneyear volatility. The one week is the white line with a huge spike in volatility that if you look at the year in volatility, the purple line is not that extreme. David this is nothing new for them. It is hard to run an economy when you have that kind of volatility. Enrique yes, it is. Especially when the key source of your economy is horizontal and exports to the European Union. Volatility has been realized on the downside which has been good. The exports to the eurozone have grown dramatically. So 3. 3 , one of the most bearish calls i have seen on the lira. Thank you for joining us, enrique diaz alvarez. This is bloomberg. Jonathan from the new york city, this is bloomberg and i am jonathan ferro. We are 35 minutes away from the open in new york city. The out performances on the ftse 100 is up. 3 . But you have to understand why. It is on hold up over 40 after a 24 billion pound approach. Dont talk about sterling, talk about it in yen. Alix this to me is the chart of the day. This blue line is the sterlingyen. An 11 decline. On the foot side, arms holding continuing to rally. This is basically giving stronger purchasing power to softbank. And even though they were considering a deal before brexit, a ceo will talk to the cfo and say, it is time to pull the trigger. David it is on sale. March down. [laughter] jonathan so the effects of the Brexit Effect is not just in the equities. It is a fascinating story and we will continue to debate it. We are 30 minutes away from the u. S. Open. This is bloomberg. E jonathan this is bloomberg. Stood forecord that 13 months and it got smashed four times last week. Alltime high u. S. Equities. Futures are firmer to kickoff the week. The pain isolated to turkish assets, no spillover. Sitting pretty up. 4 driven by the big surge in arm holding. Cross ryen currency a weaker japanese yen, once again. Market, equities shifting forwards. Yields are up one basis on the twoyear. After a drought in treasuries last week as they come off historic lows. 30 minutes away from the opening bell. Counting you down on bloomberg. David we are just under 30 minutes away from the opening bell in new york. This is bloomberg. There is a lot of news going on around the world. Alix a very busy monday. We will check in with all of our stock reporters. Julie hyman is here with the bank of america earnings call. Abigail doolittle is at the nasdaq and nejra cehic is in london. Julie, i want to start with you. We saw a beat in terms of earnings and revenue but profit is still down . Julie to summarize what we heard from bank of america we saw a drop of 21 on the net income level. Expenses are down as well. That is something the company has been concentrating on. Trying to cut as much fat as possible. A similar trend to what we have seen with other banks in the fixed income trading. Performing better than anticipated. We hearall current the from the chief Financial Officer at one of the things they are talking about is that the company will continue to cut expenses. That will perhaps continue a disruption in headcount. The bank may add consumer facing, client facing staff while cutting folks who are not directly client facing. Are also talking about the companys Net Interest Income, of being able to remain relatively stable if rates remain relatively stable where they are right now. He also laid out a scenario for what happens if there is a change in rates, higher or lower. Looking at stability at rates of this level. And strength in the consumer side of the business and an increase in mobile banking for bank of america, but has also been helping the company to stay good. The q and a portion of the call has not begun yet. And although they have cut costs, the Expense Ratio is relatively higher compared to its peers. So we to make it more questions on how they can bring down the Expense Ratio further. He will bring you any updates when the q and a begins. Alix thank you to julie hyman, the stock is up. 8 . Lets head to Abigail Doolittle at the nasdaq. Futures for the nasdaq up by seven points . Abigail have a wellknown penny stock trading higher talking of it better than expected customer ramp and valuations are attractive. Shares, more than 70 upside of groupon. Six dollars a share. Aring less well is stratus. To as have been downgraded neutral. Demand. Than expected but an 80 drop from the stoxx 2014 peak. Lower fort chairs are the Second Quarter. As trucking pricing continues to slide. Lets head to europe with neighbors change. Im am looking at european stocks. We are now completely flat on europes equity benchmark. We did see gains of. 8 earlier. Equity markets shrugging off concerns over turkey. These gains are coming from tech stocks. That is the best performing sector today. That it was led by arm holding. 43 . Most the biggest jump on record. Shares have hit the highest price on record. Softbank agreed to acquire arm cash, aence a share in 40 3 premium. So a 32 billion takeover. Shares are really jumping on that. And i wanted to take a look at sterling. The best g 10 performer against the greenback today. Weekcurrency surged last after the bank of england left policy unchanged and today, it is up against the europe against the euro as well. David . David co thank you. We want to go to the big story in turkey. Adts bring in riyad hamade. Riad the Main Development today was the continuing wave of unrest that is going on in the it is thetor and first time that the stock market and the bond market have been able to react to the news of the coup, and react they did. A drop of 5 on the stock market. The lira dropped massively on had a slight rebound but seems to be flatlining. David what do we expect from the central bank . Riad they decide tomorrow . They are meeting tomorrow, a regular meeting. Before the coup, the expectation is that they would continue to cut. Coup, the lira had been strengthening and things had been looking up a little bit. Surveying advisors and analysts are devising their predictions and say, maybe in order to protect the lira, they might hold this month but we will see. The results are not in yet. There is speculation about whether or not there will be a cut at all. Riad hamade, thank you so much. To jim a lets go now mccaughan. Does this change or view of turkish assets . I think it might. I think what this weekend reminds people of is that emerging markets have a lot of Political Risk. That was kind of forgotten after the quest after yields or assets that have weakened. I think that reminder will actually have a broader impact havel of the people who put a nearterm in the emerging markets. I still think emerging markets but it is good to remember that there is a lot of risk there. Alix the s p trading around 20 times its earnings with a 2 yield but in turkey, the yield is almost 3 . Outweigh the risk of the geopolitical premium . I dont think so. Because the issue with turkey looking forward is that it still needs to finance the deficit. It needs to be able to bring in capital. At the shock sentiment from the terrorism over the last 23 months and then the coup, you will see a big dip in tourism which is one of the biggest industries. They will have issues keeping the economy moving. The central bank can do the usual with Monetary Policy but it would lead to lower rates with foreign funding of the deficit. So i think they have a technical problem in managing the monetary and fiscal side. Looking forward, the key issue for the west will be, does the president become more authoritarian . Probably yes. Do they move towards the islamists . Probably yes. Because forces of the army have been pushed down. That perch will need to be watched for the future because i think that could hurt the relations of the west in terms of their economy. The United States with our economy and its growth. You think it will be slow growth for a long time why is that . Number ofnk you got a structural issues that are making the growth slower than perhaps making it appear slower than it is. A lot of that has to do with the deflationary impact of technology. Stuff getting cheaper. I dont really believe that the deflating for the economy is underlying. The second thing is the aging demographic and the third is the antagonism to trade that we are seeing from both sides of the president ial election. Ishink the fallacy in that that trade is not a game. If you encourage international trade, you create jobs and to grow faster. I would argue that governments in europe and america have not done enough to support people who are hurt by globalization. I do think it will be a serious issue if you have trade being rolled back in the United States and in europe. But am optimistic that it wont really happen. I think there will be a 2 growth cap in the u. S. For the next few years. But i watch politics with trepidation. Is this a statement basically saying, dont worry about the money . People are happier because they can tweak in 140 characters . But do you think it shows up in a bowl being and lifestyle . Jim multiple channels of entertainment whenever they want it is something people take for granted. When i was a kid, we had to channels and they were in black and white. It makes a big difference to peoples wellbeing. Things can catch on quickly. M people spend their money on the web and data. And that is a big difference. In terms of what else is catching on here, the theme of last week the rally we saw in bonds. How does that continue as an investor . What do you do . Jonathan and we had the backup with treasuries last week i want to talk about turkey as well. If i look at the bond market right now, where are we . 1. 2 with substantial Political Risk. , down 1 . R deal deals substantial Political Risk in turkey. Why should turkey be any different . Isnt it part of the global bond story . If anything, turkey will be a further impediment to the market in europe because there is a lot of interaction. That will tend to drive yields down. I think this is the key to valuation. Lower for longer is how Interest Rate appear to me. And if that is right and the u. S. 10 year stays above 150 then you dont need to worry too pointbout alix steels with the earnings yield. That is an earnings yield of 5 , maybe that is ok with the Interest Rates. I dont think turkey does anything other than make that likely. Alix this is our world. David that wraps it up. Jim mccaughan, thank you for being with us. We go to taylor riggs with the first word news. Taylor authorities in louisiana say the gunman sought out Police Officers to ambush them. Three officers killed, three others wounded in baton rouge. The gunman has been identified as a black former u. S. Marine. In cleveland, the first night of the Republican National Convention Theme is make america safe again. Number of bigname elected officials and public and donors are staying away. And uk Prime Minister theresa may is visiting berlin today, making the case that britain should remain a powerful player in a post brexit world. She will meet with Angela Merkel later this week. They will have talks with the french president. Global news, 24 hours a day. Powered by our more than 2600 journalists and analysts, in more than 120 countries. This is bloomberg. Alix coming up, bank of america is the latest firm to report increases in fixed income earnings. Plus, to in later today for an exclusive conversation with christine lagarde. This is bloomberg. David this is bloomberg. Bank of america is out with earnings and a beast and they beat analyst estimates. Joining us now for more insight is alison williams. Senior financial analyst. What really stuck out for you with the earnings . Meison what stuck out for across the bank is the fact that interest margins come in worst than expected but credit is pretty solid. No one is talking about the fact that Energy Credit is stabilizing. Are focusing on is the consumer side of things. So the trends are good but we andseeing reserve increases there is a lot of talk about underwriting. The bottom line worry is that we know rates will be lower for longer and we know that pressure will continue their is the credit cycle going to turn . David so they did increase their reserves but they are not writing them off yet. They think there may be trouble coming down the road . Correct. And they are right in line with expectations. Theylly analysts say that will focus on the bottom line costs. The costs were as expected. The bottom line releases were lower than expected. David what about on the growth side . There are net interest margins look like they will stay the same. Allison i think theyre arguing that they can keep Net Interest Income stable despite the pressure on merchants pressure on margins. He saw low growth at jpmorgan at wells fargo although not as much some people thought. So that is the hope for analysts and investors, that they can offset pressure through loan growth. David and how about expense costs . Allison bank of america highlighted that it is the lowest quarter in several years. People have to keep in mind that. David thank you. That is alison williams. The Financial Community has to take a pause for breath and pay tribute to fallen people. We are paying tribute now to the twoto baton rouge. Were three Police Officers killed and three others wounded. President obama saying there is no justification for violence. Lets take a moment of silence. Alix dallas the moment of silence at the New York Stock Exchange to commemorate the three Police Officers killed over the weekend in louisiana. Three others were wounded by a black man who was also killed. This is where a black man was killed by Police Officers two weeks earlier. We have seen many moments of silence and they are not good moments for our country. Ford 32 billion deal more, we want to turn to jeff mccracken. Is this exit bargainhunting . Jeff this deal surprised everyone. This isnt something that softbank had in a complementary acquisition. That being said, arm is a solid, good investment. They are going to let it run independently. Their decisions will say in the u. K. So it is a steady cash generation business if you are softbank. Given their biggest deal with billion and it has not worked out very well. They need a steady cash generation business. Jonathan people close to arm holdings, if you ask them if they would be bought out, they say no, we are the chip designer. The market cap has gotten too big. If you want to to do that, it should have been 10 years ago. When did this come . Jeff we suspected that there would be a buyer. It was on the list for this year. Arm was not shopping themselves to find the rest the best bidder. Two weeks ago, softbank showed up with a bid and they are getting a 43 premium. Thought they were never going to get sold but all Companies Think that. Jonathan right, until the price comes. The internet of things that is what softbank is saying. Change,he world does and everything now is connected on the web and the cloud, they could benefit oath ways . And i also think it is a play on more of the technology of what they are designing. Beauty of arm is that they dont have to build plants. Into thee getting internet of things but also, some of these conductors might be in the cards for the future as people look towards cars that drive themselves, and the technology that will be required, it will need a lot of products. It is in the internet of things. It will be whatever you are driving around from here to there. Alix when you and i talked to i talked toe you feel there will be more deals in europe and the u. K. Now that we see the currency fluctuation happening . Jeff i do. This is asian outbound. Countriesecause these are suffering from bad demographics. Andve an aging population they are worried where is the growth going to come from . So you look at europe and United States and you will see me seem more deals that way. Half of arm sales come from asia. Spread of a nice different parts of the world in a deal with arm. Terms of execution, we had you on this program so many times to talk about deals that have broken up. The market sees this as low risk. Looksvernment in the u. K. Set to take a harder line on potential foreign acquisitions coming into the u. K. Is that just rhetoric . Like, from what i can tell, they gave the government a heads up. 2472 hours in advance that this was coming. All the jobs will remain in the u. K. And they are going to advance and add people over time. So i think you just have to say the right thing. You cant be like pfizer when they came in after after seneca. You just have to say the right things and i think the u. K. Is happy to have someone make such a big investment to that shows that even post frexit, there is an appetite. Saying thatve been all morning. If you do the right things, you will keep jobs there. Jonathan doubling the workforce over the next five years or so. Jeff softbank plate this quite well. Alix jeff mccracken, thank you very much. Jonathan next up, the opening bell on bloomberg. A market with a firmer tone. Futures are up and there is a rally on the ftse 100. This is bloomberg. [hip hop beat] olympics 2016, let me get you on my level. So you never miss a moment, miss a minute, miss a medal. Why settle when you can have it all . Soccer to wrestling. Track and field to basketball. Fencing to cycling. Diving to balance beam. All you have to sa is, show me, and boom its on the screen from the bottom of the mat, to the couch where you at . Show me the latest medal count xfinitys where its at. Welcome to it all. Comcast nbcuniversal is proud to bring you coverage of the rio olympic games. Jonathan from new york city, the open moments away here in new york. Lets get you up to speed on Global Financial markets. Humors futures are firmer,. 1 . All time highs on the s p 500, potentially another one today. The performance on the ftse 100, up about. 4 . You can hear the opening bell in new york city. Issue in turkey is isolated to turkey. Switch up the board quickly, here is the tone with the fx market. Dollaryen, a weaker yen story again. Forugly week last week treasury yields, backed up by 20 basis points and we back up even more. At 1. 56 onht now the u. S. 10 year. Lets get the markets open and go to julie hyman. Dont havet now, we much change. Mirroring friday. The balance between gains and losses, it is unclear whether we will have another record set in the s p today. Out of the gate, we are not a 10th of a percentage point move. Lets get to the individual movers. 1. 5 aftera is up the company came out with earnings that fell 21 but beat analyst estimates. Like its competitors, it is seeing strength in fixed income trading. And bank of america has been trying to reduce expenses although its Expense Ratio is still in the mid 60s versus most of its competitors in the midupper 50s. So right now the Conference Call is still ongoing. After 40nd a got going minutes of Opening Statements so they are still undergoing questions about expenses. Shares are still hanging onto the gains for a moment. The other things we are watching our deals and potential dealings. Is trading higher after softbank agreed to buy the billion. Or 32 of mobileaker computing chip design, so it sells the design to various mobile computing companies. Also, we have been watching exxon mobil which, as expected, has made an offer for interoil. This is an increase. Exxon mobil is trading a little bit higher by nearly 3 . Oil related oil and stocks, we see declines. Chevronlittle drop in as a result. Jonathan thank you, julie hyman. Gilbert. Bring in nili she joins us now. Great to have you with us. Technically, this market looks attractive but fundamentally you are cautious. Nili from a technical perspective, this is positive that the market has been hitting new highs. A good friend put out a note last week noting that this is only the 15th time since 1950 that it has taken the market over one year to reach new highs. And the reason that is significant is because this usually happens when the market is hitting new highs after a time of significant decline. And behaviorally, when that happens, many investors are afraid at first to be buying into the new highs as they fear causes the rise to be protracted. So you get into the momentum early and you can do well. But for a fundamental perspective, we are cautious on the market. We take a blended view. Looking at technicals and fundamentals. Could causeally investors to take a pause. This is a stock index and you can see how much it climbed in the past year. When you have defensive leading it, what fundamental issues are there . Around theyou look world, you see Interest Rates so low with bond yields so low. So you have the market rising data and highlow dividend yield stocks leading the ride which is unusual. The thing is, usually the reason that low beta investing works is because of a valuation tailwind where there is lower volatility and higher yield stocks which tend to be cheaper. But what happened with the rise on the screen is that below volatility is becoming more expensive and that tailwind is going away. When you think about the momentum investing with stocks, you have to be careful. It will work for a time, as we , it is a flow to sell losers but the momentum will work for a while but when there is a turnaround, it can be really sharp. The you have to be careful in thinking about how to use momentum in your portfolio. David when you going to invest, how do you tell the difference between a momentum investment and others . Using valuation can be a good tool to distinguish. Because momentum will be giving you a different picture. This is a positive signal from a price trend perspective but the valuation will be getting more expensive. Momentum inlook at tandem, you can get competing signals. Ofs can help you to stay out the emotional game which is what you need to look out for. David do you look at Balance Sheets or cash flow or tv . All the above . Anything specific that works for you . Blended view on valuation, looking at all three financial statements. Flow to fail, rice to cash we try to stay away from pe because it is overly focused on in the market and is too easy to manipulate. View,ying to get a robust we think about different comparisons. So not just how the stock is valued relative to the Investment Universe but how it is valued with its sector. Or even within a sub industry. And you have to think about what kind of comparisons make sense. Though, whaterm leads the market aside from utilities has been buybacks. At the bloomberg here. This shows the s p by back index buyback index. The idea is that the buybacks are lacking. We are in the earnings free, but if we do see some kind of slow down with buybacks, what does that wind up doing to the market . Nili something to think about with buybacks is not all buybacks are creating equal. If sub prices are falling or are low, that is great for the remaining shareholders. Buyingthinking about back stock and the price falling, that is really not the remaining investors. What about buybacks is the subsequent price strange subsequent price change . David does this indicate that management has run out of ideas . That they would rather by their own stock back rather than invest in a new product line . Aboutyou have to think what the potential return from these opportunities are. It is and always great to be a Management Team buying a bigger environment for its own sake. Thank you so much. That was nili gilbert. Coming up on bloomberg , more on the Market Reaction to the failed coup attempt in turkey. We will discuss that with a strategist. This is bloomberg. David this is bloomberg. Im here in the hewlettpackard green room. Aning up later today, exclusive conversation with christine lagarde. Coming up at the top of the next hour, Bloomberg Markets with vonnie quinn. What is your top story . Vonnie mark barton is off all week. We will talk about the rnc starting three hours after the show starts. We will speak with gary greenberg. We will talk about investing in turkey and how they are thinking about turkey now, after the attempted coup. Does it change their expectations for anything turkish related . The lira or the Economic Conditions of the country . And how they might move money around. We also will look at the big arm holding deal and bank of america earnings. Day, indeed. Big thank you vonnie quinn. We are looking forward to it. Lets head over to julie hyman. Stocks continue to be little changed. We are looking at commentary one comment coming surrounding the humanaaction a deal. They say the deal is more likely to go through than not. Talking to legal experts about that, this would be good news for humana. A dojs, you will see as well of anthemcigna as humana but we could see a shakeout of other companies. So it is unclear what will happen with this deal but most stocks are trading higher. The bestperforming deal in the s p 500 is coach. A 2 gain is the best performer. They outperformed from neutral based on a Third Quarter consumer head back survey, which indicates Strong Demand in the outlet channel for coach bags. Analysts say the company is showing progress on grand transformation plans. And finally, a day to follow through for the herbalife settlement. Shares bouncing on friday but they are pulling back by 2. 5 today. One analyst who has been a long stock says wehis could see a prerelease of the Second Quarter results for the company, which would be helpful to take it out of the current share resurgence embargo. We will see is that happens but in the meantime, those chairs are going back. Out thatant to point oil prices have fallen below 45 a barrel, up dollar away from the 100 day moving average. Pretty pivotal for oil traders. Definitely a commodity to watch. 44. 96. Lets go to Abigail Doolittle with the nasdaq. Abigail today we are looking at trucking and toys. Jb hunt shares are lower after they missed Second Quarter profits. They also revised the fullyear forecast. Andking prices have dropped costs are rising. But on the year, shares are up more than 10 . Hasbro shares are down by nearly 5 . This is despite the fact that they put up a great Second Quarter. What worries them is the slow down in the boy and preschool categories. Hunt, these shares are up sharply on the year, 20 . Lastly, we have group on trading sharply higher on an upgrade. Seeing better than expected customers and valuations that are attractive. A 65 upside potential for the shares of groupon. A penny stock to keep an eye on. That was Abigail Doolittle joining us from the nasdaq. We are watching turkish stocks. 17 so far this year but our next guest says the failed coup attempt could help to reprice the emergingmarket assets to the downside as more risk premium is factored in. I want to bring in emad mostaque. Most investors seem to be taking this calmly. Why do see the risk . Think the key thing that has happened is that emerging markets have unaffected from the rush yield that we have seen. But this shows that Political Risk remains underpriced across the board. Turkey, it hinges on one thing. Do we see investor friendly policies . Alix so part of the idea is that if we do get more control from an executive presence, that does remove some uncertainty and it would be a good thing for turkish asset. How do you see that . Emad i think that is the way it is going. We have seen a 10 rise since the airport bombing. What you are seeing now is a mass roundup of any opposition. Earlier this year we saw real the major party has a big stake. That is what investors keep an eye on. Do we see increased crackdowns and asset seizures . Or do we see investment friendly policies . We will find out in the next month. David i am interested in the asset seizure policy. Has the president ever talked about that . Bank,we saw it with a which has been indicated and ofpointed as a key indicator this and there has been political fallout. Partiesseen related effectively marginalized. Turkey is a country where 60 of familyck market is with groups and benefits for alliances. And now the question is where will the family groups go . Alix a great point. If you look at turkish markets and you see risk premium being free price, what does that mean for the rest of the market . Emad the key driver has been the rush for yields. He got the momentum has been quite poor. See turkey to , a lot ofe market people think emerging markets, there is too much there. We need to pull back for now. In turkey to date. Investors are getting curious. Wondering whether this signifies more malays. David is a danger of a rush out of emerging markets, where would be the best investment with the lisk geopolitical premium risk . Depending on the presidency, a lot of people have liked mexico in the past but that has been changing because of external factors. What we really see is any place you see it positive trend is korea. Marginal. It isso in the gulf where remarkably stable now that oil prices have fallen back. And there liberalizing their economy. This is a big change from the last few years. Acai theyou take Political Risk in turkey for a moment, what are the underlying fundamentals that support higher valuations for assets . For example, their corporate debt. There are incremental positives . Emad turkey is one of the best yieldbased stories. You have massive currencies. The stock market is trading. So there is a massive valuation argument there. You see them more priced in with the drops in tourism. And turkey is moving closer to russia now. That might be a massive economic boom. The geopolitical fallout from that is away from america. Alix great distinction. Otherwise, mexico and korea. Thank you very much, emad mostaque. Coming up next, an exclusive interview with chuck robbins. This is bloomberg. David this is bloomberg. The Republican National convention began this morning and cleveland and welcoming the delegates were never trump protesters. These protests are likely to help the campaign. Megan murphy joins us now. You are there in cleveland. Sense, are these demonstrations resonating in the halls . Megan they are not resonating now because they have just started and it is bad weather this morning. They are keeping them cordoned off in a separate area of the stadium and we do expect them to do that to keep them separate. As you said, protests might actually help the donald trump movement. It could show that they lack respect for political discourse. Saysestingly, mena court that he thinks donald trump could contend in as many as 20 battleground states. Looking at states like oregon and even mentioned connecticut. David wow. Haveunderstand it, they named this first day keep america safe. What is the security situation like down there . Megan security is really tight. You have been speaking to the lease. It feels like they are on edge and people are worried about something happening. We have seen the shootings in dallas and often rouge. And it is no question that Police Officers feel like they are a target. This city is good at shutting things down. They will work to keep the convention safe and keep protesters separate. D the first night is named make america safe again. David typically, the presumptive candidate has it buttondown and they know what their message is. Is that the same this year . Does donald trump has been a different kind of candidate. Megan in one word, no. Havent even had the schedule being released. We dont know what hours people are speaking. Speakers are changing. Seen press briefings shifting times. It doesnt feel like a well oiled machine. This morning calling out john kasich, saying he is bringing shame upon his state by not being here to nominee to campaign with his nominee. We will see if they are able to pull it off in the next few days. Megan murphy, thank you so much. Good to have you in cleveland. Will be on the republican events kicking off this evening but i will be looking off at tech earnings. Ibm willlix, this be the last Conference Call with Marissa Mayers . You couldnt have companies in different positions than those. Alix totally. Decline. A 19 jonathan we see the tech story in global marks. We have a big deal and softbank. 26 minutes into the session. Equities are going nowhere. Bonds are flat. Whole of the Bloomberg Team, thank you very much. Bloomberg markets is up next. This is bloomberg. Vonnie it is 10 00 a. M. In new york. I am vonnie quinn. This is Bloomberg Markets on bloomberg television. Vonnie we are going to cover stories in washington, d. C. , in the next hour. Here is what we are watching. A way to start the week. A record 32 billion u. S. Deal. Virtually every mobile and computer gadget on the planet. Plus, the future of m a and a post exit u. K. Postbrexit u. K. We bring you the latest on the look at how the president s policies could undermine already fragile investor confidence. The Republican National convention in cleveland gets underway today. This week may be anything but conventional. Could events including