Transcripts For BLOOMBERG Bloomberg Go 20160728

To do. One fourth of that will be spending, but we dont know the timeframe. Jon there might be a consensus among economists, there is no consensus in this market right now. David im looking forward to that. We will speak to a man who knows the fed very well. Alan greenspan will be joining us in an exclusive interview. We begin with breaking news. Ford earnings just crossing the wire. The Company Making . 52 a share. Estimates were for . 60. Revenue,of actual coming in a bit stronger at 36. 9 billion. The company says it is committed profit. 6 pretax it it does warn that could be at risk even if u. S. Sales of its suvs pick up. We always want to look at pickups. They missed on their earnings per share but were up yearoveryear. Beat. And revenue did yearoveryear and quarter on quarter. Stay with us for that. Mark fields will join us shortly. We want to hit on that interview. Jon Credit Suisse earnings coming through, the swiss bank posting a surprise profit last order. The turnaround plans are beginning to pay off. Francine lacqua asked whether the bank needed to raise more capital. Very consistent ins and we do not need to raise capital. We have been very clear. We raised 6 billion. 11. 8 ratio. We can pull many levers to drive that forward. Thats we have been very consistent in saying we do not need to raise capital. Adequate a perfectly capital in the first half of 2017. Markets permitting. Ipos always depend on markets. It is a strategic move. We think it is a phenomenal asset hear. What we want to do with this ipo is get the markets to fully recognize the value of our assets, and very good bank in the wealthiest economy in the world. It will drive value for our shareholders. We want to keep control of what is one of our best assets. Francine if janet yellen raises rates sooner than expected, is that good for banks . Overall, yes. Jon fantastic interview. Where are they in restructuring . Are we starting to see a ray of light from that restructuring . His tone was right on message. He was pleased. You can see from the interview come in his demeanor. Charge, thisut in has been the first glimmer of hope. , theet one capital ratio capital buffers, is not only best in class at the moment, but also better than expected. He points to that in saying that is why he believes he will not need to raise any more capital. Hes been saying that for a while there are still rumors out there on the markets. Jon we can never say the worst is over. Going forward, the question of brexit looms larger. What did he have to say about the future of london . Francine he was very cautious. He said at the moment, we dont really know because article 50 hasnt even been triggered yet. That he didon mention a nightmare scenario for banks, this past porting issue. Passport this passporting issue. Certain banks may have to move to central europe. Jon thank you very much for joining us. Of 3. 5 at one point, trading lower now over in zurich. So many of her movers in the u. S. And europe as well. Other movers in the u. S. And europe as well. Alix people are using Facebook Like crazy and using it on their mobile phone, translating into huge mobile ad revenue for the stock. By 59 . Is up facebook is soaring in the premarket. A very different story when it comes to big oil. Shell, the worst quarter in 11 years. Profit was down 71 . It missed by 1 billion. It was heard all across the board. Hurt all across the board. It did boost its 2016 production target. Oil. Quarter for big looking at adidas, that stock trading around a record high. That as well. David it minutes ago, we broke their earnings report. They met analyst estimates on revenue. For more, we go to matt miller in michigan with mark fields, the ford motor president. Pleasure to talk to you this morning. Let me start by asking you about the miss on earnings. A lot of analysts were looking for . 60. That was a lot. Also, we saw margins shrink and market share shrink. Is there a problem here . By historical standards, it was one of our best Second Quarters ever. We had record profits in europe. Flow, 4. 2terly cash billion. Even the first half of the year, pretax operating profit for the company. We said the second half would be weaker than the first half. We see some risks in the business. You know us well. We will look at those risks and deal with those business realities and take decisive actions to go after the pressures on the business. You have been upfront with shareholders come up front with stakeholders here and say it is possible you do not meet your fullyear financial targets. What are the biggest risks . Mark we are committed to our financial guidance. Thate flagging these risks put that guidance we are working towards. We are seeing lower pricing and higher incentives in the u. S. And china. We are seeing softening in the Retail Industry. It is down overall as an industry in the Second Quarter. At the same time, we are seeing the effects of brexit, exchange and volume in u. K. Come our biggest market in europe. R b. Eak chinese lowernally, we are seeing option values for small vehicles released in the u. S. We started seeing those things earlier this year. Thats why we ramped up efforts in the company to try to compensate. Matt you did have your best profit ever in europe in the Second Quarter. How is the outlook for the u. S. . People are concerned about peak auto. Do you see the industry meeting last years level or being reduced . Guidanceve given our between 17. 4 and 17. 9 million units. First half of the year, the industry came in at 17. 5 million units. Within that, retail is down 1 . Our view in the second half of the year is the industry will be down versus last year. You can argue that the industry has plateaued. Early on in the economic recovery, the Auto Industry sales were good and outpaced the general Economic Development in the country. Although the industry is still at relatively healthy levels, we are seeing intensified competition as the Retail Industry has softened. That is resulting in some volatile factors each month because that will be dependent on certain manufacturers try to move the market with their product and incentives. See a turnaround in the industry, he will start using margins to win market share before you get into that declining industry. Is everyone doing that . Mark our incentives for the quarter were up on a percentage basis, basically in line with the indust. Our approach in the company is we will always prioritize our margins over market share. We arewhy Going Forward looking at that lower Retail Industry. We will stay focused and consistent on our strategy of matching and keeping our inventories in line. Matt one of the risks is brexit. How big of a risk is that . Is it a currency problem or demand issue . Mark both of those. To put it into perspective, the u. K. Is our largest business in europe, about 30 of our sales. The good news is we are fully hedged. Against the pound for this year. We are 60 next year. We are not hedged against the Balance Sheet this quarter. The remainder of the year, our view is the industry is going to come down. In total for this year, probably about 200 million. In an ongoing basis, until the union figurepean out what their trading relationship is, could be million intween 400 500 million depending on what happens to the market and exchange. We are looking at a variety of different scenarios. First off, they have to start the process. It is not only trying to put scenarios together around what we think the trading relationship will be, but what time frame. It stands right now, we are not making any changes to our operating structure. We will always stay very focused on making sure that we maintain competitiveness in the region and put ourselves on a path to sustained profitability. Are there plans where you say hang on a second, lets see where this goes . Mark it is more longerrange plans, not anything in the near term. The cfo saw south america as problematic. The places where you offset the problems elsewhere. Particular, the economy is still under a lot of pressure there. We are seeing markets like argentina where the new government has come in and taken very good actions a bit of pain in the shortterm for longterm benefit for the country. That will be dependent a little bit on the commodity cycle. Those economies are so tethered to what happens in commodities and we are starting to see commodity start to inch up. Thats one of the risks we see we are trying to offset in the second half of this year. Mark how much of a risk matt how much of a risk is donald trump . He was once again talking last night about fords production in mexico. Both we talk with campaigns to emphasize the importance of manufacturing and and making sure there is currency discipline. Do you feel like someone is manipulating the currency . Mark when you look across the world, we are against tpp, not because we are against free trade, but when you look at the countries like japan, they have done that in the past. We want to make sure we are competing on a level playing field. We have a track record of working with elected officials and policymakers on both sides of the aisle. We will continue to do so in a matter who is elected. Matt you wont be telling your employees to vote for one candidate or the other . Mark our employees should vote their conscience. Matt the swing away from when will ford have a fully committed electric car produced for Battery Power from the ground up . Mark we have our focus electric today which gets 100 miles and is extreme the competitive. Thats extremely competitive. We will introduce 13 new electric products. 40 of our vehicles around the global be electrified. We will talk more about our plans as they unroll. We have a big commitment to electrification Going Forward. Matt thank you so much. Really appreciate your time. Much. Hank you very hear we are starting to ceos talk about the Brexit Impact specifically. Interesting to hear him say it is a currency issue and demand and peak cars, something that has been circulating as well. David what that is doing to their planning down the road. They are keeping their cash back. Jon you can plan for the exchange rate, and they have. For an exchange hits you straightaway. You can see it starting to creep in. His concern is next year, 60 hedged. David the other thing that the me was office in softness in the u. S. Market. They are having to offer discounts and incentives. Alix the peak car thesis have we are reached have we weched the amount of cars can reach . Are we at the max . David currency minute relation in japan. This manipulation in japan. Currency manipulation in japan. Alix a huge facebook facelift. Beat. R earnings we will take a closer look at the blowout quarter, next. Jon this is bloomberg. Lets get a check on the markets for you. Just a bit softer, marginally lower. In europe, we are down about. 3 on the ftse. For a sixth straight day in a row. Ahead of the boj decision tomorrow, a stronger yen session. Theerday for the bulls in bond market, solid after the fed decision to do nothing. 1. 5 on the 10 year. David facebooks latest earnings beat expectations with most of its revenue come 84 coming from mobile advertising. The stock is currently trading up in the premarket. Here with more, paul sweeney. We do not route for or against companies. But wow. Paul you look across the digital landscape, facebook is the one that is really gaining share. Look at their advertising revenue, up 63 . The top line of 25 billion, extraordinary growth. As they continue to migrate to mobile, they are getting a lot of share there. They have a lot of other platforms that are out there in addition to facebook. Ts happened in stick alix facebook themselves warned that revenue will not always be this good. They have been increasing the number of ads in peoples newsfeeds. They are generating more revenue per user because of that. The big drivers here, they are anding the user base getting higher revenue per user by putting more ads in the newsfeed. The incremental ad load will play out sometime mid next year. They still have a bit of runway on the ad load. Ofrting 2017, a lot investors and saying that is when they can start pulling the revenue lever at an instagram or messenger or whatsapp. Publichen facebook went come everyone would come on a program like this and debate how they would make money. Hint yesterday that we could see facebook compete with the likes of google through search. Do . Are they going to paul the search business is dominated by google. U. S. 75 share in the what facebook is saying, listen, with 1. 7 billion euros theres users mothers a lot of information we can serve up , theresbillion users a lot of information we can serve up. Search a more relevant to you versus something a google algorithm might kick back . How do they monetize this huge social user base . David if you talk to people at talk abouthey facebook. How big can instagram get . Users. Is one billion paul Mark Zuckerberg told people, he thinks scale is one billion users. Twitter is not there. With one billion users at instagram, that is a really bible advertising platform and viable younger advertising platform and it skews younger. Maybeof concern was instagram will be another source of growth for this company. Sweeney. At is paul jon coming up, the fed inches closer to a rate hike. Ism new york, this bloomberg. Alix this is bloomberg. Hour, an in the next exclusive interview with Alan Greenspan. We talked the u. S. Economy, corporate spending. We want to take a look at the big stock movers. Miller v and sab the deal that might not be. Out of thepulling deal. The cash and options have been boosted come about the all caps part of the deal is what shareholders are complaining about. Are also really feeling the squeeze as well. Profit did fall 30 at total, but it did Beat Estimates. At shell andnce bp. Potash cutting its fullyear guidance come it missing its secondquarter estimates, slashing its dividend by 60 . Groupon up 26 in premarket, now just up about 21 , raising its fullyear revenue guidance, adding 1. 1 million customers. I use groupon a ton. It is making a comeback. Jon ive never used it before. Global markets, futures pretty much stable throughout the session. We turn to japan almost straight away. 1 fullclosing lower by percentage point. A big move in the japanese yen. Implied volatility overnight. Dollar the highest since the financial crisis. Sessionff a weaker yen in the commodity market, the sixth straight day of losses for crude. Wti down for a sixth straight day. For anyone yesterday in the bond market, the bond bulls looking for the warm embrace of an accommodative Federal Reserve. Today, up one basis point on the 10 year. Fed will theywont they rate hike debate. Y president obama made his most forceful case yet for Hillary Clinton, offering his endorsement in philadelphia. President obama there has never been a man or a woman, not me, more qualifiedy than Hillary Clinton to serve as president of the United States of america. Shery clinton joined the president on stage after the speech. Tonight, clinton will formally accept the partys nomination. Senator tim kaine a virginia formally accepted the partys nomination to be clintons running mate. Saying on the attack, the u. S. Is too great to be put in the hands of a slick talking come empty promising, self promoting oneman wrecking crew. Donald trump has reversed himself on a major policy plank. He says he is in favor of a 10 an hour edelman among wage. Thats federal minimum wage. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Im shery ahn. This is bloomberg. David tom keene joins us now from surveillance radio. The world is not ready for yet another banking crisis. The quote from this piece is as stressbraces for the test on friday, the world could be on the verge of another banking crisis. There are more than 3 trillion in stressed loan assets worldwide. He goes on from there to talk about loans in china, loans and india. Theres a lot of troubled assets. Scope ofin the global a great essay, public and. Rivate loans, a great feature the media particularly is guilty of public analysis, public analysis, public analysis. You have to bundle it all together and that is where the banks get in trouble. David he goes on to talk about the causes of that. Some of it is accommodative Monetary Policy. People are loaning money against assets that may be deflated. Tom we have seen it before. The major causes the human condition. Cause is the human condition. Nations do that as well. We have seen this buildout of debt occur. How do you clear that mess this time around given the knowledge we have . Clearing out previous crisis. David that requires a strength in the Balance Sheet. Regulations have been putting pressure on that, which makes it harder. Tom the banks are in better shape everything considered. The distinction is we want to do it pain free. Remember in 2007, the beginning , the idea if we can get through this crisis and do it without suffering a lot of pain we are still there eight years later. David the italian banks, individual retail have bought these bonds. Cram down. , bailout they will not do that to the individuals. Fine. Then, who do you do it to . The mystery on this final week of july. What you do. David the soft landing is the tricky part. Tom we dont know what kind of landing it is. Tom keene from surveillance radio. Alix the most important sentence from yesterdays nonrate hike meeting. The balance of risk statement is back. What is the fed doing now . For more, i want to bring in john ryding. Good to have you. Did you feel like they were using the balance of risk statement to prep for a september right hike . Best rate hike rate hike . John in october, they said next meeting. This is softer. Yields declined, front end ,ields declined and it was like come on come on, is this the best you will come up with . The markets were looking for something more explicit. A septemberopen to move if the numbers are strong enough, if theres nothing that scares janet yellen, which seems to be quite a lot these days. I tend to think december is when the fed is going to go. It always strikes me that people think things are so choreographed. We move towards a speech by janet yellen at the end of august and there is a general assumption that the speech is written, ready to be delivered at the end of august if things are ok the next couple of months and september is teed up. John its been an important platform for Federal Reserve chairs dating back to Alan Greenspan, to send major policy signals. Why would someone look for a major policy signal in yesterday Statement Given you will have the jobs number next week and then we will find out where we live between the week may and strong june number . We are all wordsmiths. , yesterdays effort of choreographing or signaling events moves was quiet. Alix Deutsche Bank saying conditions have never been better from an economic state and standpoint geographical risk standpoint. If you dont go now, why not . Debate shifted a long time ago from the domestic economy to global. They cannot tighten in any kind of fashion in a vacuum. I wonder how significant the boj decision is tomorrow. John i dont think it is significant for the u. S. Had longstanding inflation problems. I dont think japan is that hard for the fed. Tried toasnt really see what they can do. Needs u. S. World leadership. Low Interest Rates are hurting when you look at the returns Pension Funds need to make over the next 20 years. Divert morehave to demandy, reducing access for future retirees. Jon i wonder how much centralbank uncertainty is damaging demand. Since 2008, that line on the far right there tells me the market doesnt know what will happen tomorrow. That cannot be healthy for anything when there is that amount of uncertainty in the market over a centralbank decision. John we are not in a world where we know whats going to happen tomorrow. When Alan Greenspan started raising rates from 3 , we did not know what was going to and we got used to handling those shocks. Now, we have difficulty handling an adjective in the fed statement. The Alan Greenspan fed was one of preemptive action versus one of yellen which seems to be of reaction. John what is worse is we dont know what the fed is reacting to. They say they are data dependent , they have laid out their parameters on unemployment and unemploymenthave isow 5 and yet, policy reacting to those economic dont you think it is odd in that statement that they can say nearterm risks have diminished when the vote was june 23 and we have not seen a single economic number that brexit is a big issue for the United States. But, it was only a couple of weeks ago the atlanta fed president was using a fly saying we have to wait until the water clears. They gave us a change in the balance of risks, but they dont tell us what they say the risks are not as much as they were. They dont say what the risks are to the upside or downside. Work it out for yourself. John in 1989, they did not even tell the market they were raising Interest Rates. Us. thank you for joining john ryding. Thank you very much. A shareholder rebellion, potentially. Of sabvs takeover miller thrown into disarray. This is bloomberg. Ix this is bloomberg coming up, Alan Greenspan joins us for an exclusive interview only seen here on bloomberg tv and radio. Shery fords earnings came out short in the Second Quarter and the automaker is warning that its profit targets are at risk coming even though sales of pickups and suvs are surging. Gain in european sales and six years, but the brexit boat could lead to a slump. We spoke to mark feels. Mark fields. Mark the Retail Industry will be down versus last year. You can argue that the industry has plateaued. Shery analysts say the u. S. Market is leveling out but will not crash. Dow chemical is expected to complete its historic 60 billion merger with dupont. The company is cutting 4700 jobs as part of a cost saving plan. This is bloomberg. To the corporate world, a major beverage deal once on tap you get the pun. Alix before 8 00 a. M. . Jon now on hold. Ab inbevs record takeover of sabmiller. Duncan, great to have you with us on the program. Tell me what is going on at sab miller right now. Raised the cash offer on tuesday by 2 . Previously, it was an agree to deal. Sab are doing their duty in saying we have to speak to our shoulders and see whether they agree to the deal again our shareholders. Alix where does that leave ab inbev in the meantime . Duncan waiting for the decision from sab. , ab inbevnk about it has been chasing sabmiller for years now, so im sure they will try to work this through. Once we have the chinese regulator signed off, talks will be reestablished. Jon on the bonds issue, quite clearly the concern is they have to go back out and reby the bonds. If they have raised that financing and the deal does not go through, do they turn around and redeem the bonds and buy them back or say i want Something Else . Duncan excellent question. They might have to buy them back. I dont know whether theres any wiggle room on that. On 25, 28 billion , that leave them plenty of scope to go out and do other deals. They did it in a pretty confrontational way. Stop any further work on this deal until further notice. Is this a negotiating tactic or a deal in trouble . Duncan that is question. The big problem is the way the deal has been structured. That is an excellent question. It is at a 13 premium and that is where the problem lies with this deal. The problem for other shareholders is the fiveyear tie up. I think theyre trying to wiggle the terms on that part of the agreement. It was a bit of a surprise last night when we saw that. Jon trouble on tap, trouble brewing. Alix a little happy. A little hoppy. David coming up, taking a closer look at whats driving those facebook earnings. This is bloomberg. Alix this is bloomberg. I want to dig deeper into facebooks killer quarter yesterday after the bell starting up with ad revenue. The blue line line is overall revenue net change. The white line is mobile ad revenue. Both of them really popping right here and mobile ad revenue driven by video. When we wind up having overall revenue come down a little bit, mobile does not, it stays high. Which means mobile is leading on the outside and also keeping higher is there if there is any downside. Want to dig deeper into those user numbers. This is a normalized chart of total monthly active users and mobile active users. The mobile is blue and the overall is white. They are both increasing but for frome, a 140 increase facebook ipo. Look at how much the growth rate has diverged just in the last few quarters. What Morgan Stanley points out, more people are spending more time on their devices. They said if the Second Quarter assumed doubledigit growth for facebook, that means the amount of minutes each user has spent on their facebook device is up 10 . 51 minutes per day is what we are spending on facebook, 10 year on year and one minute per day in the first quarter. That is probably video at the end of the day. David their timing could not be better. Right now andle facebook is growing exactly in the place Everyone Wants to be. Jon the stock right now is lets say you get a 5 pop on facebook today. Add to the market cap of that it goes to show you how much this company has grown versus the likes of Twitter Twitter shareholders waiting for the acquisition that may never come. David and they are not done yet. They have other things they have not yet monetized. Messenger come all of that. Up, do not miss this interview. An exclusive interview with Alan Greenspan. We will discuss the health of the u. S. Economy and global Monetary Policy. From new york, this is bloomberg. Futures on the screen right now marginally negative. A decent session for the bulls right now. Where it has not been unchanged throughout the week is right here. Dollar, stronger yen. The overwhelming majority expecting easing a tomorrows meeting. The market is uncertain. A sixth straight day of losses. Can we make it seven with positive on the day . And the bond market, yields are lower off the back of the feds trend on treasuries. Up to basis points. Alix i want to go around the world with the top stories. Carolinas in paris with the latest on earnings. Nbc in d. C. E carolyn curry joins us from paris. Bmp. Begin with caroline . It seems to be doing better than its european peers. It is beating estimates. Taking cuts by 30 . Revenues up 1. 4 . The search and a bond trading the surge in bond trading upset equities trading. Some of his 7000 cuts from london to paris. We have our activities in the u. K. And are happy to be there and we will stay there. The main element is what is the longterm impact. It is too early to say. A couple of weeks italys revenue down 6 . They have a big operation there. In turkey, after the failed coup , a lot of uncertainty there. They are sent to generate as much as 1. 6 billion euros. Jon when we talk about european lenders, we talk about the word restructuring. The take away today are we starting to see a ray of light coming out of credit and restructuring they are doing . They told bloomberg we had the surprise profit in the Second Quarter. A good surprise as well on the capital ratio at 11. 8 . That surprised any analysts. The ceo is still in the middle of restructuring and plans to eliminate 6000 jobs. Jon live from paris, thank you very much. From the ceo. More alix mastercard coming in, earnings, making . 90 a share. Volume is something that we keyed in. It was at my percent. Those profits it was up 90 . It was up 9 . It is a very different story for shell and tell tall total. Ryan, lets start with shell. The worst quarter in years. What went wrong . We knew the prophet was going to decline . Renew oil price you on your fell about 40 . The reason why we got such a big disappointing number is that you have to produce the oil, right . 120,000 barrels a day less than the market anticipated msn estimates. It does not sound like a lot. It adds up to 6 million a day. If you go over a three month period, . 5 billion. Alix ok. That is a very different story when it comes to total. They were able to Beat Estimates. The refining was ok. Trouble is one of the parts in refinery refining is one of the trouble spots for oil. Oilhis environment, when prices are below 50 a barrel and when they can generate money, they cut costs. They said they were going to cut 2. 4 billion and say the are well on target to do more than that. Something that shall fail to do was increase production, it only by 5 , but that is enough. That is why you get the strong reaction in the share price. Alix thank you very much. We have breaking news on oracle. For 909 a next week share. Oracle sees this deal immediately and into oracle sees this deal immediately adding to earnings. It is the biggest deal they have ever done. The most recent deal was a. 4 four netsuite. A business based in the cloud. Alix it really speaks to the strength of transition of they companies needing to take it to the cloud where the competition is going to be. That is what oracle is trying to do. David software and the cloud in that space in that area. Note to settle. No question. Alix we are following this story throughout the morning. David last night, president obama let the news at the democratic condition democratic convention. Praising clinton and putting down donald trump. President clinton president obama i see people of every partyd every party to that believes we are stronger together. Young, old, men, women, folks with disabilities, all pledging allegiance under the same, proud flag with this big, bold country that i love that we love. David we are joined by megan murphy. She has been reporting from philadelphia. As i look at that, i am reminded of two things the speech he gave 12 years ago. The red and blue speech. Is an amazingly optimistic speech, wasnt it . Two great comparisons. Reagan speech is what we wanted. Ld trump this is the contrast the democrats of trying to show. They have an optimistic vision. Of america vision that you can believe in, safeguard your childrens future. That is a contrast they are trying to show. Not that everything is doom and gloom and grim. That this is a Brighter Future that barack obama has started and that Hillary Clinton will be building on her legacy on his legacy. David that optimism came through, but they did not go without taking a few shots at donald trump. Take a look at some of these. President obama the donald is not a planned guy. Clue about what makes america great. Actually, he has no clue period. [applause] to runp says he wants the nation like hes running his businesses. God help us. [laughter] [applause] i am a new yorker. And i know a con when i see one. [applause] david that new yorker of course is our own. He is the founder and Majority Shareholder of bloomberg lp. I want to go back to president obama. I dont remember a sitting president taking this many specific shots, almost filled personal, against a rival candidate for president. Do you . Trust me, david, it is personal when it comes to barack obama and donald trump. There are few things that give about animated, or angry, donald trump. Ck obama he wants his legacy to continue on. Make no mistake, it is personal. What are attacks were, is another story. Random,rump is unscripted, and goes off the cuff and does say crazy things. He himself would it knowledge that. That is part of his appeal and why he has gotten a big bump in the polls. They can chip away at that. I dont know if they will not the overall impression of donald trump. Hillary clinton will have to feel that guillen making more positive vision for her campaign, and get people to trust her, and make people believe that she is the right choice, even after everything she has been through. Murphy,hat is Megan Washington bureau chief. A lot of spectacle. Up next, oracle buys netsuite. We will have more on that deal. Interviewexclusive with former fed chief, Alan Greenspan. You will want to tune in. From new york city, this is bloomberg. Alix im alix steel. Oracle stock going higher, by netsuite for 9. 3 billion at nine dollars a share. Newssherman a bloomberg rejoins us on the phone. What was behind the steel, oracle and netsuite what was behind this deal, oracle and netsuite . I have spent all night trying to break the story. This has been something that has been on a lot of peoples. Radar for months. The idea being we are seeing major consolidation, Cloud Software companies, particularly , we have seen an ongoing trend dating back several years of legacy companies, such as oracle, by larger cloud companies. Now oracle is by netsuite. This deal has been on a lot of peoples radar because Larry Ellison who runs oracle, was the largest shareholder by far in netsuite. If a deal was going to get done, oracle was by far the most likely buyer because ellis owned such a large stake in netsuite. This is what they have been working on for the last couple of months. Theyre just needed to be a series of control agreements that needed to be agreed upon to allow oracle to buy it. Antitrustbe some problems with this deal. But, with that said, it is still only a 9 billion deal for oracle. Alix good point. Netsuites site do we expect any more bidders to come in . Or more consolidation in the industry . As far as other bidders, it is unlikely given the fact that Larry Ellison owns more than 40 of netsuite. It is possible that salesforce could take a look at it. They have gotten fairly close to buying lincoln. Linkedin. If salesforce were to make a larger at decision. Acquisition there has been a lot of back and forth, animosity over the years ellison and the idea of somebody else coming in is probably improbable. Alix alex, thank you so much. Oracle stock on most 2 in premarket. Netsuite is opening delayed due to the news. David lets turn back to the fed now. The Federal Reserve may be moving one step also to raising rates. Near economic rates have diminished. Bill gross is not so sure warning the u. S. May never see the growth it needs to raise rates. 5 . He objective is, a 4 or we wont see higher Interest Rates until we get to that level. We may never get to that level based upon some of the Current Conditions in terms of productivity. David joining us from stamford, connecticut is dean maki, managing director and chief economist. Welcome back. Listening to bill gross, is he exaggerating . What would it take for the fed to raise . I dont think it is realistic we will see 4 to 5 on a trend basis any time soon. Suche fed were to wait for a development, it would be a long time before they raise rates. I dont think that is the feds criteria. They need to be comfortable. Financial conditions are stable. The Unemployment Rate is falling. If those conditions are met, the fed will be willing to raise rates. David take us over the next few months to september. What kind of data would they have to see . The fed will need to see pretty uniformly strong economic data. They need to see to strong payroll reports. The gdp numbers need to be holding up. The Inflation Numbers need to be holding up. Markets need to be holding up. There is a lot of criteria which makes it hard to call any particular meeting, because all those variables go up and down over time. This is a fed that we have seen is very easily knocked off course. We could see a september hike in those forces align. You were an economist with the Federal Reserve, read between the lines. Were they saying about the growth rate in United States right now . What they were saying was that they think that growth has picked up to a satisfactory pace. Convincedalso been that the labor market is tightening. The labor market was quite positive. If the fed were in, say a previous fed with this pipe with this type of confidence, this that is more riskaverse than previous feds have been. David were they saying anything about inflation . In the early indications about inflation . Inflation has been moving gradually higher. What has been concerning them is inflation excitations have been low. What they did signaled yesterday though was they remain low, they are not falling further. That is a step in the right direction, and a sense. David dean, thank you so much for being here. That is dean maki, chief economist. Jon still trying to make sense of the Federal Reserve. Answersted a definitive perhaps showing ceos turnaround plan. Francine lacqua sat down and asked for his thoughts on whether the companys massive overhaul is working. Take a listen. There are indications that it is working. They are of 60 . I consider that a good effort. Ofm very proud of the work my team during a really challenging period. It gives you the sense of power of a franchise. Confident this trend will continue the second half . We have a very positive outlook. We know there are clouds under the horizon. Nobody knows how it is going to play out. With have a french connection, then a german connection. We have a french connection, then a german connection. We will continue to execute on our priorities taking down risks and continuing to grow. Our International Wealth Management Division [indiscernible] dont know how it is going to play out, could we see it full locate out of london or be more volatile . Longterm, [indiscernible] long going to take a it is going to take a while. Will ty will way weigh. What is the worstcase scenario for brexit . I dont want to speculate, it is an accurate you have activities that are more market, dependent. Global markets have done a very good job coming back to profit from a 600 Million Dollars loss. I was determined to do the right thing quickly. In six months, we said we would hit 16 billion. Way below target. Were focused on serving the clients and do what we do best, which is serving our clients. [indiscernible] to these profits and results mean you wont you dont need to raise capital . Can those rumors be laid to rest . We have been very consistent in saying that we do not need to raise capital. We had been very clear. We have raised 6 billion. That we could pull many levers to drive it forward. We say we could do about 1 billion of disposables. Never want to we have been in a reasonable range of outcomes. Guys, when you are in a position as a ceo and have to keep saying the same thing an account like this, we dont need to raise capital . Deutsche bank ceo has to do the same thing. It is not our job to speculate whether they need to our dont, but every time you have it but every time you have and say things like that, things must be hard. David when you put those data points together, what does that tell us . Trading is down. The real question is, are we at the bottom yet . Alix if you look at estimated price to earnings ratio, credit suite it seems perplexing in terms of raising capital. Suite is trading at half. Coming up, a lot more on the banks and an exclusive with the 13th chairman of the Federal Reserve, Alan Greenspan. In new york city, this is bloomberg. Jon from new york, on Jonathan Ferro. This is bloomberg. Trading down barely 1 . The dax and positive territory. Very quickly, here is the other situation in other asset classes. A stronger yen. Intial jobless claims coming in just a moment. 266,000sing slightly individuals filed for unemployment claims. The week before was revised ever so slightly to 250,000. Asaises the question we continue to see better labor data and inflation moving higher, how can the fed avoid a rate hike . In terms of market reaction, we are seeing a move higher in the 10 year yield . The twoyear yield holding 7 10 are and s p futures relatively flat . It still felt to the dilemma spills out with the dilemma of the fed. It seems like the data when it comes to jobs, aside from the may report, is slowly grinding higher. David also pointing to the fact not that may number was indicating a trend at all. Alix you are seeing the twoyear yield holding at 7 10 of 1 . S p futures are relatively flat. David . David we now want to welcome our friends from Bloomberg Radio as we turn to a very special guest. The Federal Reserve senior term rest of the economy are federal chair Alan Greenspan, welcome back and thank you for being with us. Alan thank you very much. Delighted to be here. David you are no longer in the Monetary Policy business. But you do observe the economy, and we would like to know where you think the economy is right now, and why it is in the situation it is . I think the reason it is in the situation it is is has comeolitical party to grips conceptually with what the problem in the economy is namely. Entitlements are rising at a rapid rate, and it is crowding out domestic savings, which is crowding out domestic investment. Domestic investment is the crucial statistic that determines productivity. And productivity in the United States, and throughout the rest of the developed world, has been exceptionally low. As i recall, three fourths of economies of the last five years have had less than a 1 annual rate of growth. The economy cannot go anywhere under those conditions. State oftting a stagnation, which is not only evident in the United States, but pretty much throughout europe and the far east. There is a consequence to that. It is very difficult to see what ie next at this, except what am concerned mostly is stagnation. Inflation finally picking up as deflation fades. David lets start with the stag and the inflation. How acute is the problem with productivity, the lack of growth . It is very difficult to say. Describehink you can the world economies in terms of the old, conventional issue of inflation recession and the like. What we are dealing with is a population that is raging very rapidly. That is inducing a major increase in social benefits. What we call entitlements. That is an that is dominating the whole financial system. What we have come to understand is that we have got to slow the rate of growth, and United States which in the United States is my percent per year since 1965. We are now down to the point where it is taking so much thatgs out of the economy we are not getting enough investment. I think we are just in a stagnation state. I dont see the the aspect secured rhizopus section. We can get a brexit post recession in europe. That is not where the real issues live. David go to the other side. What are the things you are looking at on your personal dashboard that would indicate inflation may be coming back . We are first thing beginning to get a pickup and wages beyond the rate of growth in productivity. That is usually the best indicator, but just as that since now is money at the end of the day causes inflation, we have been seeing since the beginning of the year, a significant pickup in the rate of money, supply growth. Over the very long run, it is the ratio of money supply divided by the real ddb capacity real gdp capacity that determines price level. Over the long run, it has never failed. Where in a situation now we are looking at the interest and inflation rates, it is very clear that we will be moving reasonably shortly and to a totally different phase. David we are talking to Alan Greenspan, the former Federal Reserve chief. Give me some, insight when you were Federal Reserve chairman and had a president ial election pending, did it affect your decision on the timing of decisions . Alan it would not have if it were crucial in the economic outlook. Things equal, we try to stay neutral as best we can. Leading up to president ial elections. But it was never an issue with us. Is that we did not give much thought to it. Greenspan, a popular conversation we have is the yield curve and the flattening of the yield curve. 1 yield calls for the first quarter. If you are the ceo of a company and see that prediction, what does that do for your desire to capital spend . Alan let me just tell you what i think is causing the general, sluggishness in the american economy. It is relevant to a lot of countries around the world. We are seeing, or had been oring, as of 2011 thereabouts, the spread between the 30 year u. S. Treasury bond and the 5year note. It opened it up to the whitest level in american history. What is that telling you effectively, is as you get out into assets, the longer the life of the asset, for example, structures are always more than 20 years. Software is three to five years. Spread,ove out on that what you do is you create a definite bias towards producing only those Capital Assets with short life expectancies. What we are seeing now is software is doing well. Nonresidential building has not moved at all. Alix it is like the quality of is what you are honing in on. What is the solution for that . Seems like fiscal stimulus is what many economists are saying to boost that. Alan the solution to that is basically removing the uncertainty, which is gender ring the extraordinary heavy discounting of the future. I can name a few things which are obvious. If you are a Corporate Executive right now, you dont have any clue as to what the Corporate Tax rate is going to be 20 years from now. Make thatestment you will last 30 years, the present value of the income you are expecting to receive in the 20th , 21st year, is so heavily discounted in todays environment, the present value of all of those are close to zero. Be investment tends to concentrated in the shorter lives of asset. It is hard to see anything other than a normal 2008, 2009om a recession in the capital markets, but very severely in the longterm capital markets. Alix Alan Greenspan, live on Bloomberg Television and Bloomberg Radio. , a lot of people are looking at the bond market and saying something similar is happening. Ise in the markets stagnation becomes reality, what does that mean for the bond market . Lation need you dont get longterm Interest Rates. You have to remember that there is no longterm trend and interest rate. , as a profit of are, or where they were where they were, i would say ancient rome. Have the discount rate is not very varied until very recently. Stay between 5 and 12 for decades and centuries. What it really says is that human time preference, which drives Interest Rates, has not changed. And to believe that we could keep rates down for very much longer, stripes me as to say me to say that human nature will change, but i dont believe that. Alix i am going to put you on the spot a little bit more. Jon what is happening in the bond market right now . Is obvious that we need to be looking at the price earnings ratio and bonds to income. We get nervous when the price index goes to high ep. We ought to be somewhat nervous when the bombing does the same. Point, when you look at the bond term premium turning negative. Investors not demanding any compensation or holding bonds over the longer term. How does a scenario wind up playing out like that when growth may pick up and inflation picks up at some point . , the best, remember way to view negative Interest Rates is to think in terms of where, for example, securities denominated in the swiss franc, the yield on those italianfor example, the euro as it used to be. That spread has not changed very much for a long period of time. Overglobal deflation takes as it has, all Interest Rates fall, but the spread does not. In order to maintain that spread, swiss Interest Rates have got to turn negative. Question is how far can they . There is an arbitrage that one can get. In the United States, if Interest Rates that a very negative, what we would do is all get into currencies and reach a 0 interest rate. Currency andinto stack it all up, i would say, in a vault somewhere. The problem with that arbitrage is there is a liver said there is a limited amount you can hold. At some point, something is going to give. The initial sign will be a big pickup in the holding, for example, in u. S. Currency both here and abroad. And if u. S. Currency is held outside of the United States. The only thing you can hedge against is the currency. That has a physical limit to it. There is a downside limit to how far people are willing to pay to say, for example, get into swiss securities. That is when the markets begin to react quite differently. David allen, lets stay on currency. We have seen a lot of volatility in Foreign Exchange rates. What is the cause of that in your estimation . How big a problem is it for the Global Economy . Alan i think the cause of it is a very significant amount of uncertainty in the Global Economy. That,coming from the fact as i have indicated before, and the United States, we got a very major entitlements problem, which politically, we are not going to touch. We went through two conventions and the word entitlement never got raised, except for lets do it more. We have to cut back. Way to doo physical it without the stabilizing the financial system. It will stop, but the problem is , it is going to take a well before the political system adjusts. See how wefor me to get out of it. How we get out of it must redress unless we address that problem first. David Alan Greenspan joining us on bloomberg tv and Bloomberg Radio. Jon if you missed it, it will be on the bloomberg terminal and bloomberg. Com. Coming up, facebook blowout results. Stats by their mobile. We will rebuild a new product, next. From new york city, this is bloomberg. David this is bloomberg. Im david westin. Willg up, Research Analyst be here to talk about his read on facebook earnings. Alix this is bloomberg and i am alix steel. He spoke beat expectations facebook earnings beat expectations. Is davidmore kirkpatrick. These resultsg at are starting to freak out a little bit . I would recommend they do that. Unfortunately, for them, they simply dont have the same advantages that facebook does. They have tremendous structural advantages over the last decade, but they will not be hurting and platform. Of ad but facebook will dominate in that platform over google. Targetable the most platform in history. And video isobile good, and they are going to go into vr, but the fact is, it does not really matter as long as they get that stuff right, they have more data about more people than anybody else, and that is what advertisers want. As long as they can apply that data to mobile, or video, or whatever, and give people a reasonable user experience, they will win. They more they know more about people than google does. That is golden the bank and that is what advertisers are recognizing because he are Getting Better results. It how quickly can they do on the search side of things . Can they really challenge google in that department . I dont think it is as big of a deal as it is sometimes discussed as being. They will get search better and better because the big repository of data that nobody else can search. The repository is very scalental and scale in and involves 1. 1 billion people. Search betterget and better, but people will not timeing to facebook any soon for search. Those how did they get many things in the pipeline . Messenger. Napchat, going for themve that other people dont . Sandberg are and an unbeatable pair. Sandberg may be the best business execution and salesperson that is ever lived. The combination of those two is unbelievable. Jon the story is, six years ago, within if any developer came to him about the desktop, he turned them around and said come out of the room. The only proposals he wanted was for mobile. A transformed the company. It it was four years ago. It goes to my earlier point. The delay for getting mobile, which was a big topic, if not a big of a deal as you might think because he have the structural advantage of data. Jon david kirkpatrick, or to have you with us. A fascinating story. David it is quite a story, jonathan. This is bloomberg. Im david westin. Time for battle of the charts. Julie it is about centralbank confidence. Confidence in Central Banks. That is what we have been talking about for a long time. I want to look us on japan of more stimulus coming. Whatever form it may take. This is buys in marginal accounts. Here is buys minus sales. Sentiment in japanese stocks has gone down to some extent. As we do have questions about of stimulus in japan, it raises the broader question of confidence in Central Banks around the world and how effective stimulus is going to continue to be. Alix and to see the yen and stocks moving up. We continue the again continue to rally. Very interesting. We spoke about productivity with dr. Greenspan. He is joining the stagflation bandwagon. Ceo at Deutsche Bank says dont freak out. Productivity is all right. Into 2008 to 2010, there was a 7. 5 increase in u. S. Activity. That was 3. 6 years of productivity rolled up into six quarters. The fact we are slow right now is ok because we are getting back to that trend line where we were before the recession at the end of 2007. The productivity is not slow, it is normal. At the end of the day, we are normalizing. When the dollar continues to appreciate, companies that are losing competitiveness will have to raise productivity. David great charts. I think it is fascinating about the diminishing effects of monetary easing coming from Central Banks and their ability to lift asset prices. We have the bank of japan tomorrow. I will do this myself and take a look at this chart over 20 years. It is a different story. I dont think the norm was in 2007. Alix that appears where we are heading in terms of the norm. Jon who would you vote for . David you mean in the political . [laughter] i am not good on productivity. Alix from new york city. This is bloomberg. Jonathan from new york city, i am Jonathan Ferro. We are 30 minutes away from the open here. 1 and thef by 5500 down by. 25 . You see that through here with the swiss franc a stronger by. 6 against the dollar. The dollar index down by. 3 . Re was a bond market yeley market rally. It is up 3. 5 basis points on the 30 year and in the commodity anotherpotentially straight day of losses on crude with uti down to 41. 89. We are 30 minutes away from the open and we are counting you down. This is bloomberg. David just under 30 minutes from the opening bell. I am here with Jonathan Ferro and alix steel. The oracle is buying in cash. We also got a lot of earnings coming in. We had Credit Suisse with disappointing earnings and shell with a bombshell of an oil report in europe. We get the big ones tomorrow in america. Alix exxon and chevron, bring it home, i am excited. Is here is a look with a look at the market before we are moving. Julie, lets begin here. We are looking at cars. Ford is weaker in premarket. Julie ford missing in terms of earnings and giving a warning. They are not cutting the profit forecast but they are saying it is at risk. That u. S. Is unlikely vehicle sales will break last years record sales. The company also saw a contraction in margins in north america. So those shares are moving lower by 7 . On the flipside, facebook. Coming up with a strong Second Quarter sale. The company is now getting so much of the ad revenue from mobile, 84 . Alienmpany has 1. 47 monthly users. More into digging this with gene munster in a few minutes. And finally, the deal with stocks trading at the oracle. 9. 3 billion. Expandingessentially its cloud offering. A Cloud Business Software Including Customer Relationship and management. Oracle is also moving up. Lets go to Abigail Doolittle at the nasdaq. Abigail we have two tech stocks storing in the market. The online deal finding company is up more than 25 , a reach the full year in revenue. We have the cfo saying he expects the company to breakeven for the full year. It looks like the companys rebate Marketing Efforts have helped here. Two weeks ago, a six dollar price target but now it has gone 6. 50, suggesting that lots of upside is possible. The chipmaker is up nicely by more than 10 , best wellknown as the apple supplier, they raised the Current Quarter above consensus and it looks like the rays has to do with strength around the iphone seven. Something to look forward to. Cirrus logic is one of the best stocks this year. Up at the close yesterday. But we do think this stock could rise by more than 30 from yesterdays close. Lets head over to london with mark barton. Mark stocks in europe falling over 70st Day Companies on the stoxx 600 reporting today, down by one third of 1 . Among them, Credit Suisse unexpectedly returning to profits last quarter. Cost cuts and job cuts. Divided a big surprise for the analysts. The measure of financial strength writing 40 basis points. Shares have been out and down. Ubs down 31 . Credit suisse, 46 lower this year. Lloyd bank cutting 3000 jobs. Brexit is going to hurt its ability to move. This is one of the reasons why lloyd chairs have outperformed berkeley. Firsthalf earnings Beat Estimates but frexit will hurt the amount of capital it will generate this year and it could hurt you to earnings. Shares are 4 lower. The forecastsing for the fourth time this year. Because of a boost the euro 2016 football tournament. Englands Chelsea Football Club what a time this company is having. Handing over the reins to the former ceo casper. Adidas up by 2. 7 . Mark barton, he is not a chelsea fan. I know that for sure. [laughter] greenspan alan take a listen to this. The human time preference, which is what drives Interest Rates, has not changed. And to believe that we can keep rates down here for very much longer strikes me as to say that human nature is going to change. And that is one thing i would not bet on. Jonathan that was Alan Greenspan not talking about stagflation. He did. Kristina hooper is joining us now. He thinks inflation pressures are starting to stir. What is happening to Global Markets . Kristina it means that we are going to have some tough going because we have relied on Monetary Policy for so long and we could be creating, as he pointed out, the potential for inflation to increase significantly in the next year. You do you look at the markets, and we have a negative bond premium and Alan Greenspan said, at some point you will have investors unwilling to pay for the yields but we are not there yet. When does that happen . Is uncharteds territory. It is hard to know exactly what be the turning point but i this is a very unusual environment. But we are likely to see is investors sticking with some level of risk assets. Moving even more towards risk assets because they just cant meet their goals and it is becoming more and more obvious to them. As time goes on. David one of them will be wealth preservation. If you knew we dont that if you knew with a certainty that stagflation was around the corner, what would you this is y unusual environment. But we are likely to see is investors sticking with some level of risk assets. Do to your performance to try to protect it . Kristina i would add in exposure to tif. I would add gold. I would add dividend paying stocks. Because what you see with a lot of the yields right now is a significant premium over treasury yields. An enormousget amount of Capital Appreciation yield in an adequate yields starved environment. Alix it seems a lot of people are taking your view. If we take a look at consumer aaples in the s p, you have 2. 5 yield. Jonathan the capital returns have been the big performer so far this year. Do you think the cap is pinned down as far as support from the bond market . Or do you think they are at risk given the momentum this year . Kristina i dont know if they are at risk in terms of capital depreciation. I dont see them moving much higher. There is potential over the shorter term for some of the areas that have been left behind Like Technology to do well. David is there a vicious feedback cycle here . Where people become more and more concerned and cautious and they invest less, which could lead to growth a selffulfilling prophecy . Kristina absolutely. That is certainly one of the significant risks we face Going Forward because i think what we are seeing more and more from ofestors is there is a lack confidence in the fed. There is a lack of confidence in a very unique environment where they dont exactly know where to go. It is just not obvious. It is notour point, obvious where Companies Want to go. We have the acquisition today withour call today oracle. We wonder if there will be a rush into m a . You need to go somewhere. David they have not had an easy time of building their way, so things like that what do you see with m a and Corporate Investment . Kristina we would like to see more m a, an area that has been woefully under focused on by companies. And perhaps it could be the boost to fed funds that actually foride some kind of impetus companies to increase capital investments. Had an issuee have where we have had an underinvestment when it comes to capital. In emerging markets we have had mal investments. Investors aresaid losing confidence in the Federal Reserve. That is a big change from five years ago. Is this the beginning of something much deeper . Losing faith in the central bank . Kristina i think it is an adjustment time understanding what data dependency means. While it is certainly a noble goal, it has created a lot of confusion because what we see is Market Participants looking at each data point with the fed and what the fed thinks. For example, one would assume that the reaction to the brexit more of a have been sustained selloff for a while but in fact, it was looked at by investors looking at it through the eyes of the fed, thinking that it will be good because they would hold off. So it is an unusual environment that we find ourselves in. Having said that, as the fed starts acting and Market Participants can appreciate the deliberations the fed took and the journey we go on, i think that the confidence will come back. Alix and a question always is when . Alan greenspan couldnt tell us himself. Kristina hooper, thank you for joining us. Up, missing estimates by more than 1 billion with low oil prices and weaker margins taking a toll on energy companies. What does this mean for exxon when they report tomorrow . And later, more on oracles deal and moving higher in premarket. This is bloomberg. Alix it is the commodity story of the day. This is bloomberg. Shell reporting a decline with the lowest Quarterly Earnings in 11 years. Tina davis joins us now. 41 but thee crude at Second Quarter was supposed to be good. It was up almost 10 . Tina what happened was that the engine that was supposed to save them if oil prices go lower when you were for in the oil when you were finally oil into products, that makes money. Totallyas been decimated. So bigger Oil Companies have to deal with that. Alix what does it mean for the next few quarters . There is a concern that the product glut will turn into a crude glut. Already reported that we think this is going to be the best quarter of what will be a bad year. Alix and this is a pretty bad quarter. Right, shell is reporting less than half of what analysts expected. It will be tough. Alix how do the investing Community Get it so wrong . We knew that refining markets were going down. Tina well, there was real hope that you would have a lot of cussed cutting measures come into effect and you would see company somehow gain shells profits are looking a lot towards natural gas and it hasnt been a rescuer for them since they bought bg in february. So the other things that were supposed to come through didnt in a way that the market expected. David i am genuinely baffled. A month ago, we had people from the banks saying that it was much reap saying that it was rebalancing much faster than we thought. They said the second half of the year would be much better. Why did we miss this problem . Glut looked like it was dissipated on the crude side but what people werent paying attention to was what was going on with gasoline. So is the glut rebalancing at the crude level . Tina well, it may be wishful thinking. We saw another 2 million added to stockpiles yesterday in the u. S. So it doesnt look like it is going anywhere. Jonathan shell says they will cut expenditure and it is bad news because it is below 50 a barrel. Do we sit here and assume that shell will have to continue cutting costs . Tina they talked about a 40 per barrel operating cost which is pretty close to where we are today. Not a huge margin of it were for them. But having said that, they are down from 49 two years ago so they happen making an effort to keep profitable in this market. Exxon, the best out there the net forecast tomorrow will be down. Are we looking at a quarter like shell and ep for exxon . Tina well, we have seen a mixed bell. Reported, which is not integrated anymore, but they did miss slightly. So the market will be unsure about going into it about which will do well and which will hurt. Alix tina davis, thank you very much. Is 41 86,t, crude turning negative on the day for the six straight day, the longest losing streak were crude in over a month. Jonathan much more on that throughout this hour. Coming up, facebook shares are surging with unexpected earnings. What is behind the companys boost in earnings . We discussed that next. This is bloomberg. David this is bloomberg. Breaking news when oracle announced they would i netsuite. Joining us for more is cory johnson from the west coast. The least surprising acquisition in history. David oracle wanted to move into cloud. Netsuite is the original cloud company. Owns 35 of family the stock. Is that the story . Cory netsuite is a Cloud Business. It was almost a side project run by Larry Ellison. This is a business that has been so close to oracle in so many ways. What were seeing with new money in terms of buying up the software companies, netsuite seems so obvious but we will be curious to see if there were other bidders. Stocks, you can see the market has been waiting for some kind of deal to happen there and oracle was always the most likely with their personal stake in the company. They pursued this in a clean way in terms of the government. Only the outside oracle directors were doing this, they require that a majority of the shares will not be controlled by larry. David bad news for salesforce . Competitionk the for salesforce will be oracle. And keep an eye on microsoft. Their acquisition looks like it will be creating a product to compete with what salesforce does. The other leads us to big story, facebook with killer earnings. Want to give opinions but it was hard to find a weak spot in the report. Were there any . Cory i didnt see one. ,ou saw fantastic sales growth spending vast fortunes in r b. Company is from this terrific growth on the top line. Strong growth with users, compare that to twitter. You have facebook with over one billion users. Some of the Key Takeaways with the changing nature of what facebook is and who the users are. User growth is picking up from where it has been, 3. 5 on a sequential basis. Users, two thirds of the users on facebook or on it every single day and most users on facebook are using it as mobile only. So think about where this was from before . We are now looking at a business where most of the users are mobile and most of them are on it every single day. The richbusiness where are getting richer and the poor are getting poorer . You have facebook and alphabets and amazon but the others are getting left behind. Is there any room for another competitor . Cory one thing about technology that ive been thinking a lot about, in tech more than other industries, there is room for competitors. There might be a leader with a number one and number two and number three. But it seems to me that number two is 1 10 the size of number one. That is will be look at with twitter and whatsapp and instagram. You see the search with google. You see that with amazon and online retailers. A lot of this is about the networking effect of how it works. Isn something is working, it growing within itself and connecting with other things and it works better than anything else. David and the Network Effect means that there is a barrier growing. Alix interesting. Talking about a number one leader google but facebook is launching its own type of search. Will they be able to put away google . Things of the advertising at increasing levels. We saw a big decline in the revenue with twitter. Twitter seeing less income for every ad. 5. 80 for every user and it is growing faster than it was a year ago. So that is doing something for the value of the ad. David and also video. More money. Cory well, they are, others arent. Ok. D cory johnson, thank you for being here. He really knows his stuff. Jonathan he really does. Great to see you. The opening bell is coming up next. Lets get you up to speed on the markets. Futures are going nowhere. By not evenres down two points. In london down by. 1 . Switch of the board quickly, this is how the bond market is set, up three basis points with yield up across the curb. A big decision, less than 24 hours away the dollaryen. A stronger japanese yen ahead of the doj decision. This is bloomberg. Jonathan for our viewers worldwide, this is bloomberg. A few minutes away from the opening l. Here is the Global Financial forecast. Markets a little bit softer. S p 500 futures down by one point. We extend the move in frankfurt, germany. Switch of the board, here is the play in the bond market. Yield are up three basis points following yesterdays rally. The yield on the 10 year is up. Intentionally be six straight day of declines on crude. 41. 84. The consensus among economists are clear they are expecting action. The dollaryen. The market has been whipsawed this week. A stronger yen story. 25 seconds into the session. Lets get to julie hyman. It has been 13 straight sessions were the s p 500 has not moved 1 by the close. So it has been a tight range that we have been seeing and it looks too, at least initially, continue today with major averages level. The dow down about 30. Nasdaq up seven points. Stocks begin trading and that is because we do see volatility fall during the earnings season as the focus shifts to individual stocks. It has really been particularly season. Ted this lets get to individual stocks that we have been watching. Facebook. It is up 3. 7 . So paring back some of the gains that happened after the close when it did numbers yesterday. And this morning. Now down to a little less than 4 . Revenuerease the mobile and increase the number of monthly users. On the flipside, we have been talking about ford, warning that profits this year may be weaker than expected. Not cutting the profits forecast yet but they may. Earnings coming in below what analysts anticipated. Basically, it says the auto market is stalling. That is pulling General Motors right along with them. As to some of the other earnings related stocks, mastercard this morning. That company reporting profits that Beat Estimates. Second quarter net income up 6. 7 . Revenue up 13 . Expenses up 15 . Conoco phillips, i know that alix steel referred to. Shares arely, those higher because the company is reporting be fifth consecutive quarterly loss. The loss was wider than expected but on the flipside it is raising the fullyear production ,uidance to 1. 5 Million Barrels 1. 541. 57. We wanted to check on how the stocks are trading, Larry Ellison from oracle as we have been pointing out he and his family are almost the Majority Shareholders in netsuite. Atcle is buying netsuite 109 a share. Both of those stocks are trading higher. A couple of minutes into the session, the s p 500 just about in positive territory. We are joined now by brian jacobsen, Wells Fargo Fund management. The i i gotg from you, i still like beta play. Why . Well, i think one of the reasons is because the market as a whole will go higher than here. My upside target for the s p 500 is about 22 50. So there is some upside room to run. Thus far, we have seen some of the new bellwethers. Companies like facebook and good earningswing surprises. I think this trend can continue and that the micro here, as opposed to the macro, i think it can push as higher. If earnings are not going to increase for the market as a whole, that means rates need to go higher. What is going to drive that . I think one of the things to keep in mind is that when you talk about earnings declining, it is relative to a year ago. 2015,e Second Quarter of depending on what measure you look at, if it is operating earnings and peak earnings at that point so the year on Year Comparison is unfair. And somewhat useless. I am much more interested in what the earnings trajectory is Going Forward. On a quarter on quarter basis, we see an improvement in earnings and that is why we expect to see improvements by third quarter. I think we could be back to record earnings with the adjusted operating eps numbers. David i also saw that you have a tendency to prefer small mid caps. Is that is because is that because of concern about exposure . Little bits a related to international exposure. A twopronged piece. One is the evaluation perspective, i find them compelling. Record highs with the midcap index. An eraace it, we are in where a lot of politics are talking about protectionism and that tends to favor the mystic oriented stocks in the United States. If you look at the s p 500, 40s and percent of revenue comes from without the United States. In a way, that is the second like to that piece. A little more protection from the rhetoric. One of election the things i found in your writing that ive never heard before is that 92 of the time, when the incumbent party wins, the stock market goes up. Quite a stunning figure. Is that right . Well, if you look back to elections going back to the mid1920s, in an Election Year let me say, in a nonElection Year, the market from august 1 until election day is up 45 of the time. In an Election Year, 65 of the time. And when you have incumbent party winning, up 92 of the. Ime and it typically turns positive from the election day to the beginning of the year 80 of the time. There was only one time in 1956 when the incumbent party one and the market was down. Is the incumbent wins, you get some certainty and no divided government, does it matter if the incumbent party loses as long as it is a divided government, is that the preference . Brian that is the preference. Markets like continuity. I dont think that even if we get a republican sweep, i think there is enough ideological differences between the senate at the wouldbe president that point that it would still be considered divided government. If a democrat wins the president , i dont think we will see them sweep the senate and the house so you have a divided government. And i think that is somewhat of a positive environment for investors. Jonathan lets deal with the here and the now. Decision. F japan what are they going to do . I think that they are going to have to announce an expansion of the asset purchase program. Right now it is running at ¥80 trillion per and him. They will have to update that to ¥100 trillion per animal. That could be a good signal that they are not doing helicopter money, her say. We know there are restrictions against that. But it would be helicopter money in all but name only. Ava has already set the amount of stimulus he is expecting on , they will match that. Or they will admit that they have been bluffing the entire time. David brian jacobsen, thank you so much. Facebook and apple have reported strong earnings this week. It is amazon and googles turn to report. Gene munster joins us next. This is bloomberg. David this is bloomberg. I am in the hewlettpackard enterprise green room. Coming up, the Eurasia Group founder. Alix coming up at the top of the next hour, bloomberg markets. We have the bank of japan on tap, the fed, oracle a lot going on. Mark so excited. Great to talk to you. Stiglitz, the Nobel Prize Winner and professor of economics. He will be joining us from the Democratic National convention to discuss the Economic Issues at play in the election. Blanchflower, former boe policymaker joining us at 11 00 new york time. So look ahead to the bank of japan for tomorrow and next weeks bank of england meeting. What an exciting seven days weve got. Alix it really is. Not going to get any sleep. Jonathan the industry is marginally softer 12 minutes into the session. So many movers to get through, lets go to julie hyman. Julie the downward movement that we are seeing has to do with ford, the best performer in the s p 500. Whole foods is number two or three at this point. Continuing to struggle with competition as other grocery chains have gotten into the natural business. Andr sales are down by 2. 6 that was the fourth consecutive decline. A 2. 4 s were looking for drop. Also, hershey is going in the opposite direction up by 2. 5 . Earningspershare rising. It raised its dividend by 6 . And her she says it will not be commenting further on the offer today in the Conference Call today. So shares are rising on earnings but not on their potential deal. As we watch forward, lets watch what is going on in the motorcycle business. Harley davidson has been struggling this year. Second quarter meeting estimates but the company saying that for the year, its shipments will be lower than it previously forecasted. Shipments will be at most 269,000 vehicles. It was 274,000 vehicles. That accounts for the drop in those shares. Jonathan lets get to Abigail Doolittle where the nasdaq is unchanged. Facebook has steadied the ship. Abigail we have big news here. Soaring, and are serous logic is the apple supplier. A derived the revenue from apple and the Company Raised the Current Quarter well above consensus. Do with theave to iphone seven, the upgrade cycle. It could be a positive tell on apple. Turning now to research. It is up just barely after it beat fourthquarter earnings and revenue. There is a more than 10 upside. And finally, a company that makes optical transition, plunging. The worst day since 2010 after warning on the nearterm revenue outlook. There are at least six downgrades out there. Thank you, Abigail Doolittle joining us from the nasdaq. Facebook dominating after hours and early trading. But Going Forward it will be amazon and google reporting after the bell. S p, amazon and google amazon is the white line. The last three months have belonged to the performance of amazon. Can it live up to the Investor Expectations today . Gene munster is joining us. How does amazon delivered today . Gene well, they deliver because they are taking more and more. They have been more aggressive with the same day and same hour delivery. As they get that, that improves the unit growth number and that is the critical number we are checking for tonight. Analytics, a proprietary analytics process where we can estimate what the number will be. We think it will be 26 , ahead of buy side expectations. Iswhat they are doing well capturing more of your wallet and the way it will come out is in the growth. But you do believe in unit growth in Revenue Growth will slow this year and next year . Can you put that in context . They will grow this quarter around 26 . We are monitoring amazon to grow at 19 next year. That will compared to overall ecommerce growth in the u. S. Probably closer to 12 . A while we are preparing for slowdown next year, it will be gaining market share in ecommerce and much faster than brickandmortar. Growth will also be growing, what does that wind up doing to margins . What is the margin expectation . Gene we think margins will continue to expand. There is some variation quarter to quarter. That we think there will be some margin upside. In the range of 3050 basis points. It might not sound like much but when you put it in the context, investors are hyperfocus on that number. They use that image use that in the trajectory of the next few years. Alix i want to get your take on google. Reporting after the bell. The concern is that we might see tough, in the back half of the year. What are you looking at . Gene the biggest question we get from investors is how they will monetize maps. Is one billion monthly users, more than one billion. And that puts it in an elite camp of five Different Properties that have one billion or more. So there is a big opportunity to monetize. So tonight for google, it is less about the june report, more about other things like how maps could offset the tough cop that you have talked about. Alix you also cover facebook. One of the takeaways from facebooks quarter is that they will go into search. Can it become a real competitor to google . And probably will not be a competitor to google. They could grab some small ad dollars from that. And waited think about search is how people typically think. This is more to search for different people and different recommendations. This isnt to try to figure out what the tallest building in the world is. So yes, they are getting more impact full in search but it will not have an impact on google. Facebook has great businesses and some huge ones that havent even started yet. I have enough thing going on. Alix yes, they have to monetize messaging. Gene munster, thank you for your perspective. Up, it has all built to this. Tonight, Hillary Clinton takes the stage at the dnc. We will have a preview of what to expect next. This is bloomberg. David this is bloomberg. President obama took to the stage last night to praise the qualifications of Hillary Clinton to be the next u. S. President. By far his most forceful endorsement yet. Obama nothing truly prepares you for the demands of the oval office. You dream about it, you can study it, but until you have sat at that desk, you dont know what its like to manage a global crisis. To defend young people. But Hillary Clinton has been in the room. She has been part of those decisions. Stake in thet that decisions our government makes. David Margaret Talev joins us now. That, he saidid no one, including himself or bill clinton, was more qualified than Hillary Clinton. Dont most people think she is qualified . Margaret youre right. Her biggest problem Going Forward will be the emotional connection and likability connection. ,art of president obamas pitch it all has to do with the context of this week and yesterday, in particular, juxtaposing clinton steadiness againstblishment i donald trump and what he was opposing as far as his relationship with the russians yesterday. President obamas emotional connection with Hillary Clinton was all about that hug on stage. The embrace against the backdrop and the way they walked out, arm in arm. He is still hugely popular in the democratic party. And he wants to try to leverage that to help her. David take us into tonight. What do we expect from Hillary Clinton and what does she expect from herself . Margaret to really make the convention a success, she needs to do as well obama did last night. She needs to make a connection with the voters. We will see her be introduced by her daughter. Be we will see her introduced by a couple of republicans who represent the effort for crossover voters. And also an appearance by pennsylvanias governor, that will be a really tough state for her. One of the tougher ones. Makeants to be able to merits andse on the the emotional case in terms of appealing not just within the party and unifying the party, that across the aisle and to independent voters as well. David Margaret Talev, thank you so much. Coming up, we pivot to the bank of japan decision in the next 24 hours. The number one consensus among economists check out dollaryen overnight. Look at the amount of uncertainty right now. 2008. Ghest since and a big point here with the fx market in london is that out of all the major Central Banks, the bank of japan is not afraid to go with against expectations. They seem to personally like to surprise markets. Alix good point. And when you look at the yen being classified as a safe haven asset, you dont qualify that with what we saw in 2008. Jonathan there is so much ,peculation with bank of japan it is over to mr. Kuroda. Weak yen a strong yen today and im looking forward to the decision. Into and we are 25 minutes the session. A quick check on markets. Tame. L, pretty the nasdaq is the highest of them all thanks to facebook. 29 points. The ftse flat in todays session. You are looking at a stronger anchor japan meeting and yields on the 10 year are 1. 5, that was a rally. This is bloomberg. It is through thought the london and 10 00 p. M. In hong kong. From new york, im vonnie quinn. London, i markve in barton. Im mark barton. Ons is bloomberg markets, Bloomberg Television. Vonnie we want to take you from new york to london to San Francisco and the next hour. Into the trading day in new york and u. S. Stocks are fluctuating with a flood of earnings reports. Little to clarify the strength of the economy. In europe, stocks dropped from a onemonth high. Democratic National Convention in philadelphia, president obama makes his most or so case to Hillary Clintons president ial bid. We are offering a blistering critique of her opponent, donald trump. Vonnie facebook shares are rising as the company Beat Estimates in every metric with sales rising 59 on mobile ad demand