Transcripts For BLOOMBERG Bloomberg Surveillance 20150309

He says the key to any deal is verification. If there is no deal, then we walk away. If we cannot verify they will not obtain a nuclear weapon, if there is a breakout. So that even if they cheated we would be able to have enough time to take action, if we dont have that deal then we are not going to take it. Talks with iran are scheduled to resume in a week. Five suspects of been invited in the death of Boris Nemstov. All five work from a predominantly muslim region of russia. A sixth suspect is said to have killed himself. Boris nemstov was one of the most vocal critics of president vladimir putin. In madison, wisconsin. There was a candlelight vigil for a black teenager killed by a white Police Officer. The teenager was shot after the Police Officer was assaulted. The Justice Department said they would not press charges against a white Police Officer who shot a black teenager in ferguson missouri. General motors will have a shared by that. This is part of a settlement with harry wilson. He had pushed for a 1 billion share i back. Gm will buy back shares. Wilson will not become a director. He is working with hedge funds that own 4 of gm. Apple is hoping you want the internet on your wrist. Tim cook will unveil the latest device, the apple watch. It will have a rectangular touchscreen. The price will start at 349. Analysts estimate they may sell 14 million of them in the first year. A solar powered plane has taken off this morning. Builders of the Solar Impulse want to be the first to fly around the World Without using any fossil feels. The plane took off from hobby dobby. It will take 25 days over five months to do it. Those are your top headlines. Tom keene very cool. I just went to the air and space museum. We will have an interview with an astronaut later on bloomberg surveillance. Right now, we do a day to check her in what a friday it was. Yields are higher. Its been a soggy euro coming off the friday carnage. The vix is showing the friday angst. The dow was under 18,000. We are back on the euro yen watch. This is a weaker euro. Gold is getting near critical support levels. That is something to talk about into march and april as well. Lets get to the bloomberg terminal and get some perspective. This was a weak euro. This was next to bergdorf. I was there this weekend. This is the classic court in new york. Then they moved so fast. This is a museum in paris. Then the headline is you cant control it. We go up Even Stronger and we come down. Up to this persistently strong, olivia he thinks we are going to 105. Alberto gallo is looking for parity. Tom keene its a debate right now. This is a snapshot of where we are with the euro. Olivia today is the day the ecb brings begins its quantitative easing program. Tom keene we saw that announcement about an hour ago. Today marks the beginning of markets adjusted with a vengeance. The euro is stable and churning. Lets go to david powell. David, good morning. What will the ecb actually do today . Are their bonds out there for them to acquire . Today is the first day they will begin buying bonds. This will be the start of the 60 billion euro per month they will be purchasing. From news reports we saw that they are actively buying german bonds already this morning. Tom keene i saw some italian as well. What do they do . Say give us your bonds . They are going to call banks and purchase bonds. The National Central banks will be doing that and will be happy. Olivia there is so much concerned that they dont want to sell because of all of these capital requirements. These banks dont want to sell that paper because they need those assets. I think those are a bit overblown. Theres not a shortage of debt out there. This has plenty of it. The other thing is flexibility in the program. Olivia going into this, we were focused on to what extent we were going to see debt mutual is asian. If that was going to be a step into physical integration. It looks like germany is in no way going to be on the hook for anybody elses that. Debt. Tom keene that was one thing mario draghi had to put in there. There is not going to be too much of it. Most of the risk will fall on the individual central banks. Germany will only be exposed to the risk from german sovereign debt. Tom keene david howell, thank you so much. The ecb is starting to buy bonds. America pushes aside the gloom. Forget about worries about qe. The yields are higher in the united states. The stock market did not cooperate. We consider the city of Bank Citibank index. Were you surprised at the disconnect on friday . We had risk on . We would have been cautioning investors the last couple of weeks. Some of our metrics are moving out of more depressed levels. One we watched is the top 50 names in market caps. They dropped down to about 25 . Once you are below 30 there is full mobility in the market. Tom keene what are people actually doing with their money right now . Lots of rotation, lots of movement around in the market. You can see Different Things with energy going up and then pulling back. People keep chasing this performance. Tom keene is that a healthy thing . Bolivia, you did six trades on sunday. Olivia they are turning out of exxon into europe. Energy they chased on the way out and then pull back in the last week or two. They Like Health Care a lot. They crushed utilities on friday. Its been over the place. Tom keene this is a critical question. You remember when the Montreal Canadiens won the stanley cup. Is this going to be another yields higher, rice is lower, stocks get hammered market . We dont think so. What you are talking about is an environment you have a combination of yields moving higher because the economy is getting stronger and earnings are the most critical dynamic. The earnings estimates have come down over the past six months. A lot of that is energy. Maybe five points is coming off. People are watching the currency. You start to get a loss. Tom keene you see the wall street journal. Its use of cash like apple. Or like gm, driving the mood of the moment. Olivia this is one of the criticisms of altra low rates. Ultralow rates. This makes gm do buybacks and borrow to do it. This is at the expense of something else. Capital spending it hasnt. That is the point. Has been hitting records the past several years. Buybacks in 2007. Most people dont seem to get that. Olivia what is the most important leading indicator . Iwatch credit conditions. That is still supporting economic growth. We watched Capital Spending treads. Tom keene does a Company Change when it enters the doubt . Does behavior change . I think there is initially some movement in and move been out area. Tom keene we will talk about this later in the hour. Olivia coming up, greases finance minister says they are quickly running out of cash. You have heard that before. We will tell you what is different this time around. We are streaming on your tablet and phone and on bloomberg. Com good morning. Tom keene good morning. Willie apple watch the as huge as the iphone . I think not. We need your observations on the apple watch. We say i dont think so. Will the iphone apple watch be as huge as the iphone . Olivia sterns we begin with the Nuclear Talks between iran and the united states. Republicans are sending an open letter. They say that any deal will not last after president obama leaves office. Five men in russia are indicted for the killing of Boris Nemstov they are all from a predominantly muslim region. A sixth suspect is said to have killed himself. Also on the bloomberg terminal a racist video has led to the closing of a fraternity at the university of oklahoma. They have suspended members of the Sigma Alpha Epsilon fraternity. Black students found it and posted it online. The investigation of that rough landing in new Yorks Laguardia airport looks at the jets rakes. Officials have talked to the pilot and checked the flight recorders. The plane stopped just short of an icy bay. President obama wants to get more people ready for technology jobs. He is expected to unveil a program called tech higher. Re. A cycling Organization Says they turned a blind eye to lance armstrong. They found that the organization ignored hence that he was doping because of his superstar status. Those are your top headlines. Tom keene a number of stories today, the ecb is out in greece. Greece is front and center. Olivia sterns there is in all of branch. There are reforms like using tourist as spies to crackdown on tax avoidance. He was diplomatic with his response to these proposals. We are in athens. Walk us through the offering. It does not look like its going to cut it in brussels . Far from it. I am afraid that things have not bridge the gap that stands between greece and its creditors and the structures of the reforms. What they are demanding, a positive outcome would be a big surprise. Olivia sterns we saw headlines across the weekend that there might be a referendum in greece . Is that possible . What with the consequences be . They could have a referendum on whether greeks what their dignity. The finance minister said more elections could be in place. The consequences are going to be vast. The economy will be in severe recession. I think we are running out of time. Olivia sterns we have so many of these one minute to midnight moments in greece. When will greece actually run out of cash . Our projections are saying that march is going to be a hard time. Even our reserves in the government sector, even if they cut out this month, its going to be hard. We have money to pay wages and pensions. We will see about the rest. Tom keene the picture of all of this besides words by the greek drama, is the spread to the german yield. Its not all that bad. We stabilize and we move in the right direction. Over the weekend, i read that tourism is a salvation for greece. Other than Olivia Sterns taking her 14th trip to the greek islands, can tourism bailout greece . It is a very important factor. You were talking about investors not thinking its a possibility. That is the main reason you dont see the market react negatively on this. Tourism has been a source of income generation for the greek society. We should be investing more on that front. Olivia sterns i mentioned in the intro that startling headline that i found on the cover of Financial Times. Can you explain what the differences are thats being proposed . I think we are going to have some individuals that will not come from and is official sector. They may be housewives or Unemployed People that will be trained and in place for a couple of months. It is a proposal. I dont know the breakdown of it. We have not had enough details on this. It doesnt sound worrying for european creditors. Olivia sterns some critics are saying it was a bit amateurish. Thank you for joining us from our athens euro. Tom keene part of it is deflation in europe. One of the great calls of a generation, Gary Shilling joins us. He is talking about oil below 20 a barrel. He is always interesting and always controversial. Its daylight savings time. We spring forward. I actually got it right this year, for the first time in five years. The gorge eos city of new york city. Good morning. Tom keene good morning, everyone. Futures are negative three. The euro is 108. Now for a morning mustread. Olivia sterns mine is the governor of hawaii. This is from the wall street journal. They are writing about a trade deal that must work for americas middle class. It represents an opportunity and one that may not return for decades to set up trade rules in asia that advance u. S. Values. This would establish rules on enterprise intellectual property rights. I dont know about you, this is a reaction to the failure. Tom keene talking to the trade minister for the president , there is an urgency that i dont think is captured in the public. I just dont get out there. Olivia sterns global trade is not popular mainstream politics extent they extent to which except for the extent to which americans are afraid their jobs might get outsourced. Larry summers is writing in the Financial Times about the same thing. He said this is necessary to let americans compete on a level playing field. Japanese producers can get better terms in each others markets than the u. S. Does. If the u. S. Does not pass this china is going to step in. Its our fight to lose at the moment, but its a crucial deal. Tom keene theres a huge body of america that disagrees with everything you just said. Its amazing how contentious this is in washington. I dont think this will be an election issue. Its that far removed from the dialogue. There is very little agreement. Olivia sterns we try to have those controversial morning mustread. Tom keene professor summers is talking it up. Olivia sterns are you going to buy an apple watch . What will it do . Will it be as big of a hit as the iphone was . We will be back in a moment. Tom good morning, everyone. Bloomberg surveillance. Lots going on in europe. A little bit of pop for the euro after friday. Lets get to our top headlines. Olivia it has been one year since the disappearance of malaysian flight 170. A battery on the planes underwater begin disappeared months before its disappearance. As long as there are reasonable leads, the search will go on. We have 60,000 square kilometers that is the subject of this search. If that is unsuccessful, there is another 60,000 kilometers we intend to search. We are reasonably confident. Olivia the search is focusing on some of the deepest and most remote parts of the indian ocean. The u. S. Stock rally turns six years old today. Gains have been predicted at every turn. Euphoria has yet to surface. The s p 500 has been predicted to continue gaining. There will be a major change announced today in the way Credit Report errors are handled. Firms will wait six months before letting any unpaid medical bills. General motors will return some of its cash to shareholders. Gm will announce a Share Buyback today. Harry wilson called on the automaker to buyback as much as 8 billion in shares. The buyback will not be that much but wilson will give up his request for a place on the board. Apple will unveil a new device. It has only given out a few details about its smart watch. Smart watch apps will allow for maps, photos music, and messages. In the nfl, the dominicans and suh is about to become one of the most expensive players. He is one of the most nfls controversial players. He has been fined eight times. Tom i know nothing about him but he is the dirtiest player i have ever seen. Im not qualified to make the statement i have just made, but he is appalling. My 21yearold son feels the same way. Tom on the Credit Report, i have to tell you that one of my daughters is my wife. The middle child is one of my wives according to the Credit Report. Im going to talk about the equity markets. The headline came across the bloomberg terminal that the apple will join the dow. Tobias is old enough to remember , but not old enough to remember the American Cotton Oil company. It is the most amazing thing. I have noted less than five younger people say, so what . What does it symbolize to a grizzled veteran like you . Tobias it is a curse word to some people and others say it is great because more people will buy it. Tom what does it mean from a Stock Performance . There is something about the dow. David blitzers press release. It is something from our grandparents, something from our parents and it is still what the public is hardwired to. Tobias im not even convinced about that. People are just unaware of it. It does not hit them every day. What is my performance doing against a benchmark . Olivia i take your point. The dow trailed the s p 500. Tobias i had a bunch of emails saying, this must be the curse of death. I think this stuff is more emotional. There is not great evidence of longerterm horizons. I do not invest in stocks because it entered an index or not. Olivia sure. Tom westinghouse is in here somewhere. This is all about earnings and revenue and nominal gdp. Tobias mostly. Tom look at this. And yet the public is not engaged in this. Why is that . Tobias two big drops before it is part of it. If corporates make a lot of money, that does not mean the average person got a break or a better job. Tom carl icahn really driving this forward. Did apple become a dow stock because of activist shareholders . Tobias that is a hard question to answer. I think buybacks of been so important. Have been so important. You have had over 2 trillion in buybacks on the s p 500. In the same sixyear period, you had far less on the dow. Olivia im not so sure. They sold 75 million iphones last quarter. Then you look at the stock price. Carl icahn thinks it could be the next trillion dollar company. I dont think it is in the dow because of buybacks. Tobias it changes over times. There were Great Companies back in the 1950s and 1960s that were the cutting edge of technology and now it changes over time. We talked about social media and the internet. We talk about them in a way no one could ever have imagined in the 1970s. The farming machines were pretty impressive products in the 1930s and 1940s. Today, precision act farming brings in Something Different brings income brings in computers to help them do Something Different. Tom i never perceived apple as a dow component. Olivia because it was new tack and ibm is old tech . Tom a cultural thing. Olivia coming up, gone are the days of the regular trip to the Grocery Store for homecooked meals. Todays single best chart shows more americans are dining out. This is bloomberg surveillance. Happy monday. Tom good morning, everyone. Bloomberg surveillance. We have a correction. We have a wonderful single best chart. Thanks kevin. From the lions to the miami dolphins. There was a joint effort correction. Olivia tom, when was the last time you want to the Grocery Store . According to todays chart you are not alone if you are not going to the Grocery Store that much anymore. Americans spend more money in restaurants than Grocery Stores for the first time. Isnt that incredible . Tom it is. Olivia it is a combination of a recovering economy and changing eating habits. For the millennial generation going out to restaurants is not just a special occasion. And chipotle and shake shack do count. Tom everybody is working 100 hours a week. Tobias the idea of the family getting together for dinner today does not happen, unless it is a birthday or anniversary. Olivia we dont even have those leave it to beaver families anymore. People are single, lower household formation rates, and that yields going out to dinner. I think it is fast casual. It is also wage growth. We are also hyperventilating looking for Wage Inflation and you keep seeing it in the restaurant sector. Tobias this is also inflationadjusted. Olivia i disagree. If you are going to chipotle and Cracker Barrel is that it . Cracker barrel . Dennys . Cheddar barrel . Tom Cracker Barrel. You will get 40 hate mails. Olivia from you and your children. Tom you have never been to a Cracker Barrel . Olivia never been. Tom this is a surveillance breaksclusive. Next week im a we will ask Olivia Sterns about waffle house. Waffle house, you and i, together. [laughter] olivia serious photos. Islamic state militants bulldoze an ancient site in order to a race the ancient culture of the middle east. Artifacts were smashed and toppled. Isis originally cap showed captured nnimrud last summer. Tom it speaks to the value of museums away from points of contact. Olivia a trespasser was arrested after being spotted on top. There was no information as to why the man was on the roof. Suicide was ruled out as a probable cause. My guess is that he was trying to take a selfie. Tom is that the thames below him . Olivia there is a road in between. He was arrested. Our number one photo. Controversy over damage. Families and children visit the houses but the screws used to build the homes slowly kill the tree. The Irish Fairy Door Company started initiatives against fairy homelessness. Tom ok. [laughter] olivia any thoughts . Tom does this Say Something about u. K. Politics . [laughter] is it labours fault . Olivia we are going to be speaking with nasa astronaut scott kelly who is about to go on a yearlong journey for the International Space station. We will be speaking him with him live on bloomberg tv. Tom good morning, everyone. Bloomberg surveillance. Good monday morning on this apple day. We will go to cory johnson in a bit. Will the apple watch be as huge as the iphone . We would like to hear what you think. Olivia good morning, tom. Iran is telling its leaders that any nuclear deal signed with president obama will not last after he leaves office. Five men are under arrest in russia after the killing of an Opposition Leader. A sixth suspect was said to have killed himself as authorities moved in. The disappearance of a Malaysia Airlines flight 370 was a big factor in airline is asked rising in 2014. The jet shot down over ukraine is not counted because it was not considered an accident. Officials in miami confirmed that Climate Change has been banned in florida as an unofficial policy. Rick scott is not convinced that humans are causing Climate Change. Big pieces of baseball history are up for sale. They will be sold by sothebys. They will fetch at least 3000. Ricky jackson bought the letters when the stadium closed in 2008. It will be a windfall for him. Bramwell was 74 years old. Tom it is a huge loss and i cannot say much enough about what she did. She went to columbia. Gabelli hired her. She was the star of those late 1980s, early 1980s value equity markets. Early 1990s value equity markets. She aggressively wanted nothing to do with it. The only equivalent to her is sallie krawcheck. It is a huge loss. Lets go to betty liu with an important interview on space travel. Betty how about a mission from mars . It is not russia versus america but a russian and an american joining together to see if life can exist outside. They lift off on march 27 and a recordbreaking yearlong journey aboard the International Space station. While he is up in space, his twin brother will stay on land to measure the effect of life in the cosmos. Captain kelly is with us live in moscow after undergoing rigorous training. Great to have you this morning. How are you feeling . Captain kelly feeling pretty good. I have been over here for 2. 5 weeks now. We had our last bit of training and concluded with our final exams. I have a rest week prior to heading to cause extent kazakhstan. Betty you have been pretty active on social media. Inside what looks like a cockpit or a capsule you say this is about to get real. What is the biggest thing you will be looking for in this mission . What are you going to bottom line find out . Captain kelly we have a lot of responsibilities on the space station. There are a lot of activities. We are going to be remodeling the space station. We are going to be moving the components around. To prepare the space station for a docking of commercial crew vehicles to bring u. S. Astronauts and other International Partner astronauts to the space station. We also do a lot of science on board. There are over 400 different scientific experiments that will be going on while i am on board the space station. This sort of off the earth, for the earth philosophy. But also, the explorationbased research. How to go further beyond earths orbit. Betty have any of the deteriorating relations between the u. S. And russia had any effect on this mission . Captain kelly none at all. I have been coming over here for 15 years. As far as our working relationship with the russians not only the cosmonauts but the management, the engineers, scientists instructors, it has only improved over time. Whatever the Political Climate is at a time is something that is completely transparent to us that a working level. Myself and my cosmonaut colleagues rely on one another literally for our lives. That is what is most important to us. We will even he of the political conversations to the people that that is their job to discuss. Betty thank you so much and good luck out there. Tom lets do a forex report. The euro is what we are all watching for the ecb action today. The brazilian rain now continues weakness r. Another hour of bloomberg surveillance is next. This is bloomberg surveillance. Tom the markets read just and recalibrate after surging job growth in america. Europe readjusts and recalibrate stu mario draghi. Recalibrates to mario draghi. Break out the cotton terry cloth sweatbands. There are a sweat in cupertino over the birth of the apple watch. Good morning everyone. This is bloomberg surveillance. Im tom keene. It joining me, Olivia Sterns. Lets get to our top headlines. Olivia republican senators are warning iran to not negotiate the nuclear deal. Any agreement they sign with president obama will not last once he leaves office, they say. They have been pushing to have their say if and when a deal has been signed. President obama said the country is willing to walk away from Nuclear Talks with iran. President obama if there is no deal, we walk away. If we can verify that they are not going to obtain a nuclear weapon, that there is a breakout period so that even if they cheated, we would be able to have enough time to take action if we dont have that kind of deal, then we are not going to take it. Olivia talks are scheduled to resume within one week. Five suspects have been indicted in the killing of an Opposition Leader in russia. A sixth suspect was said to have killed himself as authorities kill closedend. Closed in. In madison wisconsin, there was a candlelight vigil for an unarmed black teenager killed in his apartment by a white Police Officer. The officer shot the teenager after he was assaulted. The shooting happened several days after the Justice Department decided not to press charges against a white Police Officer who shot a black teenager in ferguson, missouri. There is part of a settlement with harry wilson gm is announcing a buyback of shares and it is a settlement with harry wilson. Wilson is working with hedge funds that own more than 2 of General Motors stock. Apple is hoping you will want the internet on your wrist. Ceo tim cook will unveil the apple watch. It will let you track your health and fitness. The price will start as much is 349. There is not much known. Apple may sell as many as 14 million apple watches in the forced year first year. The builders of the Solar Impulse want to become the first to fly around the World Without using any fossil fuel. That plane took off from abu dhabi. It will take over five months. It has a 36 foot wingspan larger wingspan than that of a 747. Tom pretty cool. Something new in aviation. Lets look at something new in our data check. The 10 year yield. Zero dollar eurodollar turning. Chruningurning. Keep your eye on the ball. Today marks the beginning of the ecb qe. They are buying italian they are buying this, they are buying that. David, what will happen tomorrow . What happens one week, two weeks, five weeks on . David it is going to be a bit more of the same. This is here to stay. 60 billion euros for month until september of next year. This is the very beginning of this. Tom will it move yields . Does he have the ability to drive negative yields negative and other yields ever lower . David he did announce that the ecb will not buy bonds lower than the ecb deposit rate. That is a floor to a certain extent. There are a lot of yields above that. The only thing below that is really the german twoyear yield. Olivia is there going to be enough paper for the ecb to buy . Banks want to hold on to these high rated securities. David everyone has a price. The ecb if they are willing to pay enough, there will be plenty of securities to buy. This is a debt crisis. One of the most heavily indebted nations regions in the world. Tom thank you so much. Joining us for the hour, dr. Gary shilling. He has been forecasting disinflation. He has been correct. His call for persistent low yields is flat out the call of a generation. I guess it goes back to your wonderful book the blue book on deflation. I love the book. Can you say low yields over the yield pullback we have seen . Dr. Shilling i dont think so. If you look at the rest of the world japan and europe in particular, they are in quantitative easing. As far as the fed is concerned, the fed has a dual mandate. It is full employment and price stability. More jobs are being created, but they are not highpaying jobs. Tom the heart of this is the linkage of the money economy to the real economy. We are going to separate from a Gary Shilling world and the u. S. Is going to do better than good. David rosenberg even looks for some form of Wage Inflation becoming cost pushing. Dr. Shilling we are not seeing that so far, tom. This last report was 0. 1 increase in wages. Tom agreed. Dr. Shilling you are getting low paying jobs being created and you have globalization and businesses under tremendous pressure to cut cost. Tom you would recommend that Olivia Sterns by the 30 year bond this morning . Dr. Shilling yes, i would. Tom why . Dr. Shilling let me tell you why. [laughter] the yields on almost every european sovereign are higher than american. Is the portuguese tenyear sovereign a better paper than the 10 year treasury . I dont think so. Tom this is important. 99 of other people say the portuguese yield will go higher. Ndamukong suholivia why . Dr. Shilling why . Tom you both said why at the same time. Dr. Shilling i think this is the euro of the dollar. Why wouldnt people buy treasuries and sell european debt . What am i missing . Olivia you brought in a Monopoly Game of inflation . I assume you made this yourself. If we are printing all of this money and the fed Balance Sheet has quadrupled and we have seen shinzo abe do it in japan, why are we in deflation . Dr. Shilling because the money is simply sitting there. It is not going into goods and services and wages. It is the liquidity track. It is pushing on a string. It is what they talked about in the 1930s. Olivia does it unleash a wave of inflation up on point . Dr. Shilling it may, but you may get through the age of deleveraging. That was the title of my last book. Tom shameless plug. Dr. Shilling as long as you have slow growth, you are not going to see the kind of use of that money, just sitting there. Tom the power game right now is waiting. Do you agree with alan sent her elen zentner . Dr. Shilling i think that is right. I think the fed is going to wait. I dont think we will see weight increases this year or may be next year. If you look at the forecasting record they always start out and then crank it down to reality. Tom even with 250,000 on average job creation . Dr. Shilling look at the jobs that are being created. Leisure, hospitality, waiters retail. You dont see the big jobs in manufacturing, utilities information the high pay jobs. Tom we could talk for 14 hours. I will put this out on radio. I cannot say enough. I call this the blue book. I get a royalty for showing it, i have sold so many. Ed hyman loves shilling deflation. It is that a good enough shameless plug . Will you stay around for the hour . [laughter] olivia i will put in a shameless plug for Gary Shillings honey. He is a beekeeper in his spare time. Tom good morning, everyone. Bloomberg surveillance. It is time for my morning mustread. Olivia sterns and Gary Shilling with me. We look to paul krugman for a smart polemic about the 1970s. It is about selling and ideology. The 1970s were the final year before the turn. He is going after the right, saying they are messaging the 70s and that is grarim. We had rising Median Income even with inflation. Inflation is not necessarily bad. You could have good or bad inflation. Dr. Shilling why it is coming, whether it is good or bad. You get good deflation when you get productivity increase. Tom you could have good inflation if you get productivity increase. Dr. Shilling either way it is productivity. Lately, productivity has been lousy. That is what drives incomes. Tom what does the right get wrong . You have been a supporter of some. What does the right get wrong about their nostalgia for the reagan years . Dr. Shilling i think the problem is that that was building up to ultimately a blowoff. You had this inflation and nobody paid attention to it. You got speculation ultimately. You ended up with the dotcom blowup and the housing blowout. I think people got comfortable with those situations and they lost perspective. Tom we have a deflation game here. Olivia this is Gary Shillings custom edition monopoly. [laughter] dr. Shilling we made that in 1989. That is when we first started talking about deflation. Tom this is 25 years in the making. Didnt the part her Parker Brothers suit you . Dr. Shilling look at those cars. Cards. Olivia i did notice the 300,000 park avenue condo. Tom we are not going to see deflation in the united states. Dr. Shilling im not so sure about that, tom. As a matter of fact and beyond that, if you look at the oecd 34 countries come a yearoveryear have declined and month over month, 17 of them have axed food and energy costs. Olivia coming up, continuing to talk about deflation. We will also be speaking with the founder and ceo of tom good morning, everyone. Bloomberg surveillance. Im tom keene. With may, Olivia Sterns. Lets get to our top headlines. Olivia we begin with the latest on Nuclear Talks between iran and the u. S. Republican senators are saying that any nuclear deal signed with president obama will not last after he leaves office. Talks are scheduled to resume within a week. In russia, five men are under indictment in the killing of an opposition politician. A sixth suspect was said to have killed himself as authorities closed in. Also on the bloomberg terminal, a racist video has led to the closing of a fraternity at the university of oklahoma. This is truly shocking. The school has suspended members of the fraternity. A black Student Group found the video and posted it online. A student demonstration as planned for later today. There are new indications that Prime Minister Benjamin Netanyahu is facing a tough fight in the polls. The Zionist Union and netanyahus party aren and neck are neck and neck. President park had been on a nineday visit to the middle east. The u. S. Ambassador to south korea needed 80 stitches. A report today is out from the new leaders of the International Cycling union and found that the doping allegations were a because of his superstar status. Tom it is one of the most difficult concepts and economic banking. The concept of money. People literally flunk exams struggling with this odd and beautiful thing. Kabir sehgal has written a history on our elusive sense of value to read coin value. Coined. I go back to isaac newton. He was in the base of the tower of england trying to figure out modern money. What it isaac newton struggle with that we still struggle with today . Kabir sehgal he struggled with the basis of money. Isaac newton, adam smith, aristotle. Where does money come from . It comes from bartering. Money was invented. Anthropologists go back and say has every society the principal carmody currency has been social that. Tom how does that fuld over to the congenital fear fold over to the congenital fear of the mail i get . How does this move over to the rhetoric of dollar fear in 2015 . Kabir sehgal social debt is simple things like saying a ou one, iou this, iou that. We always keep track of reciprocity. When you overlay financial obligations onto it, you get weird fears and all kinds of problems. In h at mesopotamia, it was illegal to sell your wife or your mom into slavery unless you are settling a financial debt. Why is it ok when you introduce a social burden into a Financial One . There are people in mesopotamia trying to bring that practice back olivia there are people in mesopotamia trying to bring that practice back. When did we move to paper money . Kabir sehgal not until 900 bc in china. In the 1200s they were trying to rule over one of the biggest empires in the world. Paper was simple to transport. Tom Gary Shilling was an economist a few years ago Gary Shilling is with us today. The Gold Standard and the u. S. Dollar standard. What is the standard after the u. S. Dollar standard . Kabir sehgal we are in a period of heightened monetary supply. Tom do you agree that we move over to the bitcoin world . Dr. Shilling i dont think so. I think that is a ponzi scheme. Kabir sehgal i dont think bitcoin is the future. 85 of the worlds transactions are still in cash and i think the future is more credit card payment. Olivia how does apple pay change the way we think about money . Kabir sehgal when you go for starbucks, you are more likely to use your phone in different ways. Olivia i love that. The you spend differently because of that . Kabir sehgal sometimes. When youre not actually see in cash, you are not experiencing the part of the brain that causes pain. Olivia youre happier about the idea of making money. Tom can i read from page 204. Truly, i tell you, it is hard to not read Gary Shillings age of deleveraging. [laughter] the book is coined. It is a wonderful history of money and the anthropology of what money can do. Olivia thank you so much for joining us. We are going to head out to San Francisco to preview the release of the hotly anticipated apple watch. What do you think . Will the apple watch be as huge as the iphone . Tom good morning. Bloomberg surveillance. Olivia sterns decided to show up. Brendan greeley is on sabbatical. Gary shilling is with us. Europe with some real struggles. Lets look at synthetic euro. Back one million years. The euro, 1999. Deutschemark. The plaza accord. Weak euro. Strong euro. A bout of weakness also of 1999. What does the litmus paper, Gary Shilling, tell you . What does the euro signal about the european system . Dr. Shilling shows that your economy is weak. A combination of the teutonic north and the club med south. I think parity, i have been forecasting parity. Tom can it stabilize germany, italy and france . Dr. Shilling i dont know that it stabilizes them but the downward pressure is there. When you have the ecb buying everything in sight, why shouldnt you see a lower europe . Olivia the hope is that it buys some time. Spanish numbers, looks like growth is coming back to spain. 25 unemployment. Alberto gallo at ubs has a prominent parity call. As soon as next month. We do not have bank lending, we dont do corporate investments and we use the cheap euro to pick up the rest. Dr. Shilling the question is whether quantitative easing is going to work anymore than it did in the u. S. It resulted in reduced asset prices but stocks are held by higher income people. Tom lets get the top headlines. Olivia one year after Malaysia Airlines flight 370 disappeared it is still a mystery. The search is still ongoing for the boein thatg 777 disappeared. Any reports of a battery on the beacon expired before the disappearance. That could have hurt efforts to find the plane after it went missing. Australia is still leading the search. The Prime Minister sounded optimistic about the chances for success. Prime minister abbott as long as there are reasonable elites, the search will go on. 60,000 square kilometers. If that is unsuccessful another 60,000 square kilometers that we intend to search. As i said, we are reasonably confident of finding the plane. Olivia the search is focusing on some of the deepest and most remote parts of the indian ocean. And its the bull markets birthday. Six years old. An investor says pessimists are going to drive it higher. He predicted gains at every turn while the s p 500 has tripled since march 9, 2009. The thing that kills bull markets has yet to appear. Birinyi has protected the s p will gain 8 the next 36 months. Of the biggest changes and Credit Reports. The 3 biggest Credit Reporting firms have reached a deal with new york state. Echo fax qu equifax,experian and trans union will become more proactive. General motors will return 25 billion cash to shareholders. Tonight today gm announced a Share Buyback part of an agreement with activist investor harry wilson. Wilson the automaker to buy ba ck 8 in sha wilson called on the automaker to buy back a billion dollars in share. S. He asked for 8 billion dollars. Tom they will try to whittle it down. Olivia a few hours from now apple will unveil what it hopes is the next musthave device. Apple has only and got a few details of the smart watch. A particular touchscreen, comes in two sizes and will be able to track health and fitness information. It will allow music and messages. In the nfl, a player is about to sign a 114 million deal with miami. Suh has been fined 8 times. The latest game after he stepped on green bay quarterback aaron rodgers. Tom General Motors, it is not apples and oranges. It is apples and soybeans or something. Apple uses about 15 of cash on capex. A big company like gm uses 70 , 70 . A different dynamic when you see a Share Buyback with dividends like we see from the gm announcement. Futures up 3, dow futures up 26. This is bloomberg surveillance. Im tom keene. With me, Olivia Sterns. Olivia when in doubt, sell iphones. From time to time, improve features. The iwatch, the apple watch, is another story. There is concern over what demand for the play will look like. Our resident fan boy is cory johnson. Up way too early and joins us from San Francisco. To start, lets address what the skeptics are saying. What is the point of the apple watch . It was clear the appeal of the iphone and the ipad look like a crossover. Who wants an apple watch . Cory let me distance myself from the fan boy segment. They are too vociferous for me. I dont think it was clear when the phone was launched that the world meet his mother smartphone. I dont think it was clear when the ipad was launched that we needed another ereader. What this watch will be and what it uses will be it is reasonable to . When we look back at what happened with early launches we can see that. Look at what happened when the first iphone came out. Initial sales werent robust initial sales were robust but a drop in the bucket of later years. Once business was built around the ipod and iphone, it did not seem like, even after its first and second year, that the ipad numbers were going to be big. That took a few years. I do not think the first year is going to matter a lot. Olivia cory, is this the first fully tim cook product . Did steve jobs still have a hand . Cory probably steve was involved but this is very tim cooky. Tim cook is a fitness guy focused on personal health. Its a passion of his, hes famous for walking quickly around headquarters and chewing on a power bar. Having a water bottle with him. He does meetings on his bike. This is something that resonates with him. That is one of the reasons they are making fitness a focus. Some of my sources tell me fitness is going to be a big focus. Tom the bad news is you grew up in rochester, new york. Everybody put their instant matic up on the shelves. A toy comes out, everybody goes gaga, do you put it up on the shelf or give it to a kid who mows the lawn . Is the iwatch something cory johnson puts on the shelf . Cory it is a question of functionality. Tim cook spoke about the apple watch. They do not know what people are going to do. There Encouraging Development but they really think the functionality with the phone with apple pay might make this somewhat different. Wearing the job done up im wearing the jawbone up now. People tend to where these things for six months and move onto something else. It will be a challenge to keep this. That is why fashion is a part of the focus as well. Tom bolivia, i want to know what you think. The wall street journal says tim cook is going to be a rolex company. Nobody is being rolex, they are buying toys to keep kids wired in. Olivia ive read articles about apple trying to position as a low end luxury goods company. Do you agree . Cory i think the notion that apple is better than the next thing over and apple phone is significantly brand more important than a Samsung Phone that has similar functionality. That has helped event and all markets, not just in china but the u. S. As well. Attaching themselves to a fancy side of things, putting the first ad in vogue rather than Popular Mechanics helps you sell more. Tom are you buying one . Olivia no. Cory i said i would not buy an iphone tom Gary Shilling, im not going to ask you. Victor are you going to buy one . 05 on the set. Olivia thank you so much, cory johnson. We will be in cupertino, california bringing you live coverage. We appreciate you. Answer our twitter question. Will the apple watch be as huge as the iphone . Tweet us. Tom was he up that early . Olivia good morning. This is bloomberg surveillance. The kkr partner overseeing private equity and the americans, a 20 year veteran spoke to bloomberg about the changing nature of business. Jason kelly joins us with more from that interview. Thanks for joining us. What was your take a lie . Jason interesting to hear from a veteran of the private equity business. Kkr is known for private equity, that is where he spends a lot of time. One of the things we spent time talking about was the different businesses kkr is in. Including Capital Markets underwriting, credit and as the market expands, so too does kkr. Olivia they own Many Companies worldwide. What is his Market Outlook . Does he think equity markets are frothy . Is it a positive deal environment . Jason he was positive about the deal market, especially in the u. S. Part of that is because of the window that they have into not only doing private equity deals lets hear what he has to say about how they do all these different kinds of businesses. What weve been able to develop is take the base of what we have and Capital Markets, in addition to a large Balance Sheet that we have at kkr that allows us to be able to invest and land to companies. Take that expertise and take our capital and go to a company and say maybe the banks cannot give you financing because they are under regulatory pressure or its a segment are not focused on anymore but we are prepared to lend to you. We are prepared to give you capital. Jason interesting to hear them talk about this changing nature of the market. One of the other things we discussed was the notion that shareholder activism, the big names that we know really does spur great business for private equity. It puts pressure on ceos to do something and to really, whether it is selloff and underperforming division, make an acquisition, the people they call our private equity firms. Tom a little saber rattling and activism is good for private equity. Jason it creates customers. Olivia interesting what alex was saying about private equity firms stepping and where traditional banks are not lending. Jason part of that is coming from higher regulatory postfinancial crisis world we are living in. More pressure on the traditional banks to speak for the sorts of businesses they are doing and take less risk. Olivia to pass stress tests. Dr. Shilling you have shadow banking moving into a lot. Banks are being pushed back. Jason that is right. This is not just kkr. This is blackstone, carlisle, apollo. All these guys are stepping in. It is a shadow Banking System to some extent. These guys are opportunists. They have been their whole careers. Dr. Shilling any idea how the regulators are responding . That must bother them because theyre losing control. Jason theyre keeping an eye. Olivia c jasons full interview with alex navab online. Tom good morning. Bloomberg surveillance. Tom keene on monday morning. Oil, 49. 76 a barrel. Olivia some republican senators are flexing their diplomatic muscles. Warning iran in an open letter that any nuclear deal signed with president obama will not last after he leaves office. Talks are scheduled to resume within a week. In russia, five men under indictment in the killing abortion himself in the killing of boris nemtsov. There are from the north kospis region they are from the north causcasus. Gm buying back 5 million. An investigation into the rough landing at Laguardia Airport is focusing on the jets brakes. The plane hit a fence and stopped short of a bay. Banned in florida, Climate Change. Officials are under order by governor rick scott not to write Climate Change or Global Warming in official email. Scott has said hes is not convinced humans are causing Climate Change. Some big pieces of baseball history up for sale. The letters that spell you keys stadium the letters that spell Yankee Stadium will be sold by sothebys. Those are your top headlines. Tom yeah, yeah, yeah. The next thing they are going to sell is the citgo sighn in boston. Thank you stadium and reggie jackson, it is upside down. Turn your keypad over. It was a mouse pad. As simple as this. The sick assigned the citgo sign is the mona lisa. It will go for billions of dollars. The red sox played like venezuela last year. Olivia my father would be excited to have the original letters. Speaking of citgo, are you ready for 10 a barrel . That is the contrarian call Gary Shilling made. Crude has been hovering around 50 a barrel and dropped below that this morning. Gary, has your reading changed . Dr. Shilling i think we are beginning to see down in oil. He really is that cartels exist to keep prices above equilibrium and that encourages cheating. The leader of the cartel has to encourage cheaters saudis are tired of that. They are playing a game of chicken. Tom everybody is on supply side, i will that the bank i will bet the bank gary is looking at demand destruction. Dr. Shilling we wrotes this three months ago after the saudis pulled a plug at thanksgiving. It is supply and demand. Weakness in demand and supply is increasing. 9. 3 Million Barrels a day in this country of production and it is increasing. Other places are increasing. Russia tom you are calling for outright demand destruction . Dr. Shilling i am calling for increased supply and weak demand. It is a combination of the two. Olivia one thing struck me is the survey showing of 2,222 oilfields globally, at 44 a barrel only 1. 6 had negative cash flow. Dr. Shilling the idea of marginal cost. Thats what it takes to back out some producers. The chicken out price. The oil is flowing, it is not the cost the full cycle of new production, it is the marginal cost. That is what price wars are about. Tom ed morris says we are going to 20. But we will go higher. Are you looking for persistently low oil prices . Dr. Shilling im not that smart. Im saying you get to that point and then somebody chickens out. I am more concerned about getting there. And the financial fallout of that. That is what really could have further ramifications. Olivia let me challenge you on demand destruction. We had tobias left of which we had tobias at citigroup. He said we are seeing pickups in capex, haeeavy truck spending. Dr. Shilling im not big on the demand destruction side. I think it is more supply. Russia depend on oil to meet their budgets, to finance their imports. As the price goes down their pressure is to produce even more oil and export more because they have to do more tom lets split the difference between ed morris and Gary Shilling. What does that due to u. S. Dollar if we go to 15 a barrel . Dr. Shilling if anything it strengthens the dollar. Business is done in dollars. What it does is it forces anybody who is not in dollars, it makes it more expensive. It is downward pressure. As the dollar strengthens, it puts downward pressure on the oil price. Tom then nigeria, venezuela and the rest are flat on their back. Dr. Shilling in venezuela, 6. 2 9 bolivars per dollar. The blackmarket rate is higher. That economy is about tom to collapse. Gtom gdp in the u. S. . Dr. Shilling 2 growth. The average since the recovery started in the middle of 2009 is 2. 3 compound annual rate. My 2010 book, that is what i forecast. You get out until the age of deleveraging is over and it is not over. Tom agenda. Olivia you are taking it off, looking at greece. Tom greece who cares . A lot of smart people. Francisco of goldman sachs. He says look, we are exhausted and we do not care but we should. A huge deal with knock on effects to the Banking System of europe. Read about greece get smarter, it will not go away. Olivia happy birthday to the bull market. The stock rally turns six years old. The s p 500 has tripled since march 9, 2009. Gary shilling, do you agree we should be in cash . Tom i am in the ryan we are still in a risk on environment. They are defensive. Things Like Health Care, consumer staples, utilities. Thanks people by regardless and things that had descended on protection. Olivia also on my agenda is the apple watch. The device will be unveiled today and San Francisco. Not in cupertino. Cory johnson will be there live. The first big launch since 2010. It is almost wholly a tim cook product. Questions about what you will need it for. I will be convinced if i do not have to take my phone out of my pocket. 349 is the starting price. Dr. Shilling boy. Anybody who pays over 50 for a watch olivia this brings us to our twitter question. Will the apple watch be as huge as the iphone . No. The apple watch is not as useful as the iphone. Watches are used as an accessory. The apple watch is ugly. Tom thanks for your opinion. Sorry. Olivia i heard there was a 24 carat gold one. The watch will be successful, it is another gadget people thinking need. Dr. Shilling what are the odds apple is pushing this too far . Tom its another toy. Dr. Shilling its going on the shelf. Olivia third answer, aplple watch will likely be another google glass. Tom very interesting. Was the google glass a complement to the phone . Tom theres some substance here. I like how they partitioned it out. Olivia if i do not have to take my phone out of my pocket i will start to get interested. Tom ok. More coverage on cory johnson getting us a perspective from bloomberg television. Gary shilling, thank you so much. Dr. Shilling delighted to be here. Tom Gary Shilling on lower yields. Stay with us on bloomberg. Betty good morning. Monday, march 9. Live from bloomberg headquarters. 90 minutes away from the opening bell. A great show lined up. Check canadia chet kanojia with me, talking about the apple plan to disrupt wearables. The apple event make sure you set your clock. All republicans in iowa. Why jeb bush chris christie, and scott walker were talking to farmers about everything from immigration to ethanol subsidies. Who won . We will tell you in a moment. We want to get to scarlet fu. Getting mcdonalds numbers and boy are they ugly for february. Scarlet global sales fell 1. 7 . Analysts were looking for a drop of. 3 . Geographic region, europe did better than anticipated, a gain of. 7 versus in estimated increase of. 2 . The u. S. , asia