Londonome we send it to for the first word is. Best first word news. Another victory for donald trump, his third in a row. The catch is 45 of the vote last night. Mark and ted cruz were battling it out for second place with 20 Percentage Points behind. If you listen to the pundits, oo werent expected to win t much. Soon come of the country is going to start winning, winning, winning. Republicans now set their sights on super tuesday. More than a dozen states and territories will hold primaries on march 3. One hit a recreational vehicle in louisiana. 30 were injured and others may be trapped in the wreckage. The u. S. And china close to agreeing on new sanctions for north korea. Both countries want to punish north korea for its recent Nuclear Tests. Chinas participation is essential. It is north koreas largest trading partner. Matt chesapeake out with earnings, coming in line on etf . 16 was the adjusted loss per share. That is what the market was looking for. It was not the earnings or sales that were most important to this company. It is really asset sales and its land to p plan to pay debt. Exceeded its goals of 300 million. Intend to pay that 500 million debt due in march. It has a revolving credit line. 1. 5is a company that has billion in market cap. Billion in debt. Stephanie if you look at the debt and the they have already committed, they cannot get out from under this. Did see the, we stock jumped 18 . It was the worst performing stock in the s p in all of 2015. When oil drops and you get numbers like this, how will they get out from under the debt burden . Matt they have to continue to. Pend that x. That cap see the shares down 8. 6 in the premarket. We are talking about what is now basically a penny stock. Lets move onto to the other markets we are looking at. Features in the west down across the board. Futures in the u. S. Down across the board. European boards right now, the cap trade is off to. 5 in germany. 2. 5 in germany. In london, you have the minors down across the board. Miners down across the board. Something jon ferro pointed out a Jonathan Ferro pointed out to me, the three biggest losers in a row our volkswagen, kreiser and bmw daimlerchrysler and bmw. The pound coming down below 139 right now. What is this . The lowest weve seen since 2009 . We are still in the last decade. Im waiting for the 1980s lows. The british pound coming under real pressure as talk about bre xit gets amped up over the weekend. Still driving the pound lower. Jgb come of the debt markets, japan, we see the japanese 10 year going negative again. Beforefairly down there a bit of a bounce up. Bund come a at the wound see pressure there as well. Hillary has hr right now that Jonathan Ferro and hillary worked together to show has a chart right now. Critical. This is redline,. 3 , that is the ecb deposit rate. Ecb can only buy debt with yields about that redline. The yield is below the deposit right. What can ecb do if they want to qe . Ease they can only by above that redline. The constraints they have if they want to increase that qe program. Matt this is what you see a flattening of the yield curve. If they can only by at the higher end here, they will be pushing down yields here and they cannot get them down here. Let me finish off with a look at oil because we know the correlation has been very tight lately. Oil continues to come down throughout the day. Have uti much worse than brand. Wti much worse than brent. Jonathan airbus shares down this morning despite the company plus profits rising by 1. 5 from last year. Companys profits rising by 1. 5 from last year. Down in line with the markets. The analysts fairly impressed with what weve heard from airbus today. Lets talk to the cfo. Thank you for the time today. We saw what happened with boeing when they had production issues. As are flying close to the sun right now. You have the a320 which is going to be the premier version. You have an awful lot on your plate right now. Are you worried about a misstep . We have a lot on the plate, but we are executing. Aircraft from a lot on the plate, but we are getting there and translating that into improvement in the bottom line. 2015 was another europe operational improvements. , were very happy about that. When issue investors are keen to find out about is what is happening with the a320. About concerns about the fact that we still have ongoing engine problems. That will be fixed by jim. Is there a plan b . That will be fixed by june. Whose Balance Sheet will this fall upon . Is a wonderful performing aircraft in terms of the performance. It is what it is committed to do. Plan and the plan agreed customers rightfully expect. In order to execute that plan, we will see it ramp up to the second half thanks to the we canf the se execute in 2016. Customer and i have a neoand im expecting it to be delivered to me, am i talking to you . We talked to the customers and we know who the build lungs to. Belongs to. We are also concerned about whats happening with the 350 and the issue of the supply chain. You are the cfo, you are looking at the supply chain, these guys are causing you all kinds of problems. When are you going to buy them . Integration isal it jack the right thing. We are helping with what they are doing. Together. Nstructively it remains difficult. We also need to reduce our outstanding work on the aircraft. U. S. Worried about it as fabrice . He is the man in charge. Im concerned in the sense of getting the right things done in time. We have more than 30 aircraft in the Assembly Line for delivery. Things need to happen quickly. Are all very interested to see what happens with the iran story. The question now comes, how are we going to figure out can you name me a bank that is stepping up to finance those aircraft that iran wants to buy . It is a great Business Opportunity in terms of iran opening up, fully in line with the sanction relief. We are working with the key relationship banks. Over time, they will see that opportunity. Is it somebody signed up . Were working on that. We saw airbus been the times of london. What would a brexit mean . Have you plug in what it would actually mean for your model have you plugged in what way would mean for your model what it would actually mean for your model . We would prefer the u. K. To stay in the eu. We working in an integrated way today. It allows efficiency for airbus as a whole and for our operations in u. K. I cannot judge and you today when it would be, the cost of the brexit. The current framework allows that industrial efficiency. Congratulations on those numbers. The cfo of airbus. Back to you in new york. Stephanie thank you to guy johnson. Financing those plans when you were not sure how to do it is a problem. Crude is down this morning as iraqs oil minister is waiting cuts. Ress opec oil down this morning following the pound in the premarket. Matt moodys cutting the debt of brazil, the sovereign debt of brazil to junk. Ba2ing it to notches to from baa3. I have a onemonth chart of brazil that up here. Brazil up here. Bt up here. E 0 of gdp. Exceed 8 of this is a Bloomberg Business . Home depot cashing in on the homeimprovement boom. S says fourthquarter sales rose in 6 . Are not spending as much on clothing, but rising home values are encouraging them to spend more on their houses. Moisture feeds into the inflator finding will be used to determine how many air backs to recall. Phil knight pledging 400 million to Stanford University to be used for a stanford gram oil down again this morning after a big slide yesterday. Members continue to spar over potential production cuts. The latest member, iraqs oil minister who earlier today said they plan to maintain plans agreed upon in january. We have our plans. Were not doing something surplus. Plans. Aintaining our wants to doraq their own thing. How will anyone get to any agreement inside or outside opec to freeze production . Theyre playing an elaborate game of chicken right now. The people in position to grow do not want to do the freeze that was talk about last week. It becomes the argument that we should all do this together or none of us should do it. The saudis gave a tough love message that said we will not cut production. Iraq is producing just under 30 Million Barrels a day now that should Million Barrels a day now. Underq is producing just 3 Million Euros a day now. 3 Million Barrels a day now. It is quite possible we will see another one Million Barrels for the end. You are just waiting for someone else to say opec will do this or that. Ereten to the saudis and tha is no cut on the horizon, is there . No. The saudis are the biggest producer, 30 of opec. They matter the most. Without the saudis doing anything, it will not amount to much. Jonathan weve come down 500,000 barrels a day in the u. S. Alltime highs in saudi arabia and russia. Enoughot happening quick. Im expecting that to change in 2016 all are we expecting anything to change in 2016 . Chesapeake is for the first time talking about a cut for this year. You are starting to feel the effects. It is still not happening quick enough, but you are starting to see a pullback because of the financial ramifications. Jonathan thank you very much for joining us this morning. Big shakeup in Global Markets this money. Crude dropped below 31 a barrel. Shakeup in the Global Markets this morning. We take you across assets for you. 138 hou dropped below dollars. 1. 38. Keep your eye on whats happening in the bond market. German bond yields grinding down to april lows, just 13 basis year. On the ten. Ay with Bloomberg Stephanie you are watching bloomberg. Were taking a look at the markets. When you look at the api number that we got last night, it is still too high. When you look at what production is like, you have to think, who is this affecting . Carnival cruise benefits from this. Map they will spend 1 million to rebuild or refit their magic cruiseship. This stock is one of the biggest losers weve had today. Let me start off with the debt market. Weve been talking about jg be, the bond curve today. Here you see the japanese 10 year has gone negative, went negative again today. Real pressure on yields around the world as the risk off trade is prevalent today. You see that, you also see the pound coming down. 39 under one dollar 1. 39. If you look at currencies tomorrow currencies are losing out against the dollar today. Except one, the yen. Take a look at carnival now. Pressure ass under well. Spending 1 million to refit the magic cruiseship. Transocean has gotten one of its licenses taken away. It will not get the money back for the drill license. Stephanie this is the pear version, were calling for companies to spend in terms of r d. This is exactly what carnival is doing but we are living in a shortterm environment and investors to like it. This is the perversion. The fact that they are making their ships more attractive to potential travelers and the market doesnt like it, what does that say . David i dont understand. Stephanie i thought we wanted cap x. Matt one place we dont want cap x, chesapeake. That distribution, you can see that they have half 1 billion of debt due in march. Andhalf 13 billion in change do. Due. David the my exclusive interview with jack lew. Next, my exclusive interview with jack lew. Stephanie you are watching bloomberg. We are looking at futures come s p down, nasdaq down across the board. When under pressure. We had an Oil Acquisition last night. Oil under pressure. The fact that things are going down so much does not mean they are completely bad. Tom keene joining us. What a day. We will dig into these markets. Lets get you some first word news. Republicans Standing Firm on the Supreme Court saying they will refuse to hold hearings of president obama nominates someone to replace justice antonin scalia. Nomination to come from whoever is elected president in november. The top u. S. Commander in the pacific says a new shipment is to be deployed soon the missile is needed to counter improved chinese and Russian Naval threats. Cuba, the older brother of fidel castro has died. He was 91. He oversaw sugar production in cuba. S a day. Ews 24 hour the morning must watch will be the bond market. Something about donald trump moving on to super tuesday. Right now, it is wednesday for the markets. Lets start with sterling. You are far more away of this aware of this. At sterlingooking dollar if it is about brexit . Shouldnt it be euro sterling . Jonathan what is bad for europe is one to be bad for the euro and for sterling. If the pound is one to come down, the euro will as well. 2000, come back to the march 2009 no. March 2009 low. Tom you go back to Margaret Thatcher to get the idea david i remember those days. I was living there then. Beginning to talk about getting back to those valuations. David how much of this is anticipation of what the fed might do . One of the governor said do not rule out march. We are seeing more divergence again. Jonathan sterling is a strong dollar story. The only currency straight it stronger against the dollar this morning as the japanese yen the only currency stronger against the dollar this morning is the japanese yen. Risk forely brexit sterling. Tom there is a lot more going on. If there are more risks in the system and we get closer to a sub 20 oil and the 10 year starts to look like it will get below 1 , it is more signs that the central bank will come in with that safety net. Mario draghi three years ago saying i will do whatever it takes and what is the market do . Thank you very much come i will go a long. Tom we are not at that u. S. Style dialogue. I would suggest that these coordinated market responses are outside of brexit. Jonathan there is a plethora of negative reviews. Pimco saying revenue is down hard. You see the numbers out in japan and europe. The big carmakers getting spanked. You say mario draghi will do whatever it takes investors went long, but they went long boom. The remember bill gross, the short of a lifetime . Matt april 21 when he put out that note. The short of a lifetime. Tom that is where the yield moved up. Matt that means the price moved down. Now, the price has come up and the yield has moved back down. We are right back where we started from one year ago. David this is risk off again. Tom where we are now versus where he made that statement. Jonathan an investor wants to be compensated for inflation. If you are going to accept the yield at 14 basis points for longer dated maturities, you are saying there will be no growth and inflation. The ecb stimulus is not going to work. That is the market saying good luck generating inflation. Tom there is curve flattening this morning in the u. S. It is a group effort. Stephanie isnt the impact beyond just this . We are at a fouryear low in terms of issuance. Every company is looking at this is what can i do. Can i step in the Capital Markets . Jpmorgan down in terms of trading revenues. What do you think that does for the rest of the trading environment . David i want to turn this back to where you were going. Jack lew is concerned about currencies. The Central Bank Governors will be meeting later this week in shanghai. I sat down with jack lew just before he left for china. He is clearly focused on currency fluctuations. I asked him about the Chinese Central Bank governance and the yuan. Jack the interview governor joe gave last week was quite important because it was the most detailed explanation of what is the thinking behind chinas Exchange Rate policy. , youu know and we know dont communicate once, you to communicate over and over again. Worldmakers around the get frustrated. He have to say it at meetings like the g20 and after meetings like the g20. Challenge the chinese economy is facing is quite significant. It is being interpreted in a way that will move negative. China is in a hard transition from industrial exportbased model to a more marketdriven economy. Disruptive come at a time when you have crosscurrents in exchange weight pressures. It makes it all the more important to be clear about what you are trying to do. The policies they took when they explained them in august and now after the beginning of the year to provide more of a basis for that anxiety to go down. It is a tendency to assume the worst that the bottom may be falling out. Is do you believe the undervalued . Jack it has to go up and down with markets when there is appreciate and depreciate. In a world where the dollar is not moving in the same direction as the basket of other currencies they look to for guidance, the not always a simple answer to that question. It is a hard path to navigate. They have to show willingness to go in both directions. They are trying to maintain balance. In a world where there are competing things they are trying to stay balanced to. The burden on them is to communicate very clearly because if they move in the opposite direction, market forces, it gives rise to speculation as to what is going on. We have seen a of appreciation against other currencies and depreciation against the dollar. They have not announced what they were doing as they were doing it, which made it very hard for anyone to understand what theyre trying to accomplish. As i look at the pattern over the last two years, it seems to support the story that governor joe is telling. This is a question of Going Forward being clear and reframing from the kinds of interventions that are unfair. The interventions they have been doing lately have been to depreciate against the dollar. That is the opposite of what we used to complain about. David is it harder or easier to have these discussions in china . It is very important for china to be the host of the g20. It is part of them stepping to the table and accepting as well as the benefits that go with being a major economy. That is something that is very much a part of having julie julie part of how they think about managing this. It be one of the laboring orders. It is a good thing of china takes more responsibility and hold itself accountable to rules we abide by. The future will require continued diligence on that these economic decisions are a mixture of economic and political decisions. He is focused on china, wants more transparency, does not want abrupt moves. More generally, throughout the interview, he kept coming back to currency. He is worried about currency moves. Tom theres different kinds of currency wars. Brazil focused on capital flows look at the Interest Rate dynamics or capital flows. The last sentence of your wonderful interview with the secretary is about this linkage of economic thinking with political reality. Or rubent is plaza 85 dollar dynamics in 2002, it all comes back to a political dialogue. We are not there for this weekend. We will get there if these markets continue to deteriorate. Jonathan there was a fundamental misunderstanding about what is happening with the chinese yuan. They are trying to support it. He has a keen interest in whats happening. When they were keeping a lid on the yuan, they were buying treasuries pick right now, they are trying to support it. A lot of people are talking about been selling treasuries. What is happening with the reserves . What are they selling down . What does it mean for the Treasury Holdings . , the he made it clear real work is done outside the communique. What he really wants to do a sit down with people like joe oneonone. Stephanie what are the markets most concerned about . U. S. Recession, brexit . It seems the concern is the fed is out of ammo. , investors are concerned what can be done in terms of policy to turn this around and they dont have confidence that anything will. Tom most people would suggest we have asked too much of our central banks. A real discussion of the efficacy of negative Interest Rates. The heart of the matter is this search for growth. Christine lagarde is way out front with this in terms of this idea of new mediocre. It is a search for growth. Stephanie wall street has become lazily addicted to central bank intervention. , there is not a strategy. Jonathan i would say policymakers, officials like jack lew had become addicted to what the Federal Reserve is doing. Stimulusd not have the , could you imagine what wouldve happened with the fiscal tightening . Looking ats to stop the central bank and start look at what they are doing themselves. David tom, you have other responsibilities back on radio. Take you for being with us. Next, we will talk with one of the Top Hedge Fund managers in 2015. Jonathan coming up in the next hour, david lichtenstein. Fourthquarter profit was better than expected at dreamworks animation. They been restructuring their struggling sales operation. Last year, the ceo cut 500 jobs and put movies on the shelf pencil the company and sold the company. Gdp may expand by 12 this year , hong kongs worst performance since 2012. A drop in tourism and a slump in exports are to blame. Stephanie one u. K. Hedge fund manager is investing like he is play cricket. It is paying off. Tt International Portfolio manager ranks fifth among the Top Hedge Funds. He joins us now from london. Congratulations on a big year. How did you do it . , europe was good for analyst stockpicking. We like concentrated bets. That paid off for us. Stephanie what was your big short . A Company Called at been goa in spain. We stuck with it. We believe the management were covering up liabilities. We felt that would lead to a lot of cash burn. A lot of hedge funds went long on the back of that. We felt that was just delaying the inevitable. Last year, they did move towards bankruptcy. We have closed that now. Were taking profits now and that is heading toward liquidation. Stephanie from 100 offside two on. On. To bloomberg one of our biggest winners last year was tomtom. It is a very misunderstood technology company. A lot of focus is on its legacy and hardware. Market missed the heart of this story. This is about the mapping database, one of three people in the world to have that kind of ip. Tomtom is now the last independent provider. Video games also help the last year. Absolutely. In europe, we have a competitor isoft. Called ub the content value is misunderstood. It is famous for the assassins creed product. They are now diversifying. Have a big lunch coming up, a product called the division. They have a big launch coming up. If you look three years out, others also a corporate angle. We will see how that plays out. Haveanie oil services killed other investors. Where are you on that . Our biggest short is see a Similar Company to transocean. Closed most of our oil services shorts. Oilhave to be bullish on because without doing so, you will have to worry about default rates in the u. S. Weve neutralized the position and reviewed where we stand on it. Stephanie what is your 2016 play . Firepower. Some we love to see a bit more weakness we are a stockpicking fund. Our best guide is price valuation for us, its more of the same in europe. The ecb will have to ramp up their support. Free cash yield is very attractive. Us, it is an opportunity panic provides opportunity. Stephanie as long as you have patient investors. This guy puts cricket in his game in terms of stockpicking strategy. , it is time for a little off the charts. Matt miller taking a closer look at what is driving german yields down. David the german yield curve has flattened amid a greater supply of longer data funds. Matt Jonathan Ferro showed me a chart this morning you know when you have a few pieces of information in your head but you have not put them together get . Isnow the deposit rate low 0. 3 negative. I know the ecb cannot buy bonds below that, but i had not thought about this fact. You are showing me the yield curve here. We are always worried about flattening. Jonathan a lot of people looking at the universe available to the ecb to buy. Program canrchase only buy above that deposit right now, german bonds 30 and more all the way out to six years which produces the best reduces the available units emphatically. Which reduces the available units emphatically. Matt they can only flatten it. It is a vicious cycle, it made me think of the 3d chart you can use on your bloomberg. Check out gc3d. It populates initially with treasuries. You can switch to bond. This is the bond tenor. This is Interest Rates. The german yield curve has flattened substantially. The interesting thing come i think this is the result of what johns curve is showing us. Look back to february 11, we were just about as flat. David i did not understand the last time why is there plenty bonds out there jonathan the question. Ask the german finance minister. Stephanie we will wrap it up there. Lichtenstein,id ceo of light snow group. Light stone group. Jonathan a snapshot of how the American Consumer is doing target will report fourthquarter earnings a moment from now. Global stocks falling with the price of crude and the pound has broken 1. 40. The Global Economy is not in a secretarythe treasury sits down with bloomberg for an exclusive interview. Welcome to the second hour of bloomberg. David here with us through the hour is steve ratner. Stephanie we have some breaking news this morning. Target numbers are out. Give us a bright spot, please. Organic come online, what you got . Earnings per share came in a couple cents lower than analysts were expecting. That was because of bigger promotions and discounts, the increasing in samestore sales. Traffic was up 1. 3 percent. More people are going to the store and spending more while they are there. Sayhanie one would Consumer Sentiment is up. Consumers are now addicted to discounting. Wouldnt you say this is a positive . Sure. Weve all been worried about retail sales and whether the consumer was going to spend that gas dividend. In this case, it appears were spending a bit of it. Said of their apparel sales were up 3 . Macys seeing traffic decline. There are winners and losers in retail right now. If you have a product that people want and a store experience people enjoy, they will go there and spend their money. They do have some money to spend. You have to have that product in that store experience. Stephanie go specific on which is going up. How has this affected their expense rate . A bit lower than it had been in a previous year. Theyve been having to increase wages. When walmart moved to 10 an hour, target has not come out and said they are doing that, but they have to be competitive. That is weighing them down. If you are selling more, that should help offset it. The wages dont have to be this catastrophic event for companies. Stephanie walmart thinks that. David lets go to matt miller. Matt were down across the board. A risk off day. S p futures down 16 points. Down 135. We see yields down across the board here as investors look for relative safety. 1. 7 . Year at take a look at europe. The ftse down 1. 5 as miners come down. Carmakers come down. This european stock european down across the board. When oil comes down come it tends to drag markets down with it. At 30. 97. David we talked about carmakers before. They were all german. Lt . T about renau they were all german carmakers. What any index you type in you can see the biggest losers and biggest gainers on the index. Only two stocks are gaining. Lt is awfully percent. Off 3 . Some negativen analyst notes on ford as well. Gm had some lawsuits last night. Stephanie take your economist hat off and put your investor hat on. Hinting more qe come investors will say, great, that looks good to me in terms of a buying opportunity. Over the last couple of months, the trade has not worked. When they did boost quantitative easing, it pushed down to the end date for qe ended not work at all. And it did not work at all. People believe it is because mario draghi did not do enough. He said we are here, but he did not bring the bazooka and pump up the volume enough. People have been waiting for the european equities to come back for some time. Argue come a we have discussions. As far as the carmakers are concerned, it seems to be a different case. You have steve ratner here come a great person to ask about this. The carmakers have done fantastically well. Since the bailout and the , the carmakers have done amazingly in terms of product and sales. Stephanie lets ask steve. Why dont we see them doing well . I dont know why the stocks havent come back. Everything matt said is true. They have done well. The stocks are worried about what is coming next. Most of us dont believe the current 17 billion sales rate in the u. S. Is longterm sustainable. There is a lot of global weakness. These companies have big operations in places like brazil that are very challenge. Of the whole picture of these Cyclical Companies and the whole stock market coming down. I was caught in between in the crossfire there. Much like the election. Three victories in a row for donald trump. He won last night in the nevada caucuses and got 45 of the vote. At a rally in las vegas, trump look forward to upcoming races. It is going to be an amazing two months. We might not even need the two months, folks, to be honest. Next up, super tuesday. More than a dozen states and territories will hold primaries and caucuses. The u. S. And china disagreed over the south china sea. They are close to an agreement on new sanctions for north korea. Both countries want to punish north korea for its recent Nuclear Tests which violated Un Security Council resolutions. Ministers prime promising to increase defense spending. The government is committed to boost spending on the military to 2 of gdp by 2023. Australia is a major ally of the u. S. Jonathan a risk off morning. The bond yield dropped below zero earlier this morning. German bond yields grinding down lows. Ril 2015 steve, great to have you with us. If youre looking for income, it is challenging enough. What does it mean for your world right now . Steve i saw a bit of the jack lew view earlier. Interview earlier. A great guy come ive known him for years. It is his job to rally the troops, so to speak. The view of the market is somewhat different than his. The market sees these global risks everywhere. The u. S. Is certainly the best house in a bad neighborhood. We still have our own challenges. That is what the market is worried about. David one of our colleagues wrote me this morning and said jack lew is saying markets, you go your way, lets talk about the real economy. Steve the markets may be telling him something. Youstand the old joke have the credit markets, the commodity markets, all these markets, currency markets, sovereign debt markets telling you the same thing. The people putting their money on like ae come treasury secretary, people are putting their money on the line are quite scared about the Global Outlook at the moment. Imf came out the other day and lowered its forecast. Stephanie david wade in saying more purchasing is happening this month due to such a bad january. When there is macro negative news taking place during that month when there is an absence of share purchases, its amid concerns about the Falling Oil Prices and china january was week. The authorizations for new buying is at record high levels. That is a key dynamic in the market. Stephanie that is not fundamental growth. That is a shortterm potential pop that will help those who own equities. This concerts in january are not going away. Steve you really have to get country by country, market by market and assess each one of them and there are a lot of troubling signs out there. Jonathan what should the policy response be . We know the reluctance of the German Finance Ministry to take advantage. Treasury yields all along the way down the curve, down here. Why arent we taking advantage of this . Steve this is one of the things that is truly bothering markets. If we go into some kind of difficult situation here, this will be an unusual one in that it is being caused by government as opposed to caused by private actors like the mortgage crisis and being saved by government. Governments are paralyzed around the world. Look whats going on within the eurozone, whats going on within who donthe chinese seem to understand how to manage the market or even an economy. This is what scares the market. Hens is the moment w government should be doing stuff. Should have more investment in infrastructure taking advantage of 2 30 year rates. Stephanie does it not scary orn mario draghi steps in theres intervention in china and the market does not really react . It makes many people think, what is up . Steve this is what the market is scared about, we are running out of ammunition. Nobody has a lot of confidence in the whole negative Interest Rate idea as a policy tool. When Interest Rate are bumping along at zero level matt or below. Investment sent me a chart it has real sovereign yields here. Take out inflation, u. S. That is yielding negativ. 3 . Here in green, you have growth rates. For anre negative investor because you have to calculate inflation as well. Growth is continuing to slow down. This is what investors are concerned about. Can i give a pitch . Is anybody else wants to send me me an msg. Oot im good to use any charts. Back, we when we come speak exclusively to treasury secretary jack lew. What he has to say about Global Growth. David steve ratner with us. Yesterday, i sat down with jack lew. We talked about with the g20 could do at their upcoming shanghai meetings to stimulate Global Growth. Im hopeful that this will be a g20 when we take the commitment we got in the last meeting for countries to refrain from the devaluation and push it a little bit and have that be something that is heard outside of a meeting room to reassure the world that that is a commitment taking seriously. Taken seriously. David is it a matter of taking the last communique and marking it out . These last months have made clear that the weakness in demand globally is a problem that cannot be solved by everybody looking to the u. S. Ive been telling my counterparts for couple years now, i think were doing pretty well. They think we are doing pretty well. You cannot count on the United States providing all the demand for the world. We cannot be the consumer of first and last resort. In countries that have big economies, they need to use policy tools. When china looks at what it can do come and has to look at how to stimulate consumer demand. When europe asks what it can do with fiscal policy in a country like japan where theres been two decades of slower negative growth, theyre careful not to make the mistake of stopping the economy with fiscal policies that put the brakes on and use the School Policy to drive things forward. There are structural issues that need to be addressed. Issome countries come it regulatory come in some countries it is labor markets come in some countries it is structural reform. Fiscal and Monetary Policy are important tools. That combined with sharing information about Exchange Rates, having a clear understanding that it is unacceptable to target Exchange Rates to gain unfair advantage outside of your country, that is question of who gets more of the existing pie, it does not grow the pie. As ive talked to my counterparts, they understand that that is not a direction we can go in. Im hoping this g20 reinforces that. Theres a lot of speculation in the world that these conversations could lead to different decisions. That is an important principle. David you started with Global Demand. Say theeconomists problem we have to some extent is a demand problem at this point. Do you hope the agreement coming out of g20 actually does have a specific have specifics about how Global Demand can be there are . Jack general principles that apply in Different Countries in different ways. Theres always a lot of discussion about the words that no country wants to sign on to general words that it notes it will be inconsistent with. We are still going back and forth before we even meet on some of these issues. I dont think this is a moment in time when you will see individual countries make the kinds of specific commitments that have been made in some other contexts that have been marked by real crisis. This is not a moment of crisis. You have real economies doing better than markets think in some cases. Could bea future that influenced very much by the kinds of policies that are described and the ideas of how to avoid going to a place that you dont want them to go, that is a different conversation th an what to do when you are in the middle of a fullblown crisis. The only way to see communiques with that kind of detail is once youve gotten beyond the point. Im hopeful the kind of conversation im describing moves the dialogue. If it were to go the other way and you were to see some evaluation, the that would be a cause of real concern because right now, it is a moment in time where if one country were to move in that direction, there is a triggering effect of knock on policies and that would be a bad thing for the Global Economy. Negativelead to very ramifications both economically and jim politically. Geopolitically. These kinds of principles really matter. There is no substitute forcing your counterparts facetoface and talking to them. David the world will be watching. The markets will be watching. Are you concerned that expectations may be too high about what the g20 can deliver . My response is sending a clear message, do not expect a Crisis Response in a noncrisis environment. Of secretariesob ministers i have in my conversations with my counterparts gotten a strong sense that there is serious attention being given to how to address the issues we are discussing. Together, by having these conversations, we can lead to better outcomes. Does that mean you will have estimates that each country will do inhouse . That would not be the kind of expectation to have. Unreasonable it is to have the expectations that coming out of this will be a more stable understanding of what the future may look like. An important thing. You look at the worlds reaction to the policy making over the ,ast two months or six months it is underscored how communication of policy is critically important in order to the market and other counterparts around the world know what you intend and what you can be expected to do. It is not just a challenge in china. It is a problem as each of us undertakes policies and these meetings are a chance to work through those. David lack of Global Growth. We cannot be the consumer of first and last resort in the u. S. Can you lead from that position . Steve he is right. We are doing better than other people. We cannot solve the worlds problems. There are other regions that have more things they have to worry about than we do. The only two places i disagree with jack, theres a still things we can do and should be doing. Structural reforms and better fiscal policy. , the risks aree greater than he seems to be willing to acknowledge, which i dont completely blame him for. There is more risk out there than is being conveyed. Stephanie matt miller . Of 12. Ld futures up 16 year to date after concerns about Global Growth. Joining me now to talk about that is phil struble. What do you think about the direction of gold from here . It has already gotten fairly strong. Can it continue . Phil gold looks solid. It is since that the best three gold upfutures 16 and silver up 11 year to date. Everybody knows the current fundamentals, those problems with Global Growth, uncertainty with the equity markets. Weve reached that low when the Federal Reserve raised rates back in middecember. Since then, we have shot up through 1200. We had a healthy pullback and retest at 1200. Since then, we have consolidated. 1260, upsh through to 1300. Matt at the biggest we have seen it in history. Is in the market a bit lopsided . Phil you would think that part look at the new fundamentals that have come out here. The problem with the u. K. , they are looking at exiting the european union. That is crazy. Those are gaining here. We have 39 in favor of it. 10 undecided. That could quickly shift and change. The other problem you have to monitor is banks, banks are having some crisis here with ifenergyrelated loans we hear about defaults and other problems, you could see the Banking Sector take a freefall. You could see those bullish bets become even more lopsided. Matt thank you for joining us. Jonathan a very pessimistic a picturee world of where futures markets are trading. 144. Es negativ sterling at the lowest since march of 2009. Points. Next, the ceo of one of the biggest real estate companies. When youre on hold, your business is on hold. Thats why comcast business doesnt leave you there. When you call, a Small Business expert will answer you in about 30 seconds. No annoying hold music. Just a real person, real fast. Whenever you need them. So your business can get back to business. Sounds like my rides ready. Dont get stuck on hold. Reach an expert fast. Comcast business. Built for business. David you are watching bloomberg go. With us is steve rattner. We will start with first word and that is julie. Julie donald trump says he may not need all of the next two months to wrap up the republican president of nomination. Trump what his trump won his third contest ending up with 45 of the vote. Marco rubio and ted cruz were more than 25 Percentage Points behind. Next up, the caucuses on march 1. Adding up the toll from last night vascular tornadoes. Two people were killed when more than 30 were injured. Another person was killed in mississippi. In cuba, the older brother of fidel and raul castro has died. Ramon castro was 91yearold, a lifelong rancher who oversaw sugar production in cuba. Global news 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world. Im Julie Hyman Matt . Lets take a look at some of the retail earnings some of the Retail Companies we have had out today that have put out earnings that did beat market expectations. The shares are down. We heard Shannon Pettypiece talk about target. Down as well. We have been talking that the fact that for example all of the german automakers are down today. There does not seem to be any apparent reason. No reports about a slowdown in chinese sales or european sales turning around because they are doing well as we are in the u. S. But we saw them down. U. S. Automakers down across the board as well with board of 3 with ford off 3 and chrysler down too. We see movement. Avis budget reporting fourthquarter loss and as a 15 lt those shares are down. These rental carmakers have had real trouble lately. Those stocks have been getting beat down hard. I want to take a look at dycom industries. It can see that stock down 10 right now. Thirdquarter eps missing estimates as well. It is boosting its Buyback Program to 50 million and investors do not seem impressed with that. If you look around the globe, you see down arrow stories for equities as investors put money into debt. Jg b is going negative. German bunds coming down. As investors pull their money out of asian markets, which regions might be untapped opportunities . We discussed that with luis costa. Thanks for joining us. Strategy. About em i know you are interested in india and that is something we do not really cover that much. Luis that is right. The indian market continues, especially on the currency side and fixed income side, continues to attract a good chunk of international flows given all the transformation we had in the over theapital account past two years. It is interesting that back in 2013 when the fed started tapering, india was included among the most vulnerable economies. Probably one of the few economies that has managed to undergo some sort of a structural change. Unfortunately, many other vulnerableemain very from the balance of payments perspective. Havel, turkey, they all do some important vulnerability angles here. India, i still believe it offers an interesting carry situation. Budget wise the situation seems to be stable. Most importantly, india offers an interesting Monetary Policy anchor here. There is a Strong Institution with a hawkish tone, not necessarily hiking rates but very cautious on the monetary side and i think that is an important anchor for the currency. It will continue to be an anchor for the rupee. Matt we just got news out today that moodys has downgraded brazil debt to junk. Concerns about china have been spooking equity markets globally for some months and russia is getting crushed because of the low price of oil. I know brick is an antiquated i is the only letter left. Luis absolutely. Structural change for em in general as an asset class. Necessarily embarking in commodity rally type of i think we had quite a bit of relief here in multiple commodity families. I still believe that the terms of trade aspect for most of the yen economies and even economies that are not necessarily exporters of economies but are somehow inserted in the china supply chain like korea for example. I think these economies downward pressure when it comes to growth prospects. Entering a serious process of growth. Fiscal concerns given the commodities aspect and the fact that brazil relied a lot on the chinese demand. It is difficult for me to expect a massive rebound in terms of credit. Oft campaign interest, 20 budget cost if they cannot raise taxes. Thank you for joining us. Luis costa, joining us. Ti. Ategy head at ci stephanie as we navigate market volatility, is real estate the right place to be . David lichtenstein, founder and chairman of life stone, joins us now. Talk to us about the economy. So many people are worried about a recession, what you think . David it is difficult to know. China, india, brazil. Most of these countries have tos functions that the United States does not have. I think this country has great opportunity. I started with a dollar. Today i run a really big company. I am a believer in the United States. I think this is still a country that you can really create yourself. If you look at the forbes 400, 90 of them started with nothing. I am a believer in the United States stephanie . You were a believer in 2007 and you got burned in 2009. What did you learn then that you need to apply now . David i think we have to learn from our mistakes. Now,nk that, particularly it is a good time to stay low leverage. When people are scared and worried it is a good time to look for opportunity. Stephanie where are you looking . David here in new york city, new york has 58 million visitors a year. London has 17 million visitors a year. London, 137,000 hotel rooms, new york, 100,000 hotel rooms. That is really disproportionate. Stephanie jim tisch told david and i a few years ago we had 75,000 hotel rooms and now it is over 100,000. Maybe we are faced with oversupply. David compare that to london, triple the amount of visitors, less hotel rooms. To me there is something disproportionate. Airbnb, almost zero effect in new york. The price of a hotel in new york city despite the recession, down around 1 . Stephanie so jim tisch is wrong and you are not afraid of the power of airbnb whose valuation goes up by the second . David millennials are not using airbnb. Airbnb use in new york city is 5 . , we areare doing building a new brand called moxie. The size of the room is 175 square feet. When people come to new york city they are not looking for a big hotel room. It is not wichita, kansas. They want to come to their room and then they want to go to midtown. Are, soho, they want a great shower, lots of outlets and they are willing to spend so you can go to airbnb in ozone park, queens, get into a room and take two trains, spend the same price point not know what type of laundry is hanging on the door when you get in. In time square, myriad security, for the same dollar point that is an opportunity. Stephanie i will play devils advocate. Brian chesky has a whole lot of moxie. Maybe he is marketing and says maybe he is watching and says new york is my best opportunity. What happens when airbnb starts paying attention . David they cannot be our price point in new york city. New york city has a shortage of one million housing units. That means for airbnb to make inroads they have to start pushing out affordable housing. That is not going to make new yorkers happy. Additionally, at a price point we are coming in at at 250 the 300 a room, do you want to stay in ozone park or in midtown . Where would you stay . Stephanie im not going either one, me personally. One new yorker who wants to be happy with Hillary Clinton is you. Tell us why hillary is the right person. David if you look at the resumes you have one guy who runs a tv show and then you have two firstterm senators, really children and away. You have somebody who has been secretary of state. Someone who has been a first lady. She was a lawyer. Stephanie a president who used to be a community organizer. David one of the top 100 lawyers and the United States. If you were looking at the candidates just on a resume and they came in for a business job, who would you choose if this was a Business Opportunity and you were looking for a ceo . Stephanie great question. Only the voters can answer. This guy started with a dollar and a dream and it has worked out for him. David lichtenstein, founder, chairman, and ceo of like stone. Of lightstone. Jonathan it looks let there will be more pain on the way for u. S. Investors as well. S p futures 17. That futures, 160. Switch up the board quickly, a pound, a dollar 3932. 1. 39. Steve rattners take on Donald Trumps win last night in nevada. Trump watch after the break. Jonathan we are waiting for katie koch who joins us at the top of the hour to talk about markets. Stay with bloomberg go. Julie this is the Bloomberg Business flash. Samestore sales rose 2 in the Fourth Quarter beating estimates. Fell. Profit margins the chain was more aggressive with promotions cutting prices on items like toys and offering Free Shipping to online customers. Chesapeake energy will be able to cover a half billion dollar debt coming due thanks to rising asset sales. The driller said it signed agreements to divest 700 million in gas fields and other assets. It plans to sell 1 billion more this year. Chesapeake pumps more gas than any other u. S. Producer except exxon mobil. Cocacola fell flat in the European Court today. Lost its bid to trademark a new version of its bottle. The Eu General Court says the curvaceous shape was not distinctive enough. Coke is deciding whether to appeal. Stephanie now it is time for power go. Donald trumps victory gives him a clearly from his closest republican competitors. Steve rattner of Willett Advisors is still with us. I love that you brought charts. Help us understand, what does this tell us about mr. Trumps base . Steve i think it is interesting because it is not that confusing when you look at some of the numbers. These are nationwide numbers of who is supporting trump, cruz, and rubio. Is 63 of hisump supporters are men. Cruz, 31 , rubio, 56 . David twice as many trump men as cruz. Steve i think it may be that he is over performing with women and i sense because of the evangelical side but whatever. If you look at education level, trump has a higher percentage of people without a College Degree than his principal competitors. And rubio is low. He does very well with well educated postgraduate types. If you look at income, trump has a higher percentage of people with income less than 50,000. It says you are looking at men, mostly white, without a College Degree, with lower incomes. These are the people who have taken it on the chin in the last six or seven years. Stephanie how is that given that he is a new york businessman billionaire . Many people had an issue when it came to mitt romney, why is it that nonCollege Degree people with low incomes seem to like donald trump . Steve that is one of the great mysteries because nobody thought a billionaire of any sort could be successful. David this is a little bit reagan democrats isnt it . Steve reagan was not a billionaire. Reagan had come from modest background and so on. ,f we look at the next chart what is going on in nevada, its economy has also suffered. It was heavily dependent on housing, the casino gamble industries at a very tough time during the recession. The Unemployment Rate in nevada went up as high as 14 and it is still well above the national average. A lot of those people we just identified are probably still unemployed. David those under educated men are out of jobs and angry. Steve and if you look at the last chart you will see they also may be out of houses. Nevada has the secondhighest foreclosure rate in the country after new jersey which also got attention during this primary season stephanie . If they are unemployed and angry that would make one believe they are going to be angry with the current president. Many people have said if donald trump is a republican candidate he is going to be handing this election to Hillary Clinton. Isnt Hillary Clinton during the baton from obama and all of these americans who lost their jobs based with the housing crisis, they cant be happy with democrats . Steve i think that is right. All things being equal the should be a republican year. The problem trump has is that once you get away from his base and his base is 40 of the republicans at the moment, but once you get away from that group, i think there is a lot less enthusiasm. David i was in washington yesterday and talked to al hunt and he noted that the negatives among republicans for trump are very high. 33 to 40 . He said he never saw anyone stephanie when and if he becomes the candidate will they turn around . Steve he has massive negatives. If you look at the headtohead polls nationally which are not that reliable at the moment, Hillary Clinton versus cruz, rubio, trump, the only one she beats is trump. In those polls chooses to cruz and rubio. As a hillary supporter, i think this is a gift to hillary if trump gets the republican nomination. David you cannot rule that out by a long shot. It looks like it is going that way. Steve al hunt things it is 85 or Something Like that. It is high. David lets talk about an educated male, alexander hamilton. When i talked to jack lew, i said youre probably most famous for saying you would put a woman on the 10 bill. We are looking at exciting ways to tell more of the american story on our currency. I said over the summer that we were going to continue to honor alexander hamilton. An extraordinary play. He left an incomparable legacy in terms of our financial and political system. He deserves the attention and credit he is getting. People should never have been worried we were going to do anything that would be to a race that memory but we will do some things. David this has caused a lot of controversy. It has been postponed. A lot of people writing in and calling. Steve there should have been an easy out which is to put hamilton which is to put a woman on the 20 bill which has more in circulation to my get rid of jackson who was a disaster for the American Economy and lee hamilton where he was. It is hard to find 10 bills. David steve rattner, stay with us. We have an exciting segment. We all get to vote and Steve Stephanie you will be our guest judge. Jonathan time for everybodys favorite segment. Battle of the charts. Mark barton versus matt miller. 100 in five weeks, come on. Mark five weeks ago today on january 20 the bloomberg world mining index, the gauge of the world possible biggest miners sank to its lowest levels in 12 years. I have used it as a starting block. January 20 2016, how could you make 100 in five weeks . This has been normalized at 100. You invested in the invested in kinross gold you would be sitting on a return of 96 . Anglof you invested american, the other line, you would be sitting on a return of 85 . Freeportmcmoran 78 . Glenn core up by 64 . Stellar returns in the last five weeks. Look at the box at the right hand corner of my chart. What i have done is gauged how much these companies have sunk since they reached their record highs. Sunk 84 since its record high in 2008. 89 . Ort down by glenn core down by 77 . It does not distract that you can make 100 in five weeks if you invested in this company. Matt can i take it now . I want to bring it back to new york. Back to the u. S. Something our u. S. Viewers can appreciate. A broader view that Equity Investors can appreciate. Equity bears do not take the bait. What we have here in blue is the s p and from the most recent low. E have rallied up 4. 5 the white line is the amount of stock that is borrowed on the nyse to be sold short. This is short sellers and you can see we are still at a high. Risen 4. 5 . Even though the market has rallied in the past week or two, we have not seen people stopped borrowing stocks to sell short. There are still a lot of bearish people out there. You can see this chart as well and use it on your bloomberg. 312. In g btv make sure there is a space the between btv and 312. Stephanie the u. S. Market by 200 billion yesterday. Matt you do not believe the bloomberg . Stephanie it makes sense you would see short interests continue to be a strong as it is. Jonathan i think these charts say the same story. The lights of glenn core, some of the more shorted stocks, when you put those together that is a tough market. David you get to vote on which one you like. Steve oh boy. Stephanie london or new york. Steve new york. Matt thank you. Jonathan i am going with london. Stephanie new york. David i am sorry, london. That green thing is so short it does not tell me anything. That rally is a couple of days. Stephanie we have to leave it there. Mark barton, youre the winner. We come back, were talking to katie koch from goldman. Crude falling through 31 a barrel in new york. U. S. Futures pointing to a lower open. Emerging markets stocks getting hit today but goldmans 80 koch says katie koch says there are opportunities in india. Jpmorgan trading revenue drops yet jamie dimon is feeling positive about his firm and the u. S. Economy. Stephanie 29 minutes and 41 seconds away from the opening bell in new york city. David here with us for the hour is katie koch, managing director at Goldman Sachs asset manager. Welcome back. Lets get a check on markets. Matt lets take a look at what is going on with futures down across the board right now. We have losses of 142 points in the dow jones. S p futures down 16 and nasdaq futures down 48 as investors flee into bonds. U. S. Debt, we see yields coming down. You can see the drop increasing on the 30 year, the long bond, and the 10 year. 1. 69 on the 10 year yield coming down on the two year as well. I want to take a look at my terminal. Open. Unction is it breaks down industry groups. This is on the stoxx 600. The interesting thing as we get ready for the open in the u. S. , what could be down here . Basic resources chairs down. Down. Res the big heavy ones are the ones that are really hurting the indexs gains giving the index losses today and that is what you should be careful of. One of the commodities we see gaining is gold. Oil coming down. Barrel. F 3 down 3088 a gold rising higher. Gold up 1. 7 . Gold has already done really well so far year to date. I had a great chart up. I encourage you to send me charts if youre a bloomberg client is i will use them if they are this cool. Gold glover Global Growth slowing down your it real Interest Rates in blue for the u. S. , white for germany, coming into negative territory. That is the impetus for gold. Everyone has talked about gold on this program, slowing Global Growth and negative Interest Rates as well as volatility are pushing people in to the precious metal. That should set you guys up for an amazing segment and im excited to listen but first off we will go to first word news with julie hyman. Julie what is the red line . Matt the zero down. Real Interest Rates coming down below the zero bound. Julie thanks, matt. The head of germanys central bank is upbeat about the outlook for the economy but he wants warns that inflation is not where policymakers want it. First of all, i have not really seen the necessity. It is crucial to discuss the instruments. I think we need to analyze this first and then the necessity to act and we discussed the instruments. Julie the ecb will consider increasing its monetary stimulus at its meeting next month. Three consecutive victories for donald trump. The nevadauses caucus strengthening his position. Marco rubio and ted cruz, more than 20 percentage point behind him. Next up is super tuesday on march 1 when more than a dozen states and territories will hold primaries and caucuses. President obama says he is going to uphold his obligation to nominate a Supreme Court justice to replace antonin scalia. Mr. Obama made the comment on scotus blog. Republicans on the Senate Judiciary committee refuses to hold refuse to hold hearings. They want the nomination to come from the next president who will not take office until january of 2016. Global news 24 hours a day. Im julie hyman. Stephanie it is time for the three stories that matter most to markets now. I will kick it off with Number One Oil weighing on markets again dragging down banks to commodity producers, minors in Energy Companies leading losses in europe. Wti falling through 31 per barrel yesterday. He is saying it is ridiculous. There is a lot of companies that are suffering through this. Chesapeake earnings out today. When you have a day where oil looks like this it only makes the picture worse. Katie we are pretty neutral in our diversified portfolios in terms of Energy Exposure at Goldman Sachs Asset Management on the equity side. You have to say why is oil selling off a lot. We think there is a supply issue. We do not see it as a demand issue. When we look around the world we would say from the companies we meet with across sectors that the fundamentals are a lot better than what the market suggests on many metrics including oil. Stephanie commented on banks selling off the back of that, i would argue banks around the world have very limited loan exposure to oil. That could be a great buying opportunity. Jonathan this correlation between equities and with crude. People can argue against it all they want. It will not break down. An investor spoke to stephanie earlier and he said some thing interesting. Riskid, i can only be long if we are long energy at the same time. The you not subscribe to that at all . Katie i think it is more about getting volatility out of the price of oil. Less see some clearing and volatility that could be a mortgaged up the backdrop for risk assets. In the short term the correlation has been high and that could persist for some time but it will eventually break down. We are asking clients to take a medium to longterm view and we would argue this is an important time to stay invested in and he markets and possibly a good moment to increase exposure. David when you talk about volatility in the oil price you paid it back on supply. Putting it simply, is saudi arabia winning on their strategy . When youuld think about the supply situation , i dont really have a strong view in terms of who is the winner in driving the price. David i mean specifically their strategy was thought to be get other people to get out of the market and cut back on production. His production being cut back the way they wanted it to be . Katie you are seeing cuts already in the u. S. This year but i would argue we will talk a lot about this later with the next guest. There really is no clarity when the market will get in balance. This could grind forward matt i wonder if that is bad for saudi, just as bad as it is for the rest of oil investors. We see the 30 day oil volatility. Access this chart at g btv. It is almost like a hockey stick chart. Katie what we need to see is moderation and that. For there to be a more constructive backdrop and equity as part of that. Jonathan the price of oil drops. A bet against growth and inflation. If you look at the bond market, havens, japanese 10 year yields, negative. German 10 year yields riding back toward what he 15 lows ahead of a Central Bank Meeting at the ecb two weeks away. Koch, it is almost a event a bet against everything that is good. Katie we would say whether you look around the world when you look around the world, spreads widening, you talked about sovereign in the credit space or the fact that Fund Managers have record high caste positions, putting all of that together market is telling us growth is bad. Taking a step back from that what we are trying to do is Rigorous Research to look at the real Economic Data and engage with ceos around the world. What we are seeing is growth looks ok. We think the fundamentals are significantly stronger than what the market is suggesting. Over the long term this will work itself out. Stephanie ceos are hamstrung in an environment of shortterm. Carnival, one Company Actually spending and the market does not like it. If you are a ceo you are forced to look at external factors. Katie i think that is true in terms of stock price that in terms of operating environment a lot of ceos see a good operating environment. We wouldsumer agree with that. The u. S. Consumer looks quite strong. We have a consumer that is saving, the savings rate has gone up dramatically since the crisis. They are actually spending. Consumer spending was up 3 last year and is on track to do Something Like that this year. Im not sure what more we can ask. David howd you account for this difference of views between the markets and underlying economy . Jack lew basically set a version of that going to the g 20. Steve rattner said the markets are trying to tell you something. Who is right . Katie a great point. We are humble and we look at the markets and try to understand what they are telling us but the markets are a barometer of emotionality and sentiment. The fundamentals are what we think will play out in longerterm. I think you take advantage of the tips that happened because of sentiment and anchor yourself in the fundamentals and that is a wealth creating opportunity. David the british pound continues to slide. Now at its weakest level against the dollar since 2009. Wouldists say in and it be so devastating to the pound that it would sink to levels not seen since 1985. I will start with you, jon. I dont quite get this. A brexit has been in the air for a long time. Cameron says he things he can sell the british people. What is going on here . Jonathan we will get a lot of uncertainty between now and then. What we have seen is that it is going to get ugly. You dont want an ugly uncertain referendum for months. What i will say, the u. K. Runs a huge current account deficit. It is the elephant in the room and has been for a long time. Many effects traders have set for ages the pound should not be where it is. At one. At 1 40 i know this is a big question to ask and i want to emphasize a do not think that is what happening now. At what point does this become a run on a currency . Katie that is not our biggest case. You have inside because you just made a brexit. Jonathan i have to say, at the wrong time. Katie we do not think that is the biggest case. When we look at the brexit scenario, we think it is unlikely. We think there will be a lot of volatility. The currency was one we have been talking about for some time. Expect to see that persist until june. In our Equity Portfolios we underweight the u. K. Because of some of this uncertainty but our biggest Case Scenario is that it is not going to pass. Jonathan i think the standout that we maybe have not spoken about, the pound selling off, yields are going lower. Is there a reason for that . Have a veryt strong beer but i would say that is probably in line with what we are seeing on sovereign debt across the world and that is probably wrapped up into broader risk. David it is up to the british people to say whether they will stay in or out. Have you done any have you seen what the actual effects would be . I saw one study that says going into 2030 the range was between. 8 in terms of gdp. Keepingery big picture, those things together would seem to make longterm economic sense. Jonathan also, a big trade deficit for the u. K. Runs with europe. Europe, u. K. , that is a big climb for them. You would help even if there is an exit you get some swiss like trade agreement. The interest for both of them to do that, irrelevant despite whatever happens after the vote. David those are the storied as bash the stories that matter to markets now. Much more ahead on bloomberg go including tom petri. And hisctations on oil views on the opec freeze. Julie youre watching bloomberg go. Ford motor is issuing two safety recalls. The automaker is recalling more than 51,000 20152016 transit f150 trucks700 2016. For says it is not aware of any accidents or injuries related to the seatbelt issues. At is cashing in on the homeimprovement boom three lowes says fourthquarter sales rose almost 6 beating estimates are it americans are not spending as much on electronics but rising home values are encouraging people to fix their houses. A change at the top of germanys secondlargest company. The drugmaker has named werner baughman to be the next ceo. He will replace deckers who replaces who leaves in april. That is the Bloomberg Business flash. Matt kicking off the movers with dreamworks. Earnings beat the street in investors like that area the maker of the kung fu panda series, stephanie and i both love those movies, up 9 . Stephanie i love kung fu panda. Matt i am a big fan of jack black and pandas. Up 9 but dreamworks needed it. This stock is down 18 year to date. It has gotten hit hard. The Movie Division is struggling which is the main business. They are reorganizing that. Take a look at transocean. This company got an early termination for its and gola operations its angola operations for ultradeepwater drillers. This is going to cost a lot of money or lose money because of this. As a result the stock is down 8 . Chesapeake is gaining big in the premarket. We saw earnings previously out better than estimated on the bottom line. The most important thing is chesapeake said it is going to 200 million to 300 million and that will help it cover the money that is due. You can see the debt distribution overtime. I have taken a look at that distribution and changed it to a monthly look. Even see here this is march. Half 1 billion in debt due in march 3 at they say they are going to make those payments and thats why the market likes the stock today. Take a look at cruise liners. We saw carnival saying its going to spend 1 million to retrofit its magic ship. Carnival coming down on that. People do not like right now. Royal caribbean down as well maybe on concerns about tourism around the world. A report out that chinese tourism is slowing. We also saw moves in commodities today that are not good necessarily for freeport mclaren freeport mcmoran. A downgrade to macy stock down 2 . It beat on earnings yesterday and macys has been on fire year to date. This could be profittaking as the stock has risen 21 . Goldman sachs managing director katie koch continues with us. She will give us her next big bet. Her big idea on india. David this is bloomberg go. Here with us is katie koch, managing director of Goldman Sachs Asset Management. Im here to talk with you about india, something you know a lot about. Katie we just took a group of clients there and met with leading policymakers and ceos. David what did you find . Katie we found reason to be optimistic. Taking a step back i want to say that we do think u. S. Clients should think about india in the context of water emergingmarket exposure. We are advocates of clients getting brought em exposure with india being a big part of that. We are bullish on the prospects of india. Our trip reinforced our view that the economy has the capability of growing at 9 to 10 and there is not a lot of that growing around the world. As you and i were talking about during the break inflation signals are positive. Trip. Keaways from our Monetary Policy can continue to be accommodative. We met with the Central Bank Governor and he made it clear that if they stayed on the path of can fiscal of Fiscal Consolidation will get Monetary Policy good for equity markets. Demographics look attractive to read one Million People entering the workforce in india every month for the next 15 years. David an amazing number. Jonathan i remove or a line from katies sermon. In japan they sell more geriatric diapers and baby diapers. I just wonder in india. Katie baby diapers is a good product to own a many emerging markets with that demographic. 70 of the people are under the age of 30. Demographics correlate to longterm growth prospects. Infrastructure has been talked about for a long time in india but going around the country, meeting with ceos and policymakers really build up our belief that we are on the precipice of something important. Already they are laying 30 kilometers of roadway a day in india, up three times over the past five years. The other opportunity that is interesting is in the telco space. One billion cell phone users in india. More people have a cell phone in india than they have access to a toilet for example. Matt i have a chart that shows flows are coming drastically out of india over the past half year. I wonder why. What are we missing here . As i said earlier it seems to be the only letter left standing as far as the brick countries are concerned. Katie therein lies the opportunity. We have had a lot of investors voting with their feet against emerging markets outflows in india in particular are you did this is a reflection of people being scared. This is the moment we would encourage people to be bold, stick with positioning, and add to it. Stephanie nearly risk off. What is the rationale . Matt this chart on your btv. Erg, g b stephanie what is the rationale . Off. i think it is risk emerging markets do more poorly in an environment where there is less Risk Appetite and people are reacting to that end with the are scared they are buying gold and selling emerging markets. Jonathan how much of it is his appointment about modi . Katie clearly there was a lot of optimism based into this government. If you actually look at india equity Market Performance to be fair rallies four months before his election and outperform markets. There is some of that good news into it. The only ground, meeting with people, expectations may have been high. We think a lot of these reforms are going to get pushed through and we are starting to see progress like the progress i pointed to on infrastructure. Stephanie what is your biggest concern . You have to have some fears. Katie i think the execution, that the bureaucracy does not stand in the way of the reforms the government wants to put through, that a sump and we continue to track closely. If you saw a big reversal in commodity and that started to put pressure on the situation that would be a negative as Monetary Policy could not be accommodative. Making sure all of these people entering the workforce can be put to work effectively. If you are willing to take a longterm perspective the investment implications are positive. Jonathan we are minutes away from the cash open in new york city. Futures negative across the board. A rough session in europe as well eeri. Points to german tenure yield this morning. 10 year yield this morning. Jonathan this is bloomberg go. Futures have been negative throughout the morning. I want to get your attention to a couple of premarket movers. Target, the stock higher posting higherthanexpected holiday sales growth. Taking a toll on profits, something to watch in the year ahead. Lowes falling after matching earnings estimates impair to home depot. Compared to home depot. There is your opening bell. Ugly session in europe. Likely to see more of the seine in nyc more of the same in nyc. I want to welcome tom petrie. Koch still with us. Crude on the board this morning. When does that break down . Tom second half of this year maybe. Getting ther a year market condition to really embrace the correlation. It will break down. Talked to this earlier and i agree with that area it is going to take a little while yet. We really have to see some of the fundamentals kick in on supply and demand. The supply side in north america, the curve has bent. That was the goal of the saudis in the thanks giving surprise of 2014. We are down 500,000 barrels a day so far in terms of unconventionals. You dont see it in the u. S. Because we brought on a number of deep water projects. The last of those comes on the first half of this year and you start to see the doubling of that unconventional. Probably in the first three quarters of this year. Stephanie when financing for these companies dries up which it could do in the First Quarter of this year, what could defaults look like . Tom we will get some defaults even without the financings drying up. The ones that are on life support at this point are probably dealing with negotiations, prepackaged arrangements. It is underway and we will see more. There have been a couple dozen already if you count all that happened. Relevant ones, about a halfdozen. Stephanie that number could double . Put into context how big and that it could get. it will be as testing as in 40 years to have been three other times when this is happened. This will be as bad as the worst periods of those years. Katie you have some of the best relationships in the oil patch and i was curious if you have insights on consolidation. From our Vantage Point we would have expected to see more and how do you see that playing out. Tom the reason it has not happened as fast, the industry recognized right after the thanks giving surprise that they needed to do something. They came out and issued billions in new equity and billions in longerterm debt. Highyield market was there. There was a presumption we were going to have this v shaped recovery. It was a failed v shaped. Only in the best of cases accommodating on equities. Nobody is questioning they will make across. There is no financing available now. It is gone. David we want to check out the markets where they are. Matt before i go to markets let me ask you one question about a chart i have been looking at. David i was wrong. Matt i am throwing an audible here. Ive been looking at the number andistressed debt issues you can see from trace data that we have not been this high since 2009. Almost all oil and energy. How much of a concern is that . Tom it is a real concern. The interesting thing is so far it has not risen to the level there has been a little trepidation recently but not a lot of concern according to the banks that have financing out there that it is not going to be a big problem. Those that are in the market are dispersed in the ownership. It is a manageable problem as far as i can see now but it is a booming business for reorganization. For the balance of this year and a good chunk of next year. David now may we go to the markets . Matt lets look at weei, world equity indexes. In the u. S. , we are down across the board. 1899, s p 500 coming in under 1900. The Dow Jones Industrial average coming down 184 points three and the nasdaq, lets look at some of the stocks that are trading here on new york and see how they are doing. Starting with target and lows. We had Shannon Pettypiece breaking the target earnings. She did a great job of explaining they were not only better than expected but pointing to pretty good things and as a result target is up about 1 . 3. 5 . , down we had a number of earnings out in the Retail Sector and we continue to cover that on bloomberg go. The oil patch, how the Falling Oil Price is affecting stocks. Xxon mobil down 1. 4 chevron down 1. 6 . Conoco phillips down 1 even. I can see that Oil Continues to come down. Down 3. 8 right now so we are looking at a price of 30 62 one cents per barrel. 30. 61 seems to be per barrel. I showed you all of the german automakers were down. ,mw, volkswagen, and daimler all down. The same is true in the u. S. Julie told you about ford recalls but they are not that big of a deal. This is a global risk off trade and for some reason the automakers have taken the brunt of investors concerns even though the auto sales market does well. , this company has had a rough time. It is down 16 because its outlook is well under the streets estimate. They had earnings forecast for 330 at the most. If you take a look at the yeartodate chart of avis budget they are off about 50 . This is the yeartodate chart, down 31 . A full year chart, 12month chart, they are down more than 50 . It has been a tough rainy innocence you is standing by. Ramy the nasdaq is down by about 1. 3 following what is happening with the s p 500 as well as the dow. Tech shares year to date have been doing the worst out of our three majors down 11 or so year to date and their biggest fall since 2008. There is some green that is happening. I want to focus on dreamworks. Yesterday they said their Fourth Quarter profit blew past estimates. Shares right now are up by more than 5 . At the the earnings released tuesday they did rally as much as 12 and this has to do with what ceo Jeff Katzenberg is doing. He is shifting focus from feature films to dreamworks tv business and home video business. It expects 30 higher revenue from its tv business in 2016 year on year. Matt i was going to ask about dreamworks of it. Such an interesting story because they are having a problem in their movie unit. We talked about kung fu panda but overall they are reorganizing that unit. It was such a big success and now it is not. Stephanie if you look at the way the models are changing, they are changing to lowercost content in terms of production. David a hit driven business. If it is a success they go way up and if they do not have one for years ago way down. Stephanie . If you are meet you by three copies of the dvd, lunchboxes and about 17 plus toys. Us. , thank you for joining i want to keep this conversation going. With oil down a percent over the last two days when you look at some of these opportunities, are someessed investments would say you want to be higher up on the capital structure but maybe things are so cheap, who knows . Tom i would say equity. Equity is where the bang is going to be on the recovery. The opportunities on the debt side that are out there, there is an over discounting in my view. At least the possibility of oil testing 25 and maybe 20 briefly. Buy debt that has been issued within the last year at . 30 on the dollar. If you can pick the right company to buy the debt of and , youoffer that at a markup can heal the company if youre a third party. The company cannot do it themselves. They burn the cash too fast. A thirdparty can make real opportunities but it takes good judgment. Jonathan you said a number that screamed in my head. You said 20. We could test 20. Wti down 3. 7 . Equities have opened up and we are down over 1 on the s p 500. I want to know what this market looks like with crude at 20. Tom that is the concern. It becomes very clear to me that if we go to 20, it is not going to be lower for longer proposition. Lower for much shorter. At that point, even the oil minister of saudi arabia may not change his tune but the country is likely to change actions without an announcement. They get all their objectives achieved at todays price. They may want, in order to persuade fellow members and opec, about the dire consequent is a not working with them, to test that. But only long enough to make the point. David do you think the saudis as they look at it think that their strategy is working . To what extent is technology or increased efficiency made it more difficult . Is getting cheaper at the same time the prices are going down. Tom that is a theme running to the press right now. Is a case where there is truth to it. Ically that technology those Technology Advances work at 40, 50, and 60. They do not work at 30, 25, or 20. It is unlikely anything really works at that level for anybody producing oil today. Jonathan outside of the correlation i see this morning, how much is total production got to do with the fact that these companies have been funded by debt and have no choice but to keep pumping the stuff out of the ground . Katie i will defer to tom on the impact of that and i will come back and talk about the company. Tom basically, when you get to the point or think the world as one big tank, the next barrel after it is totally full goes over the side transforms oil on the margin from being an asset to a liability. We are close to that condition. Close to it but amazing innovations come along one way or another to deal with it and we are dealing with a seasonal period between right now and the first of may. The seasonal low in demand. It seasonally gets better. Odds are we navigate that. Katie at the Company Level i would say when you have a low price for the commodity it gives management teams and opportunity to differentiate themselves read if you put consolidation on the table and you put the opportunity for improved Operational Efficiency i would agree with the point that there could be longterm from that upside from an equity perspective. Stephanie great conversation this morning. Partnerse, petri chairman, and katie koch, Goldman Sachs. Why is it good to be a big bank . We know mike is very well known for hitting up jamie dimon with exciting questions on those investor days and he did not disappoint. Mr. Mayo will be here to tell us mr. Dimons answers. Matt this is bloomberg go. Coming up a little later, Jens Weidmann ways and on negative Interest Rates and the brexit. Julie im julie hyman with the Bloomberg Business flash. A setback for cocacola and a European Court. The Eu General Court in luxembourg says the bottles curvaceous shape is not distinctive enough. Coke is deciding whether to appeal. Airbus says fullyear profit rose almost 2 . The manufacturer ramped up deliveries of its new was model, opened its first Assembly Line in the United States and cut jobs. Airbus is forecasting earnings this year will be stable and is cashing in on the growing demand for fuelefficient aircraft. More Business Executives are backing David Camerons campaign to keep the u. K. In the european union. A survey of executives in london found the city draws its greatest strength from the countrys eu membership. They say it gives london more International Reach in new york, hong kong, and paris. Shares of jpmorgan are trading down this morning after the bank held its annual Investor Conference yesterday. Investors itsold sales and trading revenue was down 20 so far this year or it drop in revenue is due to market turmoil and lower fees. Mike mayo is a managing director at Clf A America and attended yesterdays conference. I cannot believe jamie dimon took your question. At this point, doesnt he know better . What did you ask him . Mike what took place is a tough environment at the investor day. Low rates, low stock, low Capital Markets. Stephanie investor sitting in cash. Mike the expectations for earnings this year are pushed up to next year. Next years are pushed further. It is delayed. It is a tough environment. Having said that, in a way for jpmorgan just like the Banking Industry it is the opposite of before the financial crisis. Then you had great earnings and a weak foundation. To that you have a Strong Foundation and earnings softness. A little bit like a coiled spring. It is positioned to uncoil at any time when you get better rates. Stephanie what did you ask jamie . Mike my question of the end is, why is it good to be a big bank . You hear the president ial candidates and see the public sentiment. You have the movie the big short up for an Academy Award this sunday. A public still dislikes the banks. Stephanie the answer . Mike his answer was because 787 is a safe airline. I thought he should have elaborated on that more and i thought he couldve given a better answer. What he should have said, which he did say in the prior seven hours of the Investor Conference is that they have so much capital. 350 billion of capital to absorb losses, eight times the level of their Actual Energy loans. He mentioned consistency earlier. Jpmorgan has some of the most consistent earnings of any of the megabanks in the last decade and when it comes to cost control their holding costs consistent but they are investing a 9 billion technology budget, 3 billion stephanie you are the Debbie Downer when it comes to banks and here you are backing jpmorgan more than jamie dimon is. Mike they messed up. A month ago they reported earnings now month later they have 500 million extra for oil loss oil reserves. As far as stephanie how is that a mess up . Mike they could have been more conservative. I think they are ahead of the game. 10 reserves against the oil loans. I heard you say oil is down the last 8 the last couple of days. That is a tough spot to be in. The are ahead of that. They have costs under control. They are gaining share. They did say longterm many times yesterday. Shortterm is tough, longterm is good. I think they will benefit. One headline away from this company doing a lot better whether that is oil rates, stocks, or capital. Stephanie jamie dimon said he is going to buy his stock all day long. You agree with him that it is a by . Mike we have not had our top august. Uy since before that, im not sure i apprehend the top rating on the jamie dimon company. Matt i wanted to show mike one of the coolest charts ceos themselves love to see on the bloomberg. Go. In the index box you can put any index you want. Im going to put the bloomberg big diversified banks index. Dikpe. We know jamie dimon is paid well. One of the best paid bank ceos out of the entire group of 10 or 20 banks. He is also the best performing. The rest of them are poor are performing the only ceo in the whole group that is paid better is the Royal Canada Bank ceo. Jamie is doing well for shareholders and himself. David i thought you were setting him up for a potentially powerful answer. We hear a lot about Systemic Risk from big banks but they have not made the case neil there is a systemic benefit. The system is better off with big banks. I thought that is where he would take us. Mike what he could have said bettermike and which they said during the prior seven hours is that more products per customer they can deliver. They have greater consistency because of the diversification. They have a better Balance Sheet because of their capital. They have technology, 9 billion with new chaseet pay which is coming out that the scale allows them to have this option now the others do not have. He did not pound the table as much as he did in the past. Stephanie it is not the right time to pound the table. If youre jamie dimon living in a scenario where youre in this you going to are stand up on your investor day and pound your chest with the markets looking like they are . You risk looking like a fool. Mike this is the environment jamie dimon in jpmorgan live for three of the gain share through the financial crisis. Stephanie hasnt he learned his lesson not to be rocky . We are not in that environment. David i think it is an opportunity to stand up and say we are doing something good for the country. Country is it better off place with us and it. Stephanie not necessarily the right time to be pounding your chest. Jonathan revenue is down 20 . We will leave it there. Lets get a check on the markets. 22 minutes in, stocks down across the board. The dow down over 200 points. Up next we wrap up the last three hours of a bloomberg go. Markets deep in the red. Stephanie it is time for a little post it. For me we have not covered it yet, valiant, a stock that has moved tremendously gotten killed in the last few days. 1. 50 this morning. One might make the argument, do they sell product . Itsd throughout all the worst critics, they make this is not a ponzi scheme at all. This isnow that trading, it may make sense here. Jonathan i love hearing the word fundamentalsjonathan . It is ugly out there. If you woke up this morning that is the first place you went to, the bond market. It told you all unions to know about the session. Section,s into the stocks deeply negative. Tune in tomorrow we will be speaking to sky bridge vonnie welcome to bloomberg markets. From bloomberg World Headquarters in new york, good morning. An exclusive interview with treasury secretary jack glue. He is jack lew. Why he says the Global Economy is not in crisis. The turmOil Continues today with Global Markets extending losses with crude oil back below 31 per barrel. It was another big victory for donald trump last night in nevada so how is world trade reacting to a potential trump presidency. We have Economic Data on housing. Julie new home sales came out the low estimates that an annual pace of 194 thousandch
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