Transcripts For BLOOMBERG Bloomberg Go 20160318

The eu wants to fasttrack asylum decisions in greece and the wants of turkey. They are throwing another 3. 4 billion, but it has watered down earlier assurances for turkey to join the eu. Dilmaters are angry that rousseff has added luiz inacio da dilva to her cabinet. Turning to the ncaa tournament, how many haveder entered in our bloomberg brackets. Has comes the ivy league. Yale upset baylor. It is their first appearance in the tournament since 1962. We saw a mixed session. The shanghai capping off its best week in june. Month, the 10 year , stocks bouncing around a little bit. Oil prices had been putting pressure on Energy Producers in europe. Taking a u. S. Feet taking a it means. S. Futures, that we are now year today positive. This is the fastest recovery we have seen at the beginning of a year according to bloomberg data. There is a lot of debate over whether it is justified. Pound weakness as well. Not much change in the dollar versus the yen. We have been have a ring of this longer rebound. Gold futures pulling back. Crude oil bouncing back by nearly 2 . Sovereign debt a big focus this theing, particularly japan, investors there as cannot get enough field. Investors are finding the bond attractive. You argue this is not a coincidence, that it is a pattern here. We have a chart to show the yen versus the japanese stock exchange. The japanese brought this. Aradigm it is recently adopted. The blue is the yen. Down is for a stronger. This is inverted. If you scroll the chart back a few more years, you will see it has powerful rallies when the yen was weakening. I would develop this further. We are just trading the dollar. What is remarkable is you have all time low yield in the market. There is just a dollar story at the moment. The dollar is the single Biggest Issue for risk markets without question. That gets back to this discussion about what happened , almost ais week historic event in certain respects. What you are seeing here is the fed does not have a global mandate, but you are seeing my argument is that the fed is recognizing Interest Rate hikes are not Interest Rate hikes per se. They are dollar hikes. The dollar is for the fed, the de facto tightening mechanism. If it is, you have to have a global perspective and incorporate that, whether you want to or not, whether Congress Gives you that mandate or not. You have the global calculus, if you will. The centraltching banks figuring out they are limited in what they can do in their economies . They may not be officially tied together, but there is a limit as to how far they can go. The fed has been dubbed into , everore dovish stance stronger stimulus out of the ecb. When you look at the action this week, your outlook as we go through the next three to six months, what should people be doing . Rally, but more investors sitting cash today that they have in years. The sentiment is low. If you look at institutional low, evenhey are very after this parental up from the february lows. As you go positive, you see a lot of momentum. I would say get long s p, off of the structural weakness we have in the dollar. At least intimate. We push another 15, 20 points higher. We need to get more positive perspective. Positive sentiment around corporate earnings. To take this as an extension crude, weakrld, dollar, it is the only thing that seems to matter. It hasnt been driven by a significant change in supply. It is anticipation us up wide changes, but it has not happened. Oil ripped from 40 to 60, ultimately, moved lower. Higher, itices move is selflimiting. We have not seen the appropriate read since the oil markets to justify this. Any move higher delays that process. Above 45 a barrel, they will start drilling again. What you are seeing now is that tall and anticipation of changes, which dont justify the move. Move from the technology. Ep companies are changing the way they do business. The top number will come down and down. We are not sure how far down it will go. Is a technologyled revolution. Lower prices have forced them to innovate asked her, to do things better. The change you have seen, i dont think can be attributed to a shift in technology. Stephanie isnt that a push in the technology . This is one of the problems. The breakeven costs, you need to invest money. We are not there. Rmb dollars is going to reduce the amount of time it takes to reduce those costs. Higher oil prices are not going to help in terms of the overall supply situation because now you more and an increase in production and continue drilling. The crude should not be rallying, should stops not be allowed . The fundamentals have not gotten back to where they need to get. Crude has started a bottoming process here. I do think equities, if you will smell that, it is a bottoming process. Equities can continue to accelerate to the upside. Julie dennis will what we have seen, with it moving in tandem. What you have here is the asiapacific index. This has affected a lot of the commoditybased economies as well as emerging markets. Here is oil. The rally that has been happening in tandem. We talk about the correlation between stocks and oil. It is happening globally as well. Stephanie does this change your view in anyway of what people should be doing . Can look at the eem, the , one of the things that is. Is if you look of a technical from the dollar charts, it is the mirror invoice of proper of copper or crude. Those patterns basically bottoming in commodities, coming into play. They start helping set up this. Had negative rates in japan, massive amounts of stimulus in europe. If you overlay the dx why with crude prices, you can see it has passed very clearly. The story may be the story about the dog. Thank you. Great morning conversation. Coming up, showdown in brussels. We will have those details next. Youre watching bloomberg. David says tiffany is warning investors will take a hit. They missed estimates. Fourth quarter estimates did better than expected. Sales fell almost 6 . Has backed off of plans to get congress to overhaul the tax code. 150 milliono create dollar political organizations get the job done. He underestimated the gridlock in washington. Moreid his work will be low key and will probably not spend 150 million. The swiss bank was the only major european lender to boost compensation. Ubs set aside money for bonuses. Ceo received a 28 raise. Over to david westin. David we welcome matt winkler. I blew it. Sorry about that. Brussels, euut of leaders are hoping to hammer out a deal with turkey to halt the flow of refugees. I thought they had a deal and now it sounds like they are backing off the deal. What is going on . They almost had a deal 10 days ago. Is a draftave now deal. The 28 member countries of the European Union have agreed on a deal. This is the deal with turkey. The european commission, if you they areyou will, discussing with turkey. If they think they have a deal with turkey, they go back to the 28 member countries and say does this work for you . We are not there yet. Encourage turkey to keep those refugees from going to greece. Isunderstanding is cyprus requiring the eu to back off. Why does cypress get to drive this for all of europe . I do not understand. They are looking for three things, money. No big issue there. Euros as an additional compensation. They want these visafree travel for turks. It looks like the eu is ok with that. The question is just the calendar. They want a speeding up of their membership costs to join in the European Union. This is where cyprus comes into play. Ciber thinks the best chance it has for the unification best chance ithe has for the unification of the island occupied by turkey is to keep the pressure on turkey. To send positive signals to turkey about joining the European Union until reunification has happened. They could hold this whole thing up. They could veto it if they wanted to. John says talk to me about the 10 the tension in the room. The idea they would get a visa waiver at the time when Prime Minister cameron is trying to get people on his side to vote his way in the referendum. How critical is this discussion to his campaign . It is important. Here, peopleo deal are going to say you cannot decide anything eight lias the deal they arrived at is one that everyone recognizes was a Political Fix that is not going to lead to anything. Cause problems. Those wont be apparent by june 23. When the u. K. Has its referendum. Everybody needs to deal here. They need to be seen as saving face and showing the European Union can work, even when there are is a lot of division among the eu on how to deal with these refugees. Some want to take them in. Many do not want to take them in. Some people think the turks should not get any money, something they should not get visafree travel. A are all over the place with this. Have theirthey all own motivations and they are all over the place, what is going to come out of this . Abuse. The only people that dont need a deal are the turks. That puts them in the driver seat for this. They have 2. 7 million refugees. They are the ones the European Union is relying on to stop the flow of refugees to the European Union and take back some of the refugees. If the turks feel they are not going to get what they want, if they do not think there is progress here, especially if they dont think down the line europe is willing to take in refugees as long as they have a legal status, they could walk away. Jon ryan chilcote, thank you. If anyone in the u. S. Is worried d. C. , that is in what gridlock looks like. These guys getting together and having an agreement with anything is impossible. Stephanie what is the excuse here . Jon cyprus this time around. You cannot be flippant around it flippant about it. Stephanie you have 17 countries, what is our excuse . David underscore is the basic difficulty in holding this union together. Jon we will look at the impact of free trade on the u. S. Economy. We might throw in the political gridlock as well. David critics of free trade say it is bad for the economy. Los angeles and long beach tell a different story. Att winkler matt the subtext might be america is working and getting greater. Shown by these two gateways to trade in the United States, where business is booming and likely to be a record this year. Just about everything coming into the United States that matters goes through los angeles and long beach. The jobs that are being created by these two ports are about as good as it gets. Somewhere between 80,000 to begin with up to 300,000. Are 60,000 people who are employed directly by these two ports alone. Are many more ports in the United States. These are the biggest. Business has never been as good as it is now. February was the best month in the 109 year history of los angeles. It was the best month in the hundred five month history of long beach. The hundred five year history of long beach. Chart goes back to 1999. The jobless rate has gone down. Consumer comfort has gone up. This is what he is talking about. If i can bring up another chart that i have been looking at, this is outbound containers in los angeles. Over fiveas gone down years. Over the longer term, you continue to see an increase. Matt we were sitting here in january and one of the most read stories on bloomberg was recession for the u. S. In 2016. If you look at what is going on in the ports, it is a leading u. S. Economic activity. This is as broadbased as it gets. We are talking about housing and the financial industry, manufacturing, you name it. Jon thank you. Next up, russia. Rates on hold. Bend me shape me, any way you want me as long as you love me, its alright bend me shape me, any way you want me. Shape the best sleep of your life. Sleep number beds with Sleepiq Technology adjust any way you want it. The bed that moves you. Only at a sleep number store. Stephanie you are watching bloomberg. We are here with matt winkler. Just joining us from radio, bloombergs tom keene. We are going to your mustmust watch. Here is david gura. David the California College student who went on a stabbing rampage was inspired by islamic state. He stepped for people before being shot down by a Campus Police officer. Republicans blame federal regulators and say the head of the epa should quit for not acting quickly enough on flints water supply. Withck garland has met Senate Minority leaders. Orrin hatch would consider a vote, but not until november. Im david gura. Much,westin thanks, very david. You have a must watch, tom. We are going to take a look at it. Riskat represented a real to credibility on the part of the fed. The fed either lacks the will or the tools to keep inflation at 2 in a sustainable way. 1 that is a nice tom that is a nice summary of the tension that is out there after the central bank meetings. Here is the fed. The market believes a lower rate regime. With the shock and all press conference, it got wider. I would suggest moving it forward, i would suggest moving it forward at the speech of chair yellen at the end of march it is absolutely vital for her to reaffirm credibility. Stephanie i was interviewing david i was interviewing Alan Greenspan and i asked why the fed is consistently wrong. He smiled at me and said, no comment. Ferro they have to forecast what their mandate is. They have to say they are getting back to 2 . The market can take a view and say, i dont think you will and this is where i think rates will be. The summaryee it in of economic projections. Year after year, they are predicting 23 years out. They get back toward their mandate. That is their job. Matt there is a book worth reading called this time is different and it takes a long time to get back to what people call normalcy. The market is very impatient. The market thinks the fed lacks a certain amount of credibility. If you look at the longerterm, the fed is getting to where they want to be. It is just taking a lot longer. Tom James Sweeney with credits reaffirmedt suisse that. The bond market coming out of world war ii was a 20year europe low yield glide path before that was change. David i wonder if there is a fundamental problem expecting something from the fed they cannot deliver. They cannot generate growth or inflation. Matt as i said earlier, if you look at where some of us were in january, talking about slowdown, the u. S. Economy may be having a recession, here we are in march and that is all gone. Economy ishe u. S. Very close to where the fed said it is. It is performing pretty well. Relative to everywhere else, the u. S. Is doing fine. Tom can i suggest that what will get us out of this is Technological Progress . When you have two iphones, this is what happens when you walk out of the house with two iphones. Im in big trouble. David i thought it was so you could talk and do emails at the same time. Tom seriously, this is the technological problem. David to your point, productivity gains may come from technology. Tom there is a huge mystery about this. If you want to do a research study, where his productivity . No interview ive done that does not bring this up. It is the topic. Jon apart from tom keenes two phones, matt winkler, where is the productivity . Matt im not qualified to answer that question. This is the question that stumps everyone. No one has a real answer for it. Israel cause for concern. Having said that, you look at the other variables in the economy and they are all performing as we would like them for the most part. Jobs are being created, retail sales are humming along. Companies are reporting earnings. Tom but there is a but. Jon matt winkler came on in early february. Andaid, everyone is ok everyone thought he was crazy. Matt winkler is now feeling good about himself and the world around him. [laughter] are not. D we turning to russia, the bank of russia announced that it would keep its base rate of 11 for a fifth meeting. They may consider continuing the moderately tight policy for longer than planned. Fromore, were joined moscow by our correspondent. The markets were predicting that they would cut rates by as much as 83 basis points, but they didnt. Is this an inflation problem . Although they kept the rate unchanged, it is a very interesting statement. Most economists expected no change, but many traders and some respected economists, including citigroup and rebel , expected aabobank rate cut. The statement sounded more hawkish than expected. Some people expected the central bank to change its tone to more dovish and to signal further rate cuts. However, this statement actually mentions the tighter Monetary Policy that may stay put for a while, which was a surprise for a lot of people. At the same time, since the rate stayed unchanged, it was good for the ruble. The ruble rally. Well went higher. That helped oil went higher. That helped the ruble, as well. But it is not so great for bonds. Stephanie what does this mean about future policy decisions . Well, it all depends on what is going to happen to the oil prices, to the inflation expectations, to the ruble level. The central bank and the governor are choosing to be rather more cautious than aggressive. The economy is in recession. The rate cuts are much needed to stimulate growth. The Central Banks main aim is to lower inflation. The statement mentions that there is still a bunch of risk out there, like the lower oil price. Are on that. That is the most important theme for the central bank. Jon it is a classic central bankers dilemma. The tension between the central bank and the government. The emphasis is on the inflation side of things. Is this the Central Bank Policy that president putin wants to see. You would be surprised. Even in russia, the central bank is actually quite independent from the government and from putins decisions. Putin has backed the central bank, which has proven quite prudent over the past several years. The central bank has been very strict in its Monetary Policy. December 2014, it hiked to the rates in a surprise move. A lot of people were not happy with that, including in the government, but they have stayed put with their decision. Tom what oil price does mr. Putin need to rebuild reserves and repair the russian Balance Sheet . Does he need a higher price . Of course, he would like to see a higher price. Tom sure. Oil priceot just the that matters, it is the ruble level in relation to oil then matters. Once oil is weaker, lower, the ,uble should be weaker, as well in order for russia to be able to get its budget together, the deficit that it is aiming for which is around 3 this year. It is an important correlation. The ruble has to be following the oil price, but the government would obviously be more comfortable with oil above 50 per barrel. David thank you very much for that update on russia. We want to talk more broadly about Interest Rates. We have something just come in from Christine Lagarde about negative Interest Rate. If we had not had those negative rates, we would be in a withworse place today inflation probably lower than where it is. With growth lower than where we have it. It was a good thing to implement those negative rates. David w. this was an interview that Christine Lagarde did with bloomberg that just came in this morning. She thinks negative Interest Rates are working. Policy is good public driving forward a conversation that they cannot control. The paragraph on the week on negative Interest Rates was stephen major on hsbc modeling off swiss dynamics what mario draghi would do given lagardes Interest Rate curiosity. 100 basis points. That is a huge, unimaginable move. It is unthinkable. Stephen major has been right for several years now. Tom it is the mathematics of her negative rates after go, but it is not appropriate for mario draghi, Christine Lagarde, Stephanie Ruhle, and the rest of the policymakers. It is original theory, right . It is like my ncaa bracket. It is original. Theyanie in terms of what can actually implement tom exactly. Stephanie they cant do that. Tom they cant implement good theory. I would say this is an extension of what the fed started with qe. To be fair to the fed, qe did accomplish a good bit of what bernanke was hoping it would do. He has said as much. He said, look, negative Interest Rates are an extension of that. Tom david, in terms of the conversation this morning, in economics and some of to stein amex, the smartest of twos dynamics, thetuse comments on the negative Interest Rates question two erik schatzkers question the way she stopped and walked through what we have seen from lagarde and others. David w. janet yellen has shown no enthusiasm about negative Interest Rates, has she . Tom that is interesting and i dont want to give an opinion. You are right. There is not a lot of enthusiasm. Stephanie tom keene does not want to give an opinion . What day is it . Tom look at my bracket. [laughter] jon i think he came to some opinion in the end. Tom keene, thank you very much. Matt winkler will stay with us. We go to brazil where protests against the Police President have increased. In the next hour, we are going to talk to Don Donahue Tom donahue. We are going to talk about fixing the growth problem around the world. David gura this is the Bloomberg Business flash. Former cfo went on trial in october. The trial judge said there was nothing to the allegations. Transcanada is expanding its three chin to the u. S. Natural gas market, buying columbia pipeline group. Itsscanada gets the bulk of revenues from gas shipping. Apple is coming out with a smaller iphone. That isfour inch device meant to attract customers who 5cill use the iphone 5s or with a more compact screen. We will look at apples latest product announcements after 1 00 p. M. Eastern on bloomberg television, radio, and bloomberg. Com. That is your Bloomberg Business flash. Jon thank you very much. Dilma rousseffs attempt to salvage her presidency has backfired. Yesterday, the pointman of the new chief of staff was suspended as protesters took to the streets. Our bureau chief joins us. Julia, this is such a complex story. Motives as toe why he was appointed. There were a whole group of people that said this would be great for him because it could insulate him from the corruption allegations. Another group said it was good for Dilma Rousseff to consolidate what little power she had left. The allegations are that it was very much about the former and not the latter. Is that the story . That is what got his nomination suspended. He is a great political articulater. Of here is a salvaging term, lula is it. This is her shot of not getting impeached. Stephanie this is her shot . What is the likelihood . The likelihood of her being raised tohas been 75 , at this point. They expect the Vice President to be the president by may. Her chances are not looking great at this point. David w. if this is her shot not to get impeached, hasnt she picked a fight with the judiciary . You have the president against the judiciary. It is sort of a constitutional crisis. Tumultuous. As been some of the phone calls that have been released made references, not the most favorable references to the judiciary. T is now in their hands with the Supreme Court, there are 10 injunctions to get the nomination suspended. Jon stay with us. I want to crawl over to julie hyman crossover to my colleague julie hyman. Julie investors are voting for impeachment. They seem to be in favor of impeachment. Im sure julie is familiar with ibovespa hasthe rallied by 17 . It seems to make it more likely that recess Dilma Rousseff would be ousted. Another chart we have is of flows into the brazilian etf that trades in the u. S. , ewz. Weoes all the way back have seen these flows spike the most since 2014 at we have had this bounce in brazilian stocks. It definitely seems investors have an opinion. David w. just when you think youve seen it all in brazil, it turns out you havent. Matt i think the most important perspective is that this is an economy that lost more than 3 of gdp last year and it is going to lose another 3. 4 5 this year. Gone from7 of gdp is brazil in two years. Even if you had a leader who had all of the support of her party, that would be tough. Really what is driving the politics, the economic backdrop. It could not be more bearish at the moment than it is right now in brazil. Stephanie wow. Matt winkler clearly paints to pictures. He likes to stay above the equator. [laughter] stephanie thank you so much. Next, a big upset already in the ncaa tournament. Actually, a couple upsets. But you a lot beating baylor is already hurting yale beating baylor is already hurting many of us in a bracket for a cause. We will see who made that call. Stephanie you are watching bloomberg. A goododay, there is shot you will be watching ncaa basketball. March madness is finally underway. Yesterdays games lived up to the hype. The biggest upset so far, gail yale stunning baylor for the teams first tournament win. It may have hurt a few people in the bracket for a cause challenge to read we have brought together 42 titans from business and finance and asked them to pony up 10,000 apiece in a winner take all bracket challenge, money going to the cause of of choice. 14 of us picked the kansas jayhawks to win with the tar heels a close second. We have jimmy done playing. We have kevin plank. Maryland. Stephanie cause we have a lot f people playing who have their special favorites. With only 14 games played and over 60 total, it is still too early to declare a leader. I love in a challenge with very few women playing, Barbara Burns at barclays is the leader. Jim chain us and mark cuban , theyanos and mark cuban picked yale. Doing pretty well. Brkt, youdo bkrt can enter your brackets for the womens ncaa tournament. At four 30d fan, p. M. Today, i know where i will be. I will be watching my team. These upsets we have seen have been the number 12 seed speeding the number five seed. Maryland is a number five. South dakota state is a number 12. Im hoping the pattern will not continue. Stephanie those are the two magic numbers. Getting that 5 seed is tricky. It often gets upset by the number 12. There are other people that are mix. Ng in this we have jenna bus from the lakers. We have phil jackson. We have big names playing. You can follow this on the bloomberg terminal. We have bill ackman playing. He could use a big win. That is going to do it. Weve got a lot more to cover. Jon thank you very much. Up next, we will break down Global Markets for you. The dow erasing all of the losses for 2016. Ubs a bonus of 14 . Special thanks to matt winkler. Futures in the green this friday. Happy friday. David w. the ubs bonus pool surges 14 . Bulls continue to march. The dow is now in the green. How long can the rally last . An exclusive interview with blackstones vicechairman, tom hill. David w. it is 8 00 a. M. In new york city. It is 8 00 p. M. In hong kong. Im david westin with Stephanie Ruhle and jonathan ferro. Jon we are going to talk bank bonuses and private equity. It is now about the folding screen. Stephanie the new, new thing. We now have the duchess of doom, sarah quinlan, senior vp at mastercard advisors. Good morning. Stephanie first, some news. David gura thanks, steph. The eu wants to fasttrack asylum decisions in greece and sent those who dont qualify back to turkey. Sweetened the deal for turkey, but it water down earlier assurances on turkey being able to join the eu. Russia wants the u. S. To push syrias Opposition Forced to compromise. Talks aimed at ending the five year civil war are going on in geneva. This is the u. S. Should use its influence they say the u. S. Should use its influence to push the Opposition Force to the table. Julie hyman lets look at where we are seeing markets around the globe. In asia. Mixed session the japanese 10year yield fell to its lowest point. We have stocks in europe up just a bit today. U. K. Banks and miners helping with the gains. Exporters are also doing well. Speaking of the japanese yield curve, this indeed is what an inverted yield curve looks like. Here is the overnight call rate versus the japanese 10year thed going more deeply into negative, as we continue to have investors buying those japanese bonds at a negative yield. It continues to be a remarkable situation. Back in the United States, futures are indicating that they are building on the gains yesterday. At least two of the three are peeking into the green for the year. The s p not quite making it there, but the dow holding onto the gains. We have had an incredibly rapid recovery in the dow, as it once again goes positive. Lets take a look at the fx market this morning. 0. 25 . Lar rallying, up the euro falling, the pound falling. Not seeing much action versus the yen today. In commodities, we are seeing a comeback for oil prices a strengthening, even. Gold comes lower. Ofare seeing a little bit selling of gold as we see the buying of stocks. David w. lets turn to european banks. Deutsche bank and Credit Suisse cut their bonus pools, but the ubs bonus pool surged by 14 . Michael moore of Bloomberg Finance joins us from london. Are these big surprises . Michael on one hand, it is a surprise, in terms of the relative terms that you mentioned. profitther hand, ubs was up 75 . They had a lot fewer legal charges in the year. It in that sense, it is not surprising that, coming off a fairly good year for them, they would reward employees. Jon they had the best year since 2010 versus Deutsche Bank having their first loss since 2008. My question to you is, can ubs use this as leverage . Kenneth take advantage and snatch the talent from elsewhere in europe . Is that an objective at this point . Michael i think that is a possibility, but it think it will be on a small level. I think it might be a few people here and there, some top performers. They have significantly cut back on the Investment Bank Balance Sheet and i dont think there is a desire to build it back up. If you do see poaching based on the kind of first mover advantage they have, it will be on a smaller scale. Stephanie dont we need to put it in perspective . Ubs has last few years, cut bonuses and headcount more than their peers. Weve got to put it in perspective that it has been a much worse story post crisis. Michael right. This is a bit of a timing issue. They were definitely early to the party, in terms of cutting. Alance sheet, cutting pay maybe this is a little bit of a catch up. Maybe it feels a little bit better to come up for a year, rather than down for one. Is it really pay for performance or if you lead with affected your litigation costs so your bad, behavior is gone. From my perspective, let me see what you are paying for. There is really no trading unit left. If you were not trading last year, you did ok. Stephanie they do not have the trading units left for the people who get paid massive numbers. Private Wealth Management is basically a commission or commissionlike business. Jon they are still doing terrifically well at it. Aty are the Market Leader Wealth Management. Quite clearly, the business has done well. Weah this is something absolutely no. They have always done better than their arrival with respect to Wealth Management. They were also early to singapore, so they have capitalized on the asia wealth rising. Of what isms happening in asia at the moment, you can speak to this. Everyone wants to be a wealth manager. They wanted to be in asia. It is not so much the hotspot that it was a couple of years ago, but what are you seeing . Sarah i can tell you that it is not so rosy. Retail sales, we went to the negative rates and we were trying to spur them on a seasonably adjusted rate down 2. 1 in japan. We went down over 10 in hong kong. The wealth is dropping dramatically. Obviously, Securities Prices have not supported it, as well. Remember, it is also challenging to get your money out of china at this moment because of the capital controls. Stephanie michael, is it as though ubs is running a victory lap . Or are they happy to have a negative headline today . [laughter] michael i think not having a negative headline is a win for the european banks right now. Doubledigitsnto on the roe in 2016, which is fairly rare for any large bank globally. It is all relative. They used to be above 20 . Certainly, they like these small wins. David w. im just looking at the line chart on the ubs stock, the equity, right now. It is down off the peak of july, but if you go over the last year, it is not a healthy margin. Why should i object to this . Just on an absolute basis, but relative to Credit Suisse and some of their closest peers, they have outperformed over the last couple years. People have gotten behind the moves theyve made in terms of shifting the balance of business. They have definitely outperformed, but if you go back five years, they are certainly down from where they used to be. They have a ways to go. Jon the company we havent talked about is Credit Suisse. David mentioned the share price. You compare ubs to credit and Credit Suisse that is their big rival, their big competitor in the heart of switzerland. Michael you have seen them take moves to look at little bit more like ubs, focusing more on the wealth business, building that up internationally. They have taken some of the stuff that steps that ubs took a few years ago. I think they are hoping for the kind of returns that you have seen out of ubs. Stephanie sarah, how much of a worse position or all of these european banks in . Compared to the power and strength that the u. S. Banks are in right now, is it apples and oranges . Sarah it is. The u. S. Economy, if you measure it on any measure, is so much stronger than what we are seeing. The only other economy we measure where we see real strength is the united kingdom. We are not seeing that in the rest of the world. Perspective, you need to see this evolution of stability happening, which is why you are seeing the bazooka come out in europe, etc. That is why you are seeing negative rates in japan. Weve got to get the world back on a Global Growth trajectory, otherwise, the u. S. Will continue to gather the assets. It will flow to blackstone, for example. Jon that is a good tease. [laughter] jon thank you very much for joining the program, michael. Coming up, we speak exclusively to tom hill from the Blackstone Group about global risks and possible solutions. Futures are positive this morning. The s p 500 is positive. We have a rally in europe. The dax is up 0. 2 . Stephanie you are watching bloomberg. We are talking the Global Economy remaining dangerously vulnerable to global shocks at least according to our next guest. Here with us now to discuss, blackstones vicechairman tom hill and also, ian morris. Walk us through this thesis. Tom h. we have zero lower bound around the world. It means rates are basically at 0 . We also have 7 trillion of government bonds, whether it is andn, denmark, switzerland negative Interest Rates. Go figure that. What thee a recession, Central Banks do to get us out of recession, given the fact that many governments face gridlock so, fiscal policy may be problematic. What we do is pose the question, what do you do in the event of a recession to get various economies out . Say that tom, you given history, we should expect a recession by 2020. That is the most likely outcome. We dont have any shock absorbers, as you put it. We have not had a recession in eight years. What is the longest period of time for a recovery . To 10 be able to get years. There will be the probability of a recession. David w. 2020 was the day that you put. Tom h. we said that, but we look at scenarios. We dont predicts the price of oil. As of two years ago, we said, what is the prospect of oil 20, 30 dollars per barrel . We assigned a probability to that. We assign a probability to a recession. Jon that is the scenario. Lets talk about the policy response. If we are at the zero lower bound and those with zero negative Interest Rates cannot go lower, make sure it does not happen here it being are we really thinking about helicopter money now . Stephanie what does that mean . Ian it is essentially monetary financing. It is financed by the central bank. Seems unreasonable now. It seems like it is never going to happen. Imagine a scenario when we are in recession, unemployment is higher, deflation happens that changes everything. It wont just be helicopter money. That is attractive because it takes out the middleman. Qe works through the Banking System and you have to hope the banks lend consumers and companies. They have not been doing that that much. Fundsrectly using fiscal to inject cash into the pockets of consumers is going to be much more effective. This is going to be one of solutions that may need to be tried to lift the Global Economy up. Stephanie one of many. What else . Already talked about negative Interest Rates. What is so magic about 7 trillion . Not 20 trillion . You had Stanley Fischer about a month ago saying, im actually surprised that negative Interest Rates are working. If you are in a deflationary environment, why not set your inflation target at higher than what is historically what it historically has been . What is so magic about 2 in japan . Why not 3 . There are any number of tools you can use. David w. there are unintended consequences from these actions. We are very dependent on money markets in this country for funding, much more than other economies. How would that work with negative Interest Rates with money markets . Tom h. in negative Interest Rates, what are you doing . You are looking at a diversifying asset. What is cash . It is a diversifying asset. You dont earn any money. At some point, you could argue that there is a limit to what you can have in terms of negative Interest Rates. 1 or 2 , but we are far from taking a from that level. Do we write the rules . You assume risk, you are paid to assume risk. You will not get paid if you hold to maturity this time around. You are not worried about that . It is a question of other Asset Classes and is there the prospect that you could use more money in other Asset Classes . The stock market was down 10 through february. , depending on your Asset Allocation models, you might be prepared to say that that is a diversifying asset. Stephanie it really seems you are suggesting policies we have never seen before. Our investors prepared for untested policies . We want lack of predictability. Summerse are in larry stagnation theory in the long run, investors will want solutions. I think one of the more novel features that we highlight, as well, is a deflation Insurance Plan that the federal government can provide. If you dont raise your debt levels, your debt burden may still rise because your inflationadjusted debt levels are increasing. One idea is to allow for a Compensation Scheme that, through the tax system, allows people to be compensated for the rise in their real debt burden. This is great because it is not going to cost anything when you have moderate inflation. But it is a great plan to have. It might mean that the risk of deflation is less because of people know that they have that Insurance Plan, then, ultimately, they will be less hesitant in putting on justified debt levels to expand investment. That is going to make investors happy. At w. this could look be looked at as a dramatic extension of where Central Banks are already going. Often, the results are not the ones we expected them to be. You can see that with japan going to negative Interest Rates yen went up. Are you concerned that the effects might be different if we implement these measures . Tom h. these are contingency plans. You dismount from your horse if your horse has died. In qe, you have diminishing returns. Central banks are saying, what else can we use, in terms of tools, in the event of a recession . David w. thanks very much for being here. I hope you come and join us again. Tom h. thank you. David w. that is tom hill from blackstone and ian morris. Apple is set to unveil a new iphone. That is coming up next on bloomberg. Jon apple will be unveiling a new phone on monday. The company will be replacing the iphone 5c and 5s. Apple wants to entice customers to replace their phone, even if they dont want a bigger device. Cory johnson joins us now. Inches. Why . Corey why not . Whoe are a lot of users never made the upgrade who are looking forward to what apple is trying to get them to move along to another phone. They look at the iphone 6plus. I go running and i feel like i have stolen a television set. The bigger phones are not for everyone. This is a way to get the old users to keep them from going to the android. Jon there will be a lot of people watching this will are saying apple is at the end of the road, this is desperate. This is all stuff on the margin, where is the big stuff . Corey i agree. Adding a new ipad is likely to also happen. Adding a new small iphone. Adding watch bands. That is the margins. It really does reflect where apple is right now. Great new product launches are not the thing. Upgrades and thinking about new countries to add sooner are where innovation or growth happens for the company. Jon you also used to manage money, you used to run a fund. When you look at this company as a stock, it is not the growth stock it once was. Corey certainly not. Maybe they will exceed their guidance, as they tend to do. The valuation for a company the size is really low. Im not telling anyone to buy the stock, i dont do that. But it is interesting to look at from a valuation perspective. They generate tons and tons of free cash flow. It is fascinating to watch. I agree with the people who criticize the company and say they are not creating brandnew innovation things. It is kind of hard at the scale they are at. When they launched the ipad, it was a big deal because the company was much smaller. This is really about incrementalism. To be fair, apple is not making it a huge announcement. They are not doing it in San Francisco in a giant convention all. Theirre doing it at corporate headquarters. It is a smaller announcement for them. That reflects where they are with innovation. Jon cory johnson. It is a big deal. Thank you very much. Up next, private equity and emerging markets on bloomberg. Stephanie youre watching the bloomberg. Weve got a lot to cover this morning. We are going to give you some news. There were more demonstrations in brazil. They areangry that avoiding a big corruption case. Isnwhile, the Congress Getting impeachment going. The kremlin says the demonization of russia is a mandatory feature of the American Election campaign. The might hold a vote on Supreme Court after the election. Democrats and other broke the party ranks saying they would consider a vote, but not until november. I can only wonder how many entered. Business yale won its first game ever in the tournament. They upset baylor. Its not like they play a lot of these games. It was their first appearance in the turn it since 1962. Julie we want to look at some of those stocks on the move in the premarket. Tiffany is not moving that much. The jeweler came out with earnings this morning and fourthquarter sales were down 5. 6 . The forecast trails estimates. The forecast will be unchanged. The company is heavily reliant on tourist traffic. They have seen a drop in the business. It represents 20 of annual sales. The dollar has been having a negative effect on Companies Like tiffany. Much changed. Not we are looking up adobe. They make photoshop and acrobat. Profits topped estimates. They are making a transition to cloudbased software. That has been paying off. Revenue is up 25 . The forecast for the year has been raised. This has been talked about for the past couple of weeks. Transcanada acquired columbia pipeline group. Its a 10 billion deal. 25. 50 is the share. Higher than it closed couple of days ago before the deal for started being talked about. You can see the shares are rising. Are point to talk about private equity. They are starting with russia. The Russian Central Bank left its rate, matching expectations. The managing partner. Spend a lot of time in moscow. You oversee investments. Give us a snapshot of what is going on. Have russia isolating itself and being isolated at the same time from the rest of the world. The sanctions in place after the ukraine crisis has forced russia to go into a war mode. Leaders areand top really unifying around a new kind of Foreign Policy where the military aspect is used for the first time. Support popular there is broad Popular Support from the general public. Jonathan whats more important, the sanctions on russia or what happened to the market . Drew our investors ask us what proportion is affecting what. On in thets going crude market and the commodity downturn. 20 is what the sanctions have done. The sanctions were very longterm projected things. It was to prevent financing, deep offshore oil drilling. That is probably dead for this foreseeable future. It was not meant to affect daytoday activities. Most of whats happening in brazil is the impact of chinas slowdown and lower Commodity Prices. Stephanie if Commodity Prices say states stunted and china doesnt turn around, what happens . Ew we have had a little bit of tailwind. Central bankers decided they would keep rates unchained unchanged. They have a little bit of help from oil. Theres not as much pressure to ease. Ends in russia, they have been real inflation hawks. Got russia through the crisis. It was really a magnificent job considering every spinning plate that she had to do with. Jonathan heres an example of a country not just exposed to the commodity market, but a lack of significant forms. Is that the biggest story in brazil . Drew thats right on point. Regimehas a monetary that is so tough and disciplined. They have a population that is not going to come out in the streets and ask for more social spendingor Health Care Like brazil. They have been able to deal with that aspect of the crisis better. Hand, on the other theyre not moving on the fundamentals anymore. Will be in the postwar out of the post. There is almost a correlation going on as to whether the peoples. Party falls. We have had a watergate moment in brazil. Everything thats happening is being driven by a powerful judiciary. Ceos are being put in jail. Top politicians are being put in jail. This is painful in the shortterm, the longterm development of having institutions that people start to have some faith in is going to make a difference longterm. Stephanie how long would that need to be . Watergate you could isolate and quantify it. In brazil, its everywhere. Situation isrency this hopefulness that an Opposition Party will eventually come in and be filled with technocrats and deliver brazil from its misery. Thats not likely to happen. Were going to have a model for a while. Market downtock there has bounceback on that hope. Companies,n and buy does it hold out hope for you . Is this a good time to go in . At any kind ofk metric of what one can buy today 2013, not only are valuations lower than ever before, not only is the dollar stronger than ever before, the bulk of what someone could buy for 500 million whether its subscribers at the cell phone orpany or the shopping malls how many diagnostic centers in the health care industry, its probably improved by a factor of four between the valuation. Equityprivate we focuses. You cant get this in the index. The index of the emerging markets whether its china or brazil is loaded with companies in oil and gas extraction, the big banks. Those are cyclical. They are not growth stories anymore. The real growth story is the private sector. , thethe future alibabas future xiaomis. These are the things you cant get in the index that Venture Capital is getting. Those are in the higher growth sectors, even if gdp is flat or negative. You find areas that are growing at 20 . Stephanie you were going to stay with us. Toare going to change morning meetings. The estimates of the highend reeler retailer said that sales may drop 20 in the coming year. Numbers. Reak down the i want to make this clear. Shares are inching hires. They are going to have a buyback. When you look at samestore sales, they are down 20 . Thats not a good picture. Its not near term. We recently upgraded the stock. Its more of a margin story. We have commodity cost down. Diamonds, silver, platinum are down. This Company Listed 63 Gross Margins year over year. The top line was tough, the margin story is compelling. Longterm, there is rising global wealth. He will be talking about the foreign currency issues. The dollar is starting to weaken again. We are excited about tiffany over the long term. We have a margin improvement story here. There is a longterm ship sales trajectory. The margin story is compelling longterm. The sales will recover in time. Stephanie you mention the dollar weakening as a positive, isnt this about getting people in those stores and buying that product . They hired a recent new creative director. They are doing a good job there. Whats important to note is 40 of the sales in the new york market are two foreign tourists. 25 of sales are two foreign tourists. This is been related to the strong dollar and the weakening u. S. Market. The dollar is starting to turn the other way. The company got hurt in paris with the terrorist attacks. There is rising global wealth. They are doing a great job in china. Thats goodory Going Forward. They have 300 stores. Outlook is not something thats going to be in secular decline in the longterm. Stephanie they are a story connected to the rich getting richer. Macys is in pain as the middle class is getting whacked. They had issues with some channel shift. There have been some problems there. The other elephant in the room for macys near term is the rise of jcpenney. We dont cover jcpenney. They had positive comps in the holidays and macys did not. Macys has some issues of channel shift towards distribution and share shift toward a competitor that was left for dead a couple of years ago. Stephanie thank you so much for joining us. Randy connick is joining us. Up next, the fight over u. S. Trade. Chamber ofr from the commerce president. Emily chang sits down with the ceo of showtime. David i sat down with tom donahue. We talked about this crop of president ial candidates and wall street. What do regulators get wrong about the financial industry tom they see it as a problem as opposed to the that wey core service need to grow the economy and put people back to work. They have got to change that view and deal with it in a different way or we will pay the price for long time to come. David how far are you willing to go to change minds . These are people you need to do business with. Tom we are willing to do it. We have been trying to educate them. Weve been trying to petition them. As ant to look at this value and not as a loss. Why are they doing it . They figure out that it plays well. ,hey listen to Elizabeth Warren she is the hope in terms of whats acceptable in this religion. We are making a fundamental mistake. David when you look at the leadership of the country and you look at the president ial candidates on both sides of the aisle, they are not making warm and fuzzy noises about wall street and the banks. They are acting up the criticism , saying there should be more regulation. Is theyercentage of it may believe that waste on a lack of valid knowledge. Be a good political line. People begin to believe all this. They have been badly treated by large financial institutions. How . There is a responsibility for those running to talk about the issues as they really understand them and not as the polls tell them how to put it so they will become more popularity. Its incumbent on people who take major positions in our government to familiarize themselves with the facts and get off the rhetoric. Thed do you look at candidates . Trade is talked about and its not in a good way. Donald trump says there should be 45 tariffs. Hillary clinton is coming out against the tpp. Longshe supported it for a amount of time. She is under pressure from the unions. Donald trump has very little knowledge of what trade really is. Most you are the important person to speak out for american business. Have 45 d it mean to tariffs on chinese imports . Tom they would impeach donald trump. I am trying to make it very clear. If you double the price of something we are buying from china, the citizens that go to walmart and target and go to ,heir stores and buy components they are going to a for this. Its not the leaders of the government or the leaders of big company. Your neighbors are going to pay for this. We have to understand that 95 of the people we want to sell something to dont live in our country. They live somewhere else. If we dont want to sell it to them, other bill and we will become a less significant economic force. When that happens, we will become less significant in geopolitics and we dont want that. David that was tom donahue. He is in a fighting mood. Stephanie he always is. David he wants to fight for wall street. Stephanie we have some breaking news in the hotel industry. Julie they are getting a bid. Its 78 a share. Starwood is saying its superior to the deal offer they got for marriott. They are suspending or putting an Stockholder Meeting as effective this. Its ending the merger with marriott as a result of getting this higher offer. The shares are trading higher. Marriott is up a little bit as well. Its been a spoiler. Marriott starwood deal was a done deal until talk of this other been surfaced earlier in the week. It looks like that is a done deal. Palletie spoiler is a positive. Its a net positive for the industry. Julie they are trading above the offer price could there be a bidding war . There is a little bit of anticipation for that . Itshan coming up next, title of the charts. Thats next. Battle of the charts. Thats next. Jonathan i am not allowed to vote. Caroline hyde is here to take on julie hyman. David we vote on americans. Why cant you vote on brits . Recentweve had this ounce in stocks. To nearen me s p 500 positive on the year. The forecast continue to go low despite the bounce. 2154 theforecasting forecast. That is below where we are now. There is not a lot of optimism out there. This goes back to the idea that the longer term rally is one of the least loved ever. This bounce remains not very loved on the part of strategist. Caroline im taking this back to your. Im going to fly the flag while i am here. This is how much we see among analysts. This is the stock 50. It has been a volatile ride. This is how much we could gain over the next few months. Up 3300. End up that is a 6 climb. We are only going to climb 1 on the year. If you go back to the beginning of 2016, there was optimism out there. Seeing upon . Higher ond up just 1 the euro stock 50. Here, since matt is not he would normally do my chat. He goes a lot further than that. He really pushes it. The boulder more courageous one is julies. Predicting down terms and anyone losing money, i think thats a more courageous call. Stephanie i am going to go with julie as well. Out, iwant to point appreciated your execution. I liked your chart. Julie wins it for me. David i am going to go with caroline. Just three month ago, everybody was talking about this was the reverse. Go to europe. They have turned around. Stephanie nice job all around. , we love having you. We be back with more. Thats next. Stephanie emerging markets are leading stocks higher. U. S. Futures are pointing to a higher open. Ubs is bucking the trend. European rivals are cutting back. Join us for the hour is rick reader from blackrock. He is managing 1 billion and assets. The are about 30 minutes from the opening bell here in your city. You are watching bloomberg go. I am a Stephanie Ruhle. Jonathan when you wake up in the morning and there are all time rose, its nice to have rick here. He oversees 1 trillion in assets. I want to see why anybody wants that. We need to get some news with julie hyman. Julie this is whats going to futures. We have an increased across the board. We are talking about the correlation between oil and stocks. Take a look at the bloomberg. I am looking at the s p 500 year to date against oil. Obviously, you see the rally. There is a balance and oil erices near to a less magnitude with what is happening in the stock market. If you look at oil over the past two days and the recovery we have seen it, you are looking at a magnitude of 6. 5 over the two days. Whats been helping that has been weakness in the dollar. The dollar index is up a little bit today. If you look at the last two days in the wake of the fad talking about not wanting dollar strength, we have a 1 decline in the dollar index. On the stock of the day. Starwood has a new bid. Thattock is going above 78 level. There might be a new competing and for marriott. The marriott did was based on its stock rise. Greatan ferro sent me a quote about marriott where an toestor said any board has consider if they want 76 in like 65or something in current value that has the chance to go. Starwoodhe decision has to make. David those new sanctions dont seem to be deterring north korea. They fired one missile into the waters. The Security Council imposed more sanctions on another Missile Launch and a Nuclear Weapons test. The European Union is negotiated with turkey on the refugee crisis. Billion. Ts three 4 the eu is water down assurances of turkey joining the organization. Turkey once their citizens to get visa free travel through europe. There were multiple calls of resignation from the governor of michigan. Republicans claim regular regular federal regulators. 2400 powered by journalists and 150 years news bureaus. David these are the three stories that matter. We are talking about emerging markets. Central bank is supporting risk year assets. There is a poll market up from the january low. Chinese stocks listed there best gain since november. In emergingvests markets. Is it starting to run back in . Rick there is money going back into the asset class. They came under pressure for a long time. China, the decision that china ite whether they have stated outwardly or not to not devalue the currency was tremendously important Going Forward. That has an impact. You have a shortterm benefit from the commodity side. I would throw in one last point. The decision by the fed of keeping rates easing is emerging markets. Pressure is an appreciating dollar. Classnk e. M. Is an asset you should have part of your exposure in. The fed made a big statement over the last couple of days about the dollar. Stephanie thats a chart we can pull up. Hasof the funds you manage 20 in emerging markets. You have done well with this rally. Can we get that up there . There we have it. Clearly, you have this right. Rick we think clients should diversify their exposure outside of the u. S. Most investors are dollar long Interest Rates long. Exposure makes a tremendous amount of sense. We think emerging markets get where we were 10 years ago. Basis lowerreds of points. There are some places that are higher in yields. We have overshot to some extent in where we are. We have negative rates. It doesnt make a lot of sense to invest in them. We can get kerry. We think that makes a lot of sense. Jonathan i went to the function on the bloomberg and looked at emerging markets. I could not find an em currencies it was down against the dollar. We have had a lot of investors say go for the local currency debt. The swings in the market are so vicious, is that the kind of risk you are taking . Rick generally what we are doing, we think local markets are more attractive than dollar debt. Were hedging that currency risk three mexico, we are keeping that on edge. It has gotten that way in brazil. We are not using as much of a currency today. Argentina is another one. It depends on where you are in the world. Do you want to take that generally . It depends on what fund it is and what investors want in that fund. Julie stocks in the emerging market world have had a big run this year. They have two thresholds. Since may the lowest 2009 in the emerging markets index. To have rocketed higher by 19 . Its almost 20 . We entering april market. For the same time, we see the index getting closer to its average. We are approaching these levels. Gains, withve these all of this bullishness, should your bullishness stay at the same level . Rick thats a great point. Think of what happened here to four. There was a huge risk of china devaluing. Making,t we are diversification your portfolio makes a lot of sense. Dont go whole hog into emerging markets. We do think it provides diversification. We do think its a complement to a portfolio with these shields. Places like indonesia and mexico, we think 8 should be of the portfolio Going Forward. Your act is very well taken. Taking some of the pressure off china has created a return boost. Jonathan lets talk about the bond market. The 10 year yield in japan is a fresh record low. Treasury yields and the United States have the biggest weekly drop since january. Me, they areut at buying eight 9 billion in bonds. Japanese bonds. Who wants that stuff . Rick we do a lot of work and we talk about negative Interest Rates. We dont think thats is important as quantitative easing. They are using things like credit. Who buys this stuff . The people that buy it, we dont have much exposure on our funds today. We are in it negative rates in japan. There are a few that will press rates further. The only way anybody would buy it is you thought it would go lower. There is an argument that makes a lot of sense. The question is the efficacy of what that does in the economy. David you are pointing us in that direction. At what point do you get too far away from fundamentals . People did not wake up today and say japan is a better bet than it was yesterday. Why do you think its so safe . What is it about japan thats so safe . Places andone of the one of the reasons why the equity market has value. There is tremendous value in parts of the japanese equity market. Its one of the few parts in the world where you have fiscal stimulus and Monetary Policy. Just doing negative Interest Rates does not work. This is what mario draghi has been so profound about. He has been brilliant about it. If you dont take advantage of it, you missed the window. Japan does not just have negative rates. , it was alast week game changer. What was the first thing you did in terms of your investments . Rick we dont talk specifically about what we do with the funds. We are come with her europe is going. Exposure in the marketplace in terms of rates in spain or italy or ireland or slovenia, you have a supportive central bank. Who is going to do more . I think people underestimate. We can run negative rates. Sometimes thats an big u. S. Ambiguous. Qe, ite fed did infinite moves rates. It moves assets. You change the supply and demand paradigm in the world. 80 billion in a month is incredible. Dynamic europe the in europe is growing. Inflation has been disappointing. Its starting to pick up a bit. We think europe is an interesting place to invest invest. I know people have criticized during he should have gone further in terms of negative rates. I think he did a number of smart things. The credit transmission channel we like the peripheral that market. We think it makes sense. We like the credit markets in europe. Stephanie i want to stay in europe. Ubs is talking the trend. Iny raise the bonus pool 2015. Compare that with Credit Suisse and Deutsche Bank. They cut 11 . Ony forecast another audible. I love that he did that in march. Way to be optimistic. See banks going in different directions. Traditionally, some pay more than others but we dont see this . Rick the Banking System in , people dont talk about that. Its a big deal. You are talking about longterm funding. Deal. Nie its a big five days later, Deutsche Bank says how could that be . Rick i cant comment on whats happening in terms of their assets. I cant say specifically. I think you are seeing lending up in europe. Velocity is picking up and thats encouraging. Sure about the ubs numbers. Some banks are changing their business model. They are changing in significant ways. Ubs is transforming their model to more Wealth Management. A lot of that is clearly working. Its working in terms of the numbers. David you are worried about losing good people. With all the changes in the banks, are you seeing evidence of brain drain . Rick i would say the model is changing quite a bit. Are people leaving the traditional businesses . Are they going to others . Are people focusing on Wealth Management businesses . Is there a desire for those people . No doubt. Its a great business for a number of banks. There is a need to keep the best people in that space. David were talking about the big banks. Does that affect the marketplace . If you dont have the best of the best trading, is that affect the marketplace . Stephanie he hired them already. Rick the structure has totally changed. The structure of the way banks manage risk has changed. Its an unfair statement to say theres not some highquality people in the banks today. The model has changed. To risks they are willing take in the resources they are willing to put to that is different. How we think about how we operate has to be different area some of these markets different. Some of these markets are incredibly liquid. Clearly, its not as liquid today. Youve got to think about your holding. What is your entry and exit strategy . Stephanie those are the three stories that matter to markets. He is staying with us for the hour. We have much more to cover on bloomberg. Starwood said the new offer is superior to the marriott offer. Theres nothing the market likes as much as up anymore. The heat is on. Its 15 minutes until the market opens. Stick around. David this is the Bloomberg Business flash. A group has agreed to buy starwood for 78 a share. This was superior to the bid from marriott. Sheraton. Ncludes thestine lagarde says Global Economy will be worse off without negative Interest Rates. Bloomberg news that without them, inflation and growth would be lower than they are now. For apple on monday, they are coming out with a smaller iphone. Attract peopleo who still use the iphone five with the smaller screen. They have big challenges. Thats at 1 00 eastern. Itsext, has the fed hit unemployment metric . Stephanie you are watching bloomberg. Were nine minutes away from the market opening. I am here with my partners david and jonathan. Rick, weve got to talk about the fed decision. Your reaction to what we heard this week. Rick its a big statement. I thought some of the questions that came up about not hitting the conditions yet, when will we hit the conditions . 220,000 jobs. Created 8 million jobs in three years. Thats big numbers. Average Hourly Earnings is up 2. 2 . Even ec is up. The fed has hit its conditions. The globalut in economy and financial markets, that was a big statement. That was a big statement in terms of the dollar. They are going to be patient in policy,where easing they were very sensitive to dollar acceleration. Meeting,if at the g20 china is a big deal to emerging markets. I thought it was a powerful statement or lack of action. I still think they are going in june. Quite frankly, i think its a harder amount of time. I think its harder. China is risky. Commodities nearterm are better. Stephanie its easy to the like yes. She should have done. This is where she is. Rate if you look at the of growth of corporate earnings, they are coming down. That has implications for wages and employment. Rick that may be the biggest thing. Capital, whatsted a company can invest in what the return is against what it costs to fund it. They are converging. That means forward growth. Forward growth has to moderate. There is a lag to it. Labor has a lag. You may see another couple of months of good labor. I dont think the u. S. Is going into a recession. Think we have seen the best of the acceleration of the u. S. Economy. It will keep us out of recession. From wheremoderated we are. Jonathan i want to tie it all up. I want to bring of the treasury curve. There is an argument at the fed meeting that the reserve was going to run things hot allowed inflation to work. Yields should push up. Why . Rick i think your statement is right. The fed made a decision that will let inflation run hotter and employment run hotter. There is an incredibly important point to that. There are so many tools at your disposal. You dont have many to break a deflationary cycle. I think thats a big deal. What about the backend of the yield curve . Thats a very interesting dynamic. Inflationeing expectations that are trending higher as they should. Rateske japanese long and or german bonds, if you are a to buy company that has in, its a steal. Its a steal relative to negative rates. We dont think you will see a tremendous appreciation in treasuries. Being around these levels, we think it could trend lower given that demand function. Jonathan you think it sends the signals it used to send . Of analysise a lot that talks about the shape of the yield curve and what that means in terms of recession or not recession. I think thats not necessarily relevant. We live in a world of supply demand characteristics that a different than they were historically. You should have inflation that is accelerating. You should be changing the shape of the curve, the number of things are working away from it. Jonathan the open is next. Jonathan br360mikeme sopvictorsierra. Victorindiaalenum. Usralphalimas. Usralphalimas. Soujuliettimike. Soujuliettimike. 10 i. Iindia. 5mikee. Pointn2 novemberd. We have weakness in the euro. We have a little bit of strength in the dollar versus the yen. It is a mix of currency. Oil as i mentioned, we watched it go higher today. It has been helping in the United States. That is one of the reasons why we are seeing a little bit of again at this point. The market is up 1. 6 . We are watching individual stocks. Tiffany is puzzling. The company came out with a decline in revenue for the last quarter. They are coming out with a forecast below estimates. They are hurt by currency. The shares are trading higher. Adobe is transitioning to cloudbased software. They have acrobat and photoshop. That has been a boom for the company. We have been talking about the deal. Is going for an acquisition. The price on the deal is 78 share. They are rising above that. Maybe marriott will come back with a competing bid. Lets go now to abigail doolittle. She is starting with paypal. Lowerl paypal shares are. They are citing valuation needs. The valuation reflects the companys Growth Prospect and shares are trading at a premium. Paypal may trade back down into a range formed from its ipo last summer. Another stock moving lower on ground the firm is citing a soft environment that echoes concerns. Bearish a lot of commentary on micron. There is a big slide continuing. Back to rick. Et we are talking about warnings around the world. We havent gotten into credit. Last week, mario draghi said they would start buying corporate bonds. Whats the best place for you . Rick we do like highyield. A yearhink the market is of kerry. Growth is moderating in the world. We like highyield. The highyield market is in the havenots. We think its a place to invest. Talk about emerging markets. The other area that doesnt get as much focus is the securitized markets. They are attractive. Commercial mortgages are priced at attractive levels. Even highquality mortgages have attractive levels. I would say those places. From a rate perspective, we like europe quite a bit. A lot of people have warned about things like what the ecb has said about buying debt. This is a missed allocation of capital problem. The referee is getting into the game and playing. Have you seen distortions in the market because of that intervention . Rick not yet. There is the bond market that they are investing in aggressively. I think there is distortion. The negative rates dynamic is to arting levels that lead pure problem. I think there is distortion all over the market. The question about buying credit, its execute hard to execute. Its interesting to see what mario draghi does. They have bank debt and financial that. You narrow the universe. It gets a lot of attention. It will be interesting to see how much they execute. Draghi, its so big you have to expand the universe. Thee is one negative point, front end of the yield curve, they dont borrow. What he is trying to do is make sure that long and real rates are low for consumers so that mortgages dont. I think he is brilliant in focusing on long end Interest Rates. How do we get those rates where real investment, permanent investment takes place . Weve got to make people store money in gold as opposed to keep it in their savings account. Jonathan with the u. S. Market and the european market, europe an lending is done through the banks. A marketthis develop that doesnt exist in the same way as the United States . The rate dynamic you talked about, there is a Natural Evolution its different. The u. S. Has a big Capital Market. Europe is much more of a bank driven lending mechanism. I think that will us on this and create a more open Capital Market and more financing in the Capital Market area Insurance Companies and Pension Funds are the entities that have the dated liabilities. They should be buying assets. That is the natural place of the Capital Markets. David lets turn to china. You said they have taken off the table the depreciation of the yuan. How important is china as we look forward . Are you concerned about the amount of credit he and pumped in . Rick its incredibly important. When you take growth the last three years, 60 comes from the emerging markets. Half of that is china. Its even bigger when you talk about cross trade and the influence on commodities. China has been 100 of the consumption growth. Its hugely important that if they devalue, the pressure it on is important. I think not doing a devaluation is dangerous. David we have a chart about credit and liquidity. Rick they are doing more in terms of trying to stem capital flight by capital controls and keeping it inhouse. They want to let the leverage build. Thats different from where they were going. They have to bring the leverage down. If the leverage builds or the liquidity builds, the Housing Market and the Service Sector will be good. Its a dangerous game. The point is you are pushing it out longer. You have taken shock risk off the table. You will not create a 30 devaluation it to the currency. Longerterm, it has to work. You have to get that growth. Yourre transitioning economy, thats hard. Stephanie you need to support the economy until you get to that longterm time. What happens in the midterm . All of these moving parts, its very complicated and there are many falls and there is such little investor confidence. Rick capital flight and the reason markets were worked up, they over focused on oil. They are worked up because of capital flight in china. Its hard to do the things you need to do it you have money leaving the system. It does appear that that has stabilized and confidence is better. Its incredibly complex. Eye on it. E the fed is keeping one eye on that dynamic. You have to keep one eye on whats happening in the chinese dynamic. Economy second largest in the world, but its been the driver of growth in the world. Its built on leverage to a large extent. Thats hard to play through. Jonathan you mentioned the Property Market area whats happening in the main cities and the Main Financial centers in china right now . There is a price explosion. And opportunity around those properties . Its a tough, complex, dangerous mechanism. Leverage in the Banking System is high. If you have a nonperforming buildg system, the over and the area that has already been over built in terms of real estate, its a tough thing. Keep one eye on china. Keep one eye on the real estate on the realhe other estate market in china. Thats a really big deal. David these are your words. You said you cant overstate the importance of china. You said its a dangerous situation. That gives me pause. Stephanie they also give you yield. Think about what happened in january and february this year and you think about or the perception of it. The markets can have a problem. In most of our portfolios, we are more cautious. Barbells. Ning more we have some parts of the emerging market. We are maintaining a lot of liquidity and not doing things where there is a lot of upside. Growths moderating in the world. You have to be thoughtful about that. Have moderating growth, you can make a lot of mistakes. I think its a trickier world. Yield is a winner. I think markets have come to that conclusion over the last few weeks. Thought it takes some and it might take some time to explain. Commoditynd the channel. What hasnt been explained is a chinesese slowdown would look like. Rick i dont know how long the show can extend four. Thats a tricky question and part of what people worried about in january and february. Its hard. What you learn over time is the intertwined nature of financing and trade in the world, china has become this tremendous Growth Engine and if you take the last 25 years, this is an marketsstat, emerging driven by china and housing. Thinkke those two out and about whats going to be the major stimulus that will create growth Going Forward . Technology is different. It cuts costs in a number of ways. Its a tricky thing. Level ofus to a higher growth from where we were. I dont know what that influence will be. David there is an honest answer. Its refreshing. Thank you very much. He is the blackrock chief officer. Of next, cocacola is at a record high. We have analysts with different views on the stock. Julie this weekend honest studio 1. 0, emily chang interviews the ceo of showtime. That is sunday. Cocacola is trading at near record highs. Summite struggling with consumption. Soda consumption. Joining us are too analysts with different views of the stock and welcome to both of you. Explain. Explain why cocacola is trading so high. Caroline he is doing a great job of recommending it. People are looking at safety. Have bought the losers the last couple of years early in the year. Cocacola is a great story. They are refranchising in north america. There are rising margins and returns. Thats going to start to be 2018. E in there is a lot of hope right now. You have to get through some earnings seasons. Nick we saw a big rise yesterday. I think for that reason. Digging into the refranchising, that is the prevailing logic on the case. Returns are going up. Coke is getting back to a concentrated marketing model. There will be a higher margin. As we have done work in the marketplace, its helping volume growth in a sense that when you out of thestribution Marketing Company and give it to people who do this for a living, you find that volume accelerates. Independent systems has outgrown cocacola distribution by four percentage points. A largerolls through portion of the base in the United States, it will accelerate. Jonathan i remember the warren worse. , which one was the chancellor in the u k was talking about a sugar tax. Nick if you look at the new marketing campaign, they are trying to appease the regulators. We have a brand and we have a lot. Stephanie they love to say this. Thats when they sell products. They could have a zillion products. Where they make their money is selling soda. we think the sugar problem is a huge win. For thehad speakers last several years. The last place you see regulation will be the United States. We have seen it coming in other countries. It could be china or india. Categories,at the water is outgrowing carbonated soft drinks. There is a shift from the consumer to nonsugared drinks. Now the regulators are getting involved. We think owning coke longterm is a risk. Dont know if we would disagree with you on that. They are trying to grow their noncaloric beverages. Caroline its 25 of the portfolio. They cant make anywhere near as good of money and water as they can with carbonated soft drinks. Nick we talk about the sugar issue and its true. Look at what goes on with starbucks. Sales areir frappuccinos and lattes. Im not sure that consumers are exiting sugar produced thanks. Look at red bull. Look at Monster Energy drink. They have a higher sugar content. The u. S. Is going to be a challenge to get that through. Lets see what happens in the u. K. As well. Its just a proposal. Look at what happened to mexico. They talked about repealing the tax. Studies have been done that there was a net reduction of six calories per person. Caroline its an easy thing to get through from the general population to accept there is an obesity problem. Countries, the parliament has made this. They are giving them two years to prepare for it. They are trying to get the regulators off their back. Its naive to say that if i take cocacola, there wont be a problem with their most profitable products. The populace doesnt like ascertain either. Its overwhelming. Jonathan thank you very much for joining us. Coming up, its Bloomberg Markets with Caroline Hyde and mark barton. Caroline you are going to be in switzerland, analyzing the ubs increase. We will dig into that story. Should it really be more than half of the fullyear net income . In switzerland. We are talking about gloom. Been sove policymakers clueless. Never have we seen models so dysfunctional. We are going to get someone who is never short of an opinion. Stephanie who wouldnt want to end the week on a low note . We are taking a quick break on bloomberg. Well be back with more. David weve had a great three hours of lumber go. I appreciate you being here. Day two. it is you know i am talking about brackets for a cause. Ceos have kicked in 10,000 apiece. 14 games were played yesterday. Games continue today. We saw a huge upset yesterday. Yell beat baylor. Yail beat baylor. How are you going to follow this . You can follow it on her very special website designated just for this. Its an interactive site. You can also catch it on the terminal. Good luck, notre dame. Jonathan im going to get there. For bloomberg. Best of luck for the rest of your day. We are 26 minutes into the session. Stocks are higher across europe. The dow jones average is up. Happyself and the team, friday. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. When it comes to the fithings you love,. You want more. Love romance . Get lost in every embrace. Into sports . Follow every pitch, every play and every win. Change the way you experience tv with x1 from xfinity. Caroline it is 10 00 a. M. In new york and 10 00 p. M. In hong kong. I am Caroline Hyde in for betty liu. Mark i am mark barton, this is Bloomberg Markets on bloomberg television. Caroline from london to new york to zurich in the next hour and here is what we are watching. Ubs is raising their bonuses. Mark imf managing director Christine Lagarde is defending the negative rate move in europe and japan. Why she says the Global Economy would be worse out without them. Caroline the identity of street artist banks see has never been revealed but that could change. Is that a good thing or a bad thing . Lets get straight to the market