Transcripts For BLOOMBERG Bloomberg Go 20160407 : comparemel

the devilish from the fed has dissipated. futures in the u.s. negative, dow futures off 75 points. that flat. -- dead flast. t. dollar yen bright red. down 1.3 1%, the japanese yen is stronger. every single major currency. a weaker euro. yields lower. that is her market wrap. let's get first word news. vonnie: in syria, fighters backed by the u.s. and russia have been on opposing side and are zeroing in on islamic state, the russian supported syrian army is trying to cut off their main supply route between iraq and syria. kurdish forces supported by the u.s. are moving closer to the militant group's capital. in icelandic, a third day of antigovernment demonstrations. after leaked documents reveal the prime minister's -- the trimester had -- rhetoric heating up between bernie sanders and hillary clinton, bernie sanders said the front runner is not qualified to be president. his reason, sanders listed wall street donations to her super pac and support for the war in iraq. clinton was asked if sanders was qualified to be president but she declined to answer. david. david: the yen is surging. at its strongest level against the dollar in 1.5 years. it gained even after a government official said they would take action on the currency if needed. as well asis here simon kennedy. just when i think the yen is maxed out, it goes even further. 108. to what is causing this? talk companies are repatriating earnings into yen. >> a move we have seen over several months. dollar yen down 9.94% year to date, a significant move. easing, is that we're looking at? that is the case, a worried that intervention is a false campaign. it has a limited effect. the agreement among the g-20 officials not to do such things. the japanese are on their own. vonnie: japan hosting the next g7 meeting. what about the idea with exiting markets going down, people are hedging using yen? yenhat is an issue and the is a safe haven given the amount of debt, in times of trouble the yen is often favored over other currencies and maybe you be are seeing a bit of that. banksns that the central are not packing the punch they once did and the global economy is not doing well. david: you are a student of how markets interrelate. one of the reasons i should be concerned is not so much the actual trading of the yen but about the japanese economy, the third largest economy in the world. if this will deter their ability to grow, thanks global growth -- effects global growth? >> about positioning of the markets, the fed has given a more dovish tone than the market was expecting and that will cause weakness in the dollar. positioning and the central banks are playing by the same playbook to be on the dovish side. a matter of who will be more dovish than the other or who will be more dovish relative to expectations. with the federal reserve, we are seeing a more dovish stance in light of inflation statistics showing a pickup in the u.s., the fed seems to be preoccupied with risk to the downside inflation. the chief cabinet secretary has come out twice and said that he is looking at the fx markets with vigilance. if a chinese policymaker came out and said those words, twice in a week, this market would fall out of bed if china were looking for a weaker a currency, why does japanese get away with that kind of rhetoric? >> i wish i knew the answer. hang oncentral bankers every word and it used to be where we focused on more companies, not with his what is the central banker saying. david: how can they get away with it. they want to talk it down and it looks like they cannot. the market based not believe them when they say they may intervene to get the yen down. >> they want to introduce two-way wrist into the tray or slowing if they feel the yen will keep going up. if it is a fundamental move and they feel intervention will not fx, jpmorgan talking about how much higher the yen can go. vonnie: shinzo abe has promised there will not be intervention, does he lose credibility or the central bank lose credibility if they do intervene? >> yes, it seemed problems with that as g-20 seven -- g-20 hosts , you have to member that some suggestion that the currency wars which may have been overblown are no longer in place. the bank of japan perhaps not cutting more negatively as perhaps first hinted when it started. probably because of the reaction of markets. the fed not raising as quickly. the ecb not using currency in the late it may have been in the past. but that together and you get a rise in the yen. david: if you are shinzo abe, you are more concerned about the economy than anything else. this makes his job much more difficult. if he is trying to get inflation and growth going, a strong yen hurts them. economythe japanese used to have lower commodity prices, will be good for the economy to import most of their goods. getting back to the move in the end, you had a great chart earlier, it has been in a downtrend, we see big move but this move in the last several months is barely even a blip on the screen. the long-term trend of the yen has been weaker. >> the magnitude of some of the moves we are seeing in the japanese yen. >> here is what it has done today. all of the major currencies that have a cross with the yen are seeing declines, the south african rand has consistently seen the deepest declines. you can flip this to look at year to date and you see similar movement, more magnitude in terms of movement but all of the major currencies falling versus the japanese yen. if you look at the base of the town falling the most. that's the pound falling the most -- the town falling the most. this looks at forecast for various current sees, -- currencies, they are looking for weakening in the yen. here is where the forwards are trading, what the markets are saying and what strategist are saying. >> just wrapping this up. traditionally, you look at a metrics in howt it was valued, the management, bigstrategy, looks like one fx trade, the research you are doing. markets, itll these is a currency move. the fundamentals of the specific companies are taking a backseat. >> is there a bazooka that kuroda can come out with like mario draghi did? >> a suggestion that negative rates were only the start of the campaign when he introduced those, they were surprised i the kickback they got from markets. he can continue to put negative rates more lower and continue to pursue that. that might be a surprise but what he needs to do. >> thank you for joining us. i guess the takeaway is that -- the markets punish them. bankxt, china central reports an unexpected rise in their foreign exchange reserves, could the market be stabilizing and is it the winner of a weaker dollar world? ♪ ♪ -- a texase are your teenager has become the 10th american to die in a crash involved a ruptured check on airbag. the defect not had repaired. samsung posted better than expected first quarter profits, the early release of its has struck got a head start of apple and chinese competitors. it sold three times as fast in its first time -- goldman sachs is oil at $35 a barrel is just right to make shares of u.s. explores worth buying. oldman forecasting west texas intermediate will average $57 a barrel next year and that opec will increase production and set of freezing or cutting at. that's cutting it. china's fxon: reserves increased for the first time in five months, rose by 10 point $3 billion in the last month as the nation's currency stabilized. my question is, is this a reflection of improving fundamentals in china or the reflection of what is happening with the dollar? >> this is the result of the efforts to stabilize expectations. you were on the story, the wild swings in january. they interfered in the market to punish speculators. , they caused severe doubt on the concept of a free inket, it has succeeded curbing depreciation expectations, easing capital outflow pressures and even the pressure of the foreign exchange reserve spends fewer dollars to support the one. saying,s what you are because of what the pboc did, they send a message to people in china, they should hold their yuan rather than halve capital flow out of the country so they are more confident of keeping their money in china. >> the story behind the story behind the story is the -- they are following this dual policy of allowing appreciation against the dollar while helping by allowing depreciation of partners. how it is achieving those goals is by controlling the appreciation against the dollar as the dollar declines. the euro has risen about 5% against the greenback this year. -- this has increased activity is allowing them to weaken the currency against its trading partner, this is how it's achieving this whole thing. that drives of sentiment and people say, they are not allowing a depreciation against the dollar, setting the whole sentiment. this is short-term. i am not sure how long this can last, how long the trading partners will allow this appreciation to go on. vonnie: how is china looking at the appreciation of the japanese yen? appreciating substantially versus the dollar. >> i am not sure the policymakers in china are concerned about things that are happening far outside their own borders. as a short in- august, they shorted in january, they want to drive home a message, they are not concerned about what the yen is doing or what the dollar is doing. they are concerned when it suits them. for the moment, i am not sure the yen's decline is a huge concern. jon: what we had at the theson's best epicenter is dollar, a stable currency in china, you see losers, japan, looking at asset classes, what is the biggest winning as a class from the week dollar story? >> biggest winning as a class is gold. a strong rally in gold. as you see the dovish playbook employed by every central bank, gold continue -- should continue to do well. china, the week dollar plays and you have seen improved economic data, the manufacturing's saw its biggest monthly increase in four years in march and the nonmanufacturing base increase in two years in march. whether or not it is a one month blip remains to be seen but an improvement. the shanghai composite, that long-term downtrend from the middle of 2015 started to break that. , we broke about that, tested it and remain above that. as long as we can remain above that downturn for the shanghai, it shows better sentiment for the region. jpmorgan ceo warns of emerging geopolitical risks to the details coming up. ♪ jon: this is bloomberg . markets, two hours away from the open in new york, to just negative. -- futures negative. plenty going on elsewhere. straight to the fx market, dollar yen, 10830 two, down by 1.34%. yen strength across the board. treasuries down by two basis points to 1.73%. keep an eye on crude. so many interesting moves across asset classes. >> announcing the big deal with the nfl, twitter, morgan stanley cutting its estimates, the target on the stock going from 16 to 18. fewer minutes and at dollars plus more traffic acquisition costs equals less earnings power according to an analyst who sees declines in twitter's engagement and user trends despite the deal with the nfl, twitter shares down about 25% this year and another 2.5% this morning. , shares of win upgraded by 5%. upgraded by 5%. and analyst raising his rating based on the stronger than expected outlook provided by the company and his confidence and his confidence in management even though shares fell on that outlook yesterday. about analyst estimates and down year over year, we saw pullback in the shares, bouncing back. toid: in his newsletter shareholder, jamie dimon warned of emerging geopolitical risks. the possibility of britain leaving european union, the outcome is potentially large and unknown. erik schatzker dug into the better. we have paul hickey. let's talk about brexit. >> he said there are risks and said the best case scenario for britain if it were to lead the european union is that hundreds of trade agreements that britain has with the eu we need to be renegotiated. necessarilyio, not the worst case scenario is that the eu retaliates against britain. also close to the worst case scenario, the european union falls apart. clearly a possibility. it is what jamie dimon did not say about brexit that is more newsworthy. wisdom.conventional he did not say stuart gulliver, if there were a brexit this is how many jobs we are going to have to pull out of london. did not go as far as john mcfarlane that said london would be significantly worse off in the event of brexit. jon: is that because they have more skin in the game? erik: yes but jamie dimon styles himself a spokesman for the banking industry and has often a claim within the industry and i think -- the point about brexit is made on page 48 of 50. of how important this issue is to jpmorgan is -- and jamie dimon. he does run an american back. , he said heedged did not know whether it would make the european union stronger or weaker. brexit is one of the major concerns in the market, will it impact u.s. equities? paul: the unintended consequences, you never know, about this letter, the commitment to brazil. you see that big money is made in their markets and the tendency is for companies to pack up and go home when things look bad. we saw that in the asia financial crisis, russia, brazil in 2000. that is when the money is made. stick with it. erik: it is what people choose to say is as important of what they choose not to say, he flags china and brazil and argentina as three other countries that they are mentioned in this report in addition to britain, and that is it. he said jpmorgan could lose $2 billion in brazil and they are still in. >> talking about the great recession the front and center of people's my comment increases their instincts to run for the exit and that is an issue, a sentiment in a lot of investors minds, when you see weakness in the market, it you think here is the big one and most of the time the big one never happens. vonnie: thank you to paul hickey at erik schatzker. usgender inequality costing trillions, details coming up. ♪ david: u.s. equity futures are in the red as you can see here. s&p down 79. joining us from radio is tom king. good morning. good to have you here. vonnie: we will start with president obama taking his case for supreme court nominee merrick garland on the road today. the president will argue that senate republicans should reverse course and get garland a confirmation hearing. so far,, the white house campaign for garland has had little effect. the u.s. will search for the panama papers for evidence of companies or people evading sanctions against russia. show at least $2 billion in transactions involving individuals and businesses that have ties to vladimir putin.russia has dismissed the report in attempts to destabilize the country. merle haggard has died. merle haggard came out of the music scene in the 1960's and ended up with 38 songs that reached number one in the charts. he is known at least four ok from muskogee among other songs. merle haggard was 79 years old. powered by tom king and john also. jonathan: tom king, whether you have? tom: it is on the yen, which is front and center right now. this is out of the telegraph, and this is a must read for everybody on wall street with some global chart as well. global inflation is at a 15 year belief.trary to popular this is one theory. a lot of people pushing back as well. jonathan: just want to get to this headline very quickly. a credit line amendment. valley of getting lender consent for a credit line amendment. maybe some of the pressure alleviated for valeant. vonnie: it is a comfortable current liquidity position. out,ll see when that comes or back to tom's morning must-read. one of the things you said is the global peace. the fed maybe it was extended cycle to 2017 but we are looking at a counter,. -- a downturn. tom: valeant at the remedy has all sorts of challenges, which i'm not expert on, but we know they are having massive placement issues. they cannot get the price they want. there is the disinflation trend that every scripture says may end at some point. david: this is the point people are not -- power overpriced. whether it is in the labor market or production market, price,ou get our over you have not use your capacity fully and you will not get growth and we don't find that almost anywhere. tom: when you look at that in london real estate, the basic idea here is service sector inflation is a similar beast from oil and selected good. jon: here is my single be really interesting. economists have been very wrong about a series of things. were worried- we of lots of inflation. now we are worried about disinflation. that's right around the u.s. is the labor market gets tighter. i have heard several talking about stagflation. no growth, inflation picking up. a high risk to inflation and downside to growth with no idea where to go. that could be a big thing. tom: we did a chart on surveillance a week or two ago. the cpi are like this. that is a fact. are they at a worrying stage? i would suggest not. janet yellen and others use the phrase overshoot. there is concerned it will be a recent of market pricing that will throw everything into upheaval, and that would include inflation expectation. tom: we got through this whole thing without talking about the japanese yen. extraordinary. david: your point, looking at the cbi numbers and projections of gdp growth that are very modest. we are talking like .4% in the first quarter. you will have to make up in the other three quarters to get back. nominal as real gdp in this strange inflation dynamic, we are talking about we are repeating what we have seen, which is this desire of a massive catch up second, third, fourth quarter, and enter is a heated debate about that. something will happen. others say no way. vonnie: definitely going to place on the into this. here.is a beverage david: what worries me having just worked doing five-year plans, it is always a hockey stick with the first year or two is not good and in the years three or five ramp up. tom: that goes through the presidential debate where they are not talking about adult material. the plug-ins, the guesstimates of the five or 10 or 20 year experts even the best would suggest are a fiction. jon: what we have not heard from the presidential candidates, two board seats at the foic. tom: welcome to global america. no one cares. in the bank of england, that is a big deal. here, whatever. how are the rangers doing? vonnie: the president recently said he will -- jon: not seeing it. vonnie: there are a few differences. jon: it should be. vonnie: tom king, thank you so much. appreciate your input on our morning must-read. we are moving on to another very interesting topic. everyone hundred women in the , this isworkforce related to japan as well. there are 152 men to everyone hundred women. $2.1 million, this gender inequality. how did you get to that number, $2.1 trillion? >> absolutely. the $2.1 trillion is actually a part of the overall opportunity to close the full gap for women in the workplace. it would be over $4 trillion, but we do not think that is a realistic scenario. what would be a realistic scenario over the next 10 years would be for all states in the u.s. to match the best state of improvement over the last 10 years because that had empirically happened and to do that would close about half of the gap and get you to the $2 trillion. the $2 trillion is 10% to gdp growth. you're talking about low gdp growth expectations. that is about equal to any an economy the size of texas to the united states. david: let's break this down a little bit. i understand there are at least two issues involved. one is how many women are in the workforce at all, and the other if you go to it is how many are full-time versus part-time.there is a big difference , men versus women. kweilin: yes. there is actually three components to this. the first as he described his workforce participation. are women working at the same rate as men? we find that they are not. there are two other components. the first is 40% of the $2 trillion. 30% of it is actually the part-time, full-time mix. half, ake up over majority of the part-time role in a minority of full-time roles. the third component is sector mix. women tend to work more in services sectors that have lower somege productivity than of the manufacturing sectors where men tend to dominate. vonnie: it is a fascinating study because we are obviously seeing this in japan as well. tom: it is almost an abenomics platform. what i interested in is the wounds. mckenzie is known for linking a long view of time, the long data. what portion of that change will be made up by a generational shift outside five years, 10 years, 30 years? kweilin: we think this is a tenure aspirational opportunity, but we don't think that the business as usual are doing nothing is going to really close that gap. tom: right. kweilin: it is changing at a very slow rate itself and really accelerating that. we think the private sector has a huge role to play here. we think the government has a significant role to play and nonprofits have a big role to play. the private sector, companies over thechange that next 10 years by looking outside their walls to they're dissolution channel to the supply chain and impacting and then within their walls, they can look at the full cycle of how do we recruit and get women in the door at a more equal rate? some companies are doing blind resume screening. within the whole on over talent, how are we retaining women better? how are we rethinking work to make a more flexible and less 24/7? how are we thinking strategically about on ramps and off ramps, keeping women more full-time by giving them flexibility and providing on-site childcare. and through promotion and getting limited to the senior leadership positions. thank you very much for joining this program. tom king, thank you for joining us. yen, what a move. tom: we are not yet to it is a lot of talk about intervention and everybody goes to the text was unilaterally. david: i was going to say would it be effective? the you wonder with dysfunction of our system today, who do you coordinate with? hard you have a g0 coronation? we are not there yet -- how do you have a g0 coordination? we are not there yet. we have forgotten where the yen is supposed to be. it is a real exercise. jon: thank you very much for your time. we speak to the ceo of pearson. that is next. ♪ jon: this is "bloomberg ." coming up at 8:00 a.m. eastern, we will be talking with the ceo with management. vonnie: you are watching "bloomberg ." a battle involving japan's largest retailers. a sit down after a power struggle with the board. arrangeis trying to with those trying to that -- blankenship will appeal his one-year prison sentence. a get the maximum allowed on 's conviction stemming from the 2010 explosion at a coal mine in west virginia that killed 29 people. replace peopleto in the insurance industry with software in europe. they want to save $1 billion by the end of 2018 with changes that affect 8000 jobs. the report says automation mainly to the loss of one million insurance jobs over the next decade. that is your bloomberg business flash. david: we are now going to turn to pearson. shares for the education company are up from january after announcing plans to restructure, the second in three years. a very different story compared to wha where they were a year ago, so is the plan now working? i sat down with the executive appears in to talk about where he expects the new growth the company will come from in the future. kenneth: i think it makes for a simpler company. pearson over the last 20 years has went through a significant portfolio changes is. a lot of businesses sold. acquired.usinesses when you go through that, you end up with a hodgepodge of finance and technology platforms and systems, so what we are really tried to do is modernize and transform and simplify the company so we can scale you are bigger more global products much more effectively, that is the work currently underway. david: is it still a good business, education? john: education is a great business to be an over the long-term. inevitably like any business, it has its ups and downs. we have been going through a more difficult period, but we have a very compelling growth and certification plan underway. we are very confident we can get pearson to be delivering at least 800 million pounds or $1.2 billion in profit by 2018 and then resume significant growth from there onwards. yes, i do believe it is a good business for the long-term, and that is something we are working very hard to demonstrate and prove. david: random house statement. -- penguin. that is not a -- does it fit into the core vision? is that i that you will hold onto or are you interested in selling it? john: we are 47% of penguin random house. we're still in the business of consolidating and integrating the businesses so we don't achieve peak synergies from those until 2017. we are also working through a new e-book trading deal with amazon, which will have some impact on performance this year. i think let us work our way through 2017. that will be the first window of opportunity for us to exercise our right to dispose of the asset. for now, we are very happy with the performance and pleased to be a shareholder with penguin random press. david: a lot of your business is overseas. u.s., china, various places. eu,ritain were to leave the what would it mean for pearson's business? john: i don't think it would mean a lot for pearson's business. clearly we do not want to see as much economic uncertainty. i hope britain does not leave the european community. a recent survey of vice chancellors and universities across the u.k. overwhelmingly in favor of britain staying a part of europe because of the benefits it brings education. i hope it does not happen, but if it does in the polls suggest it more likely than it was a few weeks ago, it is something we will manage and work our way through. david: what is the fastest-growing part of your international operation? what countries are you going to fastest in? john: i was in beijing and shanghai two weeks ago. really exciting growth opportunities there primarily around the desire to learn english and what is often described as communities english. globalwant to work for companies, chinese companies that are becoming more global, so that exciting growth opportunity for us. david: that was john fallon, ceo of pearson. i find this company particularly interesting. it is restructured to be an education company, and it is on the cutting edge of technology in education. they are going to be a bellwether. 66% of the revenue coming from the united states. almost exclusively now education, education, education. you wonder what that means for the next administration. the new want of the language, britain remaining part of the european community. part of the european union and community are two different things so this a yell is the united kingdom that turns away from europe. i am not sure there are many people that want that anyway from the leave camp. david: in britain does outcome of the have to punish them so you don't encourage other people in the eu to take a similar course? jon: there is a big argument there, but that is a bitg debate. big event coming up in new york city in what could be a historic conversation. janet yellen, three former fed chairs scattered all at the same place, same time, same panel. makes a u-turn into our special coverage at 5:30 p.m. eastern time. we take a deeper dive off the charts. that is next. ♪ david: we just are valeant has gone lender consent for a credit line amendment. the amendment terms to restrict valeant's ability to make certain acquisitions it on investments are affected. for war, we bring in donnie. explained to us with this consent is. donnie: valeant is like to get an agreement from its lenders that it will be doing its annual filing because it is late on that. it will restrict some ability to do mma and raises how much money it will give. that give lenders. david: is a giving them more or less? donnie: it is giving them less leeway. lenders are concerned because it has been late on filing its 10k, and it has fallen into the technical default. it loosens some of his ability to pay back that debt and not be in technical default, but in return, he needs to pay a fee and raise a bit of interest, and it restricts its ability to do deals. david: i see. so they got a waiver on the 10k but they have restrictions on getting money back. donnie: exactly. lenders were willing to give them a little bit of room, but they needed to bind themselves so they can get the trust of their lenders in and also because the lenders now have leverage. david: that is donnie joining us on telephone from boston. now we go to vonnie:. vonnie: it is time now for all the charts. we are digging into the yen. just about 108. at strongest move in a year and a half. julie hyman is with us. julie: we have a trade weighted is somethingknow one is a look at because it is something to look at the slice and dice. you want to walk us through it? currenciesagainst like the korean and many asian currencies that they trade heavily with. not as much strengthening versus the u.s. dollar, which has to do with central banks dynamics. thing tor interesting look at because you look at how much the trade weighted yen has declined over the last three years. it is hurting companies in japan. julie: right. another corner of the market i wanted to look at that is affected by this yen trait is options purposes. this is options purposes on etf that tracks the currency 84% above average on wednesday. it is the highest since mid-february. definitely seeing a lot of volume increase there. hisracy share etf having particular highest volumes this year. vonnie: when it comes to currencies, it is always more sophisticated investors so it is interesting to watch. we have been looking at sterling over the last few days. and we are looking at low volumes and equities, we start out looking at low volume or low volatility when it comes to the japanese yen. julie: definitely not. vonnie: we also have to look at the g-20 because japan is actually hosting that. it will be interesting to see what they say before that. thank you, julie hyman. nextg up, the ceo of bny on "bloomberg ." ♪ a 17 monthyen hits high against the dollar and emerging-market shares rally. central banks in no rates to raise rates. jamie dimon's wants shareholders to look out for geopolitical risks.and china could get some bumps in the road . say $60 billion could grow to $2 trillion by 2020. how many based jobs will be that -- how many bank jobs will be tech?to welcome to the second hour of "bloomberg ." stephanie ruhle is out today. vonnie: a historic day for fred shares. bloomberg will have full coverage of that. it takes place at independence house in new york. jon: people excited in toronto. joining us is david rosenberg, chief economist and strategist. i want to get a check on the markets for you because there is a lot going on. s&p 500 up around one percentage point, the biggest since march 11. futures up by 89 point. deutsche bank a big loser on the index. down over 20% so far. it has been remarkable. 10848. yen, your thing a lot of dollar strength across the board except for this one. down almost 1.2% on the screen this morning in october 2014 low. a surprise drop in u.s. crude stockpiles. we cross over to vonnie quinn now. vonnie: thank you so much. president obama takes his case for supreme court nominee merrick garland on the road today. a goes to the university of chicago where he once taught constitutional law. is says they should give garland a confirmation hearing. so far, the campaign from the white house has had little effect. filing cites patrick's out and that he already paid a high price after violating bank laws and agreed to pay hush money. physically deal calls for no more than six months in prison. bernie sanders says hillary clinton is not qualified to be president. as reasons, you listed wall street donations to her super pac. also her support for the war in iraq. earlier in the day, clinton was asked if bernie sanders is qualified to be president and she declined to answer. andunwanted or journalists powered by -- journalists and 250 bureaus around the world. david: a 17 month high against the dollar for the yen despite growth concerns from the country officials. now from toronto, david rosenberg. as you think about investing people's money, how does this move affect your decisions? rosenberg: well it basically underpins our view now that after the big rally we are in a more risk offloaded than a risk on load. the yen typically rallies when there is more in the way of risk aversion and risk appetite. reflects largely to what we saw in the fmoc minutes last week that the fed will be lower for longer. that means the u.s. dollar is probably going to be soft against those currencies, including the yen. that should be positive news for the recent materials complex, commodities. one of the reasons why we have trimmed on the community canadir now. the search for you will be extended for quite a while longer with the fed on hold almost somewhat permanently here. jon: that "don't fight the fed -- that old quote don't fight the fed, they are fighting the dollar yen in japan. is that why? david rosenberg: it is easy to say that the policies are not working, but you cannot look at currencies in a vacuum. it is a pair trade. it has been sometime since the boj invoke is negative rate policy. on the back of that other things are happening in other countries. despite the fact that we had a decent payroll number in the u.s., manufacturing was down almost 30,000. the factory work week was down. the industrial factor in the u.s. is still reeling under the act of the super strong u.s. dollar. you take a look at what is happening in the eurozone. germany just printed an incredibly soft factory orders numbers the other day. the euro zone economy is slowing down precipitously once again, and you have these brexit concerns that are accelerating and what that means for the eu project in general so you cannot take a look at the isolation of boj and japanese economy because of the things are happening in the world precipitating these. vonnie: which central bank is next to move then? rosenberg: i think the next bank to move will be the bank of japan. they will probably go deeper into the asset purchase programs, but i think that when you take a look at what the japanese policymakers are saying about the yen that they are monitoring it very carefully, it is moving into uncomfortable terrain for them. the boj is the next central bank to move. outside of that, we just saw the r.b.i. in india cut interest rates. 6.25 inflations coming down. that is a bank that has a long room going forward. david: i want to come back and talk about the u.s. for a moment and the extension which they are looking to international factors. we heard from one of the members of the fmoc. listen to it and please react. globalve not added to my factors compared to what i had before. i have not really seen anything that would indicate to me that this is particularly salient at this point compared to where it has been over the last several years. how influenced is the fed at this point but what is going on overseas as opposed to domestically? firstly, it is: obvious global risks are front and center. anybody who says the fed only operates policy based on the domestic side was not around in 1998 wendy's policy following the asian crisis deepening in the russian debt to fall, the event cut rates three times in the fall of 1998 at a time when the economy was at full employment. you take a look for example at the minutes yesterday from the fmoc march meeting. they were even more of his inverse on the downside risk coming from what is happening in the global economy and global financial development than they were six weeks earlier despite the fact that risk asset prices moved off the lows. defense seems more concerned. you can quote as many bank fence as you want. isvote that is the most janet yellen's. ever remember a central bank chief having the word uncertainty as the title of their speech. is uncertainty in monetary policy. you find sometimes uncertainty worms its way through the text budget yellen had that in the title of her speech. that tells you right there. she spoke repeatedly about the global risks, particular to what is happening to the u.s. economy. with the fed not being independent, we printed 1.4 on real gdp growth. the latest number of the atlanta .4.tracker is down to the case for the fed truly do nothing for an extended amount of time is quite strong. jon: let's take away your youmberg terminal and give different minutes yesterday and save the dollar yen is down 10% on the year, and i told you for the forward earnings estimated earnings on the s&p 500 were 17.5 times, would you believe me? i would believe you in a sense to what has really changed this year and it comes to the earnings backdrop. it is soft because we have the impact of week oil prices, week basic material prices. that is basically deflationary. the u.s.is impact of dollar almost big up 20% year-over-year, and return to under the selectivity and foreign earnings so you have a earnings recession in the u.s.. what does that even the fed? automatic relative earnings drives currencies. -- i don't think they really drive earnings currencies. a lot closer thing we have full rate hikes in our pocket for 2016. you've got forward to today and because of the things you cited, which is the earnings recession, and a soft u.s. economy, all of a sudden you barely have 50% of a rate hike by december. a really big shift here. we focus on the boj. the big shift here has been the shift to a much more dovish fed. that is undermining the u.s. dollar right now. david: i want to bring it back to where we started, some of your investment thoughts, and specifically the weakening dollar and the earning percentage. is a weakening dollar actually going to be some tailwind for u.s. equities? we were talking about strengthening and would. now it is weakening. does that improve the outlook for u.s. equities? david rosenberg: the markets are trained to look at things on a year-over-year basis, right? so if you take a look at the year-over-year percent change right now in the u.s. dollar trade weighted, the bull market has been broken. if you take a look at the year-over-year change now, the level is the breastbone markets don't trade off at levels. they treat all of change -- trade off of change. sector inities year-over-year terms is turning we willso my sense is have a better than expected earnings picture over the next four quarters. the second quarter will mark the end of the so-called earnings recession of the united states. a letter that was caused by the light impact of what i just talked about, surging u.s. dollar and the commodity prices extremely weak. we turned the corner on that. i think we will have earnings momentum shifting upwards going into next year, but a lot of that is priced in. when you take a look at a 17 s, the market is priced well ahead of where the market consensus is. this is a market that is in search of a theme. the enduring theme here is lower for longer on race. innings the search for you will remain extensive -- it means the search for a yield will remain extensive. it is not confined to utility stocks and telecom and health care, but the hidden value will be in corporate credit and especially the investment great space which is trading over 8% right now. if you can find the gems that will not default, corporate credit. a thank you very much for joining this program. up next, jpmorgan chase is ceo jamie dimon about emerging political risks and u.s. federate. we take a look at his annual letter. that is "bloomberg ." ♪ vonnie: you are watching "bloomberg ." a texas teenager has become the 10th american to die in a crash involving a ruptured take on takata airbagor -- ata inflator. the defect led to the biggest auto recall in u.s. history. blankenship' lawyers and so theys will appeal his one-year prison sentence. the judge gave him the maximum allowed. that stems from the 2010 explosion at a coal mine in west virginia that killed 29 people. here in manhattan, renters are getting a break after two years of surging costs. rentedian is now $3300 for in new york apartments, down 3% from last year. douglas says the vacancy rate is almost 2.5%, the highest and at least nine years. that is your bloomberg business flash. david: that does sound pretty good. let's turn back to that dim on annual letters. he took a shot regulators. he said "our shareholders should bear in mind the u.s. government requires a capital surcharge that is the will that of our international competitors. this additional surcharge may put some u.s. banks at a disadvantage against international competitors." joining us now is erik schatzker. welcome back. to us what he had to say. erik: this is part of a mild run side against regulators broadly speaking in the post crisis banking environment. jonathan ferro, i am curious to know you're not on this because it is a funny thing for him to say. said not as though he has it before, below is keep in mind against whom would u.s. banks of the at a disadvantage? the european banks? surely not. the european regulatory environment is far harsher than the u.s. environment. if you ask european bank ceos, they say the energy the u.s. regulations lighters to the u.s. banks can be more global and powerful, which leaves you really with china. if you look at the debt problems china has and the bad loans on the balance sheets that are yet undisclosed, it is hard to see the chinese building a business that will compete with jp morgan or citigroup or bank of america on a global scale anytime soon. maybe he is looking ahead 10, 15, even 50 years, but this is not a five-year problem. jon: the swiss bank may have a word to say also. have you ever seen a sign outside of recession where people have been so bearish about investment banks given the quarter that is about the reported? erik: there is a good reason for it. one, capital markets activity is very subject to the upside down s of financial markets and they are very volatile and two, capital surcharges. dimon addresses some of that in the letter. jon: you think the point they are at right here right now, that is when he is complaining? erik: i am not so sure it is about right here right now only because there are consistent in this letters that are consistent with things he has said in the past, by specifically about the current environment and what it is going to look like going forward. he says volatility and liquidity are here to stay. that will result in clients having to pay wider sprint. they will have -- wider spreads. they will have to pay more. sometimes wider spreads help market makers and rebalancing she positions like repo how health the consistency of results. bad for the people investing, not necessarily bad for the banks. want to look at j.p. morgan specifically as a proxy for the banks. this is something we look at with various banks recently, the decrease in earnings estimates. here is the earnings estimates going down by about four cents per share for the quarterback threw reported. this is the change we have seen in the past month. people listen to jamie dimon because j.p. morgan has had this petition.ass or it is very clear that j.p. morgan is subject to some of the vulnerabilities the other ranks curious -- banks are. i am curious the status. erik: it has committed to staying in a number of businesses the other banks have exited, for example. ubs among the first to take cap drastic steps to get out of race. deutsche bank of cbs single race rating, of sovereign bond trading. regulators are forcing banks to exit what we would call vanilla businesses because capital rules make them unprofitable. jp morgan for the most part has remained among the full service corporate and investment banks in the world, if not the most full-service. their results will reflect theably more accurately state of the markets that we know what. wrote,white jamie dimon who is the addressing? this to one of markets that he would be rough sledding for his company? erik: i don't think it will be rough sledding for his company. at least, that is not the point he is trying to make. the waynfident about j.p. morgan has built his business. he is talking to his shareholders. the one point that comes through to me the ball is jp morgan will do its utmost to deliver the best returns to you, our shareholders, but be warned. a return on tangible equity was 13% and we don't think in a normal environment it can exceed 15% by much. there is not that much more to look forward to. vonnie: 50 pages worth. thank you very much, erik schatzker. he addressed the public with an op-ed. that is erik schatzker. a check on the markets coming up on "bloomberg ." ♪ jon: this is "bloomberg ." one hour and seven minutes away from the open in new york. let us get you up to speed on what is happening in financial markets. futures is still negative. in europe, it is the banks, is the automakers. they are leading the losses. japan snapping a seven-day losing streak. switch of the board. 108.47, a huge move on the japanese currency. yen strength 108.47, that is in october 2014 low. there are some of your market moves.let us go to julie hyman now. julie: let's start with apple, the world was valuable company. stock is in the red this morning after cutting a price target to 130 from 141 and cut 2016 earnings estimates, but the same time some analysts maintained the by ratings -- buy ratings. end users may be holding on to their ipods longer. you can also see him on bloomberg markets later at 3:30 p.m. eastern. verizon shares falling. its -- wit giant with the price remaining at 53. mike mccormack citing a lack that telecom by the way one of the worst performing groups yesterday helped downward by verizon shares. finally, high-end retail, specifically coach. the stock could be headed to his second day of gains potentially. nolan believesy the luxury store format is gaining traction in the marketplace. shares not seeing any movement yet this morning. jon: thinking very much. will bethis program, we breaking the high-frequency data point in the u.s. the weekly jobless claims number. withhe federal reserve -- the federal reserve sitting on its hands looking outward worried about global growth abroad. we will be speaking next on ."bloomberg coming up what a panel of historic significance. janet, same time, same place, same general along spike greenspan, ben bernanke, four said shares. three previous, one current. 5:30 p.m. new york, 10:30 p.m. london. 5:30 a.m. in hong kong. that will be on bloomberg tv and bloomberg radio. this is "bloomberg ." all of you waking up on wall street, good morning. ♪ jonathan: i know her and 27 seconds from the opening bell in new york city. with us now is donald heberle, 198 billion dollars in private client assets so we will get his investment take but first, a quick check on the markets. futures are negative, negative around 10 points. getting some breaking news in. let's go to julie hyman. julie: official jobless claims for last week, 267,000, slightly lower than 270,000 which was anticipated. another sign that we are seeing some relative help in the job market with some economists nearg that we are at or atl employment continuing 2.2 million on the week. so again, down 9000 week over week. we do see futures remaining in the red following these numbers. the ny wealth management closing and acquisitions this week, the firm brought a silicon valley advising firm which manages money for client. joining us to discuss this is donald heberle. he has $1.7 trillion in assets. -- so the silicon valley as it is not the biggest part of your business. but do you see a difference in the profile of an investor in silicon valley to what you see elsewhere in your business? donald: generally speaking, yes. there are characteristics of a silicon valley investor. for the most part, they tend to be a little bit younger and more risk averse. if you think about their portfolio, there risk assets are largely in the company's private equity firms and things like that. so they tend to be less aggressive in their investment portfolio than other clients. david: how is a reacting to the volatility in the marketplace? it has been a tumultuous first quarter. donald: absolutely. down for six weeks and then a rebound which we have been calling for. it is not surprising as in that regard. they're reacting by asking a lot of questions, wondering where to go next. they're interested in our reviews of the market and what will happen with the fed, in particular. generally speaking, staying the course and the fact that they have been more conservative with their portfolio has served them well. jonathan: does the sense of how you run your business -- credit suisse and it is for that reason. is it limiting to be so focused? donald: no. and we are not exclusively domestically focused. in asia, we launched in hong kong a few years ago so we do have a meaningful and growing presence there. we actually think there is a nice synergy between our west coast presence at in particular, silicon valley, and our asian business. we have clients were bicoastal and also in terms of finally dynamics and owning real estate. so there are only a couple of differences between our offices in the west coast and in asia. vonnie: so is the biggest difference how you manage volatility? donald: yes, most of the questions come from around the fed. we recently heard from janet yellen that we think it is less likely. so one or two increases this year is more likely in our view. david: when you look at what the fed likes to do, they are making noise that they are not going anywhere fast. even the jobless numbers claims come in and it turns you to a real quest. how do you get real growth in your portfolio without getting risks? what is your answer to that? donald: to the yield question? you are right. this has been a long-standing trend in general. where do you go for yields? as far as telecoms, we are not going there. we think that is overbought as a trade so we are diversifying in terms of the broad asset class representation across the board. jonathan: if i called you up and see futures were negative across the board and there was a big rally in the japanese yen, are they still after returns? donald: yes, i would say still after returns but our job is longer-term views for clients. what we try to get them to do is look past today and yesterday's headlines. we think about what their plan is and what they are trying to accomplish. we try to help clients achieve objectives. most from a retirement perspective and wealth preservation. some are still in wealth creation. many are interested in future generations and philanthropic interests. vonnie: i think what you are trying to say is that many of your clients are names we see in papers? take a silicon valley investor, typically a young person who is risk-averse, where do you put that client? donald: we would be broadly diversified, many of them looking at fixed income cash investments. again, as a complement to a high risk asset that is in a smaller startup company. jonathan: negative interest rates, theoretically, let's say they apply to real tale customers -- applied to retail customers. -- id: well, we are not would advice is not to hold onto cash, generally. elyerally, they are relativ small in terms of cash allocation so it is not a big issue to start. but you don't want to be in the business of paying to park cash in other places. david: it is a competitive environment for you and your business, there is a lot of change going on and there are some people getting out of the business. how does that affect your business? donald: well, you are right about the many people getting out and in. or people are growing their business. there is a lot of reasons for that, it is much more stable than any other business that financial firms are in. so it is a great business and also, the dynamics of wealth creation and preservation and transfer are very favorable. so lots of firms are looking to get in and grow. we have been very aggressive and public about it in for -- as far as our goals about it. the competitive environment is growing. lots of firms that are in the wealth management business, both big or small, and there are others entering it. ard thatwe have he companies need to position for the future. in the area of sin tech, what are you doing? donald: there will be a big impact on wealth management in terms of that. i think where it evolves to is that the phenomenon becomes a part of or a feature of a broader wealth management offering. i'm not sure these grow up to be wealth managers in their own right but i do think they become features of -- and from our perspective, they are helpful to advisors. prettyyou made it substantial investment in sin tech? haven't you? it is a big part of your strategy? donald: broadly speaking, the company is heavily invested in innovation. it is significant. we view ourselves as a technology company and a leading innovator in the financial services world. we spend a lot of money on the syntax side and we are interested in other aspects of it as well. from a wealth perspective, the mobile advisor area is interesting. vonnie: have you read --? why not? donald: it will be something i will get to. how doeshow does the -- bny mellon look at northwood chase? all different types of banks -- do you view them as a competitor? donald: in the wealth business, .hey are a competitor jpmorgan and other firms, sure, competitors. there were new fiduciary rules about advisors, yesterday. washington is spending a bigger interest in the relationship of advisors. donald: not so much our business. we have been acting as a fiduciary. i suspect it will have limited impact on our business and how we do it. a bigger impact on others, but less so on us. jonathan: donald heberle, thank you for joining this program. inflation is rising at the start of the year, is it time for inflation protection? here's you talk to us about that is martin hegarty. great to have you with us. my first question, inflation in this fragmented federal reserve, inflation is real and durable or will it not be sustained? where do you see that debate? martin: thank you for having me. there was a tremendous amount of focus yesterday on inflation. the current trajectory of inflation at how it relates to the inflation market. when looking at inflation, i am somewhat optimistic that we will continue to run inflation in the context of 2.3% on a core metric as we have seen in the latest news. over the next couple of months, the pace will slow down and our forecast for the year and is in the vicinity of two .3%. with respect to the inflation market, what is interesting is viewed the rapid repricing expectations of inflation that we have seen in the context of spot inflation at forward inflation. spot inflation metrics have risen since mid-february but when looking at forward inflation metrics, which are more important in setting fed policy, you heard the five-year rate that they like to focus on -- that is basically 10-15 basis points off the lows that we saw in february. 30 points higher, depending on which part of the curve that you focus on. i think this paves the way for a very fragile fed from this day forward. jonathan: with that in mind, what if the fed gets it wrong? what does that mean for your recommendations to clients? martin: i think the fed have recently demonstrated a greater asymmetry towards monetary policy, given that we are very ,ear to the zero lower bound they are inclined to actually let inflation run a little consensus, at least on a short-term basis, given that we are near to the zero bound. i perhaps some of this is a result of the negative rates or negative market reactions that have resulted from other central banks that have involved a shift towards more of a negative rate dynamic. jonathan: i will try to let you put an argument to bed. with the fed running things hot and inflation running things quickly or, -- martin: i am not arguing against gold. i just think inflation bonds offer different return characteristics and liquidity dynamics than something such as gold. when you look at the run rate of inflation priced into the u.s. inflation market, you have an energy inflation run rate between july 2017 and july 2018 of above 1%. at the same time, you have core inflation running at 2.3%. so we are priced for a substantial decline in inflation to hit those valuations priced by the market. so i think inflation doesn't necessarily have to run hot, it just has to gravitate gently towards the feds inflation target and there is tremendous upside to be realized in bonds. specifically related to nominal securities. jonathan: we appreciate your time. thank you so much for coming on, martin hegarty. today, a historic joint appearance with janet yellen and -- all today on bloomberg television. ♪ david: you are watching bloomberg go. i don't know what you are doing this afternoon at 5:30 but you will be one to be watching bloomberg's coverage of this historic meeting of the four heads of the fed. ♪ vonnie: you are watching "bloomberg ." it is a victory for the activist investor involving the largest retailer. the ceo of seventh and i holdings step down after a power struggle. the ceo was trying to arrange his son to succeed him. the ceo denied that. $35 an sachs says oil at barrel is just right to make the shares worth buying. goldman is forecasting that they will average $57 a barrel next year. opec will actually increase production inside of freezing. 8-year-old -- showed the kids. he was going for a record here, trying to become the oldest player ever to make a hole in one. it seems like the ball would never make it to the hole. we had some drama. is it? yes. a hole in one. [laughter] that was his 31st hole in one. he says the older he gets, the luckier he gets. jonathan: he is probably fitter than 99% of the kids. vonnie: it's not even about fitness, that is just art. david, i know you can do that. david: automated financial services are computer programs and vanguardrithms is leading with $32 billion in assets management and joining us now is bloomberg's personal finance reporter. she wrote a story last year -- last week. give us a sense of how big this is. >> the market is about $50 billion in assets right now. the expectations are that it could grow to 285 billion dollars by next year so it is expanding rapidly with firms like ability to think in and all of the banks looking at the technology. david: to put this in perspective, that sounds like a lot but compared to the total marketplace -- >> that is a great point. it is a small slice now but it is growing and growing rapidly amongst young investors and some wealthy investors who are trying it out. putting a piece of their assets into a robo advising platform. vanguard ineatured your piece and charles schwab. >> we did, because they are the two established players who jumped into the market last year. they were the first of the firms to say that they recognize that this is legitimate. vanguard has really taken the lead because they have produced a product form that is a hybrid, part robo and part human and it seems to be originating -- to be resonating with their target audience. david: how do they charge for this? how do they get compensated? >> here's the thing. they are lowering the cost of your actual investment product expenses but they are lowering the cost of advice to 30 basis points. that is the third of what a typical human advisor charges. david: how many advisors may lose their jobs? >> many people are worried that robots will replace all of us in all of our jobs but vanguard's platform a showing that there is a desire to have somewhat of a hybrid model. people with their money -- it is different than booking a hotel room. you want some type of interaction. telling people about your goals or life changes, had a baby or lost your job. there is a desire to have human interaction there that we are seeing a monk's platforms. david: how will this work with a robo advisor? >> it is changing the wealth management space and the robo advisors are excited about this, the ceo of betterment came out and said that they are excited because they believe they are providing low-cost advice with low-cost investment and the labor department rule is scrutinizing high products. david: thank you so much for joining us. she is a personal finance reporter. coming up next, jonathan ferro steps up for the battle of the charts. next on "bloomberg ." ♪ david: it is that special time of the day -- total of the charts. jonathan ferro, he is going up against julie hyman. vonnie: listen -- julie: let's take the personality out of it. it is based on the charts. i will go first. this is a basic chart but i thought it was interesting that we have this risk on and off scenario at the same time. typically, when you see stocks strong and these people are selling treasuries, typically, and you typically also have it go up but that is not what is happening. this is the world index in white, it is going up, gold is going up, treasuries globally going up but yields are going down as people buy treasuries. so the risk is on if you just look at equities but they are still worried. it is another way of showing that there is not a lot of confidence in the rally that we have had in the stocks from the lows of the year. david: you want to go both ways, right? what do you have for us? jonathan: you see abenomics in the news all the time. well, down, hedge fund managers are worried about nepotism and that is what i want to talk about now. more transparency and better governance -- what you saw in the last year with the corporate governance code in japan, this charts on the far right is basically the percentage of independent direction that is with japanese companies. you see an improvement to 11 .79% in 2014. that is a proportion of japanese companies that are incredibly low. lower then kenya, the netherlands. better, thatet number needs to improve. when people talk about a change, it this change is not good enough. this is the important part. you can go to the news function to figure out how i got here. fmgo on your bloomberg. david: it might be difficult to see. just point out the united states? vonnie: i'm surprised pakistan is above japan. it to you on an aesthetic because it is prettier. but that is the more compelling story. pretty good. coming up, michael buchanan will be joining us here on "bloomberg ." ♪ urges, risk yen's s aversion driving for a 17 month high. investors testing the bank of japan's tolerance for a stronger currency. global concerns weighing on the mind of the fed and the ecb officials. more rates and trading -- from the annual letter. standing behind the investment bank when rivals are cutting back. and we are 30 minutes from the opening bell in new york, this is "bloomberg ." stephanie ruhle is off today. david: joining us today is michael buchanan. welcome. good to have you here. michael: great to be here. david: i was impressed that he brushed japan into your chart. jonathan: guess what is coming? -- those losses were led by the banks and the automakers. japanese stock broke a 17 day losing streak on the nikkei. switch up the board quickly, the dollar yen, look at this. 1.33 percent, that is a stronger japanese yen. the job owning is falling on deaf years. strengthe some dollar which makes the dollar yen more remarkable. treasuries are down lower by three basis points. crude has given up some of the gains. 37.49. vonnie: president obama returning to his hometown today for arguing for confirmation hearings for merrick garland. he will speak at the university of chicago and he will make his case that senate republicans should allow garland's nomination to move forward. so far, the white house's campaign has had little effect. janice hazard are trying to get the plan -- out of prison. filing cites his health and says he has already prayed a high price. he tried to pay $3.5 million to conceal what multiple reports say is a legend sexual misconduct. penama is looking to boost transparency in the offshore financial industry. the president is creating an international committee of experts. they will recommend ways to show transparency after the release .f the documents global news, 24 hours a day powered by our 2400 journalists. i am vonnie quinn. david: we always need more committees. that's right. today, we are talking about the search with the yen, the rate hike and let's start with the yen. the yen is surging, the strongest level in 1.5 years. the bank of japan extensive quantitative easing and it has gained nearly 4% in the last five days. it is almost perverse, because the bank of japan came out and they had a very aggressive plan. it has only gone up since then. what is going on? michael: it really is shocking and it runs contrary to everything the markets would have expected. part of it is certainly that the fed has become more dovish. that plays into it. there are other factors as well. i don't think you can underestimate how short -- everyone was convinced that quantitative easing would take the young lower, versus the dollar. everyone was set up for that short position. and just like a year ago when we had the u.s. dollar-euro relationship, people thought that was going to parity but sometimes markets move in a way that is surprising. it is a combination of a number of things but clearly it is different than what economic theory would tell you. 1.08than: we are down to and you bring up something interesting. is this a new trend? -- itl: it is far to say is hard to say how far it goes. my guess is that is a big move so you do have some capitulation. it still seems like there is a decent component of a short in that as well. it is hard to say how low it goes. vonnie: one-story says it would need to be 1.05 before they do anything. the bank of japan is on tenterhooks because they want more credibility but they may have to. at what point would they have to? michael: another thing that is tough to say. clearly they want a weaker yen and it isn't doing anything for their economy and their situation. i have heard that they do have some willingness to go quite a bit stronger before they accept it. vonnie: parity? michael: to 100 perhaps. david: when you come in and do see a move like this in the yen, take us through your thinking. how does it affect your decisions? michael: we always take a longer-term view. to anyone -- anytime you're looking at and long-term investment we are looking at the valuations and we are trying to get good, risk-adjusted returns. we don't focus so much on the ebbs and flows of the daily market. we try to look for longer-term trends and we recognize that sometimes, you will have volatility along the way. but if you get the theme right, you will make money for your clients. vonnie: let's go to the number two thing that markets are looking at today. from yesterday, there was concern about the net -- the next rate hike. ability of a june increase is below 20%. if this is the case, will it reverse spectacularly at some point? michael: here is what i would say. the fed has changed their tune. had triedmarch, they to condition the market to expect higher rates. they were talking a lot about getting used to a higher rate environment and now, the fed is transitioning to a message of caution or risk management. you here about the asymmetric risks and you question the limitations of monetary policy. i think they do recognize that. don't have a playbook or a spreadsheet for monetary policy. they just want to react to conditions in the market. , out with theimon annual letter, he says there will be more aggression. he says that the federal reserve could go away and also other sovereign banks and nations and he said also commercial banks could be buying fewer treasuries going further. i want to look at what we have seen in treasuries this year. the yield has gone down and down as has the buying of treasuries. we are forecast at 2.4% so we do expect to see a reversal but the question is, how abrupt is it going to be? how much will it take people off guard? michael: i think you have to appreciate that we are at incredibly low levels. so the chances of higher rates in the future is a distinct probability. but i don't look at treasuries -- they are a reflection of the growth prospects in the economy and inflation prospects. employment situations. so i don't think they are too far from what i would call reasonable warfare. jonathan: what do you think about the eurozone debt market? that is our number three. meeting minutes were released today from mario draghi. ,ate cuts with more bond buying non-big corporate debt on the agenda -- i don't know where to start. mario draghi says they are ready to boost stimulus even more. talk about treasury markets -- germany is negative around 50 basis points. i just wonder how far they will go. what happens beyond that? are you worried about that? michael: well, it was interesting. i don't think you can misjudge or not appreciate the willingness of the ecb with their recently announced corporate on buying program. that will be hugely powerful. we don't know all of the details yet and we don't know how it will play out. but clearly there is some impact that we are seeing for quantitative easing coming from the ecb is manifested itself in its sovereign rates and corporate rates. so we look and we are more cautious than the u.s. corporate's because of that technical. david: some u.s. technicals are issuing corporate bonds. about thatr concern situation? michael: i'm not so sure that it , icapital misallocation think you are being smart if you are fedex and you can issue in europe as opposed to dollars and get a lower financing rate -- you should do that. i think we should expect that. so you will see supply migrate from the u.s. market into european markets as a result of this. vonnie: we were talking about inflation earlier but what is the greatest risk of the pickup in inflation? is it that the fed doesn't move and that we overheat? or is it that we see a situation stifling? said thathey have they are much more worried about growth. they are willing to let inflation go above their target if that is the case because they recognize the tools that they have for dealing with the opposite and dealing with slow growth and moving towards a recession. those are limited right now and they won't take negative rates off the table but i think for all intents and purposes, they are off the table and the market recognizes that. jonathan: there you are. michael buchanan, he will be sticking with us right here on "bloomberg ." much more ahead. a look at a stock that is really on the move. , this from a company that has lender consent. we are counting you down to the market opened. ♪ vonnie: you are watching "bloomberg ." fewer americans than expected filed claims for unemployment benefits last week. 267,000, 900 fewer than the week before. it has stayed below 300,000 for more than a year now. xiteywell international may e its business that makes manufacturing nylon. the business earmarked for investment carries an estimated $150 million in profit. -- valiant pharmaceuticals easing restrictions on its loan tax. the drugmaker is trying to rein in its $32 million debt. therefore will be extended to may 31 as the deadline for filing the first quarter reports will move to july. right now, stock is up almost 7.5% in premarket trading. jonathan: 15 minutes away from the open. futures ahead of the open, we are still negative. as of the -11 points. peel back the index is little bit and you will see it as the autos and the banks that are getting hammered in europe. 1.34%.e bank was off is one to watch. switched up the board. a remarkable move in the fx market. thesee this massive move on dollar yen. that strength is remarkable. at 108.3, that is remarkable. the treasury markets were down by three basis points at 1.73%. .8% forre down by crude. lots more to watch before the open. here is julie hyman. julie: let's start with big names in the internet sector. netflix and amazon -- trimming estimates and price targets on both of these stocks ahead of the earnings reports. on netflix, it has reduced and they have reduced the domestic net subscriber prescriptions by half. we do see some near-term risk from pricing but we haven't got it overweight on that stock. on amazon, a dropping price target with near-term currency risks. that is for web services and international investments. both of them are pulling back but not by much. about .5% each. and twitter is taking a substantial hit this morning as morgan stanley cutting estimates and the target. the bear case is as low as eight dollars a share. trafficvak seems more acquisition costs and he also sees decline in twitter in the engagement numbers and the user trends. twitter shares are already down sharply this year. this is coming in the wake of their deal with the nfl. and lastly, the world's most valuable company, apple, cutting its price target to 130 and lowering 2016 estimates. -- is citing concerns about the structural change we have seen with the iphone upgrades. he says people are holding onto their iphones for longer, i know that i am. you can see shares are down by .5%. he will be on bloomberg television coming up at 3:30 eastern on bloomberg television. coming up next, fallen angel. talking about bonds downloaded from investment grade just as they get the highest numbers from recession. should investors be concerned? ♪ vonnie: you are watching "bloomberg ." western asset management deputy michael buchanan is with us this morning. we are seeing more and more fallen angels. investment grade bonds that are falling into high-yield territory. michael: it sure is concerning. it is a huge topic for the credit markets as we came into into 2016. if you look at where the stress is, it is an energy and metals and mining. that is not the paper that people want to buy and we knew that a lot of fallen angels were coming from vestment grade into high-yield. so what you saw was a lot of selling by investment grade folders. high-yield holders were reluctant to add because we sell so much stress in that particular sector and what happened was it created a real buying opportunity for those in their own credit work and it was responded to the values in the market. david: was it specific to those sectors? or was it a contagion that slumped into other sectors as well? michael: there is clearly an opportunity to look at these broadly, especially when you see a market that has a higher risk profile. there is a real aversion to risk right now in the market. where there was a record of new supply in this quarter but then it was aa and single-a and triple be issuing's that went down. so what that is telling you is that there is risk aversion in the market. and whether it is metals, mining or energy, if you're willing to overlook the ones that are oversold, there is opportunity there. fallen angels, if you look at them as a sector, they were one of the best performers in the first quarter of 2016. jonathan: i just wanted to visualize how dramatic these downgrades were. julie: this is our atc. it looks at the number of downgrades that we have seen with the fallen angels. it is a record number. 50 downgrades and zero upgrades. another way to visualize this is to look at the chart down here. it goes back about 10 years, 2000 nine is when you saw this kind of a case but it still wasn't quite as many. so it really is notable that you are seeing this kind of activity and downgrades for the fallen angels. vonnie: are the pulling the trigger faster this time around? michael: there is no question that they pull the trigger a lot quicker. and i'm not saying that a lot of these downgrades are not warranted. but in western assets we always look at the relationships between fundamentals and valuations. and all we are seeing is that the relationship really became out of whack. there was a real anomaly there. jonathan: a lot of investors have used these credit ratings and when you look at the function and see these moves, is that where we have reached the peak in terms of pessimism? michael: we think we have reached the peak and we are beyond that now. you bring up a good point. if you look at financials in 2009, march 2009 there was a tremendous number of downgrades from investment grade into high-yield yet that was precisely the moment when you wanted to buy into financials. they had spectacular performance from that point forward. david: so as you sort through this and you do your homework, are you looking at the debt options or overall leverage in a company? because for some companies as the equity value goes down, their value goes up. michael: we are fortunate in that we have a strong investment-grade credit team and a high-yield credit team. those teams work together and really, what we're looking for is the ability to service that debt. let's look at freeport macular and, a fallen angel. copper has been under a lot of pressure for the last few years but if you look, they still can pay down debt. they're selling assets and cutting dividends. they have a management schedule, so what they have a management , so what we are looking for our countries that service that debt and ultimately pay us back. vonnie: we are seeing this wine out again. earlier, we talked about corporate credit being the best bet. at what point do you start avoiding the downgraded forces again? michael: you have to let the balance between fundamentals and valuations guide you. and i'm glad you said that. we do think there is an opportunity, despite the crazy ride went on in the first quarter where we were down at them we came back and finished in the positive territory -- we will adjust our view on corporate credit when the valuations and fundamentals tend to balance out and there is no longer an upside for the client. but right now we think there is a real opportunity. jonathan: michael buchanan, great to have you with us this morning. he will be with us. the opening bell is three minutes and 40 seconds away on "bloomberg ." stocks are lower across much of europe. ♪ "his is "bloomberg david westin and vonnie quinn, i'm jonathan ferro. futures are low. off.utures you hear the opening bell in new york. led by the automakers and the banks on the session down in europe. the fx market, we have been hammering this all day. we just go lower, lower, yellow -- lower. this move made all the more remarkable because we see dollar strength on euro-dollar. the yen strength remarkable. the dollar-yen, yields keep grinding lower. we are off by four basis points. after the big gains in crude yesterday, we give some of that up. $37 per barrel on wti. julie: we have opened lower. we have the positive sentiment that had come back into the market yesterday really melting away once again. the fed minutes were the catalyst for some of the late afternoon gains, particularly the read on the minute was that the fed members are remaining dovish even if there were divisions within the fomc. the strength we saw yesterday as people take a step back to assess the outlook for global growth. has been a source of concern for global investors. certainly, the japanese bank governor has said, as we see the dollar fall compared to the japanese yen, falling closer to 1.08, going below the threshold -- if you look at the 10 year treasury, the action we are seeing here, we are seeing yields go lower, as we see the buying of treasuries. more in line with what we saw from the fed and that dovish sentiment. oil prices, want to come back to that. it will be key for energy stocks. oil declines have been accelerating. an unexpected drawdown in crude oil supplies last week, so we saw oil rally on that. it has given up that gain. the decline is just about doubling every of -- doubling. david w.: thanks, julie. investors are doubting a june rate hike after the fed minutes out yesterday signaled a cautious outlook. market implies the odds are below 20% now. metrics areeconomic looking up right now. what has spooked the fed? larry: the fed seems to be spooked a bit by markets and by concerns about global growth. it certainly isn't anything in the domestic economy. the real focus is about the economic factors. if thisust wonder translates into a surprise shipped in monetary policy. the fed seems to be fighting themselves. this is driven by changes in secular stories, where the -- then there is the side that is the more cautious approach. in the recent uptick in the participation rate in the labor market i think ultimately will andhe driver for the fed the speed of future rate hikes right now. that is the untold story in the fed, as opposed to the ones we just touched. are we seeing a calibration or is there a fundamental shift in how they are looking at it. the employment level is up and there is more capacity online. larry: it is sort of funny. -- you don't find many echoes of it in terms of the fed. i think it is coming simply isause the video -- that beginning to evolve. it does seem to be larger than previously thought. vonnie: the fed has not been guide it in terms of monetary policy ever. it does seem to be taking more note now. would it take a bleed into the u.s. markets or the u.s. economy for the fed to change its path? to be perfectly honest with you, i think the fed and international policymakers have probably exaggerated this particular impact. it is relatively small in employment and growth terms and its impact on inflation -- by which i mean the china slowdown, the faltering recovery in europe , or the strength of the dollar. all of those things are comparatively small. to my surprise, they seemed to emphasize it more than it is merited. david w.: mike, i would love to have your thoughts on this. are we seeing a difference of degree or in kind of how the fed is perceiving the economy. are they taking a different look at this? mike: i think there is no doubt that there has been a real seachange at the fed. -- they are close to running out of bullets. it is exactly that. they want to be extra cautious here. you've got a market, you've got several policymakers taking either side of an aggressive trade. you have the likes of pimco saying, get some upside inflection --inflation protection. what is your view? mike: at western asset, what we do is we are going to look at the risks in our portfolio and make sure the risks balance out. i think you do have to appreciate that rates could go higher, inflation could go higher. yourant a component of portfolio to do well in that kind of backdrop. we certainly don't dismiss it. we recognize it is a probability in longer-term. there is the danger of this --that is more of a hedge than a conviction call. vonnie: we dipped below 1.084 the yen. what are you making of the japanese yen? larry: i think there are two comments i would make. and thebout the markets other is about policy. as far as the markets are concerned, we are seeing interesting breakdowns in correlations. we have had a bit of resumption in the oil market weakness story. euro-dollar is taking place in the context of dollar weakness. it does suggest that what is driving this move is an unwinding of positions. there were at least two. people were looking for more stimulus from the boj and every storm -- and a return. people were also looking at the be to see a room and devaluation -- renminbi devaluation. if that isdoes -- what it is, then we don't have much to worry about. mike: markets don't let you relax. you always have something to worry about [laughter] david w.: mike, where are you on this? as you look at this correlation situation, is it signal or is it noise? mike: it is probably a little bit of both, i would argue. i think we are testing the limitations of monetary policy right now. jon: do you agree with that? larry: i think that is exactly the right point here. one can look at it through that prism and surely the market is challenging the boj and the boj does not have that much left in it. ease if you want, it may or may not push your currency lower. my own view of this is that it speaks precisely to the issue that many observers every suddenly talked about -- if we really want to think about growth policies, we have to think in terms of structural adjustment and fiscal policy. we are really at the limits of what monetary policy can do in this environment. this is a real call to japan to address those other arrows. vonnie: you used to be ubs. as an economist, do you think differently about the economy depending on where you are thinking from, depending on your perch? [laughter] larry: there is no doubt. but that has to do with other responsibilities, including managing money, and that conditions your outlook. vonnie: rate hikes this year? larry: i still think we are going to see two. vonnie: thanks to larry hathaway and to michael from western asset management. you are sticking with us. don't miss a rare conversation with sitting fed chair janet yellen and her predecessors ben bernanke and alan greenspan. coveragel be full starting at 5:30 eastern. something to look forward to. up next on "bloomberg ," inie dimon warns of dangers the economy. we will be talking about that next. ♪ hyman in ourlie green room. don't miss ken benson later today at 2:00 p.m. eastern on bloomberg. vonnie: you are watching "bloomberg ." here is your latest business flash. sccos slim is bidding for in barcelona. -- billionaires george soros and bill gates are also betting on its emergence from a property crash. the latest youth-oriented isthing chain to falter un.sun. -- is pacs the disney has released first trailer for "star wars: rogue one." decembereduled to open 16th. mark your calendars. jon: it is marked. thanks, vonnie. stocks are opening lower. let's strip this back. julie: i'm going to start with one of the higher movers. hanes brand acquired champion europe. it is an all cash deal. is going to be worth around 20 million euros. investors like the deal. we are also looking at s5 networks. it is down 6% after it was downgraded to negative at otr global. no details on the note. we will try to get those to you. lots of stocks have been moving. valeant, it won the support of its lenders to waive a default and ease restrictions on its loan packed. the company has a $32 billion debt load. 8%se shares rebounded by this morning. bill ackman talking about valeant in his quarterly call yesterday, reasserting his confidence in the company. he also noted that there are a handful of ceo candidate right now to replace mike pearson. vonnie: wait till we get our hanes on you. good title. julie: i can't take credit for that. that is all jamie berlin. vonnie: let's go right to the nasdaq. >> wynn resorts shares are trading higher. management offered a stronger-than-expected long-term outlook. specifically, they see $2.2 billion in 2019. inres have been updated confidence. resorts, shares of wynn did put in a bullish golden stock suggesting the could trade higher yet. arebath & beyond shares higher cost -- higher, after the company declared its first dividend ever. the stock has been dogged by weak sales and margin contraction. we see a strong downtrend of selling pressure that may suggest that some of those issues could return. david w.: i will take it from there, abigail. jamie dimon is out with his latest letter to shareholders, one that covers everything from potential lawsuits in china to bank resolutions. erik schatzker is back with more on his thoughts. 50 pages? what is it, the next warren buffett? erik: we found deflation in so many places, like japan. i've found some inflation and it is in the jpmorgan letter to shareholders. it is the longest letter to shareholders ever attend by by jamieon -- penned dimon. it is kind of all that he would choose a year like 2015, this is a letter ending the year 2015, to increase at 250. think of what we have been through since the financial crisis. 2008, it was only 28 pages. 2012, when the sovereign debt crisis reared its head again and again, he has 32 pages and 29 pages. david w.: maybe he has more time since things are going better. [laughter] erik: i'm not sure he feels that way. let's talk about rates. larry hathaway was talking about the potential for a faster than increased rate of interest rates. he said i'm not worried about negative interest rate or divergent rates. he is concerned that the fed thanraise rates faster expected and another thing we should be paying attention to is that three of the big tires of treasuries since the financial crisis, the fed with quantitative easing, china with its buildup of lauren fx commercialnd u.s. banks that have been buying treasuries to meet liquidity were tyrants are not going to be buyers in the future. ofould ask this question you, mike. what do you think jamie dimon is thinking when he says, i'm concerned the fed may raise rates too fast. does he really believe that an fomc stacked with the doves is really going to do that? is he saying that because he has repositioned jpmorgan's balance sheet? about a more worried dislocation and financial markets if rates rise to quickly. he has to be the full of what a rate rise will do. i think that is more his way. jon: isn't it a financial stability issue? it takes away that gradual point. that puts financial stability back on the table. with that be a concern? we have to recognize the fed has to real choices. let it run hoty right now. that is what they are choosing. erik: remember that jpmorgan cannot make markets like it used to to capitalize on the disappearance of liquidity. when jamie dimon talks in this letter about his community -- putstment to clients, he it in terms of one thing and one thing only -- electronic platforms. it is no longer about putting butts in seats to service clients like you, mike. he says there was an increase across the electronic trading platforms. david w.: he wants to get ahead of it with spin, if he can. mike: it is clear, you are going to see an evolution and a growth in electronic trading. i don't think that solved the problem. i think the only thing that solves the problem for getting liquidity back to her capital markets need it is a return of risk capital. regulation has limited the amount of risk capital that firms like jpmorgan can use. it is probably a pendulum and we are probably pretty far at one extreme. at some point, that comes back and that is going to be a healing point. jon: gentlemen, thank you very much. for readingatzker all 50 pages. [laughter] jon: coming up, it is "bloomberg markets." mark, what is on your agenda? [laughter] yellen today. we will be looking over at the big gathering of the four big chairs of the fed, including the current chair, janet yellen. we will be combing through yesterday's minutes. our chap is a member of the israeli parliament. he also founded one of the most .uccessful vc funds in israel we will be grilling him on technology and policy. rick marshall also joins us. airbnb, one luxury fine day. his airbnb or luxury airbnb the future -- it seems to be the present. vonnie: mark, thank you so much. looking forward to that. a look at what is coming up next on bloomberg. the fed chairs looking like something out of a marvel movie. ♪ on: this is "bloomberg ." i'm jonathan ferro. let me get you up to speed. 6 --&p 500 is down by 0.6%. the dax is up. is thehe automakers, it banks that are leading the losses. breaking 1.08. it is a challenge to abenomics. big day ahead, big event ahead. president obama will speak to law students at the university of chicago about his supreme court nominee. on bloomberg tv, don't miss ken bentston. don't miss the conversation between the former fed chairs. full coverage on bloomberg tv and bloomberg radio. ♪ betty: it is 10:00 a.m. in new york. from bloomberg world headquarters, i'm betty liu. mark: and i'm mark barton. markets" onomberg bloomberg television. betty: we are going to take you from new york to london to tel aviv in the next hour. we are 30 minutes into the trading session in new york. stocks are lower now the day after the s&p had its biggest jump in a month. european stocks are falling on renewed skepticism. mark: mario draghi says no surrender as the ecb outlines its regiment to ease monetary policy more. should new risk to the economic outlook arise? betty: jamie dimon warns of geopolitical risks between china and the potential brexit. more on his 50-page annual letter to shareholders and the cae

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