Transcripts For BLOOMBERG Bloomberg Go 20160513

Coming up on the show, we have Dale Stafford. He will join us on all the dealmaking and unmaking going on. We will preview aprils retail sales. Jon looking forward to that conversation. S p 500 futures negative five. Switch over to the board very quickly. 1. 1345. Lar, foot. Llar is on the front yields are down by two basis points. What a week for wti. 46 thought. Flat. Lets go around the world for indepth coverage. Selena wang as the latest. We are 90 minutes away from the april retail Sales Numbers. Speaking of ecodata, guy johnson has latest on euro area growth. Julia tells us what to expect a day after Dilma Rousseffs suspension. Apple has found a way to use its enormous pile of cash and it could have an effect on the uber. Lets get the details from selena wang. Selena this is a huge deal. This is the single largest investment they have ever received. Was in talks to raise 2 billion. This is very unusual for the smartphone maker. They dont normally invest in startup funding rounds like this. What does it mean for this company . We are all watching uber. What does it mean for uber . This definitely deals a blow to uber. They have been pushing hard. Gives didi a big push. The fight is going to continue. This is bolstering their position. Thanks so much. Retail sales in the United States will be out in less than 30 minutes. Joining us with a preview is mike mckee. Looking for . Omists it is 90 minutes. Not 30 minutes. Mike you are so excited. Economists are looking for a better april. Howard largely by car sales and higher gasoline prices. Powered largely by car sales and high gasoline prices. In march,wn month they saw a rebound in april. We are expecting retail figures to track that along the way. Important to the fed as it is to wall street. We have seen this tectonic shift in spending. We have gotten all these bad numbers from the Department Stores. For the last decade, we have seen people spend more money on services than on goods, especially nondurable goods like clothing and shoes. The yellow line is the growth in services spending. The Younger Generation by things at Stores Like Zara and h m. David w. mike you mentioned the fed. What are they talking about . The markets dont believe them. Why do they keep saying this. Mike they want the markets to move now. They thought the markets were a little more hawkish than the invest ors. They want to push markets up. They dont wanted to be a big shock if they go in june. They dont want to be stuck with Interest Rates this low. Very much. Hanks that is Bloomberg Economics editor mike mckee. Jon a lot of data coming out in europe. Joining us from london, guy johnson. The bearishness. German gdp is not that bad. I would say it is actually downright good. Absolutelyeconomy is striking. Driven domestically story. A lot of people or pointing fingers at germany. They are getting going. A mixed picture across europe. We had a 0. 5 read for the aggregate number. It has been revised down. The numbers are different from country to country to country. This is really quite a good number. It may not be sustainable, but the underlying momentum is good. Europe is on a bit of a terror rightnow and jura tear now and germany is absolutely flying. Quited argue that it is good news being generated from this side of the pond. Jon things you dont get to say very often, guy johnson. But on every financial publication is the big, bearish headline about brexit. The doom and gloom brigade taking over. What is the conversation . Guy it is definitely a fear conversation dominating things. I spoke earlier on to the irish Prime Minister and got his take on what is happening. The could be a Silver Lining for ireland. Maybe you could get banks relocating, etc. , it that arrest etc. He is worried about the contagion that may spin over. If the british electorate were to decide to leave the European Union, ireland would still stand up for britain and things that het european level, but i could not determine the outlook of the response from the other 26 countries. Talking to me a little bit earlier on, they are worried about the contagion effect and a shortterm slowdown in the british economy and how that will read. Dr. Carney down the road at the bank of england is worried, making waves yesterday, saying. Ou could see jon is the pushback fair . Is his criticism fair . You are always going to get pushback. One side of the argument is that he is meant to be apolitical. Some say he should not be jumping into a political debate. This is where the door opens a little bit for him. He is meant to be apolitical. He is saying, i can see the data slowing down. I can see it from both sides of the ring. Closely, youvery are going to get my twopence worth in this debate. Jon ive got to say. The door is opening just a little bit. A lot of people would like to see him walk out of the door. To leave the bank of england. It was a very strong response to his news conference. David w. they were angry with him because of the politics. Jon very angry. I thought he handled that well. That it would be political to not talk about the risks. Did the fact that he is canadian, but all . [laughter] is vowing toseff fight back in brazil. Much has happened in the last 24 hours. There is a new cabinet. Early criticism and tension on the finance minister. Yes. This is the finance minister markets wanted. The longestserving central banker we have had. He is already talking this morning, speaking to a local news agency about cutting down debt and setting realistic goals. He is going to talk a little bit later in detail how he is going to get us there. Thank you so much for that. David w. that is news from the business world. Lets turn to the rest of the world. That is taylor riggs. Taylor it has been called the most secure financial messaging system in the world. To moveed by banks money around the world. This attack involved in unnamed bank. They stole 81 million from the central bank of bangladesh. A report today says that a brexit could erode londons status as a financial sector. The vote is on june 23. The u. S. Navy has fired the commander of 10 sailors who were captured by iran for 15 hours. He has been relieved of his duties. Global news 24 hours a day powered by our 2400 journalists in 150 news bureaus around the world. Jon coming up, so much bearishness in the market. Is it the end of the bull market . Is it a sign of the end game . Day to the beautiful city of london. If we close at these levels and we are four hours into the session so far, it is a fourth straight week of losses. Lets get to the cross asset boards. The eurodollar. Yields are grinding lower. Yesterday on crude, closing at a sixmonth high or thereabouts. Lot to get through. Lets cross over to matt miller. Matt it has been a tough week for retailers. That did not change last night. Nordstroms and dillards boasts both missed estimates. In the premarket, they are down 2 . We will get their earnings out in 30 minutes. If you look in almost any retailer we have had out so far this earnings season, it has not only been a miss on earnings and samestore sales, but it has also been cutting forecasts for the full year. It is a bloody picture for retail sales area take a look at the Department Store index. Over the last week alone, the Department Store index is down 13 . When todays trading opens, you will see an even bigger drop in u. S. Department stores. It has been a rough time to say the least for retail. The kids are buying more stuff, including clothing online. Hopefully, they are eating burgers a lot out. Shake shack keeps adding stores. It easily topped estimates. Shake shacks new chicken sandwich chain or addition in those stores, the chicken shack, brought in new customers. Shares are doing well in the premarket. It is no secret that apple is struggling for the first time in a long while and americas most Profitable Company has seen the shares fall to a 22month low. Tim cook may be looking to china for a way out. Billion of apple in two didid. I. Into did look, the shares are down today again. Dropping below 90 apiece. We will be talking about who could overtake apple is the Worlds Largest company. No one has done it on a closing basis. David w. who could it be . Alphabet . Matt the owner of google, that is correct. Jon financial markets, bearishness, bearishness, bearishness. Byare just up marginally 0. 1 . Is there more upside left in the market . Lets ask julian emmanuel. The amount of bearishness. Where do you want to begin. Shoulde any reason i just go out there and go long . The near term, we are cautious, as well. For now, at 17. 5 times earnings with political risks here and abroad directly in front of us and the economies and numbers starting to slow down below expectations, there is reason to be cost is very david w. but causedy, a recession is by something. What would precipitate it . Thean i would say it is after effects of the negative rate regime in europe, lack of confidence in the financial system. As we have seen over the last week or so, the news out of debt concern about there. That could precipitate a global , the sentiments you saw in january. In terms of the u. S. Economy, we are slow, but we dont see make the ahead. Case for financials. It has not been a fun cycle for financials. They did not get the typical pickup and Interest Rates they hoped to get. Julian it has not been a fun cycle for financials. The fed is going to raise rates. We dont think theyre going to do it in june. We are looking for september. Rates are going to go higher. Is anality is that it environment where it has been very difficult to make money. That sector has been very washed out in terms of positioning and sentiment. Less than terrible news has moved those stocks higher. Jon lets have a conversation about this word sentiment. It is a very fuzzy concept. A lot of them are my age, around the 30year mark. In aapproach the word risk certain way. The fed, brexit, the election, a possible showdown over the debts dealing all over again. It is risk on, risk off. How do view you view that . Julian we have gone absolutely no where for two years, but every move in the market has felt like i did the floor was going to be broken through or we were going to continue going much higher. There has been a sense of frustration and angst about missing out on the upside or being protected from the downside. If the economy is going to grow the way we think it will, what we are likely to see is bonds and stocks moving together again rather than this risk on, risk off and that is something that most of the world does not have experience with. I want to talk about the possibility of a hike. Does it give you somewhere to go when a recession does hit . Julian we dont look at it that way. What we have seen in past rate hike regimes, the second hike, the third hike are validations, signals that the economy is moving forward. One of the concerns has been that the personal savings rate has risen. That is why there is so much focus. The fed wants to have the room to say that things are ok. David w. thank you so much, julian. Still ahead, harnessing solar power proves to be harder than it seems. We will talk about that next. David w. it is time for bloomberg trends. You can find these for yourself. Amanda, you have our first. Amanda it is on solar. Who was thechina 41st richest man in china at one time. 2 billion of wealth. He is now worth 17 million because of the collapse in solar. This is still a rags to riches story. David w. rags to riches to rags. Amanda solar is coming. Beknow that this is going to one of the ways we power energy, but you are looking at his company. The white line is more interesting. That is the index of solar companies. It has been a rough ride. Maybe it is still too early for solar. David w. our oil prices driving solar back out of the market . Partly i think it is that or the earlystage investor valuations went too high. The cost of the technology is plummeting, but it is not so good if you are one of the investors. Jon it was so concentrated last summer. You became a billionaire and then you were a millionaire overnight. It is so heavily subsidized. That is the story today. The aggregate financing. It was below all analysts for china. That is significant. David w. they are dialing it back. The good news is the Chinese Government is devoted to making green energy work. Amanda they have to. Jon lots more coming up. Still ahead, brexit concerns now and around the world. Christine lagarde is the latest leader to express concern. Jon happy friday to you all. This is bloomberg go. Over in europe, it is the ftse heading to a fourth straight day of losses. The dollar is on the front foot. Yields just keep grinding lower. It has been the pain trade of the last year. Yields must go higher, they cry, but they keep going down. Lets get over to matt miller for breaking news. Matt im looking at jcpenney right now. Be in line with estimates. They are missing estimates by about 100 million. But up there. We have seen this trend with retailers. Missing on estimates and sales and the growth is not there. The company came out with a firstquarter adjusted loss per share of . 32. We were looking for a loss per share of . 37. A little bit narrower loss than we have been looking for. The myths on sales is probably going to get investor attention today is the feeling on retail is negative. Amanda we continuing the trend e have seen from other retailers. We are two hours away from the opening bell. Apple is using some of its cash investing 1 billion in dd ridesharechinese start up, giving dealing a big blow to overs investment ubers in china. We will get ppi this morning. David w. now it is time for first word news. Taylor hi, david. U. S. Authorities are ramping up their part of the corruption stateownedazils oil company. The petrobras bribery probe it is already led to 50 arrests. This may be one of chinas Biggest Online leaks ever in sensitive personal information. Personal information on dozens of Chinese Communist Party Leaders and Business Executives has been leaked on twitter, including that of jack ma. Quicklythe tweets were deleted. A report says the European Union Naval Operation is not working in the mediterranean. Efforts to disrupt the multibilliondollar migrant smuggling business are falling short. , the eu isr hand succeeding in rescuing refugees on the high seas. Im taylor riggs. It is one of the biggest political decisions of the year. Should the u. K. Vote to leave or stay in the European Union . Tom the table. Me around so many people weighing in and the last 24 hours. Take a listen to this. We are not doing it out of politics. This is not the job of the imf. We are doing it because it is a significant downside risk. Course there are a range of possible scenarios around these directions which possibly include a technical recession. We identified the fact that britain might cite these as a major Strategic Risk in 2014. Clearly a decrease in the risk and the british gdp would result in a contagious impact on ireland. It is not just a domestic issue. I know it is a big domestic issue for many of you, but it is an international issue. Last 24, over the hours, it is charged. Now even more so. It is heating up for breakfast brexit rockfest. [laughter] i have never seen a leader of a central bank be so careful as Governor Carney yesterday. It was extraordinary. It was extraordinary about the politics of brexit. Huge amounttaken a of criticism of the way he presented himself in that news conference. He is often very charismatic and engaging and that was the most tense i have seen him. Tom we have an interview with a denmark Banking Leader today, as well. Paneuropean, this. Luggishness is the story it was supposed to be done in february or march. Jon the people who would like to see the u. K. Leave the European Union have labeled this operation fear. Is there a sense with you that you think that could become selffulfilling even if it is not real, so to speak . Tom there is always a risk of that. Polarity about 200 economists the basic idea is that the economists are weighing in with the theme for next week, seeing more worthy is stepping in to say it is not a good thing. Analysis is that actually when you boil it down, it is not a systemic risk. We are talking about a political decision. Going back to the point of that fear becoming real, it may not , but if you keep saying it will be bad, it will be bad. Tom when we wrap up what we have seen all this week, the history and brazil, the amazing debate we have had in the last five days or a week in the united date and then bringing it over to the eu, the overarching theme was so far economic growth. It is amazing how that can become a catalyst or reality. Rowley was way out on his call for a new american terminal value. Jon doom, gloom, and i wonder how the polls will develop. Tom is it doom and gloom or is it reality . That is the nuance. Amanda that seems like a perfect segue. We could move from boom to bust after wall street bankers had a record m a year year in 2015 it has been undone. A lot of these are going bust for reasons to do with regulatory, tax, government rather than the two players deciding that they should. Does that make this different than previous times . Indeed. The way that we are characterizing the m a market for 2016 is uncertain. It feels like a very uncertain market. We had a record deal year in 2015. It was the third of three successive really great years and gravity is beginning to take hold. A set of factors on one side of the ledger that will continue to contribute to robust dealmaking. Factors thatt of is also going to put shade on the dealmaking. Amanda what will contribute . I would guess access to capital is on that list. Absolutely. If you are a large multinational with a lot of asked bowsher, you are still quite concerned about where the growth is going to come from in the near to longterm. That combined with the fact that debt is relatively cheap have been robust environments for raising capital. There is a lot of capital waiting for those things to be deployed. , water,e the nitrogen and sunlight that contribute to growth in the m a market. Amanda what will constrain m a . Sure. You mentioned a couple of them. Some of the deals that have been undone were driven by principally by tax incentives. , by the prospect of inversion. Administration is continuing to write the rules that will further constrain inversion, making those less likely. When you look at some of the megadeals, the greater than 50 thosen deals, a lot of were driven by tax inversion. That not only constrains the number of deals, but the kind of deals. There has also been more scrutiny by regulators in the u. S. We have had a number of deals called off by the regulatory authorities. The third thing is uncertainty. If i believe that equity values might fall in the next 12 months , if im uncertain about whether we are headed to a recession, those kinds of uncertainty can throw in the gears. Jon jcpenney has cut their growth margin view. Jcpenney is seeing growth margins up 1030 basis points. More negative news, matt miller. Matt yes. Im looking at jcpenney quickly before we go back to m a. What you can see here is that growth over the past 12 months and eps growth over the past 12 months, jcpenney is the blue bubble. Im not comparing with walmart or target. These are mostly retailers that are clothing retailers. It is trailing on both of those metrics. Let me bring us back to m a. Put in chinese companies. If you i dont know noticed the incredible growth in china. We are not even in june yet and we have already got as many deals done as we had in 2014. The premiums, 25 . The most we have seen since 2012. Amanda lets bring Dale Stafford back on. We have seen a change of tone here. Is happening overseas . Especially in china. Is that where the action is going to be . We continue to believe that will be a big team. Theme. When you look at the , we are wayegions down in the americas, we are way down in europe. Asiapacific is sexually steady. I talked actually steady. I talked about the last time i was with you guys. We are seeing a lot of outbound chinese activity. The biggest deal so far was a 50 billion deal in the agribusiness space originating from china. We believe that will be a big space. Amanda Dale Stafford, great to have you with us. David w. up next, we are going to hear from jim chanos. He is going to talk about his latest short positions. Jon this is go bang bloomberg go. Apples its nearly at a twoyear low. Amanda thanks so much. Matt miller looks altogether too comfortable. Lets take a look at what is happening in the premarket ahead of the open in new york. We do see weakness in the futures. The nasdaq is down 13. Nordstrom and jcpenney are both in focus premarket. We get the allimportant retail figure. Is the consumer back at the tail table. The quarter has been a tough one. We will watch for the opening bell. David w. should near announced a new ceo. Wellknown investor jim chanos reiterated his short on the liquefied Natural Gas Company calling a crazy expensive. Spoke with Erik Schatzker yesterday in las vegas on his outlook on other companies and on the oil markets. One of the concerns is the longterm price of oil and whether we get a move to electric cars and trucks, which would have a huge impact on longterm demand. Demand is oneum transportation. We are looking at it. This is far out. Who knows. Erik another stock you have taken a close look at. Solar city. You criticized it for being a finance company when a lot of people think of it as a solar company. What other companies fit that profile . Actually financing companies, but they masquerade as or are perceived to be something else. Jim you have seen the collapse of the online lenders in the past few weeks. It has underscored the growth of shadow banking again. We are starting to see that in the u. S. Businesses that really do finance customers and append on that for a large source of income. You can look at areas such as timeshares, we are in vegas you can look at areas such as retailing things like jewelry retailers and others were all the money is being made on financing. A longterm contract to service your wedding ring, sort of like circuit city. The contract to service your tv so. Servicing your wedding ring . Some of the auto retailers. Some of the specialized auto retailers make an awful lot of money financing off the lot. I dont want to name any additional names, but there are a lot of areas where this is happening in the u. S. Erik were you active in the marketplace . Tom we were short one of the big ones that blew up. We were. We were short lending club. Erik as of one . Jim because we had problems with the model itself. Erik that stock has completely blown up. Have you closed out the short . Jim no comment. Erik why not . Jim because i cant give you a comment. [laughter] erik if we are thinking about things on a structural level, what other industries look as though they are becoming wildly divorced and fundamentals . Jim one area that fits into what we are talking about is the industrial commodity area. It has had an enormous run off the february bottoms. Erik iron ore for example . Jim iron, copper. The stocks have had far more of a run than the commodities. Erik we are seeing leverage plays. Jim except the commodities have gone back down. That is the interesting thing. Iron has given up all of its gains. Copper is up marginally from its lows. A lot of the big plays that have gone up 100 in a couple of months did so on the back of entering a new commodities cycle and china was restimulating and real demand was picking up. It was just a speculative trading bubble in china. They have given off the gains. David w. that was investor jim chain us speaking with Erik Schatzker. I find it fascinating. This shadow banking area. There is a lot of credit not involving banks. Amanda i think he makes a fascinating point. Maybe it is not as bad as it has been, which is bad for gdp, but good for the Balance Sheet of the country. About companies financing in an off the Balance Sheet way, to what extent are traditional banks exposed to that through investments . They have been cut out for regulatory reasons from the lending they used to do. But they found ways around it. If we do see a tightening of credit in that part of the market, what happens to traditional banks . It may make it more difficult for them to get their arms around where the credit market is. Now it is getting dispersed through the entire economy. I think that is a real fascinating point. Real hand,can get a but if that is only a fraction of what is happening, how healthy do we know how the consumer is . Jon it is a short lending club. Im chanos the shares are taking a big hit a jcpenney. I dont like to be an alarmist, david, as you know. David w. i know. I have never seen you be an alarmist. Pointed out that nordstroms and jcpenneys are about the same. , i have organized the bubble size here on rbc. This is how much walmart dwarfs this blue dot. That is jcpenney. Just to keep things in perspective. I also wanted to point out suppliers. When we see a company pulling back on margins, it needs somewhere to get profit from. Jcpenney has some pretty big suppliers if you do at plc. Nike is one of them. Corporation. Vf byave arranged to these their price change over the last month. The biggest suppliers have gotten hit pretty hard. Jcpenney is going to try to squeeze them for more margin. Jon retail is a huge story for us. Numbersbring you retail live on bloomberg tv. Coming up, apple status as the worlds most valuable company could be at risk. We will tell you why. Go. His is bloomberg we are an hour and 30 minutes away from the open. The s p 500 futures are negative. We are going to talk about apple. The stock is up 90 per share in premarket trading. Place as theits worlds most valuable company to alphabet. Apple is now at risk again. Matt you were talking about intraday numbers. Alphabet eclipsed apple. It came back down. Just to show you how big the swings are, i want to show you apple spread over alphabet. This is closing prices only. Million is still how much bigger apple is then out for that. Here are a couple places where alphabet has eclipsed apple. Were doing your alevels at cambridge or whatever you call that stuff here in 2011, this purple line is exxon. I remember when ask on was a Bigger Company than apple back in the day. Jon you are so old, matt miller. I dont know how i cope. The biggest story is how they have rerated apple downward. Summer,last year in the down. Now come they are saying we are not seeing growth coming anymore. No longer the growth stock it once was. , why the stockle is still a buy. Jon we are hitching a ride into china. Amanda recession confessions. Preparing orrs are a u. S. Downturn. David w. a penny for your losses . Jcpenney is the latest victim in a list of retailers taking a hit this week. We will break the numbers as they cross in under 30 minutes. Ferrom jonathan alongside amanda lang. And david westin. He was working hard in beijing, not on vacation. [laughter] erik w. our colleague schatzker has talked to david rubin thine rubenstein. Not a lot of bullishness about the market. A lot of skepticism. Lets get a check on the equity markets. Futures are a little bit softer through much of the session. The footsie ftse will have the longest losing streak lang into the bearish sentiment. The dollar is firmer. A little bit lower on the session now. Crude oil. Matt miller. We have been talking about what is going on with jcpenney. The stock literally getting decimated as they cut back. Nordstrom is also cutting back. Across retail, especially the apparel spectrum, companies are getting hit hard. Consumers are not going to the mall. They are generally spending less. Sorry, this is the wrong chart. Let me pull it up. Im going to save this for later. Out this here this is the savings rate in white. You can see it jumped up to 9 back in 2012. This is Consumer Spending. What i like to do with this chart really is taken look at it on one axis. You change this i think it gives a better picture. You see Consumer Spending bouncing along zero. The savings rate is at 5 . This is not great for the Department Stores. It could be good for the stability of america. Apple is helping fund chinese car service didi. John was talking about the fact that they are only trading at 10 times earnings. It is not a lot of money, but they are trading at 90 per share. We get excited when these milestones are hit. Be taken over as alpha that by also that Worlds Largest company. Alphabet as the Worlds Largest company. Amanda extraordinary. Matt i have nine apple products in my household. Just me and my female companion. Tim cook has got to come up with the plan for growth. Look for a dividend, look for buybacks. Jon earnings season is nearing the end and it has been worse than anticipated. Does the dovish fed keep a floor under stocks. Joining us now is the Portfolio Manager with Washington Crossing advisers. Do you listen to what they say or watch what they do . I think youve got to watch what they do. I think they are telling the truth when they say that they are data dependent. The models are very interested in feedback. Given the fact that they are at they have never been before close to 0 Interest Rate and all of these other things and still very weak global credit growth, they are going to move forward incrementally. They will poke at Interest Rates. They see what happens as a result and then they reassess and queue up the next one. I think they are being very honest when they say they are being data dependent. You have to dial down the rhetoric and look at what they do. Amanda keeping it similarly hearing from Portfolio Managers who have no place to go. What is your take on where we are with the market . Yes, but the trick is you have to go somewhere. To stocks, bonds, cash, or a more exotic asset class. When you go around and look at all of them, the fed is raising Interest Rates. What do you do with the growth part of the portfolio . Our take has been to shift the to more companies that have more consistency in the mix and focus more on attaining lower, more consistent returns than grabbing for the high returns. David w. are the markets data dependent . If you look at the data in the United States, jobs are growing, Consumer Confidence is pretty good. Small Business Confidence is better than ever. Foreclosures and mortgage defaults are down. What is the data that is making the markets so negative . It is always hard to do this. You can pick out the things that prove your case one way or the other. What we do is we have a composite of a lot of different data points and we go through and look at them like a checklist. Of the things that we look at, the majority of them globally have been tending toward weakness. It may be some of the drawdown in flak we have seen the last few years. We are not seeing it in the data. We are data dependent and we need to see growth in the economy. Expansion, you need it to give equities a left. Jon to the data points the data picks out, can you identify companies that play into those kind of themes . Sure. For all the talk of concern about the consumer, we will get retail sales data, i think one of the bright spots globally has been the consumer in the United States. I think you can get angry much Revenue Growth across the sector. Types of companies we want to look for are like budweiser or a dr pepper, snapple. Honeywell would make sense from a valuation perspective, as well. Amanda in terms of where you are seeing growth for those names, i get you on the budweiser and dr pepper, insulated those are not things people stopped buying even if their income falls honeywell it is spinning off its chemical business. That is a play on gdp growth, right . It has big exposure to markets like europe. You bet. Honeywell is just a very well operated company. They have made good acquisitions in the past and have done a good job integrating those. They try to do a deal with you tx and that did not come around. The ultimate thing for us is to find companies that are levered to the Global Economy over a long period of time. While things looked challenged right now, over the long period of time, we think honeywell can. O well regardless if there is an upside surprise in the later part of the year, honeywell would be a beneficiary. Thank you very much for joining in the program. Amanda lets take it over to taylor riggs. Has pickedald trump up lucrative endorsements. In an opinion article, casino mogul Sheldon Adelson says he is Backing Trump for president. Tosaid that the alternative trump being elected is frightening. Wife contributed supporting super pacs reporting republican candidates. It has been called the most secure financial messaging system in the world. Cyber crooks have attacked it again. Swift is used by banks to move money around the world. This attack involved in unnamed bank. In february, attackers stole 81 million from the central bank of bangladesh using swift. Votes to leave the European Union, it is likely to face a cold chill from the rest of europe. If they were to decide to leave the European Union, ireland would still stand up for thosen and talk about things that a european level, but i could not determine what and response is from the other 26 countries would be at that stage. Taylor he says ireland has reached out to one million irish citizens living in the u. K. So they know what the consequences of a leave vote would be. Global news. Im taylor riggs. David w. up next, the apple of chinas i. Company toives its its secondlargest investment ever. A 1 billion stake in ubers biggest rival in china. Something to think about as we had to break. Apple has shed 82 billion in market value alone. Biggert into context than the market cap of some of the worlds biggest companies. That is just the loss at apple. It is greater than netflix, yahoo , and macys put together. Ubers biggest rival is getting a hefty cash infusion in china. Apple is putting 1 billion in two didi. Not a bad little return. Why dont we start their . Or has been a lot of gloom around apple. Talking about the valuation on it. It is pricing like ibm in 1990. [laughter] there is a lot of concern about whether this new product is going to be able to deliver growth in the Fourth Quarter. There is also may be some flagging hope about what new products a credit now to return the company to growth. Last night, you saw this 1 billion investment in china. You wonder whether that is to get better access into china or indication of their long rumored interest of a car. It seems kind of like a random time to all of a sudden spend 1 billion. Over the past year, they spend less than 400 million on acquisitions. We do believe they are going to return to growth. Amanda there is some new product, some new thing around the corner we have not seen yet. It is the fact that this is the most important product of your life and a lot of customers already have an ios phone and the upgrade rate in the Fourth Quarter should deliver some level of growth. We have modeled this out for the or major operators in the u. S. , brazil, and china. We can believe they will return growth not because they have a productic problem. The success of this company is still the iphone. We wrote a note about how r d came up. The iphone has continued to grow in revenue. The next iphone comes out in september . That is the anticipation. Hypergrowth in the smartphone industry. This is an evolution we are seeing. We are seeing more technology on the software side. A lothink you are seeing of people yelling fire in a crowded theater on a smartphone industry. You look at the pentup demand within the u. S. And europe. A lot of eyes are on it in the second half of the year. Would bey comparison intel and the 1990s. Ibm was a joke. It could have bought sony out right and have room for lunch money. Is that not going to be the story here . Unless there is some other new apples story. S if you look at other competitors like samsung and things that have happened in the industry, you are not the only game in town, you have seen competition. You are also seeing the hardware, the software space. Cloud, data identity. I think it is about can they start to monetize in general. I go into the bloomberg terminal whenever we have an analyst on to look at their performance in the last year. ,ou have maintained your buy you have remained with your convictions. I brought this out to a longerterm look. It is a fiveyear look. You have had a buy rating all the way up. You have cut your price target from 162 115. Whys it still a buy and why you bring your target back substantially . We definitely missed the second rollover. The reason is that i think we missed the upgrade rate. We were thinking that the new phone payment plans in the u. S. Were going to accelerate the replacement cycle. That did not happen. And then the quarter fell after medically. It is continuing to discount. Knowing what we know now about the upgrade rates, we think they are going to return to growth. Jon threesome i put that chart up there, the rollover, not through your fault, you believed tim cook too much. Do you believe that was the case . All of the Management Team talked about new product portfolios. We make our own decisions. We believed the upgrade rate would accelerate. There were quotes from that note there are quotes from tim cook talking about how they also thought the upgrade rate was going to accelerate as a result of the payment plan. David w. it is also markets. Tim cook said china is where we are going to grow a lot. China, if you look at smartphone growth in general, we are on the high end side. Ago,u go back a few years think about some of the doldrums , in terms of the smartphone now you i think it is are going to go through a Natural Evolution from moregrowth to just longterm growth. That is something we are seeing. Over the past year, they have 3737 billion million. R d continues to go up. It is maybe making acquisitions to deliver some new product categories. Amanda making the bull case for apple. Thank you very much. Jon coming up, could the u. S. Find itself in a recession within three years . One prospective voice has some money on it and says neither hillary nor trump can do anything to stop it. We will reveal the bearer of bad news next. David w. this is bloomberg go. Im here with my colleagues Jonathan Ferro and amanda laying. Amanda lang. What are the odds the next president will face a downturn matter who the president is . Lets bring in the chief u. S. Economist at mizzuou. Make the best case for a recession within the next three years. What are the factors that would lead to it . The best case are the Federal Reserve over tightening and causing an inopportune financial problem to unfold. Sheets do the balance not suggest there are any real imbalances in corporate Balance Sheets, household Balance Sheets or bank Balance Sheets. ItsFederal Reserve, in infinite wisdom of trying to keep imaginary inflation from materializing, could cause a problem. Look at how you long expansions go, if we went three years, it would be the longest in history. Thats correct. David w. is there anything to be learned from that . No. In the postwar period, you have two different types of recessions that have occurred. Inflation recessions. That is a natural process of the economy heating up. Then you have the credit cycles. Veryredit cycles have been different in nature. The first one was the longest expansion in history. That we could go even longer than that, as long as something stupid does not happen in Balance Sheets. People are looking at the wrong things. They are looking at inflation, labor markets Balance Sheets dominate. Amanda we are going to come back in a minute with the retail Sales Numbers. We are wondering about the strength of the economy. It is practically the only bright spot in the world. In terms of what happens next, we never got a real expansion feeling. Do we have room to maneuver . Horribleld be really if it happens. The consumer has his back against the wall. Earnings are getting squeezed. They are not expanding employment or incomes. When you look at the quality of jobs being created, they are poor quality jobs. Stephen, thank you. He will be raining with us for the next block. Amanda after this, we are asking the question will retail sales in april confirmed the growing angst from u. S. Consumers . As we head to the break, take a look at the performance of some of the retailers this week. These are the stocks that have not been pretty after they reported their numbers. [ soft music ] e. T. Phone home. When you find something you love, you can never get enough of it. Change the way you experience tv with xfinity x1. Jon lets get a look at the markets. Dow futures off by 64 points. S p 500 futures negative, around six points. 144. Onger dollar at the yield low on the session down by two basis point spirit 1. 73 is your yield on the 10 year. Data with matt miller. Matt retail sales coming out, the headline number a gain of 1. 3 . The survey was for 8 10 of a percent. That is blowing away the estimate. That is a number most clients are subscribed to. The number that the fed will be concerned with, that you want to ex auto salese and ask gasoline sales number. That was a gain of 6 10 of a percent. Street was the looking for. These are good numbers for retail sales. I, a gain of 0. 2 . We were looking for 0. 3 . Not as much inflation as the fed would like. Food andok at the energy number, 0. 1 gain. In line with the streets estimate. Mon index. Ph rft very jagged here. Look at the level that we have hit. We are on a high, one of the bounces here of what is a jagged number. That is a great way to said way back to stephen regim. Bearish and this has come in more bullish than the street. What do you make of that . Matt a lot of this is automobile activity. You have seen that between the exauto. Automobile manufacturers are pulling back on production. They are looking at the fact they have had sales beyond what they are comfortable doing. They are taking out the automobile. 5 sumers will add one point to gdp. That is the problem we are dealing with. Solid retail sales number. Futures trimming losses. A stronger dollar story. We add on to the gains throughout the session. The dollar index up for tenths of 1 . Treasury yields creeping higher. Twoyear yields up. The gains we saw in the 10 year, we trim some of them. This movement, that data is pretty solid. Is it enough to offset what we saw on the First Quarter . The average is not particularly strong. We are early on in terms of data for the second quarter. Have the auto Sales Numbers up, we will see auto sat sales automobile les stagnate. The problem with the fed is they are betting on future inflation. As you saw with the ppi number, they are not getting what they wanted. Markets, itest rate is give and take. Does the Federal Reserve back away like they did in january and let the dollar roll off . The dollar will move lower because inflation is taking hold in europe and japan. Mark we see wage numbers going up 2. 5 . That money is going somewhere. It appears to be going into peoples pockets. Is there good news in here in households have stronger Balance Sheets, we are more protected against recession. Is it gives us insurance . Balance sheets tell you we do not have a recessionary environment. What we argue over is how strong the economy is. This concept we are on the verge downturn, itm is whether the Balance Sheets deteriorate. We have struggled to get these into pristine condition. It will be a long time before we allow them to deteriorate. You have this give and take going tont that is make this the longest expansion in americas history. 11 of 13 categories show increases. We have seen a revision of march. It is not as bad as previously clocked in. When we think about the retailers, they look at this number and say there is a glimmer of hope. If you look at the gains in employment we have been not beening, there has anything overwhelming in terms of retail. Jon retail sales are up the most in a year. Back in december, a conversation we have had. The fed was pushing the idea that normalizing was a good thing. On main to the people street, it is a good thing the economy is strong. I dont hear that anymore. Officialn the communication. Steven there is recognition of the fact that it is ok, but not good. You dont want to be the cheerleader whose team is down 1000 the one. It does not make sense. They are coming down to the realization we have to muddle through the economy. We could muddle through for a long period of time. Jon investors dont want to come on programs like this and found bullish. There haunted by what happened in the financial crisis. How much are we haunted by the financial crisis that no one wants to put themselves out there and say things are ok. It is easier to seem bearish now. Steven there are reasons for that. The answer is most economies are by neighbor approach to get themselves going. Think about the uptick in europe. To currency is beginning unwind itself. Need toas there is a stimulate your economy. It will be hard for investors to say this is an upbeat story. If this is the best apple can do, wheres the growth . It is not a growth story. Not a growth story out of latin america. Not out of japan. We are muddling through without much inflation. We will get a new president and the new president will have a new secretary of the treasury. It could be somebody willing to pull some levers here. Is that what is required here . The road America Needs to go down . Yes. N for america, we need a president who says there is environmentalism. The problem the Obama Administration had. A lot of things got in the way of accomplishing them. Andeed to get to the meet get it done. We did not have that happen. We need to get that done. Bernie sanders is not out of the woods at this point. We do not know what will happen to hillary. We dont know how the superdelegates are going to unfold. Jon how do you view the economy now . I always go from the official data points. I look at the data market the data, the labor market saying one thing different. I lean towards the other data this time. Something is out of kilter with these numbers. What is out of kilter is the quality of the jobs. Great to have you here. . Att matt i am going to our morning meeting. What he banks are telling investors. The mediaeen watching quadplay come to life. What is the quadplay . Mike wireless is a separate buying decision by consumers. Are seeing a we combination. At t is a poster child for it. Video, whether it is traditional in the case of or verizon were they are doing this go product with a a well, merging the worlds together to produce more usage. See whateresting to happens, particularly as we go through the broadcast options. Have other characters coming how important is wireless to this bundle Going Forward . Matt you have a buy on comcast and a hold on verizon. Why is that . Mike they are going down the path of nontraditional media. Goy have a product called 90. They are layering on other properties. It will be interesting to see how that plays out. Our bigger concern is with respect to the wireless business. Pressure, which ay. What customers p showinghave a chart verizon and telephone down at 13 or 14 times forecast future earnings. Tmobile work so much more . Very Mature Companies and strong cash generators. Tmobile has turned corners. They have taken a lot of shares in the marketplace. Is less onere earnings. The key for investors on tmobile is Free Cash Flow inflection. They can move from what was a zero year in cash flow into something closer to 1. 5 to two point billion dollars. Matt great to hear from you this morning. Jon coming up, from amazon to apple, the biggest stories in tech. Futures trimming the losses after the back of the strongerthanexpected you tell u. S. Retail Sales Numbers. His is bloomberg eastern for 00 p. M. What did you miss . Bloomberg your business flash. Auto recalls on the way due to faulty airbags. Honda will recall 20 million vehicles. The bags have insulators that can deploy to forcefully. Honda is taking a two point 5 billion charge leading to the recall. Impactgen is feeling the of the omissions cheating scandal. It is at the lowest level in five years. M w, mercedes, and Fiat Chrysler have increased their sales. That is your business flash. We are going to look at amazon. Shares hit a new record high, up 255 over five years. They are on pace for their biggest weekly gain in 10 months. This came after Sanford Bernstein put a 1000 price target on the stock, calling it undervalued. Johnson joins us. This number is a big number compared to the analysts. This is not a first time this has happened. Corey there was a moment when a young analyst who had yet to achieve fame and infamy put this audacious price target on amazon at a time when the stock was lower. Target is based on a research note. , it causedge model the stock to jump better than 15 in a day. It took the company until 2014 to hit the price tag. David says what is the equivalent of the one page know . What are the price target . Set. Has a different the analysts have to come from industries. They have a different background. They have to look at what this will look like Going Forward. What the note starts to look at is with the services, but operating number gets better and better and real profits are being generated. Of forever. Een shy remember when he made that call. The analyst at Merrill Lynch got fired for going negative on amazon and replaced by henry blodgett. Amazon proved itself. It does not just not make a profit, it refuses to make a profit. And gets refuses to forgiven for it. Is this a call on it changing its 10 on that . We see a different philosophy. As the business grows at a be a bigger it will part of amazon in terms of mix, providing profitability if they keep it that way, even as it faces competition from google and microsoft. Falling by better than 80 . That changes the culture of the company. It helps amazon keep costs low. Stock options do not fundamentally hit the income stick the income statement. It does not seem to get hurt too much for the stock option grant. When Stock Options become worthless, employees do different math. A fallen stock could impede the profitability of the company and its growth rate. David says that his cory johnson. Good to have you with us. Retailw do you play the sales story . That is next. I think it is battle of the charts. We like winding up matt miller. That is next. Jon a solid day throughout the United States great u. S. Retail sales on the upside. Strongest since march 2015. Futures, and dow futures off. Switch out the board, the dollar is stronger against every single currency, including the euro and the pound. Raising some of the earlier advances on the day. Yields on the front and rising a touch. Wti highs closed yesterday. We are tracing some of that, down by over one fourth percentage point. It is that time of the day on bloomberg. Time for battle of the charts with a new contestant. Facing off against matt miller. What do you have . Making a global. I am looking at brent crude. I have noticed a technical triumvirate here with brent crude. A golden cross on the way. Finally, brent crude is bouncing off against its seven on sea level here. So the old italian dude fibonacci was an old italian dude. Good in predicting stock of. When the stock crosses through acci level, you can graph this on bloomberg. You can check this out. You might want to save this one and watch what brent crude does here. , i am note technicals necessarily a follower of technical analysis. It often proves itself true. Technical analysts are watching this to see if we can balance through this sieve and. Down, it ises come cut here in the u. S. , but it is boosted overseas. We will see how the balance works out. You have technicals, i am going to talk about fundamentals. I am going to purport to answer the question about whether investors care about sales growth. Top bars, right here. This is small growth. Quarterlies going back two years. Bright blue, that is for large caps. Trend isoking at the since march where you have had an underperformance in bigger companies. For five quarters for the russell 1000. Ask yourself, declining sales. What does this mean from an investment perspective and valuation perspective . This is the difference between price to sales levels in the russell 1000 versus the russell 2000. Look at this trajectory. The past two years, pricier and pricier, despite the fact sales have been deteriorating. For why. Sting question the answer might not be obvious. Part of it might be passive investing. Ofdrives up the price stocks. Regardless, you have the biggest difference in prices, in price for sales. You have to wonder what that means. Jon ding ding ding. Round this out. That chart is the winner. Red line in put a the zero bound, that would make it a winner. Up, a chief economist is with us. Stay with us. Iaaem driving for new sources of growth. Tim cook puts 1 billion behind ubers biggest rival in china. David we are 30 minutes underneath the opening bell. I am alongside amanda lang and Jonathan Ferro. Wonderfulu brought us material back from the conference in vegas. Jon it is one of those mornings when journalists spent yesterday writing these stories. David then the facts come in. You the official data tells another thing. Here is your financial scorecard. Theyes deep in the red and trim some of their losses and they are rolling back over again. Dow futures 48 points. Europe, ftse is poised to close for a fourth straight week of losses. The fx market, stronger dollar story on every cross. We stay there. The u. S. 10 year yield, going lower again. Wti, the highest close since november. A little bit of a reach race meant. Matt miller. Matt we are watching shake shack. They got a boost from adding more stores and sandwiches. 33 boost in locations. It has a new chicken shack sandwich that i intend to try today. That brought more buyers into the chain. Samestore sales jumped by 10 . Club, down 47 this week. In aounder resigned scandal. Yesterday, jim chanos said he was sure the lender. Like to hear that because they jump on board with jim. He has a great track record. Cyber Security Specialist symantec is going to cut 10 of its jobs. They reiterated lower outlook for the First Quarter. It reiterated that lower outlook. It will take a charge of 280 million to pay for the cutbacks. It does not look like it has traded so far today. Woes for retail got worse as the firstuffered in quarter. Nordstrom is going to lower its guidance after missing on revenue profit and samestore sales. We saw earlier cutting its outlook for growth margins, indicating more discounting may be necessary to clear out inventory. Down 10 free market. Nordstrom down almost 15 . Sector, thent store index is down 13 for the whole industry. It is going to get crushed again today. David jim keenan is here. We are talking about retail sales in the economy. Lets start with number one. Ines, retailers jumping april. Purchases climbed 1. 3 , the biggest gain since march 2015. You feel better about headwinds to growth . The consumer is fine, unemployment is slow. General, the economy is doing fine. It does not mean month on month you will not have volatility for a variety of reasons. There are a variety of reasons going on. Who is winning, you look at the Department Sales for stores this week. They have been under pressure. There is a bigger move to ecommerce. You look at the trends of how we are consuming. Consumer long as the is spending money, that should mean growth. The reality is, since the financial crisis, we have been in a Balance Sheet repair. To continue to improve the Balance Sheet at the household level. You still see that with rates at a low level. What about the concern some of the spending we are seeing is being driven by financing. , that is causing some concern for people. It is different what it was in 2006 and 2007. You wantve credit and to use capital now and pay it back, that is fine. Healthy economy. What you are not seeing is the financing in more of the subprime level. To get harder point credit. Employment and a stable household, getting credit in order to buy a car or improve your home, that is fine for your economy. Hawks bed the feds and coming into a consensus. They spoke at separate events thursday. The underlying theme was the same. Talking up the prospect of a rate hike. And two, sales data comes out and this is how the market reacts. The front end is up by about one basis point. The long and comes down by about two basis points. Bias is, if they hike rates, they will go too soon. Even if they dont hike rates, i need some yield. Return so far this year, how long does it continue for . This moves towards bank Balance Sheets. You see that when you look at inflation era numbers. Think the fed is in a different spot. They are trying to transition away from that accommodative policy. We are in a healthier spot. You do not need as much accommodative policy. There is an argument the fed needs to have a lever to pull. I understand you have a bias. Every bank has a regional mandate. We live in a Global Economy and capital moves quickly through the system. They have to move with the rest of the economy. Those have significant factors. The fed is looking at it and saying it is in a much more stable place. Aboutgoing to be tricky how quickly they are going to be able to move up. Single factor model. A lot of things are going to come into play. The strength of any foreign economy, it is significant. Or goodst is financial in the economy. You see that. It is a significant fact. The communication has to be believed. The reality is, we have had significant Monetary Policy. From a market standpoint, that is going to create volatility. Those will create opportunities. The economy is improving at a slow pace. Apple investing one billion horde cash toward cash company. Hailing it is a big rival to uber in that market. Apple has huge pressures on improving its market. Not going to ask you about the valuation of this. In terms of what this represents, are you favorable here . There has been a decade of growth with regards of the smartphones. Each song you see out there is marginally better than the last. You can see the growth is just climbing. They only spent 1 billion on this ride sharing service. It seems to me investors, one of the worries investors have is apple does not know what to do with this money. Stock was hammered after the numbers, tim cook said i will buy back stock, which is the last thing you want from a company you want to see creativity and innovation from. Stock,when you buy back it means you have run out of ideas. Apple could by another company of some size and recreate itself, or it could take that and plow it into r d and create something magical. Even have so much money you have to spend it and you make a foolish deal. Jon how quickly this deal was struck . David 22 days. Jon that goes to say how much money they have to play with. In aey are investing company that is premarket value. They do not have a big ownership stake in this. David there are big names who have invested already. The shares trading at only 10 times earnings now. Are the stories that matter the markets now. Thank you for being here. Jon the market open here. One stock to watch his jcpenney. It is a divergence, a distinction we have to make. We will discuss the next on bloomberg. To the cache down open here. 14 minutes away. Where markets are, a softer session globally. Dow futures off by 35. Losses on the ftse. A weaker euro. Down by a half of 1 . 109ar yen back with a handle. A nice print. The strongest since march 2015. Percent 1. 74 is your yield. Market, of the bond geoff there is a 50 chance the fed will raise rates this year. It will climb 6 over the next decade. We will get to the credit in a moment. Had to move through 6 , given the levels, we have been discussing the risk all morning. How much risk has been taken . If you look at the duration risk. The demographics you see, technology that continues to reduce inflation risk. The question i think we need with regards to risk is the majority of our clients, talking about pensions, the liability they have is the retirement. People are living longer. If you look out, trades below 3 . Liabilities that are 5, 6, 7 . When you have to spend more in health care. That is a risk from the investment standpoint. David one thing we know, we will have a new president , november. If you look at the candidates, there is reason to believe either one of them would run a higher deficit. Is the bond market figuring that in . In the clinton administration, it went the other way. Market is the bond Market Pricing in . With regards to the deficit, i do not think it is a bad ring in the short term to run a higher deficit depending on how they are going to spend. The economy, we have talked about the transition with the types of economy we have today. It is probably a healthy thing for them to run a higher deficit if they are going to spend on things like infrastructure or improving the longterm health of the u. S. Economy. Spending money to spend money does not make sense and that will bring into question with regards of funding the deficit. Bad thing to increase the deficit to fund at the things that are productive. There are a lot of things they can do. Jon thank you. Next, apple writes a 1 billion ubers rivala for cap mailing company. Breaking news. Jack lew making comments from d. C. , speaking on a range of issues, saying the risk to Global Economy are geopolitical, not economic. He is commenting that the economy is doing well, there are risks globally. He says a brexit would be bad for the u. K. And the globe. In terms of stability, they would be better off if a brexit were avoided. Puerto rico is seen challenges, but seeing some stabilization. He is weighing in on the issue of the brexit. Apple has announced it is backing dd. It is being seen as a blow to ubers hopes in china. Joining us, tim higgins. Lets talk about what is propelling apple to do this. Investment, a tiny steak. What is this about . Tim there is a race to develop the future of transportation. Help apple down the road if it is going to do its own driverless car. Latest technology is going to hit the masses is through car hailing services. That would be the investment theory behind gms stake in lyft. About where it does go. China has been a weeks pot for apple, getting into that market, we have seen partners make sense. Is this an entry point for other services . In the could help apple country. It puts than in business with a country that has political ties to the leadership and some big players within the tech space. It could help apple down the road. It helps them develop relationships with further Tech Companies for other products. David what we have seen so far are auto manufacturers, such as entering into these arrangements, we have not seen a tech Company Enter in this way. Tim you have to think about apple is a Legacy Company in silicon valley. Cooper is the upstart. An iphone maker. To get into the technology of ridesharing is new to them. Is a way to jumpstart that. We have seen apple in the past. They bought into beats to help improve streaming music. Cashook has been using his to do these deals recently. David is this a way to sell more iphones or a new business in services for apple . Tim if you look at the smart phone market, it seems to have reached peak smartphone. Apple is looking for the next big thing. Right now, he is talking about their role in autos, the Music Service within the car. We have been reporting that. They are looking for other opportunities. If you look at the multiple on apple, it looks like the this is the company that made its business on the new thing we could not picture. Is that over for apple . Tim apple stock is cyclical. The new iphone will come out this fall. Thing, thee next big stock will skyrocket and we will have this conversation about how great it is. To have you with us. Jon counting you down to the market open. It is about four minutes away. Future soft. Pointsgative around two on the s p 500, trimming some of those losses. 2 se in london down 2 10 of 1 . Stronger dollar story. The dollar yen with a 109 handle. Treasury yields a little lower. Show me top new artist. Ah, ha ha. Show me top male artist. My whole belieber fan group. Its not a competition, but if it was i won. Xfinity x1 lets you access the greatest library of Billboard Music awards moments, simply by using your voice. The Billboard Music awards, live sunday may 22nd, 8 5 pacific, only on abc. Jonathan this is bloomberg go. Futures are off by 30 points on the dow, going abroad, the dax is down by. 5 . The stoxx 600 said to eke out a week of gains. We go across assets for you. A stronger dollar story with the euro 11321, the euro has been the story of the week, down by about a basis point, even with the really strong u. S. Retail sales in the United States today. 1. 47 is your yield. Crude coming back from yesterday , up by . 61, 46 a barrel flat. 20 seconds of the session, lets driven back. David a really little change on the markets to end the week. At dow at 17,000, the s p 2061. Still flirting with highs for the year within a couple of percentage points. My spxake a look at index, you can see which Industry Groups are moving what am i doing wrong . In my making mistake . You are doing it in german. Matt im in the wrong tablet. Across the board, only one slice of the pie, semiconductor and some of conductor equipment. Everything is falling, but the drops are that serious to pull the index is down. Are not that serious to pull the indexes down. You are seeing i. T. Starting to gain a full hold. Debbie ti having its first full down date wti having its first down day. They are not down by a lot. The market cap battle that weve been talking about between google and apple google calls itself the now in order to confuse the entire world. Do no evil wasnt that their motto . And yet they have this Holding Company alphabet a shares. Jonathan another gets evil. I dont think it is evil. Matt i didnt say that it was evil. We are seeing these to buy intraday. Its my last day here. David you get some license. Matt i get a little help. Actually hiss not last day, hes just going to dish this and annoy europe for a couple of months. Stephanie hopefully come right back. Reservewo federal president s have made a case for an increase. Marcus will rate hike until december. The boston fed president repeated his view that such sentiment might be misguided. Street if you look at financial futures, they are expecting at most one increase over the course of this year. That would be consistent with an economy that was actually pretty weak. My own view is that the underlying strengthen the economy is stronger than that. But the fundamentals in the u. S. Economy are Strong Enough that we are likely going to be removing a comedy show little more quickly than is currently anticipated and financial markets. David lets bring in michael feroli, and a former fed economist as well, also with this is jim keenan. Michael, lets start with you. What do you think about whats really going on with the economy . We are starting to hear talks about possible recession. Where you think the economy is heading . Wasael First Quarter disappointing. After this mornings report, it may get revised up to around 1 . Its not terrible against the backdrop of potential growth in gdp,. S. , 1 numbers for you have to get used to that a little more frequently. Second quarter, looks i get off to a decent start. It looks like it is off to a decent start. An areaumers, there is in the economy in the First Quarter that saw some concerns. We have a soft patch. David how does that read against with the boston fed president just said . If they didnt raise, would it be wrong because the economy is not that week . Weak . Michael i dont think anyone was expecting them to raise next month. If the labor market continues to do what it has been doing, which is healthy job growth numbers, then probably some further tightening will be appropriate. I should have mentioned that at the outset, gdp has been touching go. The labor markets [indiscernible] have been for quite some time. We were talking earlier about the 6 long bond. What a lot of people want to know is not so much with the fed goes in june, but when we do when we see a normalization of rates and Global Growth . What is your take on 10 years from now, this man will be 40. Anything can happen. Over the long time, i assume normal will happen. Where do we get there . Jim i think mike hit it. Growth in the Economy Today is lower than it has been in the past. We are talking about month on month or quarter on quarter. , what isthe aggregate the real engine to drive growth and higher level above trend . Thats going to be really difficult. I think rates will normalize on the long end of the curve to a lower growth and lower inflation profile. I think we have a longer time to adjust to that. Years of rates at these levels . David i wonder if the growth has been better than people give it credit for. Has there been an effective tightening . The Balance Sheet is not continuing to grow. We have had these fed president s tell us repeatedly they are going to raise. Is the growth better than we think it is . Michael theres an argument to a made. A fed that from was expounding the Balance Sheet raiseomising not to rates, now you are talking about one who has talked about raising rates. It probably has impacted the economy. You may be looking at an economy now that is growing, but growing with a headwind of tighter Monetary Policy that it had one or two years ago. Jonathan we bring up the chart of where the market is positioned, you are dead in line with the Federal Reserve. Hikes this year, looking for july and december. June is off the table, a week before the referendum in the u. K. The conversation you and i had was you know whats going to happen in september . We start worrying about the election. After that, there will be something else. July 8 through december, what are the other risk factors for that . Sure you that we wont be saying theres something else, and other risk on the table . Michael theres a leap of faith that the fed is going to be paying attention. It has real financial risk for the economy. In terms of the election cycle, its anyones guess as to whether thats going to factor into their thinking. They are goingt to focus on employment and price stability and Inflation Numbers are going to matter quite a bit. I think its going to determine whether that july call is right. David i wonder what you think about this . One of the things that struck me is that a uniform opinion that the fed would not take into account election results, from two prominent former fed secretaries. Do you believe that . The political aspect, yes, i do believe that. But with the decisions from postelection, and what that might mean are having an impact for the economy. Theres a lot of different impacts for the dual factor model. As you go into next year, whats going to go on with china is important. Have an economy that was slowing down dramatically last year and accelerated a beneficiary. That was substantial for the health of the Global Economy. They may pull back next year. I think all those things will factor into growth. Jonathan the bank of england last year ahead of the u. K. General election last year, change the date of the meeting for Monetary Policy. The speech to the members many policy committee, theyre well aware. They sometimes dont move, because they worry that if they do, it will be politicized. Jim if you look at the point the jack lew made the comment that the risk of the Global Economy has to do with geopolitical risk, if thats a real risk, they have to watch it. The treasury secretary was speaking in d. C. On a range of issues. They talked about the fact that geopolitical is a real risk. , andys growth here is ok that the u. S. Consumer is the driver of it. Are you feeling competent confident about that . Michael you had good retail last and good auto sales month. I think overall, there was a scare in q1, but if you look over the last year as a whole, its doing quite well. Its been pretty steady. Youre beginning to see wage growth, that starts to percolate up, that could be a thing. Michael, your estimate was 1. 1, which is above what the consensus was. It was better than consensus. Well done on that one. And blackrocks jim keenan will be staying with us. Still ahead, retailers are feeling the pain. Jcpenney is tumbling this morning, becoming the latest of the retailers to miss Topline Revenue estimates. What it means for the state of the consumer and what that tells us, after this. Amanda the hewlettpackard ,nterprise green room, later the head of be of a Merrill Lynch coming up with 4 00 p. M. Eastern. Jonathan this is bloomberg go, we are about 13 minutes of the session. Equities opening marginally high, up five points on the dow, barely two on the s p 500. Lets cross over to matt miller. First of all, you can see a bunch of these Retail Companies falling, you may have seen these companies when you pull up suppliers or j. C. Penneys. Uggs, thecker makes furry boots that tom brady and a lot of girls wear. On macyswn 6 earnings. Michael Kors Holdings also down about 14 through the make the bags that tom brady carries. Genescort is a maker of jeans all these retail suppliers down. Im only kidding about tom brady. Amanda he just carries the bags. Matt im poking fun at tom brady because he went to michigan. David he was a Great Quarterback. Not hard to be a Great Quarterback for michigan. Nordstrom has a big menswear sales. Settled a patent case with under armour. 3 , the retail sale, no matter where you look, down. Sales are the retail problem extends to landlords as well. Lower rents when context for new, Department Stores turned in the worst sales growth since the recession. General growth, properties as well. The retaillege problems going far beyond stores. David i have to say, you are right, michigan has had trouble with quarterbacks because we have an academic Partner Institution unlike the play south of us. The place south of us. Win footballdo is games. David lets go now well do little live from the nasdaq looking at abigail doolittle. Abigail hitting a record high for intel, they beat firstquarter estimates. They offered a secondquarter revenue view. Bullish, at least now ade, including by brian alger. Its likely to drive meaningful growth Going Forward on a stock thats up nicely over the last 12 months. Trading in the opposite direction on the open are the shares of Western Digital this after Merrill Lynch downgraded Western Digital to an underperform from a neutral. Analysts are citing various headwinds, including increasing debt levels, higher share count, and their stock is down more than 60 over the last 12 months , hit by weakening fundamentals. Amanda . Amanda on behalf of everyone from ohio, can i apologize for my friends trashing ohio state . David ohio state is a different matter. Jonathan im trying to steer clear, i dont understand. Amanda fair enough. Weve been talking about retailers and whats been happening all week, because its been earnings week for retailers. Take a look at jcpenney. This is the Market Reaction you are getting after he missed on revenue and is lowering its growth for the year, this is supposed to be a turnaround story. So far today, investors are voting with their feet. Also posting the numbers that didnt match the estimates of the street. With us now is rick snyder, and what happened . Its amazing that we get this on a day when the consumers are holding up, until this year, its been bad for retail sales. Whats going on with these stores . Rick there are number of moving parts. First, theres a weather issue. Its much more than that. Nordstrom called out last night full price business was doing fine, but once it goes on markdown, theres a Price Transparency on the internet, so you can give the consumer what they want, apparently they are still buying. Theres also price deflation in these categories. What i have been pointing out for some time, i noticed matt mentioned Michael Cores being down. We had a threeyear run in handbags, where handbags were the fashion item, the musthave fashion item. Its a very high price point, they are very high margin. When that business started to level out, i think there was some weakness in the Department Stores that was massed by the strong trend. Dont have aags good replacement cycle. Thats true. Handbags are becoming smaller, because the need for larger handbags is your phone does more becomes less. I just think there are a lot of moving parts here and retail. David im struck by what you said about nordstroms. I wonder if thats a larger phenomenon that the internet is allowing price comparison, which actually squeezes margins because everyone knows where they can get it cheaper. Is that a broader phenomenon and retail . Rick macys call that the Price Transparency of the internet is hurting gross margins. You dovetail that with what nordstrom said if we give the customer what they want, they will pay for it. However, once it becomes commoditized to any degree, they can buy it more cheaply on the internet, and they will. Struck why shop on amazon, the same item across the board, they will have starting at five dollars, going up to 25. Thats remarkable. Nda have you pick that . How do you pick that . We are treating these as all of their problems are the same, thats attempt because they are universally bad and we worry about what topline growth in general for companies right now. Jcpenney is supposed to be a turnaround, and it is cash flow positive for the first time. The last two years, it was deep in a hole, its taking its way out. Can we look at this and say theres an overreaction going on to what we are seeing . Residual concern about softening of sales, which is not what we want to see . The consumer is still spending, we talked about that earlier on the show. They are much smarter on how they consume it. There is certainly market share gain. Not only do they have the ability and accessibility with smartphones to shop for product, but its easier for them to do that and be able to get product delivered to their home in 24 hours as opposed to going to a mall and having to visit a store and shop in that fashion. Theres a different friend of they go to Department Stores versus amazon of a mix shift in how people are consuming. David we have seen a number of consumers, for example, target, saying they want to move into online. They have a hybrid of stores and online. The having success in trying to hold off amazon . I think they are losing share more surely by doing so more slowly by doing so. When you get to the internet, its a different animal. Its price, price, price. Phenomenonthat was a because of the amazon sales tax situation, they werent paying state income tax and best buy was a big market share donor during that time it. People would go to the best buy and spend 30 minutes or 40 minutes with one of the gentlemen or ladies in the blue shirt deciding which tv, and then they said i would get back to you and then they would go on amazon. Thinkowroom phenomenon i is sort of one of the things thats going on. Jim its a change in the economy. These stores on have to bear the cost of bricks and mortar with a risk of a risk of holding all that inventory that some of the stores have. Amanda thanks for both of you. Rick snyder and jim keenan, thanks for being with us. David coming up next, its bloomberg go, bloomberg markets. They we continue conversation about what the market and economys stand. Isk rivkin joins us, he giving us his take on the outlook for the economy, and also what he calls trump volatility and how that will impact the markets Going Forward. Were also going to have Alexis Maybank with us, one of the founders of an online retailer and commerce company, shes now started her own, but she wants to give us her take on why we are seeing two different outlook between retail Sales Numbers and retail earnings. In the irish Prime Minister an exclusive Bloomberg Television interview, his plea to stay in the eu. The devastating impact it could have if we see a brexit on the irish economy. Back to you guys. David thanks, buddy. On bloomberg go, what to watch out for next week. Jonathan this is bloomberg go. 25 minutes into the session in the United States, let me get you up to speed on where markets are. It will blow on the s p, not even down. 1 , the dow up by 0. 12 . In europe, the dax is up here session high,. 9 . The dollar on the front foot with the eurodollar 11310 in the dollar yen at 10919. The Treasury Curve flattening out, coming down on the 10 year by one basis point to 1. 74 in verizon the front and for the strong as retail sales print in a year. What a morning. Surprise the sales upside, but doesnt seem to be helping. Amanda it allows a week for almost all of them. A couple of bright spots, really nasty. We get this number that surprised just about everybody. And suggests that consumers are alive and well. David its not bad news. Jonathan another week dominated by risk. , and you raise jack lew the thing that struck me is what he said about chinese overcapacity, because we hear that from our trade people. Theyre worried about chinese trade. Jonathan its going to be an ongoing story. That does it for bloomberg go. They head of Global Commodities and divisions research for bank of america. Bloomberg markets, is next. Hiim here to tell homeowners that are sixtytwo and older about a great way to live a better retirement. Its called a reverse mortgage. 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Germany leaving the regionwide Greek Economy shrinks the most. Betty apple is placing a bet on ubers big rival in china. With a twoyear low, is it anything to get investors excited about