Transcripts For BLOOMBERG Bloomberg Surveillance 20150204

The wind at his back. The biggest rally in greek stocks since the days of the druckman, of the dropped my jordan has hanged does prisoners after the Islamic State released a sickening new video showing the jordanian pilot being burned alive in a cage. The pilot was captured in syria in december and was on a mission fighting the Islamic State. One of the condemned iraqis was a failed suicide bomber. Astonishing video of a Trans Airways plane crash. The turboprop clipped a taxi on an elevated roadway and instant before flipping into a river. 16 were injured and 23 a reported missing. It is a taiwanese carriers second accident in less than a year. Seven people are dead after a commuter train accident in the suburbs of new york city. It happened near oh halle. It hit an suv and burst into flames. Hundreds raced to the back to avoid fire and smoke. Some jumped out of windows. Nearly a dozen people were injured. Authorities said it was that deadliest crash in the railroads history. The Obama Administration is entering the argument over sex scenes saying it is irresponsible for parents not to vaccinate their children. But White House Press secretary josh earnest added there is no need for mandatory federal vaccinations, a topic a hot topic especially among republicans, Chris Christie of new jersey and rand paul said it should be a matter of parental choice. Dr. Ben carson disagrees. Here is dr. Carson last night on bloombergs with all due respect. I would agree with them that it is a personal choice if they were the only ones being affected. But we are all in this together. We do not live in isolation. So your decision does not affect only you. It is sort of like secondhand smoking. You do not get to say it is only affecting me and not all these other people around me. That is a selfish attitude to have. I would suggest that was a definitive and it are a definitive interview on this position. The outbreak in california has affected over 100 people. Pretty amazing that vaccines have become a political football. I had no idea. Prochoice . I thought this conversation was so done. You watch the republicans scramble. Kristi says something and then he has to walk it back. Rand paul tweeted something then tweeted a picture of himself getting a booster shot. I liked Hillary Clintons tweet the science is clear the earth is round, the sky is blue, and vaccines work. Lets protect all of our kids. Grandmothersknowbest. We saw a reaction after the chinese rate cut. Futures at 4. It is a giveback day. We will talk oil through much of surveillance. The vix showing very good markets. The german twoyear bond that is a negative number. That is wrong on the data screen. That is a. 199. That is a stunning statistic as well. This is claims, which we will see tomorrow, but this is continuing claims, sort of the chronic claims, population adjusted. So you have gloom, gloom. Here is a herb on a in the 1990s. Then we are back there. 1998 was the time a year out of college when jobs were so plentiful that i clip the job once so i could take a vacation. Even if i quit a job once so i could take a vacation. This number alone is insufficient to describe the quality of the economy. How people are employed, what they are paid, and the hours they are given is increasingly more important. We begin three days of coverage. Bill gross and jim glassman joining us at 8 30 friday morning. We need to go to john farrow in london and this of course on the chinese news. It simply looks like a race to the bottom. Is that what this is . And feels like that, but what i would say there is concern, not so much panic. When you see the reserve rate requirement, the amount of reserves the banks have to hold and it stands at 19. 5 , i would caution against using the word panic and race to the bottom. The rate cut back in november, that was about cutting the benchmark rate and changing the price of credit. That was probably more significant than the one you are seeing today. No doubt there is some concern about a slowdown, and when you look at the big picture, 12 nations, easing Monetary Policy in january there it is. John farrow, thank you very much. Just a quick moment with john as we saw the Australian Dollar spike up and come back off that news. It really is a race to the bottom. This is what currency wars look like. 13 Central Banks have eased since the start of the year. Is china the 14th . I would not call it a currency war. This feels like inflation desperation. How do you create it . It is not necessarily that we are fighting on trade, but how do you create inflation desperation . Someone on the bull market brian belsky. He who has he holds hands at the most capital market. The august track record, looking at china going back decades and decades dr. Pillsbury will join us with the shortterm and longterm view on china. Brian, this has to be good for equity. Banks are driving the equity markets, arent they . The volatility is good for what we do. The chart last year showed much longer term. Last year there was a ton of complacency. Now we head into 2015 and a lot of people still are behind what we think is really driving equity prices, especially here in america. American consistency, stability of earning. Cash flow as well. The primary theme is the redistribution of capital. When you see a bond transaction like we saw at apple computer, that is a predistrict that is a precursor. We saw fortune 500 Companies Bring capacity back to america. Lower oil prices it is a very positive thing. Dr. Pillsbury, lets go to your service with president reagan. Is it morning in america . No. The chinese gamble is that americans are going to be declining over the next 20 or 30 years, so a lot of what you see in their policies is adjusting to take into account this surefire american decline. But arent they trying to do the same thing that our economy is doing right now, which is turning inwards and to consumption and driving itself . That is what they are telling us. They go to the bank of international settlements. In switzerlands they are a guest, and they talk quite openly about following the other countries decisions about currency. They are a team player, in other words. Dr. Pillsbury, we will talk to you much more throughout the show. Why are you so skeptical, and what evidence is your book based on to replace the u. S. , china as the global superpower . Their dream to replace us is hardly the same thing as theyre doing it. The chinese say that we are in year 65 of a 100year marathon. 34 34 years to go before they plan to triple our economy. America will wake up and become much more competitive with tax reform and lots of other things. So they are not certain they will surpass us. Economists say they will. They will trip they will triple by 2040. That is their dream. I want to pull back from the 100year marathon and go to next year possible worth of strategy. Brian belsky, you almost acted like a psychologist saying investors were confused and saying prior cycle strategies. Are we fighting the last war . We are always fighting the last war. That is what the Minnesota Vikings do. Pete carroll would look good coaching the fightings. Pete carroll was a coach for the vikings. He was a defensive back coach before but grant. Before bud grant. I thought it was going to be a hockey morning. We have spent countless hours talking to investors about that stocks can go up but the dollar goes up, stocks can go up but the economy improves. All investors know is that you buy stocks because of the qe. You talk about graduating in the 1990s yet we are entering a period, put me in coach pass the puck, shoot the puck. I am talking about traditional fundamental they hair, lets do this. When you are out in the field, what are you hearing from beam oh capital clients. Do they share your optimism . They are in battling every day. This is a stock market that cannot wait to diagnose the end. They are masochists. I was two weeks ago during the qe, and i heard crazy stuff like oil is 40 of in america. I heard that the dollar will drive the stock market lower. Wrong. People do not understand this. From an emotional standpoint, we spent tons of time and ours worrying about china, em, credit. We are scared about being wrong. It is kind of like when you are playing sports. If you are worried about getting hurt, you are going to get hurt. Portfolio managers are underperforming because there is no original thought. Those who have original thought, we are heading back into a peter lynch era of investing. You pick stocks, stay with your convictions. On a day like this in new york, peter lynch would be on the streets of boston going down the street like peter, fannie mae, great. He would be in the freezing cold, oblivious. There is a twinkle in toms i that you have made this hockey allegory. Well get to the blackhawks later with brian belski. The unthinkable happened with melter north. The fallout from a fatal train crash when we come back. Tom good morning, everyone. We give back some of the gains from the last two days. Negative yields in germany. Lets get to world news. Here is brendan greeley. The United Nations says more than 5000 people have been killed in ukraine since midapril. One and 12,000 have been wounded. The u. N. Says civilian deaths are accelerating. More than 220 died in the last three weeks of january. By minister tony abbott is under fire. Liberal party fought liberal Party Lawmakers have broken ranks over spending cuts. He could soon face an internal party challenge. Parliament returns next week. North korea says it will not talk to the u. S. Anytime soon. Instead, it is focused on its ability to destroy america altogether. According to state media, the gangster like u. S. Imperialists are inching toward war. The u. S. And china have recently tried to prod north korea back to the table. It is time for our morning must reads. Mine is a morning must listen. I am excited about this. A few weeks ago, i got a chance to sit down with the ceo of united therapeutics, and she is working on something called mind clones are i believe it will be humanitys biggest invention. The Market Opportunity like we all want a smart phone, we all want the social media kill. We are all going to want to have a mind clones are it will make everything in our lives more useful, more valuable. It will give us twice as much time to do everything. This is really exciting stuff. This is on the forefront of what is going on in Artificial Intelligence. A mind clones is a digital copy of a persons memories thoughts, even feelings. I feel like we have been reading about this for years how close are we to it . The idea that you could take a persons personality, put it on a thumb drive, and put it on a computer are we closer to that than five years ago . It is still a long way off, but she believes in 10 to 20 years we will be working with mind clones. Amazon and google in particular are really driving this. The head of googles Artificial Intelligence is on the board of united therapeutics. But i got a chance to catch up with the robot, the mind clones that dr. Rossthblatt has been talking about. It was fascinating talking to the robot. I am vina. How are you feeling . I am feeling an existential crisis here. Mi alive . Do i exist . Will i die . The robot was talking about an existential crisis. Do you believe there is a heartbeat in there somewhere . No. A metaphorical heartbeat . There were moments where i was very confused. Artificial intelligence mimics people. There were moments when i thought the robot was connecting the dots. This is a long way off. Eric schmidt said Artificial Intelligence is going to be googles biggest business. Imagine if you could take a bust of tom keene home with the brain of tom keene and as you did your work, he could look over your shoulder and say, what you are doing right now is not smart she is really a fascinating person. This is a woman who started her career in the 1980s, spearheading the new Satellite Radio Service for the fcc. She then founded sirius radio. You may have heard of it, tom. She later went to found a Biotech Company because one of her four kids was sick with a rare lung disease. She cured it with the Biotech Company united therapeutics, is now the ceo of that company, and the highestpaid ceo in the u. S. And if you did not put the dots together, she was born in man. It is amazing to see these things that are in Science Fiction 10, 15 years ago. It is amazing that you see a business based on it. We are taking a different take with our twitter question today. Should the government he able to force you to vaccinate your kids . Tom one of our themes in the next hour are struggling emerging markets. Do i play china through u. S. Multinationals, or should i have emerging Market Investments in my portfolio . It is a tough question because i think everybody wants to buy emerging markets because of the perceived value. Tom and the romance and all that. Brian you do want i think more exposure with respect to the multinationals, and the conglomerates in america have been hurt because of their exposure with china. I think that is the opportunity. Tom dr. Pillsbury, did you buy shares with alibaba . Michael yes. Tom is alibaba a representation of the good of shortterm investment in china . Michael yes. Holly baba a play on the Chinese Government favoring jack ma. If the Chinese Government wants to show this is a good idea it will return to a higher price. Brendan recently they hinted at allegations that they would be investigated but that disappeared. What are they saying when they do that . Michael it is probably a bureaucratic message that you have counterfeit stuff you need to be more careful, we are going to find you if you did to finde it you if you do not. It looks like jack ma is going to be ok. Brendan there are two kinds of people who come on the show to talk about china. One believes that china can manage the bubble and the other does not. Which are you . Michael i believe in the success of china. Tom later, brian belski on the oil stock. He had to come in with security this morning, there are so many oil bears pushing up against belsky. Olivia we will continue the conversation on china and find out why michael pills barry says china is americas biggest threat, when we come back. This is bloomberg surveillance. On Bloomberg Television streaming on your tablet, your phone, and bloomberg. Com. Tom good morning, everyone. Bloomberg surveillance. Lets get to top headlines. Here is brendan greeley. Brennan walt disneys frozen is the gift that keeps on giving. Tom how many millions did you make . Brendan net income rose to 27 a share. Analysts expected 1. 07. Surging suv sales in production in japan made it a big beneficiary of a weaker yen. Toyota is extending leadership often ability among carmakers. At least seven people are dead after a commuter train accident in the suburbs of new york city. A crowded metro north train hit an suv and burst into flames. Hundreds went to the back of the train to avoid the fire. Witnesses said people were jumping out of windows. Those are your latest top headlines. Olivia the president is ignoring the biggest threat to the u. S. Economy, so says our guest host for the hour, dr. Michael pillsbury, the director of chinese strategy at the hudson is a new at the hudson institute. His new book hit the shelves yesterday. Dr. Pillsbury, i question is, if china wants to be a superpower why are they so strident about being not interventionist with Foreign Policy . Michael that is their secret. They have had a series of articles about how america is wasting itself as world policemen. Their Defense Budget is half of hours, and they feel making money domestically is the first step. And they say they got this from american history. They are following the american model from 1840 to 1920 when we became the strongest economy taking market share from germany, england, and so forth so they would like to follow our model and surpass us quietly and become double our economy. Olivia so china is america in the 18 michael in the 1800s, yes. Brendan did we miss a trick in the 2000s . Should we have been directing our focus at china and not the middle east . Michael co no michael rumsfeld started a strategy. We hope for 80 probability, but we do other things in the military and intelligence area. Brendan like what . What was the head . Michael the hedge was transferring American Military forces away from europe and the middle east, to 60 or more being deployed in the pacific. Olivia isnt that what president obama is doing . Michael president obama is copying his strategy. I have been paid for this for the past six years, so i sort of know. Tom since when culturally have we had a partnership with anybody in asia, but particularly japan and china . Where does this thinking come from . Michael this book could not have come out unless i got permission to declassify a lot of president ial decisions. The partnership started under kissinger and nixon. Secret documents were signed by jimmy carter and president reagan to provide Massive Science and Technology Investment with the chinese. We decided to make china strong. President reagan signed the documents making china strong is our strategy. Tom what do they drink when they have shots . Sake, vodka . Olivia rice wine. Michael the chinese . Tom nobody trusts anybody, is my point. Michael the trust is in the military balance. They believe we will attack them. We believe they are irresponsible. The most important thing that has happened in the trust areas the chinese themselves asked last year . Please agree on this new model. President obama did not accept the new model. The chinese are saying you see the americans are out to get us. So president obama and his team have made a series of speeches that maybe we can move toward a new model. The socalled new model means america will not use force during chinas rise. I think president reagans decision in 1984 when he was in china, signed a document saying we need to make sure that china is strong but only if they stay away from the soviet union which of course they have not. They are close with the russians. Number two, they move toward democracy and the free market. Their free market is not free. They are about half state owned. Brendan do they have to win . Do we have to stay a great power . Can we not just be a happy little democracy . Michael a lot of americans agree with this. We made a mess of things, so let china takeover. I am more associated with the patriotic, nationalistic side that we should do something about this and not go with the longterm trend. China grows three times faster than us. Tom what did you learn from the great john spence . If he invented our great 20th century knowledge on china, what can we take from spence forward through pills barry in the future . Through pills barry in the future . Michael the french china expert looks like he may be the best of them all. He has 12 books, translated into english. He says Jonathan Spence is too narrow focusing only on chinas struggle to get over humiliation and become a strong power. The french guy, six of his books are in english. He is saying china really wants to become number one and has fought this for 2000 years. There is some compatibility. Both see china as wanting to be strong but professors in paris say they will not stop it to state he will. Olivia what is the fault line for china . Michael what they are most afraid of . Olivia no, what makes them become a superpower . Michael when they triple our economy. When they get to triple, that is when they say with a will be a world leader. They assure us that they will be virtuous and we are all going to like it. Brendan coming up, we are taking a look at vaccinations the rate of vaccinations, the rate of exemptions. The single best chart. Which states have the highest number of exemptions. Also our twitter question of the day. We expect a lot of angry answers. Should the government be able to force you to vaccinate your kids. Tweet us bsurveillance. Tom good morning, everyone. Bloomberg surveillance. A bit of a giveback over the news the last two days. Here is brendan greeley. Brennan we have been trying to figure out the best way to look at the epidemic of measles and explain it using data. The problem with the cdc data is at state level. We have been looking at vaccination rates, which could be misleading because it could be a Public Health measure of the state or people deciding not to get vaccinated. This is rejection rate, exemption, the total number of people by state who have this year for their kindergartners declared a philosophical exemption to vaccinations. Tom is that different than religious exemption . Brendan these are both together. You are now looking at 17,000 in california. A decade ago, that number was in the hundreds. They has really been a shift. I want to come to the data later this week. I have been looking at a relatively new paper in pediatrics that describes clusters. The real problem right now is not the overall vaccination rate in the state, but clusters where the vaccination rate is very low. Tom, this is something you feel very passionate about. Tom i think a lot of people do. We have a huge response to this. There is a huge push back. As you mentioned this morning, backpedaling by a lot of candidates in the heat of the news lights. Olivia in particular, Chris Christie is backpedaling. Terrible video we are showing right now, but he goes to show it is a serious disease. Diseases that we had eradicated from the country are now once again contagious. Brendan i thought the backpedaling was fascinating to watch. It shows how tricky this is. This is one of the things that government does well. We have a Government Health plan. We carry it out. When you take a libertarian stance on this, you can get in trouble. I thought ben carson was right on point. Tom my personal physician, i happened to see, was doing hair transplants, and off the cdc sites, 600 people who get the vaccination, it leads to that 600 people who get the measles get pneumonia. Brendan the paper that i am looking at right now, the data the person by person data through kaiser in northern california, looks at olivia i find it incredible that the perception of the accuracy of the science diminishes with age, with generations. There was a poll of millennials that showed 21 of millennials thought Early Childhood vaccinations could possibly have a link to what is that grounded in . Nothing. Tom the research on this linkage to autism i think i can use a phrase it is usually flawed. Brennan and it has been retracted. Olivia 43 of those under 30 tom a fabulous look back at smallpox in the 19 century. Lets get to our photos this morning. Olivia we start with number three, a group of golf caddies filing a lawsuit against the pga for wearing sponsor bids. They say they are mainly service billboards and do not receive compensation. The law said the pga tour made over 50 million through advertisements on the bids. They are being on the bids. Brendan is there any better metaphor for class in america, the golfer and the caddy. Tom he plays golf 12 days a week. He is actually quite good. Next photo. Olivia cocacola does offering its premium milk offering 50 more protein and will cost nearly twice as much 4. 59 for a 2ounce bottle of fairlife. Tom lets go to brian belski. Vmo capital. When you look at the at bm oh capital. It really is affecting not only the company but the sector as a whole. Brian it definitely affects Consumer Staples. Starbucks has had a great run the last six to 12 months but they are technically a discretionary stock. Part of that is because the retail part of dispute of Consumer Discretionary traditional retailers have a lot of fundamental structural issues. The media component is where the majority of the rally has been. With respect to Consumer Staples and Consumer Companies in general, you have the haves and the havenots. Where we think we are heading into an era where you want the names that are brand dependent that can pass along pricing like cocacola and general mills. Tom two dollars for a thing of milk . Are you kidding me . Brennan i want to issue a curve brendan i want to issue a correction. Coffee is not a stable, it is a food group. Olivia a youtube user fluid drone over the apple headquarters. The building is not scheduled to open until 2016. It will be four stories high and accommodate over 12,000 employees. The estimated cost of campus 2 is 5 million. I guess their antimissile shield is not working to shoot down missiles. To shoot down drones. That thing looks like the death star. Again, one more way we were proven wrong. Two years ago we were laughing about how this indicated apple was over the hill because it was building a massive new campus. That clearly was not true. Tom two years . Brendan coming up, when will oil hit bottom . We ask every day. We will ask one more time. Brian belski will find the bottom for us. Bloomberg surveillance streaming on your tablet, phone, and bloomberg. Com. Tom good wednesday morning, everyone. We begin three days of jobs coverage. We been given that with bill gross and bill glassman on friday. Olivia the race to Drug Delivery by the Biggest Online retailers. Alibaba is actually doing it for the asian Internet Company is flying drones over beijing delivering packets of ginger tea to customers. Amazon has been forced to test Drone Deliveries overseas while it awaits permission from the faa to run the trials here at home. You really cannot make this one up. The u. K. May become the first country with threeparent babies. Yes, i said threeparent babies. Lawmakers voted to legalize technology that would allow embryos to be created with three peoples dna in an effort to prevent genetic diseases that originate in the mitochondria. In the procedure, the bad mitochondria in the womans egg would be replaced with good mitochondria from another woman. The upper house of parliament has to approve the measure before it becomes law. And Vladimir Putin and barack obama banned from china at least those who use their names online. I have been dying to tell you. Do you know what the chinese call katy perry . Tom please. Olivia fruit sister, because she always wears costumes that look like fruit. Tom i could not have done that olivia. Olivia i just gave my kids the birds and the bees. Tom you gave me the birds and the bees as well. This is boring compared to what olivia did. Oil has been particularly that has been persistently south. Brian belski considers the microeconomic gloom and finds value in hydrocarbon shares. What do your clients throw at you when you say get in front of the Freight Train . Brian we have been inundated with trying to fix the bottom. When people stop trying to pick the bottom, that is when it is time to start. With bubbles, you have shock and awe. Now we are in the awe stage. Tom upstream downstream, bigbudget, small budget midcap, largecap . Brian a lot of the tension will be placed on the smaller Cap Companies that will have credit issues, and there may be some defaults and the like as these companies suffer through lower oil prices. I think at the end of the day you follow the cash and go back to the original premise that we talked about here, the theme of investing with the redistribution of capital. You want copies of have great talents sheets and great operating performance. Going back to the 1980s and 1990s, you will see massive consolidation in the energy patch, both with respect to canada and the United States. Brendan we were talking during the break about habits investors get into. Investors you talked to were in the habit of thinking low oil high dollar, bad for America Emerging markets. That is no longer true, right . Brian no longer true. The s p 500 Energy Earnings has been going down for years. I have a chart that we showed our clients around europe that when the s p 500 Energy Sector underperforms, the average performance of the s p 500 is 19 . Nobody believes that. Olivia so cheap oil should be a buying signal . Brian it should be. But we have forgotten everything about investing, so lower input costs third and Fourth Quarter will boost gdp. U. S. Companies are in the bunker. Firstquarter earnings, we were freaked out about. Brendan i think brian belski did a dance mix and go go, oil, oil, emerging markets. Brian i was one of those kids in line for the booster shot in 1974. Tom where does all the cash under the mattress go . Do you just assume it goes to your world . Brian when i learned the stock market business over 20 years ago from william of neil and company, the adage was that dumb money was retail, smart money was institutional. It has flipflopped. The Retail Investor and the private wealth person has been positioned for this, averaging in, slowly coming into equities, shortening their duration on fixed income. They are freaking out trying to chase the market and protect jobs versus create wealth through portfolios. That is where the wealth is. So people are slowly coming back into the equity market. Tom Chelsea Clintons husband, blowing up in a greek hedge fund those reports do not put all of your investments in one basket. Brian investing should never be a binary event. Tom thank you so much. The forex report, sort of a quiet report, but there it is the yen ever stronger. 117. 49. Stay with us. This is bloomberg surveillance. Jordan executes two in response to the Islamic State brutal burning alive of jordanian pilot. The greek finance minister brick visits berlin. And emerging markets reflecting this. Good morning, were live from our world headquarters. Lets get to the top headlines. Correctly begin in germany where the greek finance minister has been meeting with mario draghi. Conspicuously off the list is chancellor angela merkel. Here he is this morning speaking in frankfurt. I had the opportunity to present to him our governments offer and unwavering determination that it cannot possibly be business as usual in greece. He arrived with the wind at his back today, the biggest rally in stockton the biggest rallies in stocks. Jordan executes to prisoners after the Islamic State released a video showing a jordanian pilot being burned alive. Astonishing airway video of a plane crash. The dash cam video of the taiwanese video shows a clipping a roadway before going into the river. It was the taiwanese carriers second accident in less than a year. At least seven people are dead after a commuter train accident in the suburbs of new york city. The metronorth train hit an suv and burst into flames. Hundreds raced to the back to avoid fire and smoke will stop witnesses said some jumped out of windows. Apparently, it was the deadliest crash in the railroad history. An argument over vaccines saying it is irresponsible for parents not to vaccinate their children. The White House Press secretary said there is no need for a federal mandate. Back to you vaccines are a hot topic this day these days. Dr. Ben carson also a potential 2016 gop hopeful here he is on bloombergs with all due respect. I would agree with them that it is a personal choice if we were not all in this together. Your decision does not affect only you. It is sort of like secondhand smoking stop you dont get to say well, its only affecting me. Thats a very selfish attitude to have. Brendan greeley showed in our single best chart, affecting more than 100 people with the outbreak of measles. We have confirmation at staples is going to buy office depot at 11 per share, combining the two Office Supply the two Largest Office of my companies in the country. The companies asking huge pressure on sales from online companies. I looked at the income statements. Might i suggest dinosaurs mating . I was going to say great, now i only have one choice of a large, poorly stocked store to go to pull some every time you go to one of these places, you either have to buy 90 racers or none. 90 erasers or none. What i like to wander through and look at notebooks. None of that stuff is that office a boat. Brendan is that guy that likes to wander through and test depends. Can we talk about vaccines . And test the pens. Can we do about vaccines . The only asset radioshack has left is a lot of real estate quickly on vaccines. I know you are fired up. Be king of meeting dinosaurs speaking of mating dinosaurs i cannot believe he was in the u k and said this. And then you heard rand paul saying, i dont understand why this is controversial saying that he supports choice. I go to what Hillary Clinton tweeted out. She said, scientist clear, the earth is round, the skies blue and vaccines protect our kids. Vaccines work. Ive been reading about this and i think we are learning got the idea that vaccines are dangerous is in itself a kind of virus. It is not easy to eradicate like we are doing on tv. When you introduce evidence that contradicts them, they hold those views even more closely. The smallpox equivalency in the 19th century. Its amazing the echoes from our past about the evil vaccine. Nymex crude, i want to point out, well over 50. Optimistic on the oil stocks. Yesterday, Mohamed Elerian emphasized that so much of what we have seen in recent market moves is a socalled cover of one way best. Everyone, for example, was strong on the driver trade. On the forever trade. Jpmorgan has these investors at deltek as well. Wonderful to have two different views on the show this morning. Where are we after january . Is it business as usual at j. P. Morgan, or have you recalibrated . I dont think weve had to recalibrate. I think today is a reminder of the world we are in. We had to centralbank cuts. China and romania, about 16 so far this year. You lose track, because countries like denmark have gone three times this year. The Central Banks are seeing something they dont like. They are worried about deflation, worried about a slowdown in growth. They are worried about an extension of credit. They are providing an enormous amount of liquidity and that will percolate. To use a sentence that you use every day, how big a deal is this, exporting of inflation and importing of inflation . How big a deal is that global dynamic echoes that global dynamic . It is a huge deal. The is being taken out of emerging markets and that has an impact. On the real economy site. On the real economy site can we are not releasing of the change. The real economy level in the u. S. , we are seeing we are seeing inflation start to bubble away. Elsewhere around the world, we are not seeing times of inflation, but not huge signs of deflation either. And its difficult in places like europe, just because of structural issues. Everybodys trying to cut everybody is trying to open the task. How bad is this wall of money flooding into the u. S. Distorting treasury prices . Correct i think its doing quite a bit. We see a lot in japan in particular, where the large holders of g jb of jgbs sell their jgb. If you dont do anything, you have just tightened policy because everyone around you has provided more liquidity. It puts the fed in interesting spot coming up. And when we do our global tour of who is cutting rates, you talk about literally was cutting around you. Romania literally had to follow pulled in. They are competing with their regional partners. Had to follow poland. They are competing with their regional partners. With what the ecb is doing, can that possibly increase euro liquidity . Or is it just doing something to do something . For the eurozone, ecb liquidity does a lot. But around the world, what matters most is u. S. Dollar liquidity, because that is what funds emerging markets and that is where the carry trade is funded out of. It is not out of the ecb or the 13 other Central Banks that weve seen cut this year. Everybody is freaking out about the strength of the dollar and its impact on earnings. I had one person at georgia are we overstating the risk . I dont think we are. I cannot play you how many meetings ive had with the head of u. S. Equities over the last few years where he has pointed out that many s p 500 earnings come oh from oak desk come from overseas. Is there a Transformational Energy between bonds and equities . Look im joking. Youre taking it seriously. If you want to see one of the great hotair press releases of all time, try the stapleshome depot press release. They are going to compete against a diverse set of competitors. This is a transformational acquisition. Whatever that means. Here we go. The bottom line is we now have twice the shelf space to adequately fill. Today, transformational bloomberg surveillance. Health care costs are growing or shrinking . Is it cyclical . Good morning, everyone. Bloomberg surveillance, im tom keene. Olivia sterns with a story. Seven people are dead after an accident in the suburbs of new york city. The commuter train hit an suv that was stuck on the tracks. It occurred near the town of walhalla. I know you have been there all through the night. Locus through what you have learned at the scene. How did this car gets stuck on the track fiasco on the tracks . They are still piecing together the details, but heres what we know. An suv, jeep cherokee, was on track late last night. They gave came down upon her vehicle. She exited the vehicle, walked around it, got back in the vehicle and drove forward. That put her into a collision course with the train. Her car burst into flames on impact. It caused an electrical fire in the train and that is how seven people ended up dead. It is the worst accident in new york subway history. What does this mean for commuters taking metronorth this morning . I spoke with an officer just a little bit ago and he said they were in the final stages of removing the bodies and notifying next of kin will stop we dont know next of kin. We dont know how long it will be here. Travel will be impacted. You should expect significant delays, they say, and there will be packed cars. Anybody who can avoid taking the train today will try to do that. I know it has been less than a days in the accident, but is there any sense what this will mean longterm for metronorth . I know they had that horrific derailing less than a year ago on the hudson line. That is exactly right. There have been a lot of questions and metronorth has come under intense scrutiny recently after that incident a little more than a year ago. Investigators from washington by the National Transportation safety board, are on their way here and are going to be here next couple of hours. They will try to piece together exactly what happened and why. We believe it there. We will leave it there. For our global audience, we need to being the picture. This comes out of Grand Central station, right . It comes out of Grand Central station and it feeds north into the suburbs. This is the westchester area that it feeds. This is a key are very a key artery of all the commuters. It goes under bridges and over overpasses, but starts to hit grade level crossings and those are the most dangerous right around the halle fall halle v slhaslla. Quick good morning, everyone. Im tom. With me Olivia Sterns and brendan greeley. With get to our top headlines around the world. The United Nations now says more than 5000 have been killed in ukraine mid april when the conflict began. More than 12,000 have been wounded. More than 220 people died in the last three weeks of january. And tony abbott is under fire, but senior cabinet members are rallying around him. The discontent is fueling speculation that abbott could soon face an internal parley challenge. Parliament returns next week. And north korea says it will not be talking any time soon. It is focused on its ability to destroy america altogether. According to date media, the gangster like u. S. Imperialists are inching toward war the sanctions are proof of this. The u. S. Is trying to broad north korea back to the table. We have breaking news on petrobras. The last couple of weeks, be led demonstrating outside the ceos house. She is about to be looking for new real estate, because she has resigned. This is maria foster. It is a scandal so big that it is not just petrobras, but the country as well. The Petrobras Scandal in brazil happened on a three year every three years, but this is so embarrassing. It is commanded goes to the heart of what is going on with the Energy Industry in brazil which is the jewel of the country. This scandal has loomed over her head for months. She had been speaking with the president about when she would resign and was expected by the end of this month. And its not just her, but five directors as well. Petrobras shares are up 6 already. And completely inbred within the company 37 years back to an internship in 1978. In the linkage to recess is not casual. That is the problem. You can let five directors and a ceo go, but you cannot fix petrobras without fixing the country of brazil, they are so deeply in meshed together. Would you think this is something you need to brazil . Not unless you believe all of conspiracy theories by exxon no. Perhaps their feet are a little more to the fire because of falling oil. There it is. We moved to health care. The house voted yesterday again to repeal the Affordable Care act. It swings on whether or not the acts working for 72013, the cost of health care grew at 3. 6 , the fifth year in a row of relatively low growth. A former advisor to policy for mitt romney is now at the manhattan institute. There are two ways to look at this. The slow down in Health Care Cost growth, is this a business issue or longterm trend growth . It is both. The slowdown in Health Care Spending in u. S. Began in 2003. It has been a longterm organic trend. There has also been addicted slowdown in the world since 2008 stop if you look at the since 2008. If you look at the oecd and the u. S. , the slowdown has been global. And there are measures designed as experiments to see if the cost of health care could be brought down for some is there any promise coming from any of those that could be turned into policy . By and large, i would say no. There is one tweak in obamacare that has led to lower cost which is punishment for hospitals that have too many patients go out of the hospitals and come back in for the same problem. Because hospitals are getting less reimbursement from medicare for that and that is really working. They have change protocol and hired extra social workers to bring down those readmission rates. My question for you is, what role is drug prices our drug prices playing in runaway impression what role our drugplaying in runaway inflation . In that case, competition is helping out. Competition is driving prices down as they battle for market share. Broadly speaking, the u. S. Is reasonably healthy on drug spending. It is only about 9 of Overall National health ministers, which is lower than the industrial average. And the reason for that is a most 80 of drugs prescribed in the u. S. Are 80 our generic rubs drugs, which are cheaper. Our eyes glaze over on the informal care act. What is the distinction between mere treatment of the savings we are saving we are seeing from like peter or zach peter ortzag . Peter ortzag talk specifically about medicare spending in the federal program and how that goes down and me there are policy changes to address that. The Congressional Budget Office what they say specifically about medicare is a lot of the slowdown instrument by the economy. And the george w. Bush perception benefit since 2003, which is a much slower rate. The next fight will be how to bring costs down. What is your prescription . What are two things we can do to bring costs down in the future . Number one thing we can do is put people in charge of their own health dollars. If someone else is in charge, it is a cash bar. It is a it is an open bar. If it is a cash bar [indiscernible] that is number one. Number two, if we Subsidized Health care for a breakdown people less and for more than low and more for lowerincome people, we would have a lot better outcomes. Is very crisis emerging in the worlds developing economies . Our guest host gives us his answer after the break. Good morning. This is bloomberg surveillance. Im Olivia Sterns. But get into the top headlines. Here is brendan greeley. Strong holiday sales of gifts related to the frozen movie boosted disney results. Toyota raises its fiscal year profit forecast. The automaker Beat Estimates surging suv sales in japan made it a bigger beneficiary of the weaker yen. Even as volkswagen closes in on the Global Vehicle sales crown. Sony is headed toward recovery things to his devices unit. Its devices unit. The business posted the best corner profits in seven years. Sonys german traded shares changed as much as 6. 5 , their highest since april, 2011. Breaking news from olivia. General motors reporting earnings at this hour. I can see the General Motors fourthquarter revenue coming in a little bit shy of estimates of 40. 3 billion. The fourthquarter adjusted earnings per figure Beat Estimates. They we we know they had a very strong january. The thing we will want to look out for is what happened to the overall 2014 and how badly did all those cars due from the recall bite. On General Motors earnings, lets continue with our guest host. Bob michael goes in search of coupons to put that jpmorgan. A jenners motors a General Motors tenure bond has a whopping 2. 4 , president premium 3. 6 this morning. Priced at a premium 3. 6 this morning. Why should i own a gm bought for 120 months . Do i want to bind aging by a gm bond do i want to buy a gm bond this morning . I think you do. The thing is, you dont want to go by you dont want to buy because the coupon looks low relative to the last 30 years. But if you dont buy it investors from japan will come in and buy it, investors from europe are looking for securities to buy. Do we have a riskier that at some point a risk here that at some point the ecb or the fed could finally act and my bond im enjoying at 92 . Craze i think that is the risk. The other way is easing policy. It is cutting rates. It is building a tremendous amount of pressure on sabres were holding cash. We look at the Corporate Bond market and it looks great to us today. Youll stress have widened because of all the supply. Yield scores have widened because of all the supply. What is the rookie mistake ecco do we buy too long on maturity . I dont think so. I think investors tend to take too much risk that they dont understand and try to cherry pick the bond. It is better to go into a diversified Corporate Bond get the yield, clip the coupon, and live with that. Is it a coupon year, or could it be a total return, 2015 . I think it could be a total return here. I think it will surprise people. I think the fed holds the key to that. If they are patient about how they normalize rate and start later in the year, then yields look pretty attractive. Let me get you in trouble then. Is it a 2009, 2012 year . Not that good but a capital gain yet request i think you have a little clipping of coupon and then a capital gain. But a capital gain . I think you have a little clipping of coupon and then a capital gain full to the u. S. Yield is off just by one basis point. It is incredible to see money flowing into the tenure into the treasury market. The euro slightly weaker against the dollar as the greek finance minister meets with his current german with his german cap counterparts. Good morning, everyone. Im tom keene and with me Olivia Sterns and brendan greeley. Futures deteriorate. A brief look back at Morgan Stanley emergingmarket index. Down 10 since august. Our guest from deltek says this is not quite a taper tantrum, maybe a taper clip. Is there no good egg for the rest of the world . For the emerging markets, l. They rely on the u. S. Dollar for liquidity funding. For the emerging markets, no. They rely on the u. S. Oliver liquidity funding. The u. S. Dollar for liquidity funding. They suffer when there is liquidity challenge. Will it be suffering all over . A little bit, but it is exacerbated by the fact that some emerging markets will be heard, and others will get hurt in exposure to commodities. You have a little bit of a double whammy coming through for certain emerging markets. Others with it we are much better off than we are were in the 1990s because many have built up. I think we have learned a lot since the 1990s, but the whole time through the 2000, a lot of the system just got rebuilt. Especially from 200407. Its a good point that you make. We have learned lessons, but there have been new mistakes that have been made from the very easy policy we had in 2000. Lets take a tour around the world. You say the global story is a dollar story. How does that affect, lets say, brazil . We are saying they have treated demands at the moment, as well as Commodity Prices. You have an environment where they are not only suffering because u. S. Liquidity in the dollar gets taken away and that is impacting the economy, but on top of that, Commodity Prices are something, which decimates the economy. Im always amazed when you talk to local traders around the world, they are much more sophisticated than people coming in london, from new york. Looking at this from where we sit in manhattan, are we missing local stories that could be traded on . We say this is a dollar story and emergingmarket decline . That is the point to make. When you look at emerging markets, you cannot look at the in a fashion where you are looking at them collectively. It becomes very granular as you look through the individual issues which i outlined. And each country is very different when it comes to the specific issue theyve got. Where are you when it comes to hedging the emerging market exposure in the currency market . Ive never found it to be of value. It is hard with volatility is hard as it is right now. Some emerging markets are out of it entirely posted there are selective opportunities, such as india, whether you are looking at monetary reforms coupled with physical reforms. Fiscal reforms. That is no fun. You are out of them, or shorting them . We are out of them entirely. We are shorting on selected currencies, but not on the markets themselves. What about when what about venezuela . Do you sure the sovereign debt, or the Oil Companies or the government . It is difficult, because if you look at an outright short, the cost of borrowing becomes very high. If you look at currency, whether on the debt side, volatility becomes very high. When it comes to venezuela, the answer for us is to stay out of the situation. This is a Stanley Fischer moment. He is now vicechairman of the fed, but do we go back to the true volatility, brennan, that you mention in 1990 evan . I would not have said in 1997 . I would not have said this is a Stanley Fischer moment. That is a tom keeneism. Wechsler we look at the emerging market, we look at external versus local. External to us like it has cheapened up a bit, but when you look take out the problem children, the brazils, the rush is, the venezuela, argentina ukraine there is not a lot of yield left. But if you go into the local market, you are very high real yields. We will buy the bonds and heads the currency. It has worked great. And by muni bonds. Buy muni bonds. Before we go, should the government be able to force you to vaccinate your kids . Good morning. This is bloomberg surveillance. Im Olivia Sterns with tom keene and brendan greeley. Betty liu of in the loop joins us now. I know youre talking about china, but you also plan to discuss income inequality. My guess will be speaking at the closing my guest will be speaking at the closing the gap conference a little bit later this year. I dont want to get too personal with you guys. I dont want to find out exactly what you make, but i do want to illustrate how being in the 1 in the united eight is very different, depending on where you live. Ive got a map here of that the Economic Policy institute without about a week ago where they say being in the 1 , you have to earn 678,000. That is, in connecticut to be in 1 . But in arkansas, you only need to make 228,000 to become part of the 1 . There is a lot of nuance. And then they talk about closing the gap between the 1 and the. 1 . Didnt we solve any quality cant we move on . You have to own assets. Who holds assets the . Is that when tens of 1 . Its not getting better. And the problem with ultralow rates is that it incentivizes buyback and penalizes that would actually penalizes capex that would actually create jobs. Of course, Hedge Fund Managers bankers, in the new york area are part of the 1 . But elsewhere it is doctors, lawyers, dentists. They are traditionally in the middle class. And it is driven by talent and education, which is what youre looking at with doctors and lawyers. Or is it driven by inequality. Highest threshold of the 1 is in connecticut. That is not enacted. There are the people those are the people that, our shows. Exactly. We will not solve it in the next few minutes, but its a very difficult situation to put policy initiatives behind it. That is why as you say it has gotten worse, the more we try to solve the situation. And it speaks to the fact that when the president speaks to middleclass economic, that means something very different depending on what part of the country you are living in. And politics as well. It will be a huge thing in 2016. Be sure to watch betty liu and her guest with his prescription on how to solve income inequality coming up starting at 8 00 a. M. And we will start discuss the election as well. Republican candidates will be trying to decide how they feel about income inequality. X and dont miss the with all the respect interview with ben carson on the vaccine debate. Do one thing today and listen to how britain and heilemann on with ben carson. And check out Hillary Clintons tweet. Which means us to our twitter question of the day should the government be able to force you to back your kids . Tweet us. Good wednesday morning, everyone. Bloomberg surveillance from a frigid new york city. Lets get to the top headlines. It is a race to Drug Delivery by the world Biggest Online retailer. Amazon is looking for permission to test and alibaba is actually doing it. They are delivering to 400 and 450 customers who volunteered to be part of a test. Amazon is waiting for permission from the faa to run its trial here at home. The u. K. May become the first country with three parent babies. Lawmakers voted to legalize technology that would allow embryos to be created with three people see in a. This is all in an effort to prevent some genetic diseases that originate in the mitochondria. In the procedure, the bad mitochondria in the mothers egg would be replaced by anothers woman another womans mitochondria, giving the baby dna from two moms and one dad. It has to parliament has to approve the measure before it he comes law. This old time weve been doing it wrong. Starting next month, the Chinese Government will go after people who use online handles that include names seem to be unlawful or unsound. Also on the blacklist interestingly, people daily and firearms dealers, among others. Those are your top headlines. Read incredible. Do you know what they call Kerry Katy Perry in china . Fruit sister, because she is often wearing fruit costumes for direct do you know what they call time tom keene in china . Martini brother. Did she get paid for the super bowl . Oh, yeah, as to the sharks. 118 million viewers. You are glossing over the three parent in a story. Ive got to read up on it. For those of you on radio worldwide, she was cool, calm, and collected. I will be taking questions about the birds and the bees. We will be doing that on Bloomberg Facebook and twitter. Two thousand nine was a spectacular year for bond investors. We are talking to bob michael of jpmorgan and atul lele of dell tech as well. Lets have a quick question. On the single digit, doubledigit return conundrum in your world is it a doubledigit world . Oh, my god, i didnt make 18 and in your world, it is a way of to make a coupon. Is doubledigit over . I dont think it is over. Right now, we are looking at treasury yields in real terms after 10 years, youve made as negative made a negative return for some where are you standing to get to a doubledigit return . We are overweight in u. S. And europe. He is overweight lucius to be able to translate overweight in bluechip to be able to translate. We are overweight junk. We like the highyield. We like the credit spread. We like the fiscal discipline that companies are bringing to their balance sheet. There has been some backup in yield, some supply. You are taking the highyield debacle and going to other sectors and playing there. Exactly, but we are starting to look through some of the energy names. But right now, we are dancing along the top of some very basic assumptions that both of you have to make about the economy. Do you buy the idea that real growth is over in developed markets . Absolutely not. We could say that growth specifically in the back half of 2015, growth is going to stick. Growth will pick up substantially. Where does janet yellen fit into the mix . I think she is our friend. When we listen to her in front of congress, she will back off tightening in the middle of the year. She has talked about international development, which we the strong dollar effectively tightening Monetary Policy. What does that mean . What does International Matters . International matters, shes talking about emerging markets. From our perspective, what she will do mid or late this year, it does not matter. It matters when the market rate moves up, not when the fun moves up the fed rate moves up. International developments. Weve got to get to the twitter question of the day, because what a storm weve seen on twitter. We asked, should the government be able to force you to vaccinate your kids . We got a Record Number of responses. The first one, no, but you should not be able to attend Public Schools if you dont. Should you be able to go to soccer practice, to the supermarket . You cannot pull out of society altogether. Very true. Another echoed that, choice but no Public Schools. Another said vaccines are about Disease Eradication good Public Health works. Brendan gaughan your wife is a doctor. How do you feel that the she feels very brendan, on your wife is a doctor. How does he feel . She feels strongly. We picked a pediatrician who had a plaque on the door who said if you do not vaccinate your kids, do not come here. We will not recommend a doctor. Leave. 21 of millenial, people aged 18 to 29, think it is possible there is a link with autism and vaccination. That is very tenuous science. Two mustread i will mention. William tab was the one over for smallpox. Fantastic on this madness 110 years ago. Here is justin fox with the morning mustread. He nailed it, in the Harvard Business review. Vaccine refusal is like drunken driving. Brendan, and i say this with immense respect for your gun children, that is what is going for your young children, that is what it is going to take. We have a right to stay healthy. We have a right in a democracy to ask our government for things that help us stay healthy. And that right is just as important as your right to individual liberty to decide not to be vaccinated. Whats i would say it is more about libertarian right and less about questioning science. Is this a debate in the bahamas . That is a good point. I cannot believe we are having a discussion about forcing vaccination when in so many parts of the world, to be able to be vaccinated is almost a privilege. Thank you. People want their children all day to be vaccinated. Michael, you and i remember prenmr. Premmr. We are not really old enough to remember polio. What not me. Bob michaels is giving you this look that says, speak for yourself. Thank you. Its time to go to the agenda where we look at the store shaping the day. Brendan, what are you looking at . The recipe ratings cut on several there were snp s p ratings cut on several banks. We are talking about in order to guarantee a bailout for taxpayers, regulators said they would have to be haircut for bondholders first. This is a very straightforward consequence of the chaos we saw six years ago posted on my agenda is the new finance minister of greece. He is in germany today. He is meeting with mario draghi the president of the ecb and the german finance minister, his counterpart. It is interesting which meeting is more important. Likely, mario draghi, because what he needs is for the window to liquidity to stay open. The fabulous journey ofyanis varoufakis. We are seeing him at every capital. He needs mario draghi to keep the lifeline open. He says talks were productive. The jobs report on friday there is so much news flow. Nobody is paying attention to jobs to stop two jobs. No one is being attention to jobs. Correctly of gotten work obligated. We cannot just talk about jobs but we have to talk about wages. Bob michaels, dont be a stranger. And from the bahamas the bahamas, we need to go to atuls house. They with us. Good morning. Youre in the loop and i am betty liu. We are 90 minutes away from the opening bell. We start with nouriel roubini. His take on centralbank policy is going to be for almost nothing if we do not get demand up globally. One of the biggest Power Companies in the United States out with their earnings this morning. What the ceo sees in consumer demand and business demand and why their power plant is being delayed again to the tune of hundreds of millions of dollars. What does that mean for Nuclear Energy in the United States . A big takeover in the Office Supply business. Staples has agreed to buy office depot in a deal valued at 6. 3 billion. Investors pushed for the deal. Shares of disney up almost 4 of premarket trade. The movie frozen post quote get some of the credit