Transcripts For BLOOMBERG Whatd You Miss 20170508

Citys decision to take down monuments honoring key figures of the confederacy. Supporters filed a lawsuit blocking one statues removal. The city has dismantled one monument, with three more on the hit list. Global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. I am mark crumpton. This is bloomberg. Julia live from bloomberg World Headquarters in new york, i am julie chatterley. Scarlet im scarlet fu. Joe im joe weisenthal. We are 30 minutes from the close of trading in the u. S. Stocks trading near record highs and the vix heading for the lowest close in a decade. Joe but the question is, whatd you miss . Scarlet landslide victory for new french president Emmanuel Macron, but can he get a parliamentary majority in june . Cap President Trump get anything done with the pipeline of legislation on the calendar . And frustrating trades David Einhorn ratcheting up the rhetoric on 2 auto names. We will explain why. Lets look at where the major averages stand as we head towards the close. Abigail doolittle is standing by. Abigail not a lot happening for the major averages heading into the close. Doubt, s p 500, and the nasdaq. 1 ,own less than fluctuating between small gains and losses through the day. As you and scarlet and juliet were mentioning, look at the 9. 7, on pace for its lowest close since december 1993. The fear gauge is suggesting there is not a lot of fear after the s p 500 and nasdaq last friday closed new record closes. Where we are seeing more volatility lets look at the other averages that we sometimes look at, including the dow transports, russell 2000, biotech index. Down more than 10 . Look at the biotech index. On pace for its worst day since the middle of march. A number of stocks are racking of the index bragging on that index. It looks like what could be behind us our bearish comments from Morgan Stanley, guidance is a bit too optimistic. We have the Trucking Company sage robinson along with a alaska air, on pace for their worst days since the month of may. Southwest airlines down nearly 2 after the company said it will be upgrading its 30year reservation system, and a former cia out, chief information officer, over at united said anything can go wrong. It is a complicated process. Investors are not looking forward to that in a bullish matter relative to the stock. Speaking of what it could mean to the major averages, this is she have to be tv 8421. G btv 8421. She shared with us her may report, and in that she said that dow syria gives her pause. The dow transports, which put in into the bighe dow decline, macro decline in 2016. More recently did manage to put an alltime high but back below the 2015 highs with the doubt creeping back towards its record highs. He is giving her a bit of pause right now. That we couldal see something along those lines probably too early. Just the divergence is of concern. A wellknown technician out there, joe. Joe thanks, abigail. Definitely a chart to keep our eyes on. Whatd you miss . Now that the president ial campaign is over in france, Emmanuel Macron shifts its focus to governing and other we shift our focus to other consequential elections in europe, like the german original election on sunday, u. K. General election next month, and the french parliamentary elections on june 11. Here to talk about the political risks on the horizon and lessons from france, a visiting fellow on Foreign Policy at the brookings institution. Great to have you on the show. End, the great populist wave really flopped, arguably, landslide. Huge what does that say about the state of european populism . Flopped during the first round of this election, april 23, when Marine Le Pen came second, and made it to the second round but had a very bad 2 Rounds Campaign and a bad facetoface debate with Emmanuel Macron, who looked well prepared, and just a better person to run the country. The populist wave is not going to happen because now he is going to be president and he will appoint a new cabinet, new Prime Minister. He will be heading towards, as you say, parliamentary elections in june, and that is not a foregone conclusion. His body is only about a year old. His parties only about a year old and they havent got any member of parliament at all. Scarlet that will be a challenge. Under what circumstances would Emmanuel Macron become a figurehead as opposed to a leader . Philippe if nobody wants to go into a coalition with his party, lets suppose his party only that50 seats out of 577, he would become a figurehead, as you say. There would be something called cohabitation, which happened three times, not very good for the country. But my own feeling is that this man went into elections with a different mood, which is lets get together, lets have centerleft and centerright working together, lets have the best of both sides. He himself was a minister in the previous government, socialist government, very centerleft, so to speak. He has already been talking to a number of centrists and centerright leaders. My feeling is these people dont want to wait another five years. They will join a Coalition Government and he will manage to pull it together. Having said that, everybody is now facing the general elections and people dont want to lose their parliamentary seats. They are all saying lets go against macron and lets give him a hard time. But at the end of the day, they will join in. Julia lets say you are right and he can pull these parliamentarians into line to support his program. What says that the french are actually willing to reform . I spoke to Emmanuel Macron when he first started working with Francois Hollande and talked about the labor market changes he wanted to make, and everything fizzled. Other french truly ready are the french truly ready to see reform . Philippe it is a very good question. The antimacron front is already building and that is an antiglobalization and antitrade front. That will be music to the ear of some people. On the other hand, he has been elected by a large majority, including by a generation of people who want to work, and nobody believes that Marine Le Pen was going to create a dynamic with more jobs at the key. Isrybody knows that france not going to isolate itself from the European Union, from the eurozone, that the european dynamic is also important. You are right, he does after from the country. He does have to cut some government jobs. And he has to encourage even more entrepreneurship from which he tried to do as a minister. Arguably only partially good but i believe there is a dynamic that should be taken into account, and a number of people dont want him to fail. That would mean possibly another populist wave and even bigger populist wave five years. Julia great points, and i wanted to pick up on a couple of them, the future of europe. This strengthens the germanfrench axis we seek it can we use can i use the word merkron as the future . What does this mean for future negotiations with brexit and donald trump . Said he wants to work closely with macron, but what is that strengthened axis major policy Going Forward . Is appe on brexit, there snap election on june 8, and Prime Minister theresa may is hoping to get a mandate from her own people to give a hard time to these europeans. I dont think it will be very easy. With a new president in france who already says he is not going to make it easy for britain to have a market access, which britain wants, to the European Union. In other words, britain wont be able to have it both ways. Germany most likely, you alluded to the recent win by the cdu, the chancellors party in germany i mean, regional elections. He is doing well as well she might still be the chancellor in september. These two people will be facing theresa may and they are not going to make it easy for brexit to take place, and they will ask for a huge check in any case. As far as the transelect relationship is concerned, transatlantic relationship is concerned, donald trump is now in the white house and he will have to deal with europeans, the european project back on track, and europe as a market, europe as a unified force. It is quite different from what was advocated by himself, the president , and some of his advisers. Remember, stephen bannon, the eitbart website, has been advocating the nationstate as opposed to eu. Scarlet what happens to Marine Le Pen now that she has lost election . That she team up with other populists across europe and maker influence felt that make her influence felt that way . No, that would be very contrary to what she has been saying. France is about france and closing the borders and all this. She is a member of the european parliament. It is a bit of a joke. She hardly ever goes there. She gets a salary. Some of it she uses for her own political purposes, and she has been sued for that. She has been having for parliamentary elections. My gut feeling is next year there will be a Party Congress and they will change the name of the National Front and they will try to make it more of a populist force and they will find a different name. Not going to be easy, because as long as you have a le pen chairing it, it will be the National Front, with all the background behind it her father being some kind of neofascist. It is not easy for her to make people forget about this, the history of the National Front. 40 years of history the war in algeria, colonial times. But she will try to be the number one opponent to Emmanuel Macron. Julia thank you so much for speaking to us. Physically cooler, philly glencore Brookings Institute visiting fellow coming up, why the chief strategist at Morgan Stanley management thinks there are better Investment Opportunities outside the u. S. From new york, this is bloomberg. Julia whatd you miss . Now that french president ial elect Emmanuel Macron won a decisive victory against Marine Le Pen, the prospects of a more unified europe are becoming clear. What does that mean for markets . , strategist at Morgan Stanley investment management, join bloomberg earlier today to talk about what he sees as waning u. S. Influence. Ruchir i think so, because here is what is turning, and when these trains turning, they take a while. European equities versus u. S. Equities are coming off a 50year low in terms of relative performance, a multidecade low. Typically when those trains turn and there was positive economics behind it, it tends to last for a while. For me it is good news, even if the flow into the United States is overwhelmingly positive. There are many things to suggest that the u. S. Is now a market that seems to be entering rosa underperformance compared to the rest of the world relative underperformance compared to the rest of the world. There are a few factors. One is the dollar. The multiyear bull market in the dollar seems to be drawing to a close. As the 2en as great big bull markets we have seen. There is a case to be made that European Equity outperformance, especially in dollar terms, could continue to last for a while and the flows will reflect that. The other point is Economic Growth is turning around. The eurozone is growing at a pace that is slightly faster than the United States and that is happening a lot because of catchup. Europe has suffered 2 possessions in the last two to eight years. Property in some markets. There is catchup play going on here. The big story is u. S. Versus ope train is turning hitting a low in terms of relative performance, going back possibly 40, 50 years. What does that mean for spreads, and what should it be as the magician takes place . Ruchir a generic terms of the fact that rates it should a narrow entrance of effective rates catch up bund yield at the end of the year . Ruchir possible. It is realistic to expect as we get to yearend. We talk about growth, particularly investment rather than trade, one of the important factors is demographics. You have productivity and demographics. One or the other. You wrote an interesting piece in the new york times, just out, saying that for growth we need immigration. Take us through that. Ruchir when researching this piece, i found this piece of data to be the most interesting. If you look at over the , the growth of the United States, europe, and japan has been exactly identical. We here in the United States like to think about what is our superior advantage compared to these countries, and we think of productivity. We have Silicon Valley, a more dynamically reports, and the fact that we have these great educational institutions. But what i found actually fascinating is that the big difference in Economic Growth rates between these three large blocks of the developed world is largely explained by demographics. The United States has better demographics of the eurozone and japan. The United States has grown faster than the other two countries, and a large part of the demographic is explained by immigration. The United States has historically relied much more on immigration to grow. But the population is slowing down everywhere, and japan is the opposite. Japan is basically zero immigration. That is one of the main reasons the japanese economy is cast as a laggard will stop as a laggard. It is an important shift in our thinking. The really important part of demographics, explaining to you why has the United States grown faster than europe and japan, it is not productivity so much as the more graphics, which is a function of immigration. Speakingchir sharma there, chief global strategist at Morgan Stanley investment management. Scarlet time for some of the biggest business stories in the news right now. Sinclair broadcast is buying Tribune Media for 3. 9 billion, marking the first big acquisitions since regulators easy limit on tv station ownership in the u. S. Buying tribute would give sinclair access to big media markets like new york, chicago, and miami. Sinclair may sell certain stations are currently owns to comply with antitrust regulations. Blackrock is in advanced talks to fund and the infirm. Blackrock and several other state run lenders will find the providerayment service 100 million. If completed, it would make the second startup with more than 1 billion from the indians in tech industry. Bill ackman is recommending Howard Hughes to investors. Speaking in new york, he says Howard Hughes has a huge start over the past six years, and that this is one of the most opportune times to invest. Pershing square is the single largest shareholder of that stock. That is your Bloomberg Business flash. Joe i want to bring you some headlines from the investment conference. David einhorn saying pretty negative comments about core laboratories, a company that does Petroleum Reservoir services to major independent oil and gas producers. He says the company has a 45 potential downside on the stock. It is not a secular growth story. The company is likely to underperform its peers. They are confused about core labs. Instantly falling 2. 5 . There is little job there was ambiguity about his comments, but very negative. 45 downside for Petroleum Reservoir Management Company core labs. From new york, this is bloomberg. Scarlet i am scarlet fu. Whatd you miss . Everyone talks of the strong earnings season we have had so far and the foundation for record highs in the s p 500 and nasdaq, but bank of America Merrill lynch points out Global Growth is more important because of how exposed s p 500 members are the foreign sales. Our lead blogger for markets live with this chart together. Tracks u. S. Governors that get a High Percentage of sales from europe. Clear out performer this year, compared to the stoxx 600, which is in purple, and the s p 500, which is in blue. Euro terms,0 is in dollar terms, of even more. Bank of Americamerrill Lynch says that so far this for any season, many multinationals are highlighting strength in overseas markets as drivers of their earnings. That was especially the case for industrials. It is something we continue to watch for. Joe arguably the strong recovery in europe right now has been the under discussed story, with the political risks out of the way, more and more people will Pay Attention with fundamentals looking pretty good. Speaking of things that are looking good or at least people , often good, the vix called a fear gauge, although not really a measure of implied volatility, at its lowest level 1993, point today is a extraordinarily low implied volatility. This chart looks at what usually happens to the vix and the s p close. T we get sub10 the answer is, nothing conclusive. People are so complacent, or last time we were here in 2007 then the markets crashed. Turns out there is really nothing you can say about the vix this low sometimes it goes higher, sometimes it goes lower. It is not it is not a particularly good predictive level. Julia i love that could sometimes it is a chart that tells you nothing, but it is still important. Monday and merger what we can glean from the premiums being paid we have had sinclair, Tribune Media. Im showing you the volume of deals, the blue bars. The number of deals, the green. The one we want to focus on, the average premium pay. Going back to the First Quarter of 2016, since then we have seen the average premiums, down. What is the takeaway . Lower premiums is suggested is about necessity. It is about consolidation, rather than instate growth. Will more deals ship those premiums higher . Julia scarlet that is a great chart and a question we will look to answer the coming days. Whatd you miss . U. S. Stocks ending the day unchanged but closed at record highs. We saw the dollar and yields go higher while straining from the markets after the French Election results. I am julia chatterley. Scarlet i am scarlet fu. Joe im joe weisenthal. Onyou are tuning in live twitter, we want to welcome you to our closing bell coverage every weekday from 4 00 eastern. We begin with market minutes. Major indexes, a little bit of a snoozer in terms of the actual levels of the s p, doubt, and nasdaq. Record high for the nasdaq nonetheless. 6102. 66 for the nasdaq. Joe unlike the first round which produced a Massive Movement is found not so much. Scarlet im looking at the imap on my bloomberg. The worst performers were materials, down by. 9 . Read all around. Gainers,ok at the energy and tech some of the advances. Energy getting. 7 . Some of the drillers and equipment names showing weakness. In terms of the actual individual movers, lets get to some m a announcements. Julia mentioned this earlier. Coach at the highest level since 2014, buying kate spade for 2. 4 billion. Not unusual that you see the buyer gain, but as a bloomberg gadfly columnist was telling us, this is them putting their money where its mouth is. Sinclair broadcast buying Tribune Media for 3. 9 billion dollars, the first of what is expected to be quite a number of Media Telecom deals with a loser regulatory climate thanks to the looser regulatory climate thanks to the trump administration. Tyson foods disappointing some investors as a result. , 2. 7 gain,d high 153. Doesnt hurt that Warren Buffett said he made a big bet on apple and he sees it as what is it, julia . Julia it is not technology stocks, it is people buying into the tech space. Joe lets look at Government Bond markets. Lots of action in the wake of the French Election u. S. Yields a little bit higher on the day. 10year yield going to. 38 . Lets get over to europe, closer to the action in terms of what happened today. German and french twoyear yields taking a little higher. Deep into negative territory. A little bit of an easing of the anxiety. Still pretty low. Greek 10year yields down notably. General optimism that they might be able to get some of these deals going across and keep things together as the election and france an italian 10year yields higher. 2. 24 . Julia that story very much feeding into currency, too. The euro is trading slightly softer. I think it is a bit of profit taking off the back of the election result. The euro behind since november 2016. The latest analyst i will mention here raising their yearend forecast for the eurodollar to 114. Estly, you can see obviously, you can see the dollar broadly stronger. Flirting with approaching the 150 level. Whethereal focus it is oil concerns, home capital group, the mortgage lender, not helping the currency. The worst performing currency of this year. Let me show you a chart this is hedge funds and speculator positioning. Highest short positioning there has been on record. Traders tell me that a lot of the weakness we are seeing this year deals with m a. A bit of controversy here. On commodities, a lot of action there. Nymex crude ending higher on the day. Copper futures from the Industrial Metals really not looking very pretty lately. Down 1. 4 on copper. Iron ore down a little bit less than 1 . Oil having a volatile day. Intraday look at the price of oil. Lots of sharp moves getting down there. One point lower on the day. Lots of questions about whether we will see cuts in production over the next couple years. Those are todays market minutes. Now i want to take a deep dive into the bloomberg. Lets keep on the commodities front and look at commodities over the last year. The white line is the bloomberg commodity index. That is down over the last year. T the blue line is the bloomberg commodities Industrial Metals index. It really surged after the election. Still outperforming general commodities, but it has come off lately. Entioned iron ore and copper starting to catch up with the general commodities on the downside. Ring in thes chairman and ceo of market field asset management. How much should we be reading into this selloff . Michael not too much. The demand data is still pretty good. Chinese import numbers disappointed some people but the transports higher consumption out of china, as they announced the details of their program in the middle of the month, i think you will get people more interested on the demand side. But what we have seen is a lot of financial liquidation. You are seeing financial liquidation in china, where monetary conditions have been deliberately kind by the pboc deliberately tightened by the pboc this year. That is forced nonchinese holders to liquidate. I think the bear market ended a year, year and a half ago. I dont know if we are going back in the those conditions. Credit markets are not remotely interested in what is happening to Commodity Prices. It is what it is. Joe central bankers typically try to look past Commodity Prices when trying to gauge underlying inflation. Nonetheless, does this a lot happened is inflationary impulse . Macron michael it will feed into ppi, have less impact on Consumer Prices. The question on Consumer Prices is do we get any kind of sustained Wage Inflation in the developed economy. We have unemployment in the u. S. Down at the level you would typically expect to see wage gains and in europe you have seen lower unemployment julia some of the factors in Commodity Markets selloffs would be the impact on emerging markets. Obviously, weve seen a divergence in performance. Do you think the diversions can continue . 8420, to julias point. The blue line is the emerging market the white line is the commodity index. Michael it is all about indexes and what is inside them. Is around 6 ctor in the emerging market index. Index is under the service not driven by technology valuations. Earnings have been good in Em Technology the last few months. I dont think the commodity story matters as much. Joe interest just, because we dont talk about the Technology Much stop it is interesting, because we dont talk about the Technology Much. Explain that more. Which countries are exposed to that . Mostel korea is the obvious example. Helped by an election coming up and various other factors. What is driving it is great andnology and earnings the taiwan local index is dining against the 10,000 level, a key level for almost 30 years it almost exciting if you can take out 30year resistance. Technology committees have broken out in recent sessions. You mentioned that we have seen financial liquidation in some of these commodities and as far as youre concerned, the demand story is holding up. Where are the investors going to get caught up we have seen such a great deal of liquidation. Netael you can go from long to net short. You have seen a lot of blindsided mid right, alongside a lot alongside it liquidation. As i said, this looks very, very different to that commoditydriven selloff of 2014, which fed into credit markets and really was range iod the nextul per couple years. The commodities dont matter as much to emerging markets, where do they matter . Michael latin america you generally think of as more commoditysensitive. Even those markets have hung in there pretty well. The key is volumes. I was looking at chinese trade data. Chinese imports from brazil, virtually all commodities, and a threeyear high in april. Lets bring it back to the u. S. Real quickly. We saw the vix dropping below 10, implied volatility at its decade,evel in over a back to the lowest level since 1993. We are running out of things to worry about. Europe seems to be fine, growth seems to be fine, no one is particularly concerned about the pace of fed hikes. Anything out there domestically that concerns you and go that concerns you . Michael by the end of this year we will talk about Central Banks being more aggressive to Monetary Policy and that will feed into volatility and fixed income and equity markets. Where we are right now, the central bank is timid and they the ecb does not want to make the mistake they made in 2011. The fed does not want another. Ype of cancer on its hands clear evidence of inflationary pressures building in order to quicken the pace of central banking. I happen to believe it is a real possibility on the back end of this year. Right now the vix has it about right. Scarlet go ahead, julia. Julia want to ask you, how do you make money in these markets . Joe most important question. Michael global outperformance versus the u. S. , which joe touched upon before my segment. It is the most obvious thing that has happened this year. If you are along the s p, you can sleep a night, but there is global outperformance going on and adding the nonu. S. Dollardenominated assets that is expressed to a lot of people. We are alongshort investor. We are a longshort investor. We consider ourselves to be fully invested in this market. Scarlet what is going to be the thing that changes the u. S. Outperformance . Michael what is going to make the u. S. Come back . Scarlet what will make it a laggard . Michael it is a laggard. If you invested in canada, u. S. Dollar investor unhedged come it is the only way you could have lost money this year in a major market. The u. S. At 7 year to date, a pretty good return for months into the year, still lags virtually every major developed market and most emerging markets. Go to the question you thought you were being asked him how does a turnaround . Michael the u. S. Has had a long period of outperformance and it will not be a great place to be versus the rest of the world the next few months. Julia michael, great to talk to you. Market shaoul of field asset management. Aesident trump faces challenge regarding tax cuts. This is bloomberg. Mark i am mark crumpton. Time for first word news could former acting attorney general sally yates has told the Senate Committee that she alerted the white house that former National Security advisor Michael Flynn in her words could be blackmailed by the russians. And former director of National Intelligence James Clapper are testifying about how russian interference in last years president ial election may have affected the race. Yates added that she felt Vice President pence was entitled to know she was delaying information about general flynn relaying information about general flynn, who resigned. Investor shall nominate judges for key posts today as they look to pack courts with more conservative voices. White House Press Secretary sean spicer says among the candidates are individuals previously named list of 21idents possible picks for Supreme Court justices. The head of the European Union executive Committee Says the french president elect Emmanuel Macrons proeuropean message is good news for the eu. The European Commission president had this morning. Warning. 11we should not forget million votes. We cannot forget the fight against the extreme right as being nothing we dont have to continue to fight against. Juncker had already shown his crew support for macron after the first round of elections and insisted that Marine Le Pen wouldve been bad for the eu and friends. North korea has arrested a second instructor at pyongyang university. Both are u. S. Citizens and are accused of unspecified hostile acts across the country. It is not clear if the arrest of one of kim jonguns claimed that the cia has targeted him for assassination. Global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. I am mark crumpton. This is bloomberg. Mark was just reporting, former acting attorney general sally yates testifying on the chain of events that led to the ouster of Michael Flynn. For more on this, National Political reporter sahil kapur has taken a closer to the congressional has been following this testimony. He is joining us from capitol hill. What is the most interesting thing we have learned from yates today . Sahil right now sally yates, former acting attorney general, and James Clapper, former director of National Intelligence, are testifying to a senate panel in connection to the broader investigation as it pertains to russia. We learned that president obama warned donald trump when he was president elect not to hire Michael Flynn as part of his National Security team, and President Trump ignored the advice and hired him anyway. Today we learned from sally yates that officials and the Obama Administration had information to believe that the russians could potentially blackmail Michael Flynn, and that is obviously a great National Security concern. That is one of the things that senators are questioning those 2 individuals about. Julia i have looked at this and i think we have got at least four different investigations going on the house intelligence committee, the Senate Intelligence committee, this is the Senate Judiciary subcommittee, and the fbis doing their own. Do we have any sense of where these investigations stand at the moment . Question,t is a great and you are right, there are many investigations going right now. The whole idea of the National Security agencys consensus that russia actively middle in the 2016 election probably with the focus of swaying it to one candidate, donald trump, that is a very, very complicated subject with a lot of people involved, and nobody knows the extent of it, nobody knows precisely and how high it went. When we are hearing testimony about is the role of Michael Flynn, former National Security advisor to donald trump, who was fired, according to the white house, for lying to the Vice President , but we know that he had contacts with the Russian Ambassador to the United States during the transition and potentially new or did things that were at the very least inappropriate and at worst illegal. I think this is what the senate is focusing on right now. They have said the Senate Investigators and has investigators have said they will go wherever the facts lead of them. Certainly a lot of tension and something we are all watching for the markets are not necessarily moving on that. What the markets are moving on is any kind of progress on tax reform. Talk about the calendar for congress. Getting tax reform done at 2017 will be an uphill battle. Sahil it is going to be an uphill battle, and the congressional calendar, the more i look at it, is emerging come as far as i can see, is one of the most daunting obstacles to getting it done. Just right now they are 39 legislative days until the august recess in which goes for five weeks. The senate will be wrapped up in the Health Care Debate then. From all indications, going to rewrite the house bill and passed their own version. Not clear what, if anything, is going to make it through. Once Congress Gets back from august recess, they have a lot of deadlines staring them in the face. They have got to fund the government, which is not an easy task for this congress. The have to look at expiring programs like the childrens bedrooms and flood insurance. And they have to raise the debt limit. These are painful but that gets you the fundamentals of how the government spends money and whether it should be offset that will divide republicans to sources i spoke to say it is very difficult to get tax reform done in that environment. And 28 is an Election Year and things get harder when the political sensitivities rise. Joe fundamentally, there is no reason they cant pass it in 2018. We are talking about a longterm thing. They could still do it then. Sahil of course they could still do it then, and technically theres nothing stopping them. 1986, the last time we had comprehensive tax reform, that was an Election Year. But that took three years of effort and the bill died several time with hearings and vetoes and threats from the white house and so on and so forth. Republicans are very early on that spectrum. Is they will do this in a partisan way to which it looks like they are, without democratic supporter there will be a good number of republicans, moderates in the senate and house, who are wary of taking such a vote in an Election Year when the claimant is uncertain. Scarlet sahil kapur, thank you so much. Coming up, chinas Foreign Exchange remains higher for the third month despite higher capital controls. This is bloomberg. Scarlet i am scarlet fu. Whatd you miss . 20 starts at sixmonth lows as an intensive crackdown. Investor sentiment. Chinese stocks at sixmonth lows as intensive crackdown fell on investor sentiment. We have seen regulators and banking insurance and Securities Trading all down since midapril. We have seen chinese stocks and bonds decline. There is the rapid falloff in stocks, the white line, and in bonds, the blue line. According to one estimate, at least 450 billion has been raised from the value of stocks and bonds during this time. There is also 21 billion of debt sales canceled as well. Market declines in china have a tendency to snowball. They get exaggerated very quickly. Joe i think more and more people will be watching these Chinese Markets in the coming weeks and months. One thing that is not happening is it is not spilling over into the rest of the world. Not having any volatility associated with what is going on domestically in china. This chart, im looking at, explains why did he goes back to the beginning of 2015. The blue line is the s p 500. The white line is implied chinese yuan volatility in verse. When the white line goes down, currency volatility in china is picking up. When we have bouts of yuan volatility, it coincides with u. S. Equity volatility in 2015, a couple times in 2016. Lately, if you look at the right side, the two lines track each other very nicely. Volatility in the currency in china continues to decline. Not much concern about stability. The u. S. Equity markets just keep drifting higher. While there may be turbulence domestically in china, until there are signs of them leaking and the clear sign would be through the currency, they are not having an international effect. Scarlet i like the middle 2015 or early 2016. Not like the middle of 2015 or early 2016. Julia all those things tie into 8417. Rt, which is g btv this looks at bearish bets offshore. Analysts say that we have loads of indicators that things are oversold here. Perhaps we see some of the rotation onshore into the offshore h market. Just to give you a sense of what you are seeing, the short sell turnover as a percentage of transactions. 14 . That is the highest it has been since august. They are saying this is a sign that we see a pullback in the shorts and a pickup in the h shares. Rlet again, going back not going to let anything bad happen. Coming up next, David Einhorn. The shows about to start how do i look . Like a bald penguin. [ laughing ] show me the Billboard Music awards. Show me top artist. Show me the top hot 100 artist. They give awards for being hot and 100 years old . Well take 2 [ laughing ] xfinity x1 gives you exclusive access to the best of the Billboard Music awards just by using your voice. The Billboard Music awards. Sunday, may 21st eight seven central only on abc. A. M. Mark crumpton and it is time for first word news. Sally yates has told the Senate Committee that she alerted the white house that Michael Flynn could be blackmailed by the russians. Aboutyates told lawmakers a january 26 meeting that she and a Senior Member of the National Security division had with the white house counsel. Him thates we told there were press accounts of statements from the Vice President and others that related conduct that mr. Flynn had been involved in that we knew were not true. She said that Vice President pence was entitled to know that he was relaying untruthful information about mike flynn. The senate provision would be different from the house bill that was passed and it means that President Trump and House Republicans will be faced with a bill that does not repeal obamacare. Angela merkel says that she is won in france. On she pledged to continue close cooperation with france. Despite the uncertainties on whether the United States would would remain committed to the climate accord, on voice andys have convenes talks will be trying to figure out how to implement the 2015 climate agreement that the Obama Administration played a leading role in pushing through. 2600l news powered by journalists and analysts in 120 countries. Lets get a recap of the action. Moves. Ttle is at a record high is literally unchanged. Declined to the lowest massive93 and we got a French Election out of the way and there is no fear. The want to take a look at renter car Company Stock diving down 15 with the adjusted loss being deeper than the estimated loss. Perspective,into 2014. As a 120 stock in there you have it. Stock has plunged 15 . Manager has ad long position against gm and a short against tesla and oath of of the plays need a catalyst, with gm down the and tesla up. David, thank you for joining us. About what is going on with David Einhorn. Do you think it is a possibility this happens . Road to get this approved and you have not seen any investors come and say that this was a good idea, a key difference here. Made a run tods increase the Share Buyback and wilson on theby task force, you had warned saying coming in and that mary barra was doing a good job and other analysts said that they should change fiscal policy. You have not heard a lot from einhorn. It is uncharted waters. This fornot seen investors to bet on. I want to talk about the trades that David Einhorn has with the long on gm and the short on tesla. Pair where he sees to virgins . Does he see these as distinct . What has not talked about one means for the other. He says that tesla is a bubble hask and elon musk hypnotized investors and David Einhorn does not believe. When gm wasbriefly recall,gnition switch but he is now the sixth largest shareholder and he believes that gm is pushing up guidance and hitting the guidance. If you take a look at it and view it differently, you could get the value up. Pictureook at the big and auto sales seem to be declining. He is short on tesla. He says that he thinks the valuation is low, even though it is heading into a downward swing and the company is making money in china, cutting costs and the butations should be better, they are not doing enough to get the attention for the stock. The market says that this is as good as it will get and they sol not see a lot of growth, they will put money in another sector. Thank you very much. This was a point that investors were asking. Are the longterm shareholders to patient . Patient . He is on his own right now. Is thety and the beast top Global Box Office and we will take a look at how the Disney Studio business tells a different story than the media network. This is bloomberg. What did you miss . To reportsaid earnings and they recently cut staffers for espn, including talent. The Sports Network is dealing with rising programming costs and erosion in the subscription base. You can see disneys total and orangewhite 40 g south and disney gets of the revenue from the unit that includes espn and they have lost subscribers. A 16 increase because of sports rights. Espn is the highest price in a package and people have been quicker to cut the cord. Cable and satellite operators have lost 630,000 subscribers in this First Quarter. The disney film business is booming and beauty and the beast posted a record open and disney is expected to lead at the box office this summer, with pirates of the caribbean, cars, and star wars. The theme parks generate 30 of sales and Piper Jaffray climbsts the income will 64 . Analysts project a return to positive growth. Growth thiss this year would be an anomaly. Thanks for the insight on those earnings, lets ring in paul sweeney for bloomberg intelligence. Know about the troubles at espn and the layoffs. Is disney no longer the espn company and our people excited about the film and other things that scarlet talked about . By espn still driven and they have to fix it and stem some of the erosion in the subscribers. Writeave to bring it to to the consumer and they do not have a solution yet. Antsy andare getting disney is a diversified company and you think about the parks and the resorts and both of the businesses are doing extremely well with consistent profit generators and most other companies do not have that diversification. Isthe advertising side wrong. Is strong. Have richf Companies Brands and are try to figure out how to make money in the digital world. It is not just about the 32nd 30second spot. It is about skinny bundles and hulu. You have to figure out a way to reach the consumers who were cutting the cord from the Traditional Pay Television packages. Where are they going . That is what everyone is trying to figure out. At ey has eps crown jewel and the prospects no longer as right, where does disney pin the future on . If you look over the last seven or eight years, film studios made through acquisitions, pixar, marvel, lucasfilms, allowing them to franchises every year and most studio franchises look for one every 23 years. It is not the sexiest business, but it is a consistent grower and they just allocated 5 billion to a new park and it should be a profit generator. Theow are things looking at shanghai park. The company has not given investors details on it. Anecdotal evidence coming out has been positive and the feedback has been positive. This is a park with a lot of risk associated and they need this to be a home run. Plan to get into china. This is the foray into china. Paul sweeney, thank you very much. Cambridge,go to where ibm has made investments. Big blue upblue to . Down on theubling powerful Cognitive Technology on jeopardy in 2011. It now is everything the company is bringing to its customers. Machines applying deep learning to monitor for Cyber Attacks. It was foundedo, and the company has grown into a technology powerhouse, making cambridge the base for innovation in the health field. It got its start in boston in 2011. Through the acquisition of in 133s, we are countries around the world and we have not stopped acquiring companies. Thanw have acquired more one Dozen Companies focused on cybersecurity in the boston area. Watson, theusing analytical computer system, to monitor potential Cyber Attacks on clients around the world. The Vice President of security explains how the Company Applies the technology. One of the things about watson that makes it advantageous for ibm and customers is the ability to go through massive amounts of information. It offers customers a chance that ita cyber attack believes is a learning tool. It has set up a health care ibm laid explained why its roots down in the city. There is talent and partnerships that we have evolved and continue to evolve. There is innovation and creativity here was up they are paring the talent with watson to come up with the next medical breakthrough. One of the parts of watson is that it is a system that understands your language and it has been trained by the best doctors from the cleveland and mayo clinic to understand medical language and literature. It has partnered with companies to make progress in Drug Discovery and patience data. Patient data. They rose to 5. 3 billion. The big breakthroughs are still to come. I believe there is a big data stethoscope that can translate data and bring it to a doctor, a policy maker, to make better, smarter decisions out of the data. That was Caroline Hyde covering the investments in the boston area. A Company Making a big investment today was Charlie Baker and marty walsh joining General Electric for a groundbreaking ceremony at a new beingarters in what is called innovation point. Oldest companies has moved to one of the oldest cities to create the future in life sciences, renewable energy, technology, aviation, material andnces, manufacturing these are things that we want to bring and think we can do together. Lets bring in Caroline Hyde. You spoke to the mayor of boston about the investment and the investment in the technology ecosystem. How did he describe it . Upbeat. Marty walsh had been working with Charlie Baker to bring in General Electric and i spoke to the mayor and he talked about how he felt. Crown to Silicon Valley and he wants it back. I think we will and can win it back and we are doing it now. Massachusetts went through a difficult time with taxes and political decisions that set us back and what is happening is a Political Climate where everybody is looking to move the economy forward and be innovative. There is a lot of statistics to back him up. D statistics are the highest per capita and they have universities and academic power here in boston. I want to ask you about a biotech firm that was one of the companies that met with President Trump to discuss the future of biotechnology funding and there has been concerns about what will happen with their funding Going Forward. What did the mayor have to say about this . You are exactly right that it plenty of academics gathering with the trump administration, ivanka trump, mike pence, to talk about the d and the mayor feels relief here in boston and massachusetts that the funding has remained in place with this particular realm of congress. We just saw the interim budget passed and money will still go towards r d. Longerterm, the mayor was outspoken about immigration, the an, and they want the talent pool from a and in the United States. He was passionate about that and he does not sell positive of about how the administration has currently been doing. Caroline hyde reporting from boston. Thank you so much. As we mentioned this week, bloomberg is live and Caroline Hyde is taking a look at innovators from fortune 500 companies and have technology startups. You will want to catch Bloomberg Technology on television and radio. Coming up, what you need to know for tomorrows trading day. This is bloomberg. Stocks with little change and the nasdaq closed at a record high after the french president ial election and we learned about the new president. In terms of what is coming up, do not miss the South Koreans going to vote for their new president. Kospi at ad the cost b record high. The dallas from washington, you are watching bloomberg Tech Knowledge you. Lets look at the first word news. Sally yates has told the Senate Committee that she alerted the Trump White House that Michael Flynn essentially could be blackmailed why the russians. By the russians. Sally eight and James Clapper testified about the russians. Sally yates and James Clapper testified about the russians. Have convenes talks to implement the 2015 paris agreements to cut carbon emissions. North korea has arrested a second and struck her second instructor at pyongyang university. It is not clear if this is part of kim