Transcripts For BLOOMBERG Bloomberg Surveillance 20240622

Tom lets begin our friday coverage. Here are top headlines with vonnie quinn. Vonnie they would have had real snow, where beijing will have to import snow. Representatives of the ecb, imf and European Union are meeting in athens with the cabinet minister. Tsipras made troika a dirty word during the campaign. There is a rebellion among members of his party. He told lawmakers today he never had time to lead greece out of the euro. Shares of linkedin are falling in premarket trading. The professional networking website forecast revenue. There is concern that linkedins growth is slowing down in its core business. President obama is warning that opponents of the nuclear deal with iran are putting the squeeze on congress. He held a Conference Call with allies last night and said supporting that it will be tough for lawmakers i can tell when they start getting squishy. A Top Lobbying Group is pressing for the deal to be rejected. And fitness fanatics cannot get enough of soul cycle. The chain is endorsed cycling studios has filed for an ipo. It has a cultlike following. It is close to 40 for a 45minute session. There are 48 soul cycle locations across the country. Tom this has been at pinyon to for 12 this has been a pinata for 12 hours. We are doing no evil. Brendan theyre bringing soul to the people, tom. Vonnie none of us, i believe have ever had a soul cycle session. Brendan and all of us live in new york. How is that possible . Tom let me do a data check before we get too smart coverage through the hour on commodities. Futures at negative two. What you need to know now is all the focus this friday morning is on oil and gold. Oil down one point 9 . It is beginning to be a larger percent as we oil down 1. 9 . It is beginning to be a larger percentage. Complacency in the equity markets. That is a remarkable vix. The german 10year, 0. 24 when i walked in. Now it is at. 022. Bring at 0. 22. Lets go into the bloomberg terminal and look at gold. This is a chart and slope matters. This is an ugly, ugly chart through the morning. Down we go. It is called a quadratic, and the quadratic is ugly, and further ugly this morning. Brendan will stay with this for the next six months, as we were when oil dropped alone. We will see the second order of the second order effects for a while. Tom many other watchers of gold expecting 900 per ounce. It is friday. They are focused tick by tic. We will look at it throughout the entire hour, and latin america, australia. First we must go to london and compare notes with jon ferro. You are trying to get out of the office early in london, yet gold cannot find a bid. Why is that . Jon i do not think it is just this morning, it has been the whole month. It is the worst month in a number of years. You have to go back to june 2013 for a month this bad for gold. But you have to talk about the whole commodity perspective. Brent had a dreadful month, gold had a dreadful month. It has been that bad. Tom what is the sweat in the city . You live in the land on margin calls the land of margin calls on commodities. Jon some funds have been closing down, but what you are seeing is the second shift through the company. You guys are going to talk about reveal. Look at what a lot of people have had to adapt. You see that in the old earnings as well. You see it right across the commodity complex. Tom jon ferro, thank you for staying with us on your friday afternoon out of london. We will get brazil at this hour. We focus on the global commodity route in this hour. Things are not good for brazil. And latin america. Our guest is going to be in buenos aires what, tuesday . I will be there monday morning. Tom Donald Gimbel has been with surveillance for years and has truly an expertise on australia. We will dive deeper into australia later. I want you to bring the effectiveness worldwide. How does australia adapt and adjust Interest Rate and equity markets for the rest of the world . Don we will get there. Tom it is not smooth. It is that thing we cannot see right . D don the country has been trying to move itself away from a Natural Resource base, and they have in terms of the population, but in terms of the economy it is still dominated by mining. Tom you are expecting knocked down commodity effect in the United Kingdom the united states, and Continental Europe . Don we now have more Natural Resources than the world can consume over the near term. Tom and that is microeconomics. Brendan for a straley a right now, is the chinese demand for commodities for australia right now, is the chinese demand for commodities the only story . Don it is the number one story. The rest of the world is staggering for rose. For growth. Tom i want you to bring us up on something we will not talk about this hour, which is the fiction that is venezuela. We got your watch on latin america, and then there is this thing. How critical is the venezuelan fragility to the rest of latin america this friday morning . There is not going to be much contagion but what happens in venezuela is a question of bad policy mixed with the plunge in oil, which is affecting the rest of latin america is a well of latin america as well. Brendan connected to venezuela is also the opening up in cuba. We will talk about that in the next hour with congress. Katia for the rest of the caribbean, that will not be an issue for many years i would think. Sure, there is concern in puerto rico and the rest of the caribbean and the dominican republic. Tom how are they linked, don gimbel . We are also linked with australia, but there is a particular language with there is a particular linkage with the economy. Don there is a linkage with chile and oil and other parts of latin america. It ties in with latin american exports. Vonnie there is a 20 decline in its currency in just a year going from 92 to 72. How long can that go on . Don the people who invest in currencies or wolfsburg because nobody ever knows. The downside to be another . 10 i would think the people who invest in currencies are fools because nobody ever knows. The downside could be another . 10, i would think. I could make another educated guess as to where the aussie is going, but now i think there is downward pressure, as there is on the loony in canada. Brendan don says only fools make currency bets. Kazakhstan no movement. Ties extend does not get the olympics kazakhstan does not get the olympics. Nothing happens. Tom we have instant access to the thank you dollar cross. Brendan coming up, linkedin continues to grow in popularity. What about revenue . We will take a look at the companys latest results. It is also time for our twitter question of the day. Would you invest in seoul cycle . In seoulsoul cycle . We have not. Please let me go to break as soon as humanly possible. Please take us out of here. Tom good morning, everyone. If you are just joining Us Commodities soft today. Gold and oil soggy as well. Vonnie california ordered a mandatory cutback in water usage last month, and People Living there did better than expected. Water use in california fell 20 p. M. Percent fell 27 in june. California struggling through one of the worst droughts in history. Windows 10 jumps out of the starting gate. Microsoft says its new operating system is already on 14 million commuters on 14 Million Computers days after its release. It is a Free Download for those updating. George h. W. Bush did not hurt his sense of humor when he fell and broke a bone in his neck. He went to twitter to thank wellwishers. He is famed for making parachute jumps on his birthday writing who knew that jumping out of planes was safer than getting out of bed . He turned 91 just last month. Tom i wonder if he is on linkedin. Brendan linkedin report yesterday sales. Hall sweeney is the head of research for bloomberg intelligence. I am going to read you a quote. Does linkedin play by the same rules . Paul they get revenue from advertising but they also get revenue from recruiters. Investors can see this as a really interesting model. That said, they have two quarters in a row that was a wild ride. It really hurt their stock. They came back this quarter, had a very good quarter in terms of what the street was looking for and they Beat Estimates for the quarter. Then they put out guidance that initially looked very strong and the stock traded up. But when you dug into the numbers investors started saying maybe the core business was not growing. Brendan Piper Jaffray pointed out as well that the thing to focus on is that they have revenue membership membership revenue. Paul it is recurring, which investors like, and it is very high margin. Tom having don gimbel on the set, he does not buy anything with a pe under 10. Is this like 1999 again . Don absolutely. You are talking more what is the trade, not what is the investment. Tom even if i get a cash flow from paul sweeneys good membership cash flow, that is not an investment . Don listen, we could talk about amazon in the same venue. For some people it is a great investment. For me i like to see dividends and growth. Brendan are we in pets. Com territory . Paul this has been over the last 5, 6, 7 years the latest tech rally, a much different story here. Real business models, revenue real profit with facebook and so on. Brendan my feeling about social networks is that you only need them when you are looking for a date or a job. That is particularly true with linkedin. Paul the engagement for folks at linkedin, not only is their audience growing, but their engagements are staying longer. If you are an advertiser, that are that is your two key metrics. They put more compelling content on there, so you see people posting all kinds of content video content, images, text content. When you get there there are reasons to stay, that is what the metrics are showing. Vonnie how long will it take to bring people in . Paul the linden. Com acquisition is a big deal for the company, and generally it will broaden their suite of recruitment told recruitment tools, knowledge tools. Vonnie will it be accretive though . Paul we will see. Tom kocher pours a cant ski is with us. Katia porzecanski is with us. How do you use linkedin to write stories . Katia when you are a reporter working in the financial industry, it is difficult to find the right people covering the right things, and with linkedin you can narrow your search. I can say i need somebody who is an expert in fixed income at barclays. Tom so you would know that right away. Brendan you can find people who used to work at a company who might be willing to now talk about what they used to do now that they are gone. Tom we talked about twitter as an acquisition candidate. Islington and i was it is linkedin and acquisition candidate for google . Paul it is possible. If i am linkedin i feel like i have a great runway of growth here. Twitter, on the other hand might be a different story. Tom paul sweeney, thank you so much. We look at australia and latin america in this hour. We have an important twitter question. Cap it back. Would you invest in seoulsoul cycle . Anybody on wall street, read the red herring. They out Google Google from 2004. Brendan, should we do this . Brendan we should get out of the break as cleanly as possible. Tom why cant i get 1000 shares . Tom good morning, everyone. Bloomberg surveillance. Friday morning and the morning mustread with brendan. Brendan looking at netflix this morning netflixs global ambitions revitalize that of hbo. The prospect of vast has sacrificed tom i did not know you were going to do this. Netflix has changed in the last 60 days. It is like a global thing all of a sudden. Brendan they have different challenges in different continents. In europe, the dynamic is a lot like it is in the u. S. In asia, they are competing against piracy, and that is a different challenge. Tom don gimbel, you have lived this. Is there a new religion on copyright in china . Don no. There is a lot of pressure to make it important, but as of yet, you can still get whatever you want. Brendan copyright traditionally becomes more important, but we are not there yet with china. Don that is how i see it. Vonnie is it all just chatter . Don you would have to ask jack. Tom i am glad that vonnie brings this up. There is almost not a frenzy but a fervor to it, of jack ma. How is he perceived in your asian world . Don he combines close relations with very deep pockets because of his american investments. He is unique in china in that he does not need money which has come into other companies in peculiar ways. Tom do you own shares in alibaba . Don never have. We have had lots of conversations, me and bloomberg, when it went public. I wanted to give it a year to see where he was going to go with his money, and i am still sort of waiting and washington. I am still sort of waiting and washing waiting and watching. Tom coming up, we are going to look with mr. Gimbel at australia and the challenges the Australian Dollar imploding with a brutal move. Stay with us. Bloomberg surveillance. Tom good morning, everyone. Bloomberg surveillance. Lets get to top headlines. Here is vonnie quinn. Vonnie beijing has been selected to host the 2022 winter olympic. There is one major flaw a lack of natural snow. Ahmadi in kazakhstan was hurt from being selected. Alexis tsipras turned troika into a dirty word during his election campaign. Now one of his cabinet members is meeting in athens with representatives of the eu ecb, and imf. The three are blamed for austerity measures that have hurt greeces economy. But tsipras needs to come up with 94 billion worth of bailout aid. Balloons are being used to lift drones 90,000 feet and transmitting information with lasers. Facebook has given up some details of the technical challenges it faces. The drones will have the wingspan of the 737 and weigh as much as a toyota prius. There are a lot of people who do not live within range of a network, and drones and satellites and laser king medication is one way to do it. Microwave communication is another. That will be Cost Effective conductivity where there are no existing cell phone towers or infrastructure. Vonnie getting more people online can add facebook users. In cincinnati the white Police Officer who shot a black man during a traffic stop has been freed on bail. He pleaded not guilty to a charge of voluntary manslaughter. Other officers are on leave while the case is being investigated. Officials in zimbabwe want to extradite the american dentist who killed a lion. Walter palmer has said that he legally hunted the lions. Officials say it was lee Officials Say it was illegally lured out of it sanctuary. American authorities are also investigating. Tom there is a huge uproar over this. They are considering extending it to all other wildlife. Brendan all my friends who are hunters were deeply offended at the way he did it, letting the animal suffer as he dragged it out. Tom the Russian Central Bank is moving on a key rate. The russian ruble again, well out over 60. Lets go to that right now. There was that bridge in planet of the apes. Of course, that is the sum, the total knowledge that many of us have with australia. We need a briefing as australia faces massive challenges. Commodities implode. For decades there is a particularly sharp focus on southeast asia. Is there a dutch disease here . Is what is happening to rio tinto and bhp billiton does it not affect melbourne or sydney . Don of course it does. It affects employment, to begin with, and the miners have been laying off people, not just around the world but in australia also. There is a lot of pressure in australia. The relatively new government is under a lot of pressure to do something, and historically this is a country that exports Mineral Wells and agriculture. It is unfortunate, with the now 26 Million People they have a problem of generating internal growth the way larger countries do. Tom bring up the gdp chart showing the implosion in europe, animal spirit. 50 years ago, this was has it really become part of the immediate Global Community . Don the big change in australia in the last 50 years is tourism. The first time i went there, it was like island fever. Oh my god, there is somebody from out of the country we have to have a dinner party for them today. Tourism is big for australia but nowhere near mineral and agriculture. Brendan one of the difficulties australia is happening in making a transition to a Global Economy is household debt. Does australia have to deleverage . Tom is it like spain . Don please do not call me an expert. The dead load in australia is reasonable the debt load in australia is reasonably high but not to the level of other countries. The problem in australia is finding something, because of the distances, finding something that they can do that they can export, other than mineral wealth, which they have reasonably in abundance. But something that the cost of transportation does not eat them alive. Maybe they will figure Something Else out. Not right now. Brendan we talk about drought in california, and it has been much more severe in australia. Don it is a huge problem in australia. The number of farmers losing their stations is getting it is not getting any publicity outside of australia, and not a hell of a lot in australia. I read a seven page report the other day blaming the banks for the drought. That is kind of crazy. Brendan when you talk about farmers losing their stations are we talking about a problem like in the 1930s . Don exactly good point. Farmers on the land for 2, 3, 4 generations cannot grow anything, and the banks are saying, i hate to do this, but you are going to have to move. The banks are being blamed for this, whereas the shareholders are saying you have to do that. Vonnie will it help with the Federal Reserve raising rates . Don it is too late for australia. The el nino effect is serious. Tom we decided to put a small contingent of marines on the tip of queensland. It is like on page four of some International Relations article. What is the significance of our relationship with australia, and then with the Foreign Policy or regional policy, of china . How does that triangulation fit . Don the u. S. And australia have a very long history of having a lovehate relationship. The aussies have followed the americans into every conflict we have ever been in. At the same time, big trading partners. But at the same time, they want their own identity. The conflict between asia and australia goes back to the second world war. It is a very complex situation. I think that tom can you buy the mining shares this morning . Don no. Tom done gimbal, thank you for coming in this morning. Don gimbal, thank you for coming in this morning. We are going to look at latin america next as we look at commodities. Katia porzecanski is with us. We will look at latin currency as well. We will bring you up to speed on the latest ipo. I am getting in touch with my karma. Candlelight is in order. Would you invest in soul cycle . Tom good morning everyone. Bloomberg surveillance. Gold reaching down into new lows 1080 per ounce. Our single best chart of the day thank you, invesco, for that. This is a weaker currency columbia, brazil, columbia brazil, weaker than others. I spent hours on the single best chart after i stole it from kocher pours a can ski from katia porzecanski. How does for exchange express what is going on in latin america . It is like a litmus paper, isnt it go katia it expresses going on domestically, internally coming in their own idiosyncrasies there. Tom h idiosyncrasy is a different central bank. You are an expert looking at the chilean central bank. Which is the best central bank for dealing with the highest grades . Katia volatility as a result of the currency is going like crazy, or inflation that could be unleashed because of this. In mexico, for example, they are not expecting a lot of inflation coming from this. But a real issue in mexico is volatility. You cannot get Business Done if your currency is going crazy, if it will impact in the u. S. We have little experience, that this is what happens when your currency is so volatile. In latin america i used to live in buenos aires, and if you have your currency depreciated on a regular basis, one day your imports are much higher and your cost of doing business is higher, and it is difficult to adapt your business to that. That is a big issue and that is what they want to address, so now they can sell up to 200 million a day and they can start intervening with us much with a much smaller jumping currency. Brendan can we bring the chart back up again . If you compare mexico to resume, one way of looking at if you compare mexico to brazil, mexico has done a better job diversifying its economy. Can brazil pull this off . Katia brazil failed, when the decadelong commodity boom was happening. You had multiple markets failing to diversify away, and making use of the fact that they were having an excellent decade to support the economy for when the commodities boom ended. People would not run away from these countries when they failed. But that is what is happening. You have all these countries that did not make use of the windfall, so brazil now is trying to rearrange its whole fiscal target. Now they have cut their target, so they had to boost Interest Rates the day before yesterday to assuage investors that we are on it, we are on it. Brendan i think i saw recently the finance minister, does he still have it . Katia i think people are giving him the benefit of the doubt, but at what point does that run out . The recently cut their fiscal target. They were trying to be way more austere, and now they are less so. So the question is, when do they lose the face of investors . Morale is down 21 this year which is ridiculous. It is certainly catching up with them. Brazil is a great example of a country what is going on externally is just exacerbating what is happening internally. Tom we have headlines out of russia as well this morning. This is an important day. We will touch on this when we come out of the next break. The bank of russia out with a series of headlines as they adapt again to this commodity route. Vonnie even with all of that, a rate cut to 11 . Tom oil staying below 60, more likely. Lets do top photos. Vonnie number three in northern california, more than 600 firefighters are battling a fire that has engulfed more than 30,000 acres since interrupting since erupting wednesday afternoon. Tom where it is this in california . Vonnie in the rocky area northern california. Brendan we will see more and more photos like this as it progresses. Vonnie everyone thought this was an april fools joke, but they are here. 18 different brands of buttons everything from ties to easy mac. Does it have to be attached to something . Tom a 4yearold. Brendan i see people pushing it, pushing it. That is exactly what we are going to have. Tom all these things to disrupt what we are going to do. Brendan i think the idea is brilliant. Right now they are working with brands, but any way you can configure tom it is brilliant. Vonnie you have to wonder who covers the cost of delivery. Is it amazon . 1 top photo it resembles a mountain. Mountain pong. Brendan i will throw this to bloomberg surveillance senior beer pong correspondent katia porzecanski. Katia this is why i live in america, because we have innovation like this. It is unfathomable, right . God bless america. Brendan there is the rattling of the red solo cup. Does this get rid of the rattling . Tom seriously, to your point on innovation, is there a Silicon Valley whatever, in south american . The answer is no. Vonnie well, brazil. Katia you have a serious issue with protection economies. I know somebody in argentina who is spending their time and their engineering degree making heaters because they are not importing heaters from china, so i am just going to make heaters because no one is making them. Brendan argentina plays by its own unique rules. I dont know where to go with that, so we are going to go to break. Coming up, we discuss why fewer cities are interested in hosting the Olympic Games at all. Who would even want to do this . This is bloomberg surveillance , on Bloomberg Television streaming on your tablet, your phone, and bloomberg. Com. Good morning. Tom good morning, everyone. Bloomberg surveillance. Lets get to top headlines of vonnie quinn. Vonnie investors have sued American Express for losing its lucrative contract with cosco. It with costco. The deal with costco accounted for 8 of American Express revenue last year. And there is a report that the next generation apple tv will be unveiled in september. The device is an improved settop box that will have more storage in touch pad and an operating system that would allow voice control. It will be the first major change in the apple tv box since 2012. Tom everybody is waiting. I agree. There it is. Top of the show, beijing. Brendan the ioc has Just Announced beijing will host the limit games. This time, it is the winter olympics, and beijing edged out kazakhstan. Boston decided it was no longer interested in hosting the summer games. The luster has faded of being a host city. David gora why would anybody want to host the Olympic Games . David it could be a vanity project. You had a dictator in kazakhstan who might have done it to attract attention to it to his country. It often is. A city was going to undergo a dramatic reconstruction of his waterfront. The limits was a great vehicle to show that. Now it is the fourth largest tourist attraction. Brendan there is a certain pattern of this, that the reporter on the limericks, does it look like they will pull it off . But it was really expensive. David most dramatically, head of that, you had the mayor of a city saying memorably, there was a 1200 cost overrun. Brendan is rio about to have a baby . Katia the thing with 30, they are trying to hide Infrastructure Spending the thing with rio, they are trying to hide Infrastructure Spending. Hopefully brazil fares better this time. Vonnie they have hosted the summer olympics already. David it is a good part of their case. Tom i used to park at the lake placid horse show in the vines. Daviddavid tom is there any new strategy to make things less rusted out . David you wonder if there is a strategy to play that out. Maybe lake placid, maybe Something Else. Brendan is there any chance the ioc has reduced demands if you are going to host the limericks . David you are supposed to have 30,000 hotel rooms, and beijing has this already. A mahdi did not have that. You have these hotels afterward how are you going to have 30,000 rooms . Tom beijing winning today, at the top of our our. Safe travels to buenos aires, got your pores a can ski katia porzecanski. The ruble is front and center. That is a much weaker ruble 64, beginning to that can tour the 61 level. Stay with us on a friday bloomberg surveillance. Announcer this is bloomberg surveillance. Tom commodities waeak. As russia act. Adjusting to the new commodity is normal. The meetings as greek banks try to get to monday. And do not be evil cap it back, tap it back. Soulcycle, riding a bike at 40 an hour. This is bloomberg surveillance live from our World Headquarters in new york. I am tom keene. Joining me, brendan greeley. He has never used soulcycle. Brendan i feel like i am living in a satire about the future. Tom it is true. Vonnie quinn has not done so cycle as well. Vonnie i have not participated yet. Look at those pictures. Who would not want to do that . Tom we will cover soulcycle later in the hour, their initial Public Offering launched last night. Lets get to top headlines with no blinking lights are here is vonnie quinn. Vonnie beijing is becoming the first city to host both the summer and winter of living games. The Chinese Capital was chosen as the site of the 2022 winter games. The ioc held a secret vote this morning during its meeting in malaysia. The finalists were kazakhstan and beijing. Their previous success as a host was chinas major sales pitch. Kazakhstan was becoming was trying to become one of the First Nations in the region to host the will of the games. The First Time Since Alexis Tsipras became prime minister. The ioc imf our meeting. Tsipras made troika a dirty word during his campaign, he now needs them to come through with a 94 million a 94 billion bailout. He told lawmakers today he never had plans to lead greece out of the euro. Russias centralbank announced its smallest rate cut of the year. The bank lowered its key Interest Rate to 11 . Then move was in line with the average forecast by economists surveyed by bloomberg. Russias bank is coping with the prospect of inflation because of pressure from the weakening ruble, which is weaker again following that move. Shares of linkedin are falling in premarket trading. There is concern that linkedin growth is slowing down in its core business. Fitness fanatics cannot get enough of soulcycle, as we were mentioning. Now we will see what investors think. The chain of Indoor Cycling studios has filed for an ipo. Soulcycle has a cultlike following with people willing to pay 40 for a 45 minute session. Tom the good news is we are on radio, so we do not need to show how we do soulcycle. Brendan they burn candles. 60. That must have been part of the prospective that mustve been part of the prospectus, i hope. Tom we sing come by between breaks. We will touch on soulcycle, a bit of comedy in the prospectus as released last night. Maybe do a quick data check. Front and center with the russian action on commodities. Nymex crude down 1. 9 , a good . 40. Commodities do move front and center, maybe as a selected exogenous or outside shot. We are thrilled to get your weekend reading started this morning. Lewis alexander for years with the Federal Reserve, and Holding Court at nomura securities. I want to talk about the fed later in the hour. We rationalize commodity implosions. It is not us, and then things change. How close are we to where commodities begin to change the cadence of our Monetary Policy . There is no question that the big declines over the last year have had a big impact already. The question now is, after having stabilized in the 60 range, whether there is the prospect for them going meaningfully lower in the next couple of years. If that happens, it will affect timing, but it has not happened yet. On the production side marginal technologies were well below those prices. Tom within that timing, and this is critical institutions act after the fact. When i see the rate of change of the Australian Dollar, they do not have the time to get out of the way of that. How does the centralbank react if there is the rate of change with oil . Lewis they do have the help for markets, so in some sense you can look at where oil is trading in the futures market and get some indication of that. And you have to make a judgment about where you think the fundamentals are. In this case the marginal technology for supplying oil is ultimately the thing that will affect prices going forward. Tom a great chart, the fiveyear oilgas is where it was in 2008. Brendan what we are really talking about is the effect of commodities on other economies that might then spill back over into the u. S. We are not talking about the effect of the u. S. Economy. Lewis i think in terms of affecting other economies, it is easy to overdo how big those effects are going to be. The big economy economies the big commodity economies, where there is growth, i think it is a small part of the commodities story. Brendan is our consumer economy isolated . Are we protected . Lewis i would not say we are totally fine. Obviously Lower Oil Prices mean more spending power for consumers, so there is a plus that comes from Lower Oil Prices. We also have this big production side, and what weve seen over the last year is that as oil prices have come down, the drag in the decline of oil and gas has become a major drag. I think this is where oil goes meaningfully below 15 states there. You have another potential for a letdown. Thistom the core idea we go down we clear we come back. Dr. Alexander, you are suggesting that may not happen that we may just go down. Lewis i believe that view. The basic reason is this. Ultimately, as the Global Economy grows there is more demand. The fundamental question is, how are we going to meet that demand . The marginal sources of supply are fracking in the u. S. And things like offshore and oilsands. The cost of those technologies is 50 and more a barrel. Is the cost of those marginal supply technologies vonnie is the revision upwards thanks to Lower Oil Prices . Is a really the route in commodities that will give consumers the boost needed . Lewis most economists have been a little surprised that we have not gotten more of a boost out of Lower Oil Prices. I do think the more positive data we have gotten recently is an indication that that is starting to flow through in consumption, and i think we will see that going forward. But it is not as big an effect as somebody else thought. Vonnie as we look to the third and fourth quarter, will it get better . Lewis it will get better, but it is not like flipping a switch. Our forecasts anticipated gradual decline in the savings rate, so consumption will rise faster than income in the second half. In some sense those visions are important, but it is not like we will flip to 4 growth overnight because of this. Brendan you just said recount a year ago that was not a number that any of us watched. What is the next risk that we are not paying attention to right now . Lewis the biggest risk is that the fed is going to raise rates, and we do not know how Financial Markets are going to react. We have never been here before. We have never had rates at zero for effectively six years. The transition we are facing some time over the next six months to higher rates will mean adjustments to global asset markets. We do not know how the market will react and how the economy will react to the way the markets do. That has to be the biggest single risk we are facing. Tom we are going to come back with Lewis Alexander, maybe the most important conversation we have had in three years on bloomberg surveillance. We will look at the shock of productivity on the united states. Lewis alexander, do you do soulcycle . Lewis i do not. Tom we have no one on the set who does soulcycle. The entire team has to get a life. That is our twitter question bsurveillance. Would you invest in soulcycle . Brendan update from Courtney Donahue the candles smell like grapefruit. Tom good morning, everyone. Bloomberg surveillance. Brendan greeley, vonnie quinn, and tom keene. Lewis alexander is with us today. I have a mustread that falls into the debate. Tom neil duttas note dovetails with the note from Lewis Alexander years ago on how americans use computers. I continue to this day, dr. Alexander to talk about your note where computers are our friend or are our enemy. Give us an update. Is technology helping or hurting us . Lewis i think we are living in a better world in all sorts of ways. If you look around the set and see how many screens are there and how important they are, but they are not helping on they are not helping everyone equally. One of the key issues is, are you a substitute or a compliment for a computer . s computers make it easier for you to do your job, this is a good world for you. Tom essentially if we are back to the 1970s and early 1980s, in terms of productivity decline but it is a different decline than the goodsproducing america of the 1970s, isnt it . Lewis one of the things that is puzzling is we have seen this sharp decline in productivity in an environment where there is a lot of innovation, structural change, and new products coming out. There are profound measurement issues whether or not we are capturing the ways in which some of the i. T. Innovations are changing our lives. There is a decent argument to be made that we are probably overestimating inflation and underestimating real growth. But i do not think there is any question that the fact that we have had a big decline in the Unemployment Rate without the kind of gdp growth that we would normally expect is a real warning sign for the economy. Brendan you can look at movable type, allowing the enlightenment to happen. Are we waiting another 100 years to see the effects of computers . Lewis we have seen a couple of waves of it. There was a surge in productivity growth 1995 to 2003 that was clearly related to the internet. The question is are we going to see another wave like that in the future . Tom Lewis Alexander with nomura , with us today. He played hockey at Boston College and alaska fairbanks as well. We will be to a congressman on iran. Good morning. Tom good morning, everyone. Bloomberg surveillance. Lets get to top headlines with vonnie quinn. Vonnie some high profile job cuts at barclays. 150 employees are being let go by the companys Investment Bank including Jim Mccormick from asset allocations in london, and sharon casey from interstate sales in new york. Californians are responding to the urgent need for water cutbacks. Statewide water use last month fell 27 . That was better than the 25 reduction ordered by the governor. Californias devastating drought is now in its fourth year. And george h. W. Bush did not hurt his sense of humor when he fell and broke a bone in his neck. He went on twitter to thank wellwishers. The former president , famed for making parachute jumps on his birthday wrote who knew that jumping out of planes was safer than getting out of bed . Brendan representative tom emmer freshman from minnesota played hockey. The trade act of 2015 is not a euphemism, it is an actual description. Congressman, what do the people of the sixth district of minnesota get out of trade with cuba . I represent i represent a district and a state that was still home to 17 fortune 500 companies, and the primary driver of our economy in minnesota are manufacturing and agriculture. Minnesota in fact minnesota has a long history in cuba. When the exceptions were made with the embargo more than a decade ago for Agricultural Products and medical supplies, minnesota was one of the first states to send a delegation to start doing business with cuba. Brendan one of the interesting things about this issue is that it does not align along with expected axes with ours. What are the constituencies in the house for and against . Tom emmer i am pleased that mrs. Clinton agrees with me on something. Maybe we can work on other things. Brendan i will have heard people talk to you. Tom emmer it is not a partisan issue, from my perspective. It is about american jobs, about trade. Frankly if you believe in helping your neighbor, if you believe in helping get people a better life, this is about the cuban people. Brendan we have talked about the economics of this. The concern has always been that the regime will not change, will not alter its behavior in any way. What hope do you have if you change your policy, that it will bring changes in the way cuba is governed. Tom emmer i had a recent visit to cuba, and i will say to you that it is a country in transition. They once called themselves communists are now they say we are not communists, we are socialists. We want access to free markets. You talk to the people on the street out of the 11 million population, there are half a million involved in private business ventures. Private restaurants, people doing baby clothing businesses to barbershops, etc. Tom you took over the territory from ms. Bachmann, who had a reputation in politics. And then sending mr. Trump to the leadership sweepstakes in 2016 how is the republican establishment going to penalty killer against a donald trump powerplant . Im going to suggest you tilt toward mr. Trumps politics. If that is the case how do you as the establishment adapt and adjust to mr. Trump . Tom emmer i do not know how you want to categorize me, but i am just a kid from minnesota who had the opportunity to represent a state that is interested in growing and offering more jobs. In fact, the hockey rink in my town is one of the few privately owned rinks in the state of minnesota. Brendan one of the things that Donald Trumps popularity within the republican primary so far has shown is that there is deepseated resentment against the establishment of the Republican Party among republican primary voters. How do you as a sitting congressman adjusts in terms of that . Tom emmer in terms of what . Tom the deepseated upset in the nation. Tom emmer regardless of who the personality is, what you see happening across the country is it starts with people on main street. I know this from traveling my state. They get more upset when they feel the elected representatives are not represented. Vonnie are you going to vote for the closing of guantanamo on cuba . Tom emmer if you get to the point where you have a free economy, then you vote vonnie how are you going to vote . Tom emmer right now the way the country is, the answer would be no. If you get to a full free cuba with that transition tom you are the pro on this. You are in the camp on this. What are you going to listen for . Tom emmer the game is too early. We are not even halfway into the first period. In those final 10 minutes, we will see what the score is and figure out who it is who has elevated themselves. You are just talking about the beginning. This is the warmup. Tom ok. The wild side, mike riley from the gophers. Brendan it is when we find out whether donald trump is just a goon. Our toward a question of the day. Would you invest in soulcycle . Let us know bsurveillance. This is bloomberg surveillance and hockey report. Good morning. Tom good morning, everyone. Markets are moving particularly in russia. Here are headlines with vonnie quinn. Vonnie the only picture going back to china. Beijing will host the 20 22 Olympic Games. The International Olympic committee made the choice this morning during a secret vote in malaysia. The other finalist was kazakhstan. The representatives used paper ballots after a glitch stalled the electronic system. Chinas pollution was pointed to as one of the negatives. Kazakhstan was pushing to become the first Central Asian nation to host the games. Unlike beijing, kazakhstan has mountains and real snow. Representatives from europes troika are talking with greek cabinet ministers since the first time Alexis Tsipras became prime minister. Greece needs the 94 billion bailout from the European Union, imf, and the continent how central bank. The Swiss National bank is reporting a record loss in the first half of this year sparking criticism of the bank and its president , thomas jordan. There was a sixmonth loss of 52 billion. It is not required to turn a profit, but the bank does need revenue to support. Facebook wants to use highaltitude balloons, lasers and drones to link rural areas with the internet. The company is starting to unveil plans to wire the world. Mark zuckerberg talked about technical challenges with emily chang. Mark zuckerberg a lot of people do not live within range of a network, it and drones as headlights and laser communication is one way to do it. Microwave communication is another for providing solutions for more costeffective conductivity to people where there are no existing cell phone towers. Vonnie getting more people online with help people would help facebook add users. Officials in zimbabwe want to extradite the american dentist to kill cecil the lion. Walter palmer is being caused is being called a foreign culture. He says he killed the lion legally. U. S. Authorities are also investigating. Those are your top headlines. Tom to go to the bloomberg terminal now, i have written to the chart three times this morning. I cannot remember what i started with, but then we got to gold. Now we are at the russian ruble 361, which is a big deal. Up we go weaker wrubel. This is the a weaker wrubel. A weaker ruble. We have reversed a good part of that from 60 to 61. Brendan there was an interesting article from our own news service the economy has already adjusted to some extent to a weaker oil price environment. The question is not always just the wrubel, but how much is the economy going to adjust to the sanctions, the loss of oil . Tom we have more floating measurable currencies every day. Lewis alexander is with us today from nomura. The fed floating better than six, is a general rule, right . Lewis i certainly think so, and you do not have the kind of fragility that you have with changing regimes, and that is one of the big differences from the 19971998 until. The 19971998. Lewis they are trying to liberalize their economy in many ways, including financial markers. To an extent, what happened in the equity market is it a reflection of their desire to create more flexible market second fun things, do things like ipos for state owned enterprises. But it has a negative consequence of generating this level. Tom do you have a likelihood of a stronger dollar . Lewis u. S. Treasurys point of view is always going to be work for a strong dollar. Tom a surveillance exclusive, folks, Lewis Alexander predict a strong dollar. Lewis the basic point is you want strong u. S. Fundamentals and we have that. If one of the consequences is a stronger dollar that is tom i thought it was going to be a slow friday. The russian bank is reacting to what we are seeing again. Brendan and this whole cycle ipo. Tom lets do a data check right now. Looking at the lack of the markets looking at the equity markets, the ruble at 61. Brendan it is bloomberg surveillance. Brendan greeley with funny queen and tom keene. Tom very good. Brendan greeley with vonnie quinn and tom keene. Tom very good. We see this a little bit it is to me unimaginable that exxon or chevron or anybody big oil like would cut their dividend. Are we remotely close to them doing a dupont . We have suggested for quite some time now that is really that it is really not a function of cutting dividend both of chevron and exxon, somewhere between 3 and 4 . Exxon will throw off in 2015. There is roughly 3 billion of free cash flow. Chevron has much less, but the dividend given those metrics the dividend seems fairly well. Tom what have you learned this week about oil . Vincent resiliency of output acceleration of output. We have heard from several operators who highlighted operational efficiencies, cost falling. So the breakeven costs coming on down in this new price environment and rebalancing their operations for this new reality. But that output has been quite resilient. We did see for the first time this week a week over week to klein in a week over week decline. Keep in mind you are 50 down on recount, down 50 on capital spending, 50 on price, and you are still up one Million Barrels a day year over year. Brendan what is most vulnerable to the high contract after the highcost extractions . Vincent those who do not have exposure on land are exposed to these long dated projects. We will year from exxon and chevron today about their projects. Gore gone, wheatstone. Gore gone is 90 complete as of march. Wheatstone is 60 complete. But you still have projects in that phase where the final Investment Decision must be made. These projects bring on output in big chunks, so over time that needs to be managed over the next couple of years. For exxon and chevron, the output growth has been anemic. In q2 for exxon roughly 4 Million Barrels per day of output expected in q2. For chevron, 2. 6 million. That is still rather anemic growth for these companies. Had that has been that has been historically the issue. Vonnie exxon has not been optimistic about the Oil Prices Going higher again, so the company is pivoting so its refining is more important. Can they make up for the loss of revenue from fruit . Vincent for the integratives in the case of the upstream for q2, you will see that wti and brent prices year over year are down roughly 40 some odd percent. That takes on a significant native a significant negative earnings pressure. The downstream segment provides that ballast. Vonnie forever or temporarily . Vincent co not enough to offset the downstream earnings side. Brendan is it more for the staterun enterprises . Vincent it is an issue for all of those who have deepwater and areas where it is tough to get to extract a hydrocarbon. Tom i am sorry not to bring it up earlier. Is there a formal call that we are going to see . Lewis we need to see supply and balance come back into balance over the next year or so but our expectation is that oil prices will stay low for a while lower than the market is currently expecting, to have that come into effect. Tom what is the Collateral Damage . Can you come back next week . Vincent i will be here. Tom Vincent Piazza with us today. Later in the hour, we will cover soulcycle. We need your wisdom. When you invest in soulcycle . Out twitter question this friday. Tom good morning, everyone. Bloomberg surveillance. Good friday morning. It has been one of the great long calls. The usual fed talk as well. My people talked to her people. We have a detente joining us on set. Scarlet fu is with us. Scarlet good to see you guys. Tom i am going to rip up the script. We have been talking soulcycle. There is no one briefing in the survey of there is no one briefing in the surveillance world that has done soulcycle. Since you abandoned us, you went and did soulcycle once. Scarlet i did it once a year and a half ago, and it was not fun. They were telling me to chant and say woo hoo. This was not fun is what i was thinking. Brendan would it have been more fun if the candles had not smelled like grapefruit but had smelled like orange . Scarlet i did not get it. Brendan i think perhaps you do not have the soul of a warrior scarlet. Scarlet i do not. Tom what angle do you take on Market Makers today act of scarlet today we will look at big oil. Chevron reports at 8 30 a. M. Are they going to announce job cuts cuts . We have already heard from chevron, shell bp. Exxon is exceptional because it has more cash and makes more money than other oil companies. Vonnie and it was one of the first that cut spending. Scarlet but there management is also very conservative in how they plan looking 15, 20 years down the road. Tom corporations even in challenging times still make money. Do you work every day in economics with the idea that the corporate egos of america has checked that the corporate he sos that the corporate et of america has changedho . Slewis one of the things i mind thats one of the things i find most striking is, what is their problem . The primary problem is making money. The kind of Investment Opportunities they see are not ones that require a lot of capital spending. Oil is the exception, where you have these big offshore projects and whether or not to allow big capital spending. Franco and google and whatnot the problem is that Investment Opportunities are ones that do not require a lot of spending. Brendan they are not sure whether to put cash in ireland or luxembourg. Lewis as an economist, if you ask me why Interest Rates are so low, one of the reasons is that check environment does not require a lot of capital spending. Scarlet we have a number of guests coming up today. I am most excited about jack rifkin. He focuses on all on alternative investment. Tom scarlet fu coming up in a bit. Stay with us this friday. Tom good morning, everyone. Bloomberg surveillance. Brendan greeley and vonnie quinn. The news today, without question, the headlines out of russia there centralbank adapts to Lower Oil Prices. I also note gold at 1080 per ounce. There is vonnie quinn with top headlines. Vonnie investors are suing American Express saying the credit card giant the suit was filed by a Union Pension funds. It says investors were not told that a deal with costco brought amax American Express a percent of its revenues. The new apple tv is a new improved settop box. It would be the first major change in the settop box since 2012. Demonstrators in oregon gave an oil company shipped a dramatic sendoff. The icebreaker left portland headed for the arctic. Protesters opposed the companys plans to drill off the coast of alaska. Tom it is a topic of the moment and the jokes have been made. The prospectus is great for purely comic relief. It is also about a speculation investment as well. Soulcycle is what rich people do within the urban landscape at a dollar a minute. Lou alexander of nomura Lewis Alexander of nomura spins at a reasonable fee. Others do soulcycle. I have never done it. Leslie has. She joins us right now. Scarlet has done it once, you have done it more than once. But when you sat down on the set, you made clear that this is an expensive product. Leslie i think they figured out a way to get people into the gym and get people to pay. A dollar a minute for an exercise class. Their margins are tremendous. They post 4 million on average per jim, per studio. Tom can they expanded out of six cities where everybody wears black . Leslie that is the problem. When i think about my friends out of kansas, are they going to look at Something Like that and say that is ridiculous . They need to expanded in order to capture market share, but the challenge for them will be the pricing point in the middletier cities, and their ability to get people to go. Brendan the other problem is that exercise classes are like social networks. They are notoriously faddish and there is no guarantee that when people are screaming to do now is what they will do six months from now. Leslie you look at Companies Like the Parent Company for new York Sports Club they are down in the stock market because there is so much competition. Tom we go to Lewis Alexander. Remember pilates . Did the Alexander House have a pilates machine going into the house . Lewis we did for a while, but now we actually cycle on the road. I do it at the gym. Tom you do not remember this. I remember when nautilus was new. It was like cosmic, elliptical and perfect. Vonnie the fact that it is an exclusive type of product doesnt that give it the cachet of exclusivity once it goes public . Leslie people if they do not sign on for their favorite instructor at noon they will miss it. There is that high demand, little supply. Once you expand the supply, do you still get that exclusivity . Tom i want you to sell Lewis Alexander on why he needs to do soulcycle. What is the experience in the studio . Leslie a few things. They make it like a party workout. I have fun music, dancing, highenergy coaching. Vonnie so it is zuma on a bike. Leslie it is basically zuma on a bike, but you can burn calories. Brendan there we go. Tom you are lucky you are on radio worldwide. Brendan i do not feel like atom is there anybody with gray hair in the studio . Leslie absolutely, and there are men in the studio as well. All the pictures are of women but men go as well. Brendan can soulcycle continue to innovate if it owns all of its jims all of its gyms . Leslie they want more home cycle experiences. Brendan i look ridiculous . I do not feel like a warrior yet. I have been doing this for a minute for those of you on radio, i am making a fool out of myself doing soulcycle. Tom the financial aspect that struck you in the prospectus . Leslie they are profitable and growing tremendously. They are growing at 50 topline per year. A lot of people thought that soulcycle was a thing may be a couple of years ago. Tom will someone buy them before they go ipo . Leslie that is unlikely. Tom is the roadshow going to be in soulcycle studios . Leslie selfishly, i certainly hope so. Tom leslie, thank you so much. Brendan i am physically spent. That was amazing. Vonnie i think you guys are better off imagining the rest. I never thought i would say this line would you invest in soulcycle . First answer no. Anyone can be an athlete a legend, a warrior, a renegade, or a rock star. Brendan i love it. Tom i think it is absurd. Renegade, leslie picker. Renegade. Vonnie there is nothing good to be said about the soulless riding a metal frame and paying for the privilege 21st century horror. Brendan amen. Vonnie third answer hearing tom keene and his twitter handle , say tap it back may be the highlight of my weekend. Tom i have to admit i probably have to go try this. Brendan please bring a camera. Leslie picker says please bring a camera. Tom can i run this on the bloomberg expense account . I will talk to my American Express Senior Vice President about that. Brendan for most of the segment, tom was making his i play hockey phase. Tom i do not get it. Maybe i will go to john tucker on bloomberg radio. It is a friday and there is a lot of laughter about soulcycle. There is some damage in this commodity route here in there will be second and third order beneficiaries with earnings coming out of chevron and exxon. The bank of russia said earlier this morning, flat out, this bout seems to be different than it was in march and april. Brendan you have a soulcycle class you need to go to . Tom is going to radio. Soulcycle will continue. In puerto rico they have 58 million due to be paid tomorrow august 1. 72 billion in total. That is going to be another ugly sovereign restructuring. We are already hearing the sound those being fired from both sides. We will watch that for the next year. Vonnie i am going to be watching something closer to come closer to home. The composite index comes out it a 30, and it is carefully scrutinized. Wage pressures looked at as. 7 of 1 . Lewis we think that is going to be very important. Brendan this is bloomberg surveillance and soulcycle report. Did you think we would be doing this much soulcycle today . Vonnie you cannot stop once you get started, brendan. Brendan happy friday. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and stephanie ruhle. Matt good morning. Im matt miller. Sacrlet im scarlet fu. Matt we have commodities challenge. It might not be good. We could see some big drops. Lets get over to vonnie quinn at the breaking news desk. Lets wait and see if there are any adjustments that need to be made. The analysts were looking for 1. 11. The second quarter, upstream volumes increase. That is an increase there. Refining results should benefit. We want to have a look and see whether refining margins can make up for Lower Crude Oil prices in the case of exxon