Transcripts For BLOOMBERG Bloomberg Go 20160316

Then Merrick Garland, very secondspected, on the circuit. And paul watford, on the ninth california. Of so you have an Indian American an africanamerican, and a white guy. Stephanie the republican pushback has been we do not even want to hear it. The fact that president obama is putting forth three candidates t should be acceptable there is so much strife in d. C. David he wants to say this is a respected person. All these people have been confirmed with bipartisan support. So he will say, i dont understand, you voted for them, and now you are against them. The number two part of the dynamic is saying you do not want to confirm at this time. What if someone like Hillary Clinton is named president . They will not appoint somebody who is nearly as centrist as these people are. Do you want to take number two or take someone that you know right now . Stephanie david, this is your house. You used to be part of the Supreme Court establishment. Obamahows if president gets this through, he is representing progress. One of the reasons we have seen if president obama can demonstrate that come it is a big problem. What is behindt door one or door two . Clearly, the Republican Party will try to spin this against him. How do they do that . David we should put up the pictures of the three we talked about so that you can see what they look like. Weekend with some fairly senior republican strategists who said the republican position may change, depending on who he nominates. They may have to recalibrate and say wait a second, this person is a reasonable pick and we can live with this person. Republicans. Jon i just wonder what that means for donald trump and he is not what many people consider to be the face of the Republican Party, so how does he respond. What does he tell his supporters . Has got a message for his supporters to how does he spin it . David it will be a fascinating question. Donald trump has been nothing if not unpredictable. I would not put it past them, depending on the nominee, on saying i think that is a good nominee. Stephanie if theres a question who is a candidate, who sits in the middle people have wondered if it is a clintontrump race, he you may see people gravitate toward clinton. If donald trump can say i am the guy in the middle who votes on issues and not with a party, it would be a positive for him. David it also could potentially put him on the side of saying i am fed up with washington gridlock. Part of the job in the constitution is for the president to nominate and the senate to confirm. Put them on the side of lets move forward. Stephanie think about all those people who support donald trump. They sit far, far to the right. What will they think . Matt miller, what do you think . Matt i do not have an opinion, i just want to show you market reaction. There is not much in futures, but here you see the 10 year yield has come down a little bit, so investors are selling are buying a little bit into the fixed income side of things. I also want to help explain to viewers you mentioned part of the Supreme Court establishment. To tellit is important people your experience there. David Merrick Garland i clicked with him on the Second Circuit and at the Supreme Court. Guy, a very smart and able guy, as i am sure all three of these are. These are very serious candidates. It is a reset for a moment. His pick for Supreme Court nominee, at the rose garden today, president obama will undoubtedly come out with an individual. Now i believe we are joined by greg store, our Supreme Court reporter from washington on the phone. Greg, we have been talking about these three likely candidates. Why dont you give us a sense of what this means for the court. Greg any of the three would shift the court significantly. You can see them as being close nominees froms president obama, kagan and sotomayor. At least for now, they are to the left. Srinivasan Sri Srinivasan spent time at the attorney generals office. That represents the government in front of the Supreme Court. Do you know who picked him, who hired him . It was ken olson it was ted olson. Who represents apple now and also represented president george w. Bush in the fight against al gore. Srihinks the world of srinivasan. Greg he is very highly thought of among republicans and democrats. To make clear, while ted olson was the solicitor general and hired him then, that was not a political position. The political position that he was in was in the obama administration, where he was the deputy solicitor general, and then he was arguing the more politically sensitive cases, including he argued a portion of the case challenging the federal defense of marriage act. Earlier tothan asked take us through the process. The president announces the nominee in the rose garden. The next step is trying to get hearings. I expect that the white house will orchestrate congressional summit demonstrate Congressional Senate democrats will orchestrate, at least by i think the white house will do everything they , and Congressional Democrats will do everything they can to make this person seem like a nominee that actually should be considered for the Supreme Court. , our that is greg stohr Supreme Court reporter, from washington. We are waiting to hear from the fed, by the way. Stephanie people are working overtime in d. C. Today. Matt we do not see a lot of movement in the futures market here, so s p futures are almost unchanged, as are the dow and nasdaq futures. Very Little Movement there. That is appropriate considering what we see the market due in the last couple of days and weeks. Take a look at the bloomberg. I have a chart appear, number 592. What you can see here is nyse volume drops to yesterday, the lowest volume day of the year, and volatility also drops to the lowest level of the year. So very calm market ahead of the fed decision, and do not expect a lot of action during the day either, until the decision comes out. Traders turnuter off their algorithms. What the fed usually puts out is too complex for Computer Trading programs to digest, and act on. So a lot of the big funds that are using these algorithms turn them off to stop trading. Stephanie it would be great to look at oil because oil was something that we did see up 2 yesterday. Surprised we will see this opec meeting happening. We are seeing some level of progress there. That is a positive announcement. Matt lets take a look at oil right now. It looks like we have a gain of 2 . We had backtoback drops for the first time this year, so the concern about iran has played into the price of the beginning of this week. E now see a rebound from oil we also see a announcements from clutter that they would have matt that is why we have a little bit of a rebound here. We also see a gain in the european market. You could connect them to the oil prices because markets have been so correlated. The cac has turned down, but little changed there. The dax is up. 3 of 1 . European markets have come down throughout the morning. Jon you could pull up Deutsche Bank very quickly. John cryan speaking in london at the moment. He says this year will not be profitable. This year will not be profitable. I think for many people that confirms what they expected for 2016, but a big headline nevertheless. Down 3. 9 as i see things right now. For those who said we are seeing stabilization, a turnaround, when you look at voices like that, the ceo of Deutsche Bank and ubs saying hold your horses, that is definitely a sober moment. Pull bloomberg up behind me and you can see what happened to the stock after john cryan made that statement. This isy a big drop or a live cash trade. Frankfurt is open. So Deutsche Bank is falling this morning, and the bank stocks are such heavyweight that they really pull up, they really pull down the indexes. Take a look at some of the stocks that we are watching today. Oracle came out with a profit that beat analyst estimates. Sales were roughly in line, but the component of sales that come from Cloud Computing was a strong gain. Stephanie that was always a question. Can you see oracle shift to the cloud . They have such a Massive Customer base. The question was, were they sitting in ancient times oracle makes that shift, that is a big positive. Matt and then you see Peabody Energy down 33 down a mere 3 . Raising doubts about going concern there, so possible bankruptcy. My producer said there are doubts about it. David the market cap is 74 billion. Couldthe equity holders lose out, and they have already lost almost all of their money. If you invested in this company at a thai, you have lost more than 95 of the value. Stephanie i like to end on a high note. Coming up, as matt just mentioned, a merger of exchanges being announced today. Boerse be the winner . We will be speaking with the ceo. Hanie julie this is the boomer business flash. It is a merger that will create a trading tighten. The german companys stockholders will own the majority stake. It may not be a done deal. Regulator still have to give their blessing. Charter to medications plan by e warner cable is about to commissions chairman tom wheeler is expected to circulate a draft order this week approving the deal to that is according to the wall street journal. The sec shares of sony climbed the most in a week after the company priced its Virtual Reality headset lower than rivals. It will cost 399. Its virtuals priced atlity has site headset 599. China has finished up with a premier outlining plans to cut back over Growth Industries in china, sticking to the target of six point 5 . You know they love those targets. His optimistic speeches left some wondering how substantive these plans really are. Here to break it down is Morgan Stanleys hagan of economic equities. What do these remarks set . I think they reveal what really has been the problem in china. There is a contradicted this has contradicted their growth target. Why does china have a growth target of 6. 5 . In 2010 they randomly decided they needed to double the gdp by the end of the decade. That has no basis in economic reality. The chinese economy is too large. For it to grow at 6. 5 , they have been tacking on far too much debt to make any path sustainable. Problems really been a with china, and why the last three to four years i have been relatively bearish about chinas Growth Prospects. David there is a lot of debt being carried on Balance Sheets that is not worth it. What do you think of his emphasis on reform . He says he will do reforms without laying off a lot of people. Is that doable . We were very optimistic on china in the 1990s or 2000 because they were doing the right thing. The 1990s. T china laid off millions of workers to try and clean up its bloated state enterprises. They have the capacity. They have shown in the past they can carry out major reforms, but you also had the tolerance of having a lower growth target in the mid1990s. And you 93, 1994. China grew at a slow pace because they wanted to achieve the objective. Today what is going on is, doubling the gdp by the end of the decade, having a growth target. They would not tolerate anything lower. It is like in every quarter you have to get we know that the economy is not even growing at that pace, but even just the effort to maintain this optical illusion, they are banking on record amounts of debt. No emerging market in history has taken on as much debt as china has taken on in the last two units. That is what concerns us. Jon lets get Deutsche Banks stock up on the screen. Deutsche bank now down 5 in german trading. Itn you have the ceo saying may not be profitable, let me read you the exact quote. We just dont know. Theres a lot of stuff we have to get done this year, but we are not going to be profitable. The stock down for 4. 9 . Talking about investment banks. A tough revenue environment, not just in europe, but globally. How is that going to improve this year . Are in a much weaker growth environment. Across the world, this has been the weakest economic recovery in history. It is not just a u. S. Issue, it is a global issue. This is the pressure that will keep a cap on equities in the coming quarter, given the fact that weve just had very little revenue growth. Stephanie we are watching the default probability yet again jumping. It was just a few weeks ago we were sitting at ecb and Deutsche Bank was getting hammered. We saw better numbers from other banks. Its not like theyve had a good year to start. Matt the shares down 5 behind me. David they lost the e off of the name. they cannot afford another vowel. , you can seen drsk the default risk here. It is minute. 5 . You can see it has come down a little bit here at the end as the share price comes down. Stephanie it is in the default space that you can trade such massive you can see this blowout today. Matt an interesting screen to watch, drsk. Jonathan whats really fascinating about this, we look through 22016, the ecb will come in and buy nonbank corporate debt. 2016. Ough to they could get paid if they lend a lot of money as well. It may not be profitable this year because they got so much stuff to do. Would it lookt like had mario druggie not stepped in last week and helped these banks . Sayingber sitting here this is a good morning and here we are five days later, ouch. David thank you very much for being with us. We will have the feds latest decision in a News Conference beginning at 1 00 p. M. Eastern time. They have agreed to merge this third time. A deal has been attempted. The merger would create one of the largest exchanges in the world. The ceo joins us now from frankfurt with more. Great to have you with us this morning. A lot of people turned around and said merger of equals. What does that look like . For those who say that does not exist, what do you say to them this morning . Thank you for having me. It is truly a merger of equals. We both recognize and appreciate each others strengths. The management team, the boards have come together through executive developers saying this is what weve done, reaching an intermediate result. Jonathan we looked at how Deutsche Boerse shareholders, what do you say to them . Setsthink the business between the companies are kopelman three and the growth that has been driven is deeply impressive and that has resulted in expansion. The business sets between the companies are complementary. Is extremelyon productive into the future and we both know that we must gain scale in order to be globally because we are roughly half the size compared to other houses in the rest of the world. Jonathan you will be a whole lot bigger after this. If youve managed to convince shareholders, how do you convince the regulator this is a good deal . What is the conversation you are having with them as we speak . Have there have been approaches made to a number of regulators already. Others will be approached in equal. We seek Regulatory Approval from many different authorities in the world who all have to contribute to this transaction to become successful. I believe, overall, it adds to price formation, price transparency, systemic stability. Many of the really important issues in the postcrisis and financiald architecture, so overall, we are very well set up to have those conversations in a constructive manner. This is a ringing endorsement of the city of london. If we wake up june 24 and the u. K. Has voted to exit the you, does this change the calculation of this deal in any shape or form . Carsten it does not. The transaction is valued creative and constructive and yourll the objectives met respective of the outcome of the referendum in the united kingdom. Irrespective of the outcome of the referendum in united kingdom. It will not matter to the transaction objective. Most people expect another player to come into the field. Are you willing to involve cash in the steel to make it happen should another player come in cash in this deal . Ten there is a player who has announced they might consider. They are looking at it. We are currently just occupied enough with spending our time on , whichrticular proposal is an all share agree to transaction by the boards of the respective companies. This is what we are considering right now. We will go stepbystep should anything else transpire. Jonathan i just wonder if you can improve that deal, would you have to sell assets to do that . How constrained are you buy the leverage ratio in the Credit Rating . Rsten really, we are not considering that at this very moment. I apologize because we believe the transaction we have tabled is extremely valuable for customers, shareholders, and manys, employees of our other stakeholders within of necessity to gain value the transaction in the terms of runup formation in the that comes as the vision of the Capital Market union within the Financial Markets. We are focused on what weve tabled right now and we will look at other things later. Jonathan lets talk about the regulators. If they get together and they are not convinced and believe you need to dispose of more assets, which assets would you dispose of . the group is stable and indeed has been stable in its form and shape for some time. The entity you are referring to has been on the Stock Exchange group for a number of years. And is working extremely well. Int gives me great comfort the contributions that this part of the group makes to the overall. In terms of any Regulatory Approval, i dont want to prejudge them. Arguments reasonable for this to be actually enhancing and increasing competition on a global scale. Finally, europe will be able to contribute a player who is actually competitive at a global level with some of the other players. I dont think this is going to be seen any differently by the authorities. This is a sophisticated and longterm process and we will await the results from the authorities and were looking forward to discussing with them on it. Jonathan carsten, the Deutsche Boerse ceo. We were talking about china earlier. You have a book coming out in june. The rise and fall of a nation. You continue to be been negative on china. To be negative on china. What are the Growth Prospects . Uk fed could cause recession around the world. They have enough resources to stave off a crisis. Their growth rates will continue to slow down. Is like aowth pingpong ball bouncing down the stairs. Ands basically going down you keep these in stimulus efforts in the middle which provide some relief. Maybe daytraders. The question people ask me, has china had a hard landing . I find it a silly question because the fact that the chinese economy was growing at 11 in 2010, cutting the growth to 4 or so, that is already a hard landing. This economy has already had a hard landing. Nominal gdp growth has slowed down from 15 in 2010 to 5 now. The growth trajectory will continue to slow down because is itsing as population working population is aging. You, head of emerging markets and global macro at Morgan Stanley investment management. Lets get a quick check of the news now. As weve been talking about, president obama on a collision course with Senate Republicans later this morning, announcing his pick for the Supreme Court. He called his nominee eminently qualified. ,mong those under consideration paul watford. Senate republicans have vowed to not consider anyone president obama nominates. We will have the announcement. Ive at 11 00 a. M. Eastern in north korea, an American College student has been sentenced to 15 years of hard labor for what the government calls crimes against the country. Last month, north korea says he took down a propaganda sign in pyongyang while on a visit. The United Nations says the start of a Russian Military pullout in syria has breathed new life into peace talks. Special envoy for syria says there is no new momentum in this negotiation. , thea has urged its ally syrian government, to be constructive. Im julie hyman. David . David a big day here. The president will tell us who he will nominate to the Supreme Court, but it is also fed day. Tom a big day because nothing is expected. We saw that with the bank of japan a few weeks ago. Theres always a surprise. I suggest it will come out in press conference. Eric schatzker will be in that room. The press conference can be enlightening. David a lot of nuance. Tom every word will count. No question about that. The bank of japan to the bombshell announcement of mario druggie if you days ago. Aghi a few days ago. Jonathan it has not had the same impact on the fx market. Weaker dollar. Tom weaker dollar, or turning dollar . Jonathan certainly not a stronger dollar. That is good news for the fed at this point. David you brought a morning mustread for us. maybe the price they used was in the economic system. Morning, aby this brilliant essay number of weeks ago. Rates therest focus should be on the demand side. Growth is impaired by a debt rejection syndrome that takes hold in the aftermath of a Balance Sheet recession. A nice summary of the supplyside solution in a culture of calvinism of america with the idea of fix instruments in the demand side. Be ting may david im hearing a global drumbeat of consensus that Monetary Policy is not going to do it. Stephanie weve heard it from Larry Summers and so many others. Fiscal policy has to be the answer. David growth has to come on the demand side. Why cant we get them to go in front of whatever institution and say for seven years, weve done this, we are theoretically and intellectually exhausted, heres the baton, take it. Jonathan its difficult in the u. S. With one government. Imagine doing it with 19 in the eurozone. David it has to come from productivity. You have to have growth ultimately from connectivity and that requires investment. Tom you have to link in policy prescription over to this thing called productivity. Theres a nonpolicy we have in washington. David thank you for coming over to share that with us. We will be covering the feds latest decision at 1 00 p. M. Eastern. You will be explaining it all to us . we will go to chicago. Randy will link in the Financial System into the economics. With banking a little light in and they in the f fire drill of valeant yesterday. David we will turn to politics. Hillary clinton 14 of five fives won four of states. The real drama seems to be on the republican side. Donald trump winning florida. Has 621 of thew 1237 delegates needed for the nomination. Took hisjohn kasich home state saying hes in it for the long haul. What could be the implications of their potential tax plans . We are joined by the president of the American Action for him and Gene Sperling American Action forum and Gene Sperling. We have a number of proposals, tax plans coming out of these republican candidates and im not sure we would be able to pay for any of them. If you look at the amount of money would be giving up come its in the trillions of dollars. Youve hit the nail on the head. These are progrowth, the ted cruz plan has a very aggressive rate reduction. Do lose trillions of dollars and i dont think they are realistic from that point of view. David would they be progrowth in your opinion . The right way to look at it is to build on the conversation you just had with tom kean. These can be part of a progrowth strategy but there is no Silver Bullet that will generate activity growth. You need tax reform and entitlement reform. Theres a lot of work that goes into being a successful progrowth president. At every point in the policy process, you have to balance of , whether atives social justice goal or some other environmental goal versus growth. You have to choose growth. It is having a philosophy that produces growth. Stephanie how important our tax plans at this point in the election . Jean cap to be part of an overall strategy as to who will tangibly improve the lives of middleclass families. Hillary clinton has to sting with herself as the person who on helpingcused middleclass families. Some of the plans by all of her in thets are the largest tax cut side weve ever seen. Taxtax policy center and foundation estimating Donald Trumps plan is 10 trillion over the next and years. That is hard to get your arms around. That is 1 trillion a year. Hillary clinton is looking at more practical things she can get done in 2017, both in terms of college opportunity, but on the jobs front, more looking at how the tax code can reward companies focusing on longterm growth, manufacturing, investing in jobs. She will try to focus on the tax code goal to reward people investing in the u. S. Gvid we should note that ene sort of supports Hillary Clinton. Doug this is a promise to spend 1. 5 trillion theres no prescription for growth anywhere in the clinton plan. It does not add up given the budgetary situation. I find it hard to say you are laser focused on it when youre undercutting the poor growth you already have. The fact that Donald Trumps plan would cost 10 trillion, does that speak to the fact that may tax plans are not that important to voters at this point in the election . Doug this has been a very policy free primary campaign. This has not been candidates standing up, talking about their tax plans or healthcare reform plans or regulatory vision, what they think about the place of the government and civil society. It has been a far less policy rich debate than that. David i want to push you along the lines that dog was. Doug was. Hillarys plan says lets tax a lot, particularly on the upper end. How would it drive productivity growth . Be the onelan is to to pay for the initiatives she has. People in taxes on the top 1 probably about 100 billion year. Responsible youve been talking about the need for strong fiscal policy. She has a very significant infrastructure plan. That can lead to the type of demand led growth, the tighter could lead tothat more consumer demand, higher wage growth. You are sitting here saying we left too much to the Federal Reserve and Monetary Policy, i agree. Thats why we promoted the american jobs act. The type of infrastructure plan shes talking about is the type of fiscal policy people are calling for. David we talk about infrastructure, what is that . Is that roads and bridges . What is she talking about . E a combination of more traditional roads and dealing with everything from making sure that you have highspeed broadband throughout the country to dealing with light rail for , more energy, renovation. It is a broad plan. T it would do is frontload invest in things that are important for productivity while adding more fiscal impetus in to have higher wage growth, greater gdp. Stephanie you want to help the middle class. We needed to see companies, not just the government create jobs. When you look at john kasichs , would you say he is the most positive in terms of who Corporate America would like to see take that seat . Doug yes. As ashown a great record governor. He managed to cut taxes and balance the budget and get the ohio economy restarted again. To be said for looking at a track record of success. The important thing is to recognize that we are at 4. 9 unemployment. The ability of demand strategies to drive growth is pretty limited when you are getting close to full employment. You have to be respectful of the supplyside. You have to have the. Roductivity investments in r d i would say respect is the thing we are missing most in terms of this overall election. We will take a quick look at valeant, continuing to take a beating after falling more than 50 yesterday. Coming up, what will it take to turn this company around . Ken ceo mike pearson do it . David im here in the green room coming up in the next hour is a special guest, tom preston. We will talking to him about the media, of course. Julie this is the Bloomberg Business flash. A big push into electric cars and self driving features. Harold kruger will broaden the range of lucrative luxury models to pay for the strategy. Moreans to come out with suvs and wants more versions of highend models like the bmw seven series. Prosecutors say there is insufficient evidence that setbacks are hampering prosecutors of highprofile cases. Oracle has reported fourthquarter profit that beat estimates. That oracle is making progress in shifting away from the traditional software. Shares are trading higher. Stephanie shares of valeant still falling this morning after dropping more than 50 yesterday. The selloff was sparked by an earnings call. Concernspearson faced from analysts over the health of the company. Discuss, a Piper Jefferies analyst. What has been your call . When 28 of the 30 analysts following valeant were positive, were you . No. Several years ago this company was built into what has become a neutral rating i cannot get my arms around the moving parts and i said i dont know what i dont know. I was at best agnostic on the stock. Increasingly negative, but still agnostic on the stock. Yesterday, what changed for me come the company had called into question pieces of the business that many had thought were previously strong. It seems that management no longer has a handle on the Underlying Health of the company and i thought that was particularly alarming. Stephanie you downgraded them yesterday. If somebody knows the company best come it would be like. Company best, it would be mike. David i dont think mike pearson is a new problem. The issues uncovered yesterday, some of them are not new, some of them were new. Has seen a series of missteps, series of controversies. The issues go beyond just one person. There are real structural issues of the company, it is not just that level, not just managed care access. There are concerns with the core business. Stephanie is he the person who can solve the problem . David i think he is part of the problem, but the issue with the company is they made dozens upon dozens of acquisitions of lower quality assets and then with the company has done is be extremely aggressive in raising prices of products and that is a strategy that at some point you knew was not going to be sustainable. Stephanie yesterday, he made it clear they would be able to raise prices again. You think no way . No. Stephanie theyve made acquisitions of lower quality products and do not have the money to acquire new businesses. What could they do . David tough question. There are no easy answers here. You have 30 billion of that. Now, you have debt covenants. Noise. Rs making more they cannot buy back shares or do strategic m a. You are stuck with a lot of assets that are questionable quality, you dont know what the growth trajectory of the business is going forward. It could be a slowly melting ice cube. Stephanie then are they an acquisition target for someone else . David i dont know. Stephanie its that bad . David it is that bad. Stephanie are they going to zero . David i wont say they are going to zero, but is there more downside . Yes. Stock down this morning. ,ming up on bloomberg all is coming to the equity markets. Is the bond market showing warning signs that we could see more negative news out of the fed today . We will find out, next. Jonathan this is bloomberg. We are just hours away from the federal rate decision. Economists say they will not raise Interest Rates. Matt miller is joining me for the off the charts segment. There are a few bright spots. Matt i want to highlight the fcon function on the bloomberg. A number of different financial indicators amalgamated into an index. , younteresting thing here can look at money markets, bond markets, equity markets and see how they are doing according to their mean. You can click comparisons and events and graphic grab the financial conditions index. It looks like all is clear in the equity markets as we get closer and closer to the fed. We have volatility that has come down and volume thats decided that subsided. I want to switch to the 230 spread. Worth what this means because not everyone understands. To me, the idea of paying more money for two years than for 30 years is insane. The front end is very sensitive to rates, the longer and very sensitive to what happens to Economic Growth and inflation. The twoyear yields have stayed static but the 30 year yields have come down and that spread is the narrowest since 2008. What happens when the long end comes down . Usually, that means a recession is coming. Chart very important. You can get the fed decision right here on bloomberg. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. When it comes to the fithings you love,. You want more. Love romance . Get lost in every embrace. Into sports . Follow every pitch, every play and every win. Change the way you experience tv with x1 from xfinity. Jonathan the Federal Reserve policymaking wrapped up today. Essay aboutnkers the recovery of the economy at the potential for rate rises in 2016 . President obama set to announce his nominee for the open Supreme Court seat. Tells itsank investors they may not make a profit this year. Jonathan welcome to the second hour of bloomberg. Stephanie a big morning here. Fed announcement. News out of china, Supreme Court announcement. Jonathan and another read on inflation and the housing sector later in this hour. A hefty fed date. Stephanie hopefully. David a hallmark holiday over here. Know tom freston will be with us. Lets go to the first word news with julie hyman. Julie i will say happy fed data john because its his first fed day as well. First fed day in the United States come in new york. President obama on a collision course with Senate Republicans. Later this morning, the president will announce his pick for the Supreme Court. He called his nominee eminently qualified. Watfordgarland and paul under consideration. Senate republicans say the vacancy should be filled by the next president. We will have the announcement live at 11 00 a. M. Eastern. Knockedrump has not marco rubio out of the republican president ial race. Rubio lost badly in his home state of florida and suspended his campaign. John kasich won in his home state. He says he will stay in the race until the convention. 621 delegates. Ted cruz has 396 and john kasich has 138. Hillary clinton won four of five states. 1561 of the 2382 delegates needed to become the nominee. Of itish chancellor osborne needs to cut billions the balanced budget he promised by 2020. He will try to swing the pill of austerity by calling for sweeping education reforms that include a longer school day. Matt lets take a look at features here. Change, i, little would call these indexes little changed. They have turned red on the s p end down since the Deutsche Bank news came out that they do not expect to be profitable this year. That took bank stocks down heavy in europe and has turned us a bit negative as well. S p. A look at the overall a note fromred by the head strategist at wells fargo. Shes been asking questions, maybe the dollar needs to continue its march higher in order to pull the s p along with it. That is contrary to common thought as far as the dollarequities relationship. She points out this chart. It does appear they start to trace each others steps. Interesting to think about as we are looking ahead to the fed. Eeting today if divergence persists, the dollar will continue to rise. If the fed says it will maintain we see some red arrows there. The dax has come back a bit. It is now up. 3 . There. Eavy stock let me quickly run through a bunch of a little cross asset check. 56 loss wed the saw. The 10 year always interesting to look at. Are the worst debtrming of all sovereign ahead of the fed meeting because people are concerned the fed will not interest raise Interest Rates now, they want to continue going on that path. Wirp, this shows that we only see a 2 chance as far as features are concerned of a fed rate hike here now. In june, that is when the market is betting it will happen. The market now expects a june rate rise. Morgan stanley does not expect it until december. It doesnt look like anybody in the markets thinks we will today. It is day two of the Federal Reserves first open meeting of the year. Frame theen will groups thinking. Let me start right where matt left off. The markets are telling us we should not expect any change in the rates. If that is right, what are the tea leaves we should be trying to read in the press release or press conference this afternoon . What should we be looking to . I would pay a lot of attention to what chair yellin says at ther yellen press conference. What we are going to hear is the fed is going to be relatively optimistic about the outlook for the u. S. Economy and will probably be signaling with carefully guarded language that there are still prospective Interest Rate increases later this year. Thought ratesally would go up three times, it is more likely that it will be to increases in rates over the balance of the year. As events here and abroad unfold in terms of how the economy has performed, what happens to inflation and so forth, those probabilities may change. Moment, that is the message we will get from the fed. There are some Interest Rate increases in our future. Jonathan a difference between ther the Federal Reserve and where the market sees hikes. Take me into an fomc meeting. Theres a big difference between Stanley Fischer and the governor its unusual for Board Members to have such differing views. How do those issues get resolved inside the fomc . Gary the Federal Reserve spends analyzingot of time the current state of the economy and its prospects and they have a variety of models that help them forecast the future. Including the future of inflation and whether the risks are biased towards the upside or downside. Unanimity. Need it is a contradictory situation because the u. S. Economy, putting aside the inflation, the u. S. Economy is performing reasonably well, especially compared to much of the rest of the world. Employment gains have been substantial, Consumer Spending has held up and has been relatively healthy. Etc. Ng seems fine, etc. , we are in a world of excess capacity globally and that seems likely to put a lid on inflation for the foreseeable future. That gives the fed a lot of because come if you take their dual mandate to heart, price stability and high employment and reasonable Economic Growth, they are achieving it. Is toick to policy now adjust policy in such a way as to maintain the dual mandate that they have achieved. When all is said and done, thats why there will be some Interest Rate increases, but they will be very modest ones. Internally, there will be a straightforward discussion of where they think the risks lie, but they will not achieve unanimity on that question. David lets go back to that carefully guarded language that will give us some indication of how this was resolved. What should we be looking at, quite specifically . Theytime, the fomc said could not predict where the risks were. If they say the risks are neutral, does that indicate there may be further hikes this year . Gary that would be my take on it, yes. Its interesting, the way things have evolved. Took the first modest step back in december. The first couple months of this concerns andere volatility about prospects in china. Most of those concerns have diminished. Not that the world is in a better place, but volatility has declined. A certain amount of confidence has returned. Policymakers more confidence and more leeway in terms of raising rates going forward. Stephanie volatility has to climb for the moment and the picture looks brighter today. Weve had a choppy, volatile year. Can we look to this one moment of quiet and calm and say things are ok . Gary oh, no. I hope i avoided saying things are ok. The message i was trying to convey was that things are better than they were a couple of months ago. That volatility could with could return. The fed will be at least as well aware of that as we are. The fed has placed a lot of emphasis on socalled data dependence. They pay a lot of attention to the incoming information on the state of the u. S. Economy, but they are far from blind about what is happening in the Financial Markets, the energy markets, etc. What is happening to economies abroad. All of that will weigh on any decision made going forward. On the other hand, if i were still a policy maker, i would certainly say im feeling better today than i did a couple months ago. Some of the volatility has diminished. Naive enough to dismiss the possibility will return. But at the moment, things look better on that front. Onathan if you put your dot the summary of Economic Projections in december, would you bring that down at this meeting . Gary no, i dont think i would. I think its always a mistake to overreact to two or three months of information. I actually think the u. S. We have a very sophisticated, fundamentally sound, flexible economy. Avoid largeers errors i think the u. S. Economy will do reasonably well. I would not be adjusting my view of that at the moment. Jonathan thank you for joining us this morning. We know gary will be listening closely this afternoon, hopefully watching our threehour fed special. Investorsank tells profit this year is unlikely. We will have that next, and more. You are watching bloomberg. Stephanie you are watching bloomberg. Deutsche bank may not turn a profit this year. The coceo says the bank may post a loss for the year as it overhauls its business and shares do not like it, down 5 in frankfurt. Joining us is Michael Moore in london. For a year that has already been a stumble for db. Ichael not just db you have the tough start to the year and also have some idiosyncratic events across the european lenders. Credits we sang this will not be a great year for profit. Saying thisisse will not be a great year for profit. Our place selling off businesses they dont want. Selling off businesses they dont want. All the ceos come in for the european banks, 2016 is their kitchen sink year. Jonathan a lot of people would say this is not news, Deutsche Bank has some problems. We know that. For the ceo to come out in march and say they will not be profitable for the rest of this year, what does that say to you about the state of affairs at Deutsche Bank . Uphael he will try to wrap some of these issues that have been hanging over their head for a while. Hes talking about wrapping up the legal issues on the mortgage front, on russia. Hes trying to indicate that a lot of the pain will come this year. The shareholders do not like it so far. Maybe the hope is that 2017 will be cleaner. Stephanie even after mario druggie came in last week and said im here to help. Draghi came in last week and said im here to help . Michael i think youve had a bit of a relief, but when you have a bad first quarter, it is hard to make that up in the. Rading business especially on the fixed income side, that tends to be the best quarter of the year. Ine you have that path january and february, that sets the tone for the year. Matt im looking at default risk and i want to give everyone a reality check. Started when everybody freaking out thinking Deutsche Bank was having a real issue because fixed income went crazy . The German Government is going to bailout Deutsche Bank if need be. Even if you look at the equity markets in the beginning of 2016, isnt it behind investors . The at certainly on 1s. Regulators have tried to address the fears on that front. Panic story of a and more of a longterm profitability story. Jonathan the mere fact that a former bank ceo has to sit on this program is a dont worry, the company will still exist. The fact that you have to discuss the existence of europes Biggest Investment Bank is a big deal. Lets get to the glimmer of hope. The bank has been slow to settle litigation issues. Are we close to settling them . Michael it sounds like he is pushing for that. A lot of bank ceos have cautioned that they are not in control of the timeline a lot of the time because its up to regulators. When you have him saying we been too slow in the past, that sounds like he will try to push forward. Jonathan the stock is down 4. 85 . The ceo saying we will not be profitable this year. Michael moore joining us from the city of london. The white house says president barack obama will announce his pick to fill a seat on the Supreme Court today at 11 00 eastern time. Specific. Nt to get earlier, he said this would change the shift of the court the nature of the court. Lets talk about business particularly. This court has a reputation for being fairly probusiness. What do we know about the three likely candidates, their position on business . He has represented business a lot in private practice, exxon, he understands business concerns. Garland considered the most moderate or conservative or the of the group. Fairly amenable to business arguments. Looking at them as a whole, this president is not looking for far on the left. David is that something the republicans have to take into account . Gregory they do have to take that into account. You know they will be looking at the politics of it. He would stand in contrast to what the rhetoric we are hearing from donald trump about illegal immigrants. Immigrant sri was a legal immigrant. Republicans will be scouring the argument, looking at the process. David they confirmed him by 97 to nothing three years ago. Greg what they will say is that was for a federal appears court seat Appeals Court seat. There is a president ial election coming up. The same thing with Merrick Garland. He had white support previously wide support previously, but times are different now. David go to the court and whats on the docket right now. What are the issues in front of the court that this could affect . Gregory there are couple of classaction cases before the court. You could area where see the next justice really making a difference. Weve seen the court be divided 54 with conservatives winning in previous classaction cases. Same thing with arbitration. That is something the conservatives put in place by a five justice majority. The next justice could shift and make it easier for consumers to avoid arbitration and sue Companies Directly in court. David thank you for joining us. At 11 00 a. M. Today, president obama delivers a statement, announcing his nominee to the Supreme Court. Stephanie time for futures in focus. Gold trying to bounce back after suffering its biggest threeday loss since early november. My next guest expects a volatile session. Rjo futures. You think we will have a rocky day ahead of fomc . Philip definitely. Weve had a near storm since the start of the year. Negative Interest Rates become a norm out of several different countries. The last time the fed met, we saw them raise rates. Theres no indication they will do anything over the next couple of months, but we are looking for a hand towards that. The ecb cut their deposit rate last week. If you look at japan, they had an option of 19. 4 billion in government bonds. Confiscation seems to be the chatter around the gold investors. Technically, gold prices have had a setback of the past five days. To 1284. Runup the likelihood of whats going to happen here today and gold ation, we will see what wide range once the statement is released and a consolidation pattern. Weve also seen holdings in etfs backed by gold reached their highest level since 2014. What does that tell us . Philip five days ago is when that highest level was reached 1287. E hit that weve come off quite a bit. These investors are getting bored and nervous. We seeing key equities that have been hit. You will see a small etfstioning in the gold here in the next week or two until we can get the fed back on track as to when the next rate hike will be. If they lean towards a june or july or august or pushing out to december, thats when the next positioning occurs. Stephanie thank you for joining us for futures and focus. , the former ceo of viacom, tom freston joins us to talk the business of media. Vice, viacom and a whole lot more. Futures in the red ahead of a big fomc day. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. When it comes to the fithings you love,. You want more. Love romance . Get lost in every embrace. Into sports . Follow every pitch, every play and every win. Change the way you experience tv with x1 from xfinity. This is bloomberg , about 60 minutes away from the markets open. Futures little but softer this morning, s p 500 futures at down about two points. Off theeurope, the dax high, a third of 1 , with Deutsche Bank slammed down around 4. 5 . There is your move across assets. We go to the other Asset Classes. A t1 on budget day, a weaker pound. Yield just pushing higher as we get some breaking data in the u. S. Out, we are getting cpi inflation data that is better than we were anticipating. X food and energy, year over year, 2. 3 . We were looking for 2. 2 . We also have Mortgage Applications down 3. 3 . Housing starts a little better than expected at 1. 7 8 million. That is better than expected, but i am going to say that inflation is the most important data for us to look at because it is a fed day. Havea look at the chart i as we sort through what is going on in market reactions. Have draftedand i over the past five years. Look at how much higher we are now, then the 2 . 2 . Han the lets go back to the cross asset check and look at some of the indexes and assets. Dollar and euro and s p futures. If they are data dependent, it looks like the fed would have to move. S p futures moving a little lower. You see the 10 year spiking a little higher, getting closer to 2 as people selloff bonds and we were talking earlier about how u. S. Treasuries were the worst performers of all sovereigns that we were watching. Jonathan it is interesting to look at the front end because that is whats going to happen with rate hikes 2016. One fulle to that percentage mark on the u. S. Twoyear and looking at this report, another surprise the pce core year on year kicked up to 1. 7 . That debate that is going on right now inside the fomc. Sally fisher versus the fed governor over whether inflation pressure is starting to serve that starting to stir. I would say the cpi do we get this morning, that the pce core year on year we got as well, that data is fueling the pressure cap i had of todays fueling the fisher camp ahead of todays decision. David we are starting to see it. Matt one of the things john and i were talking about what the yield curve on the lightning of twos and 30s. En of twos and 30sing. Int that was to be careful trying to keep the front end down, but they cant do that if investors continue to sell off bonds. Jonathan thank you very much. Lets go to julie hyman. In north korea, an American College student has been sentenced to 15 years of hard labor for the government for what the government calls crimes against the country. Last month, they set down a propaganda sign while on a visit. This comes as the u. S. Has been ratcheting up the pressure on north korea. The second largest subway system in the United States lows all day, today. The washington metro will conduct a Safety Inspection after an electrical fire in a train tunnel. In brussels, police searched houses throughout the night, part of the investigation into the paris terror attacks. Theyre looking for two suspects who fled an apartment after a Police Sniper killed a third suspect. Matt lets take a look at some of the discussions surrounding the fed. Goldman sachs has come out with a list of 50 stocks that they believe will benefit from increased rates. The chief u. S. Equity strategist wrote in a recent note, higher rates should benefit u. S. Bank equities, boost the dollar and support newly rebalanced baskets of strong Balance Sheet stocks. Leverage inporate the forecast of continued or oil price volatility. I went through the list and i look at some of the strong Balance Sheet stocks. A few that caught my eye, facebook was one because it has for warmed so well over the last 12 months. It is already up 40 in the last year, up about 5 . It has the strongest Balance Sheet of all the stocks that he was looking at. There were a couple that you might have found interesting. Monster beverage was one of those. At the top of the Consumer Discretionary list. Here is a one year, down 5 . It is not up year to date, either. The other thing that i felt was interesting was valero. Also a weak performer and in the oil patch, it is interesting. The note also said we can see benefits of these stocks from increased oil prices, which we have seen over the past few weeks. Today it is back up. I will continue to parse through this note and pull things out of it. Total 8. 2 billion and a debt is 7. 4 billion. They earn more. Valero has a strong Balance Sheet as well. Matt some of the refiners have been doing well. Almost all of the stocks in the energy patch where refiners. David we will be talking about the fed meeting throughout the program. I want to turn to a very special guest. Tom freston has been on the cutting edge of media since he helped create mtv. He went on to become the ceo of viacom and is now the principle of firefly three. Meantime, i can the ranch, viacom stock is down over 35 and is trading below where it was when tom left, 10 years ago. Putting aside how we got here, what would you do with the viacom assets today if somebody turned to you and said here it is, go with it, what would you do . Keepingave not been close track of them, but they have wonderful assets and they have a big catchup game to do. They dont really have a footprint in the Digital World and their audience are the canary in the coal mine raleigh trends that are happening in media. I think they could use a good creative rejuvenation and i think turning back on some of the stock buyback that theyve done. They have spent over 12 billion on stock buybacks rather than buying companies are investing in new enterprises that could help them migrate to this new world. Stephanie m a is the answer. They are so far behind as far as new media, they cannot row it themselves . Them to growrd for themselves out of this, organically. Youve got incumbents and they are an incumbent and a new entrants are so well balanced. The path of least resistance would seem to be to engage in a little bit of m a. David it is not just m a, it is the right m a. Viacom, people were upset because you missed out on via on myspace. They got out of vice and you went into vice. Tom idea i did a deal with vice 10 years ago. Spike jones came to me and had the paste jackass in and he had this vision to get online video. He said youtube was starting and they wanted to be an arms dealer for all of the new online outlet. We created a 5050 partnership where we would fund their production costs in exchange for 50 equity in an enterprise called vbs. Tv. That later migrated to vice. Com. That has been held by a pornographer, but in the throes of murphy, prices went down and we captured it. James a smith bought a 50 share back and they have a devaluation now 4. 5 billion. David you are an investor on the board. Stephanie clearly vice has some special sauce. Is there a risk that they will get to big . Oprah had a special product. When she stepped out to build their own network, it was difficult to do that on a bigger scale with so many slots to build to fill. Tom we are ready have a bigger platform and the fact that they launched a tv network a couple of days ago is tangential to their entire medium. Ofy have a whole suite Digital Services that operate around food, fashion, they have a huge deal with Home Box Office not only to create a weekly newsmagazine, but to do a daily news show. They have 50 of their business outside of the country. Their move into Linear Television was taken with a different set of assumptions. Look at this as a way to create a content creation engine. Use that money to make longer form great contact content that we can sell overseas and distribute online and we will have a Television Business and the network itself we dont have to worry about cutting our ad load. It is only going to have half the ad load of a regular network. Stephanie do you consider it news . Vice has a lot of creative license. Whats there in the official news business, will they be treated with the same scrutiny of established News Organizations . If cnn gets a lower third wrong, 70 gets fired. Somebody gets fired. Vice does not consider themselves untouchable. They will be held to the same standards in the news business, yes. Most of their enterprise is not about hard news, but we will be launching a daily news show on Home Box Office and we intend for that to have the journalistic integrity of any News Organization and we have been hiring people to help us do that. David we will get back to you, but we have breaking news out of the u. K. Matt we are seeing the Economic Growth forecast cut to 2 from 2. 4 previously. I wonder if you can pull this up and take a look at all of the headlines we are seeing. George osborne is the one cutting forecast on u. K. Growth cutting forecasts on u. K. Growth. The chancellor puts out his budget around that, this forecast is. In line with the forecast of the bank of england. Was interesting today is the chancellor has said several ,imes that the world paraphrase, is a scary place and that what is important is how we respond to that. At the moment, he is responding with a fiscal problem that policy, said to cut even more, today. Is also saying that he is predicated on staying in the eu. Want assuming you dont to comment on that, lets go back to viacom because the challenge viacom faces is one faced by all Media Companies right now, how do you get to digital and strikes me that disney and hearst are partners of vice. Is that the way to do it or do you need to buy that out right as opposed to taking a limited position . Hearst have been great examples of traditional Media Companies that have been able to deploy their assets into the Digital World, even with acquisitions like they did with maker or investments in ventures such as vice. David is maker a good investment for disney . Am it has allowed disney peak into that world, the interesting world of social media and what is going on with that particular type of audience, so the learning they got from that were are getting has been very valuable to them. There is usually a long line of people who are ready to invest in the movie business, no matter how the economic and it looks like there are these Chinese Companies that look to take state that has already happened, but i dont have any inside information. Stephanie you see value ther e. Tom there is always value in a movie studio. Stephanie we will be back with a lot more. Tom freston staying with us and talking content. Matt coming up, i take on Stephanie Ruhle in battle of the charts. David futures in new york, we are 15 minutes away from the open of the market. Now a major shift is happening with content creators. Here is very killer on the program, earlier this year dillerller barry on the program, earlier this year. They will pay you a nice salary and cents neither of them have anything to do with ratings, no matter how big a hit you are, you can only go so far, so for their producer, they are getting jobs, but, there are no independent Production Companies they essentially dont exist anymore. Tom freston, former ceo of viacom is with us. Do you think you are out in hollywood doing these things, are independent producers essentially gone because of netflix and amazon . Tom i believe this is a golden age to be a seller. At the top levels of talent, there is only so much talent the goal around. I think there is a Bright Future for independent Production Companies, like Imagine Entertainment as an, ron howard and brian grazer, two oscarwinning folks, they have a great track record reading content and i think they will find a healthy demand for ideas that they have, not just with the Traditional Networks as they have done in the past. It is an amazing time in hollywood, right now. Dont the actors work, i i own a camera truck, a secret investment of mine. Special place to hang cameras in this thing used to be busy 20 weeks a year and now it is busy 50 weeks a year. The veryseasons best people are getting great work, so Binge Watching the show, these of the people that made deadwood, the wire, some of the best dramas on television, they are working for amazon. Theyre working for netflix. Amazon is spending 2. 6 billion this year on content. David but who owns the rights is the question . Talking about price, you said you would create a lot of content, vice would own the rights so they could exploit that content worldwide. Tom netflix has done deals were they will license things and then the rights revert back to the owners. With dreamworks animation, they ordered a thousand episodes of really high quality kids animation, a brilliant move for netflix to have exclusive programming for kids, but after a while, it does revert back to dreamworks and comprises a whole new Television Library for them. Stephanie given the move we are seeing, more and more content and outlets, or is no argument to be made that linear is dead, we are just watching more. A successfulng program is a game of chance, but of could argue that game chance is tilted toward the online ott folks. Time. Nie one more tom behavioral information on their user base. Amazon does everything you buy, everything you have been watching. Stephanie amazon is in a better position than nbc who has had focus groups for decades . Tom tom they have already won emmys tom they have already won emmys. Development talent is fungible. Importantly, they are not subject to ratings has pressures. They dont have to satisfy advertisers, so shows can develop over time of audiences without the fear of being canceled after the first three or four episodes. Is e network can do they have a dvr functionality. Every show is going to be someones favorite show, there so show soay so show. It is a very different business, amazon david thank you so much for being here. Tom freston is staying with us. Final thoughts, coming up next. Stephanie special morning with tom freston, in election year, we talk about young voters and the power of millennials. Youre one of the godfathers of mtv, does it break your heart that mtv doesnt even have a seat at the table anymore . Spend 25 years working someplace and you see its fortune whether a way, it hurts. You like to leave a company and see it prosper and do well, but they had some rough hatches and have not been in the zeitgeist. Stephanie why . Tom there was a creative drain at the company. David can it be turned around . People love a second act or third act, i would not be it is too late for anybody, but it will require some ingenuity and smart investment. It is a real catchup game for them. Stephanie should they have bought vice . The generalist the generational change of adf, vice is basically what they do, it wouldve been a wonderful thing for them to have in their portfolio. I cant tell you why they didnt, they sold a half sold off half of the video business that vice would have become a large part of. An. D murdoch is in. Tom trying to buy back stock, keep the price high, but the whole world around them stephanie thank you so much for joining us. Special guest tom freston. When we come back, we look at Stocks Holding steady ahead of the fed. That is next. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. When it comes to the fithings you love,. You want more. Love romance . Get lost in every embrace. Into sports . Follow every pitch, every play and every win. Change the way you experience tv with x1 from xfinity. David u. S. Futures little changed as the investors wait to hear the feds decision late, today. Shares of Deutsche Bank falling after coceo says he does not expect the bank to record a profit this year. Chipotle is estimating a firstquarter loss. David we are just under 30 minutes away from the opening bell. I am here with Stephanie Ruhle and jonathan ferro. Happy fete day, or we hope so for market investors. Here to help us break down the next hour, eric stein. Not a deep shade of red, but we are seeing 7. 5 points off the futures. That wasi data out better than the market had anticipated. The fed looks at core pc the two are correlated strongly and i have a chart if you dont believe me. I will show you a different chart, this shows how markets have gotten up until the fed rate hike. Volume on the end. The biggs has fallen to its lowest point in the year. Up my cpi pcering chart because i feel like there are some people over there who dont believe me. I used in hs screen and correlated the two. 0. 82 . David well done, pretty correlated. Had a little bit of rocking us in the european markets, we are now red across the board. Deutsche banks john cryan cannot and said profit this year . Not necessarily. Stephanie it is only march. We are not yet finished with three months of the year and yet that brought down bank stocks across the board. The ftse down as well. Despite gains in crude oil which is also highly correlated to 36. 98 still up 1. 7 at because of the meeting announced in delhomme. We all lost almost 6 from the price of oil in the last 10 days. Lets take a look at gold. When people get freaked out, especially around centralbank action, they tend to run to gold. We see very little changed right now, but it is the volatility and the centralbank action that drives gold to make more purchases, so maybe we will see that it up. The euro is interesting to watch because if that diversions continues and the fed says it is continue repair to continue raising rates and youre at the ecb and japan going negative or more negative, you can see this trade turnaround. We will watch fixed income from the front of the curve to the end. Two, thear approaching twoyear approaching one. They will continue to cover these things up until and beyond the fed meeting. Lets go to first word news with julie hyman. Julie president obama is setting up a showdown with Senate Republicans. He will announce his pick for the Supreme Court. Three u. S. Appellate judges are among those under consideration, no word yet on who the pic will be but the president says his choice will be eminently qualified. Senate republicans have vowed not to consider anyone he nominates. It is a vacancy created by the death of Justice Antonin Scalia should be told by the next president. We will have his announcement live at 11 00 eastern on bloomberg tv, radio and bloomberg. Com. Donald trump has dark not marco rubio out of the president ial race. Donald trump 13 states, yesterday, marco rubio lost badly in his home state of florida. For john kasich who wanted new life for john kasich who won in his home state of ohio. Ted cruz has 396 delegates. On the democratic side, hillary won four out of five states against bernie sanders, it is still a close race in missouri. Jonathan it is time for the three stories that matter to markets. Counting down to the open. Number one, stocks stable and the dollar rallying ahead of the fomc decision. A reminder that we will bring you the fed decision and the coverage begins at 1 00 eastern on bloomberg tv and radio. Eric, good to have you with us. The spread between what the market expects any Federal Reserve expects, a lot of people expected to be resolved. Eric thank you for having me, i think we will eventually meet in the middle. There is a lot of talk and the market that if you look at Market Expectations versus the fed dot plot, there has been this diversions and the fed did have that one rate hike, but not as aggressive as dot plots from a year ago. I do expect the fed dot plot to come down a little bit, marking it to market, but i expect that the fed is going to hike rates faster than the market is currently expecting. Stephanie the best place to see that dot plot is on the bloomberg terminal. Matt thank you so much. I have been waiting two hours o. R us to mention dot g the question is obviously, do these dots move lower or does the market expectation move higher . How do these come together . Eric the market is expecting some decline in the dot plot. If it comes down, that should move the market down. If anything, the market will look at the dot plot and what janet yellen says in her press conference. We will ultimately get some convergence of the bank rates and the dot plot. People think the dot plot is what the feds outcome is, i think it is a best case scenario, if things go as expected which is generally fairly optimistic, that is where they would like to move rates. Matt how would it be if a Federal Reserve governor said things will be horrible in the economy a year out, in two years even worse. Eric they would lose their job, it will become to communicate with markets. That is part of the challenge with the dot plot which is how do you communicate the distribution around your model. By extension, their market to market based on what is happening in the u. S. Domestic economy. I raised that point because we just had core inflation come in at a four year high. I know they track core pce but it has been ticking higher as well. Is i wondern whether the data at this point backs that up. Eric i think it is a combination. A combination of what is going on in Global Markets and u. S. Data. When the fed finally raise rates, people said it was crazy. Others look at the u. S. Domestic economy, the labor market with pressures in court pci and said that we should be raising rates faster. The feds put the difference and said lets raise rates but do it slower. Lets turn to the number two story, oil is rallying after its biggest twoday slump and a month. They will resume talks on capital production. Oil is moving up, this is my question, should i care more about the level of oil or the volatility . Depends. Consumer of u. S. Gas, you are probably loving the lower oil levels. If you look at highyield bonds Energy Equities or emerging market bonds, things that have relationships with price of oil, it is probably volatility. Stephanie are you in part of this lower for longer camp . Eric i am, there is a big supply response. They are caving a little bit and maybe they want to put a floor so where, but the supply curve in oil is very different. Over the past six weeks, if that continued, as u. S. Shale become economical at three dollars a barrel . That number will start to fall that numberf 2014, will always continue to come down. Knew i waseverybody going to hijack number three because i have to cover the story. Marchhe bank ceo in saying this year might not be profitable for the firm. He made those comments at a conference in london. Shares of Deutsche Bank are falling in frankfurt, clearly a negative response to. Us the board. Is this what the whole european Banking Sector has looked like . What the whole european Banking Sector has looked like . Eric u. S. Banks raising capital in 2008 and 2009 and european banks kept deferring that and that is part of the reason they are not as good not in as good of shape as the american banks. Mario draghi tried to finesse it to help the Banking Sector. Jonathan i find this fascinating because if you look bottom up like things are not great at Deutsche Bank with revenues dropping in every Single Division and the ceo is forecasting they might not be this is a time where credit spreads really titans really tightened. The Banking Sector has its own challenges. Deutsche bank probably has its own specific challenges given things going on, but broadly speaking, what the ecb did last week is very good for european Capital Markets, european credit markets. You own those bonds whether you are an investor or whether you are a bank that has some of those bonds on their Balance Sheet, you should do well based on the ecb policy action. Stephanie those are the three stories that matter to markets. Eric stein of eaton vance sticking with us for the hour. We have much more on bloomberg. Bringing dutch real numbers when we return. Matt lets take a look at a couple of stocks before the opening. Oracle came out with these sales cloudin line computing sales were better than expected and as a result, oracle is up one and 3 in the free market in the premarket. Industrial production, let me ecogo. The code go Industrial Production is down half a percent compared to. Predictions weaker than had been anticipated. Newsheless, the economic that is by far most important cpi and how day is that fared, 2. 3 stronger than 2. 2 estimate. You with my hs screen, cpi in white, i have grafted against the core pce because that is what the fed looks at. This is core pce. You can see that they are coordinated correlated. Strong correlation, if the feds data dependent and unemployment is below 5 , and inflation is going up to its 2 target, it would have to raise all the cpi pce is not quite there yet. Thread want to quickly touch on Deutsche Bank, yes i do. Deutsche bank shares coming out today and saying that it is not expect a profit david we are back with bloomberg. We went a little abruptly away from matt miller. There are things called gremlins thicken into the system and one got in and decided to go in a different direction. We will talk about emerging markets that rally at the beginning of march but are now paring their gains. Eric stein is with us, so where are we with this cycle . Eric our viewers need mans, we are for countries that improving, countries that are trying to do good reforms and improve the supply side. We see some countries doing that, like india or indonesia. I would not say we see every emerging market out there trying to improve, but it has been a good year and i bet most investors would not expect is there enough liquidity in Something Like indonesia in a year where liquidity is paramount . Eric if you are trading with indonesian local bonds, unlike bonds, they trade like a highyield or u. S. Investment grade corporate, they trade on the interdealer market between banks and the u. S. Indonesias local bonds traded at a local markets, you trade with local pension runs and local investors Pension Funds and local investors. Local emerging markets, new Liquidity Sources are developing and you are not just trading the same way you would with dollar bonds or other u. S. Credit products. David tell us about Structural Reforms. We hear about it in emerging markets. Where are they in Structural Reforms . Eric i would not say indonesia is perfect, but if you go back to the summer of 2013 with the socalled paper tantrum, and a lot of countries with tantrum that the deficits got hit and if you are an emerging market investor like us, when countries get hit, it puts pressure on them to do reforms. Indonesia has done some reforms, they have cut subsidies, there is lot of economic nationalism that we dont like, but that is decreasing in indonesia. Even if a country is not perfect, if the policies are getting better, asset markets can rally. Jonathan those people listening to this and i have scared about what the Federal Reserve will do, but the political situation in each individual company each individual country. Where do you think political stability supports that asset class . Eric a phase like india is perfect. The Prime Minister has not been perfect, generally speaking he has a lot of support and has gotten a lot of reform done. When he came into office in 2014, we see a big rally since then. It has not been a straight line, but india is a place that is significant more stable than it was years ago. Stephanie when you look at china, those who want to invest but are concerned about things slowing, how does one invest but also find a suitable hedge . Eric we take short positions on the chinese you want. This was a big focus of markets 201516, also august of when the first devalued the currency. People are less focused on the chinese currency weakening, but it still has to weaken. That currency is overvalued visavis the u. S. Dollar. David do you always hedge when you invest in emerging markets . Eric not always. We look to up invest in risk factors that can be currencies, Interest Rates, sovereign credit spread, and we can go long or short. If we want duration exposure, we will buy a bond or hedge the currency. David but then your trade is a hybrid. Eric it can be. We think the best way to invest is looking at risk factors. Bonds are just throwing risk factors together. Why would someone say they want brazilian credits for exposure and u. S. Treasury exposure . They are very different risk factors. Jonathan what is the best way to shore up the chinese currency . Eric cnh markets doing a deliverable forward. That can be a lot of bids and options, so the simplest way is shortening the cnh. Jonathan we sell it happened a couple of months ago, you can get with sword without even seeing it coming. Eric if you think about our strategy being long and short, you will have long positions that are hopefully making money as emerging market currencies are rallying and the dollar is weakening that we saw over the , chinese yuan happened to be reality rallying so the short position loses but the long position makes money. David you have a very powerful referee in that business. Eric it is a risk when playing in the chinese markets. They want to play games with the markets and that is certainly a time, theyt the same want a weaker currency, they want to move to a currency that is not pegged to the u. S. Dollar. Jonathan eric stein will be sticking with bloomberg. Five minutes until the open at nyc. Matt lets start in europe because the interesting equity story is really on the continent. You have markets turned it, now you have them turned up. A little bit of with saw action. Qualify, they dont post a profit this year. Unchanged, that ftse came down about half a percent. Seven ook at as sex look at sx7e. The banks index is the biggest weight on the stoxx 600 and the stocks 50 indexes. Euro, the the interesting thing is going to be what janet yellen says about the path for Interest Rates if that continues higher and if she indicates they want to continue marching higher this year, you may see more Euro Weakness because the diversions playing out, other Central Banks going negative, the u. S. Going higher as the dollar, that could be good for stocks. I will pull up a chart that i made earlier, Gina Martin Adams said at the dollar goes higher, we could see stocks going higher as well. That is contrary to common belief, but the chief strategist at wells fargo has a pretty low target for the s p this year, the Second Lowest on a completely lowest. Lowest. He billy or the completely lowest. Jonathan we are counting down to the markets opening and the fed decision. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. When it comes to the fithings you love,. You want more. Love romance . Get lost in every embrace. Into sports . Follow every pitch, every play and every win. Change the way you experience tv with x1 from xfinity. Jonathan this is bloomberg and we are 30 seconds away from the opening at nyc. Futures a little bit softer in the u. S. Futures on the down jones feet down by 30 points. S p down six. Deutsche bank drive dropped by over 5 , the ceo saying they may not be profitable this year. There is the opening bell. As well as lets say i am an ultrahigh net worth client and i give you the call. I want to know, does this matter . O me simon not really, it is why Interest Rates are going up. It is actually a good outlook for your broader business and in full your portfolio. 1 growth in gdp prizes finally taking up, the u. S. Economy and whether Interest Rates about 25 basis points. Above 25 basis points. David can the u. S. Shoulder the rest of the world . Simon europe is in cyclical recovery and we have extraordinary support. As long as the u. S. Is not deep destin get into recession and bring the world with it, it is a decent place to be investing. Eric i would agree, the rest of the Central Banks in the world, the developed thing whether it is the ecb or the bank of japan, even new zealand had a surprise rate cut, so that is supported for growth and we are seeing cyclical recovery. If there is one thing that might derail the u. S. Economy, it would be internationally focused. Stephanie isnt that the issue for janet yellen . What data should be should you be following . What is Janet Yellens real mandate . Eric it is u. S. Price stability. Stephanie we are not in a vacuum. Everythingusly, so affects the World Markets and World Markets affect the u. S. Hold that thought, we will go back to it, lets find out what is going on in the markets right now. Lot ofhere is not a volume or activity in equities right now because traders are sitting on the sideline waiting to see what janet yellen says. We have red arrows across the 22 points dow is down right now, the s p down 2. 5. 1. 99 , lets put this in perspective, Morgan Stanley says we are going to 1. 45. That bank also think it will not see a rate hike until december. Take a look at my terminal and you can see that the market expects a rate hike in june. This is world interestrate probabilities, w. A. R. P, only a 4 chance of a rate hike now, but he 56 chance but a 56 chance in june. If you look at the graph on the bottom, you can change the date and add or remove different series. Ive put in june and im only looking at one Interest Rate hike and here, you can see that just a month ago, we were looking at a 6 chance of an Interest Rate hike in june. Now we are looking at a 56 chance of a Interest Rate hike in june. Great function to use if you are following what the fed does. Take a look at some of the Asset Classes that move equities. Them, 36. 46 a barrel. There will be a meeting in qatar. We had a bit more pessimism the last couple of days because all of the increase production coming out of iran and if you look at Global Production outside of the u. S. , it continues to climb higher, so that does not help supply demand very much. Metal that precious has really rallied over the last few months, entered into a bull market but appears to be calling ing down. Alm you dont have volatility you had a few weeks ago and it is not quite as exciting as it had been. Currencies here, if you continue to see diversions, you will see a weaker euro. The market may be prepping for at least more hawkish statements from janet yellen if not a move. Been very trade has interesting and you can see a little more weakness in the japanese yen as well as the euro. Lets good abigail belittle live from the nasdaq go to Abigail Doolittle live from the nasdaq. We will see some tight week and see trade ahead of the fed decision. One stock on a clear direction is fossil shares. Company shares are lower after a downgrade. The company is facing all kinds of headwinds in 2016, including rising accounts payables, inventory backlog and as a result, estimates have been taken down in 2016 and the price ,arget has been lowered to 34 suggesting that fossil may drop down to recent lows, squashing turnaround hopes on a stock 2015 onorribly in a stock that performed horribly in 26 2015. Stephanie lets get back to simon and eric. What exactly is Janet Yellens mandate . We know what the title is, but she does not operate in a vacuum, she has to be aware of the Global Economic climate. Mandatehe has a job insofar as the economic climate affects the job mandate. Of january, the International Climate and what was happening with oil prices and european Financial Systems. What is happening with respect to fears of china were impacting her job mandate. Fastforward to today, Credit Conditions are not tighter. The u. S. Economy is showing remarkable robustness and sitting where i sit, the u. S. Looks ok but europe also looks ok. I am visiting clients around the world. In china, plans are not concerned about the outlook those economies. Clients in the middle east are concerned about the oil price, but not overly concerned about the wider global economy. In europe, clients are not concerned about how europe economies are affecting are actually very bullish about the outlook and even in the depths of the Financial Markets imaging array january, they were not changing Business Plans for this year. David it is one thing to not be worried about recessions, another to expect true growth in the underlying economy. Are they seeing growth in the top line . Of governors tell us this is the year they are looking to filing reinvestment business finally reinvesting in business, after two years of stagnant growth in europe and last year, some recovery, this is the year the ink things are turning up. 70 of them were expecting an improvement in Business Conditions this year, an organic growth. Looking to acquire other businesses to try to and in organically rather print. Jonathan i want to know how your higher net worth clients are managing their wealth. The ecb moves to a negative deposit point and at the moment, we are not passing that on to the retail clients. At this point, how are the managing their wealth in that environment . Simon whatever proportion, no a huge portion of globally asked income offering negative Interest Rates or hire of ,lients with respect to credit they are investing more in marginal equities and liquid structures. Also to a lesser extent, hedge funds in terms of diversifying their portfolio in this negative yield environment. The whole point of negative rates is to get people out of your currency and into another current. The. The point is to get people off the spectrum of risk. Go to a highyield corporate, emergingmarket bond, go to that is what the fed did with qe. Matters which channel you are targeting, so great to push you out of the currency but if you targeting credit channel and you a people out of the spectrum, you want the money to stay in your country, is that happening . Think you bring up a good question, negative rates are designed to get people out of the current. Out of the currency. I think we have seen a big rally in european credit or european yield an investment rates arbors immediately since last thursday when he has been came out. Simon you have to make the distinction, to debase your currency which arguably, ecb was engaged in the bank of japan continues to be engaged in with what the ecb announced last week. Effectively paying banks to take money through stephanie thank you both and eric, extra credit for saying simon says. Codirectoraton vance eric stein and site cio of ultra network, simon smiles. Do not miss our special coverage of todays fed decision getting at 1 00 p. M. Right here on Bloomberg Television and radio. Lots of leads to read. Facing crisis,le still weighing on its outlook despite matt miller eating there almost every day. We will have more on that story, next. Matt tomorrow, the canadian Prime Minister Justin Trudeau will sit down for an exclusive 9 00view with bloomberg at a. M. You are watching bloomberg , time for the business flash. Housing stocks rose more than expected last month. New Home Construction rose, led by the single highest Family Building in three years. U. S. Factory production rose in february for the second straight month. More demand for business equipment was one reason. Manufacturers have been struggling because of lukewarm global growth. Opec and other oil reducers our meeting next month to discuss a reason output levels according to top energy officials. They are scheduled to take place in doha next week. Jonathan lets get you up to speed on whats happening in 15 minutes into the session, big moves for shares of chipola lick, trapping down 4. 5 . It would be their first quarterly loss as a public company. Greg joins us now for more. Is it not transitioning or developing in a substantial way to actually deliver a profit . The big thing is over a month ago, they said it would be a breakeven quarter and now they are looking at a dollar loss. They said sales were improving until this most recent nor rove ovirus. Ncident nor it shows how jittery customers are about this brand. David what do they need stephanie from here, what are they need to do . They will have to offer some sort of promotions to get people in the door and that affects the bottom line. Free burritos attract the core customers. New customers, not trying the place, so they have an issue with that and they are still struggling to approach new customers. David do we have a sense that they have hit bottom or are they still going down . Insales started look up february, then they got hit with this thing last week and its fun to back down 27 . The bottom line is that people are still very jittery and every headline hits them in the sales department. Stephanie given how much they are struggling, what do they need to do . It is going to take time, there is not a magic bullet. Stephanie they have time. That is a question for investors. People are looking, hoping there would be some positive signs. Another negative round of headlines, it will take time for them to recover. Jonathan at what point does this become a self filling prophecy and at what point do they start delivering losses and had to start turning down stores or at least stopping expanding . They are not there yet. They are in a vortex of negative headlines where it used to be that people would tweak out pictures of packs stores and long lines packed stores and long lines. Stephanie luckily they still have matt miller. Thank you. We will talk about another company we are following, oracle. Shares are in the green after reporting a profit and posting strong gains in revenue. Let yesterdays battle of the charts, cory johnson represented in talking a little. Matt it was a tie. We have a lot to cover. They are going to this massive change to this transition to the Cloud Business but is only a percentage of the revenues, but you can see the stock is up the today, sales are down and you at their slowing sales for the entire company, you see a company that is getting smaller and smaller just a bit every quarter, resulting the same kinds of changes that are affecting hp, ibm and even cisco. David is this a market share issue . Cory it is a new kind of world we are looking at in terms of how ip is used. Giant company with a lot of sales and no profits, but a lot of sales of this clout software that is rented by the seat and what we are seeing is enterprise customers want to buy what they need, they want to keep their information on the cloud, by the software only when they use it in oracle is trying to make this change to compete with other companies. Stephanie salesforce has had an extraordinary run and you say they have great growth and no profit ability. Oracle has had worst growth and positive profitability, what gives . Cory they bounced back in the last year. David salesforce has been buying a lot of their growth because the costs are remarkable. Stephanie the building they just took down in midtown. Cory they are very quick to they are not making a lot of money and burning a lot cash, but it is a company there is never been a softer Software Company this big growing this fast. The numbers that oracle put up in cloud growth were simply amazing. 57 yearoveryear growth in the cloud. Stephanie the question is, does the massive spend benefit the share prices because right there, if they are not making money, but they have this amazing story, you see them everywhere, is that more important than profitability . Is back toarket rewarding top line, not bottom line, so Companies Like amazon and salesforce that are growing the size of the business in revenues, no one pays a lot of attention to the market, but we saw different Market Sentiment for the first couple of. If Market Sentiment were to change again, stephanie im pretty sure things work out just fine. David thank you very much cory johnson. To a big story out of washington, president obama expected to announce his pick for Supreme Court nomination at 11 00 eastern time. We have greg story in washington. We talked about the three likely candidates. Waterboarding is there on which one of these is most likely or is it even stephen on the trade . Greg weve heard two names the most in the last few days. Mike dohring is trying very hard to get the name, we may have that shortly, i hope so. It ends up being it will be somebody who has a track record covering business not covering business, representing businesses. Somebody who is well respected on both sides. David this name seems to come up quite often. Lets talk about who he is. He is indianamerican. The first and the american on the Supreme Court if he were the first indianamerican on this report if confirmed. He clerked for j harvey wilkinson. That judge was mentioned more than once in the Supreme Court under george w. Bush. The court for Sandra Day Oconnor he clerked for Sandra Day Oconnor. What kind of a judge has he been . Greg he has been a judge for about three years, relatively cautious. He has certainly not been the kind of judge you would say disappointed president obama. As one example, the Clean Power Plan which the Supreme Court blocked just before Justice Scalias death, a few weeks earlier, he had been on a panel and the d. C. Circuit that refused to block that plan and let it go forward. He would very likely fit in the kind of moderate to liberal camp we have come to expect from obama appointees. David talk about politics because they obviously play largely in any nomination, but especially this time given what republicans have said. Nominate an immigrant, given how large the immigrant issue plays. How would that play out with republicans and immigrants on the hill . Greg it would be a different vision of america is what you would hear the president say. He would be talking about immigrant success story. He came over here as a young child, lived in kansas, as one of his colleagues told her the other day, he is the embodiment of the american dream. That would look very different perceiveway democrats the Republican Party and donald trump to be train the issue of immigration portraying the issue of immigration. David we have full coverage of the announcement coming up at 11 00. Final thoughts on bloomberg , next. Stephanie you are watching a full morning on bloomberg. As we prepare for the fed announcement, later today, we have a threehour special reading. The miller was saying computers get turned off ahead of this because it is not like we are getting one piece of data or one number that the market reacts to, there are so many nuances that have to be reviewed. Jonathan such a complex situation comes down to something so simple, the little dots were policymakers post for the think things will be. It strikes me that we are a nation based on Free Enterprise and we spent all of our time talking about washington, whether it is the fed or the Supreme Court. Stephanie that is where the power resides. Talking about a possible Supreme Court nomination we would hear about at 11 00. Jonathan that does it for bloomberg. Breaking news right now. We are getting word from the Associated Press that Merrick Garland will be president obamas nominee to the Supreme Court. He is due to make that announcement official at 11 00 eastern well carry that for you live. Orderingiated press is that Merrick Garland will be the new nominee for the Supreme Court. Old, chiefars justice for the pc court of appeals and was on the shortlist for the last two highcourt vacancies. Go to the markets where julie hyman has the latest on the markets. Julie markets are changed ahead of the fed decision today. That is not unusual, volume has been down, volatility has been down ahead of that announcement as traders over the commentary. Take a look at me groups on the move. Consumers, utility, and consumer stocks. Energy, financials, and tech are the bestperforming