Transcripts For BLOOMBERG Bloomberg Go 20160408

The dax strip back the stoxx 600, the miners, the energy stocks. Here is a novelty dollaryen not lower, it is higher, up. 4 of 1 . Thest gain for some first game for that currency pair in some six days. This is why you are seeing the reaction on the screen. Treasury, yields are a little bit higher on todays session, upee paces points three basis points. Here is vonnie quinn with the first word. The democratic nomination is growing bernieingly testing with sanders saying this week that Hillary Clinton is not qualified to be president. Bernie sanders i have tried to run an issue oriented campaign, which is what people want to hear. Then just do not want to hear us attacking each other every day. I want to say that we are getting attacked every single day by the clinton campaign. We are going to respond in kind. Vonnie both white house for als are gearing up crucial primary in new york state 11 days from now. Republicans are eager to defeat Establishment Republicans are eager to defeat donald trump so much that they are saying that ted cruz is the only one who can defeat the nomination. Texas senator will ask hundreds of influential republican donors and jewish leaders to support him as he addresses an important Jewish Coalition in las vegas. John kasich declined an invitation. A new poll says this game for donald trump runs deep. Seven in 10 people, including close to half of Republican Voters have an unfavorable view of the republican developer. Old, men, women, conservatives, liberals, and hispanics, and blacks. Global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am vonnie quinn. David . Chair Federal Reserve janet yellen, with three of her predecessors, spoke at a Historic Panel in new york city last night. She says the economy has made tremendous progress. Yellen i would say the u. S. Economy has made tremendous progress in recovering from the damage from the financial crisis , slowly but surely the labor market is healing. For well over a year we have averaged about 225,000 jobs a month. The Unemployment Rate now stands at 5 , so we are coming close to our assigned congressional goal of maximum employment. This inalking about addition to doug ramsey, we also have dean maki, joining us from stamford, connecticut. I want to start with you, please, dean. The question for me is, can you growth inhe employment that we are seeing when corporate profits are going down . Well, i think it is a challenge because obviously profits are the lifeline of companies. Are likely to see continued employment growth because some of the things that are dragging corporate profits down, like declining commodity prices, are going to be somewhat temporary. The declines do seem to have stopped. If that is the case, corporate profits should stabilize as well. Jon anyone with a 30 year fixed in london has just dropped to the lowest ever. What will the consequences being . They do seem determined to make sure that they can inflation up at least to 2 . That was quite clear. Last night in Janet Yellens remarks. I do think that there are risks that they will overheat things at least a bit, but they seem willing to take those risks in order to make sure that they can inflation up to where they want it. Jon even with the stabilization from the Federal Reserve to pull back a week ago, the s p 500 is still read for 2016. What is going to get it back up . How do we end the year . We will be down. This is a bear market rally. Quite frankly, technically distinguishing between a bear market rally and a new bull market leg is very difficult. It has to be, right . It has to convince people that it is the real thing. Byare still troubled devaluation, and the chart we have been using to terrorize ratio. Is the s p prices that would have to fall almost in half to get back to historical medians. Not suggesting that is going to happen. Thisns are still high, but correction at only 14 on the s p and back to alltime highs has restored the valuation risk that we saw a year ago. Do not forget, we have been debating, will they or wont they hike in june . Termis a pretty short look. Tightening started more than two years ago with the paper. The s p today is about 10 points from where it was in october of 2014 when tapering ended. Doug is painting a pretty grim picture, much more grim than janet yellen is. What do you think . Dean i focus on the economy rather than the market. The economy, the growth rate should be relatively stable this year. On ave the ups and downs quarterly basis. But one thing i would say from a market perspective, this fed is extremely sensitive to market fluctuations, more so than feds have been in the past. If the market runs into turbulence, the fed will change its views quite dramatically. David it is clear your view of the economy is consistent with what janet yellen says. Can we keep growing the economy, even at a 1. 5 , 2 rate, without growth in productivity . Dean the economy can grow at that pace with limited growth in productivity, as we have been seeing the last several years. What most people would like probably what all people would like is better growth in productivity. That is one thing that chair greenspan highlighted last night, was that he thought that was the main issue facing the u. S. Economy, the very week productivity growth. He things that would be much more important to address than some of the issues that were talked about. The pullback from the fed has feel that surge. The economics are clearly not good for abenomics. The host of the g7, they have already pledged not to intervene in the currency market. What we heard from the finance minister overnight that they are ready to do exactly that. Aboutre your thoughts that currency and japan right here and right now . Strong. Has been very the most likely thing to happen is it does put a lot of pressure on the bank of japan to ease policy further, because the stronger the end gets, certainly that is interfering with the bojs goals of boosting inflation there. So i think that the swing factor is likely to be the bank of japan policy if the yen does keep strengthening. Jon just look at that chart. The boj as a percent of gdp is headed to 80 , 90 . Is there a limit to what we can see from the boj . Doug i just dont know. Central bankers have surprised us in crazy ways over the last eight years. U. S. , that chart for the and the interesting thing is, the stock market has tracked that in the u. S. But not in japan. Which you would think we would learn some of the lessons from some of those who have been afflicted with deflationary pressures, long before us. Japan has been trying to find its way out for 20 years with unusual policies, and it really has not pulled them out. You aree i know focused on the u. S. Economy, dean, but you cannot fully look at the u. S. , whether we are talking japan, china, europe. How concerned are you that the press situations over there will way on our economy . Dean we have been seeing that for the last several years. We do not see that as a new development. Global growth has been weak for quite some time. I am not as fearful that the Global Growth is going to deteriorate sharply. The evidence suggests that the recent data in china are starting to pick up a bit, it is certainly growing a lot more slowly than it has been. But i do not see the Global Economy ratcheting downward from. Ere right now Stephanie David you pointed out the ratio of 1. 8 price to sales. Equityit that the u. S. Markets would be so out of kilter with the underlying fundamentals of what is going on in Corporate America . Is one that is the most extreme. We look at probably 50 different valuation ratios. The reason it is so extreme and other measures are not that inflated is because Profit Margins have been so high. , itou have the forward pe does not sound all that high at 17 or 18 times. But forward pes always so low because forward expectations are always higher than what we ually earn your it but then what we actually earn. Look at what has been remarkable and has for much surprised us and strengthen these high dividend strategies, like the s p Dividend Aristocrats on the relative basis, they outperform dramatically during the downturn, yet during this sharp snap back in the last six or seven weeks, they have held their own. So it is one of these things, they outperform in down markets, market perform in up markets. It is too good to be true. Global gdp of produced by countries with negative interest rates. Stick withe going to us. Doug ramsey, thank you very much. Dean maki, thank you for joining this program. Coming up, our exclusive a bank president. Vonnie you are watching bloomberg. Semiconductors is weighing the sale of its products business. They say mxp, which is based in the netherlands, may incur 2 million for the product. The business has joint interest from chinese suitors, including beijing Investment Firm jac capital. Iceland is sticking to a plan of freezing the last hedge funds caught in its capital controls. Even in political terminal even if political turmoil grips the country. The auction will likely take place before the summer recess. That is your Bloomberg Business flash. Jon thank you very much, vonnie. We can bring you an exclusive conversation with the ubs andreaent bank head, orcel. He is with Erik Schatzker. Good morning, eric. Erik good morning. You live in challenging times. How would you characterize the time for environment banks bankers right now, and with trading. Andrea we are at a crossroads where we are seeing increasing regulation, changing the rules of the games. Many competitors are resetting their strategies, which means we have to look at our competition and compete with each other, and that has been amplified by markets, which has been challenging in the last decade. When you put all these together, we need to all navigate a longterm perspective while trying to cross a year that is shipping up to be quite difficult. Erik is becoming more or less challenging than it has been . The postcrisis period has not exactly been easy. Been easy,has not but i think what is happening now is with the further tightening on regulatory rules and with the market condition and with shareholders increasingly questioning the andterm profitability interest in Investment Banks, clearly the pressure has never been as high to try and reshape our model to something that can hold water and convince our shareholder that it is worth investing in us. Erik three weeks ago your ceo said client activity was still weak. Has improved since then . Andrea a little bit. We see some indicators, especially in the u. S. , where things could be slightly becoming better. But we have seen that before and it has reversed very quickly. So we are mildly more optimistic, but not significantly. K so when you see the s p 500 stager recovery that has in the last couple of weeks, you are not counting on it to maintain levels like this within a year . Andrea we think the level of the s p and the level of volatility should support much better market activity, especially in the u. S. We are already very cautious and are watching where this is going to end up in the next few weeks. Clients,n you talk to what do they say is stopping them from taking risks . Andrea uncertainty. And i think when we are facing is a different kind of uncertainty. If you go back a long time, we used to watch economic status of this kind. Today what affects the market is primarily different. In europe,exit sanctions in russia, immigrant crisis in the middle east. Monetary policy with negative interest rates, which can change from time to time. These are all things that have a very Significant Impact on the market, and that people are not used to really forecasting because they are exogenous factors. That puts everybody on a position of weight and see, where theseee things establishing into the run rate. These very same clients give you a sense of what it would take to make them feel more comfortable to be willing to take more risk . Andrea i think more clarity. There has never been such a Significant Impact of politics, social issues, and holocene issues and policy issues of the general market. Therefore, people have learned only people have learned a lesson. If policies move the market in the opposite direction, it can be very difficult. We will need to see more clarity on that, less of these factors for people to be more proactive. Erik so it may take until after the election . Andrea there is not necessarily one factor at the moment. It is the intersection of many. You talk about trying to go to weaker policies. What is draghi going to do with Monetary Policy . What is england going to do . What is a sanction for russia going to be . I do not think anyone of these is stopping the market, but altogether, it makes the environment difficult to predict. Erik i need to ask you about the socalled penama papers, helping clients set up offshore companies. Ubs made a statement earlier this week saying that it stopped using thirdparty providers to establish and administer such Companies Back in 2010. Can you elaborate . Andrea unfortunately, i cannot. I would just sick to a statement that we put out. Erik i would just stick to a statement that we put out. Would it make things more difficult for ubs to do business in russia and with chinese there has been a very significant tightening over the last decade or more over what is the right way to deal clients, what is the right business to take on, etc. All organizations have tightened up significantly, the way they attract the client and what they feel is Good Business and business they do not want to do. I do not think that any single event is trying to significantly change the way we address that. Rifleswo of your chief two of your chief rivals number Credit Suisse and Deutsche Bank, have gone further than you would like them to. Are you surprised . Andrea it is interesting to look at the replay of what we did in 2012. 2012, for then mentally what we sent is that we cannot do all things we cannot be all things to all people. Investment andd make good returns to we accepted the fact that we were going to stay in some and exit others. And not be all things to all people. Restructuring. Ep but we did it in a relatively supportive market. Credit suisse and Deutsche Bank are doing it in a more difficult market, and that makes things more difficult. Erik should they do what ubs did and make some of those difficult conditions and exit some businesses entirely . Andrea i think what ubs did or are doing is often misquoted. What is important to see is, any organization has strengths and weaknesses. What u. S. What ubs did is, well set our strengths and tried to build on those, and look at our weaknesses, and tried to exit those. The situation for Credit Suisse and Deutsche Bank is very different. They will not look exactly like what hours looked like because they are different organizations. Erik how are you taking advantage of the situation . Andrea the advantage that we have at this point in time is that we have clarity, stability, since of purpose. In a market disruption, in a market this location like we are aning now, that is advantage, and we need to try to take advantage of it. Erik where are they most vulnerable . Andrea i would not just look at them. I think the whole industry is going through systemic change. I have never seen such a questioning of models, strategy, business practice returns in Investment Bank, probably since the start of my career. As everybody response to this question, everybody is taking a number of different decisions. Standpoint, we hope we are making the right decisions. If we are, i think you will see ubs progress very decisively forward. Erik you talked about the challenges presented by the Regulatory Environment here it are you choosing to focus resources differently because the Regulatory Environment continues to change . And if so, how . Andrea absolutely. The Financial Services banks, Investment Banks, is a regulated industry. Regulators change the way they allocate capital, to one business or another. We need to factor it in because it our riskadjusted returns. Shift, we need to look at what we do. Sometimes it is a question of shifting ourselves, sometimes it is a question of exiting certain businesses, and reentering others as the weight moves over the top. Ratingbs has the highest in the industry. Is it sustainable . Andrea every Financial Institution is producing in ways that are overall not what they should be in the longterm, meaning if you look at the adjusted returns, they are not where they should be. They have a good return on equity. I think there are a lot of debates we can have on that. We think on a relative basis we are doing extremely well, but the ultimate objective is to take it to the next level and a level where we can assure to our shareholders that on a riskadjusted basis how do you do that . Is it a matter of costcutting . Andrea not only. It is a matter of which business you fall two. We took a decision on our fist income business. On our fixedincome business. Certain businesses were determined to be profitable. Certain others were not. Because of the mix we chose, our fixedincome business was probably the best performing we have done in portfolio businesses in the Investment Bank. The onlyubs is Investment Bank that can make that statement because everybody had fixed income business being the worst performing. Because we took the right decision for us on that mix, it is possible to change the mix toward things that exceed the cost of equity over time. Erik andrea, thank you for the opportunity. Of ubsorcel is the ceo Investment Bank. Jonathan happy friday. Good day to the city of london. Take it from london to tokyo. Yen higher, 108. 66. The weaker japanese yen after the finance minister came out saying that they can ask it needed. Treasuries rallied for a second straight week. The yield is higher this week. And crude, over a week away from and it is up. 57 3. 5 4 . Chief investment officer. And joining us, tom keene. A lot to come from tom keene. Lets toss it over to vonnie quinn. Vonnie u. K. Prime minister David Cameron being accused of hypocrisy after knowledge and he did have a stake in an offshore fund set up by his late father. He admitted to having four days of questions over the investigation. Those papers detailed attempts to avoid [indiscernible] will publish his returns as soon as possible. Russias so vote Aviation Authority issuing the first report on last months crash of a flight in southwestern russia. A downward shift in the horizontal stabilizer in the plane occurred as the crude tried to climb out during strong winds. Slammedraft reportedly into the ground at more than 360 Miles Per Hour and all 62 people on board were killed. 13 North Koreans working at the affectedaurant have to to south korea. Seoul Officials Say it is the first time that they have escaped from the same location. North korean defections are reported attention. Pope francis said individual the guidinghould be principle of sex, marriage and family life. It is headlined in his 256 page document that projects like in. Ig black and white rules it was released earlier today. News powered by our journalist and news bureaus around the world. Stephanie thank you. Time for your morning mustread. You are bringing up a little Bernie Sanders. Tom this was absolutely remarkable. From go over the quote arguably the ceo of the year last year who shifted g2 more Industrial Company ge to a more Industrial Company. The senator has never bothered to stop by our aviation plant in rutland, vermont. Weve been investing heavily, some 100 million in the recent rs, the plant employees the plant employs more than 1000 people who are very good at what they do. Its a picture of firstrate jobs with high wages, advanced manufacturing in a vital industry, and vermonts junior senator is always welcome to come by and toward. Is is butcode this was remarkable. This was a whole different level of ceos responding to politicians. David it is a powerful response and i was struck when i read it. We talked to jack lew recently who said, we think the markets are not necessarily reflecting the economy. This is them saying, we dont think the politicians are reflecting what is going on. They are actually employing people. Tom four years or five years ago, i had a conversation with two unnamed ceos outside the Congress Building in the snow and slippery ice. The only topic is what should ceos do . This is a hold of a of should they be more vocal and more assertive about what they do in society . I heard today, two times of the thames on surveillance, there is still this built in reticence to say, excuse me, we create jobs. Put inie for ceos, have a position where they are on the defense, but given how strong candidates like Bernie Sanders, like donald trump or politicians like Elizabeth Warren are outspoken against Financial Industries or Corporate America, the guy who hires all the people he hired and he had another quote i loved, for 100 24 years, ge has been a business for 124 years, ge has been a business. What do you think . I think they have been reticent to invest. Throughout this recovery, real Business Investment has been extremely restrained and that bothers it. Cash flow has been great, but it has been used largely to repurchase shares and hike prices rather than putting it back to cash flow generating assets. Of this goes to bens idea supply. There is so much stuff out there. Jonathan the anticapitalist rhetoric, doesnt it surprise you . They have thrown it into the same circle and hat, would you . At europe in the last seven years or eight years. The abject failure are clearly more socialistic. I know demographics are a part of it and part of why the u. S. Has an edge, but we have sort of leaned in this country toward a more european model in many respects. Just looking at the relative performance of the u. S. Economy since the great financial crisis versus much of europe. Tom the other spent i would put ,n this which was in the oped i believe they made [indiscernible] what is it about that you have , westwith an east coast Coast Media Center focused on three zip codes in new york, two zip codes in washington, and three zip codes in los angeles. And in between, and vermont, there is a lot of job investments there. In iowa, there is not enough said about that. So true. Is we need regulation. Everybody believes we need regulation, but where those 200,000 plus jobs coming from every month that we are adding . Somebody is employing these people and they are buying homes, cars and putting their kids through school. There is a lot of good being done. Tom when i talk about anxious america, i am talking about that desire for the fulltime, fully benefited job like everyone around the table has. There are a lot of americans who do not have that. Im sure that is right, but those people working in for a month for mr. Immelt had the benefit. Tom that is the job everybody wants. David exactly. Lets turn to europe. Tom, you and Francine Lacqua spoke with nyu, and that they met struck me about your conversation was the discussion of the possible legs of the britain from the eu and then greece. Ofs possible exit britain from the eu and then greece. Lets listen. If you get it on one side and the other coming out the beginning and the end of the european eurozone and those are reset to have to worry about. David he is deeply concerned about this. You hear some people say that it is not that big a deal, but he clearly thinks it is. Roubinit has changed is laid it out in front of us and pimco is the same with the europe of the lessons of and you can take it worldwide. The real issue is slowing gdp, and with the yen dynamics that john was talking about, it is s,e idea of regional bloc which harkens back to our economic history. Jonathan financially, the u. K. Economy has done ok. Tom did you take didnt it take a hit when you left . Jonathan the market didnt shift my way, did it . Done ok, sonomy has compared to greece, this is a political decision and they want this to make a generation that did not get the sake but it is about politics. Tom what about the netherlands vote . Jonathan there are two ways to look at this vote, it was the open eu and ukraine packed and there was a rejection clearly. Some people said, this is the rejection of the European Union and other people said, actually, it is a rejection of further integration carried to the latter point, it is not so much about holding back in europe but this union that is being rejected across europe and not just the u. K. Stephanie i am afraid to turn to you. [laughter] ,s you look across the globe japan, europe, china, what is your take . Doug the underlying trend, and you see it here with donald trump and Bernie Sanders, is nationalism. It is disparate and the history currencies has not been good. You eventually get into tough times and you have to revert to market prices. Andsluggish Economic Growth now on top of it, sort of this nationalistic tom and to circle back with mr. Immelt, i was at the soiree with immelt ones stephanie you are name dropping across the board. Got mad at the question and he said, all we need is 3. 2 gdp gross. What we are talking about this orle, whether it is vermont anywhere else, it is the search for growth. David it is something we dont talk nearly enough about. We talk about the markets, the fed, but we dont talk about growth activity which is essential. 3. 2 is a huge number. Stephanie tom has got to get to breakfast at the regency. [laughter] thank you both. Tom keene and doug ramsey joining us this morning. Coming up, could yahoo be the next big Tech Acquisition for verizon . Hped i am in the greenroom. Coming up, hank will be talking about china and the treasurys new in version policy on bloomberg. I am vonnie quinn at your latest business flash. Declining, meaning the sector may be a drag on firstquarter growth. Of 3 10 of 1 , and increasing the 2 10 in january. Manufacturing dropped in january, down 1. 8 from one year ago. Increasingly the amount of money in raisings to at least three point 5 billion. It is led by chinas Sovereign Wealth Fund and an arm of the countrys secondlargest bank. This is according to people familiar from the matter who say that the financial could be rally that about 60 billion. It is controlled by alibaba billionaire founder. Starting the process of choosing Investment Banks to arrange a listing of indian wireless businesses. They save the wireless carrier may sell about 10 of the India Business to the share sales. Advisors could be selected by next month. That is your business flash. I am going to take a look at one market mover. Down 8. 6, chairs percent. Missing analyst estimates and down 6 . 5 is what analyst had been anticipated. Republic performing badly. Sales down 14 . A quick look at the bloomberg. This uses Bloomberg Intelligence and they are crunching the Sales Numbers on this looks at the three various parts of gap. Here is the zero line change quarter by quarter. The gap rant has been in the negative for quite some time. Old navy has been the standout but it fell this corridor and here is banana republic, the worst performing of its three core brand. Jonathan thank you. Potentially, verizon is roceeding with yahoo they plan to make a first round offered for yahoo and is willing to acquire yahoo japan to sweeten the deal. They will face some competition from the shanking tech company. Here with me now is alex sherman , who broke the story last night. Great scoop. First of all, verizon is looking to become a Media Company. I wonder whether this is the end of the series of acquisitions or just one more and a lot more to come. Alex i think he said finally potentially, so maybe we will see if verizon actually does go forward with this. But we have learned is that they will make a first round bid. That should be no surprise. Verizon is working with at least three Financial Advisors on yahoo you do not do that unless you are serious about moving forward. Of course, what we learned yesterday was that verizon is also willing to buy yahoo s stake in yahoo japan which is dollars. 5 arian valued at 8. 5 million, which is no small feat. In terms of becoming a Media Company, it is a question about what verizon would do with that stake. Would they give it to shareholders or sell it . We could address that in the second, but to the first question, i think verizon is moving in another step toward becoming a Media Company and it would not be the final acquisition. It would merge aol and yahoo underneath verizons umbrella. You could put those two companies together and it got a lot of talk. Star advocated putting yahoo and aol together went aol was still an independent company several years ago. Yahoo s core business itself, we do not know how much it is worth heard me know verizon buys at less than 8 billion, not huge. David tim armstrong, the head of a well, hes sort of would like to run yahoo hex it makes sense why would stick around at verizon when he ran a full and independent company. If you could merge those companies together, he becomes a much bigger presence in the world. Stephanie is the important thing the price . One could argue, what is the great value of yahoo if Marissa Mayer cannot turn it around . Given how depressed it is, everything is valuable at a certain level. Alex i think youre right. The important thing is the price and we are questionable, that price will be with the core business. Rico came out and said that yahoo revenue would be about downnd earnings would be 20 , so it is a declining asset and you wonder how much progress in the paper that. On the flipside, they own a well, so there are certain things verizon could get that other companies cannot get for yahoo david lets take a look, julie. Julie this is the revenue chart alex was talking about on bloomberg. This is yahoo going back to 2009 and it looks of the revenue decline over time. At least with analysts are projecting with the drops was in the coming years, so that speaks directly to the price that yahoo may be able to get. David who will be the better . Bidder . When does this get resolved . Alex there is a who is in category, who is out and who is maybe in. Is thes verizon, there maybe category, google we hear we have been told they have not made a firm decision, but time will likely move forward. And then comcast will not make a bid. Not going to make a bid to we have reported that earlier as interested. Microsoft is not, disney is not going to make a bid, so the field is willing. That said the field is wilting. That will move forward and we just do not know. The biggest question mark is softbank because we heard they had limited interest and yahoo but they on the majority stake in yahoo japan, so the question for softbank is, would they be ok with verizon owning the rest of yahoo japan when softbank owns 80 of its print of sprint and would they be ok with building it up and trying to make money for it when 35 goes to the biggest competitor of sprint in the United States . Jonathan i use potentially, google, i get the verizon deal, but what does it mean to google . Has google and yahoo overlapping businesses in terms google would be able to likely improve on yahoo s technology, which is something that yahoo has struggled with recently. Some of yahoos acquisitions could be merged with Google Photos and tumbler makes sense to some degree. Makesnie hold on, tumblr sense for no one. Alex google as much as anybody else. Stephanie who does Marissa Mayer make sense to . If and where does she fit into this . Alex i dont see her fitting into verizon at all. She would go back to google and that seems like a long shot. Her best that is to pair up with the private equity firm and try to make some fixes that she will continue to run the company with the private equity firm if she wants to run the company or her best bet might be at all. The problem is that star board is running a proxy fight to kick out the directors at yahoo and you would have to imagine that the new board would not rehire Marissa Mayer. Stephanie i cannot imagine bristolmyers sitting in the board. Alex which is why think she would go. David can you imagine . I dont think so. Alex, awesome job. He broke the story last night. Alex sherman. We have got to move on. They shared the same stage last night, but how is each of the fed chairs to graded based on the performance of keeping the economy on track . The report card, next. You are watching bloomberg. David welcome back. Time for off the charts. Last night, the first time that for fed chairs had gathered for a public appearance. Here to break down the 10 years is julie hyman. Hillary clark has been metrics fort chart each of the feds 10 years. You can look at the dual mandate. Reasonable inflation you could say and also unemployment is the other we are looking up. Here is inflation as measured by the feds preferred indicator and here the Unemployment Rate and you see the various tenures. , bernanke, and the red bars are the variance he essentially caused the recession on purpose which drove up unemployment or if you go to bernanke, it is the reverse. He had height unemployment and they took the fed funds rate down and inflation never came back up. Julie the challenge for volcker was to bring inflation down and the challenge for janet yellen is to bring it back up. The other various red chairs stop inflation declining during the 10 years, something that has changed easily with yellen. Another to look at is the 10 year yield versus the federal funds rate or target rate. In other words, the bench mark that the fed sets. These two track together, as you most of the 10or years of the fed chairs but that has changed recently because we have fed tightening and the 10 year yield remains stubbornly low. David this basically says there are bigger factors. They are going to buy treasury bills the matter what the rate is because the alternatives are more risky and they dont want risk. Julie exactly. David back to you, jon. Jonathan coming up, another important conversation on the treasury secretary. Weighing in on relations with china and the new u. S. Conversion policy. We are 94 minutes ago before the opening new york. Futures up 85 points and the s p 500 in the red. 2016 expecting to bounce in this session. Over in europe, Energy Producers leading the game. The ftse 100 up. 8 of 1 . Dollar yen higher up. 4 of 1 , the first gain. Jonathan global intervention. Japans finance minister says he is prepared to take action it needed. The fed four, they take the stage in an historic conversation, striking a positive tone on the u. S. Economy. It is 8 00 in new york, 1 00 p. M. In london and i am Jonathan Ferro with Stephanie Ruhle and david weston. Stephanie he with us is john, editor and chief of bloomberg. David i think of him more as the boss. We will be talking china, the secretary, frank paulson. Lets get the check of the markets. Red for s p 500 in the 2015. Over in london, Energy Producers leading the game, up. 8 of 1 and heading for a fourth straight week of losses on the stoxx 600. You might not have seen this, but the dollar yen in the green, 108. 624. Verbal intervention from the japanese finance minister. Treasuries heading for the second week of gains, up to basis points this morning. Output, there we are, 38. 68, and commodities diary, of the Percentage Points today. Oil and Global Equities on the rebound after a brief fall of volatility. Some analysts are predicting a bigger fine. It was the strongest since before the bank of japan expended qe in october 2014. Joining us from boston with more is. Chiefr is editor and john. Stephanie you are going to get that one wrong . Jonathan i apologize. John crazy name. Jonathan can they really intervene . John they are stuck in a position where they find it difficult to make anything work. They keep on waiting and try and for the japanese government to do anything and they are just jumping around. David i am curious about the relationship into what is going on with the economy and stock market because the more they try to simulate, the farther down equities go. Does that make sense . Because asteresting we got desensitized to the various new rounds or forms of monetary easing and we went from there to europe and now is increasing talk about helicopter money and monetary financing, well the japanese are already doing that and the yen and the nikkei is down some 25 percent from highs last year. It shows how difficult it is to grow in your population is aging and you have too much debt great i think that is what the japanese are fighting. Stephanie does it also showed the boj is running out of ammo and could we say the same thing in europe if they are . Back january,u go february when the markets were under pressure, i think part of the reason was the ecb went from a lot of qb even more qb and it embraced more as the japanese were doing in the markets were not responding. One of the fierce where the Central Banks are at a panel and that is why we are seeing more monetaryfiscal and policy, but even then, you have to wonder if that will help. John cornyn i am in trade john i am intrigued. What do you think it main lesson would be in respect to japan, europes futures and many other places . Jurrien that there is a limit. If you asked all the central bank chiefs, maybe that should of been a question to the panel last night, as to what really keeps them awake at night, it is that it takes more and more aggressive policy that used to be unthinkable to get less and less results, right . Financial crisis, Monetary Policy in the stock markets were positively correlated so the central bank would raise rates because the economy was stronger and the stock market would do well in the central bank would raise rates too much and the cycle would roll over. Now, it is the opposite and Central Banks have to get more and more aggressive to keep rings up. That is nonus, that is a different story because the u. S. Economy is on better footing because we took it first in terms of this sold debt bubble back in 2008 so this is a nonus story for the most part. Terms of the limits of central bank Monetary Policy, looking at the boj and gdp and the Balance Sheet, it is approaching 80 , 90 and the ecb is nowhere near that. How do you gauge the limits of Monetary Policy . Is it the size of the Balance Sheet . Jurrien by my calculations, the beer cheese Balance Sheet is about 75 of gdp over there. Like the fed this may be did seem percent or 20 and the ecb is something similar, so from that perspective, there seems to be a lot of weight to go, but i think it comes back to this whole notion of pushing on a string, so the ecb at the last meeting said, we are basically going to pay the banks to lend money into the economy through these tltros and they can borrow it at a negative deposit rate, but if there is no demand for credit, it is pushing on a string and the same thing happened in 2009 and 2010 in the u. S. With pushing excess reserves onto the banks and the banks sat on them. It is what you do with that money, and if there is no demand for credit from the private sector, this is where this monetary financing concept comes into play and that the government can bypass the banks and just spend it directly into the economy. That is basically what is happening in japan. David john, he says in the United States it is a different situation and im not sure janet yellen thought about this but they did something clever and eventually scared the markets by saying we will have four rate hikes and then it turns out it is a form of quantitative easing and stimulus by not doing the rate hikes with that were coming. John stephanie is right with that smile. It is about anticipation and how you manipulate that emotion. In the end, the amount of money doesnt usually make much difference. It is about the messaging and ability to get things through. America has been better at at least American Business is reacting in some positively and in japan, it is a buyer that will never catch. It does not seem to be getting through. Stephanie messaging to who though . Recovery, obama, the markets, things have done well and the fed has done their job, but if you look at the economy across the United States, the amount of people a continued to be miserable or underemployed are pretty massive. John that is true, but on the other hand, theyre spending money and doing things other people are not. Winica seems to be in a with a cross, but they are likely to get down and spend something. That is different to what is happening in some other parts of the world. Jonathan whity are they not feeling the recovery . John a lot have not moved and stephanie is right, there are very much to americas out there. If you go to europe, there are two europes and you can go to places like spain and there are some people who have jobs and doing great and there is 20 youth unemployment. There are so many areas where it has spread so unevenly, so wherever you go in the world, you see the first worry is the economy and the second worry is some notion of sadness. Stephanie did the Central Bank Intervention give us a one picture of the economy . Whether you are talking about greece or spain, this time last you, we were focused on [indiscernible] they threw a bandaid on their and investors, especially bond investors, are saying that greece is a ok. People there feel like they are in a crisis situation, especially as the refugee crisis gets bigger. John greece is an example where you could argue for your plight is so miserable that you just have to do and pushed things through. The second category are places like france, somewhere in between where people have not things, and essentially what is happening for mario draghi, he has to do this stuff. The plant is the same in the Japanese Central bank. You have sat here and then these things and made it possible but it is with useless and lazy politicians that have not struck to the reforms. Stephanie did you hear that with lazy politicians . John sorry. Athan you can along to you can not belong to the labor market but i wonder when the two . Converge that labor market and the political tensions, does that affect the bond market in europe eventually and can the ecb put that off forever . Jurrien if you look at the big picture, all the Central Banks and really been able to do, maybe it is all they tried to do, is by time while we are in this workout days of too much to add and too little growth. This has been rolling debt prices. It started in the u. S. With subprime and moving into the housing markets and then three years later, it hits europe with the whole peripheral debt crisis and now three years after that, it is hitting china and again. This is why i think the dollar so important because what the fed now understands is that the dollar has this day somewhat look at theryone to breeze, otherwise, it is a price closing in on people. A lot of progress has been made in europe, you know, with the ecb and some other institution, over a lot of greeces debt and to get out the hands of the banks, and it removed the system of threat. I think that was a good thing, but it takes time when there is too much debt. The demand for credit is not bad, so the ecb is where the fed was in my 2010 and pushing on a string. It just takes time because in the u. S. , things are ok, Consumer Spending is good, the consumer is in reasonably good shape, so there is hope that we are going to get there, but it takes time and i think with the Central Banks are trying to do is buy time by keeping funding rates low and the markets up, and that is more successful in th europe than the u. S. Because a lot of americans own more Financial Assets directly and in europe, it is typical Pension Plans and that may be one of the reason we dont see that as much in europe as we did in the u. S. During qe over there. Has the Financial Sector simply not been did the same amount of performs in europe as it has been america and that is a big deal. America from the beginning dealt with a lot of the bad debt. You still have a lot of european banks that have not begun to go through the process, and that is not the same starting point. Jurrien exactly in europe is more of a bank economy than the Capital Markets are much bigger part, i think it is 8020 in the u. S. Versus banks and in europe, 2080, said the banks are more systemically important in europe. In the u. S. , we didnt the american way, so margin calls for closures, everyone takes the pain, things had to recapitalize and the banks in the u. S. Went from 30 times leverage in 2008 to now 12 times. In europe, they went through 40 that are still in the low 20s, so they are not quite there yet. David good point. Thank you very much, jurrien. John, we have a lot more to talk with the. Four said chairs participate in one event. But do they foresee for the economy . That is next on bloomberg. Vonnie i am vonnie quinn at the latest business flash. Investors weighing the sales the standard products of business but according to people familiar with the matter. They say the netherlandsbased company may seek at least 2 billion for the unit. It manufactures other standard chip products. The business has done interest from chinese suitors, including beijing Investment Firm. Last year, nxp merged with the austinbased semiconductor. Facebook is trying to get people to share more personal types of content on their side. Some people say people have been less willing to post updates list ofeir lives as the friends grow. Instead, they are showing more news and information from other websites. U. K. Industrial unexpectedly decline in february, meaning the factory may be a dragon First Quarter growth. They followed the revised increase of. 201 in january. Manufacturing production fell in february, prompting more than one percentage point and down 1. 8 from one year ago. That is your business flash. David yesterday, said chair yellen and former fed chair bernanke, greenspan and falconer got together for an Historic Panel in new york. Yellen took a shot at Donald Trumps view that an economic bubble could burst. Janet yellen i would not describe this as a bubble economy. We had relatively weak Global Growth, but the u. S. Economy has been doing well. David still with us is john and we aree john, joined by michael mckee. Mike, they are supposed to be apolitical, but they cannot stay away from politics. Michael they did make it clear they dont agree with the politicians assessment on the policy this year. Ben bernanke was bowl and saying that congress and its move to austerity over the last couple of beers cost the United States, hurt the economy in the attempts to recover and all of them took the position that Monetary Policy is just about that the limits. We need fiscal policy and on that point, the people in washington are falling down. Jonathan fascinating moment in the beginning when you saw janet yellen movie not script and ben bernanke turned around and said the Balance Sheet is not my problem and she said, yes, it is my problem. They talked about how they should let it roll off and let the sharing treasuries roll off. What was the number . Michael they have made about half 1 trillion, it sounds better when you say half a trillion. They take the Interest Payments on the bonds they bought and send it to the treasury. It is a recycled and bernanke called it a profit, it is not a prophet but it does mean you have to risk less money for the government. Jonathan summit call that monetization. David that is what it is. Stephanie what is your take on the four fed chairs does this not put them in a folder will position put them in a vulnerable position that we are over communicating to the markets . How does that help us . Might way you look at the communication has changed. You go to baltimore, he did not say very much. He saw what he did and you went from there. It was all about data and know every single thing that janet yellen says is looked at in a way that every single thing is analyzed and every single thing is going through. It has become so much bigger with the communication side and you could see it with all of them lined up. Michael people of argued that we need more transparency. The press is argued we need more transparency but is it always a good thing . David there are some people who say that they do events like the to reduce some of pressure for to transparency to really see what is going on day to day as a way of assuaging that need on the private press. Michael with the Supreme Court, probably so, and the Supreme Court does not have fostered hanging over its head and wall street is always going to want to know, give me the date and time when you raise interest rates. Volcker is known for not saying much but i want to share with you said last night. Be a tough it will time ahead economically and population as you look that far ahead. Becomes r and b becomes an International Policy and that would reflect an opening in china which are probably be good and i dont know where it would hurt us. Michael that is the question about whether it will overtake the dollar as growth reserve currency. Folk asked the question, why would we and greenspanr asked the question, why would we care . If china were to get there, it would mean their economy is a lot more open which would be good for the world. Was i thought that disingenuous, why would we care . Time is doing well. Every american would go mad. Michael on an economic basis is the point they were making. Ker is good at being grumpy but amusing. Stephanie he is specializing. Michael there was not a lot of it would the fed chairs. Stephanie our economic editor michael mckee, thank you. Bloombergs editor in chief, john, we are not letting him be best just yet. We are taking a look at the premarket movers. Stephanie you are watching bloomberg. We are talking saudi arabia which has plans to deal with the declining price of oil by creating a 2 trillion mega fund. An exclusive sitdown with john got details on how saudi arabia wants to evolve their economy. What did you learn . Has saudi arabia unapologetically trying to force their crews to move away from oil which is a big deal. The specific think they are going for is taking the worlds over 2company with trillion and put it into the equivalent of a huge Sovereign Wealth Fund, add in other assets, and that will now become by a very large way, the biggest Investment Fund sovereign Investment Fund. And its so has changed on top. The numbers are gigantic. Stephanie do we even have our head around that . John the 30yearold man is driving this and it is driven by his the session to make it clear in saudi arabia that they have to move away at some time from oil. That makes a lot of sense for lots of things, including the oil price and it is an opportunity from his point of view. One, because he thinks he can keep on selling oil for longer at sale prices lower, but secondly, it is a prompt for the rest of saudi arabia to change. David this is a major redirection for the country. You dont often see this thing, announced by a 30yearold deputy crown prince. John who is the son of the king. David but he has a lot of cousins, had a secret within the family . Does he have the support of the family . John yes. As the nextery much in line and this is next in line after that, but he has been surrounded by reformers and he is going for this term because i think he thinks that there isnt really an alternative. In some ways, he has to be right. That arabia has an economy rides on the oil price and they can no longer get away with that. With the the market ipo could see another year before that happens and we wait to see if they can get around the table and agree, what did you learn on that stage . John on that front, he said if iran does not join, we are not interested and instantly, the price of oil fell on the back of that. There are differences and our next guest will point out, there are many different views on that. Kuwait has as much more tolerant with the idea of iran being outside of it. Will they get prediction back up to 3 Million Barrels a day and will they come to an agreement . This is the same saudi prince who helped organize the military action yemen and he runs great chunks of the economy. He is somebody who is not friendly toward iranians ticket early, and the idea of a relatively low oil price or a policy point of view is quite useful. Jonathan john micklethwait, bloomberg editor in chief, he will stay with us. And offshore fund after the leaking of the Panama Papers, next. Show me movies with romance. Show me more like this. Show me previously watched. Whats recommended for me. X1 makes it easy to find what you love. Call or go online and switch to x1. Only with xfinity. Where almost exactly an hour away from the opening bell on this friday. You are watching bloomberg we will be interviewing hank paulson. John we have more to cover with john micklethwait. Lets give you a check on the markets. The biggest oneday drop in the s p yesterday since every three. February 3. We are going into the close up. 9 . Stocks heading for a Third Straight week of losses. That one shining bright red all week. Morning afterthis the japanese finance minister said he would be prepared. Session. 4. 4 on the there are your market moves. Lets check over to vonnie quinn. Vonnie Establishment Republicans are eager to defeat donald trump so much that party donors see ted cruz is the only one left that can deny him the nomination. There bolstered by his decisive win in wisconsin this weekend. You will speak to influence will donors and jewish leaders where he will address the jewish republican coalition. Donald trump and john kasich both declined invitations. Secretary of state baghdad on an unannounced visit meeting iraqs foreign minister and other top officials. His visit coincides with military action against militants. Coalitionruling expects to defeat a noconfidence vote today for the new Prime Minister. He took office a day ago after fallout from the Panama Papers release. Vote follows the resignation of the icelands premier implicated in the leaks. Get the news 24 hours a day powered by journalists in more than 130 bureaus around the world. John the Panama Papers John Stephanie the Panama Papers has now ensnared people up Prime Minister finally gave details on his interest in the holding fund. Take a look. We had a joint account. In the000 units Investment Trust which we sold in january 2010. That was worth Something Like 30,000 pounds. I paid income tax on the dividends, but there was a profit on it but it was less than the Capital Gains tax allowance so i did not pay Capital Gains tax. But it was subject to all the u. K. Taxes in all the normal ways. Stephanie how big is this . John it is big. He did nothing illegal. Fact that it was organized by the Panamanian Company is a blow that comes at a time when you have the brexit vote in 11 weeks. Your problems with the u. K. Steel industry where it appears the british have not been bashing the chinese as much as it should have done. On top of that, you have the Different Things about the budget and pensions. There is an element whereby cameron despite winning the amazing victory last year is suddenly stumbling. The worst thing is the fact it took him five different iterations to finally come out with what was a fairly simple thing to say. Yes he had shares and sold them. Jonathan at this point, it is a reputational issue. Before the general election he would not we learned before the general election he would not serve a full term. Are we talking about him leaving earlier . Jonathan i dont think so. The british have this history with conservative leaders, the conservative party is ruthless at getting rid of leaders. Labor is less so. At this moment, it would be difficult to imagine him going before the brexit vote. It does cast some shadow on his ability to be the person everyone trust to take it through. It fits into the visions of cameron is this slightly posh guy with trusts and stuff like that. It is just at the wrong point for him. David he is a man of means. That is not news. This is really a question of is there another shoe to drop . Jonathan i think he survives. The difficulty will come if Something Else comes out. If there was some element of illegality close to it. This was 30,000 pounds, not a gigantic amount of money. It would barely buy you a ticket of a republican fundraiser. Stephanie if it was not that much money, couldnt one argue what was the big deal or is the issue that he would engage in this activity . John it is that a reputable guy was connected to the panamanian broker. It has everything to do with the panamanian broker. The Panamanian Law Firm has cast aspersions on people. We just heard of the icelandic Prime Minister having to resign. It is a nasty scandal. The worst thing is there is more to come. Stephanie how does it work for some and not others . When i think about mitt romney and all the criticism he had a run his business dealings and being wealthy, and then you look at donald trump who says i have taken advantage of bankruptcy laws, hate the game, not the player. Why does it work for donald trump and not others . Jonathan i think that is more john i think that is more of the trump factor. I think that is something every politician in america has been asking themselves. Mitt romney is very rich. Cameron comes from a reasonably prosperous family and has worked hard. The is not somebody that has vast amounts of money stored away. Jonathan i wanted to have this conversation play into the brexit debate. His shows the polls they are tracking each other. I wonder if this conversation around whatever Prime Minister cameron has been doing with his financials, even though it looks perfectly legal, ways anyone that does not know. John two or three weeks ago if you told people it is close and then you would have a nasty terrorist thing in brussels and the swarm of nasty things around cameron, none of these are good news. There has been no good news for those that want to remain. People are already speculating there will be a speculation in britain. I say that as someone who would support britain staying in clearly. There is a very big worry when you have so many people undecided. For many it comes down as much to annoyance with the government, immigration, brussels about going to help. You have all these other areas. That is not good. It is not becoming a straightforward vote. David is there a sociological class vote on the brexit is there a socioeconomic class vote on the brexit . Is the working day stiff saying i dont see what i get out of brussels . This is nice for people that live in london and run Big Companies. It helps them. This issue of Cameron Michael whitney socioeconomic class issue . John i think it might. Look at it old versus young. There is definitely an element in london, the sort of people who are bloomberg customers. Come from Big Companies and are cosmopolitan and want to reach out. The rest of britain is thinking only get from brussels is more rules and regulations. If you go to a town like last up, lester where i grew if you visit a restaurant, the restaurant will not think it is a great idea. The associate it with regulations. They dont think of it as being one huge market. Most of the british economy is services. Ands not exports and banks people that will appear on Bloomberg Jonathan my dad is italian and runs a restaurant in lester. Thank you very much. Next, we turn to our morning meeting where we are taking a look at crude. Inventories slipped last week ahead of the meeting ahead of delhi will producers will look at ways to stabilize prices. Jason gammel joins us now from london. Good to see you. A guess the question is whether you take the meeting seriously in delhi and expect anything to come out of it either way. Works we have to take it seriously because it has been influencing the market. Even a freeze does not help supply and demand. It is important psychologically if opec appear to be acting in concert with russia and other larger producers. Jonathan where do you think the saudis are at the moment . Do you think they will keep to the idea they will not run do what it likes let it run do what it likes or do you think theyre beginning to change on that . It is difficult to interpret. I think the saudis have made the immediate having to participate. Do they want to take action in the market . We will not know the answer until the 17th. Jonathan we going to earnings season. The average price is 35. The year before it was 50. Who comes out of q1 looking good . It is going to be a terrible quarter for everybody, not only because of oil prices but natural gas prices. We are looking for companies that can stabilize their cash cycle, give the market confidence in the stability of the dividend and come up out of the back of this into Oil Price Recovery with a growing production profile. Chevron would be my top pick. Jonathan thank you very much for joining us from london. The Energy Majors set for a tough quarter of earnings. Julie has premarket movers. Morning steel edging lower a few best downgraded to sell from neutral. Matt murphy says steel is not entering a longterm bull market and it is unlikely they will be able to generate cash flow under current prices. U. S. Steel shares have doubled this year after falling in 2015 because of new tariffs. There have been a lot of analyst calls for rising steel prices. This going against the grain. In retail, under armour has undergone a stock split issuing classy shares to existing shareholders class c shares to existing shareholders. The new shares will trade under the ticker ua. C. Jonathan thank you very much. Next, an important conversation with the former treasury onretary, hank paulson, china and inversions. We have to say special thank you to john micklethwait. Julie i am in the green room. Att miss Mohamed Elerian 12 eastern today and Bernie Sanders tonight right here on bloomberg. David this week, treasury secretary jack lew stunned investors with a harsh crackdown on crossborder mergers. It is not unprecedented. With us to talk about inversions and china is former u. S. Treasury secretary hank paulson, but also former Goldman Sachs chairman and c. E. O. And author of dealing with china. Welcome to bloomberg great to have you here. Lets start with china. This is what your book is about. He spent a lot of time in china in different capacities. Give us a snapshot of where the chinese economy is in your view now. It is an economy in transition. Challenges,serious shortterm, intermediate, and long. Shortterm, currency, which is moderating. But overcapacity and confidence. Immediate, you have this debt which is a very big issue. Looking further, they need a new growth model. As i look at it, the good news theme solution to all of is rebuilding confidence in dealing with the debt and new drivers of growth are speeding up or forms. Of reforms. The reforms they need to put in place to skill back the state owned enterprises to scale back the state owned enterprises. It is a matter of political will. Marketok at china, the responds to volatility anywhere. But when you get a country as big as china and with the scale of their problems, it magnifies that volatility. Country, it the think the biggest problems are a few years in the future. If they be mitigated speed up the reforms. But i think what we will be looking at for a number of years, because it is hard to reboot an economy. You will see continual bouts of volatility as you see the struggle between state planning, state capitalism, and markets. The leader has said in the economy i want the markets to be decisive. That is a lot easier said than done when you are talking about rebooting and 11 trillion economy. David i want to make sure we talk about reforms. Yortterm, do you expect the depreciateinue to against the dollar as they try to liberalize their currency . In washington, people are accusing china trying to drive down the currency and spending a lot of money to prop up the currency. I think what they are doing is moving toward a currency that is more market determined. In the shortterm, they understand how important stability is. At a time when you have speculative pressures to the downside, confidence to the downside, and an understanding of the economy and what the leaders are doing at a low, this is a good time to have stability. I think over time, he will see you will see it market driven. I dont want to opine on what i think the value is at a time when there is so little understanding in the markets about what is going on in china and what they are doing to deal with it. Stephanie does the u. S. Have a china policy . If so, what is it or what should it be . John i was in china three days ago. They know you, henry kissinger, and bob zoellick. Why are the not more people in america that had that sort of relationship to the chinese leadership . I would say this. In china, the biggest ties between our countries have been the economic ties because we have had quite a robust economic relationship for some time. This is a very troubled relationship right now in the sense that it is under stress. A lot of people in the u. S. Are of having ahe value Good Relationship with china. What is the real value of that . Timelook at it, this is a when never has that relationship and more important because despite the differences, and we could spend a lot of time talking about the differences, we have many issues where we have a common interest. It is so essential that we keep this relationship on evenkeel because it is in our interest to get things done where we have these complement treat interests. John what a President Trump be a useful ingredient to longterm stability . You know the answer to that as well as i do. I dont think we will see a President Trump. Stephanie what do you think we will have . I should not have even made that comment. I have to tell you. I am seeing things today that i never expected to see from either party. Andr expected to see, things that are very disappointing and disturbing to me, the level of discourse. I think what we have is when you have the American People as that thishey are populism. Ripe for i think what we are seeing is rooted in that populism. I am not going to make a prediction on who our president is going to be. I will stick my neck out and say i dont think it will be donald trump. David we did have the announcement from jack lew that they are closing regulations on inversions. What do you make of that regulation to try to stop inversions . Surprised and disappointed. I think we all know the root cause is that weve got this antiquated Corporate Tax that puts our multinationals at a big competitive disadvantage with foreign competitors. I believe that undermines our Economic Security and competitiveness because these Multinational Companies have a significant advantage with other headquarters. We need to go into a territorial system so they pay the same taxes their competitors pay and they are not penalized if they want to bring money back and invest here. That is the way to go. This is dealing with a symptom, not with the problem. I think the right way to deal with the symptom is not keep changing the rules because we , i think our whole Economic System is embedded in the rule of walk. Rule of law. John do you think we should have a Corporate Tax rate . Some say the investors should pay tax through what they get out of it. I think in theory, you are probably right. What is a corporation . It is just a legal entity. Taxes are either paid by the workers, the investors, or the consumers. Billion raised from Corporate Taxes is a very expensive 300 billion in terms of what it does to impede Economic Growth. We are always going to have a Corporate Tax. That is a political reality. We are going to have a Corporate Tax. We need to come up with a Corporate Tax that lets us raise the money we need while not impeding growth and competitiveness. That is quite doable. I think it is something long overdue. The brutal force of capitalism, many Big Companies did not fail. This week it feels like a regular war against big business. Businesses get big and dont feel the brute force of capitalism when they fail. Is this a war against big business because of the moral hazard created . You are tying a lot of things together. I think for a long time, big business has been the bogeyman. Small business can do almost anything. That is sort of the third rail. Big business is the enemy. But when you look at the Multinational Companies, it is a huge advantage to have them headquartered here in terms of the jobs they create in this country. The wages are way above the average. Providert vehicles they and so on. A huge advantage. Against bigthe war business, i think there is a backlash still against the banks. There is no doubt about that. If you are looking for a banksan right now, the are an easy target to blame. Oni look at what is going and what is creating this angst in the american public, these are powerful economic forces that have been in play for a good while. I would cite what is going on in terms of the disruption in the labor market. Stephanie why would big business continue to be the bad guy or banks public enemy number one when it is banks that provide mortgages and loans to Small Businesses and big businesses give Us Health Care . You are totally right. I agree. I look and say our Banking System is the envy of the world. It is the best financial system. It is the most competitive financial system. And it really is the fuel that helps our economy grow. But the point i was trying to make is the forces that are really hurting the middle class right now our forces that are much more difficult to deal with. You look at technology, which is the future. It is providing a great advantage for all of us. It is hard to come up with an industry where technology is not disrupting the labor force, destroying more jobs than it is creating, exacerbating income inequality. This change is happening at work speed, faster than the public can understand it. Stephanie former treasury secretary hank paulson, author of dealing with china. We will be back. Verizon and google are said to be weighing bids for yahoo s web business. More from Erik Schatzkers interview with the ubs Investment Bank. We are just under 30 minutes away from the opening bell. This is bloomberg. Stephanie excited to be here. Favorites, a cohead of multiasset solutions with 150 billion in assets. Lots to cover. Jon lots to cover. About 30 minutes away from the open. Futures positive in new york. S p 500 futures up 17 on this screen. The green. We go higher, retreating from the 17 month high for the japanese yen, at or tense of 1 . The japanese finance minister with verbal intervention. Yields in the treasury market up about 3 point up about three Percentage Points. Big moves in the crude market. Lets get news with vonnie quinn. Vonnie thank you. The extradition of Salah Abdeslam is on hold. The delay is tied to a belgian investigation concerning a police raid in brussels before his arrest. Salah abdeslam fled to belgium terrorismpreliminary charges. He has been held in a prison since his arrest. David cameron is being accused of hypocrisy after a technology he held a state and an offshore fund held by his father. David cameron gave details of his interest after the league of documents from a panama law firm. Cameron says he will publish his returns as soon as possible. Pope francis says individual conscience should be the guiding principle for catholics. The document was released earlier today. Stephanie it is time for three stories that matter. The yen,lking about fed chairs, and warning about brexit. Yen isays rally in the taking a breather. The finance minister said strong yen movements are undesirable if they are abrupt. Strategist say 105 per dollar is a level policymakers would step in. It points to two things. This is negative for inflation fighting efforts, the equity markets. This could prove to be an unraveling of the Monetary Policy efforts because corona did everything right kuroda did everything right. Yet, the yen to rally. They have to read inc. It could bring about more fiscal stimulus in the months ahead. Jon the Politics Around that currency pair is amazing. Have them not highlighting the direction of the move, but rates of change. Highlightthey cannot the fact it is because it is getting too strong. The g20 has agreed you can do something if the moves are abrupt and violent. At the g7 meeting in japan, i wonder how much that plays into the willingness to intervene. Talk is except the ball to about how uncertainty is bad for the growth. It is a nono to talk about currency manipulation. Abe do everything right . This is the chart we have shown before. It bears mentioning again. Here is the death rate in japan. Then, you have births. This is an ongoing problem for the country. One question you have to ask, what can they do . An economy and secular decline and there are so much anyone would be able to do. In some ways you are right. Labor participation has been stabilizing as a result of women entering the workforce, many have been enterg as parttime workers, which means lower wages. You have not been able to bring the wave in flight the Wage Inflation that is desirable. Is left of abenomics at this point . Labor restructuring. He has been able to use some structural reform to bring capital Better Capital use. Stephanie make us money. What is the right thing to do . Would not be a buyer of japanese equities. The yen has appreciated as much as it can. Wait for a little while. Once it arts to depreciate, add to the japanese equities. But not yet. Number 2, 4 said shares shared the stage last night for a lighthearted discussion on the challenges of holding that position. Janet yellen defended the rate hike. I would not describe this as a bubble economy. We have week growth, but the economy has an doing well. Domestic strength has been propelling us forward in spite of the fact we are suffering a drag from the Global Economy. David what is the fed to do . Told you should fix the problems and are given the tools to do so. Ofy are coming to the end being able to achieve the goals you need to see other policy start to take effect. Else they can lot do to meet the conflicting demands on the policy. Declining corporate profits, on the other side, the feds are sitting on their hands. You see the economy is starting to heat up. What does that mean for stocks and treasuries . The dovish statement from the feds, the stronger oil prices, the weaker dollar, the counterpart of a stronger yen, those are starting to help out the markets a bit. To watch, we are seeing stronger wages. That is a positive. What we are not seeing is Pricing Power come through. Continues, you will not get multiple expansion at this point and it will be a shortlived rally. Stephanie one of my favorites, a warning that a socalled end tocould bring ian the European Union. Take a look. Rexit on one side and grexit on the other, the beginning of the end of the European Union and the eurozone. Brexit would be bad for europe and britain. The only thing you could hope for is rational and reasonable preva over emotion. Il if the brexit happens, i cant help but think this is a significant negative for europe as a whole. You have a negotiation period of at least two years to figure out what would happen. Week of time could be a positive. Uncertainty is bad. Will still come away thinking it is a negative. This way, there is at least a legal way for them to get out. Jon joining the dots from the European Union, they talked about greek being maxed. Does that argument resume with you . We will need to see the process play out. Three to four years out. Out, how dos play the negotiations take place . To be negative for the u. K. Economy, i am not sure the next breakup what happened. They go tos assume get out. We are. We have no idea what the clearing policies will be for the Financial Institutions. I would assume not. It has to be renegotiated. These things get put on the table. . Ho knows how it works out stephanie across the board, around the globe, there are so many question marks it is leaving investors in more cash today than they have in over a decade. Up. Ince 2012, the market is earnings are up zero. Expansion is due to multiple expansion. You need to see more liquidity, that is tough to see. Investors are looking for some sign of reflation and improvement. Jpmorgan is negative on stocks, saying the risk reward does not favor the u. S. Market. This is taking a look at weighted earnings per share. You have the trade weighted dollar and blue. Always been an inverse correlation, but jpmorgan says that is what we will see going forward. If we see the dollar come back up again, that is going to continue to exert negative pressure on u. S. Earnings. That is something we have been talking about with regards to the fed. Markets is the highest negative correlation between currency and the equity markets of that country. If the dollar were to strengthen, it would be a negative. If you look back versus last year, the dollar is about flat at this point. This is more perspective if the dollar were to strengthen. David is the dollar likely to strengthen . Think it will. I think the depreciation in the dollar we have seen could be positive for earnings and slightly positive for the u. S. Market. Jon good to have you on the program. Those are some of the stories that matter right now. Much more ahead on bloomberg. Federal reserve bank of new york president is issuing a cautious approach to raising interest rates. Sees Downside Risks to inflation and growth and says wage growth shows there is some slack in the labor markets. Undai isis hy recalling cars because of a problem with power steering cured it covers sonatas. Notify owners starting may 30. Reporting missed analyst estimates. The company says it is struggling to adapt to slowing demand. That is your Bloomberg Business flash. Are 15 minutes away from the open. Stocks across europe higher. Switch up the board quickly for a. Dollar yen on a move for the first time. The move in stocks, treasuries, all off the back of crude. Big moves out there in the market. Is the risk reward is not favorable in the short term. His new target is 23 below. A big moves in shares. They are in the red after j. P. Morgan downgraded the stock. His target to seven bucks a share. It is a red friday for ruby tuesday. Missed estimates on the top and bottom line and blamed results on store closures. Up next, more with vadim. Them vadi is with us for hour. I want to talk about your interest strategy. How much is that affect you . The level of earnings i care about. The earnings will probably be down in the First Quarter, but that is not the issue. The issue is whether there will be a positive surprise or positive guidance or not. Earningsok at the expectations, they are among the lowest. Analysts expect earnings to be up between 1 and 2 . If they come in above that, that could be a significant positive for the market. Japan has high expectations. If it is because of a weekend dollar, that is one thing. Quicksand wish i could tell you the market reacts differently. The weak dollar results in a stronger equity market. I would prefer to see stronger demand. I will take what i can get. , manyooking at the banks of them have flagged and ugly First Quarter. You can look at the average price of crude in the last quarter. Not looking good for the old majors either. We have talked about this before. There are some opportunities to own energy. We have owned everything, as well as the proxies for oil. Is going to get into the high 40s, low 50s by the end of this year. This beats whatever the current earnings are. I think oil could get into the low 40s. Emerging markets, oil producers, all markets would be lifted by the trade. Russia would be an example. David the banks have been hammered recently. Have they oversold . Is their opportunity there . You will not see significant upset or rerating a must be clear the regulatory questions in europe. To have a. , you need steeper yield curve. You are not seeing that anywhere in the world. Loan growth is not that strong. Banks will stay in the trading range for a while. Europe is interesting. So much in terms of absolute growth, but in terms of surprise. One of the things driving that is creation. You are seeing flows in europe to stimulate the growth. We are over with europe. Going to see demands pick up . That is a great question. We have to see a followup. Service seems to indicate improvement. Stephanie when you look at the u. S. Economy, why dont the employment numbers filter through when we look at housing, retail, sentiment. The savings rate has gone up. If the employment comes up, oil prices go down. The extra income is not being spent as aggressively. Housing is continuing to be spent ok. Homeimprovement chains are doing well. Uncertaintytinuing about the economic outlook. There is no obvious driver of growth. There is no easy to digest soundbite of what is going to happen. Without wage growth, there is no longterm growth. You may have to take a hit in the short term. I would love to see labor petition. You need to do things to stimulate. Jon are you confident and continues . It is more hope than confidence. I need to see the data. The only countries where you have seen the trend be strong as germany and the netherlands. Outside of those countries, Small Business creation has been tepid. If you get meaningful ovement, it is hugely jon thank you very much. The markets for you. Futures higher across the board. Dow futures up 104 points. Wti up five points. A real strong job support. Moments away from the bell. Let me show you the state of play this morning. S p 500 down by 1. 2 yesterday. , we bring uprope the boards quickly. Only the biggest move since march. We see these moves a lot. Commodity currency, the dollar down to one. 30. Over to julie to see where stocks have open. Painful,at will be that canadian dollar. I will keep watching that. Prices begin to settle here. Reporting samestore sales coming in worse than estimates. Get up continues to struggle with its business. You heard john talking about his oil about oil prices. Majors all rising. Contributingto be to gains into todays session. With aar, emerged semiconductor carry the company is weighing a sale of its standard products. That is from people familiar with the plan. We see a lot of dealmaking in the chip business. Vadim. Back with yahoo is in the green. Bloomberg reported verizon is planning to make a bid for the yahoo internet service. For more, we are going to go to cory johnson. Us about verizon and why this deal, might make sense for verizon. Verizon is a Different Company than it was five years ago. A real focus on media assets, the media we consume and the way advertisements are spread across different mediums. They acquired patch and all of the other aol content offerings, but the surfaces to serve ads. Yahoo has the same things. A combination of those assets hit the content strategies for verizon. It be interesting to see if some has looked at what they have built through acquisitions. Stephanie earlier, it was guess what, this will not work for her no matter what. Is one of the most highly compensated people. It is hard to imagine that salary being adopted why and acquire. Also highly respected in spite of the struggles she has seen as the ceo of yahoo area every person i have talked to thinks the world of her when they talk about her ability to understand technology and the media. To say. Rd from her public comments, she believes in yahoo and wants to see it happen whether she is with it here or there. Herof the big criticisms of. David one of the things you all her needs as a way to monetize. Tim armstrongngs built at at well, people think it is why verizon bought it, it is for the add tack. Is it because they have the ad tech to put with the traffic . We know about alibaba, the big pile of cash, the overall business. Two fundamental things, the media component and the ad tech are big business there. Lets also remember the fcc change in the rules about the way cable providers and phone track useran behavior through the use of cookies the way that google and face it does. Secret sauce that makes google, facebook, and yahoo work. The ability to track users through cookies. The fcc will prevent the code the phone companies and Companies Like verizon from tracking what users do without their permission. That could have a wrinkle in the strategy. What is your take your . The media strategy makes perfect sense. One interesting thing to watch is whether there is a big part of this that could be tax savings on the spinoff of alibaba. Dooo has not been able to it because of the tech issues. It could add material value to the company. With the taxes . The reports on verizon said they might buy yahoo and japan at the same time. Talk about that part of the deal. Yahoo continues to be a profitable business. It is another thing that is seen to have great value. The yahoo japan set, a big pile of cash, those are things that seem more likely for obvious reasons. Tech businesses are sold off, youre left with a Media Company down at yahoo . Alibaba assets are a different thing. The tax assets never become an issue. Stephanie this is a typical environment for technology companies. Of dreams and a lot of hope. It is going to be winner take all in a number of areas. What is happening now, there is a ton of money being poured into the broad innovation, the broad area of the market. Companies will end up being failures, but if you own a few winners that you pay off, i think things have gotten to heated up. That is in evitable when you have strong Growth Potential out there. There have been a lot of deals that have gone south. Deal, the allergen pfizer several deals going south. What is going on . Almost every industry in the world has gotten more concentrated. Resulting in competition and it raises red flags for the regulators. Cause of whatin we are seeing. That is being reflected in and monday spread. It gets wider and wider, ecting the i think there will be a lot of attempts. You could get a surge in some of these smaller deals. Email not be able to go after a merger of the equals. Stephanie great conversation. Our market strategist, it was good having you here. A next, we will have more on Erik Schatzkers interview with andrea orcel. Why does such a tough environment for wall street. We will have that next. Julie coming up later, the germany deputy finance minister. Vonnie here is your latest Bloomberg Business flash. South Africa Resources says the chairman is resigning along with his brother. The leadership is investigating those accusations. Annexed seem a look for 2 billion. It manufactures standard ships products. Is passed hong kong as the number three financial resource center. The index is based on surveys of more than 2500 Financial Services professionals. Jon we open this friday on a high. One group is not moving higher, retailers. Many of them, i told you about the downgrade. The analyst is cautious on Department Stores after a sharp deceleration in the second half of march. Business, ultimate salon is going in the other direction. It will replace Tenant Health care after the close on april 15. Various funds tracked the major averages you tend to see. Thank you. Lets go to abigail doolittle. She is taking a closer look at those coke tech companies. Microsoft is trading higher, boosting the nasdaq most. Driven by the decision to use a subscription model for its commercial business. It is trading, down slightly on the year. Another mover that had been higher on the open, turning into the red, facebook. They believe the opportunity is greater than previously believed. He thinks there is 20 upside on a tech stock that has been trading higher in 2016. Stephanie Erik Schatzker sat down with an interview with andrea orcel. He gave his view on why it is such a tough environment for wall street. We are at a crossroads where we are seeing increasing regulation, which is changing the role of the games. That is amplified by markets, which have never been asked challenging as in the last decade. You put this together, we need to navigate a longterm perspective by trying to cross a year that is shaping up to be difficult. Stephanie eric is here now. What was your biggest take away . Erik the pressure that the industry is under. It is not just the industry. He said to me the pressure has never been as high to reshape our model to something that can hold water and convince our shareholders it is worthwhile investing in it. The highest are oem the industry. Stephanie there are not just three players in this party. Been banks have lunch. Theyre saying europe was kind of late to the party. What is your take . Government is a bigger partner in every decision than any point following the great depression. Just the regulation, but also uncertainty of what is coming down the line. Plus, due to technology, it is creating pressure for the industry. We can listen to more on the interview. He talked about the seismic change the industry is undergoing. The industry is going through a change. Such anever seen question of the Business Model in the Investment Bank since i started my career. As everyone tries to respond to the question, everyone is taking a number of difficult decisions. We allow the organization to win or lose. If you are running that Investment Bank, how do you occupy you double down on equity. Ubs has jettisoned fixed income. It did that back in 2012. That is the reason they are doing so much better than their peers. They are not dragged down by the cost of holding fixed income positions on their Balance Sheet, which is very expensive under new regulations. When he says i have never seen anything like this in my career, that is not just coming from anybody. He is considered among, if not the top Investment Banker in the world, not just in europe. He has seen Investment Banking models evolve over time. When he says i have never seen this in my career you can tell. It is not like it hasnt undergone change in the past 25 years. It has. Very rare for an executive to comment on his peers by name. He was diplomatic, but quick to highlight that when we it was a much calmer time compared to where we are at the moment. Struggle. Hts the if youre going through a restructuring, it will be more difficult for you. It means more for Deutsche Bank and Credit Suisse. They are trying to restructure and what is essentially a down market. If the activity remains subdued as it is now, it is very difficult to get done what they need to on their Balance Sheet, to reorganize the Balance Sheets. What does it mean for the rest of the industry . It is probably neutral the way it is for ubs. Not a Good Environment to bn, but no dramatic need to restructure what they have done already. David coming up after this program, Bloomberg Markets. We have a lot. Liz and saunders will talk to us about the markets and what she sees for the current tech and quarter in the market and for earnings. Also, the german deputy finance minister will join us in the 11 00 hour. There is so much to talk about. I heard it david has gone to seen hamilton. I cannot get a ticket. I want to go. David it is something to see. I loved it. Nothing i have ever seen. Loved it. We talked to a Silicon Valley executive. That is next. Jon this is bloomberg. After an ugly day yesterday, the biggest oneday drop in the s p 500. We come back a bit today. The dow up by over 100 points. Going in to the close in europe. Switch up the board quickly. A dollar yen on the move. 4 10 of 1 . 130 on the u. S. Dollar. Treasuries are higher on the week. Wti up by over five Percentage Points. Stephanie i like that. That is how i like to end the week. On a high note. We will continue on the high note all day long talking tech. Crossed the billion dollar mark back in 2011. Around 200 startups are valued the1 billion or more in private market. Emily chang sat down with brian to ask him if he is worried about the bubble in tech stocks. We launched august 11, 2008. We started this company in a recession with the door closed to us. No one wanted investments. That was how we started the foundations for this company. This company is going to be fine. It is going to be founded in a bad economy. People are going to want to seek additional ways to prep. You have to take a long arc on these things. Stephanie especially if you are one of the private investors. Techluck on getting out of startups. Do not miss a special bloomberg west. Looking to next week, u. S. Banks report firstquarter earnings. An important week to look forward to. Jon look out for the macro detail as well. Meetings. Ring kicking off in washington on friday. That does it for bloomberg. Bloomberg markets continues on bloomberg television. Liz bloomberg wrote headquarters in new york, i am betty liu. Mark i am mark barton. This is Bloomberg Markets on bloomberg television. Betty we will take you from new york to london to hong kong in the next hour. Heres what were watching. You could call them the fed for. They all come together for a historic conversation with a set about financial bubbles, inflation, the recession, politics and more. Itk from verizon to google is said to be lining up with yahoo that is pushing back the deadline. A look at the bidding to buy the struggling company, and what it means for the future of the current chief executive Marissa Mayer. Mark while human never see the broadway hit hamilton, we will give you a chance to meet the man who designed the costumes. Bloomberg businessweek said he ne