Seven years. Can we keep that up . We will talk about this within the hour. Youve got earnings to going on . Conoco phillips, to mobile and mastercard are before the bell and linked in is coming out after the bell. Lets do a data check. A strange day. I was surprised by a record high yesterday. It caught me off guard as you just continue to advance and the 10 year yield is higher. There was strange economic information yesterday including the multilook at the First Quarter. Vxx shows a lack of volatility in the market. The dow is at 16,000. We have scoured the front pages3. Here is olivias are in, back from bali . Yes, ukraine lost control of the eastern part of the country. Progress and militants occupied more government buildings there and have occupied these buildings and proclaim themselves rulers of the peoples republic. This comes as the u. S. And eu continue to accuse russia of fomenting the progress that milt the prorussia military and the country. It just wont go away. The concern is that the money is going in the pockets of russia to pay off the ukraine gas bill. 1 3 of theolds about ukrainian debt in the next two years of any imf money you could say is going back to russia. In the same way that the aig bailout went to goldman sachs. Dow begins the day at a new record high, 16,000 500 81 and the s p 500 within seven points of a record. This happens on a day when the government reports the economy has basically stalled out. Gdp grew in the First Quarter by as the one percent weather was blamed and they talk about spending more on heating and the cost of obamacare kept gdp from being negative. Where is the gloom crew. The marketsle think are too complacent and it looks put or aad a Greenspan Bernanke put. I am all in cash and i have levers all my cash. Are burning cash. Coke is signaling it could change the stock deal. Warren buffett said he does not like the plan but would not vote against it out of loyalty to cope and now coke says the plan offers maximum flexibility for future adjustments. He does not like plans that are connected to stock options. We will look at this as betty liu focuses on it today. Its smoke and mirrors to me. I dont get with the Beverage Companies are doing. The total u. S. Soft drink sales since 2008 have fallen 17. 8 . Where is your juice cleanse . Im doing a juice cleanse. We used to do a coke classic clans. Clans. And now we are doing blueprint should i go get my juice . No, you can have the rest of mine. [laughter] those of the front page stories. Weve got a wonderful guest us withew maddis joins his resilience optimism. Julia emanuelwith at ubs investment bank. I was thunderstruck yesterday by what the equity markets did. I did not realize is this a surreptitious equity market . Why are we creeping up and we are not noticing it . Its because everyone is looking at it within the context of 2013. You had this roaring market up almost 30 and what we have seen so far this year is moderate by most standards. Its despite the fact that we are at new highs but if you look at the challenges, you had this terrible weather in the First Quarter holding back gdp as we know, you had emerging markets concerned with the beginnings of the taper, you had russia and the story that wont go away, you have continuing concerns about chinese growth prospects. The markets are really taking it in stride. Slope matters. This is the great boom through the 1980s and 1990s and then we break out. That thepredicted markets would predict what would be a good economy. Toant you to state right now the worrywarts out there why they dont need to worry about 0. 1 gdp. Rising rates will stimulate the economy and not weaken the economy. The threat of rising rates is what is helping boost the economy. We have to worry about if the fed decides they are too scared to move forward and they begin to signal that. All of a setting, all the reasons for people to try to boost growth instead of buybacks and dividends in the equity market goes away. Rising rates are whats going to drive that transition. Thats completely the opposite. Risingn understand rates as a reflection of growth in the economy. Why rising rates themselves actually help the economy. In a short rate environment, everyone tries to get their money back as quickly as possible because they are assuming that tomorrow they will get a better rate on their investment. For stocks, that drives dividends and buybacks. When rates begin to rise, you are in competition so you have fixede a choice between a income yield or growth. Growth then gets rewarded. Think of buybacks as a form of corporateqe. As the fed is tapering its fun purchases, we ask its bond purchases, we expect the rising rate purchases where there will be more confidence and we see that hold up, its a situation where cash will be redeployed into Revenue Generating ideas like and m a. Its a substitution effect . Is this microeconomics thursday . You are a princeton guy. The micro becomes the macro. This is a serious point. What individual companies are doing and the motivations for doing it are what drives the economy. Buybacks have been happening because they get paid a majority you do buybacks because it will boost your stock. They are also doing it because they are not seeing any topline growth. The fed said yesterday that consumer demand was one of the few bright spots in the economy. At what point do we have to get concerned that we are not seeing the topline growth . The sales are not coming in. Ofwe go back to this notion the fed being a driver of increased animal spirits. We are seeing it withcapex picking up and m a. Topline is going to come in even after this first corner abomination of gdp at about two point five percent. Its not great but not awful. Andid the fed miss opportunity to get out in front of your optimism on the economy . No, despite all the talking around it, the fed has never really wavered from a 2015 hike cycle. They have been talking about a particular five years. Anybody who expects them to push that back into 2016 will be sorely disappointed. They talked about before they got the 6. 5 unemployment and theres nothing on their radar screen. The fact they did not change the statement of all besides a tepid tells you theyit are on autopilot for the tapering and are probably on autopilot for the rate hike. As we go into jobs day tomorrow, lets get company news. Lets start with sony which has posted a quarterly loss that was 18 larger than the company had forecast. That has been hurt by a slumping computer and Consumer Electronics market and its trying to revive its fortunes with job cuts and new game consoles and smartphones. That was quick. I will give you a longer 1 there is a blockbuster deal in the pay tv industry. Directv might be bought. No one is commenting and directv is the secondbiggest paytv operator. Abercrombie fitch as given into an activist investor. Forged a partner and engaged for independent directors to its board. They had four straight quarters of losses. I get my haircut on the 11th floor of that building. They used to sell pith helmets. You could get outfitted for real safari. Abercrombie and kent used to run safaris. I do l. L. Bean when i go skeet shooting. Thats todays company news. Coming up, another megamerger in the works sprint plans a bid for tea mobile and we will discuss this on bloomberg surveillance, on Bloomberg Television, streaming on your phone, your tablet, and bloomberg. Com and now available on apple tv and amazon fire. Good morning, everyone. If users are up seven. This morning all day, betty liu goes inside pepsi. It starts with her exclusive interview with their chief executive officer. Thats today at 8 00 a. M. Eastern time. A real look at pepsi. Adam johnson has done good work on that as well. This is bloomberg surveillance. Johnson decided to join us this morning after torrential rain in new york. Olivia sterns slept here last night. It was amazing rain. It was like biblical. I saw Russell Crowe go down central park with an arc. Russellkrohl . Hes in the movie. He was going down central park. Another megamerger could be in the works. Sprint which is 80 owned by softbank is planning to move forward with the bid for tea mobile u. S. They would make debt arrangements for that offer. This is a bloomberg exclusive story and they have met with six banks, a formal bid could be announced in june or july. The big question for this deal is the concern that regulators could hold it up. The011, regulators blocked at t effort to acquire tea mobile. Everybody thought that would go through but now it looks like softbank is trying to push this through and piggyback on the conquest comcast acquisition of time warner. The stock moved. This is a surprise. Tea mobile rose 11 . On this news. This is tea mobile u. S. And has nothing to do with deutsche telekom. Men of 67 of two t mobile overall. There are four companies involved. Sprint is 80 owned by softbank. T mobile is 67 owned by germanys deutsche telekom. Thats why it is so confusing. Is the government involved . Absolutely, you have to get this passed the fcc and the department of justice. Is the fourthlargest carrier in the u. S. Only block the at t deal with everyone thought would go through. 23 billion is the valuation . Julian emmanuelle is with us from ubs. The fed has expressed confidence that we can grow Going Forward given the fact that we are continuing to taper. Now we are seeing Corporate Executives express the same confidence in m a. A month ago, we predicted it could grow by 17 this year. Now, the numbers look like its closer to 40 . Will we see nominal gdp . You guys say the word confidence too much. Thats what this is about. We were just talking about capex. M a is just buying someone elses capital stock. You will get rewarded for that in the future. I bring it back to getting off the zero rate environment. I think zero rate of the most corrosive thing that anyone has ever seen and if you want proof look at japan. Will the regulators approve this . Thats out of my purview. Deal . You banking the weeds, getting into the there is an index where they look at market share and that problem is that index is really high. There is serious concentration already. You are in the microworld today. I cant keep up with you. Micro economics and youve got power equations with adam johnson this morning which means i need more juice. The jews is making me smarter. The juice is making me smarter. Juicing because i dont want to substitute juice for meals. I will have jews in addition to meals. I am not replacing my meals print i will have jews in addition to meals. Everyone at work is doing that. You are number two and you are not an hour into your day. The viewers can see it but i think you look dewy. Dewy . I think that is creative destruction. Olivia sterns talking about a dewy eyed tom keene. The newest edition of Bloomberg Businessweek is out today and you can download the app for free on your iphone or android. The Silicon Valley conspiracy is the cover story. We will speak with the author of that story in the next hour. We will be right back. Good morning, everyone. Its our twitter question of the day sir Martin Sorrell will join us in the next hour. He would say adverts. Thats the london way to say. She justent spent six weeks in london and she is talking with the british accent. Olivia sterns and Jon Erlichman are with us. With adam johnson. President obama is blaming blocking theor minimum wage. President accused republicans of pushing down on a topdown policy that benefits mostly the wealthy. In ukraine, prorussian militants are stepping up their attacks and have seized more government buildings. Russia is being accused of stirring up trouble in ukraine. Oprah winfrey has emerged as a potential bidder for the l. A. Clippers. Teama joint bid for the with the oracle Ceo Larry Ellison and former Music Executive david geffen. The price is going up. Thats the irony. Those are your top headlines. Weve got a morning must read this comes from leon panetta. He says the world is just as dangerous and maybe more so. Has the debate going away about getting back to 1938 . That was shocking that headline, the idea of bringing the budget back to 1938. Thats incredible. Thats the concern. Wasard haas yesterday talking about how our policy is completely unfocused and we are sending the wrong messages is because we dont know what the message is we want to send and it weakens the military. He was advocating arming the ukraine. He wants us to send more military assistance and to ukraine. As does john mccain. Hour, we will hear a briefing about the travels of john kerry. Also coming up, u. S. Gdp is slowing to its weakest pace in five years and we will discuss why next. Bloomberg surveillance, on Bloomberg Television, streaming on your phone, your tablet, and bloomberg. Com and now available on apple tv and amazon fire. Good morning, everyone. Adam johnson and Olivia Sterns are with me. Scarlet fu is off today. I think it is the rain. We got biblical rain. Lets do a data check. Im looking at a ruble that is stronger. This is equities driving higher in the United States and crude oil is under 100 per barrel. Weve got gainers and losers as well. With are going to start pepco, the big winner yesterday. Up 17. 4 . Its the biggest single die on record. Exelon is buying pepco as we discussed yesterday. Dreamworks fell nine percent, the biggest drop since february. Mr. Peabody and sherman failed to attract kids to the theaters. It did not get there. David geffen of dreamworks may be buying the clippers so he needs that money. Didnt they have a song . Its a good movie, two. How many times have you seen frozen. Coming up on ive got two little girls. Addresses . Ave the i dont. We have a little barbie dolls. They are 1600 on ebay. I thought you bought one. They dont make them in my size. As the Dow Jones Industrial average guys to new highs, the First Quarter economy was flat. There is a broad assumption of better times ahead and drew latus and julian emanuek suggest go long the u. S. Economy. On domesticnote final sales is critical. What is that . Domestic final sales is what u. S. Producers are selling to u. S. Individuals print when you look at that number, it was nowhere near as bad as the headline. It was largely what we were expecting. The weakness yesterday came from trades and inventories and we know because of the Energy Revolution in the United States that the trade numbers will get at her throughout the year. Inventory to sales ratios are near alltime lows and inventories will not drop forever. We think it was a pricing effect. You take a giant stock of goods and you change the rise and then you look at the delta on that which is the change and its easy to get big swings. Was that a hat trick . Im trying to figure it out. He accused me of being lost in microeconomics. Dahlou brought up the herfen index. I defy anyone to tell me what that is. I know what it is, unfortunately. That is Square Market share. Part of the morning must read we took a poll this morning at our meeting. , 11 oftrue 1829yearolds expect to retire before age 55. These people are in for a surprise. Within the optimism of ubs, why are we so reticent about equities . Dont equities to better over the long haul . They do and we look at it as healthy skepticism. This is the wall of worry we are climbing. If you look at the headlines right now, people are saying to sell in may and go away. We dont think thats necessarily the case. The data might beg to differ. You the past five years, can take an average of the s p 500 and it declined 1. 8 . If you look at the long haul, that tends to be the case. 2014 is shaping up as a different kind of your. January is normally very strong and we had a week january. February 10 to be soft and we had a good february. We think the elements are in place. This is stranger than fiction. Nature ofe bizarro it, is because we dont know where its going . I have never seen the consensus so strong for a strong second half of the year. Everyone says we have been through this before but everything is going toward a better second half of the year. Can we get to four percent real gdp . I dont think so but i dont think you need to. One of the things we forget and one thing that has helped us it is allowing baby boomers to actually choose to retire. Baby boomers are saying we are going to stay in the labor market forever but all of a sudden, the equity market recover and the Housing Market recovered and may now have the money they thought they had and they are leaving. For the making room 1829 years old. And making money. Sectors that tend to do the best, health care consistently is up 3. 2 on average for the past 25 years over the summer months. We can debate whether or not but they rocketed last year. Correct, do you still ride that . We certainly do. Its one of the sectors that we prefer. Both earnings momentum and revenue, you getting it and health care. Its the Affordable Care act that is providing some of the tailwind. Lets jump forward. We mentioned to sell in may and go away dont we have an election coming up . Is this going to get in the way of either of your world . What does this election due to the economy . More about elections overseas. European parliamentary elections is not on anyones radar and i could be a problem. Show thath the polls its a 5050 call, no one seems to think thats an important issue. Go to our london correspondent, Olivia Sterns. Should they be george go to edinburgh next after new zealand . That would be a good idea. I can just see baby george out in the backyard. Think of the conversation. Scotland for the First Time Since 1647 you learned that from game of thrones. If i got the date wrong, please tweet me. Scotland could leave the u. K. . This is unlikely. Everybody talks about it in the u. K. All the economic analyses suggest that scotland independent of britain could not survive. One more serious question we have had equity markets for years in a row, how tired is this bull market. . It is by no means a startled but it is getting out there either in length or person to of gains. We dont think thats an issue. This year is all about the transition away f