tv Bloomberg Go Bloomberg March 29, 2016 7:00am-10:01am EDT
government's ability to break into a terrorist's iphone ultimately hurts apple's reputation. david: a warm welcome. i am jonathan ferro. stephanie and david westin are away today. big events this week. it was on friday and then today, the much anticipated fed chair speaks today in new york. before we get to all of that, we and. 30hours minutes away from the open we are done by five points on the s&p 500. the miners are leading the losses in europe.
the ftse 100 is dipping into negative territory. switch up the board. here is the yellen scorecard ahead of that speech. what a run it, has been on over the last few days. it keeps climbing. yields for a look bit lower by two basis points at 1.86%. is fascinating. we have a little history of what we might hear. is speaking in singapore and talking about the dow plot. he said today that he thinks it is still a good idea to have the dot plot. he wants to wait and see if it wasn't a mirage. jonathan: i find it fascinating that monetary policy has been reduced to some dots on a piece of paper.
anchor: i understand what you are saying. you caught up on the latest headlines with your numbered first world ms.. -- bloomberg first world news. the government has and access to data on an iphone used by terrorist. the government compelled apple to help. police say a man was shot after pulling out a gun outside the u.s. capital. good in pretty condition. they believe the man acted alone. the suspect has been arrested . the brusselsceo of airport says operations will not be back to normal for a month. the bombing last week severely damaged the airport. setceo says the airport is to reopen tomorrow, but it will only be able to handle 20% of the normal number of flights. global news, 24 hours a day, powered by 3400 journalist in
150 new sparrows around the world. jonathan: turning now to the middle east. the domestic egypt air flight was hijacked on its way to cyprus. we are still waiting for a lot of these details to be confirmed. where are we as this story develops? >> they were 55 passengers on this flight. it was due to go from alexander to cairo. all but three of those passengers have been released. on top of that, you have crew members and the hijacker. those are the last remaining people on the plane. it is still only tarmac in larnaca. they are still negotiating to get the release of these final passengers. it is unclear what exactly the demands are of the hijacker. there have been reports of the cypriot press saying it was a personal matter and perhaps, it was related to his ex-wife, who resides in cyprus. the cypriot president has said
it is not related to terrorism. one more thing i should tell you though, the egyptian aviation minister said it is unclear whether he does indeed have an explosive belt, as wheas claimed. jonathan: we will keep you up to speed on that story as a continues to develop. turn back to markets now ahead of the big speech from chair yellen. pimco in has joined a warning that costs are due to pick up. february,rose 1% in half of the 2% target. where does janet yellen said on this debate about upside risk to inflation in your mind? >> i think they desire upside risk to inflation. that is what all of these policies are designed to create. i think to get a little bit excited because tip break events
have risen a little bit is a little much. they are still trying to generate inflation. the fed and most other central banks think the risks are on the downside. >> how can john williams talked data mighthis cpi be a mirage? we're not seeing much energy to the inflation pressures that are there. >> they look a lot at the core pce. that is kind of in the ballpark of 2%. i think they are looking for cover to begin to raise the fed funds target rates again once or twice more this year. they are out of sync with the other central banks. those other banks are cutting rates into negative territory and providing liquidity in the system. jonathan: what i found fascinating was the argument that the federal reserve was
going to run monetary policy hot. the last couple years they kept promising they would be gradual with rate hikes. now we are in a position where they are saying, sit tight. and if that happens, they can hike and push inflation back down. what does that mean for financial stability? >> that means it is possible for financial stability -- jonathan: they have to hike aggressively. >> they know that can work. if things overheat on the economic front, they can raise 50, 75, 100 basis points if they need to. that happened back in 1994. what no one has shown yet is, what do you do with this inflation if it becomes entrenched deflation? that is something we have learned from the japanese. hor: it is very depressing if
this becomes the case. what is your best case scenario? >> the fed is expecting 2.2% over the coming year. i think that is a bit optimistic. we're thinking sub 2%. i don't know but is on .6% or 1.8%. >> that is not enough though. >> definitely not good enough. i am in just to see what she says that the economics club today. i think she will review the summary of economic projections. they have 3% sitting out there in 2018 and i think that is fantasy. jonathan: i think 2014 to take the helm. entions it 24eech m times. in the data you see in the labor market, has slack diminished enough that she no longer has to work about spare capacity in the labor market? >> they talk about the labor
market all the time. i think it is the underemployed that worries them. if you look at which game, yes, they have drifted up a little, but they are nowhere wher theye they should be. there is still a lot of work to be done on the employment side. jonathan: there is a question i was asking a couple minutes ago. is the fed leading the markets anymore? fouor are the markets raising te fed? they can talk about raising rates. >> the markets have certainly been leading the fed, haven't they? if you go back one year ago when it looked like there are going to begin the normalization process, they didn't. they did not do it in june because the dollar had appreciated and that was a big head went to corporate earnings. they did not do it in september because of the august volatility. they backed away from raising rates this march because of the
volatility we saw in the capital markets. they talk about foreign financial conditions a lot. i think they are responding to what is going on in the markets. it makes sense to me. what head of the fed once a crisis on their watch? >> they can't ignore it because of the impact it can have domestically. ,t can't be this old reason moving or not moving. what about the stronger dollar and trade? how much will the fed be taking that into account in march? be taking they will into consideration a considerable amount because they are looking at corporate earnings. you need corporate in the corporate earnings to be strong. when we look at the volume of borrowing, like corporations did last year, and the u.s. they did well over $1 trillion. most of that went into financial engineering, buying back shares, raising dividends, and the may activity. -- and mma activity.
>> bob michaels is staying with us. he is the j.p. morgan asset management mobile cio. later in thecause day we have full coverage of the federal reserve chair janet yellen and her speech at the economic club of new york. jonathan: we dig into japan's retail sales and a spending data. that is next. ♪ nejra
authorities say he duped a hedge fund manager into wiring him $25 million last fall and then lost it all betting on stock options. yahoo has told potential investors they have until april 11 to submit bids for its internet business and asian assets. this includes a stake in china's alibaba. 40 companies signed nondisclosure agreements, indicating the are interested in making a offer. the bank of england says companies should tighten standards. the move is part of a wider compound. rental concerned that owners are pushing up house prices in the u.k. jonathan: over to japan now, to the world of politics and economic data. the country is releasing retail sales and spending data today. the numbers for february are somewhat of a mixed bag. tobreak this down to go erik in tokyo.
is prime minister abe frontloading some spending and will that help? >> we will have to see, but you are right the economic data at today was retail sales on how spending adjusted for the extra day in february this year, for leap year. they both fell. it shows the economy is really struggling to rebound after contracting last quarter. this kind of gets back to one of the criticisms of abenomics. even though we have seen the yen weakened and exports increase, we have not seen a lot of that trickle-down -- a lot of those benefits trickle down into the economy. wages have not increased that much. we just finished the springtime annual negotiations with the unions. there was a slight increase, but it was minimal. you are not seeing the consumer spending increase that many people think would trigger the changes abe is hoping for. jonathan: looking at the
strategy for the government, prime minister abe came out saying they would frontload budget spending. is not enough from the boj, how does this help? >> that is one question a lot of people are asking. he hit on a lot of the main talking points of abenomics. to front of the budget and basically, spend a lot of the money up front to try to stimulate the economy. other things he reiterated. they want to increase the sales tax next year. they're going to do that borrowing a lehman type event. they also want to increase salaries for childcare workers. that may sound like a small thing, but a big issue here with getting women in the workforce. there are simply not enough childcare facilities. he has reiterated a lot of the things about abenomics they have been speaking about for the last few years.
we will have to see if these last few policies, whether they allocate enough money and the policies are effective. vonnie: you mentioned a couple of those policies -- the same work policiesame and the help for couples trying to conceive. he is obviously, tried to think very long-term here. he says he wants to go ahead with another sales tax increase next year. but i am not sure they can shoulder this burden. >> you know, population decline is a huge issue in japan. the population is declining and you know, they need people paying into the tax system. so abe has talked about that. it is unclear how much money they will commit to that or if it will be affected, but that is clearly an area they want to target to boost the economy. jonathan: thank you very much for breaking that down for us this morning. bob is still with us for "bloomberg ." the limitations for monetary policy now, we appear to have
reached them in japan. i don't know what the efficacy of doing more in japan is. what is the marginal improvement if boj goes up there and buys more small bonds? does improve anything? telling usk they are they are frustrated with investing in the capital markets. they have cut rates to negative and they may do more, but what we are seeing happening is the big holders are selling them to banks and then taking that money and exporting it overseas into foreign bond markets. if we know this, they know that. that is why they are trying to tackle the real economy. raise the sales tax, get them to spend, and if the if they can jumpstart the real economy. e was working, i would expect the long came to be selling off, not rallying. investors would be saying, what is going on? what is happening? >> bob miller actually sent us
this chart and this is the u.s., u.k., and german 10 year yields. all of those equally weighted to get there are yielding 1.3%. japanese 10 year yields are down about -0.1%. this is from a survey we had yesterday. it shows the japanese economists expecting the 10 year yield to stay. 70% of all japanese data, i think vonnie said, is yielding negatively. and the boj is actually going out now and buying even on the longest end, even in 40 years right now. but is this working, bob? bob: well, i don't think it is. weakenede seen the yen against the u.s. dollar for eight straight days now. finally, it turns around, right? bob: that is obviously, one of the things you get when you cut rates into negative territory. you enter the currency war.
this chart tells us many things. it tells us japan was the first to qe zero industry policy. the other markets are now on the same path. maybe there is more downside yield. it also tells you that the japanese are struggling to get it right. they are still struggling to stimulate the real economy. a could be demographics. it could be just the lack of investment going forward. exhibit a preference for savings, but i struggle to see how anything is working. >> as far as weakening the yen, kuroda has had a tough time of it. for eight days. they still have a long way to go to get back to the level where they were one year ago. bob: that is true. they are going up against a lot of other countries that are weakening their currency. you've got certainly, europe
cutting rates. you also have the u.s. backing away from the interest rate rise, as had been discussed. you have other emerging-market central banks cutting rates, like hungary. you have the people's bank of china banking away and easing monetary policy. everyone is trying to get their share of gdp wherever it exists in the world. what is really missing is strong aggregate demand. vonnie: thanks so much. the bank of england issues a warning for banks over a possible brexit. details, next. ♪
encourage banks to buil dd of lending. francine joins us. francine, first question. over brexit, risks can we draw a line with what they are doing with the countercyclical capital buffer this morning? francine: we don't really know, but the bank of england today got paid the same. they basically raised their warning of a possible credit crunch. they are asking banks to put more money to one side. you are absolutely right. this is about the countercyclical capital buffer. we don't really know what a brexit vote would mean for the banks. we don't really know the repercussions. there are two to the argument. people are saying, the u.k. banks are fine and the bank of england is doing what they can to ensure financial stability. and because we know there is a vote on june 23, there will not
be a shock like with the lehman brothers. the other argument is, we don't know what we are facing because we don't know what financial markets will interpret this possible leave. we spoke to the ocd secretary-general and he was very clear. we don't know what will happen, but there will be risks if this country decides to leave the eu. have a listen. >> there is a fundamental assumption, which is wrong i those who think that nothing would happen. that is that all of the institutional arrangements that are in place today would continue to work in the family. -- in the same way. that would not be the case. we cannot assure that. that is a very great source of uncertainty. francine: a lot of people of course, are saying the banks are strong enough to withstand the possible shock. but we don't know what that shock would look like or how big
it would be. vonnie: is the bank of england using the potential for a brexit as an opportunity to raise the buffer? francine: that is an interesting point. the bank of england is seeming not to be too political. i think they are covering their bases. they are in charge of financial stability. polls, theyk at the are so close. they are just trying to ensure that nothing bad happens. of course, in the financial system in the u.k.. it is interesting that the buffer applies to the u.k. banks. it applies to building societies, but it does also apply to other branches of european union banks. problem with the brexit is we have a lot of people who are undecided. many people are reluctant to believe the polls. they are very close. and we have a majority of the u.k. voters who are undecided and we don't even know if they actually will show up come june
23. vonnie: i can't imagine banks are too thrilled. any other big headlines from this morning's data? francine: let's look at the polls. i think they really say it all. undecided, anything between 12% and 19%. the campaigning over the next four months will be crucial. jonathan: francine lacqua in london, thanks for joining the program. coming up, we take you from the politics in the u.k. to the politics in the business world to silicon valley. the government has gained access to a terrorist's iphone without apple's help. what does this mean for the case against the tech giant and apple's reputation? ♪
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miners are leading the losses . here is your cross asset yellen scorecard. the euro-dollar at 1.12. today winning, a streak. the dollar is stronger and the yen is weaker. it is down by two basis points this morning. twocrude is lower, down by percentage points this morning. vonnie: let's get to your first word news now. we begin with that egyptian crisis. authorities in cyprus say a hijacking has something to do with love and nothing to do with terrorism. man let most of the people on board go, but is holding three passengers and four crew members. the supreme president says it has nothing to do with
terrorism. there are reports that his ex-wife lives in cyprus and he wanted a letter delivered to her. the ceo of the brussels airport says operations will not be back to normal for months. severelyngs last week damaged the airport's the barger hold. -- departure hold. it will reopen tomorrow. president obama asked reporters not to dumb down the news. he spoke in washington. regretsne of my great is that the tone of our politics has gotten worse. i will take my share of the responsibility for it. vonnie: the president did not mention donald trump, but he made it clear he is critiquing what he sees as superficial coverage of the front runner's campaign. jonathan: i think that is the president being a little bit diplomatic.
vonnie: i think he is being a lot diplomatic. is with us.m keene tom: a goes to janet yellen 12:00 today. also, what we saw from john williams really bouncing off from what jim spoke he said if you days -- what jim said a few days ago. in unemployment conditions so far this year has occurred as economic growth appears to have picked up from themodest pace seen in fourth quarter last year. she went on to say that the factors restraining economic growth are projected to fade further over time, the median rate rises to 3% by the end of 2018, closer to its longer-run normal level. they wouldwonder how adapt and just today after what we saw over the last couple days of data. vonnie: i was just literally
speaking to bob michaels about this. he is not quite optimistic that we will get there. she is arstand bo public official. she has a certain optimism she must convey. what you look for a 12: francine: francine: two -- what you look for a 12:00 today. >> i think the fed has to come out and be optimistic because they have to demonstrate they of confidence in the policies they are putting in place. i just think they lack the confidence. i don't see a fed that is taking control of the economy or a policy. they have been bent on normalizing rates and doing what they need to do to get to that 3%. i see them in evaluating everything that is going on in capital markets and oking at four an foreign financial conditions and the impact to the u.s. and backing away. jonathan: what does this mean for your world and fixed income?
i would say many fed officials would be the case. upset that with what is happening in international markets. how do you make a forecast on treasuries based on domestic pressures versus international? >> money is pouring into the bond markets right now. yellen can talk about getting to 3% today. it doesn't matter. there may be a short-term blip in yields. >> matt miller put up a chart that i love. this chart was a german two year at -0.49%. we're not to a drama level, but the vectors as we go to chair yellen's speech are moving in the wrong direction. vonnie: what was he saying, about 70% are in negative territory? >> 70% of japanese bonds.
>> the u.s. is a high-yield market, right? we were looking at global government bond yields and 80% yielded less than the 10 year treasury. money is going to come into the u.s.. they are printing money in europe. it is being exported out of japan. we're not seeing gdp oabove tr ends globally. inflation can't get jumpstarted. downgraded global gdp down to 2.0% jonathan: that is what is pushing back the fed. bob, the policy rate in europe is negative 40 basis points and -10 basis points in japan. you said the u.s. is high-yield. are we looking at nominal or real yield? >> we are looking at both. we are looking at savers being penalized pretty much in every
part of the world. and trying to find something they can put their money in that they don't pay a safekeeping charge for. and that is the u.s. market. they are coming into the u.s. market and they think the fed isn't going to be cutting rates. they are not optimistic the fed can raise rates two or three times this year, much less get to 3%. in that case, they think the dollar looks pretty good and they can pick up some yield in the bond market. vonnie: what fixes this, bob? obviously, central banks are trying their best. maybe trade can do it. we are running really low on trade, 2% growth rate each year needs to be at 4%. is that a possibility? >> it feels like monetary policy has reached terminal velocity. they shift has to be to policy. -- the shift has to be to policy. door.b opened the
that is a change for them. they talked about austerity. they talked about leveraging. they talked about saving. and suddenly they opened the door to germany to invest and create some fiscal stimulus. jonathan: many people in europe don't think that will happen. the frontloading of government spending announced this morning, is that to drive the economy forward or two insulated from a potential sales tax hike? tom: i think there is a domestic nuance here. i would always turn to robert feldman and his analysis. he actually has a positive construct that the japanese will figure outsom some form of abenomics, but it will not be through the simplicity -- there is no third arrow, there is no 10th arrow, there is no quick fix here. it will be demographics, the
ballot box, that kind of courage that gets into structural change. jonathan: the endgame for monetary policy in japan now? rhodkuroda do more? >> i think the fact that they have got into negative central bank rates is telling. they should have done so before the other central banks because they were at zero. they were battling deflation. they have the capital. yet, they just started. vonnie: thank you so much. tune in later by the way for full coverage of janet yellen's speech at the economic club of new york. turning to tech. the government has successfully gained access to a terrorist's iphone, no longer requiring assistance from apple. joining us from washington is matt larson.
now the fbi might be asked -- or maybe forced -- to help apple out. what is going to happen there? night the government filed a brief with the court saying it no longer needed apple's assistance, but the board that was filed in february to enlist apple's help was the longer needed. there was a third party that came in. we are not sure who it is, though there is some speculation. the basically found a workaround that enabled the fbi to access the information on one of the san bernardino shooter's work h phones. jonathan: the ultimate outcome for apple would be to lose the case and the forced to unlock the phone. they could have maintained their moral stance and the fbi would have been happy. this outcome for apple, what does it mean for their own security going forward? >> that is the big question.
in the short-term, it eliminates headline risks from the litigation, but it does raise some risks regarding the security of the iphone. we have a third party that has a workaround that back ends through the encryption through some of the security features. i think it raises questions about the iphone's security. apple has talked about creating unhackable iphone. there are security companies out there chomping at the bit to create more security surrounding data on personal devices. >> is america engaged in this debate? are they willing to give up some of their iphone security to go after the bad guys? >> you know, i think it depends on who you ask. there are strong opinions on both side of the equation and we saw that during the briefing for
this case. tech community came out in support of apple. on the other hand, there are certainly legitimate government toerests and giving access these devices to uncover information that could be helpful in law enforcement efforts and counterterrorism efforts. ultimately, the question will get kicked to congress. we see in the eu and the rest of the world there is legislation being proposed as to where the line should be drawn. where do tech companies have to help out and where can they step back and say it is on the government's plate? vonnie: will apple and other tech companies be as socal ial now as they were when they were defending their right to privacy and secrecy? will they let us know when they find out how it was hacked? >> i would guess that they will be leading the conversation on this. they will probably disclose as
need be to drive the next level decision. there are some legal remedies in place where if there is a software vulnerability that was used in the government's investigation that apple can figure out what those are and potentially, patcfh any vulnerabilities there. i think they will use this as the model moving forward, as pointed back to both legitimate concerns and also will mobilities that exist in the software systems. the extent to which we figure out what happened behind the butes remains to be seen, it will certainly be a talking point moving forward in policy and legal discussions. jonathan: matt larson, thank you for joining this program. bob michal, sticking with us. that wall street mirage. how one investor defrauded
matt: matt miller here. it is just over one hour from now that the case-shiller housing report is released. robert shiller will join us live. vonnie: here is your latest bloomberg business flash. it is a big payday for the ceo of google. it totals more than $100 million, almost all of that is in stock.
he took over his current role as part of a restructuring, which turned out to bed into google's parent company. janet yellen speaks with her today at an event hosted by the economic club of new york. school, glenness hubbard. we have live coverage of the speech just afternoon eastern time on bloomberg television, bloomberg radio, and on bloomberg.com. it is the beginning of a new era in virtual reality. $600. costs facebook but the company two years ago for $2 billion. jonathan: you may have heard this morning. the hijacker wearing a explosive belt hijacked a plane. it looks like that have come to a conclusion.
thatair hijacker arrested, is according to the cypriot foreign ministry. the hijacker has been arrested and all hostages have been released. that story has come to a conclusion and back to the markets, one hour and 45 minutes away from the open. we are waking up some big calls on wall street. matt: i want to start off by looking at the broader calls that matter to global wall street. storieshe most read only terminal has been a barclays note. the analyst calls for a slump in commodities as investors rush for the exit. 4000r may slump to the low per metric ton. to $30ld fall abcback per barrel. if you look at my terminal, i have a chart. this is the first of two times i
will reference the website. squeeze the oil short may have pushed up oil prices. this is short interest here in blue and in white you can see the xop, which is the oil and gas energy producers. you can see the price rising. that is number 716 on your chart library. warning that inflation might pick up. blackrock global chief investment strategist richard wrote on the company website monday that stabilizing oil prices and a tighter labor market could contribute to rising actual and expected u.s. inflation. he joins his competitors at pimo with that opinion. however, blackrock is the biggest asset manager in the world with $4.6 trillion under management. so what they say really means a lot. buyingecommend lying inflatio
inflation bonds and gold. jonathan: if you are wondering who tyler durden is, mabye it is matt miller. some final thoughts with bob. side ofu take the other the trade? bob: i think i would. i think everyone is getting a little bit excited that personal expenditures have drifted up to 1.7%. we think they have peaked in there and will start to come down because of the euro comparisons. when you look at the headline, matt brings up a good point about oil. people want to extrapolate that good run to $50 or $60 a barrel. we can see that gasoline consumption in the u.s. have gone up a lot. well, it is a very warm winter relative to last year.
that doesn't look sustainable to us. the other thing that has happened that has gone under the radar is that china has been stockpiling oil reserves and it doesn't feel to us like that will continue. oil comes back down the $30 range. jonathan: matt miller, thank you. but michael at j.p. morgan investment management, a great pleasure. bob: thanks for having me. vonnie: i was going to thank you as well. thank you so much, bob wasthan: andrew caspersen arrested. he allegedly set up false e-mail addresses and misleading domain names. has been news reporter following this story and joins us now. looking at this story, why are we talking about this guy? reporter: we found out that andrew caspersen, he is the son
caspersen. he was a very wealthy financer. he also was a very big political donor to a lot of republican parties in new jersey and he had four sons, who went off to be people in finance. all four graduated from harvard law school. and now, there is a bit of an ironing to find him in a legal sitch. vonnie: does the firm continue on? pjt recently spun off from blackstone. because of that it is unclear. some of this happened in july. some of this carried on. this was brought to pjt's attention march 14. that is when they started an internal investigation. he was arrested on saturday and fired from the for monday. vonnie: phenomenal. wha one of the institutions
that was defrauded was a charity. >> we don't who the charity was but it was linked to a multinational hedge fund in new york. it will be interesting to find out who the hedge fund may be and how they look at some of this money back. it was $25 million. where it went really, was to a personal bank account mostly used on options trading and he lost the money. the money is not there anymore. who will the responsible for that money? vonnie: we are taking a closer look at some indicators that might be pointing to a u.s. recession and off the charts. that is next. ♪
>> you are the most skeptical and bearish reporter we have here on staff. i thought it might be fun for me to play the bearish role and you to play devil's advocate. jonathan: i will do my best. >> they were talking about the dallas fed report, which had headlines as trumping better than expected. still, another negative month and that makes 15 in a row from the dallas fed because the wages , hours worked, and things like that. we don't see that, unless we are in a recession. what do you think about that? and contrasted that to the data we saw yesterday, for over the weekend, that corporate profits in the u.s. fell 11.5% in the last quarter? jonathan: i find it hard to take a bearish point of view.
looking at markets, i don't see a market pricing in a recession. i see a u.s. yield trading lower. they understand that. -- i understand that. but when the s&p 500 trades like that, we can say that they are pricing in inflation. matt: you have not taken a bearish view. when you asked who was writing it, i think matt miller writes some of those. coming up in one hour from now, the housing report. we have robert shiller joining us on "bloomberg ." ♪
he west is ending its court fight against apple after successfully accessing a terrorist's phone without the help of the tech giant. welcome to the second hour of "bloomberg ." quinn, along with jonathan ferro. emmanuelle, the director of u.s. equities. how do you fit that on one business card, julia? ahead of janet yellen, let's check the scorecard before she begins her speech in new york. futures are softer this morning. dow futures, -52. equities are in the red. 1%. ftse 100 is down barely .
what a run on dollar-yen. a stronger euro this morning at almost 1.12 flat. yields are little bit lower going into janet yellen's speech. think: obviously, i everyone is watching yellen. jonathan: she is really pushing this agenda that europe doesn't work. everyone goes on holiday. productivity, we will talk about that. first word news now. the hijacking in cyprus is over. according to cypriot officials, the man who hijacked an begich an airliner has been arrested. there are no reports of anybody being hurt. the hijacking had nothing
to do with terrorism. there are reports that the hijacker's ex-wife lived in cyprus. it is a victory for apple. the u.s. has dropped its case against apple after gaining access to the data on an iphone used by a terrorist. the had gotten a court order to compel apple to help, but the company resisted. last week, the company found a third-party to help pack into the phone -- hack into the phone. 7 million americans are now portable to man-made earthquakes. highest risk include oklahoma, kansas, and texas. news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. i'm vonnie quinn. jonathan: one of the top stories this morning out of japan. shinzo abe rejecting speculation
that he would announce additional stimulus measures putk "it is necessary to this into action as soon as possible. joining us on the phone is chris mcguire. he manages the japanese and asian portfolio. great to have you with us. from what you have heart out of japan, is it just moving? in a: i think abe is position of strength. he has had good approval and japan is in a weight anait and d mode. we saw what did not happen when the equity market was down almost 1% in january -- almost 20% in january. vonnie: we were talking about this earlier. some of the policies he put into place, such as giving aid two couples trying to conceive, that is for the next generation. chris: true, and they have been
very forward thinking. foreigners of course, jumped on the abe bandwagon in 2012 and 2013. there has been a frustration because we in the west are used to seeing action that continues, that strikes as a strong catalyst and continues. the japanese has taken a long time for these very aggressive moves to take affect. it will take time for these types of issues to really have that strong impact on the economy. jonathan: just a question regarding your portfolio at a moment. what is the case for japanese equities at the moment? chris: with the yen strengthening by 9% in february, that scared everybody. everybody was expecting the dollar yen to move towards 1.2 5. what has gone on over the last
couple months, since mr.kuroda moved to this unprecedented negative interest rate policy, has taken foreigners by surprise. i am surprised that we are trading at 1.13. i think we should be above 1.20 and that is what markets need to see. vonnie: thank you so much. european stocks were a little changed thanks to the easter holiday. and not much movement here yesterday, nor today. the cac 40 is the only one doing anything. reffner.we have steve both, are you doing anything these days with regards to the market? or are you waiting for the next thing to happen? >> we tend to be long-term investors. we don't get too upset when
little bits and pieces happen. we took some exposure off in december because we felt things were getting choppy and i think that proved to be a good decision, but right this second we are waiting and watching. the yen thing was a surprise for all of us. the yen is still so strong that we will stay the course. jonathan: it has been a big question for the market. how can you have yields at all-time lows, but still be aggressive strengthening of the japanese yen. does this mean a weaker japanese yen? >> we do, but what it shows is in the immediate term that this entire concept of what negative rates actually mean is more academic theory than anything else. we have never been there before. it is no wonder that there is this kind of surprised reaction in japan if you look at it, this market has been driven by positioning. right now, the positioning in
the yen is a very one-sided. that alone, and you can see it today announcing a more stimulative measures, but the yen response very calmy. forhe yen has weakened eight days in a row. let me ask you a question about equities. i am looking at a sbs chart. and this is a bloomberg function you can use. it shows the volume compared to the last 20 days average. you can see every single industry group has fallen substantially compared to the average over the last 20 days. this chart has looked the same every day for the last couple weeks. each day we hit a new low for the year in terms of equity trading volume. why is that? >> so, what we think is going on off of ae have ovemoved
negative the bubble in february or the markets, primarily because of the correlation of oil and high-yield, discount of the recession that isn't going to happen in 2016. but you have moved off so strongly that you are now at this point where the market needs to wait and see basically, whether the economy is going to catch up and exceed depressed expectations, which is why friday's numbers are as important as thery are. you want to reduce the field of candidates to help things be less certain, but that does not seem likely. vonnie: the fed is in a very interesting position. now there are so many other dynamics that are taking priority from the geopolitical situation to oil potentially having reached the bottom, to just the dollar's. strength. >> sure, but you still have a
pretty weak economy here, based on the gdp numbers that have been coming out. i was among those that did not think the fed should have raised rates in december. i hardly think they should be raising rates now. we still have a very fragile economy here. in ay be the best house bad neighborhood, but it is a tough neighborhood. europe is a mess on many levels with the terrorist thing just being the icing on the cake and the brexit. i think the case for the fed acting now is pretty weak. jonathan: over the last year and several years, we focused exclusively on the fx market and decided that what is good for the global economy was specifically a strong dollar. are we finding out that a strong dollar is part of the negativity bubble and actually, it is not what the global economy needs? >> there is no question that that is part of it.
the correlation between oil implying lower growth and the dollar have been quite strong. interestingly enough, we have gone to negative rates in europe and in japan. the currency markets have bailey budged.-- have barely we think we are reaching this more equilibrium kind og statf . >> let's not forget that the strong dollar has wreaked a fair amount of havoc in industrial america. what is going on with exports, which have become a dreg on our economy. the strong dollar is not necessarily but we need this second for our own economy. jonathan: janet yellen comes to york and is about to deliver a speech. where it is the market leading the fed, is that where we are
right now? is her biggest gauge try now what happened with the corporate market and with equities? >> i hope not. we have had occasions in the past for the market was leading the fed. then moved to a place where it in effect, forced the fed to act. i don't think that is a great situation for anybody. he fed should be leading the market -- the fed should be leading the market. they should be the ones to pronounce whether or not rates raised, rather than being backed into a corner. vonnie: even if the fed wanted to weaken the dollar, how on earth would they go about doing it? but again, what has been strengthening the dollar has been the prospect of hiring interest rates. the lastit did in meeting, it takes some of that off the table and i think that could cause a slightly weaker dollar. vonnie: it did not the last
time, though. >> that is true. jonathan: what are you looking for from janet yellen's speech today? the speech from a few years ago, slack, slack, slack. i don't care that anymore. -- i don't hear that anymore. >> basically, the fed is in the game of risk management. we have never come off zero rates successfully in the modern economy and the fed needs the flexibility. they are going to err on the side knowing they would rather month studyion 6-18 road, rather than see the global economy turned down again. vonnie: does the u.s. get punished for being the cleanest 30 share, if you like? -- cleanest dirty share, if you like? >> it certainly put a damper on the financial sector for one, by
compressing spreads, but we would argue that in general, lower rates is a positive discount factor for equity we are notich is why overly concerned about valuation right now. jonathan: a special thanks to julia emmanuelle. thinks he for joining "bloomberg ." coming up on this program, all eyes on janet yellen. luck with the fed's dovish stance hurt u.s. banks? ♪
jonathan: this is "bloomberg ." futures i little bit softer. -- are a little bit softer. the ftse 100 is negative, down by .1%. let's cross over to matt miller. matt: take a look first off, at chipotle. those shares are in the red. the stock was downgraded to an underperform from a neutral. nick is the analyst there and he cut his price to $400 from $450. to the lay shares are down shares arechipotle down roughly 1%. they are down 2% in the be
b market. you can see our bloomberg primer from our in-house analyst if you want to learn more. did is a very fascinating look at fast food restaurants on the bloomberg terminal. now moving from food to social media. to give look at linkedin and ebay. paul vogel cut linkedin to equal weight. he is citing slower revenue growth. ebay was cut to an underweight. buybacks may not be enough to drive performance. take a look at the chart of revenue growth for both companies. you can see linked is still rapidly expanding, while ebay is a slightly more mature company. jon? jonathan: let's continue the stocks story.
federal reserve chair janet yellen is getting ready to speak in new york. the american managing director raising the red flag on the bed's position saying, the more dovish stance will cost of the u.s. banking industry $5 billion. at thethe path for rates fed. talk to me about what that means for some of these banks? >> i think it is pretty obvious. the fed simply leaves the high-pressure that is already on the net interest margin. it is very tough for banks to make money in this kind of an environment. we are in no danger, i think, of going negative. but negative interest rates are worse because the banks have not, in europe anyway, then prepared to start charging negative interest rates on the positive accounts. it is not great for the banks.
banks should be the highest priority at this moment. vonnie: obviously, this pushes the banks. you will have one or two major mortgage lenders until we hit the next product. cycle of interest rates is a cycle and at some point, they will go up and you will have a reasonable net interest margin and be able to make money. the bank have a much broader set of problems, as you know. one could argue that the regulatory environment is really hard for the banks to function in. loan demand is not that high. fixed income and equity trading terrible.re there is a little trading volume and us a little inventory being carried by the banks. they can't be in the risk business anymore. the people who
don't like banks was to turn them into utilities that did very little and took no risk, were really boring institutions, they have for the most part, succeeded. alsohan: mr. buffett taking a 10% stake in wells fargo. justlonger-term horizon, looking at the u.s. economy, how far ahead that is from europe and japan, and china for that matter, is that a company you would want to be invested in? >> first of all, he has had a position at wells fargo for some time. these banksrices, have been up and down so much. wells fargo is a bit of a different bank from the money center banks. they are not as big and these trading businesses. they are not a factor at all in the mma business. they are classic retail bank the has been incredibly well managed.
i think it is consistent with his philosophy of life. basic business of taking deposits from customers and lending money to business is not going away. that is what wells fargo does. vonnie: is it necessarily a bad thing in the end, though? nks can't be extending this kind of credit anymore. we had a financial crisis due to the banks, so let's keep our banks as utilities. >> i know what you are saying and i am not completely disagree, but what is happening and this is a good example, we are creating this shadow banking universe out there of financial institutions that have large pools of capital and can lend them at will and they are not subject to these regulations. at some point, one of them is going to blow up by making too many loans without enough reserves or whatever. it is something else the regulators need to be aware of.
vonnie: you are watching "bloomberg ." support for the brazilian president is crumbling and investors may be looking to get out. vice president michel temer may succeed her. brazil's largest party will meet today to discuss abandoning the coalition. there is increased speculation that an impeachment is in store for rousseff.
what is the likelihood of the vice president being able to take over, given he has mainly ousseffe problems as r herself? >> the markets are looking at the fact that the president will be impeached in april with temer taking over in may. we don't know if this will be a transition government, or if he will be able to take us into 2018 for the next election. jonathan: julia, the market reaction strikes me as strange. the market rallies and you get rousseff. that is awesome for the markets, apparently. but is it? is that really going to be good for markets? julia: will be here from investors is that anything is better than this, anything is better than dilma.
we saw this in the 2014 elections. anytime the opposition gained ground be markets would rally. we don't know what a temer government would look like. we are starting to hear what the economic would look like. he would just be able to get things moving again, hopefully. jonathan: julia, thank you for joining "bloomberg ." we are one hour and four minutes away from the open. futures are a little softer threat today. negative.0 is stocks in europe are in the red ahead of yellen's speech in new york. ♪
oh, hi! micky dolenz of the monkees here, getting ready to host the flower power cruise. (announcer) we're taking the love generation to the high seas and reliving the '60s. we'll celebrate that unbelievable era with the music that made it so special. there'll be over 40 live performances featuring eric burdon & the animals, micky dolenz, the monkees lead singer and cruise host,
the 5th dimension, the lovin' spoonful, rare earth, spencer davis, three dog night, and many more! imagine enjoying all that great music on the fabulous celebrity summit, leaving fort lauderdale and making ports of call in jamaica and the bahamas. you'll be back in the days of bellbottoms, peace signs, and so much more, with special theme parties and 20 fun-filled celebrity interactive events. cabins are filling up fast, so come on, relive the era you remember so well. the flower power cruise, february 27th, 2017. let your freak flag fly. don't miss the grooviest trip at sea. jon: this is "bloomberg ." you up to speed on what is happening in other asset classes. 1202. market on
eight-day winning streak. market yield down this morning. 8.15%. europe and getting back to work after a poor the day weekend. i will not pretend i am not jealous. >> a little bit more fresh faced. the market holding on to the games. the stoxx 600, real estate holding on. are talking about oil and gas companies. they are feeling the pain.
they were off the previous highs. this of course gives you the whole section of what is going on in terms of global commodities. atlantic,side of the pulling things lower. barclays, kevin coming out saying, look, oil could go lower. he says we could go back to the 30. on copper, trading up by .4 of 1%. and then they putting it into perspective why we are worried about metals and oil. a great chart. jonathan, i know you love the intricacy of the bank of england. just three months ahead of when seeing theg to be
referendum in june. this is showing you how volatility is picking up. check this out. the highest you have seen since 2010. vonnie: thank you. now to our first word news, there has been a peaceful resolution to the hijacking of that egyptian headliner. authorities say the menu horse the flight to land in cyprus has been arrested. there are no reports that anyone was hurt. they had ruled out terrorism as a motive. the suspect lives on the island of cyprus and he wanted authorities to deliver a letter to his ex-wife. the ceo of the brussels airport says operations will not be back to normal for months. last year's bombings damaged the departure hold. they see the airport is set to reopen tomorrow, but it will only be able to handle about 20% of the normal number of flights. president obama called out the news media for coverage of the
spokegn and the president at the journalism award center in washington. president obama: one of my great regrets is that a ton of our politics has gotten worse. i will not take on the responsibility for it, but i will take some. we all know some of it. i will take my share. vonnie: the president did not mention donald trump, but he superficial sees is coverage of the republican campaign. news 24 hours a day, seven days a week powered by our news bureaus. jon: i want to take a look at the top trending stories. you can find these if you are a bloomberg professional at read .go. number five this morning from barclays on commodities. caroline breaking it down much better than i ever could so i will not do it again, but fundamentals of not changed enough to justify the price
increase that we have seen and we are set for another rollover. my question to you would be if i were to restrict your access to the bloomberg, for one security, trade, commodity, one thing, it is the most important variable to you? >> it is. one because we have a significant exposure to oil, but oil is either a driver or a barometer. you -- when i tell you what happens to the oil price, you could get an idea of what happened to the chinese stock market, ethics and how new york will open. hopefully give you a nice forecast on treasuries, too. steve: commodities will grow over or not again, i am a smart enough to know. it is a very hard market to predict. i think 98% of them would have
been completely wrong. oil is the only pay the most attention to, and there is no question that the lower oil price, the longer they stay there, the higher they are going. there is an enormous amount of supply destruction going on, particularly in the u.s. in the see the pickup purchase of trucks and suvs and the number of miles driven is going up. the supply gap in oil is not that big. asoline: bond is higher commodities are just starting. david goes through a lot of the some of the japanese trading houses have party taken it down. there is another story that thews bernstein to become energy banker because they don't want anything to do with it anymore. steve: there's no question that many, many companies are in
denial, lenders are in denial, and they think the problem will go away. makingks are still reserved loans, and the size of the loans are coming down and it is creating a funding gap for a lot of the oil companies. you have quite a number of firms that are going into the business and whether provide you want to call it restructuring or recapitalization money that a looking for money to work in the oil patch, but not to make clusters but to make double-digit, if not 20% plus returns for the risk they are taking. vonnie: they are also upping their position and junk bonds, so playing it risky. i want to point out that they said the mike mayo idea is
opportunity cost and that really despite billions of dollars, it is a big number and that the fed is raising rates. we read that one at that. my trending story is a flood of money, which has been a trend for who knows how many years. central bankers managing to leave stock in the same route that led to troubles in the first place. that is the headline from our rich miller story today. central banks cannot get the world out of a rut. keep usin that to pulling or is china becoming the central bank of the world, pboc, are we waiting for them to up their game? steve: it is a very sad state of affairs. we are relying on central banks to keep the economy going. i think we could agree that there has been an enormous failure on the part of policy makers on the fiscal side, structural side, and in every developed country and many
emerging countries. that is the game we were playing. i think the central banks have by and large played that game well. i think we would all be delighted if he got the percent growth this year because these projections have been consistently wrong -- if we got 3% growth this year because they have been consistently wrong. is notink the world quite at the brink of some deflationary spiral that we might have feared in january when everything seemed to be crumbling. i am not sure i can prove that but that is appealing. jon: we have had faint signs of things changed on the fiscal side. is that fair? steve: that is fair. that a fronted government spending and they have exampled outside of the trend that will begin to get some momentum. steve: i don't see it getting any momentum. the attitude in the u.s. is very negative on anything other than squeezing down the deficit as
best they can. europe is just completely paralyzed and there is nothing going on in europe at the moment. their fiscal policy remains essentially of consolidation, so i do not see any movement toward anything other than this continuing fiscal policy we have. vonnie: steve is staying with us. we will go to matt miller for our morning meeting. matt: we are going to hear what key banks are looking at today. brian, executive director morgan stanley and leads internet research, has his eye on google and the cloud computing market. thank you for joining us. that me ask you first, why you like google and why you think google is better prepared to win in the cloud computing universe than the competitors? brian: good morning. we are bullish on google primarily because of the core
search business and youtube, however, they have this emerging business called google cloud platform, which is part of google play. you can take advantage of this growing shift toward companies, large enterprises and small companies, that are looking to move their databases and dr. storage into the cloud and into other companies data centers. ultimately, google, like amazon has done in the past and they started the trend, is looking to become the crowd provided for companies globally, and it will be a very big business opportunity for google and amazon. matt: is google better positioned than amazon? at small andere medium-sized companies and they are already using so many google applications and i cannot imagine what amazon applications they were using to choose that company for the cloud? brian: google is the new center. amazon has been in the business
for five years or six years and they will do $12 billion of revenue in cloud services this year versus google lasted did under $1 billion, so amazon is the entrenched early player leading this space. google is the new entrance. lastly, they had the google outd conference with a laid new products around machine-based learning and they will go to clients and go to potential enterprises and say, move your workloads and services into our cloud because you will not compete harder with amazon than we have in the past. matt: looking at the share of the revenue in profits from search, is there any competitor who has even got a foothold in that market? google to about $90 billion of revenue, most advertisement around search and youtube. they are far and away the leader in search right now. they have almost 70% market share in the desktop search market, 85%-90% in the mobile
search, online leaders in video, so they are the leader, but however, when you look at a jason sees, the new market that can move the needle, this cloud business can be big. her perspective, the cloud market is about $250 billion. google did less than $1 billion of revenue last year, so when you think about things that can actually move the needle for google over the next five years to 10 years, the cloud is a space that can be added to the overall avenue for advertising. morning.nk you this brian novak, executive director morgan stanley. governmentthe u.s. dropping the case against apple in the terrorist iphone. what it means for apple investors, next. ♪
in greenroom.in the hpe next hour, io professor on waking data, the fed and the u.s. economy. vonnie: here is your latest flash, firstiness quarter corning's reported that were better than expected. relatively high profit margins. yahoo! has told potential investors they have until april to submit [indiscernible] fact is according to the wall street journal. includegent assets china's alibaba.
about 40 companies as signed nondisclosure -- signed nondisclosure agreements saying they are interested in making an offer. in virtual reality. the virtual reality headsets have begun to be. it requires harmful computers to run games. facebook. the company two years ago for $2 billion. news in the last 24, u.s. has dropped the case against apple, stating they no longer need help in unlocking one of the iphones used by the terrorist in the san bernardino attack. this has dominated the world'stion around the biggest tech company. what we have not talked about is the potential drop for first quarter were at least last quarter iphone sales. technology, we have seen to have come to this moment where smart phone sales, at least on the top and, are saturated. considered to be this
juggernaut of growth and they are stumbling. what are your thoughts on the tech sector with that in mind? steve: apple is one thing and the rest of the tech sector have their own set of issues, successes or whatever. with respect to apple, first of all, i don't think the hacking thing is going to have any impact whatsoever. i think you would have to hire a team of scientists to have any effect to that. the broader question is, can apple introduced new phones that cause people to want to continue to upgrade? people say, -- that will cause people to want to continue to upgrade? people say, well, my phone has been of great but people do tend to do this if you can get them a product they want to innovate. apple got where it got by steve dismissng willing to all the naysayers and critics, and skeptics who said, i'm going to build the phone, i am going to build a tablet, a different kind of computer, and it was
enormously states and we have to see if tim cook can do that. the apple watch as and the only thing that has really come out on his watch -- no pun intended -- and we have to see what that will do. jon: good time. -- pun. vonnie: it is now 4% of sales. tom is joining us now. you scared me. .ell us a little bit about this we heard steve saying that will not be a moment for stocks or investors, but what about consumers? any chance i might be less inclined to buy the iphone now if i'm not 100% certain like the blackberry, for example? tom: how important is the privacy of your information, the things you are texting? for most of us in an average day, week or month, we are not sending things back and forth. we are really concerned about
the fbi hacking into, but for those people hyper concerned aout security, it could be firm, a company we work for, and they might ask the question -- you know, this feature that apple has made such a big deal about, is actually hackable. the fbi got a third-party in, so for some people, it will raise the question mark. we also know that apple is in depth at learning from its shortcomings, flaws in the software, and updating very quickly or the hardware, so maybe it is an incentive to upgrade to the next version of the iphone? point, iso one other did not seek the basic operating system, but as i understand it, there are hundreds of apps out there that theoretically -- i don't know how to work it -- but it allows me to chat with anybody on a secure base that apple or the fbi cannot get
into. whether good or bad and you really want secure communications, you can still do it. vonnie: what might be disappointing on the way it gone to thes discussions of what is more important, national security or privacay? made theink apple point convincingly that this is not just about u.s. government access to our phones. it also makes them susceptible to a third party, to a foreign country, so if you can force or use the lord the courts or congress to force the u.s. government for apple to comply with u.s. government request, what is stopping us from apple being forced to comply with foreign government's request, etc.? jon: when did this become, if at all, a business issue?
when apple salesman oblique to 6% last year, when did it manifest? evidenceon't have any that the sales.. the bigger concern is the saturation of the smartphone market. this is why you saw apple come out with the four inch iphone because they have to attack this parts of the market that maybe they had turned away from or they see some vulnerability. executivem giles, editor for technology up bloomberg. thank you. steve ratner stays with us. next, battle of the charts. julie hyman joins us against matt miller. ♪
." it is time for battle of the charts. matt miller in julie hyman. julie, kicked things off. julie: we are very excited. i am looking forward to janet yellen speaking later today at 12:20. matt: i am super looking forward to it. [laughter] a lot of talks unaware rates will go this year. interesting that we heard from other fed officials recently that said maybe april is on the table, but that is not help forecasters are behaving at this point in time. you are looking at the median forecast of economists and analysts who we survey of the dollar versus the euro, hello, there you are. [laughter] what we are looking at here is essentially we are looking for a weaker dollar versus the euro then we were just in january for two atllar
dollar nine, said that implies the fed is going to be more dovish in terms of raising rates. despite the recent commentary we have gotten from some fed officials that people could be on the table, the market does not look to be taken that. matt: my chart is also fed related. but i have got is the ratio of the price of gold to the s&p 500, and i got this idea from a website, the macrotoursit.coist. they point out that the trade by gold was huge as we got the fed was tightening, but it turned around as the fed has become more dovish. what i think is interesting, and by the way, i put this here because blackrock came out with a call, and they do manage $4.6 trillion that you may want to start buying gold again, as they are concerned about inflation, so this trade -- if you are watching -- the trade could turn
around. you could make money off of this chart, jon. jon: thank you very much. time for voting. steve? steve: i have no idea how to make money off that chart, so i will go with julie hyman. e's chart has no problem except the euro -- i don't know when. jon: are you going with matt? vonnie: no, julie. jon: you went on another website and did not do your homework. matt: i do my homework and research. jon: lyf stick around. "bloomberg " continues as we can you down to janet yellen. ♪
oh, hi! micky dolenz of the monkees here, getting ready to host the flower power cruise. (announcer) we're taking the love generation to the high seas and reliving the '60s. we'll celebrate that unbelievable era with the music that made it so special. there'll be over 40 live performances featuring eric burdon & the animals, micky dolenz, the monkees lead singer and cruise host,
the 5th dimension, the lovin' spoonful, rare earth, spencer davis, three dog night, and many more! imagine enjoying all that great music on the fabulous celebrity summit, leaving fort lauderdale and making ports of call in jamaica and the bahamas. you'll be back in the days of bellbottoms, peace signs, and so much more, with special theme parties and 20 fun-filled celebrity interactive events. cabins are filling up fast, so come on, relive the era you remember so well. the flower power cruise, february 27th, 2017. let your freak flag fly. don't miss the grooviest trip at sea. jon: the speech from the fed chair in new york. on the u.s. housing sector, moments away. we will have the latest data.
a legalhey may have won victory over the fbi, but have they lost bragging rights over the iphone security? we are about 30 minutes from the opening bell in new york. i am jonathan ferro alongside vonnie quinn. david westin and stephanie ruhle are away. vonnie: here with us, another and with dominique, goodness knows, there is a lot to discuss. jon: i know he it is excited -- is excited about the fed chair speak. home prices rise 5.7% year on year. from januaryrcent
2015. never mind what the survey was, that is a solid push forward for home prices. i will get you more in a moment, but professor shiller will join the program in a moment. futures added the open about 29 minutes away. points on the dow jones, s&p 500 at negative seven, and in the red, down by .4 of 1%. likewise for the dax, down by .41%. withs asset, janet yellen a stronger euro this morning up .201%. , prettywinning streak much flat on the session. treasury rallies for basis crude lower at 1.58% and dominating the market again at 38.23. vonnie: bottom falling out of the barrel once again. maybe we will not go that far, but touching 38 is probably the
big deal. let's get to our news, a cyprus airport situation is over and the suspected hijackers under arrest. they landed their plane safely, with one meant sliding off the plane. it was supposed to fly from egypt.o cairo, they do not believe the incident is related to terrorism. the hijacker asked negotiators to deliver a letter to the woman in cyprus. now to belgium, where underground train systems are running under heavy guard. one week after the terror attacks, but the station hit by that suicide bomber remains close. the mayor of brussels will hold a special meeting in paris today, saying the city can never go back to so-called normal. the victory in a legal battle for apple that could have rewritten the boundaries between personal privacy and national security. the casegovernment at
around the tech giant, after it gained access to data on an iphone use by one of the san bernardino killers. the justice department got a court order to force apple to help at the company resisted. a third-party offered to hack into the device. global news 24 hours a day powered by our journalists around the world. jon: thank you. we broke the january numbers for the s&p 500 case. 5.7% year onose year. for insight, who else? joining ushiller from yale. professor, first to you, the general economy looking at information, payroll, house prices, despite what is happening globally and a mystically in the u.s., things still looking ok, is that your take? professor shiller: we are threatened by the world economy,
but it is looking ok. ause prices are going up in number of places. i think that is a sign of our general optimism. jon: in terms of what is happening with the u.s. housing market, talk to me about what is happening in new york. a lot of talk of london as well. as you look at luxury and high-end, the problem in china, too, at the moment, is there financial instability risk their? think theshiller: i times we live in encourage upper and home prices in world centers . that is, people are fleeing something or other. are stable,london and i think the high-end housing market is not what we are reporting on in the shiller data today. vonnie: professor, the cities that post the biggest
year-to-year gains were san francisco and in portland and commuterslmost like to san francisco. is there a danger we are seeing more and more in the shiller it is creating, stumbles and not the rest of the countries benefiting from the upturn? professor shiller: i think it is interesting -- i would add fund covert to the list, not in our data, but they are experiencing a boom in home prices. -- i would add vancouver to the list, not in our data, but they are experiencing a boom in the home prices. right now, we are in a mood in the world economy today of trusting technology and not trusting with our hands to do labor. on the other hand, some high-tech cities like boston did not do well. part of thebe regional. it is interesting to me to see how much home price movements correlate over hundreds of miles. communities that are hundreds of miles in diameter.
slightlyhis data is backward looking. it provides huge information, but it is from the last three months. what do you anticipate going forward because we had that big upturn in case schiller and it has been stagnant with maybe a little rise over the last few months? professor shiller: as i look at the recent expectation data, they are modest. range, it is not overall a bubble. demand, that there is especially concern places that is pushing up home prices at double-digit rates, so it is looking like some of the few years before the boom in home prices that we saw is after the financial crisis. feelhow important to you
about the housing market in terms of adding to growth in the second effectsof in the run-up to the bubble, and now it does not seem to be very that same additional consumer spending associated with housing directly? dominic: i have a paper in the same case schiller index that argues that the wealth is stronger for housing then the stock market. the stock market is driving consumption, but most people -- you did don't own any stock or the own them in retirement accounts. professor shiller: it is something that is not as salient as a home price. it is either home price going up and that can affect expenditure, and it can affect it a lot. vonnie: matt, you have something on europe? matt: it is not related to the
case-schiller index, but one of the most read stories on bloomberg terminal today and throughout last night has been london home prices, just skyrocketing. jeremy from bloomberg sent me this chart riches frankfurt apartment prices, paris apartment prices and london prices in the national colors, so easier to figure out. prices for london real estate have just absolutely soared. i wonder, bob, if you see that know your index looks at the u.s., but you obviously are a learned man and well-traveled man, do you think there is any reason for london home prices to slow down or is it just the epicenter of global wealth? professor shiller: i think the latest data is not quite as strong in london, but it has been very strong. not just in london but oxford and cambridge with take-home price increases. i think it might go on for a
substantial time and get really overpriced. this is -- london has a history of price volatility, but it has something to do with the fact that johnson wanted to lay out quotingcarpet, i am him, for billionaires who wanted to come to london, so it is really looking capitalists and safe at the moment. it is also high-tech in terms of finance high-tech. they are wizards. it does not surprise me that british cities, especially london, would be doing so well right now. whether it will continue, that is another question. affordability is getting to be a real issue, and that could lead to a turning point, and maybe not right away but coming up. fed church and aln is speaking in new york today. looking at the domestic picture versus international, -- fed
chair janet yellen is speaking in new york today. looking at the domestic picture versus international, what does it look like for 2016? professor shiller: the stock market is not normally soak salience, but we had this big drop in the market in august and in january. people have that volatility high, the pixel is high, and now it seems to be fading. after a couple of months after some major financial moves, the public starts to think, well, it is over. we can read safely, but there is still a question. between august and january, the other big stock market drops, we could have a third one and it might bring back that psychology. i think this is not what janet yellen likes to say, but i am imagining it is on the mind of the people on the fomc. the worry about some kind of financial instability is fading but it is still there. vonnie: thank you so much.
professor economics and finance at dale, professor shiller. the index coming in right at the higher month over month. much more ahead on "bloomberg ." let's get a check on one stock among the red in bloomberg. apple shares are giving up yesterday's gains. the u.s. dropped the case against apple after the gained access to the iphone use by the san bernardino shooters. more on that story later in the hour. and dominic of deutsche bank joins us the entire hour. ♪
"bloomberg . it" . it is a big payday for google. almost all of that is in stock. they took over the current role last october. it was part of restructuring that turned off of that into google's parent company. yahoo! has told investors that they have until april 11 to submit lids for their asian assets. assets have a stake in chinese alibaba. nondisclosure agreements, indicating they are making an offer. the bank of england says lenders should tighten standards for investors buying houses to rent. crackdown on a investments. rental owners are pushing up home prices in the u.k. jon: thank you. top -- time for the top three
stories, about 15 minutes away from the open. number one, investors will be watching for monetary passage when fed chair speaks today. she will address the economic club of new york at about 12:20 p.m. eastern time. after the big run last week, sitting on the sidelines, the dollar index will be flat ahead of her remarks. your conviction called with what the fed should or should not do and what you expect today? dominic: i think if the fed once to make every effort to avoid a recession in the u.s., then i don't think they should be raising rates at all this year. the good news is i think they are beginning to realize the some extent but the question is since the last meeting, a number of fed officials have come out suggesting they want to keep the meetings alive, and i think it reflects -- this reflects in the market as well.
they really don't want dumps anymore. they think poor guidance might have been the transparency and that might have been the problem over the time because the market has become so fickle and so responsive to anything the fed does or does not intimate, but i substantialat his point was that he did not want there to be a violent recess of market pricing, that that could destabilize market prices. is that not a valid argument? dominic: i would take that back and try to get to the heart of the matter, which is the economic playbook that someone using, it is very narrow. looking at the lake market and saying, it is tight and they are usually going up and has to work at some point doesn't it, and that means you have inflation. in the viewomestic
of how the economy works. which is fine but it is wrong. i think the question really is, if you take a step back and understand what is going on globally and you understand it is very hard for markets to regenerate the kind of wage inflation, let alone for companies to inflate actual inflation, you run the risk that you are not going to force -- that you are going to force some kind of procession. we just saw the housing market data. the good news is that this would not be a household led recession but a corporation recession. it is about getting productivity higher, so people forget 2001-2002 and those recessions were not a big deal, but every recession they say it has to be a great crisis and wipe out the financial system, which is wrong. it does mean that there is some kind of slow down at risk and it means the fed normalization path would be a very interrupted or
limited as to what they could do. vonnie: you are one of a few number of people saying none this year at all. dominic: officially, my colleagues believe they will be able to inch out one or two, and i agree. but they are running very close to the coordinate, if you like, of procession. number two story today, japanese prime minister says the japanese government will frontload budget spending. he spoke earlier this morning and they passed -- after the parliament passed a record budget for the fiscal year. he rejected to have been writes when he would announce the package, so he said a front load budget but he said he will not do anything stimulative bright now in terms of anything else that he could possibly do. jon: what does japan need? dominic: [laughter] jon: aside from producing
babies, what do they need? dominic: they are bruised beyond repair in relation to gop ratios and they will never have any public interest rates at all. in the end, you're talking about some kind of monetization over debt. that means, if they want to do a fiscal package, that is fine. the boj is not yet willing to do that, but it the boj is going to buy all of that and they would cancel the debt, it would cost money in some sense and they would get that growth up. the risk they run is the yen would become potentially week destabilizing way, so no one really wants to go down that road. they actually announced they were going to sort of brush a few hundred thousand or a few hundred percent of the debt the gop under the carpet. this experiment began, they were looking for and push to target by 2015, and then
crude happened. that is number three, commodity in oil. they improved fundamentals according to barclays, which says prices may tumble as investors rushed for the exit. we have had this big rebound. have fundamentals changed enough for you to justify what has happened and it they change or view -- and did they change of view on rates? dominic: when we look at commodity, we agreed that the fundamentals are not [indiscernible] and we lay into that dollar cycle because it looks to be highly correlated with commodity prices. the rebound you have got, the recent it is running ahead is because the fed has got more dovish and the dollar, which was at risk of continuing to strengthen, particularly is momentum that is weakening. so gains are slowing down and that helps underpin stability
and commodities -- instability in commodities. the real risk goes back to trying to insist that the idea that april is life and you want to get you in up. that is the risk. you will have oil prices in question at that point. vonnie: we are seeing huge inflows. barclays talking about people about $20 billion into commodities, at least in the beginning of the year, and then saying it will be about a load of junk. that is the clip that americans heard. is this bad? dominic: hopefully not. i would hope we don't see new lows, but the idea that we could revisit the old lows or get close to is recent. jon: i am pleased to say that dominic konstam will be sticking with us. we will be breaking down what to
jon: this is "bloomberg ." i am jonathan ferro. open about six minutes away. let's go to matt miller. the broader call from ubs. analyst helen brand has cut her earnings forecast riskless watchmakers. of doodlingmpact tourism spending. the watchmakers battling the impact of last year's currency cut. they don't have to worry about the impact from the apple watch. are likely to fall. year to date with r ichemont down 15%.
after climbing nearly 4% yesterday, susquehanna releasing a note saying they continue to recommend marriott shares with her with out an acquisition of starwood. the firm believes either scenario will be a win-win for marriott and they reiterated the positive rating. a bidding war with angbang and we will see who comes out on top. of tesla. the shares tesla unveiling model three on march 30 one. it is likely to be a positive event with substantial media coverage and strong initial orders. we will cover it. ubs coming in with negative news, saying the market should not ignore headwinds of the storage business, long-term profitability of the model 3 and needs to raise capital, so this is up in the air. shares down about .801%. jon: thank you. we are getting you up to speed on global markets ahead of the
futures in the u.s., negative five points on the s&p 500, -50 seven on the dow jones. rolling over in europe as well with that session about halfway through. down byn and dax .2 of 1%. both get to the fx market, dollar and yen, it is 11345 this morning. at 10 year just coming down by about three basis points. yields lower in the u.s.. your yield on the 10 year followed by crude. .75% of the open, don boyd -- down by .75%. ♪
strategist with northern trust. -- chief investment strategist with northern trust. a few thoughts into the open, s&p 500 and dow jones negative. in london as well, down about point 33 of 1%. switching up quickly, happy people as they always are at this time in the morning in new york. euro-dollar at 1.12. yields coming in, tracking crude, down by almost three full percentage points. we cross over to matt miller premarket update. look at whatake a major markets are doing carried down across the board, not huge losses but about .25% on the dow jones. 17,400 92, s&p 500 trading at 33,000 right now. i have a chart, basically the same as this, so either one
works. there he ugly chart. it is u.s. equity volume and look at what dives right here. i will and it did that in red and added to the library. it has been so slow over the last week. it has got to be warning for my friends on the floor of the new york stock exchange. it had been interesting in the oil pitch for sure over the nymex. take a look at commodity is we are watching, gold and oil interesting to watch as well as other commodities. note fromng, a barclays saying you have to get ready for people to run from the exits. they're saying there is an oil .75 to and they're off by of 1%. this has been down, down, down for oil. gold futures hold strong. up seven $.45. -- $7.45. walk rock saying today that
maybe you should consider using gold as a hedge against inflation. vonnie: thank you so much. let's get back to jim mcdonald now of northern trust, the chief investment strategist, and he joins us from chicago. looking ahead to janet yellen's remarks later today, what are you looking for in janet yellen to say? will be careful not to break any new ground. she has emphasized how data dependent they will be. the data they are looking at is not just economic but market volatility. she will preserve all of her hedges parried the market has got about the 25% probability to raise rates by june and a 70% probability by december. we think that is right about there. they will raise once over the next 12 months. jon: let's say they go down from four hikes to one. what does that mean for the money your firm manages? jim: they have argue reduced their expectations are just two
hikes this year, and we think that is a reasonable pace. we think they have set their expectations back down toward where the market is, so we don't think there is another positive precept from them changing their dot plot. want todominic:, i bring you in here. he needs to think about returns and possibly bring them down as time goes on. we are 10 years into the recession, what do you tell someone like this? dominic: good luck. [laughter] it is difficult, but at the end of the day, you should still -- you have to reach for yields. you're supposed to take on more risk, and i think there was a point when we were trading high yield were even if you have the regular session, high yield was looking attractive. the options are out there. i think obviously, in this about going further out and trying to pick up what yield they can.
don't underestimate yields, they are negative all over the world, and they can come down much lower in the u.s. as well, unfortunately. jon: i am guessing you do not need luck or fortune. what are your big conviction strikes? jim: we have been counseling clients for a couple of years. it be lower than historical, so they will have to reset expectations. from a tactical standpoint, we are moderately over risk today, which means we are taking in less risky assets like the u.s. equity market and u.s. high-yield, and we are throwing them out in some areas that we are less confident in the growth outlook, and that includes the emerging targets and natural resource base. vonnie: where are you in emerging markets? have you managed to hedge fund with the other? jim: in the emerging markets base, they have had a nice awns, but they are on
multi-basis of underperforming. the keys we will be looking for to become more positive, one of the day has come into place, which is the dollar stops appreciating and has a third negative relationship between negative assets, and the dollar, but we want to see the economic momentum improve and reduced credit risk before we get more constructive on emerging-market assets. jon: you are looking at an fx market and the dollar in politics as well, but if you just look at the dollar, for the rates market, do you see developing and 2016 for the dollar in any way, shape or form? dominic: no, not really. i think the issue loose to what extent that it becomes undermined as the dollar strength. i think the dollar is actually relatively stable and the rest of the world is not to well enough to warrant a much weaker dollar, but on the other hand, it is important that the fed and not sort of push on
drive the dollar to new highs. that will be the key issue. as jim said, it is constructive and it will not transform it. if the dollar was to go down, the growth was recovering and the u.s. was really tightening the cycle, then that would be forceful. jon: jim, if the market leads the fed and the fed does not lead the market anymore, do i need to spend less time listening to the fed and pay more attention to what is happening in markets? is true.ink that we think the economy is the key driver over the next year and politics in second place. the federal reserve has brought expectations closer to the market, so the risk of them making a mistake, which is what everyone is worried about, has gone down. i do think the economic data will be the key over the next year. vonnie: what about the u.s. presidential election? how does that change the way you allocate or will it?
jim: the history of the u.s. market has me entered midyear, said jim, and has the right to the end of the year, and the political environment becomes more clear. this year, we will see the end of july before we have better clarity with republican and the democratic conventions. what the market once is uncertainty, so they will be happier with candidates that they feel they will have predictable policies, the ability to pass legislation, and volatility would be higher with an uncertain election. according to this increasing, politically speaking, going forward, i remember a conversation i had a couple months ago. down toars ago, it came something as simple as who would run the fed under mitt romney and it would run it under president obama? that was the question, that simple. what with the question before markets looking at this race? jim: i think the federal reserve will be important.
i think thathe supreme court is on people's minds, but it will be around the ability to pass legislation. if we get a congress elected a president elected, we will be able to compromise and pass bills that one need to be passed. we have the possibility of being positive for the markets. vonnie: do you see anyone out there that has that ability? on either side, and even considering vice presidential picks potentially? there is ak possibility for my decided that i'll that you get a president elected that will work with congress. the people that go to congress do not go to not pass bills. they want to pass legislation and approval ratings go up when they passed legislation, so it is a possibility, but the reality has not been paid.
vonnie: jim thinks people are willing to work together in the next congress, are your clients talking to you about it? dominic: no, people are talking and that didn't erratic is going to change in the sense that you have a congress that will work with either one of these likely presidential candidates. the only question is, in the case -- most people think in the case of a democratic win, it will be the same old, same old in terms of nothing being done that affects the underlying fiscal position. looking atasuries, 30 year, a fantastic debate emerging in the market. we have the market and obey consensus use on the dollar and dollar yen, but barclays warning of commodities rolling over, pimco and blackrock saying go
along inflation, you see what is happening in the eurozone and the bank of japan in the jgb market worried what does it mean for that on the screen, the u.s. 30 year with yield around 2.5%? jim: we expect rates to stay low for long. when you have got a german 10 year and a 15 basis points, a japanese 10 year at -10, and foreign investors with a predisposition toward the u.s. dollar, that tells me that there was support for interest all along the yield curve. told yourm, when you clients that you were taking down your return assumptions, what is that at now? long-terme diversified portfolio investment all the way from cash to alternative investments, we think you have about a 5.5% return potential for the next five years. definitely lower than what we realized historically and lower than i think many clients, and
certainly institutional clients pension funds, are hopeful for. jon: i will put you on the spot, events this week. janet yellen, a trader i am speaking to, s&p 500 for the end of the week? jim: i think with the rally we have had, there is more downside than upside if we are talking about three days trade, but i would not put a lot of money on a trade that short term. jon: jim mcdonald, thank you. special thanks to dominic konstam, deutsche bank's global head of rates joining us on "bloomberg ." quick programming notes, it do not miss janet yellen's speech. watch bloomberg tv. :00 p.m.begins at told eastern on bloomberg tv. the u.s. government dropping the suit against apple. why this matters to investors, if at all, next on "bloomberg ." ♪ ♪
hpe: i am in our new greenroom. later today, jeff rosenberg will react that fed chair janet yellen's speech. you are watching "bloomberg ." i am vonnie quinn. the case-schiller index said home values increased 5.7% in certain cities. that is in line with estimates and a sign that the limited supply of available homes could push prices out of reach for some buyers. they say the fiscal first-quarter earnings are better than expected. the company has posted relatively high profit margins. is the dawn of a new era in
the virtual reality world. the new headsets are now shipping. requires a600 and powerful computer to run games. facebook bought the company two years ago for $2 billion. that is our latest is this flash. jon: about 60 minutes into the session and stocks rolling over. -- about 60 minutes into the session and stocks rolling over. let's take a look at stock movement for matt miller. matt: starting off with shout we start with chipotle mexican grill? cutting price target down to $400, saying the unit economics may not recover. we have had a story on this we have had a story on bi about the fact that giving away burritos for free is not the way to boost revenue and not the way to come back with profit. chipotle downright now. vonnie told you about lenar forecasting better for this
quarter than analysts had seen. also, home sales rocketed up 5.1% we were looking for a drop, 3.43% this morning. bankruptcy risk, we have been talking about this topic. it is a penny stock. a lot of people love it because word, itad it as one says [indiscernible] instead of edison. you are always going to be some n at the topnediso and it is down a whopping 32%. think theld love to people sold their stocks based more on the legion. matt: look, it is a gamble. it is a gambling stock. jon: we're going to bloomberg's
abigail doolittle. abigail: over at the nasdaq, shares are higher and morgan stanley overweight. this is the big drop had an attractive buying opportunity, plus, he thinks the company is not going to face headwinds anymore from gopro and checks out of china are encouraging with more than 25% upside to the new price target of $55. on the other side, we have micron trading lower on a downtrend from needham, and they have cut the estimates to -- for the fiscal second quarter and a reporting that tomorrow after the bell, they think the company continues to struggle with the ram space. this was one of the worst stocks last year, the worst stock last your. credit down more than 25% so far this year. it will be another breath year for micron. jon: about 18 minutes -- it will be in another rough year for micron. jon: about 18 minutes into the
share. the techlosses against company. u.s. officials said they have gained access to an iphone that belonged to one of the san let's get my words out this morning -- shooters and no longer need apple's assistance. corey inined by san francisco. a discussion about morals and what the business should stand for from investors sitting back and saying, i don't know what this means for me, if anything at all? believeram not a big but anyone to completely changed the after hours because of the court ruling, but i will say that this is an important decision by the government great and interesting. the government decided they don't want to pursue the case anymore, saying they were able to successfully hack into the iphone all by themselves. security and the government
said it did not take long and [indiscernible] government finding some way thend apple's security for iphone held by the san bernardino shooter. it certainly lets the other major tech companies off when it comes to coming to apple's defense because now they don't have to fight the good fight. what happens to the public oncourse and public debate the importance of national security over privacy or vice versa? toey: the judge does not let -- does not have to let them off the hook. there is something known as an equities review, so as part of this long debate over the best practices on cyber security, there has been the temerity to sort of open their [indiscernible] and show what has happened to the cyber community so that other companies can learn and
benefit from the attacks. there was a government process called inequity review that folder ability in thousands of computer systems, and that phone ability must be shown so companies can improve security and find out where the weaknesses are. apple could demand this equities are a few. the government may be compelled to do it because it is the right thing to show what they did and how they did it because of the equity review process to increase the security of the devices that the government decided it wanted and passing the law of equity review. it is an interesting and it shows the long winning challenge. what i would say is, why did the government say that they were going to hack the phone? they could have kept that a secret, they could've argued national security and never said anything about their ability and the could've pursued the case. they could've try to get the precedence of that the case would have provided so they could get other bones in the future. i think this might suggest the government you they're going to lose the case or were at risk of
losing the case and setting a precedent would prevent them in the future from going after phones. that is perhaps why they did this and they had the option of not saying anything. fascinating story. cory johnson, thank you so much from san francisco. coming up in the markets, or line height today. i might make a cameo later on. today.line i might make a cameo later on. caroline: a feast of central banks once again. the bank oft from england, what would they be taken into when it comes the ramifications of what they see in relation to the british pound and asset clouds. janet yellen talking at the new york economic club later, so the head of that, we will be digging and across the asset clouds for the equity strategy of j.p. morgan and chase. we will be speaking to the head and we equity strategy will have that conversation next
hour. indeed, one hour after that, we will be talking to the blaine -- talking to bill blaine. he is having a little bit more optimism. we will have that much more throughout the next two hours. thank you very much. i am looking for to the irish tagteam coming up on bloomberg markets up next, final thoughts. ♪
matt miller. but: i showed you earlier, here is an apple to apples comparison of just how little volume there is. whenever you pull up this chart, theill show you act time buying compared to the average of whatever you choose here. i choose the last 20 days, so you can see the first 20 minutes of the session today have in substantially lower in terms of volume compared to the first 20 minutes of the last 20 sessions. this breaks down industry groups. they are all down. volume is incredibly slow in the equity markets, but then we tend to trade dress and we tend to sit on our hands more -- trade glass and 10 to sit on her hands were in front of a fed speech because the computers cannot trade on it. it is too complicated and traders have to think about it for a moment before they actually buy or sell something. vonnie: looking at the notes this morning, [indiscernible] matt: i love notes from david
buick, for the record. vonnie: can i say, what was your command? svs? i also looked up svu. jon: a shout out "bloomberg " in the u.s., i never thought i would see it coming. matt: i hear him on the radio. jon: that does it for "bloomberg ," with vonnie quinn and myself. do not miss janet yellen dated today. at 12:00 p.m.s eastern, 5:00 p.m. in london. that comes on bloomberg tv and bloomberg radio. ♪
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bloomberg television. eddie calvo we will take you from new york to london and san francisco in the next hour. we are half an hour into the trading session in new york. stocks are lower as you can see at the bottom of these green and investors are keeping a close eye on the sliding price of oil. but a closer eye on janet yellen and clues about the rate hike. then, the justice department is dropping the case against apple, saying it was able to break into an iphone used by a terror suspect without apple's help. but it is not clear how they did it or who helped them. the debate will be far from over. betty: