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tv   Bloomberg Go  Bloomberg  June 9, 2016 7:00am-10:01am EDT

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squeezing bank progress. super aggressive super mario. the ecb began buying pork -- corporate debt. but what happens if he holds countries -- companies that need restructuring? ♪ david: welcome to "bloomberg ." towardscks going another hive. amanda: we're watching a day after initiating corporate on buying programs. mario draghi makes a case for structural reform at the economic form in brussels. david: we had there in just a moment.
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amanda: we hear from the ceo of disney with just a week until the grand opening of the new theme park in shanghai. around the world and check in with our team for in-depth coverage. brussels where mario draghi has been speaking this evening. guilty yields dropping a record low. david: let's begin in brussels were mario draghi has been calling on those to help the european central bank store economic health to the area. economic form with the latest. what are these reform specifically that mario draghi is asking for. amanda: i don't hear him. david: i'm afraid we lost a matt miller. it fromwe now take
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brussels. talk about the brexit vote fallout. in this case, interesting to the 10 year bond dropping to record yield. it to anna edwards now. what is driving the yield? about what islk been happening to guilty yields this morning. they've come up a little bit since then. talk, was on the final before the eu referendum that takes place on the 23rd of june. you have the global and the domestic. the global side we saw guilds an d treasuries rallying today. they're in good company in recent months we've seen developed market upon the yields falling. on the domestic side, all of how itey questions about would react. how quickly does the u.k. remain -- how quickly does the u.k. economy bounceback? we have had some weakness in recent data, most of the overnight in the housing market.
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one person safe haven asset could be something entirely different to somebody else. who will see interesting questions about how the bank of england reacts and how quickly it is forced to react. uncertainty about how much all of this has been priced in. is priced in, you wouldn't expect yields to follow her. bank stocks have not priced in a leave. are traders waiting for a vote? referring to some reporting done around the banking sector about how quickly dok stocks might react if we see a vote. error in mind, a lot of the probabilities around this we re still polls a divided. if you look at the odds checker are talking see we what a 30% probability of a
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brexit, or just below that at the moment. these are the probabilities we are talking about. we remain based on those kinds of odds. on the terminal, traders are foreigng, overnight for exchange markets. in some cases, learning lessons from when they cut their take to the euro last year changing the way they are doing business. they think night, voice rating to give them the flexibility they need. amanda: thank you so much. toid: we want to go back matt miller now where he is covering the economic forum. matt, before we got interrupted come i was asking what specifically for ms. mario draghi calling for? he didn't mention any specific reform, but all of the commissioners we have been talking to today are talking what structural reform meaning
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austerity for those countries that still need them. that in the peripheral, policy initiatives for those countries that can afford them. spendingalking about initiatives, stimulus initiatives for countries like germany to bring all of this fractured market into one complete a market. mario draghi continued to say that he thinks we need to complete the single market in order for the monetary policy to the policy initiatives have the strongest effectiveness. listen to what he had to say. are many understandable political reasons to delay structural reforms. few good economic ones. the cost of delay is simply too high. given the interactions between policies that i described, it is in everyone's interest to the
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various trends of policies to buttress each other. if only because that will shorten the time it takes for each to produce its effects. matt: of course, it is nothing new to hear a central banker asking politicians for a little help on the fiscal side. obviously, the u.s. the fed at least since ben bernanke has been asking for fiscal help as well. the problem being that politicians want to get reelected. that sometimes becomes more important than the greater good. david: indeed, thanks for a much, matt, willst a few minutes matt sit down with the european commission for economic affairs, stay tuned for that. has had its longest run of games in six weeks. but this morning a little bit of the retreat. this comes as new wildfires in canada sparked fresh concerned overproduction.
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chief energy correspondent is life in london with the latest. >> we have some profit-taking today. there has been a massive rally. than 85%, have more it is just a bit of profit taking in the market. it seems we have really .ntrenched the $50 level the market seems comfortable trading at about that level. that will be sustained even after today's correction that we have seen with trading close to $51 with brent trading about $52 a barrel. amanda: thanks. closerthe s&p 500 edged to all-time high in speculation that borrowing costs will remain lower, for longer. now with thes latest foot that we've seen the s&p 500 flirt with this for some time now. is there any reason to believe it may go past to this? >> it is remarkable to heading
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to new highs when you look at is much bearishness there out there. that sentiment to say we have a little bit of a reversal. so far, that is playing out this morning. future so far are off. weis very, way above what usually have. that we have had in the bull markets. the strange dichotomy it seems like day after day that stocks keep inching higher. thatears will say valuations are very rich right now. we have poor economic numbers last week, what happened earlier this year will me had a lot of turmoil in the market, not much has changed since then. there is no reason stocks should keep edging higher. some people might take profits today because of that. they are reaching almost record highs, and there is not too much recent for it. again, it is this issue of looking for hedges in the market.
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time.ields are at all some people are building up the safer assets within the stock market. that is notaying going to last. at some point there will be a reversion. we will see how long these gains last and if we see some of the reversion today. david: thanks, now let's head over to a look at the markets. >> we have gotten little pieces of it. the overall thing is risk off has come back to the four. stocks are coming off the day pretty broadly, you can see the dax in particular down more than 1%. down as that is manifesting itself in the selling of stock. it also is manifesting itself in buying of government debt. sovereign bond is going higher in price yield today. as we talked about, in particular, we have seen the
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yield dropped a record low. if you flip over to commodities we just heard from hobby air, -- falling.old is also the commodity index is off. keep an eye on anything that is perceived as more safe today. it is things like the japanese yen or gold bond. thanks so much, who want to get an update on what is making headlines outside the business world. >> first up, and u.s. presidential politics elect the presidential candidate hillary clinton is mobilizing her major fundraisers for the general election. they have been asking to match what they race for the primaries by the end of this month. the clinton campaign wants to raise $1.1 billion in total by the november election. the u.s. house will vote today on a bill to manage puerto
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rico's debt crisis. that would create a financial control board to manage the restructuring. a passers hope to get before july 1. that is on puerto rico must make a $2 billion payments to bondholders. has crackdown of palestinians following the first major attack in five months. two palestinians opened fire in a tel aviv shopping district. both attackers were captured. in response, israel is deploying more troops in the west bank. access foroked palestinians to travel to israel. still ahead, we had back to brussels and economic forum and we joined by very special guest. in an interview will see first on bloomberg television. take another look at the uk's 10
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year yield falling to a record today. that follows the german benchmark yield which felt when though just yesterday.
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david: the european commission is hosting its annual economic forum in brussels. on the agenda is the need for structural reform and create growth in the euro area. we turn to matt miller who is joined with the eu economic minister. matt? matt: david, thanks for a much. thank you for joining us. let me ask you first about, thee is so much talk about importance of a single market. the stage two of the deepening
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of the european union. how does that discuss one britain is on the eve of a vote to leave the eu? .> we are watching this it is of high importance. first, let's think about the result of this debate. the britishhat asple will choose to remain a united great britain inside the united union. that is what we need., respect the to vote, whatever it is. clearly, i think there is a good way. no contradiction between having great britain inside the eu, the uk inside, thecompleting the eu, european monetary union. not prevent the 18 member state of the euro zone to move forward for the political
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and economic integration. matt: when you talk about completing the monetary union, does that mean eventually getting the other members, including great britain, to start to use a single currency? pierre: no, it is clear that there is not only one currency. that is a point that it's at the heart of the discussion with great britain. the u.k. would have some advantage to join the euro. they chose a long time ago not to join. living together in the eu. together with the council on economic matters. 18 the day before, the member states would share the euro. we worked together in the framework.
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i think that is the way things must go on. those who chare the eurpo can, and in my opinion must work more to get an economic policy that is stronger. democratic area that is stronger. there is no contradiction to be together in the eu. the biggest problem with this vote in the near term is the uncertainty. i wonder if the european commission has worked on a contingency plan for either outcome. pierre: certainly not. my experience is that we had the referendum more than 10 years ago. there is no plan b. you must not discuss that. discuss that, to that means you don't believe in your plan a. for me, there is the best way, the best choice, is to live
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together. matt: one of the things a lot people have been talking about, the head of the ems, all talking about structural reforms the need to happen. what specific kind of structural reform to ucs unnecessary from member states? perre: we're entering into the period of recovery. the way is still towards an economic policy which relies on stimulus. fiscal conservation, that is progrowth now. to lead the investment policy through the -- we lack investment in europe. aird, i would say second-generation of structural reforms. i mean that we have to deal with competitiveness.
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more generally, with the factors which great productivity. communication, i think about innovation. i think about everything which is linked to the capitol. i think about infrastructures, future, we need to prepare. i want reforms. our reforms for the people can be understood by the people. of which they can take ownership. reforms ando have progress. i wonder about the reforms we are seeing in greece right now to comply with the agreement we came to a couple weeks ago. almost eight billion dollars in investment right now and new privatization of vehicles. have they met all of your demands? are you ready to now give them the first of the euros?
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pierre: last year's group was certainly of high importance. it was a very important moment of decision. there, we saw that the reforms are almost done, so that we capable of completing the first review of the program. we are now checking the details. that will take stock. i am very, very confident the next week on the 16th of june in luxembourg, we will be capable 10.3eciding that the billion euros, that will give a really strong oxygen for the greek economy. that is what we need. there must be a clear deal. there needs to be a
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deal. they are necessary, and important to us. to watch a growth coming back into greece, investments coming back into greece. that is where we are. at the moment, we can enter into in our relationship with greece. that doesn't mean that all efforts are behind us. we need to implement the reforms. that willnt that now open the new page. have someimf seems to disagreement about the sustainability of those agreements. 3.5% as forarget of as gdp is concerned. do you think that those things can be made? discussed for the
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-- we agreed on methods that would be shortened by measures. , after that, we will take the midterm and long-term more ambitious measures. it is very important that it is to take a positive stance. the staff and management are ready to be convene to be with us in this program. that needs to have some checking about the system. this decision will be made by the end of the year. i am also confident we will stay together. for us, the imf is a very credibilityement of and influence or reassurance for member states. this.going to work on i think everybody hopes the general interest in europe is throughout greece inside the euro zone, and in good shape.
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matt: thank you so much, we really appreciate you. david: thank you to both. coming up, george soros warning the markets. ♪
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david: "bloomberg this is "bloomberg ." and theto george soros risk of large market risks may be at hand. is 85 years old, almost to say i have to be involved here. he is worried about china, and the u.s. equities market. this is a very bearish take. david: especially going short the world, you he says this is going in the wrong direction. amanda: for those who thought that bonds finally going to a they thought, he says nope.
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as deflationse comes out of a week china. at least two years, or so. whenever george soros takes a major position, you pay attention. amanda: i'm wondering if the world is paying attention today. lots of negativity. coming up, we discuss a bank leadership. ♪ okay, ready?
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whoa! [ explosion ] nothing should get in the way of the things you love. ♪ get america's fastest internet. only from xfinity. david: we take a look at the markets right now. function. gmm
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we basically have a tale of two asset classes. one in the red is equities, then the greenwich's bond and the debt. this is a risk. you can see across the european equities we are down. at the same time, bonds are up. people are going away from risk right now. commodities have been up quite a bit this week so far. i will point out the u.s. dollar is also off a little bit. that may well account for the difference. about two are just hours away from the opening bell on wall street. are is what you need, on speech in brussels, mario draghi called to help restore economic health to the region by accelerating reform. bondsb bought corporate for the second day. purchases included securities issued by german carmaker
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volkswagen, and french mobile company orange. soros has become more involved trading at his office. isis time to find out what making headlines. ryan unveilspaul national security part of the republican party's new agenda today. he calls for increasing military strength in taking the fight directly to islamic terrorists. there is no talk of donald trump's proposal to build a wall between the u.s. and mexico. meanwhile, the house and senate will try to resolve differences over funding to fight this zika virus. the house has approved more than half of that amount, the senate majority predicts a measure will be passed by next week at the latest. in peru, almost all of the vote
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in the presidential election has a former wallnd street banker is edging closer to victory. winner will be announced this weekend. both are seen as market friendly. amanda: in 2014, several european central banks cut key interest rate below zero. japan followed in early 2016, now a quarter of the world economy is living with the rates in the red. how are banks making money? ow, we have two guests david: billion, i believe. amanda: downgraded you any major way. david: amanda set the table, david you are talking about bonds. look at germany come every maturity under 10 years in negative territory.
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this possibly be a healthy environment for banking? why would anybody own a bank stock in germany, europe, japan or here? the fed is on hold until september, or later? >> there are three things, between the difference short and rate and the capacity to rollover is at an all-time low. deal,ly, on a 5000 years we never had rates anywhere close. the key question to ask yourself is, obviously today is bad and the reason is because banks are not making any money, basically. or the profitability is barely acceptable. but, the key issue is for how long can this go long? if you think it is in perpetuity
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of your cash flow, then how many will keep the show going. i tell you what is the answer -- in europe it is about three years. mario draghi comment three years will leave office. his term expires. batch insurance companies are probably going belly up. money in lifet insurance companies, and now the insurance itself is worthless. as a result, when you have that backlash you return to slightly positive terms. -.05, they might be +.05. 0% profit,re making your profit the triple afterwards. amanda: your timeline on that is three years? >> set mean are dead money for
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three years? davide: they can only earn a dividend. for the next two or three years, don't increase profit. when rates move, it will be the biggest windfall of all. a companyt it, assume like apple was forced to sell margins.t 0.5% what would stock be worth? 95% less. this is what is happening to the banking sector. if you look at the last, 100 y been suchr have banks a small share of the global market cap as they are today. amanda: if you are apple, you would raise prices. banks will pass some of this on to their customers. banks do like to make money. davide: we have seen this happening.
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in denmark, one of the highest negative interest rate in europe. ,anks are starting to charge passing the spread back to mortgage. mortgage is in switzerland used to be 89 basis points, that is the gap between funding and how much you borrow, how they have increased. why? the banks are taking a hit and passing that along. why are customers taking it? you are happy anyway. as a result, that is why banks 6% cost ofake a equity. david: is it possible for a bank to use lending as a loss leader? otheran have relationships with their customer, can it become like giving away a toaster to get them in the door? davide: that is a brilliant analogy. when you give the toaster or $100 in banking, basically that
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is your worst day. you need to get that money back. it is not the interest, it is the principal. as a result, what is happening are only, banks lending to those people that can pay you back. and those people don't need it because they have the money. what is happening, is the only ones that will be successful is those that can cross that like morgan stanley, ubs. cateredve very cystic -- sophisticated deking management. a relative basis, ubs is healthy. there are a lot of sick of banks in europe. the top of the list has to be among the large ones deutsche bank and credit suisse. how sick are those banks? around? be turned the benefitt, for of the audience i will say this -- if you take a jpmorgan market
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cap, it is equal to the first bank in spain, santander, and barclays, and france, and deutsche bank, and italy. you can have 5-for-1. about $85makes billion revenue. --se five combined make $180 $180 billion revenue. the gap in size, balance sheet is about 3-to-1. how is it possible the market is having such a different pricing? the reality is europe has been slower to adapt. deutsche bank and credit suissee are the ones that haven't been made theiraven't
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reforms. to like morgan stanley did that ahead of the curve. these these men, running institutions, getting the job done. davide: i think he can stabilize deutsche bank. excess, he isch taken it all down. you will be able to get over the regular problem. it will establish a proper business. the problem is, deutsche bank is not have a core business to fall back on. they are strategically challenge. internationally, i think deutsche bank will be a third smaller than it is today. money, it make much is going to a shrinking strategy back to the core. it has german corporate as key climate,s so you should survive
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and do well. credit suisse is more challenging. they do have the retail bank in the private bank which is a great is this. the investment bank is where it might be the slowest. so there, the issue is it is time to distract. the only one that has been able ubs thanks to amanda: who is getting it right? davide: in europe, it is ubs, lloyd's, ider, think in italy. why? these are the ones in the opening what i would call a wells fargo/jp morgan approach.
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david: who is getting it right in the united states? davide: wells fargo has a similar business model to santander, it is a universal model. if you're in the states you can keep one market. he market is big enough. if you are in spain, you need to go to other markets because your gdp isn't big enough. are one of the few people who was saying he was effectively a dead man as ceo at deutsche bank. who is the next dead man walking? davide: the next dead man by december.ll see it is too early. if within 12 months they haven't
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delivered i think investors will want them out. , the reality is, the restructuring of such a proportion needs 24 months to see. you can't basically change the surgeon in open heart. yeah? that is what is happening. i think that has to do with corporate, rather than performance itself. let's put it this way, it used to be that the bank was one of the drowned jobs. -- dreamt jobs. in backing isn't easy. it is my top talent is leaving the industry, particularly in europe. amanda: thanks to you both. up, just one week until disney's huge unveiling.
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the mouse house betting $5.5 billion on its new theme park in shanghai. when will the park be profitable? my old boss joins us to discuss it all. 9 ♪
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david: coming up in the next chief global strategist whose he's a 6% swing in the stock by summer's end. find out which direction later. this is "bloomberg ." disney has invested billions in its new location in shanghai. the company is also producing more films in the region. ob iger andn with bo
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talked about the growing expansion in china. bob: entering this market has its challenges. whether they are regulatory issues, and making a decision we felt the best way to do it was with a theme park. theme parks are expensive. cost $5.5 billion. so it is a big bet on a big market and represents not only our biggest entrance into this market, but the potential to deliver greater growth for the company long-term. is reallyiming interesting, the government has this big focus on driving the consumer market. theconsumer element of chinese economy. is that good timing on your part? you have to start with the notion that you are building something for the ages. it is not about the economy
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today, or the circumstances today, it is about what we really see long-term. bet on a market of true believe on a market. going on inwhat is china that works to our advantage, clearly establishing a move from a manufacturing trim or service economy is very important. benefit by that but also contribute to it. one of the reasons why we got the permission to do this is the nature of the business, the number of the jobs that we create in the service sector. and the message that it sends. you heard you like to looking for a joint partner, can you confirm that? an initiativeave underway already. not getting into much details but we have a lot of development activity right now to make movies, disney branded films in china.
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tom: can you tell us which partners you have been looking at here in china? bob: you know, i am not able not 100% certain we have said publicly about it. far along on this process including developing concepts, and at and defying talent already to actually make those films. tom: can you give us more clarity on the timeline? bob: shortly. [laughter] tom: within the year? moviehe want of a released, but within the year we will have a movie in production, at least one. tom: as you look more widely at the global economy, how do you gauge where things are going? anb: well, i am not economist. i just run a little walt disney
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company. clearly, what we have seen in years isr the last few cause for concern. there isn't much cause for it to be overly optimistic. although our businesses are doing reasonably well, although paris is having a tough time -- the park and paris. generally speaking, our business across europe is ok. that wouldn't suggest we have great optimism. at least in the near term. asia, even though there has been a slowdown we still see growth and opportunity for our company. parts of asia, southeast asia, for instance, recent discussions about huge growth a opportunity for the company. we think there are a number of markets in asia, even with an economy not as robust as it once was that we still have a lot of opportunity. united states is quite solid.
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while i don't know i would call exuberant itd, -- is enough for ous to thrive. that was the walt disney ceo. with more from that interview later on. how let's go over to a look at some stocks on the move this morning. >> we hav ebeen talking about commodities. leading ammodities rally in the past few days. today it is commodities that are helping the decline. some of the examples of that. also, we are seeing some european banks pullback today. isouple of news items, ubs trying to cut costs. some people are going to be cut from its wealth management division. specifically, the middle management layer. weaving no doubt from barclays ubs, is raising
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downgrading credit suisse and deutsche bank to equal weight. this has to do with litigation exposure that is in effect for some of these european investment banks. ubs is better poised to cope, but is caught in the down draft we have been watching. a bigere, we have had downdraft in retail. a surprise posting loss, cutting its annual forecast. looking for aeen five cent profit. the ceo of the company blamed the shortfall on the strong u.s. dollar. he says there has been a spending slowdown and centers of the energy industry in the united states. there's been a broader shift away from luxury purchases. en internal turmoil in the company. he sent out a memo recently scolding employees for customer service shortfalls.
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a lot going on here. much, thanks so government bonds with record low yields may be next asset bubble according to one well-known billionaire. we tell you who. ♪
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amanda: this is "bloomberg ." peter keels has government bond yield are signs of a new burgeoning asset bubble. is here to show us what he is talking about. julie: he said it is not intact just in government bonds. there are some different ways to look at this. one is this index of developed markets of sovereign bonds. the index only goes back to 2009, but it is at a record in terms of price. people have been buying these
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things up like crazy. is enormous appetite for government did that. yield, negative rates, let's have a look at where yields are. this is extraordinary. alie: not only do you have big appetite, you have some big buyers including the european central bank which has the gun buying corporate debt in europe. the average grade below 1%. as we have been talking about, the ecb is not only buying investment grade, not rated everywhere. telefonica,ase of which the ecb is buying debt up in some of these cases they are investment grade by just one agency. amanda: in this case it is the outlier. to tacticallyecb
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make that purchase. telefonica has a lot of debt in the future. if you look at its capital structure, and that is unsecured senior debt. debt: this looks at the distribution over time. your 2023, there is an awful lot of debt coming due in the next several years. amanda: pretty interesting, we will be watching. ford: that doesn't for the 60 minutes, a lot more to come on this thursday morning. ael joins us to discuss where stocks are going next. will we break the record today? ♪
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amanda: central-bank boost. the so-called rally mood. will the gains make it harder to protect against a selloff? move, thether crew to
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longest daily winning streak in six months. of a summer rate hike now in jeopardy, could crude soon be heading to $60 a barrel? amanda: two negative yields have investors finding that more attractive? ♪ david: welcome to the second hour of "bloomberg ." u.s. stocks set to open in 90 minutes, futures pointing to a lower open as the s&p keeps trying to break that all-time high. amanda: one of our guests certainly thinks we will get there. stocksn headwind for across the globe that could shake up global markets.
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first let's go around the world. for coverage of the top stories matt is in brussels. now, but buying corporate bonds for the second day. on ubs cutting managers added to wealth unit. for a second straight if the ecb is buying corporate bonds. let's go to london. what we know about what the ecb is buying? buyingthe ecb has been bonds from orange today, but also from volkswagen. of course, not to long ago there was a selloff on volkswagen. this tells us that the ecb thinks that could be coming their way in terms of damages. we have seen that they have bought bonds from telecom italia. mostly high-yield rated.
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amanda: what is the impact of all of this buying? yields have fallen across the board. investors are reaching to high-yield. amanda: is there any concern about interventions like this? katie: i think there is concern, thesee don't know yet if measures will go through into the real economy. if they will take this money and invest it in capital expenditure. amanda: thank you so much. david: let's get back to brussels what mario draghi has been calling on politicians to help the european central bank restore economic health. int is at the economic forum joins us live with the latest. what are you hearing from the economic forum? matt: well, a lot of commissioners as you know we just talked with one.
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they are all talking about this stage two of european integration, trying to make the monetary union tighter. it is interesting, it comes at a time when there is a vote in europeano exit the union. that is the issue being discussed over and over. mario draghi was here, and everybody was happy to take an hour away to listen to what he had to say. many understandable political reasons to delay structural reforms. few good economic ones. the cost of delay is simply too high. the interaction between policies i have described, it is in everyone's interest that various trends of policy buttressed each other.
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because that will shorten the time it takes for each to produce. talking, he again is about the completion of the single market. he wants to get rid of the uncertainty faced by firms trying to do business with they don't know what is going to happen is for as brexit is tax lawd, or as for as is concerned. that gives him less ability to move the inflation legal -- needle. join in.kers need to hear nothing new, we central bankers all the time asking for fiscal help. mario draghi, that is his main points today. you.: thank u.s. futures pointed to a lower open, the s&p 500 is still in a record.istance of
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oliver, we talked about that short interest is very high. what does that tell us about where we're headed next? oliver: the short interest fits in with a lot of other things. it is to very true even as we get to these levels, shortage is pretty interesting. earliero record highs this year. despite a large covering rally it is still elevated. it has come down quite a bit after the past couple of months. it still does remain above historic levels. look where we are now -- close to an all-time high. that is because some of these people were so sure institutions basically getting shorting of the market. whether it is specific stocks, we like to look at specific stocks. about that tells you that if things get down to a certain level there will be some buying power. that puts more of a floor on
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things. you have to house some conviction in the market. perhaps ecb bond buying will help. comings still sort of a around that has to happen were investors really want to get into the stocks. david: hedge funds have not had much conviction. america, to bank of getting out of equities just as they're going out. why are they doing that? what they did is they got battered in the first quarter very rough. one of the first starts to the year since the financial crisis. a lot of what investors withdrew funds. they drew down a portfolio not just because of the decline in the price of their assets but because they got really concentrated in the top 10 picks. goldman did an analysis showing more so than ever hedge funds are putting big that's on the
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top 10 positions and are still short quite a bit. about 70% in that short and starting to dip their toe in again. what it tells us is that you a big buyer here that might have to chase the market higher. that is a phrase that gets bounced around. if you have a portfolio and have to beat some kind of a benchmark and it keeps going higher than you have work to do. david: thank you very much. amanda: in and of to cut cost ubs is eliminating some management positions. at the latest on that, peggy is with us. peggy: ubs is changing the way it pays financial advisors to reward them more for staying with the bank longer. another move they announced if the plan to reduce the amount of financial advisors they recruit 40%.competitors by that is a big change as well that comes after ubs scooped up
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a number of advisors one credit left theeft -- suisse wealth management. there also cutting some jobs mainly in the middle the senior management levels including some york, home offices in new and new jersey. this is a response of the increased competition in wealth management in the u.s. as his seen with the rise of technology. leaving big banks who set up their own firms. have been talking about the banks needing to stay competitive in the face of negative rates. one place they're doing that is focusing on wealth management. the increase competition will have an effect. will reward advisors more for staying with them. also saying to advisors we will raise your target compensation so that you can keep about 50% of your revenue compared with 45%. this is a push it will be
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interesting to see if other players in the wealth management have to respond ultimately to the way that ubs is changing its conversation model. -- compensation model. amanda: thank you so now a look at markets. julie: as we have been talking about, nudged along by george soros being somewhat negative -- actually, more than somewhat. accelerating its decline now down by 1.3%. trading lower, as well as to want to point out the russian ruble as well. it is him pulling back today. the bank of america says the run was running out of steam. that country central-bank is leaving tomorrow. that is something to keep an ion. selloff included
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oil prices after the big run-up the had recently. brent and wti pulling back, both of them sell above $50 a barrel. now to get anime update on what is making headlines outside of the business world. ramy: two suicide bombs killed and injured dozens in the commercial area killing 15 people. the other suicide bomber struck north of the iraqi capital at an army checkpoint. in france there is no sign of protests over labor reform will end anytime soon. are vowing to disrupt the european football championships. refinery workers have already staged strikes. disruptingre now trash collection in paris. donald trump said he would
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raise $1 billion, but now he is backing off. trump says he will rely on his own star power is a former reality tv personality. to get media coverage for free. amanda: still ahead, a stronger dollar is one factor pushing oil prices higher. that puts the longest winning streak in six weeks in jeopardy. lee partridge shows where he is finding opportunities in energy. here is a look at have futures are performing. ♪
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amanda: crude oil is off more than 1% this morning. this as new wildfires force two canadian oil fields to shut down posted running espouse the partridge, it has been a nice bottom,ally off of a but where are you finding opportunities in energy? a huge rally.en it is hard to remember that in ,ebruary were at $26 per barrel we've come a long way from then. the opportunities are is an interesting subject. some of the upstream companies are still having struggles with their balance sheet. we live in houston, texas they are laid off over 250,000
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workers, that is a massive number. we don't think most of the opportunity really lies in the upstream space. because, even on the price of oil has come up 95% it came down from $100 a barrel. strainedso have a very balance sheets with a lot of debt that was raised in 2013 and 2014. better opportunities in the mid stream, which if you think about it, i heard the analogy that you don't want to be the guy that is taking for gold you want to be the one selling picks and shovels. if you think about the midstream gathering, really processing, storing, transporting, hydrocarbons across the united states to serve demand is supposed to supply. those are the areas we really like. is this base that is the
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really hit hard, we can show what has been happening lately, is the worst over? a guaranteed stream of income for these things so that make them a tractive now? e: one of the things is that their income is for a stable and he grows on a predictable rate and generate a nice rate of return. have been things you talking but is the low level of the yield available to bond adjusters. it had the suppression of yield by the central banks to try to bolster the economy. if you look at mlp, those are generating a much higher than average income based on their history of closer to 8% which 8% stable income for a long-term investor is a very attractive yield in today's market. it grows at a predictable rate as the infrastructure is built
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out and more going through the pipeline. not surprising to us that prices can be volatile. certainly, when oil fall 70% you will see some correlation to the price of oil. now that oil has recovered, there was much more stability and predictability in the income that mlp is regenerating. to give you a little bit of a forecast come up i can talk about what oil will continue to rise, one thing to keep in mind is that demand in the united states has been growing at about 100,000 barrels per day over the course of 2015 and 2016. but the supply that is provided by the knighted and other non-opec countries has been shrinking by about 100 50,000 barrels per day every month.
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if you look at it on a monthly basis you have about 250,000 barrels per day closing of the gap on energy demand and energy supply. we were oversupplied by about 2 million barrels a day at the and up being may undersupplied by 2 million barrels a day. david: does that mean that we have seen the bottom in terms of the upstream? jobs,0 people lost their that is a big number. have we seen the bottom of that? will we see more layoffs? lee: it is a big number. the problem is, the balance sheet. there was so much debt that was and 2014.2013 there hasn't been that much work on the upstream side to actually
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reduce that amount of debt and to do meaningful restructuring. we think that will probably be more distressed sales more activity to go on more restructuring of balance sheet. that has to happen before you can get to sustainable growth. is like argy sector 94 times. that is because earnings are so depressed right now. earnings will be coming back but it will be a slow process. we think that midstream and downstream plays are a much safer way to play the energy recovery story. amanda: stay with us. david: coming up, is a pullback in the cards. the of seen this story before. each of the last five times they've seen substantial pullback in stocks. are there too many headwinds to keep grinding higher? ♪
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david: stocks might be nearing record highs but we've seen this play out in each time we have seen a substantial pullback. froms still with us houston. how bullish are you on the stock market? where do you think there are opportunities in this market today? frank,re, well, to be they're cautious because valuations have come as far as they have. if you look at what is driving a, a lot of it has been common data policies that have been waged by the global central banks. of have this propping up fixed income instruments. the bank of japan is buying stocks. talk market has climbed to a place where it is trading above 19 times trailing
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earnings. we think that is a pretty full valuation. what we look for are sectors or companies with positive momentum. it is a classic trap that companies are getting cheaper because earnings are declining. there are very few that provide that profile. have negative technical profiles and people are moving away from them. telecom is a space interesting right now. we see telecom as being fairly cheap. we're seeing positive price momentum. we have focused on. there are very few telecom companies, so only about five major telecom companies. it is a fairly concentrated industry. have reallyt mlp's
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hit their bottom in february and are participating in the rally we seeing in oil prices over all. it is down a little bit this morning. we think that is another interesting play. we think they're better than utilities on the downside. those are the sectors we would focus on. the williams transfer energy deal -- will that go forward? what do you think about those stocks? lee: no, we think both are good stocks. williams and energy transfer are good companies. will unlikely the merger go forward. we think that will be better for both companies. we expect some improvement in the overall prices that are available to both companies as the merger cools off. amanda: can you paint a picture for us? the risk of default, what are you seeing?
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is interesting. we thought that credit -- talking about high-yield in particular, a better entry point about 10% yield or close to an 8.5% spread over comparable treasuries. the got to there in february. poet ever reason, that was the low on all markets. from that point on we have seen dramatic outperformance of credit even outperforming equities. at this point we think the risk reward profile of credit is skewed to the downside. it is been engineered by the central banks. the ecb and the market is distorted prices. of thef the recovery credit industry is coming from the energy sector. if you look at energy, it is all the way back to the first
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quarter of 2015. obviously, balance sheet are looking a little bit better. at that particular sector of the credit market has gotten ahead of itself. david: ok. thanks for your much for being with us today. aanda: still ahead, could u.k. departure from the eu send investors around the world into panic mode? michael says stocks could move much higher by the end of the summer. ♪
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amanda: it is time now for your global macro movers. you can see they're seeing stocks are on the world showing
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negative futures here in the u.s. and just about every market. germany in the u.k. are the big movers here. a giant till 2.4 billion, i toss it over to david to do the jobs numbers. david: we are waiting right now for the jobs. given the surprise last friday, these take a lot more prominent than the normally do. we report them every week, they 000 last week. the jobless claim number actually is a bit encouraging after the downward surprise last friday. amanda: back here in the markets come i want to point out what is happening with the japan. pick a look at the japanese five-year. financials are what is taking the nikkei down today. primary she, one of the dealers is considering pulling out of participation. asked the japanese government remains one of the
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biggest buyers. a sign of some unintended consequences you can see from government intervention. watching that market pretty closely. have a look at crude oil, that is a pretty steep decline. for production out of canada. this may well simply be profit-taking as well. after the run we have seen in crude oil they're keeping and i on that. that: now it is undefined would is making headlines outside the business world. first in the middle east come israel is cracked down on palestinians following the first major attack in five months. two palestinians opened fire in a tel aviv shopping district. both attackers were captured. israel is deploying more troops to the west bank and revoke permits for palestinians to visit israel and travel abroad during ramadan.
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she is expected to harshly criticize likely republican nominee donald over comments he made about a federal judge. ren says donald trump chose racism at his weapon but his aim is the same as the rest of republicans. to ensurearthquake whatrancisco can sustain rocked the markets in 2008. fiscal leaders are still haunted by the dot come bu-- dot com bubble. david: we hear what key banks are looking at. is figure the largest mutual
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fund that category. why the rush for developing nations? e, and that is the question. what does that tell us? a lot ofere is appetite for yield. you talk about what is going on with the rates in japan but also in the u.s. it was not income around the world in the more traditional fixed income markets. ofre is only a consequence that that investors are coming to emerging markets. amanda: what about the risk of that? the search is very real. but some of the still do bear a lot of risk. pablo: those have been coming down. the first data point is taht they are correlated with prices.
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other risk factor for emerging markets was volatility around the chinese economy and currency. both have stabilize. more importantly, we're seeing some signs that some of these larger economies like brazil and and turkey stands to accelerate. that is good news for emerging markets reducing the risks there. about emerging markets as if it is one thing, it is not a one thing. pick someone winners and losers among the emerging markets. pablo: it depends where you look but you are right that emerging markets are very much disparate as a class. this is one of the reasons why asset managers can obtain a lot of extra return picking the winners and losers. fxly, if you look at the
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yeild we like some high currencies like south africa and turkey. obviously, who put them tactically depending on the moment in the cycle. if you look at hard currency, we have been slightly more over on the oil related assets as we saw turning the corner from the lows of the beginning of the year. it ise the place where still steep like mexico, and purcell. amanda: we have seen asset management for the etf surge. investors aree looking. will that affect prices and yields responding to this influence? lo: we are seeing them respond. currencies, for example, in the marketarket to local
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index for emerging markets is up almost 12%. that is more than 6% or 7%. obviously, this search for yield is bringing in prices lower. we are seeing is also in supply of emerging-market debt. investor,you are an how much do you need to worry about geopolitical issues? you mentioned brazil, for me to invest in brazil, do i need to have a bet on whether the regime will work or not? this is an important factor. emerging markets tends to -- you need to know about what is going on in these economies. it is important to know the domestic factors like what is going on with the political process in brazil and the elections in argentina. know about other geopolitical factors, what happened with opec and their
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willingness to cut production. what will happen with u.s. elections it also has an impact. the good news in that front is that the credit risk coming from emerging market space have actually turn for the better. policymakers have been responding quite a wealth of the challenges this economy has been put through. that is in of the factor making it quite more positive. compared to over over the last three years. david: thank you, portfolio manager for blood rock -- blackrock's emerging debt team. amanda: the spread between the 10 year in the break evenly for the u.s. is near negative. as german and japanese real yield is deeper into the negative. it is discuss, interesting because we look at the prices and the yield, that is a look when you do that,
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america is already negative. michael: this is not necessarily a new story. this find interesting in is the spread between our treasuries and japanese sovereign paper. it is really a record high. one thing i have been noticing reallycurrency pairs are tracking that spread very closely. i am arguing that i think the dollar has a structural top two it relative to those currencies because the spread really can't rise to much further. amanda: three looking at the spread right now on the screen. my eyesight is bad but i will say that the white line is the -- itnd the blue line is is the reverse, actually. think that one of them is the euro, and one is
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the spread between the treasury and that is what i'm trying to isolate here. ist spread differential really a 40 year record. it was at zero just a couple of years ago. key from europe started, that was factored in, and the euro had we conjure manically. that spread has been range bound that is really the key. david: how much of that of the central bankers really understanding that? there was appointed point last december when it looked like we were going in different directions and came back in. is that a conscious decision? think the fed is really articulated a sensitivity to the dollar that is absolutely, hugely important.
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bow can't put a nice, tidy on it. they don't have a dollar mandate. they don't have a mandate from congress. they have to be careful about a foot of our treasury yield has been anchored by foreign qe, we have been talking all morning about low yield overseas. the means that the dollar has defacto tightening mechanism. that means the fed has to take a global calculus. i think of that is what is really happening. the question i really have is whether -- what the fed needs to articulate is that if and when they do interest rate hikes, that also strengthens the dollar. what is their model for saying a hike of x gives you a dollar
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showing thinning of y? amanda: who talk about this more coming up. david: coming up, is a june swoon ahead or will u.s. stocks continue their slow rise? we have more next. ♪
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amanda: in the next hour, we explain why he is gone bear when it comes to u.s. equities. david: here is your bloomberg
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business flash. unusual form of a golden parachute. this one gets triggered if another executive gets fired. he could leave for $63 million if the controlling shareholder fires his boss. himceo and doesn't offer that job. last week they said he is considering changes to viacom's leadership of that is jumped into one of the most competitive grocery markets. delivery service will now be available in central and east to london it is the first time the company has offered the service outside of the u.s.. a crowdedjoining market. they have been in a price war for years. the world's largest international airline is trying to get clients hurt by the collapse in oil prices. economyll offer premium seating, the airline had previously avoided in economy class because it did want to hurt sales of more lucrative
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seats. u.s. futures are down this morning after the s&p 500 finished tuesday 1% shy of its record growth a set of 13 months ago. michael is still with us. michael, you are relatively bullish on the second half of this year. michael: i'm calling a goldilocks, the rally we had has been like a many rallies over the last few years a hated rally. ,he markets have been climbing a wall of worry and hatred. but it is a powerful wall. oliver was on earlier talking about positioning, that is a big part of it. one way to contextualize this, there is a chase as a lot of investors are under position. youwill break out, and
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could people jumping on momentum. there is a real scenario where the s&p 500 can be up year to date 7% or 9%. amanda: cap is a record high price to earnings ratios? global growth that is going to work u.s. growth looks questionable, why do we need a stock rally? michael: we've had the mitigation of some big details like china. going to $15, it is hanging at $50. that is construct. at the year-to-year earnings growth that defined the 2012, 20 13 rallies it was very modest. a year last off of year we had overall very weak earnings growth, negative earnings growth. that didn't get a software great start. michael: it was a horrible quarter. david: you have to make up a lot
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of the back half. michael: exactly, but what is happening here is that i think you're having higher inflation starting to come in, which will help nominal gdp. the domino gdp story which really drives earnings and revenue for the overall corporate ecosystem is going to come in. was absolutely miserable, no question about it. valuation is stretched, earnings are mediocre. i think they will be good for him to keep up a momentum not just into the end of this month but also at some point in the back half of this year. amanda: having watched 20 years of financial markets that climb and then bust, there is a cycle. what would happen here if there was an alternative? i know asset managers hate that question, but if bonds give you if there were any
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other real class. there was private equity selling stuff to each other, the classic signs are in place for people are staying in stocks. michael: where do you go? that is an annoying argument but it is an annoying one. amanda: did you call me annoying on tv? [laughter] >> no, but that is how the table is set. benched are enched -- the s&p 500 or some other benchmark. any good news is going to be disproportionately rewarded against that backdrop. we got a lot of bad news, january was horrible. but that has been factored in. the positioning has been very
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bearish. david: you have been robust, if we get to the end of theyear and you are proven wrong, what makes you wrong? michael: there are tails that can come up. some wildcards, if trump wins the general, is at eight and flexibly the market has to process? i don't think it has been factored in. david: we don't know if it is positive, or negative. michael: it is a point of confusion. not yet-- has articulated policies. andks it is a huge thing, that is looming. i have advised my clients if you want to be bullish and put your foot on the accelerator but buy some protection for brexit.
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in terms of the u.s. economy, it is not a great economy. it is pretty mediocre. it is good enough, there was from lasted that will support some earnings growth. amanda: in that context, what sectors do you like? are interesting plays in energy. if confined companies that have that high data, but if taken balance sheet risk of the table there are a lot of companies verywill orbit are structurally screwed up. they happened during balance sheet problems. you don't want of those. you want the ones where they have decent balance sheets. michael, always great to have you with us. class areat asset
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foreign investors pulling her money out of? we tell you next. ♪
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onnda: here is a check features as we head towards a new york open and a little over 40 minutes time. we're tracking what is happening globally. it really is all about stocks turning the other direction. we see financials weakening and telecom across europe is down. the ftse seeing telecom as the biggest decliners today. there has to be more than that. we seeing energy stocks moving .ower in many markets that is having an outside effect. nasdaq are all tracking to the downside. we'll talk about what exactly is we're watching. but now it is time for battle of the charts. peter thiels said
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there is an asset bubble. he is talking with fixed income in particular. i was thinking where might there be a bubble closer to home? estate,ing about real in the san francisco area. over which there is a lot of local turmoil within tampa 2 scope. a culture clash between the new tech startups and people that have lived there for a long time. first of all, this is a measure of office rent. this is the white line, $69 a square foot is the rental rate to rent an office in separate cisco right now. this is the home price index. i took it all the way back into includes theit text search but home prices did not surge at that time. now we are even higher than that at this point in time. it is interesting, it is tough
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to measure private tech companies. you are saying san francisco, oliver? oliver: that was very good for a two line chart. a little trash talk. let's just get to your chart. oliver: this is looking at foreign selling in u.s. equities. this was brought to my attention, basically it shows what is happening if u.s. equity holders run the world. it's quick, and ebbs and flows 2000, andack to doesn't break negative and often but you have had lots of selling both by private sellers and also official sellers of the treasury. this is incredible. this the biggest 12 months some of selling. david: do you have a hypothesis?
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a lot of oil-producing nations have to break even right now. maybe they're selling liquid assets or maybe there was a bit of a divergence of monetary policy. the developed world is lagging. interesting to see if this will continue. amanda: this is a tough one. david: wonderful chart. amanda: i'm going with the julie. it is so clear, it is a bubble. david: i'm going with all her. i'm shocked by this. this surprised me. oliver wins. sorry, julie. that does it for the first two hours. a lot more coming up. ♪
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>> u.s. stocks are close to record highs. will begin their today? playing foul last week, the
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labor market may not as bad as employment data suggested. >> disney is set to open the shanghai theme park next week. we get preview of the park with ceo bob iger. ♪ we are just under 30 minutes away from the opening bell. this is "bloomberg ." jonathan ferro is off this week. anna: we have seen weakness in the futures in the opening bell. the opening is in 30 minutes. the s&p has been flirting with 21.34 closing record. we are following markets overseas. you can see across the world's negativity. -- world negativity.
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mitsubishi is in a drag, it may be belling out of the test bailing out of the primary dealer market. and now mario draghi calling on the government to lift the euro area economy. they fell unexpectedly. the u.s. cutting jobs. here to discuss it all is a contributing editor. let's start with the first story, which is u.s. stocks. we have been watching this out of europe --, sorry. the ecb president mario draghi calling on help to boost the euro, governments should do fiscal policy more effectively itshe area is far short of stimulus measures. he is saying, over to you guys. i have done what i can do. why corporate bonds. help me out. reporter: it sounds very
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familiar to me. we have had fiscal gridlock for a long time. 1, 2, 3 hass, qe done everything it could. we have not gotten into the negative interest rates yet. some countries have. i think it is a general call for fiscal stimulus around the world to help lift these struggling economies out of their troubles. david: without reading too much into mario draghi's remarks, is there a take away of whatever it takes, i have done what i can. reporter: i agree with that. we had them in janet yellen saying i have done what i can do do.bernanke say what i can and the u.s. central banks led the world in the sinking, and now mario draghi has picked it up all over the world into japan and other places. enough already.
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we are such in uncharted territory with zero interest rates policy, we don't know with the indigent -- unintended consequences will be. beot of people think it will bad. maybe it is time to take their foot off the pedal. structured a different between the u.s. and having a government fiscally -- stimulate fiscally. organizations are saying get off and stimulate. in germany, who does it? it is lopsided and there is more bailouts. we see a moral hazard problem in europe. reporter: you are seeing them play out in real time in england with the brexit debate. that is weighing on european policymakers and european economies. david: this is such an important point you make. we have one congress, they may not get it done, but in theory -- anna: and the taxpayers. david: so when europe really needs help, europe is not structured in such a way --
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reporter: we have a spectrum that like in china, you have one government that can get things done. we have centralized government, they cannot get things done. in europe, they have decentralized government. if china can get things done if they want, western countries, we have problems. anna: so the other thing happening in brussels was draghi and others saying it is time to take the next step to integration. it will be interesting to see if the european members stay or not. maybe we do not see that right now. reporter: i agree with that. he is calling for more centralization at the moment when everyone is starting to break apart. it is a time of great confusion. but it results in a struggling economy and struggling clinical dynamism as well. -- political thine is him as well. david: we got initial job claims
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that show some positive signs. first-time jobless claims fell 264,000 below the forecast of two and 70,000. americans are seeing benefits tumbled to a 16 year low. we have not talked since these numbers came out. how big of a deal is this? time that we have had all of these jobs reported for many years now, and i am not an economist obviously. but as we had closer to higher and higher employment, it is a time to be looking for jobs theoretically, i still personally worry about the people who drop out of the labor force. people who had jobs that they love and have exited out of those jobs and cannot be retrained for new jobs the way they are hiring. that concerns me.
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it is hard to know how to capture that. listening to the former economists on the way in on the radio, he was saying even though these records look good, the underlying trend is not good. i am not sure what to believe, but it feels better. i think the economy now feels much better than it has in years. that is a cyclical thing because 2010, so bad in 2009, 2011, but economies are cyclical. we are in a higher time, the intervu spirits -- the animal spirits are raging. anna: the jobless claims numbers have been below the number -- there is expansion in the job market for quite some time. we have seen unemployment lows. driver, is now an uber so we are not capturing that piece of the economy. it is income however you can get
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it. reporter: and we see the custom in many different ways, talk about how great things are when they may not be so great, the underlying facts on the ground. and so this big economy, i worry about solid long-term well-paying jobs, where are those going? anna: your grandfather's job is gone. coming jobs in the new york and new jersey offices. this mostly hit middle and senior managers. instead of reducing the number of advisors by 40%. what makes it interesting is the wealth management part of the bank is so important or they still see a runway on making money. so what is happening here at ubs? as a cost-containment, or something else? reporter: this has been one of their strong suits.
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ubs and credit suisse are the two big swiss banks whose specialty has been well-managed. they are saying, we are cutting back from trying to compete and investment banking. there is revolt from credit suisse. there has been revolt ubs. now they are saying in the core business, records and the u.s., it is not sure if that is their full wolf -- wealth management strategy. there may be too many middle managers at ubs. the european banks in general are really struggling now. it is really unclear why. maybe they are too tied up to the european economy, which is struggling, but i have been a proponent of this for some time. it is good for the american banks because european banks are struggling, they have less competition. ,nytime you want something done
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you are coming to the american banks now. david: is a good to the customers to have fewer choices? reporter: you know, i have always been of the view that in the mid-part of the 20th century, wall street has always been a monopoly anyway when it comes to ipo or advisors. you always good to the same 10 or 15 banks. whether art 100 banks that do it, go is go to the top 15. anna: there is downward pressure on the seed. even in wealth management, growth advisors, when you grow wealth management, you go downstream to smaller advisors. is that the reality? reporter: it should be. more competition from these little tech companies, that is happening. and that will drive fees down. the decision make to leave a broker you have been with for a long time to go with
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someone else. anna: very hard. david: those are the three stories that matter to the markets right now. lending club, they were talking to people about trying to do a buyout of the company. now the journalist is saying the company will discuss lending deals with various hedge funds. funding up to $5 billion in loans in the wake of this departure. the loan money has dried up. so some of the funds in talks with the company, the shares are rising 5% on these headlines coming out. elsewhere, looking at ea t becoming the kicker. the shares are up 3.4%. this is the owner of margiotta knows, chili's. chili's. o's,
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people are looking ahead and shares are still up. and the biotech company we ago, 22%out a few days on that day, today we are trading lower. i'm surprised to see them turning around because they are doing a secondary offering. the price is 8.3% discount versus the close of trading yesterday. 2.1 million share secondary. and looking at a potential deal. dow jones is reporting am surge which owns health care stuff could be dealing next week. this would be $9 billion. amsurg would be the acquirer. they offered to buy the company last year, and withdrew it
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because it was not gaining any traction. hard -- sharess are trading slightly lower. reporter: two suicide bombs killed 22 people in iraq. commercialoded in a area of a predominantly shiite neighborhood. the other one was north of the capital at an army checkpoint. the u.s. house of representatives will vote on the debt crisis in puerto rico. this would manage the restructuring of the islands 70 billion dollar get that -- island's $70 billion debt. president obama is on the verge of endorsing hillary clinton's presidential bid, but today he will page review to bernie sanders candidacy with an oval office meeting.
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people are looking forward to the general election. sanders is under pressure to drop out and make way for clinton, but he has vowed to stay in. i am ramy inocencio. david: coming up, battling for viacom. the ceo running out. we discussed the latest in the legal fight. bobwe hear from disney ceo iger on the company's expansion in china. ♪
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♪ david: this is "bloomberg ." ceo is not giving up.
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he is calling for something for redstone. this controls the $40 billion empire. bill cohen has been following this and joins me now. why do we start with just these dueling lawsuits. what is going on right this moment? reporter: what is really at the heart of this is that shares of -- sherry redstone, his daughter who has been estranged, and the ceo of viacom, do not get along. reelected,ppe was there was discussion about andng sumner off the board philippe being named chairman of the board. sherry voted against it. she was 11-1 vote in february or whatever. they have been at it for a while.
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so that is what these lessons are about. orrry is trying to take over control the situation. she wants to get rid of philippe and the guys around him. david: philly was always haver's lawyer, and they been so close, like a surrogate son. you have the estranged daughter coming back into the picture was after the surrogate son to drive him out. you cannot make this up. and then you have the two former girlfriends that were kicked out of the house, and that gave shery the opening to get closer to her father after many years of being estranged. lear this is like not king . this is a publicly traded company. , whyng at the five year people are pushing people at the top out, take a look at the five-year on viacom. it is not pretty. reporter: people are wondering
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whether sumner redstone is competent. anna: his lawyer says his competency is irrelevant. not a great headline. reporter: in the old days, if sumner redstone is seeing viacom performance the last few years as it has been, seeing the stock go down, one of the worst-performing stocks in the media index, philippe to been long gone because sumner has a tendency to fire ceos on a whim. and the fact that philippe is still there means they are probably not focusing on how much money philippe has cost him in the past few years. david: so what triggered this is philippe being removed from the old process of the trust, what controls all the empire. he will be reinstated -- if he wins that. what happens to philippe? does he get his job back? the reason he is fighting for
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the trust is because he wants his ceo job. reporter: he was the track -- chance of controlling viacom. judge declaresa sumner income attenuate the decision to remove philippe and george abrams. those two would go back onto the truck. david: who gets to decide sumner's absence? without a board to decide? reporter: as long as sumner is alive, he controls everything. after he dies -- he says he will live forever -- but in the interim, with philippe and george abrams off the trust, sherry has two allies in her purse. then permitting the sale of paramount, which is something philippe wanted. now sumner is claiming he did not want. it is a huge mess. i think this is a sort of slow
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moving through that sherry is orchestrating. -- coup that sherry is orchestrating. been at has just ridiculous spectacle of girlfriends and daughters and ceo. are the people running things that are competent? david: my own view is, this is a company that needs more than lieutenants to keep the trains running. they need to be fundamentally rethought to begin with. as you showed the stock price chart. it requires more leadership and it cannot happen in this circumstance. reporter: this is a circus at this point. i don't think philippe is the right. position, buteat now you have to manage the assets in a world where the competition is changing and they are losing their cache, and philippe does not have an answer for that.
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the board is acutely aware of this. philippe is going to have to perform or else, regardless of what happens, regardless of what sherry can do, he will lose his job. anna: thank you for being here. bill cohen. coming up on "bloomberg ," the largest money manager is saying enough is enough to illinois. they want to unite bond market access. ♪
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anna: illinois state debt was downgraded by moody's last night. it is the lowest since 1992. it has operated without a budget or nearly a year. it still plans to tap the municipal bond market. in a rather remarkable step, it is telling bond buyers to continue denying illinois that bond access until he gets
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affairs in order. , thatlly they are saying is still investment grade rating the state has. technically you can go by their bonds. why are they doing this? reporter: if you don't have a budget for 11 months, which you are required to do by law, and you have a pension liability, why should we lend you money. ? why should we do that when you have shown no semblance of coming together for a compromise to move the state forward? there was a lot of things the state can do to fix the budget problems and fix the pension liability, but first round republican governor and the democratic legislature showing no signs -- anna: by the way, it is black rock, not blackstone. blackrock is a giant. when they say something, the market has to listen. david: do they own illinois
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bonds? reporter: it is really interesting to me. it will be a short-term hit for illinois bonds if they cannot access the market. that is a big thing. you lose market access, that is a precursor for more dire things to come. they are willing to take this short-term hit for potential long-term budget solution. anna: and the spread between illinois points -- bonds and the benchmark, there is still attractiveness here. , they decided the return will outweigh the risk. reporter: yes, they have seen weeks. to funds now 30 there are even foreign buyers coming into this traditionally domestic state. you can treat -- you can get 3% on illinois versus trillions of dollars of negative yield in the world. so people -- anna: people still think municipal bonds are safe after
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all this time. david: you wonder if this is a form of law hazard. reporter: moody's saying something, blackrock is saying something, but ultimately there is a lot of safeguards in place. probably be will able to get this deal place. justthey delay it now, not blackrock saying it, but moody also downgrading it? david: that is brian takata on his story about illinois. disney is taking a big bite out of china opening and shanghai next week. we hear from bob iger next. ♪
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>> we are just moments away from the opening bell. here's a look at the futures. tracking lower,
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expecting the market to be week following overseas financial week energy stocks europe. telecom is a major factor to the downside. you have the bell as trading gets underway. and jobless claims numbers to chew on in the u.s., probably not enough to rivers anything we are seeing here with the overall negativity. having a look at cross access, with the risk off mentality, you are seeing u.s. dollars strengthen. the euro is weak or. -- weaker. crude oil continues to decline. let's take it over to julie hyman. julie: we see stocks open lower today as we have people moving their money out of what they perceive as risk -- it is not a huge downtrend. the s&p 500 averages have been higher for three straight
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sessions. oil price has been higher first for three straight sessions. these,n on the heels of within 0.5% of record close. futures and oil, a look at how they been moving in tandem. here is futures in white. we are looking at them going into the open of trading. oil prices in yellow. we saw futures taking another leg down as oil did as well. they are tracking once again back together as energy, not yesterday, but in the prior sessions, helped lead to today. chesapeake energy, which is one of the most volatile energy stocks, down 5% today. it was said over -- underperforming at rbc. arising commodity market is more likely than its peers. ideas aboutcussed
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the leverage. this is another first bring up those types of concerns. restoration hardware at the close of trading last night, shares down 19%. analysts had been anticipating again, cutting the annual forecasts. and a shiftdollar away from luxury purchases, that is where this is coming from. jam is trading higher. that is beating estimates, sales up 25%. virginity net to coffee, the dunkin' donuts take up pods -- is it should beating that to coffee -- is attributing that to coffee, the dunkin' donuts k-cups. in 2016, very
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bearish. at 2100.s fully valued let's start with -- barry, have you got us? i don't think he has us. can you hear me? no, ok. what we know is that he thinks 2100 is a range bound area. as we look at the market, we have been watching that record. david: he thinks it is fully valued. intraday foris the the s&p. we were so close, and investors had no conviction of a push in that market. every time we hit it, they pulled back. i think we have barry bannister now. you turned bearish on us, so that is the first place to go. what changed your mind? last november, we lowered the
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s&p target this year to 2100. i have not been in a bullish camp for a while. if you look at the stock market, it was loaded by qe3, which started in 2012 fourth quarter. the market went up 30% in 2013, and we have been digesting those gains for a while. in 2014, the fed but the dollar rip, and that spread inflation and other sectors in the s&p. so we have been ranging around 16% going on three years now. love that term digesting. what we have seen is this pattern of running up to that record level, and then a pullback. sometimes that has been brutal. we look to earlier at a chart that showed foreign outflows ,rom u.s. markets are large historically near-term unprecedented, who has been biting? who is getting back in? is just
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-- turning. this will be the third year in a row. gains in 2017 will depend on earnings, better global growth and income just of the u.s. dollars role in the economy. we cannot be the first to high give the west of the world is dragging. -- rest of the world is dragging. qe, get we up the shadow rate climbing. is worth discussing. you mentioned earnings, because that drives stock prices. we had a pretty bad first quarter. if you look across the sectors, are there any sectors you might see breaking out in the second half of the year? for value to be to growth, you will need a super 10-to curve.
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curve. growth is very expensive. value lacks catalyst. the s&p is probably a cheaper valuation, that is why the markets are churning. amanda: the point you make off of the low, we have seen the rate increase in the normal way. what are the implications of that, how much further the fed does have to go? >> you consider the fact we have this thing called a shadow fed 2014, there009 to was very essential minus three, which was a steep five year yield curve. i got us up recession lows. when you go from minus three effectively to positive 35 basis points, you are already 35 into a rate hike cycle. off from a bench
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point. if you look at financials, they have earning power. they can turn assets and leverage, all going forward. the requires the fed to exit without deflationary outcome. energy sector will have easier year-to-year comparisons. we just lie the entire crude curve. if crude stays flat, you better earnings next year. so we look for earnings gains, there are a few other acceptors -- other sectors that could have grinding next year. -- earnings next year. david: disney is poised to open the shanghai disneyland park next week in a project that has spanned years and cost the company billions. is it a payoff? we sat down with bob iger and asked him about the challenges facing this market in china. challenge, this
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there are regulatory issues. making a decision on how to enter the market, we thought the best way to do it was with a theme park. their expensive. -- they are expensive, $3.5 billion. is a big bet on a big market, and it represents not only the biggest interest in this market, but the potential to deliver great growth for the company long-term. david: that was the walt disney co, and my boss for a few years. and now is running as paul sweeney from research north america. what is the likelihood this will pay off in the long run for disney? >> investors are pretty bullish about this opportunity. as the chinese economy goes to a consumer-based economy, the people are trying to find out how to get into china and capitalize. it is difficult to get movies in china. so disney says the parts could
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be the way to make a big bet on the chinese consumer. $5.5 billion is a big bet. bob iger once said it is important to disney today as disney world was in the 1970's. david: disney has been all about brand. establishing the brand and expanding the brand in china may free up the chinese market for things beyond theme parks areas >> they talked about the production on the film side as well, expanding in the film business as well. the chinese to consumer in shanghai, it is a fantastic opportunity. bob iger suggested there is a lot of risk. but i think they learned some of the interest -- lessons from the paris opening where did not go well. hopefully what they learned in paris they can bring to shanghai. amanda: the coproduction side is a big side. disney has kind of honed the
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cost-benefit of which movies are going to work. but so far they have made movies that went global. is the return going to be worth the risk they are taking? >> i think so. you look at the chinese market, it will become the largest film market in the world surpassing north america next year. it is experiencing double-digit growth where the american market has been flat in terms of attendance three and a lot of studios are seeing the growth in our business, that yet goal business, has to come from china. quota --sn't have a they still have a quota on the number of foreign films they allow in. so then if you do coproduction deals, we saw dreamworks do this , that was positive. disney is looking to make investments as well. david: it is also an important
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project for bob iger. i remember when michael eisner took on the hong kong park read his job was to expand overseas. this is a personal goal for bob as he looks at the end of his career. we asked him about succession. your enjoying the opening of this park and this great achievement. i know i will enjoy the next three years as ceo is this company. it is the opportunity of a lifetime to get to run this company in this age. i'm thrilled with that. by 2018, i will let been here 13 years. that is enough. i have said all there is to say. david: so he said all there is to say. as you report on the walt disney company, what do we know about the succession process at this point? >> until recently they had
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textbook succession land under. bob and the board identified two very strong candidates, put them 10 years, andver groomed them both over 10 years. the ultimately chose one of them, tom staggs. he is the heir apparent. in the board concluded tom was not going to be the successor. he left the company. now it is really up in the air. the board and bob are struggling to figure out what do we do in two years' time? amanda: and this is a little bit of turmoil and consternation. does it matter for investments to have that laid out clearly? >> i think it is. i think investors believe there is a lot of talent within disney , but also outside disney, there are a lot of very big names being bandied about. and it is the big job in corporate america, who would not want it?
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amanda: what david westin be one of them? [laughter] >> bob iger is there for two more years. he could take an even bit longer to make your they get the right person. disney and the board will get it right again. amanda: all i want to say. david: paul sweeney, bloomberg intelligence director, thank you for being with us. cme grouplater, chairman on his industry and strategy for staying competitive. ♪
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♪ david: this is "bloomberg ." coming up at the top of the
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hour, jack welch. we only want to hear from him. -- we always want to hear from him. check. time for markets we go to abigail doolittle live from the nasdaq. reporter: one of the top stocks we are watching is skyward shares lower on the downgraded city to sell from neutral. more bearish on the company after a recent trip to asia. he thinks the current multiple is unsustainable and evaluation will come in because there is a lack of inflation. open,g higher on the solar city. it will outperform from neutral. carol lowe says regulatory concerns are overdone. he also believes financial transactions have good access to the capital markets. he sees 50% upside for the shares of solar city.
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,n this possibility of support we see even though there is lots of volatility, shares are up 200%. the volatility has created a trading range, suggesting the stocks they trade backup into that range of $37 per share. that is what is happening at nasdaq. amanda: the european commission is hosting the annual forum in belgium. there talking about reforms in the area. the president at of the european commission. you are about to go on stage and talk about the theme of the day, which has been unifying even more work completing the single market, deepening the european monetary union. what are your thoughts on how stage two is going to look? >> actually, we are doing a lot of work on deepening and
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widening internally marketing. this is the greatest thing the european economy has, 500 million mers and one market. 28 and do -- there will be concrete proposals coming from the commission to do the parliament and national governments to solve or prove. and capital markets is something which is not well in europe. that is why we are going to trade european regulation in order to harmonize. by doing so, create better internal market or capital. matt: you talk about 500 million consumers in this market. it could be closer to 400 million depending on the referendum in the u.k.. how important is it for the european commission to keep the u.k.? >> it is a part of europe, a
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part of our market. market. would be the u.k. would be better if they stay in the eu and also the eu would be better if the u.k. is a part of us. it is up to the british to decide what they want from their future. matt: one of the problems they have is the rhetoric in the institutions. i remember the government of france talking about having one finance minister for all of europe. it makes sense from the european commission perspective, but it doesn't make sense to the in england. hardy do you juxtapose or bring together those two things? >> we already have quite a set of rules for fiscal policies. the remaining issue is to implement all of them and lead according to the rules. member states need to bring down their deficits. also to reform the external
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competitive's. the commissioner is putting more emphasis on the member states economy. we are not only dealing with the cyclical problems or lack of demand type of problems. we are also dealing with its structural things. our society must change accordingly. a lot of times countries don't meet goals they intend to, like spain. some people, that would be the european commissions action debt . even france is not following structural reforms, one of the most important in the european commission. >> it is a constant battle between the member states, which are in trouble, and the commission. we want to encourage all the member states to do what is necessary, even though they are politically quite fiscal. i am a former prime minister.
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know how it is to reform societies. something is always political with people, but if you want to take care of public finances, you need these reforms. that is why it the rule base keeps these tools to push forward in the member states. matt: what is the best way to strengthen your mandate, on a layman's terms, have more expertise in enforcing these rules, or less political institution should be in charge? >> we already have quite powerful tools at our disposal. we just need to use them. forn't see that much need changing the rules. interested to i'm look at is whether we should expose to thes, home countries public debt, for
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instance. banks,taxpayers and the we have needed a banking union which partially has a grasp -- addressed this program. and european deficit schemes, which we want to perform. matt: we really appreciate your time. i look forward to your panel. back to you. thank you very much. that was matt miller reporting from the eu economic reform in brussels. coming up, it is "bloomberg markets," with vonnie quinn. vonnie: we are talking with germany's deputy finance minister on reform. and the allegations of the potential brexit for germany. and we talk about crazy markets with the dow above 18,000. greg peters is here.
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and others will weigh in on south korea's interest rate. what this means for safe haven currencies. ale.hen pork pies and real it is products you can eat, drink, the things you can attend that will be affected by the potential brexit. so is the british life. david: i love those pork pies. we look at the markets in the u.s. today is not the day we break a new record, but we will wait and see. ♪
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amanda: we are 25 minutes into the session. let's get a check of the market. we are following very negative after overseas markets are down. .ll the telecoms were weakening
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financials were weakening. we have been mixed. the s&p 500 now at 2113. we are waiting for the 2131 closing record. says it is getting it right. to this.ontinue to get you may see a turn right around into positive territory. and later today, president obama is meeting with bernie sanders sanders is not conceding the presidential race despite hillary clinton getting enough delegates. they will try to make peace. amanda: that does it for "bloomberg .
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vonnie: it is 10:00 in new york, 3:00 -- i am vonnie quinn. markets"s "bloomberg
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on bloomberg television. ♪ vonnie: we are going to take you from new york to london to brussels. stocks and commodities ending their running streak after investors await the next week's fed decision. and the brexit vote in two weeks. and george soros is said to have made many large bearish investments. mark: mario draghi gets invested of -- aggressive. the ecb will do whatever it takes to jumpstart europe's recovery. but will the strategy prove risky? vonnie: we had exclusive interview with jack welch, of ge. corporate leadership and much more.


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