tv Bloomberg Daybreak Americas Bloomberg May 8, 2018 7:00am-9:00am EDT
was one of the most one-sided transactions the united states has ever entered into. >> the worst deal ever. countdown on the decision on the iran nuclear agreement. -- $70 perelow 70 to jamie dimon says 4% of a 10-year is possible for a fed hike faster and he sees more volatility. you can handle it. in emerging markets can handle fed hikes. >> as we take a look at a beautiful white house where the president will announce the iran deal. welcome to "bloomberg daybreak." alix: all the reports i am seeing has big changes for the .x markets you will see flow back into the
dollar and have a disastrous effect on emerging markets. you can see where we are headed into the iran announcement. lower by 9.0. dollar weaker. morgan stanley says ds why -- ds dip lower. nothing happening in the u.s. bond market, but a lot happening in the italian market. huge selloff in peripherals. pointshigher by 10 basis . we are in for potentially another election in italy. , oil is under $70 despite the fact that we are worried about iran. daivd: now for the bloomberg we are joined by a bloomberg reporter.
president trump makes his announcement at 2:00. he does not like the deal, but it is not just him. a lot of his cabinet officers agree with him. >> president trump has called for real and lasting restraints on iran's nuclear and ballistic ambitions. >> president trump is determined that iran won't have nuclear weapons now or in five years or 10 years. >> we now understand it was an imperfect agreement. there views of denial and deception tied nuclear weapons program over many years have them in a position of being suspect. >> the iran nuclear deal was designed it to be too big to fail. >> unless the iran nuclear deal is fixed in the coming months, the united states of america will withdraw from the iran nuclear deal immediately. daivd: nobody is defending it,
but what will make it better? will that improve it? to improvekely meant it. that is the argument european allies have made that this is the best way to monitor a difficult situation and pulling out is not the answer. strengthening it is. we will see at 2:00 today whether or not that has resonated with this president. daivd: is it a binary decision? marty: the market is telling you they are not sure exactly what donald trump is going to do at 2:00. thinks hedifferent could announce. he could delay it, although i think it is unlikely. it could be a hard withdraw, a warning, or it could be that we are going to talk with european allies and give it more time. the markets are telling you it is not sure. daivd: is that we are seeing in
the markets? >> there is a premium that has been built into it. i don't know if that will completely disappear after today. probably the risk has been getting ramped up further and it .ould be limited from reports i have read, it is broader and longer-term and the matter what the decision, you will see disruption in the middle east and syria and around and -- and iran. do we need to be prepped for that? marty: this president has suspectto make long-term relationships, nafta being one and the tpp, the paris accord, and now this.
growingthere is a concern about the isolation of the u.s. and what it means to the world in general. breakdown of the long-term stability that we have been used to for decades. alix: the second story has to do with j.p. morgan and jamie dimon. we talked to him about where rates are going. he said 4% could the eight reality and we could see 400 billion dollars of issuance and volatility. what was your take away? luke: 4% would freak a lot of people out. he saidthe nuances caught my eye because they have resonated. if you look at the overnight , that is expectations where they think the fed will be at that time. the upward move in those stalled out around the time market started to regain footing in
late april. perhaps the concern about a parallel shift in rates has been controlling things. when you talk about this getting of the way up to four, a lot it will depend on what the central banks do. we have a term premium that is negative and that could be unconventional monetary policy in europe and japan. we are also in a point where the term premium decompresses. see: the backdrop is, if we torisking and what that does the dollar, you would have made that call a couple months ago and people would have thought you were crazy. somethingink that is that people are talking about how u.s. dollar will go to the treasuries. and also about the cap. also rising geopolitical risk premium and oil off with short-term effects.
it is easy to see how this could and not see a lot of resolution. to ourthat takes us third story. emerging markets have hit the dollar heavily. the chairman of the fed said he thinks they can handle it but there are risks. >> i do not dismiss the respect the risks emanating from global policy normalization. some investors may not be well-positioned for a rise in thought rates, even broadly anticipated. future economic conditions may surprise us as they often do. isvd: in some sense, this the big question. the normalization is going on and the fed pulling against the geopolitical risk and how they go against each other. marty: i think powell wants to make sure the markets are in firm control, but the reality is
there are things out there that they have no idea what the future will bring. prospect of athe government shutdown that no one is talking about. a government shutdown and an impasse on the budget would have a deep destabilizing effect on the markets. powell is doing exactly what he should do in trying to get confidence. ultimately, there are things out there like oil shot and that would upset their plans. daivd: at the same time come mr. powell said there are other pack -- factors other than the central banks. the emerging middlethe emerging, reforms in the middle class, and not just the fed. luke: they have avoided that original thing, borrowing outside of your currencies, which apple fires the u.s. if you look under the hood at e.m. underperformance recently,
that is still worse than the equity. even fx versus equity, you see volatility geeking out -- picking up. that tells me it is still very much an idiosyncratic story of a couple economies and governments that are under acute distress more than it is a broad-based macro story. alix: it feels like the macro story makes investors less tolerant. luke: completely so. what is the next domino going to be? where all saying that kind of pressure idiosyncratically. it is easy to find things not to be involved in this space. look, thank you -- luke, thank you. emerging markets. where to find opportunities.
-- a shakeup in the health care business. comcast is threatening to derail disney's deal to buy 21st century fox. according to a person familiar with the matter, comcast is lining up financing for its own potential bid. the company has made a $30 billion offer for the stake in a european television group. fox and disney are also interested in buying the business. qualcomm is giving up its stop the stronghold on the server chip market. according to a person familiar with the matter, the company may shut or sell its server processor unit. qualcomm is the biggest maker of mobile phone chips, and it is now focused on making cuts in non-core product areas. that is your "bloomberg business flash." daivd: emerging markets have had a rough go. fed saidman of the
monetary policy shouldn't pose risk for emerging market economies. it played a relatively limited role in the search -- search of capital flow. there is good reason to think should provetion manageable. fed policy normalization has proceeded without disruption to financial market and expectations for policy. figures seem reasonably well aligned with policymakers' expectations. michaeloining us now is has a job -- michael hasenstab. do think that is important for what they do to the e.m.? michael: those who have not maintainedd and have
fiscal discipline absolutely agree. stress not the first test emerging markets have had since the global market. we have had depreciation market change on and off worst them we have today, and we have not had a crisis. an if.that answers with that raises the question, are we shining a spotlight toward normalization on e.m. to say you are in good shape? is that what we are seeing with argentina and places like that? michael: argentina is an important example of when a policy mistake occurs and the central bank was loose, will it be corrected? in a case of argentina, they have reversed the mistake and will get back on track. there are other countries that are more vulnerable, like turkey that has had repeated errors am -- and have not corrected. it will be important to differentiate countries that are
caught up in market swings. alix: would you buy argentina now? michael: it is a long-term buy. the government and the people have rejected a populism that was unorthodox and unsustainable. a lot of what has drawn us to latin america, rizzo, argentina, is the adoption of orthodox world where things are polarized, we need to identify trends in a move towards orthodox policy making. those two are stark examples, argentina and brazil of unsustainable macro policies in a move toward the center. they have great potential. alix: how would you buy in argentina? michael: local currency bonds, and that is where our position has been. daivd: turkey you mentioned was vulnerable. who else is honorable to the
nontraditional approaches? michael: countries like venezuela who is in a humanitarian crisis and irrespective of what the fed does it is unsustainable. have not that aggressively raised rates in anticipation of the fed adjusting. if they got behind the curve and had vulnerabilities to lower yielding countries in asia and they could face depreciation pressures when the fed normalizes and we expect rates to go higher. low. asia had a 10 year the chart that has been circulating is this one. where is the biggest overvalued? michael: i think it is really in with currency debt. it has been overvalued for some time. in fed has been successful pushing people to risk assets.
and one of those is hard currency debt. you still have a yield premium. mexico is 7%. alix: this is actually local currency in the five-year. michael: you have to be selective in countries where you pick. in brazil, you can get a longer. mexico is over 7%. those are pretty big cushions. if you go to countries like korea, you are flat inside the u.s. treasury. it depends on the country you are picking. daivd: when you say something like mexico, you are taking a risk, are you? i think it is most likely that the market will react bearish lead to that -- bearishly to that. there are questions about what the president and mexico can do
to influence the central bank. there will be an overreaction. many traded mx -- pemex. to bottomd you look fish as anxiety rolls out? michael: we are not invested in pemex. our play is on the exchange rate and the carry. we think there is good value at this point. daivd: what happens if nafta gets resolved? there would be some upside. alix: how much? michael: we were at 1850 not long ago. certainly the exchange rate is undervalued. we could get a correction. , what was your biggest take away?
a lot of the time officials are trying to figure out how to deal with traded negotiations. ultimately, we do not think this will be a systemic trade war. initial shott of across and within it can be resolved through intellectual property agreement here at the resolving $200 billion for tariffs is unlikely to ever be feasible. there are some things that can be dealt with. i think it will be the typical process that ultimately will resolve itself. between here and the point to resolve it, which could be an extended here. time, what happens to emerging markets in the face of that -- period of time, what happens to the emerging markets in the face of that? michael: it has become clear that nafta is not going to be
ripped out, but more renegotiated. in the end, trade continues without a complete shutdown of economic activity. it is more risky in china because china is a different size and in a different bargaining position. we have to be aware of the tail risk. we see soybean imports into china already down. are we talking commodities? alix: soybeans, david. michael: you will have some sector by sector or dislocations. soy is a big factor. when you take a step back and look at global trade, we have across the trade board be increasing on the back of stronger u.s. demand and synchronized global demand. we don't see any signs of systemic collapse in trade from
this uncertainty. let's move to treasuries. the trade issues with china have synchronized the story. jamie dimon spoke to bloomberg and here is what he had to say on treasury yield. >> there is a possibility growth accelerates and inflation accelerates. the short and might force the 10 year up and not down. you can easily see 4%. like, yeah,u'd be bring it. how bad do you think the selloff in treasuries will be? michael: the economy can deal with 4% for higher u.s. treasury. the deregulation and tax cuts have not been priced into people's expectation. we will have a growth tailwind throughout the year. inflation rate pressures on the
more recent inflationary data is showing 3% core inflation numbers. we have the removal of the biggest buyer of treasuries, which is the fed, which was funding 25% of our net debt. we have increased supply. deficits are growing. that is a perfect storm for putting pressure on treasury. those factors will definitely push it higher. alix: would you be adding? michael: we have a good position. we are comfortable where it is. daivd: what is the duration on your duration play? you said to the end of this year, are we essentially bringing forward the growth out of 2019 and 2020? when does that turn? michael: at some point, the massive stimulus late in the cycle will set us up for a downturn. i do not think that is 2018 probably not the first part of
2019. we do have to be ready for when that turns. the question will be -- have we created structural inflation in addition to cyclical inflation? , you have goodl growth and that is picking up because of deregulation. we have changes to trade raising prices. those are more structural. at the end of the cycle, it will be a question -- we have inflation without growth or do we have a normal downturn and that will affect how we position. alix: what is your next big trade? you are known for these big bets . what is the next one? michael: it is really holding what we have right now. latin america is under a lot of pressure right now and we remain convinced that the end of populism will ultimately steer them through this path. the one position that we have is that there is disagreement over the strong dollar and the euro and the yen.
yields in the u.s. relative to japan and europe, the dollar will strengthen their. that is when we remain convinced. daivd: long-term, that is an accounts issue. president trump is right about trade issues. are you on his side when it comes to that? we need to address that issue to strengthen the dollar? michael: there is legitimacy on concerns that there is an imbalance on tariffs. tariffs we impose on imports are a lot lower than countries like korea or china in those who import tariffs. need -- adjustment does need to occur but that will put pressure on u.s. consumers. there is no free lunch. we have to decide who pays back. alix: i have to ask, 10-year yield come what do think? situationn a normal
with u.s. growth at 3% and inflation at 2% and rising, in history the 10 year yield would be 4.5% to 5% yield. we are not completely and a normal situation, but we are getting closer to that state. certainly above 4%, the u.s. economy could handle it and it is consistent. alix: michael, great to catch up with you. good to see you. coming up, global oil markets and iran. we have ed morse with us to talk about what is at stake with president trump's decision today. interview.clusive this is bloomberg. ♪ mom you called?
slipping intos positive territory for the year. another asset class is about the dollar rally. morgan stanley says peripheral selling in europe heavy bond selling. btp moving higher by nine basis points. crude is surprisingly rolling over 1%. president trump will announce today whether the us will leave the 2015 iran nuclear agreement, which could result in sanctions. it was acknowledged that the potential issues a country faces if we pull out. >> it is possible that a particular person comes to a gets an a country and extraordinary decision p may face of problems for two or three months, but we will manage the problem anyway. the policy is to work with the world and have construction --
constructive engagement with the world. is ed morseg us with citigroup global markets. what is the base case today? that the president is ready to reimpose sanctions. to give thely going europeans chance to step up what they offered in terms of tightening sanctions. will talk about the ballistic missiles iran is developing and the use of financing in the region. he will certainly push for new sanctions on companies in the revolutionary guard corps and new sanctions on hezbollah. it will move in a positive direction for him. alix: he comes out of the gate very aggressively and walks back on negotiation. walk me forward when the next
sanctions,. ed: we not quite as critical as this one. this one deals with the banking search on -- system. these are the ones that could .ripple iranian exports it depends on how fast he moves. he could potentially say that he is going to implement the sanctions immediately. he could disrupt $900,000 of crude. will he do that before the gasoline season when the prices are up? is he going to crash a nuclear agreement days before he meets with mr. kim in north korea? i think the likelihood that he will come out strong and say the europeans are stepping up to the table and we have to do more. we will give them a certain amount of days to get a tighter grip on what other sanctions
they offer on the missile program, has below, and the revolutionary guard. daivd: this place through the summer. let's assume that he takes action to cut back significantly on iranian oil production. can't the saudis just turn a spigot? ed: they can. they are sticking to the story that the world is not just balanced yet and this would certainly turn it into imbalance. opec could meet and decide that they will open it. just like the president could say what we are doing. daivd: in that world, saudi arabia wins both ways. they do damage to their rival, iran, and they get to sell more oil and bring in more money. that is a good deal for them isn't it? ed: it is a good deal for them. alix: let's talk about the
mechanism. this is what i will watch. it is the curve for oil. orange is where we are now in the green is where we were. it is iran and venezuela and stronger demand. if you look on the curve of where we see the most reaction, where would you look today? ed: in the first 12 to 18 months. the most action will be promptly. the more you get into it, the more stable the market has been. one of the reasons you have seen that stability at the back end is because when you get a bump in the front, producers come in and hedge more. at 70, how much geopolitical risk is priced in -- iranian geopolitical risk? about five dollars in the market. you can see that five dollars on a number of things that have happened since the beginning of april.
there is a selloff in it will be more than five dollars. there are no short positions in the market in terms of managed money. there is a record amount of weight. will be talking to ed later. great to see you. don't miss our live coverage of president trump's announcement coming at 2:00 p.m. eastern time. daivd: traditional equity managers could be forgiven if they felt quantitative is taking over. a qr is at the forefront. with us.tzker is here will turn it over to you. erik: thank you very much. income foris fixed yourself? it is the next frontier and an old frontier.
we have been using the fact that the core things we and many other believe in our effective for fixed income at a qr. until recently, we have used them only in a return context. i like to avoid the word hedge fund because we don't charge fees. that is relatively simple. long with the one you like and don't like. incomeditional fixed hasnst an index, that 10,000 names in it. you need to have the risk be fairly tight. you have to know how much risk
you are taking. erik: you need data. it is and we are getting that data. error: --erik: why did you do that? i have no answer for that. erik: the ones you like our value. cliff: value, momentum, carry, it and defensive. value tends to be expensive. if you scale price and lower prices come in overtime. momentum just says what has been going on lately tends to go on were often than not. kerry says both the first about
predict and price. it is also nice to make money while you wait. less risky quality is than other securities and a stronger balance sheet. so people understand that these have been applied. do they work on fixed income? cliff: they do. value is something like a yield compared to a default probability. momentum is just momentum. you always get that. kerry is something called and adjusted spread which is what you get when you wait. quality is like the strength of the balance sheet. the concepts pour over and the results are similar. none of these things work all of the time. they are good strategies. they are about equally as good in the fixed income world as the equity world. factoro style and a
investing has become popular in as a strategy -- an active strategy and a way to isolate excess return. cliff: when you apply it to , you get very similar average results. one of the beautiful things is they are not the same. all strategies go through good and bad, and a good time for factor investing in equity is not very strongly related to forher it is a good time picking what government bonds to be in or corporate bonds to be in. on average, the ideal of value and momentum work just as well and -- in fixed income as equity. erik: this will sound a bit , because we bought this. we bought the barclays index index. pick on the --
why pick on that? a business is decision. you are trying to be appealing. it is the most popular and most common index. i was going to tell you i'm using the bloomberg index. erik: there is something wrong with it that if you apply the factors, i know you come to a certain conclusion about fundamental flaws if you will and the way bond funds are managed. cliff: you can get philosophical about that. if we can beat an index we think it is flawed. i would say the real flaw is in how the universe of other active managers attempt to beat an index like the bloomberg barclays index. we are not the first people to run active fixed income. we are early for doing it in the quantitative approach.
it is the universe, biggest one out there. one thing we discovered and heather -- and there has been other research -- erik: we have a nice chart to illustrate. cliff: i love a nice chart. imagine you are taxed with beating fixed income index and you had no way to do it. one thing you might do is just buy lower quality, higher-yielding bonds. that is taking a rash -- risk but more often than not you get paid for taking a risk. not a bad idea if your only goal is to be the index page two big problems, one is an idea that it is not worth the active management fees it is a passive debt. if you want to be an index i i it, pay indexding
fund fees. that so manyact fixed income managers do this. our chart shows there are almost 100% correlating. their performance against the index is 0.95 correlated with how high that quarter. they are making a one-way bet on credit. it is a debt that hurts one of the important parts of fixed income, which is diversification. a tilt toward lower credit is similar to a tilt for equities. cliff: a good year for equities --usually a good year for they are raising the correlation of what they do to equities when
the purpose of fixed income is to diversify. erik: depending on your loyalty, etf index funds and factor based products have either ruined equity investing or saved it, will fixed income fund managers suffer a similar fate? cliff: i just don't know what that fate is. the traditional equity universe is in flames right now. cliff: if you look, at least by our data, at historical performance of equity managers, they have generally by their fees over the long haul. that almost has to be when you at everyone up. we have not been doing that bad. maybe people are sick of it and are saying we will pay lower fees and some go to people like us. some of us move on. so much that has
gotten people fed up. the reality is that quant qresn't live in fumes like a or in larger places like black hawk. on thee wants in quantitative action. is it getting too expensive to hire quantitative talent? cliff: it is expensive. people fromt of our school. we have always been competing with whatever is out there. electivesy, general -- electric wants more of the now. , dobook, google, twitter they want data scientists? it is harder.
the prices have not doubled. we have to compete more. that is fair. if you believe in something and it becomes more popular, you cannot spend a lot of time whining about it. erik: are you getting comfortable with the idea of using more data and machine learning? i do not think i have been comfortable with anything since 1986, but that was a particularly important year. my comments on big data and machine learning -- i tried to be consistent in my waffling. we are interested in it. we have experts -- efforts exploring it to see if we can work it into our process. i am somewhat cynical it will affect the very basics. this is a matter of philosophy. the things we believe in, cheap
beats expensive in the combination is better than either alone. i have great difficulty imagining the huge, hidden, sneaky patterns. erik: having said that, there other decisions, high-frequency, where perhaps they will have a role. the beauties of modern television is we can elicit questions from the audience. what are you doing in the risk premium space? -- we all of these terms have a brave new world. we fight have to time about semantics. to this idearefers of tilting toward factors not claiming that they are alpha and charging and claiming they are somewhat that are made. that is our wheelhouse. year, you filed for exempted relieved from the sec
to offer etf's. where are you with that? , excepte are no further that we are getting the relief. we did that -- and these things always make me laugh because they are over and two-putted. .e want -- over interpreted we want it and we think it is appropriate. we have no immediate plans to do an etf. there is a long lead process -- lag process. it is a possibility. erik: great seeing you. you,: you, dr. very -- too. daivd: we returned to wall street beat. first, schneiderman steps down. new york attorney general is resigning after reports of his abusing women in romantic relationships outside of the
office. the veteran fund manager is out after findings of gross violations. third, musk but about $10 million of tesla spot -- stock after it fell on his own remarks. alix: joining us is jason kelly from bloomberg. i opened my email and my jaw dropped. not only is he resigning, but the circumstances are truly staggering. jason: the speed with which it happened was amazing and it cut people by surprise. hours from the initial report to the resignation. governorat period, andrew cuomo was among the first to call for it. daivd: that was a new yorker report. is,important thing
schneiderman was important to wall street. jason: extremely. alix: and to the democratic party. arguably -- you -- eliotelliott sir spitzer. important isis is that you look at what schneiderman has done over the past two years. he got a settlement from ubs around securities. he was the principal around all of the fx settlement. this is someone who is looking after and looking for bad behavior on wall street. it will be very interesting to see who gets into that seat temporarily. the state legislature has the ability to point -- appoint someone. theou mentioned, in
democratic party, he has been a huge foil for the current president. alix: all the anchors and ceos will be women. daivd: and we will all be better off. the senior manager dismissed after legislation found what they called gross violations of policy. jason: it feels like with this story we are starting to see something that a lot of people have been wondering about -- which is windows me to and other times up start to come into the too and which is me times up start to come into wall street. daivd: it is fair to say the days of the locker room if not over are coming to a close. whether something sexual is going on, if there is abusive
hader in the workplace. abusive behavior in the workplace. jason: we will see some of this in the firms. musk e line musk -- elon short-sellers on the call. he bought back some of his shares. daivd: cheaper than when it started. jason: there is that. rhetoric has been remarkable here. elon musk every once a while there would be a tweet where he volumee snarky, but the -- hementary coming out said the magnitude of short carnage will be of -- be unreal. alix: just be private. if you don't want a short position on your stock. aivd: i would say as
shareholder, just focus on making more model threes. you shouldn't spend any time tweeting. alix: yesterday he was tweeting about candy. jason cohen at least here he is talking about tesla. : at least here he is talking about tesla. daivd: many thanks. debtg up, a billion-dollar . that is what i am watching. alix: if you have a bloomberg terminal, check out tv . go straight to tv on your terminal. this is bloomberg. ♪
♪ daivd: this is what i am watching. $1.2 billion invested. it is an undervalued stock he says. they will return a lot of capital to shareholders. he also says they have a unique or very special position into corporations to provide what he says is the plumbing behind it. he is a big believer. i think we have a chart about what the stock is doing. alix: i wonder how active. daivd: they have not said they would change the stock. he specifically has not asked for any changes.
alix: for now. far,: city is saying thus you shouldn't change anything. the path they are on will turn a lot more value to shareholders and he thinks it is a good thing. alix: i wonder if there is a broader investor story. i would be surprised if there was an investor who want to change would be in the stock a few years ago. changethere is room for and you wonder. alix: at some point, you have to act of eight. talkingp, michael cohen all about oil and all about iran. this is bloomberg. ♪
transactions. that the united states has ever entered into. alix: markets are on tenterhooks as oil slips. and jpmorgan, jamie dimon says and markets chair shouldn't be surprised. is brian roberts versus bob iger. dave co -- bloomberg daybreak and ip route alix steel. alix: i wonder if we are going to get disappointment. we are waiting for charity. i wonder if we will get that.
david: when have we ever gotten clarity? alix: you get a lot of tough talk. maybe there were exceptions? alix: trying to parse all of the different outcomes. as a be futures down by eight points, a dollar rally story. morgan stanley sees the potential. 1.18 is how we print. i want to highlight what is happening in italy. italy, bonds on offer. moving higher by nine basis points. seeing a wind up shift? and crude oil is still off. david: it worked so well the first time. i think they will do it again.
time now for the first word news. >> the fate of the first word of the iranfate nuclear deal is in the president's hand. has called it the worst deal ever. he said it doesn't do enough to address iran's ballistic missile program. trying to work outside agreements that would address the concern. for the second time in less than two months, the leaders of north china have met. -- a wall street watchdog eric schneiderman resigned last night. that story was a new walker magazine. in new yorker magazine. global news, 24 hours a day. powered by our more than 2700 journalists and analysts, in
more than 120 countries. alix: we know what trump thinks about the iran nuclear deal. here is what other officials have to say. on thep has called congress and european allies to create lasting restraints. >> both our countries know the threat that iran poses to the region. now,ey won't have them they won't have them in 10 years. i think their use of denial to hide the nuclear weapons themam over many years has in a position of being suspect. cracks the iran nuclear deal was designed to be too big to fail. unless it ends in the coming
months, the united states of america will draw from the iran nuclear deal immediately. joining us now is a state street global advisors. michael joins us over the phone. you had a great detail -- you had a great article and yesterday. michael: thank you for having me on. today, it is likely that there are two extremes. the first is that they walk away ism the deal and the second that they restate the opposition to the deal. and for new waivers that are due of may 12. we think it is likely more important to focus on the issue of the geopolitical applications of this decision. bolton, being in the
national security position. so it is more important to focus on the geopolitical issues rather than what may or may not happen today. it is difficult to predict. and he has already stated that deal.ts a better so this will open up a several month long process of renegotiation that we don't think will and instability for those that are taking iranian oil. so obviously today, little-no .mpact output has been up since january. so even if sanctions are reimposed as of today, not much of an impact on prices. crude atsee that with $70. i want to show our viewers the curve. the green line is one month ago for oil prices.
orange line is where we are now. going forward with your base this and we will see more auction, where you see the biggest rereading -- biggest rereading of pricing. ? michael: we think we could see 2025. you could see it in the second half of 2019. opec and other moving parts -- it is a wait-and-see approach to see how hard these sanctions what there deciding policy will be. and the other moving policy is that if we do see concern about of the iranian export over the latter part of the year and oil prices move up to $80, then obviously there is a supply impact and a demand impact. so a lot of moving parts. but it is clear that at the end
of the curve, the deferred timeframe is beyond the pricing. david w.: what is the effect on the u.s. economy and global economy? if there is a repricing of oil over the medium or long term? oil pricesn't think go much higher from here. u.s. oil production, for example -- structural issues with sustainable sources and a lack of demand. ofwe don't think it has much an impact on a global economy. it will come through on the top line. but in terms of core inflation, we don't see that being an impact in the longer term. the fed has said they will look at this inflation from an oil
standpoint. alix: do you like energy stocks? lori: we have. they have had quite a run. the effecthat about on growth? potentially? because topline growth isn't core and it is coming out of your pocket. lori: consumers are not impacted yet. we don't see gasoline prices going up materially. so it is counterbalanced is constructive for the u.s. economy. alix: focusing on the company reaction, you see companies like defensee and potential companies taking a hit on this. are you looking at certain sectors? and are more cautious? lori: yes. this is just another one where you have to look through company by company basis to see what the effect is. david w.: michael, what are the chances for saudi arabia stepping in and it having no
effect on oil production at all? michael: there are limits to that. there continue to be -- which will keep it within reason. we will see a couple of new pipelines coming to place and that could be another 300,000-500,000 barrels a day in growth. so we can't completely offset the one million a day barrel from iran. but if trump makes that decision -- it is important that we don't have an idea of how the administration will reinstitute sanctions on officials and illnesses and tanker companies. there are a whole host of different regulations. structureer legal
that needs to be imposed and i don't think the administration is ready for that yet. so i think what we will see is , the verying beginning stages, of the renegotiation process. and who knows where that will lead. but it will clearly lead to the medium term the effects will not be coming. overall, this chart -- totally crushed it. are you coming back to the markets from commodities? is the rally cut sustainable? lori: we were saving commodities earlier in the year because we thought they provided that her values and equities. but now we think equities are favored and we would getting out of commodities to favor equities. alix: michael: in and lori l cohenx: michael
japan's to cater pharmaceutical is shaking up the drug buying business. it will buy shares for $62 billion in cash and stock. deal transforms to cater into a top player in the locator -- in the lucrative business. first-quarter earnings beat estimates at the alien. billion ined to $25 long-term debt. the ceo says balian is making significant process with the turnaround but the company will change its name in july. and comcast is threatening to derail the deal to buy 21st century fox with film and tv assets. comcast is lining up financing for its own potential bid. the company has already made a $30 billion for sky that fox doesn't already own.
that is the bloomberg business flash. on a pathwith the fed towards higher rate and the treasury on a pass to borrow more from the market, the talk this morning is about where rates are headed. >> policy normalization has proceeded without disruption to markets. red symbols in figure six seem reasonably well aligned with policymaker expectations. a possibility that growth accelerates and it is higher than you expect, both in to get knocked up and not down like in the past? cracks in a normal situation with u.s. growth at 3% and inflation rising, in history, the 10 year yield will be 4.5%-five .5% yield. so we are not in a normal
situation but we are getting closer to that state and we are about 4%. i think the u.s. economy could handle it. and it is consistent. david w.: lori heinel is still with us. nobody says that rates will go up. at the question is how much and how fast. jerome powell says we are on track. jamie dimon says, who knows. could be more than 4.5%? lori: a lot could happen. but we are already seeing the de-risking by tension plans. so even if this is an opportunity to lock in tension rates, we think it is a long-term growth rate there isly up both and a lot of global outlet still. so europe, for example. growth aroundrm
3% in the u.s. and we think the global growth rate is around 3.5%-4%. think it is the presence of long-term higher growth. david w.: and you are not concerned that the cake won't cause the fed to raise more in longer trend? lori: they may but they have said that they will be cautious. this is appropriate because they do have better tools to deal deflation their inflation. alix: with jamie dimon, what is interesting, is that the u.s. will borrow more per quarter and volatility will pick up. how do you factor that in? a problem withve finding clearing for treasuries -- but we don't see that being an issue now. with tension plans and pockets of capital, they would welcome plus -- welcome the 3%
capital. david w.: are you seeing this come into the marketplace? lori: we are. the data in 2018, we see capital flowing out and into fixed income. alix: how does that wind up impacting your view of the equity market? lori: we don't think equities are bad. but we do think that the trade test up.e want to look at things like interest rate sensitive sectors. we would not be buyers of utilities. we would be looking for a better risk reward trade-off. looking at growth and trade-off
and we like long banks. what if you are wrong and we do go to 3.5%? -- said that 3.5% could look towards a recession. do you agree? lori: i do not. whethertimately about consumers see improvement in wage growth. we don't see that translating into unemployment. we don't see that necessarily being a problem. david w.: what if it cuts into margin? fact we see in adjusting a where we see investment capital with productivity enhancements. and unless we see workers demanding higher regions and it creates a feedback loop, we are
david w.: italy continues to struggle to find a government that can work together after attempts of a coalition have failed. and now there will be another election this summer. being with you for us. is it certain there will be an election in july? this certainty is that the president of state is expected to name a new prime minister. haveopulist parties
already said they are against this idea and they don't want a nonpartisan government or what the president calls a neutral government. that means that when the government goes to parliament for a vote, it stands to lose and we should get new elections. david w.: if there are new elections, why would it be a different result than last time? are there differences that have caused one person to gain over another? if we get elections as early as july -- which is everyone's nightmare -- there will be no time to change the system which is blamed for the uncertainty with the lack of the majority now. that theon polls show party that has benefited the most from the bargaining, quarreling over the last two months are the league -- the populist leak. so that would lead to a stronger
position. to auld actually lead populist government. because the league might feel strong enough to break with its allies. and join up with five-star instead. david w.: if the league is the winner so far, is berlusconi the loser? opinion polls for berlusconi are very bad. he stands to lose in the industrial north, whereas up to now, his party has been strongest. david w.: thank you so much, that was john follain reporting from rome. yields were point, up by 10 basis points. with us is lori heinel. do you like europe? lori: from an equity standpoint, we have been cautious on europe for a while. brexit is hanging over us. but we have a number of things in europe and now with the
thetions in italy -- populist sentiment and the structureess to reform. alix: we saw the upgrade for the u.s. and earnings. the estimate, you can see that -- wait, euros stocks? oh, i meant u.s. stocks. the point is, not as many estimates as were revised upwards. the conversation now is that the tax bump is over and you will be able to have the outperformance in european equities? lori: you could. but one thing at the headwind was the strength of the euro. over whether u.s. multinationals will suffer. we think that it favors the u.s. we pay.: why would
attention to the italian elections at all? we have one every six months or so? it is the ongoing concern about populism and what it would mean. reforms -- itural is another example of the inability to move forward. david w.: -- alix: is it the peripheral? how do you wind up reconciling that? lori heinel will be sticking with us. and coming up, media m&a is heating up. roberts versus bob iger. this is bloomberg. ♪ mom, dad, can we talk?
s&p futures off by six points. european stocks are down but the whole indices are in the positive for the year, they really. despite the fact that ip data came in better. in other asset classes, a couple of stories. one is the big selloff in referral bond market in europe. yields are up eight basis points in italy. this selloff is not as bad as we thought earlier. the other story has to do with the dollar index. treasuriest 94 but basically go nowhere. goldman sachs coming out to upgrade their cash position to overweight and in crude, softer. you can imagine some potential volatility picking up. david w.: time now for headlines outside the business world. kailey: trump will announce today if the u.s. will leave the
iran agreement. has called the agreement the worst deal ever. he says it doesn't do enough to address threats from the iranian ballistic missile program. diplomats are trying to work out agreements that would address concerns. the announcement is due at 2:00 p.m. eastern. china's trade surplus grows in a row. that is the first time the gap has widened since november. trump has threatened to impose tariffs on $150 billion of it or beijing china unless does something to reduce the surplus. and in australia, the government will balance the budget earlier than expected. billion dollars surplus. voters will get a reward. modest tax cuts for low and mid income earners. global news, 24 hours a day. powered by our more than 2700 journalists and analysts, in more than 120 countries.
this is bloomberg. ♪ david w.: this started out as a but now, itengland looks like it could turn out to be an all-out war between two of the biggest media companies in the world. news came that comcast has put together a financing war chest which would give it the ability to have more than $60 billion in cash when disney had agreed to pay only $52 billion for. company is one dollar 70 on share and that is not what most of the talk is about. we welcome now paul sweeney and andneernerr -- john lori heinel.
people going into this say it is over the top? it will be the first quarter where they can talk about the espn direct mobile app. investors will be looking for color on the uptack on subscribers. the direct subscriber offerings. it really is going to be the content side of the business. david w.: i will put up a chart now. this is the enterprise value of netflix and disney is the white, up above. netflix is catching up with disney. we have seen media stocks stall out of the last couple of years and the issue has been cord cutting. netflix and wee
have seen that. which takes it to the potential battle with comcast. because disney wants to buy it to get the over the top offering. is brian roberts going to go after bob iger? capabilityhave the to go that big. they have a tremendous balance sheet which is a strategic offset for them. and they have made a big bet on content. it was a great acquisition for them and i think comcast feels like they can do it again. but if you are bob iger, the assets are strategic to his plan, which is, i need to go head to head with not just netflix but facebook and google and amazon. and in order to do that, i need to get bigger. david w.: disney over the last few quarters has been theme
parks. and that is why we are bringing in john. growth for the disney parks and resorts has been impressive. tell us about his knees position? you just said it -- tell us about disney's position on theme parks? you just said it. in the past, it has been the leading division. for example, in the 1990's. so with the growth you are looking at now and with the potential in the foreign markets for new attractions, it could end up being the top division in a few years. david w.: go back to the comcast issue. nbc has done well with their own theme park, harry potter. and they're going to china. is there competition there with
universal in the themepark business? john: with the latest announcement on what the universal is doing in beijing, that is good news for disney. because universal has, in the last few days, and announced they will double the investment. many billions of dollars of additional investment that they put into beijing. has says that universal seen what disney has done in shanghai and has been impress by it and feels the chinese market overall is bigger then these companies thought originally. and that is great for both companies because they go head to head in florida and california and they have been fine. anything, they helped each other. the harry potter expansion in florida got disney on board and going after the same approach of having an entire themed area on a single ip.
now they did it with avatar and next year we await the star wars land. and it could take them to a whole new level. wars resort a star as well. they are going through a lot of change. is that attractive? because there is potential there? we see consumer and withes change media and information technology -- we see winners and losers. david w.: there was a time when downturned but they
are so massive now -- they are , they arev or movies now a cruise ship as well. china, there are 100 million middle-class consumers. risingbout the middle-class globally. david w.: coming back to disney, is this nice for bob iger or is it necessary? if bob iger wants disney to be one of the players remaining then it has to do this deal. murdocheven rupert looks at his hand and bob iger looks at this and says he has to double down. does brian roberts need this as badly as bob iger does? think so.n't
you do need the global expansion opportunities. he does need expansion. and they're looking to get bigger as well. david w.: let me come back to you on theme parks.
we tend to focus on what this means for over-the-top -- is there a player in the theme parks? yesterday's could make this into something like harry potter or star wars? of course. anytime you bring in a >> new studio with ip's and established open up the opportunity to take a vantage. and what disney has done now is to do it at different levels. , such multigenerational as star wars, you do an entire
land. if it is something that is newer and you are not sure how long the shelf life is like guardians of the galaxy, you put in a new ride and you do it on the rider show base. so they are able to exploit all of the ip's and that is the ability with the theme parks. the goal is to be relevant and up-to-date. this takes years before you see something in a themepark but if it is proven and it has legs and it will last for years, you will see some version of it in the themepark. i want to get your opinion because there is conversation that avengers will wind down. we don't how much longer it will go on. does it affect the themepark decision-making? or is it ok? john: we are looking long-term
with the themepark. when you look at a themepark -- when you look at a movie, you see a short-term with your return. so the goal is to have established brands. even brands that may be having up with -- having ups and downs. but they have the appeal that is established. that is why star wars is so great because it is multigenerational. i saw star wars when i was a teenager and now every generation behind me has had the opportunity to see a branch new star wars movie. and today they get to see more. that is what disney is looking at. david w.: i will never forget the first star wars movie. it was quite something. and sweeney, john gerner lori heinel.
igerl be speaking to bob
after the company announces its reports. coming up, what companies are doing to boost diversity in and room. the board and as you commute in, you can tune into tom keene and jonathan ferro. surveillance is heard in washington, d.c., the bay area and across the states. this is bloomberg. ♪ this is bloomberg. ♪
el-erian. david w.: a record number of statehave stepped up for races. it is a reflection to a certain extent of the reaction to donald trump's election. many of these women tell us they expected hillary clinton to win they felthe did not, it is important for them to step up and take charge. thatis story makes clear there is no guarantee that women are going to dominate the wind count -- the wind count. is the.: that interesting thing. what happens to the composition of the house? >> it is still up for grabs. trump supporters, female trump supporters, who are among the women running
unopposed by democrats. so it is unclear exactly how congress.translate in david w.: we put up a graph for a moment that shows if you look at women republicans versus democrats, many more democrats for women. a big gender gap. number of these women are asked military people. which is not the traditional demographic profile. so it is clear that the democrats have chosen these people carefully. and if the money is there than they have a fairly good chance. david w.: but they have it a gap to close. 435 seats? it is interesting on the governor's. there have never been more than nine women governors at one time but it may change in this election. that there is also a claim
they dilute themselves. they don't get to run on a women's platform. : a lot of these races are local. david w.: and we have a lot of newcomers who are not affected and have never run for the office. that seems to have very little impact on the presidential race. never count them out. david w.: marty schenker, great to have you with us. alix: the tech sector has a lot of room for improvement. men outnumber women in leadership and high tech positions. in particular, senior office managers are eclipsed by men as well as mid-level officers as well. joining us for more is barbara whye. great to see you. you are here for the bloomberg equality summit.
barbara: i am delighted to talk about what is going into inclusion and the journey we have been on. we stood on the business stage at the consumer electronics show andnnounce our commitment since we have started this commitment to transparency and being clear about what the data is, we have almost been able to reduce that gap to full representation by 84%. i don't know of any other company that has made is great of progress as that. talk about theto work we are doing. alix: can you define. visitation? we track market availability for every job level in the company. up to the board of directors. use fullll
representation as a metric to ensure that we achieve market categoriesy for the and higher. women make 49% of the workforce but 25% of women in tech. so intel's metric is that 25% or higher. which is interesting because if you look at the rising number of women who are studying computer cyber -- studying computer science, it is rising. focus on diversity, it women diversity or is it also affect? barbara: we focus on both. ethnic and gender representation. and we have metrics around both of those to achieve the goals. what i will tell you is that the key areas we focus on in intel is retention. it isn't enough to just focus on hiring. we have to focus on hiring
progression and retention. and what we've done is implement as a place where employees can call into and have assistance with retention challenges. we have been in what to say about 90% of the employees have entered into the services. david w.: when do you work yourself out of a job? women and what percentage of african-americans? 18% hispanic? are you measuring those? barbara: absolutely. diversity andut inclusion is that we recognize officers. it is not a one and done. this work is such that it has to be integrated into your business
properties. i am an engineering background which is a lot we can focus on the systems required for employees to integrate and how we address employees. not have to talk about equal pay days. is that theyty exist and we have to continue doing the work to make sure that everyone has equal access to the jobs and opportunities. david w.: when i did this, i found that the overall workforce , pretty quickly but the overall rates, it got harder and harder. we have lower paid people getting too old representation. but senior management, it gets a lot harder. barbara: leadership parity is critically important.
intel is driving that as a metric. our performance bonus structure, retention experts in a -- that is 7% of all of our employee bonuses. and if you want to drive inclusion, you have to hold companies and employees accountable to achieving those goals. a quick way to do that is to put it in the performance metric. how do you do that and have a true meritocracy? who had aomeone person of color who was not getting the job done, i can't get rid of them because it won't hurt my numbers? isn't about a lose or win. it is about including everyone. it includes the majority
counterparts and women and underrepresented minorities. well, it requires everyone. it isn't about us versus them. whye, thank you so much. she will be part of the bloomberg equality summit later this morning. you can watch by going to live go on your terminal. awaiting a decision on iran. i will say you buy this is so important up next. this is bloomberg. ♪ this is bloomberg. ♪
on the curve? if you make the argument that no matter what we hear today, it it in theghlight attention middle east, it is a long-term issue and not a short term export. w.: do you think news has trickled out? wonder if it will. how much and where. this is what i am watching. that wraps it up for "bloomberg daybreak." and our bloomberg opinion columnist will be back. markets are waiting for trump's iranian decision. ♪ mr. elliot, what's your wifi password?
this is the countdown to the open. ♪ coming up, decisions for the iran nuclear deal. fed's influence of its policy on global financial conditions is overstated. and the 10 year treasury yields, -- the question from the futures are down two points and up by a 10th of 1%. story stays, and the commodity markets, it is decision day for crude and the iran nuclear deal, markets bracing for president trump's ruling on that deal. is one of thet dumbest deals in one of the