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tv   Bloomberg Markets Americas  Bloomberg  June 28, 2018 2:00pm-3:30pm EDT

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julia: we are live and bloomberg world headquarters in new york over the next hour. here are the top stories we are covering on the bloomberg and around the world. great dalio takes a step back from bridgewater. we are live in a few moments with the billionaire investor from the ideas festival. speaking of that, heavy hitters continue with the -- with david rubenstein. thoughts -- at foxconn. he is said to tell to his economic policies of the groundbreaking ceremony for a new multibillion-dollar facility in wisconsin. in two hours.lose let's get a check on where stocks are trading with abigail doolittle. abigail: we have a push for the major averages. we have had moves up and down on the day. at this point, we have solid games for the dow, s&p 500, and
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nasdaq. the s&p 500, that index, the broadest is on pace for its best day in three weeks per the russell 2000 which have been down earlier, now up ever so slightly. on the week, looking at the climes. the worst decline since the end of march. this week, this comes from the week we are looking at right now. over the course of the month, going into this week, we did have the s&p 500 and nasdaq higher. this past week has been brutal. we are looking at fractional gains for these averages on the month. it will be interesting to see how it does close up. let's take a look at the transports. over the last six days, we have the transports down sharply. down 5%. the worst six days since november of last year. twohe day, we do have culprits. let's take a look at two stocks dragging on the transports. ups and fedex. this has to do with amazon. not only as amazon buying pill
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cap for $1 billion, they are also helping start up people who want to start up companies to help deliver their packages. you could do this for as little as $10,000. this news came out today. we see the competition trading lower. i mentioned that we get -- that weakness for the transports. this is very interesting. we are looking at a true breakdown for the dow transports. this is a one-year chart. we see last year's nice uptrend. not as strong as we have had for the s&p 500. 200 a moving average, for the most part, and yellow. this year, on the volatility, touching down on the 200 day moving average. on this escape decline, telling you the sellers are taking control. above the 200 day moving average, there are analysts who say the dow transport is more of an older of economy. it is not as relevant in this age of e-commerce. this technical pattern, the congestion on the year, very similar to what we are seeing for the s&p 500 and the doubt.
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.his may be a bearish tone this breakdown for the dow transports below the 200 day moving average. something to keep an eye on. julie: definitely. time will tell if it is an outmoded signal or not. thank you, abigail. let's go to first word news with mark crumpton. mark: thank you. attorney general jeff sessions says 600 one people have been charged in what he called the largest ever health care fraud enforcement action. the justice department says schemes billing medicare, medicaid, military, and private insurance providers for medically unnecessary prescription drugs and medications were targeted. >> much of this fraud is related ,o our ongoing opioid crisis which is tremendously dangerous for america, it is the deadliest drug epidemic in the history of this country. we have never seen anything like it. sessions said those
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charged allegedly participated in the health care fraud schemes that involved more than $2 billion in false billings. federal officers arrested a protesters -- eight protesters while trying to reopen a customs enforcement building in portland, oregon. that has been closed for more than a week because of a round-the-clock demonstration. the group calls itself occupy ice 80 ex protesters want to abolish ice and and the trump administration's zero-tolerance immigration policy. officials closed the building a few days into the occupation because of safety concerns. as of this morning, there were no reports of violence. heading back is toward the southern border of the u.s., the first lady is expected to visit centers housing migrants apprehended at the u.s.-mexico border. the visit comes one week after mrs. trump traveled to the meetr town in texas to with officials. she met with children at one of the facilities. a federal judge this week
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ordered that thousands of migrant children and parents be reunited within 30 days, and sooner if the child is under the age of five. the interior department inspector general is looking into a complaint about a montana land deal that links interior secretary ryan zinke he and the head of energy services giant tele-verve. the spokesperson says a preliminary review is under way to determine whether a full investigation into the land deal is open. democratic lawmakers called for investigation into using the -- nke's involvement and the chairman. global news, 24 hours a day, on air and at tic toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. julia: thank you very much, mark. bridgewater is reportedly planning to become a partnership. a step as they take back.
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erik schatzker is joined by the billionaire investor at the festival. eric: thank you very much. i am here with ray dalio in the colorado rockies. not a bad place to be. ray: let's have it. eric: let's begin with the obvious. a memo went out to your employees and clients today about a restructuring at bridgewater. tell me about it. we want to do is formalize a partnership structure so that they are able to be -- so that there are actual rules about partnership, a designated group that is partnership. i wanted to formalize that appeared we are going from a company in which i led the company in this way, and now we are going to something that my -- that needs broader far -- broader partnership. it would be like if you were going to have mckinsey as a partnership. goldman sachs has a partnership -- erik: once upon a time they were a partnership. ray: it is a good example.
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when they have a partnership, they still have to maintain that partnership way of being the yet and they are a public company to we will not be a public company. erik: never? ray: never. that notion of creating a structure so that there is a partnership structure and plays a greater role, nukes to have some formalization, so that is why we are excited about it. erik: how will it work? of: we are in the process figuring out how it works. the way it is, mostly, there has been a group of designated preliminary partners. succeed partners and 50 other partners. erik: these are the senior people at the firm? ray: senior people generally speaking. people who have been there a certain number of years, all the things he would represent -- you would think represent partnerships. -- we, bob, greg, me, have
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established that group. they have to decide how it is going to work. we are not part of it. so that we have the total freedom. there is a board. it will have board representation because they are the owners and so on. just like in goldman in the sense. erik: these partners will have equity in the firm. ray: a lot of them already do. they will continue to have more equity in the firm. will have their board representations on the board. and then the ceos really will and to evaluate the ceos, that is how it will work. erik: david and eileen. ray: david and eileen. so that process will operate by the partners who report to them and there is a board that is overseeing that representing the owners as there is a transition. that is part of the transition process. erik: over what period of time? ray: we have done most of the
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transition in terms of equity and the like. a lot of it. so i think probably over the next three years or so, we will do a lot more. most of it has been done. we needed to formalize their decision-making capabilities. erik: the most interesting thing you said there was that the partners are going to decide what bridgwater is. ray: that's right. erik: that is a big change. ray: well, i don't think so. erik: nope? change in that it is formalized. the way that we operate it, this idea of meritocratic way. they were all ideal partners. erik: radical truth, radical transparency. so the ideas have been surfacing for a long time? ray: we have been doing transition over gradual period of time for a number of years. this is just a great step into -- in terms of formalizing it.
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what does it mean to be a partner? what are your decision rights? how do they get together? and evaluate the ceos? those kinds of things being much more -- erik: these will be systematized. ray: systematized. a lot of it has to be worked out. we are at the stage where we signed a partners, we have stepped aside, it is up to them to do that. we are excited about it. erik: are you at all afraid that bridgewater, at some point in the future, will no longer be the idea of meritocracy? it will note -- not stand for radical truth, radical transparency, the things you obviously championed, believe in, and that you enshrined in your principles? ray: i don't worry about that because the issue is everyone has values what are their values, what is the culture? the important thing is it is up to -- i don't worry about it. it is their lives. it is like raising kids are being around a certain environment. it is up to them now. the important think i've -- the
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important thing i think is we have come to value it. we have a certain culture that people come to appreciate. it should evolve. it will probably evolve to be a better way. the important thing is that they own it. and that it is theirs. you do not want to control their lives. that is why my whole transition, i am so excited about the transition, wrote of the book, pass it along, do these things and then they own it like you would want to have your 45 euros kids, you want them to own it and it will evolve. we are thrilled about this. erik: just like it is with your children, you probably have some ideas about what these partners and the firm that they continue to build is going to be like. what do you think they will change, if anything? ray: i think they are improving things in the way like this partnership concept. erik: whose idea was it? ray: a number of people, really. it seemed like a natural
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evolution of, how do you capture the particulars? erik: was there a moment? ray: it was evolutionary. erik: it wasn't something david floated. ray: no, it wasn't a person like that. it was the evolution where you start to say, how do you operate in a partnership kind of way? the futuree think of heir. you think mckinsey has a partnership. companies,different partnership models. we spent a lot of time doing that, to think, that is what we wanted to be. we all wanted it to be that way. there was no one person, it was really collectively instantaneously pretty much. erik: is this a necessary step bridgwater has to take to remain a success? ray: yes, i think it benefits a lot from the clarity that we are going to have. in other words, a greater amount of clarity regarding what makes
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a partner, what your decision rights are. it is like a constitution. be much better, i think, by having that type of clarity. erik: i can see from your perspective how it helps the firm, how it helps your employees. how would you say it helps your investors? ray: i think the most important thing for the investors is a commitment of the people and what the culture is like. right? the fact that we have a company where these people who have been there for many, many years is so committed to the culture. i would take him a you look at that and you say, wow, that is a great team. i am going to be as much involved in the investment decision-making as possible. think of me as being more an employee. i will be a ceo. i'm a chairman and ceo. excited aboutre the whole transition of how well the transition is going. erik: was it important to coach some of them through this? ray: we were always explaining
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what it is. at every step along the way, we explain it. erik: i presume it has been a backing of your outside investors? ray: everybody. erik: texas teachers, shareholders. ray: i will not speak on their behalf. that i would say our partners, everybody thinks this is one of the best thought-out transitions. leader,entrepreneurial to a team of people that have worked there for a long time. bob prince has worked there for 31 years, 32 years. greg jensen has worked to their 21 years. eileen, all these people, and they have a sense. they know us up close. they know that there is a tight group of culture and there is a way of doing things. the fact that it has been done very transparently with them -- a lot of people don't even announce that they are going to have a transition or they don't have it worked out. we have been radically transparent.
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they see it step-by-step. they see it is a good step in that direction. they know all the people. people hang around too long. clearly aevity is dominant feature among your employee base. do you think, to the degree that you don't have it in some places, this is going to improve retention? so. i think i don't think on the margin it will be that big of a deal. people welot of the spoke to, that we always treated them like partners, and so on. i think what it will do is it makes it clearer. all that clarity. bridgwater't make any more attractive to potential employees, applicants? the folks who you're always looking for and are increasingly competed -- competing for? ray: i would say the fact that we have always operated in a certain way, is the way that it is.
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it operated like a partnership without the clarity. so we are bringing clarity to that. what is it exactly your decision rights? how would this satisfaction with the ceo be determined? who will have what responsibility as a backup? of theeally that clarity partnership that i think is going to be the most important thing. erik: you described this as being a natural step along your journey. it included writing the book. what do you do next? the well, first of all, passion since i was 12, i've played markets in the economy. i will do that as long as i am welcome to do that i bridgwater. that is what i am going to do. think about it like i would do maybe and 80 hour week. now what i have done is i have something that might be a 40 hour week or 40 or 50 hour week. that frees me up to do all these things. i am trying to transition well. that is why i wrote the book.
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i will be passing the tools along to help other companies. that will -- we will put that out. then there are lots of things i am excited about. i love spending time with my family. -- i have twohave grandkids. three now with a young daughter. it is that kind of stuff. i am also excited about the philanthropy and all the different ways. i am excited about ocean exploration. i have too many things i am excited about. ,till, markets and the economy and being in -- being involved in the game, that is pretty much encompassing the you have to keep the eye on the ball. erik: let's talk about that. -- have likened the currents current state of global tensions, populism, and the economic backdrop, to what the world knew in the 1930's. we all knew where that ended. with a genocide, and with a world war. where are we headed now? ray: let me clarify what i mean
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by that. i think everything in history repeats over and over again. some things happen only once in one's lifetime. because -- let's say for example the debt crisis. let me give you what i think is going on. 2008 financiale crisis was very similar to the 1929 crisis in that there was too much debt, zero interest rates, it is the only other time that hit zero interest rates and we had to do quantitative easing. that is what they did. we bought 15 trillion dollars worth of financial assets. that puts us as higher. 2009, whenn 1933, in that happened, financial assets rise. there was a recovery. until 1937. we still had these wealth disparities. erik: very uneven distributions.
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ray: for a lot of reasons. if we look at today, the top 1/10 of 1% of the population's net worth is equal to the bottom 90% combined. that is very much was the same in that particular period. let me clarify. there was that. and also a sense of the system is not working for us. as a result, populism became more of the case. erik: and people question democracy and capitalism. ray: right. because, is capitalism working for the majority of people? erik: is it? ray: it is not working adequately for the majority of people. erik: would you say the same for democracy? ray: democracy is questionable in terms of how it is working. i love capitalism, i believe it. but it has to work for the majority of the people. the other thing that was happening in that period of
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time is when a rising power comes in conflict with an existing power. much the same way. it is called something. erik: now we have china and america. ray: right. there is a wonderful book about this. it goes back 500 years. exists, there is more likelihood of conflict. in 12 of the 16 times, there was war. when you have -- that does not mean you have to have war. i'm not predicting war. i'm not saying anything like that. what i am saying is let's be clear. there is a wealth gap. populism is an issue. populists or certain types of personality, they are aggressive , and so on. we are in a situation where these forces are analogous.
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when we look forward, and i think we have risks, and that the risk is of the next economic downturn. because -- anyway, i am going on too long. that will give you the picture. erik: no, i want to continue talking about this. let's talk about the risks. the risks in the financial system today, the risks to investors. people with capital. they are different than they were clearly in 2007, 2008 what would you say are the principal risks? ray: ok. as far as the debt crisis then, we calculated that we would have a debt rollover crisis and that we would have debt to we don't have that. we have a situation in which the weber of i/o you -- iou's have in terms of health care and such, pensions and so on are a lot. bere is more iou's than can
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dealt with. that is a problem. as we sell more bonds into the market, because we are in the process of allowing a larger deficit, and we are running down the balance sheet, that is supply and demand. if i take three things in terms of what i would say the three most important issues of our time will be a, how we deal with this downturn, how we will deal with that, i will take his economic downturn. if you have a downturn, and we are at odds, i think it will he a difficult time, and i think you can get more political poll d, the left can be more extreme, the right can be more extreme. i'm worried about that. but longer-term, the three things would be, how well does capitalism gets reformed in a way where it is working for the majority of people? people feel like they're
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benefiting, people feel like they are invested in it. ray: right. in a way that creates incentives and pay for themselves. i'm not talking about social programs, i am talking about enabling and empowering people. number two issue, not in order of priority, is the relationship between the united states and china. and then of course, other countries, as we talk -- as we come into a rivalry. how is that rivalry handled? will it be handled peacefully or will it be antagonistic late? -- antagonisticly? data and artificial intelligence. when we look at the world 10 years from now, or 5-10 years from now, and that is not so far, i think we are going to see a world that will be very different depending on how we handle the world in terms of data and artificial intelligence to how we will use it. it will be a different world. a world in turn -- in terms of
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that conflict with china will be a big deal. that issue of whether we can operate as a country as a whole in which we do not have the factionalism in the country, so that we are united against common principles, and pull together to the effect -- to be effective, those will be the three things. erik: can i go back to the point you are making amount -- about the amount of debt that will have to be sold to fund these commitments that we made and the deficit of the government in has created? quiz going to buy this debt and at what price -- who is going to buy this debt and at what price? ray: when we calculate who where the buyers and what they represent in terms of the percentage of the portfolios, it looks to us like there is more -- there is more debt being sold than we will have. erik: so prices will have to go down. ray: i think what will happen is the fed's selling program, or
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reducing its balance sheet, will go at a slower and slower pace than his planned. will be reactive to that. but the circumstances will produce a weakness in the economy. if you have in a just rate that russians the demand, the way that happens is it reduces economic activity. the fed's job is to deal with that notion. i think the federal reserve will sheet or the balance terminate it, or if things get bad enough, add more to it. in terms of that process. i don't think the tightening is going to be as big as is expected. i think it will affect assets rises. day,nk at the end of the you are going to probably see a change in the nature of monetization and rolling down the balance sheet. because the consequences of
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selling that -- i think of the bigger issue when we are dealing with it is that all countries around the world, because of the united states role as a reserve currency, are holding a lot of bonds, and amount of debt, which is larger than they would ordinarily hold. i think there is a classic cycle of reserved currency. that has to be -- that is something to watch. i don't think they are going to sell it. i don't think it is going to happen. it has to be watched. i think they are not going to add to it like we would want them to. so, are we talking about the chinese and japanese, large holders of u.s. government? ray: i am not going to comment on any entities. erik: they may not have the same appetite for u.s. government going forward. ray: i think anybody acquiring so much -- if you have to limit tenure balance sheet, and you are operating in a different
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way, i don't think it lends itself to acquiring the amounts that need to be acquired. erik: if you are right, and the fed slows down, the rolloff of the balance sheet, is that going to moderate the rate at which and the point to which it yields rise? ray: yes. can we concoct a clearing price? a clearing yield for treasuries? ray: i think if they did not cut their balance sheet, that bond yields would go to 4.5%. but they can't go to 4.5% without hurting all of the other assets and hurting the economy. that is why something else has to give. i don't think they will make it to 4.5%. because everything that starts -- all assets trade off at the same discount rate. in other words, when we are
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looking at stocks, bonds, private equity, real estate, and so on, they all have the same sensitive interest rates. the 10here do you think year will peak if it is not at 4.5%? you know, i would say, probably between 3.5% and 4%. this is an imprecise thing because the feedback loops in terms of -- the more interest rates rise, discount relative to what is discounted and the curve already, the more all assets have as a negative thing. we are talking about the asset prices before that. what are the implications in this scenario for other assets like equities, for example? ray: what we call risky assets up insets that tend to go
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a growth environment. they are assets like equities and so on. i think you almost have to look at what are the assets that don't do well in those types of and garments? the key -- of environments? the key is to have a balanced portfolio. hedge?s now the time to ray: i think now is the time to have a well-balanced portfolio. and to take a look at the big bear markets. i'm sure i will be misunderstood. that portfolios have good times and bad times. and they go through the cycle. and when you are late in the cycle, as we are late in the cycle, and when you have central banks having a tightening of monetary policy in that cycle, that one wants to have a lower exposure to "risky assets" assets that do well in good
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times, or assets that do well when interest rates don't rise much. balance is always good. but it is particularly important to have balance at this time. erik: let's bring it full circle. we talked about the memo that todgewater took -- sent out their employees to we talked about what you are doing and how this changes things for you. i'm dying to ask you one more thing to when does the next come out? ray: there is a book on investment principles. i suspect a year. i don't know. erik: we will have lots to talk about between them. thank you. julie, that is the one and only ray dalio. we are in aspen, colorado. much more coming your way. looking forward to it. thank you so much. bloomberg's eric's checker -- erik schatzker there. a wide ranging and deep conversation there. let's go to president trump did he is midway through his remarks of the new foxconn facility. it is in mt. pleasant, wisconsin. plus trump: $100 billion,
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they have a 17%, almost, that tax that nobody thinks about. the eight ball because that tax was there at the beginning. right from the beginning, we were behind. mexico wants to make a deal. we are going to make a deal with a lot of people. china. i have a lot of respect for china. think it is great. he isesident xi, i think great. he is a friend of mine. but we lost $500 billion over the last number of years. $500 billion a year. we have helped rebuild china. someday, they will say, thank you. but we don't want to do that anymore. we want to have a fair and balanced situation. it does not have to happen immediately. it has to be fair. because our country is never -- has never done better than it is
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doing now. european union, last year, trade imbalance. we had a deficit of $151 billion. they send us mercedes, they send us by the millions the bmw's, cars by the millions. we send them a bushel of corn and they reject it. they don't want our corn. because they have their farmers. ok. i understand. ourif you don't want agricultural product, we don't want your cars. it is not such a complicated formula. and they are going to come back and they are going to say, let's talk. likely, don't tell them i said it, but they already have. don't ever tell them i said that. you will screw up my negotiations. but we are doing good. they are great. great people. it will all work out. many other cases. we have actually made a deal with south korea. we took the deal.
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i expired it. it was a terrible deal. it was supposed to give us 250,000 jobs. done by hillary clinton. and she was right. it did give too much of 50,000 jobs. so she was right. it gave it to south korea, not to us. this was not a good deal. we have renegotiated the deal and subject to signing. i always a subject to sign a because lots of things happen. if it did happen, that's fine. we made a new deal with south korea. wonderful deal for health. our farmers now are protected. and our tariff which has been paid for years, which was expiring, has been extended for a long period of time on trucks. at the center of america's economic resurgence are the massive tax cuts that i signed into law six months ago. we slashed tax rates for individuals, and we did numbers for business, we did tremendous,
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tremendous amount of work. ever the largest tax cut approved, ever gotten, in the history of our country. and tax reform. included in there is an war, the largest drilling site potentially in the world in alaska to we got rid of the individual mandate. which is going to be great for the people here and the people that work here. in other words, we got rid of obamacare's individual mandate. where you have the privilege of paying a lot of money for not having to buy health care. think of that. think of that one. you pay a lot of money not to have health care. so, it is gone. int unpopular provision obamacare by far. obamacare is largely gone now. we are opening up secretary acosta's here. secretary a sauce is here. we're opening up unbelievable health care.
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across state lines, highly competitive. care. great health everyone is competing for it. all of the insurance companies are dying to get it. they all want to compete. the costs are going to be low. it is costing our country nothing. nothing. it is so much better than any form of insurance. association and secretary is our is coming out in three weeks with a massive plan. you will not believe it or do did repeal and replace obamacare. unfortunately, one senator decided to put the thumb down late in the morning. that was not a good thing when he put that thumb down. that we made up for it. and in many ways, more than made up for it. that was a sad day, to me. repealed and replaced. now we have something that ultimately, i think, will be better. that is what we do. today, we are seeing the results of the pro-american agenda,
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america first. make america great again. all those hats. greatest phrase ever used in politics, i suspect, right? mama make america great again to what are we using an two years? can you believe two and a half years, so soon. you know what the phrases, right? that's right. keep america great. of course, exclamation point. we can't say in two years, so you were here for four years, make america great again. but when you look at what we are doing, it is very simple. it is called keep america great. we will give you nice hats. maybe we will make them green this time instead of red. green. representing cash. [laughter] this plant will manufacture a state of the art billion average of $3.4
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to the states of a cotton -- states economy every year. by the way, i don't know this, but i understand life and i understand politics, i guess. or it would not be here. in a short period of time. i must have potential. here we are together. aresume the democrats probably saying, no deal is any good. they say any deal you do, -- the democrats, as headed by nancy pelosi, and maxine waters, they have a new leader, max in waters. -- maxine waters. any deal you make, they have no ideal -- no idea what the deal is the we had a couple of them, a trade deal, one of the democrats got up. the deal doesn't work. he didn't know the deal. nobody ever knew. we didn't know the deal because we didn't negotiate it. that is the way it is. they will always criticize. this is one of the great deals ever. what this is going to do, and i don't even know that anybody is
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critical of it. i can't imagine they could be. they are investing $10 billion in the state. $10 billion. incredible. stage, thes early economic benefits of this new plan is being felt. and 60 of wisconsin 72 counties. already. don't worry. and another three weeks, it will be 72. [applause] foxconn has already contracted 27 local wisconsin companies to begin construction of the main facility. as big as this is. this is just another -- this is just a toy compared to the main facility. i am pleased to report that foxconn intends to build 100% of the factory with beautiful american concrete, and beautiful american steel. made right here. so important. [applause] pres. trump: our steel industry,
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are aluminum industry, our solar panel industry, it is all coming back. it is coming back faster one of the many people with us here today, who will benefit from this plant, is celia griffin. she is a mother of three and a member of the international union of operating engineers, local, 139. tell, could you come up, us what this foxconn job, this incredible -- this really incredible plant has done for you and your family? [applause] pres. trump: celia? celia: thank you for having me. hello, everyone. an honor to god, i started in 2005 as an operated engineer. i got my first job in a hall
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track. [applause] i went on from there to work for the obeying. building the northwest neutral towers in milwaukee. [laughter] -- [applause] area: now the two families together, and they have brought me to foxconn to work in the hall truck again, and me and my family grateful and very pleased to be at home again. thank you, everyone. thank you. [applause] thank you, celia. celia, we want to tell, by the way, harley davidson, please build those beautiful motorcycles in the usa. ok? don't to get cute with us. don't get cute. don't realize their taxes are coming down. they don't realize it.
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i spent a lot of time with them. build them in the usa. your customers will not be happy if you don't. i will tell you that. now let's hear from don wallace, after she and her husband were chart -- were able to raise three children, don decided to take advantage of the new job opportunities that foxconn created right here in wisconsin. i would like to have, can you, please, where are you? hi, dawn. hi. [applause] dawn: so, did you receive any of my tweets, president trump? pres. trump: i did. dawn: stay-at-home mom turned into foxconn builder. julia: that was president trump speaking in the wet -- mount pleasant. a groundbreaking ceremony.
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he talked about china. reestablishing, redefining the relationship as we have heard for many weeks and months. could not help but to throw in harley davidson and the challenges the harley davidson company is trying to get around the eu tariffs. by putting production elsewhere in the world. theously, the irony here, two different situations. but skied context and bring in kevin cirilli. our chief washington correspondent. as i mentioned, they are seeing this as a huge pivotal moment and investment opportunity for jobs as well in the united states, which we should not overlook. huge contrast with harley davidson. the situation, 25 miles north. kevin: 25 miles north come outside of the lucky. president trump just there within the last five minutes calling out harley davidson and saying that they should make their motorcycles in the united states. "your customers will be unhappy if you don't." motorcyclesdo make in the united states.
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the motorcycles they sell in the united states are made in the united states. i just had to make that point. it is the ones being sold abroad that they are talking about manufacturing elsewhere. president trump also bringing on scott walker and saying -- praising him. they have had a political back-and-forth during the republican primary. he criticized china. he praised his increase of the steel and aluminum tariffs. as well as defended some of his trade policies. steven mnuchin also traveling with him. cirilli, thank you so much for your context there. highlight for another from the aspen ideas festival. erik schatzker sat down with the david rubenstein, cofounder and cochairman of the carlyle group eric asked him about president trump's policies on trade and china. studied everynot single position he has taken. clearly, there is controversy with the positions he has taken. he is a negotiator by trade.
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i think he feels by setting out certain positions that are tough, he can get a better deal. we will see if that works. the business community does not want to have confrontation on a long-term basis with our major trading allies. europe, china, and others. in the end, the business community would like to see these resolved peacefully and successfully. i don't know where that will come out. i would not say anybody is thrilled to see confrontation. i don't think the president is thrilled to see it or want to get something done. ultimately good for the u.s. economy and the others. erik: if you are right that this is a negotiating tactic as nd,osed to an absolute e do you think it will work? david: sometimes it can work. in north korea, president trump was tough on north korea. then he got a meeting with the president of north korea. we don't know what the result will be. the tactic may have worked. with respect to iran, he pulled out of their agreement. iran is still complying with the agreement and it seems like they
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are willing to make some negotiations to come closer to his position. his tactics may work sometimes. not all the time. but we will see. erik: do you think as a matter of principle, and approach like that, is a better approach than the one previous president's have taken whether those presidents be obama, or dubya bush -- w bush? david: it's not the tactic i would take. nobody voted for me. he has a right to try his approach. it is a system where congress has involvement. other people have involvement. or i -- i don't think we will go to a long-term floor. i don't think that will happen. i think these things will get resolved and negotiated. be things you don't want to made, legislation and sausage. he might've added trade negotiations. trade negotiations can be complicated. i think it will take time. erik: these positions are creating tension.
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of some companies, they are creating problems flared what impact do you think they will have on the economy? david: if it is a long-term trade war, i don't think that will be good. erik: how do we define not good? david: right now, the economy is as good as it is going to get. over 3%. inflation is 2% or lower. unemployment is under 4%. what more do you want? there is no sign of it slowing down. the economy is in good shape for this year and next year. if something unexpected comes along, that could change. if we went into a tariff war, that would not be wonderful. i don't think that will happen. i think there will be negotiations. but i think it will ultimately be resolved. in carlisle's case, we have two injured 50 companies around the world that operate in europe, china, the united states and they would not want to see a tariff war. i think everyone would like to see these resolved. you want to major we have equitable trade agreements. erik: do the tariffs that have been implemented or the ones
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that have been threatened have an impact on carlisle's portfolio? with 250 are 250 -- companies, it is hard to say. erik: carlisle has not done a workup on it? david: we have, but it is relatively new. erik: harley davidson, for example. david: we don't on that one. at some point, if these things went on for a long time, it would have impact. at this point, it is too early to say it has an adverse impact. i can't get a i see it as a deterioration of our companies performance. successfule to see a resolution of this. i think the business community would in the short term rather than long-term. a concertedve spent -- considerable amount in china. you understand the issues from the american perspective. you understand the issues from a chinese perspective. let's talk about them both. how far do you suspect at the administration is willing to go with its challenge to china? david: i don't know. it depends on what part of
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the ministration will take the lead. the president makes a final decision. i think it is too early to tell where the administration will come out on tariffs and trade barriers. i suspect it will get resolved when the president meets with xi jinping. and before that meeting, i suspect there will be resolution. erik: what about the converse, the chinese? they have a number of instruments that in they can wield. antitrust approval. that came up recently in the qualcomm situation. the chinese could make a decision to stop buying u.s. treasury bonds. either wholesale or in part. what do you think about those options or perhaps some others? david: let's talk about the letter. i think it is unrealistic for china to not buy our treasured builds. would hurt them. they own over $1 trillion of treasury bills. if they stopped buying them, it would decrease the thing of what they own. it would have an adverse effect
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on their currency. it would increase the value of the currency which is not what they want to do right now. "is something they will do. they've never said they would. no doubtust, there is that antitrust can be used in a way to slow down acquisitions. i should point out, right now, it is difficult for the chinese to make investments in the united states. their investments are modest compared to what we are investing in china. it goes both ways. we have to let the chinese invest in certain things. we have to be able to invest in their country as well. erik: if i look at carlisle, i see a firm that is a product and a beneficiary of what we might call the post war system of global trade and investment. david: erik: that is correct. you even based the firm in washington. you are as close to the power structure as any in your industry. whether me wonder carlyle needs to contemplate or
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consider the need for a change in strategy if in fact the president -- if the president is successful in what he appears to want to do, which is dismantle that postwar come in part, or undermine the postwar system of trade and investment. david: i think what the president wants to do, i can't speak for him, but to improve the system we have and make it more equitable. if he can do something along those lines, that would be good. we don't want to ruin our relationships with our allies or impair relationships with people like china or countries like china. in the early is stages. we will have to see how it goes. currently, i think there is more that has to be negotiated before anyone can be satisfied. i don't really see in the end a long-term tariff war. erik: what about the investment climate? david: the investment climate is cautious. prices are high. there is a little bit of the nosebleed category when you pay
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the prices that the industry has to pay. on the other band, the return to been good. the economy has been good. right now, investors are reasonably happy with our returns. and with our returns of our peers. i think as long as the economy is in good shape, that will continue. at some point, the economy may not continue at this pace forever. i don't see any sign of a slowdown or economic recession. erik: it doesn't feel to you like the cycle is nearing its peak? david: i thought that four years ago. three years ago. two years ago. one year ago. right now, the cycle may be longer than anything we have seen since 2001. we might to be the longest cycle ever of economic growth. it could go on for another year or three. i talked to leading economist's in the country and i can't find any of them who say we are going into recession in 2018 or 2019. are notoriously bad at making connections to begin with. we get datarlyle,
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from our companies. every quarter we say, do we see signs of a slowdown? we don't see it right now. erik: don't people point to the high poles on private equity deals as a sign of excess? what do you think? david: who is that person? i'm kidding. i would say -- erik: north of 10, north of 11 is high. david: they have gone appeared before the great recessions, the average was probably under 10. probably today, between 10 and 11. investors are willing to take lower rates of returns none they were 3, 4, 5, 6, 7 years ago. if you can get a net internal rate return on an average of 19%,as opposed to 18 or investors are happy. that is why people have been paying higher prices. everything else is not as attractive as private equity. erik: you describe the investment climate is cautious and how would you describe your own risk appetite? david: i'm a cautious person by
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nature. i would not say -- erik: you live through cycles. you probably swung between cautious and at the very least, less cautious in the past. when markets are going up, your own extended to say i want to make sure i am not missing something. so you russian. i try not to do that. you never know when the markets are going to end. then the music stops. placedifficult to find a to sit. i don't know that i am a person or carlyle is a person that is taking out a risk. we are a firm that is trying to say, we know what we are doing. we know how to invest good and bad cycles are right now, we think the cycles are good. we are cautious. we don't think it will go on forever. erik: what are you doing less of today than you would have five years ago? david: probably we are not putting as much debt on the deals as we were many years ago. have lessuyout feels debt percentagewise than they did before.
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in the early days of buyouts, you have 5% or 10% equity and 90% debt. was 95%us still in 1989 debt or today, closer to 40%. some cases more than that. the deals are much better equipped ties -- equity ties. erik: is that a change from five years ago? david: it is. i think the debt is very favorable. it has no covenants at all. i would say before the great recession, rapidly about some new percent of the deals -- probably about 70% of the deals were deals about restriction. now some is -- now 70% has less. julia: that was david rubenstein, cochairman of the carlyle group speaking to erik schatzker at the aspen ideas festival. you can hear lots more from david on the david rubenstein show, or two p conversations right here on bloomberg television. we will be going back to eric as well. later on "what'd you miss?"
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in -- later on in "what'd you miss?" hase: president trump wrapped up his remarks on the foxconn facilities in mount pleasant wisconsin. we wanted to recap the comments he made there. he said the foxconn plant is one of the most advanced places in the world. foxconn is investing about $10 billion to initially create 3000 as 13,000.s many it is not clear if that trajectory will end up coming to fruition. the president also said the u.s. steel businesses are expanding all over the u.s. he says the eu came to him to negotiate on trade as he talked about trade deals. as a mentioned earlier, he asked harley to build motorcycles in the u.s. just to clarify, all of the motorcycles that harley cells in the u.s. are made in the u.s. it did close a plant in missouri. it said recently is that because of the eu retaliatory tariffs on motorcycles, that it
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may have to shift more of its production in order to avoid this harris. importantly, the president also said he will make his supreme court pick when he is back and do see that he has started that process which julia is not as surprised as we know. key has a list. 25 names. coming up, we will continue this conversation on politics. we will speak with senator ben cardin. can the democrats do anything to slow down president trump supreme court pick? that is the question. and finally, you can check out gtv go on the bloomberg. excitingind all of the charts you see here on the bloomberg tv. you can click on them, catch up on key analysis. this is bloomberg. ♪
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12:00 in san francisco and 8 p.m. in london. .'m julia chatterley welcome to bloomberg markets.
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we are live in new york over the next hour, here are the top stories we are covering around the world. interview with the billionaire investor coming up later. senator ben cardin joins us. he voices concerns about president's looming supreme court pick. banks bounced back a 13 date losing streak. we are one hour from the close of trading. it's check on the markets. >> you are right about that. we are looking at the best day for the nasdaq and also -- almost a month. today, we were muddling through small gains and losses. the buyers are really stepping up and taking the major averages
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higher. we have bonds selling off the 10 year yield. has turned out to be a classic risk on day. let's hop into the bloomberg and see what is happening for the financial sector. you can find this chart using the gdb function. until today, we have 13 down days and a row. that was the longest streak on record going back to 1989. today we have a very solid again. banks had been down, not just in anticipation of the stress test but also the flattening yield curve. let's look at amazon for today. we are going to see a nice gain of 2.4%. it's best day since the end of april. this is because of the news of commerce giant.
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liking the fact that it is happening, we are seeing declines in the drug . let's look at the drug retailers and distributors. walgreens down 19.4%. this action after putting up a strong quarter. investors are scared by this move on the part of amazon. with cbs and mckesson and cardinal health. we are looking at a beautiful gain for oil. we see that the last six days have been a remarkable move up of more than 12% over that time. . a bullish inventories report came out yesterday. we're looking at the details into that price next. senate democrats are
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retiring justice kennedy will face a tough confirmation fight for the replacement. >> don't tell me that this battle is one. it is already lost. abolitionwork for didn't believe that. those who work for suffrage didn't believe that. those who worked for civil rights kept on fighting. we are the inheritors of their struggle. hold ablicans are 80 slim majority in the senate so they should be able to approve any nominee as well as their coalition holds together. as tensions increase between nato and russia, the alliances secretary-general is welcoming month scheduled meeting between president trump and president putin. stoltenberg outlined nato's
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approach to russia. because important to me we need to work for a better relationship. there is no way we can improve the relationship without meeting them. dialogue is a strength. nato doesn'that want to isolate russia. hundreds of syrian revenue -- refugees began crossing the border today they are mostly farmers and they packed their belongings on pickup trucks and when through identity checks at the border. lebanon hopes to round a million syrian refugees. they can no longer afford the strain on the economy. congo's health ministry says they are nearing the end of the ebola outbreak. health officials say anyone who was in contact with the last
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confirmed case has passed and the incubation. with no sign of the virus. global news 24 hours a day on air and on talk on twitter powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. julia: crude climbed. wti rallying around 12% in a week as u.s. oil inventories have declined. trump is pushing allies to isolate iran. rebecca, always good to have you on. there's a pendulum switch that we have seen since the opec meeting. now actually we have the opposite. talk us through what is going on. >> it has been an exciting week in energy for sure.
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heading into opec you had heightened volatility. with different agendas. hedge funds and particular saw opec -- from opect a result which was 600,000 2 million barrels goldman back online, we had a rally there. ignited thelly the shift to capacity concerns is what you talked about which is a ron. the u.s. coming out saying we want all of our allies to reduce iran to zero. they have already walked it back a little bit today. as soon as that came out in addition to what the doe drawdowns this week. canada and unexpected supply outage. libya not looking great area you are looking at spare capacity. saudi arabia can pump 12 million barrels a day.
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10.8 fromoing up to 10 million after opec. i think the kicker is this. the shale producers have been what has dampened every move higher in crude because you knew that show producers would be able to ramp up production very quickly. right now we are in an environment we don't have that. they have takeaway capacity of maybe 3.5 million barrels. you don't get that same ramp to put a little bit of deceleration on the move to the upside. that's why this has seen such a velocity. if you're talking about infrastructure lag in the permian. >> that is a really long time horizon in this vast new cycle we are in were headlines are changing and ran every cycle.
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like anall sounds amazing environment for oil to continue to go higher. is there anything else if it will not be the u.s. shale producers that will put the break on it? we couldk there is. release the strategic reserves. that is not out of the question considering we are heading into a midterm election. if you're looking at the demand side of the picture as gasoline goes higher. what is happening right now is we are pricing in tales area. it is not necessarily what will happen, but it does look like that upside tail is larger than we anticipated. when you came on we talked about the like in equities.
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what the reaction will be then in the equities or if you get it followthrough, now we are talking about supply-side. >> the supply-side shocks will remove and 50 to 60, you saw equities get some momentum. above,ve from 60, 70 and there is demand about the -- concern about the demand side and it is causing hesitation. if you look at e&p stocks they are looking pretty good sector quarter today. earnings,to wait for see with the demand side of the picture looks like, see what driving season looks like? june looked soft for consumption it was down 1% year-over-year. let's get information on the demand side before we chase.
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>> what about some of the smaller infrastructure plays? that is something you might be interested in. >> that is were the value is in this group right now. there is a focus on a which , nobodys not been focuses on pipelines until you need one. the risk reward makes the most since there because they haven't rallied as much as the rest of the group either. when we expecting to hear from these guys as we head into the earnings season? even demand which you are kind of hinting at two. >> i think they are going to have a good quarter. i think it's how they guide at theorward and i think gas conference you saw some ceos come out and say with trade war talks escalating, it makes it
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difficult to make longer-term decisions. that obviously ways from a company perspective and from an investor perspective but that they can't also say crude oil is higher and we are going to continue to perform. i'm not saying it will be ultra bearish but they will start to talk about demand. thank you, rebecca. we do have some breaking news. white house chief of staff john kelly is expected to depart the white house in the coming weeks. this comes from the wall street journal which reports that president trump is talking with advisers about a replacement. kelly, presidents chief of staff is on his way out. any further headlines, we will continue to bring them to you.
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from new york, this is bloomberg. ♪
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breaking right to the news. chief of staff john kelly is expected to depart in the coming weeks. that is coming from the wall street journal which is reporting that president trump is talking with his advisers are replacement. we are joined on the phone by kevin. this is not been a new rumor. what are we hearing about this? >> it is definitely not a new rumor but the timing is interesting. this is the same day that we reported about the president trump and president trump -- president who meeting.
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normally the president would work in chief -- in close conjunction with the chief of staff about this. i can tell you that the rumor mill about his replacement has been running rampant. i can also tell you that some sources suggest within the past couple weeks that the president would again try to do something unorthodox in terms of naming a successor. we don't know how that process will play out. interesting timing in a very interesting newsweek. let's get some more context here. we are joined by ben cardin. heard theou just prospect perhaps that john kelly is going to be departing the white house and the coming weeks. what does that mean to you in another member of the
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administration set to depart? >> this is not a surprise. we have been hearing's rumors for a long time that mr. kelly has not been that happy in this position and that the president has had his issues with his chief of staff. this is a difficult but important position. you need someone who can coordinate a matters that go to the president and that is not easy. in coordinate with the president. it will be tough to fill the position. affectomething that will the functioning of the white house. >> senator want to talk about trade. and the needle that the president is trying to thread here as he participates in the groundbreaking in wisconsin. criticizes harley davidson for moving some of its production overseas. what is your concern level about retaliatory tariffs particularly
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for your home state and some of the industries they are like tobacco? talked to myeady businesspeople in maryland. their supply chains and final products are being affected. there is great concern in our state and the nation. i think the main concern is that we are not clear that president trump has a trade strategy. he seems to because of trading on our friends, many of which we have a fine trade relationship with. rather than concentrating on the country's that have historically closed markets to america. if he had come in with a plan just for china, i think he would have gotten strong support for congress and our allies around the world because china's trade policies are out of step with international norm. going against is
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canada, europe, mexico, it has caused a great deal of concern and we believe it will hurt our economy. senator, will you support the corker amendment on trade that would put limits on the president's ability to impose tariffs on national security grounds? >> i believe we should vote on the corker amendment. i am disappointed that we have not had a chance to vote on the amendment. i have offered some suggestions to senator corker on how to could be modified to make it more acceptable. protect our trade enforcement laws. it is important to take america against unfair trading practices a get -- around the world. our colleagues believe that the president has acted in an particularlyner against our closest allies in therefore if we can tailor the amendment, it is one that can get broad support.
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>> senator, we got confirmation from the white house of the president is going to be meeting with vladimir putin in a few weeks. in dialogue with mr. putin, is that a wise choice at this time? >> you can also add the results of the g7 meeting and president trump's comment about crimea being part of russia. that is so much going on it looks like the president is favoring russia over our allies recognizing that russia attacked us in 2016. he has done a lot of things that have been against our national security interests. we object to whether the meeting areasf -- focus on important to national security. we don't want to further isolate america from our traditional i want to move on
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to the retirement of justice kennedy. would there be any delay in the ?onfirmation of the nominee how likely is that sort of a pack? >> you are exactly right. if the president goes forward and nominate a person that is extreme that would put at risk progress that we have made in rights andy on civil women's right and freedom rights in dealing with the lgbt community, i could go on a list. if the president nominates a supreme court nominee that would change dramatically the balance of the supreme court, we would hope that we would have over 51 members of the senate that would stand up and say no.
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i can assure you that the democrats are going to be focused on this on what this appointment means to the rights of americans and we will need work -- help from the republican side of the aisle. >> thank you, senator. from new york, this is bloomberg. ♪
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it's time for options insight. good to see you, steve. once again you have your eyes on the fixed curve. -- fixed curve. one for threeom days ago. when we had -- a 1% rally will put an end to that fairly quickly. that helps illustrate how quickly these things move. had actually really shot
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up. , it istalking about fascinating for me to have vixher short-term the level of short-term fear we had four hours ago. >> how quickly it can change. let's look at oil for a moment. we've seen a big rally. your trade today had to do with an oilsands play. have a 10% move in a major commodity like this in a is duehe trader instinct trade or fade? that it has gone a little far a little fast. that is the short-term viewpoint
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not necessarily the long-term viewpoint. extrapolate that to the stoxx. there is a feeling around in the 70-ish range because the saudi's and the russians don't want north american fracking and canadian oilsands to be viable. suncor is a turning point when you get above $40. it's actually performed a bit better in canadian dollars. the trade would be, we are at the $40 level. you basically by the 40 to call out of the money, that covers you in case i am wrong. receive $.70. your maximum loss is $1.30. it is a hit or miss kind of trade. wrong, we had our risk under control. >> oil proxy here. thank you, steve.
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of -- had a little bit coming up, our exclusive conversation with neel kashkari. from new york, this is bloomberg. ♪ retail.
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comcast business outmaneuver. well, it's a whole day's worth of love songs. 300 minutes of baby videos. or, it's a million chat messages. a gig goes a long way. that's why xfinity mobile lets you pay for data one gig at a time. and with millions of wifi hotspots included, you'll pay less for data. it's a new kind of network designed to save you money. click, call or visit a store today. world news. white house chief of staff john kelly is expected to leave his position sometime this summer. president trump is consulting advisors about possible
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replacements. front runners are said to be new tires and chief of staff pants. bloomberg has learned that the president has asked advisors about their opinions about nominating utah senator mike lee to replace justice kennedy of the supreme court. sources tell bloomberg president thanks lee would be confirmed easily by the senate but the president has expressed concern about keeping his senate seat in republican hands. the 81-year-old kennedy announces retirement yesterday. ambassador to the united nations, nikki haley, says china is written to the united rates. a meeting that the u.s. wants to have a relationship with china. >>


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