we consider an italian recovery. while there is no 13th floor on an elevator, we consider trust safety among the elevator wars. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york. i'm tom keene. joining me, brendan greeley. brendan, look at elevators. brendan: i'm excited. new elevator technology means new building. we can look at everything with an elevator. tom: it is going to be -- it is quiet out there, so we have a lot of the things to talk about, including getting to michael darda. right now, top headlines with vonnie quinn. vonnie: investigators want to know why the amtrak train sped up before it derailed. the ntsb says the train went from 70 miles per hour to 100 just before it ran off the tracks. the crash killed eight people and injured more than 200 others. >> i am pleased to report we

have contacted the engineer and he has agreed to be interviewed by the ntsb. we look forward to that opportunity. we will be meeting with him in the next two days. vonnie: the engineer's lawyer told abc news that he suffered a concussion in the crash, that he was not under the influence of drugs or alcohol and was not using his cell phone. the u.s. marines have confirmed the wreckage of the missing helicopter that disappeared earlier this week on an earthquake relief mission. three bodies were found near the crash, and officials say it is unlikely anyone survived or it the chopper carried six marines and two nepalese soldiers. at least one of those marines were shown delivering food and other survived -- and other supplies to earthquake victims earlier this week. president obama is saying with iran we have got your back.

the president promised to defend the gulf nations against external attack and what is called destabilizing behavior from iran. president obama: we have to ensure that our partners can deal with iran politically from a position of confidence and strength. vonnie: the president told gulf leaders that any deal with iran will cut off its path with a nuclear weapon. there is no final agreement. in pro football, wonder what the point spread is on this one. nana phil announced commissioner roger -- the nfl announced that nfl commissioner roger goodell will hear the appeal from tom brady. he was suspended for four games. the nfl players union urged the league to appoint a neutral party for the appeal.

and he was at the top of an american artform, the blues. bb king died late last night at his home in las vegas. he grew up in poverty on a mississippi cotton plantation. he became one of the most influential guitarists. influencing jimmy hendrix -- influencing jimi hendrix and eric clapton. bb king dead at 89. unfortunately, i never got to see him live. tom: i will recommend cadillac records. that movie was made when he was at sony, and it got the spirit of bb king. what a fabulous guitarist. nothing else to say. we will talk about bb king through "bloomberg surveillance peter: you play as well. --"bloomberg surveillance."

you play as well? brendan: i played upright bass. no one could get that sound. like louis armstrong, you could hear one note and know who was playing. a: 30 a.m. new york time. the result of the empire state's manufacturing survey. industrial production numbers are what we get at 9:15. at 10:00 a.m., consumer sentiment from the university of michigan. all morning we will get a gauge of tom's sentiment about everything. tom: let's go to equities, bonds, currencies, commodities. we can do this in three seconds on a quiet friday. crude back under $60 per share. we are wasting precious seconds with michael darda. why is greece somnolent? why is greece quiet right now? brendan: because eventually they are going to figure it out. tom: capacity utilization back

30 years, it is cyclical. here is the financial crisis. it is a well contained trend. we have recovered nicely. we are not there yet. brendan: but also you have these trendlines going down. almost every chart we look at every time period, bigs the question how far back do we go? i am looking right now -- the fed's average 1972 to 2014 is 80. that is about where we are now. when you look at the beautiful 90's -- the beautiful 1990's, you miss what is going on farther back here. tom: let's move on now. what a treat on a friday. this time is different, and we will lurch forward in some form of weak growth, low inflation euro.

1932 or grammar, 1954 -- no one analyzes our normal -- our nominal spirit like michael darda. it is allowed -- it is a lousy economy. when do we get better nominal gdp? michael: unfortunately, the 4% trend we have been seeing throughout the recovery is about as good as it is going to get. unless we get a better inflation target from the fed, we will not see better. tom: is 4% nominal animal spirit ok for the politicians? michael: well as noted before it is about as good as it gets, unless we can do some work on the supply side of the economy. the fed has a 2% inflation target. productivity is trending at 1% or 2%. unless you allow on the inflationary side for more room

it is the supply side of the economy we will have to do more. brendan: on what you said about politicians, this is important when you talk about nominal gdp. if you are urging greater inflation, that makes sense. it is a valid argument, i think. the real problem is that the fed is a little creation. you have to convince a whole generation of politicians raised on being terrified of it that this is a good idea how do you do that? michael: i think you look at these economic cycles historically. the best environment is one where you have stability stability and nominal gdp growth. that is with the fed is trying to do with its dual mandate. they also have a inflation target. the dual mandate is essentially what a nominal gdp -- what a nominal gdp growth rate target would get you. brendan: two mandates one indicator.

michael: it typifies what banks care about. they do not influence the supply. tom: why doesn't the fed pay more attention to michael darda and look at the pulse of gdp? michael: i think they do. the fed has an implied target of around 4%. if you look at what trend productivity is doing versus their inflation target, that is about the number we would get. tom: you do so well on your research notes. you link animal spirit directly to the stock market evaluations. what do you see? michael: a big problem with some fed critics that look at low-interest rates and say that is easy money, equals bubbles, equals favors. interest rate levels really only matter relative to some equal level interest rate we cannot

observe. the natural rate of interest. tom: can we put a dollar in the jar every time michael darda says vixellian? michael: we can see central banks when they get off course. it ends up with nominal gdp growth and rising inflation. the fact that we have had modest nominal growth and low inflation through this cycle tells us the low interest rate condition is an equilibrium condition. if that were not the case, you would see strong nominal growth and accelerating inflation. we do not see that. same goes for the central bank balance sheet. tom: is the headline here michael darter -- michael darda agrees with paul krugman? michael: i think we would be much more in alignment then the fed critics that are saying low

money bubble. brendan: the problem is the central banks are responding. there is too much money sitting around in the world looking for a return. michael: ben bernanke, his first two or three blog posts took this on. tom: isn't that great? michael: fantastic blogger great teacher. take a look at the bernanke blog post, which i think is excellent. tom: a massive shout out to david russell at brookings institution. what a public service. michael: look at these postwar business cycles. the fact is the average nominal gdp growth correlates inversely with p/e ratios. what is easy money? the fed interest rate is too low relative to an equal or -- to an equilibrium demand for base that shows up in high nominal growth inflation. tom: the summary is that you are

still in the stock market. michael: i am still in the stock market. tom: this is his public television commercials we have to go to. michael darda. brendan: the other great advocate for nominal gdp is scott sumner. they have both been doing work in spreading this idea. coming up, the dollar's weakness. will overseas investors unveil on corporate debt. this is "bloomberg surveillance" on bloomberg television streaming on your phone and tablet. good morning. ♪

tom: good morning, everyone. "bloomberg surveillance."

it's get to top headlines with vonnie quinn. vonnie: islamic state maybe trying to counter a force that its leader was wounded in an strike. the militant group put out an audio recording. he called on sunni muslims to carry out attacks against western nations. there are reports that he was seriously wounded in march. the sec is reviewing what appears to be a fake takeover bid. for avon. shares spiked but the excitement did not last long. avon said it had not received an offer, and no one could firm that ptt capital even exists. regulators will try to find out if it was an attempt to manipulate the market. in course rating -- in horse

racing the belmont stakes. no horse has won the triple crown since 1989. are you guys in line? tom: i am amazed how they are going from 20 down to eight horses. brendan is all fired up about italy. we will look at the italian recovery. it is a recovery. that alone is a surprise. well, it it is as if the new ge danneraher strategy and how it relates to general electric. people will stop by to talk to us about high rise the buildings, and all that. bonds, bonds, brendan. brendan: we have been looking

back and forth at each other did he just say generous electric? i am going to drag us back in line. we spent a year watching the dollar go up. investors poured cash into -- what happens to these positions when the dollar weakens? that is what the dollar has been threatening to do this week. lisa bremmer joins us on the tortoise problem on the a trillion dollar bond market -- on the $8 trillion bond market. >> a lot of people are looking of the composition of credit markets right now. who owns the market that increased by almost 50% in the past seven years. the answer is an increasing volume of buyers from china, europe, and around the world who are coming to the u.s. and saying not only are the yields higher than in the negative yielding universe, the vortex of crazy low yields in europe and japan but the dollar is

strengthening. so they put their money into u.s. assets, u.s. credit. tom: very quickly, michael darda, you this is your wheelhouse. michael: the move in the last six months of last year was too forceful and too fast. my opinion on the dollar is probably the rally reasserts itself but at a slower pace because we have major business cycles that are the verging in the sense that the eurozone and japan are fighting -- tom: to pick up on that conversation, the idea of a continuing dollar, how does a folded to what foreigners will do? lisa: it probably will not shake things too much if the dollar stays where it is. but the question is, is it sticky money? the answer is, maybe not. traditionally if you look back at periods where the dollar weakened, if it is strengthening in places like europe, investors

from europe will not stay here. brendan: you and i have been talking about this for a couple of days talking about how to get this idea on this show. the resistance people have to this idea is that we do not like to think of ourselves as the kind of country will -- where hot money will flow back out. lisa: but you have to think about that. it is uncomfortable to think about, but we have seen this huge increase in markets where people are saying maybe there is a bubble, maybe there is a problem with this incredible froth that we are seeing, incredible lows, the average high yield bonds lower than where the 30-year bond used to trade not so long ago. brendan: there have been other times where there has been a credit and currency play at the same time right? michael: there is a perception that we have never been here before in terms of zero rates on the long-term bonds. from the 1930's up to the

1950's, we had t-bills lower than today. brendan: vonnie: ♪ please jump in lisa. lisa: the 1930's to the 1950's was not a period known for its junk-bond market. this is a very different time with a very different profile. brendan: lisa abramowicz is reporting. what is holding a back -- what is holding back the u.s. consumer? that is a twitter question of the day. tweet us @bsurveillance. ♪

[blues music plays] [applause] tom: very good. bb king, one of the moments here. dead at 89. he had been in ill health recently. the guitar is lucille, which says a lot. some great perspective on mr. king -- i love this. this is charles dennis, the new guy who was his side man. critically in point in with -- critically important. bono or jo bonner matzo -- more joe bonamassa are likely to sit in.

tom: mr. dennis was acclaimed with bobby bland and ended up with mr. king. brendan: it is hard to believe that he played and continue to perform as long as he did. in a way, his life can be used to define the 20th century. he was first heard on the king biscuit hour. he moved to memphis. he influenced hollen wolf -- howling wolf to muddy waters. he was still performing. tom: this is an incredibly important part of american history. we have seen the challenges of america. i cannot convey enough -- cadillac records -- i am biased here. cadillac records, there is a scene i was told about -- the cotton fields.

there is no hope, there is no nothing. those are the cotton fields that mr. king came from. brendan: we also have to cautiously talk about race. he opened up the blues to a whole generation of guitar players, from jimi hendrix to eric clapton. 40 years later after these performances he gave, all these white guys went to they returned to favor. eric clapton recorded with bb king. bono sought legitimacy and touched the hem of bb king's clip. tom: his simplicity is still valuable. what is so great is that a guy like joe bonamassa, who is truly virtuosic the classical modes in theory and all of that, none of that meant anything to bb king. he had some prodigious cord

chops, as we all know. brendan: the first time ever heard him was on a peanuts album that i was given as a christmas present. he played an important role in taking that music and bringing it to a different audience. tom: i will put some stuff out on social media as well. bb king is dead at 89. good morning, everyone. ♪

tom: good morning, everyone. from new york city, "bloomberg surveillance peter: let's get the top headlines with vonnie quinn. vonnie: investigators want to know why the amtrak train

speeded up. the ntsb says it went from 70 miles hour to just over 100 as it entered the curve before jumping the tracks. the ntsb says it may get answers in the next two days. >> i am pleased to report we have contacted the engineer, and he has agreed to be interviewed by the ntsb. we look forward to that opportunity. we will be meeting with him in the next few days. vonnie: the engineer's lawyer says his client suffered a concussion in the crash and that he was not under the influence of drugs or out the hall not using his cell phone read three times now, pimco has -- for the third time, it is retreating. pimco says it will focus on enhanced strategies.

greece's outspoken finance minister is at it again. yanis varoufakis is saying that the head of the ecb, mario draghi, was filled with fear giving greece a break on its debt. he also says he has had second thoughts about the euro. yanis varoufakis: i wish that we had the drachma. make no mistake this is not the statement i wanted to make. i think that deep down all member states of the eurozone would agree with that now. vonnie: yanis varoufakis has been moved -- has been removed from day to day handling of the crisis. a california man is suing huber saying that he cash is suing uber. he said that he came up with the idea and the technology. uber is in a new round of

funding that may boost its valuation to $50 billion. the man who filed the lawsuit is a yoga practitioner and filmmaker who was -- who has previously sued two other tech companies. in the nba playoffs, a decisive game seven in the western conference semifinals. the rockets came from 19 points down to stun the los angeles clippers, 119-107. lebron james and the cavaliers have advanced to the houston conference finals. they beat the chicago bulls 94-73 to win the series 4-2. brendan: italy is ungovernable. the italian economy is unfixable until possibly now. gdp numbers show the most growth since 2011, the country is on track to exit its modest recession on record. francine lacqua joins us. she is from london, but also originally from genoa. was that a happy accident?

francine: i am a little bit on the fence. we saw gdp growing .3%. we had not seen that in years. he is working on labor, he is working on education he is trying to push through. he has pushed through the electoral system reform. if you look at gdp, it has so much to do with the weaker euro. the fashion, the ferraris. the weaker euro helps them out. brendan: i am really curious about the political reforms. italy famous for decades was ungovernable. what did the electoral reform give him? francine: it gives you a little more political stability. here in the u k we used to talk about having to possibly form a coalition. in italy you have a coalition

with 15 to 20 parties, you have the far right, the far left, and the electoral system meant that a lot of these parties would cause chaos, but without advancing the conversation. this reform streamlines it and makes it much more governable because you are a little estimate and in on the crazies of the world. tom: francine, you have special wisdom on this, as brendan alluded to. one of the issues is nominal gdp. what is your basic take on the younger crew in italy? are they going to get it together and become a more vibrant nation? is very social paradigm shift coming up? francine: there is a social problem. unemployment is overall 13% maybe under 30's with youth

unemployment. when you have 40% of the youth unemployed, you have a difficult time. it is much more difficult to enter the workforce. in london, you have a lot of top bankers. there has been over the last 10 to 15 years, brain drain. tom: they do not want that. brendan: the ecb looks around the eurozone and sees one fix, which is labor reform. how close is italy to pulling that off? francine: they are starting. they are pulling it off, which means it is much more easy to fire people. when i talked to you, you are american. italy is so far off the benchmark this is a reform that will take 5, 10, maybe 15 years. in italy, if you get gross

misconduct, you still get a paycheck. tom: francine, were you surprised that jim o'neill was sitting -- was selected by mr. cameron to be part of his government? francine: no, he is a great person for the job because he deeply cares about the u.k. and he will be great for it. tom: ok. francine lacqua on mr. o'neill. brendan: tom asked the question because he did not want to get into the area of older people challenging him. francine: in the u.s., it is very democratic. brendan: no comment on that. we are taking a look coming up at danaher's shape shifting and stock price. it is a tom keene single best chart. that coming up after the break. this is "bloomberg surveillance

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tom: good morning, everyone. "bloomberg surveillance." let's do a single best chart on particularly a piece of america that has been a massive success story.

verizon aol. this is an important chart, back 20 years. slope matters. all you need to know is you minted money. this goes directly into michael darda's idea of the idea of american spirit and nominal gdp. buy the company, own it, fix it and bring it into the system for shareholder return. you bring in the revenue for nominal gdp and take it down to the operating income line, and everybody makes money. michael: the chart looks a lot like the s&p 500 to me. in an environment where you getting that you are getting steady, sustained growth. inflation is low, so p/e ratios have moved up. brendan: brendan: it is also true of private equity.

they all say they do operations operation is the hard work. execution is hard. financial engineering is fun. i spent some time with a private equity group that has hired a bunch of people who do reengineering of their company and they really focus on -- tom: this comes out of william deming and -- brendan: it comes out of the japanese model in the 1950's when they did not have a lot of money. they make constant small changes over time. tom: how do you respond to the critics who say that danaher is inefficient? michael: i do not think we see that result overtime. if you look at environments where there has been a lot of competition or strong productivity growth, are those environments of high unemployment, like the late 1990's going into the 2000's, or the period after the industrial

revolution? the answer is no writ we do not see the competition in -- the answer is no. nowhere in the historical data do we see that, even though the data is palpable. brendan: i walked a floor in a cooling plant in alabama. i kept on asking them, trying to get somebody to complain about the owners and what they were doing on the shop floor. everybody in the plant said we like it better. we stopped yelling at each other. things work. it makes sense. tom: from your point of view what does jeff in melt want? he becomes an industrial company that wants to be more like d anaher. michael: i cannot speak to him or that company specifically but he has to be in a position to lead, to generate earnings and profits in a competitive

global environment, and one where the regulatory mix has changed quite a bit. tom: can you bring that to a french company? brendan: i have been trying to bring it into my household. i have been trying to take the toyota principles and make my household run better. tom: the transaction with pll earlier this week. brendan: this one makes my head explode. people are selling blue bell ice cream. the product was recalled due to a wisteria outbreak. here is the thing. we asked our photo editor -- how do you know that it is actual bluebell ice cream? here is what is happening. people are eating half of it and then selling the rest of it. it is like taste the food before

you give it to the king, so the taster dies before the king dies. i do not know whether i love the internet or hate the internet because of this. number two -- favorite picture of the day, in the pacific ocean. the first warm-blooded fish has been identified. it is called the moon fish, i guess because it looks like a sunfish. the discovery was made when scientists were studying its gill tissue. it weighs about 100 pounds and is up to six feet long. tom: what does the beast eat? that is a big fish. science with brandon. brendan: number one -- this is the most australian thing that has ever happened. in adelaide, a python named winston eight -- ate a pair of

barbecue tongs. they were being used to feed the snake a rat, but it ate the tongs as well. a snake eating appear of barbecue tongs in australia. tom: all i can think about are the snakes in the everglades. brendan: coming up, we will travel to the top of america's tallest building in 60 seconds. a sneak peek inside one world trade center observation deck. we are serving on your tablet your phone and bloomberg.com. ♪

tom: good morning, everyone. in our next hour, gina martin adams from wells fargo will be with us. let's get to our top headlines on friday. here is vonnie quinn. vonnie: a ratio plans to use for arctic oil drilling is in

seattle, and when it arrives protesters did not give it a warm welcome. [siren] vonnie: activists paddled out to the rig as it was towed toward the harbor. shell has a preliminary ok to drill into the arctic but still needs more state and federal permits. barclays will probably be fine for violating a three-year-old agreement on interest rate reading. bloomberg news were words u.s. prosecutors will not seek a guilty plea. barclays may be fined $60 million. dairy queen is dropping soda from its children's meals. even though its owner's famously fond of carbonated drinks. dairy queen is part of warren buffett's berkshire hathaway empire a big fan of cherry coke in particular.

don't worry, you will still be able to get your carmel latte that your caramel latte. tom: you cannot drop sodas from kids meals. vonnie: yes, you can. tom: we will look at the equity markets and the challenges we are seeing in may. a record high in the s&p yesterday. how about that? brendan is looking at mario draghi, an important speech to the imf. we will continue the discussion. this is maybe the most emotional conversation of the week. stan colander will join us. we will speak of our trains and the need for infrastructure investment across all of america. this is fun. we are really looking forward to this. a otis did not build the first elevator in 236 bc.

and then there was an ascending room in 1823. it was flat out not safe. it has now evolved into a cutthroat business with international competition, stunning technology, and stunning safety. germany has momentum in moving people up high-rises. still nothing has changed. every day we wake up and hope that they work. patrick bass is here. this is a trust business, isn't that? patrick: absolutely. we focus on the safety side and the innovation side. we are selling safety and transportation. the basic safety principles are the same. it is just more extreme because now you're dealing with more height. as you go up, you are exponentially increasing the risk in regards to building

movement, in regards to the handling capacity. tom: it is literally exponential. brendan: what has changed in elevator technology to make these super skin the that super skinny -- these super skinny elevator high-rises possible? >> controlling the outer rhythms -- the control outer rhythms, having new materials to provide the light weights that control the elevator. how it will respond as the building is moving. it is all about aerodynamics. to go into a building at these high speeds -- tom: how fast are the speed? patrick: 23 miles per hour. brendan: i am not used to the

idea that buildings move. it is not a static system. patrick: absolutely. every building has a signature footprint. when you get into seismic influence at the design, you have to address it. brendan: can we look at elevators as a proxy for the growth of real estate? what does your business look like in china right now? patrick: china is a key growth area for us or you look at the super talls in asia, it is substantial. it is a fun time to be in this business, and it is all driven from urbanization. urbanization is key. tom: if we assume that an aircraft is a jet engine with other stuff strapped to it is your real business to capture the ongoing service after the sale, and the elevator is just a myt piece of material?

patrick: certainly, service is a key component. tom: modernization of existing systems is elevated talk to you will go way over budget. brendan: michael darda you are looking at the broader macro picture. do you use elevator sales as a proxy? michael: no, but we are willing to look at it. we have seen some soft data in q1, and there is debate on whether this is whether related or more permanent in nature. are you seeing evidence that things are softening in the u.s.? patrick: we are not. we clearly see there is more focus in the deal with the urbanization trend right now. we have -- this is coming out of

the tall business council right now. they are saying we have to build a city to house a billion people per week for the next 10 years. from a resource standpoint, that is impossible. how do you handle it? you deal with it by going vertical. tom: there is magnificent new architecture downtown. tell me about putting in elevator there. patrick: you are dealing with high-rise structures and going to smaller footprints. you are going vertical and smaller. that is pushing technology. the exciting thing for efficient crops -- for -- we can leverage on a broad base and bring value to our customers. tom: when there is a fire, we are told not to get on elevators. stairs have their place. is your stuff so reliable now, you would say something different and get on the elevator to escape a fire? patrick: it has nothing to do with equipment. it has to do with building

design. it is the interface of the building or you have to have rescue floors. brendan: we are looking at photos from the observation deck of one world trade center. you cannot talk about building there and building in those elevator shafts without talking to the emotion of -- talking about the emotion of the safety in place at that location. patrick: that is a once-in-a-lifetime career job to be involved in that. at the time i was head of r&d and was responsible for putting the equipment that was designed into that facility. the opportunity to be on site as we were in erecting and going through the process of putting in that equipment is huge emotion. tom: be on the 13th floor issued? -- is there a beyond the 13th floor issue? patrick: yes, but you see that fading away on a global basis.

tom: michael darda, thank you for joining us as well. there has been a stronger dollar. you heard him say that -- euro 113.50 eight. stay with us. another hour of "bloomberg surveillance." good morning. ♪

announcer: this is "bloomberg surveillance."

tom: statistics show it is safer to travel by train them by car. paying for our new railroads. it was a week of interesting mergers. can m&a support the stock market? here's a partial score -- pimco submits to the cult of the index fund. this is "bloomberg surveillance ," live from our world headquarters in new york. it is friday, may 15. i am tom keene, with brendan greeley. brendan: it is hard to disentangle what happened. the conductor wanted to be an engineer his entire life and advocated for better safety standards. so far as we know, he did everything right, he passed toxicity levels. he had his phone off. it is hard to comprehend what happened. tom: let's get caught up on top headlines with vonnie quinn. vonnie: the ill-fated amtrak train was speeding as it entered

the turn when it derailed. safety investigators say the train went from 70 miles per hour to over 100 before the wreck tuesday night. the national transportation safety board wants to know if the engineer sped up the train manually. investigators say they might get some answers soon. >> i am pleased to report we have contacted the engineer, and he has agreed to be interviewed by the ntsb. we look forward to that opportunity. we will be meeting with him in the next few days. vonnie: the engineer's lawyer told abc his client suffered a concussion in the crash. he said the engineer was not under the influence of drugs or alcohol or using his cell phone. the funeral will be today for one of the eight victims. the wreckage of an american helicopter has been found this morning in nepal. the helicopter crashed while flying aid to earthquake victims. three bodies were found at the crash site. officials say it is unlikely

anyone survived. six their marrying's -- six marines and two nepalese were on board. one of those marines was shown on video earlier this week delivering food and supplies to quake victims. president obama is telling persian gulf allies, when it comes to iran, we have your back. the president promised to defend the gulf nations against attack and what some call destabilizing behavior by iran. president obama: we will keep bolstering the capacity of our gcc partners to ensure that iran can deal politically, diplomatically, from a position of confidence and strength. vonnie: he told the leaders that any deal with iran will block their path to nuclear weapons. wonder what the point spread is on this one. the nfl says the commissioner himself will hear tom brady's

deflategate appeal. he was given a four-game suspension and probably knew that footballs were tampered with. and he was called the ambassador for a unique american art form the blues. bb king died last night at his home in las vegas. he grew up in poverty on a mississippi cotton plantation and became one of the most influential guitarists of the 20th century, inspiring musicians ranging from eric clapton to jimi hendrix. his signature tune, "the thrill is gone," is an all-time blues classic. he was 89 years old. tom: vonnie quinn, thank you so much. a really subjective list of guitarists. i never paid much attention to the. brendan: it is hard to believe

he was gone, but it was a life well lived. tom: he just got out there and did it. some of the people from his band who played with mr. king. brendan: we are bringing you back to earth with economic news. at 8:30 a.m., the empire state manufacturing survey. 9:15, industrial production. at 10:00 a.m., we get a gauge on consumer sentiment from the university of michigan. tom: let's do a data check. you almost need half the screen. oil, $60. the euro comes from 1.14 down to 1.13. should you sell in may? gina martin adams is at wells fargo. she has been in the bull market. she is decidedly not selling. you are still in the market, argue? gina: yes, we are.

now that we are testing the highs again, we probably have to confirm that we are going to move higher before we get more optimistic. we have been stuck in this range all year long. we have been so cautious on the earnings environment. earnings are better than most people realize. it has been related to oil. i think we will move higher. tom: the theme of this week on this friday is mergers and acquisitions, whether it is aol and upward and over mr. armstrong's success. to those support gina martin adams' optimistic view? gina: i think so. it does not necessarily drive them in one direction or another. as stock prices rise, m&a tends to accelerate. but you have share production. you have better growth prospects, given some of these transactions. that helps the numerator of

earnings per share. all in all, it is generally positive. leverage is great for -- tom: did she say you cannot say numerator and denominator? brendan: my goodness, you say it two times an hour. tom: but not on friday. brendan: the last six months you have oil going down, the dollar going up. the dollar has sound -- the dollar has found a ceiling, oil has found a floor. what does that mean for you? vonnie: and it -- gina: an important shift. oil prices bottomed in march, the dollar topped in march. tom: another item this week, we sold a picasso for $170 million. we all know the red, the blue, the white on the twiggy

dress. is there too much money that has to find a warm spot? gina: i think that is some of it. look at the bond market. you have a lot of competition for very few investment opportunities broadly. we talked about share count. i will not bring up the denominator-numerator thing again, but the supply of shares available has been falling year over year, so it is falling back on all sorts of investment. brendan: i was introduced to an indicator i had not been aware of, and do you look at sentiment-based gauges like that? gina: that is not something i look at. i do look at sentiment-based ages broadly, but it is usually investor sentiment about the stock market specifically to try to derive near-term trends. right now, investigators are -- investors are incredibly

bearish. we had investors excited about stocks in early 2014, and then they gave up the ghost. tom: wiest boko about -- we spoke about bloomberg investors yesterday. do you see improving productivity that will allow for those sustained and improving earnings that needs -- that means i need to be in the stock market? gina: it is a good flow that kind of conflicts with margins. margins are expanding rapidly in the s&p 500. you would think that would translate into better productivity for the broader economy. i think it is working for a select group of companies, and that is what the diverted is. the broader economy, not particularly productive. probably should start to become more productive as it gets a little bit of growth. the s&p 500, incredibly productive, allowing pretty strong margins, keeping revenue

growth moderate, allowing for decent productivity for a substantive -- for the substantive companies of america. brendan: the other factor i am missing in there is wages. gina: very little wage growth right? companies keeping costs extremely low but able to continue to drive output is allowing forward s&p 500. tom: on this friday i want to pin you down -- for anybody's 401(k), your recommendation is to participate in equity markets. where is the value that you see? gina: i think this year u.s. stocks will trail local stocks. it does not mean that you shy away from the u.s. altogether. it means that you stay with your u.s. investments and start

finding opportunities around the world as well. stocks over bonds still. it is tough to get a lot of optimism out of the bond market. tom: the bond market -- prices lower, yield higher? gina: for the last few weeks or so yes. over the longer term, we're still on the downward trajectory in yield. brendan: so you do not see a shift in these trends, you see a plateau. gina: i think equities will move higher. tom: do we have a math twitter question today? brendan: we have a basic twitter question. what is holding back the u.s. consumer? i have been entertained at the responses we are getting. continue to tweet them to us @bsurveillance. ♪

tom: good morning everyone. "bloomberg surveillance." this is an interesting announcement yesterday. brendan: i think it means a lot. more than five years after pimco started, now it's third attempt to bring stockpicking strategies to its on fun. mary, is that it for stockpicking? stick a fork in it, it is done? mary: it is not done but it is a

huge pull back. they are saying we will no longer have this position of cio of equities. when bill gross was still at the firm saying you need this exposure, if you need people -- if you want people taking you seriously as a stockbroker, you need this. now they do not have it. tom: all of the media was great including your article. is every other from going to stop and look at this? does every firm wake up and do a pimm: banged this morning -- does every firm wake up and do a pimco this morning? mary: there is a trend of becoming a one-stop shop. for whatever reason one of the times it. what -- it did not work because of the cultural miss back -- because of the cultural miss batch.

-- because of the cultural mismatch. brendan: tom's basic point earlier when he intro to this was thing guard, one pimm: zero. is this a pimm: story -- a pimco story or a broader story? >> i do think that pimco in particular has done such a good job branding itself as the bond shop with bill gross and all the others now that it does not carry over. people for whatever reason do not think of it as their equity offering. at firms like brats -- at firms like blackrock and vanguard where they have all the different shortest board of offerings, it has worked better for investors who say i would take this, this, and this. tom: mary childs, greatly appreciated this morning. this is maybe the emotional interview of the week.

stan will join us. legendary, looking at america's fiscal policy. stan collaender on your emotion about the situation in philadelphia. strong emotion from john boehner and amtrak. stay with us on "bloomberg surveillance." ♪

tom: good friday morning, everyone. let's go to top headlines with vonnie quinn. vonnie: islamic state may be trying to disprove that an airstrike injured its leader. the militant group released an audio courting of blue background back daddy -- media reports say he was

seriously wounded in march. the authenticity of the tape could not be verified. regulators are investigating what appears to be a fake takeover bid. in electronic filing, a from calling itself ptt capital offered to buy avon for triple its trading price. but the company says it had not received an offer. avon says it had not received an offer but it had not then confirmed either. the sec wants to know if it was a market manipulation attempt. the field is set for the second leg of the triple crown. american faro is the -- american pharaoh is the favored to win in the preakness. apparently the preakness could move to sundays in the future. tom: absolutely. david joins us on bloomberg radio.

we will get his perspective later. let me look forward in this hour of "bloomberg surveillance" on television and radio. brennan, an important conversation with stan collender on capitol hill. an interesting twist in what we saw on retail sales this week. and india and china. here is the quote -- "it is hard for me to imagine that people take the bait on some of the nonsense that gets spewed around here. the speaker boehner of ohio response to criticism?" john boehner: are you really going to ask? that is a stupid question. adequate funds where there, no money has been cut from rail safety. the house passed the bill earlier this spring to reauthorize amtrak and to

authorize a lot of these programs. tom: speaker boehner really going at it. there was a brilliant chart showing how safe train travel is versus brendan's drive in. truly next bird in linking our nation's budget to the emotion of state-by-state politics -- john boehner's ohio is not in the northeast corridor. there is an emotion here -- just do something. what is the "do something" that you would recommend? stan: you talked about it the other day. if a bridge had collapsed, we would fix it in a second. there is a lot that needs to be done in the northeast corridor. i'm sorry, speaker boehner, it does require additional money. it is difficult for technical region -- for technical reasons. it looks too expensive to most politicians. tom: why can't the commerce one

from new jersey compromise with the -- why can't the congressman from new jersey compromise with the congresswoman from kansas? stan: compromise is seen as the enemy in washington. the congresswoman in kansas does not have a train that goes through a district -- tom: regular route. brendan: looking around the world, i praised the u.k. system yesterday and i got some sharp tweets about it. let me turn that into a question. what country has got this right? this is a tough infrastructure because rail is a natural monopoly. stan: have you been to switzerland? those trains run quietly and are efficient. brendan: what is different about their system? stan: first of all, there is a tremendous investment in rail in general in switzerland.

you also have got -- they do not have the same legacy problems that amtrak has going back to the days. brendan: so it is simple investment? stan: and also a cultural change. don't forget, amtrak is only efficient and only makes money on two routes, the northeast corridor and southern california. everybody else does not care about it. tom: but you compromise over other modes of transportation. stan: that was in a different area. tom: we build a denver airport so senator schumer and senator moynihan got an amtrak tunnel over to chris christie's new jersey. stan: they come to an agreement on the floor of the senate about just that type of thing. it does not happen these days. compromise just does not happen. brendan: with rail, did we miss

a trick in the stimulus? we look at routes in california, in florida and we missed a chance to take a route that is heavily trafficked that everybody used when you really needed train travel to the northeast corridor to fix that. stan: they probably did, but it took to an long -- it took too long. it was going to take five or six years. tom: a graduate student has an actual amtrak document showing that amtrak employees are way overpaid versus european train employees. in your washington, is the constraint here that everybody is way overpaid? stan: you have union employees on amtrak that the unions do not necessarily support republicans. so you have a political estimate there. that is not a good comparison. it is not a good comparison, european employees versus american.

brendan: that takes us straight to washington doesn't work. coming up, we will talk -- we will come back to it. it may be a miracle if congress gets work done. stan collender says it is a mirage. we will discuss this. ♪

just because i'm away from my desk doesn't mean i'm not working. comcast business understands that. their wifi isn't just fast near the router. it's fast in the break room. fast in the conference room. fast in tom's office. fast in other tom's office. fast in the foyer [pronounced foy-yer] or is it foyer [pronounced foy-yay]? fast in the hallway. i feel like i've been here before. switch now and get the fastest wifi everywhere. comcast business. built for business. tom: let's look at the bloomberg terminal on a friday. coming up, and anachronism. tina martin adams but does from wells fargo. you are manufacturing america and we are becoming more service

sector and it rolls over here only have this ugliness of both 7 -- of 2007, 2008, and 2009. a very contained trend and an elegant year of utilization. what does that signal to you about our industrial life? >> it's improving as a broad trend, although if you look at the last 30 years, it has been decelerating. you have this massive improvement on the thousand nine bottom that is positive and a little bit inflationary now but considering where we were -- tom: when you talk to your colleagues, you say this is a thumbs-up for industrial america and equities? gina: it is in my opinion. we are at a point work industrials relative to the s&p 500 have been underperforming for the better past years. they have written it off and piled into the consumer-oriented names again we would get this great consumer recovery which has not materialized. in the industrial economy,

continuing to turn forward. not great growth but we are not finding great growth decides health care and technology. brendan: chemical the chart again? the fed -- can we look at the chart again? the fed said -- what is normal? gina: i think normal changes with every cycle. when you look at capacity utilization after a long period of time, the u.s. is an incredible machine and it tends migrate and change. when you see these periods with excess capacity in the middle of a cycle, is it excessive or matter of shift? maybe we don't need so much housing related and not a related production that we did in the last cycle? maybe we don't need as much export? brendan: i ask what the new normal is any respond --gi

gina: we don't always know. that is one of the challenges of the fed. they don't really know. tom: brilliant perspective on bloomberg's "surveillance." is go to top headlines. >> wreckage of an american helicopter has been found in nepal. u.s. marines are confirming that it crashed. they found the bodies of the class -- the crash site and officials say it is unlikely anyone survived. six marines and two soldiers from the palmer on board. they showed a very delivering food and supplies to quake victims. pimco has allowed stockpicking to its lineup. for the third time, it is retreating. pimco will host -- will focus on enhancing indexing strategies. the chief investment officer will leave and will not be replaced.

the greek finance ministers at it again. he says the head of the european central bank is careful about giving greece a break on debt. they say mario draghi is worried about how germany would react. >> the express second thoughts on the euro. i wish that we had -- make no mistake, this is not the statement. i wish we had never entered this monetary [indiscernible] . deep down, all states of the eurozone would agree to that now. >> the european finance minister says he is irresponsible. the california man suing uber sadie came up with the technology and idea. the man said he discussed it nine years ago with uber ceo. they are in their third round of funding that could boost their

market via to $50 billion. the man who is suing is a yoga practitioner and filmmaker who has previously sued to other tech companies. high drama in the nba playoffs. the rockets shot los angeles crowd and forcibly the clippers into a seven-game back in houston. rockets trailing by 19 points in the third quarter and lebron james steps closer to another ring by leading cleveland to the conference finals. they want the best-of-seven series, four games to two. tsipras that is -- tom: that is what i love, she delivered that so dry. brendan: this is my father's nightmare. he goes to a party and they asked, what is brandon doing you know, he is a yoga practitioner and filmmaker. he is making it work. tom: i wonder who will be next? let's look at equities and

bonds. tina martin adams said the euro-dollar with crude nestled nicely below $60 a barrel. brendan: i am with tom keene. i almost said i was tom keene. tom: my deepest sympathy. brendan: we will move on as quickly as possible. congress is doing things. they compromise on iran legislation and stan kolender knows how the sausages made. now the executive vice president and dogs and cats living together, everything working out now? >> sure. it is one happy family. we just feel that the world has shifted. they are passing lots of legislation but not doing anything. think of the budget. we've got a budget and it is on

implementable. it really does not forecast what is going to happen. it's a political thing by the republican majority and no democrats voted. the iran legislation on what the card discussed to review with the president did or trying to do, they always had the capability. this does not give them anything additional. what will they be able to do about it -- as an example on the other side, the highway trust fund? they don't have a compromise there. they don't have a compromise on spending, on the debt ceiling. brendan: i'll take your point on the budget. two houses both run by republicans, half the budget together, no hope of ever becoming law. on iran and in particular on trade, you actually get the sense that there is a republican willingness to let the president do something. that in the last six years of the brand-new experience. >> trade is an example -- good example of what you talk about. something that might get done. from the beginning of the year, we knew that was a republican

priority that the president agreed with. it's not so much the republicans allowing the president to do something but the president doing something the republicans wanted. a little bit different. on the most anything else, there is not the compromise going on. there is no governing but passing legislation. brendan: why is it that the senator from new jersey and kansas can't just compromise? i would argue they used to compromise by sending money back to each other's districts because she we bring back that? >> there is a strong argument that it is hurt the process substantially. yes, it may have taken a marginal dollar but because they can't trade back and forth or the leadership tom: -- what's the first lame-duck president -- lame-duck president you worked under? stan: bill clinton was lame-duck for a couple years -- tom: regina when he became lame-duck president or is there

a shift in the wind? stan: what happened with democrats -- same thing happens is republicans on break in. you are going to see representatives and senators from your own party start to move away from you. tom: is the president entering a lame-duck status? stan: some people say he has been there for six years or eight years. they were just saying that this is not for us and we don't have to support our president on this. we've got to run for reelection and he does not. brendan: is that a real illogical rift within him and the democratic party? stan: it's a real rift. there is some significant position here because the people against it are making a difference. tom: help us with gina martins equities go up is a surplus feasible? stan: not anytime soon. tom: remember that from a

whisper with the surplus. stan: 19 -- 1997, 1998. tom: we can't pay so much in tax. stan: -- brendan: no, i have a chart that shows taxes and personal income are nowhere near where they were in 2000. i suspect that had something to do with that. tom: you read our research notes? oh, my god. scandal. stan: you have demographics in the wrong direction. social security and medicare going up substantially -- tom: so they cut it off? gina: that's the key. we committed to spending. this is about the nondiscretionary programs that are not shifting. those are permanent. brendan: thank you as always for helping us understand how washington does not work. our twitter question of the day, we ask, what is holding back the u.s. consumer? we will talk about that in the next block.

thank you so far for your responses. there has been a great volume. we appreciate them. tweet us at bloomberg surveillance on bloomberg television. ♪

tom: good morning from new york

city on a ride a little chilly as you get ready for the game on the rangers in tampa bay. looking forward to that. new york city on a beautiful friday morning. brendan: as we speak, thousands of refugees from myanmar stranded at sea. they are playing from homes and muslims are now looking for safety in neighboring thailand and malaysia and indonesia. this comes at a time when myanmar looks west from foreign direct investment and trade relations. erik schatzker was there recently just a few weeks ago and myanmar. we obviously have some political problems still in myanmar and as it looks for foreign direct investment, is this economy ready? erik: an excellent question. the economy is opening up to the west for the first time in 50 years. in the 1960's, a military dictatorship to control of the country and experimented with

russian-style central planning. the terrible failure. tremendous property in the country. you remember protests in the 1980's and 1990's. efforts to try and lift up the burmese people and since 2010, the country has been moving in the direction of a western-style democracy. is it ready? it will take a little while before we find out what is clear . all kinds of western money is pouring into the country from america, europe, and particularly from places like south korea and china. brendan: what did you see when you were there? the society unchanged or in the last two? years, has anybody got a cell phone erik: depends on what part of the country you are in. the western state are where the migrants originate in there about one million of them in a country of 150 million people. it feels fairly unchanged and that is the appeal. if you go to a city formerly known as rangoon, no longer the

capital, that's another story but the historic capital of myanmar -- beauty -- you do see a transformation. every car is new, everybody has a cell phone, bright shiny lights and bmw advertisements. it is an opportunity to witness and that is why i went there. to witness an economy in the midst of transformation. those of us at this age, tom got used to it eastern europe in the early 1990's after the wall fell but since then there has not been an economy like that. tom: what is the ages relationship between burma and china? that is a timeless relationship what is that new one? erik: a bit tense right now. a number of different ethnic groups in burma and one in the north. these people, like so many -- it is kind of like pakistan and afghanistan. there is a porous is empty will -- a porous if you will because ethnic groups are positioned on both sides of the border. tom: do burma and rangoon get

angry? erik: no. you say burmese. that is a political choice that every publication has to make. much more back coming up on "market makers." brendan: this is bloomberg's surveillance" on bloomberg television. ♪

tom: interesting market. where will we be in two weeks? i don't know. i know where we will be right now. vonnie quinn. >> drilling in seattle. protesters were waiting. activists went out to the break as it was towed into the harbor. shell has a preliminary ok to drill in the arctic but needs more state and federal permits. opponents say the arctic and wildlife will be harmed. after $60 million could be fined

and they reached a settlement on the charge for years ago. u.s. prosecutors now say they violated the deal. they say traders break the london interbank trade. pimco has added stock to their lineup of bond and now for the third time, it is retreating. pimco says it will have mutual funds and focus instead on enhanced index strategies. the chief investment officer for equities will leave and will not be replaced and those are the top headlines. tom: thank you. one big question about terminal values and bringing down the rate structure, bring down the assumptions and active management in the mutual fund business is expensive management, the math does not work given the new yields and assumptions. brendan: i would argue it's a bigger long-term shift in the way we think about equities. the question was, did he went the nobel prize for saying you

can find out the? we don't know. we are finding this out every quarter. tom: you've got to feel wonderful about it on this friday. i really wonder this pimco decision has legs across the rest of the industry. brendan: there are all sorts of entrepreneurship opening up to people who don't understand the markets and don't feel comfortable. i think the idea of indexing is powerful. tom: the structures are lower. let's switch gears to the economy which all depends on investment. what a weekend has been carried the first quarter of 2015 maybe four or five months long and not three. gina martin adams says the consumer will consume and growth will be had. i don't see it. when does the consumer pickup? gina: a lot of that is they have been -- tom: this is all --

gina: i think a lot of this is about oil. you will start to see the numbers as the year progresses but it takes time. if you go back to the mid-1980's cycle, it is a good prophecy for what we are going through now. gas prices took about one year before the consumer started picking up sales. -- they really started spending money. i think that's an important point to make for this cycle. the consumer is coincident with gas prices. it's a symptom of product demand, -- broader demand. oil prices have started to turn and we should start to see better growth going forward. brendan: had you read her notes you would know this is something she was prepared to say. personal consumption versus crude oil. and then hourly earnings versus employment rate and they move in different directions except in the latter year. gina: there is this magic level

of 5.5% of unemployment at which you get to 5.5% average hourly earnings recover. that has happened in each of the two cycles. it did not happen this time. it's something we have to watch pretty carefully. i assume a lot of this is related to the oil and gas industry and the contraction it has gone through. tom: what do your colleagues say? gina: he thinks we are going to see recovery. recovery and income over the next 12 to 18 months. he thinks he will turn through this period and ultimately get there. it might take a little while. tom: what about gdp? this is absolutely critical, can we get some inflation? rosenberg says it is out there somewhere inflation. do you invest believing that? gina: you do. look at the expansion and the 10 year treasury fund over the last weeks. oil prices starting to turn

higher, the dollar turning over. we will see inflation pickup over the next 12 months.in to the last 12 that it's a matter of time. brendan: the expansion was on the far end of the yield curve. this is what i'm trying to figure out. very far in the future about a 30 year yield. gina: even the tenure is not that far. but it is far out. the expectations are for this inflation to be thorough. i will say that happens with just about every cycle. we never see the inflation coming. we always think it's eventually going to get here and it surprises us when it pops up. this cycle, to be fair, we have really seen none. tom: you are an academic and i know you don't speak about individual stocks, but i'm going to quiz you on mergers with the giants and little companies. verizon, a well. i don't want your opinion but do mergers work out in your reading of the literature, do big mergers work out like that?

gina: at the earliest stages of the recovery, yes. mergers and acquisitions become a lot more about financing conditions, about syncing that -- tom: egos? gina: a little bit about egos. i don't think we are that yet but i don't think if the mergers from two or three years ago turn out to be the best and as they go forward, we start to stretch. brendan: i would argue the better dynamic is not verizon. i don't think that was what we do at this cash merger but how we adapt to the new economy and this might be a strategic shift. tom: the strategic shift is there. what is the one sector you love? gina: tech. tech over health care. tom: old tech? t=gub -- gina: some of the communication names are looking pretty attractive. i would go broad tech. still very still strong on

health care but we are in the midst of a cycle that will benefit. tom: let's get to the trivia questions now. >> evidence on why some consumers are not spending and we asked what is holding the consumer back and the first answer -- our debt to income ratio. every individual has a debt ratio, too. americans are not spending but still came down -- still paying down. brendan: we are still looking at the great deleveraging. tom: to restore have debt up to eyeballs? gina: yes but for the amount we actually need to spend to service those that's -- tom: did you rocket a different memo today? what is this? brendan: extraordinary coordination. tom: they got the same low capital. >> have a look at our twitter

feeds. the third answer, and thank you for everybody for tweeting us, the wage gross -- the wage growth is missing. brendan: wait a minute. control room, how did we miss between same we are too busy getting the gons --tongs out of our python? sorry, that was a reference to earlier with a photograph of an x-ray of tongs in a python. all right what are you looking at today? >> you have to look at the economic data. empire manufacturing are hoping it will be positive. negative last month. tom mentioned earlier that it will come in flat and michelin is important. tom: very good. the president is speaking today to police officers. this is not front and center

this morning. i would watch this. i think this is an important point for the nation on a friday. brendan: i would recommend you read a piece and i will try and put that out on twitter talking about police unions and how they had so much coulter :00 for so many decades. we are feeling the ground shift. tom: the statistic this year is 148 officers were falling in the line of duty. this is a big issue. brendan: real quick, visiting china right now right above the fold on the wall street journal this morning. two enduring economies and we constantly find ourselves comparing them and the relationships between those countries than their relationship with us. hard reality to adjust to. tom: japan with announcements billion this week. i will call it a more proactive military into the future. some amendments there. what an interesting week this has been. we thank all of our team for helping us.

we continue on bloomberg television with "market makers." bloomberg's surveillance" on economics and the nation next. stay with us. ♪

kers," with erik schatzker and stephanie ruhle. stephanie: good morning. it is friday, may 15 and you are watching "market makers." last day of the week.

i need time slot, what do you think? erik: i'm delighted. i love it. stephanie: he, too. i am stephanie ruhle. erik: i am erik schatzker. lots to tell you about. questions about the future of stock breaking. stephanie: a visit from home depot cofounder and chris christie supporter. he will be joining us at a: 30. -- at 8:30. erik: i would love to see him in a suit. stephanie: i will give you headlines and here are the news. >> avon said the company share are searching are surging. -- our surging. it was claimed that someone would buy a bond. >>